Document:

Agreement of Purchase and Sale

  
 EXHIBIT 10.30 
  
 
	  	    	 AGREEMENT OF PURCHASE AND SALE
 	    	  
	 
	  	    	 by
 	    	  
	  	    	 and
 	    	  
	  	    	 between
 	    	  
	 
	  	    	 CATALINA INDUSTRIES, INC.,
 	    	  
	  	    	 a Florida corporation
 	    	  
	 
	  	    	 as Seller,
 	    	  
	 
	  	    	 and
 	    	  
	 
	  	    	 HANCOCK FABRICS, INC.,
 	    	  
	  	    	 a Delaware corporation,
 	    	  
	 
	  	    	 as Buyer
 	    	  

 
  

 AGREEMENT OF PURCHASE AND SALE 
  
 THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) is made as of the 22nd day of April, 2002 (the “Effective Date”), between CATALINA INDUSTRIES,
INC., a Florida corporation (formerly known as Dana Lighting, Inc., and herein “Seller”), and HANCOCK FABRICS, INC., a Delaware corporation (“Buyer”), collectively the “Parties” and, occasionally, each of the Parties is
hereinafter referred to individually as a “Party.” 
  
 FACTUAL CONTEXT 
  
 A.    Seller is the owner of that certain land (the “Land”), the improvements thereon (the
“Improvements”), certain of the furniture, fixtures and equipment utilized with respect to the Improvements (the “Fixtures”), and all rights, instruments, documents of title, transferable licenses, plans, specifications, as-built
drawings, warranties by contractors and manufacturers warranties related thereto (collectively the “Rights”), situate in the County of Lee, State of Mississippi, which Land is described in Exhibit A, attached hereto and incorporated
herein. The Land and the Improvements are depicted on the drawing attached hereto as Exhibit B and incorporated herein, and are hereinafter referred to jointly as the “Subject Property.” The Fixtures are listed in Exhibit C, attached
hereto and incorporated herein. 
  
 B.    The Parties have agreed that, subject to certain
conditions, Buyer shall purchase and Seller shall sell the Subject Property, the Fixtures and the Rights, with a simultaneous short-term leaseback of the Subject Property and the Fixtures, and the Parties desire hereby to set forth their agreement
with respect to that transaction. 
  
 NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements hereinafter contained, the Parties mutually agree as follows: 
  
 1.    On and subject to all of the
terms, provisions and conditions of this Agreement, Buyer agrees to purchase, and Seller agrees to sell, the Subject Property, the Fixtures and the Rights (collectively herein the “Total Property”). The purchase and sale of the Total
Property shall be accomplished through an escrow to be established by Buyer with Escrow Agent (as defined in Section 4[a][i] hereof), which escrow is hereinafter referred to as the “Escrow.” 
  
 2.    The purchase price for the Subject Property and the Rights shall be Seven Million Three Hundred Fifty Thousand Dollars ($7,350,000.00),
hereinafter referred to as the “Subject Property Purchase Price.” The Subject Property Purchase Price is allocated Four Hundred Forty-six Thousand Six Hundred Ninety-five Dollars ($446,695.00) to Land, Six Million Nine Hundred Three
Thousand Three Hundred Four Dollars ($6,903,304.00) to Improvements and One Dollar ($1.00) to the Rights. The purchase price for the Fixtures shall be Three Hundred Fifty Thousand Dollars ($350,000.00), hereinafter referred to as the “Fixture
Purchase Price.” The Subject Property Purchase Price and the Fixture Purchase Price are hereinafter referred to jointly as the “Purchase Price.” The Purchase Price shall be paid to Seller in cash at Closing (as defined in Section 5[b]
hereof). 

 
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 3.    (a)    Seller acknowledges Buyer’s need to enter the
Subject Property to conduct its investigations, including, without limitation, surveys, site analyses, soil tests, engineering studies, building inspections, hazardous materials investigations and other investigations. Buyer acknowledges
Seller’s interest in maintaining control over Buyer’s entry and desire in certain circumstances to be present during Buyer’s entry. Thus, Seller and Buyer agree that Buyer, its representatives and contractors shall arrange with
Seller’s on-site manager in advance with respect to any such entry, and Seller shall instruct such on-site manager to extend reasonable accommodation to Buyer, its representatives and contractors. In connection with any such entry by Buyer,
Buyer agrees not to interfere unreasonably with the use of the Subject Property and the Fixtures by Seller. In addition, Buyer agrees not to perform any invasive testing without the prior consent of Seller, which consent shall not be unreasonably
withheld. Buyer shall indemnify and hold harmless Seller from any loss of or damage to the Subject Property as a result of such entry by Buyer. Buyer agrees that, except to the extent applicable law, ordinance, rule and/or regulation or court order
may require, Buyer shall not without the consent of Seller disclose to any party or entity (other than Seller, upon Seller’s written request only, and other than the employees and representatives of and advisors to Buyer, all of whom shall be
similarly-bound) the results of such tests, inspections or investigations. Seller represents and warrants that Seller has the right and authority to grant Buyer these rights. 
  
 (a)    Within five (5) days after the Effective Date, Seller shall provide and/or shall have provided to Buyer true and complete copies of the following
documents if possessed by or within the control of Seller (and written disclosures of the terms and content of any oral agreements) with respect to the Total Property: (i) all surveys, permits, certificates, approvals, plans and specifications and
as-built plans relating to the Total Property; (ii) real and personal property tax bills and assessment bills relating to the Total Property; (iii) all soils, seismic, structural, mechanical, engineering, property inspection, insurance,
hazardous/toxic material, environmental impact and other reports relating to the Total Property; and (iv) all documentation relating to the Rights. 
  
 4.    The following are conditions precedent to the obligation of Buyer to purchase the Total Property. Each of such conditions shall be, in Buyer’s sole, subjective opinion, fully satisfied or waived by
Buyer before Buyer shall be obligated to purchase the Total Property. Such conditions are of two (2) types, the “Initial Conditions” set forth in Section 4(a) hereof, and the “Closing Conditions” set forth in Section 4(b) hereof.

  
 (a)    The Initial Conditions are: 
  
 (i)  That the Subject Property not be subject to any easements, rights-of-way, restrictions or other matters (including, without limitation, any
tenancies or rights of occupancy) other than current real property taxes not delinquent and those acceptable to Buyer (“Permitted Exceptions”). In this regard, Seller agrees to cause Michael D. Ferris, Mitchell, McNutt & Sams, P.A.,
105 South Front Street, P.O. Box 7120, Tupelo, Mississippi 38802, hereinafter referred to as “Escrow Agent,” to issue within five (5) days after the Effective Date a current Commitment For Title Insurance by First American Title Insurance
Company (the “Title Insurer”) with respect to the Subject Property and to deliver it, together with copies of all exceptions to title shown therein, to Buyer. 

 
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 (ii)  That Buyer has obtained, at Buyer’s expense,
a topographical, boundary and as-built survey of the Subject Property, in form and content (including certification) and depicting a condition satisfactory to Buyer. 
  
 (iii)  That Buyer has obtained, at Buyer’s expense, an environmental assessment of the Total Property and the results thereof are
satisfactory to Buyer. 
  
 (iv)  That Buyer be satisfied with the zoning and access of and
any operating or development conditions applicable to the Subject Property and that the Total Property and the operation of any business thereon or therewith shall be in full compliance with all applicable rules, regulations, laws, ordinances and
other legal requirements and subject to no limitations or conditions unacceptable to Buyer. 
  
 (v)  That Buyer be satisfied with the availability now, the prospects for future availability and the current and projected costs for utilities, including, without limitation, electricity, gas, water, storm drainage and
sewer, relating to the Subject Property. 
  
 (vi)  That Buyer has obtained, at Buyer’s
expense, an inspection of the Improvements and the Fixtures and the results thereof are satisfactory to Buyer. 
  
 (vii)  That Buyer has obtained, at Buyer’s expense, an inspection of the soils conditions relating to the Land and the results thereof are satisfactory to Buyer. 
  

(viii)  That Buyer be satisfied that Seller’s title to the Fixtures is not subject to any lien, encumbrance, financing statement or
other security device or agreement. 
  
 (ix)  That Buyer be satisfied that Buyer shall be
able to have transferred to it and its successors, transferees and assigns the benefit of any and all tax incentives and benefits which benefit or accrue to the Total Property, all upon conditions or requirements satisfactory to Buyer. 

 
 (b) The Closing Conditions are: 
  
 (i)  That at Closing, Title Insurer shall issue to Buyer, in form and content satisfactory to Buyer, an ALTA Extended Coverage Owner’s Policy
of Title Insurance (or equivalent extended coverage) in the full amount of the Purchase Price, insuring fee title to the Subject Property and any easements and other appurtenances thereto to be vested in Buyer, together with such endorsements as may
be requested by Buyer, subject only to Permitted Exceptions and the Lease referenced in Section 4(b)(viii) hereof (the “Title Policy”). 
  
 (ii)  That at Closing, all of the Initial Conditions that Buyer has indicated to Seller as being satisfied pursuant to Section 5(a) hereof shall remain satisfied. 
  
 (iii)  That at Closing, the Total Property shall not have been damaged or destroyed by any act, casualty, act of
God and/or the elements. 
  
 (iv)  That at Closing, the Total Property shall not have been
the subject of or be under the threat of any eminent domain or other governmental or quasi-governmental 

 
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 proceeding, land use regulation or other restriction (including, without
limitation, a moratorium on permits or utility supply) or assessment district creation. 
  
 (v)  That at Closing, Seller shall deliver to Buyer for recordation an executed Warranty Deed in the form of Exhibit D, attached hereto and incorporated herein (,the “Warranty Deed”), with regard to the Subject
Property. 
  
 (vi)  That at Closing, Seller shall deliver to Buyer an executed Bill of Sale
in the form of Exhibit E, attached hereto and incorporated herein (the “Bill of Sale”), with regard to the Fixtures. 
  
 (vii)  That at Closing, Seller shall deliver to Buyer an executed Assignment of Rights in the form of Exhibit F, attached hereto and incorporated herein (the “Assignment”), with
regard to the Rights. 
  
 (viii)  That at Closing, duplicate copies of an executed Lease in
the form of Exhibit G, attached hereto and incorporated herein (the “Lease”) shall be delivered to Buyer and Seller. 
  
 (ix)  That at Closing, all of the representations and warranties made by Seller in Section 8 hereof remain true in all material respects. 
  

(c)    Seller and Buyer shall each exercise reasonable best efforts to obtain the satisfaction of the Initial Conditions and the Closing
Conditions, and Seller agrees to assist and cooperate in connection with Buyer’s efforts to gain satisfaction of such Conditions. 
  
 5.    (a)    Buyer agrees that it shall notify Seller by written notice postmarked not later than May 1, 2002, that the Initial Conditions are satisfied, unsatisfied or waived. If there is no
such notification, the Initial Conditions shall be deemed unsatisfied. If Buyer gives notice that any of the Initial Conditions is unsatisfied, or if the Initial Conditions are deemed unsatisfied, there shall be no further obligation by either Party
hereunder, and this Agreement shall automatically terminate. 
  
 (b)    If Buyer notifies Seller
of the satisfaction or waiver of the Initial Conditions as provided in Section 5(a) hereof, provided the Closing Conditions are satisfied or waived in writing by Buyer on such date of Closing, Buyer shall become obligated to purchase the Total
Property, and Escrow shall close on May 6, 2002 (the “Closing”), pursuant to separate closing instructions of Seller and Buyer compatible with this Agreement and deposited on or before May 2, 2002; provided, however, that if the only
reason that the Closing cannot occur on such date is that there is in existence an exception to title or a condition with respect to the Subject Property that makes satisfaction of the condition contained in Section 4(b) (i) hereof not possible,
Seller may elect, by written notice to Buyer on such date of closing, to extend the date of Closing to a date mutually acceptable to Seller and Buyer and not later than May 30, 2002, in order for Seller to attempt to cure such exception or
condition, Seller’s failure so to do being deemed a failure of condition hereunder. 
  
 6.    At Closing:

 
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 (a)    The cost of transfer tax relating to the Warranty
Deed, the commitment fee, if any, for the Title Policy, the cost of recordation of the Warranty Deed, and the cost of clearing title to the Total Property, including, without limitation, the cost of release of any security documents, shall be paid
by Seller. 
  
 (b)    The premium for the Title Policy shall be paid by and Buyer. 

 
 (c)    Escrow costs shall be shared equally by Seller 
  

(d)    Current real property taxes not delinquent regarding the Subject Property and current personal property taxes not delinquent regarding the
Fixtures shall be prorated as of the Closing. If no current tax bill is available, such proration shall be based on 105% of the previous year’s amount. Seller shall pay in full all current installments of assessments for public improvements
affecting the Total Property. 
  
 (e)    Seller shall furnish to Buyer all documentation required
by Internal Revenue Code Section 1445, and any related state laws, if applicable, and Buyer is authorized to withhold and deduct any and all amounts required by such laws, if applicable. 
  
 (f)    Seller shall deliver possession of the Total Property to Buyer, subject only to the tease. All keys and security codes shall be delivered to
Buyer at Closing. 
  
 7.    Buyer and Seller each represent and warrant to the other that they have dealt with no broker
or finder and have not incurred an obligation for any real estate commission, finder’s fee or other fee resulting from the transaction contemplated herein. 
  
 8.    Seller hereby agrees, covenants, represents, and warrants (which are deemed restated and remade as of Closing and which shall survive Closing) with and to Buyer as follows (as used in this Section
8, “knowledge” of Seller means the actual current awareness of the person employed by or for Seller as Manager of the Subject Property): 
  
 (a)    Except as set forth in that certain Phase I Environmental Assessment of Catalina Lighting Baldwyn, Mississippi, dated July 2001, and prepared by ENVIRON International
Corporation under its Project No. 02-9581-A, Seller has no knowledge of any “Hazardous Material” located on the Subject Property, and Seller has not received any notice of any action or proceeding relating to any Hazardous Material or any
release or threatened release thereof on, under or at same. “Hazardous Material” means any substance or material defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” “extremely hazardous waste,” “acutely hazardous waste,” “restricted hazardous waste,” “toxic substances” or “known to cause cancer or reproductive toxicity” (or words of similar
import), petroleum products (including crude oil or any fraction thereof), or any other chemical, substance or material which is prohibited, limited or regulated under any federal, state or local law, ordinance, regulation, order, permit, license,
decree, common law, or treaty regulating, relating to or imposing liability or standards concerning materials or substances known or suspected to be toxic or hazardous to health and safety, the environment, or natural resources. 

 
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 (b)    Seller has no knowledge and has received no written
notice of any pending proceeding for the imposition of any special assessment, or the formation of a special assessment district, or for a condemnation proceeding which would affect directly any portion of the Subject Property. 

 
 (c)    No litigation, administrative or other proceeding order or judgment is pending or outstanding, or,
to Seller’s knowledge, threatened against or relating to any portion of the Subject Property. 
  
 (d)    Seller has no knowledge nor has received any written notice that any governmental or quasi-governmental agency is contemplating, has initiated, or has in place any land use regulation or other restriction
(including a moratorium on permits or utility supply) which would detrimentally affect the operation of the Total Property. 
  
 (e)    Seller has no knowledge and has received no written notice that the Total Property or any portion thereof is in violation of building, environmental, land use, health, insurance and other applicable laws
governing the use and operation thereof. 
  
 (f)    Seller is not the subject of any insolvency
or bankruptcy proceedings at law or in equity or otherwise or under the threat or likelihood of same and will not be for at least one hundred twenty (120) days after the Closing. 
  
 (g)    Seller is a Florida corporation duly organized, validly existing and in good standing under the laws of the State of Florida and authorized to
transact business in the State of Mississippi. 
  
 (h)    The persons executing this document on
behalf of Seller are authorized so to sign and their signing binds Seller to the terms of this Agreement; this Agreement is duly authorized, executed and delivered by Seller; the consent of no party, entity, court or governmental agency is required
for this Agreement to be a binding agreement of Seller; and this Agreement violates no law or agreement or order applicable to Seller. 
  
 9.    Seller agrees to give Buyer prompt notice of any damage to or threat of or act of condemnation of the Total Property. Seller shall bear all risk of loss to the Total Property prior to Closing. 

 
 10.    If Closing fails to occur due to the default of either Party under this Agreement, the other Party shall have all remedies
available at law or in equity, including the right to bring an action for damages or specific performance or both. 
  
 11.    All notices, required or elective, shall be in writing and shall be mailed by United States mail, registered or certified, return receipt requested, postage prepaid, or sent by a recognized national
overnight courier service (such as Federal Express or Airborne) which keeps written records of the receipt by the addressee, addressed to Seller, attention Chief Financial officer at: 18191 N.W. 68th Avenue, Miami, Florida 33015, with copies to Ann
F. Corso, Esq., Butler, Snow, O’Mara, Stevens & Cannada, PLLC, P.O. Box 22567, Jackson, Mississippi 39225-2567 (courier address: 210 East Capitol Street, 17th Floor—AmSouth Plaza, Jackson, Mississippi 39201), to Seller c/o Gregg Foxx,
V.P. Distribution Center, One Catalina Way, Baldwyn, 

 
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 Mississippi 38824, and to Kristin Kolesar, Esq., Morgan Lewis & Bockius LLP, One Oxford Centre, 301
Grant Street, 32nd Floor, Pittsburgh, Pennsylvania 15219, and to Buyer, attention Senior Vice President Real Estate, at: P.O. Box 2400, Tupelo, Mississippi 38803-2400 (courier address: 3406 West Main Street, Tupelo, Mississippi 38801) or to such
other address as the respective parties may designate. Notices shall be deemed complete upon receipt thereof, or upon attempted delivery, if delivery is refused. With respect to Seller, the address to determine completion of notice shall be the
Miami, Florida, address. 
  
 12.    In the event court action is brought between the Parties
hereto relating to this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees and costs incurred in said action to be fixed by the court. 
  
 13.    This Agreement shall survive and shall not be merged into any document to be delivered to Buyer from Seller. 
  
 14.    The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the
successors, transferees and assigns of the Parties hereto. 
  
 15.    This Agreement shall be
interpreted and construed only by the contents hereof, and there shall be no presumption or standard of construction in favor of or against either Seller or Buyer for any reason, including the fact that counsel for Buyer prepared this Agreement, as
each Party has had the opportunity to negotiate each and every provision of this Agreement. This Agreement shall be construed and enforced in accordance with, and governed by, the law of the State of Mississippi, excluding conflicts of law. Whenever
required by the context, the singular shall include the plural and vice versa. If any term or provision of this Agreement or the application of it to any person, entity or circumstance shall to any extent be invalid and unenforceable, the remainder
of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall be valid and
shall be enforced to the extent permitted by law. Time is of the essence of this Agreement. This Agreement supersedes any prior agreements and contains the entire agreement of the Parties on the matters covered. No other agreement, statement or
promise made by any Party or agent of any Party that is not in writing and signed by all Parties shall be binding. Any amendments to this Agreement shall be in writing and signed by all Parties. 
  

16.    Except as expressly set forth in this Agreement and the Warranty Deed, the Bill of Sale and the Assignment, it is understood and agreed that
Seller is not making and has not made any warranties or representations of any kind or character, express or implied, with respect to the Total Property, or any part thereof, including, but not limited to, any warranties or representations as to
habitability, merchantability, fitness for a particular purpose, title, zoning, tax consequences, latent or patent physical or environmental conditions, utilities, operating history or projections, valuation, governmental approvals, the compliance
of the Total Property with governmental laws, or any other matter or thing regarding the Total Property. Buyer represents to Seller that Buyer has conducted, or will conduct prior to closing, such investigations of the Total Property, including, but
not limited to, the physical and environmental conditions thereof, as Buyer deems necessary to satisfy itself as to the condition of the Total 

 
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 Property, and will rely solely upon same and not upon any information provided by or on behalf of Seller
or its agents or 
  
 [Remainder of page left blank intentionally.] 

 
 8 

  
 employees with respect thereto, other than such representations, warranties and covenants of Seller as
are expressly set forth in this Agreement. 
  
 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first hereinabove written. 
  
 CATALINA INDUSTRIES, INC., HANCOCK FABRICS, INC., a Florida
corporation a Delaware corporation 
  
 
	  	 	  	 	  
	 
	 By:
 	 	 /s/    ERIC BESCOBY        

	 	  	 	 By:
 	 	 /s/    WILLIAM D. SMOTHERS
        
 

	 Title:
 	 	 President
 	 	  	 	 Title:
 	 	 Senior Vice President
 

 
  
 
	  	 	  	 	  
	 
	 By:
 	 	 /s/    LYNN SKILLEN        

	 	  	 	 By:
 	 	 /s/    WILLIAM A. SHEFFIELD,
JR.        
 

	 Title:
 	 	 Vice President
 	 	  	 	 Title:
 	 	 Senior Vice President
 

 

 

  
 LEGAL DESCRIPTION 
  
 A 64.36 acre tract located in the Southwest Quarter of Section 10 and the Northwest Quarter of Section 15, Township 7 South, Range 6 East, Lee County, Mississippi, and described as follows:

  
 Commencing at a point in the center of present (1992) US Highway No. 45, where said highway crossed the South boundary line of the
Northwest Quarter (NW 1/4) of Section 11, Township 7 South, Range 6 East, and run thence West 2,042.4 feet; run thence North 8 degrees 39 minutes East 1,290.0 feet to a point in the center of Lee County Road No. 2878; run thence North 79 degrees 47
minutes West along the center of said Road No. 2878 for a distance of 2,226.66 feet to the intersection of County Road No. 2878 with New US Highway No. 45 (said proposed highway project being known and designated as State Project Nos
79-0002-06-021-10 and 96-0002-06-021-10 being a segment of U.S. Highway No. 45); thence run South 01 degrees 51 minutes 17 seconds West along the center of said highway for a distance of 1,653.75 feet (said point is 1,271.9 feet East of the
Southwest Corner of the Northwest Quarter (NW 1/4) of Section 10, Township 7 South, Range 6 East) run thence South 89 degrees 31 minutes 59 seconds West for a distance of 130.1 feet to the West right-of-way of said highway for a POINT OF BEGINNING;
thence run South 89 degrees 32 minutes 10 seconds West for a distance of 132.20 feet; thence South 84 degrees 28 minutes 08 seconds West for a distance of 272.04 feet; thence North 88 degrees 32 minutes 01 seconds West for a distance of 392.75 feet;
thence South 00 degrees 18 minutes 01 seconds East for a distance of 449.0 feet; thence North 87 degrees 09 minutes 56 seconds West for a distance of 274.0 feet to the East right-of-way of County Road No. 911; thence South 00 degrees 36 minutes 44
seconds West along said East right-of-way of County Road No. 911 for a distance of 385.25 feet; thence South 00 degrees 46 minutes 25 seconds East along said East right-of-way of County Road No. 911 for a distance of 461.86 feet; thence South 01
degrees 09 minutes 20 seconds East along said right-of-way of County Road No. 911 for a distance of 1,114.96 feet; thence South 00 degrees 01 minutes 05 seconds East along said right-of-way of County Road No. 911 for a distance of 254.48 feet;
thence South 00 degrees 04 minutes 49 seconds West along said right-of-way of County Road No. 911 for a distance of 735.94 feet to the North right-of-way of County Road No. 2788; thence North 69 degrees 39 minutes 17 seconds East along the North
right-of-way of County Road No. 2788 for a distance of 268.89 feet; thence North 71 degrees 10 minutes 56 seconds East along the North right-of-way of County Road No. 2788 for a distance of 466.61 feet; thence North 71 degrees 39 minutes 34 seconds
East along said North right-of-way of County Road No. 2788 for a distance of 109.54 feet to the West right-of-way of U.S. Highway No. 45; thence North 22 degrees 10 minutes 15 seconds East along said highway right-of-way for a distance of 451.25
feet; thence run North 01 degrees 35 minutes 25 seconds East along said highway right-of-way for a distance of 119.63 feet; thence North 01 degrees 06 minutes 28 seconds West along said highway right-of-way for a distance of 600.59 feet; thence
North 04 degrees 31 minutes 14 seconds East along said highway right-of-way for a distance of 300.31 feet; thence run North 00 degrees 50 minutes 09 seconds West along said highway right-of-way for a distance of 801.31 feet; thence run North 06
degrees 55 minutes 25 seconds East along said highway right-of-way for a distance of 501.97 feet; thence run North 01 degree 27 minutes 31 seconds East along said highway right-of-way for a distance of 389.31 feet to the 

 
 Exhibit A 
 Page 1 of 5

  
 POINT OF BEGINNING; containing 70.23 acres, more or less, and being situated in the Southwest Quarter of
Section 10, and the Northwest Quarter of Section 15, Township 7 South, Range 6 East, Lee County, Mississippi. 
  
 LESS AND EXCEPT THEREFROM,
THE FOLLOWING DESCRIBED REAL PROPERTY, TO-WIT: 
  
 (1) A 1.98 acre tract along the West side of U.S. Highway No. 45 required for
additional right-of-way described as follows: 
  
 Commencing at a point in the center of present (1992) US Highway No. 45, where said
highway crossed the South boundary line of the Northwest Quarter (NW 1/4) of Section 11, Township 7 South, Range 6 East, and run thence West 2,042.4 feet; run thence North 8 degrees 39 minutes East 1,290.0 feet to a point in the center of Lee County
Road No. 2878; run thence North 79 degrees 47 minutes West along the center of said Road No. 2878 for a distance of 2,226.66 feet to the intersection of County Road No. 2878 with New US Highway No. 45 (said proposed highway project being known and
designated as State Project Nos 79-0002-06-021-10 and 96-0002-06-021-10 being a segment of U.S. Highway No. 45) ; thence run South 01 degree 51 minutes 17 seconds West along the center of said highway for a distance of 1,653.75 feet (said point is
1,271.9 feet East of the Southwest Corner of the Northwest Quarter (NW 1/4) of Section 10, Township 7 South, Range 6 East), run thence South 89 degrees 31 minutes 59 seconds West for a distance of 130.1 feet to the West right-of-way of said highway
for a POINT OF BEGINNING; thence run South 89 degrees 32 minutes 10 seconds West for a distance of 68.08 feet; thence South 01 degree 51 minutes 16 seconds West for a distance of 1,086.96 feet; thence South 88 degrees 08 minutes 43 seconds East for
a distance of 20.00 feet; thence South 01 degree 51 minutes 17 seconds West for a distance of 900.00 feet; thence South 88 degrees 08 minutes 43 seconds East for a distance of 30.00 feet to the present West right-of-way of U.S. Highway 45; thence
run North 04 degrees 31 minutes 14 seconds East along said highway right-of-way for a distance of 300.31 feet; thence run North 00 degrees 50 minutes 09 seconds West along said highway right-of-way for a distance of 801.31 feet;. thence run North 06
degrees 55 minutes 25 seconds East along said highway right-of-way for a distance of 501.97 feet; thence run North 01 degree 27 minutes 31 seconds East along said highway right-of-way for a distance of 389.31 feet to the POINT OF BEGINNING; and
lying and being in the Southwest Quarter of Section 10, Township 7 South, Range 6 East, Lee County, Mississippi. 
  
 (2) A 2.19 acre
tract for a roadway from existing Hwy. No. 45 to Lee County Road No. 911, described as follows: 
  
 Commencing at a point in the center
of present (1992) US Highway No. 45, where said highway crossed the South boundary line of the Northwest Quarter (NW 1/4) of Section 11, Township 7 South, Range 6 East, and run thence West 2,042.4 feet; run thence North 8 degrees and 39 minutes East
1,290.0 feet to a point in the center of Lee County Road No. 2878; run thence North 79 degrees 47 minutes West along the center of said Road No. 2878 for a distance of 2,226.66 feet to the intersection of County Road No. 2878 with New US Highway No.
4 5 (said proposed highway project being known and designated as state 

 
 Exhibit A 
 Page 2 of 5

  
 Project Nos 79-0002-06-021-10 and 96-0002-06-021-10 being a segment of U.S. Highway No. 45); thence run
South 01 degree 51 minutes 17 seconds West along the center of said highway for a distance of 1,653.75 feet (said point is 1,271.9 feet East of the Southwest Corner of the Northwest Quarter (NW 1/4) of Section 10, Township 7 South, Range 6 East),
run thence South 89 degrees 31 minutes 59 seconds West for a distance of 130.1 feet to the West right-of-way of said highway; thence run South 89 degrees 32 minutes 10 seconds West for a distance of 68.08 feet; thence South 01 degree 51 minutes 16
seconds West for a distance of 647.46 feet to the POINT OF BEGINNING; thence North 88 degrees 22 minutes 05 seconds West for a distance of 1,027.63 feet; thence South 00 degrees 36 minutes 44 seconds West for a distance of 100.02 feet; thence South
88 degrees 22 minutes 05 seconds East for a distance of 1,016.59 feet; thence North 01 degree 51 minutes 16 seconds East for a distance of 100.0 feet to the POINT OF BEGINNING; and lying and being in the Southwest Quarter of Section 10, Township 7
South, Range 6 East, Lee County, Mississippi. 
  
 (3) A 1.7 acre tract described as being a 25’ strip along the East side of Lee
County Road No. 911 as required for additional right-of-way and more particularly described as follows: 
  
 Commencing at a point in the
center of present (1992) US Highway No. 45, where said highway crossed the South boundary line of the Northwest Quarter (NW 1/4) of Section 11, Township 7 South, Range 6 East, and run thence West 2,042.4 feet; run thence North 8 degrees 39 minutes
East 1,290.0 feet to a point in the center of Lee County Road No. 2878; run thence North 79 degrees 47 minutes West along the center of said Road No. 2878 for a distance of 2,226.66 feet to the intersection of County Road No. 2878 with New US
Highway No. 45 (said proposed highway project being known and designated as State Project Nos 79-0002-06-021-10 and 96-0002-06-021-10 being a segment of U.S. Highway No. 45) ; thence run South 01 degree 51 minutes 17 seconds West along the center of
said highway for a distance of 1,653.75 feet (said point is 1,271.9 feet East of the Southwest Corner of the Northwest Quarter (NW 1/4) of Section 10, Township 7 South, Range 6 East) ; run thence South 89 degrees 31 minutes 59 seconds West for a
distance of 130.1 feet to the West right-of-way of said highway; thence run South 89 degrees 32 minutes 10 seconds West for a distance of 132.20 feet; thence South 84 degrees 28 minutes 08 seconds West for a distance of 272.04 feet; thence North 88
degrees 32 minutes 01 second West for a distance of 392.75 feet; thence South 00 degrees’ 18 minutes 01 second East for a distance of 449.0 feet; thence North 87 degrees 09 minutes 56 seconds West for a distance of 274.0 feet to the present
East right-of-way of County Road No. 911 and the POINT OF BEGINNING; thence South 00 degrees 36 minutes 44 seconds West along said East right-of-way of County Road No. 911 for a distance of 385.25 feet; thence South 00 degrees 46 minutes 25 seconds
East along said East right-of-way of County Road No. 911 for a distance of 461.86 feet; thence South 01 degree 09 minutes 20 seconds East along said right-of-way of County Road No. 911 for a distance of 1,114.96 feet; thence South 00 degrees 01
minute 05 seconds East along said right-of-way of County Road No. 911 for a distance of 254.48 feet; thence South 00 degrees 04 minutes 49 seconds West along said right-of-way of County Road No. 911 for a distance of 735.94 feet to the North
right-of-way of County Road No. 2788; thence North 69 degrees 39 minutes 17 seconds East along the North right-of-way of county Road No. 2788 for a distance of 26.68 feet; thence North 00 degrees 04 minutes 49 seconds East for a distance of

 
 Exhibit A 
 Page 3 of 5

 

  
 726.64 feet; thence North 00 degrees 01 minute 05 seconds West for a distance of 254.76 feet; thence
North 01 degree 09 minutes 20 seconds West for a distance of 1,115.12 feet; thence North 00 degrees 46 minutes 25 seconds West for a distance of 461.47 feet; thence North 00 degrees 36 minutes 44 seconds East for a distance of 383.97 feet; thence
North 87 degrees 09 minutes 56 seconds West for a distance of 25.02 feet to the POINT OF BEGINNING; and lying and being in the Southwest Quarter of Section 10 and the Northwest Quarter of Section 15, Township 7 South, Range 6 East, Lee County,
Mississippi. 
  

 
 Exhibit A 
 Page 4 of 5

 LIST OF 
 FURNITURE, FIXTURES AND
EQUIPMENT 
  
 
	 DESCRIPTION
 
	  	 VALUE
 

	 STEEL-KING PALLET RACKS
 	  	  	  
	 •      17,200            DRIVE-IN RACKING
 	  	 $
 	 135,000
 
	 •      760                 SINGLE DEEP SELECT
 	  	  
 	 5,000
 
	 •      1,200              FLOW RACK
 	  	  
 	 60,000
 
	 
	 1200 PALLET BUSHMAN CONVEYOR & SORTATION PICK-TO-BELT SYSTEM
 	  	  
 	 85,000
 
	 •      ABOUT 1⁄2 MILE OF POWER CONVEYOR
 	  	  	  
	 •      ABOUT 1⁄2 MILE OF ACCUMULATION CONVEYOR
 	  	  	  
	 •      24 DIVERT LANES AND AN OMNI BAR CODE SCANNERS (3-1 HAND HELD)

	  	  	  
	 
	 32 TELZON PTC-960 HAND HELD RF SCANNERS
 	  	  
 	 40,000
 
	 •      5 ANTENNAS
 	  	  	  
	 •      4 HUBS
 	  	  	  
	 
	 MISCELLANEOUS
 	  	  
 	 25,000
 
	 •      ALL GOLF CARTS
 	  	  	  
	 •      SWEEPER/SCRUBBER
 	  	  	  
	 •      MAINTENANCE LIFT TRUCK (CHERRY PICKER)
 	  	  	  
	 •      PHONE SYSTEM
 	  	  	  
	 •      SECURITY/ALARM SYSTEM
 	  	  	  
	  	  	 
	 

	 TOTAL
 	  	 $
 	 350,000
 

 
  
 Exhibit C 
 Page 1 of 1 

  
 INDEXING INSTRUCTIONS TO THE CHANCERY CLERK OF LEE COUNTY, MISSISSIPPI: The real property described
herein is situated partly in the Northwest Quarter of Section 15 and partly in the Southwest Quarter of Section 10, Township 7 South, Range 6 East, Lee County, Mississippi. 
  
 
	  	 	 WARRANTY DEED
 	 	  
	 CATALINA INDUSTRIES, INC.
 (F/K/A DANA LIGHTING, INC.)
 18191 N.W. 68th Avenue
 Miami, Florida 33015
 305)
558-4777
 	 	 TO
 	 	 HANCOCK FABRICS_, INC.
 P.O. Box
2400
 Tupelo, MS 38803
 (601) 842-2834
 

 
  
 In consideration of $10.00, cash in hand paid, and other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, CATALINA INDUSTRIES, INC., a Florida corporation (formerly known as DANA LIGHTING, INC.), “Grantor,” does by these presents warrant unto HANCOCK FABRICS,
INC., a Delaware corporation, “Grantee,” the real property, lying and being in Lee County, Mississippi, described in Exhibit A, attached hereto and incorporated herein. 
  
 THIS CONVEYANCE AND WARRANTY IS MADE SUBJECT TO THE FOLLOWING: [To Be Determined] 
  
 WITNESS the signature of the Grantor, this the              day of
                        , 2002. 
  
 
	 CATALINA INDUSTRIES, INC. 
 a
Florida corporation
 
	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

 
  
 This Instrument Prepared By 
 Harrison S. Robinson, Esq. 
 Donahue,
Gallagher, Woods & Wood, LLP 
 P.O. Box 12979 
 Oakland, California 94604 

 
 15 

  
 
	 State of
 	  	  
 

	 
	 County of
 	  	  
 

 
  
 Personally appeared before me, the undersigned authority in and for
the said County and State, on this              day of
                    , 2002, within my jurisdiction, the within named
                        , who acknowledged that he/she is
                         of Catalina Industries, Inc., a Florida corporation, and the within named
                         who acknowledged that he/she is
                         of Catalina Industries, Inc., a Florida corporation, and that for and on behalf of the said
corporation and as its act and deed, each, respectively, executed the above and foregoing instrument, after first having been duly authorized by said corporation so to do. 
  
 
	 
	 

	 NOTARY PUBLIC
 

 
  
 My Commission Expires: 
  
 
	 
	 

	 [AFFIX NOTARIAL SEAL]
 

 
  

 
 16 

 BILL OF SALE 
  
 THIS BILL OF SALE is made as of the              day of May, 2002, by CATALINA INDUSTRIES, INC., a Florida corporation (formerly known
as DANA LIGHTING, INC., and herein “Seller”), pursuant to that certain Agreement of Purchase and Sale dated as of
                        , 2002, by and between HANCOCK FABRICS, INC., a Delaware corporation (“Buyer”), and
Seller. 
  
 1.    Seller, for the consideration of Three Hundred Fifty Thousand Dollars
($350,000.00), the receipt and sufficiency of which is hereby acknowledged, hereby sells, conveys and transfers to Buyer the furniture, fixtures and equipment listed on Exhibit A, attached hereto and incorporated herein, and located at One Catalina
Way, Baldwyn, Mississippi (the “Fixtures”). 
  
 2.    Seller hereby warrants and
represents to Buyer that, on the date hereof, Seller has and hereby conveys to Buyer good, clear and absolute title to the Fixtures free from any lien, charge, claim, encumbrance or security interest and that Seller has the full and complete right
and authority to dispose of same in any manner. 
  
 IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of
the day and year first hereinabove written. 
  
 
	 CATALINA INDUSTRIES, INC. 
 a
Florida corporation
 
	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

	 
	  	 	 “Seller”
 

 

 
 17 

  
 ASSIGNMENT OF RIGHTS 
  

THIS ASSIGNMENT OF RIGHTS is made as of the              day of May, 2002, by CATALINA INDUSTRIES, INC., a
Florida corporation (formerly known as DANA LIGHTING, INC., and herein “Assignor”), pursuant to that certain Agreement of Purchase and Sale dated as of             , 2002, by and
between HANCOCK FABRICS, INC., a Delaware corporation (Hancock”), and Assignor. 
  
 1.    Assignor, for the consideration of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby sells, conveys, transfers and assigns to
Hancock all of Assignor’s right, title and interest in all rights, instruments, documents of title, transferable licenses, plans, specifications, as—built drawings, warranties by contractors and manufacturers’ warranties related to
the land situate in the County of Lee, State of Mississippi, described in Exhibit A, attached hereto and incorporated herein, the Improvements thereto and thereon and the Fixtures listed in Exhibit B, attached hereto and incorporated herein
(collectively, the “Rights”). 
  
 2.    Assignor hereby covenants and represents to
Hancock that, on the date hereof, Assignor has and hereby conveys to Hancock good, clear and absolute title to the Rights free from any lien, charge, claim, encumbrance or security interest and that Assignor has the full and complete right and
authority to dispose of same in any manner. 
  
 IN WITNESS WHEREOF, Assignor has executed this Assignment of Rights
as of the day and year first hereinabove written. 
  
 
	 CATALINA INDUSTRIES, INC. 
 a
Florida corporation
 
	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

	 
	 By 
 	 	  
 

	 
	 Title
 	 	  
 

	 
	  	 	 “Assignor”
 

 

 
 18 

 L E A S E 
  
 THIS LEASE (the “lease”) is made as of the              day of May, 2002, by and between HANCOCK FABRICS, INC., a Delaware
corporation, hereinafter called “Landlord,” and CATALINA INDUSTRIES, INC., a Florida corporation, hereinafter called “Tenant.” 
  
 W I T N E S S E T H : 
  
 1.    PREMISES. Landlord is owner of certain land situate in the County of Lee, State of Mississippi, described in Exhibit A, attached hereto and incorporated herein (the “Land”). 

 
 Landlord is owner of the building (the “Building”) and the other real property improvements (collectively, the
“Improvements”) on the Land. The Land and the Improvements are depicted on the drawing that is Exhibit B, attached hereto and incorporated herein. Landlord is owner of the fixtures, furniture and equipment described in Exhibit C, attached
hereto and incorporated herein (the “Fixtures”); the Fixtures are located within or on the Improvements. As used in this lease, the term “Premises” means the Land, the Improvements and the Fixtures, or the portion thereof, from
time to time demised to Tenant pursuant to the provisions of Section 1(a) and Section 1(b) hereof. Landlord leases to Tenant, and Tenant leases from Landlord, the Premises on all of the terms and provisions hereof. 
  
 (a)    Initial Premises. From and including the date hereof to and including September 30, 2002, the Premises
shall be all of the Land, Improvements and Fixtures. 
  
 (b)    Final Premises. From and
including October 1, 2002, to and including December 31, 2002, the Premises shall be (i) the portion of the Improvements shown as cross-hatched on Exhibit B hereto, (ii) a non-exclusive right of passage over and across that portion of the
Improvements shown as single-hatched on Exhibit B hereto for the purpose of accessing and utilizing towmotor charging stations, (iii) a non-exclusive right of passage and parking upon and over the portions of the Land devoted to driveways and
parking areas, provided that such non-exclusive rights shall be utilized only by Tenant, its customers, employees and business invitees, and (iv) the Fixtures situate in the portion of the Improvements shown as cross-hatched on Exhibit B hereto.

  
 2.    TERM. The term of this lease shall commence on the date hereof and shall
continue to and including December 31, 2002. 
  
 3.    RENT. Tenant agrees to pay as rent
for the entire term hereof (excluding any holdover pursuant to Section 19 hereof) the sum of One Hundred Dollars ($100.00), payable in full upon the date hereof. 
  
 4.    FIXTURES. Except for the Fixtures, all fixtures and equipment (including signs) in the Premises shall remain the property of Tenant, and Tenant may remove the same or
any part thereof at any time during the term and shall remove the same prior to the end of this lease. Tenant shall repair any damage to the Premises caused by the removal of said fixtures or equipment. 
  
 Exhibit G 
 1 

  
 5.    USE OF PREMISES. Tenant shall use the Premises
as a warehouse and distribution facility for lighting products. Tenant shall conduct its business insofar as the same relates to Tenant’s use and occupancy of the Premises in compliance with all applicable laws and governmental regulations.

  
 6.    TAXES. Tenant shall pay before delinquency all taxes and assessments levied or
assessed against Tenant’s personal property located upon the Premises and all business taxes, licenses and similar permit fees payable by Tenant with respect to Tenant’s business operations at the Premises. 
  
 7.    DAMAGE TO PREMISES. (a), Procedure Upon Damage. If the Land and or the Improvements or any portion
thereof shall be damaged or destroyed by fire, or by any other cause whatsoever, then whether or not this lease shall continue thereafter through the end of the term hereof shall be determined as follows. Landlord and Tenant shall within twenty (20)
days of the occurrence of such damage or destruction determine the reasonable cost, if any, of any work necessary to cause Tenant to be able lawfully to use the Premises hereunder for the balance of the term hereof (the “Repair Cost”). If
Tenant does not wish to contribute Tenant’s share of the Repair Cost as hereinafter provided, then Tenant may terminate this lease by written notice to Landlord within ten (10) days after the date of the determination of the Repair Cost. If
Tenant does not terminate this lease, then Landlord shall with reasonable diligence effect the repair work necessary to cause Tenant to be able lawfully to use the Premises hereunder, and Landlord and Tenant shall share the Repair Cost equally,
provided that Landlord’s share thereof shall not exceed Ten Thousand Dollars ($10,000.00). If Tenant does not terminate this lease, Tenant shall pay to Landlord in cash the full amount of Tenant’s share of the Repair Cost within fifteen
(15) days after the date of its determination. Within thirty (30) days after completion by Landlord of such repair work, Landlord shall refund any overpayment by Tenant or shall bill Tenant for any underpayment by Tenant relating to such Repair
Cost, and Tenant shall pay any underpayment within thirty (30) days of receipt of Landlord’s demand therefor. 
  
 (b)    Waiver of Subrogation. Each of the parties hereto mutually releases the other from liability, and waives all right of recovery against the other, for any loss of or damage to the property of each,
property of others for which either of the parties hereto is liable, or may become liable, or as to which either may have assumed liability, property of others in the actual or constructive custody of either of the parties hereto, including earnings
derived therefrom, caused by or resulting from fire, the perils of the commonly referred to Special Form Endorsement and leakage from automatic sprinkler systems, if any, or from perils insured against under any insurance policies maintained by the
parties hereto, regardless of the cause of such loss or damage even though it results from some act or negligence of a party hereto, its agents or representatives; provided, however, that this provision shall be inapplicable if it would have the
effect, but only to the extent that it would have the effect, of invalidating any insurance coverage of the parties hereto. 
  
 Exhibit G 
 2 

  
 8.    INSURANCE AND INDEMNIFICATION. (a) Casualty
Insurance. Landlord at Landlord’s expense shall provide and maintain fire insurance (including the so-called Special Form Endorsement) on the Improvements and Fixtures in a company or companies licensed to do business in the state in which the
Premises are located in a total amount of not less than ninety percent (90%) of the replacement cost thereof. Tenant shall at Tenant’s expense provide and maintain fire insurance (including the so-called Special Form Endorsement) on
Tenant’s personal property located at the Premises from time to time in a company or companies licensed to do business in the state in which the Premises are located. 
  
 (b)    Tenant’s Indemnification. Subject to the provisions of Section 7(b) hereof, Tenant, with respect to its use and occupancy of the
Premises during the term of this lease, but not otherwise, agrees, at Landlord’s option, to defend Landlord, its agents, servants, employees, officers and directors (the “Tenant Indemnified Parties”), against any, all and every
demand, claim, assertion of liability, or action arising or alleged to have arisen out of any act or omission of Tenant, its agents, servants or employees, whether such demand, claim, assertion of liability or action be for damages, injury to person
or property, including the property of Landlord, or death of any person, made by any person, group or organization, whether employed by either of the parties hereto or otherwise, and agrees to assume legal liability for, indemnify and hold free and
harmless the Tenant Indemnified Parties from any and all loss, damages, liability, costs or expenses (including, but not limited to, reasonable attorneys’ fees, reasonable investigative and discovery costs and court costs) and all other sums
which the Tenant Indemnified Parties may reasonably pay or become obligated to pay on account of any, all and every demand, claim, assertion of liability or action arising or alleged to have arisen out of any act or,omission of Tenant, its aqents,
servants or employees, whether such claim, demand, assertion of liability or action be for damages, injury to person or property, including the property of Landlord, or death of any person, made by any person, group or organization, whether employed
by either of the parties hereto or otherwise. 
  
 (c)    Landlord’s Indemnification.
Subject to the provisions of Section 7(b) hereof, Landlord, with respect to acts or omissions with respect to the Land, Improvements and/or Fixtures during the term of this lease, but not otherwise, agrees, at Tenant’s option, to defend Tenant,
its agents, servants, employees, officers and directors (the “Landlord Indemnified Parties”), against any, all and every, demand, claim, assertion of liability or action, arising or alleged to have arisen out of any act or omission of
Landlord, and Landlord’s agents, servants or employees, whether such demand, claim, assertion of liability or action be for damages, injury to person or property, including the property of Tenant, or death of any person, made by any person,
group or organization, whether employed by either of the parties hereto or otherwise, and agrees to assume legal liability for, indemnify and hold free and harmless the Landlord Indemnified Parties from any and all loss, damages, liability, costs or
expenses (including, but not limited to, reasonable attorneys’ fees, reasonable investigative and discovery costs and court costs) and all other sums which the Landlord Indemnified Parties may reasonably pay or become obligated to pay on
account of any, all and every demand, claim, assertion of liability or action arising or alleged to have arisen out of any act or omission of Landlord, and Landlord’s agents, servants or employees, whether such claim, demand, assertion of
liability or action be for 
  
 Exhibit G 
 3 

 damages, injury to person or property, including the property of Tenant, or death of any person, made by any person, group or organization,
whether employed by either of the parties hereto or otherwise. 
  
 (d)    Liability
Insurance. Each party shall maintain at its own expense insurance written by one or more insurance carriers licensed to do business in the state in which the Premises are located which shall insure against liability for injury to and/or death of
and/or damage to property of any person or persons, with policy limits of not less than Two Million Dollars ($2,000,000) combined single limit for any claim arising out of any one occurrence. Said insurance shall provide blanket contractual
liability insurance recognizing and,,.insuring the assumption of liability assumed by the purchaser thereof in Section 8(b) or Section 8(c) hereof as applicable. 
  
 (e)    Workers’ Compensation Insurance. Each party shall maintain all Workers’ Compensation and Employers’ Liability Insurance required under applicable
Workers’ Compensation Acts. 
  
 (f)    Certificates. Each party shall deliver to the
other certificates of insurance for the insurance hereinabove provided for. Each certificate shall (i) not be canceled or materially amended unless ten (10) days’ prior written notice is given to the respective certificate holder, and (ii) be
primary coverage, not coverage that is contributing with or in excess of the coverage which Landlord or Tenant, as the case may be, may be required to carry pursuant to this lease. 
  
 9.    EXERCISE OF EMINENT DOMAIN. An appropriation or taking under the power of eminent domain of any portion of the Land, Improvements and/or
Fixtures, or the sale of any portion thereof in lieu thereof, are sometimes hereinafter called a “taking.” In the event of the taking of any portion of the Land, Improvements and/or Fixtures, then whether or not this lease shall continue
thereafter through the end of the term hereof shall be determined as follows. Landlord and Tenant shall within twenty (20) days of the occurrence of the taking of possession by the condemning authority determine the Repair Cost. If Tenant does not
wish to contribute Tenant’s share of the Repair Cost as hereinafter provided, then Tenant may terminate this lease by written notice to Landlord within ten (10) days after the date of determination of the Repair Cost. If Tenant does not
terminate this lease, then Landlord shall with reasonable diligence effect the repair work necessary to cause Tenant to be able lawfully to use the Premises hereunder, and Landlord and Tenant shall share the Repair Cost, Tenant shall pay to Landlord
in cash, and Landlord and Tenant shall adjust overpayment and underpayment in the same manner and at the same times as provided in Section 7(a) hereof. In any event Tenant shall have no interest in any condemnation award or the sale price paid, and
Tenant hereby assigns to Landlord any and all right or interest Tenant may have in such award or sale price or other right to compensation, except that Tenant may seek compensation for moving and relocation expenses as a result of such taking so
long as the granting thereof to Tenant shall not reduce the sum paid or payable to Landlord. 
  
 Exhibit G 
 4 

  
 10.    UTILITIES. During the term hereof, Tenant shall
pay all public utility charges in connection with the Land, Improvements and Fixtures whether or not they might be part of the Premises. 
  
 11.    COVENANTS AGAINST LIENS. Tenant shall not permit any lien to be attached to the Premises by reason of any act or omission of Tenant. If any such lien does so attach, Tenant shall cause such
lien to be released (by bonding or otherwise) within twenty (20) days after notice to Tenant thereof. If Tenant has not caused such lien to be released within said twenty (20) day period, Landlord may discharge the same, and Tenant shall reimburse
Landlord upon demand for the amount so paid by Landlord. 
  
 12.    ASSIGNMENT AND
SUBLETTING. Tenant shall not assign this lease by operation of law or otherwise or sublet all or any part of the Premises without Landlord’s prior written consent, which consent may be withheld, conditioned or delayed in Landlord’s
sole, subjective discretion. No permitted assignment or subletting shall relieve Tenant from any of its obligations as tenant hereunder. Every such permitted assignment or sublease shall recite that it is and shall be subject and subordinate to the
provisions of this lease, and the termination or cancellation of this lease shall constitute a termination and cancellation of every such assignment or sublease. 
  
 13.    NOTICES. All notices, required or elective shall be in writing and shall be mailed by United States mail, registered or certified, return receipt requested, postage
prepaid, or sent by a recognized national overnight courier service (such as Federal Express or Airborne) which keeps written records of the receipt by the addressee, addressed to Landlord at: attention Real Estate Manager, at: P.O. Box 2400,
Tupelo, Mississippi 38803-2400 (courier address: 3406 West Main Street, Tupelo, Mississippi 38801) and to Tenant, attention Chief Financial officer, at: 18191 N.W. 68th Avenue, Miami, Florida 33015, with copies to Ann F. Corso, Esq., Butler, Snow,
O’Mara, Stevens & Cannada, PLLC, P.O. Box 22567, Jackson, Mississippi 39225-2567 (courier address: 210 East Capitol Street, 17th Floor-AmSouth Plaza, Jackson, Mississippi 39201), to Seller c/o Gregg Foxx, V.P. Distribution Center, One
Catalina Way, Baldwyn, Mississippi 38824, and to Kristen Kolesar, Esq., Morgan Lewis & Bockius LLP, One Oxford Centre, 301 Grant Street, 32nd Floor, Pittsburgh, Pennsylvania 15219, or to such other address as the respective parties may
designate. Notices shall be deemed complete upon receipt thereof, or upon attempted delivery, if delivery is refused. With respect to Tenant, the address to determine completion of notice shall be the Miami, Florida, address. 

 
 14.    RIGHT TO GO UPON PREMISES. Landlord reserves the right for itself, its officers, directors,
employees, contractors and invitees, to go upon the Premises during the term hereof at any time for any purpose so long as the business operations of Tenant are not unreasonably interfered with, and Tenant acknowledges that, after September 30,
2002, Landlord shall be performing work preparatory to Landlord’s occupying the entire Land and Improvements. Landlord agrees that, except in cases of emergency, Landlord shall consult with Tenant’s on-site manager prior to entering the
Premises to the extent such on-site manager is reasonably available. 
  
 Exhibit G 
 5 

  
 15.    MAINTENANCE; SURRENDER. During the term hereof
Tenant shall use and occupy the Premises in a manner such that the Premises suffer only reasonable wear and tear, and should Tenant, or those on or at the Premises at the invitation of Tenant or because Tenant is on or at the Premises, act or omit
to act so that the Premises shall suffer more than reasonable wear and tear, Tenant shall maintain, repair and/or replace as necessary as a result of such act or omission. On or before September 30, 2002, Tenant shall remove all of its property from
and otherwise vacate the portion of the Improvements it will not demise after such date, leaving such portion in a broom clean condition and in the condition in which such portion was received by Tenant, reasonable wear and tear excepted. Prior to
the end of the term hereof, or within thirty (30) days after the termination of this lease pursuant to the operation of the provisions of Section 7 or Section 9 hereof, Tenant shall so remove all of its property from and otherwise vacate the
Premises demised by Tenant at the time of the end of the term hereof, leaving such Premises in a broom clean condition and in the condition in which such Premises were received by Tenant, reasonable wear and tear and damage by casualty or taking
excepted. Except as required of Tenant pursuant to the preceding provisions of this Section 15, Landlord shall maintain the Premises (including, without limitation, the roof, the structure and all mechanical and operating systems and the parking,
sidewalk and common areas [both interior and exterior]) in good condition and repair. 
  
 16.    DEFAULT.    (a) By Tenant. Should Tenant default in the payment of rent and such default continue for five (5) days after Tenant receives written notice thereof from
Landlord, or should Tenant default in the performance of any other covenant or agreement herein, and such default continue for twenty (20) days after Tenant receives written notice thereof from Landlord, or if the default of Tenant is of a type
which is not reasonably curable within twenty (20) days, if Tenant has not commenced to cure same within said twenty (20) day period and does not thereafter diligently pursue the curing of said default to completion, Landlord may, so long as such
default continues, exercise any rights or remedies it may have in law or in equity against Tenant. 
  
 (b)    By Landlord. Should Landlord default in the performance of any covenant or agreement herein, and such default continue for thirty (30) days after Landlord receives written notice thereof from Tenant,
or if the default is not reasonably curable within thirty (30) days, if Landlord has not commenced to cure same within said thirty (30) day period and does not thereafter diligently pursue the curing of said default to completion, in the event
Landlord’s default is of a type which can be cured by the payment of money, Tenant may, without limitation and subject to the provisions of Section 16(c) hereof, terminate this lease. 
  
 (c)    Remedies Cumulative. Remedies conferred by this lease are not exclusive and are cumulative and in addition to remedies at law or in
equity. 
  
 17.    SIGNS. Tenant may install, erect and maintain upon the Premises all
signs in compliance with applicable law that are necessary or appropriate to the conduct of its business. Tenant shall remove the same before the end of the term and repair any damage caused thereby. 
  
 Exhibit G 
 6 

  
 18.    ATTORNEY’S FEES. The unsuccessful party
shall pay reasonable attorney’s fees and costs fixed by the court in any action wherein: (a) the other party is successful therein, or (b) a third person commences an action against Landlord and Tenant respecting the Premises, and one of them
is held liable and the other exonerated. 
  
 19.    HOLDING OVER. If Tenant continues to
occupy the Premises after the expiration of the term of this lease and Landlord accepts rent thereafter, a monthly tenancy terminable by either party on one (1) month’s notice shall be created, which shall be upon the same terms and conditions
as those herein specified, except that monthly rent shall be Fifty Thousand Dollars ($50,000) per month. 
  
 20.    SUCCESSORS IN INTEREST. Subject to the provisions of Section 12 hereof, the provisions of this lease shall inure to the benefit of and shall bind the successors, transferees and assigns of the
respective parties hereto. 
  
 21.    ALTERATION. Tenant shall obtain Landlord’s
written consent to any alterations or construction which affect the Land, Improvements and/or Fixtures. Landlord’s consent shall not be withheld, conditioned or delayed unreasonably. 
  
 22.    GENERAL CONDITIONS. Time is of the essence of this lease. No waiver of any breach of this lease by either party hereto shall be construed
to be a waiver of any succeeding breach of the same or any other provision hereof. The use herein of any gender or number shall not be deemed to make inapplicable the provision should the gender or number be inappropriate to the party referenced.
Landlord and Tenant have negotiated this lease, have had the opportunity to be advised respecting the provisions contained herein and have had the right to approve each and every provision hereof; therefore, this lease shall not be construed against
either Landlord or Tenant as a result of the preparation of this lease by or on behalf of either party. If any portion .of this lease shall become illegal, null or void for any reason, or shall be held by 
  
 [Remainder of page left blank intentionally.] 
  
 Exhibit G 
 7 

 any court of competent jurisdiction to be so, the remaining portions thereof shall remain in full force and effect. 
  
 IN WITNESS WHEREOF, as of the day and year first hereinabove written, the respective parties hereto have executed these presents,
consisting of: Section 1 through Section 22 and Exhibits A, B and C personally or by officers or agents thereunto duly authorized. 
  
 
	 HANCOCK FABRICS, INC.,
 a Delaware corporation
 
	 
	 By
 	 	 

	 By
 	 	 

	  	 	 Landlord
 

 
  
 
	 CATALINA INDUSTRIES, INC.,
 a Florida corporation
 
	 
	 By
 	 	 

	 By
 	 	 

	  	 	 Tenant
 

 
  
 Exhibit G 
 8LOAN AGREEMENT

THIS LOAN AGREEMENT ("Agreement") is made and entered into as of August 14, 2002
by and  between  BEI  TECHNOLOGIES,  INC, a Delaware  corporation  ("BEI"),  BEI
SENSORS & SYSTEMS  COMPANY,  INC., a Delaware  corporation  ("BEISEN")  (BEI and
BEISEN each a "Borrower" and,  collectively the "Borrowers"),  and UNION BANK OF
CALIFORNIA, N.A., a national banking association ("Bank").

                              SECTION 1. THE CREDIT

1.1      CREDIT FACILITIES

1.1.1 The  Revolving  Loan.  Bank will loan to Borrowers an amount not to exceed
Twenty  Five  Million and No/100  Dollars  ($25,000,000.00)  outstanding  in the
aggregate at any one time (the "Revolving  Loan"). The proceeds of the Revolving
Loan shall be used for  Borrowers'  general  working  capital and other  general
corporate purposes.  Borrowers may borrow, repay and reborrow all or part of the
Revolving  Loan in  accordance  with the terms of the  Revolving  Note  (defined
below).  All  borrowings  of the  Revolving  Loan must be made before August 15,
2004,  at which time all unpaid  principal  and interest of the  Revolving  Loan
shall be due and  payable.  The  Revolving  Loan  shall be  evidenced  by Bank's
standard form of commercial  promissory note (the "Revolving Note").  Bank shall
enter each amount  borrowed and repaid in Bank's  records and such entries shall
be deemed  correct  absent  manifest  error.  Omission  of Bank to make any such
entries shall not discharge any Borrower of its obligation to repay in full with
interest all amounts borrowed.

          1.1.1  (a) The  Commercial  L/C  Sublimit.  As a  sublimit  under  the
          Revolving Loan, Bank shall issue, for the account of Borrowers, one or
          more  irrevocable  commercial  letters  of  credit  (individually,   a
          "Commercial L/C") with transport  documents presented in a full set to
          Bank (and,  in case of airway  bills,  consigned to Bank) or at Bank's
          option,  with transport documents presented in less than a full set to
          Bank and/or consigned to Borrowers or to any party other than Bank and
          calling for drafts at sight or usance up to one hundred  eighty  (180)
          days covering the importation or purchase of inventory.  The aggregate
          amount available to be drawn under all outstanding Commercial L/Cs and
          the aggregate amount of unpaid  reimbursement  obligations under drawn
          Commercial  L/Cs  shall not exceed  Five  Million  and No/100  Dollars
          ($5,000,000.00)  and shall  reduce,  dollar for  dollar,  the  maximum
          amount  available  under the Revolving Loan. All Commercial L/Cs shall
          be drawn on terms and conditions  acceptable to Bank in its reasonable
          determination  and shall be  governed  by the terms of (and  Borrowers
          agree to execute) Bank's standard form of commercial  letter of credit
          application  and  reimbursement  agreement.  No  Commercial  L/C shall
          expire  more than one hundred  eighty  (180) days from the date of its
          issuance, and in no event later than August 15, 2004.

                                     Page 1
<PAGE>

          1.1.1 (b) The Standby L/C Sublimit.  As a sublimit under the Revolving
          Loan,  Bank shall  issue,  for the account of  Borrowers,  one or more
          irrevocable standby letters of credit  (individually,  a "Standby L/C"
          ). The aggregate  amount  available to be drawn under all Standby L/Cs
          and the aggregate  amount of unpaid  reimbursement  obligations  under
          drawn  Standby L/Cs shall not exceed Five  Million and No/100  Dollars
          ($5,000,000.00)  and shall  reduce,  dollar for  dollar,  the  maximum
          amount  available  under the Revolving Loan. All Standby L/Cs shall be
          drawn on terms and  conditions  acceptable  to Bank in its  reasonable
          determination  and shall be  governed  by the terms of (and  Borrowers
          agree to execute)  Bank's  standard  form of standby  letter of credit
          application and reimbursement  agreement.  No Standby L/C shall expire
          later than August 15, 2004.

          Notwithstanding  the foregoing,  the combined amount outstanding under
          the  Commercial  L/C Sublimit  and the Standby L/C Sublimit  shall not
          exceed Five Million and No/100 Dollars ($5,000,000.00), at any time.

1.2 Terminology. The following words and phrases, whether used in their singular
or plural form,  shall have the meanings set forth below for all Loan Documents,
unless otherwise defined therein:

          (a) "Event of Default" is defined in Section 6.

          (b)  "GAAP"  means  generally  accepted   accounting   principles  and
          practices   consistently  applied.   Accounting  terms  used  in  this
          Agreement but not otherwise  expressly defined have the meanings given
          them by GAAP.

          (c) "L/C" means the  Commercial  L/Cs or the Standby L/Cs, or both, as
          the context may require.

          (d) "Lien"  means any  voluntary  or  involuntary  security  interest,
          mortgage,   pledge,  claim,  charge,   encumbrance,   title  retention
          agreement,  or third party  interest,  covering all or any part of the
          property of any Borrower.

          (e) "Loan" means all the credit facilities described above.

          (f) "Loan  Documents"  means this  Agreement,  the Note, and all other
          documents, instruments and agreements required by Bank and executed in
          connection  with this  Agreement,  the Note,  the Loans,  and with all
          other credit  facilities from time to time made available to Borrowers
          by Bank.

          (g) "Note" means all the promissory notes described above.

          (h) "Note Purchase Agreement" means that Note Purchase Agreement dated
          November 16, 1998, by and between  Borrowers,  Allstate Life Insurance
          Company, and Connecticut General Life Insurance Company.

          (i) "Subsidiary(ies)" is defined in Section 3.2.

1.3  Prepayment.  The  Loan  may be  prepaid  in  full or in  part  but  only in
accordance with the terms of the Note, and any such prepayment  shall be subject
to any  prepayment  fee  provided  for  therein.  In the  event  of a  principal
prepayment on any term indebtedness, the amount

                                     Page 2
<PAGE>

prepaid  shall be applied to the  scheduled  principal  installments  due in the
reverse order of their maturity on the Loan being prepaid.

1.4 Interest.  The unpaid  principal  balance of the Loan shall bear interest at
the rate or rates provided in the Note.

1.5  Upfront  Commitment  Fee.  On or  before  the  date  of  execution  of this
Agreement,  Borrowers shall pay to Bank a nonrefundable commitment fee of Thirty
Five Thousand and No/100 Dollars ($35,000.00).

1.6 Commitment Fee.  Beginning  September 15, 2003, and on the last calendar day
of each  three-month  period  thereafter,  Borrowers  shall pay to Bank a fee of
0.1875% per year on the unused  portion of the Revolving  Loan for the preceding
quarter, computed on the basis of a 360 day year for actual days elapsed.

1.7 Legal  Fee.  Borrowers  shall  have  reimbursed  Bank for  Bank's  costs and
expenses, including, without limitation, reasonable attorneys' fees and expenses
(including  the fees of Bank's  in-house  legal  counsel and staff)  incurred in
connection with the negotiation and drafting of this Agreement provided that the
upfront  commitment  fee  provided  for in Section  1.5 will be applied  against
payment of such costs and expenses.

1.8 Balances.  Each Borrower shall maintain its major  depository  accounts with
Bank until all  obligations  of Borrowers to Bank under the Loan  Documents have
been paid in full.

1.9  Disbursement.  Bank shall  disburse the proceeds of the Loan as provided in
Bank's standard form Authorization to Disburse executed by Borrowers.

                         SECTION 2. CONDITIONS PRECEDENT

Bank shall not be  obligated  to disburse all or any portion of the Loans unless
at or prior to the time of each such disbursement, the following conditions have
been fulfilled to Bank's satisfaction:

2.1  Compliance.  Borrowers shall have performed and complied with all terms and
conditions  required by this  Agreement to be performed  or complied  with,  and
shall have executed and delivered to Bank the Note and all other Loan Documents.

2.2  Authorization to Obtain Credit.  Borrowers shall have provided Bank with an
executed  copy of Bank's form  Authorization  to Obtain  Credit  with  certified
copies of resolutions  duly adopted by each Borrower's board of directors and in
form satisfactory to Bank,  authorizing the execution,  delivery and performance
of this  Agreement and the other Loan  Documents.  Such  resolutions  shall also
designate  the  persons  who  are  authorized  to act on  Borrowers'  behalf  in
connection with this Agreement to do the things  required of Borrowers  pursuant
to this Agreement.

2.3  Continuing  Compliance.  At the  time  any  disbursement  is to be made and
immediately  thereafter,  there  shall  not  exist  any  Event  of  Default  (as
hereinafter defined) or any event,  condition, or act which with notice or lapse
of time, or both, would constitute an Event of Default.

2.4  Schedule  of  Subsidiaries.  Each  Borrower  shall have  provided  Bank the
schedule referred to in Section 3.2 ("Schedule 3.2").

                                     Page 3
<PAGE>

                    SECTION 3. REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants that:

3.1 Business  Activity.  Borrower's  principal  business is the  manufacture  of
electronic sensors, motors and actuators.

3.2 Affiliates and Subsidiaries.  Borrower's  Subsidiaries and Affiliates (those
entities in which  Borrower has either a  controlling  interest or a twenty-five
percent (25%) or more ownership interest) and their addresses,  and the names of
the persons or entities owning five percent (5%) or more of the equity interests
in  Borrower,  are as provided on a schedule  delivered to Bank on or before the
date of this Agreement.

3.3  Organization  and  Qualification.  Borrower is duly  organized and existing
under the laws of the state of its  organization,  is duly qualified and in good
standing in any jurisdiction  where such qualification is required (except where
the failure to be so qualified would not have a materially adverse effect on the
operations or financial condition of Borrower and its Subsidiaries), and has the
power and  authority  to carry on the  business  in which it is  engaged  and/or
proposes to engage.

3.4 Power and Authorization.  Borrower has the power and authority to enter into
this Agreement and to execute and deliver the Note and all other Loan Documents.
This  Agreement  and all things  required by this  Agreement  and the other Loan
Documents have been duly authorized by all requisite action of Borrower.

3.5  Authority  to Borrow.  The  execution,  delivery  and  performance  of this
Agreement, the Note and all other Loan Documents are not in contravention of any
of the terms of any  indenture,  agreement or undertaking to which Borrower is a
party or by which it or any of its property is bound or affected.

3.6 Compliance with Laws.  Borrower is in compliance  with all applicable  laws,
rules,  ordinances  or  regulations  noncompliance  with which would  materially
adversely  affect the  operations  or  financial  condition  of Borrower and its
Subsidiaries.

3.7 Title.  Except for assets  which may have been  disposed of in the  ordinary
course of  business,  Borrower  has good and  marketable  title to all  property
reflected  in its  financial  statements  delivered  to Bank and to all property
acquired by Borrower since the date of said financial statements, free and clear
of all Liens, except Liens that are permitted under Section 5.1 hereof.

3.8 Financial  Statements.  Borrower's  financial  statements,  including both a
balance sheet at September 28, 2001, together with supporting schedules,  and an
income  statement for the nine (9) months ended June 29, 2002,  have  heretofore
been furnished to Bank, are true and complete,  and fairly represent  Borrower's
financial  condition for the period covered thereby.  Since June 29, 2002, there
has been no material adverse change in Borrower and its Subsidiaries'  financial
condition or operations.

3.9  Litigation.  There is no  litigation  or  proceeding  pending (that has not
already been disclosed to Bank) or, to Borrower's knowledge,  threatened against
Borrower  or any of its  property  which is  reasonably  likely  to  affect  the
financial condition, property or business of

                                     Page 4
<PAGE>

Borrower  and its  Subsidiaries  in a  materially  adverse  manner  or result in
liability in excess of Borrower's insurance coverage not previously disclosed to
Bank.

3.10 ERISA. Borrower's defined benefit pension plans (as defined in the Employee
Retirement Income Security Act of 1974, as amended  ("ERISA")),  meet, as of the
date  hereof,  the minimum  funding  standards  of Section 302 of ERISA,  and no
Reportable Event or Prohibited Transaction as defined in ERISA has occurred with
respect to any such plan.

3.11 Regulation U. No action has been taken or is currently planned by Borrower,
or any agent acting on its behalf,  which would cause this Agreement or the Note
to violate Regulation U or any other regulation of the Board of Governors of the
Federal Reserve  System,  or to violate the Securities and Exchange Act of 1934,
in each  case as in  effect  now or as the  same  may  hereafter  be in  effect.
Borrower is not engaged in the business of  extending  credit for the purpose of
purchasing  or carrying  margin stock as one of its  important  activities  and,
except as may be expressly  agreed to and documented  between Borrower and Bank,
none of the proceeds of the Loan will be used  directly or  indirectly  for such
purpose.

3.12 No Event of  Default.  Borrower is not now in default in the payment of any
of its  material  obligations,  and  there  exists no Event of  Default,  and no
condition,  event or act  which  with  notice or lapse of time,  or both,  would
constitute an Event of Default.

3.13 Continuing  Representations and Warranties.  The foregoing  representations
and warranties shall be considered to have been made again at and as of the date
of each and  every  Loan  disbursement  and  shall be true  and  correct  in all
material respects as of each such date.

                        SECTION 4. AFFIRMATIVE COVENANTS

Until all sums payable  pursuant to this Agreement,  the Note and the other Loan
Documents  have been paid in full,  unless Bank  otherwise  consents in writing,
each Borrower agrees that:

4.1 Use of Proceeds. Borrower will use the proceeds of the Loan only as provided
in Section 1 above.

4.2 Payment of Obligations.  Borrower will pay and discharge promptly all taxes,
assessments and other governmental  charges and claims levied or imposed upon it
or its property,  or any part thereof;  provided,  however,  that Borrower shall
have the right in good faith to contest any such taxes, assessments,  charges or
claims  and,  pending the outcome of such  contest,  to delay or refuse  payment
thereof  provided that  adequately  funded reserves are established by it to pay
and discharge any such taxes, assessments, charges and claims.

4.3 Maintenance of Existence. Borrower will maintain and preserve its existence,
its assets,  and all material rights,  franchises,  licenses and other authority
necessary  for the conduct of its  business,  and will maintain and preserve its
property,  equipment and  facilities in good order,  condition and repair.  Bank
may,  during  regular  business hours at reasonable  times and after  reasonable
prior notice, visit and inspect any of Borrower's properties.

4.4  Records.  Borrower  will keep and maintain  full and accurate  accounts and
records of its  operations on a consolidated  basis in accordance  with GAAP and
will  permit  Bank,  at  Borrower's  expense,  to have access  thereto,  to make
examination and photocopies thereof, and

                                     Page 5
<PAGE>

to make audits of Borrower's  accounts and records and Bank's  collateral during
regular business hours and after reasonable prior notice.

4.5 Information Furnished. Each Borrower will furnish to Bank:

          (a)  Within  forty-five  (45)  days  after  the  close of each  fiscal
          quarter,  except  for the  final  quarter  of each  fiscal  year,  its
          unaudited  balance sheet as of the close of such fiscal  quarter,  its
          unaudited income and expense  statement with  year-to-date  totals and
          supportive schedules,  and its statement of retained earnings for that
          fiscal quarter, all prepared in accordance with GAAP.

          (b)  Within  one  hundred  twenty  (120)  days after the close of each
          fiscal year, a copy of its statement of financial  condition including
          at least its balance sheet as of the close of such fiscal year and its
          income and expense statement,  and its retained earnings statement for
          such  fiscal  year,  examined  and  prepared  on an  audited  basis by
          independent  certified  public  accountants  selected by Borrower  and
          reasonably satisfactory to Bank, in accordance with GAAP.

          (c)  Prompt  written  notice to Bank of any Event of Default or breach
          under any of the terms or  provisions  of this  Agreement or any other
          Loan  Document,  any  litigation  which would have a material  adverse
          effect on Borrower's and its Subsidiaries'  financial  condition,  and
          any other  matter  which has resulted in, or is likely to result in, a
          material adverse change in Borrower's and its Subsidiaries'  financial
          condition or operations.

          (d)  Within  forty-five  (45)  days  after  the  close of each  fiscal
          quarter,  a certification  of compliance with all covenants under this
          Agreement,  executed by Borrower's  duly authorized  officer,  in form
          acceptable to Bank.

          (e)  Prior  written  notice  to  Bank  of any  change  in  Borrower's,
          chairman,  chief  executive  officer,  president  or  chief  financial
          officer or, Borrower's name or state of organization, and the material
          relocation of Borrower's assets.

          (f) Within  fifteen  (15) days after  Borrower  knows or has reason to
          know that any Reportable  Event or Prohibited  Transaction (as defined
          in ERISA) has  occurred  with respect to any defined  benefit  pension
          plan of  Borrower,  a statement of an  authorized  officer of Borrower
          describing  such event or  condition  and the  action,  if any,  which
          Borrower proposes to take with respect thereto.

          (g)  Such  other  financial  statements  and  information  as Bank may
          reasonably  request from time to time,  including  without  limitation
          update(s) to Schedule 3.2.

4.6 Current Ratio. Borrower will at all times maintain a ratio of current assets
to current liabilities of not less than 1.50:1.0.

4.7 Tangible Net Worth. Borrowers will not permit or suffer at any time Tangible
Net  Worth to be less than (i) the sum of (A) the  Tangible  Net Worth as of the
end of the  fiscal  year of the  Company  ended  October  3,  1998,  plus (B) an
aggregate amount equal to 50% of Consolidated Net Income (but only if a positive
number)  for the period  beginning  October 4, 1998 and ending at the end of the
most recently  completed fiscal quarter of the Company,  less (ii) Three Million
and No/100  Dollars  ($3,000,000.00).  "Tangible  Net Worth"  means at any time,
stockholders' equity as set forth on the consolidated balance sheet of Borrowers
and their Subsidiaries

                                     Page 6
<PAGE>

determined in accordance  with GAAP,  minus (a) the net book value of all assets
of Borrowers and their  Subsidiaries  (after  deducting any reserves  applicable
thereto)  which would be shown as  goodwill,  patents or trade names and (b) the
net book value of investments in unrestricted  Subsidiaries.  "Consolidated  Net
Income"  means,  with  reference  to any  period,  the net  income  (or loss) of
Borrower and its restricted  Subsidiaries for such period (taken as a cumulative
whole),  as determined in accordance with GAAP, after eliminating all offsetting
debits and credits  between  Borrower and its  restricted  Subsidiaries  and all
other  items  required  to be  eliminated  in the course of the  preparation  of
consolidated financial statements of Borrower and its restricted Subsidiaries in
accordance with GAAP.

4.8 Fixed Charge Coverage Ratio. Borrowers will not permit or suffer at any time
the ratio of  earnings  available  for Fixed  Charges to Fixed  Charges  for the
period  comprised  of the  immediately  preceding  four  fiscal  quarters of the
Company  to be less than 1.25 to 1.00  from the date of this  Agreement  through
March 29,  2003;  not less than  1.35:1.00  from March 30, 2003 through June 28,
2003; and not less than 1.50:1.00  from June 29, 2003 and  thereafter,  provided
however,  notwithstanding  anything to the contrary in the  foregoing,  one time
charges of up to  $15,600,00.00  for excess  capacity  and  uncollectables  with
respect to  OpticNet,  Inc., a related  party,  and a product line move shall be
excluded from the  calculation  of  Consolidated  Net Income for the purposes of
calculating  the ratio of earnings  available for Fixed Charges to Fixed Charges
for each of the fiscal quarters ending March 30, 2002, June 29, 2002,  September
28, 2002,  and  December  28, 2002 and one time  charges of up to Seven  Hundred
Fifty  Thousand and No/100 Dollars  ($750,000.00)  for litigation and settlement
expenses related to a property in Camden,  Arkansas,  shall be excluded from the
calculation of Consolidated Net Income for the purposes of calculating the ratio
of earnings  available for Fixed Charges to Fixed Charges for each of the fiscal
quarters ending September 28, 2002,  December 28, 2002 , March 29, 2003 and June
28, 2003. "Earnings Available for Fixed Charges" means consolidated net earnings
(as  defined in the Note  Purchase  Agreement)  plus taxes,  interest  and lease
payments. "Fixed Charges" means interest charges and lease payments.

4.9 Maximum Total Debt/EBITDA  Ratio.  Borrowers will not at any time permit the
ratio  of,  (A)  Total  Debt to (B)  Consolidated  EBITDA  for  the  immediately
preceding four fiscal  quarters of Borrowers,  to exceed 3.00 to 1.00,  provided
however,  that  notwithstanding  anything to the contrary in the foregoing,  one
time charges of up to $15,600,000.00 for excess capacity and uncollectables with
respect to  OpticNet,  Inc., a related  party,  and a product line move shall be
excluded  from the  calculation  of  Consolidated  Net Income for the purpose of
calculating  the  ratio of Total  Debt to  Consolidated  EBITDA  for each of the
fiscal quarters  ending March 30, 2002,  June 29, 2002,  September 28, 2002, and
December 28, 2002 and one time  charges of up to Seven  Hundred  Fifty  Thousand
($750,000.00)  for litigation and settlement  expenses  related to a property in
Camden,  Arkansas,  shall be excluded from the calculation of  Consolidated  Net
Income  for the  purposes  of  calculating  the ratio of (A)  Total  Debt to (B)
Consolidated  EBITDA for each of the four fiscal quarters  ending  September 28,
2002,  December 28, 2002 , March 29, 2003 and June 28, 2003. "Total Debt" means,
as of any date of  determination,  the total of all indebtedness of Borrower and
its restricted  Subsidiaries  determined on a  consolidated  basis in accordance
with GAAP. "Consolidated EBITDA" means, with reference to any period, the sum of
consolidated  net earnings (as defined in the Note Purchase  Agreement) for such
period plus all amounts  deducted in the  computation  thereof on account of (a)
taxes imposed on or measured by income or excess profits,  (b) interest expense,
(c) depreciation, and (d) amortization.

4.10 Insurance.  Borrower will keep all of its insurable property, whether real,
personal or mixed,  adequately insured by good and responsible companies against
fire and such other risks

                                     Page 7
<PAGE>

for  damages to persons  and  property  as are  customarily  insured  against by
companies conducting similar business with respect to like properties.  Borrower
will maintain adequate worker's compensation insurance.

4.11 Additional  Requirements.  Upon Bank's demand,  Borrower will promptly take
such further action and execute all such additional documents and instruments in
connection  with this  Agreement  and the other  Loan  Documents  as Bank in its
reasonable discretion deems necessary,  and promptly supply Bank with such other
information  concerning its affairs as Bank may reasonably  request from time to
time.

4.12 Litigation and Attorneys' Fees. Upon Bank's demand,  Borrower will promptly
pay to Bank reasonable attorneys' fees, including the reasonable estimate of the
allocated  costs and  expenses of  in-house  legal  counsel  and staff,  and all
reasonable  costs and other  expenses  paid or incurred  by Bank in  collecting,
modifying or  compromising  the Loan or in enforcing or exercising its rights or
remedies  created by,  connected  with or provided for in this Agreement and the
other Loan Documents. If any judicial action, arbitration or other proceeding is
commenced,  only the prevailing  party shall be entitled to attorneys'  fees and
court costs.

4.13 Bank Expenses. Upon Bank's request, Borrower will promptly pay or reimburse
Bank for all reasonable  costs,  expenses and fees incurred by Bank in preparing
and   documenting   this   Agreement  and  the  Loan,  and  all  amendments  and
modifications to any Loan Documents, including but not limited to all filing and
recording fees, costs of appraisals,  insurance and attorneys'  fees,  including
the  reasonable  estimate of the allocated  costs and expenses of in-house legal
counsel and staff.

                          SECTION 5. NEGATIVE COVENANTS

Until all sums payable  pursuant to this Agreement,  the Note and the other Loan
Documents  have been paid in full,  unless Bank  otherwise  consents in writing,
each Borrower agrees that:

5.1 Liens.  Borrower will not create,  assume or suffer to exist any Lien on any
of its  property,  whether  real,  personal  or mixed,  now  owned or  hereafter
acquired,  or upon the income or profits  thereof,  except (a) Liens in favor of
Bank,  (b)  Liens  for  taxes,  assessments  and other  government  charges  not
delinquent and taxes,  assessments and other government  charges and other items
being  contested in good faith,  (c) minor  encumbrances  and  easements on real
property which do not affect its market value,  (d) existing Liens on Borrower's
personal  property,  (e)  statutory  Liens of  landlords  and Liens of carriers,
warehousemen,  mechanics,  materialmen  and other similar Liens  incurred in the
ordinary  course of  business,  (f)  attachment  or judgment  Liens,  unless the
judgment it secures shall not, within  forty-five (45) days after entry thereof,
have been  discharged  within  forty-five  (45) days after the expiration of any
such  stay,  (g) Liens  incurred  or  deposits  made in the  ordinary  course of
business in connection with worker's  compensation,  unemployment  insurance and
other  types of social  security  or  retirement  benefits,  or to secure (or to
obtain  letters of credit that  secure) the  performance  of tenders,  statutory
obligations,  surety  bonds,  appeal bonds,  bids,  leases,  performance  bonds,
purchase,  construction  or sales contracts and other similar  obligations,  (h)
Liens  existing  on  property  of  a  person  immediately  prior  to  its  being
consolidated with or merged into a Borrower or subsidiary,  or any Lien existing
on any property  acquired by a Borrower or  subsidiary at the time such property
is acquired,  and (i) future purchase money security interests  encumbering only
the personal property purchased.

                                     Page 8
<PAGE>

5.2  Borrowings.  Borrower  will not sell,  discount or  otherwise  transfer any
account receivable or any note, draft or other evidence of indebtedness,  except
to Bank or except to a  financial  institution  at face  value  for  deposit  or
collection  purposes  only,  and  without  any fees  other  than  the  financial
institution's normal fees for such services. Borrower will not borrow any money,
become  contingently  liable to borrow money, or enter any agreement to directly
or indirectly  obtain  borrowed  money,  except (a) pursuant to agreements  with
Bank, (b) operating  leases executed in the normal course of business,  provided
that the cumulative amount of such leases does not exceed an aggregate amount of
Four Million and No/100 Dollars ($4,000,000.00) each fiscal year.

5.3 Sale of Assets, Liquidation or Merger. Borrower will not liquidate, dissolve
or enter into any consolidation,  merger,  partnership or other combination,  or
convey,  sell or lease all or the  greater  part of its assets or  business,  or
purchase or lease all or the greater  part of the assets or business of another.
Notwithstanding  the  foregoing,  Borrowers  may enter into any of the foregoing
transactions if (a) the successor  formed by such  consolidation or the survivor
of such merger or the person that acquires such assets,  as the case may be (the
"Surviving  Corporation"),  shall be solvent and organized under the laws of the
United States or any state thereof  (including the District of Columbia),  shall
be  acceptable  to Borrowers  and Bank and, if any Borrower is not the Surviving
Corporation,  (i) prior written  approval shall be obtained from Bank,  (ii) the
Surviving  Corporation  shall  have  assumed  in  writing  the due and  punctual
performance  of each  provision of this  Agreement  and the other  documents and
(iii) shall have  delivered  a legal  opinion as to the  enforceability  of such
assumption;  and (b)  immediately  after giving effect to such  transaction,  no
Event of  Default,  or event or  circumstance  that with the giving of notice or
passage of time would result in an Event of Default,  shall have occurred and be
continuing,  and the Surviving  Corporation  shall be able to incur at least One
and No/100 Dollars ($1.00) of indebtedness under Section 4.9.

5.4 Loans,  Advances and  Guaranties.  Borrower will not, except in the ordinary
course of business, make any loans or advances, become a guarantor or surety, or
pledge  its  credit  except  for the  following:  (a) loans or  advances  to, or
guaranties  in favor of,  Subsidiaries  of  Borrowers,  (b) loans,  advances and
guaranties existing on the date of this Agreement and disclosed to Bank, and (c)
loans,  advances  and  guaranties  not  otherwise  permitted by this Section 5.4
provided that the  aggregate  amount at any time does not exceed an amount equal
to five percent (5%) of Tangible  Net Worth as of the then most  recently  ended
fiscal quarter of Borrower.

5.5 Investments. Borrower will not purchase the debt or equity of another except
for the following:  (a) savings accounts and certificates of deposit,  direct or
guaranteed U.S. Government  obligations,  repurchase agreements,  and commercial
paper  issued by  corporations  with the top  ratings of  Moody's or  Standard &
Poor's,  provided that all such  permitted  investments  shall mature within one
year of  purchase,  (b)  purchases  of the debt and or  equity  of  another  not
exceeding   the   aggregate   amount  of  Five   Million   and  No/100   Dollars
($5,000,000.00)  per fiscal year and (c)  purchases of the debt and or equity of
another  exceeding  the  aggregate  amount of Five  Million  and No/100  Dollars
($5,000,000.00)  per fiscal year  previously  approved in writing by Bank.  This
approval shall not be unreasonably withheld.

5.6 Redemption of Stock.  Borrowers will not declare or pay any dividend (except
dividends  in its  capital  stock) or redeem or retire any share of its  capital
stock (except when in exchange for capital stock),  or incur any liability to do
any of the foregoing, unless after giving effect to such action, on a cumulative
basis,  (i) the aggregate  amount of such dividends and redemptions  declared or
made at any time after March 30,  2002 is less than the sum of (A) an  aggregate

                                     Page 9
<PAGE>

amount  equal to fifty  percent  (50%) of the  Consolidated  Net  Income for the
period  beginning  March 31,  2002 and  ending  at the end of the most  recently
completed   fiscal   quarter,   plus  (B)  Five   Million  and  No/100   Dollars
($5,000,000.00)  plus (C) the aggregate  amount of net proceeds of capital stock
for such period,  and (ii) no Event of Default,  or event or  circumstance  that
with the  giving  of  notice  or  passage  of time  would  result in an Event of
Default, would exist.

5.7  Affiliate  Transactions.  Borrower  will not  transfer  any property to any
affiliate, except for value received in the normal course of business and for an
amount,  including any management or service  fee(s),  as would be conducted and
charged with an  unrelated or  unaffiliated  entity.  Borrower  will not pay any
management fee or fee for services to any affiliate without Bank's prior written
consent if any Event of Default shall occur and be continuing.

                          SECTION 6. EVENTS OF DEFAULT

The  occurrence  of any of the  following  events  ("Events of  Default")  shall
terminate  any  obligation  of Bank  to make or  continue  the  Loan  and  shall
automatically,  unless  otherwise  provided  under  the  Note,  make all sums of
interest and principal  and any other  amounts owing under the Loan  immediately
due and payable,  without notice of default,  presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:

6.1 Borrowers shall default in the due and punctual  payment of the principal of
the Note when due or the interest on the Note or on any amounts  owing under any
of the Loan Documents within five (5) business days after the date when due.

6.2 Any default shall occur under the Note.

6.3 Any event of default  under the Note Purchase  Agreement  shall occur and be
continuing.

6.4 Borrowers shall default in the due performance or observance of any covenant
or condition of the Loan Documents.

6.5 Any guaranty or subordination agreement required hereunder shall be breached
or becomes  ineffective,  or any Guarantor or subordinating  creditor shall die,
disavow  or  attempt  to revoke or  terminate  such  guaranty  or  subordination
agreement.

                          SECTION 7. GENERAL PROVISIONS

7.1 Additional Remedies. The rights, powers and remedies given to Bank hereunder
shall be cumulative and not  alternative and shall be in addition to all rights,
powers and remedies  given to Bank by law against  Borrowers or any other person
or entity  including  but not  limited to Bank's  rights of setoff and  banker's
lien.

7.2  Nonwaiver.  Any  forbearance  or failure or delay by Bank in exercising any
right,  power or remedy  hereunder  shall not be deemed a waiver thereof and any
single or partial exercise of any right,  power or remedy shall not preclude the
further exercise  thereof.  No waiver shall be effective unless it is in writing
and signed by an officer of Bank.

7.3 Suretyship Releases and Waivers. In further consideration of Bank permitting
inter-Borrower  advances,  borrowing  and  lending and other  credit  extensions
between  and among  Borrowers,  each and every  Borrower  expressly  waives  and
forgoes any and all rights  and/or  claims it has or may have  against any other
Borrower for contribution, reimbursement,

                                     Page 10
<PAGE>

subrogation,  indemnity  and/or the like, and any and all defenses it has or may
have by reason of any such rights or claims, arising out of any payment or other
performance or any breach,  default or other  non-performance by any Borrower of
any obligation,  duty or liability under this Agreement,  any Note or other Loan
Document.

In the event any  Borrower  is at any time deemed to be a surety,  guarantor  or
accommodation  party in connection with the obligations  ("Indebtedness") of any
other Borrower hereunder (in such capacity, a "Guarantor"), then:

To the  maximum  extent  permitted  by law,  Guarantor  waives (a) all rights to
require Bank to proceed against  Borrower,  or any other  guarantor,  or proceed
against,  enforce or exhaust  any  security  for the  Obligations  or to marshal
assets  or to pursue  any other  remedy  in  Bank's  power  whatsoever;  (b) all
defenses  arising by reason of any disability or other defense of Borrower,  the
cessation  for any reason of the  liability  of  Borrower,  any defense that any
other  indemnity,  guaranty or security was to be obtained,  any claim that Bank
has  made  Guarantor's  obligations  more  burdensome  or more  burdensome  than
Borrower's  obligations,  and the use of any proceeds of the  Obligations  other
than as intended  or  understood  by Bank or  Guarantor;  (c) all  presentments,
demands  for  performance,  notices  of  nonperformance,  protests,  notices  of
dishonor,  notices  of  acceptance  of this  Guaranty  and of the  existence  or
creation of new or additional  Obligations,  and all other notices or demands to
which Guarantor might otherwise be entitled; (d) all conditions precedent to the
effectiveness  of this  Guaranty;  (e) all rights to file a claim in  connection
with the Obligations in an Insolvency  Proceeding filed by or against  Borrower;
(f) all rights to require Bank to enforce any of its remedies; and (g) until the
Obligations are satisfied or fully paid with such payment not subject to return:
(i) all rights of subrogation,  contribution,  indemnification or reimbursement,
(ii) all rights of recourse to any assets or  property  of  Borrower,  or to any
collateral  or  credit  support  for  the  Obligations,   (iii)  all  rights  to
participate  in or benefit from any security or credit  support Bank may have or
acquire,  and (iv) all  rights,  remedies  and  defenses  Guarantor  may have or
acquire against Borrower.

7.4 Inurement. The benefits of this Agreement and the other Loan Documents shall
inure to the  successors  and assigns of Bank and the permitted  successors  and
assigns of any Borrower,  but any attempted  assignment by any Borrower  without
Bank's prior written consent shall be null and void.

7.5  Applicable  Law.  This  Agreement  and the other  Loan  Documents  shall be
governed by and construed according to the laws of the State of California.

7.6  Severability.  Should any one or more  provisions of this  Agreement or any
other Loan  Document be  determined  to be illegal or  unenforceable,  all other
provisions of such document shall nevertheless be effective.

7.7 Construction.  The section and subsection headings herein are for convenient
reference  only and shall not limit or otherwise  affect the  interpretation  of
this Agreement.

7.8  Amendments.  This  Agreement  may be amended only in writing  signed by all
parties hereto.

7.9  Counterparts.  Borrowers and Bank may execute one or more  counterparts  to
this  Agreement,  each of  which  shall  be  deemed  an  original,  but all such
counterparts when taken together, shall constitute one and the same agreement.

                                     Page 11
<PAGE>

7.10  Notices.  Any  notices  or other  communications  provided  for or allowed
hereunder shall be effective only when given by one of the following methods and
addressed to the parties at their  respective  addresses and shall be considered
to have been validly given (a) upon delivery, if delivered personally,  (b) upon
receipt, if mailed,  first class postage prepaid,  with the United States Postal
Service,  (c) on the next business day, if sent by overnight  courier service of
recognized  standing,  or  (d)  upon  telephoned  confirmation  of  receipt,  if
telecopied  or e-mailed.  The  addresses  to which  notices or demands are to be
given may be changed from time to time by notice delivered as provided above.

7.11  Integration  Clause.  Except for the other Loan Documents,  this Agreement
constitutes the entire agreement between Bank and Borrowers  regarding the Loan,
and all prior oral or written communications between Borrowers and Bank shall be
of no further effect or evidentiary value.

THIS  AGREEMENT  is executed  on behalf of the parties by their duly  authorized
representative(s) as of the date first above written.

UNION BANK OF CALIFORNIA, N.A.                       BEI TECHNOLOGIES, INC.

  /s/ Ryan Bradley                        By: /s/ Charles Crocker
-------------------------                    ----------------------------
        Ryan Bradley                                Charles Crocker
        Vice President                              Chairman of the Board/
                                                    CEO

Address for Notices:                      By: /s/ Robert R. Corr
                                             ----------------------------
350 California Street, 10th Floor                   Robert R. Corr
San Francisco, California  94104                    Secretary/Treasurer

                                                   BEI SENSORS & SYSTEMS
                                                   COMPANY, INC.

                                          By: /s/ Charles Crocker
                                             ----------------------------
                                                    Charles Crocker
                                                    Chairman of the Board

                                          By: /s/ Robert R. Corr
                                             ----------------------------
                                                    Robert R. Corr
                                                    Secretary/Treasurer

                                        Address for Notices for Borrowers:
                                        One Post Street, Suite 2500
                                        San Francisco, California 94104

                                     Page 12

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