Document:

EXHIBIT
10.37

 

SECOND AMENDMENT

 

THIS SECOND AMENDMENT
(this “Amendment”) dated as of March 22, 2010 to the Credit
Agreement referenced below is by and among Citi Trends, Inc., a Delaware
corporation (the “Borrower”),
and Bank of America, N.A. (the “Lender”).

 

W I T N E S S E T
H

 

WHEREAS, revolving credit
facilities have been extended to the Borrower pursuant to the Credit Agreement
(as amended, modified and supplemented from time to time, the “Credit
Agreement”) dated as of March 26, 2008 among Borrower, the Guarantors
from time to time party thereto and the Lender; and

 

WHEREAS, the Borrower has
requested certain modifications to the Credit Agreement and the Lender has
agreed to the requested modifications on the terms and conditions set forth
herein.

 

NOW, THEREFORE, IN
CONSIDERATION of the premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

1.                                       Defined Terms.  Capitalized terms used herein but not
otherwise defined herein shall have the meanings provided to such terms in the
Credit Agreement.

 

2.                                       Amendment.  The definition
of “Maturity Date” in Section 1.01 of the Credit Agreement is amended to
read as follows:

 

“Maturity
Date” means March 22, 2012; provided, however, that, in
each case, if such date is not a Business Day, the Maturity Date shall be the
next preceding Business Day.

 

3.                                       Conditions Precedent.  This Amendment shall be effective as of the
date hereof upon satisfaction of each of the following conditions precedent:

 

(a)                                  execution of
this Amendment by the Borrower and the Lender;

 

(b)                                 receipt by the
Lender of favorable opinions of legal counsel to the Loan Parties, addressed to
the Lender, dated as of the date hereof, and in form and substance satisfactory
to the Lender; and

 

(c)                                  payment by the
Borrower to the Lender of an amendment fee equal to $20,000.

 

4.                                       Representations
and Warranties.  Each Loan
Party represents and warrants to the Lender that, after giving effect to this
Amendment, the representations and warranties set forth in the Loan Documents
are true and correct in all material respects as of the date hereof.

 

5.                                       Reaffirmation of Obligations.  Each Loan Party
affirms its obligations under the Loan Documents and agrees that such
obligations are valid and subsisting obligations of the Borrower to the Lender
and not subject to any credits, offsets, defenses, claims, counterclaims or
adjustments of any kind.

 

 

6.                                       No Other Changes.  Except as
modified hereby, all of the terms and provisions of the Loan Documents shall
remain in full force and effect.

 

7.                                       Counterparts; Delivery.  This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and it shall not be
necessary in making proof of this Amendment to produce or account for more than
one such counterpart. Delivery of an executed counterpart of this
Amendment by facsimile or other electronic imaging means shall be effective as
an original.

 

8.                                       Governing Law.  This Amendment
shall be deemed to be a contract made under, and for all purposes shall be
construed in accordance with, the laws of the State of Georgia.

 

[SIGNATURE PAGES FOLLOW]

 

2

 

IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Second Amendment to be duly executed and delivered
as of the date first above written.

 

	
  BORROWER:

  	
  CITI
  TRENDS, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bruce D. Smith

  
	
   

  	
  Name:

  	
  Bruce
  D. Smith

  
	
   

  	
  Title:

  	
  Senior
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
  GUARANTOR:

  	
  CITI
  TRENDS MARKETING SOLUTIONS, INC.,

  
	
   

  	
  a
  Colorado corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bruce D. Smith

  
	
   

  	
  Name:

  	
  Bruce
  D. Smith

  
	
   

  	
  Title:

  	
  President,
  Secretary and Treasurer

  
	
   

  	
   

  
	
  LENDER:

  	
  BANK
  OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stephanie Pendleton

  
	
   

  	
  Name:

  	
  Stephanie
  Pendleton

  
	
   

  	
  Title:

  	
  Senior
  Vice PresidentEXHIBIT
10.20

 

THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR LAWS OR PURSUANT TO AN EXEMPTION
THEREFROM.

 

AXCESS
INTERNATIONAL, INC.

Form of
Convertible Note

 

	
  $xxx,xxx

  	
   

  	
                          ,
  200  

  

 

Subject
to the terms and conditions of this Note, for good and valuable consideration
received, Axcess International, Inc. (“Axcess”) hereby promises to pay to
the order of the                                               
(“Investor”) the principal amount of                                                
Dollars and         Cents (***xxx,xxx***),
plus simple interest, accrued on unpaid principal from                                      ,
200  , until paid, at the rate of 
Five  percent (5.00%) per annum
(365-day year basis) payable on December 31, 2014 (the “Maturity Date”),
in addition Axcess will issue to Investor a warrant to purchase                                                          
(***xxx,xxx***) common shares with a strike price of $0.75 and expire December 31,
2014.  If Axcess completes an equity
offering of any of its securities and the aggregate proceeds to Axcess are at
least $1,000,000 (“Transaction”), then the Note will automatically convert to
common shares at $0.50.

 

Upon
the occurrence of the Transaction described above, the principal amount and all
unpaid interest, of this Note shall convert to Common Stock.  This Note, including the principal amount and
all accrued and unpaid interest hereunder, may otherwise be prepaid in whole or
in part at any time at the option of Axcess, without premium or penalty.

 

Payment
of the principal amount of this Note and any accrued and unpaid interest
hereunder shall be made in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.  Any such
payment shall be paid by wire transfer of federal funds in accordance with the
written instructions of Investor or, in the absence of current written
instructions, by check mailed to Investor at the address last given to Axcess
by Investor in writing for such purpose.

 

This
Note is not assignable except by operation of law; provided, however,
that Investor may assign all or part of the Note to its stockholders in
connection with the partial or complete liquidation of Investor.

 

If the
Company fails to pay the principal amount of this Note when due, the entire
unpaid principal of this Note shall forthwith become absolutely due and payable
without any further notice, demand, protest or presentment whatsoever, all of
which are hereby expressly waived.  All
expenses incurred by Investor for the collection of the note will be paid for
by Axcess.

 

This
Note shall be governed by and construed in accordance with the laws of the
Delaware, without reference to its or any other jurisdiction’s rules as to
conflicts of law.  Any judicial
proceeding brought against Axcess to enforce, or otherwise in connection with,
this Note shall be brought in any court of competent jurisdiction in Delaware,
and, by acceptance of this Note, Investor (a) accepts, generally and
unconditionally, the exclusive jurisdiction of such courts and any related
appellate court and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Note and (b) irrevocably waives
any objection it may now or hereafter have as to the venue of any such
proceeding brought in such a court or that such a court is an inconvenient
forum.  The prevailing party shall be
entitled to collect from the nonprevailing party all reasonable attorneys fees
incurred in connection with any action to enforce the terms of this Note.

 

 

Any
provision of this Note may be amended or waived if, but only if, such amendment
or waiver is in writing, signed by Axcess and Investor.

 

IN
WITNESS WHEREOF, Axcess has caused this Note to be signed by its duly
authorized officer and has caused its corporate seal to be affixed and attested
by its Secretary, as of the date first set forth above.

 

	
  [Corporate
  Seal]

  	
   

  	
  AXCESS
  

  
	
           Attested:

  	
   

  	
  INTERNATIONAL,
  INC.

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
  /s/
  Allan Frank

  	
   

  	
  By:
  

  	
  /s/
  Allan Frank

  
	
   

  	
   

  	
   

  
	
  Name:
  Allan Frank

  	
   

  	
  Name:
  Allan Frank

  
	
  Title:
  Vice President & CFO

  	
   

  	
  Title:
  Vice President & CFOExhibit
10.1

 

 

CREDIT AND SECURITY
AGREEMENT

BY AND AMONG

ANALYSTS INTERNATIONAL CORPORATION,

as Borrower

WELLS FARGO BANK, NATIONAL ASSOCIATION,

acting through its Wells Fargo Business Credit operating division

 

As of September 30,
2009

 

 

 

 

CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY
AGREEMENT (this “Agreement”) is dated as of September 30,
2009, and is entered into between ANALYSTS INTERNATIONAL CORPORATION, a
Minnesota corporation (“Company”), and
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association  (as more fully defined in Exhibit A, “Wells Fargo”), acting through its Wells Fargo Business
Credit  operating division.

 

RECITALS

 

Company
has asked Wells Fargo to provide it with a $15,000,000 revolving line of credit
(the “Line of Credit”) for working capital
purposes and to facilitate the issuance of  letters of
credit.  Wells
Fargo is agreeable to meeting Company’s request, provided that Company agrees
to the terms and conditions of this Agreement.

 

For purposes of this Agreement,
capitalized terms not otherwise defined in the Agreement shall have the meaning
given them in Exhibit A.

 

ARTICLE I

AMOUNT AND TERMS OF THE LINE OF CREDIT

 

Section 1.1                                      Line of Credit; Limitations on
Borrowings; Termination Date; Use of Proceeds.

 

(a)                                  Line of Credit and Limitations on Borrowing. 
Wells Fargo shall make Advances to Company under the Line of Credit
that, together with the L/C Amount,  shall not at
any time exceed in the aggregate the lesser of (i) the Maximum Line
Amount, or (ii) the Borrowing Base. 
Within these limits, Company may periodically borrow, prepay in whole or
in part, and reborrow.  Wells Fargo has no obligation to
make an Advance during a Default Period or at any time Wells Fargo believes
that an Advance would result in an Event of Default.

 

(b)                                 Maturity and Termination Dates. 
Company may request Advances from the date that the conditions set forth
in Article III are satisfied until
the earlier of:  (i) the Maturity
Date, (ii) the date Company terminates the Line of Credit, or (iii) the
date Wells Fargo terminates the Line of Credit following an Event of
Default.  The earliest of the dates
described in this clause (b) is the “Termination Date”.

 

(c)                                  Use of Line of
Credit Proceeds.  Company shall use the proceeds
of the initial Advance to refinance existing senior debt and shall use the
proceeds of each subsequent Advance and
each Letter of Credit for ordinary working capital purposes.

 

(d)                                 Revolving Note.  Company’s
obligation to repay Advances, regardless of how initiated under Section 1.3, shall be evidenced by a revolving
promissory note substantially in the form set forth in Exhibit G
(as renewed, amended, substituted or replaced from time to time, the “Revolving Note”).

 

 

Section 1.2                                      Borrowing Base; Mandatory
Prepayment.

 

(a)                                  Borrowing Base. 
The borrowing base (the “Borrowing Base”)
is an amount equal to:

 

(i)                                     85%, or such lesser percentage as Wells Fargo in its
sole discretion may deem appropriate, of Eligible Billed Accounts minus
Subcontractor Payables related to Billed Accounts; plus

 

(ii)                                  the smaller of (A) 70%, or such lesser percentage
as Wells Fargo in its sole discretion may deem appropriate, of Eligible
Unbilled Accounts minus Subcontractor Payables related to Unbilled Accounts, or
(B) $3,000,000; less

 

(iii)                               the Borrowing Base Reserve, less

 

(iv)                              the Dilution Reserve, less

 

(v)                                 the Payroll Reserve, less

 

(vi)                              Indebtedness that Company owes Wells Fargo that has
not been advanced on the Revolving Note, less

 

(vii)                           Indebtedness that is not otherwise described in Article I, including Indebtedness that Wells Fargo in
its sole discretion finds on the date of determination to be equal to Wells
Fargo’s net credit exposure with respect to any Rate Hedge Agreement,
derivative, foreign exchange, deposit, treasury management or similar
transaction or arrangement extended to Company and/or any of its Subsidiaries
by Wells Fargo.

 

Wells Fargo will use its
best efforts to promptly notify Company of any change in the advance rates set
forth in clauses (i) and (ii)(A) above.

 

(b)                                 Mandatory Prepayment; Overadvances. 
If outstanding Advances evidenced by the Revolving Note plus the L/C
Amount exceed the Borrowing Base or the Maximum Line Amount at any time, then
Company shall immediately prepay the Revolving Note in an amount sufficient to
eliminate the excess, and if payment in full of the Revolving Note is
insufficient to eliminate this excess and the L/C Amount continues to exceed
the Borrowing Base, then Company shall immediately deliver cash to Wells Fargo
in an amount equal to the remaining excess for deposit to the Special Account,
unless in each case, Wells Fargo has delivered to Company an Authenticated
Record consenting to the Overadvance prior to its occurrence, in which
event the Overadvance shall be temporarily permitted on such terms and
conditions as Wells Fargo in its sole discretion may deem appropriate,
including the payment of additional fees or interest, or both.

 

2

 

Section 1.3                                      Procedures for Advances.

 

(a)                                  Advances Credited to
Operating Account.  All Advances, whether accruing
interest at the Floating Rate (“Floating Rate Advances”) or at the Fixed Rate (“Fixed Rate Advances”), shall be credited to Company’s
demand deposit account maintained with Wells Fargo (the “Operating
Account”), unless the parties agree in an Authenticated Record to
disburse to another account.

 

(b)                                 Advances upon Company’s Request. 
Company may request one or more Advances on any Business Day.  Each request shall be deemed a request for a
Floating Rate Advance unless Company specifically requests that an Advance be
funded as a Fixed Rate Advance as provided in Section 1.5.  No
request for an Advance will be deemed received until Wells Fargo acknowledges
receipt, and Company, if requested by Wells Fargo, confirms the request in an
Authenticated Record.  Company shall
repay all Advances, even if the Person requesting the Advance on behalf of
Company lacked authorization.

 

(c)                                  Advances through Loan Manager. 
If Wells Fargo has separately agreed that Company may use Loan Manager,
Advances will be initiated by Wells Fargo and credited to the Operating Account
as Floating Rate Advances as of the end of each Business Day in an amount
sufficient to maintain an agreed upon ledger balance in the Operating Account,
subject only to Line of Credit availability as provided in Section 1.1(a). 
If Wells Fargo terminates Company’s access to Loan Manager, Company may
continue to request Advances as provided in Section 1.3(b). 
Wells Fargo shall have no obligation to make an Advance through Loan
Manager during a Default Period, or in an amount in excess of Line of Credit
availability, and may terminate Loan Manager at any time in its sole
discretion.  Wells Fargo will use its
best efforts to promptly notify Company of the termination of Loan
Manager.  Advances through Loan Manager
shall not be made as Fixed Rate Advances.

 

(d)                                 Protective Advances; Advances to Pay Indebtedness Due. 
Wells Fargo may initiate a Floating Rate Advance on the Line of Credit
in its sole discretion for any reason at any time, without Company’s compliance
with any of the conditions of this Agreement, and (i) disburse the
proceeds directly to third Persons in order to protect Wells Fargo’s interest
in Collateral or to perform any of Company’s obligations under this Agreement,
or (ii) apply the proceeds to the amount of any Indebtedness then due and
payable to Wells Fargo.

 

Section 1.4                                      Floating Rate Advances. 
Company may request an Advance at the Floating Rate no later than 11:59 a.m.
Central Time on the Business Day on which Company wants the Floating Rate
Advance to be funded.  Rate Hedges may
not be used with respect to any Advance that utilizes the Floating Rate.

 

Section 1.5                                      Fixed Rate Advances and Rate
Hedges.

 

(a)                                  Fixed Rates for Fixed Rate Interest Periods; Quotation
of Rates.  Wells Fargo will quote Company a Fixed Rate
for a three (3) month term (each a “Fixed Rate 

 

3

 

Interest
Period”, as more
fully defined in Exhibit A), which Fixed Rate Interest Period will commence on
the Business Day on which the request was made, provided that the request is
received by Wells Fargo no later than 11:59 a.m. Central Time of the
Business Day that the Advance is to be funded. 
If Company does not promptly accept the quoted Fixed Rate, then the
quote shall expire and any subsequent request for a quote shall be subject to
redetermination by Wells Fargo.

 

(b)                                 Procedure for Requesting and Renewing Fixed Rate
Advances.  Company may request a Fixed Rate Advance, or
convert a Floating Rate Advance to a Fixed Rate Advance, or renew an existing
Fixed Rate Advance, provided that Wells Fargo receives the request no later
than 11:59 a.m. Central Time three Business Days before the Business Day
that will be the first day of the new Fixed Rate Interest Period.  Each request shall specify the principal
amount to be advanced at the Fixed Rate, or to be converted from the Floating
Rate, or to be renewed, and shall be confirmed in an Authenticated Record if
requested by Wells Fargo.  Each Fixed
Rate Advance shall be in multiples of $500,000 and in the minimum amount of at least $1,000,000.  No more than four separate Fixed Rate
Advances may be outstanding at any time.

 

(c)                                  Expiration of Fixed Rate Advances. 
Unless a Fixed Rate Advance is subject to a Rate Hedge, or is renewed,
paid, or prepaid on or before the expiration of the related Fixed Rate Interest
Period, each Fixed Rate Advance shall automatically be converted to the
Floating Rate upon the expiration of the Fixed Rate Interest Period.  An expiring Fixed Rate Advance may not be
renewed for a new Fixed Rate Interest Period if a Default Period is in effect,
unless a Rate Hedge applies to the Fixed Rate Advance.

 

(d)                                 Fixed Rate Advances Subject to a Rate Hedge; Interest
Rate Floors.  Any Fixed Rate Advance may be made subject to
a Rate Hedge pursuant to the separate agreement of Company and Wells
Fargo.  Any Fixed Rate Advance subject to
a Rate Hedge shall automatically and continuously renew for successive Fixed
Rate Interest Periods until the earlier of the Termination Date or the
termination of the Rate Hedge for any reason, after which time the Advance will
accrue interest at the Floating Rate, and subject to the Default Rate, if
applicable.  If the Floating Rate, which
determines Fixed Rate Advance pricing, is subject to a minimum interest rate
floor, the interest rate floor will not apply to the calculation of interest
accruing with respect to any Fixed Rate Advance at any time that a Rate Hedge
is currently in effect.  Upon termination
of any Rate Hedge, the minimum interest rate floor shall resume application to
Fixed Rate Advance borrowings that were formerly subject to such Rate Hedge.

 

(e)                                  Taxes and Regulatory Costs. 
Company shall also pay Wells Fargo with respect to any Fixed Rate
Advance based on LIBOR, all (i) withholdings, interest equalization taxes,
stamp taxes or other taxes (except income and franchise taxes) imposed by any
domestic or foreign governmental authority that are related to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage, the
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar costs imposed by any domestic or foreign governmental authority or
resulting from compliance by Wells Fargo with any request or directive (whether
or not having the force of law) from any central bank or other governmental
authority that are related to 

 

4

 

LIBOR
but not otherwise included in the calculation of LIBOR.  In determining which of these amounts are
attributable to an existing Fixed Rate Advance that is based on LIBOR, any
reasonable allocation made by Wells Fargo among its operations shall be deemed conclusive
and binding.

 

Section 1.6                                      Collection of Accounts and
Application to Revolving Note.

 

(a)                                  The Collection Account.  Company has
granted a security interest to Wells Fargo in the Collateral, including without
limitation, all Accounts. Except as otherwise agreed by both parties in an Authenticated
Record, all Proceeds of Accounts and other Collateral, upon receipt or
collection, shall be deposited each Business Day into the Collection Account.
Funds so deposited (“Account Funds”)
are the property of Wells Fargo, and may only be withdrawn from the Collection
Account by Wells Fargo.

 

(b)                                 Payment of Accounts by Company’s Account Debtors. 
Company shall instruct all account debtors to make payments either
directly to the Lockbox for deposit by Wells Fargo directly to the Collection
Account, or instruct them to deliver such payments to Wells Fargo by wire
transfer, ACH, or other means as Wells Fargo may direct for deposit to the
Collection Account or for direct application to the Line of Credit. If Company
receives a payment or the Proceeds of Collateral directly, Company will
promptly deposit the payment or Proceeds into the Collection Account. Until
deposited, Company will hold all such payments and Proceeds in trust for Wells
Fargo without commingling with other funds or property.  All deposits held in the Collection Account
shall constitute Proceeds of Collateral and shall not constitute the payment of
Indebtedness.

 

(c)                                  Application of Payments to Revolving Note. 
Wells Fargo will withdraw Account Funds deposited to the Collection
Account and pay down borrowings on the Line of Credit by applying them to the
Revolving Note on the first Business Day following the Business Day of deposit
to the Collection Account, or, if payments are received by Wells Fargo that are
not first deposited to the Collection Account pursuant to any treasury
management service provided to Company by Wells Fargo, such payments shall be
applied to the Revolving Note as provided in the Master Agreement for Treasury
Management Services and the relevant service description.  All payments shall be applied first to any
unpaid Floating Rate Advances, and once paid, to outstanding Fixed Rate
Advances.  If more than one Fixed Rate
Advance is outstanding, the payments shall be applied to such Fixed Rate
Advances in the order and in the amounts as Wells Fargo may deem appropriate,
unless Company specifies at the time of payment how such payments are to be
applied.

 

5

 

Section 1.7                                      Interest and Interest Related
Matters.

 

(a)                                  Interest Rates Applicable to
Line of Credit.  Except as otherwise provided in this
Agreement, the unpaid principal amount of each Advance evidenced by the
Revolving Note shall accrue interest at an annual interest rate calculated as
follows:

 

(i)                                     Floating
Rate Pricing.  The “Floating
Rate” for Advances shall be an interest rate equal to Daily Three
Month LIBOR plus the  applicable  Margin, which
interest rate shall change whenever Daily Three Month LIBOR changes.

 

(ii)                                  Fixed Rate Pricing.  The “Fixed Rate”
for Advances shall be an interest rate equal to the Floating Rate in effect on
the first Business Day of the Fixed Rate Interest Period.

 

(iii)                               Margin.  The margin
(the “Margin”) shall be  three
and one-half percent (3.50%).

 

(b)                                 Default
Interest Rate.  Commencing on the day an Event of Default
occurs, through and including the date identified by Wells Fargo in a Record as
the date that the Event of Default has been waived (each such period a “Default Period”), or during a time period specified in Section 1.10, or at any time following the Termination
Date, in Wells Fargo’s sole discretion and without waiving any of its other
rights or remedies, the principal amount of the Revolving Note shall bear
interest at a rate that is three percent (3.00%)  above
the contractual rate set forth in Section 1.7(a) (the “Default
Rate”), or any lesser rate that Wells Fargo may deem appropriate,
starting on the first day of the fiscal
quarter in which the Default Period begins through the last day of that
Default Period, or any shorter time period to which Wells Fargo may agree in an
Authenticated Record.

 

(c)                                  Usury. 
No interest rate shall be effective which would result in a rate greater
than the highest rate permitted by law. 
Payments in the nature of interest and other charges made under any Loan
Documents or any other document or agreement described in or related to this
Agreement that are later determined to be in excess of the limits imposed by
applicable usury law will be deemed to be a payment of principal, and the
Indebtedness shall be reduced by that amount so that such payments will not be
deemed usurious.

 

Section 1.8                                      Fees.

 

(a)                                  Origination
Fee.  Company shall pay Wells Fargo a one time
origination fee of $150,000, which shall be fully earned and payable upon the
execution of this Agreement.

 

(b)                                 Unused Line Fee.  Company shall pay Wells Fargo an
annual unused line fee of one-half of one percent (0.50%) per annum of the
daily average of the Maximum Line Amount reduced by outstanding Advances and
the L/C Amount (the “Unused Amount”),
from the date of this Agreement to and including the Termination Date, 

 

6

 

which
unused line fee shall be payable monthly in arrears on the first day of each
month and on the Termination Date.

 

(c)                                  Collateral Exam Fees.  Company shall
pay Wells Fargo fees in connection with any collateral exams, audits or
inspections conducted by or on behalf of Wells Fargo at the current rates
established from time to time by Wells Fargo as its collateral exam fees (which
fees are currently $125.00 per hour per collateral examiner), together with all
actual out-of-pocket costs and expenses incurred in conducting any collateral
exam, audit or inspection.

 

(d)                                 Line of Credit Termination
and/or Reduction Fees.  If (i) Wells Fargo terminates the Line of Credit
or reduces the Maximum Line Amount during a Default Period, or if (ii) Company
terminates the Line of Credit on a date prior to the Maturity Date, or if (iii) Company
reduces the Maximum Line Amount, then Company shall pay Wells Fargo as
liquidated damages a termination or reduction fee, as applicable, in an amount
equal to a percentage of the Maximum
Line Amount or the reduction of the Maximum Line Amount, as the case may be,
calculated as follows:  (A) two
percent (2.00%) if the termination or reduction occurs on or before the first
anniversary of the date of this Agreement; (B) one percent (1%) if the
termination or reduction occurs after the first anniversary of the date of this
Agreement, but on or before the second anniversary of the date of this
Agreement; provided, however, the termination fee set forth in this Section 1.8(d) shall be waived by Wells Fargo if the Line of Credit is fully refinanced
by a commercial banking office of Wells Fargo at any time following the date
which is eighteen (18) months after the date of this Agreement.

 

(e)                                  Overadvance Fees.  Company shall
pay a $500 Overadvance fee for each day that an Overadvance exists which was
not agreed to by Wells Fargo in an Authenticated Record prior to its occurrence;
provided that Wells Fargo’s acceptance of the payment of such fees shall not
constitute either consent to the Overadvance or waiver of the resulting Event
of Default.  Company shall pay additional
Overadvance fees and interest in such amounts and on such terms as Wells Fargo
in its sole discretion may consider appropriate for any Overadvance to which
Wells Fargo has specifically consented in an Authenticated Record prior to its
occurrence.

 

(f)                                    Treasury Management Fees. 
Company will pay service fees to Wells Fargo for treasury management
services provided pursuant to the Master Agreement for Treasury Management
Services or any other agreement entered into by the parties, in the amount
prescribed in Wells Fargo’s current service fee schedule.

 

(g)                                 Letter of Credit Fees.  Company shall
pay a fee with respect to each Letter of Credit issued by Wells Fargo of three
percent (3.0%) of the Aggregate Face Amount of the Letter of Credit accruing
daily from and including the date the Letter of Credit is issued until the date
that it either expires or is returned for cancellation, which fee shall be
payable monthly in arrears on the first day of each month and on the date that
the Letter of Credit either expires or is returned for cancellation; provided,
however, following an Event of Default, this fee shall increase to six percent
(6.0%) of the Aggregate Face Amount of such Letter of Credit, commencing on the
first day of the 

 

7

 

fiscal  quarter  in which the
Default Period begins and continuing through the last day of such Default
Period, or any shorter time period that Wells Fargo in its sole discretion may
deem appropriate, without waiving any of its other rights and remedies.  Pricing will be determined on a case-by-case
basis in respect of any commercial letters of credit.

 

(h)                                 Letter of Credit Administrative Fees. 
Company shall pay all administrative fees charged by Wells Fargo in
connection with the honoring of drafts under any Letter of Credit, and any
amendments to or transfers of any Letter of Credit, and any other activity with
respect to any Letter of Credit at the current rates published by Wells Fargo
for such services rendered on behalf of its customers generally.

 

(i)                                     Other Fees and Charges.  Wells Fargo
may impose additional fees and charges during a Default Period for (i) waiving
an Event of Default, or (ii) the administration of Collateral by Wells
Fargo. All such fees and charges shall be imposed at Wells Fargo’s sole
discretion following oral notice to Company on either an hourly, periodic, or
flat fee basis, and in lieu of or in addition to imposing interest at the
Default Rate, and Company’s request for an Advance following such notice shall
constitute Company’s agreement to pay such fees and charges.

 

(j)                                     Appraisal Fees.  Company shall
pay Wells Fargo fees in connection with any appraisal of Collateral or any
other property in which Wells Fargo has a security interest conducted by or on
behalf of Wells Fargo, together with all actual out-of-pocket costs and
expenses incurred in conducting any appraisal.

 

(k)                                  Fixed Rate Advance Breakage Fees. 
Company may prepay any Fixed Rate Advance at any time in any amount,
whether voluntarily or by acceleration; provided, however, that if the Fixed
Rate Advance is prepaid, Company shall pay Wells Fargo upon demand a Fixed Rate
Advance breakage fee equal to the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which the Fixed
Rate Interest Period matures, calculated as follows for each such month:

 

(i)                                     Determine the amount of interest that would have accrued each
month on the amount prepaid at the interest rate applicable to such amount had
it remained outstanding until the last day of the applicable Fixed Rate
Interest Period.

 

(ii)                                  Subtract from the amount determined in (i) above the
amount of interest that would have accrued for the same month on the amount of
principal prepaid for the remaining term of the Fixed Rate Interest Period at a
rate equal to LIBOR in effect on the date of prepayment for new loans extended
at a Fixed Rate for the remainder of the Fixed Rate Interest Period in a
principal amount equal to the amount prepaid.

 

(iii)                               If the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii) above.

 

8

 

Company acknowledges that prepayment of
the Revolving Note may result in Wells Fargo incurring additional costs,
expenses or liabilities, and that it is difficult to ascertain the full extent
of such costs, expenses or liabilities. 
Company agrees to pay the above-described Fixed Rate Advance breakage
fee and agrees that this amount represents a reasonable estimate of the Fixed
Rate Advance breakage costs, expenses and/or liabilities of Wells Fargo.

 

Section 1.9                                      Interest Accrual; Principal and
Interest Payments; Computation.

 

(a)                                  Interest Payments and Interest Accrual. 
Accrued and unpaid interest under the Revolving Note on Floating Rate
Advances and interest accruing on any Fixed Rate Advance shall be due and
payable on the applicable Interest Payment Date (as defined in Exhibit A
hereto) and on the Termination Date, and, in the case of interest due and
payable on Floating Rate Advances, shall be paid in the manner provided in Section 1.6(c). 
Interest shall accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of Advance to the
Interest Payment Date.

 

(b)                                 Payment of Revolving Note Principal. 
The principal amount of the Revolving Note shall be paid from time to
time as provided in this Agreement, and shall be fully due and payable on the
Termination Date.

 

(c)                                  Payments Due on Non-Business Days. 
Unless otherwise specified, if an Interest Payment Date or the
Termination Date falls on a day which is not a Business Day, payment shall be
made on the next Business Day, and interest shall continue to accrue during
that time period.

 

(d)                                 Computation of Interest and Fees. 
Interest accruing on the unpaid principal amount of the Revolving Note
and fees payable under this Agreement shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.

 

(e)                                  Liability Records.  Wells Fargo
shall maintain accounting and bookkeeping records of all Advances and payments
under the Line of Credit and all other Indebtedness due to Wells Fargo in such
form and content as Wells Fargo in its sole discretion deems appropriate.  Wells Fargo’s calculation of current
Indebtedness shall be presumed correct unless proven otherwise by Company.  Upon Wells Fargo’s request, Company will
admit and certify in a Record the exact principal balance of the Indebtedness
that Company then believes to be outstanding. 
Any billing statement or accounting provided by Wells Fargo shall be
conclusive and binding unless Company notifies Wells Fargo in a detailed Record
of its intention to dispute the billing statement or accounting within 30 days
of receipt.

 

Section 1.10                                Termination, Reduction or
Non-Renewal of Line of Credit by Company; Notice.

 

(a)                                  Termination or Reduction of the Line of Credit by
Company after Advance Notice.  Company may
terminate or reduce the Line of Credit at any time prior

 

9

 

 

to the
Maturity Date, if it (i) delivers an Authenticated Record notifying Wells
Fargo of its intentions at least 90 days prior to the proposed date of
termination or reduction, (ii) pays Wells Fargo the termination or
reduction fee, as applicable, set forth in Section 1.8(d), and (iii) pays the Indebtedness in full in connection
with a termination or down to the reduced Maximum Line Amount in connection
with a reduction.  Any reduction in the
Maximum Line Amount shall be in multiples of $1,000,000, with a minimum
reduction of at least $5,000,000.

 

(b)                                 Termination or Reduction of the Line of Credit by
Company without Advance Notice.  If Company
fails to deliver to Wells Fargo timely notice of its intention to terminate the
Line of Credit or reduce the Maximum Line Amount as provided in Section 1.10(a), Company may nevertheless terminate the
Line of Credit or reduce the Maximum Line Amount and pay the Indebtedness in
full in connection with a termination or down to the reduced Maximum Line
Amount in connection with a reduction if it pays the termination or reduction
fee, as applicable, set forth in Section 1.8(d).

 

(c)                                  Non-Renewal by Company; Notice.  If
Company does not wish Wells Fargo to consider renewal of the Line of Credit on
the next Maturity Date, Company shall deliver an Authenticated Record to Wells
Fargo at least 90 days prior to the Maturity Date notifying Wells Fargo of its
intention not to renew. If Company fails to deliver to Wells Fargo such timely
notice, then the Revolving Note shall accrue interest at the Default Rate
commencing on the 90th day prior to the Maturity Date and continuing
through the date that Wells Fargo receives delivery of an Authenticated Record
giving it actual notice of Company’s intention not to renew.

 

Section 1.11                                Letters of Credit.

 

(a)                                  Issuance of Letters of Credit; Amount. 
Wells Fargo, subject to the terms and conditions of this Agreement,
shall issue, on or after the date that Wells Fargo is obligated to make its
first Advance under this Agreement and prior to the Termination Date, one or
more irrevocable  standby or commercial  letters of credit (each, a “Letter of
Credit”, and collectively, “Letters of Credit”)
for Company’s account.  Wells Fargo will
not issue any Letter of Credit if the face amount of the Letter of Credit would
exceed the lesser of:  (i) $3,000,000
less the L/C Amount, or (ii) the lesser of the Maximum Line Amount or the
Borrowing Base, minus an amount equal to the sum of the outstanding Advances
plus the L/C Amount.

 

(b)                                 Additional Letter of Credit Documentation. 
Prior to requesting issuance of a Letter of Credit, Company shall first
execute and deliver to Wells Fargo a Standby Letter of Credit Agreement or a
Commercial Letter of Credit Agreement, as applicable, an L/C Application, and
any other documents that Wells Fargo may request, which shall govern the
issuance of the Letter of Credit and Company’s obligation to reimburse Wells
Fargo for any related Letter of Credit draws (the “Obligation
of Reimbursement”).

 

10

 

(c)                                  Expiration.  No Letter of
Credit shall be issued that has an expiry date that is later than one (1) year
from the date of issuance, or the Maturity Date in effect on the date of
issuance, whichever is earlier.

 

(d)                                 Obligation of Reimbursement During Default Periods. 
If Company is unable, due to the existence of a Default Period or for
any other reason, to obtain an Advance to pay any Obligation of Reimbursement,
Company shall pay Wells Fargo on demand and in immediately available funds, the
amount of the Obligation of Reimbursement together with interest, accrued from
the date of presentment of the underlying draft until reimbursement in full at
the Default Rate.  Wells Fargo is
authorized, alternatively and in its sole discretion, to make an Advance in an
amount sufficient to discharge the Obligation of Reimbursement and pay all
accrued but unpaid interest and fees with respect to the Obligation of
Reimbursement.

 

Section 1.12                                Special Account. 
If the Line of Credit is terminated for any reason while a Letter of
Credit is outstanding, or if after prepayment of the Revolving Note the L/C
Amount continues to exceed the Borrowing Base, then Company shall promptly pay
Wells Fargo in immediately available funds for deposit to the Special Account,
an amount equal, as the case may be, to either (a) the L/C Amount plus any
anticipated fees and costs, or (b) the amount by which the L/C Amount
exceeds the Borrowing Base.  If Company
fails to pay these amounts promptly, then Wells Fargo may in its sole
discretion make an Advance to pay these amounts and deposit the proceeds to the
Special Account.  The Special Account
shall be an interest bearing account maintained with Wells Fargo or any other
financial institution acceptable to Wells Fargo.  Wells Fargo may in its sole discretion apply
amounts on deposit in the Special Account to the Indebtedness.  Company may not withdraw amounts deposited to
the Special Account until the Line of Credit has been terminated and all
outstanding Letters of Credit have either been returned for cancellation to
Wells Fargo or have expired and the Indebtedness has been fully paid.

 

ARTICLE II

SECURITY INTEREST AND OCCUPANCY OF COMPANY’S PREMISES

 

Section 2.1                                      Grant of Security Interest. 
Company hereby pledges, assigns and grants to Wells Fargo  a Lien and security interest (collectively referred to as
the “Security Interest”) in the Collateral,
as security for the payment and performance of all Indebtedness. Following
request by Wells Fargo, Company shall grant Wells Fargo  a
Lien and security interest in all commercial tort claims that it may have
against any Person.

 

Section 2.2                                      Notifying Account Debtors and
Other Obligors; Collection of Collateral.  Wells Fargo
may, at any time during any Default Period, deliver a Record giving an account
debtor or other Person obligated to pay an Account, a General Intangible, or
other amount due, notice that the Account, General Intangible or other amount
due has been assigned to Wells Fargo for security and must be paid directly to
Wells Fargo.  Company shall join in
giving such notice and shall Authenticate any Record giving such notice upon
Wells Fargo’s request.  After Company or
Wells Fargo gives such notice, Wells Fargo may, but need not, in Wells Fargo’s
or in Company’s name, demand, sue for, collect or receive any money or property
at any time payable or receivable on account of, or securing, such Account,
General Intangible, 

 

11

 

or
other amount due, or grant any extension to, make any compromise or settlement
with or otherwise agree to waive, modify, amend or change the obligations
(including collateral obligations) of any account debtor or other obligor.  Wells Fargo may, in Wells Fargo’s name or in
Company’s name, as Company’s agent and attorney-in-fact, notify the United
States Postal Service to change the address for delivery of Company’s mail to
any address designated by Wells Fargo, otherwise intercept Company’s mail, and
receive, open and dispose of Company’s mail, applying all Collateral as
permitted under this Agreement and holding all other mail for Company’s account
or forwarding such mail to Company’s last known address.

 

Section 2.3                                      Assignment of Insurance.  As additional security for the Indebtedness, Company
hereby assigns to Wells Fargo all rights of Company under every policy of
insurance covering the Collateral and all business records and other documents
relating to it, and all monies (including without limitation all proceeds and
refunds) that may be payable under any policy, and Company hereby directs the
issuer of each policy to pay all such monies directly to Wells Fargo.  At any time, whether or not a Default Period
then exists, Wells Fargo may (but need not), in Wells Fargo’s or Company’s
name, execute and deliver proofs of claim, receive payment of proceeds and
endorse checks and other instruments representing payment of the policy of
insurance, and adjust, litigate, compromise or release claims against the
issuer of any policy.  Any monies
received under any insurance policy assigned to Wells Fargo, other than
liability insurance policies, or received as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid to
Wells Fargo and, as determined by Wells Fargo in its sole discretion, either be
applied to prepayment of the Indebtedness or disbursed to Company under staged
payment terms reasonably satisfactory to Wells Fargo for application to the
cost of repairs, replacements, or restorations which shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed.

 

Section 2.4                                      Company’s Premises.

 

(a)                                  Wells Fargo’s Right to Occupy Company’s
Premises.  Company hereby grants to Wells Fargo the
right, at any time during a Default Period and without notice or consent, to
take exclusive possession of all locations where Company or any Subsidiary
conducts its business or has any rights of possession, including without
limitation the locations described on Exhibit B (the “Premises”),
until the earlier of (i) payment in full and discharge of all Indebtedness
and termination of the Line of Credit, or (ii) final sale or disposition
of all items constituting Collateral and delivery of those items to purchasers.

 

(b)                                 Wells Fargo’s Use of Company’s Premises. 
Wells Fargo may use the Premises to store, process, manufacture, sell,
use, and liquidate or otherwise dispose of items that are Collateral, and for
any other incidental purposes deemed appropriate by Wells Fargo in good faith.

 

(c)                                  Company’s Obligation to Reimburse Wells Fargo. 
Wells Fargo shall not be obligated to pay rent or other compensation for
the possession or use of any Premises, but if Wells Fargo elects to pay rent or
other compensation to the owner or mortgagee of any Premises in order to have
access to the Premises, then Company shall promptly 

 

12

 

reimburse
Wells Fargo all such amounts, as well as all taxes, fees, charges and other
expenses at any time payable by Wells Fargo with respect to the Premises by
reason of the execution, delivery, recordation, performance or enforcement of
any terms of this Agreement.

 

Section 2.5                                      License. 
Without limiting the generality of any other Security Document, Company
hereby grants to Wells Fargo a non-exclusive, worldwide and royalty-free
license to use or otherwise exploit all Intellectual Property Rights of Company
for the purpose of finishing, selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.

 

Section 2.6                                      Financing Statements.

 

(a)                                  Authorization to File.  Company
authorizes Wells Fargo to file financing statements describing Collateral to
perfect Wells Fargo’s Security Interest in the Collateral, and Wells Fargo may
describe the Collateral as “all personal property” or “all assets” or describe
specific items of Collateral including without limitation any commercial tort
claims.  All financing statements filed
before the date of this Agreement to perfect the Security Interest were authorized
by Company and are hereby re-authorized. 
Following the termination of the Line of Credit and payment of all
Indebtedness, Wells Fargo shall, at Company’s expense and within the time
periods required under applicable law, release or terminate any filings or
other agreements that perfect the Security Interest.

 

(b)                                 Termination.  Wells Fargo
shall, at Company’s expense, release or terminate any filings or other
agreements that perfect the Security Interest, provided that there are no
suits, actions, proceedings or claims pending or threatened against any
Indemnitee under this Agreement with respect to any Indemnified Liabilities,
upon Wells Fargo’s receipt of the following, in form and content satisfactory
to Wells Fargo:  (i) cash payment in
full of all Indebtedness and a completed performance by Company with respect to
its other obligations under this Agreement, (ii) evidence that the
commitment of Wells Fargo to make Advances and to issue Letters of Credit under
the Line of Credit or under any other facility with Company has been
terminated, (iii) a release of all claims against Wells Fargo by Company
relating to Wells Fargo’s performance and obligations under the Loan Documents,
and (iv) an agreement by Company, any Guarantor, and any new lender to Company
to indemnify Wells Fargo for any payments received by Wells Fargo that are
applied to the Indebtedness as a final payoff that may subsequently be returned
or otherwise not paid for any reason.

 

Section 2.7                                      Setoff. 
Wells Fargo may at any time, in its sole discretion and without demand
or notice to anyone, setoff any liability owed to Company or any Subsidiary by
Wells Fargo against any Indebtedness, whether or not due.

 

Section 2.8                                      Collateral Related Matters. 
This Agreement does not contemplate a sale of Accounts or chattel paper,
and, as provided by law, Company is entitled to any surplus and shall remain
liable for any deficiency.  Wells Fargo’s
duty of care with respect to Collateral in its possession (as imposed by law)
will be deemed fulfilled if it exercises reasonable 

 

13

 

care
in physically keeping such Collateral, or in the case of Collateral in the
custody or possession of a bailee or other third Person, exercises reasonable
care in the selection of the bailee or third Person, and Wells Fargo need not
otherwise preserve, protect, insure or care for such Collateral.  Wells Fargo shall not be obligated to
preserve rights Company may have against prior parties, to liquidate the
Collateral at all or in any particular manner or order or apply the Proceeds of
the Collateral in any particular order of application.  Wells Fargo has no obligation to clean-up or
prepare Collateral for sale.  Company
waives any right it may have to require Wells Fargo to pursue any third Person
for any of the Indebtedness.

 

Section 2.9                                      Notices Regarding Disposition of
Collateral.  If notice to Company of any intended
disposition of Collateral or any other intended action is required by
applicable law in a particular situation, such notice will be deemed
commercially reasonable if given in the manner specified in Section 7.4 at least 10 days before the date of
intended disposition or other action.

 

ARTICLE III

CONDITIONS PRECEDENT

 

Section 3.1                                      Conditions Precedent to Initial Advance
and Issuance of Initial Letter of Credit.  Wells Fargo’s
obligation to make the initial Advance or issue the first Letter of Credit
shall be subject to the condition that Wells Fargo shall have received this
Agreement and each of the Loan Documents, and any document, agreement, or other
item described in or related to this Agreement, and all fees and information
described in Exhibit C, executed and in form and content satisfactory to
Wells Fargo.

 

Section 3.2                                      Additional Conditions Precedent
to All Advances and Letters of Credit.  Wells Fargo’s obligation to make
any Advance (including the initial Advance) or issue any Letter of Credit shall
be subject to the further additional conditions: (a) that the
representations and warranties described in Exhibit D are correct on the date of the Advance
or the issuance of the Letter of Credit, except to the extent that such
representations and warranties relate solely to an earlier date; and (b) that
no event has occurred and is continuing, or would result from the requested
Advance or issuance of the Letter of Credit that would result in an Event of
Default.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

To induce Wells Fargo to
enter into this Agreement, Company makes the representations and warranties
described in Exhibit D.  Any request
for an Advance will be deemed a representation by Company that all
representations and warranties described in Exhibit D are true, correct,
and complete as of the time of the request, unless they relate exclusively to
an earlier date. Company shall promptly deliver a Record notifying Wells Fargo
of any change in circumstance that would affect the accuracy of any
representation or warranty, unless the representation and warranty specifically
relates to an earlier date.

 

14

 

ARTICLE V

COVENANTS

 

So long as the Indebtedness
remains unpaid, or the Line of Credit has not been terminated, Company shall
comply with each of the following covenants, unless Wells Fargo shall consent
otherwise in an Authenticated Record delivered to Company.

 

Section 5.1                                      Reporting Requirements. 
Company shall deliver to Wells Fargo the following information, compiled
where applicable using GAAP consistently applied, in form and content
acceptable to Wells Fargo:

 

(a)                                  Annual Financial Statements. 
As soon as available and in any event within 120  days
after Company’s fiscal year end, the audited financial statements of Company
and its Subsidiaries prepared by an independent certified public accountant
acceptable to Wells Fargo, which shall include the balance sheet, income
statement, and statement of shareholders’ equity and cash flows for Company and
its Subsidiaries prepared on a consolidated basis.  The annual financial statements shall be
accompanied by the unqualified opinion of such accountant and a certificate
(the “Compliance Certificate”) in the form
of Exhibit E that is signed by Company’s chief financial officer.  Each Compliance Certificate
that accompanies an annual financial statement shall also be accompanied by
copies of all management letters prepared by Company’s accountants if provided
by such accountants.

 

(b)                                 Monthly Financial Statements. 
As soon as available and in any event within 30  days
after the end of each fiscal month, a Company-prepared balance sheet, income
statement and statement of cash flows of Company and its Subsidiaries prepared
for that month and for the year—to-date period then ended, prepared on a
consolidated basis and stating in comparative form the figures for the
corresponding date and periods in the prior fiscal year, subject to year-end
adjustments.  The financial statements
shall be accompanied by a Compliance Certificate in the form of Exhibit E that is signed by Company’s chief
financial officer.

 

(c)                                  Collateral Reports.  No later than
10 Business Days after each month end (or more frequently if Wells Fargo shall
request it), detailed agings of Company’s accounts receivable and accounts
payable, and a calculation of Company’s Accounts, Eligible Billed Accounts and
Eligible Unbilled Accounts as of the end of that month or shorter time period
requested by Wells Fargo.  All reports
described in this subsection (c) shall be submitted electronically to
Wells Fargo through the secure file upload service available through Wells
Fargo’s Commercial Electronic Office® (“CEO®”) portal.

 

(d)                                 Projections.  No later than
30  days after each fiscal year end,
Company’s projected balance sheet, income statement and statement of cash flows  for each month of the next fiscal year, certified as accurate
by Company’s chief financial officer and accompanied by a statement of
assumptions and supporting schedules and information.

 

(e)                                  Supplemental Reports.  Weekly, or
more frequently if Wells Fargo requests, Wells Fargo’s standard form of “daily
collateral report”, together with 

 

15

 

receivables
schedules, collection reports, credit memos,  copies
of invoices, shipment documents and delivery receipts for goods sold and
services provided to account debtors; provided, however, if (a) the sum of
outstanding Advances and the L/C Amount has been less than $3,000,000 at all
times and (b) the sum of Cash-on-Hand and the Excess Borrowing Base
Availability has been $8,000,000 or more at all times, then Wells Fargo will
permit such collateral reports to be delivered to Wells Fargo on a monthly
basis.

 

(f)                                    Litigation.  No later than
3 days after discovery, a Record notifying Wells Fargo of any litigation or
other proceeding before any court or governmental agency which seeks a monetary
recovery against Company or any Subsidiary in excess of $100,000.

 

(g)                                 Intellectual
Property. 
(i) No later than 30 days before it acquires material Intellectual
Property Rights, a Record notifying Wells Fargo of the intention of Company or
any Subsidiary to acquire such rights; (ii) except for transfers permitted
under Section 5.18, no later than 30 days before
Company or any Subsidiary disposes of material Intellectual Property Rights, a
Record notifying Wells Fargo of Company’s or such Subsidiary’s intention to
dispose of such rights, along with copies of all proposed documents and
agreements concerning the disposal of such rights as requested by Wells Fargo; (iii) promptly
upon discovery, a Record notifying Wells Fargo of (A) any Infringement of
Company’s or any Subsidiary’s Intellectual Property Rights by any Person, (B) claims
that Company or any Subsidiary is Infringing another Person’s Intellectual
Property Rights and (C) any threatened cancellation, termination or
material limitation of Company’s or any Subsidiary’s Intellectual Property
Rights; and (iv) promptly upon receipt, copies of all registrations and
filings with respect to Company’s or any Subsidiary’s Intellectual Property
Rights.

 

(h)                                 Defaults.  No later than
3 days after learning of the probable occurrence of any Event of Default, a
Record notifying Wells Fargo of the Event of Default and the steps being taken
by Company to cure the Event of Default.

 

(i)                                     Disputes.  Promptly upon
discovery, a Record notifying Wells Fargo of (i) any disputes or claims by
Company’s customers exceeding $200,000 individually or $500,000 in the
aggregate during any fiscal year; (ii) credit memos not previously
reported in Section 5.1(e); and (iii) any
goods returned to or recovered by Company or services disputed outside of the
ordinary course of business or in the ordinary course of business but with a
value in an amount in excess of $200,000.

 

(j)                                     Changes in Officers and Directors. 
Promptly following occurrence, a Record notifying Wells Fargo of any
change in the persons constituting Company’s Officers and Directors.

 

(k)                                  Collateral.  Promptly upon
discovery, a Record notifying Wells Fargo of any loss of or material damage to
any Collateral or to any material assets of any Subsidiary or of any substantial
adverse change in any Collateral or the prospect of its payment or in any
material assets of any Subsidiary.

 

16

 

(l)                                     Commercial Tort Claims.  Promptly upon
discovery, a Record notifying Wells Fargo of any commercial tort claims brought
by Company or any Subsidiary against any Person, including the name and address
of each defendant, a summary of the facts, an estimate of the damages of
Company or such Subsidiary, copies of any complaint or demand letter submitted
by Company or such Subsidiary, and such other information as Wells Fargo may
request.

 

(m)                               Reports to Shareholders.  Promptly upon
distribution, access to all financial statements, reports and proxy statements
which Company shall have sent to its Shareholders.

 

(n)                                 Violations of Law.  No later than
3 days after discovery of any violation, a Record notifying Wells Fargo of any
violation by Company or any Subsidiary of any law, rule or regulation, the
non-compliance with which could materially
and adversely affect the financial condition, properties or operations of
Company or any Subsidiary.

 

(o)                                 Pension Plans.  (i) Promptly
upon discovery, and in any event within 30 days after Company knows or has
reason to know that any Reportable Event with respect to any Pension Plan has
occurred, a Record authenticated by Company’s chief financial officer notifying
Wells Fargo of the Reportable Event in detail and the actions which Company
proposes to take to correct the deficiency, together with a copy of any related
notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly
upon discovery, and in any event within 10 days after Company or any
Subsidiary fails to make a required quarterly Pension Plan contribution under Section 412(m) of
the IRC, a Record authenticated by Company’s chief financial officer notifying
Wells Fargo of the failure in detail and the actions that Company will take to
cure the failure, together with a copy of any related notice sent to the
Pension Benefit Guaranty Corporation; and (iii) promptly upon discovery,
and in any event within 10 days after Company knows or has reason to know that
Company or any Subsidiary may be liable or may be reasonably expected to have
liability for any withdrawal, partial withdrawal, reorganization or other event
under any Multiemployer Plan under Sections 4201 or 4243 of ERISA, a Record
authenticated by Company’s chief financial officer notifying Wells Fargo of the
details of the event and the actions that Company proposes to take in response.

 

(p)                                 Other Reports.  From time to
time, with reasonable promptness, all customer lists, receivables schedules,
inventory reports, collection reports, deposit records, equipment schedules,
invoices to account debtors  and such other
materials, reports, records or information as Wells Fargo may request.

 

Section 5.2                                      Financial Covenants.  Company agrees to comply with the financial covenants
described below, which shall be calculated using GAAP consistently applied,
except as they may be otherwise modified by the following capitalized
definitions:

 

(a)                                  Minimum Year-to-Date Earnings Before Taxes. 
Company shall achieve, during each year-to-date period described below,
Earnings Before Taxes for the Consolidated Group of not less than the amount
set forth for each such year-to-date period (numbers appearing between “<
>” are negative):

 

17

 

	
  Year-to-Date

  Period Ended

  	
   

  	
  Minimum Earnings

  Before Taxes

  	
   

  
	
  September 2009

  	
   

  	
  $<16,000,000>

  	
   

  
	
  December 2009

  	
   

  	
  $<17,000,000>

  	
   

  
	
  March 2010

  	
   

  	
  $<3,000,000>

  	
   

  
	
  June 2010

  	
   

  	
  $<3,500,000>

  	
   

  
	
  September 2010

  	
   

  	
  $<3,250,000>

  	
   

  
	
  December 2010

  	
   

  	
  $<2,000,000>

  	
   

  
	
  March 2011

  	
   

  	
  $100,000

  	
   

  
	
  June 2011

  	
   

  	
  $250,000

  	
   

  
	
  September 2011

  	
   

  	
  $350,000

  	
   

  
	
  December 2011

  	
   

  	
  $500,000

  	
   

  
	
  March 2012

  	
   

  	
  $100,000

  	
   

  
	
  June 2012

  	
   

  	
  $250,000

  	
   

  
	
  September 2012

  	
   

  	
  $350,000

  	
   

  

 

(b)                                 Capital Expenditures.  Company and
its Subsidiaries shall not incur or contract to incur Capital Expenditures of
more than $2,000,000  in the
aggregate for the Consolidated Group during any fiscal year, or more than
$2,000,000  in any one transaction.

 

(c)                                  Minimum Excess Borrowing Base Availability. 
Company shall maintain, at all times, a minimum Excess Borrowing Base
Availability of not less than $5,000,000.

 

Section 5.3                                      Other Liens and Permitted Liens.

 

(a)                                  Other Liens; Permitted Liens.  Company shall not, and shall not
permit any Subsidiary to, create, incur or suffer to exist any Lien upon any of
its assets, now owned or later acquired, as security for any indebtedness, with
the exception of the following (each a “Permitted Lien”;
collectively, “Permitted Liens”):  (i) in the case of real property,
covenants, restrictions, rights, easements and minor irregularities in title
which do not materially interfere with the business or operations of Company or
such Subsidiary as presently conducted; (ii) Liens in existence on the
date of this Agreement that are described in Exhibit F and that secure indebtedness for
borrowed money permitted under Section 5.4;
(iii) the Security Interest and Liens created by the Security Documents;
and (iv) purchase money Liens relating to the acquisition of Equipment not
exceeding the lesser of cost or fair market value of such Equipment and so long
as no Default Period is then in existence and none would exist immediately
after such acquisition.

 

18

 

(b)                                 Financing Statements.  Company shall
not, and shall not permit any Subsidiary to, authorize the filing of any
financing statement by any Person as Secured Party with respect to any of the
assets of Company or any Subsidiary, other than Wells Fargo.  Company shall not, and shall not permit any
Subsidiary to, amend any financing statement filed by Wells Fargo as Secured
Party except as permitted by law.

 

Section 5.4                                      Indebtedness. 
Company shall not, and shall not permit any Subsidiary to, incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or letters of credit issued on behalf of Company or any Subsidiary, or
advances or any indebtedness for borrowed money of any kind, whether or not
evidenced by an instrument, except:  (a) Indebtedness
described in this Agreement; (b) indebtedness of Company described in Exhibit F; and (c) indebtedness secured by
Permitted Liens.

 

Section 5.5                                      Guaranties. 
Company shall not, and shall not permit any Subsidiary to, assume,
guarantee, endorse or otherwise become directly or contingently liable for the
obligations of any Person, except:  (a) the
endorsement of negotiable instruments by Company or any Subsidiary for deposit
or collection or similar transactions in the ordinary course of business; and (b) guaranties,
endorsements and other direct or contingent liabilities in connection with the
obligations of other Persons in existence on the date of this Agreement and
described in Exhibit F.

 

Section 5.6                                      Investments and Subsidiaries. 
Company shall not, and shall not permit any Subsidiary to, make or
permit to exist any loans or advances to, or make any investment or acquire any
interest whatsoever in, any Person or Affiliate, including without limitation
any partnership or joint venture, nor purchase or hold beneficially any stock
or other securities or evidence of indebtedness of any Person or Affiliate,
except:

 

(a)                                  Investments in direct obligations of the United States
of America or any of its political subdivisions whose obligations constitute
the full faith and credit obligations of the United States of America and have
a maturity of one year or less, commercial paper issued by U.S. corporations
rated “A-1” or “A-2” by Standard & Poor’s Ratings Services or “P-1” or
“P-2” by Moody’s Investors Service or certificates of deposit or bankers’
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers’ acceptances are fully insured by the
Federal Deposit Insurance Corporation);

 

(b)                                 Travel advances or loans to Company’s Officers and
employees not exceeding at any one time an aggregate of $100,000;

 

(c)                                  Prepaid rent not exceeding one month or security
deposits; and

 

(d)                                 Current investments in those Subsidiaries in existence
on the date of this Agreement which are identified on Exhibit D.

 

Section 5.7                                      Creation of New Subsidiaries; New
Guarantors.  Company shall not, and shall not permit any
Subsidiary to, create a Subsidiary, nor will it acquire any business which
would constitute a Subsidiary, without first obtaining the prior written
approval of Wells

 

19

 

 

Fargo.  Upon receipt of any such prior written
approval, Company will cause each new Subsidiary to execute and deliver to
Wells Fargo a Guaranty guarantying the Indebtedness and a Security Agreement
and such other security documents as may be required by Wells Fargo, granting
Wells Fargo a security interest in all of the assets of such Subsidiary, each
in form and content acceptable to Wells Fargo.

 

Section 5.8                                      Dividends and Distributions. 
Company shall not declare or pay any dividends (other than dividends
payable solely in stock of Company) on any class of its stock, or make any
payment on account of the purchase, redemption or retirement of any shares of
its stock, or other securities or make any distribution regarding its stock,
either directly or indirectly.

 

Section 5.9                                      Salaries. 
Company shall not, and shall not permit any Subsidiary to, pay excessive
or unreasonable salaries, bonuses, commissions, consultant fees or other
compensation.

 

Section 5.10                                Books and Records; Collateral
Examination; Inspection and Appraisals.

 

(a)                                  Books and Records; Inspection. 
Company shall keep, and shall cause each Subsidiary to keep, complete
and accurate books and records with respect to its assets and its business and
financial condition and any other matters that Wells Fargo may request in
accordance with GAAP, and all such books and records shall at all times be
maintained at the chief executive office of Company located at 3601 West 76th Street,
Minneapolis, Minnesota 55435.  Company
shall permit, and shall cause each Subsidiary to permit, any employee,
attorney, accountant or other agent of Wells Fargo to audit, review, make
extracts from and copy any of its books and records at any time during ordinary
business hours, and to discuss its affairs with any of its Directors, Officers,
employees or agents.

 

(b)                                 Authorization to Agents of Company and Subsidiaries to
Make Disclosures to Wells Fargo.  Company
authorizes, and shall cause each Subsidiary to authorize, all accountants and
other Persons acting as its agent to disclose and deliver to Wells Fargo’s
employees, accountants, attorneys and other Persons acting as its agent, at
Company’s expense, all financial information, books and records, work papers,
management reports and other information in their possession regarding Company
or any Subsidiary.

 

(c)                                  Collateral Exams and Inspections. 
Company shall permit, and shall cause each Subsidiary to permit, Wells
Fargo’s employees, accountants, attorneys or other Persons acting as its agent,
to examine and inspect any Collateral or any other property or assets of
Company or any Subsidiary at any time during ordinary business hours; provided,
however, so long as (i) no Event of Default exists, (ii) the sum of
outstanding Advances and the L/C Amount have been less than $3,000,000 at all
times, and (iii) the sum of Cash-on-Hand and the Excess Borrowing Base
Availability has been $8,000,000 or more at all times, then collateral exams
may be performed on a semi-annual basis.

 

20

 

(d)                                 Collateral Appraisals.  Wells Fargo
may also obtain, from time to time, at Company’s expense, an appraisal of the
Collateral and of any other assets of Company or any Subsidiary by an appraiser
acceptable to Wells Fargo in its sole discretion.

 

Section 5.11                                Account Verification; Payment of Permitted Liens.

 

(a)                                  Account Verification. 
Wells Fargo or its agents may (i) contact account debtors and other
obligors at any time to verify Accounts of Company or any Subsidiary; and (ii) require
Company or any Subsidiary to send requests for verification of Accounts or send
notices of assignment of Accounts to account debtors and other obligors.

 

(b)                                 Covenant to Pay Permitted Liens. 
Company shall pay when due each account payable due to any Person
holding a Permitted Lien (as a result of such payable) on any Collateral.

 

Section 5.12                                Compliance with Laws.

 

(a)                                  General Compliance with Applicable Law; Use of
Collateral.  Company shall comply, and shall cause each
Subsidiary to comply, with the requirements of applicable laws and regulations,
the non-compliance with which would materially and adversely affect its
business or its financial condition. 
Company shall use and keep, and shall cause each Subsidiary and each
other Person to use and keep the Collateral and all other assets only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.

 

(b)                                 Compliance with Federal Regulatory Laws. 
Company shall (i) prohibit, and cause each Subsidiary to prohibit,
any Person that is a Director or Officer from being listed on the Specially
Designated Nationals and Blocked Person List or other similar lists maintained
by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury or included in any Executive Orders, (ii) not
permit the proceeds of the Line of Credit or any other financial accommodation
extended by Wells Fargo to be used in any way that violates any foreign asset
control regulations of OFAC or other applicable law, (iii) comply,  and cause each Subsidiary to comply, with all applicable
Bank Secrecy Act laws and regulations, as amended from time to time, and (iv) otherwise
comply, and cause each Subsidiary to comply, with the USA Patriot Act and Wells
Fargo’s related policies and procedures.

 

(c)                                  Compliance with Environmental Laws. 
Company shall (i) comply, and cause each Subsidiary to comply, with
the requirements of applicable Environmental Laws and obtain and comply with
all permits, licenses and similar approvals required by them, and (ii) not
generate, use, transport, treat, store or dispose of, and shall cause each
Subsidiary to not generate, use, transport, treat, store or dispose of, any
Hazardous Substances in such a manner as to create any material liability or
obligation under the common law of any jurisdiction or any Environmental Law.

 

Section 5.13                                Payment of Taxes and Other
Claims.  Company shall pay or discharge, when due, and shall
cause each Subsidiary to pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or 

 

21

 

profits,
upon any properties belonging to it (including without limitation the
Collateral) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach, (b) all
federal, state and local taxes required to be withheld by it, and (c) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a Lien upon any properties of Company or of any Subsidiary, although
Company or such Subsidiary, as applicable, shall not be required to pay any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings and for which
proper reserves have been made.

 

Section 5.14                                Maintenance of Collateral and
Properties.

 

(a)                                  Company shall keep and maintain, and shall cause each
Subsidiary to keep and maintain, the Collateral and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair
any worn, defective or broken parts, although Company or such Subsidiary, as
applicable, may discontinue the operation and maintenance of any properties if
Company or such Subsidiary, as applicable, believes that such discontinuance is
desirable to the conduct of its business and not disadvantageous in any
material respect to Wells Fargo.  Company
shall take, and shall cause each Subsidiary to take, all commercially
reasonable steps necessary to protect and maintain its Intellectual Property
Rights.

 

(b)                                 Company shall  defend, and
shall cause each Subsidiary to defend, the Collateral and all other property
against all Liens, claims and demands of all third Persons claiming any
interest in the Collateral or such property. 
Company shall keep, and shall cause each Subsidiary to keep, all
Collateral and other property free and clear of all Liens except Permitted
Liens. Company shall take, and shall cause each Subsidiary to take, all
commercially reasonable steps necessary to prosecute any Person Infringing its
Intellectual Property Rights and to defend itself against any Person accusing
it of Infringing any Person’s Intellectual Property Rights.

 

Section 5.15                                Insurance. 
Company shall at all times maintain, and shall cause each Subsidiary to
maintain, insurance with insurers acceptable to Wells Fargo, in such amounts
and on such terms (including deductibles) as Wells Fargo in its sole discretion
may require and including, as applicable and without limitation, business
interruption insurance, hazard coverage on an “all risks” basis for all
tangible Collateral and other property, and theft and physical damage coverage
for Collateral consisting of motor vehicles. 
All insurance policies must contain an appropriate lender’s interest
endorsement or clause, and name Wells Fargo as an additional insured.

 

Section 5.16                                Preservation of Existence. 
Company shall, and shall cause each Subsidiary to, preserve and maintain
its existence and all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business and shall conduct its business
in an orderly, efficient and regular manner.

 

Section 5.17                                Delivery of Instruments, etc. 
Upon request by Wells Fargo, Company shall, and shall cause each
Subsidiary to, promptly deliver to Wells Fargo in pledge all 

 

22

 

instruments,
documents and chattel paper constituting Collateral under this Agreement or
constituting collateral under any of the other Security Documents, endorsed or
assigned by Company or such Subsidiary, as applicable.

 

Section 5.18                                Sale or Transfer of Assets;
Suspension of Business Operations.  Company shall
not, and shall not permit any Subsidiary to, sell, lease, assign, transfer or
otherwise dispose of (a) the stock of any Subsidiary, (b) all or a
substantial part of its assets, or (c) any Collateral under this Agreement
or any collateral under any of the other Security Documents or any interest
therein (whether in one transaction or in a series of transactions) to any
other Person other than the sale of Inventory by Company in the ordinary course
of business and shall not liquidate, dissolve or suspend business
operations.  Company shall not, and shall
not permit any Subsidiary to, transfer any part of its ownership interest in
any Intellectual Property Rights and shall not permit its rights as licensee of
Licensed Intellectual Property to lapse, except that Company or any Subsidiary
may transfer such rights or permit them to lapse if it has reasonably
determined that such Intellectual Property Rights are no longer useful in its
business.  If Company or any Subsidiary
transfers any Intellectual Property Rights for value, Company or such
Subsidiary, as applicable, shall pay the Proceeds to Wells Fargo for
application to the Indebtedness.  Company
shall not license any other Person to use any of its Intellectual Property Rights,
except that Company may grant licenses in the ordinary course of its business
in connection with sales of Inventory or the provision of services to its
customers.

 

Section 5.19                                Consolidation and Merger; Asset
Acquisitions.  Company shall not, and shall not permit any
Subsidiary to, consolidate with or merge into any other entity, or permit any
other entity to merge into it, or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all of the
assets of any other entity.

 

Section 5.20                                Sale and Leaseback.  Company shall not, and shall not
permit any Subsidiary to, enter into any arrangement, directly or indirectly,
with any other Person pursuant to which Company or such Subsidiary will sell or
transfer any real or personal property, whether owned now or acquired in the
future, and then rent or lease all or part of such property or any other
property which Company or such Subsidiary intends to use for substantially the
same purpose or purposes as the property being sold or transferred.

 

Section 5.21                                Restrictions on Nature of
Business.  Company shall not, and shall not permit any
Subsidiary to, engage in any line of business materially different from that
presently engaged in by Company or such Subsidiary, as applicable, and will not
purchase, lease or otherwise acquire assets not related to its business.

 

Section 5.22                                Accounting. 
Company shall not, and shall not permit any Subsidiary to, adopt any
material change in accounting principles except as required by GAAP,
consistently applied.  Company shall not,
and shall not permit any Subsidiary to, change its fiscal year.

 

Section 5.23                                Discounts, etc.  After notice from Wells Fargo, Company shall not, and
shall not permit any Subsidiary to, grant any discount, credit or allowance to
any customer of Company or such Subsidiary, as applicable, or accept any return
of goods sold.  

 

23

 

Company
shall not, and shall not permit any Subsidiary to, at any time modify, amend,
subordinate, cancel or terminate any Account.

 

Section 5.24                                Pension Plans. 
Except as disclosed to Wells Fargo in a Record prior to the date of this
Agreement, none of Company, any Subsidiary or any ERISA Affiliate shall (a) adopt,
create, assume or become party to any Pension Plan, (b) become obligated
to contribute to any Multiemployer Plan, (c) incur any obligation to
provide post-retirement medical or insurance benefits with respect to employees
or former employees (other than benefits required by law) or (d) amend any
Plan in a manner that would materially increase its funding obligations.

 

Section 5.25                                Place of Business; Name. 
Company shall not, and shall not permit any Subsidiary to, transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business Premises.  Company
shall not, and shall not permit any Subsidiary to, permit any tangible
Collateral under this Agreement or collateral under any other Security Document
or any records relating thereto to be located in any state or area in which, in
the event of such location, a financing statement covering such Collateral or
such other collateral would be required to be, but has not in fact been, filed
in order to perfect the applicable security interest.  Company shall not, and shall not permit any
Subsidiary to, change its name or jurisdiction of organization.

 

Section 5.26                                Constituent Documents; S
Corporation Status.  Company shall not, and shall not permit any
Subsidiary to, amend its Constituent Documents. 
Company shall not, and shall not permit any Subsidiary to, become an
S Corporation.

 

Section 5.27                                Performance by Wells Fargo. 
If Company or any Subsidiary fails to perform or observe any of its
obligations under this Agreement at any time, Wells Fargo may, but need not,
perform or observe them on behalf of Company or such Subsidiary and may, but
need not, take any other actions which Wells Fargo may reasonably deem
necessary to cure or correct this failure; and Company shall pay Wells Fargo
upon demand the amount of all costs and expenses (including reasonable
attorneys’ fees and legal expense) incurred by Wells Fargo in performing these
obligations, together with interest on these amounts at the Default Rate.

 

Section 5.28                                Wells Fargo Appointed as Company’s
Attorney in Fact.  To facilitate Wells Fargo’s performance or
observance of the obligations of Company and/or any Subsidiary under this
Agreement, Company and each Subsidiary hereby irrevocably appoints Wells Fargo,
and Wells Fargo’s agents, as its attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) to create, prepare,
complete, execute, deliver, endorse or file on behalf of Company or such
Subsidiary, as applicable, any instruments, documents, assignments, security
agreements, financing statements, applications for insurance and any other
agreements or any Record required to be obtained, executed, delivered or
endorsed by Company or such Subsidiary in accordance with the terms of this
Agreement.

 

24

 

ARTICLE VI

EVENTS OF DEFAULT AND REMEDIES

 

Section 6.1                                      Events of Default. 
An “Event of Default” means any of the following:

 

(a)                                  Company fails to pay any the amount of any
Indebtedness on the date that it becomes due and payable;

 

(b)                                 Company fails to observe or perform any covenant or
agreement of Company set forth in this Agreement, or in any of the Loan
Documents, or in any other document or agreement described in or related to
this Agreement or to any Indebtedness;

 

(c)                                  An Overadvance arises as the result of any reduction
in the Borrowing Base or arises in any other manner or on terms not otherwise
approved of in advance by Wells Fargo in a Record that it has Authenticated;

 

(d)                                 An event of default or termination event (however
defined) occurs under any Rate Hedge Agreement, derivative, foreign exchange,
or similar transaction or arrangement entered into between Company and Wells
Fargo;

 

(e)                                  A Change of Control shall occur;

 

(f)                                    Company, any Subsidiary or any Guarantor becomes
insolvent or admits in a Record an inability to pay debts as they mature, or
Company, any Subsidiary or any Guarantor makes an assignment for the benefit of
creditors; or Company, any Subsidiary or any Guarantor applies for or consents
to the appointment of any receiver, trustee, or similar officer for the benefit
of Company, any Subsidiary or any Guarantor, or for any of their properties; or
any receiver, trustee or similar officer is appointed without the application
or consent of Company, any Subsidiary or such Guarantor; or any judgment, writ,
warrant of attachment or execution or similar process is issued or levied
against a substantial part of the property of Company, any Subsidiary or any
Guarantor;

 

(g)                                 Company, any Subsidiary or any Guarantor files a
petition under any chapter of the United States Bankruptcy Code or under the
laws of any other jurisdiction naming Company, such Subsidiary or such
Guarantor as debtor; or any such petition is instituted against Company, any
Subsidiary or any Guarantor; or Company, any Subsidiary or any Guarantor
institutes (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, debt arrangement, dissolution,
liquidation or similar proceeding under the laws of any jurisdiction; or any
such proceeding is instituted (by petition, application or otherwise) against
Company, any Subsidiary or any Guarantor.

 

(h)                                 Any representation or warranty made by Company in this
Agreement or in any other Loan Document or by any Guarantor in any Guaranty or
in any other Loan Document, or by Company (or any of its Officers) or any
Guarantor in any agreement, certificate, instrument or financial statement or
other statement delivered to Wells Fargo in connection with this Agreement or
any other Loan Document or in connection with 

 

25

 

such
Guaranty or in any other Loan Document is untrue or misleading in any material
respect when delivered to Wells Fargo;

 

(i)                                     A final, non-appealable arbitration award, judgment,
or decree or order for the payment of money in an amount in excess of $100,000
which is not insured or subject to indemnity, is entered against Company, any
Subsidiary or any Guarantor which is not immediately stayed or appealed;

 

(j)                                     Company, any Subsidiary or any Guarantor is in default
with respect to any bond, debenture, note or other evidence of material
indebtedness issued by Company, such Subsidiary or such Guarantor that is held
by any third Person other than Wells Fargo, or under any instrument under which
any such evidence of indebtedness has been issued or by which it is governed,
or under any material lease or other contract, and the applicable grace period,
if any, has expired, regardless of whether such default has been waived by the
holder of such indebtedness;

 

(k)                                  Company, any Subsidiary or any Guarantor liquidates,
dissolves, terminates or suspends its business operations or otherwise fails to
operate its business in the ordinary course, or merges with another Person; or
sells or attempts to sell all or substantially all of its assets;

 

(l)                                     Company, any Subsidiary or any Guarantor fails to pay
any indebtedness or obligation owed to Wells Fargo which is unrelated to the
Line of Credit or this Agreement as it becomes due and payable;

 

(m)                               Any Guarantor repudiates or purports to revoke the
Guarantor’s Guaranty or other Loan Documents, or fails to perform any
obligation under such Guaranty or under such other Loan Documents, or any
individual Guarantor dies or becomes incapacitated, or any Guarantor ceases to
exist for any reason;

 

(n)                                 An event of default shall occur under any of the
Security Documents or any other security agreement, mortgage, deed of trust,
assignment or other instrument or agreement directly or indirectly securing any
Indebtedness;

 

(o)                                 Company engages in any act prohibited by any
Subordination Agreement, or makes any payment on Subordinated Debt that the
Subordinated Creditor was not contractually entitled to receive under the terms
of the applicable Subordination Agreement;

 

(p)                                 Any event or circumstance occurs that Wells Fargo in
good faith believes may impair the prospect of payment of all or part of the
Indebtedness, or the ability of Company, any Subsidiary or any Guarantor to
perform any of its material obligations under any of the Loan Documents to
which it is a party, or any other document or agreement described in or related
to this Agreement, or there occurs any material adverse change in the business
or financial condition of Company, any Subsidiary or any Guarantor.

 

26

 

(q)                                 Any Director, Officer or individual Guarantor is
indicted for a felony offence under state or federal law, or Company or any
Subsidiary hires an Officer or appoints a Director who has been convicted of
any such felony offense.

 

(r)                                    Any Reportable Event, which Wells Fargo in good faith
believes to constitute sufficient grounds for termination of any Pension Plan
or for the appointment of a trustee to administer any Pension Plan, has
occurred and is continuing 30 days after Company gives Wells Fargo a
Record notifying it of the Reportable Event; or a trustee is appointed by an
appropriate court to administer any Pension Plan; or the Pension Benefit
Guaranty Corporation institutes proceedings to terminate or appoint a trustee
to administer any Pension Plan; or Company or any ERISA Affiliate files for a
distress termination of any Pension Plan under Title IV of ERISA; or Company or
any ERISA Affiliate fails to make any quarterly Pension Plan contribution
required under Section 412(m) of the IRC, which Wells Fargo in good
faith believes may, either by itself or in combination with other failures,
result in the imposition of a Lien on Company’s assets in favor of the Pension
Plan; or any withdrawal, partial withdrawal, reorganization or other event
occurs with respect to a Multiemployer Plan which could reasonably be expected
to result in a material liability by Company to the Multiemployer Plan under
Title IV of ERISA.

 

Section 6.2                                      Rights and Remedies. 
During any Default Period, Wells Fargo may in its discretion exercise
any or all of the following rights and remedies:

 

(a)                                  Wells Fargo may terminate the Line of Credit and
decline to make Advances, and terminate any services extended to Company under
the Master Agreement for Treasury Management Services;

 

(b)                                 Wells Fargo may declare the Indebtedness to be
immediately due and payable and accelerate payment of the Revolving Note, and
all Indebtedness shall immediately become due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which Company
hereby expressly waives;

 

(c)                                  Wells Fargo may, without notice to Company or any
Subsidiary, apply any money owing by Wells Fargo to Company or to any
Subsidiary to payment of the Indebtedness;

 

(d)                                 Wells Fargo may exercise and enforce any rights and
remedies available upon default to a secured party under the UCC, including the
right to take possession of Collateral under this Agreement or any other
collateral under any of the other Security Documents (without posting a bond or
other form of security, which Company and each Subsidiary hereby waives), to
proceed with or without judicial process (without a prior hearing or notice of
hearing, which Company and each Subsidiary hereby waives) and to sell, lease or
otherwise dispose of such Collateral and/or such other collateral for cash or
on credit (with or without giving warranties as to condition, fitness,
merchantability or title to such Collateral or to such other collateral, and in
the event of a credit sale, Indebtedness shall be reduced only to the extent
that payments are actually received), and Company will, and will cause each
Subsidiary to, upon Wells Fargo’s demand assemble 

 

27

 

such
Collateral and such other collateral and make it available to Wells Fargo at
any place designated by Wells Fargo;

 

(e)                                  Wells Fargo may exercise and enforce its rights and
remedies under any of the Loan Documents and any other document or agreement
described in or related to this Agreement;

 

(f)                                    Company will pay Wells Fargo upon demand in
immediately available funds an amount equal to the Aggregate Face Amount plus
any anticipated costs and fees for deposit to the Special Account pursuant to Section 1.10;

 

(g)                                 Wells Fargo may for any reason apply for the
appointment of a receiver of Company and its Subsidiaries or of the Collateral
under this Agreement or any other collateral under any of the other Security
Documents (to which appointment Company and each Subsidiary hereby consents)
without the necessity of posting a bond or other form of security (which
Company and each Subsidiary hereby waives), and Company agrees to execute and
deliver any and all documents reasonably requested by Wells Fargo relating to
the appointment of such receiver; and

 

(h)                                 Wells Fargo may exercise any other rights and remedies
available to it by law or agreement.

 

Section 6.3                                      Immediate Default and
Acceleration.  Following the occurrence of an Event of
Default described in Section 6.1(f) or
(g), the Line of Credit shall immediately terminate and all of the Indebtedness
shall immediately become due and payable without presentment, demand, protest
or notice of any kind.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1                                      No Waiver; Cumulative Remedies.  No
delay or any single or partial exercise by Wells Fargo of any right, power or
remedy under the Loan Documents, or under any other document or agreement
described in or related to this Agreement, shall constitute a waiver of any
other right, power or remedy under the Loan Documents or granted by Company,
any Subsidiary or any Guarantor to Wells Fargo under other agreements or
documents that are unrelated to the Loan Documents.  No notice to or demand on Company, any
Subsidiary or any Guarantor in any circumstance shall entitle Company, such
Subsidiary or such Guarantor to any additional notice or demand in any other
circumstances.  The remedies provided in
the Loan Documents or in any other document or agreement described in or
related to this Agreement are cumulative and not exclusive of any remedies
provided by law.  Wells Fargo may comply
with applicable law in connection with a disposition of Collateral under this
Agreement or any other collateral under any of the other Security Documents,
and such compliance will not be considered to adversely affect the commercial
reasonableness of any sale of such Collateral or such other collateral.

 

Section 7.2                                      Amendment; Consents and Waivers;
Authentication.  No amendment or modification of any Loan
Documents, or any other document or agreement described in or related to this
Agreement, or consent to or waiver of any Event of Default, or 

 

28

 

consent
to or waiver of the application of any covenant or representation set forth in
any of the Loan Documents, or any other document or agreement described in or
related to this Agreement, or any release of Wells Fargo’s Security Interest in
any Collateral under this Agreement or Wells Fargo’s security interest or Lien
in any other collateral under any of the other Security Documents, shall be
effective unless it has been agreed to by Wells Fargo and memorialized in a
Record that:  (a) specifically
states that it is intended to amend or modify specific Loan Documents, or any
other document or agreement described in or related to this Agreement, or waive
any Event of Default or the application of any covenant or representation of
any terms of specific Loan Documents, or any other document or agreement
described in or related to this Agreement, or is intended to release Wells
Fargo’s Security Interest in specific Collateral or Wells Fargo’s security
interest or Lien in any other specific collateral; and (b) is
Authenticated by the signature of an authorized employee of both parties, or by
an authorized employee of Wells Fargo with respect to a consent or waiver.  The terms of an amendment, consent or waiver
memorialized in any Record shall be effective only to the extent, and in the
specific instance, and for the limited purpose to which Wells Fargo has agreed.

 

Section 7.3                                      Execution in Counterparts;
Delivery of Counterparts.  This Agreement and all other
Loan Documents, or any other document or agreement described in or related to
this Agreement, and any amendment or modification to them may be Authenticated
by the parties in any number of counterparts, each of which, once authenticated
and delivered in accordance with the terms of this Section 7.3, will be deemed an original, and all such
counterparts, taken together, shall constitute one and the same
instrument.  Delivery by fax or by
encrypted e-mail or e-mail file attachment of any counterpart to any Loan
Document Authenticated by an authorized signature will be deemed the equivalent
of the delivery of the original Authenticated instrument.  Company shall send, and shall cause each
Subsidiary to send, the original Authenticated counterpart to Wells Fargo by
first class U.S. mail or by overnight courier, but the failure of Company or
such Subsidiary to deliver a Record in this form shall not affect the validity,
enforceability, and binding effect of this Agreement or the other Loan
Documents, or any other document or agreement described in or related to this
Agreement.

 

Section 7.4                                      Notices, Requests, and
Communications; Confidentiality.  Except as
otherwise expressly provided in this Agreement:

 

(a)                                  Delivery of Notices, Requests and Communications. 
Any notice, request, demand, or other communication by either party that
is required under the Loan Documents, or any other document or agreement
described in or related to this Agreement, to be in the form of a Record (but
excluding any Record containing information Company must report to Wells Fargo
under Section 5.1) may be delivered (i) in
person, (ii) by first class U.S. mail, (iii) by overnight courier of
national reputation, or (iv) by fax, or the Record may be sent as an
Electronic Record and delivered (v) by an encrypted e-mail, or (vi) through
Wells Fargo’s CEO® portal or other secure
electronic channel to which the parties have agreed.

 

(b)                                 Addresses for Delivery.  Delivery of
any Record under this Section 7.4
shall be made to the appropriate address set forth on the last page of
this Agreement (which either party may modify by a Record sent to the other
party), or through Wells Fargo’s CEO® portal or
other secure electronic channel to which the parties have agreed.

 

29

 

 

(c)                                  Date of Receipt.  Each Record sent pursuant to the
terms of this Section 7.4 will be
deemed to have been received on (i) the date of delivery if delivered in
person, (ii) the date deposited in the mail if sent by mail, (iii) the
date delivered to the courier if sent by overnight courier, (iv) the date
of transmission if sent by fax, or (v) the date of transmission, if sent
as an Electronic Record by electronic mail or through Wells Fargo’s CEO®  portal or
similar secure electronic channel to which the parties have agreed; except
that any request for an Advance or any other notice, request, demand or other
communication from Company required under Article I, and any request for an accounting under Section 9-210 of
the UCC, will not be deemed to have been received until actual receipt by Wells
Fargo on a Business Day by an authorized employee of Wells Fargo.

 

(d)                                 Confidentiality of Unencrypted E-mail. 
Company acknowledges that if it sends an Electronic Record to Wells
Fargo without encryption by e-mail or as an e-mail file attachment, there is a
risk that the Electronic Record may be received by unauthorized Persons, and
that by so doing it will be deemed to have accepted this risk and the
consequences of any such unauthorized disclosure.

 

Section 7.5                                      Company Information Reporting;
Confidentiality.  Except as otherwise expressly provided in
this Agreement:

 

(a)                                  Delivery of Company Information Records. 
Any information that Company is required to deliver under Section 5.1 in the form of a Record may be delivered to
Wells Fargo (i) in person, or by (ii) first class U.S. mail, (iii) overnight
courier of national reputation, or (iv) fax, or the Record may be sent as
an Electronic Record (v) by encrypted e-mail, or (vi) through the
file upload service of Wells Fargo’s CEO® portal or
other secure electronic channel to which the parties have agreed.

 

(b)                                 Addresses for Delivery.  Delivery of
any Record to Wells Fargo under this Section 7.5 shall be made to the appropriate address set forth on the last page of
this Agreement (which Wells Fargo may modify by a Record sent to Company), or
through Wells Fargo’s CEO® portal or
other secure electronic channel to which the parties have agreed.

 

(c)                                  Date of Receipt.  Each Record sent pursuant to this Section will
be deemed to have been received on (i) the date of delivery to an
authorized employee of Wells Fargo, if delivered in person, or by U.S. mail,
overnight courier, fax, or e-mail; or (ii) the date of transmission, if
sent as an Electronic Record through Wells Fargo’s CEO®  portal or similar secure electronic channel to which the
parties have agreed.

 

(d)                                 Authentication of Company Information Records. 
Company shall Authenticate any Record delivered (i) in person, or
by U.S. mail, overnight courier, or fax, by the signature of the Officer or
employee of Company who prepared the Record; (ii) as an Electronic Record
sent via encrypted e-mail, by the signature of the Officer or employee of
Company who prepared the Record by any file format signature that is acceptable
to Wells Fargo, or by a separate certification signed and sent by fax; or (iii) as
an Electronic Record via the file upload service of Wells Fargo’s CEO®  portal or
similar 

 

30

 

secure
electronic channel to which the parties have agreed, through such credentialing
process as Wells Fargo and Company may agree to under the CEO®  agreement.

 

(e)                                  Certification of Company Information Records.   Any Record (including without limitation any
Electronic Record) Authenticated and delivered to Wells Fargo under this Section 7.5 will be deemed to have been certified as
materially true, correct, and complete by Company and each Officer or employee
of Company who prepared and Authenticated the Record on behalf of Company, and
may be legally relied upon by Wells Fargo without regard to method of delivery
or transmission.

 

(f)                                    Confidentiality of Company Information Records Sent by
Unencrypted E-mail.  Company acknowledges that if it sends an
Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail
file attachment, there is a risk that the Electronic Record may be received by
unauthorized Persons, and that by so doing it will be deemed to have accepted
this risk and the consequences of any such unauthorized disclosure.  Company acknowledges that it may deliver
Electronic Records containing Company information to Wells Fargo by e-mail
pursuant to any encryption tool acceptable to Wells Fargo and Company, or
through Wells Fargo’s CEO®  portal file upload service without risk of unauthorized
disclosure.

 

Section 7.6                                      Further Documents. 
Company shall, and shall cause each Subsidiary to, from time to time,
execute, deliver, endorse and authorize the filing of any instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements that Wells Fargo may reasonably request
in order to secure, protect, perfect or enforce Wells Fargo’s Security Interest
in the Collateral and Wells Fargo’s security interest or Lien in any other
collateral under any of the other Security Documents, or Wells Fargo’s rights
under the Loan Documents, or any other document or agreement described in or
related to this Agreement (but any failure to request or assure that Company or
any Subsidiary executes, delivers, endorses or authorizes the filing of any
such item shall not affect or impair the validity, sufficiency or
enforceability of the Loan Documents, or any other document or agreement
described in or related to this Agreement, and Wells Fargo’s Security Interest
or any other security interest or Lien of Wells Fargo, regardless of whether
any such item was or was not executed, delivered or endorsed in a similar
context or on a prior occasion).

 

Section 7.7                                      Costs and Expenses. 
Company shall pay on demand all costs and expenses, including without
limitation reasonable attorneys’ fees and reasonable consultant’s fees,
incurred by Wells Fargo in connection with the Indebtedness, this Agreement,
the Loan Documents, or any other document or agreement described in or related
to this Agreement, and the transactions contemplated by this Agreement,
including without limitation all such costs, expenses and fees incurred in
connection with the negotiation, preparation, execution, delivery, amendment,
administration, performance, collection and enforcement of the Indebtedness and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of Wells Fargo’s Security Interest in
the Collateral under this Agreement and all other security interests and Liens
of Wells Fargo in any other collateral under any of the other Security
Documents.  Without limiting the
generality of the foregoing, Company acknowledges and agrees that it is
obligated to reimburse Wells Fargo the full amount of any payment made by 

 

31

 

Wells
Fargo pursuant to the Lockbox and Blocked Account Agreement by and among
Company, Wells Fargo and Harris N.A. of even date herewith.

 

Section 7.8                                      Indemnity.  In addition to its obligation to pay Wells Fargo’s
expenses under the terms of this Agreement, Company shall indemnify, defend and
hold harmless Wells Fargo, its parent Wells Fargo & Company, and any
of its affiliates and successors, and all of their present and future officers,
directors, employees, attorneys and agents (each an “Indemnitee”)
from and against any of the following (collectively, “Indemnified
Liabilities”):

 

(a)                                  Any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents, or any other document or
agreement described in or related to this Agreement or the making of the
Advances;

 

(b)                                 Any claims, loss or damage to which any Indemnitee may
be subjected if any representation or warranty contained in Exhibit D proves to be incorrect in any respect or
as a result of any violation of the covenants contained in Section 5.12; and

 

(c)                                  Any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including without limitation the reasonable fees and disbursements of counsel)
in connection with this Agreement and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall be designated a
party to such proceedings, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents, or any other
document or agreement described in or related to this Agreement, or the use or
intended use of the proceeds of the Advances, with the exception of any
Indemnified Liability caused by the gross negligence or willful misconduct of
an Indemnitee.

 

If any investigative, judicial or administrative
proceeding described in this Section is brought against any Indemnitee,
upon the Indemnitee’s request, Company, or counsel designated by Company and
satisfactory to the Indemnitee, will resist and defend the action, suit or
proceeding to the extent and in the manner directed by the Indemnitee, at
Company’s sole cost and expense.  Each
Indemnitee will use its best efforts to cooperate in the defense of any such
action, suit or proceeding.  If this
agreement to indemnify is held to be unenforceable because it violates any law
or public policy, Company shall nevertheless make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities to the extent
permissible under applicable law. 
Company’s obligations under this Section shall survive the
termination of this Agreement and the discharge of Company’s other obligations
under this Agreement.

 

Section 7.9                                      Retention of Company’s Records.  Wells Fargo shall have no
obligation to maintain Electronic Records or retain any documents, schedules,
invoices, agings, or other Records delivered to Wells Fargo by Company, any
Subsidiary or any Guarantor in connection with the Loan Documents, or any other
document or agreement described in or related to this Agreement for more than
30 days after receipt by Wells Fargo.  If
there is a special need to retain specific Records, Company must notify Wells
Fargo of its need to retain or return 

 

32

 

such
Records with particularity, which notice must be delivered to Wells Fargo in
accordance with the terms of this Agreement at the time of the initial delivery
of the Record to Wells Fargo.

 

Section 7.10                                Binding Effect; Assignment;
Complete Agreement.  The Loan Documents, or any other document or
agreement described in or related to this Agreement, shall be binding upon and
inure to the benefit of Company and its Subsidiaries and Wells Fargo and their
respective successors and assigns, except that neither Company nor any
Subsidiary shall have the right to assign its rights under this Agreement or
under any other Loan Document or any interest in this Agreement or in any other
Loan Document without Wells Fargo’s prior consent, which must be confirmed in a
Record Authenticated by Wells Fargo. To the extent permitted by law, Company
and each Subsidiary waives and will not assert against any assignee any claims,
defenses or set-offs which Company or such Subsidiary could assert against
Wells Fargo. This Agreement shall also bind all Persons who become a party to
this Agreement as a borrower.  This
Agreement, together with the Loan Documents, or any other document or agreement
described in or related to this Agreement, comprises the complete and
integrated agreement of the parties on the subject matter of this Agreement and
supersedes all prior agreements, whether oral or evidenced in a Record.  To the extent that any provision of this
Agreement contradicts other provisions of the Loan Documents other than this
Agreement, or any other document or agreement described in or related to this
Agreement, this Agreement shall control.

 

Section 7.11                                Sharing of Information. 
Wells Fargo may share any Confidential Information that it may have regarding
Company, its Subsidiaries and its Affiliates with its accountants, lawyers, and
other advisors, and with each business unit and line of business within Wells
Fargo and each direct and indirect subsidiary of Wells Fargo &
Company.

 

Section 7.12                                Severability of Provisions. 
Any provision of this Agreement which is prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining terms of this Agreement.

 

Section 7.13                                Headings.  Section and
subsection headings in this Agreement are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.

 

Section 7.14                                Definitional Terms and Rules of
Interpretation.  All accounting terms not otherwise defined in
this Agreement shall have the meanings given them in accordance with GAAP.  Unless the context clearly requires
otherwise, the word “or” has the inclusive meaning represented by the phrase “and/or”.  Reference to any agreement (including without
limitation the Loan Documents), document or instrument means the agreement,
document or instrument as amended, restated or supplemented, subject to any
restrictions on amendment contained therein (and, if applicable, in accordance
with the terms of this Agreement and the other Loan Documents).  Unless otherwise specified, any reference to
a statute or regulation means that statute or regulation as amended or
supplemented from time to time, and any corresponding provisions of successor
statutes or regulations.

 

Section 7.15                                Customer Identification — USA
Patriot Act Notice.  Wells Fargo hereby notifies Company that
pursuant to the requirements of the USA Patriot Act (Title III of 

 

33

 

Pub.
L. 107-56, signed into law October 26, 2001) (the “Act”),
Wells Fargo is required to obtain, verify and record certain information and
documentation that identifies Company and each Subsidiary, which information
includes the name and address of Company and each Subsidiary and such other
information that will allow Wells Fargo to identify Company and each Subsidiary
in accordance with the Act.

 

Section 7.16                                Governing Law; Jurisdiction,
Venue; Waiver of Jury Trial.  The Loan
Documents (other than real estate related documents, if any) shall be governed
by and construed in accordance with the substantive laws (other than conflict
laws) of the State of Minnesota.  The
parties to this Agreement (a) consent to the personal jurisdiction of the
state and federal courts located in the State of Minnesota  in
connection with any controversy related to this Agreement; (b) waive any
argument that venue in any such forum is not convenient; (c) agree that
any litigation initiated by Wells Fargo, Company or any Subsidiary in
connection with this Agreement or the other Loan Documents may be venued in
either the state or federal courts located in the City of Minneapolis, County
of Hennepin,  State of Minnesota; and (d) agree
that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.

 

Signature page(s) follow

 

34

 

COMPANY
AND WELLS FARGO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN
EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT.

 

ANALYSTS INTERNATIONAL
CORPORATION

 

 

	
  By:

  	
  /s/ Randy Strobel

  	
   

  
	
  Name:

  	
  Randy Strobel

  	
   

  
	
  Its:

  	
  Senior Vice President,
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
  WELLS
  FARGO BANK,

  NATIONAL ASSOCIATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Karen J. Hagen

  	
   

  
	
  Name:

  	
  Karen
  J. Hagen

  	
   

  
	
  Its:

  	
  Officer

  	
   

  

 

Waiver

 

 

COMPANY AND WELLS FARGO have executed
this Agreement through their authorized officers as of the date set forth
above.

 

	
  WELLS FARGO BANK,

  NATIONAL ASSOCIATION

  	
   

  	
  ANALYSTS
  INTERNATIONAL

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Karen J. Hagen

  	
   

  	
  By:

  	
  /s/ Randy Strobel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Karen J. Hagen  

  	
   

  	
   

  	
  Name:

  	
  Randy
  Strobel

  
	
   

  	
  Its: Officer

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President,
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Wells Fargo Bank, National Association

  MAC N9312-040

  109 South Seventh Street, Suite 4

  Minneapolis, MN 55402

  Fax: (612) 673-8589

  Attention: Karen Hagen

  e-mail: karen.j.hagen@wellsfargo.com

  	
   

  	
  Analysts
  International Corporation

  3601 West 76th Street

  Minneapolis, MN 55435

  Fax: (952) 838-3175

  Attention:
  Randy Strobel

  e-mail:
  rstrobel@analysts.com

  

 

Signature Page to Credit and Security Agreement

 

 

Exhibit A to Credit and
Security Agreement

 

DEFINITIONS

 

“Account
Funds” is defined in Section 1.6(a).

 

“Accounts” shall have the
meaning given it under the UCC.

 

“Advance” and “Advances” means an advance or advances under the Line of
Credit.

 

“Affiliate” or “Affiliates” means any Person controlled by, controlling or
under common control with Company, including without limitation any Subsidiary
of Company.  For purposes of this
definition, “control,” when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

 

“Aggregate Face Amount” means the
aggregate amount that may then be drawn under each outstanding Letter of
Credit, assuming compliance with all conditions for drawing.

 

“Agreement” means this
Credit and Security Agreement.

 

“Authenticated” means (e) to
have signed; or (f) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part,
with the present intent of the authenticating Person to identify the Person and
adopt or accept a Record.

 

“Billed Account” means an
unpaid Account of Company arising from the sale or lease of goods or the
performance of any services, net of any credits, with respect to which Company
has earned full payment and has issued an invoice to the applicable account
debtor.

 

“Borrowing
Base” is defined in Section 1.2(a).

 

“Borrowing Base Reserve” means, as of any date of determination, an amount or a percent of a
specified category or item that Wells Fargo establishes in its sole discretion
from time to time to reduce availability under the Borrowing Base (a) to
reflect events, conditions, contingencies or risks which affect the assets,
business or prospects of Company or its Subsidiaries, or the Collateral or its
value, or the enforceability, perfection or priority of Wells Fargo’s Security
Interest in the Collateral, as the term “Collateral” is defined in this
Agreement, or (b) to reflect Wells Fargo’s judgment that any collateral
report or financial information relating to Company or its Subsidiaries and
furnished to Wells Fargo may be incomplete, inaccurate or misleading in any
material respect.

 

“Business Day” means a day on which the Federal Reserve
Bank of New York is open for business and, if such day relates to a Fixed Rate
Advance, a day on which dealings are carried on in the London interbank
eurodollar market.

 

A-1

 

“Capital
Expenditures” means, for any Person for any period, any
expenditure of money during such period for the purchase or construction of
assets, or for improvements or additions to such assets, which are capitalized
on such Person’s balance sheet.

 

“Cash-on-Hand” means all
fully collected funds deposited by Company in an account at Wells Fargo.

 

“CEO®” is defined in Section 5.1(c).

 

“Change of Control” shall mean any
one or more of the following events:

 

(a)                                  The purchase or other acquisition by any one Person,
or more than one Person acting as a group, of stock of the Company that,
together with stock held by such Person or group, constitutes more than 50% of
the total combined value or total combined voting power of all classes of stock
issued by the Company; provided, however, that if any one Person or more than
one Person acting as a group is considered to own more than 50% of the total
combined value or total combined voting power of such stock, the acquisition of
additional stock by the same Person or Persons shall not be considered a Change
of Control;

 

(b)                                 Any one Person, or more than one Person acting as a
group, acquires or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such Person or Persons, direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of stock of the Company constituting more than
50%  of the total combined voting power
of all classes of stock issued by the Company;

 

(c)                                  A change in the composition of the board of directors
of the Company at any time during any consecutive twelve (12) month period such
that the Continuity Directors cease for any reason to constitute at least 66
2/3% majority of the board of directors.

 

“Collateral” means all of
Company’s Accounts, chattel paper and electronic chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods, instruments,
Intellectual Property Rights, Inventory, Investment Property, letter-of-credit
rights, letters of credit, all sums on deposit in any Collection Account, and
any items in any Lockbox; together with (a) all substitutions and
replacements for and products of such property; (b) in the case of all
goods, all accessions; (c) all accessories, attachments, parts, Equipment
and repairs now or subsequently attached or affixed to or used in connection with
any goods; (d) all warehouse receipts, bills of lading and other documents
of title that cover such goods now or in the future; (e) all collateral
subject to the Lien of any of the Security Documents; (f) any money, or
other assets of Company that come into the possession, custody, or control of
Wells Fargo now or in the future; (g) Proceeds of any of the above
Collateral; (h) books and records of Company, including without limitation
all mail or e-mail addressed to Company; and (i) all of the above Collateral,
whether now owned or existing or acquired now or in the future or in which
Company has rights now or in the future.

 

A-2

 

“Collection
Account” means “Collection Account” as defined in the Master
Agreement for Treasury Management Services and related Lockbox and Collection
Account Service Description or Collection Account Service Description,
whichever is applicable.

 

“Compliance Certificate” is defined in Section 5.1(a) and is in the form of Exhibit E.

 

“Commercial Letter of
Credit Agreement” means an agreement governing the issuance of
commercial letters of credit entered into between Company as applicant and
Wells Fargo as issuer.

 

“Company” is defined in
the Preamble.

 

“Confidential Information” means all
non-public, confidential or proprietary information of Company and/or any
Subsidiary that is disclosed to Wells Fargo prior to or during the term of this
Agreement by Company or any Subsidiary or any of its officers, employees,
agents or representatives, and includes, without limitation, any trade secrets,
research and development test results, marketing or business plans, strategies,
forecasts, budgets, projections, customer and supplier information, and any
other analyses, computations or studies prepared by or for Company or by or for
any Subsidiary.

 

“Consolidated Group” means Company
and its consolidated Subsidiaries.

 

“Constituent Documents” means with
respect to any Person, as applicable, that Person’s certificate of
incorporation, articles of incorporation, by-laws, certificate of formation,
articles of organization, limited liability company agreement, management
agreement, operating agreement, shareholder agreement, partnership agreement or
similar document or agreement governing such Person’s existence, organization
or management or concerning disposition of ownership interests of such Person
or voting rights among such Person’s owners.

 

“Continuity Directors” means those
members of the board of directors of the Company who either:

 

(a)                                  were directors at the beginning of the applicable
twelve (12) month period; or

 

(b)                                 were elected by, or on the nomination or
recommendation of, at least a two-thirds majority of the then-existing board of
directors of the Company.

 

“Copyright Security
Agreement” means each Copyright Security Agreement given by
Company or any Subsidiary of Company in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof.

 

“Daily Three Month LIBOR” means, for any day, the rate
of interest equal to LIBOR then in effect for delivery for a three (3) month
period. When interest is determined in relation to Daily Three Month LIBOR,
each change in the interest rate shall become effective each Business Day that
Wells Fargo determines that Daily Three Month LIBOR has changed.

 

A-3

 

 

“Debt” means of a
Person as of a given date, all items of indebtedness or liability which in
accordance with GAAP would be included in determining total liabilities as
shown on the liabilities side of a balance sheet for such Person and shall also
include the aggregate payments required to be made by such Person at any time
under any lease that is considered a capitalized lease under GAAP.

 

“Default Period” is defined in Section 1.7(b).

 

“Default Rate” is defined in Section 1.7(b).

 

“Dilution” means, as of
any date of determination, a percentage, based upon the prior twelve (12)
months, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, net credits, and any other items with
respect to the Accounts determined to be dilutive by Wells Fargo in its sole
discretion during this period, by (b) Company’s net sales during such
period (excluding extraordinary items) plus the amount of clause (a).

 

“Dilution Reserve” means, as of
any date of determination, an amount that Wells Fargo establishes in its sole
discretion from time to time to reduce availability under the Borrowing Base to
reflect a reduction in the advance rates applicable to Eligible Billed Accounts
and/or Eligible Unbilled Accounts to accomplish a two percent (2%) reduction in
such advance rates for each percentage point by which Dilution on the date of
determination is in excess of two and one-half percent (2.5%).

 

“Director” means a
director if Company is a corporation, or a governor or manager if Company is a
limited liability company.

 

“Earnings Before Taxes” means, for any
Person for any period, pretax earnings of such Person from operations during
such period, excluding extraordinary gains, but including extraordinary losses.

 

“Electronic Record” means a Record
that is created, generated, sent, communicated, received, or stored by
electronic means, but does not include any Record that is sent,
communicated, or received by fax.

 

“Eligible Billed Accounts” means all
unpaid Billed Accounts of Company, but excluding any Billed Accounts having any
of the following characteristics:

 

(a)                                  That portion of Billed Accounts unpaid 90 days or
more after the invoice date; provided, however, the foregoing period shall be
120 days for Billed Accounts with respect to which IBM is the account debtor;

 

(b)                                 That portion of Billed Accounts related to goods or
services with respect to which Company has received notice of a claim or
dispute, which are subject to a claim of offset or a contra account, or which
reflect a reasonable reserve for warranty claims or returns;

 

A-4

 

(c)                                  That portion of Billed Accounts not yet earned by the
final delivery of goods or that portion of Billed Accounts not yet earned by
the final rendition of services by Company to the account debtor, including
with respect to both goods and services and progress billings;

 

(d)                                 Billed Accounts constituting (i) Proceeds of
copyrightable material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) Proceeds of
patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office;

 

(e)                                  Billed Accounts owed by any unit of the United States
federal government or any unit of any foreign government (except that there
shall be included in Eligible Billed Accounts that portion of Billed Accounts
owed by such units of United States federal government for which Company has
provided evidence satisfactory to Wells Fargo that (i) Wells Fargo’s
Security Interest constitutes a perfected first priority Lien in such Billed
Accounts, and (ii) such Billed Accounts may be enforced by Wells Fargo
directly against such unit of the United States federal government under all
applicable laws);

 

(f)                                    Billed Accounts denominated in any currency other than
United States Dollars;

 

(g)                                 Billed Accounts owed by an account debtor located
outside the United States which are not (i) backed by a bank letter of
credit naming Wells Fargo as beneficiary or assigned to Wells Fargo, in Wells
Fargo’s possession or control, and with respect to which a control agreement
concerning the letter-of-credit rights is in effect, and acceptable to Wells
Fargo in all respects, in its sole discretion, or (ii) covered by a
foreign receivables insurance policy acceptable to Wells Fargo in its sole
discretion, or (iii) covered by an Ex-Im Bank working capital guaranty
acceptable to Wells Fargo in its sole discretion;

 

(h)                                 Billed Accounts owed by an account debtor who is
insolvent or is the subject of bankruptcy proceedings or who has gone out of
business;

 

(i)                                     Billed Accounts owed by a Subsidiary, Affiliate,
Officer, Director or employee of Company;

 

(j)                                     Billed Accounts not subject to the Security Interest
or which are subject to any Lien in favor of any Person other than Wells Fargo;

 

(k)                                  That portion of Billed Accounts that has been
restructured, extended, amended or modified;

 

(l)                                     That portion of Billed Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;

 

(m)                               Billed Accounts owed by an account debtor, regardless
of whether otherwise eligible, to the extent that (i) the aggregate
balance of such Billed Accounts of 

 

A-5

 

such
account debtor exceeds 20% of the aggregate amount of all Billed Accounts, or (ii) the
aggregate balance of such Billed Accounts and the Unbilled Accounts of such
account debtor exceeds 20% of the aggregate amount of all Billed Accounts and
Unbilled Accounts;

 

(n)                                 Billed Accounts owed by an account debtor, regardless
of whether otherwise eligible, if (i) 20% or more of the total amount of
Billed Accounts of such account debtor due from such account debtor is
ineligible under clauses (a), (b) or (k) above, or (ii) 20% or
more of the total amount of Billed Accounts and Unbilled Accounts due from such
account debtor is ineligible under clauses (a), (b) or (k) above or
under clauses (a), (b) or (k) of the definition of “Eligible Unbilled
Accounts”;

 

(o)                                 Billed Accounts, or portions of Billed Accounts,
otherwise deemed ineligible by Wells Fargo in its sole discretion.

 

“Eligible Unbilled
Accounts” means all unpaid Unbilled Accounts of Company, but
excluding any Unbilled Accounts having any of the following characteristics:

 

(a)                                  That portion of Unbilled Accounts which are unbilled
40 days or more after Company’s completion of the service or the date of the
sale related to such Unbilled Account;

 

(b)                                 That portion of Unbilled Accounts related to goods or
services with respect to which Company has received notice of a claim or
dispute, which are subject to a claim of offset or a contra account, or which
reflect a reasonable reserve for warranty claims or returns;

 

(c)                                  That portion of Unbilled Accounts not yet earned by
the final delivery of goods or that portion of Accounts not yet earned by the
final rendition of services by Company to the account debtor, including with
respect to both goods and services and progress billings;

 

(d)                                 Unbilled Accounts constituting (i) Proceeds of
copyrightable material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) Proceeds of
patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office;

 

(e)                                  Unbilled Accounts owed by any unit of the United
States federal government or any unit of any foreign government;

 

(f)                                    Unbilled Accounts denominated in any currency other
than United States Dollars;

 

(g)                                 Unbilled Accounts owed by an account debtor located
outside the United States;

 

(h)                                 Unbilled Accounts owed by an account debtor who is
insolvent or is the subject of bankruptcy proceedings or who has gone out of
business;

 

A-6

 

(i)                                     Unbilled Accounts owed by a Subsidiary, Affiliate,
Officer, Director or employee of Company;

 

(j)                                     Unbilled Accounts not subject to the Security Interest
or which are subject to any Lien in favor of any Person other than Wells Fargo;

 

(k)                                  That portion of Unbilled Accounts that has been
restructured, extended, amended or modified;

 

(l)                                     That portion of Unbilled Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;

 

(m)                               Unbilled Accounts owed by an account debtor,
regardless of whether otherwise eligible, to the extent that (i) the
aggregate balance of such Unbilled Accounts of such account debtor exceeds 20%
of the aggregate amount of all Unbilled Accounts, or (ii) the aggregate
balance of such Unbilled Accounts and Billed Accounts of such account debtor
exceeds 20% of the aggregate amount of all Unbilled Accounts and Billed
Accounts;

 

(n)                                 Unbilled Accounts owed by an account debtor,
regardless of whether otherwise eligible if (i) 20% or more of the total amount
of Unbilled Accounts due from such account debtor is ineligible under clauses
(a), (b) or (k) above, or (ii) 20% or more of the total amount
of Unbilled Accounts and Billed Accounts due from such account debtor is
ineligible under clauses (a), (b) or (k) above or under clauses (a), (b) or
(k) of the definition of “Eligible Billed Accounts”;

 

(o)                                 Unbilled Accounts, or portion of Unbilled Accounts,
otherwise deemed ineligible by Wells Fargo in its sole discretion.

 

“Environmental Law” means any
federal, state, local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the environment.

 

“Equipment” shall have the
meaning given it under the UCC.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means any
trade or business (whether or not incorporated) that is a member of a group
which includes Company or any Subsidiary and which is treated as a single
employer under Section 414 of the IRC.

 

“Event of Default” is defined in Section 6.1.

 

“Excess Borrowing Base
Availability” means, at any date of determination, the amount by
which the Borrowing Base exceeds the sum of the outstanding Advances and the
L/C Amount.

 

A-7

 

“Fixed Rate” is defined in Section 1.7(a).

 

“Fixed Rate Interest Period” means a three (3) month
period that commences on (and includes) the Business Day on which either a
Fixed Rate Advance is made or continued or on which a Floating Rate Advance is
converted to a Fixed Rate Advance, and ending on (but excluding) the Business
Day numerically corresponding to that date three (3) months thereafter,
during which period the outstanding principal amount of the Fixed Rate Advance
shall bear interest at the Fixed Rate; provided, however, that:

 

(a)                                  If a Fixed Rate Interest Period would otherwise end on
a day which is not a Business Day, then it shall end on the next Business Day,
unless that day is the first Business Day of a month, in which case the Fixed
Rate Interest Period shall end on the last Business Day of the preceding month;

 

(b)                                 No Fixed Rate Interest Period may have a term that
extends beyond the Maturity Date; and

 

(c)                                  No Fixed Rate Interest Period may be selected if any
part of the Fixed Rate Advance must contractually be prepaid prior to the end
of the Fixed Rate Interest Period.

 

“Fixed Rate Advance” is defined in Section 1.3(a).

 

“Floating Rate” is defined in Section 1.7(a).

 

“Floating Rate Advance” is defined in Section 1.3(a).

 

“GAAP” means generally
accepted accounting principles, applied on a basis consistent with the
accounting practices applied in the financial statements described on Exhibit D.

 

“General
Intangibles” shall have the meaning given it under the UCC.

 

“Guarantor” means, as the
context may require, Analysts International Business Solution Services, LLC,
Analysts International Business Resource Services, LLC, Analysts International
Management Services, LLC, Analysts International Strategic Sourcing Services,
LLC, Medical Concepts Staffing, Inc. and any other Person now or in the future guaranteeing any Indebtedness
through the issuance of a Guaranty (and “Guarantors”
means all of foregoing collectively).

 

“Guaranty” means a
guaranty executed by a Guarantor in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof (and “Guaranties”
means all of the guaranties collectively).

 

“Hazardous Substances” means
pollutants, contaminants, hazardous substances, hazardous wastes, or petroleum,
and all other chemicals, wastes, substances and materials listed in, regulated
by or identified in any Environmental Law.

 

A-8

 

“IBM” means
International Business Machines Corp., a New York corporation.

 

“Indebtedness” is used in its
most comprehensive sense and means any debts, obligations and liabilities of
Company and/or any of its Subsidiaries to Wells Fargo, whether incurred in the
past, present or future, whether voluntary or involuntary, and however arising,
and whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and including without limitation all obligations
arising under any Rate Hedge Agreement, derivative, foreign exchange, deposit,
treasury management or similar transaction or arrangement however described or
defined that Company and/or any of its Subsidiaries may enter into at any time
with Wells Fargo, whether or not Company and/or any of its Subsidiaries may be
liable individually or jointly with others, or whether recovery upon such
Indebtedness may subsequently become unenforceable.

 

“Indemnified Liabilities” is defined in Section 7.8.

 

“Indemnitee” is defined in Section 7.8.

 

“Infringement” or “Infringing” when used with respect to
Intellectual Property Rights means any infringement or other violation of
Intellectual Property Rights.

 

“Intellectual
Property Rights” means all actual or prospective
rights arising in connection with any intellectual property or other
proprietary rights, including without limitation all rights arising in
connection with copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.

 

“Interest Payment Date” means (i) with respect
to each Floating Rate Advance, the first day of each month and (ii) with respect to
each Fixed Rate Advance, the last day of the applicable Fixed
Rate Interest Period; provided,
however, that if a Fixed Rate Interest
Period is in excess of one month, and is not subject to a Rate Hedge, then the
Interest Payment Date with respect to such Fixed Rate Advance shall be the
first day of each month, and (iii) with respect to  Fixed Rate Interest Period subject to a Rate Hedge, the earlier of the last day of
the Fixed Rate Interest Period or the Termination Date.

 

“Inventory” shall have the
meaning given it under the UCC.

 

“Investment
Property” shall have the meaning given it under the UCC.

 

“IRC” means the
Internal Revenue Code of 1986, as amended, or any successor federal tax code,
and any reference to any statutory provision shall be deemed to be a reference
to any successor provision or provisions.

 

“L/C Amount” means the sum
of (a) the Aggregate Face Amount of any outstanding Letters of Credit,
plus (b) the amount of each Obligation of Reimbursement that either
remains unreimbursed or has not been paid through an Advance on the Line of
Credit.

 

“L/C Application” means an
application for the issuance of standby or commercial Letters of Credit
pursuant to the terms of a Standby Letter of Credit Agreement or Commercial
Letter of Credit Agreement, as applicable, in form acceptable to Wells Fargo.

 

A-9

 

“Letter of Credit” and “Letters of
Credit” are each defined in Section 1.11(a).

 

“Licensed Intellectual Property” is defined in Exhibit D.

 

“LIBOR” means the rate per annum (rounded upward, if
necessary, to the nearest whole 1/8th of one
percent (1%)) determined pursuant to the following formula:

 

	
    LIBOR = 

  	
  Base LIBOR

  
	
  100% — LIBOR
  Reserve Percentage

  

 

(a)                                  “Base LIBOR” means the rate per annum for United
States dollar deposits quoted by Wells Fargo (i) for the purpose of
calculating the effective Floating Rate for loans that reference Daily Three
Month LIBOR as the Inter-Bank Market Offered Rate in effect from time to time
for three (3) month delivery of funds in amounts approximately equal to
the principal amount of such loans, or (ii) for the purpose of calculating
the effective Fixed Rate for loans making reference to LIBOR as the Inter-Bank
Market Offered Rate on the first day of a Fixed Rate Interest Period for
delivery of funds on said date for a period of time approximately equal to the
number of days in the Fixed Rate Interest Period and in an amount approximately
equal to the principal amount to which the Fixed Rate Interest Period
applies.  Company understands and agrees
that Wells Fargo may base its quotation of the Inter-Bank Market Offered Rate
upon such offers or other market indicators of the Inter-Bank Market Offered
Rate as Wells Fargo in its discretion deems appropriate, including but not
limited to the rate offered for U.S. dollar deposits on the London Inter-Bank
Market.

 

(b)                                 “LIBOR Reserve Percentage” means the reserve
percentage prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D
of the Federal Reserve Board, as amended), adjusted by Wells Fargo for expected
changes in such reserve percentage during the applicable term of the Revolving
Note.

 

“Lien” means any
security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance,
title retention agreement or analogous instrument or device, including without
limitation the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or subsequently
acquired and whether arising by agreement or operation of law.

 

“Line of Credit” is defined in
the Recitals.

 

“Loan Documents” means this
Agreement, the Revolving Note, the Master Agreement for Treasury Management
Services, the Guaranties, the Subordination Agreements, if any, the Standby
Letter of Credit Agreement, the Commercial Letter of Credit Agreement,  the L/C Applications, and the Security Documents, together
with every other agreement, note, document, contract or instrument to which
Company or any Subsidiary of Company now or in the future may be a party and
which may be required by Wells Fargo.

 

A-10

 

“Loan
Manager” means the treasury management service defined in
the Master Agreement for Treasury Management Services and related Loan Manager
Service Description.

 

“Lockbox” means “Lockbox”
as defined in the Master Agreement for Treasury Management Services and related
Lockbox and Collection Account Service Description.

 

“Margin” means a rate
per annum, expressed as a percentage, as more fully defined in Section 1.7(a).

 

“Master Agreement for
Treasury Management Services” means the Master Agreement
for Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by Company.

 

“Maturity Date” means September 30,
2012.

 

“Maximum Line Amount” means $15,000,000.

 

“Multiemployer Plan” means a
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any Subsidiary of Company or any ERISA Affiliate contributes
or is obligated to contribute.

 

“Obligation of
Reimbursement” is defined in Section 1.11(b).

 

“OFAC” is defined in Section 5.12(b).

 

“Officer” means with respect to Company, an officer if
Company is a corporation, a manager if Company is a limited liability company,
or a partner if Company is a partnership.

 

“Operating
Account” is defined in Section 1.3(a), maintained in
accordance with the terms of Wells Fargo’s Commercial Account Agreement in
effect for demand deposit accounts.

 

“Overadvance”
means the amount, if any, by which the outstanding principal amount of the
Revolving Note, plus the L/C Amount, is in excess of the then-existing
Borrowing Base.

 

“Owned
Intellectual Property” is defined in Exhibit D.

 

“Patent
and Trademark Security Agreement” means each
Patent and Trademark Security Agreement given by Company or any Subsidiary of
Company in favor of Wells Fargo, together with all
amendments, modifications and restatements thereof.

 

“Payroll Reserve”
means an amount determined by Wells Fargo in its sole discretion, based on
historical information of Company, equal to two (2) weeks of payroll and
payroll taxes of Company.

 

A-11

 

“Pension Plan” means a
pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Company or any ERISA Affiliate and covered by Title IV of ERISA.

 

“Permitted Lien” and “Permitted Liens” are defined in Section 5.3(a).

 

“Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision of a governmental entity.

 

“Plan” means an
employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of Company or any ERISA Affiliate.

 

“Premises” is defined in Section 2.4(a).

 

“Proceeds” shall have the
meaning given it under the UCC.

 

“Rate Hedge” means any interest rate swap or interest rate
collar agreement applicable to borrowings advanced by Wells Fargo under the
Line of Credit.

 

“Rate Hedge Agreement” is an agreement entered
into between Wells Fargo (or any of its affiliates) and Company and/or any of
its Subsidiaries for purposes of providing Company and/or any of its
Subsidiaries with a Rate Hedge.

 

“Record” means
information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Company to Wells Fargo
pursuant to Section 5.1.

 

“Reportable Event” means a
reportable event (as defined in Section 4043 of ERISA), other than an
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the Pension Benefit Guaranty Corporation.

 

“Revolving Note” is defined in Section 1.1(d).

 

“Security Agreement” means any
security agreement of any Person in favor of Wells Fargo, granting Wells Fargo
a security interest in property described therein, together with all
amendments, modifications and restatements thereof.

 

“Security Documents” means this
Agreement, the Copyright Security Agreements, the Patent and Trademark Security
Agreements, all other Security Agreements  and
any other document delivered to Wells Fargo from time to time to secure the
Indebtedness or any guaranty of the Indebtedness.

 

“Security Interest” is defined in Section 2.1.

 

“Shareholder” means with
respect to Company, each Person having legal or beneficial title to an
ownership interest in Company or a right to acquire such an interest.

 

A-12

 

“Special Account” means a
specified cash collateral account maintained with Wells Fargo or another
financial institution acceptable to Wells Fargo in connection with each undrawn
Letter of Credit issued by Wells Fargo, as more fully defined in Section 1.11.

 

“Standby Letter of Credit
Agreement” means an agreement governing the issuance of standby
letters of credit by Wells Fargo entered into between Company as applicant and
Wells Fargo as issuer.

 

“Subcontractor Payables” means, at any
date of determination, the aggregate amount of accounts payable owed by Company
to subcontractors of Company.

 

“Subordinated Creditor” means  any Person now or in the future subordinating indebtedness
of Company or any Subsidiary of Company held by that Person to the payment of
the Indebtedness pursuant to a Subordination Agreement.

 

“Subordinated Debt” means
indebtedness owed by Company that has been subordinated to Wells Fargo by a
Subordinated Creditor pursuant to a Subordination Agreement.

 

“Subordination
Agreement” means a subordination
agreement in form and content acceptable to Wells Fargo in its sole discretion,
executed by a Subordinated Creditor in favor of Wells Fargo (and “Subordination Agreements” means all of the
subordination agreements collectively).

 

“Subsidiary” means any
Person of which more than 50% of the outstanding ownership interests having
general voting power under ordinary circumstances to elect a majority of the
board of directors or the equivalent of such Person, irrespective of whether or
not at the time ownership interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

 

“Termination Date” is defined in Section 1.1(b).

 

“UCC” means the
Uniform Commercial Code in effect in the state designated in this Agreement as
the state whose laws shall govern this Agreement, or in any other state whose
laws are held to govern this Agreement or any portion of this Agreement.

 

“Unbilled Account” means an
unpaid Account of Company arising from the sale or lease of goods or the
performance of services, net of any credits, with respect to which Company has
earned full payment but has not issued an invoice to the applicable account
debtor.

 

“Unused Amount” is defined in Section 1.8(b).

 

“Wells Fargo” means Wells Fargo Bank, National Association
in its broadest and most comprehensive sense as a legal entity, and is not
limited in its meaning to the Wells Fargo Business Credit operating division,
or to any other operating division of Wells Fargo.

 

A-13

 

 

Exhibit B to Credit and Security Agreement

 

PREMISES

 

The Premises referred to in
the Credit and Security Agreement have an address of 3601 West 76th Street, Minneapolis, Minnesota 55435, and are
legally described as follows:

 

South Edina Development 3rd ADD, Lot 001
Block 001

 

In the event of any conflict
between the address and the legal description, the legal description shall
control.

 

B-1

 

Exhibit C to Credit and
Security Agreement

 

CONDITIONS PRECEDENT

 

Wells
Fargo’s obligation to make an initial Advance shall be subject to the condition
that Wells Fargo shall have received the following, executed and in form and
content satisfactory to Wells Fargo.  The
following descriptions are limited descriptions for reference purposes only and
should not be construed as limiting in any way the subject matter that Wells
Fargo requires each document to address.

 

A.                                    Loan Documents to be Executed by Company
and Subsidiaries:

 

(1)                                  The Revolving Note.

 

(2)                                  The Credit and Security
Agreement.

 

(3)                                  The Master Agreement for
Treasury Management Services, the Acceptance
of Services, and the related Service Description for each deposit or
treasury management related product or service that Company will subscribe to,
including without limitation the Lockbox and Collection
Account Service Description.

 

(4)                                  The Copyright Security
Agreement.

 

(5)                                  The Patent and Trademark
Security Agreement.

 

(6)                                  A Standby Letter of Credit
Agreement and a Commercial Letter of
Credit Agreement, together with a separate L/C
Application for each Letter of Credit that Company has requested
that Wells Fargo issue.

 

(7)                                  The Collateral Pledge
Agreement of Company, pursuant to which Company grants Wells Fargo a
security interest in the ownership interests in the Subsidiaries more fully
described in the Collateral Pledge Agreement, together with the stock
certificates and stock powers.

 

(8)                                  The Guaranties of Analysts
International Business Solution Services, LLC, Analysts International Business
Resource Services, LLC, Analysts International Management Services, LLC,
Analysts International Strategic Sourcing Services, LLC and of Medical Concepts Staffing, Inc.

 

(9)                                  The Security Agreements
of Analysts International Business Solution Services, LLC, Analysts International
Business Resource Services, LLC, Analysts International Management Services,
LLC, Analysts International Strategic Sourcing Services, LLC and of Medical Concepts Staffing, Inc.

 

B.                                    Loan Documents to be Executed by Third
Parties:

 

C-1

 

(1)                                  A Landlord’s Disclaimer and
Consent with respect to each lease entered into by Company or any
Subsidiary with respect to Company’s chief executive office located at 3601
West 76th Street, Minneapolis, Minnesota 55435.

 

(2)                                  Certificates of Insurance required under this Agreement, with all hazard
insurance containing a lender’s interest endorsement in Wells Fargo’s favor and
with all liability insurance naming Wells Fargo as additional insured.

 

C.                                    Documents Related to the Premises:

 

(1)                                  Copies of any lease pursuant
to which Company or any Subsidiary is leasing the Premises from a lessor.

 

D.                                    Federal Tax, State Tax, Judgment, UCC and
Intellectual Property Lien Searches:

 

(1)                                  Current searches of Company and each Subsidiary in appropriate filing offices showing
that (i) no Liens have been filed and remain in effect against the
property of Company or any Subsidiary except Permitted Liens or Liens held by
Persons who have agreed in an Authenticated Record that upon receipt of
proceeds of the initial Advance, they will satisfy, release or terminate such
Liens in a manner satisfactory to Wells Fargo, and (ii) Wells Fargo has
filed all UCC financing statements necessary to
perfect the Security Interest in the Collateral under this Agreement and the
security interests and Liens in all other collateral under the other Security
Documents, to the extent the Security Interest or such other security interest
or Lien is capable of being perfected by filing.

 

E.                                      Constituent Documents:

 

(1)                                  The Certificate of Authority
of Company, which shall include as part of the Certificate or as
exhibits to the Certificate, (i) the Resolution of
Company’s Directors authorizing the execution, delivery and performance of
those Loan Documents and other documents or agreements described in or related
to this Agreement to which Company is a party, (ii) an Incumbency Certificate containing the signatures of Company’s
Officers or agents authorized to execute and deliver those instruments,
agreements and certificates referenced in (i) above, as well as Advance
requests, on Company’s behalf, (iii) Company’s Constituent
Documents, (iv) a current Certificate of Good
Standing or Certificate of Status issued
by the secretary of state or other appropriate authority for Company’s state of
organization, certifying that Company is in good standing and in compliance
with all applicable organizational requirements of the state of organization,
and (v) a Secretary’s Certificate of Company’s
secretary or assistant secretary certifying that the Certificate of Authority
of Company is true, correct and complete.

 

(2)                                  The Certificate of Authority
of Corporate Guarantor for each Guarantor, which shall include as
part of the Certificate or as exhibits to the Certificate, (i) the Resolution of Guarantor’s Directors authorizing the
execution, delivery and performance of the Guaranty of Corporation, (ii) an
Incumbency Certificate containing the
signatures of Guarantor’s Officers or agents authorized to execute and deliver
the Guaranty by Corporation on Guarantor’s behalf, (iii) Guarantor’s Constituent Documents, (iv) a current Certificate of Good Standing or Certificate
of Status issued by the secretary of

 

C-2

 

state or other appropriate authority for Guarantor’s
state of organization, certifying that Guarantor is in good standing and in
compliance with all applicable organizational requirements of the state of
organization, and (v) a Secretary’s Certificate
of Guarantor’s secretary or assistant secretary, or equivalent Officer,
certifying that the Certificate of Authority of Corporate Guarantor and all
attached exhibits are true, correct and complete.

 

(3)                                  Current Evidence that Company and each Guarantor is licensed or
qualified to transact business in the jurisdiction where organized.

 

(4)                                  A Customer Identification
Information Form for Company and each Subsidiary and such other
forms and verification as Wells Fargo may need to comply with the U.S.A.
Patriot Act.

 

F.                                      Miscellaneous Matters or Documents:

 

(1)                                  Payment of fees due under this Agreement through the
date of initial Advance or issuance of a Letter of Credit.

 

(2)                                  Evidence that, as of September 5, 2009, and after
satisfying all obligations owed to Company’s prior lender, if any, paying all
trade payables older than 30 days from invoice date, and paying all book
overdrafts and closing costs, Cash-on-Hand and Excess Borrowing Base
Availability under the Line of Credit is not less than $13,000,000.

 

(3)                                  Such other documents and items as Wells Fargo in its
sole discretion may require.

 

C-3

 

Exhibit D to Credit
and Security Agreement

 

REPRESENTATIONS
AND WARRANTIES

 

Company represents and
warrants to Wells Fargo as follows:

 

(a)                                  Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Federal Employer Identification Number and
Organizational Identification Number.  Company and
each of its Subsidiaries is a corporation or limited liability company,
organized, validly existing and in good standing under the laws of the State of
Minnesota,  and each is licensed or qualified to
transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary. 
Company and each of its Subsidiaries has all requisite power and
authority to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, those Loan Documents and
any other documents or agreements that it has entered into with Wells Fargo
related to this Agreement.  During their
existence, Company and each of its Subsidiaries has done business solely under
the names set forth below in addition to its correct legal name.  The chief executive office and principal
place of business of Company and each of its Subsidiaries is located at the
address set forth below, and all of the records of Company and each of its
Subsidiaries relating to its business or its properties are kept at that
location.  All Inventory and Equipment of
Company and each of its Subsidiaries is located at that location or at one of
the other locations set forth below.  The
name, Federal Employer Identification Number and Organization Identification
Number of Company and each of its Subsidiaries are correctly set forth below.

 

Trade Names

 

·      AIC

 

·      Analysts
International

 

·      Analysts
International Corporation

 

Chief Executive Office / Principal Place of Business

 

3601 West 76th Street

Minneapolis, MN 55435

 

Other Inventory and Equipment Locations

 

1.               3252 University Drive, Suite 200,
Auburn Hills, MI 48326

2.               3101 Technology Blvd., Lansing, MI 48910

3.               5445 DTC Parkway, Suite 320, Denver,
CO 80111

4.               3169 Holcomb Bridge Road, Suite 210,
Norcross, GA 30071

5.               1101 Perimeter Drive, Suites 830 and 835,
Schaumburg, IL 60173

6.               8720 Castle Creek Parkway, Suite 120,
Indianapolis, IN 46250

7.               2365 Harrodsburg Road, Southcreek Park
Bldg G, Lexington, KY 40504

 

D-1

 

8.               229 W. Main Street, Suite 203,
Frankfort, KY 40601

9.               1530 Greenview Drive SW, Suite 112A,
Rochester, MN 55902

10.         2345 Grand Blvd., Suite 750, Kansas
City, MO 64108

11.         1065 Executive Parkway, Suite 300,
St. Louis, MO 63141

12.         2200 Gateway Center Blvd., Suite 209,
Morrisville, NC 27560

13.         702 N. 129th Street, Suite 123, Omaha, NE 68154

14.         99 Wood Ave. S., Suite 303, Iselin,
NJ 08830

15.         Tri West Plaza, 3030 LBJ Frwy, Suite 820,
Dallas, TX 75234

16.         Westpark Office Complex Bldg., 8140 N.
Mopac, Suite 245, Austin, TX 78759

17.         1177 W. Loop Building & 1177 W.
Loop South, Suite 725, Houston, TX 77027

18.         4136 Innslake Drive, Glen Allen, VA 23060

19.         600 108th Ave. NE, Suite 345, Bellevue, WA 98004

 

Name, Federal Employer Identification Number and Organization
Identification Number

 

Analysts International Corporation

 

FEIN: 41-0905408

 

Organizational ID: NAICS 561330 / SIC 7363

 

(b)                                 Capitalization.  The
Capitalization Chart below constitutes a correct and complete list of all
ownership interests of Company and each of its Subsidiaries and all rights to
acquire ownership interests, including the record holder, number of interests
and percentage interests on a fully diluted basis, and the Organizational Chart
below shows the ownership structure of all Subsidiaries of Company.

 

Capitalization
Chart

 

Publicly traded company: NASDAQ: ANLY

 

D-2

 

Organizational
Chart

 

 

(c)                                  Authorization of Borrowing; No Conflict as to Law or
Agreements.  The execution, delivery and performance by
Company and each of its Subsidiaries of the Loan Documents and any other documents
or agreements described in or related to this Agreement, and all borrowing
under the Line of Credit have been authorized and do not (i) require the
consent or approval of Company’s or any Subsidiary’s Shareholders; (ii) require
the authorization, consent or approval by, or registration, declaration or
filing with, or notice to, any governmental agency or instrumentality, whether
domestic or foreign, or any other Person, except to the extent obtained,
accomplished or given prior to the date of this Agreement; (iii) violate
any provision of any law, rule or regulation (including Regulation X
of the Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to Company or to
any Subsidiary or of Company’s or such Subsidiary’s Constituent Documents; (iv) result
in a breach of or constitute a default or event of default under any indenture
or loan or credit agreement or any other material agreement, lease or
instrument to which Company or any Subsidiary is a party or by which it or its
properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than the Security Interest or any
other security interest in favor of Wells Fargo) upon or with respect to any of
the properties now owned or subsequently acquired by Company or any Subsidiary.

 

(d)                                 Legal Agreements.  This
Agreement, the other Loan Documents, and any other document or agreement
described in or related to this Agreement, will constitute the legal, valid and
binding obligations of Company and each of its Subsidiaries which is a party
thereto, enforceable against Company and each of its Subsidiaries in accordance
with their respective terms.

 

(e)                                  Subsidiaries.  Except as
disclosed below, Company has no Subsidiaries.

 

D-3

 

Subsidiaries

 

Analysts International
Business Solution Services, LLC, Analysts International Business Resource
Services, LLC, Analysts International Management Services, LLC, Analysts
International Strategic Sourcing Services, LLC, Medical Concepts Staffing, Inc. and AiC Analysts
Ltd.

 

(f)                                    Financial Condition; No Adverse Change. 
Company has furnished to Wells Fargo its audited financial statements
for its fiscal year ended December 31, 2008 and unaudited financial
statements for the fiscal-year-to-date period ended July 4, 2009 and those
statements fairly present the financial condition of Company and its
Subsidiaries as of those dates and the results of Company and its Subsidiaries’
operations and cash flows for the periods then ended and were prepared in
accordance with GAAP.  Since the date of
the most recent financial statements, there has been no material adverse change  in business, properties or condition (financial or
otherwise) of Company or its Subsidiaries.

 

(g)                                 Litigation.  There are no
actions, suits or proceedings pending or, to Company’s knowledge, threatened
against or affecting Company or any of its Subsidiaries or any of its
Affiliates or the properties of Company or any of its Subsidiaries or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to Company or any of its Subsidiaries or any of its Affiliates, would
have a material adverse effect on the financial condition, properties or
operations of Company or any of its Subsidiaries or any of its Affiliates.

 

Litigation Matters in Excess of $100,000

 

None.

 

(h)                                 Intellectual Property Rights.

 

(i)                                     Owned Intellectual Property.  Set forth below is a complete list of all
patents, applications for patents, trademarks, applications to register
trademarks, service marks, applications to register service marks, mask works,
trade dress and copyrights for which Company or any Subsidiary is the owner of
record (the “Owned Intellectual Property”).  Except as set forth below, (A) Company
or such Subsidiary, as applicable, owns the Owned Intellectual Property free
and clear of all restrictions (including without limitation covenants not to
sue any Person), court orders, injunctions, decrees, writs or Liens, whether by
agreement memorialized in a Record Authenticated by Company or such Subsidiary,
as applicable, or otherwise, (B) no Person other than Company or such
Subsidiary, as applicable, owns or has been granted any right in the Owned
Intellectual Property, (C) all Owned Intellectual Property is valid,
subsisting and enforceable, and (D) Company or such Subsidiary, as
applicable, has taken all commercially reasonable action necessary to maintain
and protect the Owned Intellectual Property.

 

D-4

 

(ii)                                  Agreements with Employees and Contractors.  To the best of Company’s and each
Subsidiary’s knowledge, Company and each Subsidiary has entered into a legally
enforceable agreement with each Person that is an employee or subcontractor
obligating that Person to assign to Company or such Subsidiary, as applicable,
without additional compensation, any Intellectual Property Rights created,
discovered or invented by that Person in the course of that Person’s employment
or engagement with Company or such Subsidiary (except to the extent prohibited
by law), and further obligating that Person to cooperate with Company or such
Subsidiary, without additional compensation, to secure and enforce the
Intellectual Property Rights on behalf of Company or such Subsidiary, unless
the job description of the Person is such that it is not reasonably foreseeable
that the employee or subcontractor will create, discover, or invent
Intellectual Property Rights.

 

(iii)                               Intellectual Property Rights Licensed from Others.  Set forth below is a complete list
of all agreements under which Company or any Subsidiary has licensed
Intellectual Property Rights from another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated
licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
payments Company or such Subsidiary is obligated to make with respect to
Licensed Intellectual Property.  Except
as set forth below or in any other Record, copies of which have been given to Wells
Fargo, the licenses of Company or any Subsidiary to use the Licensed
Intellectual Property are free and clear of all restrictions, Liens, court
orders, injunctions, decrees, or writs, whether agreed to in a Record
Authenticated by Company or such Subsidiary or otherwise.  Except as disclosed below, neither Company
nor any Subsidiary is contractually obligated to make royalty payments of a
material nature, or pay fees to any owner of, licensor of, or other claimant
to, any Intellectual Property Rights.

 

(iv)                              Other Intellectual Property Needed for Business.  Except for Off-the-shelf Software
and as disclosed below, the Owned Intellectual Property and the Licensed
Intellectual Property constitute all Intellectual Property Rights used or
necessary to conduct the business of Company and each Subsidiary as it is
presently conducted or as Company or such Subsidiary reasonably foresees
conducting it.

 

(v)                                 Infringement. 
Except as disclosed below, neither Company nor any Subsidiary has
knowledge of, or has received notice either orally or in a Record alleging, any
Infringement of another Person’s Intellectual Property Rights (including any
claim set forth in a Record that Company or any Subsidiary must license or
refrain from using the Intellectual Property Rights of any Person) and, to the
knowledge of Company and each Subsidiary, there is not any threatened claim or
any reasonable basis for any such claim.

 

D-5

 

Intellectual Property Disclosures

 

	
  MARK

  	
   

  	
  SERIAL

  NO.

  	
   

  	
  REG.
  NO.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  80140200

  	
   

  	
  TMA493176

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  77/388,676

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  77/742,368

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  1022263

  	
   

  	
  TMA574540

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  1291240

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  379226

  	
   

  	
  618271

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  379227

  	
   

  	
  624875

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  75/629,884

  	
   

  	
  2,354,918

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL

  	
   

  	
  78/818,975

  	
   

  	
  3,227,276

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL CORPORATION

  	
   

  	
  801403

  	
   

  	
  TMA578633

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ANALYSTS
  INTERNATIONAL CORPORATION

  	
   

  	
  74/713,939

  	
   

  	
  2,074,968

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NEW
  EQUITIES

  	
   

  	
  78/434,089

  	
   

  	
  3,047,008

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RADD

  	
   

  	
  882044

  	
   

  	
  TMA529369

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RADD

  	
   

  	
  75/459,783

  	
   

  	
  2,253,368

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SYMMETRY WORKFORCE SOLUTIONS

  	
   

  	
  78/954,702

  	
   

  	
  3,352,428

  

 

Licensed Intellectual Property:  None.

 

(i)                                     Taxes.  Company, its
Subsidiaries and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them.  Company, its
Subsidiaries and its Affiliates have filed all federal, state and local tax
returns which to the knowledge of the Officers of Company, any Subsidiary or
any Affiliate, as the case may be, are required to be filed, and Company, its
Subsidiaries

 

D-6

 

and
its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on these returns or on any assessment received
by any of them to the extent such taxes have become due.

 

(j)                                     Titles and Liens.  Company has
good and absolute title to all Collateral free and clear of all Liens other
than Permitted Liens.  Each Subsidiary
has good and absolute title to all collateral granted to Wells Fargo under any
Security Document free and clear of all Liens other than Permitted Liens.  No financing statement naming Company or any
Subsidiary as debtor is on file in any office except to perfect only Permitted
Liens.

 

(k)                                  No Defaults.  Company and
each of its Subsidiaries is in compliance with all provisions of all
agreements, instruments, decrees and orders to which it is a party or by which
it or its property is bound or affected, the breach or default of which could
have a material adverse effect on the financial condition, properties or
operations of Company or such Subsidiary.

 

(l)                                     Submissions to Wells Fargo. 
All financial and other information provided to Wells Fargo by or on
behalf of Company and each Subsidiary in connection with this Agreement (i) is
true and correct in all material respects, (ii) does not knowingly omit
any material fact that would cause such information to be misleading, and (iii) as
to projections, valuations or proforma financial statements, presents a good
faith opinion as to such projections, valuations and proforma condition and
results.

 

(m)                               Financing Statements.  Company and
each Subsidiary has previously authorized the filing of financing statements
sufficient when filed to perfect the Security Interest and other security
interests and Liens created by the Security Documents.  When such financing statements are filed,
Wells Fargo will have a valid and perfected security interest in all Collateral
under this Agreement and all Collateral under the other Security Documents
which is capable of being perfected by the filing of financing statements.  None of the Collateral or any other such
collateral is or will become a fixture on real estate, unless a sufficient
fixture filing has been filed with respect thereto.

 

(n)                                 Rights to Payment.  To the best
of Company’s knowledge, each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral under
this Agreement or collateral under any other Security Document is (or, in the
case of all future Collateral or other such collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim of the account debtor or other obligor named in
that instrument.

 

(o)                                 Employee Benefit Plans.

 

(i)                                     Maintenance and Contributions to
Plans.  Except as disclosed below, no Company,
Subsidiary or ERISA Affiliate (A) maintains or has maintained any Pension
Plan, (B) contributes or has contributed to any Multiemployer Plan, or (C) provides
or has provided post-retirement medical or insurance benefits to employees or
former employees (other than benefits required under Section 601 of ERISA,
Section 4980B of the IRC, or applicable state law).

 

D-7

 

(ii)                                  Knowledge of Plan Noncompliance
with Applicable Law.  Except as disclosed below, no Company,
Subsidiary or ERISA Affiliate has (A) knowledge that Company, any
Subsidiary or any ERISA Affiliate is not in full compliance with the
requirements of ERISA, the IRC, or applicable state law with respect to any
Plan, (B) knowledge that a Reportable Event occurred or continues to exist
in connection with any Pension Plan, or (C) sponsored a Plan that it
intends to maintain as qualified under the IRC that is not so qualified, and no
fact or circumstance exists which may have an adverse effect on such Plan’s
tax-qualified status.

 

(iii)                               Funding Deficiencies and Other
Liabilities.  No Company, Subsidiary or ERISA Affiliate has
liability for any (A) accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the IRC) under any Plan, whether or not
waived, (B) withdrawal, partial withdrawal, reorganization or other event
under any Multiemployer Plan under Section 4201 or 4243 of ERISA, or (C) event
or circumstance which could result in financial obligation to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, the Department of
Labor or any participant in connection with any Plan (other than routine claims
for benefits under the Plan).

 

Employee Benefit Plans

 

1.               Analysts
International Corporation Savings and Investment Plan

2.               Special
Executive Retirement Plan

3.               Supplemental
Medicare Coverage Plan

4.               Supplemental
Dental Coverage Plan

5.               Analysts
International Corporation Retiree Medical and Dental Benefit Program

 

(p)                                 Environmental Matters.

 

(i)                                     Hazardous Substances on Premises. 
Except as disclosed below, there are not present in, on or under the
Premises any Hazardous Substances in such form or quantity as to create any
material liability or obligation for Company, any Subsidiary or Wells Fargo
under the common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a way as
to create a material liability.

 

(ii)                                  Disposal of Hazardous Substances. 
Except as disclosed below, neither Company nor its Subsidiaries have
disposed of Hazardous Substances in such a manner as to create any material
liability under any Environmental Law.

 

(iii)                               Claims and Proceedings with
Respect to Environmental Law Compliance. Except as disclosed below, there have not existed in
the past, nor are there any threatened or impending requests, claims, notices,
investigations, demands, administrative proceedings, hearings or litigation
relating in any way to the Premises, Company or any Subsidiary, alleging
material liability under, violation of, or noncompliance with any Environmental

 

D-8

 

Law or any license,
permit or other authorization issued pursuant to such an Environmental Law.

 

(iv)                              Compliance with Environmental
Law; Permits and Authorizations.  Except as
disclosed below, Company and each of its Subsidiaries (A) conducts its
business at all times in compliance with applicable Environmental Law, (B) possesses
valid licenses, permits and other authorizations required under applicable
Environmental Law for the lawful and efficient operation of its business, none
of which are scheduled to expire, or withdrawal, or material limitation within
the next 12 months, and (C) has not been denied insurance on grounds
related to potential environmental liability.

 

(v)                                 Status of Premises. 
Except as disclosed below, the Premises are not and never have been
listed on the National Priorities List, the Comprehensive Environmental
Response, Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.

 

(vi)                              Environmental Audits, Reports,
Permits and Licenses.  Company has delivered to Wells Fargo all
environmental assessments, audits, reports, permits, licenses and other
documents describing or relating in any way to the Premises or Company’s
businesses.

 

Environmental Matters

 

None.

 

(q)                                 Regulation U. 
Neither Company nor any of its Subsidiaries is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

 

(r)                                    Investment Company and Public Utility
Holding Company Acts.  Neither Company nor any Subsidiary is an “investment
company” or a company “controlled” by an “investment company”, within the
meaning of the Investment Company Act of 1940, as amended, or a “holding
company” or a “subsidiary company” of a “holding company” or an “affiliate” of
a “holding company” or of a “subsidiary company” of a “holding company”, within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

 

D-9

 

Exhibit E to Credit and
Security Agreement

 

COMPLIANCE
CERTIFICATE

 

To:                                                                              Wells Fargo
Bank, National Association

Date:                                                                    [                                      ,
20        ]

Subject:                                                     Financial
Statements

 

In accordance with our
Credit and Security Agreement dated September 30, 2009  (as amended from time to time, the “Credit
Agreement”), attached are the financial statements of Analysts
International Corporation (“Company”)
dated [                              ,
20        ] (the “Reporting Date”) and the year-to-date period then ended
(the “Current Financials”).  All terms used in this certificate and not
otherwise defined herein have the meanings given in the Credit Agreement.

 

A.                                    Preparation
and Accuracy of Financial Statements.  I certify that the Current Financials have
been prepared in accordance with GAAP, subject to year-end audit adjustments,
and fairly present Company’s financial condition as of the Reporting Date.

 

B.                                    Name of
Company; Merger and Consolidation.  I certify that:

 

(Check one)

 

o                                    Company has
not, since the date of the Credit Agreement, changed its name or jurisdiction
of organization, nor has it consolidated or merged with another Person.

 

o                                    Company has,
since the date of the Credit Agreement, either changed its name or jurisdiction
of organization, or both, or has consolidated or merged with another Person,
which change, consolidation or merger: o was consented
to in advance by Wells Fargo in an Authenticated Record, and/or o is more fully
described in the statement of facts attached to this Certificate.

 

C.                                    Events
of Default.  I certify
that:

 

(Check one)

 

o                                    I have no
knowledge of the occurrence of an Event of Default under the Credit Agreement,
except as previously reported to Wells Fargo in a Record.

 

o                                    I have
knowledge of an Event of Default under the Credit Agreement not previously
reported to Wells Fargo in a Record, as more fully described in the statement
of facts attached to this Certificate, and further, I acknowledge that Wells
Fargo may under the terms of the Credit Agreement impose the Default Rate at
any time during the resulting Default Period.

 

E-1

 

D.                                    Litigation
Matters.  I certify that:

 

(Check
one)

 

o                                    I have no
knowledge of any material adverse change to the litigation exposure of Company
or any of its Affiliates or of any Guarantor.

 

o                                    I have knowledge
of material adverse changes to the litigation exposure of Company or any of its
Affiliates or of any Guarantor not previously disclosed in Exhibit D, as
more fully described in the statement of facts attached to this Certificate.

 

E.                                      Financial
Covenants.  I further
certify that:

 

(Check and complete each of
the following)

 

1.                                       Minimum Year-to-Date Earnings Before Taxes.  Pursuant to Section 5.2(a) of the Credit Agreement, Company’s Earnings Before Taxes for the  year-to-date  period ending on the
Reporting Date, was  [$                          ],
which o 
satisfies o  does not satisfy the
requirement that such amount be not less than  the
applicable year-to-date amount set forth in the table below (numbers appearing between “< >“ are
negative) on the Reporting Date:

 

	
  Year-to-Date Period

  Ended

  	
   

  	
  Minimum Earnings

  Before Taxes

  
	
  September 2009

  	
   

  	
  $<16,000,000>

  
	
  December 2009

  	
   

  	
  $<17,000,000>

  
	
  March 2010

  	
   

  	
  $<3,000,000>

  
	
  June 2010

  	
   

  	
  $<3,500,000>

  
	
  September 2010

  	
   

  	
  $<3,250,000>

  
	
  December 2010

  	
   

  	
  $<2,000,000>

  
	
  March 2011

  	
   

  	
  $100,000

  
	
  June 2011

  	
   

  	
  $250,000

  
	
  September 2011

  	
   

  	
  $350,000

  
	
  December 2011

  	
   

  	
  $500,000

  
	
  March 2012

  	
   

  	
  $100,000

  
	
  June 2012

  	
   

  	
  $250,000

  
	
  September 2012

  	
   

  	
  $350,000

  

 

E-2

 

2.                                       Capital Expenditures.  Pursuant to Section 5.2(b) of the Credit Agreement, for the year-to-date period ending on the
Reporting Date, Company has expended or contracted to expend during the  fiscal  year
ended
[                              ,
200      ], for
Capital Expenditures,
[$                                      ] in the aggregate and at most
[$                              ] in any one transaction, which o satisfies o does not satisfy the requirement
that such expenditures not exceed $2,000,000  in the
aggregate and $2,000,000  for any one transaction during
such year.

 

3.                                       Minimum Excess
Borrowing Base Availability. 
Pursuant to Section 5.2(c) of the Credit Agreement, the current Excess Borrowing Base
Availability [$                                      ], which o satisfies o does not satisfy the requirement Company maintain an Excess Borrowing
Base Availability of at least $5,000,000.

 

4.                                       Salaries.  Company o is o is not in
compliance with Section 5.9 of the Credit Agreement, which requires that
Company not pay excessive or unreasonable salaries, bonuses, commissions,
consultant fees or other compensation.

 

Attached are statements of
all relevant facts and computations in reasonable detail sufficient to evidence
Company’s compliance with the financial covenants referred to above, which
computations were made in accordance with GAAP.

 

	
   

  	
  ANALYSTS
  INTERNATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its: Chief Financial
  Officer

  

 

E-3

 

Exhibit F to Credit and
Security Agreement

 

PERMITTED
LIENS

 

	
  Creditor

  	
   

  	
  Collateral

  	
   

  	
  Jurisdiction

  	
   

  	
  Filing Date

  	
   

  	
  Filing No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  None.

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

INDEBTEDNESS

 

	
  Creditor

  	
   

  	
  Current

  Principal

  Amt.

  	
   

  	
  Maturity

  Date

  	
   

  	
  Monthly

  Payment

  	
   

  	
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  None.

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

GUARANTIES

 

	
  Primary
  Obligor

  	
   

  	
  Amount and Description of

  Obligation Guaranteed

  	
   

  	
  Beneficiary of Guaranty

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  None.

  	
   

  	
   

  	
   

  

 

F-1

 

Exhibit G to Credit and
Security Agreement

 

REVOLVING NOTE

 

	
  $15,000,000

  	
   

  	
  September 30, 2009

  

 

FOR VALUE RECEIVED, the
undersigned, ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (“Company”), hereby promises to pay to the order of WELLS
FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”),
acting through its WELLS FARGO BUSINESS CREDIT operating division, on the
Termination Date described in the Credit and Security Agreement dated as of September 30,
2009 (as amended from time to time, the “Credit Agreement”)
and entered into between Wells Fargo and Company, at Wells Fargo’s office at
MAC N9312-040, 109 South Seventh Street, Minneapolis, Minnesota 55402, or at
any other place designated at any time by the holder, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Fifteen Million Dollars  ($15,000,000)
or the aggregate unpaid principal amount of all Advances under the Line of
Credit made by Wells Fargo to Company under the terms of the Credit Agreement,
together with interest on the principal amount computed on the basis of actual
days elapsed in a 360-day year, from the date of this Revolving Note until this
Revolving Note is fully paid at the rate or rates from time to time in effect
under the terms of the Credit Agreement. 
Principal and interest accruing on the unpaid principal balance amount
of this Revolving Note shall be due and payable as provided in the Credit
Agreement.  This Revolving Note may be
prepaid only in accordance with the Credit Agreement.

 

This Revolving Note is the
Revolving Note referred to in the Credit Agreement, and is subject to the terms
of the Credit Agreement, which provides, among other things, for the
acceleration of this Revolving Note. 
This Revolving Note is secured, among other things, by the Credit
Agreement and the Security Documents as defined in the Credit Agreement, and by
any other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements that may subsequently be given for good and valuable
consideration as security for this Revolving Note.

 

Company shall pay all costs
of collection, including without limitation reasonable attorneys’ fees and
legal expenses, if this Revolving Note is not paid when due, whether or not
legal proceedings are commenced.

 

Presentment or other demand
for payment, notice of dishonor and protest are expressly waived.

 

	
   

  	
  ANALYSTS
  INTERNATIONAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  

 

G-1

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