-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Intef1sToaXxwHNdg5j9ZQs5Ef/l8vVzctBaF+6ModKgnBl/tOht8/b2Kfbn2wls 8x5zJGcf7Lww68j++BQOMg== 0001104659-09-007773.txt : 20090210 0001104659-09-007773.hdr.sgml : 20090210 20090210080036 ACCESSION NUMBER: 0001104659-09-007773 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20090209 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090210 DATE AS OF CHANGE: 20090210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEADE INSTRUMENTS CORP CENTRAL INDEX KEY: 0001032067 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 952988062 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22183 FILM NUMBER: 09583178 BUSINESS ADDRESS: STREET 1: 6001 OAK CANYON CITY: IRVINE STATE: CA ZIP: 92618 BUSINESS PHONE: 9494511450 MAIL ADDRESS: STREET 1: 6001 OAK CANYON CITY: IRVINE STATE: CA ZIP: 92618 8-K 1 a09-5107_18k.htm 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported)

February 9, 2009

MEADE INSTRUMENTS CORP.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State or Other Jurisdiction of
Incorporation)

0-22183
(Commission File Number)

95-2988062
(IRS Employer
Identification No.)

6001 Oak Canyon
Irvine, California
(Address of principal executive offices)

92618-5200
(Zip Code)

(949) 451-1450

Registrant’s telephone number, including area code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement

On February 9, 2009, Meade Instruments Corp. (the “Company”) and its subsidiaries entered into agreements with FCC, LLC, d/b/a First Capital, and its subsidiary for a three-year, $10 million credit facility. This facility replaces the facility with Bank of America, N.A. that was set to expire in September 2009.

The new facility consists of a factoring arrangement for the Company’s receivables with an 80% advance rate up to $10 million of available credit and a secured credit line tied to the Company’s finished goods inventory of up to $3 million of available credit, subject to the overall credit limit of $10 million. The interest rate for advances against the facility will initially be set at LIBOR plus 5.5%, subject to a LIBOR floor of 2.25%. The agreement also sets forth unused line fees, minimum factoring commissions, early termination fees and other customary terms and conditions.

On February 10, 2009, the Company issued a press release announcing the new facility.

Item 1.02

Termination of a Material Definitive Agreement

As mentioned above in Item 1.01, the Company (and its subsidiary, Simmons Outdoor Corporation) and Bank of America, N.A. terminated the amended and Restated Credit Agreement dated as of October 25, 2002. Prior to termination, this agreement provided a $10.0 million facility and was to expire in September 2009. The interest rate for loans under this facility was 5.75%.

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

See Item 1.01 above.

Item 9.01

Financial Statements and Exhibits

Exhibit No.		Exhibit Title or Description

10.122		Factoring and Inventory Advances Agreement dated as of February 6, 2009 between Meade Instruments Corp. and FCC, LLC.

10.123		Loan and Security Agreement — Factor Sub Accounts dated as of February 6, 2009 between Meade Instruments Corp. and FCC, LLC.

10.124		Factoring and Security Agreement — Factor Sub Accounts dated as of February 6, 2009 between Meade Instruments Corp. and FCC Factor Subsidiary, LLC.

99.1		Press Release, dated February 10, 2009, issued by Meade Instruments Corp.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 10, 2009	MEADE INSTRUMENTS CORP.


	/s/ Paul E. Ross
	Paul E. Ross,
	Senior Vice President - Finance and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.		Exhibit Title or Description

10.122		Factoring and Inventory Advances Agreement dated as of February 6, 2009 between Meade Instruments Corp. and FCC, LLC.

10.123		Loan and Security Agreement — Factor Sub Accounts dated as of February 6, 2009 between Meade Instruments Corp. and FCC, LLC.

10.124		Factoring and Security Agreement — Factor Sub Accounts dated as of February 6, 2009 between Meade Instruments Corp. and FCC Factor Subsidiary, LLC.

99.1		Press Release, dated February 10, 2009, issued by Meade Instruments Corp.

EX-10.122 2 a09-5107_1ex10d122.htm EX-10.122

Exhibit 10.122

FACTORING AND INVENTORY

ADVANCES AND SECURITY AGREEMENT

Date: February 9, 2009.

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

Factor: FCC, LLC, doing business as First Capital Western Region, LLC (“Factor”)

WHEREAS, Client has requested and Factor has agreed to purchase certain of Client’s Accounts, provide Account Advances against such Accounts, provide an Inventory Advance against Inventory, guaranty Letters of Credit, and provide certain services;

NOW, THEREFORE, in consideration of the agreements, provisions, and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Client and Factor, hereby agree to the terms and conditions set forth in this Agreement.

Section 1. Definitions.

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

1.2 Other Referential Provisions.

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

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

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

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

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

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

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

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

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

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

Section 2. Purchase & Sale of Accounts.

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

2.2 Credit Approval.

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

(b) Credit Approval(s) may be withdrawn, either orally or in writing, in Factor’s sole discretion at any time before actual delivery of Goods or rendering of services. Credit Approval(s) are automatically rescinded and withdrawn if the terms of sale vary from the terms approved by Factor, or if the terms of sale are changed by Client without Factor’s prior written approval of the new terms, or if the Account is not assigned to Factor within ten days from the date of the invoice, or if the Goods are not delivered on or before the expiration of the Single Order Approval or if there is no expiration date if the Goods are not delivered within 30 days of the date of the Single Order Credit Approval. If Accounts exceed either a Credit Line or Single Order Approval, only the amount in excess of the Credit Line or Single Order Approval shall be considered Client Risk Accounts, provided, however, that if Client ships Goods or

provides services to a Customer who has outstanding Accounts owed to Client, and such Customer’s Credit Line and/or outstanding Single Order Approval(s) have been withdrawn by Factor, and the Accounts created by such shipment exceed ten percent (10%) of the total amount of Client’s Accounts outstanding, any Credit Approvals applying to those Accounts shall be deemed cancelled and all outstanding Accounts from that Customer are Client Risk Accounts for all purposes.

(c) Factor shall have no liability of any kind for declining or refusing to give, or for withdrawing, revoking, or modifying, any Credit Approval pursuant to the terms of this Agreement, or for exercising or failing to exercise any rights or remedies Factor may have under this Agreement or otherwise. In the event Factor declines to give Credit Approval on any order received by Client from a Customer and in advising Client of such decline Factor furnishes Client with information as to the credit standing of the Customer, such information shall be deemed to have been requested of Factor by Client and Factor’s advice containing such information is recognized as a privileged communication. Client agrees that such information shall not be given to Client’s Customer or to Client’s sales representative(s). If necessary, Client shall merely advise its Customer(s) that credit has been declined on the account and that any questions should be directed to Factor.

(d) Factor will assume the Credit Risk on Approved Accounts, i.e., if a Customer, after receiving and accepting the delivery of Goods or services (subject to all warranties herein) for which Factor has given written Credit Approval, fails to pay an Account when due, and such nonpayment is due solely to financial inability to pay, Factor shall bear any loss thereon up to the amount of the Credit Approval, subject to the terms and provisions stated herein or in the Credit Approval. If Factor fails to collect an Approved Account within 120 Days of its maturity solely due to the Customer’s financial inability to pay, Factor will pay the Purchase Price of such Approved Account to Client on the Collection Date. Specifically, Factor shall not be responsible for any nonpayment of a Credit Approved Account: (i) because of the assertion of any claim or Dispute by a Customer for any reason whatsoever, including, dispute as to price, terms of sales, delivery, quantity, quality, or other, or the exercise of any counterclaim or offset (whether or not such claim, counterclaim or offset relates to the specific Account); (ii) where nonpayment is a consequence of enemy attack, terrorism, natural disaster, civil commotion, strikes, lockouts, the act or restraint of public authorities, acts of God or force majeure; or (iii) if any representation or warranty made by Client to Factor in respect of such Account has been breached whether intentionally or unintentionally. The assertion of a Dispute by a Customer shall have the effect of negating any Credit Approval on the affected Approved Account(s) and such Approved Account(s) shall be deemed a Client Risk Account until paid or otherwise cleared from Factor’s books.

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

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

2.3 Purchase Price.

(a) On the Collection Date applicable to an Account, Factor shall pay to Client the Purchase Price for such Account, less (i) any Reserve or credit balance that Factor, in Factor’s sole discretion, determines to hold, (ii) all Advances, moneys remitted, paid, or otherwise advanced by Factor to or on behalf of Client (including any amounts which Client may reasonably be obligated to pay in the future), (iii) any other charges provided for by this Agreement or otherwise due Factor by Client, and (iv) any deductions taken by the Customer in connection with such Account.

(b) No discount, credit, allowance or deduction with respect to any Account in excess of $10,000 shall be granted or approved by Client to any Customer without the prior written consent of Factor unless

such discount, credit, allowance or deduction is shown on the face of an invoice at the time such invoice is submitted to Factor. Client agrees to give Factor notice of all discounts, credits, allowances or deductions in excess of $10,000.

(c) Client shall pay to Factor or Factor may charge Client’s account with Factor or to the Reserve, the amount of any payment that Factor receives with respect to a Client Risk Account if Factor is subsequently required to return such payment, whether as a result of any proceeding in bankruptcy or otherwise.

(d) Client agrees to repurchase (i) any Account upon the breach of any representations or warranties relating to such Account or upon a Default hereunder, (ii) any Client Risk Account at any time, and (iii) any Approved Account at any time after the assertion of a Dispute.

2.4 Reserve. Factor shall be entitled to withhold a Reserve, and may revise the Reserve at any time and from time to time if Factor deems it necessary to do so in order to protect Factor’s interests. Factor may charge against the Reserve any amount for which Client may be obligated to Factor at any time, whether under the terms of this Agreement, or otherwise, including but not limited to the repayment of any damages suffered by Factor as a result of Client’s breach of any provision hereof (whether intentional or unintentional), any adjustments due and any attorneys’ fees, costs and disbursements due. Client recognizes that the Reserve represents bookkeeping entries only and not cash funds. It is further agreed that with respect to the balance in the Reserve, Factor is authorized to withhold, without giving prior notice to Client, such payments and credits otherwise due to Client under the terms of this Agreement for reasonably anticipated claims or to adequately satisfy reasonably anticipated Obligation(s) Client may owe Factor.

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

Section 3. Account Advances/Inventory Advances.

3.1 Account Advances. In Factor’s sole discretion, subject to the terms and conditions of this Agreement, Factor may from time to time advance to Client up to eighty percent (80.0%) of the aggregate Net Invoice Amount of Accounts outstanding at the time any such Account Advance is made, with dilution of ten percent (10%) or less on a trailing 12 month basis, less: (1) Any such Accounts that are in Dispute; (2) any such Accounts that are not acceptable to Factor in its sole discretion; (3) the amount of the Reserve; and (4) any interest, fees and other items, actual or estimated, that are chargeable to the Reserve; or (5) the amount of any Letters of Credit not deducted pursuant to Section 3.2(a). The Account Advances shall be reduced by a minimum of two percent (2%) for every one percent (1%) of dilution in excess of ten percent (10%).

3.2 Inventory Advances. (a) In Factor’s sole discretion, subject to the terms and conditions of this Agreement, Factor may from time to time advance to Client up to the least of (i) fifty percent (50.0%) of the dollar value (determined at the lower of cost or market) of Eligible Inventory, (ii) $3,000,000, or (iii) seventy-five percent (75.0%) of net orderly liquidation value of Eligible Inventory as per the most recent approval (Inventory shall be appraised semi-annually by an appraiser acceptable to Factor), less the face amount of all Letters of Credit issued or guaranteed by Factor for or on behalf of the Client or such reserves as Factor shall establish from time to time in its sole discretion. Borrowed amounts that are repaid may be reborrowed upon the terms and conditions of this Agreement. Notwithstanding the foregoing, Advances will not be made against Eligible Inventory until Factor receives the initial appraisal of the Inventory and such appraisal is satisfactory to Factor.

(b) Factor will determine eligibility and the loan value of the Eligible Inventory, in its sole discretion, consistent with Factor’s experience, prudent business judgment and standards of commercial reasonableness applicable to asset-based credits and in good faith.

(c) Client shall deliver to Factor an Inventory Certificate no less frequently than weekly (by the second Business Day of each week and determined as of the close of business on the last Business Day

of the immediately preceding week), except when no borrowings against Inventory are made. At times when no Advances are outstanding against Inventory, Client shall deliver to Factor an Inventory Certificate no less than monthly (by the tenth Business Day following the last day of the applicable month).

(d) In no event shall the total of the outstanding Advances exceed the lesser of i) $10,000,000 or ii) the sum of Account Advance Availability plus Inventory Advance Availability and Client shall immediately pay to Factor any and all amounts necessary to reduce the aggregate outstanding Advances below such limit.

3.3 Letters of Credit.

(a) Subject to the terms of this Agreement, and so long as no Default has occurred and is continuing, upon the request of Client and for Client’s account, Factor shall issue or shall cause to be issued one or more Letters of Credit for the purpose of facilitating the purchase of goods or services in the ordinary course of Client’s business. The aggregate face amount of all Letters of Credit shall be deducted from the amount of Inventory Advances available under Section 3.2 hereof and to the extent necessary, from the amount of Account Advances available under Section 3.2 hereof. The aggregate face amount of all Letters of Credit outstanding at any time shall not exceed an amount equal to Eight Hundred Thousand No/100 Dollars ($800,000); provided, that, at no time shall the aggregate face amount of all Letters of Credit outstanding, plus the outstanding Account Advances and Inventory Advances, exceed the lesser of the $800,000 or the amounts available to be advanced/borrowed under Sections 3.1 and 3.2 [and if available and only to the extent of such availability, Section 3.4 hereof] hereof. The expiration date of each Letter of Credit shall not be later than 365 days from the date of issuance of such Letter of Credit. No Letter of Credit shall have any automatic or “evergreen” renewal provisions. No extensions, modifications or amendments to a Letter of Credit shall be made without Factor’s prior written consent.

(b) In the event that Factor shall make any payment on or pursuant to any Letter of Credit, such payment shall then be deemed automatically to constitute first, an Inventory Advance, and second an Account Advance, hereunder.

(c) Client shall pay to Factor, as compensation for the Letter of Credit Obligations incurred hereunder, immediately upon demand, all amounts necessary for Factor to meet all disbursements and payments of any kind or character, together with the Letter of Credit Fee, and any interest, commissions and other charges, which Factor has incurred or will incur or to which Factor is entitled in connection with the Letters of Credit or any draft drawn thereunder and any fees charged by any Bank issuing any Letters of Credit, all as set forth on Exhibit A.

(d) Client shall give Factor at least five (5) business days’ prior written notice of a requested Letter of Credit. The Letter of Credit shall be issued pursuant to a letter of credit application entered into by Client and Factor for the benefit of the Issuer, completed in a manner satisfactory to Factor and the Issuer. The terms and conditions set forth in such letter of credit application shall supplement the terms and conditions hereof, but if the terms of such letter of credit application and the terms of this Agreement are inconsistent, the terms hereof shall control.

(e) The Client hereby agrees to reimburse Factor for payments made with respect to any Letter of Credit Obligations and such obligation shall be absolute, unconditional and irrevocable, without necessity of presentment, demand, protest or other formalities. Client acknowledges that neither this Agreement nor any guaranty of a Letter of Credit by Factor pursuant to this Agreement shall in any way be construed to create any liability, obligation, warranty or representation on Factor’s part with respect to any matter other than Factor’s obligation to make payment of any Letter of Credit guarantied by Factor. Neither Factor nor any Person issuing a Letter of Credit shall be responsible for: (a) verifying the existence of any act, condition or statement made by a beneficiary of a Letter of Credit in relation to its drawing or presentment under the Letter of Credit or for verifying or passing judgment on the reasonableness of any statement made by the beneficiary of the Letter of Credit; (b) the validity, sufficiency or genuineness of documents, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) the failure to give any notice; or (d) any breach of contract between the beneficiary of the Letter of Credit and Client. Furthermore, neither Factor nor any Person issuing a Letter of Credit shall be responsible for errors, omissions, interruptions or delays in transmission or delivery of any

messages, by mail, cable, telegraph or otherwise; and none of the above shall affect or impair any of Factor’s rights or powers hereunder. In furtherance of the foregoing, Client agrees that, absent gross negligence or willful misconduct on Factor’s part, any action taken or not taken by Factor or by any Person issuing a Letter of Credit, under or in connection with a Letter of Credit or the related draft or documents shall be binding on Client and shall not make Factor liable to Client.

(f) Factor shall not be obligated to issue or cause to be issued Letters of Credit for any purpose other than the sole purpose of allowing Client to purchase goods or services in the ordinary course of business.

(g) Client shall indemnify Factor and hold Factor harmless from and against any and all liabilities, losses, costs, fees and expenses, including attorneys’ fees, that Factor may sustain or incur based upon, arising under, or in any way relating to any Letter of Credit. Client’s obligation to reimburse and indemnify Factor shall be conclusive but shall not prejudice any rights Client may have against any other person in the event that Client disputes liability of any amounts owing under any Letter of Credit.

(h) Whenever a draft is submitted under the Letter of Credit, Clients authorize Factor (regardless of whether a Default exists or whether Clients have sufficient borrowing availability hereunder) to make a Inventory Advance first and, to the extent necessary to cover the amount of such Letter of Credit, an Account Advance hereunder in the amount of such draft (plus any applicable fees of the Issuer associated therewith) and to apply the proceeds of such Inventory Advance or Account Advance thereto. Such Inventory Advances and/or Account Advances shall bear interest and be repayable in accordance with, and be treated in all other respects pursuant to the terms hereof.

(i) Clients’ obligations arising hereunder shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including (without limitation) the following circumstances:

(A) any lack of validity or enforceability of the Letter of Credit or any other agreement or instrument relating thereto (collectively the “Related Documents”);

(B) any amendment or waiver of or any consent to departure from all or any of the Related Documents;

(C) the existence of any claim, setoff, defense or other right which any Client may have at any time, against any beneficiary or any transferee of the Letter of Credit or any other Person, whether in connection with this Agreement, the transactions contemplated herein or in the Related Documents or any unrelated transactions;

(D) any statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever;

(E) payment by or on behalf of the Issuer under the Letter of Credit against presentation of a draft or certificate which does not strictly comply with the terms of the Letter of Credit; and

(F) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

Section 4. Collections/Repayment.

4.1 Collections.

(a) Factor shall have the right at any time with or without notice to Client, to notify any or all Customers of the sale and assignment of the Accounts and pledge of the Collateral to Factor and to direct such Customers to make payment of all amounts due or to become due to Client directly to Factor. Client agrees not to change any of such instructions or to give its Customers different instructions so long as this Agreement shall remain in effect. To the extent there are no Obligations of Client owed to Factor hereunder and so long as Client is not in Default, Factor shall be deemed to have received any such proceeds of Accounts and other Collateral in excess of that which Factor is entitles as Owner of the Accounts or in repayment in full of the Obligations as a pure pass-through for and on account of Client.

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

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

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

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

4.2 Repayment.

(a) Client hereby unconditionally promises to pay all Advances and all other Obligations. All Advances and Obligations shall bear interest at the rate set forth in subsection 5.1 below until paid in full. All Advances and all other Obligations shall be immediately due and payable upon termination of this Agreement for any reason.

(b) The Purchase Price and all other amounts received by Factor will be paid to Client by crediting same to Client’s account with Factor on the Collection Date. The Purchase Price and all other amounts so credited to Client’s account with Factor shall be applied first to all fees and expenses due Factor, next to accrued interest, then to the Inventory Advances, then to Account Advances, provided, however, that the allocation of Credit Risk shall be governed by Section 2.2 hereof.

(c) Client shall make each payment required hereunder or under any other Factoring Document without setoff, deduction or counterclaim.

(d) Unless payment is otherwise timely made by Client, the becoming due of any amount required to be paid under this Agreement or any other Factoring Documents as principal, accrued interest, expenses or fees shall be deemed irrevocably to be a request by Client for an Account Advance or Inventory Advance on the due date of, and in the amount required to pay, such principal, accrued interest or fees or expenses and the proceeds of each such Account Advances or Inventory Advance if made by Factor, shall be disbursed by Factor by way of direct payment of such Obligation.

Section 5. Interest and Fees.

5.1 Interest.

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

Interest Rate for each calendar month shall be adjusted (if necessary) on the first day of such calendar month and shall be equal to the Interest Rate in effect as of the close of business on the last Business Day of the immediately preceding calendar month.

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

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

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

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

(c) If during any month, a net credit balance exists (i.e., the Reserve or credit balance exceeds outstanding Accounts), then Factor shall credit Client’s account as of the last day of each month with interest at a rate equal to the greater of zero percent (0%) or one percent (1%) below the LIBOR.

(d) Interest upon the daily net balance of all of Client’s Inventory Advances shall be payable at a rate equal that described in 5.1(a) above.

(e) Interest shall be charged to Client’s account with Factor as of the last day of each month and shall constitute Obligations. Any adjustment in Factor’s interest rate, whether downward or upward will become effective on the first day of the month following the month. All interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days.

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

that are difficult to ascertain. In the event of termination of this Agreement by either party hereto, Factor’s entitlement to this charge will continue until all Obligations are paid in full.

(g) IT IS THE INTENTION OF THE PARTIES HERETO THAT AS TO ALL ACCOUNTS, THE TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE A TRUE PURCHASE AND SALE OF ACCOUNT(S) UNDER § 9-318 OF THE UCC AS IN EFFECT IN THE STATE OF CALIFORNIA AND AS SUCH, THE CLIENT SHALL HAVE NO LEGAL OR EQUITABLE INTEREST IN SUCH PROPERTY SOLD. NEVERTHELESS, IN THE EVENT ANY PORTION OF THIS TRANSACTION IS CHARACTERIZED AS A LOAN AND AS IT RELATES TO THE INVENTORY ADVANCE, THE PARTIES HERETO INTEND TO CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. IN FURTHERANCE THEREOF SUCH PARTIES STIPULATE AND AGREE THAT NONE OF THE TERMS AND PROVISIONS CONTAINED IN THIS AGREEMENT SHALL EVER BE CONSTRUED TO CREATE A CONTRACT TO PAY, FOR THE USE, FORBEARANCE OR DETENTION OF MONEY, INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER DEFINED) FROM TIME TO TIME IN EFFECT. NEITHER CLIENT, ANY PRESENT OR FUTURE GUARANTOR OR ANY OTHER PERSON HEREAFTER BECOMING LIABLE FOR THE PAYMENT OF THE OBLIGATIONS, SHALL EVER BE LIABLE FOR ANY OBLIGATION THAT MAY BE CHARACTERIZED AS UNEARNED INTEREST THEREON OR SHALL EVER BE REQUIRED TO PAY ANY OBLIGATION THAT MAY BE CHARACTERIZED AS INTEREST THEREON IN EXCESS OF THE MAXIMUM AMOUNT THAT MAY BE LAWFULLY CHARGED UNDER APPLICABLE LAW FROM TIME TO TIME IN EFFECT, AND THE PROVISIONS OF THIS SECTION SHALL CONTROL OVER ALL OTHER PROVISIONS OF THIS AGREEMENT WHICH MAY BE IN CONFLICT THEREWITH. IF ANY INDEBTEDNESS OR OBLIGATION OWED BY CLIENT HEREUNDER IS DETERMINED TO BE IN EXCESS OF THE LEGAL MAXIMUM, OR FACTOR SHALL OTHERWISE COLLECT MONEYS WHICH ARE DETERMINED TO CONSTITUTE INTEREST WHICH WOULD OTHERWISE INCREASE THE INTEREST ON ALL OR ANY PART OF SUCH OBLIGATIONS TO AN AMOUNT IN EXCESS OF THAT PERMITTED TO BE CHARGED BY APPLICABLE LAW THEN IN EFFECT, THEN ALL SUCH SUMS DETERMINED TO CONSTITUTE INTEREST IN EXCESS OF SUCH LEGAL LIMIT SHALL, WITHOUT PENALTY, BE PROMPTLY APPLIED TO REDUCE THE THEN OUTSTANDING OBLIGATIONS OR, AT FACTOR’S OPTION, RETURNED TO CLIENT OR THE OTHER PAYOR THEREOF UPON SUCH DETERMINATION. IF AT ANY TIME THE RATE AT WHICH INTEREST IS PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT OUTSTANDING HEREUNDER SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL AMOUNT OF INTEREST ACCRUED HEREUNDER EQUALS (BUT DOES NOT EXCEED) THE MAXIMUM RATE APPLICABLE HERETO. AS USED IN THIS SECTION, THE TERM “APPLICABLE LAW” MEANS THE LAWS OF THE STATE OF CALIFORNIA OR, IF DIFFERENT, THE LAWS OF THE STATE OR TERRITORY IN WHICH THE CLIENT RESIDES, WHICHEVER LAW ALLOWS THE GREATER RATE OF INTEREST, AS SUCH LAWS NOW EXIST OR MAY BE CHANGED OR AMENDED OR COME INTO EFFECT IN THE FUTURE AND THE TERM “MAXIMUM RATE” MEANS THE MAXIMUM NONUSURIOUS RATE OF INTEREST THAT FACTOR IS PERMITTED UNDER APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR RECEIVE WITH RESPECT TO THE OBLIGATIONS.

5.2 Commission.

(a) For Factor’s services hereunder, Client shall pay and Factor shall be entitled to receive a factoring Commission equal to three-quarters of one percent (0.75%) of the gross invoice amount of each Account (“Commission”). The Commission shall be due and payable to Factor on the date of creation of each Account and shall be chargeable to Client’s account with Factor. Factor shall be entitled to receive a surcharge equal to two percent (2%) of the gross invoice amount of all Accounts arising out of sales to any Customer that is a debtor-in-possession. All of the foregoing fees constitute compensation to Factor for services rendered and are not interest or a charge for the use of money.

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

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

5.3 Fees.

(a) All of the fees charged under this Agreement constitute compensation to Factor for services rendered and are not interest or a charge for the use of money. Each installment of such fees shall be fully earned when due and payable and shall not be subject to refund or rebate.

(b) It is agreed by and between Client and Factor that Factor should be compensated for maintaining available credit balances for Client. Should Client fail to utilize the available credit line hereunder, Client agrees to pay to Factor, monthly, a fee of three-quarters of one percent (0.75%) of the difference between the available credit line and the average outstanding balance of Account advances.

(c) It is agreed by and between Client and Factor that Client shall pay Factor a documentation fee in the amount of Ten Thousand and No/100 Dollars ($10,000.00). Such fee shall be fully earned and payable on the date of this Agreement.

Section 6. Collateral.

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

6.2 Perfection/Further Assurances. Client agrees to comply with all appropriate laws in order to perfect Factor’s security interest in and to the Collateral and to execute such documents as Factor may require from time to time. Client authorizes Factor to file at such times and places as Factor may designate such financing statements, continuations and amendments thereto as are necessary or desirable to perfect Factor’s rights in and give notice of Factor’s purchase of the Accounts under the Uniform Commercial Code in effect in any applicable jurisdiction and Factor’s security interest in the Collateral. Factor may at any time and from time to time file financing statements, continuation statements and amendments thereto that describe the Collateral as “all assets” of Client or words of similar effect and which contain any other information required by Part 5 of Article 9 of the applicable UCC for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including whether Client is an organization, the type of organization and any organization identification number issued to Client. Client agrees to furnish any such information to Factor promptly upon request. Any such financing statements, continuation statements or amendments may be signed by Factor on behalf of Client or filed by Factor without the signature of Client and may be filed at any time in any jurisdiction. Client acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement naming Client as the debtor and Factor as the secured party without the prior written consent of Factor, and Client agrees that it shall not do so without the prior written consent of Factor. Client hereby ratifies any UCC financing statements previously filed by Factor.

6.3 Collateral Representations, Warranties and Covenants

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

(b) The Collateral is located at the locations set forth on Schedule 6.3 (b) hereof and at no other location. Client shall provide written notice to Factor of any change in the locations at which it keeps its Collateral at least thirty (30) days prior to any such change. Client shall obtain from any landlord, warehouseman, or other third party operator of premises on which any Collateral is located an acceptable lien waiver or subordination agreement in Factor’s favor with respect to such Collateral. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Client shall, immediately endorse and assign such Negotiable Collateral over to Factor and deliver actual physical possession of the Negotiable Collateral to Factor. Client shall at any time and from time to time take such steps as Factor may request for Factor (i) to obtain an acknowledgment, in form and substance satisfactory to Factor, of any bailee having possession of any of the Collateral that such bailee holds such Collateral for Factor, (ii) to obtain “control” of any investment property, deposit accounts, letter-of-credit rights or electronic chattel paper in accordance with Article 9 of the UCC, with any agreements establishing control to be in form and substance satisfactory to Factor, and (iii) otherwise to insure the continued perfection and priority of Factor’s security interest in the Collateral and of the preservation of its rights therein other than the Inventory in Mexico.

(c) Accounts. The Accounts are a valid, bona fide account, representing an undisputed indebtedness incurred by the named Customer for goods actually sold and delivered or for services completely rendered; Other than those discounts, allowances and deductions set forth on the face of the invoice at the time it was created, there are and shall be no set-offs, allowances, discounts, deductions, counterclaims, or disputes with respect to any Account. Client shall inform Factor, in writing, immediately upon learning that there exists any Dispute. Client shall accept no returns and shall grant no allowance or credit to any Customer without prior written notice to Factor. If required by Factor, Client shall submit to Factor credit memos itemized on a separate Schedule of Accounts for all returns and allowances made during the previous week. At Factor’s option, Factor may require that Client pay Factor for the amount of such credit memos, or in Factor’s sole and exclusive discretion, Factor may agree to accept the Schedule of Accounts and apply same to Client’s Reserve.

(d) Inventory. Client will maintain Inventory at the locations set forth on Schedule 6.3 (b) hereof subject to a perfected, first-priority Lien in favor of Factor (other than Inventory located in Mexico). Sales of Inventory will be made in compliance with all material requirements of applicable law. Client covenants and agrees:

(i) To notify Factor immediately of any event causing loss or depreciation in the value of Inventory and the amount of such loss or depreciation;

(ii) To keep correct current stock, cost and sales records of Client’s Inventory, accurately and sufficiently itemizing and describing the kinds, type, and quantities of Inventory and the cost and selling prices thereof, all of which records shall be continuously available to Factor for inspection, and Factor shall at all reasonable times have access to and the right to inspect and draw off data from any of Client’s other books and records for the purposes of checking and verifying all such statements, stock, cost and sales records;

(iii) At all reasonable times and from time to time, by or through any of Client’s officers, agents, attorneys, or accountants, permit Factor to examine or inspect the Inventory wherever located and, for such purposes, to enter upon Client’s premises or wherever any of the Inventory may be found; and

(iv) Until Default, Client may use the Inventory in any lawful manner not inconsistent with this Agreement or with the terms or conditions of any policy of insurance thereon, may use and consume any raw materials or supplies, the use and consumption of which is necessary in order to carry on Client’s business, and may also sell the Inventory in the ordinary course of business. (A sale in the ordinary course

of business does not include a transfer in partial or total satisfaction of a debt owing by Client to any person other than Factor.)

(e) Equipment. Client will maintain all Equipment used or useful in Client’s business in good and workable condition, ordinary wear and tear excepted, subject to a perfected, first-priority security interest in Factor’s favor and free and clear of all other Liens except Permitted Liens at one of the locations set forth on Schedule 6.3(b).

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

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

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

(i) Appraisal. Client’s Inventory shall be appraised semi-annually by an appraiser acceptable to Factor.

Section 7. Power of Attorney.

7.1 Power of Attorney. Client hereby grants to Factor an irrevocable power of attorney authorizing and permitting Factor, at its option, without notice to Client to do any or all of the following: (a) endorse the name of Client on any checks or other evidences of payment whatsoever that may come into the possession of Factor regarding Accounts or Collateral, including checks received by Factor pursuant to Section 9 hereof; (b) receive, open and dispose of any mail addressed to Client and put Factor’s address on any statements mailed to Customers; (c) pay, settle, compromise, prosecute or defend any action, claim, conditional waiver and release, or proceeding relating to Accounts or Collateral; (d) upon the occurrence of a Default, notify in the name of the Client, the U.S. Post Office to change the address for delivery of mail addressed to Client to such address as Factor may designate, however, Factor shall turn over to Client all such mail not relating to Accounts or Collateral; (e) file any financing statement deemed necessary or appropriate by Factor to protect Factor’s interest in and to the Accounts or Collateral, or under any provision of this Agreement; (f) effect debits to any deposit account or other account that Client or Client’s principals who have executed a guaranty agreement maintain at any bank for any sums due to or from the Client under this Agreement; (g) upon a Default, to prepare and mail all invoices relating to Accounts; and (h) to take all actions necessary and proper in order to carry out this Agreement. The authority granted to Factor herein is irrevocable until this Agreement is terminated and all Obligations are fully satisfied.

Section 8. Client’s Representations, Covenants and Warranties.

Section 8.1 Client’s Representations, Covenants and Warranties. Client represents, warrants and covenants to Factor that:

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

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

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

(d) Client shall maintain its books and records in accordance with GAAP and shall reflect on its books the absolute sale of the Accounts to Factor. Client shall furnish Factor, upon request, such information and statements, as Factor shall require from time to time regarding Client’s business affairs, financial condition and results of its operations. Without limiting the generality of the foregoing, Client shall provide Factor, (i) on or prior to the 30th day of each month, unaudited financial statements with respect to the prior month, (ii) within forty-five (45) days after the end of each of Client’s quarters, unaudited financial statements (on a fiscal year-to-date basis) prepared by a CPA acceptable to Factor, (iii) within ninety (90) days after the end of each of Client’s fiscal years, audited financial statements prepared by a CPA acceptable to Factor, (iv) prior to the Agreement Date and annually thereafter, projected income statement, balance sheet and statement of cash flows by month for the next year, (v) within 30 days of each month-end, a certificate from the president or chief financial officer of Client stating whether any Default has occurred and stating the nature of the Default, (vi) within 10 days of each month end, a detailed listing of Inventory with a cover summary report, (vii) within 10 days of each month-end, a current listing of all open and unpaid accounts payable, and (viii) such other information as Factor may request. All financial statements and reports furnished to Factor hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP;

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

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

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

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

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

		Meade
		Meade.com
		Coronado

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

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

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

(m) Client represents and warrants to Factor that: (i) Client is not engaged as one of Client’s principal activities in owning, carrying or financing the purchase or ownership by others of “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System); (ii) Client owns no real property and leases no real property other than as listed on Schedule 8.1 (m); (iii) a true, correct and complete list of any warehousemen, processors, consignees or other bailees with possession or control of any Inventory is set forth on Schedule 6.3 (b); and (iv) a list and brief description of all bank accounts maintained by Client with any bank or financial institution is set forth on Schedule 8.1 (m);

8.2 Negative Covenants.

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

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

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

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

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

(f) Loans/Investments. Client will not make any loans or Account Advances to or extend any credit to any Person except (i) the extension of trade credit in the ordinary course of business; and (ii) Account Advances to employees not to exceed an aggregate outstanding amount of $10,000 at any one time outstanding for all employees. Client shall not purchase, acquire or otherwise invest in any Person except:

(A) existing investments in Client’s subsidiaries described on Schedule 8.2 (f) ; (B) direct obligations of the United States of America maturing within one year from the acquisition thereof; (C) certificates of deposit issued by, or investment accounts in, banks or financial institutions having a net worth of not less than $50,000,000; and (D) commercial paper rated A-1 by Standard & Poor’s Ratings Group or P-1 by Moody’s Investors Service, Inc. Without limiting the generality of the foregoing, Client shall not create any new subsidiary.

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

Section 9. Administration.

9.1 Disputes/Chargebacks. Client shall notify Factor immediately upon the assertion by a Customer of a Dispute and Factor may charge such Account back to Client. Factor may charge back to Client all amounts owing on Client Risk Accounts at any time either before or after the due date. Client indemnifies and holds Factor harmless from and against any and all loss, costs and expenses arising out of Disputes or Client Risk Accounts, including collection and attorneys fees with respect thereto. A chargeback shall not be deemed a reassignment of an Account and title thereto and to the Goods represented thereby shall remain in Factor until such time as Factor executes a reassignment of the Account.

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

9.3 Credit Inquiries. Client authorizes Factor to disclose such information as Factor deems appropriate to Persons making credit inquiries about Client.

9.4 Persons Authorized to Request Account Advances/Inventory Advances. Client hereby authorizes and directs Factor to make Account Advances or Inventory Advances to or for the benefit of Client upon receipt of instructions from any of the persons listed on Schedule 9.4. Factor shall have no liability whatsoever to Client or any other Person for acting upon any such instructions which Factor, in good faith, believes were given by any such person, and Factor shall have no duty to inquire as to the propriety of any disbursement. Factor is hereby authorized to make the loans provided for herein based on instructions received by facsimile, electronic mail, telephone or other method of communication from any of such persons. Although Factor shall make a reasonable effort to determine the person’s identity, Factor shall not be responsible for determining the authenticity of any such instructions, and Factor may act on the instructions of anyone it perceives to be one of the persons authorized to request loans hereunder. Factor shall have the right to accept the instructions of any of the foregoing persons unless and until Factor actually receives from Client (in accordance with the notice provisions of this Agreement) written notice of termination of the authority of that person. Client may change persons designated to give Factor borrowing instructions only by delivering to Factor written notice of such change. Client will ensure that each telephone instruction from any person designated in or pursuant to this paragraph shall be followed by written confirmation of the request for disbursement in such form as Factor makes available to Client from time to time for such purpose; provided, however, that Client’s failure to provide written confirmation of any telephonic instruction shall not invalidate such telephonic instruction.

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

Section 10. Accounting Information.

10.1 Accounting Statements. Factor shall provide Client with information on the Accounts and a monthly reconciliation of the factoring relationship relating to billing, collection, Account Advances, Inventory Advances, Obligations and account maintenance such as aging, posting, error resolution and e-mailing or mailing of statements. All of the foregoing shall be in a format and in such detail, as Factor, in its sole discretion, deems appropriate. Factor’s books and records shall be admissible in evidence without objection as prima facie evidence of the status of the Accounts and Reserve between Factor and Client. Each statement, report, or accounting rendered or issued by Factor to Client shall be deemed conclusively accurate and binding on Client unless within thirty (30) days after the date of issuance Client notifies Factor to the contrary pursuant to Section 13 hereof, setting forth with specificity the reasons why Client believes such statement, report, or accounting is inaccurate, as well as what Client believes to be correct amount(s) therefore. If the Client gives notice of its disagreement with Factor’s statement, all matters in such statement that are not objected to in Client’s notice, shall be deemed conclusively accurate and binding on Client. Client’s failure to receive any monthly statement shall not relieve it of the responsibility to request such statement and Client’s failure to do so shall nonetheless bind Client to whatever Factor’s records would have reported.

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

Section 11. Defaults and Remedies.

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

11.2 Remedies. (a) Upon a Default, Factor may, without demand or notice to Client, exercise all rights and remedies available to it under this Agreement, under the UCC or otherwise, including,

terminating this Agreement and declaring all Obligations immediately due and payable, provided, however, that in the event a Default occurs under subsection (c) of Section 11.1, such termination and acceleration shall occur automatically without any notice, demand or presentment of any kind.

(b) Without notice to or demand upon Client or any other Person, Factor may make such payments and do such acts as Factor considers necessary or reasonable to protect its security interest in the Collateral. Client authorizes Factor to enter each premises where any Collateral is located, take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest or compromise any lien which in Factor’s opinion appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. Factor may ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale and sell the Collateral. Any such sale may be either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms. It is not necessary that the Collateral be present at any such sale.

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

11.3 Cumulative Rights; Waivers. The occurrence of any Default shall entitle Factor to all of the default rights and remedies (without limiting the other rights and remedies exercisable by Factor either prior or subsequent to a Default) as available to a Secured Party under the Uniform Commercial Code in effect in any applicable jurisdiction. All rights, remedies and powers granted to Factor in this Agreement, or in any other instrument or agreement given by Client to Factor or otherwise available to Factor in equity or at law, are cumulative and may be exercised singularly or concurrently with such other rights as Factor may have. These rights may be exercised from time to time as to all or any part of the Accounts hereunder or the Collateral as Factor in its discretion may determine. In the event that any part of the purchase of Accounts hereunder by Factor is construed to be a loan from Factor to Client, any Account Advances or payments made as the Purchase Price for all Accounts shall be secured by the Accounts and the Collateral. Factor may not be held to have waived its rights and remedies unless the waiver is in writing and signed by Factor. A waiver by Factor of a right, remedy or default under this Agreement on one occasion is not a waiver of any right, remedy or default on any subsequent occasion. No exercise by Factor of one right or remedy shall be deemed an election, and no waiver by Factor of any default on Client’s part shall be deemed a continuing waiver. No delay by Factor shall constitute a waiver, election or acquiescence by it.

Section 12. Term.

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

Prepayment Penalty		Time Period During Which Termination Occurs
$	300,000	During the first year
$	200,000	During the second year
$	100,000	During the third year

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

Prepayment Penalty		If Termination Occurs Due To Stock Or Asset Sale
$	300,000	Within 180 days of the Agreement Date
$	150,000	More than 181 days after the Agreement Date but prior to 365 days after the Agreement Date
$	100,000	During the second Contract Year
$	50,000	During the third Contract Year

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

Section 13. Notices. Any notice or communication with respect to this Agreement shall be given in writing, sent by (i) personal delivery, or (ii) overnight delivery service with proof of delivery, or (iii) United States mail, first-class with postage prepaid, or registered or certified mail, or (iv) prepaid telegram, telex or telecopy, addressed to each party hereto at its address and to the attention of the person listed as set forth below the signatures of the parties to this Agreement. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of overnight delivery service or telecopy, on the next business day at the receiving location or in the case of mail, upon receipt.

Section 14. Attorney’s Fees. Client agrees to reimburse Factor upon demand for all reasonable attorney’s fees, court costs and other expenses incurred by Factor in the preparation, negotiation and enforcement of this Agreement and protecting or enforcing its interest in the Accounts or the Collateral, or in the representation of Factor in connection with any bankruptcy case or insolvency proceeding involving Client, the Collateral, or any Accounts, including any defense of any Avoidance Claims (except to the extent related to Approved Accounts where no Dispute exists). Client hereby agrees to pay such fees, costs and expenses and Factor shall also have the right to charge the Reserve therefore. Notwithstanding the existence of any law, statute or rule, in any jurisdiction which may provide Client with a right to attorney’s fees or costs, Client hereby waives any and all rights to hereafter seek attorney’s fees or costs hereunder and Client agrees that Factor exclusively shall be entitled to indemnification and recovery of any and all attorney’s fees or costs in respect to any litigation based hereon, arising out of, or related hereto, whether under, or in connection with, this and/or any agreement executed in conjunction herewith, or any course of conduct, course of dealing, statements (whether verbal or written) or actions of either party.

Section 15. Indemnity. Client hereby indemnifies and agrees to hold harmless and defend Factor from and against any and all claims, judgments, liabilities, fees and expenses (including attorney’s fees) which may be imposed upon, threatened or asserted against Factor at any time and from time to time in any way connected with this Agreement or the Collateral. The foregoing indemnification shall apply whether or not such indemnified claims are in any way or to any extent owed, in whole or in part, under any claim or theory of strict liability, or are caused, in whole or in part, by any negligent act or omission of Factor except for gross negligence or willful misconduct of Factor.

Section 16. Severability. Each and every provision, condition, covenant and representation contained in this Agreement is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of the Agreement shall not be affected thereby.

Section 17. Parties in Interest. All grants, covenants and agreements contained in this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Client may not delegate or assign any of its duties or obligations under this Agreement without the prior written consent of Factor. Notwithstanding anything herein to the contrary, the Factor may, without consent of the Client, grant a security interest in, sell or assign, grant or sell participations in or otherwise transfer all or any portion of its rights and obligations hereunder to one or more Persons and upon notice of such assignment, sale or grant of participation by Factor, to treat such assignee, transferee or participant as “Factor” for all purposes hereunder.

Section 18. Governing Law; Submission to Process and Venue. This Agreement shall be deemed a contract made under the laws of the State of California and shall be construed and enforced in accordance with and governed by the internal laws of the State of California, without reference to the rules thereof relating to conflicts of law. Client hereby irrevocably submits itself to the exclusive jurisdiction of the state and federal courts located in any county in the state of California in which Factor has an business location, and agrees and consents that service of process may be made upon it in any legal proceeding relating to this Agreement, the purchase of Accounts or any other relationship between Factor and Client by any means allowed under state or federal law. Client hereby waives and agrees not to assert, by way of motion, as a defense or otherwise, that any such proceeding, is brought in any inconvenient forum or that the venue thereof is improper.

Section 19. Complete Agreement. This Agreement, the written documents executed pursuant to this Agreement, if any, and the acknowledgment delivered in connection herewith set forth the entire understanding and agreement of the parties hereto with respect to the transactions contemplated herein and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. No modification or amendment of or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced.

Section 20. Miscellaneous.

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

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

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

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

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

(e) INTENTIONALLY RESERVED

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

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

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

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

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

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

Section 21. Governing Law; Jurisdiction; Venue, Waiver of Jury Trial and Service of Process.

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

RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST CLIENT OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.

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

Section 22. Acknowledgment of Waivers and Loss of Defenses.

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

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

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

Section 23. Waiver Of Jury Trial. This Section concerns the resolution of any controversies or claims between the Client and Factor, whether arising in contract, tort or by statute, including but not limited to controversies or claims that arise out of or relate to: (i) this Agreement (including any renewals, extensions or modifications); or (ii) any of the other Factoring Documents (collectively a “Claim”).

(a) Judicial Reference.

The parties prefer that any dispute between them be resolved in litigation subject to a Jury Trial Waiver as set forth in Section 21 herein, but the California Supreme Court has held that such pre-dispute jury trial waivers are unenforceable. This Section will be applicable until: (i) the California Supreme Court holds that a pre-dispute jury trial waiver provision similar to that contained in Section 21 herein is valid or enforceable; or (ii) the California Legislature passes legislation and the governor of the State of California signs into law a statute authorizing pre-dispute jury trial waivers and as a result such waivers become enforceable.

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

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

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

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

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

vii.		The referee shall be required to determine all issues in accordance with existing case law and the statutory laws of the State of California. The rules of evidence applicable to proceedings at law in the State of California will be applicable to the reference proceeding. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or

		provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision pursuant to CCP Section 644 the referee’s decision shall be entered by the Court as a judgment or an order in the same manner as if the action had been tried by the Court. The final judgment or order or from any appealable decision or order entered by the referee shall be fully appealable as provided by law. The parties reserve the right to findings of fact, conclusions of laws, a written statement of decision, and the right to move for a new trial or a different judgment, which new trial, if granted, is also to be a reference proceeding under this provision.

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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

FCC, LLC, doing business as First Capital Western Region, LLC


By	/s/Robert S. Yasuda
Name:	Robert S. Yasuda
Title:	Senior Vice President

Address:			700 South Flower Street
			Suite 2325
			Los Angeles CA 90017

Attention:


MEADE INSTRUMENTS CORP.


By:	/s/Steven G. Murdock
	Steven G. Murdock
	Chief Executive Officer

Client address & name for notice through
February 28, 2009:

6001 Oak Canyon
Irvine CA 92618
Attention:		John A. Elwood


Client address & name for notice after
February 28, 2009:

27 Hubble
Irvine, CA 92618
Attention:		John A. Elwood

STATE OF CALIFORNIA		)
		) SS:
COUNTY OF	)

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

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

WITNESS my hand and official seal.

Signature

(Signature of Notary)

(Seal of Notary)

SCHEDULE “A”

Definitions

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

“Account Advance” means amounts Account Advanced by Factor to or for the benefit of the Client under this Agreement or otherwise against the Net Invoice Amount of Accounts.

“Account Advance Availability” means the amount determined by Factor pursuant to section 3.1 hereof.

“Advance(s)” means all Account Advances and Inventory Advances and any other amounts advanced by Factor to or on behalf of Client.

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

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

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

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

“Chattel Paper” means (i) all “chattel paper” as defined in the UCC, and (ii) all record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods.

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

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

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

“Collection Date” means (a) for payments received by Factor in payment of Accounts, the date a check, draft or other item representing payment on an invoice is posted to Factor’s account plus two (2) business days; or (b) for Approved Accounts paid by Factor solely for any reason other than a Bona Fide Defense,, the Friday of the calendar week following the calendar week in which the 120 day period for such Approved Account ends.

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

“Commission” has the meaning ascribed thereto in Section 5.2 hereof.

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

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

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

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

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

“Default” means any of the events specified in Section 11 of this Agreement.

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

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

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

“Eligible Inventory” means and includes that Inventory (other than packaging materials, labels and supplies) located in the continental United States which Factor, in its discretion, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory unless:

(a) it is finished goods;

(b) at all times it strictly complies with all of Client’s warranties, covenants and representations to Factor;

(d) it is not slow moving, obsolete or unmerchantable, in Factor’s discretion;

(e) it meets all standards imposed by any governmental agency or authority;

(f) it is at all times subject to Factor’s duly perfected, first-priority security interest and there exists no other Lien thereon;

(g) it is in Client’s possession and control situated at a U.S. based location disclosed to Factor in compliance with this Agreement, the Inventory is not in-transit, Client’s books reflect the Inventory, the Inventory is insured to the full value thereof, and the insurance policy lists Factor as sole loss payee;

(h) it is not in the hands of any third party, including a warehouseman, finisher, consignee, bailor, etc., unless such arrangement is fully disclosed to Factor in writing and Client shall have provided to Factor such waivers, acknowledgments and other items requested by Factor in its discretion;

(i) it is not subject to any license or other agreement that limits, conditions, or restricts Client’s or Factor’s right to sell, transfer or otherwise dispose of such Inventory;

(j) Client owns such Inventory and such Inventory is not in Client’s possession based upon any consignment, guaranteed sale, or similar basis; and

(k) it is not of a type that Factor, in its discretion, has determined is not Eligible Inventory.

“Equipment” means (a) all “equipment” as defined in the UCC, and (b) all of Client’s present and hereafter acquired machinery, equipment, furniture, fixtures, goods, and all other tangible personal property (other than Inventory), including computer and other electronic data processing equipment and other office equipment and supplies, computer programs and related data processing software, embedded software, spare parts, tools, motors, automobiles, trucks, tractors and other motor vehicles, rolling stock, jigs, as well as all of such types of property leased by Client and all of Client’s rights and interests with respect thereto under such leases (including, options to purchase), together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

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

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

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

to the extent that such accounts are purchased by Factor Sub under the terms of the Factor Sub Factoring Agreement.

“Factor Sub Accounts Proceeds” means the proceeds of Factor Sub Accounts, including any amounts payable by Factor Sub as the Purchase Price of the Factor Sub Accounts under the Factor Sub Factoring Agreement.

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

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

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

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

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

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

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

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

“Inventory Advance” means amounts advanced by Factor to or for the benefit of the Client under this Agreement or otherwise against Eligible Inventory pursuant to Section 3.2 hereof.

“Inventory Advance Availability” means the amount determined by Factor in under section 3.2 hereof.

“Inventory Certificate” means the certificate in such form as Factor may prescribe form time to time substantially with appropriate insertions, to be submitted to Factor by Client pursuant to this Agreement and certified as true and correct by the Chief Executive Officer or the Chief Financial Officer of Client.

“Issuer” means a financial institution selected by Factor and reasonably acceptable to Client.

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

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

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

“Letter of Credit Fee” means a monthly fee equal to percent ( .0 %) of the face amount of all issued and/or outstanding Letters of Credit and such other fees and charges as set forth on Exhibit A hereto as such may be revised from time to time.

“Letter of Credit Obligations” means all indebtedness, liabilities and obligations incurred by Factor at the request of Client in connection with the issuance of Letters of Credit.

“Letter of Credit Reserve” means, from time to time, an amount equal to the aggregate amount that may then be drawn under the Letter of Credit assuming compliance with all conditions for drawing, plus the aggregate amount of all draws under the Letter of Credit for which Client has not reimbursed Factor.

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

“Lien” means any security interest, security title, mortgage, deed to secure debt, deed of trust, lien, pledge, charge, conditional sale or other title retention agreement, or other encumbrance of any kind in respect of any property, including 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 hereafter acquired and whether arising by agreement or operation of law.

“Loan Agreement – Factor Sub Accounts” means that certain Loan and Security Agreement – Factor Sub Accounts by and between Client and FCC, LLC dated as of the date hereof.

“Misdirected Payment Fee” means fifteen percent (15%) of the amount of any payment on account of an Account which has been received by Client and not delivered in kind to Factor within two (2) business days following the date of receipt by Client.

“Negotiable Collateral” means all of Client’s present and future letters of credit, advises of credit, notes, drafts, instruments, and documents, including bills of lading, leases, and chattel paper, and Client’s books and records relating to any of the foregoing.

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

“Obligations” means all present and future Account Advances, Inventory Advances, Letter of Credit Obligations, Commissions, interest, fees, expenses, and all other present and future obligations (including the obligation to turn over all proceeds of Accounts purchased hereunder) owing by Client to Factor, including interest thereon, whether or not for the payment of money, whether or not evidenced by any note or other instrument, whether direct or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary, liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether presently contemplated or not, regardless of how the same arise, or by what instrument, agreement or book account they may be evidenced, or whether evidenced by any instrument, agreement or book account, whether arising before, during or after the commencement of any federal Bankruptcy Case in which Client is a debtor, including but not limited to, obligations arising pursuant to Letters of Credit or acceptance transactions or any other financial accommodations, agreements or any guaranty executed by Client in favor of Factor.

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

“Permitted Liens” means (a) liens for unpaid taxes, assessments, or other governmental charges or levies that are not yet delinquent, (b) liens set forth on Schedule 1 hereto, (c) the interests of lessors in goods which are leased to Client, including leases which are deemed to be “capital leases” in accordance with GAAP, (d) liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in connection with the borrowing of money, and which liens are for sums not yet delinquent, (e) Liens in favor of FCC or its affiliates; and (f) encumbrances on trademarks arising pursuant to any agreements whereby Client grants a license to a third party to use one or more of Client’s trademarks.

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

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

“Reserve” means a bookkeeping account on the books of the Factor representing an unpaid portion of the Purchase Price and such other amounts as Factor deems advisable as security for the payment and performance by Client of its Obligations hereunder.

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

“Security Interest” means the rights, title and interest in and to and liens of Factor on and in the Collateral.

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

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

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

Schedule 1

Permitted Liens

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

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

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

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

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

Schedule 6.3 (b)

Collateral Locations

6001 Oak Canyon

Irvine CA 92618

Boulevard San Antonio

De los Buenos de Mendoza

No. 20104, Parque Industrial Valle Sur 2

Tijuana, Baja California, Mexico CP. 22114

Ave La Paz No 10009

Parque Industrial Pacifico

Nave 15-AB-0500

Tijuana, Baja California, Mexico CP. 22670

27 Hubble

Irvine, CA 92618

Warehousemen, Bailees, Consignees & Processors

None

Schedule 8.1 (m)

Real Property

6001 Oak Canyon

Irvine CA 92618

Boulevard San Antonio

De los Buenos de Mendoza

No. 20104, Parque Industrial Valle Sur 2

Tijuana, Baja California, Mexico CP. 22114

Ave La Paz No 10009

Parque Industrial Pacifico

Nave 15-AB-0500

Tijuana, Baja California, Mexico CP. 22670

Bank Accounts

Bank of America #xxxxxxxxx0477 (Controlled Disbursement)

Bank of America #xxxxxxxxx5331 (Payroll)

Bank of America #xxxxxxxxx5330 (General)

Bank of America #xxxxxxxxx7067 (Lockbox)

Schedule 8.2 (f)

Subsidiaries

Meade Coronado Holdings Corp.

Coronado Instruments, Inc.

MTSC Holdings, Inc.

Simmons Outdoor Corporation

MC Holdings, Inc.

Meade.com

Meade Instruments (Guangzhou) Co., Ltd.

Meade Instruments Foreign Sales Corporation Limited

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

Meade Instruments Europe Corporation

Schedule 9.4

Persons Authorized to Request Loans

Steven G. Murdock

Paul E. Ross

John A. Elwood

EX-10.123 3 a09-5107_1ex10d123.htm EX-10.123

Exhibit 10.123

LOAN AND SECURITY AGREEMENT –

FACTOR SUB ACCOUNTS

Date: February 9, 2009

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

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

Section 1. Definitions.

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

1.2 Other Referential Provisions.

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

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

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

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

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

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

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

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

Section 2. Loans.

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

2.2 Advances.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 3. Collections.

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

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

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

Section 4. Collateral.

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

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

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

4.3 Collateral Representations, Warranties and Covenants

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Meade

Meade.com

Coronado

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

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

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

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

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

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

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

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

6.2 Negative Covenants.

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

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

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

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

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

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

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

Section 7. Administration.

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

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

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

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

Section 8. Accounting Information.

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

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

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

Section 9. Default and Remedies.

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

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

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

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

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

Section 10. Term.

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

Prepayment Penalty		Time Period During Which Termination Occurs
$	300,000	During the first year
$	200,000	During the second year
$	100,000	During the third year

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

Prepayment Penalty		If Termination Occurs Due To Stock Or Asset Sale
$	300,000	Within 180 days of the Agreement Date
$	150,000	More than 181 days after the Agreement Date but prior to 365 days after the Agreement Date
$	100,000	During the second Contract Year
$	50,000	During the third Contract Year

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

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

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

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

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

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

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

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

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

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

Section 19. Miscellaneous.

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

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

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

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

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

(e) INTENTIONALLY RESERVED

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

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

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

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

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

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

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

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

Section 21. Acknowledgment of Waivers and Loss of Defenses.

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

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

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

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

(a) Judicial Reference.

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

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

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

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

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

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

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

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

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

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

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


By:		/s/Robert S. Yasuda
Name:		Robert S. Yasuda
Title:		Senior Vice President


MEADE INSTRUMENTS CORP.


By:	/s/Steven G. Murdock
	Steven G. Murdock
	Chief Executive Officer

STATE OF CALIFORNIA	)
	) SS:
COUNTY OF	)

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

WITNESS my hand and official seal.

Signature

(Signature of Notary)

(Seal of Notary)

EXHIBIT “A”

Definitions

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

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

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

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

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

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

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

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

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

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

A-1

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

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

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

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

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

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

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

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

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

A-2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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SCHEDULE 1

Form of Schedule of Factor Sub Accounts

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SCHEDULE 2

Permitted Sales or Liens

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

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

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

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

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

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SCHEDULE 4.3 (b)

Collateral Locations

6001 Oak Canyon

Irvine, CA 92618

Boulevard San Antonio

De los Buenos de Mendoza

No. 20104, Parque Industrial Valle Sur 2

Tijuana, Baja California, Mexico CP. 22114

Ave La Paz No 10009

Parque Industrial Pacifico

Nave 15-AB-0500

Tijuana, Baja California, Mexico CP. 22670

27 Hubble

Irvine, CA 92618

Consignees, Processors, Bailees and Warehousemen

None

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SCHEDULE 6.1 (m)

Real Property

None

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SCHEDULE 6.2 (f)

Subsidiaries

Meade Coronado Holdings Corp.

Coronado Instruments, Inc.

MTSC Holdings, Inc.

Simmons Outdoor Corporation

MC Holdings, Inc.

Meade.com

Meade Instruments (Guangzhou) Co., Ltd.

Meade Instruments Foreign Sales Corporation Limited

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

Meade Instruments Europe Corporation

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SCHEDULE 7.4

Persons Authorized to Request Advances

Steven G. Murdock

Paul E. Ross

John A. Elwood

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SCHEDULE 8.1 (m)

Bank Accounts

Bank of America #xxxxxxxxx0477 (Controlled Disbursement)

Bank of America #xxxxxxxxx5331 (Payroll)

Bank of America #xxxxxxxxx5330 (General)

Bank of America #xxxxxxxxx7067 (Lockbox)

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EX-10.124 4 a09-5107_1ex10d124.htm EX-10.124

Exhibit 10.124

FACTORING AND SECURITY AGREEMENT

FACTOR SUB ACCOUNTS

Date: February 9, 2009

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

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

Section 1. Definitions.

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

1.2 Other Referential Provisions.

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

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

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

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

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

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

Section 2. Purchase & Sale of Factor Sub Accounts.

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

2.2 Credit Approval.

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

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

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

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

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

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

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

2.3 Purchase Price.

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

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

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

2.4 Commission.

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

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

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

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

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

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

Section 3. Collections.

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

3.2 Collections.

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

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

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

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

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

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

Section 4. Power of Attorney.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Meade
Meade.com
Coronado

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

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

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

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

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

Section 6. Administration.

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

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

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

Section 7. Accounting Information.

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

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

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

Section 8. Defaults and Remedies.

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

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

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

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

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

Section 9. Term.

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

Prepayment Penalty		Time Period During Which Termination Occurs
$	300,000	During the first year
$	200,000	During the second year
$	100,000	During the third year

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

Prepayment Penalty		If Termination Occurs Due To Stock Or Asset Sale
$	300,000	Within 180 days of the Agreement Date
$	150,000	More than 181 days after the Agreement Date but prior to 365 days after the Agreement Date
$	100,000	During the second Contract Year
$	50,000	During the third Contract Year

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

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

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

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

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

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

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

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

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

Section 17. Miscellaneous.

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

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

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

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

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

(e) INTENTIONALLY RESERVED

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

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

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

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

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

Section 19. Acknowledgment of Waivers and Loss of Defenses.

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

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

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

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

(a) Judicial Reference.

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

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


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

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

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

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

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


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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

FCC Factor Subsidiary II, LLC

By:	/s/Robert S. Yasuda
Name:		Robert S. Yasuda
Title:		Senior Vice President


Attention:


MEADE INSTRUMENTS CORP.


By:	/s/Steven G. Murdock
Steven G. Murdock, President and Chief Executive Officer


Client address through February 28, 2009:
6001 Oak Canyon
Irvine, CA 92618

Client address after February 28, 2009:
27 Hubble
Irvine, CA 92618

Attention:			John A. Elwood

STATE OF CALIFORNIA )

) SS:

COUNTY OF )

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

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

WITNESS my hand and official seal.

Signature

(Signature of Notary)

(Seal of Notary)

SCHEDULE “A”

Definitions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EX-99.1 5 a09-5107_1ex99d1.htm EX-99.1

Exhibit 99.1

	Meade Instruments Corporation 6001 OAK CANYON, IRVINE, CALIFORNIA 92618-5200 U.S.A. (949) 451-1450 · FAX: (949) 451-1460 · www.meade.com

Meade Instruments Corp.		The Piacente Group, Inc.
Paul Ross, CFO		Shelley Young
Tel: 949-451-1450		Tel: 212-481-2050
Fax: 949-451-1460		Email:shelley@tpg-ir.com

MEADE INSTRUMENTS OBTAINS NEW $10 MILLION CREDIT FACILITY

IRVINE, CALIF. — FEBRUARY 10, 2009 — MEADE INSTRUMENTS CORP. (NASDAQ GM:MEAD), a leading designer and manufacturer of telescopes and other optical products, today announced that it has entered into an agreement with First Capital LLC for a three-year, $10 million credit facility. The new facility replaces the existing facility with Bank of America, N.A. that was set to expire in September 2009.

The new facility consists of a factoring arrangement for the Company’s receivables with up to an 80% advance rate and a secured credit line tied to the Company’s finished goods inventory of up to $3 million of available credit, subject to an overall credit limit of $10 million. The interest rate for advances against the facility will initially be set at LIBOR plus 5.5%, subject to a LIBOR floor of 2.25%. The agreement also sets forth unused line fees, minimum factoring commissions, early termination fees and other customary terms and conditions.

Steve Murdock, Chief Executive Officer of Meade, commented, “We are pleased to have completed the new credit agreement on favorable terms and to have found a new partner in First Capital. We expect that First Capital will be an excellent partner going forward, and we believe that this new facility will be sufficient to meet our working capital needs in the coming year.”

ABOUT MEADE INSTRUMENTS

Meade Instruments is a leading designer and manufacturer of optical products including telescopes and accessories for the beginning to serious amateur astronomer. Meade offers a complete line of binoculars that address the needs of everyone from the casual observer to the serious sporting or birding observer. The Company distributes its products worldwide through a network of specialty retailers, mass merchandisers and domestic and foreign distributors. Additional information on Meade is available at www.meade.com.

“Safe-Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This news release may contain comments and forward-looking statements based on current plans, expectations, events, and financial and industry trends that may affect the Company’s future operating results and financial position. Such statements involve risks and uncertainties which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed above. Such risks and uncertainties include, without limitation: whether the new credit facility is sufficient for the Company’s future business; as well as the other risks and uncertainties previously set forth in the Company’s filings with the Securities and Exchange Commission. For additional information, please refer to the Company’s filings with the Securities and Exchange Commission.

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