Sample Contracts - Financing Agreement - CIT Group/Business Credit, Inc. and ViewSonic Corp.

EXECUTION COPY

FINANCING AGREEMENT

The CIT Group/Business Credit, Inc.

(as Agent and Lender)

And

Viewsonic Corporation

(as Company)

Dated: December 18, 2001

THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with offices located at 300 South Grand Avenue, Third Floor, Los Angeles, California 90071 (hereinafter “CIT”), and CIT as agent for the lenders (the “Agent”), and any other party which now or hereafter becomes a lender hereunder pursuant to Section 13 hereof (individually a “Lender” and collectively the “Lenders”) are pleased to confirm the terms and conditions under which the Agent shall make revolving loans and other financial accommodations to Viewsonic Corporation, a Delaware corporation with a principal place of business at 381 Brea Canyon Road, Walnut, California 91789 (herein the “Company”).

SECTION 1. Definitions

Accounts shall mean all of the Company’s now existing and future: (a) accounts (as defined in the UCC), and any and all other receivables (whether or not specifically listed on schedules furnished to the Agent), including, without limitation, all accounts created by, or arising from, all of the Company’s sales, leases, rentals of goods or renditions of services to its customers, including but not limited to, those accounts arising under any of the Company’s trade names or styles, or through any of the Company’s divisions; (b) any and all instruments, documents, chattel paper (including electronic chattel paper) (all as defined in the UCC); (c) unpaid seller’s or lessor’s rights (including rescission, replevin, reclamation, repossession and stoppage in transit) relating to the foregoing or arising therefrom; (d) rights to any goods represented by any of the foregoing, including rights to returned, reclaimed or repossessed goods; (e) reserves and credit balances arising in connection with or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles and letter of credit rights (all as defined in the UCC); (g) insurance policies or rights relating to any of the foregoing; (h) general intangibles pertaining to any and all of the foregoing (including all rights to payment, including those arising in connection with bank and non-bank credit cards), and including books and records and any electronic media and software thereto; (i) notes, deposits or property of account debtors securing the obligations of any such account debtors to the Company; and (j) cash and non-cash proceeds (as defined in the UCC) of any and all of the foregoing.

Affiliate shall mean, with respect to any person or entity, any other person or entity which directly or indirectly, is in control of, is controlled by, or is under common control with such person or entity, or which owns, directly or indirectly, ten percent (10%) or more of the outstanding equity interest of such entity. A person or entity shall be deemed to control another entity if the controlling person or entity possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other entity, whether through ownership of voting securities, by contract or otherwise.

Anniversary Date shall mean the date occurring three (3) years from the Closing Date and the same date in every year thereafter.

Approved Foreign Accounts shall mean Trade Accounts Receivable which are otherwise Eligible Accounts Receivable at any one time and which are otherwise subject to review by, approval of and assignment to Agent of Company’s foreign credit insurance. Trade Accounts Receivable owed by foreign subsidiaries of Ingram Micro, Inc. and Tech Data Corporation shall

be Approved Foreign Accounts only to the extent these accounts are guaranteed by their respective U.S. parent corporation in form satisfactory to Agent.

Availability shall mean at any time the amount by which: (a) the Borrowing Base exceeds (b) the outstanding aggregate amount of all Obligations, including without limitation, all Obligations with respect to Revolving Loans, but excluding the Letters of Credit.

Availability Reserve shall mean the sum of: (a) (i) three months rental payments or similar charges for any of the Company’s leased premises or other Collateral locations for which the Company has not delivered to the Agent a landlord’s waiver in form and substance reasonably satisfactory to the Agent, plus (ii) three (3) months estimated payments plus any other fees or charges owing by the Company to any applicable warehousemen or third party processor (as determined by the Agent in its reasonable business judgment), provided that any of the foregoing amounts shall be adjusted from time to time hereafter upon (x) delivery to the Agent of any such acceptable waiver, (y) the opening or closing of a Collateral location and/or (z) any change in the amount of rental, storage or processor payments or similar charges; and (b) any reserve which the Agent may reasonably require from time to time pursuant to this Financing Agreement, including without limitation, for Letters of Credit pursuant to Paragraph 5.1 of Section 5 hereof, or as a result of (x) negative forecasts and/or trends in the Company’s business, industry, prospects, profits, operations or financial condition or (y) other issues, circumstances or facts that could otherwise negatively impact the Company, its business, prospects, operations, industry, financial condition or assets. Without limiting the foregoing, Agent may in its sole discretion establish a reserve for Company’s accrued warranty liability to be calculated in the following manner, subject however to Agent’s right to change such calculation in accordance with Section 7.14 or in its discretion, reasonably exercised:

Book warranty liability times 65% less 85% of the orderly liquidation value of the In Transit Inventory.

Borrowing Base shall mean the sum of (a) eighty five percent (85%) of the Company’s aggregate outstanding Eligible Accounts Receivable less the greater of (i) that portion of dilution (excluding inter-company accounts) exceeding 5% calculated on a rolling three month average (if dilution does exceed 5% as determined by Agent, the advance rate shall be reduced by 1% for each percentage of dilution in excess of 5%) or (ii) Company’s accrued promotional expense liability balance, plus (b) the least of (i) sixty five percent (65%) of the aggregate value of the Company’s Eligible Inventory, valued at the lower of cost or market, on a first in, first out basis, (ii) eighty five percent (85%) of the net orderly liquidation value of the Company’s Eligible Inventory (as determined by appraisal pursuant to Section 6.3), or (iii) the Inventory Loan Cap, less (c) any applicable Availability Reserves. In no event shall the Borrowing Base exceed at any time one hundred percent (100%) of the Company’s cash collections for the prior forty day period.

Borrowing Base Certificate shall have the meaning specified in Paragraph 2.1(p) of Section 2 of this Financing Agreement.

Business Day shall mean any day on which the Agent and The Chase Bank are open for business.

Capital Expenditures shall mean, for any period, the aggregate expenditures of the Company during such period on account of, property, plant, equipment or similar fixed assets that, in conformity with GAAP, are required to be reflected in the balance sheet of the Company.

Capital Improvements shall mean operating Equipment and facilities (other than land) acquired or installed for use in the Company’s business operations.

Capital Lease shall mean any lease of property (whether real, personal or mixed) which, in conformity with GAAP, is accounted for as a capital lease or a Capital Expenditure in the balance sheet of the Company.

Chase Bank Rate shall mean the rate of interest per annum announced by The Chase Bank from time to time as its prime rate in effect at its principal office in New York City. (The prime rate is not intended to be the lowest rate of interest charged by The Chase Bank to its borrowers).

Chase Bank Rate Loans shall mean any loans or advances pursuant to this Financing Agreement made or maintained at a rate of interest based upon the Chase Bank Rate.

Closing Date shall mean December 18, 2001.

Collateral shall mean all present and future Accounts, Equipment, Inventory, Documents of Title, General Intangibles, Real Estate, investment property (including stock of the Company’s Subsidiaries and venture capital investments which are subject to a pledge agreement in favor of Agent) and Other Collateral.

Collection Day shall have the meaning provided for in Section 3.4 of this Financing Agreement.

Commitment shall mean each Lender’s commitment in accordance with this Financing Agreement to make Revolving Loans (the “Revolving Credit Commitment”), in the amount of their respective pro rata share set forth in schedules prepared by the Agent or the Assignment and Transfer Agreement executed by each such Lender.

Commitment Letter shall mean the Commitment Letter, dated November 26, 2001, issued by the Agent to, and accepted by, the Company.

Company shall mean Viewsonic Corporation, a Delaware corporation. In all cases hereunder, the term “Company” shall not be deemed to include any of the Company’s Subsidiaries.

Consolidated Balance Sheet shall mean a consolidated or compiled, as applicable, balance sheet for the Company and its consolidated Subsidiaries, eliminating all inter-company transactions and prepared in accordance with GAAP.

Consolidating Balance Sheet shall mean a Consolidated Balance Sheet plus individual balance sheets for the Company and its consolidated Subsidiaries, showing all eliminations of intercompany transactions, including a balance sheet for the Company exclusively, all prepared in accordance with GAAP.

Copyrights shall mean all present and hereafter acquired copyrights, copyright registrations, recordings, applications, designs, styles, licenses, marks, prints and labels bearing any of the foregoing, goodwill, any and all general intangibles, intellectual property and rights pertaining thereto, and all cash and non-cash proceeds thereof.

Default shall mean any event specified in Section 10 hereof, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act, has been satisfied.

Default Rate of Interest shall mean a rate of interest per annum on any Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the applicable increment over the Chase Bank Rate (as set forth in paragraph 8.1 hereof) plus the Chase Bank Rate, or the applicable increment over the LIBOR (as set forth in paragraph 8.13 hereof) plus the LIBOR, which the Agent shall be entitled to charge the Company on all Obligations due the Agent on behalf of the Lenders by the Company, as further set forth in Paragraph 10.2 of Section 10 of this Financing Agreement.

Depository Accounts shall mean the collection accounts, which are subject to the Agent’s instructions, as specified in Paragraph 3.4 of Section 3 of this Financing Agreement.

Documentation Fee shall mean the Agent’s reasonable fees relating to any and all modifications, waivers, releases, amendments or additional collateral with respect to this Financing Agreement, the Collateral and/or the Obligations.

Documents of Title shall mean all present and future documents (as defined in the UCC), and any and all warehouse receipts, bills of lading, shipping documents, chattel paper, instruments and similar documents, all whether negotiable or not and all goods and Inventory relating thereto and all cash and non-cash proceeds of the foregoing.

Early Termination Date shall mean the date on which the Company or the Agent terminates this Financing Agreement or the Revolving Line of Credit which date is prior to an Anniversary Date.

Early Termination Fee shall: (a) mean the fee the Agent on behalf of the Lenders is entitled to charge the Company in the event the Revolving Line of Credit or this Financing Agreement is terminated on any Early Termination Date; and (b) be determined by multiplying the average outstanding Revolving Loans and Letters of Credit for the 180 day period preceding the Early Termination Date by (x) two percent (2%) if the Early Termination Date occurs on or before one (1) year from the Closing Date, and (y) one half of one percent (0.5%) if the Early Termination Date occurs after one (1) year from the Closing Date but on or before two (2) years from the Closing Date.

EBITDA shall mean, in any period, all earnings of the Company before all (i) interest and tax obligations, (ii) depreciation, (iii) amortization for said period, (iv) reserves for doubtful accounts and (v) loss on investments, all determined in accordance with GAAP on a consistent basis with the latest audited financial statements of the Company, but excluding the effect of extraordinary and/or non-reoccurring gains or losses for such period.

Eligible Accounts Receivable shall mean the gross amount of the Company’s Trade Accounts Receivable that are subject to a valid, exclusive, first priority and fully perfected security interest in favor of the Agent, on behalf of the Lenders, which conform to the warranties contained herein and which, at all times, continue to be acceptable to the Agent in the exercise of its reasonable business judgment, less, without duplication, the sum of: (a) any returns, discounts, claims, credits and allowances of any nature (whether issued, owing, granted, claimed or outstanding), and (b) reserves for any such Trade Accounts Receivable that arise from or are subject to or include: (i) sales to the United States of America, any state or other governmental entity or to any agency, department or division thereof, except for any such sales as to which the Company has complied with the Assignment of Claims Act of 1940 or any other applicable statute, rules or regulation, to the Agent’s satisfaction in the exercise of its reasonable business judgment; (ii) foreign sales, other than sales which otherwise comply with all of the other criteria for eligibility hereunder and (x) are secured by letters of credit (in form and substance satisfactory to the Agent) issued or confirmed by, and payable at, banks having a place of business in the United States of America, (y) to customers residing in Canada provided such Accounts do not exceed $4,000,000 in the aggregate at any time or (z) Approved Foreign Accounts; provided, that loans made against Approved Foreign Accounts shall not exceed a maximum aggregate amount of $5,000,000; (iii) Accounts that remain unpaid more than ninety (90) days from invoice date or sixty (60) days from the due date; (iv) contra accounts; (v) sales to any Subsidiary, or to any Affiliate of the Company in any way; (vi) bill and hold (deferred shipment) or consignment sales; (vii) sales to any customer which is: (A) insolvent, (B) the debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law, (C) negotiating, or has called a meeting of its creditors for purposes of negotiating, a compromise of its debts, or (D) financially unacceptable to the Agent or has a credit rating unacceptable to the Agent; (viii) all sales to any customer if fifty percent (50%) or more of the aggregate dollar amount of all outstanding invoices to such customer are unpaid more than ninety (90) days from invoice date; (ix) pre-billed receivables and receivables arising from progress billing; (x) an amount representing the Company’s accruals for returns, discounts, claims, credits, allowances and applicable terms; (xi) sales not payable in United States currency; (xii) the total obligations of any customer to the extent such obligations exceed thirty five percent (35%) of all Accounts and (xiii) any other reasons deemed necessary by the Agent in its reasonable judgment, and which are customary either in the commercial finance industry or in the lending practices of the Agent and/or the Lenders.

Eligible Inventory shall mean the gross amount of the Company’s Inventory that is subject to a valid, exclusive, first priority and fully perfected security interest in favor of the Agent, on behalf of the Lenders, and which conforms to the warranties contained herein and which, at all times, continues to be acceptable to the Agent in the exercise of its reasonable business judgment, less, without duplication, any (a) work-in-process, (b) supplies (other than raw materials), (c) Inventory not present in the United States of America, (d) Inventory returned or rejected by the Company’s customers (other than goods that are undamaged and resalable in the normal course of business) and goods to be returned to the Company’s suppliers, (e) Inventory in transit, and (f) less any reserves required by the Agent in its reasonable discretion, including without limitation for special order goods, discontinued, slow-moving and obsolete Inventory, market value declines, bill and hold (deferred shipment), consignment sales, shrinkage and any applicable customs, freight, duties and Taxes.

Equipment shall mean all present and hereafter acquired equipment (as defined in the UCC) including, without limitation, all machinery, equipment, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto and all proceeds thereof of whatever sort.

ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended from time to time and the rules and regulations promulgated thereunder from time to time.

Eurocurrency Reserve Requirements for any day, as applied to a LIBOR Loan, shall mean the aggregate (without duplication) of the maximum rates of reserve requirements (expressed as a decimal fraction) in effect with respect to the Agent and/or any present or future Lender or participant on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under Regulation D or any other applicable regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect, dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by the Agent and/or any such Lenders or participants (such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of one percent (1/16 of 1 %)).

European Subsidiaries shall mean ViewSonic Europe Limited, ViewSonic SARL and ViewSonic Technology GMBH.

Event(s) of Default shall have the meaning provided for in Section 10 of this Financing Agreement.

Financing Agreement shall mean this Financing Agreement dated as of December 18, 2001 by and among the Company, the Agent and the Lenders party hereto from time to time, and all amendments, modifications and supplements hereto.

Fiscal Quarter shall mean, with respect to the Company, each three (3) month period ending on March 31, June 30, September 30, and December 31 of each Fiscal Year.

Fiscal Year shall mean each twelve (12) month period commencing on January 1 of each year and ending on the following December 31.

GAAP shall mean generally accepted accounting principles in the United States of America as in effect from time to time and for the period as to which such accounting principles are to apply, provided that in the event the Company modifies its accounting principles and procedures as applied as of the Closing Date, the Company shall provide to the Agent and the Lenders such statements of reconciliation as shall be in form and substance acceptable to the Agent.

General Intangibles shall mean all present and hereafter acquired general intangibles (as defined in the UCC), and shall include, without limitation, all present and future right, title and interest in and to: (a) all Trademarks, tradenames, corporate names, business names, logos and any other designs or sources of business identities, (b) Patents, together with any improvements

on said Patents, utility models, industrial models, and designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all applications with respect to the foregoing, (g) all right, title and interest in and to any and all extensions and renewals, (h) goodwill with respect to any of the foregoing, (i) any other forms of similar intellectual property, (j) all customer lists, distribution agreements, supply agreements, blueprints, indemnification rights and tax refunds, together with all monies and claims for monies now or hereafter due and payable in connection with any of the foregoing or otherwise, and all cash and non-cash proceeds thereof, including, without limitation, the proceeds or royalties of any licensing agreements between the Company and any licensee of any of the Company’s General Intangibles.

Indebtedness shall mean, without duplication, all liabilities, contingent or otherwise, which are any of the following: (a) obligations in respect of borrowed money or for the deferred purchase price of property, services or assets, other than Inventory, or (b) lease obligations which, in accordance with GAAP, have been, or which should be capitalized.

Insurance Proceeds shall mean proceeds or payments from an insurance carrier with respect to any loss, casualty or damage to Collateral.

Interest Expense shall mean the total interest obligations (paid or accrued) of the Company, determined in accordance with GAAP, on a consistent basis with the latest audited statements of the Company.

Interest Period shall mean:

(a) with respect to any initial request by the Company for a LIBOR Loan, a one month, two month, three month or six month period commencing on the borrowing or conversion date with respect to a LIBOR Loan and ending one, two, three or six months thereafter, as applicable; and

(b) thereafter with respect to any continuation of, or conversion to, a LIBOR Loan, at the option of the Company, any one month, two month, three month or six month period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Loan and ending one, two, three or six months thereafter, as applicable;

provided that, the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day which is not a Working Day, that Interest Period shall be extended to the next succeeding Working Day, unless the result of such extension would extend such payment into another calendar month in which event such Interest Period shall end on the immediately preceding Working Day;

(ii) any Interest Period that begins on the last Working Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month, at the end of such Interest Period) shall end on the last Working Day of a calendar month; and

(iii) for purposes of determining the availability of Interest Periods, such Interest Periods shall be deemed available if (x) The Chase Bank quotes an applicable rate

or the Agent determines LIBOR, as provided in the definition of LIBOR, (y) the LIBOR determined by The Chase Bank or the Agent will adequately and fairly reflect the cost of maintaining or funding its loans bearing interest at LIBOR, for such Interest Period, and (z) such Interest Period will end on or before the earlier of Anniversary Date or the last day of the then current term of this Financing Agreement. If a requested Interest Period shall be unavailable in accordance with the foregoing sentence, the Company shall continue to pay interest on the Obligations at the applicable per annum rate based upon the Chase Bank Rate.

In Transit Inventory shall mean that portion of the Company’s Inventory which the Agent shall not consider to be Eligible Inventory but which also satisfies the following additional requirements: (i) such Inventory is insured against loss, damage, hazards and risks and in amount satisfactory to Agent in its discretion and the benefits of the insurance have been assigned to Agent, (ii) Agent has received appropriate documentation evidencing title in such inventory and all other relevant shipping documents (such documents, at a minimum, to include clean negotiable on-board bills of lading issued by the relevant carrier naming Company, or at Agent’s request, Agent as consignee, together with a commercial invoice describing such Inventory and, if applicable, a Certificate of Inspection and Certificate of Origin, and any originals of such documents have been delivered to Agent upon Agent’s request (iii) Agent has received a Custom Broker’s Consent Agreement in form and substance acceptable to Agent and, if requested by Agent, a Freight Forwarder’s Consent Agreement in form and substance acceptable to Agent (iv) such Inventory has not yet arrived at a port in the United States, and (v) Agent has filed ail documents necessary to establish or maintain a first priority perfected security interest in such Inventory including, without limitation, financing statements in the jurisdictions in which the ports of entry of such Inventory in the United States are located.

Inventory shall mean all of the Company’s present and hereafter acquired inventory (as defined in the UCC) and including, without limitation, all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing, packaging or shipping same in all stages of production from raw materials through work-in-process to finished goods and all proceeds thereof of whatever sort.

Inventory Loan Cap shall mean the lesser of (x) $25,000,000 and (y) sixty five percent (65%) of the Availability set forth in clause (a) in the definition of Borrowing Base.

Issuing Bank shall mean the bank issuing Letters of Credit for the Company.

Letters of Credit shall mean all letters of credit issued with the assistance of the Agent, on behalf of the Lenders, in accordance with Section 5 hereof by the Issuing Bank for or on behalf of the Company.

Letter of Credit Guaranty shall mean the guaranty delivered by the Agent, on behalf of the Lenders, to the Issuing Bank of the Company’s reimbursement obligations under the Issuing Bank’s reimbursement agreement, application for Letter of Credit or other like document.

Letter of Credit Guaranty Fee shall mean the fee the Agent, on behalf of the Lenders, may charge the Company under Paragraph 8.2 of Section 8 of this Financing Agreement for: (a)

issuing a Letter of Credit Guaranty, and/or (b) otherwise aiding the Company in obtaining Letters of Credit, all pursuant to Section 5 hereof.

Letter of Credit Sub-Line shall mean the commitment of the Lenders to assist the Company in obtaining Letters of Credit, pursuant to Section 5 hereof, in an aggregate amount of $10,000,000.

LIBOR shall mean, at any time of determination, and subject to availability, for each applicable Interest Period, a variable rate of interest equal to: (i) the applicable LIBOR offered rates published in the eastern edition of the Wall Street Journal under “Money Rates” on the day which is two (2) Business Days prior to the first day of such Interest Period, or if such rate is not published or available (ii) the LIBOR rate offered to Agent by the Chase Bank on the day which is two (2) Business Days prior to the first day of such Interest Period.

LIBOR Lending Office with respect to the Agent, shall mean the office of The Chase Bank, or any successor thereof, maintained at 270 Park Avenue, New York, NY 10017.

LIBOR Loan shall mean any loans made pursuant to this Financing Agreement which are made or maintained at a rate of interest based upon LIBOR, provided that (i) no Default or Event of Default has occurred hereunder, which has not been waived in writing by the Required Lenders, and (ii) no LIBOR Loan shall be made with an Interest Period that ends subsequent to an Anniversary Date or any applicable Early Termination Date.

Line of Credit shall mean the aggregate commitment of the Lenders to (a) make Revolving Loans pursuant to Section 3 of this Financing Agreement and (b) assist the Company in opening Letters of Credit pursuant to Section 5 of this Financing Agreement, in the aggregate amount equal to $50,000,000; provided that nothing herein shall be deemed to increase any Lenders commitment hereunder, and which commitment shall be set forth in the applicable schedules maintained by the Agent or the Assignment and Transfer Agreements executed by such Lender.

Line of Credit Fee shall: (a) mean the fee due the Agent at the end of each month for the Line of Credit (based on $50,000,000), and (b) be determined by multiplying the difference between (i) the Revolving Line of Credit, and (ii) the sum, for said month, of (x) the average daily balance of Revolving Loans plus (y) the average daily balance of Letters of Credit outstanding for said month, by three eighths of one percent (.375 %) per annum for the number of days in said month.

Loan Documents shall mean this Financing Agreement, the Revolving Credit Note, the Pledge Agreements, the Subordination Agreement, the other closing documents and any other ancillary loan and security agreements executed from time to time in connection with this Financing Agreement, all as may be renewed, amended, extended, increased or supplemented from time to time.

Obligations shall mean all loans, advances and extensions of credit made or to be made by the Agent and/or the Lenders to the Company pursuant to the Loan Documents, or to others for the Company’s account (including, without limitation, all Revolving Loans, Letter of Credit Guaranties; any and all indebtedness and obligations which may at any time be owing by the Company to the Agent and/or the Lenders pursuant to the Loan Documents, howsoever arising, whether now in existence or incurred by the Company from time to time hereafter; whether

principal, interest, fees, costs, expenses or otherwise; whether secured by pledge, lien upon or security interest in any of the Company’s Collateral, assets or property or the assets or property of any other person, firm, entity or corporation; whether such indebtedness is absolute or contingent, joint or several, matured or unmatured, direct or indirect and whether the Company is liable to the Agent and/or the Lenders for such indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations shall also include indebtedness owing to the Agent and/or the Lenders by the Company under any Loan Document; indebtedness or obligations incurred by, or imposed on, the Agent and/or the Lenders as a result of environmental claims arising out of the Company’s operations, premises or waste disposal practices or sites in accordance with paragraph 7.7 hereof the Company’s liability to the Agent and/or the Lenders as maker or endorser of any promissory note or other instrument for the payment of money; the Company’s liability to the Agent and/or the Lenders under any instrument of guaranty or indemnity, or arising under any guaranty, endorsement or undertaking which the Agent and/or the Lenders may make or issue to others for the Company’s account, including any Letter of Credit Guaranty or other accommodation extended by CIT with respect to applications for Letters of Credit, the Agent’s and/or the Lenders’ acceptance of drafts or the Agent’s and/or the Lenders’ endorsement of notes or other instruments for the Company’s account and benefit pursuant to the Loan Documents.

Other Collateral shall mean all now owned and hereafter acquired lockbox, blocked account and any other deposit accounts maintained with any bank or financial institutions into which the proceeds of Collateral are or may be deposited; all cash and other monies and property in the possession or control of the Agent and/or any of the Lenders; all books, records, ledger cards, disks and related data processing software at any time evidencing or containing information relating to any of the Collateral described herein or otherwise necessary or helpful in the collection thereof or realization thereon; and all cash and non-cash proceeds of the foregoing.

Out-of-Pocket Expenses shall mean all of the Agent’s (and the Lenders upon the occurrence of an Event of Default which is not waived by the Required Lenders) present and future expenses incurred relative to this Financing Agreement or any other Loan Documents, whether incurred heretofore or hereafter, which expenses shall include, without being limited to: the cost of record searches, all costs and expenses incurred by the Agent in opening bank accounts, depositing checks, receiving and transferring funds, and wire transfer charges, any charges imposed on the Agent due to returned items and “insufficient funds” of deposited checks and the Agent’s standard fees relating thereto, any amounts paid by, incurred by or charged to, the Agent and/or the Lenders by the Issuing Bank under a Letter of Credit Guaranty or the Company’s reimbursement agreement, application for Letters of Credit or other like document which pertain either directly or indirectly to such Letters of Credit, and the Agent’s standard fees relating to the Letters of Credit and any drafts thereunder, travel, lodging and similar expenses of the Agent’s personnel in connection with inspecting and monitoring the Collateral from time to time hereunder, any reasonable counsel fees and disbursements, whether or not suit if filed and whether incurred before or after the initiation of a bankruptcy or insolvency proceeding by or against the Company, fees and taxes relative to the filing of financing statements, all expenses, costs and fees set forth in Paragraph 10.3 of Section 10 of this Financing Agreement.

Overadvance Rate shall mean a rate equal to one-half of one percent (1/2%) per annum in excess of the applicable contract rate of interest determined in accordance with Section 8, Paragraph 8.1(b) of this Financing Agreement.

Overadvances shall mean the amount by which (a) the sum of all outstanding Revolving Loans, Letters of Credit and advances made hereunder exceed (b) the Borrowing Base.

Patents shall mean all of the Company’s present and hereafter acquired patents, patent applications, registrations, any reissues or renewals thereof, licenses, any inventions and improvements claimed thereunder, and all general intangible, intellectual property and patent rights with respect thereto of the Company, and all income, royalties, cash and non-cash proceeds thereof.

Permitted Encumbrances shall mean: (a) liens existing on the date hereof on specific items of Equipment and other liens expressly permitted, or consented to in writing by the Agent and/or the Required Lenders; (b) Purchase Money Liens; (c) liens of local or state authorities for franchise or other like Taxes, provided that the aggregate amounts of such liens shall not exceed $250,000.00 in the aggregate at any one time; (d) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and for amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens) and with respect to which adequate reserves or other appropriate provisions are being maintained by the Company in accordance with GAAP; (e) deposits made (and the liens thereon) in the ordinary course of business of the Company (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts; (f) easements (including, without limitation, reciprocal easement agreements and utility agreements), encroachments, minor defects or irregularities in title, variation and other restrictions, charges or encumbrances (whether or not recorded) affecting the Real Estate, if applicable, and which in the aggregate (A) do not materially interfere with the occupation, use or enjoyment by the Company of its business or property so encumbered and (B) in the reasonable business judgment of the Agent do not materially and adversely affect the value of such Real Estate; and (g) liens granted the Agent by the Company; (h) liens of judgment creditors provided such liens do not exceed, in the aggregate, at any time, $500,000.00 (other than liens bonded or insured to the reasonable satisfaction of the Agent); and (i) tax liens representing taxes not yet delinquent or which are being diligently contested in good faith by the Company by appropriate proceedings, and which liens are not (x) filed on any public records, (y) other than with respect to Real Estate, senior to the liens of the Agent or (z) for Taxes due the United States of America or any state thereof having similar priority statutes, as further set forth in paragraph 7.6 hereof.

Permitted Indebtedness shall mean: (a) current Indebtedness maturing in less than one year and incurred in the ordinary course of business for raw materials, supplies, equipment, services, Taxes or labor; (b) the Indebtedness secured by Purchase Money Liens; (c) Subordinated Debt;

(d) Indebtedness arising under the Letters of Credit and this Financing Agreement; (e) deferred Taxes and other expenses incurred in the ordinary course of business; (f) other unsecured Indebtedness in an amount not to exceed $1,000,000 and (g) Indebtedness existing on the date of execution of this Financing Agreement and listed in the most recent financial statement delivered to the Agent and the Lenders or otherwise disclosed to the Agent and the Lenders in writing prior to the Closing Date.

Pledge Agreement shall mean the pledge agreement required to be delivered pursuant to the terms of Section 2.l(m) of this Financing Agreement.

Promissory Notes shall mean the notes, in the form of Exhibit A attached hereto, delivered by the Company to the Agent repayable in accordance with the provisions of Section 3 of this Financing Agreement.

Purchase Money Liens shall mean liens on any item of Equipment acquired after the date of this Financing Agreement provided that (a) each such lien shall attach only to the property to be acquired, (b) a description of the Equipment so acquired is furnished to the Agent, and (c) the debt incurred in connection with such acquisitions shall not exceed, in the aggregate, $2,000,000 in any Fiscal Year.

Real Estate shall mean the Company’s fee and/or leasehold interests in the real property.

Required Lenders shall mean the Lenders holding aggregate commitments under this Financing Agreement in an amount of 51% or more.

Revolving Line of Credit shall mean the aggregate commitment of the Lenders to make loans and advances pursuant to Section 3 of this Financing Agreement and issue Letters of Credit Guaranties pursuant to Section 5 hereof to the Company, in the aggregate amount of $50,000,000, not to exceed the Line of Credit.

Revolving Loan Account shall mean the account on the Agent’s books, in the Company’s name, in which the Company will be charged with all Obligations under this Financing Agreement.

Revolving Loans shall mean the loans and advances made, from time to time, to or for the account of the Company by the Agent, on behalf of the Lenders, pursuant to Section 3 of this Financing Agreement.

Settlement Date shall mean the date, weekly, and more frequently, at the discretion of the Agent, upon the occurrence of an Event of Default or a continuing decline or increase of the Revolving Loans that the Agent and the Lenders shall settle amongst themselves so that (a) the Agent shall not have, as the Agent, any money at risk and (b) on such Settlement Date the Lenders shall have a pro rata amount of all outstanding Revolving Loans and Letters of Credit, provided that each Settlement Date for a Lender shall be a Business Day on which such Lender and its bank are open for business.

Subordinated Debt shall mean the debt due a Subordinating Creditor (and the note(s) evidencing such) which has been subordinated, by a Subordination Agreement, to the prior

payment and satisfaction of the Obligations of the Company to the Agent and the Lenders (in form and substance satisfactory to the Agent and/or the Required Lenders).

Subordinating Creditor shall mean James Chu and any other party hereafter executing a Subordination Agreement.

Subordination Agreement shall mean the agreement (in form and substance satisfactory to the Agent) among the Company, a Subordinating Creditor and the Agent, pursuant to which Subordinated Debt is subordinated to the prior payment and satisfaction of the Company’s Obligations to the Agent and the Lenders (in form and substance satisfactory to the Agent).

Subsidiaries shall mean Advanced Digital Optics, Inc., ViewAire Corporation, VisionBank Corporation, ViewSonic Europe Limited, ViewSonic SARL, ViewSonic Technology GMBH, ViewSonic International Corporation, ViewSonic Japan KK, ViewSonic Cayman Islands, Ltd., ViewSonic Hong Kong, Ltd., ViewSonic Singapore PTE Ltd., ViewSonic China Ltd. and ViewSonic Corporation (Australia).

Taxes shall mean all federal, state, municipal and other governmental taxes, levies, charges, claims and assessments which are or may be due by the Company with respect to its business, operations, Collateral or otherwise.

Total Assets shall mean total assets determined in accordance with GAAP, on a basis consistent with the latest audited financial statements of the Company.

Total Liabilities shall mean total liabilities determined in accordance with GAAP, on a basis consistent with the latest audited financial statements of the Company.

Trade Accounts Receivable shall mean that portion of the Company’s Accounts which arises from the sale of Inventory or the rendition of services in the ordinary course of the Company’s business.

Trademarks shall mean all present and hereafter acquired trademarks, trademark registrations, recordings, applications, tradenames, trade styles, service marks, prints and labels (on which any of the foregoing may appear), licenses, reissues, renewals, and any other intellectual property and trademark rights pertaining to any of the foregoing, together with the goodwill associated therewith, and all cash and non-cash proceeds thereof.

UCC shall mean the Uniform Commercial Code as the same may be amended and in effect from time-to-time in the state of California.

Working Day shall mean any Business Day on which dealings in foreign currencies and exchanges between banks may be transacted.

SECTION 2. Conditions Precedent

2.1 The obligation of the Agent and the Lenders to make the initial loans hereunder is subject to the satisfaction of, extension of or waiver of (in writing), on or prior to, the Closing Date, the following conditions precedent:

(a) Lien Searches - The Agent shall have received tax, judgment and Uniform Commercial Code searches satisfactory to the Agent for all locations presently occupied or used by the Company.

(b) Casualty Insurance - The Company shall have delivered to the Agent evidence satisfactory to the Agent that casualty insurance policies listing the Agent as additional insured, loss payee or mortgagee, as the case may be, are in full force and effect, all as set forth in Paragraph 7.5 of Section 7 of this Financing Agreement.

(c) UCC Filings - Any financing statements required to be filed in order to create, in favor of the Agent, on behalf of the Lenders, a first perfected security interest in the Collateral, subject only to the Permitted Encumbrances, shall have been properly filed in each office in each jurisdiction required in order to create in favor of the Agent for the benefit of the Lenders a perfected lien on the Collateral. The Agent shall have received acknowledgment copies of all such filings (or, in lieu thereof, the Agent shall have received other evidence satisfactory to the Agent that all such filings have been made) and the Agent shall have received evidence that all necessary filing fees and all taxes or other expenses related to such filings have been paid in full. Without limiting the foregoing, Agent, on behalf of Lender’s shall also have a first priority security interest in all venture capital investments of Company subject to release provisions if such investments are sold in accordance with the procedures set forth in Section 7.9(g).

(d) Board Resolution - The Agent shall have received a copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance of (i) this Financing Agreement, (ii) and any related agreements, in each case certified by the Secretary or Assistant Secretary of the Company as of the date hereof, together with a certificate of the Secretary or Assistant Secretary of the Company as to the incumbency and signature of the officers of the Company executing such Loan Documents and any certificate or other documents to be delivered by them pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary.

(e) Corporate Organization - The Agent shall have received (i) a copy of the Certificate of Incorporation of the Company certified by the Secretary of State of the state of its incorporation, and (ii) a copy of the By-Laws of the Company certified by the Secretary or Assistant Secretary thereof, all as amended through the date hereof.

(f) Officer’s Certificate - The Agent shall have received an executed Officer’s Certificate of the Company, satisfactory in form and substance to the Agent, certifying that (i) the representations and warranties contained herein are true and correct in all material respects on and as of the Closing Date; (ii) the Company is in compliance with all of the terms and provisions set forth herein; and (iii) no Default or Event of Default has occurred.

(g) Opinions - Counsel for the Company shall have delivered to the Agent on behalf of the Lenders opinions satisfactory to the Agent opining, inter alia and to the extent applicable, that, subject to the (i) filing, priority and remedies provisions of the Uniform Commercial Code, (ii) the provisions of the Bankruptcy Code, insolvency statutes or other like laws, (iii) the equity powers of a court of law and (iv) such other matters as may be agreed upon

with the Agent: (x) this Financing Agreement and all other Loan Documents of the Company are (A) valid, binding and enforceable according to their terms, (B) are duly authorized, executed and delivered, and (C) do not violate any terms, provisions, representations or covenants in the charter or By-Laws of the Company or, to the best knowledge of such counsel, of any loan agreement, mortgage, deed of trust, note, security or pledge agreement, indenture or other contract to which the Company are signatories or by which the Company or their assets are bound. In addition, counsel to the Subordinating Creditor(s) shall have delivered an opinion satisfactory to the Agent that the Subordination Agreement(s) have been duly authorized, executed and delivered and constitute valid and binding agreements enforceable against such Subordinating Creditor(s) in accordance with the terms thereof.

(h) Absence of Default - No Default or Event of Default shall have occurred and no material adverse change shall have occurred in the financial condition, business, prospects, profits, operations or assets of the Company or the Subsidiaries.

(i) Legal Restraints/Litigation - As of the Closing Date, there shall be no: (x) litigation, investigation or proceeding (judicial or administrative) pending or threatened against the Company or its assets, by any agency, division or department of any county, city, state or federal government arising out of this Financing Agreement; (y) injunction, writ or restraining order restraining or prohibiting the financing arrangements contemplated under this Financing Agreement; or (z) suit, action, investigation or proceeding (judicial or administrative) pending against the Company or its assets, which, in the opinion of the Agent, if adversely determined, could have a material adverse effect on the business, operation, assets, financial condition or Collateral of the Company.

(j) Intentionally Deleted

(k) Subordination Agreement - The Subordinating Creditor shall have executed and delivered to the Agent, on behalf of the Lenders, a Subordination Agreement, in form and substance satisfactory to the Agent, subordinating the debt due the Subordinating Creditor by the Company to the prior payment and satisfaction of the Obligations of the Company to the Agent and the Lenders.

(l) Cash Budget Projections - The Agent shall have received, reviewed and been satisfied with a twelve (12) month cash budget projection prepared by the Company on the form provided by the Agent.

(m) Pledge Agreement - The Company, as the case may be, shall (i) execute and deliver to the Agent, on behalf of the Lenders, a pledge and security agreement pledging to the Agent, on behalf of the Lenders, as additional collateral for the Obligations of the Company not less than one hundred percent of the stock of all domestic Subsidiaries and sixty five percent of the stock of all foreign Subsidiaries of the Company, (ii) execute and deliver to the Agent, on behalf of the Lenders, a pledge and security agreement pledging to the Agent, on behalf of the Lenders, as additional collateral for the Obligations of the Company not less than one hundred percent of the stock of all venture capital investments of the Company and (iii) deliver to the Agent, on behalf of the Lenders to the extent applicable, the stock certificates evidencing all such stock (other than Lightune Ltd., ViewSonic International Corporation and ViewSonic Cayman

Islands, Ltd. to be delivered in accordance with Section 7.15 below), together with duly executed stock powers (undated and in blank) with respect thereto, all in form and substance satisfactory to Agent.

(n) Additional Documents - The Company shall have executed and delivered to the Agent all Loan Documents reasonably requested by the Agent to consummate the lending arrangement contemplated between the Company, the Agent and the Lenders.

(o) Disbursement Authorization - The Company shall have delivered to the Agent all information necessary for the Agent and the Lenders to issue wire transfer instructions on behalf of the Company for the initial and subsequent loans and/or advances to be made under this Financing Agreement including, but not limited to, disbursement authorizations in form acceptable to the Agent.

(p) Examination & Verification - The Agent and each of the Lenders shall have completed, to their respective satisfaction, an examination and verification of the Accounts, Inventory, financial statements, books and records of the Company which examination shall indicate that, after giving effect to all Revolving Loans, advances and extensions of credit to be made at closing, the Company shall have an opening additional Availability of at least $25,000,000, as evidenced by a Borrowing Base certificate in the form of Exhibit B hereto (the “Borrowing Base Certificate”) and delivered by the Company to the Agent as of the Closing Date, all as more fully required by the Agent Commitment Letter. It is understood that such requirement contemplates that all debts and obligations are current, and that all payables are being handled in the normal course of the Company’s business and consistent with its past practice.

(q) Depository Accounts - The Company shall have established a system of lockbox and bank accounts with respect to the collection of Accounts and the deposit of proceeds of Collateral as shall be acceptable to the Agent in all respects. Such accounts shall be subject to three party agreements (between the Company, the Agent and the depository bank), which shall be in form and substance satisfactory to the Agent.

(r) Existing Revolving Credit Agreement - The Company’s existing credit agreement with Bank of America (the “Existing Lender”) shall be: (i) terminated; (ii) all loans and obligations of the Company thereunder shall be paid or satisfied in full, including through utilization of the proceeds of the initial Revolving Loans to be made under this Financing Agreement; and (iii) all liens or security interests in favor of the Existing Lender on the Collateral and otherwise in connection therewith shall be terminated and/or released upon such payment.

(s) Intentionally Deleted

(t) Appraisals - The Agent shall have received a satisfactory updated appraisal of the Company’s Inventory, which appraisal: (i) shall be by an appraiser acceptable to the Agent, and (ii) shall be in form and substance acceptable to Agent in its discretion.

(u) Schedules - The Company or its counsel shall provide the Agent with schedules of: (a) any of the Company’s and its Subsidiaries (i) Trademarks, (ii) Patents, and (iii)

Copyrights, as applicable and all in such detail as to provide appropriate recording information with respect thereto, (b) any tradenames, (c) monthly rental payments for any leased premises or any other premises where any Collateral may be stored or processed, and (d) Permitted Liens, all of the foregoing in form and substance satisfactory to the Agent.

(v) The Agent Commitment Letter/Fee Letter - The Company shall have fully complied, to the reasonable satisfaction of the Agent, with all of the terms and conditions of the Agent Commitment Letter and shall have executed and returned to Agent a fee letter in form and substance satisfactory to Agent.

(w) No Material Change - The Company shall not have suffered any material adverse change in its financial condition, business, prospects, profitability, assets or operations since September 30, 2001. It is understood and agreed that any adverse change in the terms, conditions, assumptions or projections supplied to Agent by Company and on which Agent based its decision to issue the Commitment Letter may, in Agent’s reasonable business judgment, be construed by Agent as a material adverse change.

(x) Reference Checks - Agent shall have been satisfied with its reference checks of the Company’s ten largest customers and a reference and background check of Mr. James Chu.

Upon the execution of this Financing Agreement and the initial disbursement of loans hereunder, all of the above Conditions Precedent shall have been deemed satisfied except as otherwise set forth hereinabove or as the Company and the Agent shall otherwise agree in writing.

2.2 Conditions to Each Extension of Credit. Subject to the terms of this Financing Agreement, including without limitation the Agent’s rights pursuant to paragraph 10.2 of Section 10 hereof, the agreement of the Agent on behalf of the Lenders to make any extension of credit requested to be made by it to the Company on any date (including without limitation, the initial extension of credit) is subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties - Each of the representations and warranties made by the Company in or pursuant to this Financing Agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date.

(b) No Default - No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extension of credit requested to be made on such date.

(c) Borrowing Base - Except as may be otherwise agreed to from time to time by the Agent and the Company in writing, after giving effect to the extension of credit requested to be made by the Company on such date, the aggregate outstanding balance of the Revolving Loans and outstanding Letters of Credit owing by the Company will not exceed the lesser of (i) the Revolving Line of Credit or (ii) the Borrowing Base.

Each borrowing by the Company hereunder shall constitute a representation and warranty by the Company as of the date of such loan or advance that each of the representations, warranties and covenants contained in the Financing Agreement have been satisfied and are true and correct,

except as the Company and the Agent and/or the Required Lenders shall otherwise agree herein or in a separate writing.

SECTION 3. Revolving Loans

3.1 (a) The Agent and the Lenders agree, subject to the terms and conditions of this Financing Agreement, from time to time (but subject to the Agent’s and the Lenders’ right to make “Overadvances”), to make loans and advances to the Company on a revolving basis (i.e. subject to the limitations set forth herein, the Company may borrow, repay and reborrow Revolving Loans). Such requests for loans and advances shall be in amounts not to exceed the lesser of (a) the Availability or (b) the Revolving Line of Credit. All requests for loans and advances must be received by an officer of the Agent no later than (i) 1:00 p.m., New York time, of the Business Day on which any such Chase Bank Rate Loans and advances are required or (ii) three Business Days prior to any requested LLBOR Loan. Should the Agent for any reason honor requests for Overadvances, any such Overadvances shall be made in the Agent’s sole discretion and subject to any additional terms the Agent and/or the Required Lenders deem necessary.

(b) (i) Whenever the Company requests the Agent, on behalf of the Lenders, to make a Revolving Loan pursuant to this Section 3, it shall give the Agent notice in writing or irrevocable telephonic notice confirmed promptly in writing, specifying (A) the amount to be borrowed, and (B) the requested borrowing date (which shall be a business day and shall be prior to: the Anniversary Date, and if applicable, any Early Termination Date, or prior to any effective termination date of this Financing Agreement, all as further set forth herein), and (C) specify whether the requested Revolving Loan shall bear interest at the Chase Bank Rate or at the LIBOR, as further set forth herein. All requests for loans and advances must be received by an officer of the Agent no later than 1:00 P.M. New York time on any borrowing date. The procedure for Revolving Loans to be made on a requested borrowing date may be such other procedure as is mutually satisfactory to the Company, the Agent and/or the Lenders. The Agent shall make loans and advances to the Depository Account (as hereinafter defined) of the Company.

(ii) Subject to paragraph 14.10 hereof, should the Agent, on behalf of the Lenders, for any reason honor requests for Overadvances, such Overadvance shall be made in the Agent’s sole discretion, subject to any additional terms the Agent and/or the Required Lenders deem necessary. Requests for loans and advances shall be made solely by the Company and shall be directed solely to the Agent.

(c) The Agent shall on any Settlement Date, and upon notice given by the Agent no later than 2:00 P.M. New York time, request each Lender to make, and each Lender hereby agrees to make, a Revolving Loan in an amount equal to such Lender’s Revolving Credit Commitment percentage (calculated with respect to the aggregate Revolving Credit Commitments then outstanding) of the aggregate amount of the Revolving Loans made by the Agent from the preceding Settlement Date to the date of such notice. Each Lender’s obligation to make the Revolving Loans referred to in subsection (a) and to make the settlements pursuant to this subsection (c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any set-off, counterclaim, recoupment, defense or

other right which any such Lender or the Company may have against the Agent, the Company, any other Lender or any other person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company; (iv) any breach of this Financing Agreement or any other loan document by the Company or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Without limiting the liability and obligation of each Lender to make such advances, the Company authorizes the Agent to charge the Company’s Revolving Loan Account with the Agent to the extent amounts received from the Lenders are not sufficient to repay in full the amount of any such deficiency.

(d) The Company’s Revolving Loan Obligations hereunder shall be evidenced by the Promissory Note in the form of Exhibit A attached hereto.

3.2 In furtherance of the continuing assignment and security interest in the Company’s Accounts and Inventory, the Company will, upon the creation of Accounts and purchase or acquisition of Inventory, execute and deliver to the Agent in such form and manner as the Agent may reasonably require, solely for the Agent’s convenience in maintaining records of Collateral, such confirmatory schedules of Accounts and Inventory as the Agent may reasonably request, including, without limitation, weekly schedules of Accounts and monthly schedules of Inventory, all in form and substance satisfactory to the Agent, and such other appropriate reports designating, identifying and describing the Accounts and Inventory as the Agent may reasonably request, and provided further that the Agent may request any such information more frequently, from time to time, upon its reasonable prior request. In addition, upon the Agent’s request, the Company shall provide the Agent with copies of agreements with, or purchase orders from, the Company’s customers, and copies of invoices to customers, proof of shipment or delivery, access to its computers, electronic media and software programs associated therewith (including any electronic records, contracts and signatures) and such other documentation and information relating to said Accounts and other Collateral as the Agent may reasonably require. Failure to provide the Agent with any of the foregoing shall in no way affect, diminish, modify or otherwise limit the security interests granted herein. The Company hereby authorizes the Agent to regard the Company’s printed name or rubber stamp signature on assignment schedules or invoices as the equivalent of a manual signature by one of the Company’s authorized officers or agents.

3.3 The Company hereby represents and warrants that: each Trade Account Receivable is based on an actual and bona fide sale and delivery of Inventory or rendition of services to its customers, made by the Company in the ordinary course of its business; the Inventory being sold, and the Trade Accounts Receivable created, are the exclusive property of the Company and are not and shall not be subject to any lien, consignment arrangement, encumbrance, security interest or financing statement whatsoever, other than the Permitted Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the name of the Company; and the customers of the Company have accepted the Inventory or services, owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, offset, defense, counterclaim or contra, except for disputes and other matters arising in the ordinary course of business with respect to which the Company has complied with the notification requirements of Paragraph 3.5 of this Section 3. The Company confirms to the Agent that any and all Taxes or fees relating to its business, its sales, the Accounts or Inventory relating

thereto, are its sole responsibility and that same will be paid by the Company when due, subject to Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said Taxes or fees represent a lien on or claim against the Accounts. The Company hereby further represents and warrants that it shall not acquire any Inventory on a consignment basis, nor commingle its Inventory with any of its customers or any other person, including pursuant to any bill and hold sale or otherwise, and that its Inventory is marketable to its customers in the ordinary course of business of the Company, except as it may otherwise report in writing to the Agent pursuant to Paragraph 3.5 hereof from time to time. The Company also warrants and represents that it is a duly and validly existing corporation and is qualified in all states where the failure to so qualify would have an adverse effect on the business of the Company or the ability of the Company to enforce collection of Accounts due from customers residing in that state. The Company agrees to maintain such books and records regarding Accounts and Inventory as the Agent may reasonably require in accordance with GAAP. All of the books and records of the Company will be available to the Agent at normal business hours, including any records handled or maintained for the Company by any other company or entity.

3.4 (a) Until the Agent has advised the Company to the contrary after the occurrence of an Event of Default, the Company, at its expense, will enforce, collect and receive all amounts owing on the Accounts in the ordinary course of its business and any proceeds it so receives shall be subject to the terms hereof, and held on behalf of and in trust for the Agent on behalf of the Lenders. Such privilege shall terminate at the election of the Agent, upon the occurrence of an Event of Default, until such Event of Default is waived in writing by the Required Lenders or cured to the Agents and/or the Required Lenders satisfaction. Any checks, cash, credit card sales and receipts, notes or other instruments or property received by the Company with respect to any Collateral, including Accounts, shall be held by the Company in trust for the Agent, on behalf of the Lenders, separate from the Company’s own property and funds, and promptly turned over to the Agent with proper assignments or endorsements by deposit to the Depository Accounts. The Company shall: (i) indicate on all of its invoices that funds should be delivered to and deposited in a Depository Account; (ii) direct all of its account debtors to deposit any and all proceeds of Collateral into the Depository Accounts; (iii) irrevocably authorize and direct any banks which maintain the Company’s initial receipt of cash, checks and other items to promptly wire transfer all available funds to a Depository Account; and (iv) advise all such banks of the Agent’s security interest in such funds. The Company shall provide the Agent with prior written notice of any and all deposit accounts opened or to be opened subsequent to the Closing Date. All amounts received by the Agent in payment of Accounts will be credited to the Revolving Loan Account when the Agent is advised by its bank of its receipt of “collected funds” at the Agent’s bank account in New York, New York on the Business Day of such advise if advised no later than 1:00 p.m. EST or on the next succeeding Business Day if so advised after 1:00 PM EST. However, the Company’s Revolving Loan Account will be charged monthly with the cost of one (1) additional Business Day on all such Collections (a “Collection Day”) at the interest rate (based upon the Chase Bank Rate) applicable to Revolving Loans. No checks, drafts or other instrument received by the Agent shall constitute final payment to the Agent and/or the Lenders unless and until such instruments have actually been collected.

(b) The Company shall establish and maintain, in its name and at its expense, deposit accounts with such banks as are acceptable to the Agent (the “Lockbox Accounts”) into

which the Company shall promptly cause to be deposited: (i) all proceeds of Collateral received by the Company, including all amounts payable to the Company from credit card issuers and credit card processors, and (ii) all amounts on deposit in deposit accounts used by the Company at each of its locations, all as further provided in Paragraph 3.4(a) above. The banks at which the Lockbox Accounts are established shall enter into an agreement, in form and substance satisfactory to the Agent (the “Lockbox Account Agreements”), providing that all cash, checks and items received or deposited in the Lockbox Accounts are the property of the Agent, that the depository bank has no lien upon, or right of set off against, the Lockbox Accounts and any cash, checks, items, wires or other funds from time to time on deposit therein, except as otherwise provided in the Lockbox Account Agreements, and that upon instruction from Agent, automatically, on a daily basis the depository bank will wire, or otherwise transfer, in immediately available funds, all funds received or deposited into the Lockbox Accounts to such bank account as the Agent may from time to time designate for such purpose. In any month that the Company does not have outstanding loans under this Agreement, the Company may keep such funds in the Lockbox Account without an automatic transfer to Agent’s bank account; provided, however, that the Company shall pay a monthly float fee to Agent equal to $7,500 for each such month (and if the Company requests an advance hereunder in such month, the Company shall be charged (i) a pro rata portion of the $7,500 float fee for the portion of the month in which the Company did not borrow plus (ii) the Collection Days of interest charged in accordance with Section 3.4(a) above, and the Company shall not be entitled for that month to keep the funds in the lockbox). The Company hereby confirms and agrees that all amounts deposited in such Lockbox Accounts and any other funds received and collected by the Agent, whether as proceeds of Inventory or other Collateral or otherwise, shall be the property of the Agent.

3.5 The Company agrees to notify the Agent: (a) of any matters affecting the value, enforceability or collectibility of any Account and of all customer disputes, offsets, defenses, counterclaims, returns, rejections and all reclaimed or repossessed merchandise or goods, and of any adverse effect in the value of its Inventory, in its weekly and monthly collateral reports (as applicable) provided to the Agent hereunder, in such detail and format as the Agent may reasonably require from time to time; provided, that the Company shall only be required to notify the Agent of customer disputes to the extent the amount in dispute does not exceed $100,000 for any individual dispute and $250,000 in the aggregate provided further, that such amounts may be changed or eliminated by the Agent in its reasonable business judgment and (b) promptly of any such matters which are material, as a whole, to the Accounts and/or the Inventory. The Company agrees to issue credit memoranda promptly (with duplicates to the Agent upon request after the occurrence of an Event of Default) upon accepting returns or granting allowances. Upon the occurrence of an Event of Default (which is not waived in writing by the Required Lenders) and on notice from the Agent, the Company agrees that all returned, reclaimed or repossessed merchandise or goods shall be set aside by the Company, marked with the Agent’s name (as secured party) and held by the Company for the Agent’s account.

Sample Business Contracts