AGREEMENT Please Note: String References To Sections Must Be Checked Manually CREDIT AND SECURITY AGREEMENT BY AND BETWEEN ROCKSHOX, INC. AND WELLS FARGO BUSINESS CREDIT, INC. Dated as of: December 10, 1999 CREDIT AND SECURITY AGREEMENT Dated as of...

AGREEMENT




Please Note:  String References To Sections Must Be
Checked Manually
 
______________________________________________
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
ROCKSHOX, INC.
AND
XXXXX FARGO BUSINESS CREDIT, INC.
Dated as of:  December 10, 1999
 
______________________________________________

 
CREDIT AND SECURITY AGREEMENT
Dated as of December 10, 1999
ROCKSHOX, INC., a Delaware corporation (the "Borrower"), and XXXXX
FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:




Definitions




Definitions.  For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:



the terms defined in this Article have the meanings assigned to them in this
Article, and include the plural as well as the singular; and
all accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Adjusted Net Worth" means Book Net Worth minus the balance of
deferred taxes on the asset side of the balance sheet.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means any Person controlled by or
under common control with the Borrower, including (without limitation) any
Subsidiary of the Borrower.  For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
restated, supplemented or otherwise modified from time to time.
"Availability" means the difference of (i) the Borrowing Base and (ii)
the then outstanding principal balance of the Revolving Note.
"Availability Reserve" means as of any date of determination, such
amount or amounts as Lender may from time to time establish and revise in good
faith and in its reasonable judgment reducing the amount of Revolving Advances
which would otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith and in its reasonable judgment, do
or may affect either (i) the Collateral or its value, (ii) the assets, business
or prospects of Borrower, or (iii) the security interests and other rights of
Lender in the Collateral (including the enforceability, perfection and priority
thereof), or (b) to reflect Lender's good faith belief that any collateral
report or financial information furnished by or on behalf of Borrower to Lender
is or may have been incomplete, inaccurate or misleading in any material
respect, or (c) in respect of any state of facts which Lender determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Pasadena, California.
"Base Rate" means the rate of interest publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "base rate" (which "base rate" shall not
deviate from the Wall Street Journal Prime Rate except for time lag in
adjustments which shall not exceed five (5) Banking Days) or, if such bank
ceases to announce a rate so designated, any similar successor rate designated
by the Lender.
"Book Net Worth" means the difference between (i) the book value of
tangible assets of the Borrower, which, in accordance with GAAP are tangible
assets, after deducting adequate reserves in each case where, in accordance with
GAAP, a reserve is proper and (ii) all Debt of the Borrower. 
"Borrowing Base" means, at any time the lesser of:
 
the Maximum Line; or
subject to change from time to time in the Lender's reasonable discretion,
the sum of:





 


eighty five percent (85%) of Eligible Accounts, plus
the lesser of (A) eighty-five percent (85%) of Eligible Foreign Accounts and
(B) One Million Dollars ($1,000,000), and 
minus any Availability Reserves.








"Capital Expenditures" for a period means any expenditure of money for
the lease, purchase or other acquisition of any fixed or capital asset.
"Collateral" means all current or hereafter acquired or arising
Equipment, General Intangibles, Inventory, Receivables, Investment Property,
deposit accounts, letters of credit, proceeds of letters of credit, chattel
paper and all sums on deposit in any Collateral Account, and any items in any
Lockbox; together with (i) all substitutions and replacements for and
products of any of the foregoing; (ii) proceeds of any and all of the
foregoing; (iii) in the case of all tangible goods, all accessions;
(iv) all accessories, attachments, parts, equipment and repairs now or
hereafter attached or affixed to or used in connection with any tangible goods;
(v) all warehouse receipts, bills of lading and other documents of title
now or hereafter covering such goods; and (vi) the Life Insurance
Policy.
"Collateral Account" means the "WFBCI Account" as defined in the
Collection Account Agreement and the "Lender Account" as defined in the
Lockbox Agreement.
"Collection Account Agreement" means the Collection Account Agreement
of even date herewith by and among the Borrower, Xxxxx Fargo Bank, National
Association and the Lender.
"Commitment" means the Lender's commitment to make Advances to or for
the Borrower's account pursuant to Article II.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender pursuant to Article II.
"Deactivation Period" has the same meaning specified in Section
2.14.
"Debt" of any Person means, without duplication, all items of
indebtedness or liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet of that Person as at the date as of which Debt is to be determined.  For
purposes of determining a Person's aggregate Debt at any time, "Debt"
shall also include the aggregate principal payments required to be made by such
Person at any time under any lease that is considered a capitalized lease under
GAAP.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day a
Default or Event of Default has occurred and ending on the date the Lender
notifies the Borrower in writing that such Default or Event of Default has been
waived.
"Default Rate" means an annual rate equal to three percent (3%) over
the Floating Rate, which rate shall change when and as the Floating Rate
changes.
"EBITDA" for a period means, the sum of (i) pretax earnings from
continuing operations, (ii) interest expense and, (iii) depreciation,
depletion, and amortization of tangible and intangible assets, before (a)
special extraordinary gains, (b) minority interests, and (c) miscellaneous gains
and losses, in each case for such period, computed and calculated in accordance
with GAAP.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible
Accounts:


 
 
 
 


That portion of Accounts unpaid 90 days or more after the invoice date
(in the event the Accounts have trade terms beyond 30 days, that portion of
Accounts unpaid 30 days after the due date or 120 days after the invoice date,
whichever is shorter);
That portion of Accounts that is disputed or subject to a claim of offset or
a contra account;
That portion of Accounts not yet earned by the final delivery of goods or
rendition of services, as applicable, by the Borrower to the customer;
Accounts owed by any federal unit of government, whether foreign or domestic
(provided, however, that there shall be included in Eligible Accounts that
portion of Accounts owed by such units of government for which the Borrower has
provided evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such Accounts may be
enforced by the Lender directly against such unit of government under all
applicable laws, including, without limitation, the Federal Assignment of Claims
Act of 1940, as amended, or any similar law);
Accounts owed by an account debtor located outside the United States or
Canada which are not (A) backed by a bank letter of credit naming the
Lender as beneficiary or assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole discretion, or
(B) covered by a foreign receivables insurance policy acceptable to the
Lender in its reasonable discretion;
Accounts owed by an account debtor that is insolvent, the subject of
bankruptcy proceedings or has gone out of business;
Accounts owed by a shareholder, Subsidiary, Affiliate, officer or employee
of the Borrower;
Accounts not subject to a duly perfected security interest in the Lender's
favor or which are subject to any lien, security interest or claim in favor of
any Person other than the Lender including without limitation any payment or
performance bond;
That portion of Accounts that has been restructured, extended, amended or
modified which exceeds an aggregate amount of Fifty-Thousand Dollars
($50,000);
That portion of Accounts that constitutes advertising, finance charges,
service charges or sales or excise taxes;
Accounts owed by an account debtor, regardless of whether otherwise
eligible, if twenty-five percent (25%) or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i) or (ix)
above;
That portion of Accounts of a single debtor or its affiliates which
constitute more than twenty-five percent (25%), (forty percent (40%) for Trek
Bicycles subject to credit checks satisfactory to Lender) of all otherwise
Eligible Accounts; and
Accounts, or portions thereof, otherwise deemed ineligible by the Lender in
its reasonable discretion.
"Eligible Foreign Accounts" means Accounts due and owing by an Account
debtor located outside the United States; but excluding any Accounts having the
following characteristics:
(A) That portion of Accounts unpaid 90 days or more after
the invoice date (in the event the Accounts have trade terms beyond 30 days,
that portion of Accounts unpaid 30 days after the due date or 120 days after the
invoice date, whichever is shorter);
That portion of Accounts that is disputed or subject to a claim of offset or
a contra account;
That portion of Accounts not yet earned by the final delivery of goods or
rendition of services, as applicable, by the Borrower to the customer;
Accounts owed by any unit of government;
Accounts owed by an account debtor that is insolvent, the subject of
bankruptcy proceedings or has gone out of business;
Accounts owed by a shareholder, Subsidiary, Affiliate, officer or employee
of the Borrower;
Accounts not subject to a duly perfected security interest in the Lender's
favor or which are subject to any lien, security interest or claim in favor of
any Person other than the Lender including without limitation any payment or
performance bond;
That portion of Accounts that has been restructured, extended, amended or
modified which exceeds an aggregate amount of Fifty-Thousand Dollars
($50,000);
That portion of Accounts that constitutes advertising, finance charges,
service charges or sales or excise taxes;
Accounts denominated in any currency other than United States dollars,
Canadian dollars, French francs, Swiss francs, German marks, Japanese yen,
United Kingdom pounds sterling or New Taiwan Dollars;
Accounts with respect to which the Borrower has not instructed the Account
debtor to pay the Account to the Collateral Account;
Accounts owed by debtors located in countries not acceptable to the Lender
in its reasonable discretion (consistent with its internal policies);
Accounts owed by an account debtor, regardless of whether otherwise
eligible, if 25% or more of the total amount due under Accounts from such debtor
is ineligible under clauses (i) or (viii) above; and
Accounts otherwise deemed unacceptable to the Lender in its reasonable
discretion.







"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the sum of the Base Rate
plus 0.375%, which annual rate shall change when and as the Base Rate
changes.
"Funding Date" has the meaning specified in Section 2.1.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial Accounting
Standards Board changing or implementing any new accounting standard, the
Borrower either (i) is required to implement such change, or (ii) for
future periods will be required to and for the current period may in accordance
with generally accepted accounting principles implement such change, for its
financial statements to be in conformity with generally accepted accounting
principles (any such change is herein referred to as a "Required GAAP
Change"), provided that (1) the Borrower shall fully disclose in such
financial statements any such Required GAAP Change and the effects of the
Required GAAP Change on the Borrower's income, retained earnings or other
accounts, as applicable, and (2) the Borrower's financial covenants set
forth in Sections 6.12, 6.13, 6.14 and 7.10 shall be adjusted as necessary
to reflect the effects of such Required GAAP Change.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business.
"Hazardous Substance" has the meaning specified in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements, securities
accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and U.S. Government securities.
"Loan Documents" means this Agreement, the Note, any Subordination
Agreement and the Security Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox and Collection Account Agreement
by and among the Borrower, Xxxxx Fargo Bank, National Association, Regulus West
LLC and the Lender, of even date herewith.
"Maturity Date" has the meaning specified in Section 2.6.
"Maximum Line" means Five Million Dollars ($5,000,000), unless said
amount is reduced pursuant to Section 2.7, in which event it means the amount to
which said amount is reduced.
"Minimum Interest Charge" has the meaning specified in Section
2.2(b).
 "Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now or at
any time hereafter owe to the Lender under this Agreement and the other Loan
Documents, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
sole, joint, several or joint and several.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of even date
herewith.
"Permitted Lien" has the meaning specified in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the premises
legally described in Exhibit C attached hereto.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning specified in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, restated, supplemented otherwise
modified from time to time, and any note or notes issued in substitution
therefor, as the same may hereafter be amended, restated, supplemented otherwise
modified from time to time.
"Security Documents" means this Agreement, the Collection Account
Agreement, the Lockbox Agreement, the Patent and Trademark Security Agreement
and any other document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, restated, supplemented
otherwise modified from time to time.
"Security Interest" has the meaning specified in Section 3.1.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency, is at the time directly or indirectly owned by the
Borrower, by the Borrower and one or more other Subsidiaries, or by one or more
other Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default pursuant to
Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.13 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
"Year 2000 Compliant" has the meaning specified in Section
6.15.







Cross
References.  All references in this Agreement to Articles,
Sections and subsections, shall be to Articles, Sections and subsections of this
Agreement unless otherwise explicitly specified.  



 


 Amount and Terms of the Credit
Facility




Revolving Advances.  The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Funding Date") to the Termination Date
(the "Revolving Advances").  The Lender shall have no obligation to make
a Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances would exceed the
Borrowing Base.  The Borrower's obligation to pay the Revolving Advances shall
be evidenced by the Revolving Note and shall be secured by the Collateral as
provided in Article III.  Within the limits set forth in this Section 2.1, the
Borrower may borrow, prepay pursuant to Section 2.7 and reborrow.  The Borrower
agrees to comply with the following procedures in requesting Revolving Advances
under this Section 2.1:



The Borrower shall make each request for a Revolving Advance to the Lender
before 10:30 a.m. (California time) of the day of the requested Revolving
Advance.  Requests may be made in writing or by telephone (promptly confirmed in
writing), specifying the date of the requested Revolving Advance and the amount
thereof.  Each request shall be by (i) any officer of the Borrower; or
(ii) any person designated as the Borrower's agent by any officer of the
Borrower in a writing delivered to the Lender; or (iii) any person whom the
Lender reasonably believes to be an officer of the Borrower or such a designated
agent.
Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall disburse the proceeds of the requested Revolving Advance by
crediting the same to the Borrower's demand deposit account maintained with
Xxxxx Fargo Bank, National Association, unless the Lender and the Borrower shall
agree in writing to another manner of disbursement.  Upon the Lender's request,
the Borrower shall promptly confirm each telephonic request for an Advance by
executing and delivering an appropriate confirmation certificate to the Lender.
The Borrower shall repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in fact
authorized to do so.  Any request for an Advance, whether written or telephonic,
shall be deemed to be a representation by the Borrower that the conditions set
forth in Section 4.2 have been satisfied as of the time of the
request.


Interest; Minimum Interest Charge; Default Interest;
Participations; Usury.

 


Revolving Note.  Except as set forth
in Sections 2.2(c) and 2.2(e), the outstanding
principal balance of the Revolving Note shall bear interest at the Floating
Rate.
Minimum Interest Charge.
Notwithstanding the interest payable pursuant to Section 2.2(a), the Borrower
shall pay to the Lender interest of not less than Twenty-Five Thousand Dollars
($25,000) per calendar quarter on a pro rated basis (the "Minimum Interest
Charge") during the term of this Agreement, and the Borrower shall pay any
deficiency between the Minimum Interest Charge and the amount of interest
otherwise calculated under Sections 2.2(a) and
2.2(d) on the date and in the manner provided in Section 2.4. 
Default Interest Rate.  At any time during any Default Period,
in the Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Advances outstanding from time to time shall bear
interest at the Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.
Participations.  If any Person shall acquire a participation
in the Advances under this Agreement, the Borrower shall be obligated to the
Lender to pay the full amount of all interest calculated under Section 2.2(a),
along with all other fees, charges and other amounts due under this Agreement,
regardless if such Person elects to accept interest with respect to its
participation at a lower rate than the Floating Rate, or otherwise elects to
accept less than its pro rata share of such fees, charges and other amounts due
under this Agreement.
Usury.  In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document, all
agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
any applicable usury laws.  If any payments in the nature of interest,
additional interest and other charges made under any Loan Document are held to
be in excess of the limits imposed by any applicable usury laws, it is agreed
that any such amount held to be in excess shall be considered payment of
principal hereunder, and the indebtedness evidenced hereby shall be reduced by
such amount so that the total liability for payments in the nature of interest,
additional interest and other charges shall not exceed the applicable limits
imposed by any applicable usury laws, in compliance with the desires of the
Borrower and the Lender.  This provision shall never be superseded or waived and
shall control every other provision of the Loan Documents and all agreements
between the Borrower and the Lender, or their successors and assigns.


Fees.

 


Origination Fee.  The Borrower hereby agrees to pay the Lender
a fully earned and non-refundable origination fee of Twenty-Five Thousand
Dollars ($25,000) due and payable upon the execution of this Agreement.
Unused Line Fee.  For the purposes of
this Section 2.3(b), "Unused Amount" means the Maximum Line reduced by
outstanding Revolving Advances.  The Borrower agrees to pay to the Lender an
unused line fee at the rate of one-quarter of one percent (0.25%) per annum on
the average monthly Unused Amount from the date of this Agreement to and
including the Termination Date, due and payable quarterly in arrears.
Audit Fees.  The Borrower hereby agrees to pay the Lender, on
demand, reasonable audit fees in connection with any standard bank audits or
inspections conducted by the Lender of any Collateral or the Borrower's
operations or business at the rates established from time to time by the Lender
as its audit fees, together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection provided, however, that
unless an Event of Default shall have occurred, the Borrower shall be required
to pay for no more than three (3) audits in any calendar year.


Computation of Interest and Fees;
When Interest Due and Payable.  Interest accruing on the
outstanding principal balance of the Advances and fees hereunder outstanding
from time to time shall be computed on the basis of actual number of days
elapsed in a year of 360 days.  Interest shall be due and payable in arrears on
the first day of each month and on the Termination Date.
Capital Adequacy.
If any Related Lender determines at any time that its Return has been reduced as
a result of any Rule Change, such Related Lender may require the Borrower to pay
it the amount necessary to restore its Return to what it would have been had
there been no Rule Change.  For purposes of this Section 2.5:

 


"Capital Adequacy Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding capital adequacy, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the force of
law, that applies to any Related Lender.  Such rules include rules requiring
financial institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters of
credit.
"Return", for any period, means the return as determined by such
Related Lender on the Advances based upon its total capital requirements and a
reasonable attribution formula that takes account of the Capital Adequacy Rules
then in effect.  Return may be calculated for each calendar quarter and for the
shorter period between the end of a calendar quarter and the date of termination
in whole of this Agreement.
"Rule Change" means any change in any Capital Adequacy Rule occurring
after the date of this Agreement, but the term does not include any changes in
applicable requirements that at the Closing Date are scheduled to take place
under the existing Capital Adequacy Rules or any increases in the capital that
any Related Lender is required to maintain to the extent that the increases are
required due to a regulatory authority's assessment of the financial condition
of such Related Lender.
"Related Lender" includes (but is not limited to) the Lender, any
parent corporation of the Lender  and any assignee of any interest of the Lender
hereunder and any participant in the loans made hereunder.


Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error.  In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Maturity Date.  This Agreement and the
other Loan Documents shall become effective as of the date set forth on the
first page hereof ("Effective Date") and shall continue in full force and effect
for a term ending on the date two years after the Effective Date (the
"Maturity Date"), unless earlier terminated by Lender or Borrower
pursuant to the terms hereof.  Upon the Termination Date, Borrower shall
immediately pay to Lender, in full, all outstanding and unpaid Obligations and
shall furnish cash collateral to Lender in such amounts as Lender determines are
reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including checks and other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Upon final and indefeasible payment in full, Lender shall
promptly refund to Borrower any cash collateral then held by Lender, if
any.
Voluntary Prepayment;
Reduction of the Maximum Line; Termination of the Credit Facility by the
Borrower.  Except as otherwise provided herein, the Borrower may
prepay the Advances in whole at any time or from time to time in part.  The
Borrower may terminate the Credit Facility if it (i) gives the Lender at
least thirty (30) days prior written notice and (ii) pays the Lender
termination or line reduction fees in accordance with Section 2.8.
Termination and Line
Reduction Fees; Waiver of Termination and Line Reduction
Fees.

 


Termination and Line Reduction Fees.  If the Credit Facility
is terminated for any reason as of a date other than the Maturity Date, or the
Borrower reduces the Maximum Line, the Borrower shall pay to the Lender a fee in
an amount equal to a percentage of the Maximum Line (or the reduction, as the
case may be) as follows:  (A) two percent (2.0%) if the termination or reduction
occurs on or before the first anniversary of the Funding Date; (B) one percent
(1.0%) if the termination or reduction occurs after the first anniversary of the
Funding Date but on or before the second anniversary of the Funding Date.
Waiver of Termination and Line Reduction Fees.  The Borrower
will not be required to pay the termination or line reduction fees otherwise due
under this Section 2.8 if such termination or line reduction is made because of
refinancing by an affiliate of the Lender.


	Mandatory Prepayment.  Without notice or
demand, if the outstanding principal balance of the Revolving Advances shall at
any time exceed the Borrowing Base, the Borrower shall immediately prepay the
Revolving Advances to the extent necessary to eliminate such excess.  Any
payment received by the Lender under this Section 2.8 or under Section 2.8 may
be applied to the Obligations, in such order and in such amounts as the Lender,
in its discretion, may from time to time determine.
Payment.  For purposes of calculating the amount
of Revolving Advances available to Borrower, each payment will be applied
(conditional upon final collection) to the outstanding principal balance of the
Revolving Note on the Banking Day of receipt by Lender of advices of deposit in
the Collateral Account, if such advices are received within sufficient time (in
accordance with Lender's usual and customary practices as in effect from time to
time) to credit Borrower's loan account on such day, and if not, then on the
next Banking Day.  Such payment shall be applied in any order or manner of
application satisfactory to Lender.  For purposes of calculating interest,
Lender shall be entitled to charge Borrower for one (1) Calendar Day of
clearance at the Floating Rate on all payments deposited into the Collateral
Account, whether or not such payments are applied to reduce the outstanding
principal balance of the Revolving Note.  This clearance charge is acknowledged
to constitute an integral part of the pricing of the loans and financial
accommodations contemplated herein, and shall apply whether or not the amount of
payments deposited exceeds the obligations outstanding.  Notwithstanding
anything in Section 2.1, the Borrower hereby authorizes the Lender, in its
discretion at any time or from time to time without the Borrower's request and
even if the conditions set forth in Section 4.2 would not be satisfied, to make
a Revolving Advance in an amount equal to the portion of the Obligations from
time to time due and payable.  At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Loan Documents may be charged directly to the loan account(s) of
Borrower.
Payment on Non-Banking Days.  Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Banking Day, such payment may be made on the next succeeding Banking Day, and
such extension of time shall in such case be included in the computation of
interest on the Advances or the fees hereunder, as the case may be.
Use of
Proceeds.  The Borrower shall use the initial proceeds of
Advances only for: (a) payment to each of the Persons listed in the disbursement
direction letter furnished by Borrower to Lender on or about the date hereof and
(b) costs, expenses and fees in connection with the preparation, negotiation,
execution and delivery of this Agreement and the other Loan Documents.  All
other Advances made to Borrower shall be used by Borrower only for general
operating, working capital and other proper corporate purposes of Borrower not
otherwise prohibited by the terms hereof. 
Liability Records.  The Lender may
maintain from time to time, at its discretion, liability records as to the
Obligations.  All entries made on any such record shall be presumed correct
until the Borrower establishes the contrary.  Upon the Lender's demand, the
Borrower will admit and certify in writing the exact principal balance of the
Obligations that the Borrower then asserts to be outstanding.  Any billing
statement or accounting rendered by the Lender shall be conclusive and fully
binding on the Borrower unless the Borrower gives the Lender specific written
notice of exception within thirty (30) days after receipt or in the case of
manifest error.
Deactivation of Credit Facility.  So
long as no Obligations are outstanding, Borrower may deactivate the Credit
Facility (any period during which the Credit Facility is deactivated pursuant to
this Section 2.14 shall hereinafter be referred to as, a "Deactivation Period");
provided that, if a Deactivation Period commences within thirty (30) days
after the date hereof, Borrower shall give Lender prior written notice of its
intention to deactivate the Credit Facility promptly upon knowledge thereof and
if a Deactivation Period commences after thirty (30) days of the date hereof,
Borrower shall give Lender thirty (30) days prior written notice of its
intention to deactivate the Credit Facility.  During a Deactivation Period,
Lender's Commitment shall not be in effect, and the charges pursuant to sections
2.2(b) and 2.3(b) and the clearance charge referred to in section 2.10 shall not
be applied.  Notwithstanding any provisions in the Collection Account Agreement
or the Lockbox Agreement, Borrower may receive all payments on Receivables or
payments constituting proceeds of other Collateral directly (rather than
depositing or directing its account debtors or other obligors to remit such
payment or proceeds to the Lockbox or the Collateral Account).  A
Deactivation Period shall remain in effect until the date thirty (30) days after
the Borrower notifies the Lender that it desires to reactivate the Credit
Facility.  No more than three (3) Deactivation Periods may be initiated by
Borrower within a calendar year.


 
 Security Interest; Occupancy; Setoff




Grant of Security
Interest.  The Borrower hereby pledges, assigns and grants to the
Lender a security interest (collectively referred to as the "Security
Interest") in the Collateral, as security for the payment and performance of
the Obligations.
Notification of Account Debtors and Other
Obligors.  Upon the occurrence of an Event of Default, the Lender
may notify any account debtor or other person obligated to pay the amount due
that such right to payment has been assigned or transferred to the Lender for
security and shall be paid directly to the Lender.  The Borrower will join in
giving such notice if the Lender so requests.  At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, in the Lender's name or in the Borrower's name, (a) demand,
xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney in fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail for purposes of the collection of
Collateral, applying all Collateral as permitted under this Agreement and
holding all other mail for the Borrower's account or forwarding such mail to the
Borrower's last known address.
Assignment of Insurance.  As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender.  At any time, whether or not a Default Period then exists, the
Lender may (but need not), in the Lender's name or in the Borrower's name,
execute and deliver proof of claim, receive all such monies and endorse checks
and other instruments representing payment of such monies.  Following the
occurrence of an Event of Default, the Lender may (but need not), in the
Lender's name or in the Borrower's name, adjust, litigate, compromise or release
any claim against the issuer of any such policy.
Occupancy.



The Borrower hereby irrevocably grants to the Lender the right to take
possession of the Premises at any time following the occurrence of an Event of
Default.
The Lender may use the Premises only to hold, process, manufacture, sell,
use, store, liquidate, realize upon or otherwise dispose of goods that are
Collateral and for other purposes that the Lender may in good xxxxx xxxx to be
related or incidental purposes.
The Lender's right to hold the Premises shall cease and terminate upon the
earlier of (i) payment in full and discharge of all Obligations and
termination of the Commitment, (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to purchasers and (iii)
the waiver of such Event of Default.
The Lender shall not be obligated to pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises, the
Borrower shall reimburse the Lender promptly for the full amount thereof.  In
addition, the Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or imposed upon
the Lender by reason of the execution, delivery, existence, recordation,
performance or enforcement of this Agreement or the provisions of this Section
3.4.


License.  Without limiting the generality of the
Patent and Trademark Security Agreement, the Borrower hereby grants to the
Lender a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrower for the purpose of selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
Financing Statement.  A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby.  For this purpose, the following information is set forth:
Name and address of Debtor:

Rockshox, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx  00000

Federal Tax Identification No. 00-0000000
Name and address of Secured Party:

Xxxxx Fargo Business Credit, Inc.
000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx  00000
Setoff.  The Borrower agrees that,
upon the occurrence of an Event of Default, the Lender may, at its sole
discretion and without demand and without notice to anyone, setoff any liability
owed to the Borrower by the Lender, whether or not due, against any Obligation,
whether or not due.  In addition, each other Person holding a participating
interest in any Obligations shall have the right to appropriate or setoff any
deposit or other liability then owed by such Person to the Borrower, whether or
not due, and apply the same to the payment of said participating interest, as
fully as if such Person had lent directly to the Borrower the amount of such
participating interest.


 Conditions of Lending




Conditions Precedent to the Initial
Revolving Advance.  The Lender's obligation to make the initial
Revolving Advance hereunder shall be subject to the condition precedent that the
Lender shall have received all of the following, each in form and substance
satisfactory to the Lender:



This Agreement, properly executed by the Borrower.
The Note, properly executed by the Borrower.
A true and correct copy of any and all mortgages (to the extent such
mortgages exist) pursuant to which the Borrower has mortgaged the Premises,
together with a mortgagee's disclaimer and consent with respect to each such
mortgage.
A true and correct copy of any and all agreements (to the extent such
agreements exist) pursuant to which the Borrower's property is in the possession
of any Person other than the Borrower, together with, in the case of any goods
held by such Person for resale, (i) a consignee's acknowledgment and waiver
of liens, (ii) UCC financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC searches
showing that no other secured party has filed a financing statement against such
Person and covering property similar to the Borrower's other than the Borrower,
or if there exists any such secured party, evidence that each such secured party
has received notice from the Borrower and the Lender sufficient to protect the
Borrower's and the Lender's interests in the Borrower's goods from any claim by
such secured party.
A true and correct copy of any and all agreements pursuant to which the
Borrower's property is in the possession of any Person other than the Borrower,
together with, (i) an acknowledgment and waiver of liens from each
subcontractor who has possession of the Borrower's goods from time to time,
(ii) UCC financing statements sufficient to protect the Borrower's and the
Lender's interests in such goods, and (iii) UCC searches showing that no
other secured party has filed a financing statement covering such Person's
property other than the Borrower, or if there exists any such secured party,
evidence that each such secured party has received notice from the Borrower and
the Lender sufficient to protect the Borrower's and the Lender's interests in
the Borrower's goods from any claim by such secured party.
The Collection Account Agreement, properly executed by the Borrower and
Xxxxx Fargo Bank, National Association.
The Lockbox Agreement, properly executed by the Borrower, Xxxxx Fargo Bank,
National Association and Regulus West LLC.
The Patent and Trademark Security Agreement, properly executed by the
Borrower.
Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against the
Borrower, (ii) no financing statements or assignments of patents,
trademarks or copyrights have been filed and remain in effect against the
Borrower except those financing statements and assignments of patents,
trademarks or copyrights relating to Permitted Liens or to liens held by Persons
who have agreed in writing that upon receipt of proceeds of the Advances, they
will deliver UCC releases and/or terminations and releases of such assignments
of patents, trademarks or copyrights satisfactory to the Lender, and (iii) the
Lender has duly filed all financing statements necessary to perfect the Security
Interest, to the extent the Security Interest is capable of being perfected by
filing.
A certificate of the Borrower's Secretary or Assistant Secretary certifying
as to (i) the resolutions of the Borrower's directors and, if required,
shareholders, authorizing the execution, delivery and performance of the Loan
Documents, (ii) the Borrower's articles of incorporation and bylaws, and
(iii) the signatures of the Borrower's officers or agents authorized to
execute and deliver the Loan Documents and other instruments, agreements and
certificates, including Advance requests, on the Borrower's behalf.
A current certificate issued by the Secretary of State of Delaware,
certifying that the Borrower is in compliance with all applicable organizational
requirements of the State of Delaware.
Evidence that the Borrower is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
A certificate of an officer of the Borrower confirming that the
representations and warranties set forth in Article V are true and correct in
all material respects.
An opinion of counsel to the Borrower, addressed to the Lender in the form
of Exhibit E.
Certificates of the insurance required hereunder, with all hazard insurance
containing a lender's loss payable endorsement in the Lender's favor and with
all liability insurance naming the Lender as an additional insured.
Payment of the fees and commissions due through the date of the initial
Advance under Section 2.3 and expenses incurred by the Lender through such date
and required to be paid by the Borrower under Section 9.6, including reasonable
legal expenses incurred through the date of this Agreement.
Evidence that Availability as of the Funding Date is not less than Two
Million Dollars ($2,000,000) after giving effect to the amount paid or to be
paid to Borrower's prior lender to retire Borrower's line of credit with such
prior lender and bringing all other obligations to a current status satisfactory
to Lender.
Completion of a field review of the books and records of Borrower and such
other information with respect to the Collateral as Lender may require, the
results of which shall be reasonably satisfactory to Lender.
Evidence that Borrower has opened bank accounts of a type mutually
acceptable to Borrower and Lender, including, without limitation, the Collateral
Account and any other account contemplated by the Collection Account Agreement
or the Lockbox Agreement.
Such other documents as the Lender may reasonably require.


Conditions Precedent to All
Advances.  The Lender's obligation to make each Advance shall be
subject to the further conditions precedent that on such date:

 


the representations and warranties contained in Article V are correct in all
material respects on and as of the date of such Advance as though made on and as
of such date, except to the extent that such representations and warranties
relate solely to an earlier date;
no material adverse change, as determined by Lender, shall have occurred in
the financial condition or business of Borrower nor any material decline, as
determined by Lender, in the market value of any Collateral or a substantial or
material portion of the assets of Borrower since the date of the latest
financial statements delivered to Lender prior to the Funding Date; and
no event has occurred and is continuing, or would result from such Advance
which constitutes a Default or an Event of Default.




 Representations and Warranties
The Borrower represents and warrants to the Lender as follows:




Corporate Existence
and Power; Name; Chief Executive Office; Inventory and Equipment Locations; Tax
Identification Number.  The Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary.  The Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents.
During its existence, the Borrower has done business solely under the names set
forth in Schedule 5.1 hereto.  The Borrower's chief executive office and
principal place of business is located at the address set forth in Schedule
5.1 hereto, and all of the Borrower's records relating to its business or
the Collateral are kept at that location.  All Inventory and Equipment is
located at that location or at one of the other locations set forth in
Schedule 5.1 hereto.  The Borrower's tax identification number is
correctly set forth in Section 3.6 hereto.
Authorization of Borrowing; No Conflict as to Law or
Agreements.  The execution, delivery and performance by the
Borrower of the Loan Documents and the borrowings from time to time hereunder
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the Borrower's stockholders;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given prior
to the date hereof; (iii) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to the Borrower or of the
Borrower's articles of incorporation or bylaws; (iv) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
Legal
Agreements.  This Agreement constitutes and, upon due execution
by the Borrower, the other Loan Documents will constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
	Subsidiaries.  Except as set forth in
Schedule 5.4, the Borrower has no Subsidiaries.
Financial Condition; No Adverse
Change.  The Borrower has heretofore furnished to the Lender
audited financial statements of the Borrower for its fiscal year ended March 31,
1999  and unaudited financial statements of the Borrower for the fiscal year-to-
date period ended September 30, 1999, and those statements fairly present the
Borrower's financial condition on the dates thereof and the results of its
operations and cash flows for the periods then ended and were prepared in
accordance with GAAP (subject, in the case of unaudited financial statements, to
the absence of footnotes and year-end adjustments).  Since the date of the most
recent financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise).
Litigation.  There are no actions, suits or
proceedings pending or, to the Borrower's knowledge, threatened against or
affecting the Borrower or any of its Affiliates or the properties of the
Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could reasonably be expected to have a material adverse effect on the financial
condition, properties or operations of the Borrower or any of its
Affiliates.
Regulation U.  The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, as amended), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock or to
retire any indebtedness which was originally incurred to purchase or carry any
margin stock or for any other purpose which might cause any of the Advances to
be considered a "purpose credit" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, as amended.
Taxes.
The Borrower and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them.  The Borrower and its Affiliates have filed all federal, state
and local tax returns reflecting tax liabilities in excess of $50,000 which to
the knowledge of the officers of the Borrower or any Affiliate, as the case may
be, are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due except such taxes or assessments, if any, as are being
contested in good faith and as to which adequate reserves have been provided in
accordance with GAAP.
	Titles and
Liens.  The Borrower has good and absolute title to all
Collateral described in the collateral reports provided to the Lender at the
time of delivery hereof and all other Collateral, properties and assets
reflected in the latest financial statements referred to in Section 5.5 and all
proceeds thereof, free and clear of all mortgages, security interests, liens and
encumbrances, except for Permitted Liens.  No financing statement naming the
Borrower as debtor is on file in any office except to perfect only Permitted
Liens.
Plans.  Except as disclosed to the Lender in
writing prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan.  Neither the Borrower nor any Affiliate
has received any notice or has any knowledge to the effect that it is not in
full compliance with any of the requirements of ERISA.  No Reportable Event or
other fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan.  Neither the Borrower nor
any of its Affiliates has:



Any accumulated funding deficiency within the meaning of ERISA; or
Any liability or knows of any fact or circumstances which could result in
any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than accrued benefits which or which may become payable to participants
or beneficiaries of any such Plan).


Default.  The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Environmental Matters.

 


Definitions.  As used in this Agreement, the following terms shall
have the following meanings:


"Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health and the environment.
"Hazardous Substances" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and all other
chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.

Except as would not reasonably be expected to have a material adverse
effect, to the Borrower's best knowledge, there are not present in, on or under
the Premises any Hazardous Substances in such form or quantity as to create any
liability or obligation for either the Borrower or the Lender under common law
of any jurisdiction or under any Environmental Law, and no Hazardous Substances
have ever been stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Premises in such a way as to create any such liability.
To the Borrower's best knowledge, the Borrower has not disposed of Hazardous
Substances in such a manner as to create any liability exceeding $100,000,
individually or in the aggregate, under any Environmental Law.
Except as would not reasonably be expected to have a material adverse
effect, there are not now and, since Borrower's occupancy of the Premises, there
never have been any requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way to the
Premises or the Borrower, alleging liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.  To the Borrower's best knowledge, no
such matter is threatened or impending.
To the Borrower's best knowledge, the Borrower's businesses are and have in
the past always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force and effect
except, in each case, as would not reasonable be expected to result in a
material adverse effect.
To the Borrower's best knowledge, the Premises are not and never have been
listed on the National Priorities List, the Comprehensive Environmental
Response, Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.
The Borrower has delivered to Lender, to the extent Borrower has such items
in its possession, all environmental assessments, audits, reports, permits and
licenses describing or relating in any way to the Premises or Borrower's
businesses.


Submissions to Lender.  All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, are based on assumptions made in good faith (it
being acknowledged by the Lender that no assurance can be given that such
projections, valuations, or proforma results will be realized).  
Financing
Statements.  The Borrower has provided to the Lender signed
financing statements sufficient when filed to perfect the Security Interest and
the other security interests created by the Security Documents.  When such
financing statements are filed in the offices noted therein, the Lender will
have a valid and perfected security interest in all Collateral and all other
collateral described in the Security Documents which is capable of being
perfected by filing financing statements.  None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect
thereto.
Rights to
Payment.  Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral or other
collateral covered by the Security Documents is (or, in the case of all future
Collateral or such other collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation, subject to no defense, setoff or
counterclaim, of the account debtor named therein or in the Borrower's records
pertaining thereto as being obligated to pay such obligation.


 Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:




Reporting Requirements.  The Borrower will
deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender:



as soon as available, and in any event within ninety (90) days after the end
of each fiscal year of the Borrower, the Borrower's audited financial statements
with the unqualified opinion of independent certified public accountants
selected by the Borrower and acceptable to the Lender, which annual financial
statements shall include the Borrower's balance sheet as at the end of such
fiscal year and the related statements of the Borrower's income, retained
earnings and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating (if applicable) and consolidated basis to
include any subsidiaries of Borrower, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management letters
prepared by such accountants; and (ii) a certificate of the Borrower's
chief financial officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has knowledge
of the occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
as soon as available and in any event within thirty (30) days after the end
of each month, financial statements, unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the end of and
for such month and for the year to date period then ended, prepared, if the
Lender so requests, on a consolidating (if applicable) and consolidated basis to
include any subsidiaries of Borrower, in reasonable detail and stating in
comparative form the figures for the corresponding date and periods in the
previous year, all prepared in accordance with GAAP, subject to year-end audit
adjustments; and accompanied by a certificate of the Borrower's chief financial
officer, substantially in the form of Exhibit B hereto stating (i) that such
financial statements have been prepared in accordance with GAAP, subject to year
end audit adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore reported
and remedied and, if so, stating in reasonable detail the facts with respect
thereto, and (iii) all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.12, 6.13, 6.14
and 7.10;
within ten (10) days after the end of each month or more frequently if the
Lender so requires after the occurrence of an Event of Default, agings of the
Borrower's accounts receivable and its accounts payable and a calculation of the
Borrower's Accounts and Eligible Accounts as at the end of such month or shorter
time period;
at least thirty (30) days before the beginning of
each fiscal year of the Borrower, the projected balance sheets and income
statements for each month of such year, each in reasonable detail, representing
the Borrower's good faith projections and certified by the Borrower's chief
financial officer as being the most recent projections available and identical
to the projections used by the Borrower for internal planning purposes, together
with such supporting schedules and information as the Lender may reasonably
require;
as soon as possible and in any event within 10 days after receipt of notice
thereof by the Borrower, notice in writing of all litigation and of all
proceedings before any governmental or regulatory agency affecting the Borrower
of the type described in Section 5.12 or which seek a monetary recovery in
excess of One Hundred Thousand Dollars ($100,000).
as promptly as practicable (but in any event not later than ten Banking
Days) after an officer of the Borrower obtains knowledge of the occurrence of
any breach, default or event of default under any Security Document or any event
which constitutes a Default or Event of Default hereunder, notice of such
occurrence, together with a detailed statement by a responsible officer of the
Borrower of the steps being taken by the Borrower to cure the effect of such
breach, default or event;
as soon as possible and in any event within thirty (30) days after the
Borrower knows or has reason to know that any Reportable Event with respect to
any Plan has occurred, the statement of the Borrower's chief financial officer
setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty
Corporation;
as soon as possible, and in any event within ten (10) days after the
Borrower fails to make any quarterly contribution required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of the Borrower's chief financial officer setting forth details as to
such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
promptly upon knowledge thereof, notice of (i) any disputes or claims
by the Borrower's customers in which the disputed amount or amounts exceeds an
aggregate amount of $100,000; (ii) credit memos; (iii) any goods
returned to or recovered by the Borrower other than in the ordinary course of
business ; and (iv) any change in the persons constituting the Borrower's
senior executive officers and directors;
promptly upon knowledge thereof, notice of any loss of or material damage to
any Collateral or other collateral covered by the Security Documents or of any
substantial adverse change in any Collateral or such other collateral or the
prospect of payment thereof to the extent the value of such loss, damage or
adverse change or any combination thereof exceeds $100,000;
within ten (10) days of their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders;
within ten (10) days of sending or filing thereof, copies of all regular and
periodic reports which the Borrower shall file with the Securities and Exchange
Commission or any national securities exchange;
promptly upon knowledge thereof, notice of the Borrower's violation of any
law, rule or regulation, the non-compliance with which could materially and
adversely affect the Borrower's business or its financial condition; and
from time to time, with reasonable promptness, any and all receivables
schedules, collection reports, deposit records, equipment schedules, copies of
invoices to account debtors, shipment documents and delivery receipts for goods
sold, and such other material, reports, records or information as the Lender may
reasonably request, including, without limitation, weekly borrowing base
certificates.


Books and Records; Inspection and Examination.
The Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to the Borrower's business and
financial condition in which true and complete entries will be made in
accordance with GAAP and, upon the Lender's request, will permit any officer,
employee, attorney or accountant for the Lender to audit, review, make extracts
from or copy any and all corporate and financial books and records of the
Borrower at all times during ordinary business hours and upon reasonable notice,
to send and discuss with account debtors and other obligors requests for
verification of amounts owed to the Borrower, and to discuss the Borrower's
affairs with any of its directors, officers, employees or agents.  The Borrower
will permit the Lender, or its employees, accountants, attorneys or agents, to
examine and inspect any Collateral, other collateral covered by the Security
Documents or any other property of the Borrower at any time during ordinary
business hours and upon reasonable notice.
Account
Verification.  The Lender may at any time and from time to time
send or require the Borrower to send requests for verification of accounts or
notices of assignment to account debtors and other obligors.  The Lender may
also at any time and from time to time telephone account debtors and other
obligors to verify accounts.
Compliance
with Laws.

 


The Borrower will (i) comply with the requirements of applicable laws
and regulations, the non-compliance with which would materially and adversely
affect its business or its financial condition and (ii) use and keep the
Collateral, and require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute or
ordinance.
Without limiting the foregoing undertakings, the
Borrower specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and similar
approvals required by any Environmental Laws, and will not generate, use,
transport, treat, store or dispose of any Hazardous Substances in such a manner
as to create any liability or obligation under the common law of any
jurisdiction or any Environmental Law except as would not reasonably be expected
to have a material adverse effect.


Payment of Taxes and Other Claims.  The Borrower
will pay or discharge, when due, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including, without limitation, the
Collateral) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach thereto,
(b) all federal, state and local taxes required to be withheld by it, and
(c) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien or charge upon any properties of the Borrower;
provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.
Maintenance of
Properties.

 


The Borrower will keep and maintain the Collateral, the other collateral
covered by the Security Documents and all of its other properties necessary or
useful in its business in good condition, repair and working order (normal wear
and tear excepted) and will from time to time replace or repair any worn,
defective or broken parts; provided, however, that nothing in this Section 6.6
shall prevent the Borrower from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the Borrower's judgment,
desirable in the conduct of the Borrower's business and not disadvantageous in
any material respect to the Lender.
The Borrower will defend the Collateral against all claims or demands of all
persons (other than the Lender and holders of Permitted Liens) claiming the
Collateral or any interest therein.
The Borrower will keep all Collateral and other collateral covered by the
Security Documents free and clear of all security interests, liens and
encumbrances except Permitted Liens.


Insurance.  The Borrower will obtain and at all
times maintain insurance with insurers believed by the Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be reasonably required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar properties in the same general areas in
which the Borrower operates.  Without limiting the generality of the foregoing,
the Borrower will at all times maintain business interruption insurance
including coverage for force majeure and keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft, collision
(for Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender.  All policies of liability insurance required hereunder shall
name the Lender as an additional insured.
Preservation of Existence.  The Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Delivery of Instruments, etc.  Upon request by
the Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrower.
Collateral
Account.



If, notwithstanding the instructions to debtors to make payments to the
Lockbox, the Borrower receives any payments on Receivables, the Borrower shall
deposit such payments into the Collateral Account.  Until so deposited, the
Borrower shall hold all such payments in trust for and as the property of the
Lender and shall not commingle such payments with any of its other funds or
property.  
Amounts deposited in the Collateral Account shall not bear interest and
shall not be subject to withdrawal by the Borrower, except after full payment
and discharge of all Obligations.  All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of the
Obligations.
All items deposited in the Collateral Account shall be subject to final
payment.  If any such item is returned uncollected, the Borrower will
immediately pay the Lender, or, for items deposited in the Collateral Account,
the bank maintaining such account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the Borrower's commercial account
or other account.  The Borrower shall be liable as an endorser on all items
deposited in the Collateral Account, whether or not in fact endorsed by the
Borrower.


Performance by the
Lender.  Following the occurrence of an Event of Default, the
Lender may, but need not, perform or observe any covenant which the Borrower has
failed to perform on behalf and in the name, place and stead of the Borrower
(or, at the Lender's option, in the Lender's name) and may, but need not, take
any and all other actions which the Lender may reasonably deem necessary to cure
or correct such failure (including, without limitation, the payment of taxes,
the satisfaction of security interests, liens or encumbrances, the performance
of obligations owed to account debtors or other obligors, the procurement and
maintenance of insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and the Borrower
shall thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
Floating Rate.  To facilitate the Lender's performance or observance of such
covenants of the Borrower following the occurrence of an Event of Default, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.11.
Minimum Adjusted Net
Worth.  The Borrower will maintain, during each period described
below, its Adjusted Net Worth, determined as at the end of each month, at an
amount not less than the amount set forth opposite such period:


Period

Minimum Adjusted Net Worth
(in thousands)


January 2000

$25,000


February 2000

$25,000


March 2000

$26,000


April 2000

$24,000


May 2000

$21,000


June 2000

$21,000


July 2000

$19,000


August 2000

$19,000


September 2000

$19,000


October 2000

$19,000


November 2000

$20,000


December 2000

$20,000


January 2001

$20,000


February 2001

$20,000


March 2001

$22,000


April 2001

$22,000


May 2001

$19,000


June 2001

$19,000


July 2001

$17,000


August 2001

$17,000


September 2001

$17,000


October 2001

$17,000


November 2001

$18,000


December 2001

$18,000





Minimum EBITDA.  The Borrower will
achieve during each period described below, EBITDA, of not less than the amount
set forth opposite such period:

Period

Minimum EBITDA
(in thousands)


Six months ending March 31, 2000

$4,500


Three months ending June 30, 2000

$(6,200)


Six months ending September 30, 2000

$(6,400)


Nine months ending December 31, 2000

$(2,000)


Fiscal year ending March 31, 2001

$2,100


Three months ending June 30, 2001

$(5,500)


Six months ending September 30, 2001

$(5,700)


Nine months ending December 31, 2001

$(1,300)

 




New Covenants.  Upon Lender's review of
Borrower's financial statements for its fiscal year ending March 31, 2001,
Lender shall set new covenant levels for Section
6.12 for periods after such date.  The new covenant levels shall be
determined by adding to each Adjusted Net Worth covenant after March 31, 2001
the amount by which Borrower's actual Adjusted Net Worth at March 31, 2001
exceeds (if at all) the March 31, 2001 Adjusted Net Worth covenant noted
above.
Year 2000 Compliance.  Borrower agrees
to (a) perform all acts reasonably necessary to ensure that Borrower and any
business in which Borrower holds a substantial interest becomes Year 2000
Compliant in a timely manner, including, without limitation, performing a
comprehensive review and assessment of all of Borrower's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems; and (b) make reasonable inquiries of all customers, suppliers
and vendors that are material to Borrower's business, to determine whether such
customers, suppliers and vendors will be Year 2000 Compliant in a timely manner
and to disclose to Lender any failure or potential failure by such customers,
suppliers or vendors to become Year 2000 Compliant in a timely manner.  As used
herein, "Year 2000 Compliant" shall mean, in regard to any entity, that
all software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000.  Borrower shall, immediately upon request, provide to Lender such
certifications or other evidence of Borrower's compliance with the terms hereof
as Lender may from time to time require.
Premises .  The Borrower agrees to
provide the Lender with true and correct copies of leases pursuant to which the
Borrower is leasing the Premises, and to use its best efforts to obtain and
provide to the Lender a landlord's disclaimer and consent with respect to each
such lease.



Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:




Liens.  The Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; excluding, however, from the
operation of the foregoing, the following (collectively, "Permitted
Liens"):



in the case of any of the Borrower's property which is not Collateral or
other collateral described in the Security Documents, covenants, restrictions,
rights, easements and minor irregularities in title which do not materially
interfere with the Borrower's business or operations as presently
conducted;
mortgages, deeds of trust, pledges, liens, security interests and
assignments in existence on the date hereof and listed in Schedule 7.1
hereto;
the Security Interest and liens and security interests created by the
Security Documents; 
purchase money security interests relating to the acquisition of machinery
and equipment of the Borrower not exceeding the cost or fair market value
thereof and so long as no Default Period is then in existence and none would
exist immediately after such acquisition.
liens for taxes, assessments or governmental charges or levies on the
Borrower's property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on the Borrower's books;
liens imposed by law, such as carriers', warehousemen's and mechanics' liens
and other similar lines arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
liens arising out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions,  or other social security or
retirement benefits, or similar legislation;
liens securing capitalized leases permitted pursuant to Section 7.2;
and
the replacement, extension or renewal of any lien permitted hereunder so
long as the Debt secured by such lien is not increased by such replacement,
extension or renewal.


Indebtedness.  The Borrower will not incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness for borrowed money or letters of credit
issued on the Borrower's behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations,
except:

 


indebtedness arising hereunder;
indebtedness of the Borrower in existence on the date hereof and listed in
Schedule 7.2 hereto and all refundings and refinancings thereof;
provided, however, that the dollar amount of such indebtedness may not be
increased; 
indebtedness relating to liens permitted in accordance with Section
7.1;
obligations in respect of capitalized leases in an aggregate amount not to
exceed $1,200,000 at any time outstanding, and 
indebtedness in respect of performance bonds, bankers acceptances, letter of
credit and surety or appeal bonds entered into by the Borrower in the ordinary
course of business.


Guaranties.  The Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:

 


the endorsement of negotiable instruments by the Borrower for deposit or
collection or similar transactions in the ordinary course of business; and
guaranties, endorsements and other direct or contingent liabilities in
connection with the obligations of other Persons, in existence on the date
hereof and listed in Schedule 7.2 hereto.


Investments and Subsidiaries.

 


The Borrower will not purchase or hold beneficially any stock or other
securities or evidences of indebtedness of, make or permit to exist any loans or
advances to, or make any investment or acquire any interest whatsoever in, any
other Person, including specifically but without limitation any partnership or
joint venture, except:


investments in direct obligations of the United States of America or any
agency or instrumentality thereof whose obligations constitute full faith and
credit obligations of the United States of America having a maturity of one year
or less, commercial paper issued by U.S.  corporations rated "A-1" or
"A-2" by Standard & Poors Corporation or "P-1" or "P-
2" by Xxxxx'x Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of One Hundred Million Dollars
($100,000,000) (which certificates of deposit or bankers' acceptances are fully
insured by the Federal Deposit Insurance Corporation);
travel advances or loans to the Borrower's officers and employees not
exceeding at any one time an aggregate of Twenty Five Thousand Dollars
($25,000);
advances in the form of progress payments, prepaid rent not exceeding three
(3) months or security deposits;
investments existing on the date hereof and described in Schedule 7.4;
accounts receivable;
investments received in settlement of arms length disputes; and
any endorsement of a check or other medium of payment for deposit or
collection, or any similar transaction in the ordinary course of
business.

The Borrower will not create or permit to exist any Subsidiary.


Dividends.  The Borrower will not declare or pay
any dividends (other than dividends payable solely in stock of the Borrower) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Sale or Transfer of Assets; Suspension of Business
Operations.  The Borrower will not sell, lease, assign, transfer or
otherwise dispose of (i) the stock of any Subsidiary, (ii) all or a
substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any other
Person other than the sale of Inventory in the ordinary course of business and
the sale of any other property which is obsolete, worn out or no longer useful
in the Borrower's business, and will not liquidate, dissolve or suspend business
operations.
Consolidation and Merger; Asset Acquisitions.
The Borrower will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all the assets of
any other Person.
Sale and
Leaseback.  The Borrower will not enter into any arrangement,
directly or indirectly, with any other Person whereby the Borrower shall sell or
transfer any real or personal property, whether now owned or hereafter acquired,
and then or thereafter rent or lease as lessee such property or any part thereof
or any other property which the Borrower intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
Restrictions on Nature of Business.  The Borrower
will not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Capital Expenditures.  The Borrower will not
incur or contract to incur Capital Expenditures of more than Three Million
Dollars ($3,000,000) in the aggregate during any fiscal year.
Accounting.  The Borrower will not adopt any
material change in accounting principles other than as required by GAAP.  The
Borrower will not adopt, permit or consent to any change in its fiscal
year.
Discounts,
etc.  The Borrower will not, after notice from the Lender, grant
any discount, credit or allowance to any customer of the Borrower or accept any
return of goods sold, or at any time (whether before or after notice from the
Lender) modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor of the Borrower other than in accordance with
its customary business practice.
Defined Benefit Pension Plans.  The Borrower will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Other Defaults.  The Borrower will
not permit any breach, default or event of default to occur under any note, loan
agreement, indenture, lease, mortgage, contract for deed, security agreement or
other contractual obligation binding upon the Borrower.
Place of Business; Name.  Without
providing 30 days' notice to the Lender, (a) the Borrower will not transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location; (b) the Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest; and (c) the Borrower will not
change its name.
Organizational Documents.  The Borrower will not
amend its certificate of incorporation, articles of incorporation or bylaws in a manner which would
adversely affect the Lender.
 Salaries.  The Borrower will not
pay excessive or unreasonable salaries, bonuses, commissions, consultant fees or
other compensation or excessively increase the salary, bonus, commissions,
consultant fees or other compensation of any director, officer or consultant, or
any member of their families, either individually or for all such persons in the
aggregate.
Change in
Ownership.  The Borrower will not issue or sell any stock of the
Borrower so as to change the percentage of voting and non-voting stock owned by
each of the Borrower's shareholders.
Transactions with Affiliates.  Borrower
shall not enter into any transaction for the purchase, sale or exchange of
property or the rendering of any service to or by any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arms length transaction with an
unaffiliated Person.




Events of Default, Rights and Remedies




Events of Default.  "Event of Default",
wherever used herein, means any one of the following events, which Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 9.2 hereof:



Default in the payment of the Obligations when they become due and
payable;
Default in the payment of any fees, commissions, costs or expenses required
to be paid by the Borrower under this Agreement;
Default in the performance, or breach, of any covenant or agreement of the
Borrower contained in this Agreement and such default or breach shall continue
for ten (10) Banking Days; provided, that such ten (10) Banking Day cure period
shall not apply in the case of (i) any default or event addressed in any other
provision or paragraph of this Section, (ii) the failure to comply with the
covenants set forth in Sections 6.12, 6.13, 6.14 or 7.10, (iii) any default in
the performance, or breach, of any such covenant or agreement which is not
capable of being cured at all or within such ten (10) Banking Day period or
which has previously been the subject of a previous default or breach within the
prior twelve (12) month period or (iv) an intentional breach by Borrower of such
covenant or agreement;
The Borrower shall be or become insolvent, or admit in writing its inability
to pay its debts as they mature, or make an assignment for the benefit of
creditors; or the Borrower shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or for all or any substantial part
of its property; or such receiver, trustee or similar officer shall be appointed
without the application or consent of the Borrower and not dismissed in 60 days;
or the Borrower shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Borrower and not dismissed in 60
days; or any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Borrower and not dismissed in 60 days;
A petition shall be filesfriedlad by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor and, in the case of
petitions filed against Borrower, not dismissed within 60 days; provided,
Borrower shall not receive an Advance prior to the dismissal of any such
petition filed against the Borrower;
Any representation or warranty made by the Borrower in this Agreement, or by
the Borrower (or any of its officers) in any agreement, certificate, instrument
or financial statement or other statement contemplated by or made or delivered
pursuant to or in connection with this Agreement shall prove to have been
incorrect in any material respect when deemed to be effective;
The rendering against the Borrower of a final judgment, decree or order for
the payment of money in excess of One Hundred Thousand Dollars ($100,000) and
the continuance of such judgment, decree or order unsatisfied and in effect for
any period of thirty (30) consecutive days without a stay of execution;
A default under any bond, debenture, note or other evidence of indebtedness
(excluding trade payables) of the Borrower owed to any Person other than the
Lender, or under any indenture or other instrument under which any such evidence
of indebtedness has been issued or by which it is governed, or under any lease
of any of the Premises, and the expiration of the applicable period of grace, if
any, specified in such evidence of indebtedness, indenture, other instrument or
lease;
Any Reportable Event, which the Lender determines in good faith might
constitute grounds for the termination of any Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Plan,
shall have occurred and be continuing thirty (30) days after written notice to
such effect shall have been given to the Borrower by the Lender; or a trustee
shall have been appointed by an appropriate United States District Court to
administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or the Borrower shall have failed to make
any quarterly contribution required with respect to any Plan under Section
412(m) of the Internal Revenue Code of 1986, as amended, which the Lender
determines in good faith may by itself, or in combination with any such failures
that the Lender may determine are likely to occur in the future, result in the
imposition of a lien on the Borrower's assets in favor of the Plan;
An event of default shall occur under any Security Document or under any
other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of the Borrower hereunder or
under any note and such event of default shall not be cured or waived within ten
(10) Banking Days; provided, that such ten (10) Banking Day cure period shall
not apply in the case of (i) any default or event addressed in any other
provision or paragraph of this Section, (ii) any event of default which is not
capable of being cured at all or within such ten (10) Banking Day period or
which has previously been the subject of a previous default or breach within the
prior twelve (12) month period or (iv) an intentional default by Borrower;
The Borrower shall liquidate, dissolve, terminate or suspend its business
operations or otherwise fail to operate its business in the ordinary course, or
sell all or substantially all of its assets, without the Lender's prior written
consent;


Rights and Remedies.  Following the occurrence of
an Event of Default, the Lender may exercise any or all of the following rights
and remedies:

 


the Lender may, by notice to the Borrower, declare the Commitment to be
terminated, whereupon the same shall forthwith terminate;
the Lender may, by notice to the Borrower, declare the Obligations to be
forthwith due and payable, whereupon all Obligations shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which the Borrower hereby expressly
waives;
the Lender may, without notice to the Borrower and without further action,
apply any and all money owing by the Lender to the Borrower to the payment of
the Obligations;
the Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC, including, without
limitation, the right to take possession of Collateral, or any evidence thereof,
proceeding without judicial process or by judicial process (without a prior
hearing or notice thereof, which the Borrower hereby expressly waives) and the
right to sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrower will on demand assemble the Collateral and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
the Lender may exercise and enforce its rights and remedies under the Loan
Documents; and
the Lender may exercise any other rights and remedies available to it by law
or agreement.


Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section
8.1, the Obligations shall be immediately due and payable automatically without
presentment, demand, protest or notice of any kind.
Certain
Notices.  If notice to the Borrower of any intended disposition
of Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given (in the
manner specified in Section 9.3) at least ten (10) calendar days before the date
of intended disposition or other action.


 


Miscellaneous




No Waiver; Cumulative Remedies.  No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents.  The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Amendments,
Etc.  No amendment, modification, termination or waiver of any
provision of any Loan Document or consent to any departure by the Borrower
therefrom or any release of a Security Interest shall be effective unless the
same shall be in writing and signed by the Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.  No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.  No amendment or modification of any Loan Document shall
be effective unless the same shall be signed by the Borrower.
Addresses for Notices, Etc.  Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or
(d) transmitted by telecopy, in each case addressed or telecopied to the
party to whom notice is being given at its address or telecopier number as set
forth below:
If to the Borrower:

Rockshox, Inc.
401 Charcot, Inc.
Xxx Xxxx, Xxxxxxxxxx  00000
Telecopier:	(000) 000-0000
Attention:	Xxxxx Xxxxxxx
If to the Lender:

Xxxxx Fargo Business Credit, Inc.
000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx  00000
Telecopier:  (000) 000-0000
Attention:  Account Executive
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section.  All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in
the mail if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if delivered by telecopy, except
that notices or requests to the Lender pursuant to any of the provisions of
Article II shall not be effective until received by the Lender.
Further
Documents.  The Borrower will from time to time execute and
deliver or endorse any and all instruments, documents, conveyances, assignments,
security agreements, financing statements and other agreements and writings that
the Lender may reasonably request in order to secure, protect, perfect or
enforce the Security Interest or the Lender's rights under the Loan Documents
(but any failure to request or assure that the Borrower executes, delivers or
endorses any such item shall not affect or impair the validity, sufficiency or
enforceability of the Loan Documents and the Security Interest, regardless of
whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
Collateral.  This Agreement does not contemplate
a sale of accounts, contract rights or chattel paper, and, as provided by law,
the Borrower is entitled to any surplus and shall remain liable for any
deficiency.  The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third person,
and the Lender need not otherwise preserve, protect, insure or care for any
Collateral.  The Lender shall not be obligated to preserve any rights the
Borrower may have against prior parties, to realize on the Collateral at all or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
Costs and Expenses.  The Borrower agrees to pay
on demand all reasonable costs and expenses, including (without limitation)
attorneys' fees, incurred by the Lender in connection with the Obligations, this
Agreement, the Loan Documents, and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby, including without
limitation all such costs, expenses and fees incurred in connection with the
negotiation, preparation, execution, amendment, administration, performance,
collection and enforcement of the Obligations and all such documents and
agreements and the creation, perfection, protection, satisfaction, foreclosure
or enforcement of the Security Interest.
Indemnity.  In addition to the payment of
expenses pursuant to Section 9.6, the Borrower agrees to indemnify, defend and
hold harmless the Lender, and any of its parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following except to the
extent arising from the gross negligence or willful misconduct of Lender or the
breach by Lender of any Loan Document (collectively, "Indemnified
Liabilities"):
 


any and all transfer taxes, documentary taxes, assessments or charges made
by any governmental authority by reason of the execution and delivery of the
Loan Documents or the making of the Advances;
any claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.12 proves to be incorrect in
any respect or as a result of any violation of the covenant contained in Section
6.4(b); and
any and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel) in connection with
the foregoing and any other investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against any such Indemnitee, in
any manner related to or arising out of or in connection with the making of the
Advances and the Loan Documents or the use or intended use of the proceeds of
the Advances.



If any investigative, judicial or administrative proceeding arising from any
of the foregoing is brought against any Indemnitee, upon such Indemnitee's
request, the Borrower, or counsel designated by the Borrower and satisfactory to
the Indemnitee, will resist and defend such action, suit or proceeding to the
extent and in the manner directed by the Indemnitee, at the Borrower's sole
costs and expense.  Each Indemnitee will use its best efforts to cooperate in
the defense of any such action, suit or proceeding.  If the foregoing
undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The Borrower's obligation under this Section 9.7 shall survive the termination
of this Agreement and the discharge of the Borrower's other obligations
hereunder.
Participants.  The Lender and its participants,
if any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants.  All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Execution in Counterparts.  This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Binding Effect; Assignment; Complete Agreement; Exchanging
Information.  The Loan Documents shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights thereunder or any interest therein without the Lender's prior written
consent.  This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof.  Without limiting the Lender's right to share information regarding the
Borrower and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors involved in the transactions subject to this Agreement, the
Lender, Xxxxx Fargo Corporation, and all direct and indirect subsidiaries of
Xxxxx Fargo Corporation, may exchange any and all information they may have in
their possession regarding the Borrower as may be reasonably necessary in the
administration of this Agreement, and the Borrower waives any right of
confidentiality it may have with respect to such exchange of such
information.
Severability of Provisions.  Any provision of
this Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Headings.  Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Governing Law; Jurisdiction,
Venue; Waiver of Jury Trial.  This Agreement and the other Loan
Documents shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of California.  Each of the parties
hereto hereby (i) consents to the personal jurisdiction of the state and
federal courts located in the State of California in connection with any
controversy related to this Agreement or the other Loan Documents;
(ii) waives any argument that venue in any such forum is not convenient,
(iii) agrees that any litigation initiated by the Lender or the Borrower in
connection with this Agreement or the other Loan Documents shall be venued in
either the State Courts of the County of Los Angeles, State of California, or
the United States District Court for the Central District of California; and
(iv) agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  THE PARTIES WAIVE ANY RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS
AGREEMENT.
Release of Collateral.	Upon a
sale or other disposition of assets of the Borrower constituting Collateral
which was consented to or otherwise approved by Lender or is permitted under
this Agreement, the Lender, at the request of the Borrower, will execute and
deliver to the Borrower the proper instruments (including UCC termination
statements) acknowledging the release of the Lender's Security Interest in such
Collateral.
Termination, Release.  This Agreement
and the Lender's Security Interest shall terminate upon satisfaction in full of
the Obligations.  Upon such termination, the Lender, at the request of the
Borrower, will execute and deliver to the Borrower the proper instruments
(including UCC termination statements) acknowledging the termination of this
Agreement and will duly assign, transfer and deliver to the Borrower such of the
Collateral as may be in the possession of the Lender and has not theretofore
been disposed of, applied or released.
Confidentiality.  The Lender agrees to
keep confidential all information provided by the Borrower under this Agreement
except as required by applicable law or if such information is otherwise
publicly available (other than as a result of actions by the Lender).




		IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.

XXXXX FARGO BUSINESS CREDIT, INC.,
a Minnesota corporation
By	
Name:	

	    Its Vice President


ROCKSHOX, INC., 
a Delaware corporation
By	
Name:	

	    Its 





 
Table of
Exhibits and Schedules

Exhibit A

Form of Revolving Note


Exhibit B

Compliance Certificate


Exhibit C

Premises


Exhibit D

Form of Officer's Certificate


Exhibit E

Borrower's Counsel's Opinion


Schedule 5.1

Trade Names, Chief Executive Office, Principal Place of Business, and
Locations of Collateral


Schedule 5.4

Subsidiaries


Schedule 7.1

Permitted Liens


Schedule 7.2

Permitted Indebtedness and Guaranties


Schedule 7.4

Investments





Exhibit A to Credit and Security Agreement
 
REVOLVING NOTE
$5,000,000	San Jose, California
December 10, 1999
For value received, the undersigned, ROCKSHOX, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay on the Termination Date under
the Credit Agreement (defined below), to the order of XXXXX FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office
in Pasadena, California, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Five Million Dollars
($5,000,000) or, if less, the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (as the same may hereafter be amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") by and
between the Lender and the Borrower.  The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement.  This Note
may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement, which
provides, among other things, for acceleration hereof.  This Note is the
Revolving Note referred to in the Credit Agreement.  This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower hereby agrees to pay all costs of collection, including
reasonable attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.












ROCKSHOX, INC., 
a Delaware corporation

By	
        Its President













Exhibit B to Credit and Security Agreement
 
Compliance Certificate


To:

Xxxxx Fargo Business Credit, Inc.


Date:

_____________________


Subject:

Financial Statements



In accordance with our Credit and Security Agreement dated as of December 10,
1999 (the "Credit Agreement"), attached are the financial statements of
ROCKSHOX, INC. (the "Borrower") as of and for ________________, _____
(the "Reporting Date") and the year-to-date period then ended (the
"Current Financials").  All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance with
GAAP, subject, in the case of quarterly or interim financial statements, to
year-end audit adjustments and the absence of footnotes, and fairly present the
Borrower's financial condition and the results of its operations as of the date
thereof.
Events of Default.  (Check one):






"	The undersigned does not have knowledge of
the occurrence of a Default or Event of Default under the Credit Agreement.
"	The undersigned has knowledge of the
occurrence of a Default or Event of Default under the Credit Agreement and
attached hereto is a statement of the facts with respect to thereto.






I hereby certify to the Lender as follows:






"	The Reporting Date does not xxxx the end
of one of the Borrower's fiscal quarters, hence I am completing only paragraph
__ below.
"	The Reporting Date marks the end of one of
the Borrower's fiscal quarters, hence I am completing all paragraphs below
except paragraph __.
"	The Reporting Date marks the end of the
Borrower's fiscal year, hence I am completing all paragraphs below.






Financial Covenants.  I further hereby certify as follows:

		1.	Minimum Adjusted Net Worth.  Pursuant to Section 6.12 of
the Credit Agreement, as of the Reporting Date the Borrower's Adjusted Net Worth
was $____________ which " satisfies " does not satisfy the requirements of Section 6.12.

		2.	Minimum EBITDA.  Pursuant to Section 6.13 of the Credit
Agreement, the Borrower's EBITDA for the ________ period ending on the Reporting
Date, was $____________, which " satisfies
" does not satisfy the requirements of
Section 6.13.
		3.	Capital Expenditures.  Pursuant to Section 7.10 of the
Credit Agreement, for the year-to-date period ending on the Reporting Date, the
Borrower has expended or contracted to expend during the _____________ year
ended ______________, ___, for Capital Expenditures, $__________________ in the
aggregate, which " satisfies " does not satisfy the requirements of Section
7.10.
		4.	Salaries.  As of the Reporting Date, the Borrower " is " is not in
compliance with Section 7.16 of the Credit Agreement concerning salaries.

Attached hereto are all relevant facts in reasonable detail to evidence, and
the computations of the financial covenants referred to above.  These
computations were made in accordance with GAAP.












ROCKSHOX, INC.,
a Delaware corporation

 
By	
[Name]
Its Chief Financial Officer













Exhibit C to Credit and Security Agreement
Premises
The Premises referred to in the Credit and Security Agreement are legally
described as follows:
(See Attached)
Exhibit D to Credit Agreement
OFFICER'S CERTIFICATE



TO:	Xxxxx Fargo Business Credit, Inc.
000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000 


To induce you to make one or more loans from time to time to Rockshox, Inc.,
a Delaware corporation (the "Borrower"), in accordance with the Credit
and Security Agreement dated December 10, 1999 between it and you (the
"Credit and Security Agreement") and all other Loan Documents (as defined
in the Credit and Security Agreement), I hereby represent and warrant to you, in
my capacity as _________________ of the Borrower, that each and every
representation and warranty set forth in Article V of the Credit and Security
Agreement is true and correct in all material respects as of the date
hereof.
Dated:  _____________












Very truly yours,

 
	

 
Exhibit E to Credit Agreement
FORM OF OPINION OF BORROWER'S COUNSEL
(See Attached)
Schedule 5.1 to Credit and Security Agreement
TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS, AND LOCATIONS OF COLLATERAL
 
 (See Attached)
Schedule 5.4 to Credit and Security Agreement
Subsidiaries
Rockshox Taiwan (branch office - in process)
 
Schedule 7.1 to Credit and Security Agreement
Permitted Liens
[See attached]
Schedule 7.2 to Credit and Security Agreement
Permitted Indebtedness and Guaranties
NONE.
 



Schedule 7.4 to Credit and Security Agreement
INVESTMENTS
None.





Article I	Definitions	1

Section 1.1	Definitions	1
Section 1.2	Cross References	9

Article II	Amount and Terms of the Credit Facility	9

Section 2.1	Revolving Advances	9
Section 2.2	Interest; Minimum Interest Charge; Default Interest;
Participations; Usury	10
Section 2.3	Fees	11
Section 2.4	Computation of Interest and Fees; When Interest Due and
Payable	11
Section 2.5	Maturity Date	11
Section 2.6	Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower	12
Section 2.7	Termination and Line Reduction Fees; Waiver of Termination and
Line Reduction Fees	12
Section 2.8	Mandatory Prepayment	12
Section 2.9	Payment	12
Section 2.10	Payment on Non-Banking Days	12
Section 2.11	Use of Proceeds	13
Section 2.12	Liability Records	13
Section 2.13	Deactivation of Credit Facility	13

Article III	Security Interest; Occupancy; Setoff	13

Section 3.1	Grant of Security Interest	13
Section 3.2	Notification of Account Debtors and Other Obligors	13
Section 3.3	Assignment of Insurance	14
Section 3.4	Occupancy	14
Section 3.5	License	14
Section 3.6	Financing Statement	15
Section 3.7	Setoff	15

Article IV	Conditions of Lending	15

Section 4.1	Conditions Precedent to the Initial Revolving
Advance	15
Section 4.2	Conditions Precedent to All Advances	17

Article V	Representations and Warranties	17

Section 5.1	Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number	17
Section 5.2	Authorization of Borrowing; No Conflict as to Law or
Agreements	18
Section 5.3	Legal Agreements	18
Section 5.4	Subsidiaries	18
Section 5.5	Financial Condition; No Adverse Change	18
Section 5.6	Litigation	19
Section 5.7	Regulation U	19
Section 5.8	Taxes	19
Section 5.9	Titles and Liens	19
Section 5.10	Plans	19
Section 5.11	Default	20
Section 5.12	Environmental Matters	20
Section 5.13	Submissions to Lender	21
Section 5.14	Financing Statements	21
Section 5.15	Rights to Payment	21

Article VI	Borrower's Affirmative Covenants	21

Section 6.1	Reporting Requirements	21
Section 6.2	Books and Records; Inspection and Examination	23
Section 6.3	Account Verification	24
Section 6.4	Compliance with Laws	24
Section 6.5	Payment of Taxes and Other Claims	24
Section 6.6	Maintenance of Properties	24
Section 6.7	Insurance	25
Section 6.8	Preservation of Existence	25
Section 6.9	Delivery of Instruments, etc.	25
Section 6.10	Collateral Account	25
Section 6.11	Performance by the Lender	26
Section 6.12	Minimum Book Net Worth	26
Section 6.13	Minimum EBITDA	27
Section 6.14	New Covenants	27
Section 6.15	Year 2000 Compliance	27

Article VII	Negative Covenants	28

Section 7.1	Liens	28
Section 7.2	Indebtedness	28
Section 7.3	Guaranties	29
Section 7.4	Investments and Subsidiaries	29
Section 7.5	Dividends	29
Section 7.6	Sale or Transfer of Assets; Suspension of Business
Operations	29
Section 7.7	Consolidation and Merger; Asset Acquisitions	30
Section 7.8	Sale and Leaseback	30
Section 7.9	Restrictions on Nature of Business	30
Section 7.10	Capital Expenditures	30
Section 7.11	Accounting	30
Section 7.12	Discounts, etc.	30
Section 7.13	Defined Benefit Pension Plans	30
Section 7.14	Place of Business; Name	30
Section 7.15	Organizational Documents	31
Section 7.16	Salaries	31
Section 7.17	Change in Ownership	31

Article VIII	Events of Default, Rights and Remedies	31

Section 8.1	Events of Default	31
Section 8.2	Rights and Remedies	33
Section 8.3	Certain Notices	33

Article IX	Miscellaneous	34

Section 9.1	No Waiver; Cumulative Remedies	34
Section 9.2	Amendments, Etc.	34
Section 9.3	Addresses for Notices, Etc.	34
Section 9.4	Further Documents	35
Section 9.5	Collateral	35
Section 9.6	Costs and Expenses	35
Section 9.7	Indemnity	35
Section 9.8	Participants	36
Section 9.9	Execution in Counterparts	36
Section 9.10	Binding Effect; Assignment; Complete Agreement; Exchanging
Information	36
Section 9.11	Severability of Provisions	37
Section 9.12	Headings	37
Section 9.13	Governing Law; Jurisdiction, Venue; Waiver of Jury
Trial	37