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Exhibit 10.30
 
[Execution]
 
FOURTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
 
between
 
INNOTRAC CORPORATION
 
“Borrower”
 
and
 
WACHOVIA BANK, NATIONAL ASSOCIATION
 
“Bank”
 
Dated: March 27, 2009

 
 

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TABLE OF CONTENTS
         
Table of Contents
                 
Page
       
1.
Definitions
 
1
 
1.1
Defined Terms:
 
1
 
1.2
Financial Terms
 
14
         
2.
The Credit Facility; Letters of Credit; Interest and Fees
 
14
 
2.1
The Credit Facility
 
14
 
2.2
Collections Account
 
14
 
2.3
Interest
 
15
 
2.4
Interest Rate Adjustments
 
15
 
2.5
Notice and Manner of Borrowing and Rate Conversion
 
15
 
2.6
Repayment of Loans
 
16
 
2.7
Additional Payment Provisions
 
16
 
2.8
Default Rate
 
17
 
2.9
Calculation of Interest
 
17
 
2.10
Letters of Credit
 
18
 
2.11
Fees
 
18
 
2.12
Statement of Account
 
19
 
2.13
Termination
 
19
 
2.14
USA Patriot Act Notice
 
19
         
3.
Conditions Precedent to Extensions of Credit
 
19
 
3.1
Conditions Precedent to Initial Loans
 
19
 
3.2
Conditions Precedent to Each Loan
 
21
         
4.
Representations and Warranties
 
21
 
4.1
Valid Existence and Power
 
21
 
4.2
Authority
 
22
 
4.3
Financial Condition
 
22
 
4.4
Litigation
 
22
 
4.5
Agreements, Etc
 
22
 
4.6
Authorizations
 
23
 
4.7
Title
 
23
 
4.8
Collateral
 
23
 
4.9
Jurisdiction of Organization; Location
 
23
 
4.10
Taxes
 
23
 
4.11
Labor Law Matters
 
23
 
4.12
Accounts
 
23
 
4.13
Judgment Liens
 
24
 
4.14
Corporate Structure
 
24
 
4.15
Deposit Accounts
 
24
 
4.16
Environmental
 
24
 
4.17
ERISA
 
24
 
4.18
Investment Company Act
 
24
 
4.19
Insider
 
25

 
 
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4.20
Sanctioned Persons; Sanctioned Countries
 
25
 
4.21
Compliance with Covenants; No Default
 
25
 
4.22
Fiscal Year
 
25
 
4.23
Full Disclosure
 
25
 
4.24
Borrower Information Certificate
 
25
         
5.
Affirmative Covenants of Borrower
 
25
 
5.1
Use of Loan Proceeds
 
25
 
5.2
Maintenance of Business and Properties
 
25
 
5.3
Insurance
 
26
 
5.4
Notice of Default
 
26
 
5.5
Inspections of Books and Records and Field Examinations
 
26
 
5.6
Financial Information
 
26
 
5.7
Maintenance of Existence and Rights
 
28
 
5.8
Payment of Taxes, Etc
 
28
 
5.9
Subordination
 
28
 
5.10
Compliance; Hazardous Materials
 
28
 
5.11
Further Assurances
 
28
 
5.12
Covenants Regarding Collateral
 
28
 
5.13
Post-Closing Covenants
 
29
         
6.
Negative Covenants of Borrower
 
29
 
6.1
Debt
 
29
 
6.2
Liens
 
30
 
6.3
Restricted Payments
 
31
 
6.4
Loans and Other Investments
 
31
 
6.5
Change in Business
 
31
 
6.6
Accounts
 
31
 
6.7
Transactions with Affiliates
 
31
 
6.8
No Change in Name, Offices or Jurisdiction of Organization; Removal of
Collateral
 
31
 
6.9
No Sale, Leaseback
 
32
 
6.10
Margin Stock
 
32
 
6.11
Tangible Collateral
 
32
 
6.12
Subsidiaries
 
32
 
6.13
Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets,
Name and Good Standing
 
32
 
6.14
Change of Fiscal Year or Accounting Methods
 
32
 
6.15
Deposit Accounts
 
33
         
7.
Financial Covenants
 
33
 
7.1
Fixed Charge Coverage Ratio
 
33
 
7.2
Capital Expenditures
 
33
 
7.3
Minimum Excess Availability
 
33
         
8.
Default
 
33
 
8.1
Events of Default
 
33
 
8.2
Remedies
 
35
 
8.3
Receiver
 
36
 
8.4
Deposits; Insurance
 
36

 
 
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9.
Security Agreement
 
36
 
9.1
Security Interest
 
36
 
9.2
Financing Statements; Power of Attorney
 
37
 
9.3
Entry
 
37
 
9.4
Other Rights
 
37
 
9.5
Accounts
 
37
 
9.6
Waiver of Marshaling
 
37
 
9.7
Control
 
38
         
10.
Miscellaneous
 
38
 
10.1
No Waiver, Remedies Cumulative
 
38
 
10.2
Survival of Representations
 
38
 
10.3
Indemnity By Borrower; Expenses
 
38
 
10.4
Notices
 
39
 
10.5
Governing Law
 
39
 
10.6
Successors and Assigns
 
39
 
10.7
Counterparts; Telecopied Signatures
 
39
 
10.8
No Usury
 
39
 
10.9
Powers
 
40
 
10.10
Approvals; Amendments
 
40
 
10.11
Participations and Assignments
 
40
 
10.12
Dealings with Multiple Borrowers
 
40
 
10.13
Waiver of Certain Defenses
 
40
 
10.14
Additional Provisions
 
41
 
10.15
Integration; Final Agreement
 
41
 
10.16
LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES
 
41
 
10.17
BINDING ARBITRATION; PRESERVATION OF REMEDIE
 
41

 
 
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FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
 
          THIS FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
“Agreement”), dated March 27, 2009, between INNOTRAC CORPORATION, a Georgia
corporation (“Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national
banking association (together with its successors and assigns, “Bank”).
 
W I T N E S S E T H:
 
          In consideration of the premises and of the mutual covenants herein
contained and to induce Bank to extend credit to Borrower, the parties hereto
agree that this Agreement amends and restates in its entirety that certain Third
Amended and Restated Loan and Security Agreement, dated March 28, 2006, as
previously amended, as follows:
 
          1.     Definitions. Capitalized terms that are not otherwise defined
herein shall have the meanings set forth in this Section 1.
 
                    1.1     Defined Terms:
 
          “Accession” has the meaning set forth in the Code.
 
          “Account” has the meaning set forth in the Code, together with any
guaranties, letters of credit, Letter-of-Credit Rights, and other security
therefor, including Supporting Obligations.
 
          “Account Debtor” means a Person who is obligated under any Account,
Chattel Paper, General Intangible or Instrument.
 
          “Affiliate” of a Person means (a) any Person directly or indirectly
owning five (5%) percent or more of the voting stock or equity interests of such
named Person or of which the named Person owns five (5%) percent or more of such
voting stock or equity interests; (b) any Person controlling, controlled by or
under common control with such named Person; (c) any officer, director or
employee of such named Person or any Affiliate of the named Person; and (d) any
family member of the named Person or any Affiliate of such named Person.
 
          “Applicable Margin” means, at any time of determination by Bank, as to
any Base Rate Loan or LMIR Loan, the relevant percentage below corresponding to
Borrower’s Average Excess Availability set forth below:
 

             
Tier
 
Average Excess Availability
 
Base Rate
Loans
 
LMIR Loans
I
 
< $5,000,000
 
2.50%
 
3.50%
             
II
 
> $5,000,000 but < $10,000,000
 
2.25%
 
3.25%
             
III
 
> $10,000,000
 
2.00%
 
3.00%
             

 
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provided, that, (i) the Applicable Margin shall be calculated and established
once each fiscal quarter (commencing with the fiscal quarter commencing on or
about July 1, 2009) and shall remain in effect until adjusted for the next
fiscal quarter, (ii) each adjustment of the Applicable Margin shall be effective
as of the first day of each fiscal quarter based on the Average Excess
Availability for the immediately preceding fiscal quarter, and (iii) the
Applicable Margin through the fiscal quarter ending on or about June 30, 2009
shall be the amount set forth in Tier II above. In the event that at any time
after the end of a fiscal quarter the Average Excess Availability for such
fiscal quarter used for the determination of the Applicable Margin is different
than the actual amount of the Average Excess Availability for such fiscal
quarter as a result of the inaccuracy of information provided by or on behalf of
Borrower to Bank for the calculation of Average Excess Availability, the
Applicable Margin for such prior fiscal quarter shall be adjusted to the
applicable percentage based on such actual Average Excess Availability and any
difference in the amount of interest for the applicable period as a result of
such recalculation shall be, in the case of additional interest to be paid,
promptly paid to Bank, or in the case of excess interest paid, reimbursed to
Borrower. The foregoing shall not be construed to limit the rights of Bank with
respect to the amount of interest payable after a Default or Event of Default
whether based on such recalculated percentage or otherwise. Nothing in this
paragraph shall limit Bank’s rights to impose the Default Rate under Section 2.8
of this Agreement, if applicable.
 
          “Arbitration Rules” has the meaning set forth in Section 10.17.
 
          “AT&T” shall mean AT&T Services, Inc., successor in interest to
BellSouth Corporation, and its successor and assigns.
 
          “AT&T Agreement” means (i) the Innotrac Corporation Master Services
Agreement No. R13017M, dated as of March 8, 2002, as heretofore amended, between
Borrower and AT&T, successor in interest to BellSouth Affiliate Services
Corporation, (ii) all letter purchase orders thereunder, and (iii) all other
contracts between Borrower and AT&T relating thereto, as all of the foregoing
may be amended or otherwise modified from time to time.
 
          “Availability” means, on any date, the excess, if any, of (i) the
lesser of the Borrowing Base on such date or the Revolver Commitments on such
date minus (ii) the aggregate principal amount of outstanding Loans and the
aggregate amount of outstanding Letter of Credit Obligations on such date.
 
          “Average Excess Availability” means, on any date, an amount equal to
the total amount of Availability for each day during the immediately preceding
ninety (90) day period, as determined by Bank pursuant to the terms hereof,
divided by ninety (90).
 
          “Base Rate” means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the greater
of (i) the Federal Funds Rate in effect on such day plus ½ of 1% or (ii) the
Prime Rate in effect on such day. If for any reason Bank shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any reason,
including the inability or failure of Bank to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined without
regard to clause (i) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.
 
          “Base Rate Loan” means a Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the Base Rate.

 
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          “Borrower Information Certificate” means the certificate, dated as of
the Closing Date, by Borrower addressed to Bank and attached as Exhibit 3.1.2
hereto concerning certain factual information about Borrower.
 
          “Borrowing Base” means, on any date of determination thereof, an
amount equal to:
 
                    (i)       up to eighty-five (85%) percent of the total
amount of Eligible Accounts, plus
 
                    (ii)      the lesser of (a) $2,000,000 or (b) up to fifty
(50%) percent of the total amount of Eligible Inventory; minus
 
                    (iii)      any Reserves.
 
          “Borrowing Base Certificate” has the meaning set forth in Section
5.6(a).
 
          “Business Day” means a weekday on which Bank is open for business in
Charlotte, North Carolina and Atlanta, Georgia.
 
          “Capital Expenditures” shall mean, with respect to any Person for any
period, the aggregate of all expenditures by such Person and its Subsidiaries
during such period that in accordance with GAAP are or should be included in
“property, plant and equipment” or in a similar fixed asset account on its
balance sheet, whether such expenditures are paid in cash or financed and
including that portion of the obligations under Capital Leases that is
capitalized on the balance sheet of such Person during such period.
 
          “Capital Lease” means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee which would,
in accordance with GAAP, be required to be accounted for as a capital lease on
the balance sheet of such Person.
 
          “Capital Lease Obligation” means, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
 
          “Cash Flow/Availability Projections” means a report, in form
satisfactory to Bank in all respects, setting forth Borrower’s forecasted
consolidated and consolidating cash flows and borrowing availability prepared on
a week by week basis.
 
          “Chattel Paper” has the meaning set forth in the Code, including
Electronic Chattel Paper and Tangible Chattel Paper, together with any
guaranties, letters of credit, Letter-of-Credit Rights, and other security
therefore, including Supporting Obligations.
 
          “Closing Date” means the date on which all of the conditions precedent
in Section 3 of this Agreement are satisfied or otherwise waived or postponed by
Bank in writing and the initial Loans are made under this Agreement.
 
          “Code” means the Uniform Commercial Code (or any successor statute),
as adopted and in force in the State of Georgia or, when the laws of any other
state govern the method or manner of the perfection or enforcement of any
security interest in any of the Collateral, the Uniform Commercial Code (or any
successor statute) of such state. Any term used in this Agreement and in any
financing statement filed in connection herewith which is defined in the Code
and not otherwise defined in this Agreement or in any other Loan Document has
the meaning given to the term in the Code.

 
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          “Collateral” means all personal property of Borrower, wherever located
and whether now owned by Borrower or hereafter acquired, including but not
limited to: (a) all Inventory; (b) all General Intangibles; (c) all Accounts;
(d) all Chattel Paper; (e) all Instruments and Documents and any other
instrument or intangible representing payment for goods or services; (f) all
Equipment; (g) all Investment Property; (h) all Commercial Tort Claims; (i) all
Letter-of-Credit Rights; (j) all Deposit Accounts and funds on deposit therein,
including but not limited to any Disbursements Account, Collections Account or
funds otherwise on deposit with or under the control of Bank or its agents or
correspondents; (k) all Fixtures; and (l) all parts, replacements,
substitutions, profits, products, Accessions and cash and non-cash Proceeds and
Supporting Obligations of any of the foregoing (including, but not limited to,
insurance proceeds) in any form and wherever located. Collateral shall include
all written or electronically recorded books and records relating to any such
Collateral and other rights relating thereto.
 
          “Collateral Location” means any location where Collateral is located,
as identified and certified by Borrower on the Borrower Information Certificate.
 
          “Collections Account” means any Deposit Account maintained by Borrower
at Bank to which collections, deposits and other payments on or with respect to
Collateral may be made pursuant to the terms hereof, to which only Bank shall
have access to withdraw or otherwise direct the disposition of funds on deposit
therein.
 
          “Commercial Tort Claim” has the meaning set forth in the Code.
 
          “Consolidated Net Income” shall mean, with respect to any Person for
any period, the aggregate of the net income (loss) of such Person, for such
period (excluding to the extent included therein any extraordinary and/or one
time or unusual and non-recurring gains or any non-cash losses) after deducting
all charges which should be deducted before arriving at the net income (loss)
for such period and, without duplication, after deducting the Provision for
Taxes for such period, all as determined in accordance with GAAP. For the
purposes of this definition, net income excludes any gain or non-cash loss,
together with any related Provision for Taxes for such gain or non-cash loss,
realized upon the sale or other disposition of any assets that are not sold in
the ordinary course of business (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or of any capital stock of such
Person and any net income realized or loss incurred as a result of changes in
accounting principles or the application thereof to such Person.
 
          “Debt” means all liabilities of a Person as determined under GAAP and
all obligations which such Person has guaranteed or endorsed or is otherwise
secondarily or jointly liable for, and shall include, without limitation and
without duplication (a) all obligations for borrowed money or purchased assets,
(b) obligations secured by assets whether or not any personal liability exists,
(c) the capitalized amount of any capital or finance lease obligations, (d) the
unfunded portion of pension or benefit plans or other similar liabilities,
(e) obligations as a general partner, (f) contingent obligations pursuant to
guaranties, endorsements, letters of credit and other secondary liabilities, (g)
obligations for deposits, and (h) obligations under Swap Agreements.
 
          “Default” shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
 
          “Default Rate”, on any date, means a rate per annum that is equal to
(i) in the case of each Loan outstanding on such date, two (2%) percent in
excess of the rate otherwise applicable to such Loan on such date, and (ii) in
the case of any other Obligations outstanding on such date, two (2%) percent in
excess of the Prime Rate in effect on such date, provided that Obligations under
Swap Agreements shall bear interest at the Default Rate determined in accordance
with the terms of said Swap Agreements.

 
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          “Deposit Account” has the meaning set forth in the Code.
 
          “Disbursements Account” means any Deposit Account maintained by
Borrower with Bank for the purpose of depositing the proceeds of Loans made
pursuant hereto.
 
          “Document” has the meaning set forth in the Code.
 
          “Early Termination Fee” means the fee payable by Borrower to Bank
pursuant to Section 2.13 hereof in an amount equal to (i) two (2%) percent of
the Revolver Commitment in the event of termination of the Revolver Commitment
on or before the first anniversary of the Closing Date, (ii) one (1%) percent of
the Revolver Commitment in the event of termination of the Revolver Commitment
after the first anniversary of the Closing Date but on or before the second
anniversary of the Closing Date, and (iii) one half of one (.50%) percent of the
Revolver Commitment in the event of termination of the Revolver Commitment after
the second anniversary of the Closing Date but before the third anniversary of
the Closing Date.
 
          “EBITDA” shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Consolidated Net Income of such Person for such period,
plus (b) depreciation, amortization and other non-cash charges (including, but
not limited to, imputed interest, impairment to goodwill required under FASB 142
(as amended or restated), and deferred compensation) for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person),
all in accordance with GAAP, plus (c) Interest Expense for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person),
plus (d) the Provision for Taxes for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person).
 
          “Electronic Chattel Paper” has the meaning set forth in the Code.
 
          “Eligible Accounts” means all Accounts in U.S. dollars evidenced by a
paper invoice or electronic equivalent (valued at the face amount of such
invoice, less maximum discounts, credits and allowances which may be taken by
Account Debtors on such Accounts, and net of any sales tax, finance charges or
late payment charges included in the invoiced amount) created or acquired by
Borrower arising from the sale of Inventory and/or (as approved by Bank) the
provision of certain services in Borrower’s ordinary course of business in which
Bank has a first (and only) priority, perfected security interest, but excluding
any of the following, without duplication,
 
                    (a)     Accounts outstanding for longer than (i) one hundred
twenty (120) days from the original invoice date or (ii) ninety (90) days from
the original due date, which ever is shorter;
 
                    (b)     all Accounts owed by an Account Debtor if more than
fifty (50%) percent of the Accounts owed by such Account Debtor to Borrower are
deemed ineligible hereunder pursuant to clause (a) of this definition;
 
                    (c)      Accounts owing from any Affiliate of Borrower;
 
                    (d)     Accounts owed by a creditor of Borrower to the
extent of the amount of the Debt of Borrower to such creditor;
 
                    (e)     Accounts which are in dispute or subject to any
counterclaim, contra-account, volume rebate, cooperative advertising accrual,
deposit or offset, to the extent thereof;

 
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                    (f)     Accounts owed by an Account Debtor for whom Borrower
maintains Inventory purchased from Borrower’s suppliers on hand to the extent
amounts Borrower owes such suppliers exceeds such Accounts;
 
                    (g)     Accounts owing by any Account Debtor which is not
Solvent;
 
                    (h)     Accounts arising from a sale on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or similar basis
or which is subject to repurchase, return, rejection, repossession, loss or
damage;
 
                    (i)     Accounts owed by an Account Debtor that (1) is a
Sanctioned Person or (2) is located outside of the United States of America;
 
                    (j)     Accounts owed by the United States of America or
other governmental or quasi-governmental unit, agency or subdivision, unless,
with respect to the United States of America, or any governmental or
quasi-governmental unit, agency or subdivision thereof, Borrower has complied
with the Assignment of Claims Act of 1940, as amended, to the extent necessary
in order for Bank to be able to require payment on such Accounts to be made
directly to Bank during the existence of an Event of Default;
 
                    (k)     Accounts as to which the goods giving rise to the
Account have not been delivered to and accepted by the Account Debtor or the
service giving rise to the Account has not been completely performed or which do
not represent a final sale;
 
                    (l)     Accounts evidenced by a note or other Instrument or
Chattel Paper or reduced to judgment;
 
                    (m)     Accounts for which the total of all Accounts from an
Account Debtor (together with the Affiliates of the Account Debtor) exceed ten
(10%) percent of the total Accounts of Borrower (to the extent of such excess)
or Accounts for which the total of all Accounts from Smith & Hawken, Ltd.,
exceed fifteen (15%) percent of the total Accounts of Borrower (to the extent of
such excess), or Accounts for which the total of all Accounts from Target.com
exceed twenty (20%) percent of the total Accounts of Borrower (to the extent of
such excess), or Accounts for which the total of all Accounts from AT&T
Corporation exceed twenty-five (25%) percent of the total Accounts of Borrower
(to the extent of such excess);
 
                    (n)     Accounts which, by contract, subrogation, mechanics’
lien laws or otherwise, are subject to claims by Borrower’s creditors or other
third parties or which are owed by Account Debtors as to whom any creditor of
Borrower (including any bonding company) has lien or retainage rights;
 
                    (o)     Accounts the validity, collectibility, or amount of
which is determined in good faith by Borrower or Bank to be doubtful;
 
                    (p)     Accounts owed by an Account Debtor which is located
in a jurisdiction where Borrower is required to qualify to transact business or
to file reports, unless Borrower has so qualified or filed;
 
                    (q)     Accounts owed by an Account Debtor who disputes the
liability therefor;

 
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                    (r)     Accounts owed by an Account Debtor that shall be the
subject of any proceeding of the type described in Section 8.1(g) or (h);
 
                    (s)     Accounts for which aged credit balances are
outstanding for longer than the sooner of (i) one hundred twenty (120) days from
the original invoice date or (ii) ninety (90) days from the original due date;
or
 
                    (t)     Any other Account which Bank otherwise in its sole
and absolute discretion deems to be ineligible.
 
No Account shall be an Eligible Account if any representation, warranty or
covenant herein relating thereto shall be untrue, misleading or in default. Any
Accounts that are not Eligible Accounts shall nevertheless be part of the
Collateral.
 
          “Eligible Inventory” means all Inventory now owned or hereafter
acquired by Borrower in the ordinary course of its business as presently
conducted consisting of raw materials and finished goods which Bank has
determined to be eligible for credit extensions hereunder, valued at the lower
of cost or market on a first-in, first-out basis, but excluding, however, in any
event, without limitation of the foregoing, unless otherwise approved by Bank,
any such Inventory which
 
                    (a)     is acquired from a customer acceptable to Bank is
subject to a buy-back agreement with such customer in form and substance
reasonably satisfactory to Bank;
 
                    (b)     is not at all times subject to a duly perfected,
first priority (and only) security interest in favor of Bank;
 
                    (c)     is not in good and saleable condition;
 
                    (d)     is on consignment from, or subject to, any
repurchase agreement with any supplier;
 
                    (e)     constitutes returned, repossessed, damaged,
defective, obsolete, or slow-moving goods as determined by Bank;
 
                    (f)     does not conform in all respects to the warranties
and representations set forth in the Loan Documents in respect of Inventory
Collateral or Collateral generally;
 
                    (g)     is subject to a negotiable document of title (unless
issued or endorsed to Bank);
 
                    (h)     is subject to any license or other agreement that
limits or restricts Borrower’s or Bank’s right to sell or otherwise dispose of
such inventory (unless the licensor and Borrower enter into a licensor waiver in
form and substance satisfactory to Bank);
 
                    (i)     is not located at a Collateral Location;
 
                    (j)     constitutes inventory-in-transit;
 
                    (k)     is located at a Collateral Location with respect to
which, if not owned and controlled by Borrower, Bank has not received from the
Person owning such property or in control thereof a Third Party Waiver (unless
Reserves are imposed with regard thereto as determined by Bank in its sole and
absolute discretion);

 
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                    (l)       consists of any packaging materials, supplies or
promotional materials; or
 
                    (m)     which Bank otherwise in its sole and absolute
discretion deems to not be Eligible Inventory.
 
Any Inventory that is not Eligible Inventory shall nevertheless be part of the
Collateral.
 
          “Environmental Laws” means, collectively the following acts and laws,
as amended: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act; the Toxic Substances Act; the Clean
Water Act; the Clean Air Act; the Oil Pollution and Hazardous Substances Control
Act of 1978; and any other “Superfund” or “Superlien” law or any other federal,
state or local statute, law, ordinance, code, rule, regulation, order or decree
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect.
 
          “Equipment” has the meaning set forth in the Code.
 
          “ERISA” has the meaning set forth in Section 4.17.
 
          “Eurodollar Reserve Percentage” means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
 
          “Event of Default” shall mean the occurrence or existence of any event
or condition described in Section 8.1 hereof.
 
          “Federal Funds Rate” means, for any period, a fluctuating interest
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by Bank from three Federal Funds brokers of recognized
standing selected by it.
 
          “Financial Covenants” means the covenants set forth in Section 7
hereof.
 
          “Fixed Charge Coverage Ratio” shall mean, as to any Person, with
respect to any period, the ratio of: (a) the amount equal to EBITDA of such
Person for such period to (b) the Fixed Charges of such Person for such period.
 
          “Fixed Charges” shall mean, as to any Person, with respect to any
period, the sum of, without duplication, (a) the cash portion of Interest
Expense during such period, plus (b) all unfinanced Capital Expenditures during
such period, plus (c) all regularly scheduled (as determined at the beginning of
the respective period) principal payments in respect of Debt for borrowed money
(excluding payments in respect of the Loans) and Debt with respect to Capital
Leases (and without duplicating items (a) and (c) of this definition, the
interest component with respect to Debt under Capital Leases) during such
period, plus (d) all dividends and other distributions, and repurchases and
redemptions, in respect of capital stock paid in cash or other immediately
available funds during such period, plus (e) all income taxes paid during such
period in cash.

 
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          “Fixtures” has the meaning set forth in the Code.
 
          “GAAP” means generally accepted accounting principles as in effect in
the United States from time to time.
 
          “General Intangibles” has the meaning set forth in the Code, and
includes, without limitation, general intangibles of Borrower, whether now owned
or hereafter created or acquired by Borrower, including all choses in action,
causes of action, company or other business records, inventions, blueprints,
designs, patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, permits, tax refund claims,
computer programs, operational manuals, internet addresses and domain names,
insurance refunds and premium rebates, all claims under guaranties, security
interests or other security held by or granted to Borrower to secure payment of
any of any of Borrower’s Accounts by an Account Debtor, all rights to
indemnification and all other intangible property of Borrower of every kind and
nature (other than Accounts).
 
          “Guarantor” means any Person now or hereafter guaranteeing, endorsing
or otherwise becoming liable for any Obligations.
 
          “Guaranty Agreement” means any guaranty of all or any Obligations now
or hereafter executed and delivered by any Guarantor to Bank, as amended or
otherwise modified from time to time.
 
          “Instrument” has the meaning set forth in the Code.
 
          “Interest Expense” shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during such period (including the interest component of
Capital Leases for such period), including, without limitation, discounts in
connection with the sale of any Accounts and bank fees, commissions, discounts
and other fees and charges owed with respect to letters of credit, banker’s
acceptances or similar instruments.
 
          “Inventory” has the meaning set forth in the Code.
 
          “Investment Property” has the meaning set forth in the Code.
 
          “Item” means any “item” as defined in Section 4-104 of the Code, and
shall also mean and include checks, drafts, money orders or other media of
payment.
 
          “Letter of Credit” means a letter of credit issued by Bank for the
account of Borrower as provided in Section 2.1.1 and 2.10 hereof.
 
          “Letter of Credit Obligations” means all obligations of Borrower to
Bank, including but not limited to reimbursement obligations, commissions and
fees, incurred by Borrower in connection with Bank’s issuance, amendment,
renewal or extension of Letters of Credit hereunder.
 
          “Letter-of-Credit Right” has the meaning set forth in the Code.

 
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          “Lien” means any mortgage, deed of trust, deed to secure debt, pledge,
statutory lien or other lien arising by operation of law, security interest,
trust arrangement, security deed, financing lease, collateral assignment or
other encumbrance, conditional sale or title retention agreement, or any other
interest in property designed to secure the repayment of obligations, whether
arising by agreement or under any statute or law or otherwise.
 
          “LIBOR Market Index Rate”, for any day, means the LIBOR Rate where
LIBOR is defined as the rate for 1 month U.S. dollar deposits as reported on
Telerate page 3750 as of 11:00 a.m., London time, on such day, or if such day is
not a London business day, then the immediately preceding London business day
(or if not so reported, then as determined by Bank from another recognized
source or interbank quotation).
 
          “LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by Bank pursuant to the following
formula:

       
LIBOR Rate=
LIBOR
   
1.00 – Eurodollar Reserve Percentage

 
          “LMIR Loan” means a Loan, or portion thereof, during any period in
which it bears interest at a rate based upon the LIBOR Market Index Rate.
 
          “Loans” means the loans now or hereafter made by Bank to Borrower on a
revolving basis pursuant to Section 2.1 hereof (involving advances, repayments
and readvances).
 
          “Loan Documents” means this Agreement, each other Security Agreement,
each Guaranty Agreement, the Notice of Borrowings, the Borrower Information
Certificate, the Borrowing Base Certificates, UCC financing statements and all
other agreements, documents and instruments now or hereafter evidencing,
describing, guaranteeing or securing the Obligations or delivered in connection
herewith (excluding Swap Agreements), as they may be modified, amended,
extended, renewed or substituted from time to time.
 
          “Material Adverse Effect” means any (i) material adverse effect upon
the validity, performance or enforceability of any of the Loan Documents or any
of the transactions contemplated hereby or thereby, (ii) material adverse effect
upon the properties, business, prospects or condition (financial or otherwise)
of Borrower and/or any other Person obligated under any of the Loan Documents,
(iii) material adverse effect upon the ability of Borrower or any other Person
to fulfill any obligation under any of the Loan Documents, or (iv) material
adverse effect on the Collateral.
 
          “Material Agreement” means (a) the agreements listed on Schedule 7 to
the Borrower Information Certificate and (b) each other agreement to which
Borrower or any Guarantor is a party (other than the Loan Documents) (i) which
is deemed to be a material contract as provided in Regulation S-K promulgated by
the Securities and Exchange Commission under the Securities Act of 1933 or (ii)
for which breach, termination, cancellation, nonperformance or failure to renew
could reasonably be expected to have a Material Adverse Effect.
 
          “Net Proceeds” means, with respect to a disposition of any Collateral,
the proceeds (including cash receivable (when received) by way of deferred
payment) received by Borrower in cash from the sale, lease, transfer or other
disposition of such Collateral, including insurance proceeds and awards of
compensation received with respect to the destruction or condemnation of all or
part of such Collateral, net of: (i) the reasonable and customary costs and
expenses of such sale, lease, transfer or other disposition (including legal
fees and sales commissions); (ii) amounts applied to repayment of Debt for
borrowed money (other than the Obligations) secured by a Permitted Lien on such
Collateral disposed of that is senior to Bank’s Liens; and (iii) in connection
with any sale of Collateral, a reasonable reserve (not to exceed five (5%)
percent of the total purchase price) for post-closing adjustments to the
purchase price, provided that upon the expiration of not more than ninety (90)
days after the sale, any remaining reserve balance is remitted to Bank for
application to the Obligations.

 
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          “Notice of Borrowing” with respect to Loans means the written request
for a Loan as identified in Section 2.5.2 hereof.
 
          “OFAC” means the United States Department of the Treasury’s Office of
Foreign Assets Control or any successor thereto.
 
          “Obligations” means all obligations now or hereafter owed to Bank or
any Affiliate of Bank by Borrower, whether related or unrelated to the Loans,
this Agreement or the Loan Documents, including, without limitation, amounts
owed or to be owed under the terms of the Loan Documents, or arising out of the
transactions described therein, including, without limitation, the Loans, any
Debt arising out of or relating to any Deposit Accounts of Borrower at Bank or
any Affiliate of Bank or any cash management services or other products or
services, including merchant card and ACH transfer services, Letter of Credit
Obligations for outstanding Letters of Credit, obligations for banker’s
acceptances issued for the account of Borrower or its Subsidiaries, amounts paid
by Bank under Letters of Credit or drafts accepted by Bank for the account of
Borrower or its Subsidiaries, together with all interest accruing thereon,
including any interest on pre-petition Debt accruing after bankruptcy, all
existing and future obligations under any Swap Agreements between Bank or any
Affiliate of Bank and Borrower whenever executed (including obligations under
Swap Agreements entered into prior to any transfer or sale of Bank’s interests
hereunder if Bank ceases to be a party hereto), all fees, all costs of
collection, attorneys’ fees and expenses of or advances by Bank which Bank pays
or incurs in discharge of obligations of Borrower or to inspect, repossess,
protect, preserve, store or dispose of any Collateral, whether such amounts are
now due or hereafter become due, direct or indirect and whether such amounts due
are from time to time reduced or entirely extinguished and thereafter
re-incurred.
 
          “Permitted Debt” has the meaning set forth in Section 6.1 hereof.
 
          “Permitted Liens” has the meaning set forth in Section 6.2 hereof.
 
          “Person” means any natural person, corporation, unincorporated
organization, trust, joint stock company, joint venture, association, company,
limited or general partnership, limited liability company, any government or any
agency or political subdivision of any government, or any other entity or
organization.
 
          “Prime Rate” means that rate announced by Bank from time to time as
its prime rate and is one of several interest rate bases used by Bank. Bank
lends at rates both above and below Bank’s Prime Rate, and Borrower acknowledges
that Bank’s Prime Rate is not represented or intended to be the lowest or most
favorable rate of interest offered by Bank.
 
          “Proceeds” has the meaning set forth in the Code.
 
          “Projections” means Borrower’s forecasted consolidated and
consolidating balance sheets, income statements, cash flow statements (including
a detail of capital expenditures), Borrowing Base projections and financial
covenant compliance prepared on a month by month basis, all of the foregoing to
be on a consistent basis with Borrower’s historical financial statements,
together with appropriate supporting details and a statement of underlying
assumptions.

 
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          “Properly Contested” means, in the case of any Debt of Borrower or any
Guarantor (including any taxes) that is not paid as and when due or payable by
reason of Borrower’s or such Guarantor’s bona fide dispute concerning its
liability to pay same or concerning the amount thereof, (i) such Debt is being
properly contested in good faith by appropriate proceedings promptly instituted
and diligently conducted; (ii) Borrower or such Guarantor has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Debt will not have a Material Adverse Effect and will not
result in a forfeiture or sale of any assets of Borrower or such Guarantor; (iv)
no Lien is imposed upon any of Borrower’s or such Guarantor’s assets with
respect to such Debt unless such Lien is at all times junior and subordinate in
priority to the Liens in favor of Bank (except only with respect to property
taxes that have priority as a matter of applicable state law) and enforcement of
such Lien is stayed during the period prior to the final resolution or
disposition of such dispute; (v) if the Debt results from, or is determined by
the entry, rendition or issuance against Borrower or such Guarantor or any of
its assets of a judgment, writ, order or decree, enforcement of such judgment,
writ, order or decree is stayed pending a timely appeal or other judicial
review; and (vi) if such contest is abandoned, settled or determined adversely
(in whole or in part) to Borrower or such Guarantor, Borrower or such Guarantor
forthwith pays such Debt and all penalties, interest and other amounts due in
connection therewith.
 
          “Provision for Taxes” shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, county or local, and
whether foreign or domestic, that are paid or payable by any Person in respect
of any period in accordance with GAAP.
 
          “Regulated Materials” means any hazardous, toxic or dangerous waste,
substance or material, the generation, handling, storage, disposal, treatment or
emission of which is subject to any Environmental Law.
 
          “Reserves” means reserved amounts as may be required by Bank at any
time and from time to time in Bank’s good faith discretion, including but not
limited to (a) reserves for Swap Agreement Obligations, (b) dilution with
respect to Accounts (based on the ratio of the aggregate amount of non-cash
reductions in Accounts for any period to the aggregate dollar amount of the
sales of Borrower for such period) as calculated by Bank for any period is or is
reasonably anticipated to be greater than five (5%) percent, (c) returns,
discounts, claims, credits and allowances of any nature that are not paid
pursuant to the reduction of Accounts, and (d) amounts due or to become due to
the owners and lessors of the Specified Third Party Locations and any other
premises where Collateral having a net book value in excess of $1,500,000 is
located, other than for those locations with respect to which Bank has received
a Third Party Waiver acceptable to Bank; provided, that, (i) the Reserves
described in this clause (d) shall not be established prior to the date that is
one hundred twenty (120) days following the Closing Date, and (ii) so long as no
Default or Event of Default exists or has occurred and is continuing, the
Reserves described in this clause (d) shall not exceed at any time the amount
due or to become due for the next two (2) months to the owner or lessor of the
Specified Third Party Locations or any other premises where Collateral having a
net book value in excess of $1,500,000 is located.
 
          “Revolver Commitment” means the commitment of Bank, subject to the
terms and conditions herein, to make Loans and issue Letters of Credit in
accordance with the provisions of Section 2 hereof in an aggregate amount not to
exceed $15,000,000 at any one time.
 
          “Sanctioned Country” means a country subject to the sanctions program
identified on the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html or as otherwise
published from time to time.

 
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          “Sanctioned Person” means (i) a Person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/ index.html or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or
(C) a Person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.
 
          “Security Agreement” means this Agreement as it relates to a security
interest in the Collateral, and any other mortgage instrument, security
agreement or similar agreement, document or instrument now or hereafter executed
by Borrower or other Person granting Bank a security interest in any Collateral
to secure the Obligations, as each may be amended or otherwise modified from
time to time.
 
          “Senior Officer” means the chairman of the board of directors, the
president, chief financial officer or the controller of, or in-house legal
counsel to, Borrower.
 
          “Solvent” means, as to any Person, that such Person has capital
sufficient to carry on its business and transactions in which it is currently
engaged and all business and transactions in which it is about to engage, is
able to pay its debts as they mature, and has assets having a fair value greater
than its liabilities, at fair valuation.
 
          “Specified Third Party Locations” shall mean the following locations
leased by Borrower in which Collateral is or will be maintained on or after the
Closing Date: (a) 6655 Sugarloaf Parkway, Duluth, Georgia; (b) 605 W. Crossroads
Parkway, Bolingbrook, Illinois; (c) 2305 Litton Lane, Hebron, Kentucky; and (d)
3357 Southpark Place, Grove City, Ohio.
 
          “Subordinated Debt” means Debt and all other obligations owed by
Borrower to any Person other than Bank which are subordinated to the
Obligations.
 
          “Subsidiary” means any corporation, partnership or other entity in
which Borrower, directly or indirectly, owns more than fifty (50%) percent of
the stock, capital or income interests, or other beneficial interests, or which
is effectively controlled by Borrower.
 
          “Supporting Obligation” has the meaning set forth in the Code.
 
          “Swap Agreement” has the meaning for swap agreement as defined in 11
U.S.C. § 101, as in effect from time to time, or any successor statute, and
includes, without limitation, any rate swap agreement, forward rate agreement,
commodity swap, commodity option, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement, rate floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate
swap agreement, currency option and any other similar agreement.
 
          “Tangible Chattel Paper” has the meaning set forth in the Code.
 
          “Term” means the period from and including the Closing Date to but not
including the Termination Date.
 
          “Termination Date” means the earliest of (i) June 30, 2012, (ii) the
date on which Borrower terminates this Agreement and the credit facilities
provided hereunder pursuant to Section 2.13 hereof, and (iii) the date on which
Bank terminates its obligation to make Loans and other extensions of credit to
Borrower pursuant to Section 8.2(a) hereof.

 
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          “Third Party Waiver” means a waiver or subordination of Liens
satisfactory to Bank from any lessors, mortgagees, warehouse operators,
processors or other third parties that might have lien holders’ enforcement
rights against any Collateral, waiving or subordinating those rights in favor of
Bank and assuring Bank’s access to the Collateral in exercise of Bank’s rights
hereunder.
 
          “USA Patriot Act” means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT) Act of 2001, as amended.
 
                    1.2     Financial Terms. All financial terms used herein
shall have the meanings assigned to them under GAAP unless another meaning shall
be specified.
 
          2.       The Credit Facility; Letters of Credit; Interest and Fees.
 
                    2.1     The Credit Facility Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to Borrower and to issue
Letters of Credit on behalf of Borrower from time to time during the Term in
amounts such that the aggregate principal amount of Loans and the face amount of
any Letters of Credit at any one time outstanding will not exceed the lesser of
(i) the Revolver Commitment and (ii) the Borrowing Base. Loans may be Base Rate
Loans, or LMIR Loans. Within the foregoing limit, Borrower may borrow, prepay
and reborrow Loans at any time during the Term. All outstanding principal
amounts and accrued interest hereunder shall be due and payable in accordance
with the terms of this Agreement.
 
                    2.2     Collections Account.
 
                              2.2.1     Lockbox; Collections Account. Borrower
shall notify and direct all Account Debtors to forward all payments on Accounts
to the lockbox under Bank’s control on the Closing Date from which all items of
payment will be deposited in the Collections Account; provided, however, that
Bank shall have the right to directly contact Account Debtors at any time to
ensure that payments on the Accounts are directed to the lockbox. Borrower shall
continue to pay all of Bank’s standard fees and charges in connection with such
lockbox arrangement and Collections Account as such fees and charges may change
from time to time. All payment items received by Borrower on Accounts and sale
of Inventory and other Collateral shall be held by Borrower in trust for Bank
and not commingled with Borrower’s funds and shall be sent promptly by Borrower
to the lockbox. All such items shall be the exclusive property of Bank upon the
earlier of the receipt thereof by Bank or by Borrower. Borrower hereby grants to
Bank a security interest in and lien upon all items and balances held in any
lockbox, the Disbursements Account and the Collections Account as Collateral for
the Obligations, in addition to and cumulative with the general security
interest in all assets of Borrower (including all Deposit Accounts) contained in
Section 9.1 hereof.
 
                              2.2.2     Power of Attorney. Borrower hereby
irrevocably appoints Bank (and any duly authorized Person designated by Bank) as
Borrower’s attorney-in-fact to endorse Borrower’s name on any checks, drafts,
money orders or other media of payment which come into Bank’s possession or
control; this power being coupled with an interest is irrevocable so long as any
of the Obligations remain outstanding. Such endorsement by Bank under power of
attorney shall, for all purposes, be deemed to have been made by Borrower (prior
to any subsequent endorsement by Bank) in negotiation of the item.
 
                              2.2.3     Application of Payments. Payment items
received into the Collections Account shall be applied by Bank on account of the
Loans on the Business Day after deposited by Borrower, subject to chargebacks
for uncollected payment items, and if no Event of Default exists and no Loans
are then outstanding or have been repaid, Bank shall pay over such of the
proceeds of such payments to a Deposit Account maintained by Borrower at Bank
and designated in writing by Borrower. No payment item received by Bank shall
constitute payment to Bank until such item is actually collected by Bank and
credited to the Collections Account; provided, however, that Bank shall have the
right to charge back to the Collections Account (or any other account of
Borrower maintained at Bank) an item which is returned for inability to collect,
plus accrued interest during the period of Bank’s provisional credit for such
item prior to receiving notice of dishonor.

 
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                    2.3     Interest. Borrower agrees to pay interest in respect
of all unpaid principal amounts of the Loans from the respective dates such
principal amounts are advanced until paid (whether at stated maturity, on
acceleration or otherwise) at a rate per annum equal to the applicable rate
indicated below:
 
                              2.3.1     LMIR Loans. Except as set forth in
Section 2.3.2, all Loans shall constitute LMIR Loans and shall bear interest at
the Applicable Margin in effect from time to time for such LMIR Loans plus the
LIBOR Market Index Rate in effect from time to time.
 
                              2.3.2     Base Rate Loans. Notwithstanding
anything to the contrary in this Agreement, if (a) Borrower should request or
(b) Bank should at any time determine that (i) it is not possible to determine
the LIBOR Market Index Rate, (ii) the LIBOR Market Index Rate is no longer
available or (iii) a Default or Event of Default exists, then all Loans shall
constitute Base Rate Loans and shall bear interest at the Applicable Margin in
effect from time to time for such Base Rate Loans plus the Base Rate in effect
from time to time.
 
                    2.4     Interest Rate Adjustments.
 
                              2.4.1     Base Rate Loan. When a Base Rate Loan is
selected, the interest rate shall be adjusted from time to time, effective as of
the date of each change in the Base Rate, and the Base Rate shall continue to
apply until another interest rate option is selected by Borrower for that Loan.
 
                              2.4.2     LMIR Loan. When a LMIR Loan is selected,
the interest rate shall be adjusted daily as applicable to reflect the LIBOR
Market Index Rate then in effect and the LIBOR Market Index Rate shall continue
to apply until another interest rate option is selected by Borrower for that
Loan.
 
                    2.5     Notice and Manner of Borrowing and Rate Conversion.
 
                              2.5.1     Loans. Borrower shall give Bank
irrevocable telephonic notice of each proposed Loan or permitted rate conversion
not later than 11:00 a.m. (local time in Atlanta, Georgia) on the same business
day as each proposed Loan or rate conversion to a Base Rate Loan or a LMIR Loan.
Each such notice shall specify (i) the date of such Loan or rate conversion,
which shall be a Business Day, (ii) the amount of each Loan or the amount to be
converted, and (iii) the interest rate selected by Borrower from the interest
rate options set forth in this Agreement. Notices received after 11:00 a.m.
(local time in Atlanta, Georgia) shall be deemed received on the next Business
Day. Bank’s acceptance of such a request shall be indicated by its making the
Loan requested. Such a Loan shall be made available to Borrower in immediately
available funds by deposit into the Disbursement Account.
 
                              2.5.2     Additional Provisions for Requests for
Loans. Bank, in its discretion, may require from Borrower a signed written
request for a Loan in form of a Notice of Borrowing satisfactory to Bank, which
request shall be irrevocable and shall be delivered to Bank no later than 11:00
a.m. (local time in Atlanta, Georgia) on the date determined in accordance with
Section 2.5.1, and shall set forth the calculation of the Borrowing Base and a
reconciliation to the previous request or Borrowing Base Certificate, specify
the information required by Section 2.5.1 for the proposed Loan and provide such
other information as Bank may require.

 
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                              (a)         Subject to subsection 2.5.2(c) below,
unless payment is otherwise timely made by Borrower, the becoming due of any
amount required to be paid with respect to any of the Obligations (whether as
principal, accrued interest, fees or other charges owed to Bank or any Affiliate
of Bank) shall be deemed irrevocably to be a request (without the requirement
for the submission of a Notice of Borrowing) for Loans on the due date of, and
in an aggregate amount required to pay, such Obligations, and Bank may disburse
the proceeds of such Loans by way of direct payment of the relevant Obligations,
and such Loans shall bear interest as Base Rate Loans.
 
                              (b)        Subject to subsection 2.5.2(c) below,
the presentation for payment of any check or other item of payment drawn on the
Disbursement Account at a time when there are insufficient funds in such account
to cover such item shall be deemed irrevocably to be a request (without any
requirement for the submission of a Notice of Borrowing) for Loans on the date
of such presentation in an amount equal to the aggregate amount of the items
presented for payment, and Bank may disburse the proceeds of such Loans to the
Disbursement Account and such Loans shall bear interest as Base Rate Loans.
 
                              (c)        Bank shall have no obligation to
Borrower to honor any deemed request for a Loan under Section 2.5.2(a) or
Section 2.5.2(b) above after the Termination Date or when the principal amount
of such Loan, when added to the aggregate outstanding principal amount of all
Loans and the Letter of Credit Obligations would exceed the lesser of the
Revolver Commitment and the Borrowing Base at such time or when any condition
precedent in Section 3.2 hereof is not satisfied, but may do so in its sole and
absolute discretion and without regard to the existence of, and without being
deemed to have waived, any Default or Event of Default.
 
                              2.5.3     Excess Outstandings. Notwithstanding the
foregoing, Bank may, in its sole and absolute discretion, make or permit to
remain outstanding Loans which, when added to the principal amount of all other
Loans and Letter of Credit Obligations, exceed the Revolver Commitment or the
Borrowing Base, and all such amounts shall (i) be part of the Obligations, (ii)
bear interest as provided herein, (iii) be payable upon demand by Bank, and (iv)
be secured by the Collateral and be entitled to all rights and security as
provided under the Loan Documents.
 
                    2.6     Repayment of Loans.
 
                            2.6.1     Bank may apply all proceeds of Accounts,
Inventory or other Collateral received by Bank and all other payments in respect
of the Obligations to the Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Bank shall determine. In any
event, the outstanding principal amount of Loans shall be due and payable on the
Termination Date. Unless otherwise specified by Borrower, all principal
repayment of Loans shall be applied by Bank first to outstanding Base Rate
Loans, and then to outstanding LMIR Loans.
 
                            2.6.2     Interest accrued on the Loans shall be due
and payable on (i) the first day of each month for the immediately preceding
month), computed through the last calendar day of the preceding month whether a
Base Rate Loan or a LMIR Loan; and (ii) on the Termination Date.
 
                    2.7     Additional Payment Provisions.
 
                              2.7.1       Payment of Other Obligations. The
balance of the Obligations under the Loan Documents requiring the payment of
money shall be repaid by Borrower to Bank as and when provided in the relevant
Loan Documents, or, if no date of payment is otherwise specified in the Loan
Documents, on demand.

 
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                              2.7.2     Authorization to Debit. Bank may debit
the Disbursement Account, the Collections Account and any account subject to
Bank’s control (as such term is used in Article 9 of the Code) and/or make Loans
to Borrower (whether or not in excess of the lesser of the Revolver Commitment
and the Borrowing Base) and apply such amounts to the payment of interest, fees,
expenses and other amounts to which Bank may be entitled from time to time and
Bank is hereby irrevocably authorized to do so without the consent of Borrower.
 
                              2.7.3     Time and Location of Payment. Borrower
shall make each payment of principal of and interest on the Loans and fees
hereunder not later than 2:00 p.m. (local time Atlanta, Georgia) on the date
when due, without set off, counterclaim or other deduction, in immediately
available funds to Bank at its address referred to in Section 10.4. Whenever any
payment of principal of, or interest on, the Loans or of fees shall be due on a
day which is not a Business Day, the date for payment thereof shall be extended
to the next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
 
                              2.7.4     Excess Over Borrowing Base. To the
extent that the aggregate amount of all Loans and the Letter of Credit
Obligations exceeds the Borrowing Base at any time, the amount of such excess
will be paid immediately to Bank upon Borrower’s obtaining knowledge of same.
 
                              2.7.5     Swaps Are Independent. Any prepayment of
any Loans shall not affect Borrower’s obligation to continue making payments
under any Swap Agreement, which shall remain in full force and effect
notwithstanding such prepayment, subject to the terms of such Swap Agreement.
 
                              2.7.6     Capital Requirements. If either (a) the
introduction of, or any change in, or in the interpretation of, any applicable
law or (b) compliance with any guideline or request from any central bank or
comparable agency or other governmental authority (whether or not having the
force of law), has or would have the effect of reducing the rate of return on
the capital of, or has affected or would affect the amount of capital required
to be maintained by Bank or any corporation controlling Bank as a consequence
of, or with reference to, the Revolver Commitment and other commitments of this
type, below the rate which Bank or such other corporation could have achieved by
for such introduction, change or compliance, then within five (5) Business Days
after written demand by Bank, Borrower shall pay to Bank from time to time as
specified by Bank additional amounts sufficient to compensate Bank or such other
corporation for such reduction. A certificate as to such amounts submitted to
Borrower by Bank shall, in the absence of manifest error, be presumed to be
correct and binding for all purposes.
 
                    2.8     Default Rate. In addition to all other rights
contained in the Loan Documents, if an Event of Default occurs, the principal
amount of all outstanding Obligations, other than Obligations under any Swap
Agreements between Borrower and Bank or its affiliates, may, at Bank’s option,
bear interest at the Default Rate. The Default Rate shall apply from
acceleration until such Obligations or any judgment thereon is paid in full.
 
                    2.9     Calculation of Interest. All fees and other charges
provided for in this Agreement that are calculated as a per annum percentage of
any amount and all interest shall be calculated daily and shall be computed on
the actual number of days elapsed over a year of 360 days. For purposes of
computing interest and other charges hereunder, all payment items and other
forms of payment received by Bank shall be deemed applied by Bank on account of
the Obligations (subject to final payment of such items) on the first Business
Day after Bank receives such items in immediately available funds in the
Collections Account. Each determination by Bank of interest and fees hereunder
shall be presumptive evidence of the correctness of such interest and fees.

 
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                    2.10    Letters of Credit.
 
                                2.10.1    Issuance of Letters of Credit. Bank
shall from time to time issue, upon five (5) Business Days prior written notice,
extend or renew Letters of Credit for the account of Borrower or its
Subsidiaries; provided that (i) the aggregate face amount of Letters of Credit
issued by Bank which are outstanding at any one time shall not exceed
$2,000,000, (ii) Bank shall have no obligation to issue any Letter of Credit if,
after giving effect thereto, the principal amount of all Loans and all Letter of
Credit Obligations would exceed the lesser of the Borrowing Base and the
Revolver Commitment, and (iii) all other conditions precedent to the issuance of
each such Letter or Credit as set forth herein are satisfied or waived in
writing by Bank. All payments made by Bank under any such Letters of Credit
(whether or not Borrower is the account party) and all fees, commissions,
discounts and other amounts owed or to be owed to Bank in connection therewith,
shall be paid on demand, unless Borrower instructs Bank to make a Loan to pay
such amount, Bank agrees to do so, and the necessary amount remains available to
be drawn as a Loan hereunder. All Letter of Credit Obligations shall be secured
by the Collateral. Borrower shall complete and sign such applications and
supplemental agreements and provide such other documentation as Bank may require
in respect to the issuance and administration of the Letters of Credit. The form
and substance of all Letters of Credit, including expiration dates, shall be
subject to Bank’s approval, and Bank shall have no obligation to issue any
Letter of Credit or accept which has a maturity date later than the Termination
Date. Bank may charge certain fees or commissions for the issuance, handling,
renewal or extension of a Letter of Credit. Borrower unconditionally guarantees
all obligations of any Subsidiary with respect to Letters of Credit issued by
Bank for the account of such Subsidiary. Upon a Default or Event of Default,
Borrower shall, on demand, deliver to Bank good funds equal to one hundred five
(105%) percent of Bank’s maximum liability under all outstanding Letters of
Credit, to be held as cash Collateral for Borrower’s reimbursement obligations
and other Obligations.
 
                                2.10.2    Law Governing Letter of Credit. Any
Letter of Credit issued hereunder shall be governed, as applicable, by the
Uniform Customs and Practice for Documentary Credits International Chamber of
Commerce (“ICC”) Publication 500 or any subsequent revision or restatement
thereof adopted by the ICC and in use by Bank or the International Standby
Practices, ICC Publication No. 590 or any subsequent revision or restatement
thereof adopted by the ICC and in use by Bank, except to the extent that the
terms of such publication would limit or diminish rights granted to Bank
hereunder or in any other Loan Document.
 
                    2.11    Fees.
 
                                2.11.1    Closing Fee. Borrower shall pay to
Bank the amount of $100,000 as a closing fee, which fee is fully earned as of
and shall be due and payable on the Closing Date.
 
                                2.11.2   Administration Fee. Borrower shall pay
to Bank a monthly non-refundable administration fee in the amount of $275
payable on the first day of each month for the immediately preceding month.
 
                                2.11.3   Unused Line Fees. Borrower shall pay to
Bank an unused line fee with respect to the Revolver Commitment for each day
equal to the product of (i) fifty (50) basis points per annum multiplied by (ii)
the difference between (A) the Revolver Commitment and (B) the aggregate
outstanding amount of the Loans and Letter of Credit Obligations on such day,
payable quarterly on the first day of each calendar quarter with respect to the
immediately preceding quarter.

 
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                                2.11.4    Letter of Credit Fees. Borrower shall
pay to Bank, at such times as Bank shall require, Bank’s standard fees in
connection with Letters of Credit, as in effect from time to time. In addition,
Borrower shall pay to Bank a letter of credit fee at a rate equal to the
Applicable Margin then in effect for LMIR Loans per annum on the daily
outstanding balance of the Letter of Credit Obligations for the immediately
preceding quarter (or part thereof), payable in advance as of the first day of
each succeeding quarter. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination of this
Agreement.
 
                    2.12     Statement of Account. If Bank provides Borrower
with a statement of account on a periodic basis, such statement will be presumed
complete and accurate and will be definitive and binding on Borrower, unless
objected to with specificity by Borrower in writing within forty-five (45) days
after receipt.
 
                    2.13     Termination.
 
                               2.13.1   Upon at least thirty (30) days prior
written notice to Bank, Borrower may, at its option, upon payment of the Early
Termination Fee, terminate this Agreement and the Revolver Commitment in its
entirety but not partially; provided however, no such termination by Borrower
shall be effective until the full, final and indefeasible payment of the
Obligations and Early Termination Fee in cash or immediately available funds and
in the case of any Obligations consisting of contingent obligations, Bank’s
receipt of either cash collateral or a direct pay letter of credit naming Bank
as beneficiary and in form and substance and from an issuing bank acceptable to
Bank, in each case in an amount not less than one hundred five (105%) percent of
the aggregate amount of all such contingent obligations. In addition, Bank shall
be entitled to the Early Termination Fee upon the occurrence of any Event of
Default described in Sections 8.1(g) or (h) hereof, even if Bank does not
exercise the right to terminate this Agreement, but elects, at its option, to
provide financing to Borrower or permit the use of cash collateral under the
United States Bankruptcy Code. The Early Termination Fee shall be presumed to be
the amount of damages sustained by Bank as a result of the early termination of
this Agreement, and Borrower agrees that the amount of the Early Termination Fee
is reasonable under the circumstances currently existing and that the Early
Termination Fee constitutes part of the Obligations. Notwithstanding the
foregoing, in the event of the termination of this Agreement by Borrower and the
full and final payment of the Obligations in cash or immediately available funds
and (if applicable) the receipt by Bank of cash collateral or a letter of credit
in respect of all Letter of Credit Obligations as described above, in each case
from the proceeds of (a) an initial public offering of the capital stock of
Borrower, (b) the sale of all or substantially all of the assets and properties
of Borrower, (c) the sale by the current owners and holders of more than twenty
(20%) percent of the total outstanding shares of capital stock of Borrower as of
the date of the sale of such shares, or (d) the merger by Borrower with and into
a person which is not an Affiliate of Borrower, in each case in a bona fide
arm’s length transaction, Borrower shall not be required to pay the Early
Termination Fee provided for in this Section. Any notice of termination of this
Agreement given by Borrower shall be irrevocable unless Bank otherwise agrees in
writing.
 
                                2.13.2  Bank may terminate this Agreement and
the Revolver Commitment at any time, without notice, upon or after the
occurrence of an Event of Default.
 
                    2.14      USA Patriot Act Notice. To help fight the funding
of terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
Person who opens an account. For purposes of this section, account shall be
understood to include loan accounts.
 
          3.     Conditions Precedent to Extensions of Credit.
 
                    3.1      Conditions Precedent to Initial Loans. In addition
to any other requirement set forth in this Agreement, Bank shall not be required
to fund any Loan on the Closing Date or make any other extension of credit
hereunder on the Closing Date unless and until the following conditions shall
have been satisfied, in the sole opinion of Bank and its counsel:

 
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                              3.1.1     Loan Documents. Borrower and each other
party to any Loan Document, as applicable, shall have executed and delivered
this Agreement and all other required Loan Documents, all in form and substance
satisfactory to Bank.
 
                              3.1.2     Supporting Documents and Other
Conditions. Borrower shall cause to be delivered to Bank the following documents
and shall satisfy the following conditions:
 
                              (a)        A copy of the governing instruments of
Borrower and each Subsidiary, and good standing certificates of Borrower and
each Subsidiary, certified by the appropriate official of their respective
states of incorporation and each state in which Borrower or such Subsidiary is
qualified to do business;
 
                              (b)        Incumbency certificate and certified
resolutions of the board of directors (or other appropriate governing body) of
Borrower and each other Person executing any Loan Documents, signed by the
Secretary or another authorized officer of Borrower or such other Person,
authorizing the execution, delivery and performance of the Loan Documents;
 
                                (c)        The legal opinion of Borrower’s legal
counsel addressed to Bank regarding such matters as Bank and its counsel may
request;
 
                              (d)       A satisfactory Borrowing Base
Certificate duly completed by Borrower, together with all supporting statements,
schedules and reconciliations as required by Bank;
 
                              (e)        UCC and other Lien searches showing no
existing security interests in or Liens on the Collateral;
 
                               (f)        the Borrower Information Certificate,
duly authorized, executed and delivered by Borrower;
 
                              (g)        Satisfactory evidence of insurance
meeting the requirements of Section 5.3.
 
                              (h)        UCC financing statements and, if
applicable, certificates of title covering the Collateral shall duly have been
recorded or filed in the manner and places required by law to establish,
preserve, protect and perfect the interests and rights created or intended to be
created by the Security Agreement, and all taxes, fees and other charges in
connection with the execution, delivery and filing of the Security Agreements
and the UCC financing statements shall duly have been paid;
 
                              (i)         Subordinations satisfactory to Bank
from all Persons as required by Section 5.9.
 
                              (j)         Satisfactory evidence of payment of
all fees due and reimbursement of all costs reasonably incurred by Bank, and
evidence of payment to other parties of all fees or costs which Borrower is
required under the Loan Documents to pay by the date of the initial Loan;
 
                              (k)        There shall be no litigation in which
Borrower or any Guarantor or Subsidiary is a party defendant, which Bank
determines may have a Material Adverse Effect; and

 
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                              (l)          Bank shall have received Borrower’s
financial statements for its most recently concluded fiscal month and fiscal
year and such other financial reports and information concerning Borrower as
Bank shall request, and Bank shall be satisfied therewith.
 
                    3.2     Conditions Precedent to Each Loan. In addition to
any other requirements set forth in this Agreement, Bank shall not be required
to fund any Loan or issue any Letter of Credit unless and until the following
conditions shall have been satisfied, in the sole opinion of Bank, and each
Notice of Borrowing (whether or not a written Notice of Borrowing is required)
shall be deemed to be a representation that all such conditions have been
satisfied:
 
                              3.2.1     Notice of Borrowing. Borrower shall have
delivered to Bank a Notice of Borrowing and such other information, as Bank may
reasonably request.
 
                              3.2.2     No Default. No Default or Event of
Default shall have occurred and be continuing or could occur upon the making of
the Loan or the issuance of any Letter of Credit in question and, if Borrower is
required to deliver a written Notice of Borrowing, Borrower shall have delivered
to Bank an officer’s certificate to such effect, which may be incorporated in
the Notice of Borrowing.
 
                              3.2.3     Correctness of Representations. All
representations and warranties made by Borrower and any Guarantor herein or
otherwise in writing in connection herewith shall be true and correct in all
material respects with the same effect as though the representations and
warranties had been made on and as of date of the proposed Loan or Letter of
Credit (except to the extent such representations and warranties relate
expressly to a prior date), and, if Borrower is required to deliver a written
Notice of Borrowing, Borrower shall have delivered to Bank an officer’s
certificate to such effect, which may be incorporated in the Notice of
Borrowing.
 
                              3.2.4     No Adverse Change. There shall have been
no change which could have a Material Adverse Effect on Borrower, any Subsidiary
or any Guarantor since the date of the most recent financial statements of such
Person delivered to Bank from time to time.
 
                              3.2.5     Limitations Not Exceeded. Any proposed
Loan or Letter of Credit shall not cause the aggregate outstanding principal
balance of the Loans and Letter of Credit Obligations to exceed the lesser of
the Revolver Commitment and the Borrowing Base.
 
                              3.2.6     No Termination. Bank shall not have
received notice from any Guarantor or any surety terminating or repudiating such
Person’s guaranty of the Obligations incurred by Borrower.
 
                              3.2.7     Further Assurances. Borrower shall have
delivered such further documentation or assurances as Bank may reasonably
require.
 
          4.      Representations and Warranties. In order to induce Bank to
enter into this Agreement and to make the Loans or extend credit as provided for
herein, Borrower makes the following representations and warranties, all of
which shall survive the execution and delivery of the Loan Documents. Unless
otherwise specified, such representations and warranties shall be deemed made as
of the date hereof and as of the date of each request for a Loan or extension of
credit hereunder :
 
                   4.1     Valid Existence and Power. Each Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and is duly
qualified or licensed to transact business in all places where the failure to be
so qualified would have a Material Adverse Effect. Each of Borrower and each
other Person which is a party to any Loan Document (other than Bank) has the
power to make and perform the Loan Documents executed by it and all such
instruments will constitute the legal, valid and binding obligations of such
Person, enforceable in accordance with their respective terms, subject only to
bankruptcy and similar laws affecting creditors’ rights generally. Borrower is
organized under the laws of the State of Georgia and has not changed the
jurisdiction of its organization within the five years preceding the date
hereof.

 
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                   4.2     Authority. The execution, delivery and performance
thereof by Borrower and each other Person (other than Bank) executing any Loan
Document have been duly authorized by all necessary actions of such Person, and
do not and will not violate any provision of law or regulation, or any writ,
order or decree of any court or governmental or regulatory authority or agency
or any provision of the governing instruments of such Person, and do not and
will not, with the passage of time or the giving of notice, result in a breach
of, or constitute a default or require any consent under, or result in the
creation of any Lien upon any property or assets of such Person pursuant to, any
law, regulation, instrument or agreement to which any such Person is a party or
by which any such Person or its respective properties may be subject, bound or
affected.
 
                   4.3     Financial Condition. Other than as disclosed in
financial statements delivered on or prior to the date hereof to Bank or as
incurred by Borrower or any Subsidiary in the ordinary course of business since
the date of the last financial statements delivered to Bank, neither Borrower
nor any Subsidiary nor (to the knowledge of Borrower) any Guarantor has any
material direct or contingent obligations or liabilities (including any
guarantees or leases) that are required to be disclosed in financial statements
or notes thereto in accordance with GAAP or any material unrealized or
anticipated losses from any commitments of such Person except as described on
Exhibit 4.3. All such financial statements have been prepared in accordance with
GAAP and, together with the notes thereto, fairly present in all material
respects the financial condition of Borrower, Subsidiary or Guarantor, as the
case may be, as of the date thereof in accordance with GAAP. Borrower is not
aware of any material adverse fact (other than facts which are generally
available to the public and not particular to Borrower, such as general economic
trends) concerning the condition (financial or otherwise) or future prospects of
Borrower or any Subsidiary or any Guarantor which has not been fully disclosed
to Bank, including any adverse change in the operations or financial condition
of such Person since the date of the most recent financial statements delivered
to Bank. Borrower is Solvent, and after consummation of the transactions set
forth in this Agreement and the other Loan Documents, Borrower will be Solvent.
 
                   4.4     Litigation. Except as disclosed on Exhibit 4.4, there
are no suits or proceedings pending, or to the knowledge of Borrower threatened,
before any court or by or before any governmental or regulatory authority,
commission, bureau or agency or public regulatory body against or affecting
Borrower, any Subsidiary or (to Borrower’s knowledge) any Guarantor, or their
assets, which if adversely determined would have a Material Adverse Effect.
 
                   4.5     Agreements, Etc. Neither Borrower nor any Subsidiary
is a party to any agreement or instrument or subject to any court order,
governmental decree or any charter or other corporate restriction, adversely
affecting its business, assets, operations or condition (financial or
otherwise), nor is any such Person in default in the performance, observance or
fulfillment of any of the material obligations, covenants or conditions
contained in any agreement or instrument to which it is a party, or any law,
regulation, decree, order or the like that could reasonably be expected to
result in a Material Adverse Effect.

 
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                   4.6     Authorizations. All authorizations, consents,
approvals and licenses required under applicable law or regulation for the
ownership or operation of the property owned or operated by Borrower or any
Subsidiary or for the conduct of any business in which it is engaged have been
duly issued and are in full force and effect, and it is not in default, nor has
any event occurred which with the passage of time or the giving of notice, or
both, would constitute a default, under any of the terms or provisions of any
part thereof, or under any order, decree, ruling, regulation, closing agreement
or other decision or instrument of any governmental commission, bureau or other
administrative agency or public regulatory body having jurisdiction over such
Person, which default would have a Material Adverse Effect on such Person.
Except as noted herein, no approval, consent or authorization of, or filing or
registration with, any governmental commission, bureau or other regulatory
authority or agency is required with respect to the execution, delivery or
performance of any Loan Document.
 
                   4.7     Title. Each of Borrower and each Subsidiary has good
title to all of its assets and properties, free and clear of all Liens, except
Permitted Liens. Borrower alone has full ownership rights in all Collateral.
 
                   4.8     Collateral. The security interests granted to Bank
herein and pursuant to any other Security Agreement (a) constitute and, as to
subsequently acquired property included in the Collateral covered by the
Security Agreement, will constitute, security interests under the Code entitled
to all of the rights, benefits and priorities provided by the Code and (b) are,
and as to such subsequently acquired Collateral will be, fully perfected,
superior and prior to the Liens, rights of all third persons, now existing or
hereafter arising, except for Permitted Liens. All of the Collateral is intended
for use solely in Borrower’s business.
 
                   4.9     Jurisdiction of Organization; Location. The
jurisdiction in which each of Borrower and each Subsidiary is organized,
existing and in good standing, the chief executive office of Borrower and each
Subsidiary, the office where Borrower’s and each Subsidiary’s business records
are located, all of Borrower’s and each Subsidiary’s other places of business
and any other places where any Collateral is kept, are all correctly and
completely indicated on the Borrower Information Certificate. The Collateral is
located and shall at all times be kept and maintained only at Borrower’s
location or locations as described on the Borrower Information Certificate. No
such Collateral is attached or affixed to any real property so as to be
classified as a fixture unless Bank has otherwise agreed in writing. Borrower
has not changed it legal status or the jurisdiction in which it is organized or
moved its chief executive office within the five (5) years preceding the date
hereof.
 
                   4.10   Taxes. Borrower and each Subsidiary have filed all
federal and state income and other tax returns which are required to be filed,
and have paid all taxes as shown on said returns and all taxes, including
withholding, FICA and ad valorem taxes, shown on all assessments received by it
to the extent that such taxes have become due. Neither Borrower nor any
Subsidiary is subject to any federal, state or local tax Liens nor has such
Person received any notice of deficiency or other official notice to pay any
taxes. Borrower and each Subsidiary have paid all sales and excise taxes due and
payable by it.
 
                   4.11   Labor Law Matters. No goods or services have been or
will be produced by Borrower or any Subsidiary in violation of any applicable
labor laws or regulations or any collective bargaining agreement or other labor
agreements or in violation of any minimum wage, wage-and-hour or other similar
laws or regulations.
 
                   4.12   Accounts. Each Account, Instrument, Chattel Paper and
other writing constituting any portion of the Collateral (a) is genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors’ rights; (b) is not
subject to any deduction or discount (other than as stated in the invoice and
disclosed to Bank in writing), defense, set off, claim or counterclaim of a
material nature against Borrower except as to which Borrower has notified Bank
in writing; (c) is not subject to any other circumstances that would impair the
validity, enforceability or amount of such Collateral except as to which
Borrower has notified Bank in writing; (d) arises from a bona fide sale of goods
or delivery of services in the ordinary course and in accordance with the terms
and conditions of any applicable purchase order, contract or agreement; (e) is
free of all Liens; and (f) is for a liquidated amount maturing as stated in the
invoice therefor. Each Account included in any Notice of Borrowing, Borrowing
Base Certificate, report or other document as an Eligible Account meets all the
requirements of an Eligible Account set forth herein.

 
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                   4.13    Judgment Liens. Neither Borrower nor any Subsidiary,
nor any of their assets, are subject to any unpaid judgments (whether or not
stayed) or any judgment liens in any jurisdiction.
 
                   4.14    Corporate Structure. Except as set forth on Exhibit
4.14 hereto, Borrower has no Subsidiaries and no corporate or joint venture
Affiliates. Since the date of the last audited financial statements of Borrower
and its Subsidiaries delivered to Bank, Borrower has not made, or obligated
itself to make, any dividends (other than stock dividends) or other distribution
on or with respect to, or any purchase, redemption, retirement or other
acquisition of, any equity interests of Borrower, except as otherwise permitted
hereunder. Except as set forth on Exhibit 4.14 hereto, there are no outstanding
options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any equity interests or
obligations convertible into, or any powers of attorney relating to, equity
interests of Borrower or any of its Subsidiaries. Except as set forth on Exhibit
4.14 hereto, there are no outstanding agreements or instruments binding upon the
holders of any Subsidiary’s equity interests relating to the ownership of its
equity interests.
 
                   4.15     Deposit Accounts. Borrower and its Subsidiaries have
no Deposit Accounts other than (a) on the Closing Date, those listed in the
Borrower Information Certificate and (b) after the Closing Date, those otherwise
permitted by Section 6.15.
 
                   4.16     Environmental. Except as disclosed on Exhibit 4.16,
and except for ordinary and customary amounts of solvents, cleaners and similar
materials used in the ordinary course of Borrower’s business and in material
compliance with all Environmental Laws, neither Borrower, nor any Subsidiary,
nor to Borrower’s knowledge any other previous owner or operator of any real
property currently owned or operated by Borrower, has generated, stored or
disposed of any Regulated Material on any portion of such property, or
transferred any Regulated Material from such property to any other location in
violation of any applicable Environmental Laws. Except as disclosed on Exhibit
4.16, no Regulated Material has been generated, stored or disposed of on any
portion of the real property currently owned or operated by Borrower or any
Subsidiary by any other Person, or is now located on such property. Except as
disclosed on Exhibit 4.16, each of Borrower and each Subsidiary is in material
compliance with all applicable Environmental Laws and neither Borrower nor any
Subsidiary has been notified of any action, suit, proceeding or investigation
which calls into question compliance by Borrower with any Environmental Laws or
which seeks to suspend, revoke or terminate any license, permit or approval
necessary for the generation, handling, storage, treatment or disposal of any
Regulated Material.
 
                   4.17    ERISA. If requested by Bank, Borrower has furnished
to Bank true and complete copies of the latest annual report required to be
filed pursuant to Section 104 of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), with respect to each employee benefit plan or other
plan maintained for employees of Borrower or any Subsidiary and covered by Title
IV of ERISA (a “Plan”), and no Termination Event (as hereinafter defined) with
respect to any Plan has occurred and is continuing. For the purposes of this
Agreement, a “Termination Event” shall mean a “reportable event” as defined in
Section 4043(b) of ERISA, or the filing of a notice of intent to terminate under
Section 4041 of ERISA. Neither Borrower nor any Subsidiary has any unfunded
liability with respect to any such Plan.
 
                   4.18    Investment Company Act. Neither Borrower nor any
Subsidiary is an “investment company” as defined in the Investment Company Act
of 1940, as amended.

 
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                    4.19       Insider. Borrower is not, and no Person having
“control” (as that term is defined in 12 U.S.C. § 375(b)(5) or in regulations
promulgated pursuant thereto) of Borrower is, an “executive officer,”
“director,” or “principal shareholder” (as those terms are defined in 12 U.S.C.
375(b) or in regulations promulgated pursuant thereto) of Bank, of a bank
holding company of which Bank is a subsidiary, or of any subsidiary of a bank
holding company of which Bank is a subsidiary.
 
                    4.20       Sanctioned Persons; Sanctioned Countries. None of
Borrower, its Subsidiaries or its Affiliates or any Guarantor (i) is a
Sanctioned Person or (ii) does business in a Sanctioned Country or with a
Sanctioned Person in violation of the economic sanctions of the United States
administered by OFAC. The proceeds of any Loan will not be used to fund any
operation in, finance any investments or activities in or make any payments to,
a Sanctioned Person or a Sanctioned Country.
 
                    4.21       Compliance with Covenants; No Default. Borrower
is, and upon funding of the initial Loans on the Closing Date will be, in
compliance with all of the covenants hereof. No Default or Event of Default has
occurred, and the execution, delivery and performance of the Loan Documents and
the funding of the initial Loans on the Closing Date will not cause a Default or
Event of Default.
 
                    4.22       Fiscal Year. Borrower’s fiscal year end is
December 31 as of the Closing Date.
 
                    4.23       Full Disclosure. There is no material fact which
is known or which should be known by Borrower that Borrower has not disclosed to
Bank which could have a Material Adverse Effect. No Loan Document, nor any
agreement, document, certificate or statement delivered by Borrower to Bank,
contains any untrue statement of a material fact or omits to state any material
fact which is known or which should be known by Borrower necessary to keep the
other statements from being misleading.
 
                    4.24       Borrower Information Certificate. All
representations, warranties and statements made by Borrower in the Borrower
Information Certificate are true and correct, except, to the extent any
information contained therein has changed, (i) no Default or Event of Default
has occurred as a result thereof and (ii) Borrower has complied with any notice
or other reporting obligation to Bank with respect to such change.
 
          5.       Affirmative Covenants of Borrower. Borrower covenants and
agrees that from the date hereof and until payment in full of the Obligations
and the formal termination of this Agreement, Borrower and each Subsidiary:
 
                   5.1         Use of Loan Proceeds. Shall use the proceeds of
Loans only to refinance Debt existing on the Closing Date and for working
capital and general corporate purposes to be used in the operation of Borrower’s
business and shall furnish Bank all evidence that it may require with respect to
such use.
 
                   5.2         Maintenance of Business and Properties. Shall at
all times maintain, preserve and protect all Collateral and all the remainder of
its property used or useful in the conduct of its business, and keep the same in
good repair, working order and condition, and from time to time make, or cause
to be made, all material needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be conducted properly and in accordance with standards
generally accepted in businesses of a similar type and size at all times, and
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of its business.

 
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                   5.3         Insurance. Shall maintain such liability
insurance, workers’ compensation insurance, business interruption insurance and
casualty insurance in amounts as may be required by law, if applicable, or in
such amounts as in place on the Closing Date any other insurance that may be
reasonably required by Bank and shall insure and keep insured all Collateral and
other properties with insurance companies satisfactory to Bank. All hazard
insurance covering Collateral shall be in amounts acceptable to Bank, shall name
and directly insure Bank as secured party and loss payee and shall not be
terminable except upon 30 days’ written notice to Bank. Borrower shall furnish
to Bank copies of all such policies and shall provide evidence of insurance on
an annual basis or such more frequent basis as may be requested by Bank from
time to time.
 
                   5.4         Notice of Default. Shall provide to Bank
immediate notice of (a) the occurrence of a Default or Event of Default and what
action (if any) Borrower is taking to cure the same, (b) any litigation
involving an amount at issue in excess of $100,000 or material adverse changes
in existing litigation or any judgment against it or its assets in excess of
$50,000, (c) any damage or loss to property in excess of $75,000, (d) any notice
from taxing authorities as to claimed deficiencies or any tax lien or any notice
relating to alleged ERISA violations, (e) any Reportable Event, as defined in
ERISA, (f) any rejection, return, offset, dispute, loss or other circumstance in
an amount equal to $100,000 or otherwise having a Material Adverse Effect on any
Collateral, (g) the cancellation or termination of, or any default under, any
Material Agreement to which Borrower is a party or by which any of its
properties are bound, or any acceleration of the maturity of any Debt of
Borrower; and (h) any loss or threatened loss of material licenses or permits.
 
                   5.5         Inspections of Books and Records and Field
Examinations. Shall permit inspections of the Collateral and the records of such
Person pertaining thereto and verification of the Accounts, at such times and in
such manner as may be required by Bank and shall further permit such
inspections, reviews and field examinations of its other books and records and
properties (with such frequency and at such times as Bank may desire) by Bank as
Bank may deem necessary or desirable from time to time. The cost of all such
field examinations, reviews, verifications and inspections shall be borne by
Borrower, provided that the cost of field examinations shall not exceed $950 per
examiner per day, plus Bank’s reasonable out-of-pocket expenses. So long as no
Default or Event of Default shall exist or have occurred and be continuing, Bank
shall not conduct more than two (2) such inspections, reviews or field
examinations in any twelve (12) month period at the expense of Borrower.
 
                   5.6         Financial Information. Shall maintain books and
records in accordance with GAAP and shall furnish to Bank the following periodic
financial information:
 
                               (a)          Periodic Borrowing Base Information.
Within fifteen (15) days of the end of each month (and more frequently if
required by Bank), a completed Borrowing Base Certificate in the form attached
hereto as Exhibit 5.6(a) for the immediately preceding month (a “Borrowing Base
Certificate”). Borrower shall attach the following to each Borrowing Base
Certificate, which shall be certified electronically or manually by a Senior
Officer of Borrower to be accurate and complete and in compliance with the terms
of the Loan Documents: (i) a report listing all Accounts of Borrower as of the
last Business Day of such month (an “Accounts Receivable Report”) which shall
include the amount and age of each Account on an original invoice date aging
basis, the name and mailing address of each Account Debtor, a detailing of all
Accounts which do not constitute Eligible Accounts, and such other information
as Bank may require in order to verify the Eligible Accounts, all in reasonable
detail and in form acceptable to Bank, (ii) a report listing all Inventory and
all Eligible Inventory of Borrower as of the last Business Day of such month,
the cost thereof, specifying raw materials, work-in-process, finished goods and
all Inventory which has not been timely sold by Borrower in the ordinary course
of business, and such other information as Bank may require relating thereto,
all in form acceptable to Bank (an “Inventory Report”), and (iii) any other
report as Bank may from time to time require in its sole discretion, each
prepared with respect to such periods and with respect to such information and
reporting as Bank may require. Notwithstanding any provision herein to the
contrary, Bank reserves the right, in the exercise of its sole discretion, to
calculate the Borrowing Base on a basis more frequently than monthly from time
to time.

 
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                              (b)          Interim Statements. Within thirty
(30) days after the end of each fiscal month of Borrower and within forty-five
(45) days after the end of each fiscal quarter of Borrower, (i) a consolidated
and consolidating balance sheet of Borrower and its Subsidiaries at the end of
that period and a consolidated and consolidating income statement and statement
of cash flows for that period (and for the portion of the fiscal year of
Borrower ending with such period), together with all supporting schedules,
setting forth in comparative form the figures for the same period of the
preceding fiscal year and (ii) a report reconciling (x) the Accounts and
Inventory of Borrower as set forth on the Accounts Receivable Report and the
Inventory Report attached to the Borrowing Base Certificate to (y) the aggregate
Accounts and Inventory set forth in the financial statements delivered to Bank
pursuant hereto (which shall be based upon Borrower’s general ledger and
verified by a physical Inventory count conducted on a frequency acceptable to
Bank). The foregoing statements and report shall be certified by the controller
of Borrower as true and correct and fairly representing the financial condition
of Borrower and its Subsidiaries and that such statements are prepared in
accordance with GAAP, except without footnotes and subject to normal year end
audit adjustments.
 
                              (c)          Annual Statements. Within ninety (90)
days after the end of each fiscal year of Borrower, a detailed audited financial
report of Borrower and its Subsidiaries containing a consolidated and unaudited
consolidating balance sheet at the end of that period and a consolidated and
unaudited consolidating income statement and statement of cash flows for that
period, setting forth in comparative form the figures for the preceding fiscal
year, together with all supporting schedules and footnotes, and containing an
unqualified audit opinion of independent certified public accountants acceptable
to Bank that the financial statements were prepared in accordance with GAAP.
Borrower shall obtain such written acknowledgments from Borrower’s independent
certified public accountants as Bank may require permitting Bank to rely on such
annual financial statements.
 
                              (d)          Compliance and No Default
Certificates. Together with each report required to be delivered by subsection
(b) above in connection with the end of each fiscal month and each fiscal
quarter and required to be delivered by subsection (c) above, a compliance
certificate in the form annexed hereto as Exhibit 5.6(d) and a certificate of a
Senior Officer of Borrower certifying that no Default or Event of Default then
exists or if a Default or Event of Default exists, the nature and duration
thereof and Borrower’s intention with respect thereto, and in addition, a Senior
Officer of Borrower shall deliver a copy of such compliance certificate to
Borrower’s independent auditors and to the members (if any) of the audit
committee of the Board of Directors of Borrower.
 
                              (e)          Auditor’s Management Letters.
Promptly upon receipt thereof, copies of each report submitted to Borrower by
independent public accountants in connection with any annual, interim or special
audit made by them of the books of Borrower including, without limitation, each
report submitted to Borrower concerning its accounting practices and systems and
any final comment letter submitted by such accountants to management in
connection with the annual audit of Borrower.
 
                              (f)          Payables Report. Within thirty (30)
days of the end of each fiscal month of Borrower (or more frequently if required
by Bank), a schedule of all accounts payable of Borrower setting forth for each
such account the number of days which have elapsed since the original date of
invoice and containing the name and address of each vendor and such other detail
requested by Bank.

 
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                              (g)          SEC Reports. Within ten (10) days
after the issuance thereof, copies of such other financial statements and
reports as Borrower sends to its stockholders and copies of all regular and
periodic reports which Borrower may be required to file with the Securities and
Exchange Commission or any similar or corresponding governmental commission,
department or agency substituted therefor, or any similar or corresponding
governmental authority.
 
                              (h)          Other Information. Such other
information reasonably requested by Bank from time to time concerning the
business, properties or financial condition of Borrower, Guarantor and their
respective Subsidiaries.
 
                              (i)          Projections and Cash
Flow/Availability Projections. Within forty-five (45) days following the
commencement of each fiscal year of Borrower following the Closing Date,
Projections for Borrower for such fiscal year, and on or before the last
Business Day of each week, Cash Flow/Availability Projections for Borrower for
such week and for the immediately following twelve (12) week period thereafter.
 
                    5.7       Maintenance of Existence and Rights. Shall
preserve and maintain its corporate existence, authorities to transact business,
rights and franchises, trade names, patents, trademarks and permits necessary to
the conduct of its business.
 
                    5.8       Payment of Taxes, Etc. Shall pay before delinquent
all of its Debts and taxes, except and to the extent only that such taxes are
being Properly Contested.
 
                    5.9       Subordination. Shall cause all Debts and other
obligations now or hereafter owed to any Guarantor or Affiliate to be
subordinated in right of payment and security to the Obligations in accordance
with subordination agreements satisfactory to Bank.
 
                    5.10     Compliance; Hazardous Materials. Shall comply with
all material laws, regulations, ordinances and other legal requirements,
specifically including, without limitation, ERISA, all securities laws and all
laws relating to hazardous materials and the environment. Unless approved in
writing by Bank, neither Borrower nor any Subsidiary shall engage in the
storage, manufacture, disposition, processing, handling, use or transportation
of any hazardous or toxic materials, whether or not in compliance with
applicable laws and regulations. Borrower shall promptly report to Bank any
notices of any violations of such laws or regulations received from any
regulatory or governmental body, along with Borrower’s proposed corrective
action as to such violation.
 
                    5.11     Further Assurances. Shall take such further action
and provide to Bank such further assurances as may be reasonably requested to
ensure compliance with the intent of this Agreement and the other Loan
Documents.
 
                    5.12     Covenants Regarding Collateral. Borrower makes the
following covenants with Bank regarding the Collateral for itself and each
Subsidiary. Borrower and each Subsidiary:
 
                              (a)          will use the Collateral only in the
ordinary course of its business and will not permit the Collateral to be used in
violation of any applicable law or policy of insurance;
 
                              (b)          will defend the Collateral against
all claims and demands of all Persons, except for Permitted Liens;

 
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                               (c)         will promptly deliver to Bank all
promissory notes, drafts, trade acceptances, chattel paper, Instruments or
documents of title which are Collateral in tangible form, appropriately endorsed
to Bank’s order, and Borrower will not create or permit any Subsidiary to create
any Electronic Chattel Paper without taking all steps deemed necessary by Bank
to confer control of the Electronic Chattel Paper upon Bank in accordance with
the Code;
 
                               (d)          except for (i) sales of Inventory in
the ordinary course of business, (ii) the voluntary termination of Swap
Agreement to which Borrower or such Subsidiary is a party, and (iii) Permitted
Liens, will not sell, assign, lease, transfer, pledge, hypothecate or otherwise
dispose of or encumber any Collateral or any interest therein;
 
                               (e)          shall promptly notify Bank of any
future patents, trademarks or copyrights owned by Borrower or any Subsidiary and
any license agreements entered into by Borrower or any Subsidiary authorizing
said Person to use any patents, trademarks or copyrights owned by third parties;
and
 
                               (f)           shall promptly notify Bank in
writing of any new trade or fictitious name. Borrower’s or any Subsidiary’s use
of any trade or fictitious name shall be in compliance with all laws regarding
the use of such names.
 
                    5.13      Post-Closing Covenants. In addition to all other
terms, conditions and provisions set forth herein and in the other Loan
Documents, Borrower shall perform or cause to be performed the following
covenants:
 
                               5.13.1 Borrower shall obtain and deliver to Bank,
in form and substance satisfactory to Bank, as soon as possible, but in no event
later than April 30, 2009 (or such later date as Bank shall agree in writing),
evidence of the termination of the UCC financing statement naming Chatham Credit
Management III, LLC, as Agent, as secured party, and Borrower, as debtor.
 
                               5.13.2 Borrower shall obtain and deliver to Bank,
in form and substance satisfactory to Bank, as soon as possible, but in no event
later than May 15, 2009 (or such later date as Bank shall agree in writing), a
certificate issued by the Secretary of State or other applicable government
authority of the State of Ohio certifying that Borrower is qualified to do
business as a foreign corporation and is in good standing in the State of Ohio.
 
                               5.13.3 Borrower shall use commercially reasonable
efforts to obtain and deliver to deliver to Bank, in form and substance
satisfactory to Bank, as soon as possible, but in no event later than July 31,
2009 (or such later date as Bank shall agree in writing), Third Party Waivers
with respect to all premises leased by Borrower where Collateral is or will be
maintained.
 
          6.          Negative Covenants of Borrower. Borrower covenants and
agrees that from the date hereof and until payment in full of the Obligations
and the formal termination of this Agreement, Borrower and each Subsidiary:
 
                      6.1     Debt. Shall not create or permit to exist any
Debt, including any guaranties or other contingent obligations, except the
following (“Permitted Debt”):
 
                                 (a)           the Obligations;
 
                              (b)          endorsement of checks for collection
in the ordinary course of business;
 
                              (c)          accounts payable to trade creditors
which are not aged more than ninety (90) days from billing date and current
operating expenses (other than for borrowed money) which are not more than
thirty (30) days past due, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are actively being
Properly Contested;

 
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                              (d)          purchase money Debt not exceeding
$3,000,000 in aggregate principal amount at any time outstanding for Borrower
and all Subsidiaries incurred to purchase Equipment, provided that the amount of
such Debt shall not at any time exceed the purchase price of the Equipment
purchased;
 
                              (e)          Debt for taxes not at the time due
and payable or deferred taxes or which are being actively Properly Contested;
 
                              (f)           Subordinated Debt issued by Borrower
subordinated in favor of Bank pursuant to an executed subordination agreement on
terms and conditions satisfactory to Bank in all respects not exceeding $500,000
in aggregate principal amount at any time outstanding;
 
                              (g)          accrued pension fund and other
employee benefit plan obligations and liabilities (provided, however, that such
Debt does not result in the existence of any Event of Default hereunder); and
 
                              (h)          Debt existing on the Closing Date and
not otherwise permitted under this Section 6.1, as set forth on Exhibit 6.1
hereto, and the renewal and refinancing (but not the increase in the aggregate
principal amount) thereof.
 
                    6.2       Liens. Shall not create or permit any Liens on any
of its property except the following (“Permitted Liens”):
 
                                 (a)          Liens securing the Obligations;
 
                              (b)          Liens for taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA or Environmental Laws) not yet due and payable or
which are being Properly Contested;
 
                              (c)           The claims of materialmen,
mechanics, carriers, warehousemen, processor or landlords arising out of
operation of law so long as the obligations secured thereby are not past due or
are being Properly Contested;
 
                              (d)          Liens consisting of deposits or
pledges made in the ordinary course of business in connection with workers’
compensation, unemployment insurance, social security and similar laws;
 
                              (e)          Judgment and other similar non-tax
Liens arising in connection with court proceedings but only if and for so long
as (a) the execution or enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal, (b) the validity and/or amount of the
claims secured thereby are being Properly Contested and (c) such Liens do not,
in the aggregate, materially detract from the value of the assets of the Person
whose assets are subject to such Lien or materially impair the use thereof in
the operation of such Person’s business;
 
                              (f)          Liens securing Permitted Debt
incurred solely for the purpose of purchase money financing for the acquisition
of Equipment, provided that such Lien does not secure more than the purchase
price of such Equipment and does not encumber property other than the purchased
property; and

 
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                              (g)          Liens not otherwise permitted by this
Section 6.2, in existence on the Closing Date and described on Exhibit 6.2.
 
                    6.3       Restricted Payments. Shall not pay or declare any
dividends (other than stock dividends) or other distribution or purchase, redeem
or otherwise acquire any stock or other equity interests or pay or acquire any
Debt subordinate to the Obligations except that (i) any Subsidiary may pay
dividends to Borrower or another Subsidiary wholly-owned by Borrower, (ii) so
long as no Default or Event of Default is in existence before or after giving
effect thereto, Borrower may declare and pay dividends to its stockholders not
exceeding forty (40%) percent of Borrower’s consolidated net income, determined
in accordance with GAAP, in the aggregate in any fiscal year, and (iii) so long
as no Default or Event of Default is in existence before or after giving effect
thereto, Borrower may repurchase stock in an amount not exceeding $750,000 in
the aggregate in any fiscal year.
 
                    6.4       Loans and Other Investments. Shall not make or
permit to exist any advances or loans to, or guarantee or become contingently
liable, directly or indirectly, in connection with the obligations, leases,
stock or dividends of, or own, purchase or make any commitment to purchase any
stock, bonds, notes, debentures or other securities of, or any interest in, or
make any capital contributions to any Person, except for (a) purchases of direct
obligations of the federal government, (b) deposits in commercial banks, (c)
commercial paper of any U.S. corporation having the highest ratings then given
by the Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, (d)
loans and investments in Subsidiaries created, acquired and existing in
compliance with Section 6.12, (e) endorsement of negotiable instruments for
collection in the ordinary course of business, and (f) advances to employees for
business travel and other expenses incurred in the ordinary course of business
which do not at any time exceed $50,000 in the aggregate.
 
                    6.5       Change in Business. Shall not enter into any
business which is substantially different from the business in which it is
engaged on the Closing Date.
 
                    6.6       Accounts. (a) Shall not sell, assign or discount
any of its Accounts, Chattel Paper or any promissory notes held by it other than
the discount of such notes in the ordinary course of business for collection;
(b) shall not create or accept any Account, Instrument, Chattel Paper or other
obligation of any kind due from or owed by a Sanctioned Person or enter into any
lease that secures the Obligations where the lessee is a Sanctioned Person; and
(c) shall notify Bank promptly in writing of any discount, offset or other
deductions not shown on the face of an Account invoice and any dispute over an
Account, and any information relating to an adverse change in any Account
Debtor’s financial condition or ability to pay its obligations or if it learns
that any Account Debtor is a Sanctioned Person.
 
                    6.7       Transactions with Affiliates. Shall not directly
or indirectly purchase, acquire or lease any property from, or sell, transfer or
lease any property to, pay any management fees to or otherwise deal with, in the
ordinary course of business or otherwise, any Affiliate (other than a
Subsidiary); provided, however, that (i) the acts or transactions described on
Exhibit 6.7 hereto are not prohibited by this Section 6.7 and (ii) any acts or
transactions prohibited by this Section may be performed or engaged in if upon
terms not less favorable to Borrower or such Subsidiary than if no such
relationship existed.
 
                    6.8       No Change in Name, Offices or Jurisdiction of
Organization; Removal of Collateral. Shall not change its name or the
jurisdiction in which it is organized or, unless it shall have given thirty (30)
days’ advance written notice thereof to Bank, change the location of its chief
executive office or other office where books or records are kept, or permit any
Inventory or other tangible Collateral to be located at any location other than
as specified in the Borrower Information Certificate.

 
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                    6.9       No Sale, Leaseback. Shall not enter into any
sale-and-leaseback or similar transaction.
 
                    6.10      Margin Stock. Shall not use any proceeds of the
Loans to purchase or carry any margin stock (within the meaning of Regulation U
of the Board of Governors of Federal Reserve System) or extend credit to others
for the purpose of purchasing or carrying any margin stock.
 
                    6.11      Tangible Collateral. Shall not, except as
otherwise provided herein, allow any Inventory or other tangible Collateral to
be commingled with, or become an accession to or part of, any property of any
other Person so long as such property is Collateral or allow any tangible
Collateral to become a fixture.
 
                    6.12      Subsidiaries. Shall not acquire, form or dispose
of any Subsidiaries or permit any Subsidiary to issue capital stock except to
its parent.
 
                    6.13      Liquidation, Mergers, Consolidations and
Dispositions of Substantial Assets, Name and Good Standing.
 
                                (a)         Shall not merge, reorganize,
consolidate or amalgamate with any Person;
 
                                (b)         Shall not liquidate, wind up its
affairs or dissolve itself;
 
                               (c)         Shall not acquire by purchase, lease
or otherwise, all or substantially all of the assets of any Person, the assets
of any division or line of business of any Person, or any other substantial
amount of the assets of any Person outside of the ordinary course of
business, whether in a single transaction or in a series of related
transactions;
 
                               (d)         Shall not sell, transfer, lease or
otherwise dispose of any of its property or assets, or sell or dispose of any
equity ownership interests in any Subsidiary, in each case whether in a single
transaction or in a series of related transactions, except for:
 
                                       (i)   the sale of Inventory in the
ordinary course of business,
 
                                       (ii) the sale of property or assets
outside the ordinary course of business in the aggregate amount not to exceed
$100,000 during any twelve (12) consecutive month period, and
 
                                       (iii) the voluntary termination of Swap
Agreements to which Borrower or such Subsidiary is a party;
 
                               (e)          Shall not change its name or
jurisdiction of organization or conduct business under any new fictitious name;
 
                                (f)          Shall not change its Federal
Employer Identification Number; or
 
                              (g)         Shall not fail to remain in good
standing and qualified to transact business as a foreign corporation in any
state or other jurisdiction in which it is required to be qualified to transact
business as a foreign corporation and in which the failure to be so qualified
could reasonably be expected to have a Material Adverse Effect.
 
                    6.14      Change of Fiscal Year or Accounting Methods. Shall
not change its fiscal year or its accounting methods without providing thirty
(30) days prior written notice to Bank.

 
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                     6.15      Deposit Accounts. Shall not open or maintain any
Deposit Accounts except for (i) Deposit Accounts opened or maintained at Bank,
(ii) those listed on the Borrower Information Certificate, (iii) Deposit
Accounts which are not opened or maintained at Bank but which are subject to
Bank’s “control” (as such term is used in Article 9 of the Code) on terms
reasonably satisfactory to Bank, and (iv) such other Deposit Accounts as shall
be necessary for payroll, petty cash, local trade payables, and other occasional
needs of Borrower. The aggregate balance of any Deposit Accounts (other than
payroll accounts) which are not subject to Bank’s “control” (as such term is
used in Article 9 of the Code) on terms reasonably acceptable to Bank shall
never exceed $25,000 without Bank’s prior written consent. Borrower shall
maintain its primary Deposit Account and cash management Deposit Accounts with
Bank. All Deposit Accounts maintained at Bank shall be deemed to be under Bank’s
“control” as such term is used in Article 9 of the Code.
 
        7.          Financial Covenants. Borrower covenants and agrees that from
the date hereof and until payment in full of the Obligations and the termination
of this Agreement, Borrower and each Subsidiary shall comply with the following
covenants:
 
                     7.1       Fixed Charge Coverage Ratio. During any period in
which Average Excess Availability is less than $6,500,000, Borrower and its
Subsidiaries, on a consolidated basis, shall maintain, as of the end of each
fiscal month of Borrower, a Fixed Charge Coverage Ratio of not less than 1.35 to
1.00 for the immediately preceding period of twelve (12) consecutive fiscal
months.
 
                     7.2       Capital Expenditures. Borrower shall not permit
the aggregate amount of all Capital Expenditures of Borrower and its
Subsidiaries during any fiscal year of Borrower to exceed $3,500,000; provided,
that, (a) in the event that the actual amount of Capital Expenditures of
Borrower and its Subsidiaries during any fiscal year is less than the amount
permitted hereunder, Capital Expenditures may be made in the immediately
succeeding fiscal year in the amount equal to the amount permitted to be made
during such fiscal year plus one hundred (100%) percent of such excess amount
from the immediately preceding fiscal year (rounded to the nearest $100,000),
and (b) any Capital Expenditures made in any fiscal year shall be deemed to be
made first from the excess amount from the immediately preceding fiscal year and
then to the applicable limitation for such fiscal year.
 
                     7.3       Minimum Excess Availability. Borrower shall
maintain Excess Availability at all times in an amount of not less than
$1,500,000.
 
        8.          Default.
 
                     8.1       Events of Default. Each of the following shall
constitute an Event of Default:
 
                             (a)          There shall occur any default by
Borrower in the payment, when due, of any principal of or interest in respect of
the Loans or any fee due, any other amounts due hereunder or any other Loan
Document, or any other Obligations; or
 
                             (b)          There shall occur any default by
Borrower in the performance of any agreement, covenant or obligation contained
in Sections 5.1, 5.4, 5.5, 5.6 (other than subsections (g) and (h)), 5.9, 5.12
(other than subsections (b) and (c)), Section 6 or Section 7 of this Agreement;
or
 
                             (c)          There shall occur any default by
Borrower or any other party to any Loan Document (other than Bank) in the
performance of any other agreement, covenant or obligation contained in this
Agreement or such Loan Document not provided for elsewhere in this Section 8 and
the breach of such other agreement, covenant or obligation is not cured to
Bank’s satisfaction within thirty (30) days after the sooner to occur of any
Senior Officer’s receipt of notice of such breach from Bank or the date on which
such failure or neglect first becomes known to any Senior Officer; provided,
however, that such notice and opportunity to cure shall not apply in the case of
any failure to perform, keep or observe any covenant which is not capable of
being cured at all or within such thirty (30) day period or which is a willful
and knowing breach by Borrower or such other party; or

 
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                            (d)          Any representation or warranty made by
Borrower or any other party to any Loan Document (other than Bank) herein or
therein or in any certificate or report furnished in connection herewith or
therewith shall prove to have been untrue or incorrect in any material respect
when made; or
 
                            (e)          Any other obligation now or hereafter
owed by Borrower or any Subsidiary or any Guarantor to Bank or any Affiliate of
Bank shall be in default and not cured within the grace period, if any, provided
therein; or
 
                            (f)          Borrower or any Subsidiary or Guarantor
shall fail to make any payment in respect of outstanding Debt (other than the
Obligations) in an aggregate principal amount of $50,000 or more when due after
the expiration of any applicable grace period, or any event or condition shall
occur which results in the acceleration of the maturity of such Debt (including,
without limitation, any required mandatory prepayment or “put” of such Debt to
any such Person) or enables (or, with the giving of notice or lapse of time or
both, would enable) the holders of such Debt or a commitment related to such
Debt (or any Person acting on such holders’ behalf) to accelerate the maturity
thereof or terminate any such commitment prior to its normal expiration
(including, without limitation, any required mandatory prepayment or “put” of
such Debt to such Person); or
 
                            (g)          Borrower or any Subsidiary or any
Guarantor shall (A) voluntarily dissolve, liquidate or terminate operations or
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of such Person or of all or of a
substantial part of its assets, (B) admit in writing its inability, or be
generally unable, to pay its debts as the debts become due, (C) make a general
assignment for the benefit of its creditors, (D) commence a voluntary case under
the federal Bankruptcy Code (as now or hereafter in effect), (E) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding up, or composition or adjustment of debts, (F) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under Bankruptcy Code, or (G)
take any corporate action for the purpose of effecting any of the foregoing; or
 
                            (h)          An involuntary petition or complaint
shall be filed against Borrower or any Subsidiary or any Guarantor seeking
bankruptcy relief or reorganization or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of Borrower or any Subsidiary or any
Guarantor, of all or substantially all of its assets, and such petition or
complaint shall not have been dismissed within sixty (60) days of the filing
thereof; or an order, order for relief, judgment or decree shall be entered by
any court of competent jurisdiction or other competent authority approving or
ordering any of the foregoing actions; or
 
                            (i)          A judgment in excess of $100,000 shall
be rendered against Borrower or any Subsidiary or any Guarantor and shall remain
undischarged, undismissed and unstayed for more than 20 days or there shall
occur any levy upon, or attachment, garnishment or other seizure of, any portion
of the Collateral or other assets of Borrower, any Subsidiary or any Guarantor
in excess of $50,000 by reason of the issuance of any tax levy, judicial
attachment or garnishment or levy of execution; or
 
                             (j)          Any Guarantor shall repudiate or
revoke any Guaranty Agreement; or

 
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                               (k)          Loss, theft, damage or destruction
of any portion of the tangible Collateral with an aggregate book value in excess
of $100,000 for which there is either no insurance coverage or for which, in the
reasonable opinion of Bank, there is insufficient insurance coverage; or
 
                               (l)          There shall occur any default by
Borrower under any Material Agreement in the performance of Borrower’s duties
and obligations thereunder resulting in the termination of such Material
Agreement; or
 
                               (m)         There shall occur any change in the
condition (financial or otherwise) of Borrower, any Subsidiary and/or any
Guarantor which, in the reasonable opinion of Bank, would have a Material
Adverse Effect; or
 
                               (n)          Scott D. Dorfman shall on a fully
diluted basis, cease to control, with sole power to vote, at least 40% of each
class of voting stock or other equity or income interests of Borrower; or
 
                               (o)          the individual holding the position
of chief financial officer of Borrower on the date hereof is no longer employed
in such position and Borrower shall not have replaced such individual within
ninety (90) days thereafter with a new chief financial officer acceptable to
Bank.
 
                    8.2       Remedies. If any Default shall occur, Bank may,
without notice to Borrower, at its option, withhold further Loans or other
extensions of credit to Borrower. If an Event of Default shall have occurred and
be continuing, Bank may at its option take any or all of the following actions:
 
                               (a)          Bank may declare any or all
Obligations (other than Obligations under any Swap Agreements, between Borrower
and Bank or any Affiliate of Bank, which shall be due in accordance with and
governed by the provisions of said Swap Agreements) to be immediately due and
payable (if not earlier demanded) (provided, that, upon the occurrence of any
Event of Default described in Sections 8.1(g) or 8.1(h), all Obligations shall
automatically become immediately due and payable), terminate its obligation to
make Loans and other extensions of credit to Borrower, bring suit against
Borrower to collect the Obligations, exercise any remedy available to Bank
hereunder or at law and take any action or exercise any remedy provided herein
or in any other Loan Document or under applicable law. No remedy shall be
exclusive of other remedies or impair the right of Bank to exercise any other
remedies.
 
                               (b)          Without waiving any of its other
rights hereunder or under any other Loan Document, Bank shall have all rights
and remedies of a secured party under the Code (and the Uniform Commercial Code
of any other applicable jurisdiction) and such other rights and remedies as may
be available hereunder, under other applicable law or pursuant to contract. If
requested by Bank, Borrower will promptly assemble the Collateral and make it
available to Bank at a place to be designated by Bank. Borrower agrees that any
notice by Bank of the sale or disposition of the Collateral or any other
intended action hereunder, whether required by the Code or otherwise, shall
constitute reasonable notice to Borrower if the notice is mailed to Borrower by
regular or certified mail, postage prepaid, at least five days before the action
to be taken. Borrower shall be liable for any deficiencies in the event the
proceeds of the disposition of the Collateral do not satisfy the Obligations in
full.
 
                               (c)          Bank may demand, collect and sue for
all amounts owed pursuant to Accounts, General Intangibles, Chattel Paper,
Instruments, Documents or for proceeds of any Collateral (either in Borrower’s
name or Bank’s name at the latter’s option), with the right to enforce,
compromise, settle or discharge any such amounts.

 
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                    8.3          Receiver. In addition to any other remedy
available to it, Bank shall have the absolute right, upon the occurrence of an
Event of Default, to seek and obtain the appointment of a receiver to take
possession of and operate and/or dispose of the business and assets of Borrower
and any costs and expenses incurred by Bank in connection with such receivership
shall bear interest at the Default Rate, at Bank’s option, and shall be secured
by all Collateral.
 
                    8.4          Deposits; Insurance. After the occurrence of an
Event of Default, Borrower authorizes Bank to collect and apply against the
Obligations when due any cash or Deposit Accounts in its possession, and any
refund of insurance premiums or any insurance proceeds payable on account of the
loss or damage to any of the Collateral and irrevocably appoints Bank as its
attorney in fact to endorse any check or draft or take other action necessary to
obtain such funds.
 
          9.      Security Agreement.
 
                    9.1          Security Interest.
 
                                (a)          As security for the payment and
performance of any and all Obligations and the performance of all obligations
and covenants of Borrower to Bank and its Affiliates, whether hereunder and
under the other Loan Documents, Swap Agreements between Bank or any Affiliate of
Bank and Borrower or otherwise, certain or contingent, now existing or hereafter
arising, which are now, or may at any time or times hereafter be owing by
Borrower to Bank or any of Bank’s Affiliates, Borrower hereby grants to Bank
(for itself and its Affiliates) a continuing security interest in and general
lien upon and right of set off against, all right, title and interest of
Borrower in and to the Collateral, whether now owned or hereafter acquired by
Borrower.
 
                                (b)          Except as herein or by applicable
law otherwise expressly provided, Bank shall not be obligated to exercise any
degree of care in connection with any Collateral in its possession, to take any
steps necessary to preserve any rights in any of the Collateral or to preserve
any rights therein against prior parties, and Borrower agrees to take such
steps. In any case Bank shall be deemed to have exercised reasonable care if it
shall have taken such steps for the care and preservation of the Collateral or
rights therein as Borrower may have reasonably requested Bank to take and Bank’s
omission to take any action not requested by Borrower shall not be deemed a
failure to exercise reasonable care. No segregation or specific allocation by
Bank of specified items of Collateral against any liability of Borrower shall
waive or affect any security interest in or Lien against other items of
Collateral or any of Bank’s options, powers or rights under this Agreement or
otherwise arising.
 
                                (c)          Bank may at any time and from time
to time, with or without notice to Borrower during the continuance of an Event
of Default, (i) transfer into the name of Bank or the name of Bank’s nominee any
of the Collateral, (ii) notify any Account Debtor or other obligor of any
Collateral to make payment thereon direct to Bank of any amounts due or to
become due thereon and (iii) receive and direct the disposition of any proceeds
of any Collateral.
 
                                (d)          Notwithstanding the foregoing, (i)
no Account, Instrument, Chattel Paper or other obligation or property of any
kind due from, owed by or belonging to, a Sanctioned Person or (ii) any lease in
which the lessee is a Sanctioned Person shall be Collateral or shall be credited
toward the payment of the Obligations.

 
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                    9.2          Financing Statements; Power of Attorney.
Borrower authorizes Bank at Borrower’s expense to file any financing statements
and/or amendments thereto relating to the Collateral (without Borrower’s
signature thereon) which Bank deems appropriate that (a) indicate the Collateral
(i) as “all assets” of Borrower or words of similar effect, if appropriate,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Code, or (ii) by specific Collateral
category, and (b) provide any other information required by part 5 of Article 9
of the Code for the sufficiency or filing office acceptance of any financing
statement or amendment. Borrower irrevocably appoints Bank as its attorney in
fact to execute any such financing statements and/or control agreements in
Borrower’s name and to perform all other acts, at Borrower’s expense, which Bank
deems necessary to perfect and to continue perfection of the security interest
of Bank. Borrower hereby appoints Bank as Borrower’s attorney in fact to
endorse, present and collect on behalf of Borrower and in Borrower’s name any
draft, checks or other documents necessary or desirable to collect any amounts
which Borrower may be owed. During the continuance of an Event of Default, Bank
is hereby granted a license or other right to use, without charge, Borrower’s
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any Property of a similar nature,
as it pertains to the Collateral, in advertising for sale and selling any
Collateral, and Borrower’s rights under all licenses and all franchise
agreements shall inure to Bank’s benefit. The proceeds realized from the sale or
other disposition of any Collateral may be applied, after allowing two (2)
Business Days for collection, first to the reasonable costs, expenses and
attorneys’ fees and expenses incurred by Bank for collection and for
acquisition, completion, protection, removal, storage, sale and delivering of
the Collateral; second, to interest due upon any of the Obligations; third, to
the principal amount of the Obligations and to any other Obligations then
outstanding; and fourth to any other Person as required by applicable law. If
any deficiency shall arise, Borrower and each Guarantor shall remain jointly and
severally liable to Bank therefor.
 
                    9.3          Entry. Borrower hereby irrevocably consents to
any act by Bank or its agents in entering upon any premises for the purposes of
either (i) inspecting the Collateral or (ii) during the continuance of an Event
of Default, taking possession of the Collateral and Borrower hereby waives its
right to assert against Bank or its agents any claim based upon trespass or any
similar cause of action, to the extent that Bank has acted in accordance with
this Section 9.3, for entering upon any premises where the Collateral may be
located.
 
                    9.4          Other Rights. Borrower authorizes Bank without
affecting Borrower’s obligations hereunder or under any other Loan Document from
time to time (i) to take from any party and hold additional Collateral or
guaranties for the payment of the Obligations or any part thereof, and to
exchange, enforce or release such collateral or guaranty of payment of the
Obligations or any part thereof and to release or substitute any endorser or
guarantor or any party who has given any security interest in any collateral as
security for the payment of the Obligations or any part thereof or any party in
any way obligated to pay the Obligations or any part thereof; and (ii) upon the
occurrence of any Event of Default to direct the manner of the disposition of
the Collateral and the enforcement of any endorsements, guaranties, letters of
credit or other security relating to the Obligations or any part thereof as Bank
in its sole discretion may determine.
 
                    9.5          Accounts. During the continuance of an Event of
Default, Bank may notify any Account Debtor of Bank’s security interest and may
direct such Account Debtor to make payment directly to Bank for application
against the Obligations. Any such payments received by or on behalf of Borrower
at any time, during the continuance of an Event of Default, shall be the
property of Bank, shall be held in trust for Bank and not commingled with any
other assets of any Person (except to the extent they may be commingled with
other assets of Borrower in an account with Bank) and shall be immediately
delivered to Bank in the form received.
 
                    9.6          Waiver of Marshaling. Borrower hereby waives
any right it may have to require marshaling of its assets.

 
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                    9.7          Control. Borrower will cooperate with Bank in
obtaining control of, or control agreements with respect to, Collateral for
which control or a control agreement is required for perfection of Bank’s
security interest under the Code.
 
          10.    Miscellaneous.
 
                    10.1       No Waiver, Remedies Cumulative. No failure on the
part of Bank to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are in addition to any other remedies provided by
law, any Loan Document or otherwise.
 
                    10.2       Survival of Representations. All representations
and warranties made herein shall survive the making of the Loans hereunder, and
shall continue in full force and effect so long as any Obligations is
outstanding, there exists any commitment by Bank to Borrower, and until this
Agreement is formally terminated in writing.
 
                    10.3       Indemnity By Borrower; Expenses. In addition to
all other Obligations, Borrower agrees to defend, protect, indemnify and hold
harmless Bank and its Affiliates and all of their respective officers,
directors, employees, attorneys, consultants and agents from and against any and
all losses, damages, liabilities, obligations, penalties, fines, fees, costs and
expenses (including, without limitation, attorneys’ and paralegals’ fees, costs
and expenses, and fees, costs and expenses for investigations and experts)
incurred by such indemnitees, whether prior to or from and after the date
hereof, as a result of or arising from or relating to (i) the due diligence
effort (including, without limitation, public record search, recording fees,
examinations and investigations of the properties of Borrower and Borrower’s
operations), negotiation, preparation, execution and/or performance of any of
the Loan Documents or of any document executed in connection with the
transactions contemplated thereby and the perfection of Bank’s Liens in the
Collateral, maintenance of the Loan by Bank, and any and all amendments,
modifications, and supplements of any of the Loan Documents or restructuring of
the Obligations, (ii) any suit, investigation, action or proceeding by any
Person (other than Borrower), whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any Person under any statute,
regulation or common law principle, arising from or in connection with Bank’s
furnishing of funds to Borrower under this Agreement, (iii) Bank’s preservation,
administration and enforcement of its rights under the Loan Documents and
applicable law, including the fees and disbursements of counsel for Bank in
connection therewith, whether suit be brought or not and whether incurred at
trial or on appeal, and all costs of repossession, storage, disposition,
protection and collection of Collateral, (iv) periodic field exams, audits and
appraisals performed by Bank pursuant to Section 5.5 hereof;(v) any civil
penalty or fine assessed by OFAC against Bank or any Affiliate of Bank and all
reasonable costs and expense (including counsel fees and disbursements) incurred
in connection with defense thereof by Bank or such Affiliate, as a result of the
funding of Loans or the extension of credit, the acceptance of payments due
under the Loan Documents or any Swap Agreement or acceptance of Collateral,
and/or (vi) any matter relating to the financing transactions contemplated by
the Loan Documents or by any document executed in connection with the
transactions contemplated thereby; but in all instances, other than for such
loss, damage, liability, obligation, penalty, fee, cost or expense arising from
such indemnitee’s gross negligence or willful misconduct. If Borrower should
fail to pay any tax or other amount required by this Agreement to be paid or
which may be reasonably necessary to protect or preserve any Collateral or
Borrower’s or Bank’s interests therein, Bank may make such payment and the
amount thereof shall be payable on demand, may at Bank’s option be debited
against any Deposit Account of Borrower at Bank or converted to a Loan
hereunder, shall bear interest at the Default Rate from the date of demand until
paid and shall be deemed to be Obligations entitled to the benefit and security
of the Loan Documents. In addition, Borrower agrees to pay and save Bank
harmless against any liability for payment of any state documentary stamp taxes,
intangible taxes or similar taxes (including interest or penalties, if any)
which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any Loan,
whether originally thought to be due or not, and regardless of any mistake of
fact or law on the part of Bank or Borrower with respect to the applicability of
such tax. Borrower’s obligation for indemnification for all of the foregoing
losses, damages, liabilities, obligations, penalties, fees, costs and expenses
of Bank shall be part of the Obligations, secured by the Collateral, chargeable
against Borrower’s loan account, and shall survive termination of this
Agreement.

 
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                    10.4           Notices. Any notice or other communication
hereunder to any party hereto or thereto shall be by hand delivery, overnight
delivery via nationally recognized overnight delivery service, facsimile with
receipt confirmed, telegram, telex or registered or certified United States mail
with return receipt and unless otherwise provided herein shall be deemed to have
been given or made when delivered, telegraphed, telexed, faxed or, if sent via
United States mail, when receipt signed by the receiver, postage prepaid,
addressed to the party at its address specified below (or at any other address
that the party may hereafter specify to the other parties in writing):

       
Bank:
Wachovia Bank, National Association
171 17th Street, N.W., 4th Floor
Atlanta, Georgia 30363
Attn: Portfolio Manager
       
Borrower:
Innotrac Corporation
6655 Sugarloaf Pkwy.
Duluth, Georgia 30097
Attn: Scott D. Dorfman

 
                    10.5           Governing Law. This Agreement and the Loan
Documents shall be deemed contracts made under the laws of the State of Georgia
and shall be governed by and construed in accordance with the laws of the State
of Georgia (excluding its conflict of laws provisions if such provisions would
require application of the laws of another jurisdiction) except insofar as the
laws of another jurisdiction may, by reason of mandatory provisions of law,
govern the perfection, priority and enforcement of security interests in the
Collateral.
 
                    10.6           Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of Borrower and Bank, and their
respective successors and assigns; provided, that Borrower may not assign any of
its rights hereunder without the prior written consent of Bank, and any such
assignment made without such consent will be void.
 
                    10.7           Counterparts; Telecopied Signatures. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original and all of which when taken together shall
constitute but one and the same instrument. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.
 
                    10.8           No Usury. Regardless of any other provision
of this Agreement or in any other Loan Document, if for any reason the effective
interest should exceed the maximum lawful interest, the effective interest shall
be deemed reduced to, and shall be, such maximum lawful interest, and (i) the
amount which would be excessive interest shall be deemed applied to the
reduction of the principal balance of the Loans and not to the payment of
interest, and (ii) if the Loans have been or are thereby paid in full, the
excess shall be returned to the party paying same, such application to the
principal balance of the Loans or the refunding of excess to be a complete
settlement and acquittance thereof.

 
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                    10.9          Powers. All powers of attorney granted to Bank
are coupled with an interest and are irrevocable.
 
                    10.10        Approvals; Amendments. If this Agreement calls
for the approval or consent of Bank, such approval or consent may be given or
withheld in the discretion of Bank unless otherwise specified herein. This
Agreement and the other Loan Documents may not be modified, altered or amended,
except by an agreement in writing signed by Borrower and Bank and may not be
modified in any manner adverse to a provider under any secured or guarantied
Swap Agreement without that provider’s prior written consent.
 
                    10.11        Participations and Assignments. Bank shall have
the right to enter into one or more participations with other lenders with
respect to the Obligations and, upon receipt of Borrower’s prior written consent
(which consent shall not be unreasonably withheld or delayed), to assign to one
or more assignees all or a portion of its interest, rights and obligations under
the Loan Documents, provided that any such consent from Borrower shall not be
required during the continuance of an Event of Default. Upon prior notice to
Borrower of such participation or assignment, Borrower shall thereafter furnish
to such participant or assignee any information furnished by Borrower to Bank
pursuant to the terms of the Loan Documents. Nothing in this Agreement or any
other Loan Document shall prohibit Bank from pledging or assigning this
Agreement and Bank’s rights under any of the other Loan Documents, including
collateral therefor, to any Federal Reserve Bank in accordance with applicable
law.
 
                    10.12        Dealings with Multiple Borrowers. If more than
one Person is named as Borrower hereunder, all Obligations, representations,
warranties, covenants and indemnities set forth in the Loan Documents to which
such Person is a party shall be joint and several. Bank shall have the right to
deal with any individual of any Borrower with regard to all matters concerning
the rights and obligations of Bank hereunder and pursuant to applicable law with
regard to the transactions contemplated under the Loan Documents. All actions or
inactions of the officers, managers, members and/or agents of any Borrower with
regard to the transactions contemplated under the Loan Documents shall be deemed
with full authority and binding upon all Borrowers hereunder.
 
                    10.13        Waiver of Certain Defenses. To the fullest
extent permitted by applicable law, upon the occurrence of any Event of Default,
neither Borrower nor anyone claiming by or under Borrower will claim or seek to
take advantage of any law requiring Bank to attempt to realize upon any
Collateral or collateral of any surety or guarantor, or any appraisement,
evaluation, stay, extension, homestead, redemption or exemption laws now or
hereafter in force in order to prevent or hinder the enforcement of this
Agreement. Borrower, for itself and all who may at any time claim through or
under Borrower, hereby expressly waives to the fullest extent permitted by law
the benefit of all such laws. All rights of Bank and all obligations of Borrower
hereunder shall be absolute and unconditional irrespective of (i) any change in
the time, manner or place of payment of, or any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from any provision of the Loan Documents, (ii) any exchange, release or
non-perfection of any other collateral given as security for the Obligations, or
any release or amendment or waiver of or consent to departure from any guaranty
for all or any of the Obligations, or (iii) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, Borrower or any
third party, other than payment and performance in full of the Obligations.

 
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                    10.14        Additional Provisions. Time is of the essence
of this Agreement and the other Loan Documents. This Agreement and the other
Loan Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and inducements, whether express or implied,
oral or written. No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any
party hereto by any court or other governmental or judicial authority by reason
of such party having or being deemed to have structured, drafted or dictated
such provision.
 
                    10.15        Integration; Final Agreement. This Agreement
and the other loan documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.
 
                    10.16        LIMITATION ON LIABILITY; WAIVER OF PUNITIVE
DAMAGES. EACH OF THE PARTIES HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES
THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR
CONTROVERSY BETWEEN OR AMONG THEM (A “DISPUTE”) THAT MAY ARISE OUT OF OR BE IN
ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT
OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED
HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER
FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY
DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO
PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN
CONNECTION WITH ANY DISPUTE, WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION,
MEDIATION, JUDICIALLY OR OTHERWISE.
 
                    10.17        BINDING ARBITRATION; PRESERVATION OF REMEDIES.
 
                                       (a)          Binding Arbitration. Upon
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any claim or controversy between parties hereto arising out
of or relating to this Agreement or any other Loan Documents shall be resolved
by binding arbitration conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration
Association (the “AAA”) and the Federal Arbitration Act. Disputes may include,
without limitation, tort claims, counterclaims, a dispute as to whether a matter
is subject to arbitration, claims brought as class actions, or claims arising
from documents executed in the future. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to Swap
Agreements.
 
                                       (b)          Special Rules. All
arbitration hearings shall be conducted in the city named in the address of Bank
first stated above. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall conclude within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein.

 
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                                      (c)           Preservation and Limitation
of Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale or under applicable law by judicial foreclosure
including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment. Any
claim or controversy with regard to any party’s entitlement to such remedies is
a Dispute.
 
                                      (d)          Waiver of Jury Trial. THE
PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
 
[Signatures on following page]

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed under seal as of the day and year first above written.

     
BORROWER:
     
INNOTRAC CORPORATION
     
By
/s/ Scott D. Dorfman
 
 
Name:
Scott D. Dorfman
 
Its:
President
     
BANK:
     
WACHOVIA BANK, NATIONAL ASSOCIATION
     
By    
/Jeanette K. Childress
 
 
Name:
Jeanette K. Childress
 
 
Its:
Director

 
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