Exhibit 10.62

MEZZANINE LOAN AGREEMENT

BETWEEN

DOVER SADDLERY, INC.

AND

BCA MEZZANINE FUND, L.P.

December 11, 2007

1

TABLE OF CONTENTS

2

EXHIBITS

     
Exhibit 2.1
Exhibit 4.3(a)
Exhibit 4.3(b)
Exhibit 4.5
Exhibit 4.7
Exhibit 4.8
Exhibit 4.11
Exhibit 4.12
Exhibit 4.13
Exhibit 4.20
Exhibit 5.1
Exhibit 5.2(e)
Exhibit 5.18
Exhibit 6.2
  Form of Mezzanine Note
Capitalization of Borrower
Capitalization of Subsidiaries
Litigation
Material Changes
Licenses, Permits, Third Party Consents, Compliance with Law
Intellectual Property
Tax Claims
ERISA Matters
Existing Indebtedness
Use of Funds
Covenant Compliance Certificate
Form of Confidentiality, Non-Disclosure and Non-Use Agreement
Schedule of Permitted Debt

3

MEZZANINE LOAN AGREEMENT

THIS MEZZANINE LOAN AGREEMENT is dated as of December 11, 2007 and entered into
by and among DOVER SADDLERY, INC., a Delaware corporation having its principal
place of business at 525 Great Road, Littleton, MA 01460 (“Borrower”), and BCA
MEZZANINE FUND, L.P., a Delaware limited partnership having offices at One Turks
Head Place, Suite 1492, Providence, RI 02903 (collectively, with its successors
and assigns, “Lender”).

R E C I T A L S

WHEREAS, Borrower has requested that Lender make a loan to Borrower in the
original principal amount of $5,000,000, to be used as working capital and to
repay certain debt of Borrower; and

WHEREAS, Lender is willing to make such a loan to Borrower on the terms and
conditions hereinafter set forth and evidenced by the Mezzanine Loan Documents
(as such term is hereinafter defined).

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the parties, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms.  All capitalized terms used in this Agreement or in
any certificate, report or other or other document made or delivered pursuant to
this Agreement (unless otherwise defined therein) shall have the meanings
assigned to them below:

Accounts.  All rights to payment for goods sold or for services rendered, all
sums of money or other proceeds due or becoming due thereon, all instruments
pertaining thereto, all guarantees and security therefor, all goods giving rise
thereto and all rights pertaining to an interest in such goods including the
right of stoppage in transit, all rights under contracts to receive money, all
other rights and claims to the payment of money, including, without limitation,
chattel paper and amounts due from Affiliates, and insurance proceeds with
respect to any of the foregoing.

Affiliate.  See Section 6.8.

Agreement.  This Agreement (including all exhibits, schedules, annexes and the
like referred to herein) as amended, restated, supplemented, or otherwise
modified or replaced from time to time.

Application Fee. Means the Application Fee as defined in the Term Sheet.

Bankruptcy Code.  The United States Federal Bankruptcy Code of 1978, as amended
or supplemented.

Board. See Section 5.18.

Borrower. Means as set forth in the recitals.

Business Day.  Any day which is neither a Saturday or Sunday nor a legal holiday
on which commercial banks are authorized or required to be closed in Providence,
Rhode Island.

Capital Securities. As to any Person that is a corporation, the authorized
            shares of such Person’s capital stock, including all classes of
common, preferred, voting and nonvoting capital stock, and, as to partnership,
limited liability company or other non-corporate entity, ownership interests in
such Person, including, without limitation, the right to share in profits and
losses, the right to receive distributions of cash and property, and the right
to receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.

Cash and Cash Equivalents.  (i) Cash on hand or on deposit with Lender or in any
other domestic commercial bank or trust company having capital and surplus in
excess of five hundred million dollars ($500,000,000), (ii) securities issued,
or directly and fully guaranteed or insured, by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of six (6) months or less from the date
of acquisition, bankers’ acceptances, having maturities not exceeding six
months, and overnight bank deposits, in each case with Lender or with any
domestic commercial bank having capital and surplus in excess of five hundred
million dollars ($500,000,000), (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (ii) above and entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper issued by
Lender or the parent corporation of Lender, and commercial paper rated A-1 or
the equivalent thereof by Standard & Poor’s Ratings Group, a division of
McGraw-Hill, Inc., a New York corporation, or P-1 or the equivalent thereof by
Moody’s Investors Service, Inc., and in each case maturing within six (6) months
after the date of acquisition, and (vi) a readily redeemable “money market
mutual fund” advised by a bank described in clause (iii) hereof, or as
investment advisor registered under Section 203 of the Investment Advisors Act
of 1940, that has and maintains an investment policy limiting its investment
primarily to instruments of the types described in clauses (i) through (v)
hereof and having on the date of such investment total assets of at least one
hundred million dollars ($100,000,000).

Change of Control.  The acquisition of voting control or direction of over 50%
or more of Borrower’s outstanding common stock or sale of all or substantially
all of the assets of Borrower in one or more related transactions.

Capital Expenditures.  As of the date of any determination and for the period
specified, with respect to Borrower, all capital expenditures, as determined in
accordance with GAAP.

Closing. Means as is defined in Section 2.4.

Closing Date. Means as is defined in Section 2.4.

Closing Fee. Means the Closing Fee as defined in the Term Sheet.

Code.  The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

Collateral. All assets of any kind or nature of Borrower.

Collateral Documents. Any documents executed by Borrower creating a security
interest in Collateral in favor of Lender.

Common Stock. See Section 4.3.

Convertible Securities. Securities or obligations that are exercisable for,
convertible into, or exchangeable for shares of Common Stock and shall include
the Notes and the options, warrants or other rights to subscribe for or purchase
Common Stock or to subscribe for or purchase other Capital Securities or
obligations that are, directly or indirectly, convertible into or exchangeable
for Common Stock.

Covenant Compliance Certificate.  A Covenant Compliance Certificate,
substantially in the form set forth on Exhibit 5.2(e) hereto, or such other form
as shall be approved by Lender.

Default.  An event which with the passage of time or the giving of notice, or
both, shall constitute an Event of Default.

Dollars and the sign “$”.  The lawful money of the United States of America.

EBITDA. As of the date of any determination and for the period specified, Net
Income plus, to the extent deducted in the calculation of such Net Income, the
sum of (i) interest expense, (ii) deductions for income taxes,
(iii) depreciation expense, (iv) amortization expense, all as determined in
accordance with GAAP, to be determined on a 12-month trailing basis, and (v) the
$700,000 expense recognized pursuant to the settlement of the Goldsmith Agio
Helms litigation.

Effective Date. The date on which all of the closing conditions set forth in
Section 3.1 shall be satisfied, or waived or deferred in writing to a later
date.

ERISA.  The Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001, et
seq., and all rules and regulations from time to time promulgated thereunder, as
the same may from time to time be supplemented or amended and remain in effect.

ERISA Affiliate.  Any Person under common control that, together with Borrower,
is treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.

Event of Default.  Means as defined in Article VIII hereof.

Fixed Rate. 14.0%

Fixed Rate Loan. The Mezzanine Loan bearing interest with reference to the Fixed
Rate.

Funds. Means as defined in Section 2.2.

GAAP.  Generally accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent with the prior
financial practices of Borrower, as reflected on the financial statements
referred to in Section 4.7.

Guarantee Agreement. The Subsidiary Guarantee Agreement given by the Guarantors
in favor of the Lender, dated the date hereof.

Guarantors. Means each of Dover Saddlery, Inc., a Massachusetts corporation;
Smith Brothers, Inc., a Texas corporation; Dover Saddlery Retail, Inc., a
Massachusetts corporation; Old Dominion Enterprises, Inc., a Virginia
corporation; and Dover Saddlery Direct, Inc., a Massachusetts corporation.

Hazardous Materials.  Asbestos, explosives, radioactive or nuclear substances,
polychlorinated biphenyls, oil and other petroleum products, radon gas, urea
formaldehyde, chemicals, gases, solvents, pollutants or contaminants that are
detrimental or pose a danger to the environment or to the health or safety of
any person, and any other hazardous or toxic materials, wastes and substances
which are defined, determined or identified as such in any past, present or
future federal, state or local laws, by-laws, rules, regulations, codes or
ordinances or any judicial or administrative interpretation thereof.

Indebtedness.  As applied to any Person, (i) all obligations for borrowed money
or other extensions of credit, including all obligations representing the
deferred purchase price of property (but excluding obligations under any lease
which in accordance with GAAP is properly accounted for as an “operating
lease”), (ii) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (iii) all obligations secured by any Lien on property owned
or acquired by such Person whether or not the obligations secured thereby shall
have been assumed, (iv) that portion of all obligations arising under capital
leases that is required to be capitalized on the consolidated balance sheet of
such Person, and (v) all guaranties, endorsements or other contingent surety
obligations with respect to obligations of other Persons, whether or not
reflected on the balance sheet of such Person.

Intellectual Property. (i) all United States and foreign patents, and
applications, and disclosures therefor and all reissues, revisions, divisions,
renewals, extensions, reexaminations, provisional applications, continuations
and continuations-in-part thereof; (ii) all inventions (whether patentable or
not and whether or not reduced to practice), invention disclosures,
improvements, trade secrets; (iii) all copyrights, copyright registrations and
applications therefor and all other rights corresponding thereto; (iv) all
industrial designs and any registrations and applications therefor; (v) all
trade names, logos, common law trademarks and service marks and all goodwill
associated therewith; (vi) all databases and data collections and all rights
therein; (vii) all computer software including all source code, object code,
firmware, development tools, files, records and data, all media on which any of
the foregoing is recorded, all Internet addresses, sites and domain names;
(vii) any similar corresponding or equivalent rights, including, without
limitation, any and all intangible rights, to any of the foregoing and (ix) all
documentation related to any of the foregoing.

Intercreditor Agreement. The Intercreditor Agreement by and among Borrower,
Senior Lender and Lender, dated the date hereof.

Investment.  With respect to any Person, all investments in any other Person,
whether by way of extension of credit, loan, advance, purchase of stock or other
ownership interest (other than ownership interests in such Person), bonds,
notes, debentures or other securities, or otherwise, and whether existing on the
date of this Agreement or thereafter made, but such term shall not include the
cash surrender value of life insurance policies on the lives of officers or
employees or amounts due from customers for services or products delivered or
sold in the ordinary course of business.

I.R.C. The Internal Revenue Code of 1986, as amended from time to time.

Lien. With respect to any Person, any pledge, security interest, mortgage, lien
or other charge or encumbrance on any property or assets of such Person.

Loan Account.  The general ledger account on the books of Lender in which Lender
may record the Loan made to Borrower hereunder, plus interest, charges, expenses
and other items chargeable to Borrower pursuant to this Agreement or any other
Loan Document, payments made on the Loan by Borrower, and other appropriate
debits and credits as provided herein this Agreement or any other Mezzanine Loan
Document.

Material Amount. See Section 5.4(a).

Mezzanine Loan.  The loan established pursuant to Section 2.1.

Mezzanine Loan Documents.  Collectively, this Agreement, the Mezzanine Note, the
Intercreditor Agreement, the Security Agreement, the Guarantee Agreement and any
and all documents, instruments and agreements now or hereafter providing
security for the Obligations and any other Indebtedness of Borrower or any
Affiliates to Lender, as any of the foregoing may be amended, restated,
supplemented or otherwise modified from time to time.

Mezzanine Loan Maturity Date.  The earlier of (a) the fifth anniversary of the
Closing Date, and (b) the date of acceleration of the Mezzanine Loan pursuant to
Section 8.2(a).

Mezzanine Note.  The promissory note of Borrower evidencing the Mezzanine Loan,
substantially in the form of Exhibit 2.1 hereto, together with any extension,
renewal, or amendment thereof, or replacements or substitutions therefor.

Obligations.  The unpaid principal of and interest on (including, without
limitation, interest accruing after the maturity of the Mezzanine Loan and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
Borrower or any Affiliate, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) and all other obligations
and liabilities of every kind (including obligations to perform acts and refrain
from taking action as well as obligations to pay money) of Borrower and/or any
Affiliate to Lender, whether on account of principal, interest, fees, charges
and disbursements of counsel to Lender that are required to be paid by Borrower
pursuant to this Agreement, or otherwise, direct or indirect, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter acquired or arising, including without limitation, those which may
arise out of, or in connection, with this Agreement, the Mezzanine Note, and the
other Mezzanine Loan Documents and any other financial accommodation or
extension of credit by Lender to Borrower or any of its Subsidiaries.

Observer. See Section 5.18.

Participant. See Section 9.1.

Permitted Indebtedness.  See Section 6.2.

Permitted Investments. See Section 6.5

Permitted Liens.  See Section 6.1.

Person.  Any individual, partnership, limited liability company, corporation,
trust, unincorporated organization or association, and any governmental agency
or political subdivision thereof.

Plan. See Section 4.3(a).

Post-Closing Actions Letter. That certain letter agreement between Borrower and
Lender dated the Effective Date and listing certain post-Closing actions to be
completed by Borrower.

Registration Rights Agreement. That certain Agreement between Lender (and its
participants) and Borrower, dated the date hereof.

Related Documents. The Warrant, Registration Rights Agreement, the Post-Closing
Actions Letter, and the Side Letter Agreement, as any of the foregoing may be
amended, restated, supplemented or otherwise modified from time to time.

Restricted Payment.  With respect to any Person: (a) the declaration or payment
of any dividend on or in respect of any shares of any class of capital stock of
such Person, (b) Stock Repurchases, (c) any other distribution on or in respect
of any shares of any class of capital stock of such Person, and (d) any setting
apart or allocating any sum for the payment of any dividend or distribution, or
for the purchase, redemption or retirement of any shares of capital stock of
such Person.

Security Agreement.   The Security Agreement dated the date of this Agreement
and any other security documents executed by Borrower granting a security
interest in favor of Lender as security for the Obligations (including all
exhibits, schedules, annexes and the like referred to therein), as each may be
amended, restated, supplemented, or otherwise modified from time to time.

Senior Lender. RBS Citizens, National Association.

Senior Lender Loan Documents. $18,000,000 Revolving Credit Note, dated the date
hereof, and given by Borrower and its Subsidiaries in favor of Senior Lender;
Loan and Security Agreement, dated the date hereof, between Borrower and its
Subsidiaries and Senior Lender; and Collateral Assignment of Leaseholds Rights
dated the date hereof, between Borrower and its Subsidiaries and Senior Lender,
as each of the foregoing instruments may be amended, restated or otherwise
modified from time to time, and all other documents and instruments entered into
by Borrower, its Subsidiaries and/or Senior Lender in connection therewith.

Side Letter Agreement. That certain letter agreement dated the date hereof
between Borrower and Lender.

Stock Repurchases. The purchase, redemption, or other acquisition or retirement
of any shares of any class of capital stock of such Person directly or
indirectly.

Subsidiary.  With respect to any Person, any corporation, limited liability
company, partnership, joint venture, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture, or (c) the beneficial interest
in such trust or estate, is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person’s other Subsidiaries.

Term Sheet. Means that certain Term Sheet date October 24, 2007 by and between
Lender and Borrower, relating to the Mezzanine Loan and Warrant.

Total Funded Debt. All obligations of Borrower for borrowed money except for
accounts payable, and including without limitation the Mezzanine Note,
Borrower’s bank obligations, shareholder notes and that arising under the Senior
Lender Loan Documents.

UCC.  The Uniform Commercial Code as in effect in the State of Rhode Island from
time to time.

UCC Financing Statements.  All Uniform Commercial Code financing statements
covering all or any portion of the Collateral.

Warrant. Individually and collectively, Common Stock Purchase Warrant No. [WC-X]
dated the date hereof and issued to Lender, Common Stock Purchase Warrant No.
[WC-X] dated the date hereof and issued to Cephas Capital Partners, L.P., and
Common Stock Purchase Warrant [WC-X] dated the date hereof and issued to SEED
Ventures, LP.

Section 1.2 Accounting Terms.  All terms of an accounting character not
specifically defined herein have the meanings given such terms by GAAP.

Section 1.3 Certain Matters of Construction.  The terms “herein,” “hereof,” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision thereof. Any pronoun
used shall be deemed to cover all genders. The Section captions, table of
contents and list of exhibits appear as a matter of convenience only and shall
not affect the interpretation of the Agreement. All references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations. All references to any instruments or agreements,
including, without limitation, references to any of the Mezzanine Loan
Documents, shall include any and all modification or amendments thereto and any
and all extensions or renewals thereof. Unless otherwise expressly provided,
each reference to “Section” shall be a reference to the Section contained in
this Agreement.

ARTICLE II
AGREEMENT TO LEND

Section 2.1 Agreement to Lend. Subject to the terms and conditions hereof and
relying upon the representations and warranties set forth herein, Lender agrees
to make a loan to Borrower in the original principal amount of $5,000,000, as
evidenced by the Mezzanine Note (the “Mezzanine Loan”). The Mezzanine Note shall
be in the form set forth in Exhibit 2.1 and shall be executed and delivered by
Borrower pursuant to and in accordance with the terms of this Agreement. The
obligation of Borrower to repay the principal of the Mezzanine Loan and to pay
interest thereon shall be evidenced by the Mezzanine Note.

Section 2.2 Funding. Upon satisfaction of all of the Closing Conditions, Lender
shall lend $5,000,000 to Borrower (the “Funds”).

Section 2.3 Term of the Mezzanine Loan. The Mezzanine Loan shall be for a term
commencing on the Closing Date and ending on the Mezzanine Loan Maturity Date
(the “Term”).

Section 2.4 Closing. The execution and delivery of the Mezzanine Loan Documents
shall take place at the offices of Hinckley, Allen & Snyder LLP, 50 Kennedy
Plaza, Suite 1500, Providence, Rhode Island 02903, at a closing (the “Closing”)
on or about the date of this Agreement or at such other place or on such other
date as to which Lender and Borrower may agree (the “Closing Date”). If, at the
Closing, Borrower shall fail to deliver to Lender the Mezzanine Note and the
other Mezzanine Loan Documents, as provided in this Article, or if any of the
conditions specified in Article III shall not have been satisfied or waived by
Lender, then Lender shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any other respective
rights it may have by reason of such failure or non-fulfillment.

ARTICLE III

CONDITIONS

Section 3.1 Closing Conditions.  It shall be a condition precedent to Lender’s
obligation to close and fund the Mezzanine Loan and hereunder that each of the
following conditions be satisfied in full, as determined by Lender, unless
waived or deferred by Lender in writing at or prior to the closing and funding
of the initial Loan hereunder:

3.1.1 Executed Mezzanine Loan Documents.  Each of the Mezzanine Loan Documents
and Related Documents shall have been executed and delivered to Lender in form,
content and manner of execution and delivery satisfactory to Lender and its
counsel.

3.1.2 No Material Change.  No material adverse change shall have occurred in the
financial condition, business, affairs, operations or control of Borrower, or
Borrower’s business, since September 30, 2007.

3.1.3 Warranties and Representations Accurate.  All warranties and
representations made by or on behalf of Borrower to Lender under the Mezzanine
Loan Documents and Related Documents, shall be true, accurate and complete in
all material respects and shall not have omitted any material fact necessary to
make the same not misleading.

3.1.4 No Other Liens; Taxes and Municipal Charges Current.  Lender shall have
received the results of tax, judgment and lien searches showing no unexpected
Liens on the Collateral, whether inferior, pari passu or superior to Lender’s
Liens on the Collateral, except in respect of: (a) real estate taxes, personal
property taxes and other municipal charges not yet due and payable; and
(b) Permitted Liens.

3.1.5 Condition of Collateral.  There shall have been no material unrepaired or
unrestored damage or destruction by fire or otherwise to any property
comprising, or intended to comprise, the Collateral.

3.1.6 Insurance.  Borrower shall have provided to Lender with respect to the
Collateral evidence of: (i) insurance coverages which meet the insurance
requirements set forth in Section 5.9 hereof to the reasonable satisfaction of
Lender; including, without limitation, the naming of Lender as loss payee under
all policies of casualty insurance under ACORD Form 27 or other standard
lender’s loss payable endorsement, and as additional insured under all policies
of liability insurance, together with a certificate of insurance as to all
insurance coverage on the properties of Borrower; and, if requested,
(ii) payment of the premiums for such insurance, to the extent then due and
payable.

3.1.7 Organizational Documents and Entity Agreements.  Lender shall have
received with respect to Borrower and each Subsidiary (i) a copy of the
formation document on file with the governmental office of the jurisdiction of
its organization certified by an authorized official of such office, and a legal
existence and good standing issued by such official; (ii) a copy of the by-laws
or other governing documents certified by the clerk or other official keeper of
company records authorized to give such certification; (iii) legal existence and
good standing certificates for each jurisdiction, if any, in which Borrower or
any Subsidiary is required by applicable law to have registered as a foreign
entity to do business in such jurisdiction.

3.1.8 Votes, Consents and Authorizations.  Lender shall have received and
approved copies of all votes, consents and authorizations, certified by the
secretary or other official keeper of Borrower’s records authorized to give such
certification, as may be reasonably required to evidence authority for: (i) the
execution and delivery of each of the Mezzanine Loan Documents and the
transactions contemplated thereby; and (ii) providing continuing authorization
to designated persons to deal in all respects on behalf of Borrower hereunder or
in connection with the transactions contemplated hereby.

3.1.9 Legal Opinion.  Lender shall have received and approved a legal opinion
letter from counsel to Borrower, in form and substance reasonably acceptable to
Lender.

3.1.10 No Default.  There shall not exist any default or event of default under
any of the Mezzanine Loan Documents.

3.1.11 Other Documents and Information.  Lender shall have received and approved
such other documents, instruments, agreements, and information as Lender shall
reasonably request in connection with the transactions contemplated hereby,
including such other documents, instruments, agreements, and information as
Lender reasonably determines are necessary at any time to perfect any of
Lender’s liens and security interests in the Collateral.

3.1.12 Proceedings, Etc.  No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby and
thereby or which, in Lender’s good faith judgment, would make it inadvisable to
consummate the transactions contemplated by this Agreement or any of the other
Mezzanine Loan Documents.

3.1.13 Payment of Lender’s Counsel’s Fees and Costs.  Borrower shall have paid
all fees due and payable to Lender (including without limitation, Lender’s
Application Fee of $25,000 and Lender’s Closing Fee of $75,000) its
participants, and their respective counsel incurred in connection with this
Agreement and the other Mezzanine Loan Documents and Related Documents.

ARTICLE IV

BORROWER’S REPRESENTATIONS AND WARRANTIES

Borrower makes the representations and warranties set forth below to induce
Lender to make Mezzanine Loan, and to enter into this Agreement and the
transactions contemplated hereby, with the understanding that Lender is relying
thereon:

Section 4.1 Organization.   Borrower and all of its Subsidiaries are duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their organization, have the power and authority to own their
properties and to carry on their businesses as now being conducted, and are duly
qualified to do business and are in good standing in all jurisdictions except
where the failure to be so qualified or in good standing, individually or in the
aggregate, could not materially adversely affect the enforceability of any
material contract or the business, operations, financial condition or prospects
of Borrower, or Borrower and its Subsidiaries or their respective businesses
taken as a whole. The copies of Borrower’s and Subsidiaries’ organizational
documents and by-laws furnished to Lender are true, complete and correct copies
of such documents as they exist on the date of this Agreement.

Section 4.2 Authorization, No Violations.  The execution, delivery and
performance of this Agreement, the Mezzanine Note, and the other Mezzanine Loan
Documents and Related Documents by Borrower or any of its Subsidiaries, as the
case may be, (i) are within the powers and authority of Borrower and each such
Subsidiary, (ii) have been duly authorized by proper proceedings, (iii) do not
and will not contravene in any material respect any provision of applicable law
or Borrower’s or any of the Subsidiary’s organizational documents or governing
documents or any amendment thereof or any indenture or agreement to which
Borrower or any of its Subsidiaries is a party or of any other indenture or
agreement or any order, regulation, ruling or requirement of a court or public
body or authority by which Borrower or any of its Subsidiaries is bound and of
which Borrower is aware, (iv) give rise to a right to (or otherwise) terminate,
accelerate the maturity of, or increase any payment due under, or conflict with
or result in any breach of or any default under, any note, bond, mortgage,
indenture, license, agreement or other instrument applicable to Borrower; and
(v) will not result in, or require the creation or imposition of, any Lien or
encumbrance on the property or revenues of Borrower or any of its Subsidiaries
(other than Liens permitted by this Agreement). This Agreement, the Mezzanine
Note, the other Mezzanine Loan Documents to which Borrower or any of its
Subsidiaries is a party and the Related Documents have been executed and
delivered by Borrower and each such Subsidiary and constitute legal, valid and
binding obligations of Borrower and each such Subsidiary, enforceable against
Borrower and each such Subsidiary in accordance with their respective terms.

Section 4.3 Ownership .  

(a) Borrower’s Capital Securities. Borrower’s authorized capital stock consists
solely of 15,000,000 shares of Common Stock, $0.0001 par value per share
(“Common Stock”), of which 5,105,318 shares are issued and outstanding of record
(collectively, the foregoing issued shares are hereinafter referred to as
(“Issued Shares”). No shares of Borrower’s Capital Securities are held as
treasury shares. Exhibit 4.3(a) sets forth a table indicating the capitalization
of Borrower immediately prior to the Closing and a table indicating the
capitalization of Borrower immediately following the Closing, such
Exhibit 4.3(a). Except as set forth on Exhibit 4.3(a) there are no outstanding
shares of Borrower’s Capital Securities or Convertible Securities or rights or
agreements related thereto, including among others all outstanding options,
warrants, stock appreciation rights, phantom stock and other equity interests of
any kind in Borrower, pursuant to which Borrower is or may become obligated to
issue any shares of Capital Securities. Except as set forth on Exhibit 4.3(a),
the number of shares of Capital Securities, if any, issuable in connection with
the securities described on Exhibit 4.3(a), is not subject to adjustment by
reason of the issuance of the Warrants or the Common Stock issuable upon
conversion thereof. All of the Issued Shares of Borrower ‘s Capital Securities
are issued and owned by the Persons listed on Exhibit 4.3(a) have been duly
authorized, are validly issued and outstanding and are fully paid and
non-assessable have been offered, issued, sold, and delivered in compliance with
the applicable federal and state securities laws, including the Securities Act.
Lender acknowledges Borrower’s existing 2005 Equity Incentive Plan (the “Plan”)
and in the absence of an Event of Default, nothing contained in this Section 4.3
shall limit Borrower’s ability to continue to grant options under the Plan, as
presently constituted.

(b) Subsidiaries. All ownership interests its Subsidiaries are identified on
Exhibit 4.3(b) hereto by name and percentage interest of each owner, all such
interests in Subsidiaries have been fully paid for in immediately available
Dollars, and are owned, free and clear of all liens and encumbrances.

(c) Preemptive Rights, Convertible Securities, etc. There are no outstanding
rights, including, but not limited to preemptive rights, Convertible Securities
or other agreements providing for or requiring the issuance or purchase by
Borrower or of any Subsidiary of, any Capital Securities or any Convertible
Securities convertible into, or exchangeable for, or exercisable into, its
Capital Securities. All preemptive rights existing prior to the date hereof have
been validly waived or the applicable time periods relating thereto have expired
prior to exercise of such preemptive rights by the holders thereof.

(d) Voting Agreements. There are no voting trusts, proxies, or agreements
relating to the voting of the Borrower’s or any Subsidiary’s Capital Securities.

Section 4.4 Governmental and Other Approvals.  No approval, consent or
authorization of, or any other action by, or filing or registration with, any
governmental department, agency or instrumentality, domestic or foreign, other
than which have been obtained, if any, is necessary for (i) the execution and
delivery of, and the performance of the obligations under, and the consummation
of the transactions contemplated by, this Agreement, the Mezzanine Note, the
other Mezzanine Loan Documents executed by Borrower and any of its Subsidiaries
party thereto and the Related Documents, and (ii) the borrowing of the Mezzanine
Loan and the use of proceeds thereof.

Section 4.5 Litigation.  Except as set forth in Exhibit 4.5 hereto or as
otherwise disclosed in writing to Lender subsequent to the date of this
Agreement pursuant to Section 5.3 hereof, there are no actions, suits,
investigations or proceedings pending or actually known to be threatened in
writing against or affecting Borrower or any of its Subsidiaries, or any
properties or rights of Borrower or any of its Subsidiaries, by or before any
court or administrative agency or regulatory authority or agency or arbitration
tribunal which reasonably could be expected to have a material adverse effect on
the operations, financial condition, business or prospects of Borrower or their
businesses, if adversely determined.

Section 4.6 Absence of Burdensome Contracts and Restrictions.  Neither Borrower
nor any of its Subsidiaries are subject to any provision in their organizational
or governing documents, or any amendment thereof, or are a party to or otherwise
bound by any indenture or agreement (including without limitation any lease of
real or personal property) or bound by any order, regulation, ruling or
requirement of a court or public body or authority which will, under current
reasonably foreseeable conditions, have a material adverse affect on their
normal operations or impair their financial condition, business or prospects.

Section 4.7 Financial Statements; No Undisclosed Liabilities; No Changes.   The
financial statements for the fiscal year ended December 31, 2006, previously
delivered to Lender fairly and accurately reflect the financial condition and
the results of operations of Borrower and its Subsidiaries as of such date,
subject only to non-recurring year-end adjustments, and have been prepared in
accordance with GAAP applied on a basis consistently followed in all material
respects throughout the periods involved. Borrower has also provided Quarterly
Financial Statements (SEC 10Qs) for the periods ending March 31, 2007, June 30,
2007 and September 30, 2007. There are no material commitments, liabilities or
obligations of Borrower or its Subsidiaries, whether absolute, accrued,
contingent or otherwise (including without limitation any liability under any
guaranty) that are not disclosed on such financial statements or that are
materially different from those disclosed on such financial statements Other
than as set forth in Exhibit 4.7 hereto, since September 30, 2007, there has
been no material adverse change in the assets, liabilities, financial condition,
results of operations, business or prospects shown on the financial statements
of Borrower or its Subsidiaries as at and for the period ended on said date,
except for changes in the ordinary course of business consistent with past
practice.

Section 4.8 Licenses, Permits, Third Party Consents, Compliance with Law,
Etc.  Except for the consents identified on Exhibit 4.8 hereto, Borrower and its
Subsidiaries have all necessary licenses and permits and other rights to allow
them to conduct their business as presently conducted, unless the failure to
obtain such license, permit or right would not have a material adverse effect on
the business and is in compliance in all material respects with all laws, rules,
orders and regulations applicable to the conduct of their businesses or their
properties.

Section 4.9 Title to Properties and Assets.  Borrower and each of its
Subsidiaries have good and marketable title to their properties and assets,
including such properties and assets as are reflected in the financial
statements referred to in Section 4.7 hereof (except such assets as have been
disposed of in the ordinary course of business subsequent to the date thereof),
free and clear of any Lien except for Permitted Liens or Liens disclosed in UCC
search reports attached hereto as Exhibit 4.9. Borrower has not been the
surviving entity in a merger, or acquired any other Person or assets of a
Person, other than in the ordinary course of business, within the most recent
twelve-year period immediately preceding the date of this Agreement.

Section 4.10 Leases.  Borrower and each of its Subsidiaries enjoy peaceful and
undisturbed possession under all leases of real or personal property of which
Borrower or any of its Subsidiaries is lessee. All such leases are valid,
subsisting and in full force and effect and (i) there are no material uncured
defaults of Borrower or any of its Subsidiaries, or the lessors thereunder,
(ii) no event has occurred which with the passage of time or the giving of
notice, or both, would constitute a default thereunder, and (iii) there is no
other reason why the tenant under each such lease may not continue to occupy the
leased premises, including without limitation foreclosure upon the landlord’s
interest therein.

Section 4.11 Intellectual Property   Exhibit 4.11 sets forth all the
Intellectual Property that the Borrower or any of its Subsidiaries owns or
possesses the valid right to use. Except as set forth on Exhibit 4.11, Borrower
and each of its Subsidiaries owns or possesses the right to use all Intellectual
Property, and all rights with respect thereto, necessary for the conduct of
their business as now conducted and as proposed to be conducted, without any
conflict with the rights of others. Neither Borrower nor any of its Subsidiaries
have entered into any agreements for the license of any such Intellectual
Property with any third party. To Borrower’s and its Subsidiaries’ knowledge,
neither Borrower nor such Subsidiaries have infringed any Intellectual Property
rights of any other person or entity and have not received any notice of such
infringement.

Section 4.12 Tax Returns and Taxes.   All federal, state and other taxes,
assessments and other governmental charges upon Borrower and its Subsidiaries or
their respective properties which are due and payable or claimed to be due have
been paid to federal, state or local taxing authorities (including, without
limitation, taxes on properties, franchises, licenses, sales and payrolls). All
charges, accruals and reserves for taxes reflected in the balance sheet referred
to in Section 4.7 are adequate to cover the tax liabilities of Borrower and its
Subsidiaries as of the date(s) thereof. There are no tax liens upon any of the
properties of Borrower or any of its Subsidiaries. There are no pending tax
examinations nor have any tax claims been asserted by any taxing authority
against Borrower or any of its Subsidiaries other than as disclosed on
Exhibit 4.12 or as otherwise disclosed in writing to Lender subsequent to the
date of this Agreement pursuant to Section 5.3 hereof, nor is there any basis
for any such claim.

Section 4.13 ERISA Matters.  Except as set forth on Exhibit 4.13, Borrower and
each of its Subsidiaries have fulfilled their obligations, if any, under the
minimum funding standards of ERISA with respect to any ERISA plan maintained by
Borrower and is otherwise in compliance in all material respects with any
provisions of ERISA applicable to Borrower or any of its Subsidiaries.

Section 4.14 No Default.  No Default has occurred which has not been cured or
waived and neither Borrower nor any of its Subsidiaries is in default under any
instrument, contract or other agreement to which Borrower or any of its
Subsidiaries is a party or by which Borrower or any of its Subsidiaries, or any
of their respective properties is bound, or with respect to any order, judgment,
writ, injunction, decree, award, regulation, ruling or requirement of a court or
a public body or authority known to Borrower, after due inquiry, by which
Borrower, or any of its Subsidiaries, or any of their respective properties are
bound.

Section 4.15 Margin Stock.   Neither Borrower nor any of its Subsidiaries is
engaged principally, or as one of their important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock within
the meaning of Regulation U, T or X of the Board of Governors of the Federal
Reserve System. The execution, delivery and performance of this Agreement and
the other Mezzanine Loan Documents and the use of the proceeds of the Mezzanine
Loan by Borrower do not and will not constitute a violation of said regulations.

Section 4.16 Disclosure.  None of the representations and warranties contained
in this Article IV or otherwise made in writing by or on behalf of Borrower
pursuant hereto, or in the financial statements referred to in Section 4.7, or
in any other document, certificate or written statement furnished to Lender by
or on behalf of Borrower or any of its Subsidiaries in connection with this
Agreement or any other Loan Document (i) contains any untrue statement of a
material fact, or (ii) when considered in connection with all other such
representations and warranties, omits stating a material fact necessary to make
the statements contained herein or therein not misleading as of the date
thereof. There is no fact known to Borrower or any of its Subsidiaries which
materially adversely affects the business, assets, operations, or prospects of
Borrower, or Borrower and its Subsidiaries taken as a whole, the financial
position or results of operation of Borrower, or Borrower and its Subsidiaries
taken as a whole, which is not disclosed herein, in the financial statements
described in Section 4.7 hereof or in any other documents, certificates or
written statements furnished to Lender in connection with this Agreement.

Section 4.17 Survival of Representations and Warranties.  All representations
and warranties made by Borrower herein or in any other Mezzanine Loan Document
or Related Document or made in any certificate delivered hereunder or thereunder
shall survive the advance of the proceeds of the Mezzanine Loan until payment in
full of the Obligations.

Section 4.18 Solvency.  After giving effect to the transactions contemplated
under the Mezzanine Loan Documents, Borrower and each of its Subsidiaries will
be solvent, will be able to pay its debts as they become due, and will have
funds and capital sufficient to carry on its business and all businesses in
which it is about to engage.

Section 4.19 Statutory Indebtedness Restrictions. Neither Borrower nor any of
its Subsidiaries is subject to regulation under the Interstate Commerce Act, or
the Investment company Act of 1940, or any other federal, state or local
statute, ordinance or regulation which limits its ability to incur indebtedness
or its ability to consummate the transactions contemplated hereby.

Section 4.20 Indebtedness. Exhibit 4.20 sets forth a listing of all indebtedness
to a single creditor in an excess of $250,000, and where applicable, includes a
description of any collateral given as security and any restrictions on
obtaining or maintaining other indebtedness (collectively, “Existing
Indebtedness”).

ARTICLE V

AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, from the date hereof and so long as any
Obligation under this Agreement or the other Mezzanine Loan Documents is
outstanding, Borrower shall:

Section 5.1 Use of Funds. Utilize the Funds in the manner set forth in Exhibit
5.1 and pursuant to the terms and conditions of the Mezzanine Loan Documents.

Section 5.2 Information to be Furnished.  Furnish, or cause to be furnished, to
Lender:

(a) Annual Audited Financial Statements.  As soon as available and not later
than one hundred and twenty (120) days after the close of each fiscal year of
Borrower, audited financial statements consisting of Consolidated and
Consolidating balance sheets and the related Consolidated and Consolidating
statements of income, shareholders’ equity and cash flow for such year,
(including a comparison to the immediately preceding fiscal year of Borrower),
together with a statement of a firm of independent certified public accountants
selected by Borrower and satisfactory to Lender (“Independent Auditor”), to the
effect that such financial statements, in such firm’s opinion, fairly present,
in all material respects, the financial condition of Borrower and its
Subsidiaries, as at the end of such fiscal year and the results of Borrower’s
unconsolidated and Consolidating operations and changes in financial position
for such fiscal year in conformity with GAAP. Such report shall not be qualified
or limited because of a restricted or limited examination by the Independent
Auditor of any material portion of Borrower’s or its Subsidiaries’ respective
records.

(b) Quarterly Financial Statements.  As soon as available and not later than
forty-five (45) days after the close of each fiscal quarter of Borrower,
Consolidated and Consolidating balance sheets of Borrower and its Subsidiaries
as of the close of the period and the related Consolidated and Consolidating
statements of income, cash flow, and shareholders’ equity for the elapsed
portion of the year through such quarter, (including a comparison to the
immediately preceding fiscal year of Borrower and a comparison to budget), and
accompanied by a certificate signed by the chief financial officer of Borrower
to the effect that such financial statements in such officer’s opinion, subject
to year-end adjustments, fairly present, in all material respects, the financial
condition of Borrower and its Subsidiaries, if any, as at the end of such
quarter and the results of its operations and changes in financial position for
the period covered thereby in conformity with GAAP.

(c) Quarterly Management Discussion.  As soon as available and not later than
forty-five (45) days after the close of each fiscal quarter of Borrower, a
management discussion of Borrower’s operations and financial performance for the
period.

(d) Board Approved Budget. Within ninety (90) days after Borrower’s fiscal year
end, an operating budget for the upcoming fiscal year approved by the Board,
including balance sheet, income statement and cash flow statement.

(e) Covenant Compliance Certificate. Concurrently with the delivery of the
financial statements required by clauses (a) and (b) above, a duly completed
Covenant Compliance Certificate of Borrower, in substantially the form attached
as Exhibit 5.2(e) attached hereto, as of the end of the period covered by such
statements, signed by the chief financial officer of Borrower;

(f) Management/Audit Reports.  Concurrently with the delivery of the financial
statements required by clause (a) above, copies of any management letter given
in connection with the financial statements prepared at the end of any fiscal
year and copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with any interim review of Borrower
accounts and/or books and records, or any audit of such account, books and/or
records;

(g) Other.  From time to time such other data and information bearing on the
financial condition, results of operations and changes in financial position of
Borrower or the Collateral as Lender may reasonably request in writing.

Section 5.3 Accounting Practices and Changes.  Keep books and records and
prepare all financial statements required under Section 5.1 hereof in accordance
with GAAP consistently applied.

Section 5.4 Notice Requirements.  Notify Lender in writing, promptly after any
officer of Borrower or any of its Subsidiaries obtains actual knowledge thereof
and with full details, of:

(a) any contingent liability(ies) involving an amount in excess of $500,000 with
respect to Borrower (a “Material Amount”), which is not covered by insurance;

(b) any litigation or arbitration or other proceeding pending or commenced
before any court or administrative or regulatory agency or authority which by
itself or taken together with other such litigation or proceedings involves a
Material Amount not covered by insurance, or which, if adversely determined,
would have a material adverse effect on the financial condition, assets,
business or prospects of Borrower or any of its Subsidiaries, individually or in
the aggregate;

(c) the acceleration of the maturity of any Indebtedness of Borrower or any of
its Subsidiaries (whether or not disputed) in excess of a Material Amount;

(d) the occurrence of a material default under any material agreement or
instrument to which Borrower or any of its Subsidiaries is a party or by which
Borrower or any of its Subsidiaries is bound;

(e) any loss, destruction or diminution in the value of any Collateral or of
other assets, whether or not covered by insurance, in excess of a Material
Amount, in the aggregate during any fiscal year of Borrower, or if any event
having a material adverse effect on any of the Collateral or the value or amount
thereof in excess of a Material Amount occurs, including, in any event but
without limitation, any request by an account debtor for credit or adjustment of
an Account of Borrower; any discount, allowance or other adjustment by Borrower
of the amount owing on an Account of Borrower not shown on the face of any
invoice therefor; any dispute; and any other event affecting Accounts or the
value or amount thereof;

(f) any notice of cancellation, nonrenewal received from, or given by Borrower
to, any insurer, or any material change in coverage from that existing on the
Effective Date;

(g) any Lien asserted, and any attachment, levy, execution or other legal
process levied against any property of Borrower or any of its Subsidiaries in
excess of a Material Amount, in the aggregate during any fiscal year of
Borrower;

(h) any bankruptcy or other insolvency proceeding of any account debtor owing an
aggregate amount in excess of a Material Amount to Borrower and any return or
adjustment, rejection, repossession or loss or damage of or to merchandise
represented by the Accounts, and of any credit adjustment or dispute arising in
connection with the goods or services represented by the Accounts, in each case
involving an amount in excess of a Material Amount;

(i) the occurrence of any reportable event (as defined in 4043 of ERISA),
together with a statement of Borrower’s president or treasurer as to the details
thereof and a copy of its notice thereof to the Pension Benefit Guaranty
Corporation;

(j) any known release occurring after the date of this Agreement, or likely
threat of release, of Hazardous Materials from, on or onto any site owned or
operated by Borrower, or of any expense or loss in connection therewith, or the
commencement of any investigation, action or the incurrence of any expense or
loss by any governmental authority in connection with the containment or removal
of any Hazardous Materials for which expense or loss Borrower or any of its
Subsidiaries may be liable or potentially responsible;

(k) any change in (i) Borrower’s legal name, (ii) the address of Borrower’s
principal or main office, (iii) the jurisdiction of Borrower’s organization, or
(iv) the location of any Collateral or Borrower’s records with respect to
Accounts; and

Section 5.5 Inspection.  Permit Lender, its participants, or their respective
officers, employees or representatives to visit and inspect any of Borrower’s
and its Subsidiaries’ properties and to examine and make extracts from
Borrower’s and its Subsidiaries’ books and discuss the affairs, finances and
accounts of Borrower and its Subsidiaries with their respective officers, once
per each calendar year, upon reasonable notice; provided, however, that the
foregoing limitation shall not apply if an Event of Default has occurred and is
continuing.

Section 5.6 Type of Business.  Remain engaged solely in (i) the lines of
business carried on by Borrower and its Subsidiaries on the Effective Date, and
(ii) other businesses or activities that are similar thereto or that constitute
an extension, development, or expansion thereof, or that are ancillary or
otherwise related thereto.

Section 5.7 Legal Existence.  Do or cause to be done all things necessary to
preserve and keep in full force and effect Borrower’s and each of its
Subsidiaries’ existence, rights and franchises and to maintain in good standing
Borrower’s and its Subsidiaries’ legal existence and status as a foreign entity
qualified to do business in those jurisdictions where Borrower or any of its
Subsidiaries is required to be qualified and where failure to be so qualified
could have a material adverse effect on either Borrower or its Subsidiaries.

Section 5.8 Payment of Taxes and Claims.  Pay each tax or other assessment or
governmental charge or levy imposed upon Borrower or any of its Subsidiaries or
their respective property prior to the time when any penalties or interest
(except interest during extensions of time for filing of tax returns) accrue
with respect thereto, as well as any lawful claim for labor, materials or
supplies which if unpaid might become a lien or charge upon Borrower’s or any of
its Subsidiaries’ respective properties or any part thereof, unless in each such
case, the same is being contested in good faith and an adequate reserve therefor
has been established and is maintained in accordance with GAAP; and indemnify
Lender against and hold it harmless from any and all sales, use or value added
taxes imposed by the United States or any state, municipality or other
jurisdiction in connection with the Mezzanine Loan or the Collateral.

Section 5.9 Maintenance of Properties.  Maintain and keep its and its
Subsidiaries’ tangible properties in good repair, working order and condition,
wear and tear, obsolescence, condemnation and casualty excepted (subject to any
obligation to restore from insurance proceeds and/or condemnation awards made
available to Borrower), and make or cause to be made such repairs thereto and
replacements thereof as shall be appropriate to the effective conduct of
Borrower’s and its Subsidiaries’ businesses.

Section 5.10 Maintenance of Insurance.  Maintain insurance with financially
sound and reputable insurers reasonably satisfactory to Lender against such
risks and in such amounts as is usually carried by owners of similar businesses
and properties in the same general areas in which Borrower and each of its
Subsidiaries have previously maintained insurance or as shall otherwise be
reasonably satisfactory to Lender; provide to Lender on the Effective Date and
annually thereafter, an endorsement naming Lender as additional insured or loss
payee under a lender’s loss payable endorsement under all insurance policies
maintained with respect to the Collateral and providing for thirty (30) days
prior notice to Lender of cancellation or reduction in coverage; maintain in
full force and effect public liability insurance, in such amounts as are deemed
prudent by Borrower and reasonably acceptable to Lender, against claims for
bodily injury, death or physical property damage occurring upon, in, about or in
connection with any properties owned or controlled by Borrower or any of its
Subsidiaries or through the operation of any motor vehicles by Borrower’s or any
of its Subsidiaries’ agents or employees or arising in any manner out of the
business carried on by Borrower or any of its Subsidiaries; and, upon request by
Lender, furnish to Lender satisfactory evidence of all such insurance. In the
event of failure by Borrower to provide or maintain insurance as required
herein, Lender may, at its option, provide such insurance and add the amount of
the premium therefor to the amount of the Mezzanine Loan.

Section 5.11 Compliance With Law.  Comply in all material respects with the
requirements of all present and future applicable laws, rules, regulations and
orders of any governmental authority having jurisdiction over Borrower and its
Subsidiaries and/or Borrower’s or its Subsidiaries’ businesses and maintain in
full force and effect at all times all licenses and permits necessary to the
operation of Borrower’s and its Subsidiaries’ businesses, except, in each case,
where (i) the failure to comply would not have a material adverse effect on
Borrower or its Subsidiaries or their respective businesses, or (ii) Borrower or
any of its Subsidiaries shall have commenced action to contest any such law,
rule, regulation or order and thereafter diligently pursues such action to
completion, provided that, Borrower’s or its Subsidiaries’ non-compliance
therewith shall not have, or result in, a material adverse effect on either
Borrower or its Subsidiaries or their respective businesses.

Section 5.12 Subsidiaries.  Concurrently with the acquisition or creation by a
Borrower of a Subsidiary after the date of this Agreement, execute, and cause
such Subsidiary to execute, such documents as Lender may require consistent with
the documents specified under Section 3.1 hereof, which documents may include,
but shall not be limited to, a guaranty, security agreement, and Uniform
Commercial Code Financing Statement(s) covering all personal property of such
Subsidiary.

Section 5.13 Field Audits and Exams.   Borrower shall allow Lender, or any of
Lender’s employees or representatives to visit and inspect Borrower’s and its
Subsidiaries’ properties to conduct a field audit and exam at such reasonable
times as Lender may reasonably request and at Lender’s expense. So long as no
Event of Default has occurred, Lender shall conduct no more than one (1) such
field audit and exam during any calendar year.

Section 5.14 Financial Covenants.  Borrower and its subsidiaries shall maintain
at all times the following financial covenants, calculated on a consolidated
basis, (which are also set forth in the Covenant Compliance Certificate of
Borrower, which shall be tested at the end of end fiscal quarter by Lender:

(a) The ratio of Total Funded Debt to EBITDA (Total Funded Debt/EBITDA) measured
on a trailing four quarters basis:

i. At 12/31/07 and 3/31/08 shall not exceed a ratio 5.5:1; and

ii. For each quarter after 3/31/08 shall not exceed 5.0:1 at any time.

(b) Interest Coverage Ratio (EBITDA/Total interest expense (regardless of
whether paid) under the Senior Loan Documents and Mezzanine Loan Documents)
shall exceed 1.75 times at all times.

(c) Fixed Charge Coverage Ratio (EBITDA/Borrower’s cash interest expense,
principal payments, cash income taxes and unfinanced CAPEX expensed in that
year) shall equal or exceed 1.03 times at all times.

Section 5.15 Further Assurances.  At any time and from time to time, execute and
deliver such further instruments and take such further action as may reasonably
be requested by Lender to effect the purposes of this Agreement, including,
without limitation, the defense of the right, title and interests of Lender in
and to any of Lender’s or Borrower’s rights in the Collateral against, and the
taking of any action necessary to remove, any liens or encumbrances other than
Permitted Liens.

Section 5.16 Maintenance of Funds. Maintain the Funds in the form of Cash and
Cash Equivalents, subject to the prior written consent of Lender.

Section 5.17 Reservation of Common Stock for Exercise of Warrant.   Authorize
and reserve at all times after December 11, 2007, sufficient shares of Common
Stock to allow Lender and its participants, to exercise their respective
available rights under the Warrant.

Section 5.18 Board Observer Seat.   Provide to Lender the right to designate an
individual of its choice to represent Lender as a non-voting, observer to
Borrower’s Board of Directors (an “Observer”), who shall be entitled to attend
all Board of Director (“Board”) meetings and receive timely notice thereof and
all documentation that is made available to the other Directors; provided,
however, that in the event Gregory Mulligan is no longer a Director, then Lender
shall have the right to designate an additional individual of its choice to
represent Lender and its participants as an Observer. The Observer shall be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
attendance at Board meetings. As a condition to becoming an Observer pursuant to
Section 5.18, such Observer shall first execute the Borrower’s form of
Confidentiality, Non-Disclosure and Non-Use Agreement, attached hereto as
Exhibit 5.18.

ARTICLE VI

NEGATIVE COVENANTS

Section 6.1 Liens, Security Interests, Etc.  Borrower covenants and agrees that
so long as this Agreement is in effect or any Obligation remains outstanding,
Borrower and its Affiliates shall not: other than sales of Inventory or grants
of licenses and other rights in the ordinary course of Borrower’s or its
Subsidiaries’ businesses for cash or on open account and on terms of payment
ordinarily extended to their customers, sell, factor or borrow on the security
of the Collateral, or create, assume or permit to exist any Lien in Borrower’s
or its Subsidiaries’ real or personal property in favor of any Person other than
Lender, except for the following (“Permitted Liens”):

(a) Liens for taxes or assessments not yet delinquent or whose validity or
amount is being contested in good faith by appropriate proceedings (unless and
until foreclosure or any similar proceeding shall have been commenced) and for
which adequate reserves have been established and maintained in accordance with
GAAP;

(b) landlords’ non-consensual statutory or common law Liens in respect of rent
not in default on property located at such landlord’s leased premises;

(c) Liens in respect of (i) pledges or deposits under workers’ compensation,
unemployment insurance, social security laws, or similar legislation (other than
ERISA), (ii) appeal and similar bonds incidental to litigation,
(iii) mechanics’, laborers’ and materialmen’s and similar liens, if the
obligations secured by such Liens are not then delinquent or, if delinquent and
in dispute action shall have been commenced to have such lien bonded off or
otherwise removed or discharged and thereafter such action is being pursued
diligently to completion for a period not to exceed 90 days, and (iv) statutory
obligations incidental to the conduct of Borrower’s and its Subsidiaries’
businesses that do not in the aggregate materially detract from the value of
Borrower’s and its Subsidiaries’ property, or materially impair the use thereof
in the operation of Borrower’s and its Subsidiaries’ businesses taken as a
whole;

(d) judgment Liens that shall not have been in existence for a period longer
than 90 days after the creation thereof, or if a stay of execution shall have
been obtained, for a period longer than the expiration of such stay provided
that such periods shall be extended by an additional 30 days if, within any such
initial 90 day period, a bond for such Lien shall have been provided; and

(e) Liens pursuant to the Senior Loan;

(f) Existing equipment leases; and

(g) Any other Liens to which Lender gives its written consent.

Section 6.2 Indebtedness.  Borrower covenants and agrees that so long as this
Agreement is in effect or any Obligation remains outstanding, Borrower and its
Affiliates shall not: incur, assume or permit to exist Indebtedness (including,
without limitation, Guaranties) to any Person other than Lender except for the
following permitted Indebtedness (“Permitted Indebtedness”):

(a) Indebtedness which is secured by Permitted Liens;

(b) Indebtedness under the Senior Loan Documents;

(c) Indebtedness set forth on Exhibit 6.2 hereto (“Scheduled Debt”); and

(d) Indebtedness that is subordinate to the Mezzanine Loan and subject to a
subordination agreement satisfactory to Lender in its sole discretion.

Section 6.3 Merger; Consolidation; Sale or Lease of Assets.  Borrower covenants
and agrees that so long as this Agreement is in effect or any Obligation remains
outstanding, Borrower and its Affiliates shall not: (a) liquidate, merge or
consolidate with another Person, or (b) sell, lease, assign or otherwise dispose
of Borrower’s or any of its Subsidiary’s (i) assets having an aggregate value of
Five Million Dollars ($5,000,000) during any fiscal year, or (ii) any material
asset of Borrower or any of its Subsidiaries.

Section 6.4 Sale and Leaseback.  Borrower covenants and agrees that so long as
this Agreement is in effect or any Obligation remains outstanding, Borrower and
its Affiliates shall not: sell or transfer any of Borrower’s or its
Subsidiaries’ properties to any Person with the intention of taking back a lease
of the same property or leasing other property for substantially the same use as
the property being sold or transferred.

Section 6.5 Acquisitions; Investments.  

(a) Acquisitions. Borrower covenants and agrees that so long as this Agreement
is in effect or any Obligation remains outstanding, Borrower and its Affiliates
shall not enter into any transaction, or series of related transactions, by
which Borrower or any of its Subsidiaries acquires the business of, or all or
substantially all of the assets of, any Person other than a direct or indirect
Subsidiary of Borrower, or any division of such Person, whether through the
purchase of assets, purchase of stock, merger or otherwise for aggregate
consideration in excess of $10,000,000, without the prior written consent of
Lender.

(b) Investments. Borrower covenants and agrees that so long as this Agreement is
in effect or any Obligation remains outstanding, Borrower and its Affiliates
shall not enter into any transaction, or series of related transactions, by
which any Person that was not theretofore a Subsidiary of Borrower becomes a
Subsidiary of Borrower, or make any Investments in any Person (including without
limitation advances to officers and employees except for business expenses
incurred in the ordinary course) except that Borrower may acquire and hold
Investments in Cash and Cash Equivalents (“Permitted Investments”).

Section 6.6 ERISA.  Borrower covenants and agrees that so long as this Agreement
is in effect or any Obligation remains outstanding, Borrower and its Affiliates
shall not, with respect to all employee benefit plans maintained by Borrower, if
any: (a) engage in any “prohibited transaction” (as such term is defined in 406
or 2003(a) of ERISA); (b) incur any “accumulated funding deficiency” (as such
term is defined in 302 of ERISA), whether or not waived, by failing to pay to
any such employee benefit plan any contribution which Borrower is obligated to
pay under the terms of such plan; (c) incur any withdrawal liability with
respect to any multiemployer plan which is not fully bonded; or (d) terminate
any such employee benefit plan in a manner which could result in the imposition
of a lien on any property of Borrower pursuant to 4068 of ERISA, or allow or
suffer to exist any occurrence of a reportable event” (as defined in 4043 of
ERISA) or any other event or condition which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such employee
benefit plan.

Section 6.7 Restricted Payments.  Borrower covenants and agrees that so long as
this Agreement is in effect or any Obligation remains outstanding, Borrower, its
Subsidiaries and its Affiliates shall not declare or make any Restricted
Payment.

Section 6.8 Transactions With Affiliates.  Borrower covenants and agrees that so
long as this Agreement is in effect or any Obligation remains outstanding,
Borrower and its Affiliates shall not engage in any transaction or enter into
any agreement with, or on behalf of, any Person that, directly or indirectly,
through one or more intermediaries controls or is controlled by or is under
common control with Borrower, or is a shareholder, member, employee, director or
officer of Borrower (an “Affiliate”), except on any terms that are not
materially less favorable to Borrower than those that would have been obtained
in a comparable transaction by Borrower with an unrelated Person. As used in
this Section 6.8, “control” of a Person means the possession, direct or
indirect, of the power to vote twenty percent (20%) or more of the voting stock
or equivalent interests of such Person, or to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
such voting stock or equivalent interests, by contract, or otherwise.

Section 6.9 Fiscal Year.  Borrower covenants and agrees that so long as this
Agreement is in effect or any Obligation remains outstanding, Borrower and its
Affiliates shall not change the last day of its fiscal year from December 31.

Section 6.10 Charter.  Borrower covenants and agrees that so long as this
Agreement is in effect or any Obligation remains outstanding, Borrower and its
Affiliates shall not amend its articles of incorporation or any other
organizational documents in an manner that would adversely affect the Lender,
without the prior written consent of Lender.

Section 6.11 Capital Stock. Borrower covenants and agrees that so long as this
Agreement is in effect or any Obligation remains outstanding, Borrower and its
Affiliates shall not (a) authorize the issuance of any additional Capital
Securities or Convertible Securities; (b) issue any additional Capital
Securities or Convertible Securities; or (c) recapitalize or reclassify any
Capital Securities or Convertible Securities. Nothing contained in this Section
6.11 shall limit Borrower’s ability to continue to grant options under the Plan,
as presently constituted.

Section 6.12 Material Changes.  Borrower covenants and agrees that so long as
this Agreement is in effect or any Obligation remains outstanding, Borrower and
its Affiliates shall not make any material changes in Borrower’s business
purposes, without the prior written consent of the Lender.

Section 6.13 Shareholder Indebtedness.   Borrower covenants and agrees that so
long as this Agreement is in effect or any Obligation remains outstanding,
Borrower and its Affiliates shall not repay any loans owning to any shareholders
of the Borrower.

Section 6.14 Capital Expenditures.  Borrower covenants and agrees that so long
as this Agreement is in effect or any Obligation remains outstanding, Borrower
and its Affiliates shall not make capital expenditures in any fiscal year
greater than $2,500,000, without the prior written consent of the Lender.

ARTICLE VII

POWER OF ATTORNEY

For the purpose of exercising the rights and remedies of Lender under this
Agreement or any of the other Mezzanine Loan Documents and the Related
Documents, at law or in equity, Borrower hereby irrevocably constitutes and
appoints Lender its true and lawful attorney-in-fact, upon and following any
Event of Default, to execute, acknowledge and deliver any instruments and to do
and perform any acts reasonably permitted hereunder or by law in the name and on
behalf of Borrower. The foregoing power of attorney shall be deemed to be
coupled with an interest and shall be irrevocable. Notwithstanding any provision
to the contrary elsewhere in this Agreement or the other Mezzanine Loan
Documents or the Related Documents, Lender shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with Borrower and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Mezzanine Loan Documents or the Related Documents or
otherwise against Lender.

ARTICLE VIII

EVENTS OF DEFAULT; REMEDIES

Section 8.1 Events of Default.  If any of the following events (an “Event of
Default”) shall occur:

(a) Borrower and/or its subsidiaries shall fail to pay within five (5) days
written notice of (i) any amount of principal of or interest on the Mezzanine
Loan, or (ii) any fees, expenses or other amounts (other than amounts covered by
subclause (i) hereof) owing at any time hereunder on or before the due date,
including extensions and grace periods.

(b) Borrower or any of its Subsidiaries shall fail to comply with any covenant
contained in Article V and Article VI.

(c) Borrower or any of its Subsidiaries shall fail to perform or observe any
term, covenant or agreement herein contained (other than those referred to in
subsections 8.1(a) and (b) above), or shall fail to perform or observe any other
covenant contained herein or in any other Loan Document to which Borrower is a
party and such failure shall not be remedied within thirty (30) days after
written notice, or, if earlier, the date an officer of either Borrower or any of
its Subsidiaries obtains actual knowledge thereof; provided, however, that such
notice shall not be given more than once in any twelve month period;

(d) an Event of Default under any of the other Mezzanine Loan Documents or
Related Documents shall have occurred and all grace periods, if any, applicable
thereto shall have expired;

(e) any representation, warranty, statement, certificate, schedule or report
made herein or in any other Mezzanine Loan Document or Related Document or
furnished hereunder shall prove to have been false or misleading in any material
respect as of the time made or deemed to have been made or furnished and the
same shall not be remedied within thirty (30) days after written notice, or, if
earlier, the date an officer of either Borrower or any of its Subsidiaries
obtains actual knowledge thereof; provided, however, that such notice shall not
be given more than once in any twelve month period;

(f) there shall have occurred the dissolution, termination of existence of, or
the insolvency of, or the making of an assignment or trust mortgage for the
benefit of creditors by, Borrower or any of its Subsidiaries;

(g) Either Borrower or any of its Subsidiaries shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar official of itself or of all or a substantial
part of its property, (ii) be generally not paying its debts as such debts
become due, (iii) make a general assignment for the benefit of its creditors,
(iv) commence a voluntary case under the Bankruptcy Code (as now or hereafter in
effect), (v) take any action or commence any case or proceeding under any law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, or any other law providing for the relief of debtors,
(vi) fail to contest in a timely or appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under such Bankruptcy
Code or other law, (vii) take any action under the laws of its jurisdiction of
incorporation or organization similar to any of the foregoing, or (viii) take
any corporate action for the purpose of effecting any of the foregoing;

(h) A proceeding or case shall be commenced, without the application or consent
of either Borrower or any of its Subsidiaries, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of sixty (60) days; or an order for relief shall be
entered in an involuntary case under such Bankruptcy Code, against Borrower or
any of its Subsidiaries or action under the laws of the jurisdiction of
incorporation or organization of such Borrower or any of its Subsidiaries,
similar to any of the foregoing shall be taken with respect to Borrower or any
of its Subsidiaries;

(i) an entry of judgment or award against either Borrower or any of its
Subsidiaries shall be made (i) which exceeds $350,000 in the aggregate
outstanding at any time for any such Person (ii) which has been in force more
than sixty (60) days (or, if the applicable appeal period is shorter, for such
shorter period) or on which execution has been levied, (iii) in respect of which
Borrower or any of its Subsidiaries shall not at the time in good faith be
prosecuting an appeal or proceedings for review and in respect of which no stay
of execution shall have been obtained pending such appeal or review, and
(iv) the judgment or award shall have arisen out of liabilities not fully
covered by insurance unless the insurer shall have acknowledged in writing that
full coverage (subject to any deductibles applicable thereto) exists with
respect to such judgment or award;

(j) an entry shall be made by any court or administrative agency of a final
order requiring either Borrower or any of its Subsidiaries to divest itself of a
substantial part of its assets and, as a consequence thereof, the ability of
Borrower or any of its Subsidiaries to pay its indebtedness hereunder when due
and payable is or may reasonably be expected to be materially adversely
affected;

(k) there shall have occurred the loss, theft, damage or destruction of any
Collateral or other property of either Borrower or any of its Subsidiaries
having a value in excess of a Material Amount for which there is either no
insurance coverage or for which, in the reasonable opinion of Lender, there is
insufficient insurance coverage, or any levy, seizure or attachment upon any of
the Collateral or other property of Borrower having a value in excess of a
Material Amount by any third party shall have been made;

(l) a Change of Control shall have occurred;

(m) Borrower or any of its Subsidiaries or any ERISA Affiliate shall fail to pay
when due any amount which it shall have become liable to pay to the Pension
Benefit Guaranty Corporation (“PBGC”) or to a plan under Title IV of ERISA; or
notice of intent to terminate a plan or plans shall be filed under Title IV of
ERISA by Borrower or any of its Subsidiaries, any ERISA Affiliate, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such plan or plans or a proceeding shall be
instituted by a fiduciary of any such plan or plans against Borrower or any of
its Subsidiaries or any ERISA Affiliate and such proceedings shall not have been
dismissed within sixty (60) days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such plan or plans must be terminated;

(n) a material adverse change in the business, assets, or financial condition of
either Borrower, or Borrower and its Subsidiaries taken as a whole, shall have
occurred;

(o) Borrower or any of its Subsidiaries is enjoined, restrained, or in any way
prevented from conducting all or any material part of its business affairs;

(p) there shall be instituted in any court criminal proceedings against Borrower
or any of its Subsidiaries, or Borrower shall be indicted for any crime, in
either case for which a forfeiture of a material portion of Borrower’s or any of
its Subsidiaries property is a potential penalty; or

(q) there shall exist an event of default under any other agreement of any
Person (except the Senior Lender) with the Borrower or any of its Subsidiaries,
which event of default can reasonably be expected to have a material adverse
effect on the Borrower or its Subsidiaries’ business, prospects, or financial
condition.

Section 8.2 Remedies Upon Default.  

(a) Upon the occurrence and during the continuance of an Event of Default, and
at any time thereafter Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Mezzanine Loan
Documents and Related Documents or at law or in equity, take such action,
without notice or demand, that Lender deems advisable to protect and enforce its
rights against Borrower and in the Collateral, including, without limitation, at
its option and without prior notice or demand, declare the unpaid principal
balance of the Mezzanine Note and all accrued but unpaid interest thereon, as
well as all other sums owing under the Mezzanine Loan Documents, immediately due
and payable, except that Lender may make any advances after the happening of any
one or more of said events of default without thereby waiving the right to
demand payment in full of the Mezzanine Note and such other amounts and without
liability to make any other or further advances.

(b) If Borrower fails to perform any covenant or obligation contained herein or
in the other Mezzanine Loan Documents or Related Documents and such failure
shall continue for a period of thirty (30) days after Borrower’s receipt of
written notice thereof from Lender, without in any way limiting Lender’s right
to exercise any of its rights, powers or remedies as provided hereunder, or
under any of the other Mezzanine Loan Documents or Related Documents, Lender
may, but shall have no obligation to, perform, or cause performance of, such
covenant or obligation, and all costs, expenses, liabilities, penalties and
fines of Lender incurred or paid in connection therewith shall be payable by
Borrower to Lender upon demand and if not paid shall be added to the
Indebtedness (and to the extent permitted under applicable laws, secured by the
Security Agreement and other Mezzanine Loan Documents) and shall bear interest
from the date expended at the Default Interest Rate. Notwithstanding the
foregoing, Lender shall have no obligation to send notice to any Borrower of any
such failure.

(c) At the option of Lender, any default by Borrower under this Agreement or in
the performance of any of Borrower’s covenants, agreements or obligations
contained herein, shall constitute a default under the Mezzanine Note, the
Security Agreement or any of the other Mezzanine Loan Documents to the same
extent as though the Note had by its own terms become due and payable at
maturity and payment thereof had been refused, and in such event Lender may,
without liability to Borrower, assert and exercise any and all rights and
remedies provided for herein or in the Mezzanine Note, the Security Agreement or
any of the other Loan Documents or otherwise as may be provided by law. Such
rights and remedies may be asserted concurrently or successively from time to
time (either before or after commencement of foreclosure proceedings or before
or after the exercise of any other remedy of Lender) until the Mezzanine Note,
including interest thereon, and all of the Indebtedness of Borrower to Lender
under this Agreement and the other Mezzanine Loan Documents, have been paid in
full.

(d) An Event of Default under Section 8.1(1), shall give Lender the additional
right to require Borrower to repurchase the Mezzanine Note, to the extent
allowable under the applicable SBA regulations, with the consideration
consisting of (x) cash and/or (y) Common Stock (but only to the extent
insufficient cash exists to allow repurchase of the Mezzanine Note in cash) as
follows:

(i) Between December 11, 2007 and December 10, 2008: 105% of the remaining
principal balance of the Note, plus any accrued but unpaid interest thereon;

(ii) Between December 11, 2008 and December 10, 2009: 104% of the remaining
principal balance of the Note, plus any accrued but unpaid interest thereon; and

(iii) Between December 11, 2009 and December 10, 2010: 103% of the remaining
principal balance of the Note, plus any accrued but unpaid interest thereon.

If Lender, acting in its sole discretion, exercises its rights to require
Borrower to repurchase the Note with Common Stock, the number of shares of such
Common Stock being offered to Lender as consideration for such repurchase shall
be calculated as follows:

S=C/P

Where S equals the number of shares of Common Stock comprising the repurchase
consideration, C equals the amount of cash consideration payable in accordance
with the provisions of Section 8.2(d)(i) to (iii) and P equals the Fair Market
Value (as defined in the Warrant) per share of Common Stock under the Warrant as
of the date of the Change of Control.

Section 8.3 Remedies Cumulative. No right, power or remedy conferred upon Lender
hereby or by under this Agreement or any of the other Mezzanine Loan Documents
or the Related Agreements, or at law or in equity, shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.

ARTICLE IX

PARTICIPATIONS

Section 9.1 Participations. Lender may sell participations to one or more banks
or other Persons (each, a “Participant”) in all or a portion of its rights and
obligations under this Agreement (including all or a portion of the Mezzanine
Loan); provided, that (i) Lender’s obligation under this Agreement shall remain
unchanged, (ii) Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Participant shall be
entitled to the benefit of the cost protection provisions contained herein to
the same extent as if it were a Lender, provided that except as otherwise
provided herein and in the Mezzanine Loan Documents and Related Agreements,
Borrower shall not be required to reimburse any Participant in an amount which
exceeds the amount that would have been payable hereunder to Lender had Lender
not sold such participation, (iv) Borrower shall continue to deal solely and
directly with Lender in connection with Lender’s rights and obligations under
this Agreement.

Section 9.2 Assignment. Lender may sell, assign or transfer this Agreement and
the other Mezzanine Loan Documents only with the prior written consent of
Borrower, which consent may not be unreasonably withheld, delayed or
conditioned, and Borrower agrees that so long as such consent is granted
(i) such purchaser, assignee or transferee shall be entitled to all rights,
remedies and benefits of Lender to, in and under this Agreement and the other
Mezzanine Loan Documents and (ii) such purchaser, assignee or transferee shall
be and become “Lender” for all purposes under this Agreement and the other
Mezzanine Loan Documents, provided further, however, that if an Event of Default
exists, then Borrower’s written consent shall not be required.

Section 9.3 Disclosure. Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Article IX, with the prior written consent of Borrower, which consent may not be
unreasonably withheld, delayed or conditioned, disclose to any prospective
participant and all Participants any information relating to Borrower furnished
to Lender by or on behalf of Borrower; provided, however, that all such
information shall be (i) kept confidential and (ii) only used for the purpose
disclosed.

Section 9.4 No Assignment by Borrower. Borrower shall not assign or delegate any
of its rights or obligations hereunder and any such assignment shall be void.

ARTICLE X

GENERAL

Section 10.1 Set-Off.  Any deposits or other sums at any time credited by or due
from Lender or any Participant to Borrower and any securities or other property
of Borrower in the possession of Lender or a Participant shall at all times be
held and treated as collateral security for the payment of the Obligations.
Regardless of the adequacy of any collateral, any such deposits or other sums
may be applied to or set off against Obligations at any time after an Event of
Default if Borrower is primarily liable thereon, or at or after the maturity
thereof if Borrower is secondarily liable thereon. Borrower irrevocably invites
each financing institution which may consider becoming a Participant to rely on
the provisions of this Section 10.1 as making the Participant a creditor of
Borrower and agrees that its becoming a Participant shall constitute an
acceptance of the offer hereby made. Any and all rights to require Lender to
exercise its rights or remedies with respect to any other Collateral which
secures the Obligations, prior to exercising its right of setoff with respect to
such deposits, credits or other property of Borrower, are hereby knowingly,
voluntarily and irrevocably waived.

Section 10.2 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived, discharged, nor any non-compliance
therewith deemed to have been consented to, orally or by course of conduct, but
only by a written agreement signed by an authorized officer of Lender, as to
amendments, and also signed by an authorized officer of Borrower. Any such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on Borrower in any case shall
entitle Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any right of Lender to take action
without notice or demand. No failure or delay on the part of Lender in
exercising any right hereunder shall operate as a waiver thereof or of any other
right, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or of any other right or remedy.

Section 10.3 Notices. Except as otherwise provided herein, all notices and other
communications in connection with this Agreement or any of the other Mezzanine
Loan Documents and/or Related Documents, shall be in writing, and shall have
been duly given and be effective (i) when delivered, or (ii) the third Business
Day following the day on which the same is sent by certified or registered mail,
postage prepaid, return receipt requested, in each case addressed to the
respective parties at the address set forth below, or at such other address as
such party may specify by written notice to the other parties hereto, provided,
however, that failure to provide a copy of any notice given hereunder to counsel
to any party shall not affect the validity of any notice given to any party
hereunder:

If to Borrower:

Dover Saddlery, Inc.

525 Great Road

Littleton, MA 01460

with a copy to:

PretiFlaherty, PLLP
P.O. Box 1318
Concord, NH 03302-1318
Attention: John M. Sullivan, Esq.

If to Lender:

BCA Mezzanine Fund, L.P.
One Turks Head Place, Suite 1492
Providence, RI 02903

with a copy to:

      Hinckley, Allen & Snyder LLP
50 Kennedy Plaza, Suite 1500
Providence, RI 02903

Attention:
  Tobias Lederberg, Esquire

Additionally, Lender shall be sent copies of all notices delivered to or
received from Senior Lender, within five (5) days following delivery or receipt,
as applicable, of said notices.

Section 10.4 Waivers and Assents. Borrower waives notice of acceptance of this
Agreement, the Mezzanine Note and the other Mezzanine Loan Documents, notice of
Mezzanine Loan made, credit extended, Collateral received, delivered or
repossessed or other action taken in reliance hereon. With respect to both
Obligations and Collateral, Borrower assents to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral, to the addition or release of any Person primarily or
secondarily liable, to the acceptance of partial payments thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as Lender may deem advisable.

Section 10.5 Special Provisions .  

(a) Full Recourse.  The Obligations constitute the full recourse Obligations of
Borrower enforceable against it to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstance whatsoever.

(b) Consents.   Borrower assents to any other action or delay in acting or
failure to act on the part of Lender with respect to the failure by Borrower to
comply with any of its Obligations, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with applicable laws or regulations thereunder, which might, but for the
provisions of this Section 10.5, afford grounds for terminating, discharging or
relieving Borrower, in whole or in part, from any of its Obligations under this
Section 10.5 or otherwise, it being the intention of Borrower that, so long as
any of the Obligations hereunder remain unsatisfied, the Obligations of Borrower
under this Agreement, including, without limitation, this Section 10.5, shall
not be discharged except by performance and then only to the extent of such
performance. The Obligations of Borrower under this Agreement, including without
limitation, this Section 10.5, shall not be diminished or rendered unenforceable
by any winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to Borrower or Lender. The liability of Borrower
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of Borrower or Lender.

(c) Obligations Absolute; No Marshalling.  The provisions of this Section 10.5
are made for the benefit of Lender and its successors and assigns, and may be
enforced by it or them from time to time against Borrower as often as occasion
therefor may arise and without requirements on the part of Lender first to
marshall any of its claims or to exercise any of its or their rights against any
other Borrower or to exhaust any remedies available to it or them against any
other Borrower or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy. The provisions of
this Section 10.5 shall remain in effect until all of the Obligations shall have
been paid in full or otherwise fully satisfied. If at any time, any payment, or
any part thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by Lender upon the insolvency, bankruptcy
or reorganization of Borrower or otherwise, the provisions of this Section 10.5
will forthwith be reinstated in effect, as though such payment had not been
made.

(d) Subordination of Subrogation Rights, etc.  Borrower hereby agrees that it
will not exercise any of its rights of contribution or subrogation against any
Affiliate of Borrower with respect to any liability incurred by it hereunder or
under any of the other Mezzanine Loan Documents, any payments made by it to
Lender with respect to any of the Obligations or any collateral security
therefor until such time as all Indebtedness of Borrower owing to Lender under
the Mezzanine Loan Documents (the “BCA Indebtedness”) has been paid in full in
immediately available funds denominated in Dollars. Any claim which Borrower may
have against any other party with respect to any payment to Lender hereunder or
under any other Mezzanine Loan Documents are hereby expressly made subordinate
and junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full of the
BCA Indebtedness and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to Borrower, its debts or its assets, whether voluntary or
involuntary, all such BCA Indebtedness shall be paid in full in immediately
available funds denominated in Dollars before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.

(e) Subordination.   Borrower hereby agrees that the payment of any amounts due
with respect to the indebtedness owing by Borrower from any Affiliate of
Borrower is hereby subordinated to the prior payment in full in immediately
available funds denominated in Dollars of the BCA Indebtedness. If,
notwithstanding the foregoing sentence, Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by Borrower as trustee for the Lender and be
paid over to Lender to be applied to repay the BCA Indebtedness. This Section
shall have no effect on Borrower’s obligations to the Senior Lender.

Section 10.6 Expenses.  Borrower shall pay or reimburse Lender and its
participants on demand for all expenses and costs (including, without
limitation, reasonable attorneys’ fees but excluding audit/examination fees)
incurred or paid by Lender in connection with the negotiation, preparation,
review, execution or delivery of this Agreement, any intercreditor agreements
relating to the Mezzanine Loan, the other Mezzanine Loan Documents, the Related
Documents, and any amendments hereof or thereof or waivers or consents with
respect thereto; the making of the Mezzanine Loan; the perfection of any Lien;
the enforcement (including any arbitration, suit or other proceeding) of any
obligation of Borrower; the satisfaction of any indebtedness under this
Agreement or the other Mezzanine Loan Documents; or the realization upon or
liquidation of any collateral or any lien or security interest therein; and
without limiting the foregoing any such expenses incurred by Lender and its
participants in connection with proceedings under a bankruptcy petition filed by
or against Borrower or any of its Subsidiaries.

Section 10.7 Indemnification.  Borrower agrees to indemnify, defend, and to hold
Lender and/or its participants harmless from and against any liability, claim,
demand, expense, or loss made against Lender on account of, or arising out of,
this Agreement and the transactions contemplated hereby, the reliance upon loan
requests submitted by Borrower and any other action taken by Lender and/or its
participants hereunder or under any of the other Mezzanine Loan Documents or any
other agreement with Borrower and/or any other Person except with respect to any
such liability, claim, demand, expense, or loss resulting solely from Lender’s
and/or its participants’ gross negligence or willful misconduct.

Section 10.8 Sealed Instrument; Successors and Assigns. This Agreement is
intended to take effect as a sealed instrument, and shall be binding upon and
inure to the benefit of Lender and Borrower and their respective successors and
assigns, except that Borrower not may assign or transfer its rights hereunder.

Section 10.9 Governing Law. This Agreement and the other Mezzanine Loan
Documents shall be deemed to be contracts under the laws of the State of Rhode
Island, without regard to its conflicts of law rules, provided, however, that if
any Collateral shall be located in any jurisdiction other than the State of
Rhode Island, the laws of such jurisdiction shall govern the method, manner and
procedure for foreclosure of Lender’s Liens and security interests in such
Collateral and the enforcement of Lender’s other remedies in respect of such
collateral to the extent the laws of such jurisdiction are different from or
inconsistent with the laws of the State of Rhode Island. Borrower hereby
consents and submits to the jurisdiction of the Superior Court of Providence
County in the State of Rhode Island or, at Lender’s discretion, the United
States District Court for the District of the State of Rhode Island, as well as
to the jurisdiction of all courts to which an appeal may be taken or other
review sought from the aforesaid courts, for the purpose of any suit, action or
other proceeding arising out of any of the Obligations under or with respect to
this Agreement or any other Loan Document or any matter relating thereto,
expressly waives any and all objections it may have as to venue in any of such
courts and personal service of the summons or complaint or other process in any
such action or suit, agrees that service of process may be made by mailing a
copy of the summons to Borrower at its address for notices hereunder, and
consents to the granting of such legal or equitable relief as is deemed
appropriate by any such court.

Section 10.10 Provisions Severable. The provisions of this Agreement are
severable, and if any of these provisions shall be held by any court of
competent jurisdiction to be unenforceable, such holding shall not affect or
impair any other provision hereof, or, to the extent not invalidated, the effect
of said unenforceable provisions in other jurisdictions.

Section 10.11 Rights and Remedies Cumulative. The rights and remedies set forth
herein are cumulative and not exclusive of any other right which Lender or any
subsequent holder or holders of the Mezzanine Note would otherwise have.

Section 10.12 Captions. The captions in this Agreement are for convenience of
reference only and shall not be construed so as to define or limit the
provisions of this Agreement.

Section 10.13 Counterparts. This Agreement may be executed in several
counterparts, each of which when so executed and delivered shall be deemed an
original but all of which together shall constitute but one Agreement.

Section 10.14 Term of Agreement. This Agreement shall continue in full force and
effect so long as the Mezzanine Loan or any other Obligation hereunder shall be
outstanding.

Section 10.15 Integration; Ambiguities.  This Agreement and the other Mezzanine
Loan Documents and Related Documents represent the agreement of Borrower and
Lender with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by Lender or Borrower relative to
the subject matter hereof not expressly set forth or referred to herein or in
the other Mezzanine Loan Documents or the Related Documents. Borrower
acknowledges that it and its counsel have reviewed and negotiated this Agreement
and the other Mezzanine Loan Documents and the Related Documents and Borrower
agrees that any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be applied in construing this
Agreement or the other Mezzanine Loan Documents or Related Documents.

Section 10.16  JURY WAIVER.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
AND LENDER TOGETHER WITH THEIR RESPECTIVE SUCCESSORS AND ASSIGNS WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY ACTION, SUIT, PROCEEDING,
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE MEZZANINE LOAN DOCUMENTS OR RELATED DOCUMENTS, THE COLLATERAL OR THE
OBLIGATIONS, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, AND AGREE NOT TO SEEK TO CONSOLIDATE
ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. BORROWER REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVER WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH ITS LEGAL COUNSEL, AND AGREES THAT IN THE EVENT OF
LITIGATION THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT WITHOUT A JURY. BORROWER ACKNOWLEDGES THAT LENDER HAS NOT AGREED OR
REPRESENTED THAT THE PROVISIONS OF THIS WAIVER WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.

4

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

         
 
  BORROWER:
 
  DOVER SADDLERY, INC.
 
  By:
WITNESSED:
    —  
Print Name
  Name:
 
  Title:
 
  LENDER:
 
  BCA MEZZANINE FUND, L.P.
 
  BY: BCA MEZZANINE PARTNERS, LLC
 
  Its General Partner
 
  By:
WITNESSED:
    —  
Print Name
  Name: Gregory F. Mulligan
 
  Title: Managing Member

5

EXHIBIT 2.1

FORM OF MEZZANINE NOTE

6

Exhibit 4.3(a)
CAPITALIZATION TABLE OF BORROWER

7

8

Exhibit 4.3(b)
CAPITALIZATION TABLES OF SUBSIDIARIES
EXHIBIT 4.5

LITIGATION

9

EXHIBIT 4.7

MATERIAL CHANGES

10

EXHIBIT 4.8

LICENSES, PERMITS, THIRD PARTY CONSENTS, COMPLIANCE WITH LAW

11

EXHIBIT 4.11

INTELLECTUAL PROPERTY

12

EXHIBIT 4.12

13

TAX CLAIMS
EXHIBIT 4.13

ERISA MATTERS

14

EXHIBIT 4.20

EXISTING INDEBTEDNESS

15

EXHIBIT 5.1

USE OF FUNDS

16

EXHIBIT 5.2(e)

COVENANT COMPLIANCE CERTIFICATE

17

EXHIBIT 5.18

FORM OF CONFIDENTIALITY, NON-DISCLOSURE AND NON-USE AGREEMENT

18

EXHIBIT 6.2

SCHEDULE OF PERMITTED DEBT

19