CREDIT AND SECURITY AGREEMENT
 
This CREDIT AND SECURITY AGREEMENT is entered into as of May 16, 2011 (the
“Execution Date”), by and among, HearUSA, Inc., a Delaware corporation (“HUSA”
or “Borrower”) and William Demant Holdings A/S (“DIP Lender”):
 
WHEREAS, HUSA intends to be a debtor and debtor in possession in a bankruptcy
case to be pending under chapter 11 of title 11 of the United States Code, 11
U.S.C. § 101, et seq. (the “Bankruptcy Code”), to be filed within two business
days after the Execution Date (the date in which such bankruptcy case shall be
commenced, the “Filing Date”) in the United States Bankruptcy Court for the
Southern District of Florida, West Palm Beach Division (the “Bankruptcy
Court”)(the “Chapter 11 Case”) and Borrower shall retain possession of its
assets and shall be authorized under sections 1107 and 1108 of the Bankruptcy
Code to continue the management and operation of its business as a debtor in
possession;
 
WHEREAS, Borrower requested that DIP Lender provide, and the DIP Lender agrees
to provide, subject to the terms and conditions hereof,  a new
debtor-in-possession financing facility to Borrower to provide working capital
to the Borrower in an aggregate principal amount up to and including
$10,000,000.00;
 
WHEREAS, DIP Lender or its affiliate has also executed an APA (hereinafter
defined) with the Borrower to serve as the “stalking horse” purchaser in
connection with a section 363 sale of substantially all of the assets of the
Borrower in the Chapter 11 Case and DIP Lender is providing the DIP Loan to
accommodate and support such sale process and such “stalking horse” bid;
 
NOW, THEREFORE, in consideration of these premises and the covenants and
agreements contained herein, the parties hereto agree to as follows:
 
1.           DEFINITIONS, CONSTRUCTION AND RATIFICATION
 
1.1         Terms. As used in this DIP Credit Agreement, the following terms
have the following meanings:
 
(a)           “Account” means (i) any and all post petition accounts receivable,
trade accounts and other amounts receivable (including overdue accounts
receivable) owed to the Borrower relating to, or arising in connection with the
operation and conduct of, the Business from and after the Filing Date and any
other rights of the Borrower to payment from third parties arising from and
after the Filing Date, including, but not limited to, those reflected in the
books and records of HUSA, and the full benefit of all security for such
accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of services rendered, in each case
owing to the Borrower from and after the Filing Date; (ii) all other accounts or
notes receivable of the Borrower  arising from and after the Filing Date and the
full benefit of all security for such accounts or notes receivable arising in
the conduct of the Business; and (iii) any and all claims, remedies or other
rights relating to any of the foregoing, together with any interest or unpaid
financing charges accrued thereon, in each case existing on the Execution Date
or arising in the ordinary course of business after the Execution Date and in
each case that have not been satisfied or discharged prior to the close of
business on the day immediately preceding the Filing Date or have not been
written off or sent to collection prior to the close of business on the day
immediately preceding the Filing Date (it being understood that the receipt of a
check prior to the close of business on the day immediately preceding the Filing
Date shall constitute satisfaction or discharge of the applicable account or
note receivable to the extent of the payment represented thereby). No
PrePetition Collateral shall be included in this definition of the term
“Account.”
 
 
 

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(b)           “Advances” means all loans, advances and other financial
accommodations by DIP Lender to or on account of Borrower under Section 2.1
hereof.
 
(c)           “APA” means the Asset Purchase Agreement entered into
contemporaneously or prior to the execution of this DIP Credit Agreement by the
DIP Lender or its affiliate, subsidiary or designee established for such
purpose, William Demant Holdings A/S, as guarantor,  the Borrower and Auxiliary
Health Corporation (“Auxiliary Health”) for the purchase of substantially all of
the Borrower’s assets and Auxiliary Health’s assets and to serve as the stalking
horse bidder under the section 363 sale proposed by the Borrower in the Chapter
11 Case.
 
(d)           “Authorized Officer” means any officer or other representative of
Borrower authorized in a writing delivered to DIP Lender to transact business
with DIP Lender.
 
(e)           “Avoidance Actions” means recoveries from, or settlements of,
actions commenced by Borrower’s bankruptcy estate under chapter 5 of the
Bankruptcy Code.
 
(f)           “Bankruptcy Code” means chapter 11 of title 11 of the United
States Code, 11 U.S.C. § 101, et seq.
 
(g)          “Bankruptcy Court” means the United States Bankruptcy Court for the
Southern District of Florida, West Palm Beach Division, or such other court
having jurisdiction over the Chapter 11 Case.
 
(h)          “Borrower’s Books” means all of Borrower’s books and records
including all of the following:  ledgers; records indicating, summarizing, or
evidencing Borrower’s assets or liabilities, or the Collateral; all information
relating to Borrower’s business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information, and the facilities containing such information, but
specifically excluding Borrower’s corporate minute books, stock ledgers and the
like.
 
(i)           "Borrower Professional Expense Reserve" means on any date, an
amount (in each case excluding security retainers provided by Borrower to
Professionals prior to the date hereof) set forth for Professional Expenses in
the Budget, but in no event shall such amount exceed the aggregate amount set
forth in the Budget.
 
(j)           “Business Day” means any day, excluding Saturday, Sunday and any
other day on which commercial banks in New York are authorized or required by
law to close.
 
 
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(k)           “Budget” means the budget agreed to by the Borrower and the DIP
Lender (and as amended, from time to time, with the consent of Borrower and the
DIP Lender),  a copy of which is attached as Schedule 2.1.
 
(l)           “Chapter 11 Case” means, collectively, Borrower’s cases under
chapter 11 of the Bankruptcy Code, to be commenced in the Bankruptcy Court
within two business days after the Execution Date.
 
(m)          “Chattel Paper” shall have the same meaning ascribed to such term
in the Code.
 
(n)          “Code” means the Florida Uniform Commercial Code, as amended or
revised from time to time.
 
(o)          “Collateral” means and shall include, pursuant to sections
364(c)(2), 364(c)(3) and 364(d) of the Bankruptcy Code, a fully perfected
security interest in substantially all of the existing and after-acquired real
property and personal, tangible and intangible, assets of the Company including,
without limitation, all cash, cash equivalents, bank deposit and securities
accounts, Accounts, other receivables, Chattel Paper, contract rights,
Inventory, instruments, documents, securities (whether or not marketable),
Equipment, fixtures, real property interests, franchise rights, general
intangibles, Avoidance Actions (to the extent permitted in the Final DIP Order),
investment property, supporting obligations, tax refunds, securities, franchise
rights, letter of credit rights, commercial tort claims, causes of action and
all substitutions, accessions and proceeds of the foregoing, wherever located,
including insurance or other proceeds, patents, tradenames, trademarks,
copyrights, intellectual property and all substitutions, accessions and proceeds
of such intellectual property, wherever located, including insurance or other
proceeds; but expressly excluding Avoidance Actions and any proceeds with
respect to such Avoidance Actions (unless expressly permitted in the Final DIP
Order).  Notwithstanding the foregoing, the Borrower will not be required to
grant leasehold mortgages on their leased property, but the Interim DIP Order
and Final DIP Order will grant a security interest in any proceeds of leases and
other real property.
 
(p)          "Committee Professional Expense Reserve" means on any date, the
applicable amount per week set forth in the Budget  (effective as of Monday or
first business day of each week), multiplied by the number of Mondays that have
elapsed from the date of this Agreement through the date of determination, minus
the amount of allowed Professional Expenses paid during such period to
Professional Persons retained by the Committee, but in no event shall such
amount exceed the aggregate amount provided therefor in the Budget.
 
(q)          “Deposit Account” shall have the meaning ascribed to such term in
the Code.
 
(r)           “DIP Credit Agreement” means this Credit and Security Agreement,
by and among HUSA and the DIP Lender and any extensions, supplements,
amendments, addenda or modifications to or in connection with this  DIP Credit
Agreement.
 
(s)          “DIP Lender” means William Demant Holdings A/S, its successors and
assigns.
 
 
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(t)           “DIP Lender Expenses” means all of the following:  costs and
expenses (whether taxes, assessments, insurance premiums or otherwise) required
to be paid by Borrower under any of the Loan Documents which are paid or
advanced by DIP Lender; filing, recording, publication, appraisal and search
fees paid or incurred by DIP Lender in connection with DIP Lender’s transactions
with Borrower; costs and expenses incurred by DIP Lender in the disbursement or
collection of funds to or from Borrower; charges resulting from the dishonor of
checks; costs and expenses incurred by DIP Lender to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; and costs and expenses incurred
by DIP Lender in enforcing or defending the Loan Documents, including, but not
limited to, costs and expenses incurred in connection with any proceeding, suit,
enforcement of judgment, or appeal; and DIP Lender’s reasonable attorneys’ fees
and expenses (which will include reasonable outside counsel fees and expenses)
incurred in amending, terminating, enforcing, defending, or otherwise
representing DIP Lender post petition concerning the Loan Documents or the
Obligations; but expressly excluding the “Expense Reimbursement” under the APA
and any costs and expenses (including, without limitation, any legal, accounting
or other fees and expenses) incurred by the DIP Lender or its affiliate(s) in
connection with the negotiation of, due diligence with respect to, and the
consummation of, the transaction contemplated by the APA.
 
(u)          “DIP Loan” means the loan, in the aggregate amount up to
$10,000,000.00 including but not limited to borrowings, interest due on the DIP
Loan and the DIP Lender Expenses, which is made by the DIP Lender to the
Borrower, as evidenced by this DIP Credit Agreement and the other Loan
Documents.
 
(v)          “DIP Order” means any Interim DIP Order or Final DIP Order, as
applicable, in form and substance satisfactory to the DIP Lender approving the
DIP Credit Agreement and authorizing the Borrower’s incurrence of post petition
secured and super priority debtor in possession financing, subject to the liens
and security interests of the First Lien Lender.
 
(w)         “Documents” means all of Borrower’s written files, documents,
instruments, papers, books, reports, records, tapes, microfilms, photographs,
letters, budgets, forecasts, plans, operating records, safety and environmental
reports, data, studies and documents, Tax Returns, ledgers, journals, title
policies, customer lists, regulatory filings, operating data and plans, research
material, technical documentation (design specifications, engineering
information, test results, maintenance schedules, functional requirements,
operating instructions, logic manuals, processes, flow charts, etc.), user
documentation (installation guides, user manuals, training materials, release
notes, working papers, etc.), marketing documentation (sales brochures, flyers,
pamphlets, web pages, etc.) and other similar materials, in each case, whether
or not in electronic form.
 
(x)           “Encumbrance” means any lien, encumbrance, claim (as defined in
section 101(5) of the Bankruptcy Code), right, demand, charge, mortgage, deed of
trust, option, pledge, security interest or similar interests, title defects,
hypothecations, easements, rights of way, restrictive covenants, encroachments,
rights of first refusal, preemptive rights, judgments, conditional sale or other
title retention agreements and other impositions, imperfections or defects of
title or restrictions on transfer or use of any nature whatsoever.
 
 
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(y)          “Equipment” means all equipment, machinery, vehicles, furniture,
fixtures, supplies and other tangible personal property of every kind and
description used, or held for use, in connection with the operation of the
Borrower’s business and owned by Borrower, wherever located, and including all
warranties of the vendor applicable thereto, to the extent such warranties are
transferable, but excluding software and any other intangibles associated
therewith except to the extent embedded in such Equipment and required to
operate it.
 
(z)           “ERISA” means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
 
(aa)        “ERISA Affiliate” means any entity which is, or at any relevant time
was, a member of (A) a controlled group of corporations (as defined in section
414(b) of the Code), (B) a group of trades or businesses under common control
(as defined in section 414(c) of the Code), (C) an affiliated service group (as
defined under section 414(m) of the Code) or (D) any group specified in
regulations under section 414(o) of the Code, any of which includes or included
Borrower.
 
(bb)        “Event of Default” means the events specified in Section 8, below.
 
(cc)        “Financial Assets” shall have the meaning ascribed to such term in
the Code.
 
(dd)        “Final DIP Order” means the order, in a form consented to by the DIP
Lender in its sole discretion,  authorizing, inter alia, the granting of credit
by DIP Lender to Borrower on a permanent basis authorizing to the Borrower as
post petition secured and super priority debtor in possession financing .
 
(ee)        “Final Order” means an order or judgment of the Bankruptcy Court or
any other court of competent jurisdiction entered by the Clerk of the Bankruptcy
Court or such other court on the docket in Borrower’s Chapter 11 Case or the
docket of such other court, which has not been modified, amended, reversed,
vacated or stayed and as to which (i) the time to appeal, petition for
certiorari, or move for a new trial, reargument or rehearing has expired and as
to which no appeal, petition for certiorari or motion for new trial, reargument
or rehearing shall then be pending or (ii) if an appeal, writ of certiorari, new
trial, reargument or rehearing thereof has been sought, such order or judgment
of the Bankruptcy Court or other court of competent jurisdiction shall have been
affirmed by the highest court to which such order was appealed, or certiorari
shall have been denied, or a new trial, reargument or rehearing shall have been
denied or resulted in no modification of such order, and the time to take any
further appeal, petition for certiorari or move for a new trial, reargument or
rehearing shall have expired, as a result of which such order shall have become
final in accordance with Rule 8002 of the Bankruptcy Rules; provided, that the
possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure,
or any analogous rule under the Bankruptcy Rules, may be filed relating to such
order, shall not cause such order not to be a Final Order.
 
(ff)          “First Lien Credit Agreement” means that certain Second Amended
and Restated Credit Agreement, dated as of December 30, 2006, among HUSA, as
borrower, and the First Lien Lender, as lender, as such agreement has been
amended, modified and supplemented from time to time.
 
 
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(gg)        “First Lien Lender” means Siemens Hearing Instruments, Inc. and its
successors and assigns.
 
(hh)        “First Lien Loan Documents” means the “Loan Documents” as defined in
the First Lien Credit Agreement, as such Loan Documents are amended, modified,
supplemented or restated from time to time.
 
(ii)           “GAAP” means United States generally accepted accounting
principles as in effect from time to time.
 
(jj)           “General Intangibles” means in addition to the definition of
general intangibles in the Code all of Borrower’s present and future general
intangibles and other personal property (including choses  or things in action,
goodwill, patents, trade names; trademarks, service marks, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds
(other than “trust funds”), route lists, infringement claims, computer programs,
computer discs, computer tapes, Borrower’s Books, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax refund claims)
other than goods and Accounts.  However, the term “General Intangibles” shall
not include Avoidance Actions.
 
(kk)         “Insolvency Proceeding” means any proceeding commenced by or
against any person or entity under any provision of the Bankruptcy Code, as
amended, or under any other state or federal insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, or extensions generally with its creditors.
 
(ll)           “Instruments” shall have the meaning ascribed to such term in the
Code.
 
(mm)       Interim DIP Order” means the order, that is consented to by the DIP
Lender in its sole discretion,  authorizing, inter alia, the granting of credit
by DIP Lender to Borrower on a permanent basis authorizing to the Borrower as
post petition secured and super priority debtor in possession financing; but
without any use by the Borrower of any cash collateral of the First Lien Lender.
 
(nn)        "Interim Period" means the period commencing on the date that the
Interim DIP Order is entered by the Court and ending on the date that the Final
DIP Order is entered by the Court.
 
(oo)        “Inventory” means in addition to the definition of inventory in the
Code all present and future inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract of
service, Borrower’s present and future raw materials, work in process, finished
goods, tangible property, stock in trade, wares, and materials used in or
consumed in Borrower’s business, goods which have been returned to, repossessed
by, or stopped in transit by Borrower, packing and shipping materials, wherever
located, any documents of title representing any of the above, and Borrower’s
Books relating to any of the foregoing.
 
(pp)        “Investment Property” shall have the meaning ascribed to such term
in the Code.
 
 
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(qq)        “IRC” means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
 
(rr)          “Letter of Credit Rights” shall have the meaning ascribed to such
term in the Code.
 
(ss)         “Loan Documents” means, collectively, this DIP Credit Agreement,
any Note, Interim DIP Order, Final DIP Order, security agreement, pledge
agreement, mortgage, deed of trust or any other encumbrance or agreement which
secure the Obligations, and any other agreement entered into between Borrower
and DIP Lender or by Borrower for the benefit of DIP Lender relating to or in
connection with this DIP Credit Agreement or the Obligations, as each of same
may be amended, modified, extended or substituted from time to time.
 
(tt)          “Multiemployer Plan” means a multiemployer plan as defined in
ERISA sections 3(37) or 4001(a)(3) or IRC section 414(f).
 
(uu)        “Negotiable Collateral” means all of Borrower’s present and future
letters of credit, notes, drafts, instruments, documents, leases, and Chattel
Paper.
 
(vv)        “Note” means any promissory note made by Borrower to the order of
DIP Lender concurrently herewith or at any time hereafter.
 
(ww)       “Obligations” means all loans, advances, debts, liabilities
(including all interest and amounts charged to the Obligations pursuant to any
agreement authorizing DIP Lender to charge the Obligations), obligations, lease
payments, guaranties, covenants, and duties owing by Borrower to DIP Lender of
any kind and description (whether Prepetition Obligations or incurred thereafter
and whether pursuant to or evidenced by the Loan Documents or by any other
agreement between DIP Lender and Borrower, and irrespective of whether for the
payment of money), whether made or incurred prior to, on, or after the
Termination Date, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including any debt, liability or
obligation owing from Borrower to others which DIP Lender may obtain by
assignment or otherwise, all interest thereon and all DIP Lender Expenses.
 
(xx)         “Plan” means any plan described in ERISA section 3(2) maintained
for employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
 
(yy)        “PrePetition Collateral” means any collateral encumbered by the
liens evidenced by the First Lien Loan Documents arising prior to the Filing
Date.
 
(zz)         “Prime Rate” means that rate designated in the “Money Section” of
the Wall Street Journal on the business day prior to the date in question or any
successor thereof, from time to time as its prime rate, which shall not
necessarily constitute its lowest available rate.
 
(aaa)      "Professional Expenses" means the fees and reimbursable expenses of a
Professional Person.
 
(bbb)      "Professional Expense Reserve" means the collective reference to (i)
the Borrower’s Professional Expense Reserve, (ii) the Committee’s Professional
Expense Reserve and (iii) the other reserves for the payment of Professional
Persons, in each case, as set forth in the Budget.
 
 
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(ccc)      "Professional Person" means a Person who is an attorney, accountant,
investment banker, appraiser, auctioneer or other professional person and who is
retained, with Court approval, by (i) Borrower pursuant to Section 327 of the
Bankruptcy Code or (ii) a Committee pursuant to Section 1103(a) of the
Bankruptcy Code.
 
(ddd)      “Reserve” means an amount, for the exclusive benefit of the
Professional Persons and the U.S. Trustee, equal to the sum of (a) the
Professional Expense Reserve and (b) an amount equal to all claims for the fees
and expenses of the Clerk of the Court and fees of the United States Trustee if
not paid within five days of the due date.
 
(eee)      “Super-Priority Administrative Expense” means a claim against
Borrower or its estate in its Case which is an administrative expense claim
having priority over (i) any and all allowed administrative expenses and (ii)
unsecured claims now existing or hereafter arising, including, without
limitation, administrative expenses of the kind specified in section 503(b),
506(c) or 507(b) of the Bankruptcy Code.
 
(fff)         “Supporting Obligation” shall have the meaning ascribed to such
term in the Code.
 
(ggg)      “Term” means the period from the date of the execution and delivery
by DIP Lender of this DIP Credit Agreement through and including the earlier of
(a) the closing of the sale contemplated by the APA and (b) the closing of any
higher and better bid approved by the Bankruptcy Court and (c) to and including
120 days following the entry of the first Interim DIP Order.  Once the DIP Loan
is repaid it is terminated and unavailable.
 
(hhh)      “Wind Down Amount” shall have meaning set forth in Section 2.1.
 
1.2         Construction.  Unless the context of this DIP Credit Agreement
clearly requires otherwise, references to the plural include the singular and to
the singular include the plural.  The words hereof, herein, hereby, hereunder,
and similar terms in this DIP Credit Agreement refer to this DIP Credit
Agreement as a whole and not to any particular provision of this DIP Credit
Agreement,  section, subsection, clause and exhibit references are to this DIP
Credit Agreement unless otherwise specified.  Words importing a particular
gender mean and include every other gender.
 
1.3         Accounting Terms.  All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles (GAAP) as in effect from time to time.  When used herein, the term
financial statements shall include the notes and schedules thereto.
 
1.4         Exhibits.  All of the exhibits, addenda or riders attached to this
DIP Credit Agreement shall be deemed incorporated herein by reference.
 
1.5         Code.  Any terms used in this DIP Credit Agreement which are defined
in the Code shall be construed and defined as set forth in the Code, unless
otherwise defined herein.
 
 
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2.           ADVANCES AND TERMS OF PAYMENT
 
2.1         Advances.  Upon the request of Borrower, Advances under the DIP
Loan  will be used, in accordance with the terms of the Budget attached as
Schedule 2.1,  (i) to pay expenses described  in the Budget during the Interim
Period and, after the Interim Period, to pay any expenses described in the Final
DIP Order; (ii) to pay adequate protection claims, but only to the extent
authorized by the Bankruptcy Court and consented to by DIP Lender; (iii) to pay,
on a weekly basis, fees required to be paid to the office of the U.S. Trustee;
(iv) to pay, on a weekly basis, Professional Expenses of Professional Persons
subject to any limitations in the Interim DIP Order, the Final DIP Order,
allowance by the Court and Borrower's receipt of an itemized billing and expense
statement from such Professional Person; (v) to pay property taxes with respect
to any Collateral to the extent nonpayment thereof is secured by a Lien senior
to DIP Lender's Liens thereon; (vi) to fund the Reserve, on a weekly basis, as
provided in the Interim DIP Order and the Final DIP Order; and (vii) to pay
other expenses authorized by the Bankruptcy Court in orders entered in the
Chapter 11 Case that are acceptable to DIP Lender; including to pay transaction
costs, fees and expenses under the DIP Loan, on the entry of an Interim DIP
Order approving this DIP Credit Agreement on an interim basis solely  up to the
interim amount agreed to by the DIP Lender under the Budget for ordinary
operating expenses and other expenses described above during the period
authorized under the Interim DIP Order and, further, under a Final DIP Order,
the lesser of the amount permitted under the Budget and up to and including Ten
Million Dollars ($10,000,000.00).   DIP Lender shall fund the Reserve on a
weekly basis in accordance with the Budget.  Notwithstanding the foregoing,
immediately prior to the Auction (as defined in the APA), the DIP Lender shall
fund, and the Borrower shall borrow, the sum of (i) the amount designated in the
Budget as the amount needed to fund the wind down of the Chapter 11 Case (the
“Wind Down Amount”) and (ii) for the exclusive benefit of the Professional
Persons and the U.S. Trustee to be held by Borrower’s counsel in escrow,  the
Reserve.  The Reserve and the Wind Down Amount (a) shall be retained by Borrower
(or Borrower’s counsel in escrow with respect to the Reserve), (b) shall be free
and clear of all liens, claims and encumbrances in favor of the First Lien
Lender or the DIP Lender and (c) shall not be sold and transferred to the
Purchaser under the APA.
 
2.2         Authorization to Make Advances.  DIP Lender is hereby authorized, on
entry of an Interim DIP Order or Final DIP Order to make the Advances based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Officer. All requests for Advances shall specify the date on which
such Advance is to be made (which day shall be a Business Day) and the amount of
such Advance.  Requests received after 12:00 p.m. Eastern time on any day shall
be deemed to have been made as of the opening of business on the immediately
following Business Day.  All Advances made under this DIP Credit Agreement shall
be conclusively presumed to have been made to, at the request of, and for the
benefit of Borrower when deposited to the credit of Borrower or otherwise
disbursed in accordance with the instructions of Borrower or in accordance with
the terms and conditions of this DIP Credit Agreement.  Unless otherwise
requested by Borrower, all Advances shall be made by a wire transfer to the
deposit account of Borrower designated on Schedule 2.2 annexed hereto, or such
other account as Borrower shall notify DIP Lender in writing.  Borrower shall
pay to DIP Lender a funds transfer fee of $25.00 for each Advance.  Said fees
shall be payable on the first day of each month of the Term for all Advances
made during the preceding month.
 
 
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2.3         Interest.
 
(a)           Except where specified to the contrary in the Loan Documents, the
aggregate outstanding balances of the Obligations shall accrue interest at the
per annum rate of four percentage points (4%) above the Prime Rate.  The
Obligations shall bear interest from and after written notice by DIP Lender to
Borrower of the occurrence of an Event of Default, and without constituting a
waiver of any such Event of Default, at the per annum rate of two percentage
points (2%) above the highest interest rate before an Event of Default.  All
interest payable under the DIP Loan shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.  Interest as
provided for herein shall continue to accrue until the Obligations are paid in
full.
 
(b)           The interest rate payable by Borrower under the terms of this DIP
Credit Agreement shall be adjusted in accordance with any change in the Prime
Rate from time to time on the date of any such change.  No payments of interest
or principal shall be due and payable prior to the expiration of the Term of the
DIP Loan and DIP Lender shall add such accrued interest and all DIP Lender
Expenses to the Obligations, and such amount shall thereafter accrue interest at
the rate then applicable under this DIP Credit Agreement.
 
(c)           In no event shall interest on the Obligations exceed the highest
lawful rate in effect from time to time.  It is not the intention of the parties
hereto to make an agreement which violates any applicable state or federal usury
laws.  In no event shall Borrower pay or DIP Lender accept or charge any
interest which, together with any other charges upon the principal or any
portion thereof, exceeds the maximum lawful rate of interest allowable under any
applicable state or federal usury laws.  Should any provision of this DIP Credit
Agreement or any existing or future Notes or Loan Documents between the parties
be construed to require the payment of interest or any other fees or charges
which could be construed as interest which, together with any other charges upon
the principal or any portion thereof and any other fees or charges which could
be construed as interest, exceeds the maximum lawful rate of interest, then any
such excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.
 
(d)           Notwithstanding the foregoing, for purposes of this DIP Credit
Agreement, it is the intention of Borrower and DIP Lender that “interest” shall
mean, and be limited to, any payment to DIP Lender which compensates it for
extending credit to Borrower, for making available to Borrower a line of credit
during the term of this DIP Credit Agreement and for any default or breach by
Borrower of a condition upon which credit was extended.  Borrower and DIP Lender
agree that, for the sole purpose of calculating the “interest” paid by Borrower
to DIP Lender, it is the intention of Borrower and DIP Lender that interest
shall mean and include, and be expressly limited to, any interest accrued on the
aggregate outstanding balance of the Obligations during the term
hereof.  Borrower and DIP Lender further agree that it is their intention that
the following fees shall not constitute “interest”: any attorney fees incurred
by DIP Lender, any premiums or commissions attributable to insurance
guaranteeing repayment, finders’ fees, credit report fees, appraisal fees or
fees for document preparation or notarization.  To the extent, however, that
governing law excludes from the calculation of “interest” any fees defined
herein as interest, or includes as interest any fees or other sums which are
intended not to constitute interest governing law shall supersede and prevail
and all such interest shall be subject to Section 2.3(c) above.
 
 
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2.4         Collection of Accounts. DIP Lender or a DIP Lender designee may, at
any time during the existence of an Event of Default (but subject to the terms
of any Interim DIP Order and Final DIP Order), with or without notice to
Borrower, notify customers or Account  debtors that the Accounts have been
assigned to DIP Lender, and that DIP Lender has a security interest in them and
collect the Accounts directly, and add the collection costs and expenses to the
Obligations.  During the existence of an Event of Default,  at the request of
the DIP Lender, Borrower shall notify all Account debtors to remit payments on
Accounts to a lockbox to be designated by DIP Lender.  All such payments
remitted to the lockbox shall be credited to a deposit account of DIP Lender and
into which account remittances from account debtors of other clients of DIP
Lender may be credited.  If during the existence of an Event of Default,
notwithstanding said notice Borrower obtains payment on any Account, Borrower
shall receive all payments on Accounts and other proceeds, including cash, of
Collateral in trust for DIP Lender and immediately deliver said payments to DIP
Lender in their original form as received from the Account debtor, together with
any necessary endorsements.  Notwithstanding the receipt by DIP Lender or a DIP
Lender designee of any proceeds of any Accounts during an Event of Default or
otherwise or such lockbox arrangement for the payment of proceeds of the
Accounts for the benefit of the DIP Lender during the existence of an Event of
Default, in either case, in the event the DIP Lender has not properly terminated
the Term of the DIP Loan, then, the DIP Lender shall disburse to Borrower, at
the request of Borrower, to fund the working capital needs of the Borrower in
accordance with the Budget, any and all proceeds of any Account received by DIP
Lender.
 
2.5         Use by Borrower of Receipts.  The receipt of any item of payment by
DIP Lender from any Person other than Borrower shall be provided to Borrower for
use in the funding of Borrower’s working capital expenses as described in the
Budget.  Any prepayment by Borrower of the DIP Loan shall be applied to the
outstanding balance of the DIP Loan without penalty.  Notwithstanding anything
to the contrary contained herein, payments received by DIP Lender after 12:00
p.m. Eastern time shall be deemed to have been received by DIP Lender as of the
opening of business on the immediately following Business Day.
 
2.6         Closing Fee.  In consideration of DIP Lender entering into this DIP
Credit Agreement, Borrower shall pay DIP Lender a closing fee of two percent
(2%) of the DIP Loan, which shall be paid simultaneous with the first Advance
made following the entry of the Interim DIP Order.
 
2.7         Monthly Statements.  DIP Lender shall render monthly statements to
Borrower of all Obligations, including statements of all principal, interest and
DIP Lender Expenses, and Borrower shall have fully and irrevocably waived all
objections to such statements and the contents thereof unless, within thirty
(30) days after receipt, Borrower shall deliver to DIP Lender, by email (to the
email address provided by DIP Lender to Borrower), registered, certified or
overnight mail as set forth in Section 12 hereof, written objection to such
statement specifying the error or errors, if any, contained therein.
 
 
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2.8         No Right To Reborrow. The DIP Loan is not a revolving credit
facility. The aggregate amount of all Advances made by the DIP Lender under this
DIP Credit Agreement shall not at anytime exceed the lesser of the maximum
amount provided for in the Budget from time to time and $10,000,000; provided
however that DIP Lender shall provide to Borrower and Borrower shall be entitled
to use, 100% of the funds received by DIP Lender (or its designee) or Borrower
from any Account or otherwise and the release of such funds by DIP Lender to
Borrower (or the use of such funds by Borrower) shall not be included in the
calculation of the $10,000,000 DIP Loan amount.  Any amounts repaid hereunder
may not be reborrowed at any time.
 
2.9         Use of Cash Collateral; Adequate Protection Liens and Relative
Priorities.  Notwithstanding anything to the contrary set forth in this
Agreement, Borrower shall have the right to use 100% of the proceeds of any and
all Accounts (regardless of whether such proceeds are received by DIP Lender,
its designee or Borrower) to fund the working capital needs of Borrower as
described in the Budget, in addition to the amounts funded by DIP Lender to
Borrower under the DIP Loan.  The DIP Order shall provide that (i) the First
Lien Lender shall be granted first priority, perfected replacement lien covering
the Accounts to secure the indebtedness owing under the First Lien Loan
Documents and (ii) the DIP Lender shall be granted a junior perfected lien on
such Accounts to secure the DIP Loan, subject only to the first lien granted to
the First Lien Lender described in clause (i) above.
 
3.           TERM
 
3.1         Term.  This DIP Credit Agreement shall become effective upon
execution by DIP Lender and continue in full force through the Term. This DIP
Credit Agreement may be extended by mutual written agreement of the parties on
mutually agreeable terms. In addition, DIP Lender shall have the right to
terminate the Term of this DIP Credit Agreement immediately at any time upon the
occurrence of an Event of Default by sending written notice of termination to
Borrower. No such termination shall relieve or discharge Borrower of its duties,
Obligations and covenants hereunder until all Obligations have been paid and
performed in full, and DIP Lender’s continuing security interest in the
Collateral shall remain in effect until the Obligations have been fully and
irrevocably paid and satisfied in cash or cash equivalent. Following the
termination of the Term of this DIP Credit Agreement, the Obligations shall be
immediately due and payable in full. In the event DIP Lender or its affiliate
closes the acquisition contemplated by the APA, then, following the disbursement
by the DIP Lender to Borrower prior to the Auction of the Wind Down Amount and,
to Borrower’s counsel, the Reserve which disbursement is described in the last
sentence of Section 2.1, all Obligations under this DIP Credit Agreement shall
be automatically paid in full at the closing under such APA and the DIP Lender
shall release all liens and security interests granted in connection with the
DIP Loan.
 
3.2        Interim DIP Order.  Prior to making Advances, the Bankruptcy Court
shall have entered an Interim DIP Order or a Final DIP Order, as appropriate,
and the applicable order shall  be in full force and effect and shall not have
been amended, modified, stayed or reversed.
 
 
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4.           CREATION OF CONTINUING SECURITY INTEREST
 
4.1         Grant of Security Interest.  Borrower (as debtor and as debtor in
possession) hereby grants to DIP Lender a security interest in all presently
existing and hereafter acquired or arising Collateral, which is subject and
junior to any and all validly existing prepetition liens and security interests
in the Collateral, including without limitation, the liens and security
interests of the First Lien Lender, in order to secure prompt repayment of the
Obligations and in order to secure prompt performance by Borrower of each and
all of its covenants and Obligations under the Loan Documents and otherwise.
 
4.2         Negotiable Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall
notify DIP Lender and upon the request of DIP Lender, immediately endorse and
assign such Negotiable Collateral to DIP Lender and deliver physical possession
of such Negotiable Collateral to DIP Lender.
 
4.3         Delivery of Additional Documentation Required.  Borrower shall
execute and deliver to DIP Lender concurrently with Borrower’s execution and
delivery of this DIP Credit Agreement and at any time thereafter at the request
of DIP Lender, all financing statements, continuation financing statements,
fixture filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that DIP Lender may request, in form satisfactory to DIP Lender, to
perfect and maintain perfected DIP Lender’s continuing security interests in the
Collateral and in order to fully consummate all of the transactions contemplated
under the Loan Documents and Borrower hereby authorizes DIP Lender to file
and/or record such financing statements and other documents as DIP Lender deems
necessary to perfect and maintain DIP Lender’s continuing security interest in
the Collateral, and agrees any such financing statement may contain an “all
asset” or “all property” description of the Collateral, and Borrower hereby
ratifies any such financing statement or other document heretofore filed by DIP
Lender. The documentation of the DIP Loan and any Interim DIP Order and Final
DIP Order shall be reasonably satisfactory to the DIP Lender.
 
4.4         Power of Attorney.  Borrower hereby irrevocably makes, constitutes
and appoints DIP Lender (and any person designated by DIP Lender) as Borrower’s
true and lawful attorney-in-fact with power to sign the name of Borrower on any
of the above described documents or on any other similar documents to be
executed, recorded or filed in order to perfect or continue perfected DIP
Lender’s continuing security interest in the Collateral, subject however to the
rights of the First Lien Lender in and to the PrePetition Collateral.  In
addition, subject to the rights of the First Lien Lender in the PrePetition
Collateral, Borrower hereby appoints DIP Lender (and any person designated by
DIP Lender) as Borrower’s attorney-in-fact with power to:  (a) sign Borrower’s
name on verifications of Accounts, on other Collateral and, subject to Section
2.5 hereof, on notices to Account debtors; (b) send requests for verification of
Accounts and other Collateral; (c) endorse Borrower’s name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into DIP Lender’s possession; (d) upon the occurrence of an Event of
Default notify the post office authorities to change the address for delivery of
Borrower’s mail to an address designated by DIP Lender, to receive and open all
mail addressed to Borrower, and to retain all mail relating to the Collateral
and forward all other mail to Borrower; (e) upon the occurrence of an Event of
Default make, settle and adjust all claims under Borrower’s policies of
insurance (other than any director’s and officer’s insurance of the Borrower),
endorse the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of insurance.  The
appointment of DIP Lender as Borrower’s attorney-in-fact and each and every one
of DIP Lender’s rights and powers, being coupled with an interest, is
irrevocable so long as any Accounts in which DIP Lender has a continuing
security interest remain unpaid and until all of the Obligations have been fully
repaid and performed.
 
 
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4.5         Right To Inspect.  DIP Lender shall have the right at any time or
times hereafter during Borrower’s usual business hours, or during the usual
business hours of any third party having control over Borrower’s Books to
inspect Borrower’s Books in order to verify the amount or condition of, or any
other matter relating to, the Collateral or Borrower’s financial condition.  DIP
Lender also shall have the right at any time or times hereafter during
Borrower’s usual business hours to inspect and examine the Inventory, the
Equipment and the other Collateral and to check and test the same as to quality,
quantity, value and condition.
 
5.           REPRESENTATIONS AND WARRANTIES
 
Borrower represents and warrants to DIP Lender the following and acknowledges
(it being agreed that references to the “knowledge of Borrower” in this DIP
Credit Agreement shall be limited to the actual (not constructive) knowledge
of  Steve Hansbrough, Frank Punal and Gino Chouinard):
 
5.1         Prior Encumbrances; Security Interests. Borrower has good and
marketable title to the Collateral, including without limitation the Collateral,
free and clear of liens, claims, security interests or encumbrances, except for
the security interests granted to DIP Lender by Borrower and those arising under
the First Lien Documents in favor of the First Lien Lender and those disclosed
on Schedule 5.1 annexed hereto.  Other than those expressly disclosed, Borrower
will not create or permit to be created any security interest, lien, pledge,
mortgage or encumbrance on any Collateral or any of its other assets other than
purchase money security interests on and capital leases of hereafter acquired
items of Equipment.
 
5.2         Location of Inventory and Equipment.  The Inventory and Equipment is
not now and shall not at any time or times hereafter be stored with a bailee,
warehouseman, processor, or similar party.
 
5.3         Inventory Records.  Borrower now keeps and hereafter at all times
shall keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of the Inventory and Borrower’s cost of said items.
 
5.4         Relocation of Chief Executive Office.  The chief executive office of
Borrower is at the address indicated on the first page of this DIP Credit
Agreement and Borrower will not, without thirty (30) days’ prior written notice
to DIP Lender, relocate such office.
 
5.5         Due Incorporation and Qualification.  Borrower is and shall at all
times hereafter be a corporation duly organized and existing under the laws of
the state of its incorporation as set forth on the first page hereof and is
qualified and licensed to do business and is in good standing in any state in
which the conduct of its business or its ownership of assets requires that it be
so qualified.
 
 
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5.6         Fictitious Name. Borrower is conducting its business under the
following trade or fictitious name(s) and no others:  [none].  Borrower has
complied with the fictitious name laws of all jurisdictions in which compliance
is required in connection with its use of such name(s).
 
5.7         Permits and Licenses. Borrower holds all licenses, permits,
franchises, approvals and consents required for the conduct of its business and
the ownership and operation of its assets.
 
5.8         Due Authorization.  Borrower has the right and power and is duly
authorized to enter into the Loan Documents to which it is a party.
 
5.9         Compliance with Articles; Bylaws.  The execution by Borrower of the
Loan Documents to which it is a party does not constitute a breach of any
provision contained in Borrower’s Certificate or Articles of Incorporation or
its Bylaws, nor does it constitute an event of default under any material
agreement to which Borrower is now or may hereafter become a party.
 
5.10       Accuracy of Information and Financial Statements.  All information
furnished by Borrower to DIP Lender and all statements made by Borrower to DIP
Lender including, without limitation, information set forth in any loan
application, is true, accurate and complete in all material respects and, to the
knowledge of Borrower, does not contain any misstatement of fact or omit to
state any facts necessary to make the statements or information contained
therein not misleading.  All financial statements relating to Borrower which
have been or may hereafter be delivered to DIP Lender (i) have been prepared in
accordance with GAAP; (ii) fairly present Borrower’s financial condition as of
the date thereof and Borrower’s results of operations for the period then ended;
and (iii) disclose all contingent obligations of Borrower which are required to
be disclosed in accordance with GAAP; provided however the Budget was not
prepared in accordance with GAAP or any reporting requireements by the
Securities and Exchange Commission, the AICPA or any state societies of CPAs.
 
5.11       ERISA. Neither Borrower or any ERISA Affiliate, nor any Plan is or
has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC section 401(a), or any of the published
interpretations thereof.  No lien upon the assets of Borrower has arisen with
respect to any Plan.  No prohibited transaction within the meaning of ERISA
section 406 or IRC section 4975(c) has occurred with respect to any
Plan.  Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each ERISA
Affiliate have made all contributions required to be made by them to any Plan or
Multiemployer Plan when due.  There is no accumulated funding deficiency in any
Plan, whether or not waived.
 
 
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5.12       Environmental Laws and Hazardous Materials.  (A) Subject to
subsection (B) below: to the knowledge of Borrower, Borrower has complied, and
at all times through the Term will comply, with all Environmental
Laws.  Borrower has not and will not cause or permit any Hazardous Materials to
be located, incorporated, generated, stored, manufactured, transported to or
from, released, disposed of, or used at, upon, under, or within any premises at
which Borrower conducts its business, or in connection with Borrower’s
business.  To the Borrower’s knowledge, no prior owner or operator of any
premises at which Borrower conducts its business has caused or permitted any of
the above to occur at, upon, under, or within any of the premises.  Borrower
will not permit any lien to be filed against the Collateral or any part thereof
under any Environmental Law, and will promptly notify DIP Lender of any
proceeding, inquiry or claim relating to any alleged violation of any
Environmental Law, or any alleged loss, damage or injury resulting from any
Hazardous Material.  DIP Lender shall have the right to join and participate in,
as a party if it so elects, any legal or administrative proceeding initiated
with respect to any Hazardous Material or in connection with any Environmental
Law.  “Hazardous Material” includes without limitation any substance, material,
emission, or waste which is or hereafter becomes regulated or classified as a
hazardous substance, hazardous material, toxic substance or solid waste under
any Environmental Law, asbestos, petroleum products, urea formaldehyde,
polychlorinated biphenyls (PCBs), radon, and any other hazardous or toxic
substance, material, emission or waste.  The term “Environmental Law” means the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, the Resource Conservation and Recovery Act of 1976, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the regulations
pertaining to such statutes, and any other safety, health or environmental
statutes, laws, regulations or ordinances of the United States or of any state,
county or municipality in which Borrower conducts its business or the Collateral
is located.
 
(B)           To the knowledge of Borrower, all present business operations of
Borrower’s businesses including those involving Hazardous Materials are in
material compliance with all applicable Environmental Laws.
 
5.13       Tax Compliance.  Borrower has filed all tax returns required to be
filed by it and has paid all taxes due and payable on said returns and on any
assessment made against it or its assets, except for returns which have not been
filed but are the subject of appropriate extensions.
 
5.14       Use of Proceeds.  All proceeds provided by DIP Lender to Borrower
pursuant to any Interim DIP Order or Final DIP Order, this DIP Credit Agreement
or otherwise, shall be used by Borrower to make payments in accordance with the
Budget prior to the closing of the Section 363 sale, including, without
limitation, to fund prior to the Auction, both the Wind Down Amount and the
Reserve. Borrower shall pay for administrative expenses from the proceeds of
Advances which are (i) directly attributable to the operation of the business of
Borrower or (ii) as otherwise authorized by the Bankruptcy Court in any
proceeding to which DIP Lender received notice and a reasonable opportunity to
object, but in no event may the proceeds of any Advance be used for in excess of
the amount permitted under the Budget as approved by the then applicable Interim
DIP Order or Final DIP Order.
 
5.15       DIP Order.  Any applicable Interim DIP Order or Final DIP Order has
been duly entered, is valid, subsisting and continuing and has not been vacated,
modified, reversed on appeal, or vacated or modified by any order of the
Bankruptcy Court (other than as consented to by DIP Lender) and is not subject
to any pending appeal or stay.
 
5.16       Super-Priority Administrative Expenses.  Upon the entry of an Interim
DIP Order of a Final DIP Order, as appropriate, the Obligations: (a) shall at
all times constitute a Super-Priority Administrative Expense having priority,
pursuant to sections 364(c)(1) of the Bankruptcy Code, over any other claims of
any entity, including, without limitation, any claims under sections 503, 507,
1113, and 1114 of the Bankruptcy Code, and (b) pursuant to sections 364(c)(2)
and (3) and 364(d) of the Bankruptcy Code, shall at all times be secured by a
second priority perfected lien in all of the assets (expressly excluding
any  proceeds of Avoidance Actions until the issuance of the Final DIP Order),
whether now owned or hereafter acquired of Borrower and their estates, pursuant
to the terms of the Loan Documents, subject to the first priority liens and
security interests of the First Lien Lender in the PrePetition Collateral.
 
 
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5.17       Reliance by DIP Lender; Cumulative.  Each warranty, representation
and agreement contained in this DIP Credit Agreement shall be automatically
deemed repeated by Borrower with each request for an Advance and shall be
conclusively presumed to have been relied on by DIP Lender regardless of any
investigation made or information possessed by DIP Lender; provided however that
the information in any schedule with respect to such representation or warranty
shall be limited to the time period in which such schedule was delivered to the
DIP Lender.  The warranties, representations and agreements set forth herein
shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall now or hereafter give, or
cause to be given, to DIP Lender.
 
5.18       Credit Bidding.  Subject to the terms and provisions of the APA, DIP
Lender shall have the right to credit bid all of the Obligations in connection
with a sale of the Debtors’ assets under section 363 of the Bankruptcy Code or
under a plan of reorganization or otherwise.
 
6.           AFFIRMATIVE COVENANTS
 
Borrower covenants and acknowledges that during the Term Borrower shall comply
with all of the following:
 
6.1         Budget Variance and Other Reports.  On the fifth (5th) Business Day
of the week, the Borrower shall issue a variance report (the “Variance Report”)
setting forth actual cash receipts and disbursements of the Borrower for the
prior week and setting forth all the variances in excess of ten percent, on a
line-item basis, from the amount set forth for such week as compared to the
Budget on a weekly and cumulative basis; each such Variance Report shall include
explanations for all material variances in excess of ten percent per line item
and shall be certified by the Chief Financial Officer. Borrower shall deliver to
DIP Lender, as DIP Lender may from time to time require, collection reports,
sales journals, invoices, original delivery receipts, customers’ purchase
orders, shipping instructions, bills of lading and other documentation
respecting shipment arrangements.  Absent such a request by DIP Lender, copies
of all such documentation shall be held by Borrower as custodian for DIP
Lender.  In addition, Borrower shall provide to DIP Lender within three (3)
business days of Borrower’s filing with the Bankruptcy Court all Monthly
Operating Reports required by the Office of the United Sates Trustee and all
schedules and statements required by section 521 of the Bankruptcy Code and
Federal Rule of Bankruptcy Procedure 1007.
 
6.2         Financial Statements, Reports, Certificates.  Borrower shall deliver
to DIP Lender:  (a) as soon as available, but in any event within forty-five
(45) days after the end of each month during the Term, a balance sheet and
profit and loss statement prepared by Borrower covering Borrower’s operations
during such period; and (b) as soon as available, but in any event within one
hundred fifty (150) days after the end of each of Borrower’s fiscal years,
financial statements of Borrower for each such fiscal period, reviewed by
independent certified public accountants acceptable to DIP Lender.  Such
financial statements shall include a balance sheet and profit and loss
statement, and the accountants’ management letter, if any, and shall be prepared
in accordance with GAAP.  Together with the above, Borrower shall also deliver
Borrower’s Form 10-Qs, 10-Ks or 8-Ks, if any, as soon as the same become
available, and any other report reasonably requested by DIP Lender relating to
the Collateral and the financial condition of Borrower and a certificate signed
by its chief financial officer to the effect that all reports, statements or
computer prepared information of any kind or nature delivered or caused to be
delivered to DIP Lender under this Section 6.2 fairly present its financial
condition and that there exists on the date of delivery of such certificate to
DIP Lender no condition or event which constitutes an Event of Default.
 
 
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6.3         Tax Returns, Receipts.  Borrower shall deliver to DIP Lender copies
of each of its future federal income tax returns, and any amendments thereto,
within thirty (30) days of the filing thereof.  Borrower further shall promptly
deliver to DIP Lender, upon request, satisfactory evidence of Borrower’s payment
of all withholding and other taxes required to be paid by it.
 
6.4         Title to Equipment.  Upon DIP Lender’s request, Borrower shall
deliver to DIP Lender, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
 
6.5         Maintenance of Equipment.  Borrower shall keep and maintain the
Equipment in good operating condition and repair (ordinary wear and tear
excepted), and shall make all necessary replacements thereto so that its value
and operating efficiency shall at all times be maintained and
preserved.  Borrower shall not permit any item of Equipment to become a fixture
to real estate or an accession to other property, and the Equipment is now and
shall at all times remain leased by Borrower or be Borrower’s personal property.
 
6.6         Taxes.  To the extent Borrower has sufficient funds to pay such
amounts when they become due, all Federal, state and local assessments and
taxes, whether real, personal or otherwise, due or payable by, or imposed,
levied or assessed against Borrower or any of its assets or in connection with
Borrower’s business shall hereafter be paid in full, before they become
delinquent or before the expiration of any extension period except for those
taxes, assessments and the like being contested by Borrower in good faith and by
appropriate proceedings and as to which Borrower has established appropriate
reserves, provided that no lien is placed on any assets of Borrower during any
such contest as a consequence of the failure to pay such tax, assessment or the
like.  To the extent Borrower has sufficient funds to pay such amounts when they
become due, Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to DIP Lender, on demand, appropriate
certificates attesting to the payment or deposit thereof.
 
 
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6.7         Insurance.  Borrower, at its expense, shall keep and maintain the
Collateral insured against all risk of loss or damage from fire, theft,
vandalism, malicious mischief, explosion, sprinklers, and all other hazards and
risks of physical damage included within the meaning of the term “extended
coverage” in such amounts as are ordinarily insured against by similar
businesses.  Borrower shall also keep and maintain comprehensive general public
liability insurance and property damage insurance, and insurance against loss
from business interruption, insuring against all risks relating to or arising
from Borrower’s ownership and use of the Collateral and its other assets and the
operation of its business.  All such policies shall be in such form, with such
companies and in such amounts as are currently maintained by Borrower.  Borrower
shall deliver to DIP Lender certificates of insurance for such policies and
evidence of the payments of all premiums therefor.  All such policies (except
those of public liability and  liability property damage) shall contain a DIP
Lender’s Loss Payable endorsement in a form satisfactory to DIP Lender, naming
DIP Lender as sole loss payee thereof, and containing a waiver of
warranties.  Subject to the rights of the First Lien Lender in such insurance
with respect to any PrePetition Collateral, all proceeds payable under such
policies shall be payable to DIP Lender. In the event of partial or total
destruction of the collateral by fire or other casualty, then, subject to the
rights of the First Lien Lender with respect to any PrePetition Collateral, the
insurance proceeds shall, if an Event of Default exists, at the option of DIP
Lender, be paid to DIP Lender to reduce the Obligations, or, alternatively, be
held in a trust fund with DIP Lender to be disbursed solely for repairs and
reconstruction of such collateral or if no Event of Default exists such
insurance proceeds shall at the option of Borrower, be applied to reduce the
balance owing on the Obligations or be held in a trust fund with DIP Lender to
be disbursed solely for repairs and reconstruction of the collateral.  Any such
trust fund shall be additional security for the Obligations.  Borrower shall
notify DIP Lender of its exercise of its option as to the use of such insurance
proceeds within thirty (30) days of the subject casualty occurrence.
 
6.8         DIP Lender Expenses.  Borrower shall immediately and without demand
reimburse DIP Lender for all DIP Lender Expenses and Borrower hereby authorizes
the payment of such DIP Lender Expenses without the need for further approval of
the Bankruptcy Court or any other court having jurisdiction over the Chapter 11
Case and/or the Borrower.
 
6.9         Compliance With Law. Borrower shall comply, in all material
respects, with the requirements of all applicable laws, rules, regulations and
orders of governmental authorities relating to Borrower and the conduct of its
business.
 
6.10       Accounting System.  Borrower at all times hereafter shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger and
account cards or computer tapes, disks, printouts and records pertaining to the
Collateral containing such information as may from time to time be requested by
DIP Lender.
 
6.11       Compliance with Bankruptcy Court.  Borrower shall comply in full with
the notice and other requirements of the Bankruptcy Code and all other
applicable rules with respect to any relevant DIP Order in a manner acceptable
to DIP Lender and its counsel.
 
7.           NEGATIVE COVENANTS
 
Borrower covenants and acknowledges that during the Term Borrower shall not
undertake any of the following without the prior written consent of DIP Lender:
 
7.1         Extraordinary Transactions and Disposal of Assets.  Except as
expressly authorized by the Bankruptcy Court under section 363 of the Bankruptcy
Code, enter into any transaction not in the ordinary and usual course of its
business as conducted on the date hereof, including but not limited to the sale,
lease, disposal, movement, relocation or transfer, whether by sale or otherwise,
of any its assets other than sales of Inventory in the ordinary and usual course
of its business as presently conducted; incur any indebtedness for borrowed
money or other indebtedness outside the ordinary and usual course of its
business as conducted on the date hereof except for renewals or extensions of
existing debts permitted by DIP Lender; make any advance or loan to any third
party; or grant a lien on any of its assets except (a) in favor of DIP Lender or
(b) the continuing security interests, if any, set forth on Schedule 5.1.
 
 
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7.2         Change Name. Change its name, business structure or identity or add
any new fictitious name.
 
7.3         Merge, Acquire.  Merge, acquire, or consolidate with or into any
other business organization.
 
7.4         Guaranty. Guaranty or otherwise become in any way liable with
respect to the obligations of any third party, except by endorsement of
instruments or items of payment for deposit to the account of Borrower for
negotiation and delivery to DIP Lender.
 
7.5         Restructure.  Make any change in its financial structure or business
operations.
 
7.6         Prepayments. Prepay any existing indebtedness owing to any third
party other than trade payables and provided no Event of Default exists, upon
notice to DIP Lender, prepayments of permitted equipment financing indebtedness.
 
7.7         Change of Ownership.  Cause, permit or suffer any change, direct or
indirect, in the ownership of the capital stock of Borrower or enter into any
agreement with any person or entity that provides for a payment to such person
or entity based upon the income of Borrower.
 
7.8         Loans and Advances.  Make any loans, advances or extensions of
credit to any officer, director, executive employee or shareholder of Borrower
(or any relative of any of the foregoing), or to any entity which is a
subsidiary of, related to, affiliated with or has common shareholders, officers
or directors with Borrower.
 
7.9         Consignments of Inventory.  Consign any Inventory except to persons
or entities as to which Borrower has furnished to DIP Lender prior written
notice and provided Borrower has filed such UCC-1 financing statements or taken
such other action as required by applicable law to perfect Borrower’s interest
in such consigned Inventory.
 
7.10       Distributions.  Make any distribution or declare or pay any dividends
(in cash or in stock) on, or purchase, acquire, redeem or retire any of its
capital stock, of any class, whether now or hereafter outstanding except that
provided no Event of Default exists so long as Borrower is a subchapter S
corporation under federal or state income tax laws Borrower may pay and declare
cash dividends to its stockholders up to the amount of the federal or state
income tax payable by said shareholders solely as a consequence of the income of
Borrower being attributed to said shareholders based upon the highest income tax
rates applicable to any shareholder of Borrower.
 
7.11       Accounting Methods.  Modify or change its method of accounting or
enter into, modify or terminate any agreement presently existing or at any time
hereafter entered into with any third party for the preparation or storage of
Borrower’s records of Accounts and financial condition without said party
agreeing to provide DIP Lender with information regarding the Collateral or
Borrower’s financial condition.
 
 
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7.12       Business Suspension.  Suspend or go out of business.
 
7.13       Chapter 11 Case.  Seek, consent or suffer to exist (i) any
modification, stay, vacation or amendment to any DIP Order, unless (A) DIP
Lender has failed to perform its obligations hereunder in any respect material
to the business or operations of Borrower and the effect of such modification,
stay, vacation or amendment is solely to remedy such failure or to obtain for
Borrower substitute performance or (B) DIP Lender has consented to such
modification, stay, vacation or amendment in writing, (ii) a priority claim for
any administrative expense or unsecured claim against Borrower (now existing or
hereafter arising of any kind or nature whatsoever, including without limitation
any administrative expense of the kind specified in section 503(b), 506(c) or
507(b) of the Bankruptcy Code) equal or superior to the priority claim of DIP
Lender in respect of the Obligations, or (iii) any lien on any Collateral,
having a priority equal or superior to the liens in favor of DIP Lender in
respect of the Obligations (other than the existing prepetition liens and
security interests, including,without limitation the liens and security
interests of the First Lien Lender).
 
7.14       Prepetition Indebtedness.  Borrower shall not pay or discharge, or
cause to be paid or discharged, any obligations of Borrower incurred before the
Filing Date other than those agreed to by the DIP Lender in the Budget and
permitted by Final Order.
 
8.           EVENTS OF DEFAULT
 
The occurrence of any one or more of the following events shall constitute an
Event of Default by Borrower hereunder:
 
8.1         Failure to Pay.  Borrower’s failure to pay when due and payable, or
when declared due and payable, any portion of the Obligations (whether
prepetition or post petition, and whether principal, interest, taxes, or
otherwise) and such failure continues for a period of three days after written
notice from DIP Lender to Borrower;
 
8.2         Failure to Perform.  Borrower’s failure to perform, keep or observe
any term, provision, condition, representation, warranty, covenant or agreement
contained in this DIP Credit Agreement, in any of the Loan Documents, in any DIP
Order, or in any other present or future agreement between Borrower, and/or a
DIP Lender and such failure to perform, keep or observe continues for a period
of twenty days after written notice by the DIP Lender to Borrower;
 
8.3         Misrepresentation.  Any material misstatement or material
misrepresentation now or hereafter exists in any warranty, representation in
this DIP Credit Agreement
 
8.4         Injunction Against Borrower.  Borrower is enjoined, restrained or in
any way prevented by court order from continuing to conduct all or any material
part of its business;
 
8.5         Government Lien.  A notice of lien, levy or assessment is filed of
record with respect to any of Borrower’s assets by the United States Government,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, or any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Borrower’s assets and the same is not paid on the payment
date thereof;
 
 
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8.6         Subordinated Debt Payments. Borrower makes any payment on account of
indebtedness which has now or hereafter been subordinated to the Obligations,
except to the extent such payment is allowed under any subordination agreement
entered into with DIP Lender;
 
8.7         ERISA Violation.  A prohibited transaction within the meaning of
ERISA section 406 or IRC section 1975(c) shall occur with respect to a Plan
which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan shall
arise; Borrower or any ERISA Affiliate shall completely or partially withdraw
from a Multiemployer Plan and such withdrawal could, in the good faith opinion
of DIP Lender, have a material adverse effect on the financial condition of
Borrower.  Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ERISA Affiliates
may be required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; the voluntary or involuntary termination of any Plan or Borrower shall
fail to notify DIP Lender promptly and in any event within ten (l0) days of the
occurrence of an event which constitutes an Event of Default under this clause
or would constitute an Event of Default upon the exercise of DIP Lender’s
judgment.
 
8.8         Bankruptcy Court.  The Bankruptcy Court enters any order (i)
amending, supplementing, altering, staying, vacating, rescinding or otherwise
modifying any DIP Order or any other order with respect to the Chapter 11 Case
affecting in any material respect this DIP Credit Agreement  (ii) appointing a
chapter 11 trustee or an examiner with enlarged powers relating to the operation
of the business (powers beyond those set forth in section 1106(a)(3) and (4) of
the Bankruptcy Code) under section 1106(b) of the Bankruptcy Code in the Chapter
11 Case, (iii) dismissing the Chapter 11 Case or converting the Chapter 11 case
to a chapter 7 case or (iv) granting relief from the automatic stay to any
creditor holding or asserting a lien or reclamation claim (in excess of $100,000
when aggregated with all other reclamation claims), except if the relief granted
to the creditor is limited to an administrative expense or except with respect
to the First Lien Lender.
 
8.9         Judgments or Execution Action.  There remains undischarged for more
than ten (10) days any final post-petition judgment or execution action against
Borrower, or relief from the automatic stay of section 362(a) of the Bankruptcy
Code shall be granted to any creditor or creditors of Borrower with respect to
assets having an aggregate value in excess of $100,000 or where the deprivation
of Borrower of such assets would reasonably be expected to have a material
adverse effect on Borrower, considered as a whole.
 
8.10       Motions.  Borrower files a motion in any of the Chapter 11 Case
(i) except as provided in any DIP Order, to use cash collateral of DIP Lender
under section 363(c) of the Bankruptcy Code without the DIP Lender’s consent,
(ii) to recover from any portions of the Collateral any costs or expenses of
preserving or disposing of such Collateral under section 506(c) of the
Bankruptcy Code, or (iii) to take any other action or actions adverse to DIP
Lender or its rights and remedies hereunder or under any of the other Loan
Documents or any of the documents evidencing or creating DIP Lender’s  interest
in any of the Collateral;
 
 
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8.11       Actions.  A suit or action against DIP Lender is commenced by
Borrower, any federal, state environmental protection or health and safety
agency or any official committee in any Case, which suit or action asserts any
claim or legal or equitable remedy contemplating subordination of any claim or
lien of DIP Lender, and shall remain undismissed or unstayed for thirty (30)
days after its commencement without any preliminary relief of the nature sought
having been granted;
 
8.12       Reorganization Plan.  Borrower files a plan of reorganization in any
Case which does not provide for payment in full of the Obligations on the
effective date thereof or to which DIP Lender does not consent in writing.
 
9.           DIP LENDER’S RIGHTS AND REMEDIES
 
9.1         Rights and Remedies. Upon the occurrence of an Event of Default and
subject to the rights and remedies of the First Lien Lender with respect to the
Borrower and the PrePetition Collateral, DIP Lender may, notwithstanding the
provisions of section 362 of the Bankruptcy Code, at its election, without
notice of such election and without demand, do any one or more of the following:
 
(a)           Declare all Obligations, whether evidenced by the Loan Documents
or otherwise, immediately due and payable in full:
 
(b)           Cease advancing money or extending credit to or for the benefit of
Borrower under the Loan Documents or under any other agreement between Borrower
and DIP Lender;
 
(c)           Terminate this DIP Credit Agreement as to any future liability or
obligation of DIP Lender, but without affecting DIP Lender’s rights and security
interest in the Collateral and without affecting the Obligations;
 
(d)           Settle or adjust disputes and claims directly with Account debtors
for amounts and upon terms which DIP Lender considers advisable and, in such
cases, DIP Lender will credit the Obligations with the net amounts received by
DIP Lender in payment of such disputed Accounts, after deducting all DIP Lender
Expenses;
 
(e)           Cause Borrower to hold all returned Inventory in trust for DIP
Lender, segregate all returned Inventory from all other property of Borrower or
in Borrower’s possession and conspicuously label said returned Inventory as the
property of DIP Lender;
 
(f)           Without notice to or demand upon Borrower, make such payments and
do such acts as DIP Lender considers necessary or reasonable to protect its
security interest in the Collateral.  Borrower shall assemble the Collateral if
DIP Lender so requires and deliver or make the Collateral available to DIP
Lender at a place designated by DIP Lender.  Borrower authorizes DIP Lender to
enter any premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest
or compromise any encumbrance, charge or lien which in DIP Lender’s
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith;
 
 
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(g)           Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, lease, license or other disposition, advertise for sale, lease,
license or other disposition, and sell, lease, license or otherwise dispose (in
the manner provided for herein or in the Code) the Collateral.  DIP Lender is
hereby granted a license or other right to use, without charge, Borrower’s
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any asset of a
similar nature, pertaining to the Collateral, in completing the production of,
advertising for sale, lease, license or other disposition, and sale, lease
license or other disposition of the Collateral.  Borrower’s rights under all
licenses and all franchise agreements shall inure to DIP Lender’s benefit;
 
(h)           Sell, lease, license or otherwise dispose of the Collateral at
either a public or private proceeding, or both, by way of one or more contracts
or transactions, for cash or on terms, in such manner and at such places
(including Borrower’s premises) as is commercially reasonable.  It is not
necessary that the Collateral be present at any such sale;
 
(i)           DIP Lender shall give notice of the disposition of the Collateral
as follows:
 
(1)           To Borrower and each holder of a security interest in the
Collateral who has filed with DIP Lender a written request for notice, a notice
in writing of the time and place of public sale or other disposition or, if the
sale or other disposition is a private sale or some other disposition other than
a public sale is to be made, then the time on or after which the private sale or
other disposition is to be made;
 
(2)           The notice hereunder shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12 hereof, at least ten (10)
calendar days before the date fixed for the sale or other disposition, or at
least five (5) calendar days before the date on or after which the private sale
or other disposition is to be made, unless the Collateral is perishable or
threatens to decline speedily in value.  Notice to persons other than Borrower
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to DIP Lender;
 
(j)           DIP Lender may credit bid and purchase at any public sale:
 
(k)           Any deficiency that exists after disposition of the Collateral as
provided herein shall be immediately paid by Borrower.  Any excess will be
remitted without interest by DIP Lender to the party or parties legally entitled
to such excess;
 
(l)           In addition to the foregoing, DIP Lender shall have all rights and
remedies provided by law (including those set forth in the Code) and any rights
and remedies contained in any Loan Documents and all such rights and remedies
shall be cumulative; and
 
(m)           In addition to the foregoing, DIP Lender shall, as provided for in
the Interim DIP Order and the Final DIP Order, at any time at the request of
Borrower (whether or not an Event of Default exists or has occurred) fund, prior
to the Auction: (i) into an escrow account with Borrower’s counsel for the sole
and exclusive benefit of the Professional Persons and the U.S. Trustee in an
amount equal to the Reserve, and (ii) to the Borrower, the Wind Down Amount; and
such funds advanced by the DIP Lender shall be entitled to all of the benefits
and security of such Orders.
 
 
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9.2         No Waiver.  No delay on the part of DIP Lender in exercising any
right, power or privilege under any Loan Document shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege under such
Loan Documents or otherwise, preclude other or further exercise of any such
right, power or privilege.
 
10.           TAXES AND EXPENSES REGARDING THE COLLATERAL
 
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums or otherwise) due to third persons or entities, or fails to make any
deposits or furnish any required proof of payment or deposit, or fails to
perform any of Borrower’s other covenants under any of the Loan Documents, then
in its discretion and upon prior notice to Borrower, DIP Lender may do any or
all of the following:  (a) make any payment which Borrower has failed to pay or
any part thereof; (b) set up such reserves in Borrower’s loan account as DIP
Lender deems necessary to protect DIP Lender from the exposure created by such
failure; (c) obtain and maintain insurance policies of the type described in
Section 6.10 hereof and take any action with respect to such policies as DIP
Lender deems prudent; or (d) take any other action deemed necessary to preserve
and protect its interests and rights under the Loan Documents.  Any payments
made by DIP Lender shall not constitute:  (a) an agreement by DIP Lender to make
similar payments in the future or (b) a waiver by DIP Lender of any Event of
Default.  DIP Lender need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance or lien and the receipt of
notice for the payment thereof shall be conclusive evidence that the same was
validly due and owing.
 
11.           WAIVERS
 
11.1         Demand, Protest.  Except as provided in the Interim DIP Order and
the Final DIP Order, Borrower waives demand, protest, notice of protest, notice
of default or dishonor, notice of payment and nonpayment, notice of any default,
and notice of nonpayment at maturity and acknowledges that DIP Lender may
compromise, settle or release, without notice to Borrower, any Collateral and/or
guaranties at any time held by DIP Lender.  Borrower hereby consents to any
extensions of time of payment or partial payment at, before or after the
Termination Date.
 
11.2         No Marshaling.  Borrower, on its own behalf and on behalf of its
successors and assigns hereby expressly waives all rights, if any, to require a
marshaling of assets by DIP Lender or to require that DIP Lender first resort to
some portion(s) of the Collateral before foreclosing upon, selling or otherwise
realizing on any other portion thereof.
 
11.3         DIP Lender’s Non-Liability for Inventory or Equipment or for
Protection of Rights.  So long as DIP Lender complies with its obligations, if
any, under section 9-207 of the Code, DIP Lender shall not in any way or manner
be liable or responsible for:  (a) the safekeeping of the Inventory or
Equipment; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency or other
person whomsoever.  All risk of loss, damage or destruction of the Inventory or
Equipment shall be borne by Borrower.  DIP Lender shall have no obligation to
protect any rights of Borrower against any person obligated on any Collateral.
 
 
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12.          NOTICES
 
Unless otherwise provided herein, all consents, waivers, notices or demands by
any party relating to the Loan Documents shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be telecopied (followed up by a
mailing), personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by receipted overnight delivery service to
Borrower or to DIP Lender, as the case may be, at their addresses set forth
below
 
If to Borrower,  to:
 
HearUSA, Inc.
1250 Northpoint Parkway
West Palm Beach, FL 33407
Attn:  Stephen Hansbrough, CEO
Facsimile No.:  (561) 478-9603
 
With a copy (which shall not constitute effective notice) to:
     
Berger Singerman
200 South Biscayne Boulevard
Miami, FL 33131
Attn:  Paul Steven Singerman, Esq.
and Brian Gart, Esq.
Facsimile No.:  (305) 755-4340
 
And to:
 
Bryan Cave LLP
1155 F Street, N.W.
Washington, D.C. 20004
Attn:  LaDawn Naegle, Esq.
Facsimile No.:  (202) 508-6046

 
 
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If to the DIP Lender, to:
 
William Demant Holding A/S
Kongebakken 9
2765 Smørum
Denmark
Attn:  Legal Department
 
With a copy (which shall not constitute effective notice) to:
     
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey  07068
Attn:  Peter H. Ehrenberg, Esq.
Telephone No.: 973-597-2350
Facsimile No.: 973-597-2351

 
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice. Any party may change the address at it is to
receive notices hereunder by notice in writing in the foregoing manner given to
the other.  All notices or demands sent in accordance with this Section 12 shall
be deemed received on the earlier of the date of actual receipt or five (5)
calendar days after the deposit thereof in the mail or on the date
telecommunicated if telecopied.  The failure to provide a copy of any notice,
consent, waiver, demand or other document or communication to Borrower’s or DIP
Lender’s counsel as indicated above shall not affect its validity.
 
13.          DESTRUCTION OF BORROWER’S DOCUMENTS
 
All documents, schedules, invoices, agings or other papers delivered to DIP
Lender may be destroyed or otherwise disposed of by DIP Lender four (4) months
after they are delivered to or received by DIP Lender, unless Borrower requests,
in writing, the return of the said documents, schedules. invoices or other
papers and makes arrangements, at Borrower’s expense, for their return.
 
14.          GENERAL PROVISIONS
 
14.1         Effectiveness. This DIP Credit Agreement shall be binding and
deemed effective when executed by Borrower and executed and delivered by DIP
Lender.
 
14.2         Successors and Assigns.  This DIP Credit Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this DIP Credit
Agreement or any rights hereunder and any prohibited assignment shall be
absolutely void.  No consent to an assignment by DIP Lender shall release
Borrower from its Obligations.  Without notice to or the consent of Borrower,
DIP Lender may assign this DIP Credit Agreement and its rights and duties
hereunder and DIP Lender reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in DIP Lender’s
rights and benefits hereunder.  In connection therewith, DIP Lender may disclose
all documents and information which DIP Lender now or hereafter may have
relating to Borrower or Borrower’s business.  Borrower and DIP Lender do not
intend any of the benefits of the Loan Documents to inure to any third party,
and no third party shall be a third party beneficiary hereof or thereof.
 
 
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14.3         Section Headings.  Headings and numbers have been set forth herein
for convenience only.
 
14.4         Interpretation. Neither this DIP Credit Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against DIP
Lender or Borrower, whether under any rule of construction or otherwise.  On the
contrary, this DIP Credit Agreement has been reviewed by each party and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto.
 
14.5         Severability of Provisions.  Each provision of this DIP Credit
Agreement shall be severable from every other provision of this DIP Credit
Agreement for the purpose of determining the legal enforceability of such
provision.
 
14.6         Amendments in Writing.  Neither this DIP Credit Agreement nor the
APA can  be changed or terminated orally.  This DIP Credit Agreement is the
entire agreement between the parties with respect to the matters contained
herein.  This DIP Credit Agreement supersedes all prior agreements,
understandings and negotiations, if any, all of which are merged into this DIP
Credit Agreement.
 
14.7         Counterparts. This DIP Credit Agreement may be executed in any
number of counterparts each of which, when executed and delivered, shall be
deemed to be an original and all of which, when taken together, shall constitute
but one and the same DIP Credit Agreement.
 
14.8         Indemnification.  Borrower hereby indemnifies, protects, defends
and saves harmless DIP Lender and any member, officer, director, official,
agent, employee and attorney of DIP Lender, and their respective heirs,
successors and assigns (collectively, the “Indemnified Parties”), from and
against any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, including reasonable counsel fees
incurred in investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way connected
with the Loan Documents and the transactions contemplated therein or the
Collateral (whether prepetition or post-petition) (unless caused by the gross
negligence or willful misconduct of the Indemnified Parties) including, without
limitation:  (a) losses, damages, expenses or liabilities sustained by DIP
Lender in connection with any environmental cleanup or other remedy required or
mandated by any Environmental Law; (b) any untrue statement of a material fact
contained in information submitted to DIP Lender by Borrower or the omission of
any material fact necessary to be stated therein in order to make such statement
not misleading or incomplete; (c) the failure of Borrower to perform any
obligations required to be performed by Borrower under the Loan Documents; and
(d) the ownership, construction, occupancy, operations, use and maintenance of
any of Borrower’s assets.  The provisions of this Section 14.8 shall survive
termination of this DIP Credit Agreement and the other Loan Documents.
 
 
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14.9           Joint and Several Obligations.   If more than one person or
entity is named as  a Borrower hereunder, all Obligations, representations,
warranties, covenants and indemnities set forth in the Loan Documents to which
such person or entity is a party shall be joint and several.  The foregoing is a
material inducement to the agreement of DIP Lender to enter into this DIP Credit
Agreement and to consummate the transactions contemplated hereby.  The Borrower
represents they are operated as part of one consolidated business entity and are
directly dependent upon each other for an in connection with their respective
business activities financial resources.  Each Borrower will receive a direct
economic and financial benefit from the Obligations incurred under this DIP
Credit Agreement and the incurrence of such Obligations is in the best interests
of Borrower.
 
15.           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
 
THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
FLORIDA , WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS
SHALL BE TRIED AND LITIGATED ONLY IN THE BANKRUPTCY COURT.  BORROWER AND DIP
LENDER EACH WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A
TRIAL BY JURY IN ANY PROCEEDING UNDER THE LOAN DOCUMENTS OR RELATING TO THE
DEALINGS OF BORROWER AND DIP LENDER AND ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF “FORUM NON CONVENIENS” OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 15.
 
 
 

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Borrower and DIP Lender have executed this DIP Credit Agreement as of the date
first above written.
 

 
DIP LENDER:
     
WILLIAM DEMANT HOLDING A/S
       
By: 
 /s/ Niels Jacobsen
   
Name:  Niels Jacobsen
   
Title:    President & CEO
       
BORROWER:
     
HEARUSA, INC.,
 
a Delaware corporation
       
By:
 /s/ Gino Chouinard
   
Name:  Gino Chouinard
   
Title:    Interim CEO, President and COO

 
 
 

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