Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT made as of  May 1, 2008, by and between
STERLING NATIONAL BANK, a national banking association, having an office located
at 500 Seventh Avenue, New York, New York 10018 (hereinafter referred to as the
"Bank" or "Secured Party"), CAPSTONE INDUSTRIES, INC., a Florida corporation
having its principal and chief executive office at 350 Jim Moran Blvd.,
Deerfield Beach, Florida 33442 (hereinafter referred to as the "Borrower" or
"Debtor"), CHDT CORPORATION, a Florida corporation, with offices located at 350
Jim Moran Blvd., Deerfield Beach, Florida 33442 (the “Entity Guarantor”) and
HOWARD ULLMAN, residing at 5000 Thoroughbred Land, Southwest Ranches, Florida
33330, and with offices located at 350 Jim Moran Blvd., Deerfield Beach, Florida
33442 (the “Individual Guarantor” and together with the Entity Guarantor,
hereinafter collectively referred to as the "Guarantors");

W I T N E S S E T H:

WHEREAS, the Borrower desires the Bank to make extensions of credit to the
Borrower, and the Bank has agreed to make such extensions of credit upon certain
terms and conditions set forth herein and in other agreements, instruments and
documents executed in conjunction herewith;

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

SECTION 1.  DEFINITIONS AND TERMS

1.1           Defined Terms.   As used in this Agreement, the following words
and terms shall have the following meanings:

"Accounts" or "Accounts Receivable" shall mean, in addition to the definition of
the term "account" contained in the UCC, any and all obligations of any kind at
any time due and/or owing to the Debtor (including any such obligation that
might be characterized or classified under the UCC as accounts, contract rights,
chattel paper, general intangibles or otherwise), and all rights of the Debtor
to receive payment or any other consideration whether arising from goods sold or
leased by the Debtor or services rendered or otherwise, whether or not such
right has been earned by performance, whether secured or unsecured, including
without limitation, invoices, contract rights, accounts receivable, notes,
drafts, acceptances, instruments, refunds, including tax refunds, and all other
debts, obligations and liabilities in whatever form owing to the Debtor from any
Person, all security and guaranties therefor, all of the Debtor's rights in, to
and under all purchase orders heretofore, now or hereafter received by the
Debtor for goods or services, and all Debtor's rights to goods sold (whether
delivered, undelivered, in transit or returned) which may be represented
thereby, including all of Debtor's rights as an unpaid vendor or lienor,
including stoppage in transit, replevin and reclamation, whether now existing or
hereafter arising, and all books, records, ledger cards and other tangible and
intangible property pertaining to same including records, computerized
data,  and software.

 
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"Account Debtor" shall mean a Person obligated on an Account, chattel paper or a
general intangible.

"Advances" shall mean any monies advanced, loans made, or credit extended to
Borrower by the Bank hereunder.

"Affiliate" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer or manager (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, to vote 5% or more of the
securities or membership interests having ordinary voting power for the election
of directors or managers of such Person, or to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.

"Agreement" shall mean this Loan and Security Agreement, together with any and
all exhibits, schedules, amendments or supplements hereto.

"Anti-Terrorism Laws" shall mean any applicable laws relating to terrorism or
money laundering, including Executive Order No. 13224, the USA Patriot Act,
applicable laws comprising or implementing the Bank Secrecy Act, and applicable
laws administered by the United States Treasury Department’s Office of Foreign
Asset Control (as any of the foregoing may from time to time be amended,
renewed, extended, or replaced).

"Bank" shall mean STERLING NATIONAL BANK, its affiliates and subsidiaries, and
all successors and assigns thereof (also referred to as "Secured Party" and
"Lender").

"Borrower" shall mean CAPSTONE INDUSTRIES, INC., and any other Person designated
or signing this Agreement as Borrower, together with all successors and assigns
thereof (also referred to herein as "Debtor" and "Obligor").

"Borrower's Availability" shall mean, as of any date of determination, the
amount computed under the Borrowing Base less the outstanding principal balance
currently owing on the Line of Credit, but in no event greater than the Maximum
Revolving Advance Amount.

"Borrowing Base" (also known as the "Advance Rate") shall mean the following
formula utilized by the Bank to make Advances to the Borrower subject to the
Maximum Revolving Advance Amount and subject to any sublimits established under
this Agreement: (i) up to 85% of Borrower's Eligible Accounts Receivable
(consisting only of Domestic Accounts Receivable less than 90 days from invoice
date), plus (ii) up to 50% of the value of the finished goods Eligible Inventory
of Borrower from time to time on hand, stored at warehouses located in the
United States, less reserves with respect to Inventory which the Bank may deem
necessary in its sole and absolute discretion, up to the Inventory Sublimit ,
plus (iii) up to 50% of the face amount of any undrawn Letters of Credit issued
by the Bank from the Loan Facility for the purchase of Inventory, up to the
Letter of Credit Sublimit. The Bank shall have the right from time to time to
adjust the foregoing percentages based upon, among other things, its sole
determination of the value or likelihood of collection of Eligible Accounts
Receivables owing to

 
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said Borrower from a particular Account Debtor or class of Account Debtors, and
considerations regarding Inventory. All amounts collected by Bank on Eligible
Accounts Receivable shall be credited to Borrower's current loan account with
the Bank. The excess of collections over Obligations, as herein defined, shall
be credited to Borrower on a daily basis.

"Borrowing Base Certificate" shall mean the certificate form prescribed by the
Bank as its borrowing base certificate which forms the basis upon which Advances
are made to the Borrower hereunder, and which sets forth the percentages of
prescribed assets of the Borrower as set forth in this Agreement and required by
the Bank as part of the Borrower's financial reporting obligations to the Bank.

"Business Day" shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in the State of New York.

"Capital Expenditures" shall mean for any period, the aggregate of all
expenditures, including that portion of Capitalized Lease Obligations
attributable to that period, made for the acquisition of any fixed assets or
improvements, replacements, substitutions or additions determined in accordance
with GAAP.

"Capitalized Lease Obligation" shall mean any Indebtedness of Debtor represented
by obligations under a lease that are required to be capitalized for financial
reporting purposes in accordance with GAAP.

"Change of Control" shall mean the occurrence of any event (whether in one or
more transactions) which results in a transfer of control of Borrower to a
Person who is not an Owner of Borrower as set forth in Schedule B, or any merger
or consolidation of or with Borrower, or any sale of all or substantially all of
the property or assets of Borrower. For purposes of this definition, "control of
Borrower" shall mean the power, direct or indirect, to direct or cause the
direction of the management and policies of Borrower whether by contract or
otherwise.

"Change of Ownership" shall mean that there has occurred a change in the
ownership of the stock interest of Borrower from that which is reflected in
Schedule B without the prior written consent of the Bank.

"Collateral" shall mean all property of any nature whatsoever pledged, assigned
for security, mortgaged, hypothecated or otherwise transferred for security to
the Bank, or in which the Bank has been granted a security interest, lien or
other interest, for the purpose of securing the Obligations.

"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of each governmental body
and other third parties, domestic or foreign, necessary to carry on Debtor's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.

 
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"Debtor" shall mean the Borrower and any other Person who has pledged, assigned,
mortgaged, hypothecated, or granted a security interest or other Lien to the
Bank in any property in connection with the Loan Documents.

"Default" shall mean that an Event of Default (as defined herein) has occurred,
the giving of notice, the lapse of time, or both, has occurred, and such Event
of Default has continued beyond any permitted cure period.

"Default Rate" shall mean the increased rate of interest chargeable by the Bank
if a Default has occurred and as specified in Section 2 of this Agreement.

"Domestic Accounts Receivable" shall mean Accounts with respect to which the
Account Debtor is domiciled in the United States of America.

"Eligible Accounts Receivable" shall mean those Accounts or Accounts Receivable
of the Borrower which (i) are less than ninety (90) days from the original date
of invoice; (ii) comply with all of the terms, conditions, warranties and
representations applicable to Accounts and Accounts Receivable made to the Bank
under this Agreement and the other Loan Documents; and (iii) are otherwise
acceptable in all respects to the Bank. Eligible Accounts Receivable shall not
include the following: (a) that portion of the Accounts owed by any single
Account Debtor which exceeds twenty-five percent (25%) of all of the Accounts
[commonly referred to as Accounts Receivable concentration factor], provided,
however, that the Bank may increase the concentration factor with respect to
certain Account Debtors upon request from the Borrower in the sole discretion of
the Bank; (b) all Accounts owing by any Account Debtor if fifty percent (50%) or
more of the Accounts due from such Account Debtor are older than ninety (90)
days from original invoice date [commonly referred to as Accounts Receivable
cross age factor]; (c) Accounts arising from progress billings, invoices for
deposits, and rebills of amounts previously credited to the extent of credits
issued more than fifteen (15) days prior to such rebill; (d) Foreign Accounts
Receivable; (e) Accounts with respect to which the sale is on an installment
sale, lease or other extended payment basis; (f) Accounts with respect to which
the Account Debtor is a federal governmental authority unless approved by the
Bank in advance and subject to the Bank requiring compliance with the Federal
Assignment of Claims Act; (g) Accounts with respect to which goods are placed on
consignment, guaranteed sale, bill-and-hold, repurchase or return, or other
terms by reason of which the payment by the Account Debtor may be conditional;
(h) Accounts with respect to which the Account Debtor is a Subsidiary of,
Affiliate of, or has common officers or directors with the Debtor; (i) Accounts
with respect to which the Bank does not for any reason have a perfected first
priority security interest; (j) Accounts with respect to which the Debtor is or
may become liable to the Account Debtor for goods sold or services rendered by
the Account Debtor to the Debtor, to the extent of the Debtor's existing or
potential liability to such Account Debtor; (k) Accounts with respect to which
the Account Debtor has disputed any liability, or the Account Debtor has made
any claim with respect to any other Account due to the Debtor, or the Account is
otherwise subject to any right of setoff, deduction, breach of warranty or other
defense, dispute or counterclaim by the Account Debtor; (l) Accounts with
respect to which the Account Debtor is an officer, director, employee, or agent
of the Debtor or an Affiliate; (m) that portion of any Accounts representing
late fees, service charges or interest, but only to the extent of such portion;
(n) Accounts of an Account Debtor where the Account Debtor is located in a state

 
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which requires a Notice of Business Activities Report or similar report to be
filed, and the Debtor has not filed same for the current year, or where the
Debtor is not otherwise authorized to transact business in said state, or where
the Debtor is not in good standing in such state; (o) Accounts owed by any
Account Debtor which is insolvent or is the subject of an insolvency proceeding;
(p) that portion of any Accounts represented by unperformed contract rights,
documents, instruments, chattel paper or general intangibles; and (q) any and
all Accounts of an Account Debtor whose credit worthiness is not satisfactory to
the Bank in its sole credit judgment based on information available to the Bank.
References to percentages of all Accounts are based on dollar amount of
Accounts, and not number of Accounts. Anything to the contrary notwithstanding,
the Bank shall have the right, in its sole and absolute discretion, to classify
any Accounts Receivable as not being Eligible Accounts Receivable.

"Eligible Inventory" shall mean that portion of the Borrower's Inventory of
finished goods held for sale by the Borrower, normally and currently saleable in
the ordinary course of the Borrower's business, and which at all times pertinent
hereto is of good and merchantable quality, free from defects, as to which the
Bank has a perfected first priority Lien, and which is located at the locations
set forth in this Agreement, and as to which Borrower has satisfied all terms,
conditions, warranties and representations of this Agreement and the other Loan
Documents. Eligible Inventory does not include any of the following: (a)
catalogs and other promotional materials of any kind; (b) work in process; (c)
any returned items; (d) any damaged, defective or recalled items; (e) any
obsolete items; (f) any items used as demonstrators, prototypes or salesmen's
samples; (g) any items of Inventory which have been consigned to Borrower or as
to which a Person claims a Lien; (h) any items of Inventory which have been
consigned by the Borrower to a consignee; (i) packing, packaging and shipping
materials; (j) Inventory located on premises leased by Borrower which are not
located in the United States or are leased by the Borrower from a landlord with
whom the Bank has not entered into a landlord's waiver on terms satisfactory to
the Bank; (k) Inventory in the possession of a bailee which is not located in
the United States, or which has not executed a bailee waiver acknowledging to
the Bank that such bailee holds said Inventory for the benefit of the Bank and
shall act upon the instructions of the Bank, without the further consent of the
Borrower; (l) perishable items of produce; and (m) Inventory which in the
reasonable judgment of the Bank is considered to be slow moving or otherwise not
merchantable.  Eligible Inventory shall be valued at the lower of (a) cost, (b)
market value, or (c) the valuation consistent with that employed in the
preparation of the financial statements of the Borrower required under this
Agreement. Anything to the contrary notwithstanding, the Bank shall have the
right, in its sole and absolute discretion, to classify any Inventory as not
being Eligible Inventory.

 
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"Environmental Laws" means any and all federal, state, regional, county,
municipal or local laws, statutes, rules, regulations, directives or ordinances
concerning public health, safety, or the environment, affecting or applicable to
Debtor, Debtor's operations, properties or facilities, or any property or
facility at which any Collateral is located. Without limiting the expansive
definition of Environmental Laws hereunder, Environmental Laws includes all
rules, regulations, and guidance documents promulgated or published by any
agency which regulates, investigates, or is involved with issues relating to
public health, safety, or the environment, including, without limitation,
relating to (i) releases, discharges, emissions, or disposals to air, water,
land, or groundwater; (ii) the withdrawal or use of groundwater, (iii) the use,
handling, or disposal of polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde; (iv) the treatment, storage, disposal, or management of hazardous
substances (including, without limitation, petroleum, its derivatives,
by-products, or other hydrocarbons), and any other solid, liquid, or gaseous
substance, exposure to which is prohibited, limited, or regulated, or may or
could pose a hazard to the health and safety of the occupants of the Property
and the operations thereon or the property adjacent to or surrounding the
Property; (v) the exposure of persons to toxic, hazardous, or other controlled,
prohibited, or regulated substances; and (vi) the transportation, storage,
disposal management, or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration, notice or demand issued in
connection therewith.

"Equipment" shall mean any "equipment" as such term is defined in the UCC, now
or hereafter owned by the Debtor and, in any event, including, without
limitation, all machinery, equipment, furnishings, fixtures, and vehicles now or
hereafter owned by the Debtor, of any kind, nature and description whether
affixed to real property or not, and all additions to, substitutions and
replacements for or accessions to any of the foregoing, together with all
attachments, components, parts (including spare parts), equipment and
accessories installed thereon or affixed thereto and all fuel for any thereof.

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

"Event of Default" shall mean any of the events specified in this Agreement as
constituting an Event of Default whether or not any requirement for the giving
of notice, the lapse of time, or both, has been satisfied.

"Executive Order No. 13224" shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

"Foreign Accounts Receivable" shall mean Accounts with respect to which the
Account Debtor is not domiciled in the United States of America.

"GAAP" shall mean the Generally Accepted Accounting Principles in the United
States of America as in effect from time to time.

 
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"Guarantor(s)" shall mean CHDT CORPORATION (the "Entity Guarantor"), and HOWARD
ULLMAN (the "Individual Guarantor"), and any other Person designated or signing
this Agreement as Guarantor or signing any separate guaranty agreement in favor
of Bank, together with all successors and assigns, and in addition, if an
individual, all heirs, executors, administrators, and personal representatives
thereof (sometimes referred to as an "Obligor" or a "surety").

"Indebtedness" of any Person at any date, shall mean (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv)
the face amount of all letters of credit issued for the account of such Person
and all drafts drawn thereunder, (v) all obligations of other Persons which such
Person has guaranteed, (vi) all Obligations of such Person under hedging
agreements, (vii) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof, and (viii) all obligations of such Person which in
accordance with GAAP would be classified upon a balance sheet as liabilities
(other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices).

"Intellectual Property" shall mean all of Debtor's past, present and future:
trade secrets, know-how and other proprietary information; trademarks, Internet
domain names, service marks, trade names, business names, designs, logos,
slogans (and all translations, adaptations, derivations and combinations of the
foregoing) indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying copyrights and unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable codes, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to sue for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.

 
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"Inventory" shall mean inventory as such term is defined in the UCC, and shall
include, without limitation, all goods and other personal property of the
Debtor, whether now owned or hereafter acquired or in which the Debtor now has
or hereafter may acquire any right, title or interest, and wherever located,
whether in transit or otherwise, held for sale or lease, or furnished or to be
furnished under contracts for service, sale or lease, including all goods
returned or reclaimed from customers, and all raw materials, work in process and
materials owned by the Debtor and used or consumed or to be used or consumed in
its business, or in the processing, packaging or shipping of the same, and all
finished goods and all assets of a type classified as Inventory as reflected, or
as should be reflected pursuant to GAAP, on the financial statements of the
Debtor.

"Inventory Sublimit" shall mean the maximum amount of Advances permitted at any
time from the Line of Credit against Eligible Inventory, which amount is fixed
from time to time by the Bank; the current Inventory Sublimit is $500,000.00.

"Letters of Credit" shall mean standby letters of credit issued to or to be
issued by Bank for the account of Borrower pursuant to this Agreement or any of
the Loan Documents, which shall be used for the purchase of Inventory.

"Letter of Credit Amount" shall mean the sum of (i) the aggregate undrawn amount
of all Letters of Credit outstanding at any time plus (ii) the aggregate amount
of all drawings under Letters of Credit for which Bank has not been reimbursed
at such time.

"Letter of Credit Documents" shall mean any Letter of Credit, any amendment
thereto, any documents delivered in connection therewith, any application
therefor, or any other documents (all in form and substance satisfactory to
Bank), governing or providing for (i) the rights and obligations of the parties
concerned or at risk, or (ii) any collateral security for such obligations.

"Letter of Credit Fees" shall mean the fees prescribed hereunder or in any of
the other Loan Documents in connection with the issuance of Letters of Credit
and for draws and payments pursuant thereto.

"Letter of Credit Sublimit" shall mean the maximum Letter of Credit Amount
permitted at any one time from the Line of Credit, which amount is fixed from
time to time by the Bank; the current Letter of Credit Sublimit is
$1,000,000.00.

"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment
for security, security interest, lien (whether statutory or otherwise), charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to permit the
filing of, any financing statement under the UCC or comparable law of any
jurisdiction

 
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"Line of Credit" shall mean the revolving line of credit established for the
benefit of the Borrower having a maximum principal amount of $2,000,000.00, the
proceeds of which are to be used for the refinance of existing lender
Indebtedness and for working capital needs of the Borrower.

"Loan" shall mean any Advance or extension of credit in any form made by the
Bank to or for the benefit of the Borrower.

"Loan Facility" shall mean the Line of Credit.

"Loan Documents" shall collectively mean this Agreement and all agreements,
instruments and documents executed in connection herewith including, but not
limited to, all notes, guarantees and all documents giving the Bank an interest
in Collateral, all as may be extended, modified, renewed, restated,
supplemented, amended, or replaced from time to time.

"Material Adverse Effect" shall mean a material adverse effect with respect to
(a) the business, assets, properties, financial condition, stockholders' equity,
contingent liabilities, prospects, material agreements or results of operations
of Borrower or any Obligor under the Loan Documents, or (b) Borrower's or any
Obligor's ability to pay the Obligations in accordance with the terms hereof, or
(c) the validity or enforceability of this Agreement or any of the other Loan
Documents or the rights and remedies of Bank hereunder or thereunder.

"Material Default With Third Party" shall mean a default under any material
Indebtedness or other material obligations of any Obligor to any third party
that entitles such third party to declare such Indebtedness or obligation due
prior to its date of maturity.

"Maturity Date" shall mean the date on which the Loan Facility matures and comes
due. In the case of the Line of Credit, the initial term shall be two (2) years
(the "Initial Term"), and the Maturity Date of the Initial Term shall mean April
___, 2010.  The Maturity Date for the Loan Facility shall be extended as
provided for in this Agreement, with each renewal term ("Renewal Term") having
its corresponding later Maturity Date.

"Maximum Revolving Advance Amount" shall mean $2,000,000.00.

"Note" shall mean any promissory note executed at any time in connection with
the Loan Documents.

"Obligations" shall mean any and all loans, Advances, debts, liabilities,
obligations, covenants and duties owing by Borrower to Bank or to any other
direct or indirect subsidiary or affiliate of Bank of any kind or nature,
present or future (including, without limitation, any interest accruing thereon
after maturity, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether or not evidenced by any note, guaranty
or other instrument, whether arising under any agreement, instrument or document
(including, without limitation, this Agreement and the other Loan Documents),
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening of a letter of credit opening of a letter of credit
or a reimbursement obligation

 
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thereunder, loan, equipment lease or guarantee, under any interest or currency
swap, future, hedge, derivative, option or other similar agreement, or in any
other manner, whether arising out of overdrafts or deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of Bank's non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or
other similar arrangements, whether direct or indirect (including those acquired
by assignment or participation), absolute or contingent, joint or several, due
or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness or liabilities
arise or by what agreement or instrument they may be evidenced or whether
evidenced by any agreement or instrument, including, but not limited to, any and
all of Borrower's Indebtedness and/or liabilities under this Agreement, the
other Loan Documents or under any other agreement between Bank and Borrower and
any amendments, extensions, renewals or increases and all costs and expenses of
Bank incurred in the documentation, negotiation, modification, enforcement,
collection or otherwise in connection with any of the foregoing, including but
not limited to reasonable attorneys' fees and expenses, and expenses arising
from all obligations of Borrower to perform acts or refrain from taking any
action, and the Bank's enforcement thereof. The obligations of the Guarantors to
the Bank are also included in the term "Obligations" hereunder.

"Obligor" shall mean each Borrower and each Guarantor, together with all
successors and assigns, and in addition, if an individual, all heirs, executors,
administrators, and personal representatives thereof

"Original Owner" shall mean those Persons designated on Schedule B annexed
hereto as currently owning the stock or membership or partnership interests of
the designated Obligor.

"Permitted Liens" shall mean (a) Liens in favor of Bank; (b) Liens for taxes,
assessments or other governmental charges not delinquent or being contested in
good faith and by appropriate proceedings and with respect to which proper
reserves have been taken by Debtor; provided, that, the Lien shall have no
effect on the priority of the Liens in favor of Bank or the value of the assets
in which Bank has such a Lien and a stay of enforcement of any such Lien shall
be in effect; (c) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment insurance;
(d) Liens securing Capital Lease obligations of Borrower permitted by this
Agreement; (e) any interest or title of a lessor or sublessor under any lease or
sublease permitted by this Agreement; and (f) Liens listed as Permitted Liens on
Schedule B, if any.

"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint venture, entity or
government (whether federal, state, county, city, municipal or otherwise,
including any instrumentality, division, agency, body or department thereof).

"Revolving Credit Loans" shall mean Advances made directly to the Borrower from
the Line of Credit.

 
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"Subordinated Debt" shall mean Indebtedness of Borrower or another Person that
is to be made subordinate to the Obligations due the Bank.

"Subsidiary" shall mean, as to any Person, a corporation or other entity of
whose shares of stock or other ownership interests having ordinary voting power
to elect a majority of the directors of such corporation or entity, or other
Persons performing similar functions for such entity, are owned, directly or
indirectly, by such Person.

"UCC" shall mean the Uniform Commercial Code as in effect in the State of New
York, and Article 9 of the Uniform Commercial Code as in effect in the state of
formation of any entity which is a party to this Agreement.

"Wall Street Prime Rate" shall mean the rate of interest designated as the Prime
Rate which appears in each publication of The Wall Street Journal under the
designation entitled Money Rates. This rate of interest fluctuates and is
subject to change without prior notice. In the event that the Wall Street Prime
Rate cannot be ascertained from publication of The Wall Street Journal, the rate
of interest which shall be used in substitution thereof and until such time as
the Wall Street Prime Rate can be ascertained by reference to The Wall Street
Journal shall be a rate equal to the average of the prime rate of interest
announced from time to time by three New York banks selected by the Bank in its
discretion.

1.2           Accounting Terms.  As used in this Agreement, the other Loan
Documents or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in this Section or
elsewhere in this Agreement and accounting terms partly defined in this Section
to the extent not defined, shall have the respective meanings given to them
under GAAP.

1.3           UCC Terms.  If not otherwise defined in this Agreement, terms used
herein which are defined by the UCC shall have the same meaning as set forth in
the UCC. All terms indicating Collateral include the meanings assigned thereto
under the UCC.

1.4           Other Capitalized Terms.  If not otherwise defined in any other
Loan Document, capitalized terms used in such other Loan Document shall have the
respective meaning ascribed to said term in this Agreement. The definitions of
any other capitalized terms appearing in any sections of this Agreement shall be
deemed incorporated into this Section.

1.5           Certain Matters of Construction.  The terms "herein", "hereof' and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Bank is a party, including,
without limitation, references to any of the other Loan Documents, shall include
any and all modifications or amendments thereto and any and all extensions or
renewals thereof.

 
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SECTION 2. LOAN FACILITY

2.1           In accordance with the Loan Documents, the Bank hereby establishes
for the benefit of the Borrower the following Loan Facility: the Line of Credit.

2.2           Subject to the terms and conditions set forth in this Agreement
and the other Loan Documents, and provided that Borrower is not in Default
thereunder, the Bank agrees that it shall, from time to time and in its sole and
absolute discretion, make Loans to or on behalf of Borrower from its Loan
Facility which the Bank deems warranted by the facts and circumstances existing
at the time of each request by Borrower. Each request by Borrower for a Loan as
well as each such Loan to be made by the Bank shall constitute a representation
by Borrower that all conditions set forth in the Loan Documents on the part of
Borrower have been satisfied on the date of such request.

2.3           Borrower may request Advances from the Line of Credit, and
Borrower shall be authorized to make such borrowings, repay same in whole or in
part, and reborrow on a revolving basis (the "Revolving Credit Loans"). At the
time of each Revolving Credit Loan made pursuant to this Agreement, Borrower
shall immediately become indebted to the Bank for the amount of each such Loan.
All Advances shall be disbursed by Bank from its office in the City and State of
New York, and shall be payable at such office. Bank agrees to make Advances to
Borrower from time to time in Bank's sole and absolute discretion up to
Borrower's Availability and subject to the Loan Documents.

2.4           A request for an Advance must be received by the Bank no later
than 11:00 A.M. on a Business Day for the Advance to be made effective as of
such Business Day. If such request is received by the Bank after said time, the
Advance shall be made effective as of the next Business Day. Requests shall be
made by fax transmittal to the Bank at the fax number provided to the Borrower
by the Bank. If a request for an Advance is made by telephone (although the Bank
is not required to make an Advance pursuant to a telephonic request), it must be
promptly confirmed by written fax transmittal. Borrower hereby authorizes Bank
to make an Advance based on (i) a fax transmittal ostensibly sent by a
representative of the Borrower without regard to verification by the Bank of the
authority of the representative, or (ii) a telephonic request for an Advance
ostensibly made by a representative of the Borrower without regard to
verification by the Bank of the authority of the representative. Borrower hereby
indemnifies and holds Bank harmless from and against any and all damages,
losses, liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) which may arise or be created by the acceptance of any requests or
the making of any Advances. Bank will enter on its books and records the date
and amount of each Advance.

2.5           Borrower shall be obligated to pay to the Bank interest upon the
unpaid principal balance of Borrower's Revolving Credit Loans calculated at the
close of each day, and payable on a monthly basis. The interest rate which shall
be used to calculate the amount of interest due each day shall be the Wall
Street Prime Rate plus one and one-half percent (1.5%) per annum (the "Contract
Rate"). The rate of interest shall be adjusted automatically as of the opening
of business on each day in accordance with changes in the Wall Street Journal
Prime Rate. Interest at the rate set forth herein shall be charged on all sums
due to the Bank even after a Default or the entry of judgment. All computations
of interest shall be made on the basis of a three hundred sixty (360) day year
and the actual number of days elapsed.

 
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2.6           The amount billed to the Borrower hereunder may be charged to
Borrower's account maintained with the Bank as of the first day of the month
following the month for which it is billed. Such amount shall be deemed paid out
of the first collections in the account subsequent to the date of the charge. At
Bank's option, up to three (3) Business Days' shall be allowed subsequent to
receipt of remittances, without regard to the form thereof, from Account Debtors
or the Borrower to permit bank clearance and collection of such remittances
before the amount thereof shall be deemed collected by Bank, which time interval
Borrower agrees is reasonable. In the event Bank determines at any time, or from
time to time, in its sole discretion, to make available advances or funds to
Borrower prior to the expiration of such interval, Borrower shall pay additional
interest on such advances or funds at the rate set forth herein for each day
that such remittances are deemed uncollected under the provisions of this
Paragraph. Bank shall render to Borrower each month by mailing to Borrower, by
ordinary mail prepaid, a statement of Borrower's account with Bank, which shall
be deemed to be correct and accepted by and binding upon Borrower unless Bank
shall have received a written statement of Borrower's exceptions within 15 days
after the mailing thereof, and any event shall be deemed correct and accepted
except as to the matters stated in such exceptions.

2.7           The Revolving Credit Loans made by the Bank to Borrower pursuant
to this Agreement shall be noted on the records of the Bank. The Bank shall
render to Borrower each month by mailing to Borrower, by ordinary mail, postage
prepaid, a statement of Borrower's account with the Bank, which shall be deemed
to be correct and accepted by and binding upon Borrower unless the Bank shall
have received a written statement of Borrower's exceptions within 15 days after
mailing thereof, and in any event shall be deemed correct and accepted except as
to the matters stated in such exceptions.

2.8           The Borrower is hereby entering into a full dominion financing
transaction with the Bank. The collection of Accounts Receivable and the use of
the proceeds of the Collateral shall comply with all requirements of the Bank
relating to a full dominion financing relationship including, but not limited
to, the following:

(a)           All Accounts Receivable collections of Borrower and all checks,
drafts and other monies received by Borrower or Bank which are proceeds of the
Collateral will be deposited by the Bank into an account maintained by the Bank,
and will be credited by Bank as payment toward the Obligations on the Business
Day after which such items are deposited into such account. Borrower will pay to
Bank a sum equal to up to three (3) Business Days on all such deposits, at the
interest rate specified for Revolving Credit Loans hereunder. Borrower will
reimburse Bank on demand for the amount of any items credited as provided above
and subsequently returned unpaid. Bank may terminate the foregoing arrangement
upon notice to Borrower.

(b)           Borrower will collect its Accounts Receivable only in the ordinary
course of business. Borrower will notify all of its Account Debtors to forward
all Accounts Receivable collections owed to Borrower to a lockbox (the
"Lockbox") controlled by Bank. Borrower will execute such agreements as may be
required in connection with the Lockbox, including a Lockbox Agreement and
signature cards, and will pay all fees in connection therewith. If,
notwithstanding the provisions of this Section, Borrower receives directly any
checks, drafts or other monies which are proceeds of the Collateral, Borrower
will, immediately upon receipt thereof, forward all such checks, drafts and
other monies to the Lockbox.

 
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(c)           Borrower agrees that all monies, checks, notes, instruments,
drafts or other payments relating to or constituting proceeds of any Accounts
Receivable or other Collateral of Borrower which come into the possession or
under the control of Borrower or any employees, agents or other persons acting
for or in concert with Borrower, shall be received and held in trust for Bank
and such items shall be the sole and exclusive property of Bank. Immediately
upon receipt thereof, Borrower and such other persons shall remit the same or
cause the same to be remitted, in kind, to Bank. Borrower shall deliver or cause
to be delivered to Bank, with appropriate endorsement and assignment to Bank
with full recourse to Borrower, all instruments, notes and chattel paper
constituting an Account Receivable or proceeds thereof or other Collateral. Bank
is hereby authorized to open all mail addressed to Borrower and endorse all
checks, drafts or other items for payment on behalf of Borrower. Bank is granted
a power of attorney by Borrower with full power of substitution to execute on
behalf of Borrower and in Borrower's name or to endorse Borrower's name on any
check, draft, instrument, note or other item of payment or to take any other
action or sign any document in order to effectuate the foregoing. Such power of
attorney being coupled with an interest is irrevocable.

2.9           Prior to the issuance of any Letter of Credit, the Borrower shall
execute the Letter of Credit Documents, and the Borrower shall comply with all
the terms and conditions thereof in connection with any Letters of Credit
issued, such documents being fully incorporated herein by reference. All Letters
of Credit shall be in form and substance reasonably satisfactory to the Bank. No
Letter of Credit shall be issued with an expiry date later ten (10) Business
Days prior to any Maturity Date. Each Letter of Credit shall comply with the
Letter of Credit Documents.

In the event of any request for drawing under any Letter of Credit by the
beneficiary thereof, the Bank shall promptly notify Borrower and Borrower shall
immediately reimburse the Bank on the day when such drawing is honored, by
either a cash payment by Borrower or, so long as no Event of Default has
occurred and is continuing, in the absence of such payment by Borrower, and at
the Bank's option, by the Bank automatically making or having been deemed to
have made (without further request or approval of Borrower) a cash Advance under
the Line of Credit on such date to reimburse the Bank.  Borrower's reimbursement
obligation for draws under Letters of Credit along with the obligation to pay
Letter of Credit Fees shall herein be referred to collectively as Borrower's
"Reimbursement Obligations." All of Borrower's Reimbursement Obligations
hereunder with respect to Letters of Credit shall apply unconditionally and
absolutely to Letters of Credit issued hereunder on behalf of Borrower.

The obligation of Borrower to reimburse Lender for drawings made (or  for  cash
Advances made to cover drawings made) under the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation,
the following circumstances:

any lack of validity or enforceability of any Letter of Credit;

 
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the existence of any claim, setoff, defense or other right that Borrower or any
other Person may have at any time against a beneficiary or any transferee of any
Letter of Credit (or any persons or entities for whom any such beneficiary or
transferee may be acting), the Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction;

any draft, demand, certificate or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

payment by the Bank under any Letter of Credit against presentation of a demand,
draft or certificate or other document that does not comply with the terms of
such Letter of Credit unless the Bank shall have acted with willful misconduct
or gross negligence in issuing such payment;

any other circumstances or happening whatsoever that is similar to any of the
foregoing; or

the fact that an Event of Default or Default shall have occurred and be
continuing.

If by reason of (i) any change after the Closing Date in applicable law,
regulation, rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory authority of any
law, regulation, rule, decree or regulatory requirement or (ii) compliance by
the Bank with any direction, reasonable request or requirement (whether or not
having the force of law) of any governmental or monetary authority including,
without limitation, Regulation D:

the Bank shall be subject to any tax or other levy or charge of any nature or to
any variation thereof (except for changes in the rate of any tax on the net
income of the Bank or its applicable lending office) or to any penalty with
respect to the maintenance or fulfillment of its obligations under this Section,
whether directly or by such being imposed on or suffered by the Bank;

any reserve, deposit or similar requirement is or shall be applicable, imposed
or modified in respect of any Letter of Credit issued by the Bank; or

 
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there shall be imposed on the Bank any other condition regarding this Section or
any Letter of Credit; and the result of the foregoing is to directly or
indirectly increase the cost to the Bank of issuing, creating, making or
maintaining any Letter of Credit or to reduce the amount receivable in respect
thereof by the Bank, then and in any such case, the Bank shall, after the
additional cost is incurred or the amount received is reduced, notify Borrower
and Borrower shall pay on demand such amounts as may be necessary to compensate
the Bank for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate per
annum equal at all times to the applicable interest rate under the Line of
Credit.  A certificate signed by an officer of the Bank as to the amount of such
increased cost or reduced receipt showing in reasonable detail the basis for the
calculation thereof, submitted to Borrower by the Bank shall, except for
manifest error and absent written notice from Borrower to the Bank within ten
(10) days from submission, be final, conclusive and binding for all purposes.

i           In addition to amounts payable as elsewhere provided in this
Section, without duplication, Borrower hereby agrees to protect, indemnify, pay
and save the Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Bank may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of the Letters of Credit or (B) the
failure of the Bank to honor a drawing under any Letter of Credit as a result of
any such act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority (all such acts or
omissions herein called "Government Acts") in each case except for claims,
demands, liabilities, damages, losses, costs, charges and expenses arising
solely from acts or conduct of the Bank constituting gross negligence or willful
misconduct.

iiAs between Borrower and the Bank, Borrower assumes all risks of the acts and
omissions of or misuse of the Letters of Credit issued by the Bank by the
respective beneficiaries of such Letters of Credit.  In furtherance and not in
limitation of the foregoing, the Bank shall not be responsible: (A) for the
form, validity, sufficiency, accuracy, genuineness or legal effects of any
document submitted by any party in connection with the application for and
issuance if such Letters of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may prove to
be invalid or ineffective for any reason; (C) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (D) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they are in cipher, unless any of the
foregoing are caused by the Bank's gross negligence or willful misconduct; (E)
for errors in interpretation of technical terms; (F) for any loss or delay in
the transmission of any document or required in order to make a drawing under
such Letter of Credit or of the proceeds thereof, unless caused by the Bank's
gross negligence or willful misconduct; (G) for the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit;

 
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and (H) for any consequences arising from causes beyond the control of issuer,
including, without limitation, any Government Acts. None of the above shall
affect, impair or prevent the vesting of any of the Bank's rights or powers
hereunder.

iii           In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Bank in
connection with the Letters of Credit issued by it or the related certificates,
if taken or omitted in good faith, shall not create any liability on the part of
the Bank to Borrower.

f.           In the event that any Affiliate or Subsidiary of the Borrower shall
request the issuance of a Letter of Credit from the Borrower, and the Lender
issues such Letter of Credit in its sole and absolute discretion, the Borrower
shall be fully liable to the Bank therefore as if the Borrower had requested the
issuance of such Letter of Credit, and such liability shall be included as part
of the Obligations of the Borrower to the Bank, in addition to the liability of
such Affiliate and/or Subsidiary.

g.           In connection with the issuance of Letters of Credit, the Borrower
shall execute such additional agreements and documents in connection therewith
as shall be required by the Bank, and the Borrower shall comply with all the
terms and conditions thereof in connection with any Letter of Credit issued,
such agreements and documents being fully incorporated herein by reference.

2.10                      At no time shall the aggregate amount of all Loans
made by the Bank from the Line of Credit exceed the lesser of (i) the Borrower's
Availability, or (ii) the Maximum Revolving Advance Amount. At no time shall the
outstanding amount of Advances against Eligible Inventory exceed the outstanding
amount of Advances against Eligible Accounts Receivable. At no time shall
advances against Inventory exceed the Inventory Sublimit. At no time shall the
Letter of Credit Amount exceed the Letter of Credit Sublimit. Should the
outstanding amount of all Advances or Loans in the aggregate, or should any
sublimit or category established hereunder, exceed any limitations set forth in
this Agreement at any time, the excess shall continue to be secured by the
Collateral, shall be subject to all of the terms of this Agreement and the other
Loan Documents and, at the option of the Bank, shall immediately become due and
payable on demand by the Bank.

2.11                      All payments shall be made by Borrower to Bank at the
office of the Bank as appears in this Agreement, or such other place as Bank may
from time to time specify, in lawful currency of the United States of America in
immediately available funds, without counterclaim or set off and free and clear
of, and without any deduction or withholding for, any taxes or other payments.
The Bank shall be authorized to charge any interest payment, principal payment
or other sum due under the Loan Documents against any account maintained by the
Borrower at the Bank. The Borrower hereby authorizes the Bank to make all such
charges authorized by any of the Loan Documents. All payments shall be applied
first to the payment of all fees, expenses and other amounts due to the Bank
(excluding principal and interest), then to accrued interest, and the balance on
account of outstanding principal; provided, however, that after Default,
payments will be applied to the obligations of Borrower to Bank as Bank
determines in its sole discretion.

 
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2.12                      If a Maturity Date shall fall on a day, or any payment
hereunder becomes due on a day, which is not a Business Day, the due date for
payment hereunder shall be extended to the next succeeding Business Day, and
such extension of time shall be included in computing interest and fees in
connection with such payment.

2.13                      Anything to the contrary notwithstanding, on the
Maturity Date the Loan Facility shall terminate, and there shall be due and
payable all unpaid principal together with all accrued and unpaid interest,
charges, fees, and all other sums computed in accordance with this Agreement and
the other Loan Documents. The liability of the Borrower and any other party
liable for any Obligations to the Bank with respect to any other document,
instrument or obligation (such as a letter of credit) arising from the Loan
Documents which matures beyond the Maturity Date, if any, shall continue until
all Obligations thereunder and under the Loan Documents to the Bank have been
satisfied in full.

2.14  It is understood and agreed that the Bank may, in its sole and absolute
discretion, create reserves and alter the Borrowing Base to reflect
considerations of the Bank including, but not limited to, expenses involved in
the collection of receivables and liquidation of Collateral, dilution in the
Collateral, obsolescence, miscalculation of value or quantities, bad debts,
set-offs, market conditions and other factors.

2.15                      The Bank may, without notice to or consent of any
party liable under the Loan Documents as an obligor, guarantor, endorser, surety
or in any capacity whatsoever and without impairing or in anywise affecting the
liability of such party to the Bank, (i) extend the time for any payment under
the Loan Documents; (ii) alter any other term of Loan Documents by agreement
with the Borrower; (iii) release, settle or compromise with any other party
liable for any payment under the Loan Documents; and/or (iv) release, or
substitute for, any property held by the Bank as security for the payment of any
sum owing to the Bank by any party hereto; and any renewal and/or modification
document required by the Bank shall be deemed consented to by all such parties
without any requirement that any such party execute any such document. The
Borrower and all guarantors, endorsers, sureties, and all other parties liable
under the Loan Documents hereby jointly and severally waive presentment, demand,
notice of non-payment, notice of protest, protest, and all other notice of any
kind except as otherwise expressly set forth in the Loan Documents.

2.16                      If Obligations become immediately due and payable
pursuant to the provisions of this Agreement, or if Obligations are not paid in
full upon the effective date of termination of this Agreement or upon a maturity
date, or if an Event of Default has occurred, Borrower shall thereafter be
obligated to pay interest on the Obligations from the date of such declaration,
termination, maturity or Event of Default, as the case may be at the option of
the Bank, until the date the Obligations are paid in full at a rate per annum
(calculated on the actual number of days based upon a year of 360 days) equal to
5% in excess of the Contract Rate then in effect, provided, however, that such
interest rate shall in no event exceed the maximum interest rate which Borrower
may pay by law (the "Default Rate"). The Borrower acknowledges that:(i) such
additional rate is a material inducement to the Bank to make Loans hereunder;
(ii) the Bank would not have entered into the Loan Documents and agreed to make
Loans hereunder in the absence of the agreement of the Borrower to pay such
additional rate; (iii) such additional rate represents compensation for
increased risk to the Bank that the Loans hereunder will not

 
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be repaid; and (iv) such rate is not a penalty and represents a reasonable
estimate of (a) the cost to the Bank in allocating its resources (both personnel
and financial) to the on-going review, monitoring, administration and collection
of the Loans, and (b) compensation to the Bank for losses that are difficult to
ascertain.

2.17                      Borrower and each Guarantor hereby grants to Bank, a
continuing lien, security interest and right of set off as security for all
liabilities and obligations to Bank whether now existing or hereafter arising,
upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody safekeeping or control of Bank or any
entity under the control of Bank and its successors and assigns or in transit to
any of them. At any time, without demand or notice (any such notice being
expressly waived and irrespective of the fact that actual book entries may be
made at some time subsequent thereto), Bank may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower and any
Guarantor regardless of the adequacy of any other collateral securing the Loan.
Any and all rights to require Bank to exercise its rights or remedies with
respect to any other Collateral which secures the Loan Facility or any Loans
thereunder, prior to exercising its right of set off with respect to such
deposits, credits or other property of Borrower or any Guarantor, are hereby
knowingly, voluntarily and irrevocably waived.

2.18                      Borrower shall pay on demand all expenses of Bank in
connection with the preparation, administration default, collection, waiver or
amendment of loan terms or in connection with Bank's exercise, preservation or
enforcement of any of its rights, remedies or options hereunder, including,
without limitation, reasonable fees of outside legal counsel or the allocated
reasonable costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any reasonable fees or expenses
associated with travel or other costs relating to any appraisals or examinations
conducted in connection with the loan or any collateral therefor, and the amount
of all such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any Collateral. If not paid upon demand, Bank shall be authorized to charge any
account of Borrower for such expenses.

2.19                      This Agreement shall become effective the day when
finally accepted by Bank at its office in the State of New York. This Agreement
shall remain in effect until the Maturity Date of the Initial Term, and shall
thereafter be deemed automatically renewed for successive terms of two (2) years
each (each renewed term being a "Renewal Term"); subject, however, to the right
of either party to terminate a Renewal Term at any time upon at least ninety
(90) days' written notice, and subject to the payment of any prepayment premium
prescribed in this Agreement. Should an Event of Default as defined hereunder
have occurred and be continuing, the Initial Term or any Renewal Term shall be
terminable at any time by Bank forthwith on written notice. The termination of
the Initial Term or any Renewal Term shall not affect any of a Borrower's or any
Guarantor's obligations under the Loan Documents, inclusive of payment of the
prepayment premium, which shall remain in full force and effect until all
Obligations have been satisfied in full and until discharged by the Bank.

 
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SECTION 3.  SECURITY; GUARANTEE; SUBORDINATION

3.1           Borrower (also referred to as "Debtor") hereby grants to the Bank,
to secure the payment and performance in full of all of the Obligations, a
security interest in and so pledges and assigns to the Bank the following
properties, assets and rights of the Debtor, wherever located, whether now owned
or hereafter acquired or arising, and all proceeds and products thereof (all of
the same being hereinafter called the "Collateral"): all personal and fixture
property of every kind and nature including without limitation all goods
(including  inventory,  machinery, equipment  and  any  accessions  thereto),
instruments (including promissory notes), documents, accounts and accounts
receivable (including health-care-insurance receivables and other accounts
receivables), chattel paper (whether tangible or electronic), deposit accounts,
letter-of-credit rights (whether or not the letter of credit is evidenced by a
writing), commercial tort claims, securities and all other investment property,
supporting obligations, any other contract rights or rights to the payment of
money, insurance claims and proceeds, tort claims, and all general intangibles
including, without limitation, all payment intangibles, patents, patent
applications, trademarks, trademark applications, trade names, copyrights,
copyright applications, software, engineering drawings, service marks, customer
lists, goodwill, and all licenses, permits, agreements of any kind or nature
pursuant to which the Debtor possesses, uses or has authority to possess or use
property (whether tangible or intangible) of others or others possess, use or
have authority to possess or use property (whether tangible or intangible) of
the Debtor, and all recorded data of any kind or nature, regardless of the
medium of recording including, without limitation, all software, writings,
plans, specifications and schematics, and any property set forth on Schedule A
annexed hereto and made a part hereof.

3.2           The Debtor hereby irrevocably authorizes the Bank at any time and
from time to time to file in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as "all assets" of the Debtor or words of similar effect,
regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the State or
such jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) contain any other information required by part 5 of Article 9 of
the Uniform Commercial Code of the State for the sufficiency or filing office
acceptance of any financing statement or amendment, including (i) whether the
Debtor is an organization, the type of organization and any organization
identification number issued to the Debtor and, (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as-extracted
collateral or timber to be cut, a sufficient description of real property to
which the Collateral relates. The Debtor agrees to furnish any such information
to the Bank promptly upon request. The Debtor also ratifies its authorization
for the Bank to have filed in any Uniform Commercial Code jurisdiction any like
initial financing statements or amendments thereto if filed prior to the date
hereof.

3.3           Further to insure the attachment, perfection and first priority
of, and the ability of the Bank to enforce, the Bank's security interest in the
Collateral, the Debtor agrees, in each case at the Debtor's own expense, to take
the following actions with respect to the following Collateral (as applicable):

 
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3.3.1. Promissory Notes and Tangible Chattel Paper. If the Debtor shall at any
time hold or acquire any promissory notes or tangible chattel paper, the Debtor
shall forthwith endorse, assign and deliver the same to the Bank, accompanied by
such instruments of transfer or assignment duly executed in blank as the Bank
may from time to time specify.

3.3.2. Deposit Accounts.  For each deposit account that the Debtor at any time
opens or maintains, the Debtor shall, at the Bank's request and option, pursuant
to an agreement in form and substance satisfactory to the Bank, either (a) cause
the depositary bank to agree to comply at any time with instructions from the
Bank to such depositary bank directing the disposition of funds from time to
time credited to such deposit account, without further consent of the Debtor, or
(b) arrange for the Bank to become the customer of the depositary bank with
respect to the deposit account, with the Debtor being permitted, only with the
consent of the Bank, to exercise rights to withdraw funds from such deposit
account. The provisions of this paragraph shall not apply to (i) any deposit
account for which the Debtor, the depositary bank and the Bank have entered into
a cash collateral agreement specially negotiated among the Debtor, the
depositary bank and the Bank for the specific purpose set forth therein, (ii)
deposit accounts for which the Bank is the depositary and (iii) deposit accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of the Debtor's salaried
employees.

3.3.3  Investment Property. If the Debtor shall at any time hold or acquire any
certificated securities, the Debtor shall forthwith endorse, assign and deliver
the same to the Bank, accompanied by such instruments of transfer or assignment
duly executed in blank as the Bank may from time to time specify. If any
securities now or hereafter acquired by the Debtor are uncertificated and are
issued to the Debtor or its nominee directly by the issuer thereof, the Debtor
shall immediately notify the Bank thereof and, at the Bank's request and option,
pursuant to an agreement in form and substance satisfactory to the Bank, either
(a) cause the issuer to agree to comply with instructions from the Bank as to
such securities, without further consent of the Debtor or such nominee, or (b)
arrange for the Bank to become the registered owner of the securities. If any
securities, whether certificated or uncertificated, or other investment property
now or hereafter acquired by the Debtor are held by the Debtor or its nominee
through a securities intermediary or commodity intermediary, the Debtor shall
immediately notify the Bank thereof and, at the Bank's request and option,
pursuant to an agreement in form and substance satisfactory to the Bank, either
(i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Bank to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Bank to such commodity
intermediary, in each case without further consent of the Debtor or such
nominee, or (ii) in the case of financial assets or other investment property
held through a securities intermediary, arrange for the Bank to become the
entitlement holder with respect to such investment property, with the Debtor
being permitted, only with the consent of the Bank, to exercise rights to
withdraw or otherwise deal with such investment property.

 
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3.3.4.  Collateral in the Possession of a Bailee. If any goods are at any time
in the possession of a bailee, the Debtor shall promptly notify the Bank thereof
and, if requested by the Bank, shall promptly obtain an acknowledgment from the
bailee, in form and substance satisfactory to the Bank, that the bailee holds
such Collateral for the benefit of the Bank and shall act upon the instructions
of the Bank, without the further consent of the Debtor.

3.3.5  Electronic Chattel Paper and Transferable Records. If the Debtor at any
time holds or acquires an interest in any electronic chattel paper or any
"transferable record," as that term is defined in Section 201 of the federal
Electronic Signatures in Global and National Commerce Act, or in § 16 of the
Uniform Electronic Transactions Act as in effect in any relevant jurisdiction,
the Debtor shall promptly notify the Bank thereof and, at the request of the
Bank, shall take such action as the Bank may reasonably request to vest in the
Bank control under UCC § 9-105 of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, § 16 of the Uniform Electronic Transactions Act, as
so in effect in such jurisdiction, of such transferable record.

3.3.6.  Letter of Credit Rights. If the Debtor is at any time a beneficiary
under a letter of credit now or hereafter issued in favor of the Debtor, the
Debtor shall promptly notify the Bank thereof and, at the request and option of
the Bank, the Debtor shall, pursuant to an agreement in form and substance
satisfactory to the Bank, either (i) arrange for the issuer and any confirmor of
such letter of credit to consent to an assignment to the Bank of the proceeds of
any drawing under the letter of credit or (ii) arrange for the Bank to become
the transferee beneficiary of the letter of credit, with the Bank agreeing, in
each case, that the proceeds of any drawing under the letter to credit are to be
applied as provided in this Agreement.

3.3.7  Commercial Tort Claims. If the Debtor shall at any time hold or acquire a
commercial tort claim, the Debtor shall immediately notify the Bank in a writing
signed by the Debtor of the details thereof and grant to the Bank in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Bank.

3.3.8.   Other Actions as to any and all Collateral.  The Debtor further agrees
to take any other action reasonably requested by the Bank to insure the
attachment, perfection and first priority of, and the ability of the Bank to
enforce, the Bank's security interest in any and all of the Collateral
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the Uniform
Commercial Code, to the extent, if any, that the Debtor's signature thereon is
required therefor, (b) causing the Bank's name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Bank to enforce, the
Bank's security interest in such Collateral, (c) complying with any provision of
any statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Bank to enforce, the Bank's security interest in
such Collateral, (d) obtaining governmental and other third party consents and
approvals, including without limitation any consent of any licensor, lessor or
other

 
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person obligated on Collateral, (e) obtaining waivers from mortgagees and
landlords in form and substance satisfactory to the Bank and (i) taking all
actions required by any earlier versions of the Uniform Commercial Code or by
other law, as applicable in any relevant Uniform Commercial Code jurisdiction,
or by other law as applicable in any foreign jurisdiction.

3.4.                      Relation to Other Security Documents. The provisions
of this Agreement shall be read and construed with any other security documents
executed at any time by the Debtor in favor of the Bank to the end that the
Bank's Collateral has the most expansive interpretation. Nothing contained in
any such other security documents shall impair any of the rights or remedies of
the Bank hereunder. If Debtor has interests in any patents, trademarks, or
copyrights as reflected on Schedule B, at the Bank's request Debtor shall
execute and deliver to the Bank such assignments, memorandum and agreements as
Bank shall request for the Bank's perfection of its security interests granted
to the Bank hereunder including the filing thereof in the applicable U.S.
government office.

3.5           In connection with any Letter of Credit issued by the Bank on
behalf of the Borrower, the Borrower hereby pledges, assigns and transfers to
the Bank, and grants to the Bank a continuing first priority security interest
in and lien on all of the Borrower's right, title and interest in and to (i) any
payment instrument drawn under, or purported to be drawn under, such Letter of
Credit and other documents accompanying or relating to any such payment
instrument; (ii) any and all shipping documents, warehouse receipts, bills of
lading, invoices, steamship guarantees, airway releases, documents of title,
policies and certificates of insurance, and other documents accompanying or
relating to payment instruments drawn under such Letter of Credit; (iii) any and
all property shipped under or pursuant to or in connection with such Letter of
Credit, or relating thereto or to any trade documents drawn thereunder (whether
such documents, goods or other property be released to or upon Bank's order
under this agreement or any other agreement or bailee receipt or otherwise under
any payment instrument pursuant to which Bank retains a security interest); (iv)
all rights or causes of action against any party arising from or in connection
with any contract of sale or purchase of any property covered by such Letter of
Credit, or any guarantees, undertakings or other agreements, credits, or other
assurances in connection therewith and in and to the proceeds of each and all of
the foregoing; and all substitutions therefor, accessions thereto, and proceeds
and products thereof.

3.6           Guarantees. In addition to any other security interest, Lien, or
other protection in favor of the Bank as set forth in this Agreement, all of the
Obligations are hereby unconditionally and absolutely guaranteed by each
Guarantor. Each Guarantor shall execute and deliver to the Bank a written
guaranty in such form as the Bank shall require. Each Guarantor hereby consents
to all extensions, modifications, renewals, restatements, and any other change
to the Loan Documents agreed to by Borrower without further notice, action,
consent or approval from Guarantor.

3.7           Cross-Collateralization and Cross-Default. All Collateral
heretofore, herein or hereafter given or granted to the Bank shall secure
payment and performance of all of the Obligations, including any Collateral
given or granted to the Bank by any Debtor. All Loans, Advances and all other
Obligations shall be and are hereby declared to be cross-collateralized,
cross-defaulted and cross-guaranteed. All property of Borrower and each
Guarantor of any kind or nature in which Bank has been, is hereunder, or

 
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shall hereafter be granted a security interest or a Lien of any kind shall
constitute Collateral for all Obligations. Any event of default in connection
with any loan, advance or extension of credit made at any time by Bank to
Borrower under any documents executed in connection therewith shall
automatically and without further acts on the part of the Bank constitute an
event of default under all loans, advances and extensions of credit made at any
time by Bank to Borrower. In such event, Bank shall have available to it all
rights and remedies including, but not limited to, acceleration of any or all
loans, advances and extensions of credit made at any time by Bank to Borrower.
It shall not be necessary for cross-collateralization, cross-default,
cross-acceleration or cross-guarantee language to be inserted into any other
previously existing or hereafter created instrument, document or agreement for
this section to be fully enforceable by Bank against Borrower and each Guarantor
and all of their property of any kind or nature, including such property as is
specifically described in this Agreement, any of the other Loan Documents, or
any other documents executed by Borrower and/or any Guarantor in favor of Bank.

3.8           Order of Proceeding. The Bank shall be under no obligation to
proceed in any order or against any property to enforce its rights under the
Loan Documents, and it shall be free to exercise its rights in any order it
choses. Without limiting the foregoing, the Bank shall be under no obligation to
proceed against the Borrower before proceeding directly against any Guarantor,
nor shall the Bank be under any obligation to proceed against any or all of the
Collateral before proceeding directly against the Borrower and/or any Guarantor
in any order determined by the Bank.

3.9           Subordinations.  It is acknowledged that the sum of $109,741.48 is
currently due from Borrower to Howard Ullman (referred to herein as
"Subordinator"); that the sum of $546,025.00 is currently due from Entity
Guarantor CHDT to Subordinator Howard Ullman; and that the sum of $317,763.00 is
currently due from Borrower to Entity Guarantor CHDT (also referred to as
“Subordinator”). Each Subordinator agrees that such $109,741.48,  $546,025.00,
and $317,763.00 of Indebtedness (each such Indebtedness referred to herein as
"Subordinated Debt") due him or it is subordinate, inferior and subject to the
satisfaction of all Obligations due the Bank. Each Subordinator agrees to
execute and deliver to the Bank one or more subordination agreements (each a
"Subordination Agreement") required by the Bank to subordinate the Subordinated
Debt to the Obligations. If any Subordinated Debt is evidenced by notes, each
such note shall be subject to and covered by the Subordination Agreement and
such further documents as the Bank shall require to effectuate such
subordination.

3.10                      Inventory Insurance.  To further secure the payment
and performance in full of all of the Obligations and as additional Collateral
hereunder, the Borrower shall cause the Bank to be named as loss-payee and
additional insured on an inventory policy of insurance providing coverage in an
amount to be approved by the Bank, such policy to be satisfactory in form and
substance to the Bank and issued by an insurer acceptable to the Bank. The
loss-payee and additional insured endorsement or rider shall be accepted by the
home office of the insurance company; the assignment shall remain in full force
and effect until all Obligations have been paid, satisfied and discharged; the
Borrower shall at all times keep such policy in full force and effect, shall pay
all premiums, dues and assessments thereon, and shall not cause the coverage
under the policy to diminish below the amount set forth above; and provision
shall be made to confirm that there can be no cancellation of the policy without
30 days' prior  written notice to the

 
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Bank.  A duplicate of the policy and the loss-payee endorsement or rider must be
delivered to the Bank at the time of execution and delivery of the Loan
Documents together proof of premium payment.  Thereafter, the Borrower shall
provide to the Bank proof of payment of future premiums upon the request of the
Bank.

SECTION 4.  COLLATERAL; GENERAL TERMS

4.1           The Borrower (also referred to as "Debtor") warrants and
represents the following with respect to the Collateral:

4.1.1  The Debtor is (or, in the case of after acquired property, will be) the
sole owner of each item of Collateral and has good and marketable title thereto,
free and clear of any and all interests, claims and Liens except for Permitted
Liens.

4.1.2  Debtor shall maintain the Collateral in good condition and repair; make
all necessary renewals, replacements, additions, betterments and improvements
thereto; pay and discharge when due the cost of repairs and maintenance to the
Collateral; pay all rentals and other payments when due for all real estate
leased or owned by Debtor at which Collateral is located; and maintain a
disaster recovery plan with off-site back-up of the books and records of Debtor.
Debtor will safeguard and protect all Collateral for Bank's general account and
make no disposition thereof without the prior consent of the Bank whether by
sale, lease or otherwise except (i) the sale of Inventory in the ordinary course
of business, and (ii) the sale or disposition of obsolete Equipment in the
ordinary course of business; all provided that the proceeds of any such sale or
disposition shall remain subject to Bank's security interest. The Collateral may
be inspected by the Bank upon reasonable notice to the Debtor.

4.1.3  That portion of the Collateral consisting of Equipment or Inventory shall
be stored solely at the Debtor's facilities, or such other facilities as shall
be disclosed to the Bank in writing no later than 30 days prior to storage at
such facilities, and Debtor shall secure landlord waivers with respect to all
such facilities in such form as shall be satisfactory to the Bank.

4.1.4  With respect to that portion of the Collateral consisting of Inventory,
the Debtor, in addition to the foregoing, further warrants and represents that
it will not make any transfer of Inventory in partial or total satisfaction of a
debt other than a debt to the Bank; that no Inventory will be stored with a
bailee or on consignment without the prior written consent of the Bank; that no
Inventory will be stored at any location not disclosed to the Bank in writing no
later than 30 days prior to storage at such location and without the prior
written consent of the Bank to such location; and that the Debtor shall provide
such documents as the Bank may request in connection with the ownership,
location, and condition of such Inventory. If any Inventory is at any time in
the possession of a bailee, the Debtor shall promptly notify the Bank thereof
and, if requested by the Bank, shall promptly obtain an acknowledgment from the
bailee, in form and substance satisfactory to the Bank, that the bailee holds
such Inventory for the benefit of the Bank and shall act upon the instructions
of the Bank, without the further consent of the Debtor.

 
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4.1.5  The Debtor will pay or cause to be paid all taxes and other charges
relating to the Collateral. The Bank is authorized to pay any unpaid taxes or
charges deemed necessary by Bank to protect or preserve such Collateral without
prior notice to Debtor, and upon payment by the Bank same shall constitute part
of the Obligations due the Bank, and shall become due and payable to the Bank on
demand.

4.1.6  The Debtor will carry insurance issued by an insurer acceptable to Bank,
in amounts acceptable to Bank without co-insurance, against all such liability,
perils and hazards as are usually carried by entities engaged in the same or a
similar business similarly situated or as may be required by Bank in its
discretion, and in addition, will carry business interruption insurance in such
amounts as may be required by Bank. In the case of insurance on any of the
Collateral, Debtor shall carry insurance in the full insurable value thereof and
cause Bank to be named as loss payee (with a lender's loss payable endorsement)
with respect to all personal property, and additional insured with respect to
all liability insurance, as its interests may appear, with thirty (30) days'
notice to be given Bank by the insurance carrier prior to cancellation or
material modification of such insurance coverage. Such insurance shall insure
the Bank notwithstanding any act or neglect of Debtor.

Debtor shall cause to be delivered to Bank the insurance policies therefor or in
the alternative, evidence of insurance and at least thirty (30) business days
prior to the expiration of any such insurance, additional policies or duplicates
thereof or in the alternative, evidence of insurance evidencing the renewal of
such insurance and payment of the premiums therefor. Debtor shall direct all
insurers that in the event of any loss thereunder or the cancellation of any
insurance policy, the insurers shall make payments for such loss and pay all
return or unearned premiums directly to Bank and not to Debtor and Bank jointly.

In the event of any loss, Debtor will give Bank immediate notice thereof and
Bank may make proof of loss whether the same is done by Debtor. Bank is granted
a power of attorney by Debtor with full power of substitution to file any proof
of loss in Debtor's or Bank's name, to endorse Debtor's name on any check, draft
or other instrument evidencing insurance proceeds, and to take any action or
sign any document to pursue any insurance loss claim. Such power, being coupled
with an interest, is irrevocable.

In the event of any loss, Bank, at its option, may (a) retain and apply all or
any part of the insurance proceeds to reduce, in such order and amounts as Bank
may elect, the Obligations, or (b) disburse all or any part of such insurance
proceeds to or for the benefit of Debtor for the purpose of repairing or
replacing Collateral after receiving proof satisfactory to Bank of such repair
or replacement, in either case without waiving or impairing the Obligations or
any provision of this Agreement. Any deficiency thereon shall be paid by Debtor
to Bank upon demand. Debtor shall not take out any insurance without having Bank
named as loss payee or additional insured thereon. Debtor shall bear the full
risk of loss from any loss of any nature whatsoever with respect to the
Collateral.

If Debtor fails to obtain insurance as hereinabove provided, or to keep the same
in force, Bank, if Bank so elects, may obtain such insurance and pay the premium
therefor on behalf of Debtor, and require Borrower to pay such expenses on
demand, and such expenses so advanced by Bank shall be part of the Obligations.

 
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4.1.7  With respect to that portion of the Collateral consisting of Accounts
Receivable, the Debtor, in addition to the foregoing, further warrants and
represents as follows:

(a) Each Account Receivable is a bona fide, valid and legally enforceable
obligation of the Account Debtor in respect thereof and does not represent a
sale on consignment, sale or return, or other similar understanding. Except as
otherwise arising in the ordinary course of business, the right, title and
interest of the Debtor in each Account Receivable is not subject to any defense,
offset, counterclaim, or other claim, nor have any of the foregoing been
asserted or alleged against the Debtor as to any Account Receivable nor will any
of the foregoing, whether or not arising in the ordinary course of business,
have a material adverse effect on the business, financial condition or results
of operations of the Debtor or the aggregate value of the Accounts Receivable.
The amount represented by the Debtor to the Bank as owing by each Account Debtor
in respect of the Accounts Receivable is the correct amount actually and
unconditionally owing by such Account Debtor thereunder.

(b) The address of the chief and principal executive office of Debtor is
Debtor's address set forth in this Agreement. All records pertaining to the
Accounts Receivable (including computer records) and all returns of Inventory
are kept at Debtor's address set forth in this Agreement, and Debtor will notify
Bank no later than 30 days prior to any change in address of the chief and
principal executive office of Debtor or of the change of the location where
records pertaining to Accounts Receivable or returns of Inventory are kept.

(c)           All books, records and documents relating to any of the Accounts
Receivable (including computer records) are and will be genuine and in all
respects what they purport to be; and the amount of each Account Receivable
shown on the books and records of Debtor is and will be the correct amount
actually owing or to be owing at maturity of such Account Receivable.

(d)           The Bank has the immediate absolute and unconditional right to all
cash of the Borrower arising from collections of Accounts Receivable, and all
payments on account of Accounts Receivable, however evidenced, wherever located,
regardless of who is in possession thereof or the form of collection.

(e)           Debtor shall notify Bank if any Accounts Receivable arise out of
contracts with the United States or other department, agency or instrumentality
thereof, and upon request from the Bank the Debtor shall execute any instruments
and take any steps to perfect the assignment of the rights of the Debtor to the
Bank and to insure that all money due or to become due under such contracts
shall be assigned and paid to the Bank, with proper notice having been given,
all as required under the Federal Assignment of Claims Act or any similar act or
regulation.

 
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4.2           In connection with Borrower's execution of a Lockbox Agreement,
Borrower will indicate on all invoices that payments shall be made directly to
the Lockbox. At any time following Default, and at the request of the Bank,
Borrower shall notify Account Debtors to the effect that the Accounts Receivable
have been assigned to the Bank and that payments shall be made directly to the
Bank or as the Bank shall otherwise direct. At any time following Default, the
Bank may notify Account Debtors to the effect that the Accounts Receivable have
been assigned to the Bank and that payments shall be made directly to the Bank
or as the Bank shall otherwise direct.

4.3           The Bank shall have the right to make test verifications of the
Accounts Receivable in any manner and through any medium that it considers
advisable, and the Debtor agrees to pay the reasonable costs thereof and to
furnish all such assistance and information as the Bank may require in
connection therewith. The Bank may in its own name or in the name of others
communicate with Account Debtors in order to verify with them to the Bank's
satisfaction the existence, amount and terms of any Accounts Receivable.

4.4           The Debtor shall hold its books and records relating to the
Accounts Receivable segregated from all of the Debtor's other books and records
in a manner satisfactory to the Bank; and shall deliver to the Bank promptly, on
its request, true and genuine copies of all invoices, original bills of lading,
documents of title, original contracts, chattel paper, instruments and any other
writings relating thereto and other writings or evidence of performance of
contracts or evidence of shipment or delivery of the merchandise sold or
services rendered in connection therewith; and deliver to the Bank, upon receipt
and without demand, any written obligations of Account Debtors to pay, such as
trade acceptances or promissory notes or the like, received by the Debtor; and
the Debtor will deliver to the Bank promptly at the Bank's request additional
copies of any or all of such papers or writings, and such other information with
respect to any Accounts Receivable as the Bank may in its sole and absolute
discretion deem to be necessary.

4.5           The Debtor shall promptly make, stamp or record such entries or
legends on the Debtor's books and records or on any of the Collateral, as the
Bank shall request, to indicate and disclose that the Collateral has been
assigned to the Bank or that the Bank has a security interest in such
Collateral, and to maintain in the Bank's favor a perfected first priority
security interest in all Accounts Receivable and other Collateral provided to
the Bank.

4.6           The Debtor shall execute and deliver such written assignments of
all its Accounts Receivable as the Bank shall require; provided however that the
failure to execute and deliver such written assignments shall not affect or
limit the Bank's security interest or other rights in and to such Accounts
Receivable.

4.7           Borrower shall pay to Bank on demand the unpaid portion of any
Account Receivable which was formerly an Eligible Account Receivable or in which
Bank otherwise has an interest if any petition under the Bankruptcy Code or any
similar federal or state statute or a petition for receivership has been filed
by or against the Account Debtor or its property or if it has made an assignment
for the benefit of creditors, unless the unpaid portion of any former Eligible
Account Receivable has been replaced by Borrower and Borrower remains within the
limitation of Borrower's Availability.

4.8           In furtherance of the continuing security interest herein
contained Debtor will, upon the creation or acquisition of Collateral, or at
such intervals as Bank requires, provide Bank with confirmatory assignments in
form satisfactory to Bank, copies of invoices to customers, evidence of shipment
and delivery, and such further information and documentation as Bank may require
and Debtor, at Bank's request, shall deliver to Bank all documents and written
instruments constituting or relating to Collateral. Debtor will take any and all
steps and observe such formalities and will execute and deliver all papers and
instruments and do all things necessary to effectuate this Agreement and
facilitate liquidation of Collateral, including collection of Accounts
Receivable. The delivery of any information and documentation pursuant to this
Agreement shall be deemed to be a certification by Debtor that as of the date of
such delivery, such information and documentation is true and correct in all
material respects and does not omit any material fact required to be stated
therein or necessary in order to make such information and documentation not
misleading and shall also be deemed a certification that Debtor has no knowledge
of any Default or Event of Default under this Agreement.

4.9           At the time any Account Receivable becomes subject to a security
interest in favor of Bank: said Account Receivable shall be a good and valid
account representing an undisputed, unconditional bona fide indebtedness
incurred by the Account Debtor named therein for merchandise sold and delivered,
or if so indicated in the papers delivered to Bank sold and shipped, or sold and
held subject to delivery instructions, or for services theretofore fully
performed by the Debtor for said Account Debtor. There are and shall be no
setoff counterclaims or rights of recoupment against any such Account
Receivable; no agreement under which any deduction or discount may be claimed
shall have been made with Debtor on any such Account Receivable except as
indicated in a written list, statement, or invoice furnished to Bank; and Debtor
shall be the lawful owner of each such Account Receivable and shall have the
right to subject the same to a first and prior security interest in favor of
Bank, without limitation by any agreement or document to which Debtor is a party
or by which it is bound. No such Account Receivable shall have been or shall
thereafter be sold, assigned or transferred to any Person other than Bank or in
any way encumbered except to Bank and no other Person shall have proceeds claims
thereto, and the Debtor shall defend the same against the claims and demands of
all persons.

4.10                      Debtor hereby constitutes Bank and each of its
officers, agents or designees as Debtor's attorney in fact, with power to
endorse the name of Debtor upon any notes acceptances, checks, drafts, money
orders or other evidences of payment or Collateral that may come into Bank's
possession; to sign Debtor's name to any invoice or bill of lading relating to
any Collateral, drafts against Account Debtors, assignments, verifications and
notices to Account Debtors; to send verifications of Collateral to any Account
Debtor; to execute Debtor's name as well as its own name and to file financing
statements and other instruments or documents; to do all other acts and things
necessary to carry out this Agreement; to receive open and dispose of all mail
addressed to Debtor, and to notify the post office authorities to change the
address for delivery of mail addressed to Debtor to such address as Bank may
designate after Default. All acts of said attorney or designee are hereby
ratified and approved, and said attorney or designee shall not be liable for any
acts of commission or omission, nor for any error of judgment or mistake of fact
or law. This power, being coupled with an interest, is irrevocable while any
Obligations shall remain unpaid. Debtor authorizes Bank to file in its own name
as secured party any financing statement under the Uniform Commercial Code which
Secured Party deems necessary or advisable to

 
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perfect the security interests which it is intended that Bank have under this
Agreement. The Debtor acknowledges that it is not authorized to file any
financing statement or amendment or termination statement without prior written
consent of the Bank and agrees that it will not do so without the prior written
consent of the Secured Party.

4.11                      Debtor subordinates to the payment of any Obligations
due or to become due to Bank from Account Debtors on Collateral, any and all
sums then and thereafter due and become due to Debtor from such Account Debtors,
waiving and postponing all rights with respect thereto until such Obligations to
Bank shall have been fully discharged.

4.12                      Bank may, without notice to or consent from Debtor,
sue upon or otherwise collect, extend the time of payment of, or compromise or
settle for cash, credit or otherwise, on any terms, any Accounts Receivable or
any security or insurance applicable thereto, which is hereby assigned to Bank,
and release any Account Debtor thereon, or accept the return of any merchandise,
all without affecting in any way the liability of Debtor hereunder.

4.13                      Other than in the ordinary course of business Debtor
shall not without the consent of Bank, compromise or adjust any Account
Receivable (or extend the time for payment thereof) grant any additional
discounts, allowances or credits thereon, or accept the return of any
merchandise.

4.14                      In the event that any of the Collateral consists of
chattel paper, notes and other instruments and negotiable documents, the Debtor
shall, at any time and from time to time upon request by the Bank, endorse and
deliver the same to the Bank.

4.15                      It is expressly agreed that the Bank shall not have
any responsibility or liability under any contract in which the Bank has been
granted an interest by reason of or arising out of this Agreement or the receipt
by the Bank of any payment relating to any such contract pursuant hereto, nor
shall the Bank be required or obligated in any manner to perform or fulfill any
of the responsibilities of any other party under or pursuant to any such
contract, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any such contract, or to present or file any claim, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned or pledged to it or to which it may be
entitled at any time.

4.16                      Debtor shall ensure that all real properties at which
any Collateral is located remains in compliance with all Environmental Laws and
Debtor shall not place or permit to be placed any hazardous substances (as
defined by any Environmental Law) on any such real property except as permitted
by applicable law or appropriate governmental authorities. Debtor shall defend
and indemnify Bank and hold Bank and its employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Bank under or on account of any Environmental Laws, including,
without limitation, the assertion of any Lien thereunder, with respect to any
release of a reportable quantity of any hazardous substances at the real
property (any such event being hereinafter referred to as a "Hazardous
Discharge"), the presence of any hazardous substances affecting the real
property, whether or not the same originates or emerges from the

 
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real property or any contiguous real estate, including any loss of value of the
real property as a result of the foregoing. Debtor's obligations hereunder shall
arise upon the discovery of the presence of any hazardous substances at the real
property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any hazardous
substances. Debtor's obligation and the indemnifications hereunder shall survive
the termination of this Agreement or any Loan Facility. For purposes of this
Section, all references to real property shall be deemed to include all of
Debtor's right, title and interest in and to its owned and leased premises.

4.17                       The Bank shall have full power, in its sole and
absolute discretion and without notice, to consent to the substitution,
exchange, or release of all or any part of the Collateral, whether or not other
collateral, if any, received by the Bank upon such substitution, exchange, or
release shall be of the same or different character or value than the Collateral
so substituted, exchanged or released, and whether or not the Bank receives any
value for any such action.

4.18                      Intellectual Property Rights Licensed from Others.
Schedule B reflects a complete list of all agreements (“Intellectual Property
Licenses”) under which the Borrower has licensed Intellectual Property rights
from another Person (“Licensor”) other than readily available, non-negotiated
licenses of computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative tasks. Upon
request from the Bank, the Borrower shall obtain an acknowledgment and agreement
from each Licensor in favor of the Bank permitting the Bank to exercise its
rights and remedies against Inventory of the Borrower affected by such
Intellectual Property Licenses including the ability of the Bank to sell, lease
or otherwise dispose of Inventory if an Event of Default occurs under this
Agreement.

SECTION 5.  REPRESENTATIONS AND WARRANTIES

In order to induce the Bank to enter into this Agreement and, among other
things, make Advances from the Loan Facility, the Borrower and each Guarantor,
as the case may be, hereby represents, warrants, covenants and agrees as
follows:

5.1           Borrower and Guarantor are each presently in a financial condition
which will enable it to fulfill all of its obligations under the Loan Documents.

5.2           The Borrower has previously delivered to the Bank a certificate
signed by the Borrower and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Borrower represents and warrants to the Bank as follows:(a)
the Borrower's exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof, (b) the Borrower is an organization of the
type and organized in the jurisdiction set forth in the Perfection Certificate,
(c) the Perfection Certificate accurately sets forth the Borrower's
organizational identification number or accurately states that the Borrower has
none, (d) the Perfection Certificate accurately sets forth the Borrower's place
of business or, if more than one, its chief executive office as well as its
mailing address if different and (e) all other information set forth on the
Perfection Certificate pertaining to the Borrower is accurate and complete.

 
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5.3           The Borrower covenants with the Bank as follows: (a) without
providing at least 30 days prior written notice to the Bank, the Borrower will
not change its name, its place of business or, if more than one, chief executive
office, or its mailing address or organizational identification number if it has
one, (b) if the Borrower does not have an organizational identification number
and later obtains one, the Borrower shall forthwith notify the Bank of such
organizational identification number, and (c) the Borrower will not change its
type of organization, jurisdiction of organization or other legal structure.

5.4           Individual Guarantor's true domicile is set forth on page 1 of
this Agreement.

5.5           Borrower was duly formed and is in good standing under the laws of
the state of its formation, and utilizes no names other than as set forth in
this Agreement. Borrower  has all requisite power and authority (i) to execute
and deliver the Loan Documents, and to consummate the transactions and perform
its obligations thereunder; (ii) to own and operate its properties and assets
and to carry on the business now conducted or as now contemplated; and (iii) is
qualified or authorized to do business and is in good standing in all
jurisdictions wherein the character of the property owned or the nature of the
business conducted by Borrower makes such qualification or authorization
necessary.

5.6           Entity Guarantor was duly formed and is in good standing under the
laws of the state of its formation, and utilizes no names other than as set
forth in this Agreement. Entity Guarantor has all requisite power and authority
(i) to execute and deliver the Loan Documents, and to consummate the
transactions and perform its obligations thereunder; (ii) to own and operate its
properties and assets and to carry on the business now conducted or as now
contemplated; and (iii) is qualified or authorized to do business and is in good
standing in all jurisdictions wherein the character of the property owned or the
nature of the business conducted by Entity Guarantor makes such qualification or
authorization necessary.

5.7           Individual Guarantor has full legal capacity to execute and
deliver the Loan Documents, and to consummate the transactions and perform his
or her obligations thereunder.

5.8           The execution and delivery of, and the consummation of the
transactions contemplated under, the Loan Documents have been duly authorized
and approved and no other actions or proceedings on the part of Borrower or any
Guarantor are necessary or required under the laws of the State of New York, the
State of Florida and all other jurisdictions which may have an effect on the
validity and enforceability of the Loan Documents.

5.9           The Loan Documents delivered or to be delivered by Borrower and
Guarantors are legal, valid and binding obligations of Borrower and Guarantors,
enforceable against Borrower and Guarantors in accordance with their respective
terms.

 
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5.10                      The execution, delivery and performance of the Loan
Documents will not (i) violate any provision of any existing law, statute, rule,
regulation or ordinance, (ii) conflict with, result in a breach of or constitute
a default under (a) any certificates of incorporation or by-laws of Borrower or
Entity Guarantor,  or (b) any order, judgment, award or decree of any court,
governmental authority, bureau or agency, (iii) result in the creation or
imposition of any Lien or encumbrance upon any of the property of Borrower or
Guarantor immediately, with the passage of time or with the giving of notice and
the passage of time, under any contract, agreement or instrument to which
Borrower or Guarantor is a party or by which Borrower or Guarantor is bound,
(iv) result in the acceleration of any obligation under any mortgage, lien,
lease, franchise, license, permit, agreement, instrument, order, award,
judgment, or decree, or in the termination of any license, franchise, lease, or
permit to which Borrower or Guarantor is a party or by which it is bound, or (v)
violate or conflict with any other restriction of any kind or character to which
Borrower or Guarantor is subject.

5.11                       There is no known claim, loss, contingency,
investigation, whether or not pending, threatened or imminent against or
otherwise affecting Borrower or any Guarantor that involves the possibility of
any liability not fully covered by insurance or that may result in a Material
Adverse Effect in the business, properties, or condition of Borrower or such
Guarantor, or which may result in an adverse change in the ability of Borrower
or such Guarantor to fully perform under the Loan Documents.

5.12                       There is no litigation, arbitration or proceeding
before any court, arbitrator or governmental authority currently pending, nor,
to the knowledge of Borrower or Guarantors, threatened, against the Borrower or
any Guarantor or any of its properties and revenues, which, if adversely
determined, would materially adversely affect the business, operations,
financial condition or results of operations of Borrower or such Guarantor.
Borrower and each Guarantor shall notify Bank in writing within 10 days of any
claim, litigation, action, proceeding or event which may result in a Material
Adverse Effect in the business, properties or condition of Borrower or any
Guarantor.

5.13                       To the best of their knowledge, Borrower and each
Guarantor has complied with all applicable statutes, regulations, rules,
ordinances, court decrees and other directives of the United States of America,
and all states, counties, municipalities, agencies and governmental authorities
having jurisdiction over Borrower, Guarantor and/or its operations.

5.14                       Neither Borrower nor any Guarantor is in default in
any material respect in the payment or performance of any of its obligations or
in the performance of any mortgage, indenture, lease, contract or other
agreement or undertaking to which it is a party or by which it or any of its
properties or assets may be bound, and no default thereunder has occurred and is
continuing.  Neither Borrower nor any Guarantor is in default under any order,
award or decree of any court, arbitrator, or governmental authority binding upon
or affecting it or by which any of its properties or assets may be bound or
affected, and no such order, award or decree, if any, materially adversely
affects the ability of Borrower or Guarantor to carry on its business as
presently conducted or to perform its obligations under the Loan Documents.

 
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5.15                      All federal, state and other tax returns of Borrower
and each Guarantor required by law to be filed have been duly filed or
extensions obtained. All federal, state and other taxes, assessments and
governmental charges or levies upon Borrower, Guarantor or any of its
properties, income, profits or assets which are due and payable have been paid
or provided for, except such tax returns the non-filing of which, and such taxes
the nonpayment of which, would not have a Material Adverse Effect upon the
business, assets, liabilities, financial condition, results of operation or
business prospects of Borrower or Guarantor and except for such taxes and
assessments which the Borrower or Guarantor is disputing in good faith and for
which Borrower and Guarantor has established adequate reserves for the payment
of such disputed taxes or assessments. Borrower and each Guarantor shall cause
all future tax returns to be timely filed or extensions obtained therefor, and
all future taxes and assessments to be paid when due.

5.16                      Where financial statements have been given to the
Bank, and are to be given in the future, such financial statements shall be
true, correct and complete in every detail, prepared in accordance with GAAP
(wherever GAAP can apply) consistently applied, and fairly present the financial
position and results of operations and changes in cash flows of Borrower and
Guarantor as the case may be on the date and for the period involved. Such
financial statements make full and adequate provision for all obligations,
liabilities and commitments, fixed and contingent, of Borrower and Guarantor as
of the date of the financial statements.

5.17                      All property owned or utilized by Borrower, as well as
all operations of Borrower, is in compliance and will continue to be in
compliance with all federal, state, county, municipal and regulatory agency
laws, rules, regulations, and ordinances including, but not limited to, all
Environmental Laws.

5.18                      Without the prior written consent of the Bank,
Borrower shall not merge or consolidate with or sell, assign, lease or otherwise
dispose of all or substantially all of its assets whether now owned or hereafter
acquired; acquire all or substantially all the assets or the business of any
Person; effectuate a change in current management; or exceed any Capital
Expenditures or Capital Lease Obligations limitations prescribed in this
Agreement.

5.19                      Borrower is solvent, able to pay its debts as they
mature, has capital sufficient to carry on its business and all businesses in
which it is about to engage, and (i) as of the date of this Agreement, the fair
present saleable value of its assets, calculated on a going concern basis, is in
excess of the amount of its liabilities and (ii) subsequent to the date of this
Agreement, the fair saleable value of its assets (calculated on a going concern
basis) will be in excess of the amount of its liabilities.

5.20                      Borrower is in compliance in all respects with the
applicable provisions of ERISA and all regulations issued thereunder. As of the
date hereof, no employee benefit plan ("Plan") as defined by ERISA, maintained
by Borrower or under which Borrower could have any liability under ERISA (i) has
failed to meet minimum funding standards established under ERISA, (ii) has
failed to comply in a material respect with all applicable requirements of ERISA
and of the Internal Revenue Code, including all applicable rulings and
regulations thereunder, (iii) has engaged in or been involved in a prohibited
transaction under ERISA or the Internal Revenue Code which would subject
Borrower to any material liability, or (iv) has been terminated if such
termination would subject Borrower to any material liability. Borrower has

 
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timely made all contributions when due, and no event has occurred triggering a
claim against Borrower for withdrawal liability with respect to any Plan.

5.21                      Borrower has obtained all Consents necessary to carry
on its business, and is not knowingly in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect.

5.22                      Bank shall have the unrestricted right at any time and
from time to time, and without the consent of or notice to Borrower or any
Guarantor, to grant to one or more banks or other financial institutions (each,
a "Participant") participating interests in Bank's obligation to lend hereunder
and/or any or all of the Loans held by Bank hereunder. In the event of any such
grant by Bank of a participating interest to a Participant, whether or not upon
notice to Borrower, Bank shall remain responsible for the performance of its
obligations hereunder and Borrower shall continue to deal solely and directly
with Bank in connection with Bank's rights and obligations hereunder. Bank may
furnish any information concerning Borrower in its possession from time to time
to prospective Participants, provided that Bank shall require any such
prospective Participant to agree in writing to maintain the confidentiality of
such information.

5.23                      Borrower agrees that immediately upon becoming aware
of any development or other information outside the ordinary course of business
and excluding matters of a general economic, financial or political nature which
would reasonably be expected to have a Material Adverse Effect it shall give to
Bank telephonic notice specifying the nature of such development or information
and such anticipated effect. In addition, such verbal communication shall be
confirmed by written notice thereof to Bank on the same day such verbal
communication is made or the next Business Day thereafter.

5.24                      Borrower shall give thirty (30) days prior written
notice to Bank of any changes in the location of any of its respective places of
business, of the places where records concerning its Accounts or where its
Inventory or other Collateral are kept, or the establishment of any new, or the
discontinuance of any existing place of business or location, where Inventory or
other Collateral is kept; provided that Borrower may not establish any place of
business outside of the United States.

5.25                      Borrower shall not:

(a) Become liable upon the obligations of any Person by assumption, endorsement
or guaranty thereof or otherwise (other than to Bank) except the endorsement of
checks in the ordinary course of business; pledge Bank's credit on any purchases
or for any purpose whatsoever or use any portion of any Advance in or for any
business other than Borrower's business; make advances, loans or extensions of
credit to any Person, including without limitation, any parent, Subsidiary or
Affiliate;

(b) Substantially change the nature of the business in which it is presently
engaged, nor except as specifically permitted hereby, purchase or invest,
directly or indirectly, in any assets or property other than in the ordinary
course of business for assets or property which are useful in, necessary for and
are to be used in its business as presently conducted.

(c)  Directly or indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease any property to, or otherwise deal with, any Affiliate,
except transactions in the ordinary course of business, on an arm's-length basis
on terms no less favorable than terms which would have been obtainable from a
Person other than an Affiliate.

(d)  Change its fiscal year or make any significant change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.

(e)  If a registered organization, change its jurisdiction of organization.

(f)  Amend, modify or waive any term or material provision of its Certificate of
Incorporation or By-Laws without the prior consent of the Bank.

5.26                      All information, reports and other papers and data
furnished to the Bank were, at the time the same were so furnished, complete and
correct in all material respects. No document furnished or statement made to the
Bank in connection with the negotiation, preparation or execution of the Loan
Documents contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading. No fact is known to Borrower or any
Guarantor which has had or may in the future have a materially adverse effect
upon the Borrower's business, assets, liabilities, condition, financial or
otherwise, or results of operations that has not been set forth in the financial
statements furnished to the Bank or other reports or other papers or data
otherwise disclosed in writing to the Bank.

5.27                      All patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, copyrights,
copyright applications, design rights, tradenames, assumed names, trade secrets
and licenses owned or utilized by Borrower are set forth on Schedule B, are
valid and have been duly registered or filed with all appropriate governmental
authorities and constitute all of the Intellectual Property rights which are
necessary for the operation of its business; there is no objection to or pending
challenge to the validity of any such patent, trademark, copyright, design
right, tradename, trade secret or license and Borrower is not aware of any
grounds for any challenge. Each patent, patent application, patent license,
trademark, trademark application, trademark license, service mark, service mark
application, service mark license, design right, copyright, copyright
application and copyright license owned or held by Borrower and all trade
secrets used by Borrower consist of original material or property developed by
Borrower or was lawfully acquired by Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof. With respect to all
software used by Borrower, such party is in possession of all source and object
codes related to each piece of software or is the beneficiary of a source code
escrow agreement.

5.28                      Borrower is not party to any contract or agreement the
performance of which could have a Material Adverse Effect. Borrower has not
agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted Lien. Borrower is not
involved in any labor dispute; there are no strikes or walkouts or union
organization of Borrower's employees threatened or in existence and no labor

 
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contract is scheduled to expire during the term of this Agreement. Borrower is
not engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.

5.29                      All representations and warranties of Borrower and
each Guarantor contained in this Agreement and the other Loan Documents shall be
true at the time of Borrower's and such Guarantor's execution of this Agreement
and the other Loan Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.

5.30                      In the event that any change in applicable law,
regulation, condition, directive or interpretation occurs which (i) subjects the
Bank to any tax with respect to any amount paid or to be paid to the Bank under
the Loan Documents or changes the basis of taxation of payments to the Bank on
any amounts payable under the Loan Documents (other than any tax measured by or
based upon the overall net income of the Bank); or (ii) imposes, modifies or
deems applicable any capital adequacy, capital maintenance, reserve or deposit
requirements against the assets held by the Bank in connection with advances or
payments to the Bank pursuant to the Loan Documents; or (iii) imposes upon the
Bank any other condition with respect to any amounts paid or payable to or by
the Bank; and the result of any of the foregoing is to increase the cost to the
Bank of making any Loans or extensions of credit under the Loan Documents, or to
reduce the rate of return on the Bank's capital to a level below that which the
Bank would have achieved but for such event, then and in such event the Bank
shall deliver to the Borrower written notice of the happening of such event, and
the Bank shall be entitled to adjust the terms of the Loan Documents to make up
any increased cost or reduction of payment or return experienced by the Bank as
a result of such event. Such notice shall contain the statement of Bank with
regard to any such amount or amounts which shall, in the absence of manifest
error, be binding upon Borrower. In determining such amount, Bank may use any
reasonable method of averaging and attribution that it deems applicable.

5.31                      Borrower and each Guarantor, as the case may be,
warrant and represent that all information set forth on Schedule B annexed
hereto and made a part hereof is true and accurate as of the date hereof.

5.32                      Anti-Terrorism Laws.

(a)           General.

Neither Borrower, nor any Guarantor, nor any of their Affiliates is in violation
of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.

 
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(b)           Executive Order No. 13224.

Neither Borrower, nor any Guarantor, nor any of their Affiliates or their
respective agents acting or benefiting in any capacity in connection with the
Loans, Letters of Credit or other transactions hereunder, is any of the
following (each a “Blocked Person”):

(i)           a Person that is listed in the annex to, or is otherwise subject
to the provisions of, Executive Order No. 13224;

(ii)                      a Person owned or controlled by, or acting for or on
behalf of, any Person that is listed in the annex to, or is otherwise subject to
the provisions of, Executive Order No. 13224;

(iii)                      a Person or entity with which any lender is
prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;

(iv)                      a Person or entity that commits, threatens or
conspires to commit or supports “terrorism” as defined in Executive Order No.
13224;

(v)           a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or

(vi)                      a Person or entity who is affiliated or associated
with a person or entity listed above.

(c)           Blocked Person or Transactions.  Neither Borrower, nor any
Guarantor, nor to Borrower’s knowledge any of their agents acting in any
capacity in connection with any Loans, Letters of Credit or other transactions
hereunder (i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (ii) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to Executive Order No.
13224.

(d)           Trading with the Enemy.  Borrower has not engaged, nor does it
intend to engage, in any business or activity prohibited by the Trading with the
Enemy Act.

SECTION 6.  ADDITIONAL CONDITIONS, COVENANTS AND REQUIREMENTS

6.1  Field Examinations. Borrower will permit the Bank and its agents and
representatives, at any time and from time to time during normal business hours
and without undue disruption to Borrower's business, to (i) visit and inspect
the premises and the properties of Borrower and the Collateral, (ii) inspect and
make extracts from the books and records of Borrower, and (iii) discuss with
Borrower's officers, employees and accountants any and all matters with respect
to the business, assets, liabilities, financial condition, results of operations
and business prospects of the Borrower. Such audits or field examinations are
expressly authorized by Borrower, and shall include, at a minimum, periodic
field examinations as directed by the Bank. The cost of any activities of the
Bank hereunder shall be paid by Borrower as

 
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invoiced by the Bank. The cost of all field examinations required by the Bank
shall be borne by the Borrower based on $850.00 per man per day plus out of town
travel and out of pocket expenses.

6.2           Financial Reporting Requirements and Statements. Borrower and
Guarantors, as the case may be, shall comply with the following requirements:

6.2.1  Borrower and Entity Guarantor shall provide to the Bank, within 90 days
after the end of each fiscal year of Borrower and Entity Guarantor a balance
sheet as at the end of such fiscal year, and a statement of income and retained
earnings and statement of cash flow for such fiscal year, prepared on a
consolidated and consolidating basis and audited in accordance with GAAP by
independent certified public accountants of recognized standing selected by
Borrower and Entity Guarantor and satisfactory to the Bank. Borrower shall
submit with each financial statement required hereunder, a certificate
reflecting Borrower's calculation of Borrower's compliance with all financial
covenants required hereunder together with a certification by the chief
financial officer of Borrower stating that there then exists no Default under
the Loan Documents and no event which, with the giving of notice or lapse of
time, or both, would constitute an event of default under any of the Loan
Documents or any other material agreement to which Borrower is a party
("Financial Statement Calculation and Certification").

6.2.2  Borrower and Entity Guarantor shall provide to the Bank, within 60 days
after the end of each fiscal quarter period of Borrower and Entity Guarantor a
balance sheet as at the end of such fiscal quarter, and a statement of income
and retained earnings and statement of cash flow for such fiscal quarter,
prepared on a consolidated and consolidating basis in accordance with GAAP by
Borrower's and Entity Guarantor's management accompanied by an attestation of
the chief financial officer of Borrower and Entity Guarantor. Borrower shall
submit a Financial Statement Calculation and Certification with each financial
statement required hereunder.

6.2.3                      Borrower shall provide to the Bank, within 120 days
after the end of each fiscal year of Borrower, true and signed copies of federal
tax returns, complete with all schedules and attachments, filed by Borrower,
except if filed earlier in which case Bank shall be furnished with such copies
within 30 days of filing. If Borrower is on extension for the filing of any tax
return, Bank shall be furnished with, within 30 days of filing, a true copy of
any such extension and, thereafter, Bank shall be provided with a true and
signed copy of each such filed tax return, complete with all schedules and
attachments within 10 days of filing.

6.2.4                      Entity Guarantor shall provide to the Bank, within
120 days after the end of each fiscal year of Entity Guarantor, true and signed
copies of federal tax returns, complete with all schedules and attachments,
filed by Entity Guarantor, except if filed earlier in which case Bank shall be
furnished with such copies within 30 days of filing. If Entity Guarantor is on
extension for the filing of any tax return, Bank shall be furnished with, within
30 days of filing, a true copy of any such extension and, thereafter, Bank shall
be provided with a true and signed copy of each such filed tax return, complete
with all schedules and attachments within 10 days of filing.

 
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6.2.5                      Individual Guarantor shall provide to the Bank,
within 90 days of the fiscal year end of the Borrower, the personal financial
statement of such Guarantor, containing such information as the Bank shall
require and, if requested, on forms prescribed by the Bank, all such statements
to be executed by such Guarantor.

6.2.6  Individual Guarantor Guarantor shall provide to the Bank, within 120 days
after the end of each fiscal year of Borrower, true and signed copies of federal
tax returns, complete with all schedules and attachments, filed by Guarantor,
except if filed earlier in which case Bank shall be furnished with such copies
within 30 days of filing. If Guarantor is on extension for the filing of any tax
return, Bank shall be furnished with, within 30 days of filing, a true copy of
any such extension and, thereafter, Bank shall be provided with a true and
signed copy of each such filed tax return, complete with all schedules and
attachments within 10 days of filing.

6.3           Other Reporting Requirements. Borrower shall comply with the
following conditions:

6.3.1  Borrower shall provide to the Bank, within 15 days of the end of the
previous month, a detailed aging report setting forth the amount due and owing
on each of Borrower's Accounts Receivable on Borrower's books as of the close of
the preceding month on an invoice date basis, together with a reconciliation
report satisfactory to the Bank showing all sales, collections, payments and
adjustments to accounts receivable on Borrower's books as of the close of the
preceding month.

6.3.2  Borrower shall provide to the Bank, within 15 days of the end of the
previous month, a detailed aging report setting forth the amount due and owing
on each of Borrower's accounts payable on Borrower's books as of the close of
the preceding month.

6.3.3  Borrower shall provide to the Bank on a daily basis Borrower's sales
journal, cash receipts journal, credit memos and checks if any in kind
delivered.

6.3.4  Borrower shall provide to the Bank, within 15 days of the end of each
month and at the time of each request for an Advance, a Borrowing Base
Certificate.

6.3.5  Borrower shall provide to the Bank, within 15 days of the end of the
previous month, a detailed listing and summary of the Inventory on Borrower's
books as of the close of the preceding month, and including quantities, values,
and location.

6.3.6  Borrower shall provide to the Bank prompt notice of any change in the
status of an Account Receivable from that which is Eligible to that which is
not, and the rejection of goods, delay in performance, or claims made in regard
to Accounts Receivable.

6.4           Borrower shall comply with the following financial covenants:

6.4.1  Leverage; Debt to Tangible Net Worth ratio: The Borrower will maintain a
Debt to Tangible Net Worth ratio as herein prescribed for the periods set forth
hereafter: (i)  as of fiscal year end December 31, 2007, the Borrower shall have
achieved a ratio of Debt to Tangible Net Worth in a proportion not to exceed
1.60 to 1; (ii) commencing with fiscal year 2008,

 
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and for each fiscal year thereafter, the Borrower shall maintain at all times a
ratio of Debt to Tangible Net Worth in a proportion not to exceed 1.60 to 1. In
applying this ratio, the term "Debt" as numerator in the ratio equation shall
mean the total liabilities of the Borrower whether demand, installment,
contingent, secured, unsecured, guaranteed, endorsed, or assumed all determined
in accordance with GAAP, less Subordinated Debt. The term "Tangible Net Worth"
as denominator in the ratio equation shall have the same meaning as set forth in
paragraph 6.4.2. This covenant shall be tested quarterly and at fiscal year end.

6.4.2   Minimum Tangible Net Worth:  The Borrower will maintain Tangible Net
Worth as herein prescribed for the periods set forth hereafter: (i) as of fiscal
year end December 31, 2007, the Borrower shall have achieved a Tangible Net
Worth of not less than $825,000.00; (ii) commencing with fiscal year 2008, and
for each fiscal year thereafter, Borrower's minimum Tangible Net Worth
requirement hereunder shall increase by $50,000.00 per year. In applying this
requirement, the term "Tangible Net Worth" shall mean, as of the time of any
determination thereof, the Borrower's net worth as reported on Borrower's
financial statements, plus loans subordinated in favor of the Bank, less the
total of loans or advances to its officers and affiliated companies, goodwill,
licenses, patents, copyrights, trademarks, tradenames, unamortized debt discount
and expense, leasehold improvements or organizational expenses and other like
intangible assets and other items that would be characterized as intangible
assets in accordance with GAAP. This covenant shall be tested quarterly and at
fiscal year end.

6.4.3  Net Profit.  Commencing with fiscal year end December 31, 2008, and for
each fiscal year thereafter, Borrower shall reflect a net profit of not less
than $100,000.00 as reflected in Borrower's audited fiscal year end statement
for any such fiscal year.

6.4.4  No Year End Loss.  Commencing with Borrower's December 31, 2007 fiscal
year end and for each fiscal year thereafter, Borrower shall not experience a
loss as at any fiscal year end as reflected in Borrower's audited fiscal year
end statements required hereunder.

6.4.5  Pre-tax distributions. Borrower shall not declare, pay or make any
dividend or distribution on any shares of the common stock or preferred stock of
Borrower (other than dividends or distributions payable in its stock, or
split-ups or reclassifications of its stock) or apply any of its funds, property
or assets to the purchase, redemption or other retirement of any common or
preferred stock, or of any options to purchase or acquire any such shares of
common or preferred stock of Borrower except that so long as no Event of Default
or Default shall exist before or after the making of such distribution, Borrower
may make distributions equal to but not in excess of fifty percent (50%) of
pre-tax profits on an annual basis. Any increase beyond the 50% limitation
hereunder must be approved in writing in advance by the Bank.

6.4.6  Employee Loans. Borrower shall not make loans to employees in excess of
the aggregate amount of $25,000.00 in any fiscal year without the prior written
consent of the Bank in its sole discretion.

6.4.7                      Limitations on inter-company transactions. There
shall be no inter-company transactions with Affiliates or Subsidiaries in excess
of $25,000.00 in any fiscal year. Existing Subordinated Debt as set forth in
Section 3.9 shall not be included when applying this limitation.

 
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In the event that Borrower shall violate any of the aforesaid covenants, then
for such time period during which a covenant violation exists the Contract Rate
hereunder shall be increased by one percent (1.0%). Anything to the contrary
notwithstanding, the Bank reserves the right to declare that an Event of Default
under this Agreement has occurred attributable to any such covenant violation
irrespective of the increase in the Contract Rate hereunder.

In the event that a covenant violation occurs, and the Bank is requested to
waive such violation, Borrower shall be responsible to pay to the Bank a waiver
fee of one percent (1.0%) of the Maximum Revolving Advance Amount in effect at
such time if the Bank issues such waiver in its sole and absolute discretion.
Payment shall be made by the Borrower at the time of issuance of any such
waiver.

6.5           In the event that working capital or other financial needs of
Borrower arise after execution of this Agreement beyond the limitations of the
Loan Facility created hereunder, such funds shall be contributed by stockholders
of Borrower in the form of equity or loans which shall be subordinated to the
Obligations due the Bank pursuant to subordinations agreements prepared by the
Bank.

6.6           Borrower shall provide to the Bank immediately upon demand (i)
certificates of insurance for all policies of insurance to be maintained by
Borrower pursuant to this Agreement; (ii) an estoppel certificate executed by an
authorized officer of Borrower indicating that there then exists no Default
under the Loan Documents and no event which, with the giving of notice or lapse
of time, or both, would constitute an event of default under any agreement to
which Borrower is a party; (iii) all original and other documents evidencing
right to payment, including but not limited to invoices, original orders,
shipping and delivery receipts; and (iv) all information received by Borrower
affecting the financial status or condition of any Account Debtor.

6.7           Borrower and Guarantors shall promptly provide to the Bank such
additional financial information, data and documents, in form reasonably
satisfactory to the Bank, as may be reasonably requested from time to time by
the Bank.

6.8           Capital Expenditures. There shall be no limitation with respect to
Capital Expenditures of the Borrower provided that no single or series of
Capital Expenditures during any fiscal year shall result in the violation of any
financial covenant prescribed in this Agreement or otherwise cause an Event of
Default to occur.

6.9           Minimum Deposit. The Borrower shall maintain with Bank average
collected demand deposit balances equal to $50,000.00 (the "Minimum Deposit").
Furthermore, if the Borrower does not maintain the Minimum Deposit, Borrower
shall pay to Bank, on a quarterly basis, a deficiency fee equal to the Contract
Rate plus three percent (3.0%) multiplied by the difference between (i)
Borrower's actual average collected balances maintained with the Bank during
such period and (ii) the Minimum Deposit. The Borrower shall maintain its main
operating account and all other business accounts with the Bank.

 
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6.10                      Collateral Management Fee. The Borrower shall pay to
the Bank a monthly collateral management fee (the "Collateral Management Fee")
in the amount of $500.00, subject to adjustment in accordance with the
operations experience, commencing with the execution of this Agreement and for
each successive month thereafter until all Obligations have been paid in full
and the Loan Facility has been terminated under the Loan Documents.

6.11                      Lockbox Fee. The Borrower shall pay to the Bank a
monthly lockbox fee (the "Lockbox Fee") in the amount of $500.00 commencing with
the execution of this Agreement and for each successive month thereafter,
subject to adjustment in accordance with the operations experience and the
Lockbox Agreement (as referenced herein) until all Obligations have been paid in
full and the Loan Facility has been terminated under the Loan Documents.
Borrower shall execute the Bank's form of Lockbox Agreement, and shall comply
with all requirements thereof.

6.12                       Prepayment Premium.  In the event that the Loan
Facility is terminated by the Borrower at any time prior to a Maturity Date,
whether of the Initial Term or any Renewal Term, or if the Loan Facility is
terminated by the Bank as a result of the occurrence of an Event of Default,
whether of the Initial Term or any Renewal Term, the Borrower shall pay to the
Bank a prepayment premium upon the occurrence of such event (a "Prepayment
Event") equal to one percent (1.0%) of the Maximum Revolving Advance Amount in
effect at such time if the Prepayment Event occurs in the first year of the
Initial Term or any Renewal Term, and one half of one percent (0.5%) of the
Maximum Revolving Advance Amount in effect at such time if the Prepayment Event
occurs in the second year of the Initial Term or any Renewal Term.

6.13                       Annual Loan Facility Fee.  On the yearly anniversary
date of the execution of this Agreement, Borrower shall pay to the Bank a
facility fee (“Facility Fee”) in the amount of 0.5% of the Maximum Revolving
Advance Amount then in effect.

6.14                      Closing Fee. At the time of execution of this
Agreement, Borrower shall pay to the Bank a closing fee ("Closing Fee") in the
amount of $20,000.00.

6.15                       Overadvances. If at any time (either contrary to the
Bank's intention, as the result of Eligible Accounts Receivable thereafter
becoming ineligible, or with Bank's consent, as the result of Bank making
additional advances in its discretion that cause a temporary Overadvance, (as
hereinafter defined), the amount of Obligations exceeds Borrower's Availability
(such excess being hereinafter referred to as an "Overadvance"), Borrower shall
(i) in the case of an unintentional Overadvance, on notification of such fact by
Bank, forthwith pay to Bank such amount as will eliminate the Overadvance; and
(ii) in the case of an Overadvance with the Bank's consent, pay to the Bank, on
the date specified by the Bank, such amount as will eliminate the Overadvance.
At the end of any month in which any Overadvance has occurred, Borrower shall be
charged an Overadvance Fee equal to one percent (1.00%) of the maximum
Overadvance occurring during such month.

6.16                       Unused Line Fee.  N/A

6.17                      Operating Accounts.  Borrower agrees to maintain all
bank accounts, including all operating accounts, with the Bank.

 
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6.18                      Neither Borrower, nor any Guarantor, nor their agents
shall (i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person, (ii) deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224; (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224, the USA Patriot Act or any other
Anti-Terrorism Law; or (iv) engage in any business or activity in violation of
the Trading with the Enemy Act.  Borrower shall deliver to the Bank any
certification or other evidence requested from time to time by any lender in its
sole discretion, confirming Borrower’s compliance with this Section.

SECTION 7. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

Closing under this Agreement is subject to the following conditions precedent
(all instruments, documents and agreements to be in form and substance
satisfactory to Bank and Bank's counsel):

7.1           Resolutions, Opinions, and Other Requirements: Borrower shall have
delivered, or caused to be delivered to Bank, or Bank shall have received the
following:

a.           this Agreement, and each of the other Loan Documents all properly
executed;

b.           any other documents to be executed and/or delivered by Borrower or
any other Person pursuant to this Agreement;

c.           certified copies of (i) resolutions of Borrower's and Entity
Guarantor's board of directors authorizing the execution, delivery and
performance of this Agreement, and each of the other Loan Documents required to
be delivered pursuant to this Agreement and (ii) Borrower's articles or
certificate of incorporation and by-laws;

d.           an incumbency certificate for Borrower and Entity Guarantor
identifying all officers, with specimen signatures, authorized to execute the
Loan Documents;

e.           insurance certificates in form satisfactory to the Bank;

f.           all searches and certificates;

g.           such other documents reasonably required by Bank;

h.           after payment of all costs associated with Closing (including the
payoff of existing lender Indebtedness and other sums payable at Closing under
the Loan Documents), Borrower's Availability shall not be less than $500,000.00;

 
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i.           Prior to making any Advance from the Loan Facility, Borrower shall
have delivered to the Bank the final December 31, 2007 audited financial
statement of Borrower, the results of which must be consistent, in the sole
opinion of the Bank, with preliminary figures provided to the Bank by Borrower.

7.2           Fees at Closing: Borrower shall have paid at the time of execution
of this Agreement (the "Closing"), or shall at Closing authorize the payment by
direct charge to the Borrower's account with the Bank (subject to any credit for
payments made to the Bank prior to Closing), the following:

(a)           the Closing Fee;

(b)           the initial Collateral Management Fee;

(c)           the Bank's attorney's fee and disbursements, including fees for
all searches, certificates andfilings.

7.3           Officer Certification: By execution of this Agreement, the officer
or manager signing this Agreement on behalf of Borrower certifies to the Bank as
follows as of the date of this Agreement:

a.  there has not occurred any material adverse change in the operations and
condition (financial or otherwise) of Borrower since the date of the last
financial statement provided by such party to the Bank;

b. all warranties and representations contained in this Agreement are true and
correct in all respects on the date of this Agreement; and

c. all requirements on the part of Borrower and all Guarantors under the Loan
Documents as of the Closing Date have been satisfied.

7.4           Waiver of Rights:  By executing any of the Loan Documents, or by
making Advances hereunder, Bank does not thereby waive a breach of any warranty
or representation made by Borrower hereunder or under any agreement, document,
or instrument delivered to Bank or otherwise referred to herein, and any claims
and rights of Bank resulting from any breach or misrepresentation by Borrower
are specifically reserved by Bank.

7.5           Post-Closing Requirements: In addition to the ongoing requirements
of the Loan Documents, the following post-Closing actions shall be taken:

(a)  Borrower shall establish the Minimum Deposit required under this Agreement;

(b)  The Bank shall charge Borrower's account for the initial Lockbox Fee;

(c)  The Bank shall charge Borrower's account for the unpaid cost of any field
examination and appraisal.

SECTION 8. DEFAULT AND REMEDIES

8.1           Events of Default.  Any one or more of the following events shall
constitute an Event of Default hereunder (all references to Borrower and
Guarantor being applicable to each Borrower and Guarantor):

 
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(a)           Any representation, warranty or statement made by or on behalf of
Borrower or Guarantor, or in any report, certificate, financial statement or
other instrument furnished to the Bank in connection with the Loan Documents
shall prove to be inaccurate, false or misleading in any material respect as of
the date with respect to which it was made or deemed to be made;

(b)           Borrower shall have failed to make any payment under the Loan
Documents when due;

(c)           The Borrower or any Guarantor shall have failed to duly observe or
perform any covenant, condition or agreement on the part of the Borrower or
Guarantor to be observed or performed pursuant to the terms of the Loan
Documents;

(d)           Borrower or Guarantor shall have applied for or consented to the
appointment of a custodian, receiver, fiscal agent, trustee or liquidator of all
or a substantial part of its assets; shall have made an arrangement with, or an
assignment for the benefit of, its creditors; shall have filed a voluntary
petition in bankruptcy, or sought dissolution or reorganization under any law;
or shall have filed an answer admitting the material allegations of a bankruptcy
or reorganization petition;

(e)           Borrower or Guarantor shall have a custodian, receiver, fiscal
agent, trustee or liquidator appointed without its consent for all or a
substantial part of its assets; shall have an involuntary petition filed against
it in bankruptcy for dissolution or reorganization; or shall have been
adjudicated a bankrupt or had a plan of reorganization submitted by any creditor
or committee approved; provided, however, that such Event of Default shall be
subject to cure by Borrower or Guarantor within thirty (30) days of the
occurrence of such Event of Default if any such appointment, petition,
adjudication or submission is terminated,  dismissed, or withdrawn;

(f)           Borrower or Guarantor shall have transferred or caused the
transfer of title to all or any substantial part of its assets other than in the
ordinary course of its business for any reason without the prior written consent
of the Bank, or if Borrower or Guarantor shall have transferred or cause to be
transferred all or any part of any property constituting Collateral or in which
the Bank has been given an interest under the Loan Documents;

(g)           A writ of execution or attachment or any similar process shall be
issued or levied against all or any part of or interest in any of the properties
or assets of Borrower or Guarantor or any judgment involving monetary damages
shall be entered against Borrower or Guarantor which shall become a Lien on
Borrower's or Guarantor's properties or assets or any portion thereof or
interest therein, and within thirty (30) days (i) an appeal is not taken and
actively prosecuted, or (ii) any judgment involving monetary damages aggregating
to more than $25,000.00 shall not have been released, bonded, satisfied, vacated
or stayed;

(h)           Seizure or foreclosure of any of the properties or assets of
Borrower or Guarantor pursuant to process of law or by reason of legal self-help
involving monetary damages aggregating more than $25,000.00; provided, however,
that such Event of Default shall be subject to cure by Borrower within thirty
(30) days of the occurrence of such Event of Default if any such seizure or
foreclosure is terminated, dismissed, or withdrawn;

(i)           Borrower or Guarantor granting a security interest or Lien in any
of the Collateral or any other property in which the Bank has been given an
interest without the prior written consent of the Bank in its sole and absolute
discretion;

(j)           If an Event of Default as defined by the terms of any of the Loan
Documents shall have occurred and shall continue beyond any applicable cure
period;

(k)           If Borrower dissolves, liquidates or ceases operations; if a
Change of Control occurs; if a Change of Ownership occurs; or if any Guarantor
dies;

(l)           If Borrower or any Guarantor shall not be paying its debts as they
become due in the ordinary course of business; admits its inability to pay its
debts as they become due; becomes insolvent, however otherwise evidenced; or if
Borrower ceases to conduct business in the ordinary course;

(m)           If, in the reasonable opinion of the Bank, the value of the
Collateral is insufficient in relation to the Obligations;

(n)           If the Bank shall not be satisfied, in its sole and absolute
discretion, with any financial reporting documents required to be furnished to
the Bank by Borrower or Guarantor;

(o)           If any Material Adverse Effect has occurred, or if or Material
Default With Third Party has occurred, or if, in the reasonable opinion of the
Bank, the Bank concludes that the ability of Borrower or Guarantor to fully
perform under the Loan Documents is impaired; or if the Bank deems itself
insecure;

(p)           If there shall occur any default by Borrower or Guarantor under
any of the other Loan Documents or under any other instrument, document or
agreement executed by Borrower or Guarantor in favor of the Bank at any time,
now existing or hereafter arising, or if there shall occur a default in any debt
or other obligation owed to the Bank by Borrower or Guarantor now existing or
hereafter arising, whether or not such instrument, document, agreement, debt or
other obligation arose from the Loan Documents.

The occurrence of an Event of Default under this Agreement and the continuance
thereof beyond any permitted cure period shall also constitute a default under
each of the Loan Documents and under any other instrument, document or agreement
executed at any time by Borrower or Guarantor in favor of the Bank, whether or
not such other instrument, document or agreement is related to the Loan
Documents, and whether or not cross-default language appears in any of the other
Loan Documents or in any such other instrument, document or agreement.

8.2           Remedies.  Upon the occurrence of a Default, the Bank may take one
or more of the following remedial steps:

(a)           Declare the entire unpaid principal balance together with all
accrued and unpaid interest, charges and expenses under the Loan Documents to be
due and payable forthwith, whereupon the Loan Documents shall become forthwith
due and payable as to principal, interest, charges and expenses and all other
sums due thereunder, without presentment, demand,

 
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protest, or other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Loan Documents or any note to the contrary
notwithstanding;

(b)           The Bank shall be authorized to collect interest on any overdue
principal, interest and other sums owing under the Loan Documents at the highest
rate set forth in the Loan Documents or at the Default Rate, at the option of
the Bank;

(c)           Take any action at law or in equity to collect the payments then
due and thereafter to become due under the Loan Documents or to enforce
performance and observance of any obligation, agreement or covenant of Borrower
or Guarantor under the Loan Documents;

(d)           Exercise any and all rights and remedies of a creditor under the
Uniform Commercial Code or other applicable law;

(e)           Take such action and institute such proceedings as are authorized
by or permitted under the Loan Documents;

(f)           Immediately and without prior notice to Borrower or  Guarantor, or
any other party, and without other acts, set-off against any deposit account
maintained with the Bank by Borrower or Guarantor any of the Obligations owed to
the Bank, and such right of set-off shall be deemed to have been exercised
immediately upon the occurrence of any Event of Default, even though the actual
book entries may be at some time subsequent thereto;

(g)           Hold as security for the payment of all Obligations any other
property heretofore or hereafter delivered into the custody, control or
possession of the Bank for any reason or purpose whatsoever by any person liable
for the payment of the Obligations to the Bank;

(h)           Enter upon the premises of Debtor where any property in which the
Bank has an interest is located, without any obligation to pay rent to Debtor or
others, and remove such property therefrom, it being the obligation of Debtor to
assemble and make available such property for removal by the Bank;

(i)           Foreclose upon any property pledged, assigned, mortgaged,
hypothecated, or otherwise made subject to a security interest or Lien in favor
of the Bank;

(j)           Sell all or part of any of the assets of Borrower or Guarantor in
which the Bank has a security interest at public or private sale, with such
notice, if any, as may be required by law, all such notice being hereby waived
to the extent permitted by law;

(k)           Borrower and Guarantor shall be deemed to have waived presentment,
demand, protest or any notice of any kind in connection with this Agreement or
any Collateral, all rights to seek from any court any bond or security prior to
the exercise by the Bank of any remedy described herein, the benefit of all
valuation, appraisement and exemption laws, and all rights to demand or to have
any marshaling of assets upon any power of sale granted herein or pursuant to
judicial proceedings or upon any foreclosure or any enforcement of this
Agreement;

 
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(l)           Bank shall be deemed constituted and appointed as true and lawful
attorney-in-fact of Borrower with full power to do any and all things necessary
to exercise Bank's rights and remedies as fully and effectually as Borrower
might or could do without Bank being liable for any acts or omissions or for any
error of judgment or mistake of fact or law in its capacity as such
attorney-in-fact; this power of attorney is coupled with an interest and shall
be irrevocable so long as a Default has occurred, and any Obligation remains
outstanding;

(m)           Upon the institution of any action by the Bank, the Bank shall be
entitled to the appointment of a receiver for the assets and business of
Borrower;

(n)           Anything to the contrary notwithstanding, the Bank shall be
entitled to retain all sums paid by or on behalf of Borrower pursuant to the
terms of this Agreement and any other agreement, document, or instrument
executed in connection herewith despite the filing of any insolvency proceeding
under federal or state law, it being acknowledged by Borrower that all such
payments made to the Bank did not constitute a preference, was given in exchange
for contemporaneous value, permitted Borrower to continue to operate, did not
favor the Bank over other creditors, and resulted in Borrower obtaining
substantial value and benefits.

8.3           In addition to the above remedies, if a Default under this
Agreement has occurred, the Bank shall have the right and remedy, without
posting bonds or other security, to have any provision of the Loan Documents
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such Default will cause irreparable injury to
the Bank and that money damages will not provide an adequate remedy thereto.

8.4           No remedy herein conferred or reserved to the Bank is intended to
be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under the Loan Documents or now or hereafter existing at law or in equity or by
statute.  No delay or omission to exercise any right or power accruing upon any
default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Bank to
exercise any remedy reserved to it, it shall not be necessary to give notice,
other than such notice as may be expressly required in the Loan Documents.

8.5           Prior to Default, all payments shall be applied first to the
payment of all fees, expenses and other amounts due to the Bank (excluding
principal and interest), then to accrued interest, and the balance on account of
outstanding principal. After Default, the Bank shall be authorized in its sole
and absolute discretion to apply all proceeds received from the sale or other
disposition of any property or Collateral, from Borrower or Guarantor, or from
any other source, in the following order of priority:

(1)           First, to payment of all reasonable fees, costs and expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the Bank's pursuit of remedies authorized under the Loan Documents;

 
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(2)           Next, to the payment in full of accrued and unpaid interest,
charges, expenses, unpaid principal and other sums under the Loan Documents in
any order determined by the Bank;

(3)           Next, to any outstanding interest and principal of any Obligation
of the Borrower to the Bank not arising from the Loan Documents; and

(4)           Next, the balance, if any, of such proceeds to the Borrower or as
a court of competent jurisdiction may otherwise direct.

8.6           In the event Borrower or Guarantor should default under any of the
provisions of this Agreement or the other Loan Documents, and the Bank shall
require and employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or
observance of any obligation or agreement on the part of Borrower or Guarantor
therein contained, Borrower and Guarantor agree that it will on demand therefor
pay to the Bank the reasonable fees and disbursements of such attorneys and such
other reasonable expenses so incurred by the Bank.

SECTION 9. MISCELLANEOUS

9.1           Notices under this Agreement shall be directed to the address set
forth in this Agreement, or such other address as shall be furnished to the
other party by notice (hereafter, the "notice address").  Notices under this
Agreement shall be effected in one or more of the following manners: (i)
personal delivery to the notice address, effective on delivery; (ii) mailing by
certified or registered mail, return receipt requested, by the U.S. Postal
Service to the notice address, effective on the second business day after the
day on which mailed; (iii) delivery by recognized overnight delivery service to
the notice address, effective on the second day after given to the delivery
service by the sender.

9.2           All covenants, agreements, representations and warranties made
herein shall continue in full force and effect so long as any part of the
Obligations is outstanding.  Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors,
assigns, heirs, executors, administrators and representatives of such party; and
all covenants, promises and agreements by or on behalf of Borrower and Guarantor
which are contained in this Agreement shall bind the successors, assigns, heirs,
executors, administrators, and representatives of each, and shall inure to the
benefit of the successors and assigns of the Bank.

9.3           This Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of New York (excluding the laws applicable to conflicts or choice of law).
BORROWER AND ANY GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR ANY FEDERAL COURTS SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS OF ANY SUCH SUIT
BEING MADE UPON BORROWER AND ANY GUARANTOR BY MAIL AT THE ADDRESS SET FORTH IN
THIS AGREEMENT FOR SUCH PARTY, AND BORROWER AND ANY GUARANTOR HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

 
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9.4           This Agreement is intended by the parties as the final, complete
and exclusive statement of the transactions evidenced by this Agreement. All
prior or contemporaneous promises, agreements  and understandings, whether oral
or written, are deemed to be superseded by this Agreement, and no party is
relying on any promise, agreement or understanding not set forth in this
Agreement. No modification, amendment or waiver of any provision of this
Agreement, nor consent to any departure by Borrower or Guarantor from the terms
hereof, shall in any event be effective unless the same shall be in writing and
signed by the party granting such modification, amendment or waiver, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on Borrower or Guarantor in
any case shall entitle Borrower or Guarantor to any other or further notice or
demand in the same circumstances.

9.5           Neither any failure nor any delay on the part of the Bank in
exercising any right, power or privilege under the Loan Documents shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise of any other right, power or privilege.

9.6           Bank shall have the unrestricted right at any time or from time to
time, and without Borrower's or any Guarantor's consent, to assign all or any
portion of its rights and obligations hereunder to one or more banks or other
financial institutions (each, an "Assignee"), and Borrower and each Guarantor
agrees that it shall execute, or cause to be executed, such documents, including
without limitation, amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as Bank shall deem
necessary to effect the foregoing. In addition, at the request of Bank and any
such Assignee, Borrower shall issue one or more new promissory notes, as
applicable, to any such Assignee and, if Bank has retained any of its rights and
obligations hereunder following such assignment, to Bank which new promissory
notes shall be issued in replacement of, but not in discharge of, the liability
evidenced by the promissory note held by Bank prior to such assignment and shall
reflect the amount of the respective commitments and loans held by such Assignee
and Bank after giving effect to such assignment. Upon the execution and delivery
of appropriate assignment documentation, amendments and any other documentation
required by Bank in connection with such assignment, and the payment by Assignee
of the purchase price agreed to by Bank, and such Assignee, such Assignee shall
be a party to this Agreement and shall have all of the rights and obligations of
Bank hereunder (and under any and all other guaranties, documents, instruments
and agreements executed in connection herewith) to the extent that such rights
and obligations have been assigned by Bank pursuant to the assignment
documentation between Bank and such Assignee, and Bank shall be released from
its obligations hereunder and thereunder to a corresponding extent. Borrower may
furnish any information concerning Borrower in its possession from time to time
to prospective Assignees, provided that Bank shall require any such prospective
Assignees to agree in writing to maintain the confidentiality of such
information. The Loan Documents may be assigned by the Bank to any division,
Affiliate or Subsidiary of the Bank or to any successor or assign of the Bank,
and the Bank may offer participations in the Loan Documents, without any notice
to or consent from Borrower or Guarantor. There shall be no assignment of the
Loan Documents, or the rights arising therefrom, by Borrower or Guarantor.

 
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9.7           Borrower and Guarantor agree that they will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further documents and instruments as
may reasonably be required for carrying out the intention of or facilitating the
performance of this Agreement or as requested by the Bank to perfect or preserve
any interests or Liens granted to it pursuant to the Loan Documents, and to pay
the cost thereof by check or bank account debit after the execution of the
within Agreement.

9.8           Borrower agrees to pay, reimburse, indemnify and hold harmless,
the Bank, its directors, officers, employees, agents and representatives from
and against any and all actions, costs, damages, disbursements, expenses
(including reasonable attorneys' fees), judgments, liabilities, losses,
obligations, penalties and suits of any kind or nature whatsoever with respect
to: (i) the  administration, enforcement, interpretation, amendment,
modification, waiver or consent of any of the Loan Documents; (ii) the exercise
of any right or remedy granted in any of the Loan Documents, the collection or
enforcement of any of the Obligations and the proof or allowability of any claim
arising under any of the Loan Documents, whether in any bankruptcy or
receivership proceeding or otherwise; and (iii) any claim of third parties, and
the prosecution or defense thereof, arising out of or in any way connected with
any of the Loan Documents or any Collateral.

 
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9.9  BORROWER, ANY GUARANTOR AND BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF BANK RELATING TO THE ADMINISTRATION
OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT NEITHER PARTY
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, BORROWER
AND ANY GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER AND ANY
GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BANK HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT AND MAKE ANY LOAN.

9.10                      If, at any time, the rate of interest, together with
all amounts which constitute interest and which are reserved, charged or taken
by Bank as compensation for fees, services or expenses incidental to the making,
negotiating or collection of the loan evidenced hereby, shall be deemed by any
competent court of law, governmental agency or tribunal to exceed the maximum
rate of interest permitted to be charged by Bank to Borrower under applicable
law, then, during such time as such rate of interest would be deemed excessive,
that portion of each sum paid attributable to that portion of such interest rate
that exceeds the maximum rate of interest so permitted shall be deemed a
voluntary prepayment of principal. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Agreement shall be governed by such new law as of
its effective date.

 
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9.11                      No portion of the proceeds of any loan shall be used,
in whole or in part, for the purpose of purchasing or carrying any "margin
stock" as such term is defined in Regulation U of the Board of Governors of the
Federal Reserve System.

9.12  Upon receipt of an affidavit of an officer of Bank as to the loss, theft,
destruction or mutilation of any Note, agreement or any other security document
which is not of public record, and in the case of any such loss, theft,
destruction or mutilation, upon cancellation of such Note or other agreement or
security document, Borrower will issue, in lieu thereof a replacement note,
agreement or other security document in the same principal amount thereof and
otherwise of like tenor.

9.13                      The parties hereto warrant and represent that they
have been represented by, and have consulted with, counsel of their own
choosing; that they have been counseled as to their rights and remedies; that
they have utilized such counsel to negotiate this Agreement; and that each party
enters into this Agreement and all agreements, documents and instruments
executed in connection herewith voluntarily and without duress of any kind. The
parties acknowledge and agree that they and their respective counsel have
reviewed and had an opportunity to make changes to this Agreement and that the
normal rule of construction, whereby ambiguities are construed against the
drafting party, shall be inapplicable to the Loan Documents.

9.14  This Agreement is solely for the benefit of the parties hereto and their
respective successors and assigns, and no other person shall have any right,
benefit, priority or interest in, under or because of the existence of, this
Agreement.

9.15                      The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

9.16                      References to "Borrower" and "Guarantor" throughout
this Agreement includes each and every Borrower and Guarantor, and all liability
of all such parties to the Bank shall be deemed joint and several unless
otherwise expressly set forth to the contrary.  References to the singular or
plural, or to the masculine, feminine, or neuter, shall be deemed to include the
other where appropriate.

9.17                      In the event any provision of this Agreement or the
other Loan Documents shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof or thereof.

9.18                      This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.

9.19  This Agreement shall become effective upon the date set forth on page 1
hereof.

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

WITNESS OR ATTEST:
Borrower:

CAPSTONE INDUSTRIES, INC.

 
By:_____________________             By:___________________________

Name:                                Name:
Title:                               Title:

Guarantors

CHDT CORPORATION

 
By:_____________________               By:___________________________

Name:                                  Name:
Title:                                 Title:

________________________                _________________________(L.S.)
HOWARD ULLMAN

Bank:                          STERLING NATIONAL BANK

________________________                   By___________________________
Kenneth G. Poller                          Name:  John McCormack
                                           Title:  Senior Vice President

 
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SCHEDULE A

"Collateral" shall include all assets, personal and fixture property, of Debtor
including the following:
(1)  Accounts;
(2)  Certificated Securities;
(3)  Chattel Paper;
(4)  Computer Hardware and Software and all rights with respect thereto,
including, any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications, and any substitutions, replacements,
additions or model conversions of any of the foregoing;
(5)   Contract Rights;
(6)   Deposit Accounts;
(7)   Documents;
(8)   Equipment;
(9)   Financial Assets;
(10) Fixtures;
(11) General Intangibles, including Payment Intangibles and Software;
(12) Goods
(13) Instruments;
(14) Intellectual Property;
(15) Inventory;
(16) Investment Property;
(17) Money (of every jurisdiction whatsoever);
(18) Letter-of-Credit Rights;
(19) Payment Intangibles;
(20) Security Entitlements;
(21) Supporting Obligations;
(22) Uncertificated Securities; and
(23) to the extent not included in the foregoing, all other personal property of
any kind or description; and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor; together with
all books, records, writings, data bases, information and other property
relating to, used or useful in connection with, or evidencing, embodying,
incorporating or referring to any of the foregoing, and all Proceeds, products,
offspring, rents, issues, profits and returns of and from any of the foregoing.

 
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SCHEDULE B

1.           Permitted Liens:

NONE

2.           Jurisdictions for Filing of Financing Statements:

Florida

3.           Borrower's Federal Tax Identification Number and State
Organizational Identification Number for UCC Purposes:

Fed. ID.                      65-0669702
State DOC No.                                           P96000041757

4.           Leases for Space at which records and/or Collateral are located:

Principal Office Location:            Landlord:

350 Jim Moran Blvd., Suite 120        ExamSoft Worldwide
Deerfield Beach, Florida 33442        350 Jim Moran Blvd., Suite 120
                                            Deerfield Beach, FL 33442

Other Locations:                      Landlord:

5.           Places where Borrower keeps or intends to keep Collateral (not
otherwise listed in Section 4):

Price Transfer, Inc.
23011 So. Wilmington Avenue
Carson, California 90745

6.
State and Jurisdictions where Borrower is Qualified to do Business:

Florida

7.           Owners of Capital Stock of Borrower:

CHDT Corporation – 100%

8.           Alternate or Fictitious Names: None

9.           Subsidiaries or Affiliates: None

10.           Trade Names:  None

11.
Trade Marks, Service Marks, Patents, Copyrights, and Intellectual Property
Rights Licensed from Others:

(a) Trademarks owned by Capstone:           Timely Reader
                                                  Page Sitters

 
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                                                  Liqui-Lights
                                                  Siply Comfort

(b) Trademarks licensed to Capstone:        STPtools.com

(c)  Patents:                               LiquiLights Flashlight

12.
Exceptions to Ownership of Copyrights, Patents, Trade Marks, Service Marks, or
Other Intellectual Property: None

13.           Pending Litigation:  None

14.           Commercial Tort Claims:  None

15.           Environmental Exceptions: None

16.           Other Associations: None

17.           Letter of Credit Rights:  None other than issued by Bank

18.           Deposit Accounts: None other than at Bank

19.           Litigation: ______________________

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