Exhibit 10.24

CREDIT AND SECURITY AGREEMENT

between

ALDILA, INC.as Borrower

and

KEYBANK NATIONAL ASSOCIATIONas Lender

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dated as of
February 8, 2008

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TABLE OF CONTENTS

|                                                                                          |                                                                                 | Page
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----
|ARTICLE I. DEFINITIONS                                                                    |                                                                                 | 1   
|                                                                                          | Section 1.1. Definitions                                                        |     
|                                                                                          | Section 1.2. Accounting Terms                                                   |     
|                                                                                          | Section 1.3. Terms Generally                                                    |     
|ARTICLE II. AMOUNT AND TERMS OF CREDIT                                                    |                                                                                 | 14  
|                                                                                          | Section 2.1. Amount and Nature of Credit                                        |     
|                                                                                          | Section 2.2. Revolving Credit                                                   |     
|                                                                                          | Section 2.3. Term Loan                                                          |     
|                                                                                          | Section 2.4. Interest                                                           |     
|                                                                                          | Section 2.5. Evidence of Indebtedness                                           |     
|                                                                                          | Section 2.6. Notice of Credit Event; Funding of Loans                           |     
|                                                                                          | Section 2.7. Payment on Loans and Other Obligations                             |     
|                                                                                          | Section 2.8. Prepayment                                                         |     
|                                                                                          | Section 2.9. Commitment and Other Fees; Reduction of Commitment                 |     
|                                                                                          | Section 2.10. Computation of Interest and Fees                                  |     
|                                                                                          | Section 2.11. Mandatory Payments                                                |     
|ARTICLE III. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR LOANS; INCREASED CAPITAL; TAXES |                                                                                 | 18  
|                                                                                          | Section 3.1. Requirements of Law                                                |     
|                                                                                          | Section 3.2. Taxes                                                              |     
|                                                                                          | Section 3.3. Funding Losses                                                     |     
|                                                                                          | Section 3.4. Eurodollar Rate Rate Lending Unlawful; Inability to Determine Rate |     
|                                                                                          | Section 3.5. Funding                                                            |     
|ARTICLE IV. CONDITIONS PRECEDENT                                                          |                                                                                 | 20  
|                                                                                          | Section 4.1. Conditions to Each Credit Event                                    |     
|                                                                                          | Section 4.2. Conditions to the First Credit Event                               |     
|                                                                                          | Section 4.3. Post-Closing Conditions                                            |     
|ARTICLE V. COVENANTS                                                                      |                                                                                 | 22  
|                                                                                          | Section 5.1. Insurance                                                          |     
|                                                                                          | Section 5.2. Money Obligations                                                  |     
|                                                                                          | Section 5.3. Financial Statements and Information                               |     
|                                                                                          | Section 5.4. Financial Records                                                  |     
|                                                                                          | Section 5.5. Franchises; Change in Business                                     |     
|                                                                                          | Section 5.6. ERISA Pension and Benefit Plan Compliance                          |     
|                                                                                          | Section 5.7. Financial Covenants                                                |     
|                                                                                          | Section 5.8. Borrowing                                                          |     
|                                                                                          | Section 5.9. Liens                                                              |     
|                                                                                          | Section 5.10. Regulations T, U and X                                            |     
|                                                                                          | Section 5.11. Investments, Loans and Guaranties                                 |     
|                                                                                          | Section 5.12. Merger and Sale of Assets                                         |     
|                                                                                          | Section 5.13. Acquisitions                                                      |     
|                                                                                          | Section 5.14. Notice                                                            |     
|                                                                                          | Section 5.15. Restricted Payments                                               |     
|                                                                                          | Section 5.16. Environmental Compliance                                          |     
|                                                                                          | Section 5.17. Affiliate Transactions                                            |     

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|                                           | Section 5.18. Use of Proceeds                                                                           |    | 28
|------------------------------------------ | ------------------------------------------------------------------------------------------------------- | -- | --
|                                           | Section 5.19. Corporate Names and Locations of Collateral                                               |    | 28
|                                           | Section 5.20. Subsidiary Guaranties, Security Documents and Pledge of Stock or Other Ownership Interest |    | 28
|                                           | Section 5.21. Collateral                                                                                |    | 29
|                                           | Section 5.22. Property Acquired Subsequent to the Closing Date and Right to Take Additional Collateral  |    | 30
|                                           | Section 5.23. Restrictive Agreements                                                                    |    | 30
|                                           | Section 5.24. Amendment of Organizational Documents                                                     |    | 30
|                                           | Section 5.25. Fiscal Year of Borrower                                                                   |    | 30
|                                           | Section 5.26. Further Assurances                                                                        |    | 30
|ARTICLE VI. REPRESENTATIONS AND WARRANTIES |                                                                                                         | 31
|                                           | Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification                                   |    | 31
|                                           | Section 6.2. Corporate Authority                                                                        |    | 31
|                                           | Section 6.3. Compliance with Laws and Contracts                                                         |    | 31
|                                           | Section 6.4. Litigation and Administrative Proceedings                                                  |    | 32
|                                           | Section 6.5. Title to Assets                                                                            |    | 32
|                                           | Section 6.6. Liens and Security Interests                                                               |    | 32
|                                           | Section 6.7. Tax Returns                                                                                |    | 32
|                                           | Section 6.8. Environmental Laws                                                                         |    | 32
|                                           | Section 6.9. Locations                                                                                  |    | 33
|                                           | Section 6.10. Continued Business                                                                        |    | 33
|                                           | Section 6.11. Employee Benefits Plans                                                                   |    | 33
|                                           | Section 6.12. Consents or Approvals                                                                     |    | 33
|                                           | Section 6.13. Solvency                                                                                  |    | 34
|                                           | Section 6.14. Financial Statements                                                                      |    | 34
|                                           | Section 6.15. Regulations                                                                               |    | 34
|                                           | Section 6.16. Material Agreements                                                                       |    | 34
|                                           | Section 6.17. Intellectual Property                                                                     |    | 34
|                                           | Section 6.18. Insurance                                                                                 |    | 34
|                                           | Section 6.19. Deposit Accounts                                                                          |    | 34
|                                           | Section 6.20. Accurate and Complete Statements                                                          |    | 35
|                                           | Section 6.21. Investment Company; Other Restrictions                                                    |    | 35
|                                           | Section 6.22. Defaults                                                                                  |    | 35
|ARTICLE VII. SECURITY                      |                                                                                                         | 35
|                                           | Section 7.1. Security Interest in Collateral                                                            |    | 35
|                                           | Section 7.2. Collections and Receipt of Proceeds by Borrower                                            |    | 35
|                                           | Section 7.3. Collections and Receipt of Proceeds by Lender                                              |    | 36
|                                           | Section 7.4. Lender's Authority Under Pledged Notes                                                     |    | 37
|                                           | Section 7.5. Use of Inventory and Equipment                                                             |    | 37
|ARTICLE VIII. EVENTS OF DEFAULT            |                                                                                                         | 37
|                                           | Section 8.1. Payments                                                                                   |    | 37
|                                           | Section 8.2. Special Covenants                                                                          |    | 37
|                                           | Section 8.3. Other Covenants                                                                            |    | 37
|                                           | Section 8.4. Representations and Warranties                                                             |    | 38
|                                           | Section 8.5. Cross Default                                                                              |    | 38
|                                           | Section 8.6. ERISA Default                                                                              |    | 38
|                                           | Section 8.7. Change in Control                                                                          |    | 38

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|                                  | Section 8.8. Judgments                                                         |    | 38              
|--------------------------------- | ------------------------------------------------------------------------------ | -- | ----------------
|                                  | Section 8.9. Material Adverse Change                                           |    | 38              
|                                  | Section 8.10. Security                                                         |    | 38              
|                                  | Section 8.11. Validity of Loan Documents                                       |    | 38              
|                                  | Section 8.12. Solvency                                                         |    | 39              
|ARTICLE IX. REMEDIES UPON DEFAULT |                                                                                | 39
|                                  | Section 9.1. Optional Defaults                                                 |    | 39              
|                                  | Section 9.2. Automatic Defaults                                                |    | 39              
|                                  | Section 9.3. Offsets                                                           |    | 40              
|                                  | Section 9.4. Collateral                                                        |    | 40              
|                                  | Section 9.5. Other Remedies                                                    |    | 40              
|ARTICLE X. MISCELLANEOUS          |                                                                                | 41
|                                  | Section 10.1. No Waiver; Cumulative Remedies; Relationship of Parties          |    | 41              
|                                  | Section 10.2. Amendments, Waivers and Consents                                 |    | 41              
|                                  | Section 10.3. Notices                                                          |    | 41              
|                                  | Section 10.4. Costs, Expenses and Taxes                                        |    | 41              
|                                  | Section 10.5. Indemnification                                                  |    | 41              
|                                  | Section 10.6. Execution in Counterparts; Binding Effect; Borrower's Assignment |    | 42              
|                                  | Section 10.7. Patriot Act Notice                                               |    | 42              
|                                  | Section 10.8 Severability of Provisions; Captions; Attachments                 |    | 42              
|                                  | Section 10.9. Confidentiality                                                  |    | 42              
|                                  | Section 10.10. Entire Agreement                                                |    | 43              
|                                  | Section 10.11. Legal Representation of Parties                                 |    | 43              
|                                  | Section 10.12. Governing Law; Submission to Jurisdiction                       |    | 43              
|                                  | Section 10.13. Jury Trial Waiver                                               |    | Signature Page 1

|
|

|Exhibit A  |  | Form of Revolving Credit Note 
|---------- |  | ------------------------------
|Exhibit B  |  | Form of Term Note             
|Exhibit C  |  | Form of Notice of Loan        
|Exhibit D  |  | Form of Compliance Certificate
|           |  |                               
|Schedule 1 |  | Guarantors of Payment         
|Schedule 2 |  | Pledged Securities            
|Schedule 3 |  | Pledged Notes                 

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This CREDIT AND SECURITY AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this "Agreement") is made effective as of the
8th day of February, 2008 between:



WITNESSETH:

WHEREAS,
Borrower and Lender desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrower upon the terms
and subject to the conditions hereinafter set forth;

NOW,
THEREFORE, it is mutually agreed as follows:

ARTICLE I.    DEFINITIONS

Section 1.1.Definitions.As used in this Agreement, the following terms shall have the meanings set
forth below:



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Section 1.2.Accounting Terms.Any accounting term not specifically defined in this Article I
shall have the meaning ascribed thereto by GAAP.

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Section 1.3.Terms Generally.The foregoing definitions shall be applicable to the singular and plural
forms of the foregoing defined terms. Unless otherwise defined in this Article I, terms that are defined in the U.C.C. are used herein as so defined.

ARTICLE II.    AMOUNT AND TERMS OF CREDIT

Section 2.1.Amount and Nature of Credit.Subject to the terms and conditions of this Agreement, Lender
shall make Loans to Borrower, in such aggregate amount as Borrower shall request pursuant to the Commitment; provided that in no event shall the aggregate principal amount of all Loans at any time
outstanding under this Agreement be in excess of the Total Commitment Amount. The Loans may be made as Revolving Loans as described in Section 2.2 hereof, and as the Term Loan as described in
Section 2.3 hereof.

Section 2.2.Revolving Credit.Subject to the terms and conditions of this Agreement, during the
Commitment Period, Lender shall make a Revolving Loan or Revolving Loans to Borrower in such amount or amounts as Borrower, through an Authorized Officer, may from time to time request, but not
exceeding in aggregate principal amount at any time outstanding hereunder the Revolving Credit Commitment. Borrower shall have the option, subject to the terms and conditions set forth herein, to
borrow Revolving Loans, maturing on the last day of the Commitment Period, by means of any combination of Base Rate Loans and Eurodollar Loans. Subject to the provisions of this Agreement, Borrower
shall be entitled under this Section 2.2 to borrow funds, repay the same in whole or in part and re-borrow hereunder at any time and from time to time during the Commitment Period.

Section 2.3.Term Loan.Subject to the terms and conditions of this Agreement, Lender shall make the Term
Loan to Borrower on the Closing Date, in the amount of the Term Loan Commitment. The Term Loan shall be payable in fifty-nine (59) consecutive monthly installments of Eighty-Three
Thousand Three Hundred Thirty-Three and 33/100 Dollars ($83,333.33) for each month, commencing March 1, 2008, and continuing on each Regularly Scheduled Payment Date thereafter, with the
balance thereof payable in full on January 30, 2013. Borrower shall notify Lender, in accordance with the notice provisions of Section 2.6 hereof, whether the Term Loan will be a Base
Rate Loan and (or) one or more Eurodollar Loans. The Term Loan may be any combination of a Base Rate Loan and one or more Eurodollar Loans.

Section 2.4.Interest.

(a)Revolving Loans.



(b)Term Loan.



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(c)Default Rate.Anything herein to the contrary notwithstanding, if an Event of Default shall occur,
(i) the principal of each Loan and the unpaid interest thereon shall bear interest, until paid, at the Default Rate, and (ii) in the case of any other amount not paid when due from any
Credit Party hereunder or under any other Loan Document, such amount shall bear interest at the Default Rate.

(d)Limitation on Interest.In no event shall the rate of interest hereunder exceed the maximum rate allowable
by law. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable law (the "Maximum Rate"). If Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to
the principal of the Loans or, if it exceeds such unpaid principal, refunded to Borrower. In determining whether the interest contracted for, charged, or received by Lender exceeds the Maximum Rate,
such Person may, to the extent permitted by applicable law, (i) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (ii) exclude voluntary
prepayments
and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations.

Section 2.5.Evidence of Indebtedness.

(a)Revolving Loans.The obligation of Borrower to repay the Revolving Loans and to pay interest thereon shall
be evidenced by a Revolving Credit Note of Borrower.

(b)Term Loan.The obligation of Borrower to repay the Term Loan and to pay interest thereon shall be evidenced
by a Term Note of Borrower.

Section 2.6.Notice of Credit Event; Funding of Loans.

(a)Notice of Credit Event.Borrower, through an Authorized Officer, shall provide to Lender a Notice of Loan
prior to (i) 11:00 A.M. (Eastern time) on the proposed date of borrowing or conversion of any Base Rate Loan, and (ii) 11:00 A.M. (Eastern time) three Business Days prior
to the proposed date of borrowing, conversion or continuation of any Eurodollar Loan.

(b)Conversion of Loans.At the request of Borrower to Lender, subject to the notice and other provisions of
this Section 2.6, Lender shall convert a Base Rate Loan to one or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment Date
applicable thereto.

(c)Minimum Amount.Each request for:



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(d)Interest Periods.Borrower shall not request that Eurodollar Loans be outstanding for more than six
different Interest Periods at the same time.

Section 2.7.Payment on Loans and Other Obligations.

(a)Payments Generally.Each payment made hereunder by a Credit Party shall be made without any offset,
abatement, recoupment, counterclaim, withholding or reduction whatsoever.

(b)Payments to Lender.All payments of principal, interest and commitment and other fees shall be made to
Lender in Dollars in immediately available funds. Lender shall record (i) any principal, interest or other payment, and (ii) the principal amounts of Base Rate Loans and Eurodollar Loans
and all prepayments thereof and the applicable dates, including Interest Periods, with respect thereto, by such method as Lender may generally employ; provided, however, that failure to make any such
entry shall in no way detract from the obligations of Borrower under this Agreement or any Note. The aggregate unpaid amount of Loans, types of Loans, Interest Periods and similar information with
respect to the Loans set forth on the records of Lender shall be rebuttably presumptive evidence with respect to such information, including the amounts of principal, interest and fees owing to
Lender.

(c)Timing of Payments.Whenever any payment to be made hereunder, including, without limitation, any payment to
be made on any Loan, shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next Business Day and such extension of time shall in each case be included in the
computation of the interest payable on such Loan; provided that, with respect to a Eurodollar Loan, if the next Business Day shall fall in the succeeding calendar month, such payment shall be made on
the preceding Business Day and the relevant Interest Period shall be adjusted accordingly.

Section 2.8.Prepayment.

(a)Right to Prepay.Borrower shall have the right at any time and from time to time to prepay all or any part
of the principal amount of the Loans then outstanding as designated by Borrower. Such payment shall include interest accrued on the amount so prepaid to the date of such prepayment and any amount
payable under Article III hereof with respect to the amount being prepaid. Prepayments of Base Rate Loans shall be without any premium or penalty, other than any prepayment fees, penalties or
other charges that may be contained in any Hedge Agreement between Borrower and Lender (or an affiliate of Lender). Each prepayment of the Term Loan shall be applied to the principal installments
thereof in the inverse order of their respective maturities.

(b)Notice of Prepayment.Borrower shall give Lender notice of prepayment of a Base Rate Loan by no later than
11:00 A.M. (Eastern time) on the Business Day on which such prepayment is to be made and written notice of the prepayment of any Eurodollar Loan not later than 1:00 P.M. (Eastern time)
three Business Days before the Business Day on which such prepayment is to be made.

(c)Minimum Amount.Each prepayment of a Eurodollar Loan shall be in the principal amount of the lesser of Five
Hundred Thousand Dollars ($500,000), or the principal amount of such Loan, except in the case of a mandatory payment pursuant to Section 2.11 or Article III hereof.

Section 2.9.Commitment and Other Fees; Reduction of Commitment.

(a)Commitment Fee.Borrower shall pay to Lender, as a consideration for the Revolving Credit Commitment, a
commitment fee from the Closing Date to and including the last day of the Commitment Period, payable monthly, at a rate per annum equal to (i) one-fourth percent
(1/4%), multiplied by (ii) (A) the average daily Maximum Revolving Amount in effect during such month, minus (B) the average daily Revolving Credit Exposure during
such month. The commitment fee shall be payable in arrears, on March 1, 2008 and continuing on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.

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(b)Optional Reduction of Revolving Credit Commitment.Borrower may at any time and from time to time,
permanently reduce in whole or in part the Maximum Revolving Amount to an amount not less than the Revolving Credit Exposure, by giving Lender not fewer than five Business Days' (or thirty
(30) days if the Total Commitment Amount is to be terminated in its entirety) written notice of such reduction, provided that any such partial reduction shall be in an amount of not less than
One Million Dollars ($1,000,000), increased in increments of One Hundred Thousand Dollars ($100,000). After each such partial reduction, the commitment fees payable hereunder shall be calculated upon
the Maximum Revolving Amount as so reduced. If Borrower reduces in whole the Maximum Revolving Amount, on the effective date of such reduction (Borrower having prepaid in full the unpaid principal
balance, if any, of the Loans, together with all interest (if any) and commitment and other fees accrued and unpaid with respect thereto), all of the Notes shall be marked "Canceled" and delivered to
Borrower. Any partial reduction in the Maximum Revolving Amount shall be effective during the remainder of the Commitment Period.

(c)Authorization to Debit Account.Borrower hereby agrees that Lender has the right to debit from any deposit
account of Borrower, amounts owing to Lender by Borrower under this Agreement and the Loan Documents for payment of fees and expenses incurred in connection therewith.

Section 2.10.Computation of Interest and Fees.Interest on Loans, Related Expenses, and commitment and
other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed.

Section 2.11.Mandatory Payments.

(a)Revolving Credit Exposure.If, at any time, the Revolving Credit Exposure shall exceed the Revolving Credit
Commitment, Borrower shall, as promptly as practicable, but in no event later than within two Business Days, pay an aggregate principal amount of the Revolving Loans sufficient to bring the Revolving
Credit Exposure within the Revolving Credit Commitment.

(b)Mandatory Prepayments.Borrower shall, until the Term Loan is paid in full, make Mandatory Prepayments (each
a "Mandatory Prepayment") in accordance with the following provisions:



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(c)Application of Mandatory Payments.Each Mandatory Prepayment required to be made pursuant to
Section 2.11(b) hereof shall be applied to the Term Loan (to the payments of principal in the inverse order of maturities), with such payment first to be applied to the outstanding Base Rate
Loans and then to the outstanding Eurodollar Loans. Each other payment pursuant to this Section 2.11, unless otherwise designated by Borrower, shall be applied in the following order
(i) first, to outstanding Base Rate Loans, and (ii) second, to outstanding Eurodollar Loans. If the outstanding principal amount of any Eurodollar Loan shall be reduced to an amount less
than the minimum amount set forth in Section 2.6(c) hereof as a result of such prepayment, then such Eurodollar Loan shall be converted into a Base Rate Loan on the date of such prepayment. Any
prepayment of a Eurodollar Loan pursuant to this Section 2.11 shall be subject to the prepayment provisions set forth in Article III hereof.

ARTICLE III.    ADDITIONAL PROVISIONS RELATING TO
EURODOLLAR LOANS; INCREASED CAPITAL; TAXES

Section 3.1.Requirements of Law.

(a)   If,
after the Closing Date (i) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by a Governmental
Authority, or (ii) the compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority:



and
the result of any of the foregoing is to increase the cost to Lender of making, converting into, continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, Borrower shall pay to Lender, promptly after receipt of a written request therefor, any additional amounts necessary to compensate Lender for such increased cost or
reduced amount receivable. If Lender becomes entitled to claim any additional amounts pursuant to this subsection (a), Lender shall promptly notify Borrower of the event by reason of which it
has become so entitled.

(b)   If
Lender shall have determined that, after the Closing Date, the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation
or application thereof by a Governmental Authority or compliance by Lender or any corporation controlling Lender with any request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority shall have the effect of reducing the rate of return on Lender's or such corporation's capital as a consequence of its obligations hereunder, to a level
below that which Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the policies of Lender or such corporation with respect to
capital adequacy), then from

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time
to time, upon submission by Lender to Borrower of a written request therefor (which shall include the method for calculating such amount), Borrower shall promptly pay or cause to be paid to
Lender such additional amount or amounts as will compensate Lender for such reduction.

(c)   A
certificate as to any additional amounts payable pursuant to this Section 3.1 and evidence of the determination and calculation of such additional amounts by
Lender submitted by Lender to Borrower shall be conclusive absent manifest error. In determining and calculating any such additional amounts, Lender may use any method of averaging and attribution
that it (in its reasonable discretion) shall deem applicable. The obligations of Borrower pursuant to this Section 3.1 shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.

Section 3.2.Taxes.

(a)   All
payments made by any Credit Party under any Loan Document shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or
Other Taxes. If any Taxes or Other Taxes are required to be deducted or withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent
necessary to yield to Lender (after deducting, withholding and payment of all Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in
the Loan Documents.

(b)   Whenever
any Taxes or Other Taxes are required to be withheld and paid by a Credit Party, such Credit Party shall timely withhold and pay such taxes to the relevant
Governmental Authorities. As promptly as possible thereafter, Borrower shall send to Lender a certified copy of an original official receipt received by such Credit Party showing payment thereof or
other evidence of payment reasonably acceptable to Lender. If such Credit Party shall fail to pay any Taxes or Other Taxes when due to the appropriate Governmental Authority or fails to remit to
Lender the required receipts or other required documentary evidence, such Credit Party and Borrower shall indemnify Lender on demand for any incremental taxes, interest or penalties that may become
payable by Lender as a result of any such failure.

(c)   The
agreements in this Section 3.2 shall survive the termination of the Loan Documents and the payment of the Loans and all other amounts payable hereunder.

Section 3.3.Funding Losses.Borrower agrees to indemnify Lender, promptly after receipt of a written
request therefor, and to hold Lender harmless from, any loss or expense that Lender may sustain or incur as a consequence of (a) any uncured Default by Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) any uncured Default by
Borrower in making any prepayment of or conversion from Eurodollar Loans after Borrower has given a notice thereof in accordance with the provisions of this Agreement, (c) the making of a
prepayment of a Eurodollar Loan on a day that is not the last day of an Interest Period applicable thereto or (d) any conversion of a Eurodollar Loan to a Base Rate Loan on a day that is not
the last day of an Interest Period applicable thereto, but only to the extent not arising as a result of Lender's gross negligence or willful misconduct. Such indemnification shall be in an amount
equal to the excess, if any, of (i) the amount of interest that would have accrued on the amounts so prepaid, or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein over (ii) the amount of interest (as reasonably determined by Lender)
that would have accrued to Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the appropriate London interbank market that Lender reasonably selects
in transactions substantially similar to the Loans, along with any administration fee charged by Lender. A certificate as to any amounts payable pursuant to this Section 3.3 and evidence of the
determination and calculation of such additional amounts by Lender

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submitted
to Borrower by Lender shall be conclusive absent manifest error. The obligations of Borrower pursuant to this Section 3.3 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.

Section 3.4.Eurodollar Rate Lending Unlawful; Inability to Determine Rate.

(a)   If
Lender shall reasonably determine (which determination shall, upon notice thereof to Borrower, be conclusive and binding on Borrower) that, after the Closing Date,
(i) the introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any Governmental Authority asserts that it is unlawful, for Lender to make or
continue any Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into, a Eurodollar Loan, the obligations of Lender to make, continue or convert any such Eurodollar Loan shall,
upon such determination, be suspended until Lender shall notify Borrower that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Loans payable to Lender shall
automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan, or be repaid (if no conversion is permitted) at the end of the then current Interest Periods with respect
thereto or sooner, if required by law or such assertion.

(b)   If
Lender reasonably determines that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with
respect to a proposed Eurodollar Loan, or that the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan does not adequately and fairly reflect the cost to
Lender of funding such Loan, Lender will promptly so notify Borrower. Thereafter, the obligation of Lender to make or maintain such Eurodollar Loan shall be suspended until Lender revokes such notice.
Upon receipt of such notice, Borrower may revoke any pending request for a borrowing of, conversion to or continuation of such Eurodollar Loan or, failing that, will be deemed to have converted such
request into a request for a borrowing of a Base Rate Loan in the amount specified therein.

Section 3.5.Funding.Lender may, but shall not be required to, make Eurodollar Loans hereunder with
funds obtained outside the United States.

ARTICLE IV.    CONDITIONS PRECEDENT

Section 4.1.Conditions to Each Credit Event.The obligation of Lender to participate in any Credit Event
shall be conditioned, in the case of each Credit Event, upon the following:



Each
request by Borrower for a Credit Event shall be deemed to be a representation and warranty by Borrower as of the date of such request as to the satisfaction of the conditions precedent specified
in subsections (c) and (d) above.

Section 4.2.Conditions to the First Credit Event.Borrower shall cause the following conditions to be
satisfied on or prior to the Closing Date. The obligation of Lender to participate in the first Credit

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Event
is subject to Borrower satisfying each of the following conditions prior to or concurrently with such Credit Event:



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Section 4.3.Post-Closing Conditions.On or before each of the dates specified in this
Section 4.3, Borrower shall satisfy each of the items specified in the subsections below:



ARTICLE V.    COVENANTS

Section 5.1.Insurance.Each Company shall at all times maintain insurance upon its Inventory, Equipment
and other personal and real property in such form, written by such companies, in such amounts, for such periods, and against such risks as may be reasonably acceptable to Lender, with provisions
reasonably satisfactory to Lender for payment of all losses thereunder to Lender and such Company as their interests may appear (loss payable endorsement in favor of Lender), and, if required by
Lender, Borrower shall deposit the policies with Lender. Any such policies of insurance shall provide for no fewer than thirty (30) days prior written notice of cancellation to Lender. Any sums
received by Lender in payment of insurance losses, returns, or unearned premiums under the policies shall be applied as set forth in Section 2.11(b) and (c) hereof. Lender is hereby
authorized to act as attorney-in-fact for the Companies, after the occurrence and during the continuation of an Event of Default, in obtaining, adjusting, settling and
canceling such insurance and indorsing any drafts. In the event of failure to provide such insurance as herein provided, Lender may, at its option, provide such insurance and Borrower shall pay to
Lender, upon demand, the cost thereof. Should Borrower fail to pay such sum to Lender upon demand, interest shall accrue thereon, from the date of demand until paid in full, at the Default Rate.
Within ten (10) days of Lender's written request, Borrower shall

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furnish
to Lender such information about the insurance of the Companies as Lender may from time to time reasonably request, which information shall be prepared in form and detail reasonably
satisfactory to Lender and certified by a Financial Officer.

Section 5.2.Money Obligations.Each Company shall pay in full (a) prior in each case to the date
when penalties would attach, all taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be contested in good faith by appropriate
and timely proceedings and for which adequate provisions have been established in accordance with GAAP) for which it may be or become liable or to which any or all of its properties may be or become
subject; (b) all of its material wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. §§ 206-207) or any
comparable provisions; and (c) all of its other material obligations calling for the payment of money (except only those so long as and to the extent that the same shall be contested in good
faith and for which adequate provisions have been established in accordance with GAAP) before such payment becomes overdue.

Section 5.3.Financial Statements and Information.

(a)Quarterly Financials.Borrower shall deliver to Lender, within forty-five (45) days after
the end of each of the first three quarterly periods of each fiscal year of Borrower, balance sheets of the Companies as of the end of such period and statements of income (loss), stockholders' equity
and cash flow for the quarter and fiscal year to date periods, all prepared on a Consolidated and consolidating basis, in accordance with GAAP, and in form and detail reasonably satisfactory to Lender
and certified by a Financial Officer.

(b)Annual Audit Report.Borrower shall deliver to Lender, within ninety (90) days after the end of each
fiscal year of Borrower, an annual audit report of the Companies for that year prepared on a
Consolidated and consolidating basis, in accordance with GAAP, and in form and detail reasonably satisfactory to Lender and certified by an unqualified opinion of an independent public accountant
reasonably satisfactory to Lender, which report shall include balance sheets and statements of income (loss), stockholders' equity and cash-flow for that period.

(c)Compliance Certificate.Borrower shall deliver to Lender, concurrently with the delivery of the financial
statements set forth in subsections (a) and (b) above, a Compliance Certificate.

(d)Annual Projections.Borrower shall deliver to Lender, within thirty (30) days after the end of each
fiscal year of Borrower, an annual financial projection for the current fiscal year, to be in a form reasonably acceptable to Lender.

(e)Financial Information of Companies.Borrower shall deliver to Lender, within ten days of the written request
of Lender, such other information about the financial condition, properties and operations of any Company as Lender may from time to time reasonably request, which information shall be submitted in
form and detail reasonably satisfactory to Lender and certified by a Financial Officer of the Company or Companies in question.

Section 5.4.Financial Records.Each Company shall at all times maintain true and complete records and
books of account, including, without limiting the generality of the foregoing, appropriate provisions for possible losses and liabilities, all in accordance with GAAP, and at all reasonable times
(during normal business hours and upon notice to such Company) permit Lender to examine such Company's books and records and to make excerpts therefrom and transcripts thereof.

Section 5.5.Franchises; Change in Business.

(a)   Each
Company (other than a Dormant Subsidiary) shall preserve and maintain at all times its existence, and its rights and franchises necessary for its business, except
as otherwise permitted pursuant to Section 5.12 hereof.

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(b)   No
Company shall engage in any business if, as a result thereof, the general nature of the business of the Companies taken as a whole would be substantially changed and
materially altered from the general nature of the business the Companies are engaged in on the Closing Date to the extent of having a Material Adverse Effect on the Companies.

Section 5.6.ERISA Pension and Benefit Plan Compliance.No Company shall incur any material accumulated
funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. Borrower shall furnish to Lender (a) as soon as
possible and in any event within thirty (30) days after any Company knows or has reason to know that any Reportable Event with respect to any ERISA Plan has occurred, a statement of a Financial
Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable
Event given to the PBGC if a copy of such notice is available to such Company, and (b) promptly after receipt thereof, a copy of any notice such Company, or any member of the Controlled Group
may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided, that this latter clause shall not apply to notices of general
application promulgated by the PBGC or the Internal Revenue Service. Borrower shall promptly notify Lender of any material taxes assessed, proposed to be assessed or that Borrower has reason to
believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As used in this Section 5.6, "material" means the measure of a matter of significance
that shall be determined as being an amount equal to five percent (5%) of Consolidated Net Worth. As soon as practicable, and in any event within twenty (20) days, after any Company shall
become aware that an ERISA Event shall have occurred, such Company shall provide Lender with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the
details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. Borrower shall, at the request of Lender, deliver or cause to be delivered to
Lender true and correct copies of any documents relating to the ERISA Plan of any Company.

Section 5.7.Financial Covenants.

(a)Leverage Ratio.Borrower shall not suffer or permit at any time the Leverage Ratio to exceed 2.00 to 1.00.

(b)Fixed Charge Coverage Ratio.Borrower shall not suffer or permit at any time the Fixed Charge Coverage Ratio
to be less than 1.20 to 1.00.

(c)Minimum Cash Balance.Borrower shall at all times maintain, in domestic deposit and investment accounts,
unrestricted and unencumbered (except by the Lien of Lender) cash-on-hand and Cash Equivalents in an aggregate amount of no less than Five Million Dollars ($5,000,000);
provided that all cash-on-hand and Cash Equivalents not held at Lender shall be subject to a Control Agreement in favor of Lender.

Section 5.8.Borrowing.No Company shall create, incur or have outstanding any Indebtedness of any kind;
provided that this Section 5.8 shall not apply to the following:



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Section 5.9.Liens.No Company shall create, assume or suffer to exist (upon the happening of a
contingency or otherwise) any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section 5.9 shall not apply to the following:



No
Company shall enter into any contract or agreement (other than a contract or agreement entered into in connection with the purchase or lease of fixed assets that prohibits Liens on such fixed
assets) that would prohibit Lender from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of such Company.

Section 5.10.Regulations T, U and X.No Company shall take any action that would result in any
non-compliance of the Loans with Regulations T, U or X, or any other applicable regulation, of the Board of Governors of the Federal Reserve System.

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Section 5.11.Investments, Loans and Guaranties.No Company shall (a) create, acquire or hold any
Subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a party to any joint venture or other partnership, (d) make or keep
outstanding any advance or loan to any Person, or (e) be or become a Guarantor of any kind (other than a Guarantor of Payment under the Loan Documents); provided that this Section 5.11
shall not apply to the following:



For
purposes of this Section 5.11, the amount of any investment in equity interests shall be based upon the initial amount invested and shall not include any appreciation in value or return on
such investment.

Section 5.12.Merger and Sale of Assets.No Company shall merge, amalgamate or consolidate with any other
Person, or sell, lease or transfer or otherwise dispose of any assets to any Person other than in the ordinary course of business, except that, if no Default or Event of Default shall then exist or
immediately thereafter shall begin to exist:



Section
5.13.Acquisitions.No Company shall effect an Acquisition; provided, however, that a Credit Party may
effect an Acquisition with the prior written consent of Lender, or so long as such Acquisition meets all of the following requirements:



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Section
5.14.Notice.Borrower shall cause a Financial Officer of Borrower to promptly notify Lender, in
writing, whenever:



Section
5.15.Restricted Payments.No Company shall make or commit itself to make any Restricted Payment at any
time, except that, if no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall exist, the Companies may make Capital Distributions.

Section
5.16.Environmental Compliance.Each Company shall comply in all respects with any and all Environmental
Laws including, without limitation, all Environmental Laws in jurisdictions in which such Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid
waste or other wastes, accepts for transport any hazardous substances, solid waste or
other wastes or holds any interest in real property or otherwise. Borrower shall furnish to Lender, promptly after receipt thereof, a copy of any notice such Company may receive from any Governmental
Authority or private Person, or otherwise, that any material litigation or proceeding pertaining to any environmental, health or safety matter has been filed or is threatened against such Company, any
real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous waste, solid waste or other wastes
on, under or to any real property in which any Company holds any ownership interest or performs any of its operations, in violation of any Environmental Law. As used in this Section 5.16,
"litigation or proceeding" means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private
Person, or otherwise. Borrower shall defend, indemnify and hold Lender harmless against all costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including
reasonable attorneys' fees) arising out of or resulting from the noncompliance of any Company with any Environmental Law, but only to the extent not arising as a result of Lender's gross negligence or
willful misconduct. Such indemnification shall survive any termination of this Agreement.

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Section
5.17.Affiliate Transactions.No Company shall, directly or indirectly, enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (other than a Company that is a Credit Party
or a Foreign Subsidiary) on terms that shall be less favorable to such Company than those that might be obtained at the time in a transaction with a non-Affiliate; provided that the
foregoing shall not prohibit the payment of customary and reasonable directors' fees to directors who are not employees of a Company or an Affiliate.

Section
5.18.Use of Proceeds.Borrower's use of the proceeds of the Loans shall be for working capital and
other general corporate purposes of the Companies and for the financing of one or more Capital Distributions.

Section
5.19.Corporate Names and Locations of Collateral.No Company shall change its corporate name or its
state, province or other jurisdiction of organization, unless, in each case, such Company shall have provided Lender with at least thirty (30) days prior written notice thereof. Borrower shall
also provide Lender thirty (30) days written notification after the occurrence of (a) any change in any location where any Company's Inventory or Equipment is maintained, and any new
locations where any Company's Inventory or Equipment is to be maintained; (b) any change in the location of the office where any Company's records pertaining to its Accounts are kept;
(c) the location of any new places of business and the changing or closing of any of its existing places of business; and (d) any change in the location of any Company's chief executive
office. In the event of any of the foregoing or if otherwise deemed appropriate by Lender, Lender is hereby authorized to file new U.C.C. Financing Statements describing the Collateral and otherwise
in form and substance sufficient for recordation wherever necessary or appropriate, as determined in Lender's sole discretion, to perfect or continue perfected Lender's security interest in the
Collateral. Borrower shall pay all filing and recording fees and taxes in connection with the filing or recordation of such U.C.C. Financing Statements and security interests
and shall promptly reimburse Lender therefor if Lender pays the same. Such amounts shall be Related Expenses hereunder.

Section
5.20.Subsidiary Guaranties, Security Documents and Pledge of Stock or Other Ownership Interest.

(a)Guaranties and Security Documents.Each Domestic Subsidiary (that is not a Dormant Subsidiary) created,
acquired or held subsequent to the Closing Date, shall immediately execute and deliver to Lender, a Guaranty of Payment of all of the Obligations and a Security Agreement and other Security Documents,
as appropriate, such agreements to be in form and substance reasonably acceptable to Lender, along with any such other supporting documentation, Security Documents, corporate governance and
authorization documents, and an opinion of counsel as may be deemed necessary or advisable by Lender.

(b)Pledge of Stock or Other Ownership Interest.With respect to the creation or acquisition of a Domestic
Subsidiary or first-tier Foreign Subsidiary of Borrower or a Domestic Subsidiary, Borrower shall deliver to Lender all of the share certificates (or other evidence of equity) owned by a
Credit Party pursuant to the terms of a Pledge Agreement executed by the appropriate Credit Party; provided that no Company shall be required to pledge more than sixty-five percent (65%)
of the outstanding voting shares or other voting ownership interest of any Foreign Subsidiary.

(c)Perfection or Registration of Interest in Foreign Shares.With respect to any foreign shares pledged to
Lender, on or after the Closing Date, Lender shall at all times, in the discretion of Lender, have the right to perfect, at Borrower's cost, payable upon request therefor (including, without
limitation, any reasonable foreign counsel, or foreign notary, filing, registration or similar, fees, costs or expenses), its security interest in such shares in the respective foreign jurisdiction.

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Section
5.21.Collateral.Borrower shall:



Borrower
hereby authorizes Lender to file U.C.C. Financing Statements with respect to the Collateral. If certificates of title or applications for title are issued or outstanding with respect
to any of the Inventory or Equipment of Borrower, Borrower shall, upon request of Lender, (i) execute and deliver to Lender a short form security agreement, as may be reasonably acceptable to
Lender, and (ii) deliver such certificate or application to Lender and cause the interest of Lender to be properly noted thereon. Borrower hereby authorizes Lender or Lender's designated agent
(but without obligation by Lender to do so) to incur Related Expenses (whether prior to, upon, or subsequent to any Default or Event of Default), and Borrower shall promptly repay, reimburse, and
indemnify (but only to the extent any

29

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indemnification
does not arise as a result of Lender's gross negligence or willful misconduct) Lender for any and all Related Expenses. If Borrower fails to keep and maintain its Equipment in good
operating condition, ordinary wear and tear excepted, Lender may (but shall not be required to) so maintain or repair all or any part of Borrower's Equipment and the cost thereof shall be a Related
Expense. All Related Expenses are payable to Lender upon demand therefor; Lender may, at its option, debit Related Expenses directly to any deposit account of a Company located at Lender or the
Revolving Loans.

Section
5.22.Property Acquired Subsequent to the Closing Date and Right to Take Additional Collateral.Borrower shall provide Lender with prompt written notice with respect to any real or personal property (other than Accounts, Inventory, Equipment, General Intangibles and other property
acquired in the ordinary course of business) acquired by any Company subsequent to the Closing Date. In addition to any other right that Lender may have pursuant to this Agreement or otherwise, upon
written request of Lender, whenever made, Borrower shall, and shall cause each Guarantor of Payment to, grant to Lender, as additional security for the Obligations, a first security interest in or
Lien on any real or personal property of Borrower and each Guarantor of Payment (other than for leased equipment or equipment subject to a purchase money security interest in which the lessor or
purchase money lender of such equipment holds a first priority security interest, in which case, Lender shall have the right to obtain a security interest junior only to such lessor or purchase money
lender), including, without limitation, such property acquired subsequent to the Closing Date, in which Lender does not have a first priority Lien. Borrower agrees that, within ten (10) days
after the date of such written request, to secure all of the Obligations by delivering to Lender security agreements, intellectual property security agreements, pledge agreements, mortgages (or deeds
of trust, if applicable) or other documents, instruments or agreements or such thereof as Lender may reasonably require. Borrower shall pay all recordation, legal and other expenses in connection
therewith.

Section
5.23.Restrictive Agreements.Except as set forth in this Agreement, Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to
(a) make, directly or indirectly, any Capital Distribution to Borrower, (b) make, directly or indirectly, loans or advances or capital contributions to Borrower or (c) transfer,
directly or indirectly, any of the properties or assets of such Subsidiary to Borrower; except for such encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) customary non-assignment provisions in leases or other agreements entered in the ordinary course of business and consistent with past practices, or (iii) customary
restrictions in security agreements or mortgages securing Indebtedness, or capital leases, of a Company to the extent such restrictions shall only restrict the transfer of the property subject to such
security agreement, mortgage or lease.

Section
5.24.Amendment of Organizational Documents.No Company shall amend its Organizational Documents without
the prior written consent of Lender (which consent shall not be unreasonably withheld).

Section
5.25.Fiscal Year of Borrower.Borrower shall not change the date of its fiscal year-end
without the prior written consent of Lender (which consent shall not be unreasonably withheld). As of the Closing Date, the fiscal year end of Borrower is December 31 of each year.

Section
5.26.Further Assurances.Borrower shall, promptly upon request by Lender, (a) correct any
material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as Lender may reasonably
require from time to time in order to carry out more effectively the purposes of the Loan Documents.

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ARTICLE VI.    REPRESENTATIONS AND WARRANTIES

The
representations and warranties set forth in this Article VI hereof are been made by Borrower, on behalf of itself and each of its Subsidiaries, as applicable.

Section
6.1.Corporate Existence; Subsidiaries; Foreign Qualification.Each Company is duly organized, validly
existing, and in good standing (or comparable concept in the applicable jurisdiction) under the laws of its state or jurisdiction of incorporation or organization, and is duly qualified and authorized
to do business and is in good standing (or comparable concept in the applicable jurisdiction) as a foreign entity in the jurisdictions set forth opposite its name on Schedule 6.1to the Closing
Officer's Certificate, which are all of the states or jurisdictions where the character of its property or its
business activities makes such qualification necessary, except where a failure to so qualify would not reasonably be expected to have a Material Adverse Effect. Schedule 6.1to the Closing
Officer's Certificate sets forth, as of the Closing Date, each Subsidiary of Borrower (and whether such Subsidiary is
a Dormant Subsidiary) and each Person that is an owner of each Company's equity (other than Borrower), its state (or jurisdiction) of formation, its relationship to Borrower, including the percentage
of each class of stock or other equity interest owned by a Company, the location of its chief executive office and its principal place of business. Borrower, directly or indirectly, owns all of the
equity interests of each of its Subsidiaries (excluding directors' qualifying shares and, in the case of Foreign Subsidiaries, other nominal amounts of shares held by a Person other than a Company).

Section
6.2.Corporate Authority.Borrower and each Domestic Subsidiary have the right and power and are duly
authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which
Borrower and each Domestic Subsidiary is a party have been duly authorized and approved by such Person's board of directors or other governing body, as applicable, and are the valid and binding
obligations of such Person, enforceable against such Person in accordance with their respective terms. The execution, delivery and performance of the Loan Documents do not conflict with, result in a
breach in any of the provisions of, constitute a default under, or result in the creation of a Lien (other than Liens permitted under Section 5.9 hereof) upon any assets or property of Borrower
or any Domestic Subsidiary under the provisions of, such Person's Organizational Documents or any material agreement.

Section
6.3.Compliance with Laws and Contracts.Borrower and each Domestic Subsidiary:



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Section
6.4.Litigation and Administrative Proceedings.Except as disclosed on Schedule 6.4to the Closing
Officer's Certificate, there are (a) no lawsuits, actions, investigations, examinations or other proceedings
pending or threatened against any Company, or in respect of which any Company may have any liability, in any court or before or by any Governmental Authority, arbitration board, or other tribunal,
(b) no orders, writs, injunctions, judgments, or decrees of any court or Governmental Authority to which any Company is a party or by which the property or assets of any Company are bound, and
(c) no grievances, disputes, or controversies outstanding with any union or other organization of the employees of any Company, or threats of work stoppage, strike, or pending demands for
collective bargaining, that, as to subparts (a) through (c) above, if violated or determined adversely, would have a Material Adverse Effect.

Section
6.5.Title to Assets.Borrower and each Domestic Subsidiary have good title to and ownership of all
property it purports to own, which property is free and clear of all Liens, except those permitted under Section 5.9 hereof. As of the Closing Date, Borrower and the Domestic Subsidiaries own
the real property listed onSchedule 6.5to the Closing Officer's Certificate.

Section
6.6.Liens and Security Interests.On and after the Closing Date, except for Liens permitted pursuant to
Section 5.9 hereof, (a) there is and will be no U.C.C. Financing Statement or similar notice of Lien outstanding covering any personal property of Borrower or any Domestic Subsidiary;
(b) there is and will be no mortgage outstanding covering any real property of Borrower or any Domestic Subsidiary; and (c) no real or personal property of any Company is subject to any
Lien of any kind. Upon the filing of the U.C.C. Financing Statements and taking such other actions necessary to perfect its Lien against Collateral under all applicable laws of the corresponding type
as authorized hereunder, Lender has a valid and enforceable first Lien on the Collateral. No Company has entered into any contract or agreement (other than a contract or agreement entered into in
connection with the purchase or lease of fixed assets that prohibits Liens on such fixed assets) that exists on or after the Closing Date that would prohibit Lender from acquiring a Lien on, or a
collateral assignment of, any of the property or assets of any Company.

Section
6.7.Tax Returns.All federal, state, provincial and local tax returns and other reports required by law
to be filed in respect of the income, business, properties and employees of Borrower and each Domestic Subsidiary have been filed (or extended as permitted by applicable law) and all taxes,
assessments, fees and other governmental charges that are due and payable have been paid, except as
otherwise permitted herein. The provision for taxes on the books of Borrower and each Domestic Subsidiary is adequate for all years not closed by applicable statutes and for the current fiscal year.

Section
6.8.Environmental Laws.Borrower and each Domestic Subsidiary are in material compliance with all
Environmental Laws, including, without limitation, all Environmental Laws in all jurisdictions in which any Company owns or operates, or has owned or operated, a facility or site, arranges or has
arranged for disposal or treatment of hazardous substances, solid waste or other wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has
held any interest in real property or otherwise. No litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the best knowledge of Borrower,
threatened, against any Company, any real property in which any Company holds or has held an interest or any past or present operation of any Company. No release, threatened release or disposal of
hazardous waste, solid waste or other wastes is occurring, or has occurred (other than those that are currently being remediated in accordance with Environmental Laws), on, under or to any real
property in which any Company holds any interest or performs any of its operations, in violation of any Environmental Law. As used in this Section 6.8, "litigation or proceeding" means any
demand, claim,

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notice,
suit, suit in equity, action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private Person, or otherwise.

Section
6.9.Locations.As of the Closing Date, the Companies have places of business or maintain their
Accounts, Inventory and Equipment at the locations (including third party locations) set forth onSchedule 6.9to the Closing Officer's
Certificate, and each Company's chief executive office is set forth onSchedule 6.9to the Closing Officer's Certificate. Schedule 6.9further
specifies whether each location, as of the Closing Date, (a) is owned by the Companies, or (b) is leased by a
Company from a third party, and, if leased by a Company from a third party, if a Landlord's Waiver has been requested. As of the Closing Date, Schedule 6.9correctly identifies the name and address
of each third party location where assets of the Companies are located.

Section
6.10.Continued Business.There exists no actual, pending, or, to Borrower's knowledge, any threatened
termination, cancellation or limitation of, or any modification or change in the business relationship of any Company and any customer or supplier, or any group of customers or suppliers, whose
purchases or supplies, individually or in the aggregate, are material to the business of any Company, and there exists no present condition or state of facts or circumstances that would have a
Material Adverse Effect or prevent a Company from conducting such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted.

Section
6.11.Employee Benefits Plans.Schedule 6.11to
the Closing Officer's Certificate identifies each ERISA Plan as of the Closing Date. No material ERISA Event has occurred or is expected to occur with respect to an ERISA Plan. Full payment has been
made of all amounts that a Controlled Group member is required, under applicable law or under the governing documents, to have paid as a contribution to or a benefit under each ERISA Plan. The
material liability of each Controlled Group member with respect to each ERISA Plan has been fully funded based upon reasonable and proper
actuarial assumptions, has been fully insured, or has been fully reserved for on its financial statements. No material changes have occurred or are expected to occur that would cause a material
increase in the cost of providing benefits under the ERISA Plan. With respect to each ERISA Plan that is intended to be qualified under Code Section 401(a), (a) the ERISA Plan and any
associated trust operationally comply with the applicable requirements of Code Section 401(a); (b) the ERISA Plan and any associated trust have been amended to comply with all such
requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the "remedial amendment period" available under Code Section 401(b) (as
extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan and any associated trust have received a favorable determination letter
from the Internal Revenue Service stating that the ERISA Plan qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that
any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described "remedial amendment
period" has not yet expired; (d) the ERISA Plan currently satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that may be made within the
above-described "remedial amendment period"; and (e) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972. With respect to any Pension Plan, the
"accumulated benefit obligation" of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, "Employers' Accounting
for Pensions") does not exceed the fair market value of Pension Plan assets.

Section
6.12.Consents or Approvals.No material consent, approval or authorization of, or filing, registration
or qualification with, any Governmental Authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the
Loan Documents, that has not already been obtained or completed.

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Section
6.13.Solvency.Borrower has received consideration that is the reasonably equivalent value of the
obligations and liabilities that Borrower has incurred to Lender. Borrower is not insolvent as defined in any applicable state, federal or relevant foreign statute, nor will Borrower be rendered
insolvent by the execution and delivery of the Loan Documents to Lender. Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it are or will be an
unreasonably small amount of capital, taking into consideration the obligations to Lender incurred hereunder. Borrower does not intend to, nor does it believe that it will, incur debts beyond its
ability to pay such debts as they mature.

Section
6.14.Financial Statements.The Consolidated financial statements of Borrower, for the fiscal year ended
December 31, 2006 and the unaudited Consolidated financial statements of Borrower for the fiscal quarter ended September 30, 2007, furnished to Lender, are true and complete, have been
prepared in accordance with GAAP, and fairly present the financial condition of the Companies as of the dates of such financial statements and the results of their operations for the periods then
ending. Since the dates of such statements, there has been no material adverse change in any Company's financial condition, properties or business or any change in any Company's accounting procedures.

Section
6.15.Regulations.No Company is engaged 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 meaning of Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America). Neither the granting of any Loan (or any conversion thereof) nor the use of the proceeds of any Loan will violate, or be inconsistent with, the provisions of
Regulation T, U or X or any other Regulation of such Board of Governors.

Section
6.16.Material Agreements.Except as disclosed on Schedule 6.16to the Closing Officer's Certificate, as
of the Closing Date, no Company is a party to any (a) debt instrument (excluding
the Loan Documents); (b) lease (capital, operating or otherwise), whether as lessee or lessor thereunder; (c) contract, commitment, agreement, or other arrangement involving the purchase
or sale of any inventory by it, or the license of any right to or by it; (d) contract, commitment, agreement, or other arrangement with any of its "Affiliates" (as such term is defined in the
Securities Exchange Act of 1934, as amended) other than a Company; (e) management or employment contract or contract for personal services with any of its Affiliates that is not otherwise
terminable at will or on less than ninety (90) days' notice without liability; (f) collective bargaining agreement; or (g) other contract, agreement, understanding, or arrangement
with a third party that, as to subsections (a) through (g) above, if violated, breached, or terminated for any reason, would have or would be reasonably expected to have a Material
Adverse Effect.

Section
6.17.Intellectual Property.Borrower and each Domestic Subsidiary own or have the right to use all of
the material patents, patent applications, industrial designs, designs, trademarks, service marks, copyrights and licenses, and rights with respect to the foregoing necessary for the conduct of its
business without any known conflict with the rights of others.Schedule 6.17to the Closing Officer's Certificate sets forth all United States
registered patents, trademarks, copyrights, service marks and license agreements owned by each Company as of the Closing Date.

Section
6.18.Insurance.Borrower and each Domestic Subsidiary maintain with financially sound and reputable
insurers insurance with coverage and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies. Schedule 6.18to the Closing Officer's Certificate
sets forth all insurance carried by Borrower and the Domestic Subsidiaries on the Closing
Date, setting forth in detail the amount and type of such insurance.

Section
6.19.Deposit Accounts.Schedule 6.19to the
Closing Officer's Certificate lists all banks and other financial institutions at which Borrower or any Domestic Subsidiary maintains deposit or other accounts as of the Closing Date, and Schedule 6.19to the Closing Officer's Certificate correctly

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identifies
the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

Section
6.20.Accurate and Complete Statements.Neither the Loan Documents nor any written statement made by any
Company in connection with any of the Loan Documents contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or in the
Loan Documents not misleading. There is no known fact that any Company has not disclosed to Lender that has a Material Adverse Effect.

Section
6.21.Investment Company; Other Restrictions.No Company is (a) an "investment company" or a
company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) subject to any foreign, federal, state or local statute or
regulation limiting its ability to incur Indebtedness.

Section
6.22.Defaults.No Default or Event of Default exists hereunder, nor will any begin to exist immediately
after the execution and delivery hereof.

ARTICLE VII.    SECURITY

Section
7.1.Security Interest in Collateral.In consideration of and as security for the full and complete
payment of all of the Obligations, Borrower hereby grants to Lender, a security interest in the Collateral. Borrower and Lender hereby acknowledge and agree that, with respect to any ITU Application
included within the Collateral, to the extent such an ITU Application would, under the Trademark Act, be deemed to be transferred in violation of 15 U.S.C. § 1060(a) as a result of
the security interest granted herein, or otherwise invalidated or made unenforceable as a result of the execution or performance of this Agreement, no security interest shall be deemed to have been
granted in such ITU Application (notwithstanding the provisions of this Agreement or any other Loan Document) until such time as the circumstances that would give rise to such violation, invalidation
or unenforceability no longer exist.

Section
7.2.Collections and Receipt of Proceeds by Borrower.

(a)   Upon
written notice to Borrower from Lender after the occurrence and during the continuation of an Event of Default, a Cash Collateral Account shall be opened by
Borrower at the main office of Lender (or such other office as shall be designated by Lender) and all such lawful collections of Borrower's Accounts and such Proceeds of Borrower's Accounts and
Inventory shall be remitted daily by Borrower to Lender in the form in which they are received by Borrower, either by mailing or by delivering such collections and Proceeds to Lender, appropriately
endorsed for deposit in the Cash Collateral Account. In the event that such notice is given to Borrower from Lender, Borrower shall not commingle such collections or Proceeds with any of Borrower's
other funds or property, but shall hold such collections and Proceeds separate and apart therefrom upon an express trust for Lender. In such case, Lender may, in its sole discretion, at any time and
from time to time after the occurrence and during the continuation of an Event of Default, apply all or any portion of the account balance in the Cash Collateral Account as a credit against
(i) the outstanding principal or interest of the Loans, or (ii) any other Obligations in accordance with this Agreement. If any remittance shall be dishonored, or if, upon final payment,
any claim with respect thereto shall be made against Lender on its warranties of collection, Lender may charge the amount of such item against the Cash Collateral Account or any other Deposit Account
maintained by Borrower with Lender, and, in any event, retain the same and Borrower's interest therein as additional security for the Obligations. Lender may, in its sole discretion, at any time and
from time to time, release funds from the Cash Collateral Account to Borrower for use in Borrower's business. The balance in the Cash Collateral Account may be withdrawn by Borrower upon termination
of this Agreement and payment in full of all of the Obligations.

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(b)   After
the occurrence and during the continuation of an Event of Default, at Lender's written request, Borrower shall cause all remittances representing collections and
Proceeds of Collateral to be mailed to a lockbox at a location acceptable to Lender to which Lender shall have access for the processing of such items in accordance with the provisions, terms and
conditions of the customary lockbox agreement of Lender.

(c)   Lender,
or Lender's designated agent, is hereby constituted and appointed attorney-in-fact for Borrower with authority and power to endorse,
after the occurrence and during the continuation of an Event of Default, any and all instruments, documents, and chattel paper upon the failure of Borrower to do so. Such authority and power, being
coupled with an interest, shall be (i) irrevocable until all of the Obligations are paid, (ii) exercisable by Lender at any time and without any request upon Borrower by Lender to so
endorse, and (iii) exercisable in the name of Lender or Borrower. Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest, and any and all other similar
notices with respect thereto, regardless of the form of any endorsement thereof.

Section
7.3.Collections and Receipt of Proceeds by Lender.Borrower hereby constitutes and appoints Lender, or
Lender's designated agent, as Borrower's attorney-in-fact to exercise, at any time, after the occurrence and during the continuation of an Event of Default, all or
any of the following powers which, being coupled with an interest, shall be irrevocable until the complete and full payment of all of the Obligations:



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Section
7.4.Lender's Authority Under Pledged Notes.For the better protection of Lender hereunder, Borrower has
executed (or will execute, with respect to future Pledged Notes) an appropriate endorsement on (or separate from) each Pledged Note and has deposited (or will deposit, with respect to future Pledged
Notes) such Pledged Note with Lender. Borrower irrevocably authorizes and empowers Lender, after the occurrence and during the continuation of an Event of Default, to (a) ask for, demand,
collect and receive all payments of principal of and interest on the Pledged Notes; (b) compromise and settle any dispute arising in respect of the foregoing; (c) execute and deliver
vouchers, receipts and acquittances in full discharge of the foregoing; (d) exercise, in Lender's discretion, any right, power or privilege granted to the holder of any Pledged Note by the
provisions thereof including, without limitation, the right to demand security or to waive any default thereunder; (e) endorse Borrower's name to each check or other writing received by Lender
as a payment or other proceeds of or otherwise in connection with any Pledged Note; (f) enforce delivery and payment of the principal and/or interest on the Pledged Notes, in each case by suit
or otherwise as Lender may desire; and (g) enforce the security, if any, for the Pledged Notes by instituting foreclosure proceedings, by conducting public or other sales or otherwise, and to
take all other steps as Lender, in its discretion, may deem advisable in connection with the forgoing; provided, however, that nothing contained or implied herein or elsewhere shall obligate Lender to
institute any action, suit or proceeding or to make or do any other act or thing contemplated by this Section 7.4 or prohibit Lender from settling, withdrawing or dismissing any action, suit or
proceeding or require Lender to preserve any other right of any kind in respect of the Pledged Notes and the security, if any, therefor.

Section
7.5.Use of Inventory and Equipment.Until the occurrence of and continuation of an Event of Default and
the exercise by Lender of its rights under Article IX hereof, Borrower may (a) retain possession of and use its Inventory and Equipment in any lawful manner not inconsistent with this
Agreement or with the terms, conditions, or provisions of any policy of insurance thereon; (b) sell or lease its Inventory in the ordinary course of business; and (c) use and consume any
raw materials or supplies, the use and consumption of which are necessary in order to carry on Borrower's business.

ARTICLE VIII.    EVENTS OF DEFAULT

Each
of the following shall constitute an Event of Default hereunder:

Section
8.1.Payments.If (a) the interest on any Loan, any commitment or other fee, or any other
Obligation not listed in subpart (b) hereof, shall not be paid in full when due and payable or within five (5) days thereafter, or (b) the principal of any Loan shall not be paid
in full when due and payable.

Section
8.2.Special Covenants.If any Company shall fail or omit to perform and observe Section 5.7,
5.8, 5.9, 5.11, 5.12, 5.13, 5.15 or 5.20 hereof.

Section
8.3.Other Covenants.If any Company shall fail or omit to perform and observe any agreement or other
provision (other than those referred to in Section 8.1 or 8.2 hereof) contained or referred to in this Agreement or any Related Writing that is on such Company's part to be complied with, and
that Default shall not have been fully corrected within thirty (30) days after the earlier of

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(a) any
Financial Officer of such Company becomes aware of the occurrence thereof, or (b) the giving of written notice thereof to Borrower by Lender that the specified Default is to be
remedied.

Section
8.4.Representations and Warranties.If any representation, warranty or statement made in or pursuant to
this Agreement or any Related Writing or any other material information furnished by any Company to Lender or any other holder of any Note, shall be false or erroneous in any material respect.

Section
8.5.Cross Default.If any Company shall default in the payment of principal or interest due and owing
under any Material Indebtedness Agreement, beyond any period of grace provided with respect thereto or in the performance or observance of any other agreement, term or condition contained in any
agreement under which such obligation is created, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such
Indebtedness to become due prior to its stated maturity.

Section
8.6.ERISA Default.The occurrence of one or more ERISA Events that (a) Lender determines could
have a Material Adverse Effect, or (b) results in a Lien on any of the assets of any Company in excess of Five Hundred Thousand Dollars ($500,000).

Section
8.7.Change in Control.If any Change in Control shall occur with respect to Borrower.

Section
8.8.Judgments.There is entered against any Company (a) a final judgment or order for the
payment of money by a court of competent jurisdiction, that remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of thirty (30) days
after the date on which the right to appeal has expired, provided that the aggregate of all such
judgments for all such Companies, shall exceed Five Million Dollars ($5,000,000) (less any amount that will be covered by the proceeds of insurance and is not subject to dispute by the insurance
provider); or (b) any one or more non-monetary final judgments that are not covered by insurance, or, if covered by insurance, for which the insurance company has not agreed or
acknowledged coverage, and that, in either case, Lender reasonably determines have, or could be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case,
(i) enforcement proceedings are commenced by the prevailing party or any creditor upon such judgment or order, or (ii) there is a period of ten (10) consecutive Business Days
during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect.

Section
8.9.Material Adverse Change.There shall have occurred any condition or event that Lender reasonably
determines has a Material Adverse Effect on Borrower or any Company.

Section
8.10.Security.If any Lien granted in this Agreement or any other Loan Document in favor of Lender,
shall be determined to be (a) void, voidable or invalid, or is subordinated or not otherwise given the priority contemplated by this Agreement and Borrower or the appropriate Credit Party has
failed to promptly execute appropriate documents to correct such matters, or (b) unperfected as to any material amount of Collateral (as determined by Lender, in its reasonable discretion) and
Borrower or the appropriate Credit Party has failed to promptly execute appropriate documents to correct such matters.

Section
8.11.Validity of Loan Documents.If (a) any material provision, in the sole opinion of Lender,
of any Loan Document shall at any time cease to be valid, binding and enforceable against any Credit Party; (b) the validity, binding effect or enforceability of any Loan Document against any
Credit Party shall be contested by any Credit Party; (c) during the term of the Loan Documents, any Credit Party shall deny that it has any or further liability or obligation under any Loan
Document; or (d) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Lender the benefits
purported to be created thereby.

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Section
8.12.Solvency.If any Company (other than a Dormant Subsidiary) shall (a) except as permitted
pursuant to Section 5.12 hereof, discontinue business, (b) generally not pay its debts as such debts become due, (c) make a general assignment for the benefit of creditors,
(d) apply for or consent to the appointment of an interim receiver, a receiver, a receiver and manager, an administrator, sequestrator, monitor, a custodian, a trustee, an interim trustee,
liquidator, agent or other similar official of all or a substantial part of its assets or of such Company, (e) be adjudicated a debtor or insolvent or have entered against it an order for
relief under Title 11 of the United States Code, or under any other bankruptcy insolvency, liquidation, winding-up, corporate or similar statute or law, foreign, federal state or
provincial, in any applicable jurisdiction, now or hereafter existing, as any of the foregoing may be amended from time to time, or other applicable statute for jurisdictions outside of the United
States, as the case may be, (f) file a voluntary petition in bankruptcy, or file a proposal or
notice of intention to file a proposal or have an involuntary proceeding filed against it and the same shall continue undismissed for a period of sixty (60) days from commencement of
such proceeding or case, or file a petition, an answer, or an application or a proposal seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law
(whether federal, provincial or state, or, if applicable, other jurisdiction) relating to relief of debtors, or admit (by answer, by default or otherwise) the material allegations of a petition filed
against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal, provincial or state, or, if applicable, other jurisdiction) relating to relief of debtors,
(g) suffer or permit to continue unstayed and in effect for sixty (60) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, that approves a
petition or an application or a proposal seeking its reorganization or appoints an interim receiver, a receiver and manager, an administrator, custodian, trustee, interim trustee or liquidator of all
or a substantial part of its assets, or of such Company, (h) have an administrative receiver appointed over the whole or substantially the whole of its assets, or of such Company,
(i) take, or omit to take, any action in order thereby to effect any of the foregoing, (j) have assets, the value of which is less than its liabilities (taking into account prospective
and contingent liabilities), or (k) have a moratorium declared in respect of any of its Indebtedness, or any analogous procedure or step is taken in any jurisdiction.

ARTICLE IX.    REMEDIES UPON DEFAULT

Notwithstanding
any contrary provision or inference herein or elsewhere:

Section
9.1.Optional Defaults.If any Event of Default referred to in Section 8.1, 8.2, 8.3, 8.4, 8.5,
8.6, 8.7, 8.8, 8.9, 8.10 or 8.11 hereof shall occur and be continuing, Lender shall have the right, in its discretion, to give written notice to Borrower to:



Section
9.2.Automatic Defaults.If any Event of Default referred to in Section 8.12 hereof shall occur:



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Section
9.3.Offsets.If there shall occur or exist any Event of Default referred to in Section 8.12
hereof or if the maturity of the Obligations is accelerated pursuant to Section 9.1 or 9.2 hereof, Lender shall have the right at any time to set off against, and to appropriate and apply
toward the payment of, any and all of the Obligations then owing by Borrower to Lender, whether or not the same shall then have matured, any and all deposit (general or special) balances and all other
indebtedness then held or owing by Lender (including, without limitation, by branches and agencies or any affiliate of Lender, wherever located) to or for the credit or account of Borrower or any
Guarantor of Payment, all without notice to or demand upon Borrower or any other Person, all such notices and demands being hereby expressly waived by Borrower.

Section
9.4.Collateral.Lender shall at all times have the rights and remedies of a secured party under the
U.C.C., in addition to the rights and remedies of a secured party provided elsewhere within this Agreement, in any other Related Writing executed by Borrower or otherwise provided in law or equity.
Upon the occurrence and during the continuance of an Event of Default and at all times thereafter, Lender may require Borrower to assemble the Collateral, which Borrower agrees to do, and make it
available to Lender at a reasonably convenient place to be designated by Lender. To the extent not prohibited by law, Lender may, with or without notice to or demand upon Borrower and with or without
the aid of legal process, make use of such force as may be necessary to enter any premises where the Collateral, or any thereof, may be found and to take possession thereof (including anything found
in or on the Collateral that is not specifically described in this Agreement, each of which findings shall be considered to be an accession to and a part of the Collateral) and for that purpose may
pursue the Collateral wherever the same may be found, without liability for trespass or damage caused thereby to Borrower. After any delivery or taking of possession of the Collateral, or any thereof,
pursuant to this Agreement, then, with or without resort to Borrower personally or any other Person or property, all of which Borrower hereby waives, and upon such terms and in such manner as Lender
may deem advisable, Lender, in its discretion, may sell, assign, transfer and deliver any of the Collateral at any time, or from time to time. No prior notice need be given to Borrower or to any other
Person in the case of any sale of Collateral that Lender determines to be perishable or to be declining speedily in value or that is customarily sold in any recognized market, but in any other case
Lender shall give Borrower not fewer than ten (10) days prior notice of either the time and place of any public sale of the Collateral or of the time after which any private sale or other
intended disposition thereof is to be made. Borrower waives advertisement of any such sale and (except to the extent specifically required by the preceding sentence) waives notice of any kind in
respect of any such sale. At any such public sale, Lender may purchase the Collateral, or any part thereof, free from any right of redemption, all of which rights Borrower hereby waives and releases
to the extent not prohibited by law. After deducting all Related Expenses, and after paying all claims, if any, secured by Liens having precedence over this Agreement, Lender may apply the net
proceeds of each such sale to or toward the payment of the Obligations, whether or not then due, in such order and by such division as Lender, in its sole
discretion, may deem advisable. Any excess, to the extent permitted by law, shall be paid to Borrower, and Borrower shall remain liable for any deficiency. In addition, Lender shall at all times have
the right to obtain new appraisals of Borrower or the Collateral, the cost of which shall be paid by Borrower.

Section
9.5.Other Remedies.The remedies in this Article IX are in addition to, not in limitation of,
any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which Lender may be entitled.

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ARTICLE X.    MISCELLANEOUS

Section
10.1.No Waiver; Cumulative Remedies; Relationship of Parties.No omission or course of dealing on the
part of Lender or the holder of any Note in exercising any right, power or remedy hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The
remedies herein provided are cumulative and in addition to any other rights, powers or privileges held under any of the Loan Documents or by operation of law, by contract or otherwise. Nothing
contained in this Agreement and no action taken by Lender pursuant hereto shall be deemed to constitute Borrower and Lender a partnership, association, joint venture or other entity. The relationship
between Borrower and Lender with respect to the Loan Documents is and shall be solely that of debtor and creditor, respectively, and Lender shall have no fiduciary obligation toward Borrower with
respect to any such documents or the transactions contemplated thereby.

Section
10.2.Amendments, Waivers and Consents.No amendment, modification, termination, or waiver of any
provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by Lender and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

Section
10.3.Notices.All notices, requests, demands and other communications provided for hereunder shall be
in writing and, if to Borrower, mailed or delivered to it, addressed to it at the address specified on the signature pages of this Agreement, if to Lender, mailed or delivered to it, addressed to the
address of Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All
notices, statements, requests, demands and other communications provided for hereunder shall be given by overnight delivery or first class mail with postage prepaid by registered or certified mail,
addressed as
aforesaid, or sent by facsimile with telephonic confirmation of receipt (if received during a Business Day, otherwise the following Business Day). All notices hereunder shall not be effective until
received.

Section
10.4.Costs, Expenses and Taxes.Borrower agrees to pay on demand all costs and expenses of Lender, and
all Related Expenses, including but not limited to (a) administration, travel and out-of-pocket expenses, including but not limited to reasonable attorneys' fees and
expenses, of Lender in connection with the preparation, negotiation and closing of the Loan Documents and the administration of the Loan Documents, the collection and disbursement of all funds
hereunder and the other instruments and documents to be delivered hereunder, (b) extraordinary expenses of Lender in connection with the administration of the Loan Documents and the other
instruments and documents to be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses of special counsel for Lender, with respect to the foregoing,
and of local counsel, if any, who may be retained by said special counsel with respect thereto. Borrower also agrees to pay on demand Related Expenses, including reasonable attorneys' fees and
expenses, in connection with any restructuring, amendment, or enforcement of the Obligations, this Agreement or any Related Writing. In addition, Borrower shall pay any and all stamp, transfer,
documentary and other taxes, assessments, charges and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and
documents to be delivered hereunder, and agrees to hold Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or failure to pay such taxes or
fees. All obligations provided for in this Section 10.4 shall survive any termination of this Agreement.

Section
10.5.Indemnification.Borrower agrees to defend, indemnify and hold harmless Lender (and its
affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses
(including

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attorneys'
fees), or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Lender in connection with any investigative, administrative or judicial
proceeding (whether or not Lender shall be designated a party thereto) or any other claim by any Person relating to or arising out of the Loan Documents or any actual or proposed use of proceeds of
the Loans or any of the Obligations, or any activities of any Company or its Affiliates; provided that Lender shall not have the right to be indemnified under this Section 10.5 for its own
gross negligence or willful misconduct (as determined by a court of competent jurisdiction). All obligations provided for in this Section 10.5 shall survive any termination of this Agreement.

Section
10.6.Execution in Counterparts; Binding Effect; Borrower's Assignment.This Agreement may be executed
in any number of counterparts and by different parties hereto in separate counterparts and by facsimile signature, each of which counterparts when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same agreement. This Agreement shall become effective when it shall have been executed by Borrower and Lender and thereafter
shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of Lender.

Section
10.7.Patriot Act Notice.Lender hereby notifies the Credit Parties that, pursuant to the requirements
of the Patriot Act, Lender is required to obtain, verify and record information that identifies the Credit Parties, which information includes the name and address of the Credit Parties and other
information that will allow Lender, as applicable, to identify the Credit Parties in accordance with the Patriot Act. Borrower shall provide, to the extent commercially reasonable, such information
and take such actions as are reasonably requested by Lender in order to assist Lender in maintaining compliance with the Patriot Act.

Section
10.8.Severability of Provisions; Captions; Attachments.Any provision of this Agreement that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to sections and subsections herein are inserted for convenience only and shall be
ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.

Section
10.9.Confidentiality.Lender shall hold all Confidential Information in accordance with the customary
procedures of Lender for handling confidential information of this nature, and in accordance with safe and sound banking practices. Except as permitted by applicable law or regulation, Lender will not
purchase or sell Borrower's publicly traded securities on the basis of material non-public information about that security, Borrower or Borrower's subsidiaries. Notwithstanding the
foregoing, Lender may in any event make disclosures of, and furnish copies of Confidential Information (a) when reasonably required by any bona fide transferee or participant in connection with
the contemplated transfer of any Loans or Commitment or participation therein (which information shall be provided under a notice of confidentiality); (b) to the parent corporation or
corporations of Lender (or any affiliate of any of the foregoing), and to its respective auditors and attorneys, and any other advisors or consultants with a need to know; and (c) as required
or requested by any Governmental Authority or representative thereof, or pursuant to legal process, provided, that, unless specifically prohibited by applicable law or court order, Lender, as
applicable, shall notify the chief financial officer of Borrower of any request by any Governmental Authority or representative thereof (other than any such request in connection with an examination
of the financial condition of Lender by such Governmental Authority), and of any other request pursuant to legal process, for disclosure of any such non-public information prior to
disclosure of such Confidential Information.

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Section
10.10.Entire Agreement.This Agreement, any Note and any other Loan Document or other agreement,
document or instrument attached hereto or executed on or as of the Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and supersede all oral representations
and negotiations and prior writings with respect to the subject matter hereof.

Section
10.11.Legal Representation of Parties.The Loan Documents were negotiated by the parties with the
benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not
apply to any construction or interpretation hereof or thereof.

Section
10.12.Governing Law; Submission to Jurisdiction.

(a)Governing Law.This Agreement, each of the Notes and any Related Writing (except as otherwise set forth in
any Loan Document executed by a Foreign Subsidiary) shall be governed by and construed in accordance with the laws of the State of Ohio and the respective rights and obligations of Borrower and Lender
shall be governed by Ohio law, without regard to principles of conflicts of laws.

(b)Submission to Jurisdiction.Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, the Obligations or any Related Writing (except
as otherwise set forth in any Loan Document executed by a Foreign Subsidiary), and Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and
determined in such Ohio state or federal court. Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or
hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another
court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by law.

[Remainder
of page left intentionally blank]

43

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Section
10.13.JURY TRIAL WAIVER.BORROWER AND LENDER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED
THERETO.

IN
WITNESS WHEREOF, the parties have executed and delivered this Credit and Security Agreement as of the date first set forth above.

|Address: | 14145 Danielson Street, Suite B
Poway, CA 92064           |  | ALDILA, INC.                
|-------- | --------------------------------------------------------- |  | ----------------------------
|         | Attn: Chief Financial Officer                             |  | By:                         
|Address: | One Embarcadero Center, Ste. 1100
San Francisco, CA 94111 |  | KEYBANK NATIONAL ASSOCIATION
|         | Attn: Institutional Bank                                  |  | By:                         

Signature
Page to
Credit and Security Agreement

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SCHEDULE 1        GUARANTORS OF PAYMENT

Aldila
Golf Corp., a Delaware corporation

S-1

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SCHEDULE 2        PLEDGED SECURITIES

|Name of Subsidiary                                     |  | Jurisdiction               |  | Shares    |  | Certificate Number |  | Owned by / Percentage     |   
|------------------------------------------------------ |  | -------------------------- |  | --------- |  | ------------------ |  | ------------------------- | --
|Aldila Golf Corp.                                      |  | Delaware                   |  | 10        |  | 1                  |  | Borrower / 100            | % 
|Aldila Materials Technology Corp.                      |  | Delaware                   |  | 100       |  | 1                  |  | Borrower / 100            | % 
|Aldila de Mexico, S.A. de C.V.                         |  | Mexico                     |  | 6500
3496 |  | 8
9                |  | Aldila Golf Corp. / 99.98 | %*
|Aldila Carbon Fibers Products (Zhuhai) Company Limited |  | People's Republic of China |  |           |  |                    |  | Aldila Golf Corp. / 100   | %*
|Aldila Composite Products Company Limited              |  | Vietnam                    |  |           |  |                    |  | Aldila Golf Corp. / 100   | %*

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S-2

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EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE

|$10,000,000 |  | February 8, 2008
|----------- |  | ----------------

FOR
VALUE RECEIVED, the undersigned, ALDILA, INC., a Delaware corporation ("Borrower"), promises to pay, on the last day of the Commitment Period, as defined in the Credit
Agreement (as hereinafter defined), to the order of KEYBANK NATIONAL ASSOCIATION ("Lender"), at its main office at 127 Public Square, Cleveland, Ohio 44114, or at such other place as Lender shall
designate, the principal sum of

TEN MILLION and 00/100..........................................................................DOLLARS


or
the aggregate unpaid principal amount of all Revolving Loans, as defined in the Credit Agreement made by Lender to Borrower pursuant to Section 2.2 of the Credit Agreement, whichever is
less, in lawful money of the United States of America.

As
used herein, "Credit Agreement" means the Credit and Security Agreement dated as of February 8, 2008, between Borrower and Lender, as the same may from time to time be amended,
restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit
Agreement.

Borrower
also promises to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full
thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.4(a) of the Credit Agreement. Such interest shall be payable on each date provided for in
Section 2.4(a) or as otherwise provided in the Credit Agreement.

The
portions of the principal sum hereof from time to time representing Base Rate Loans and Eurodollar Loans, interest owing thereon and payments of principal and interest of any
thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided that failure to make any such entry shall in no way detract from the obligations of Borrower
under this Note.

If
this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit
Agreement, the principal hereof and the unpaid interest thereon shall bear interest, pursuant to the terms of the Credit Agreement, until paid, at a rate per annum equal to the Default Rate. All
payments of principal of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, and fails to cure
such failure to pay within five (5) days thereafter, then Lender may collect and Borrower agrees to pay a late charge of an amount equal to five percent (5%) of the amount of such late payment.

This
Note is the Revolving Credit Note referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate
payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.

Except
as expressly provided in the Credit Agreement, Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.

E-1

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JURY TRIAL WAIVER.BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

| |  | ALDILA, INC.
| |  | ------------
| |  | By:         
| |  | Name:       
| |  | Title:      

E-2

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EXHIBIT B  FORM OF  TERM NOTE

|$5,000,000 |  | February 8, 2008
|---------- |  | ----------------

FOR
VALUE RECEIVED, the undersigned, ALDILA, INC., a Delaware corporation ("Borrower"), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION ("Lender"), at its main office
at 127 Public Square, Cleveland, Ohio 44114, or at such other place as Lender shall designate, the principal sum of

FIVE MILLION and 00/100..........................................................................DOLLARS


in
lawful money of the United States of America in consecutive principal payments as set forth in the Credit Agreement (as hereinafter defined).

As
used herein, "Credit Agreement" means the Credit and Security Agreement dated as of February 8, 2008, between Borrower and Lender, as the same may from time to time be amended,
restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit
Agreement.

Borrower
also promises to pay interest on the unpaid principal amount of the Term Loan from time to time outstanding, from the date of the Term Loan until the payment in full thereof, at
the rates per annum that shall be determined in accordance with the provisions of Section 2.4(b) of the Credit Agreement. Such interest shall be payable on each date provided for in
Section 2.4(b); provided that interest on any principal portion that is not paid when due shall be payable on demand.

The
portions of the principal sum hereof from time to time representing Base Rate Loans and Eurodollar Loans, interest owing thereon and payments of principal and interest of any
thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided that
failure to make any such entry shall in no way detract from the obligations of Borrower under this Note.

If
this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit
Agreement, the principal hereof and the unpaid interest thereon shall bear interest, pursuant to the terms of the Credit Agreement, until paid, at a rate per annum equal to the Default Rate. All
payments of principal of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due, and fails to cure
such failure to pay within five (5) days thereafter, then Lender may collect and Borrower agrees to pay a late charge of an amount equal to five percent (5%) of the amount of such late payment.

This
Note is the Term Note referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof,
the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.

Except
as expressly provided in the Credit Agreement, Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in
accordance with the laws of the State of Ohio, without regard to conflicts of laws provisions.

E-3

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JURY TRIAL WAIVER.BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

| |  | ALDILA, INC.
| |  | ------------
| |  | By:         
| |  | Name:       
| |  | Title:      

E-4

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EXHIBIT C
FORM OF
NOTICE OF LOAN



KeyBank
National Association
127 Public Square
Cleveland, Ohio 44114-0616
Attention: Institutional Banking

Ladies
and Gentlemen:

The
undersigned, , on behalf of
ALDILA, INC., a Delaware corporation ("Borrower") refers to the Credit and Security Agreement, dated as
of February 8, 2008 ("Credit Agreement", the terms defined therein being used herein as therein defined), between Borrower and KEYBANK NATIONAL ASSOCIATION, and hereby gives you notice,
pursuant to Section 2.5 of the Credit Agreement that Borrower hereby requests [a Loan] [an interest change with respect to a portion of the Term Loan (the
"Term Loan Interest Change")] under the Credit Agreement, and in connection therewith sets forth below the information relating to the [Loan (the "Proposed Loan")]
[Term Loan Interest Change] as required by Section 2.6 of the Credit Agreement:



The
undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the [Proposed Loan] [Term
Loan Interest Change]:



| |  | ALDILA, INC.
| |  | ------------
| |  | By:         
| |  | Name:       
| |  | Title:      

E-5

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EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE

For
Fiscal Quarter ended

THE
UNDERSIGNED HEREBY CERTIFIES THAT:

(1)   I
am the duly elected [President] or [Chief Financial Officer] of ALDILA, INC., a Delaware corporation
("Borrower");

(2)   I
am familiar with the terms of that certain Credit and Security Agreement, dated as of February 8, 2008, between Borrower and KEYBANK NATIONAL ASSOCIATION
("Lender") (as the same may from time to time be amended, restated or otherwise modified, the "Credit Agreement", the terms defined therein being used herein as therein defined), and the terms of the
other Loan Documents, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Companies during the accounting period
covered by the attached financial statements;

(3)   The
review described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event that constitutes or constituted
a Default or Event of Default, that is continuing at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate;

(4)   The
representations and warranties made by Borrower contained in each Loan Document are true and correct in all material respects as though made on and as of the date
hereof; and

(5)   Set
forth on Attachment I hereto are calculations of the financial covenants set forth in Sections 5.7 of the Credit Agreement, which calculations show compliance
with the terms thereof.

IN
WITNESS WHEREOF, I have signed this certificate the  day of
,
20.

| |  | ALDILA, INC.
| |  | ------------
| |  | By:         
| |  | Name:       
| |  | Title:      

E-6

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