Exhibit 10.48


REVOLVING LINE OF CREDIT LOAN AGREEMENT

AND SECURITY AGREEMENT


THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT AND
SECURITY AGREEMENT (“Agreement”) is made as of November 15, 2002, by and
among  EFJ, Inc., a Delaware
corporation, and E. F. Johnson Company, a Minnesota corporation, both having an
address at c/o EFJ, Inc., 1232 22nd Street, NW, Sixth Floor,
Washington, D.C. 20037-1292,  and Bank of
America, N.A., a national banking association, having an address at 1101
Wootton Parkway, 4th Floor, Rockville, Maryland 20852.


RECITALS


1.      The
Borrower has applied to the Lender for a revolving line of credit loan facility
in the maximum principal amount of Ten Million and 00/100 Dollars
($10,000,000.00) to be used by the Borrower for working capital and to finance
the performance of government contracts, the payments under which are subject
to being assigned as security for the Revolving Loan (as hereafter defined).


2.      The
Lender is willing to make the Revolving Loan on the terms and conditions
hereinafter set forth.


AGREEMENTS


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


ARTICLE 1.                 DEFINITIONS.


1.1   Defined
Terms.   Certain
capitalized terms not otherwise defined herein are used in this Agreement with
the following meanings, unless the context otherwise requires:


1.      “Account”
means a right to payment of a monetary obligation, whether or not earned by
performance, (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services rendered
or to be rendered, (iii) for a policy of insurance issued or to be issued,
(iv) for a secondary obligation incurred or to be incurred, (v) for
energy provide or to be provided, (iv) for use or hire of a vessel under a
charter or other contract, (vii) arising out of the use of a credit or
charge card or information contained on or for use with the card, or (viii) as
winnings in a lottery or other game of chance operated or sponsored by a state,
governmental unit of a state, or person licensed or authorized to operate the
game by a state or governmental unit of a state.


2.      “Advance”
means an advance of funds under the Revolving Loan.


3.      “Affiliate”
means, with respect to any specified Person, any other Person which, directly
or indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with, such specified Person. The term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of management and policies of a Person, whether through ownership
of common stock, by contract, agreement, understanding or otherwise.


4.      “Agreement”
means this Revolving Line of Credit Loan Agreement and Security Agreement as
the same may be amended, modified or supplemented from time to time.


5.      “Allowed
Amount of Advances” means the aggregate amount of all Advances of principal
under the Revolving Loan permitted to be outstanding at any particular time
under the Paragraph below titled “Allowed Amount of Advances.”


6.      “Assignment”
means a direct assignment of Payments under Government Contracts, pursuant to
and in compliance with the Assignment of Claims Act.


7.      “Assignment
of Claims Act” means Title 31, United States Code § 3727, and
Title 41, United States Code § 15, as revised or amended, and any rules or
regulations issued pursuant thereto, 











and also shall be deemed
to include any other laws, rules or regulations governing the assignment
of payments under Government Contracts or claims against a Government.


8.      “Billed”
means that the Borrower has submitted an invoice to a Customer requesting
payment for goods or services provided by the Borrower.


9.      “Borrower”
means EFJ, Inc., and E. F. Johnson Company and to each such Person or to
all of them, as the context may require, and the representations and
obligations hereunder of the Persons comprised by the term “Borrower” shall be
joint and several. For purposes of testing compliance with the financial
covenants hereinafter, the negative covenants hereinafter, the unused fee
provided hereinafter, and pricing under the Revolving Note that is based on the
Borrower’s financial performance, financial information concerning the Borrower
shall mean financial information for EFJ, Inc., and E. F. Johnson Company
stated on a consolidated basis. In addition, the financial reporting to be
provided by the Borrower shall be provided for EFJ, Inc. and E. F. Johnson
Company on a consolidated and consolidating basis unless otherwise requested by
Lender.


10.   “Borrowing Base” means:


1.      Ninety
percent (90%) of the Borrower’s Eligible Government Accounts, plus


2.       Eighty
Five percent (85%) of the Borrower’s Eligible Commercial Accounts, plus


3.      Thirty
Five percent (35%) of the Borrower’s Eligible Inventory, provided, however,
that in the event that the amount of the Borrower’s Eligible Inventory which
would be included in the Borrowing Base should exceed Forty Percent (40%) of
the total Borrowing Base, then the amount of the Borrower’s Eligible Inventory
which shall be included in the Borrowing Base shall be reduced to an amount
which equals Forty Percent (40%) of the Borrowing Base.


After calculating the portion of the Borrowing Base
comprised of Eligible Government Accounts, Eligible Commercial Accounts and
Eligible Inventory, Lender shall deduct from such portion of the Borrowing Base
such reserves as Lender may establish from time to time in its reasonable
credit judgment, including without limitation, reserves for dilution, rent at
leased locations subject to statutory or contractual landlord’s liens,
inventory shrinkage, customs charges, warehousemen’s or bailees’ charges,
liabilities to growers of agricultural products which are entitled to lien rights
under the Perishable Agricultural Commodities Act or any applicable state law,
and the amount of estimated maximum exposure, as determined by Lender from time
to time, under any interest rate contracts which Borrower enters into with
Lender (including interest rate swaps, caps, floors, options thereon,
combinations thereof, or similar contracts).


In addition, Lender may require modifications to the
percentage rates of advance set forth above, based on the results of any field
examination or audit of Borrower, as determined in Lender’s sole and absolute
discretion. In the absence of manifest error, Lender’s determination of the
amount of the Borrowing Base shall be conclusive.


11.   “Borrowing
Base Certificate” means a certificate substantially in the form of Schedule
1.1(A) attached hereto and made a part hereof (or such subsequent form
as the Lender shall require).


12.   “Borrowing
Date” means the date on which an Advance is made.


13.   “Business
Day” means any day that is not a Saturday, Sunday or banking holiday in the
State of Maryland.


14.   “Capital
Lease” means any lease which has been or should be capitalized on the books
of the lessee in accordance with GAAP.


15.   “Cash
Collateral Account” means an account to be established by Lender in
Borrower’s name, with the Lender, for the purpose of receiving Payments, which
shall constitute part of the Collateral unless and until disbursed to the
Borrower or applied for the Borrower’s account in accordance with this
Agreement.











16.   “Closing
Date” means November 15, 2002.


17.   “Code”
means the Internal Revenue Code of the United States, as amended.


18.   “Collateral”
means all of the personal property of the Borrower, wherever located, and
whether now owned or hereafter acquired, including without limitation, all of
the following kinds of property now owned or hereafter acquired by the
Borrower:


1.      Accounts;


2.      Chattel
Paper;


3.      Deposit
Accounts;


4.      Documents;


5.      Equipment;


6.      Fixtures;


7.      General
Intangibles (including payment intangibles and software);


8.      Instruments;


9.      Inventory;


10.   Investment
Property;


11.   Intellectual
Property;


12.   Money;


13.   Supporting
Obligations (including Letter-of-Credit Rights);


14.   all books
and records and computer hardware, software and systems;


15.   all
policies of insurance and the proceeds thereof;


16.   all
additions and accessions to and replacements of the collateral described above;
and


17.   all
products and proceeds of all of the collateral described above.


19.   “Commercial
Accounts” means all Accounts due from Customers other than the Government.


20.   “Compliance
Certificate” means a certificate substantially in the form of Schedule 1.1(B) attached
hereto and made a part hereof


21.   “Contra
Account” means an Account due from an account debtor to which the Borrower
owes money.


22.   “Customer”
means any governmental entity (federal, state, county, municipal or otherwise)
or business entity (corporation, association, partnership, limited liability
company or partnership, sole proprietorship or otherwise) or individual to
which the Borrower provides goods or services for compensation; however,
certain individual agencies of the United States Government and certain
branches of certain major corporations, as determined by the Lender in its sole
discretion, shall be treated as Customers in their own right, separate and
distinct from other such agencies or branches and from the United States
Government or the corporation of which they are a part.


 













23.   “Debt” means:


1.      indebtedness
or liability for borrowed money, or for the deferred purchase price of property
or services;


2.      obligations
as a lessee under a Capital Lease;


3.      obligations
to reimburse the issuer of letters of credit or acceptances;


4.      all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person or otherwise to
assure a creditor against loss; and


5.      obligations
secured by any lien or Encumbrance on property owned by the Borrower.


24.   “EBITDA”
means the Borrower’s net income, less income or plus loss from discontinued
operations and extraordinary items, plus income taxes, plus interest expense,
plus depreciation, depletion and amortization, plus non-cash compensation
expense resulting from options granted prior to this Agreement.


25.   “Eligible,” when used to describe an Account, means that
the Account conforms to the following criteria:


1.      the
Account has been Billed;


2.      in the
case of a Commercial Account or Government Account, less than ninety-one (91)
days have passed from the original billing date;


3.      at the
Lender’s option, in the case of a Government Account, the Borrower has made an
Assignment of all Payments due or to become due under the Government Contract
giving rise to the Account;


4.      the
Account arose from a bona fide sale of goods or services to a Customer;
the goods or services have been delivered or provided to the Customer; the
Borrower possesses receipts from the Customer acknowledging delivery of the
goods or performance of the services; and Customer has not returned or rejected
the goods or services;


5.      the
Account is based upon an enforceable written order or contract for goods or
services;


6.      the
Borrower’s title to the Account is absolute and is not subject to any prior
assignment, claim, escrow agreement or amendment; lien or security interest,
and the Borrower otherwise has the full and unqualified right and power to
assign and grant a security interest in the Account to the Lender;


7.      the
amount shown on the books of the Borrower and on any invoice, certificate,
schedule or statement delivered to the Lender regarding the amount due on the
Account is due and owing to the Borrower;


8.      the
Account is not subject to any claim of reduction, counterclaim, set-off,
recoupment or other defense in law or equity, or any claim for credits,
allowances or adjustments by the Customer because of returned, inferior or
damaged goods, unsatisfactory services or for any other reason, or any claim by
a Customer against a warranty provided by Borrower for an Account arising from
the sale of goods or services to a Customer; provided, that (a) if only a
portion of an Account is subject to a claim by a Customer against a warranty
provided by Borrower for goods or services sold to a Customer, the portion of
such Account not subject to such claim will be Eligible as the Customer does
not contest making payment of the remainder of the Account and as long as it
otherwise would qualify as being Eligible under this Agreement, and (b) if
only a portion of goods sold by Borrower to a Customer are returned by the
Customer to the Borrower,  the portion of
such Account which did not arise from the sale of the returned 











goods will be Eligible as
long as the Customer does not contest making payment of the remainder of the
Account and such Account would otherwise qualify as being Eligible under this
Agreement;


9.      the
Customer has not notified the Borrower of any dispute concerning any of the
goods or services giving rise to the Account, nor made claim that the goods or
services fail to conform to the requirements of the Customer’s order or
contract, nor notified the Borrower to cure any default under the Customer’s
order or contract;


10.   the Account
does not arise out of a Customer’s contract or order that by its terms forbids
or makes void or unenforceable the Borrower’s assignment of the Account to the
Lender;


11.   the
Borrower has not received any note, trade acceptance draft or other instrument
tendered in payment of the Account;


12.   the
Borrower has not received any notice of the death of the Customer or any
partner in a Customer that is a partnership (where the death of such partner
would result in dissolution or termination of such Customer); nor has Borrower
received any notice of dissolution, termination of existence, insolvency,
business failure, appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by, or the filing of a petition in
bankruptcy or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against the Customer;


13.   the
Customer is not incorporated in any jurisdiction outside the United States and
is not conducting its business primarily outside the United States; provided,
that an Account from such a Customer shall not be excluded from the definition
of Eligible by virtue of this paragraph if (1) the contract between the
Customer and Borrower from which the Account shall be created has been approved
by Lender, in advance, in writing and the Account would otherwise qualify as
being Eligible, or (2) Borrower shall be the beneficiary under and have
recourse to a letter of credit issued by a financial institution acceptable to Lender
in respect of such an Account and Lender shall have delivered to Borrower
written approval of such letter of credit and related Account, such written
approval to be provided in Lender’s sole and absolute discretion;


14.   Borrower is
not indebted in any manner to the Customer; however, the amount of the Account
which will not qualify as being Eligible shall be only the amount equal to the
amount of the indebtedness owing by Borrower to Customer, so long as the amount
of the Account in excess of the amount of the indebtedness owing by Borrower to
Customer would otherwise qualify as being Eligible under this Agreement);


15.   no bond has
been issued or is contemplated with respect to the goods or services furnished
by the Borrower or with respect to the project or contract for which those
goods or services were furnished, unless otherwise agreed to in advance, in
writing by Lender, as determined by Lender in its sole and absolute discretion;
and


16.   the Account
is not an Ineligible Account; and


when used to describe Inventory, shall mean the cost
of the Borrower’s Inventory, less such part of the Inventory that the Lender
determines to be ineligible, and less a reserve for obsolescence to be
determined by the Lender. Ineligible Inventory shall include, but shall not be
limited to, work-in-process, inventory on consignment and any other Inventory
that the Lender believes should not be considered eligible, either because of
doubtful value or because the Lender believes there would be practical
difficulties in realizing on the Inventory.


In the event of any dispute, under the foregoing
criteria, as to whether an Account or Inventory is, or has ceased to be, an
Eligible Account or Eligible Inventory, the Lender’s decision shall control.


26.   “Encumbrance”
means any mortgage, pledge, deed of trust, assignment, security interest,
hypothecation, lien or charge of any kind (including any conditional sale or
other title retention 











agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).


27.   “Ending
Date” means September 30, 2004.


28.   “Environmental
Laws” mean all laws relating to Hazardous Wastes, Toxic Substances or
materials that might be emitted, released or discharged into the environment or
other laws or regulations protecting the environment.


29.   “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
thereunder, all as the same may be in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor sections.


30.   “ERISA
Affiliate” means an entity, whether or not incorporated, which is under
common control with the Borrower or any of its subsidiaries within the meaning
of Section 4001(a)(14) of ERISA, or is a member of a group which includes
the Borrower or any of its subsidiaries and which is treated as a single
employer under Sections 414(b), (c), (m), or (o) of the Code.


31.   “Event
of Default” means any one of the events specified as an “Event of Default”
under this Agreement.


32.   “Fixed
Charge Coverage Ratio” means the sum of EBITDA and cash rent expense, less
taxes paid in cash and less capital expenditures; divided by sum of: (i) scheduled
principal payments on the Borrower’s long term debt, (ii) cash interest
expense, and (iii) cash rent expense.


33.   “Funded
Debt” means the sum of (i) all outstanding liabilities of the Borrower
for borrowed money and all other interest bearing liabilities, including
without limitation, current and long term debt, plus (ii) all LOC
Obligations or other contingent obligations.


34.   “GAAP”
means generally accepted accounting principles in the United States of America.


35.   “Governance
Documents” means the Borrower’s Articles or Certificate of Incorporation
and Bylaws or other documents or agreements affecting the Borrower’s corporate
governance.


36.   “Government”
means the government of the United States of America or the departments or
agencies of the United States, but does not include the government of any state
or the District of Columbia or any departments or agencies of any state or of
the District of Columbia.


37.   “Government
Accounts” means all Accounts arising out of any Government Contract.


38.   “Government
Contracts” means all contracts with a Government, including all renewals,
extensions, modifications, change orders and amendments thereof and thereto.


39.   “Hazardous
Wastes” mean all waste materials subject to regulation under the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. §§ 6901 et seq., or applicable state law and any other applicable
federal, state or local laws and their regulations now in force or hereafter
enacted relating to hazardous wastes.


40.   “Ineligible Accounts” shall include the following Accounts:


1.      Accounts
that do not conform with the criteria set forth for Eligible Accounts;


2.      An
Account owing by any account debtor for which the Lender has deemed fifty
percent (50%) or more of the account debtor’s other Accounts to be
non-Eligible; however, for purposes of this category of Ineligible Accounts,
each Government Contract shall be treated as an individual Customer;











3.      Government
Accounts arising under Government Contracts which contain an express
prohibition against assignment of the Borrower’s rights to Payment;


4.      The last
payment due on a Government Account, unless such Government Account arises from
a Government Contract which is a “fixed price contract” (as defined in the
Federal Acquisition Regulations) which does not include any provision for
progress payments, incentive arrangements or price redetermination;


5.      Contra
Accounts; provided, that the portion of the Accounts owing by a single Customer
to Borrower which exceeds the amounts owing by the Borrower to such Customer
shall not constitute an Ineligible Account as long as such portion of the
Accounts would not otherwise be Ineligible Accounts as defined under this
Agreement;


6.      Accounts
receivable from Affiliates or subsidiaries of the Borrower;


7.      Unbilled
Accounts, including, but not limited to, progress payments, retainages, milestones
and final payments; or


8.      Any
Account deemed by the Lender, in the exercise of its sole and absolute
discretion, to be an Ineligible Account because of uncertainty as to the
creditworthiness of the Customer or because the Lender otherwise considers the
collateral value thereof to the Lender to be impaired or its ability to realize
such value to be insecure.


41.   “Intellectual
Property” shall mean all patents, licenses, trade names, trademarks,
copyrights, inventions, service marks, trademark registrations, service mark
registrations and copyright registrations, whether domestic or foreign and
applications for any of the foregoing, and all proprietary technology,
know-how, trade secrets or other intellectual property rights owned or used by
the Borrower or any subsidiary in the operation of their respective businesses.


42.   “Item”
means any “item” as defined in Section 4-104 of the Uniform Commercial
Code, to include, without exclusion or limitation, checks, drafts, money orders
or other media by which Payment may be made.


43.   “Lender”
means Bank of America, N.A. and its successors and assigns.


44.   “Letter
of Credit” means a letter of credit issued by the Lender for the account of
the Borrower under this Agreement.


45.   “Letter
of Credit Agreement” means the Lender’s standard form of application and
reimbursement agreement in effect from time to time that the Lender requires as
a condition for each letter of credit that the Lender issues to one of its
customers.


46.   “Letter
of Credit Sublimit” means Four Million and 00/100 Dollars ($4,000,000.00).


47.   “Loan”
means the Revolving Loan.


48.   “Loan
Documents” mean this Agreement, the Revolving Note, or any other document
executed by the Borrower or any other Person evidencing, securing, guaranteeing
or relating to the Revolving Loan, as such documents or instruments may be
amended, modified or extended from time to time.


49.   “LOC
Obligations” means, at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit; plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by the Lender
but not reimbursed.


 













50.   “Margin”
means the percentage interest rate shown on the Performance Pricing Grid to be
added to the LIBOR Rate (as defined in the Revolving Note) or the Prime Rate
(as defined in the Revolving Note) to determine the rate of interest payable at
any time under the Revolving Note. The Margin regarding the LIBOR Rate shall be
as stated in the “LIBOR +” row of the Performance Pricing Grid, and the Margin
regarding the Prime Rate shall be as stated in the “Prime Rate +” row of the
Performance Pricing Grid.


51.   “Maximum
Revolving Commitment Amount” means Ten Million and 00/100 Dollars
($10,000,000.00), or such lesser amount that Borrower may request as
hereinafter provided.


52.   “Multiemployer
Plan” means a Plan which is a multiemployer plan as defined in Sections 3(37)
or 4001(a)(3) of ERISA.


53.   “Multiple
Employer Plan” means a Plan which the Borrower or any of its subsidiaries
or any ERISA Affiliate and at least one employer other than the Borrower or any
of its subsidiaries or any ERISA Affiliate are contributing sponsors.


54.   “Operating
Account” means a demand deposit account to be established by the Borrower
with the Lender for the Borrower’s use in connection with its business
operations and with the Revolving Loan.


55.   “Payment”
or “Payments” means any check, draft, cash or any other remittance or
credit in payment or on account of any or all of the Accounts.


56.   “PBGC”
means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA and any successor thereto.


57.   “Performance Pricing Grid” means the
following table (which is also contained in the Revolving Note):


	
   

  	
   

  	
  Level 1

  	
   

  	
  Level 2

  	
   

  	
  Level 3

  	
   

  
	
  Debt/ EBITDA

  	
   

  	
  Ratio > 2.50x

  	
   

  	
  2.00x <
  Ratio <  2.50x

  	
   

  	
  Ratio <  2.00x

  	
   

  
	
  Commitment Fee

  	
   

  	
  .375

  	
  %

  	
  .375

  	
  %

  	
  .375

  	
  %

  
	
  LIBOR +

  	
   

  	
  2.75

  	
  %

  	
  2.25

  	
  %

  	
  2.00

  	
  %

  
	
  Prime Rate +

  	
   

  	
  2.00

  	
  %

  	
  1.75

  	
  %

  	
  1.50

  	
  %

  



 


58.   “Person”
means any individual, partnership, association, trust, corporation, limited
liability company or partnership, or other entity.


59.   “Plan”
means any employee benefit plan (as defined in Section 3(3) of ERISA)
which is covered by ERISA and with respect to which the Borrower or any of its
subsidiaries or any ERISA Affiliate is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an “employer”
within the meaning of Section 3(5) of ERISA.


60.   “Reportable
Event” means a “reportable event” as defined in Section 4043 of ERISA
with respect to which the notice requirements to the PBGC have not been waived.


61.   “Revolving
Loan” means the Revolving Loan facility made available by the Lender to the
Borrower pursuant to this Agreement in the maximum principal amount of Ten
Million and 00/100 Dollars ($10,000,000.00), evidenced by the Revolving Note.


62.   “Revolving
Note” means the Borrower’s promissory note, of even date, in the amount of
Ten Million and 00/100 Dollars ($10,000,000.00), payable to the order of the
Lender, and evidencing the Borrower’s obligation to repay the Revolving Loan.


63.   “Single
Employer Plan” means any Plan which is covered by Title IV of ERISA, but
which is not a Multiemployer Plan.


64.   “Tangible
Net Worth” means the value of the Borrower’s total assets (including
leaseholds and leasehold improvements and reserves against assets but excluding
goodwill, patents, trademarks, 











trade names, developed
software, organization expense, unamortized debt discount and expense,
capitalized or deferred research and development costs, deferred marketing
expenses, and other like intangibles, and monies due from affiliates, officers,
directors, employees, shareholders, members or managers of the Borrower) less
total liabilities, including but not limited to accrued and deferred income
taxes, but excluding the non-current portion of Subordinated Liabilities. For
purposes of this definition, “Subordinated Liabilities” means the liabilities
subordinated to the Borrower’s obligations to the Lender in a manner acceptable
to the Lender as determined in the Lender’s sole discretion.


65.   “Termination
Event” means (i) with respect to any Plan, the occurrence of a Reportable
Event or the substantial cessation of operations (within the meaning of Section 4062(e) of
ERISA); (ii) the withdrawal of the Borrower or any of its subsidiaries or
any ERISA Affiliate from a Multiple Employer Plan during a plan year in which
it was a substantial employer (as such term is defined in Section 4001(a)(2) of
ERISA), or the termination of a Multiple Employer Plan; (iii) the
distribution of a notice of intent to terminate or the actual termination of a
Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the
institution of proceedings to terminate or the actual termination of a Plan by
the PBGC under Section 4042 of ERISA; (v) any event or condition
which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (vi) the
complete or partial withdrawal of the Borrower or any of its subsidiaries or
any ERISA Affiliate from a Multiemployer Plan.


66.   “Toxic
Substances” mean any materials which have been shown to have significant
adverse effects on human health or which are subject to regulation under the
Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., applicable state law,
or any other applicable federal, state or local laws now in force or hereafter
enacted relating to toxic substances. “Toxic Substances” includes, but is not
limited to, asbestos, polychlorinated biphenyls (PCBs), petroleum products, and
lead-based paints.


67.   “UCC”
means the Uniform Commercial Code in effect in the state(s) as set forth in Section 1.4
of this Agreement.


1.2   Accounting
Terms.   Accounting
terms used in this Agreement but not defined in this Agreement shall have the
meanings given to them in accordance with GAAP in effect on the date of this
Agreement. Except as otherwise provided in this Agreement, all financial
computations made pursuant to this Agreement and all financial reports provided
to the Lender shall be made in accordance with GAAP, consistently applied. Except
as otherwise provided in this Agreement, whenever this Agreement refers to a
balance sheet, financial statement or the information contained in a balance
sheet or other financial statement, the Agreement shall be construed to refer
to most recent consolidated balance sheet or other financial statement that
Borrower has provided to the Lender.


1.3   Use of
Defined Terms.   All
terms defined in this Agreement shall have the same defined meanings when used
in any certificate, report or other document made or delivered in connection
with this Agreement, unless otherwise set forth therein.


1.4   UCC
Terms.   Terms
that incorporate definitions provided in the Uniform Commercial Code shall have
such meanings as are mandated by the Uniform Commercial Code of the state or
states applicable for the determination of such meanings. Terms not otherwise
defined herein and not incorporating a definition under the Uniform Commercial
Code of any particular state, but which are defined in the Uniform Commercial
Code as adopted by the State of Maryland, shall have the meanings ascribed to
them under the Uniform Commercial Code as adopted by the State of Maryland.


ARTICLE 2.               LOAN.


2.1   Revolving
Line of Credit.   The
Lender agrees to extend the Revolving Loan to Borrower, subject to the terms
and conditions of this Agreement. Until the Ending Date, Borrower may borrow,
repay and reborrow Advances in accordance with this Agreement.













1.      Allowed
Amount of Advances.   The
aggregate principal amount of Advances outstanding at any time shall not exceed
the lesser of:


1.      the
difference between (i) the Maximum Revolving Commitment Amount and (ii) the
LOC Obligations; or


2.      the
difference between (i) the Borrowing Base and (ii) the LOC
Obligations.


2.      Mandatory
Prepayments.   If
the principal outstanding under the Revolving Loan, at any time exceeds the
Allowed Amount of Advances, then Borrower shall make a payment of principal
under the Revolving Loan in an amount sufficient that the principal outstanding
under the Revolving Loan will no longer exceed the Allowed Amount of Advances,
said payment to be made within three (3) Business Days from the date the
principal outstanding under the Revolving Loan exceeds the Allowed Amount of
Advances. If the amount of the Borrower’s Funded Debt at any time exceeds the
maximum amount that will enable Borrower to comply with any of the affirmative
covenants provided hereinafter (including, without limiting the generality of
the foregoing, any covenant limiting the Borrower’s ratio of Funded Debt to
EBITDA),  then Borrower shall make a
payment of principal under the Revolving Loan in an amount sufficient to enable
Borrower to comply with all applicable financial covenants provided
hereinafter, said payment to be made within three (3) Business Days from
the date that Borrower’s Funded Debt exceeds the maximum amount that will
enable Borrower to comply with said affirmative covenants.


3.      Procedure
for Advances.   Unless
the Borrower has previously entered into a separate auto borrow or similar cash
management service with the Lender, the Borrower may request Advances by
telephone through its employees or agents, as hereinafter provided. Each
Advance request must be received by the Lender not later than 1:00 p.m.
(Eastern time) on the date the Advance is to be made and must specify the
amount of the Advance. The Lender shall deposit the Advance into the Borrower’s
Operating Account if the Borrower is entitled to the Advance, subject to the
terms and conditions of this Agreement. If the Borrower has entered into a
separate auto borrow or similar cash management service with Lender, then the
provisions of such service shall control with respect to the procedures for making
Advances to the Borrower. The Lender shall have the right to terminate such
auto borrow or similar cash management service at any time, as determined in
the Lender’s sole and absolute discretion.


4.      Letter
of Credit Subfacility.   At
the Lender’s discretion, the Lender shall issue Letters of Credit for the
account of the Borrower from time to time upon request from the Closing Date
until the Ending Date, subject to the following terms and conditions:


1.      the
aggregate amount of LOC Obligations shall at no time exceed the Letter of
Credit Sublimit;


2.      any
request for a Letter of Credit to be issued must be delivered and received by
Lender not later than five (5) Business Days prior to the date that the
Borrower wishes to have the Letter of Credit issued;


3.      no Letter
of Credit shall have an original expiry date more than one year from the date
of issuance or beyond the Ending Date unless otherwise agreed to by the Lender
in writing or unless the Borrower’s obligation to reimburse the Lender for
drawings under the Letter of Credit has been fully secured by a cash deposit
with the Lender;


4.      the
Borrower shall execute and deliver to the Lender a Letter of Credit Agreement
with respect to each Letter of Credit to be issued by the Lender, using the
Lender’s standard reimbursement agreement form at the time the Letter of Credit
is issued. The form and substance of each Letter of Credit, and any
reimbursement agreement required by the Lender in relation to a Letter of
Credit, must be satisfactory to the Lender, in its sole judgment. At the Lender’s
option, Letters of Credit shall be subject to The Uniform Customs and Practice
for 











Documentary Credits, as
published as of the date of issue by the International Chamber of Commerce
(Publication No. 500 or the most recent publication, the “UCP”);


5.      issuance
of the Letter of Credit shall not cause the aggregate outstanding principal
amount of all Advances to exceed the Allowed Amount of Advances, determined
taking into account the increase in the amount of the LOC Obligations caused by
the issuance of the Letter of Credit;


6.      the
Lender shall not be required to issue any Letter of Credit if any  circumstance exists that would entitle the
Lender not to honor a request for an Advance under the Revolving Loan;


7.      upon
notice from the Lender of any drawing under any Letter of Credit, the Borrower
shall, as to be determined in the Lender’s sole and absolute discretion, either
(a) deliver cash to the Lender, in an amount satisfactory to secure all
LOC Obligations and all amounts payable by the Borrower to the Lender under any
Letter of Credit Agreement pertaining to such LOC Obligations, or (b) reimburse
Lender, within three (3) Business Days from the date Lender provides
notice to Borrower, for the amount of the drawing, plus interest from the date
of the drawing at the highest rate of interest then in effect under the
Revolving Note. The Borrower’s obligation to reimburse the Lender for any
drawing under a Letter of Credit shall be absolute and unconditional,
irrespective of any rights of set-off, counterclaim or defense to payment the
Borrower may claim or have against the Lender, the beneficiary of the Letter of
Credit or any other Person;


8.      unless
the Borrower makes reimbursement from another source on the day of the drawing
under any Letter of Credit, the Borrower shall be deemed to have requested an
Advance under the Revolving Loan in the amount of the drawing, and (i) 
the Lender, at its option, may make such an Advance (irrespective of whether
the Borrower would then be entitled to an Advance under the terms of this
Agreement) and apply the proceeds of the Advance to satisfy the Borrower’s
obligation to reimburse the Lender for the amount drawn on the Letter of
Credit; and (ii) any such Advance shall be repayable, with interest, in
accordance with the terms and conditions of the Revolving Note; and


9.      the
provisions of the Letter of Credit Agreement pertaining to each Letter of
Credit are deemed incorporated into this Agreement by this reference and shall
be binding upon the Lender and the Borrower as if fully set forth herein. If a
conflict exists between the terms of the Letter of Credit Agreement and any
other Loan Document, the terms of the Letter of Credit Agreement shall control
with respect to the Letter of Credit issued pursuant to that Letter of Credit
Agreement but not as to other matters governed by this Agreement or such Loan
Document.


2.2   Repayment
of Revolving Loan; Auto-Debit.   The Borrower promises to repay the Revolving
Loan, with interest, at the time and in the manner and in accordance with the
terms provided in the Revolving Note. The Borrower has elected to authorize
Lender to effect payment of sums due under the Revolving Note and this
Agreement by means of debiting the Borrower’s account with the Lender, account
number 192-283-2821. This authorization shall not affect the obligation of the
Borrower to pay such sums when due, without notice, if there are insufficient
funds in such account to make payment in full on the due date thereof, or if
the Lender fails to debit the account.


2.3   Use of
Revolving Loan Proceeds.   The proceeds of the Revolving Loan shall be
used for working capital and to finance the performance of Government
Contracts, and for no other purpose.


2.4   Revolving
Loan Fees.   The
Borrower promises to pay the Lender the following fees in consideration of
entering into this Agreement. These fees are in addition to interest payable
under the Revolving Note:


1.      an up
front fee of Twenty Five Thousand and 00/100 Dollars ($25,000.00),  payable on the Closing Date.











2.      an unused
fee on any difference between the Maximum Revolving Commitment Amount and the
amount of credit the Borrower actually uses, determined by the average of the
daily amount of credit outstanding during each month (including the amount of any
LOC Obligations). The fee will be calculated at .375% per year. The fee is
calculated and payable monthly, in arrears, commencing on the first day of the
first month after the date of this Agreement until the expiration of the
availability of Advances under this Agreement.


3.      all fees
and costs for each field examination performed by the Lender or its agents, for
up to two (2) field examinations per year. However, the Lender shall have
the right to perform such additional field examinations at any time, in its
sole discretion. Each additional field examination will be at Lender’s own
expense if no Event of Default has occurred and remains uncured at the time of
the additional field examination, but shall be at the Borrower’s expense if an
Event of Default has occurred and remains uncured at the time of the additional
field examination.


4.      a letter
of credit fee for each day that any Letter of Credit is outstanding. The letter
of credit fee shall be calculated and payable monthly, in arrears, commencing
on the first day of the first calendar month after the date of this Agreement. The
letter of credit fee shall be determined for each day by multiplying the
aggregate amount of LOC Obligations on that day for undrawn Letters of Credit
by a per-diem rate equal to the applicable annual percentage rate shown on the
Performance Pricing Grid, divided by 360.


ARTICLE 3.               CONDITIONS
PRECEDENT TO LOAN.


3.1   Conditions
Precedent to Initial Advance.   The Lender shall be under no obligation to make
the first Advance under this Agreement until, in the Lender’s sole judgment,
all of the following conditions are satisfied:


1.      Representations
and Warranties; Compliance.   All representations and warranties made by the
Borrower in or in connection with this Agreement or any of the other Loan
Documents or otherwise made in writing in connection with this Agreement shall
be true and correct on the Closing Date, and the Borrower shall have performed
all of the promises or undertakings under this Agreement and satisfied all of
the conditions of this Agreement that the Borrower was required to perform or
to satisfy as of the Closing Date.


2.      Documents
Concerning the Borrower.   The Borrower shall deliver to the Lender copies
of all documents requested by the Lender, including a complete, correct and
current copy of the Borrower’s Articles of Incorporation, certified by the
Secretary of State of the Borrower’s state of incorporation; a complete,
correct and current copy of its Bylaws, certified by the Borrower’s corporate
secretary; a complete, correct and current copy of all resolutions of the
Borrower’s Board of Directors authorizing the execution, delivery and
performance of this Agreement and of the other Loan Documents, certified by the
Borrower’s corporate secretary; and appropriate certificates of incumbency for
those officers of the Borrower executing this Agreement or any of the other
Loan Documents, certified by the Borrower’s corporate secretary and president. In
addition, the following documents and materials shall have been delivered to
the Lender, and must be satisfactory to the Lender in form and substance:


1.      all
supporting documentation with regard to the Borrower or the Revolving Loan as
the Lender may require;


2.      such
additional information, instruments, opinions, documents, certificates and
reports relating to the Borrower or the Collateral as the Lender may deem
necessary; and


3.      such lien
releases or termination statements as the Lender may deem necessary to remove
any Encumbrances on the Collateral.


3.      Executed
Note and Loan Documents.   Borrower shall deliver to the Lender, fully
executed: this Agreement, the Revolving Note, Assignments of Payments Under
Government Contracts, UCC-1 Financing Statements and such other documents,
instruments and certificates as the Lender may 











reasonably require, in
form and substance satisfactory to the Lender. All taxes, fees and charges with
respect to the preparation, filing and recording of the Loan Documents shall
have been paid by Borrower.


4.      Landlord
and Mortgagee Waivers.   The
Lender shall have received such landlord and mortgagee waivers as it shall
request with respect to any of the Borrower’s landlords or mortgagees which
could claim an interest in any Collateral as a remedy for a default under any
lease, mortgage or deed of trust.


5.      Financing
Statements and Control Agreements.   All Financing Statements and/or Control
Agreements deemed necessary by the Lender to perfect its security interest in
the Collateral or any other collateral securing the Loan.


6.      Legal
Opinion.   The
Borrower shall deliver to the Lender a written opinion or opinions of legal
counsel for Borrower dated the Closing Date and addressed to the Lender, which
opinions must be in form and content satisfactory to the Lender. Without
limiting the generality of the foregoing, the opinion or opinions must address
the Borrower’s organization, existence, power, good standing and authority and
as to the validity, binding effect and enforceability of the Loan Documents,
including the existence, validity, enforceability, attachment, perfection, and
binding effect of any security interest, lien or assignment being granted by
Borrower or any guarantor or other Person providing Collateral to Lender with
respect to the Collateral. The forms of opinion letter attached to this
Agreement as Schedule 3.1, upon timely execution and delivery by
counsel, meets the requirements of this section.


7.      Operating
Account.   The
Borrower shall establish the Operating Account with the Lender.


8.      Compliance
with Covenants.   The
Borrower shall establish to the Lender’s satisfaction that the Advance will not
cause the Borrower to cease to comply with the Borrower’s financial covenants
as set forth hereinafter.


9.      Borrowing
Base Certificate.   The
Borrower shall deliver to the Lender a Borrowing Base Certificate dated the
Closing Date with supporting schedules attached thereto, including without
limitation, current Accounts Receivable and Accounts Payable reports.


3.2   Future
Advances.   The
obligation of the Lender to make any Advance under the Revolving Loan
subsequent to the Closing Date is further conditional on:


1.      Conditions
of First Advance Remain Satisfied.   The Lender shall have determined, in its sole
judgment, that the conditions precedent to the first Advance are satisfied as
of the Borrowing Date for the subsequent Advance; the Loan Documents shall
remain in full force and effect; and neither the Borrower nor any Person providing
Collateral or a guaranty shall have purported to terminate any of the Loan
Documents or notified the Lender of an intention not to perform under any
applicable Loan Document.


2.      Borrowing
Base Certificate.   The
Lender shall have received a Borrowing Base Certificate, executed by a duly
authorized officer of the Borrower with supporting updated schedules attached
thereto.


3.      Representations
and Warranties.   All
representations and warranties contained herein shall be true and correct at
the date of such disbursement.


4.      No
Material Adverse Change.   The Lender shall have determined, in its sole
discretion, that no material adverse change has occurred in the financial
condition of the Borrower since the Closing Date, as determined from the most
recent financial statements furnished to the Lender.


5.      No
Default.   No
Event of Default has occurred and remains uncured, and no event has occurred or
circumstance exists which, with the passage of time or the giving of notice or
both, would constitute an Event of Default.













3.3   Lender’s
Right To Rely On Communications.   The Borrower authorizes the Lender to accept,
rely upon, act upon and comply with, any verbal or written instructions,
requests, confirmations and orders of any employee or agent of the Borrower. The
Borrower acknowledges that the transmission between the Borrower and the Lender
of any such instructions, requests, confirmations and orders involves the
possibility of errors, omissions, mistakes and discrepancies and agrees to
adopt such internal measures and operational procedures as the Borrower deems
necessary to protect its interests. The Borrower hereby assumes all risk of
loss arising out of: (i) the Lender’s acceptance, reliance on, compliance
with or observation of any such instructions, requests, confirmations or orders
that the Lender, in good faith, believes are genuine; and (ii) any such
errors, omissions, mistakes and discrepancies, except those caused by the
Lender’s gross negligence or willful misconduct. The Borrower agrees to
indemnify the Lender and to hold the Lender harmless for and from all claims,
demands, suits, actions, judgments, decrees, losses or damages, including
attorneys fees and expenses, that the Lender may incur as a result of the
foregoing events or occurrences for which the Borrower has assumed the risk of
loss.


ARTICLE 4.               SECURITY.


4.1   Grant of
Security Interest.   As
security for (i) the payment of the Loan, and any other extensions of
credit, loans, letters of credit or other financial accommodations now or
hereafter made by the Lender for the benefit of the Borrower, and (ii) the
performance of the Borrower’s obligations under or in connection with any
interest rate swap agreement as defined in 11 U.S.C. §101 by and between the
Borrower and the Lender or any Affiliate of the Lender (whether absolute or
contingent and whether now or hereafter becoming due or owing), and (iii) any
other liability or obligation of the Borrower to the Lender whether now or
hereafter existing, of every kind and description, whether or not evidenced by
notes or other instruments, and whether or not such liability or obligations
are direct or indirect, fixed or contingent, liquidated or unliquidated, the
Borrower hereby assigns, grants and conveys to the Lender a security interest
in the Collateral. Proceeds of the Collateral shall be allocated pari passu
among the Loans and any outstanding interest rate swap agreements. The Borrower
further agrees that the Lender shall have in respect of the Collateral all of
the rights and remedies of a secured party under the Uniform Commercial Code,
other applicable law and this Agreement. The Borrower covenants and agrees to
execute and deliver, and hereby authorizes the Lender to prepare and file with
the financing records of such jurisdictions as the Lender deems appropriate,
such financing statements and other instruments and filings or perform any and
all acts as are necessary in the opinion of the Lender to perfect, maintain and
protect the security interest hereby granted. Except as otherwise set forth in
this Agreement, the Lender does not authorize and the Borrower agrees that it
shall not take any of the following actions without the prior written consent
of the Lender: (a) sell, lease, license, transfer, exchange or otherwise
dispose of any of the Collateral except in the ordinary course of business; or (b) mortgage,
pledge, lien, assign, grant a security interest or otherwise encumber any of
the Collateral.


4.2   Covenants
Regarding  Inventory and Equipment.   With regard to
Collateral that constitutes Inventory or Equipment, the Borrower further
covenants as follows:


1.      The
Borrower shall not permit any of the Equipment or other Collateral to become a
fixture to any real estate unless subordination agreements satisfactory to the
Lender are obtained by any owner or mortgagee of such real estate.


2.      The
Lender’s security interest shall extend and attach to Inventory which is
presently in existence and is owned by the Borrower or in which the Borrower
purchases or acquires an interest at any time and from time to time in the
future, whether such Inventory is in transit or in the Borrower’s constructive,
actual or exclusive occupancy or possession or not, and wherever the same may
be located, including, without limitation, all Inventory which may be located
at the premises of the Borrower or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents, finishers,
convertors or other third parties who may have possession of the Inventory.


3.      Upon
sale, exchange, lease or disposition of the Inventory or Equipment, the
security interest of the Lender shall without break in continuity and without
further formality or act continue in and attach to all cash and non-cash
proceeds of such sale, exchange, lease or disposition, including 











Inventory returned or
rejected by customers or repossessed by either the Borrower or the Lender. As
to any such sale, exchange, lease or disposition, the Lender shall have all of
the rights of an unpaid seller, including stoppage in transit, replevin,
detinue and reclamation.


4.3   Certain
Rights of the Lender.   The
Lender shall have the right, but not the obligation, (i) to pay any taxes
or levies on the Collateral or any costs to repair or to preserve the
Collateral; and (ii) to cure any defaults by the Borrower on contracts by
the Borrower intended to give rise to Accounts. Such payments and the costs of
curing such defaults shall constitute Advances under the Revolving Note and
shall be secured pursuant to this Agreement, irrespective of whether the
Borrower would then be entitled to such Advances under this Agreement.


4.4   Financing
Statements; Possession of Collateral by Lender; Control.   At the request of
the Lender, the Borrower will execute financing statements, continuation
statements and other documents with respect to the Collateral pursuant to the
Uniform Commercial Code or otherwise, in form satisfactory to the Lender, and
the Borrower will pay the cost of filing the same in all public offices
wherever the Lender deems filing to be necessary or desirable. The Borrower
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement,
provided however, that it shall not limit the obligations of the Borrower as
previously set forth herein. The Borrower grants the Lender the right, and
irrevocably authorizes the Lender, at the Lender’s option, to file any or all
such financing statements, continuation statements and other documents pursuant
to the Uniform Commercial Code and otherwise, without the Borrower’s signature,
and irrevocably appoints the Lender as the Borrower’s attorney-in-fact to
execute any such statements and documents in the Borrower’s name and to perform
all other acts which the Lender deems appropriate to perfect and to continue
the security interests conferred by this Agreement.


In addition, upon request of the Lender, Borrower
shall deliver to the Lender within two (2) Business Days following the
request of the Lender, or authorize and direct any and all Persons in
possession of Collateral, to deliver to Lender within two (2) Business
Days following the request of the Lender all Collateral for which the Lender
requires possession to perfect its security interest in such Collateral,
properly endorsed or acknowledged. Furthermore, the Borrower shall take all
such actions as may be requested by the Lender to allow the Lender to exercise control
over any Collateral for the purpose of allowing the Lender to perfect its
security interest in Collateral, which Collateral may include Deposit Accounts,
Investment Property, Letter-of-Credit Rights and electronic Chattel Paper. At
the Lender’s request, the Borrower shall execute and deliver to the Lender, and
have any other Persons in possession or control of Collateral, execute and
deliver to the Lender, control or other agreements, in form and substance
satisfactory to the Lender.


4.5   Records
of Collateral; Information.   The Borrower at all times will maintain
accurate books and records covering the Collateral. The Borrower will promptly
mark all books and records with an entry showing the absolute assignment of and
granting of a security interest in all Collateral to the Lender, and hereby
grants the Lender the right to audit the books and records of the Borrower
relating to Collateral at any time and from time to time. The Borrower shall (i) promptly
furnish the Lender with any information with respect to Collateral requested by
the Lender; (ii) allow the Lender or its representatives to inspect the
Collateral, at any time and wherever located and in whomever’s possession the
Collateral may be, and to inspect and copy, or furnish the Lender or its representatives
with copies of all records relating to the Collateral; (iii) furnish the
Lender or its representatives such information as the Lender may reasonably
request to identify the Collateral, at the time and in the form requested by
the Lender; and (iv) deliver upon request to the Lender shipping and
delivery receipts evidencing the shipment of goods and invoices evidencing the
receipt of the Collateral and payment for the Collateral.


4.6   No
Release.   No
injury to the Collateral, loss or destruction of the Collateral, failure to
perfect or to continue the perfection of the Lender’s security interest in the
Collateral, or release of the Lender’s security interest in the Collateral, or
any part of it, shall relieve the Borrower of any obligation under this
Agreement or under any of the other Loan Documents. The Borrower expressly
waives all defenses based on suretyship or impairment of collateral, and shall
not be released or discharged of any obligation under 











the Loan Documents, in
whole or in part, by the Lender’s failure to protect or preserve the Collateral.
No Person, in deciding to enter into this Loan Agreement, has relied on the
execution of this Loan Agreement or the granting of a security interest in
Collateral by any other Person. Each Person comprised by the term Borrower
waives notice of any change in financial condition of any Person liable for the
Loans or any part thereof, and agrees that maturity of the Loans or any part
thereof may be accelerated, extended or renewed one or more times by the Lender
in its discretion, without notice to the Person and without affecting the
Lender’s security interest in the Collateral. The Lender shall not be required
to bring any action against any other Person or to resort to any other security
or to any balance of any Deposit Account as a condition of enforcing its rights
against any of the Collateral.


4.7   Assignment
of Payments Under Certain Government Contracts and Government Accounts.   On the Closing
Date, and thereafter upon the creation of any Government Contract or Government
Account, the Borrower shall, at the Lender’s option, execute and deliver to the
Lender specific Assignments of Payments due or to become due with respect to
any Government Account designated by the Lender. The Borrower shall execute and
deliver any and all documents and take any and all steps necessary to provide
the Lender with an Assignment. The separate Assignment to the Lender of a right
to payment under specific Government Contracts, as contemplated under this
Section, shall not be deemed to limit the Lender’s security interest to
Payments under those particular Government Contracts and the related Government
Accounts, but rather the Lender’s security interest, as stated above, shall
extend to Payments under any and all Government Contracts and the related
Government Accounts and proceeds thereof, now or hereafter owned or acquired by
the Borrower.


4.8   Additional
Remedy for Failure to Assign Payments.   The Borrower acknowledges that the Lender will
be irreparably harmed if the Borrower fails to assign Payments due or to become
due under any Government Contract when required by this Agreement, and that the
Lender shall have no adequate remedy at law. Therefore, the Borrower agrees
that the Lender shall be entitled to the following remedies, in addition to all
other remedies allowed by law or under this Agreement,


1.      an
injunction compelling the Borrower’s compliance with the provisions of this
Agreement requiring the Borrower to assign Payments due or to become due under
any Government Contract;


2.      the
appointment of a receiver, within instructions that the receiver shall comply,
in the Borrower’s name and on its behalf, with the provisions of this Agreement
requiring the Borrower to assign Payments due or to become due under any
Government Contract; and


3.      such
other or further equitable relief as may be necessary or desirable to secure to
the Lender the benefits of the rights of an assignee under the Assignment of
Claims Act.


4.9   Indemnification;
Risk of Loss.   In
any suit, proceeding or action brought by or against the Lender relating to the
Collateral, the Borrower will defend, indemnify and keep the Lender harmless
from and against all expense, loss or damage (including reasonable attorneys’
fees) suffered by reason of any defense, set-off, counterclaim,
recoupment or reduction of liability whatsoever of account debtor or other
obligor of the Borrower. The foregoing obligation of the Borrower to indemnify
the Lender shall survive the payment of the Loans and the termination of this
Agreement, but shall not extend to any suit, proceeding or action arising out
of the Lender’s gross negligence or willful misconduct.


In addition, the risk of any loss or damage associated
with the Collateral, including without limitation, any Collateral in the
possession of Lender shall be borne by the Borrower; provided, that the Lender
shall be responsible for any loss resulting from the Lender’s gross negligence
or willful misconduct. In the event that the Lender is in possession of
Collateral, (a) the Borrower shall be liable to the Lender and shall pay
to the Lender, upon demand, all reasonable expenses, including the cost of
insurance and payment of taxes or other charges, incurred in the custody,
preservation, use or operation of the Collateral, and all such expenses shall
be secured by the Collateral; and (b) the Lender may use and operate the
Collateral, as determined in its sole and absolute discretion, (i) to
preserve the Collateral or its value, (ii) as permitted by an order of a
court having competent jurisdiction, or (iii) as otherwise set forth
herein or as previously or hereafter agreed to by the Borrower. Notwithstanding
anything in this Agreement to the contrary, the 













Lender shall have no duty and be under no obligation
to collect any income accruing on the Collateral or to preserve any rights
relating to the Collateral.


ARTICLE 5.               BORROWER’S
REPRESENTATIONS AND WARRANTIES.


To induce the Lender to enter into this Agreement and
to extend the Revolving Loan to the Borrower, the Borrower makes the following
representations and warranties to the Lender. These representations and
warranties are continuing, and each request for an Advance shall be deemed to
be an affirmation of these representations and warranties as of the date of the
most recent Borrowing Base Certificate submitted prior to the request.


5.1   Corporate
Authority; Subsidiaries.   Each Person encompassed by the definition of
the Borrower (i) is a corporation duly organized, validly existing, and in
good standing under the laws of its state of incorporation as shown on Schedules  5.1-1 through 5.1-2 attached hereto and made
a part hereof, and the exact legal name of the Borrower is as set forth
above in the definition of the Borrower; (ii) is qualified to do business
as a foreign corporation and is in good standing in all jurisdictions where its
activities or ownership of property require such qualification except where the
failure to be so qualified would not in the aggregate have a material adverse
impact on the condition of the Borrower (financial or other wise), and (iii) has
the full and unrestricted power and authority, corporate and otherwise, to own,
operate and lease its properties, to carry on its business as currently
conducted, to execute and deliver and perform the Loan Documents, to incur the
obligations provided for herein and therein, and to perform the transactions
contemplated hereby and thereby (including without limitation, the creation of
the lien and security interest in favor of the Lender in the Collateral, the
Assignments and any other Collateral required by this Agreement), all of which
have been duly and validly authorized by all proper and necessary action (all
of which actions are in full force and effect). The Borrower has no
subsidiaries other than those set forth in Schedules 5.1-1 through 5.1-2
attached hereto and made a part hereof. Each of the Persons comprised by the
term Borrower maintains its chief executive office at the location stated in Schedules  5.1-1 through 5.1-2 attached hereto and
made a part hereof.


5.2   Approvals.   The Borrower has
provided the Lender with a true and accurate certificate of a Resolution of the
Borrower’s Board of Directors authorizing the loan transactions contemplated by
this Agreement. No further approval, consent or other action by the
stockholders of the Borrower, by any governmental authority or by any other
Person is or will be necessary to permit the valid execution, delivery or
performance by the Borrower of this Agreement or any of the other Loan
Documents.


5.3   Binding
Effect, No Violations.   Each
of the Loan Documents, upon its execution and delivery, will constitute a
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, moratorium, fraudulent
transfer or conveyance or similar laws affecting creditors’ rights generally
and limits imposed by equitable principles. The execution, delivery and
performance of the Loan Documents will not (i) violate, conflict with or
constitute a default (with due notice, lapse of time or both) under any law,
regulation, order or any other requirement of any court, tribunal, arbitrator
or governmental authority, any terms of the Articles or Certificate of
Incorporation or Bylaws of the Borrower, or any contract, agreement or other
arrangement binding upon or affecting the Borrower or any of its properties, or
(ii) result in the creation, imposition or acceleration of any
indebtedness or any Encumbrance of any nature upon, or with respect to, the
Borrower or any of its properties, except such Encumbrances in favor of the
Lender.


5.4   Litigation.   Except as set forth
in Schedule 5.4 attached hereto and made a part hereof, there is no
claim, litigation, proceeding or investigation pending, or to the Borrower’s
information, knowledge or belief, threatened or reasonably anticipated against
or affecting the Borrower, its properties or business, this Agreement, any of
the other Loan Documents, or any of the transactions contemplated hereby or
thereby, before or by any court, tribunal, arbitrator or governmental
authority, and there is no possibility of any judgment, liability or award
which reasonably may be expected to occur and result in any material adverse
change in the business, operations, prospects, properties or assets or
condition, financial or otherwise, of the Borrower. The Borrower is not in default
with respect to any judgment, order, writ, 











injunction, decree, rule,
award or regulation of any court, governmental instrumentality or agency,
commission, board, bureau, arbitrator or arbitration panel, which default would
have a material adverse impact on the condition of Borrower (financial or
otherwise).


5.5   Title to
and Condition of Assets.   The Borrower has good, valid and marketable
title to all of its properties and assets (whether real or personal) and has
the power to transfer its rights and interests in the Collateral, and there
exist no Encumbrances on any of the Borrower’s properties or assets, including
without limitation, the Collateral. All personal property of the Borrower is in
good operating condition and repair, and is suitable and adequate for the uses
for which it is being used, except where the failure to be in such condition or
to be so suitable and adequate would not have a material adverse effect on
Borrower. Upon the execution and delivery of this Agreement, and upon (a) the
filing of financing statements, (b) the Lender’s taking possession of the
Collateral, (c) the Lender’s receipt of a satisfactory acknowledgment from
a Person in possession of any Collateral that such Collateral is in the
possession of such Person and is being held for the benefit of the Lender, or (d) the
Lender obtaining satisfactory control over any of the Collateral consisting of
Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic
Chattel Paper or such other Collateral for which control is required to perfect
a security interest (as control is defined in the UCC), as the case may be, the
Lender will have a good, valid and perfected first priority lien and security
interest in the Collateral, subject to no Encumbrance in favor of any other
Person, other than the Encumbrances otherwise set forth in Schedule 7.2
attached hereto and incorporated herein by reference.


5.6   Loan
Application.   The
statements made and the documents delivered by the Borrower to the Lender in
connection with its application for the Revolving Loan and in connection with
this Agreement and the other Loan Documents are true, correct and complete, in
all material respects, omit no material facts, are not misleading, and present
fairly the condition (financial or otherwise) of the Borrower. The Borrower
certifies further that the information set forth in the Borrower Information
Statements attached hereto as Schedules 5.1-1 through 5.1-2 is true,
accurate and complete as of the date of this Agreement.


5.7   No
Change.   No
change in the business, operations, properties or condition (financial or
otherwise) of the Borrower, or any other event, has occurred since the date of
the most recent financial statements submitted to the Lender by the Borrower,
which change could or would reasonably be expected to adversely affect the
ability of Borrower to perform or comply with all terms, conditions and
agreements to be performed or complied with by the Borrower under this
Agreement or under any of the other Loan Documents, or to perform the
transactions contemplated by this Agreement or the other Loan Documents.


5.8   Taxes.   Borrower has timely
filed all tax returns and reports required by any governmental authority to be
filed by Borrower, and such returns and reports are true and correct. The
Borrower has paid all taxes, assessments and other government charges imposed
upon it or its income, profits or properties, or upon any part thereof, other
than (a) those presently payable without penalty or interest, or (b) such
taxes that have been contested in good faith and by proper proceedings where
the Borrower has set aside on its books adequate reserves therefore (as set
forth in Schedule 5.8 attached hereto and incorporated herein by
reference), and in the case where such tax assessment, claim or levy might
become an Encumbrance, the Borrower has made arrangements acceptable to Lender
with respect thereto. The Borrower has timely filed all claims for refunds to
which the Borrower is entitled. The amounts reserved as a liability for income
and other taxes payable in the most recent financial statements of the Borrower
provided to the Lender are sufficient for the payment of all unpaid federal,
state, county and local income, excise, property and other taxes, whether or
not disputed, of the Borrower accrued for or applicable to the period and on
the dates of such financial statements and all years and periods prior thereto,
and for which the Borrower may be liable in its own right or as a transferee of
the assets of, or as successor to, any other Person.


5.9   No
Default.   No
Event of Default, and no event which with notice, lapse of time or other
condition would constitute an Event of Default, has occurred and is continuing.











5.10   Compliance with Laws, Governance Documents
and Agreements.   The
Borrower has complied and is in full compliance with all applicable laws,
ordinances, rules, regulations, orders and other requirements of any
governmental authority or arbitrator, and with all terms and conditions of its
Governance Documents, and with each agreement binding upon or affecting the
Borrower or any of its properties. The Borrower is not in default with respect
to any Debt. Without limiting the generality of the foregoing, the Borrower
represents to the Lender that: (1) the Borrower has previously disclosed
to the Lender all of the Borrower’s activities that involve the use,
manufacturing, storage, disposal, emission, discharge, generation or
transportation of Hazardous Wastes, Toxic Substances or other materials
regulated by Environmental Laws; (2) the Borrower has complied and is in
full compliance with all Environmental Laws; (3) the Borrower maintains in
full force and effect all permits required by Environmental Laws; and (4) there
exists no pending or threatened litigation, order, ruling, notice or
investigation regarding the Borrower’s use, manufacturing, storage, disposal,
emission, discharge generation or transportation of Hazardous Wastes or Toxic
Substances or regarding any violation or alleged violation of any Environmental
Laws, except as set forth in Schedule 5.10 attached hereto and
incorporated herein by reference.


5.11   Licenses and Contracts.   All franchises,
licenses, trademarks, trade names, copyrights, patents, permits, certificates,
consents, approvals, authorizations, agreements and contracts necessary to
operate Borrower’s business as it currently is being operated and to own or
lease Borrower’s property have been obtained, are in effect, have been complied
with in all material respects by Borrower, are free from challenge, and to the
extent permitted under applicable law, are fully assignable to the Lender for
the purpose of securing the Revolving Loan. Borrower has no knowledge and has
not received any notice to the effect that any product it manufactures or
sells, or any service it renders, or any process, method, know-how, trade
secret, part or material it employs in the manufacture of any product it makes
or sells or any service it renders, or the marketing or use by it or another of
any such product or service, may infringe any trademark, trade name, copyright,
patent, trade secret or legally protected right of any other Person.


5.12   Intellectual Property.   The Borrower owns
all right, title and interest in and to all Intellectual Property used in and
material to the operation of its business or, for such Intellectual Property
that is not owned, possesses adequate licenses or other legally enforceable
rights to use the same. The Borrower has no reason to believe that any valid
basis exists upon which a claim adversely affecting any such Intellectual
Property may be asserted against the Borrower or any subsidiary. To the best
knowledge of the Borrower, no Person is infringing upon the Intellectual
Property used by the Borrower or any subsidiary material to the operation of
their respective businesses. The Borrower has taken commercially reasonable
steps to protect the secrecy, confidentiality and value of its and all
subsidiaries’ rights in and to such Intellectual Property and to prevent others
from using such Intellectual Property without consent.


5.13   Disclosure.   No representation or warranty of Borrower
contained in this Agreement or any of the Loan Documents and no written
statement of fact furnished or to be furnished by the Borrower to the Lender
pursuant to this Agreement or any of the Loan Documents, when viewed together,
contains or will contain any untrue statement of a fact material to the
financial condition of the Borrower, or omits or will omit to state any
material fact necessary in order to make the statements contained herein or
therein, or furnished herewith or therewith, not misleading.


5.14   Trade Name;
Merger.   Except
as set forth in Schedules 5.1-1 through 5.1-2 , during the ten (10) years
immediately preceding the date of this Agreement: (1) neither the Borrower
nor any predecessor of the Borrower has used any corporate or fictitious name other
than its current corporate name; (2) the Borrower has not changed its
name, or been the surviving entity in a merger or acquired any business; and (3) the Borrower has not utilized and
does not utilize any trade name or trade names in the conduct of its business.


5.15   Payment
of Employees and Subcontractors.   The Borrower is not in default with regard to
the payment of any employee or subcontractor.


 













5.16   ERISA   Borrower is in
compliance with the Borrower’s obligations under ERISA. Without limiting the
generality of the foregoing:


1.      During the five-year period prior to the date on which this
representation is made or deemed made: (i) no Termination Event has
occurred, and, to the best of the Borrower’s knowledge, no event or condition
has occurred or exists as a result of which any Termination Event could
reasonably be expected to occur, with respect to any Plan; (ii) no “accumulated
funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412
of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each
Plan has been maintained, operated and funded in compliance with its own terms
and in material compliance with the provisions of ERISA, the Code, and any
other applicable federal or state laws; and (iv) no lien in favor of the
PBGC or a Plan has arisen or is reasonably likely to arise on account of any
Plan.


2.      The actuarial present value of all “benefit liabilities” under
each Single Employer Plan (determined within the meaning of Section 401(a)(2) of
the Code, utilizing the actuarial assumptions used to fund such Plans), whether
or not vested, did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the current value of
the assets of such Plan allocable to such accrued liabilities.


3.      Neither the Borrower nor any of its subsidiaries nor any ERISA
Affiliate has incurred, or, to the best of the Borrower’s knowledge, are
reasonably expected to incur any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, any of its
subsidiaries nor any ERISA Affiliate has received any notification that any Multiemployer
Plan is in reorganization (within the meaning of Section 4241 of ERISA),
is insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan
is, to the best knowledge of the Borrower, reasonably expected to be in
reorganization, insolvent or terminated.


4.      No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected or may
subject the Borrower or any of its subsidiaries or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975
of the Code, or under any agreement or other instrument pursuant to which the
Borrower or any of its subsidiaries or any ERISA Affiliate has agreed or is
required to indemnify any Person against any such liability.


5.17   Government
Contracts.   The
Borrower is not currently in default as to the terms of any Government
Contract, and no Government Contract has been canceled or terminated by the
Government in the past ten years. No Government Contract for which Payments
have been assigned to the Lender as Collateral is dependent on appropriations,
except as set forth in Schedule 5.17 attached hereto and made a part
hereof.


5.18   No Debarment.   The Borrower is not
subject to any pending or threatened debarment proceedings.


5.19   Assignment of
Payments.   The
Borrower has the right to assign to the Lender all Payments due or to become
due under each of Borrower’s Government Contracts (except Payments under the
Borrower’s Government Contracts which are not assignable, as disclosed in Schedule
5.19 attached hereto and made a part hereof for Government Contracts
entered into prior to the execution of this Agreement, or as promptly disclosed
by the Borrower to the Lender for Government Contracts entered into after the
execution of this Agreement), and there exists no uncanceled prior Assignment
of Payments under any of the Borrower’s Government Contracts.


5.20   Assignment of
Claims Act.   The
Borrower is now in compliance and hereby covenants and agrees that the Borrower
will in the future comply with any and all of the requirements of the
Assignment of Claims Act, where such statutes are applicable to any Government
Contract, and shall take all such other action as may be necessary to
facilitate the direct assignment to the Lender of the Payments due or 











to become due under any
Government Contract and the creation and perfection of the Lender’s security
interest in such Payments.


ARTICLE
6.               BORROWER’S AFFIRMATIVE
COVENANTS.


Until
all obligations of the Borrower under this Agreement and the other Loan
Documents are paid in full and performed, the Borrower covenants and agrees
that it shall:


6.1   Payment of Revolving Loan.   Punctually make the
payments on the Revolving Loan at the times and places and in the manner
specified in the Revolving Note.


6.2   Corporate Existence.   Preserve, maintain and keep in full force and
effect its corporate existence and good standing in the jurisdiction of its
incorporation.


6.3   Corporate Rights and Franchises; Qualification; Orderly Conduct
of Business.   Preserve,
maintain and keep in full force and effect all franchises, licenses, permits,
certificates, consents, approvals, authorizations, agreements and contracts
material to the operation of the Borrower’s business as it currently is being
conducted, whether now existing or hereafter granted to or obtained by the
Borrower; qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is necessary or desirable in view of its activities
and ownership of property; continue to engage in a business of the same general
type as now conducted by it; and conduct such business in a manner consistent
with the conduct of its business prior to the date of this Agreement.


6.4   Taxes, Charges and Obligations.   Pay and discharge
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income, profits, properties or any part thereof, prior to the date on
which penalties attach thereto, as well as all claims which, if unpaid, might
become an Encumbrance upon any properties of the Borrower, and pay, discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all of the indebtedness and other obligations of whatever
nature of the Borrower; however, the Borrower shall not be required to pay any
such tax, assessment, charge, levy, claim, indebtedness or obligation so long
as (i) the validity thereof is being contested by the Borrower in good
faith and by proper proceedings, (ii) the Borrower sets aside on its books
adequate reserves therefor, and (iii) in the case where any such tax,
assessment, charge, claim or levy might become an Encumbrance upon any item of
the Collateral or any part thereof, the Borrower makes arrangements acceptable
to the Lender to secure the payment thereof.


6.5   Maintenance of Property.   Preserve and keep
all property used or useful in its business, including without limitation, the
Collateral, in good repair, working order and condition, and from time to time
make all necessary or desirable repairs, renewals and replacements thereof.


6.6   Insurance.   Maintain and keep in full force and effect,
with financially sound and reputable insurance companies acceptable to the
Lender, insurance in such amounts and covering such risks as is usually carried
by companies engaged in similar businesses and owning similar properties in the
same general areas in which Borrower operates (but in any event, casualty
insurance covering the Borrower’s tangible personal property and real estate
for their full replacement value and comprehensive public liability insurance
coverage with limits of not less than Three Million and 00/100 Dollars
($3,000,000.00) for any one occurrence and Five Million and 00/100 Dollars
($5,000,000.00) for the aggregate of all occurrences during a policy period of
no more than one (1) year), all such insurance policies to be in form and
substance satisfactory to the Lender. If requested by the Lender, Borrower
shall also procure, maintain and keep in full force and effect business
interruption insurance in an amount, in form and issued by companies acceptable
to the Lender in all respects. All liability insurance policies shall name the
Lender as an additional insured, and all casualty insurance or business
interruption insurance policies shall name the Lender as the loss payee. All
insurance policies shall prohibit cancellation (including cancellation for
nonpayment of premium) or reduction of coverage except with thirty (30) days’
prior written notice to and consent of the Lender. At least thirty (30) days
prior to the expiration date of each and every insurance policy required by
this Agreement, Borrower shall obtain and deliver to the Lender a renewal or
substitution policy in form and substance satisfactory to the Lender.











6.7   Contract Obligations.   Perform in accordance with the terms of every
contract, agreement, obligation or other arrangement to which the Borrower is a
party or by which it or any of its property is bound which is material to the
operation of the Borrower’s business as determined by Lender in its sole and
absolute discretion, including, without limiting the generality of the
foregoing, Government Contracts, except to the extent that the contract or
agreement is inconsistent with this Agreement. In the event that any default or
performance deficiency occurs, the Borrower shall notify the Lender promptly in
writing. The Borrower shall provide the Lender promptly with copies of any cure
notices or stop work notices it may receive from the Government on any
Government Contract and detail the proposed corrective action. The Borrower
shall provide the Lender promptly with copies of any cure notices or stop work
notices it may receive from the Government on any Government Contract and
detail the proposed corrective action.


6.8   Compliance with Laws.   Comply with all applicable laws, regulations,
orders and other requirements of any court, tribunal, arbitrator or
governmental authority, non-compliance with which could have a material adverse
effect on the business, operations, property or condition (financial or
otherwise) of the Borrower. The Borrower will take all necessary actions to
remain in full compliance with such laws, regulations, orders and any other
requirements, the Governance Documents and all other agreements. Should the
Borrower be deemed by any governmental authority or deem itself to be in
violation of any relevant law, ordinance, rule, regulation, orders or other
requirement, Governance Document or agreement, the Borrower shall notify the
Lender promptly of such violation and take all necessary remedial actions.
Without limiting the generality of the foregoing, the Borrower shall: (1) comply
strictly and in all respects with all Environmental Laws affecting the Borrower
or its property; (2) promptly forward to the Lender copies of all orders,
notices, permits, applications or other communications and reports finding or
alleging that the Borrower or its property does not comply with any of the
Environmental Laws; (3) promptly provide a proposed response action, or
plan with respect to any failure to comply with Environmental Laws; and (4) defend
the Lender, indemnify the Lender, and hold the Lender harmless from and against
any claims, demands, suits, actions, judgements, decrees, losses or damages,
including attorneys’ fees, arising out of the failure of the Borrower of any of
its properties to comply with any of the Environmental Laws. To the extent that
Federal or state laws, rules, regulations or orders establish requirements
which relate to the disposition of property, compliance by the Lender with such
laws, rules or regulations in any disposition or sale of the Collateral
shall not be deemed to adversely effect the commercially reasonableness of any
such sale or disposition, or otherwise render the sale or disposition
commercially unreasonable.


6.9   Books and Records.   Keep and maintain at its chief executive
offices adequate and proper records and books of account, in which complete
entries are made in accordance with GAAP, consistently applied, and in
accordance with all laws, regulations, orders and other requirements of any
court, tribunal, arbitrator or governmental authority, reflecting all financial
and other transactions of the Borrower normally and customarily included in
records and books of account of companies engaged in the same or similar
businesses and activities as the 
Borrower. As of the date of this Agreement, the chief executive offices
of EFJ, Inc. are located in Lincoln, Nebraska and the chief executive
offices of E. F. Johnson Company are located in Waseca, Minnesota.


6.10   Access to the
Borrower’s Properties, Books and Records.   Permit the Lender and any agents or
representatives thereof to visit and inspect the Borrower’s properties to
examine and make abstracts from and/or copies of any of the Borrower’s books
and records at any and all reasonable times and as often as the Lender or such
agents or representatives may desire, and to discuss the business, operations,
properties and condition (financial and otherwise) of Borrower with any of the
officers, directors, agents or representatives (including without limitation,
the independent certified public accountants) of the Borrower. In addition to
having the right to perform field audits of the Borrower’s books and records,
the Lender shall have the right, but not the obligation, to contact the
contracting officer under any Government Contract directly to determine the
Borrower’s contract performance status on the Government Contract.











6.11   Financial and
Other Statements.   Furnish
to the Lender the following statements, which must be satisfactory to the
Lender in form and substance, at the times and in the manner specified below:


1.      Annual Financial Statements.   As soon as
available, but in no event more than ninety (90) days after the close of each
of the Borrower’s fiscal years, audited financial statements for that year,
stating the Borrower’s financial condition. The financial statements shall be
prepared by an independent certified public accountant acceptable to the
Lender, in accordance with GAAP, consistently applied. The financial statements
must be acceptable to the Lender in form and substance, and shall contain such
detail as the Lender may require. The financial statements shall include a
consolidated and consolidating balance sheet as of the end of such fiscal year,
a profit and loss statement, a cash flow statement (said statements to include
a statement of financial condition of the Borrower and changes in shareholders’
equity). If the Borrower comprises a parent corporation and its subsidiaries,
the financial statements shall state the financial condition of the parent
corporation and those subsidiaries on a consolidated basis.


2.      Annual Opinion of Accountant.   As soon as
available but in no event more than ninety (90) days after the close of each of
the Borrower’s fiscal years, an opinion of the independent certified public
accountant who prepared the Borrower’s annual financial statements. The opinion
shall be acceptable to the Lender in form and substance and shall contain no
qualification that is unacceptable to the Lender. The opinion shall state also
whether the accountant’s examination of the Borrower’s financial condition has
revealed the occurrence of an Event of Default or an event that would
constitute an Event of Default with the giving of notice or the lapse of time
or both, and, if such an Event of Default or event has occurred, shall describe
such Event of Default or event in detail satisfactory to the Lender.


3.      Management Letters.   Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants
in connection with examination of the financial statements of the Borrower made
by such accountants;


4.      Quarterly Statements and Certificates.   As soon as
available but in no event more than forty-five (45) days after the close of
each of the Borrower’s fiscal quarters, the Borrower will provide management
prepared balance sheets and profit and loss statements, with supporting
schedules, setting forth the financial condition of the Borrower as of the end
of the most recent fiscal quarter and for the year to date;


5.      Annual Projections.   Not less than thirty (30) days prior to the
commencement of each of the Borrower’s fiscal years, the Borrower shall also
furnish to the Lender projections (budgets) for each of the upcoming four
fiscal quarters, which projections shall include a balance sheet, profit and
loss statement and statement of cash flows.


6.      Monthly Reports.   The Borrower shall
deliver to the Lender:


1.      as soon as available, but not later than twenty (20) days after
the end of each month, a fully completed Borrowing Base Certificate stating the
Borrowing Base as of the last day of the immediately preceding month; and at
the Lender’s request, the Borrower shall furnish to the Lender such schedules,
certificates, lists, records, reports, information and documents to enable the
Lender to verify the Borrowing Base; and


2.      as soon as available, but not later than twenty (20) days after
the end of each month, and at such other times as Lender may reasonably
require, an accounts receivable aging schedule in intervals of not more than
thirty (30) days.


7.      Government Contract Audits.   Provide written
notice to the Lender that Borrower has received the results of any and all
audits by the Defense Contract Audit Agency, or any other government agency,
conducted before the award of a contract, before the final payment on a
contract, or at any other time, said notice to be delivered to Lender within
thirty (30) days of the Borrower’s 













receipt of such
audit results. Upon request by the Lender, the Borrower shall deliver all
written results of such audits to the Lender with ten (10) days of a
request by the Lender.


8.      Additional
Reports and Information.   With reasonable promptness, such additional
information, reports or statements as the Lender may from time to time request
and all material filings with public governmental or other agencies or
companies.


9.      Compliance
Certificate.   Within forty five (45) days
after the end of each of the Borrower’s fiscal quarters, and at such other
times as the Lender may reasonably request, Borrower shall deliver a Compliance
Certificate signed by an authorized financial officer of the Borrower
(1) setting forth the information and computations (in sufficient detail)
to establish that the Borrower is in compliance with all financial covenants at
the end of the period covered by the financial statements then being furnished
and (2) stating whether any Event of Default has occurred as of the date
of the financial statements or the date of the Compliance Certificate, or any
event which, upon notice or lapse of time or both, would constitute an Event of
Default, and if such an Event of Default exists, specifying the nature thereof
and the action that the Borrower is taking and proposes to take with respect
thereto. At the Lender’s request, the Borrower shall furnish to the Lender such
schedules, certificates, lists, records, reports, information and documents to
enable the Lender to verify the Compliance Certificate.


6.12   Accounts.   Within
twenty (20) days from the end of each month, and at such other times as Lender
may reasonably require, the Borrower shall deliver to the Lender schedules of
all outstanding Accounts. Such schedules shall be in form and detail satisfactory
to the Lender, shall show the age of such Accounts in intervals not greater
than thirty (30) days, and shall contain such other information and be
accompanied by such supporting documents as the Lender may from time to time
prescribe. The Borrower also shall deliver to the Lender copies of the
Borrower’s invoices, evidences of shipment or delivery and such other schedules
and information as the Lender may reasonably require. The items to be provided
under this Section are to be prepared and delivered to the Lender from
time to time solely for its convenience in maintaining records of the
Collateral, and the Borrower’s failure to give any of such items to the Lender
shall not affect, terminate, modify or otherwise limit the Lender’s security
interest granted in the Accounts. Without limiting the generality of the
foregoing, the Borrower shall promptly notify the Lender when the Borrower
obtains any new Government Contract or Government Account for which Payments
are to be specifically assigned to the Lender pursuant to this Agreement, and
the Borrower shall furnish to the Lender, upon request, a copy of each
Government Contract of the Borrower and a copy of each amendment thereto or
modification thereof which changes the price of such contract or the amount
funded to pay for such contract, except to the extent that furnishing such
copies may be prohibited by government security regulations. The Borrower shall
use its best efforts and shall take any and all steps necessary to collect its
Accounts, including without limitation, the filing and pursuit of legal action
in furtherance of said collection efforts.


6.13   Collateral.   Maintain
all tangible Collateral in good condition; insure insurable Collateral for its
full replacement cost under an insurance policy acceptable to the Lender that
names Lender as loss payee; execute, deliver and file, or cause the execution,
delivery and filing of, any and all documents (including without limitation,
financing statements, continuation statements or other writings or records),
necessary or desirable for the Lender to create, perfect, preserve, validate or
otherwise protect a first priority lien and security interest in the
Collateral; maintain, or cause to be maintained, at all times, the Lender’s
first priority lien and security interest in the Collateral; within three
(3) Business Days of learning thereof, report to the Lender any
reclamation, return or repossession of any goods forming a part of the
Collateral, any claim or dispute asserted by any account debtor or other
obligor owing an obligation to the Borrower, and any other matters affecting
the value or enforceability or collectibility of any of the Collateral; defend
the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Lender, and pay all
costs and expenses (including attorneys’ fees and expenses) incurred in
connection with such defense; at the Borrower’s sole cost and expense
(including attorneys’ fees and expenses), settle any and all claims, demands
and disputes, and indemnify and protect the Lender 











against any liability,
loss or expenses arising from any such claims, demands or disputes or out of
any such reclamation, return or repossession of goods forming a part of the
Collateral; however, if the Lender shall so elect, the Lender shall have the
right at all times to settle, compromise, adjust or litigate all claims and
disputes directly with the Customer or other obligor owing an obligation to the
Borrower upon such terms and conditions as the Lender deems advisable, and all
costs and expenses thereof (including attorneys’ fees and expenses) shall be
incurred for the account of the Borrower and shall constitute a part of the
obligations owed to the Lender and secured pursuant to this Agreement. The
Borrower’s Equipment, goods and other tangible personal property set forth in Schedule 6.13
attached hereto and made a part hereof shall be kept and maintained at the
locations set forth in said Schedule 6.13; the Borrower shall not relocate
or move the Equipment, goods or other tangible personal property without the
Lender’s prior written consent, which shall not be unreasonably withheld. If
Lender consents to the relocation of certain Equipment, goods or other tangible
personal property, the Borrower shall execute, and hereby irrevocably
authorizes the execution by the Lender of, all documents, records or financing
statements, and the Borrower shall take such action as the Lender may request
to assure that the Lender’s first priority security interest in the Equipment,
goods and tangible personal property continues to be perfected under the
Uniform Commercial Code or other applicable laws.


6.14   Financial
Covenants.   Maintain:


1.      Tangible
Net Worth.   A minimum Tangible Net
Worth, at all times from the closing of the Loan, equal to or exceeding
Nineteen Million Eight Hundred Seventy Five Thousand and 00/100 Dollars
($19,875,000.00) plus Seventy Five Percent (75%) of the Borrower’s positive net
income for the immediately preceding fiscal year.


2.      Funded
Debt to EBITDA.   A maximum ratio of
Funded Debt to EBITDA as follows:


1.      3.0 to
1.0 for the fiscal quarters ending on or before September 30, 2003; and


2.      2.50 to
1.0 for all fiscal quarters thereafter.


3.      Fixed
Charge Coverage Ratio.   A
minimum Fixed Charge Coverage Ratio of 1.75 to 1.0, tested on a quarterly
basis.


4.      Positive
EBITDA.   A minimum EBITDA for
Borrower of $0.00 for the immediately preceding two fiscal quarters of
Borrower, to be measured at the end of each fiscal quarter on a rolling two
quarter basis.


Compliance with financial covenants b and c above will
be measured at the end of each fiscal quarter on a rolling four quarter basis.
Unless otherwise expressly provided in this Agreement, if the Borrower
comprises a parent corporation and its subsidiaries, the covenants herein
relating to the financial condition of the Borrower refer to the financial
condition of the parent corporation and those subsidiaries stated on a
consolidated basis.


6.15   Notice
of Litigation, Default and Loss.   Give notice to the
Lender upon the occurrence of any Event of Default or event which with notice
or lapse of time or otherwise would constitute an Event of Default, and of any
loss or damage to any of the Collateral, said notice to be given within One
(1) Business Day of the date of such occurrence, event, loss or damage.
Borrower also shall give notice to the Lender of any action, suit or proceeding
at law or in equity or by or before any governmental instrumentality or agency
(domestic or foreign), commission, board, bureau, arbitrator or arbitration
panel which, if adversely determined, could materially impair or affect the
right of Borrower to carry on its business substantially as now conducted or
could materially affect its respective business, operations, prospects,
properties, assets (including the Collateral) or condition, financial or
otherwise, said notice to be given within Two (2) Business Days of the
date Borrower receives information regarding or becomes aware of such action,
suit or proceeding. Within One (1) Business Day of Borrower becoming aware
that the holder of any Debt or Encumbrance has given notice or taken any action
with respect to a claimed breach, default or event of default, a written notice
shall be given by the Borrower to the Lender specifying the notice given or
action 











taken by such holder and
the nature of the claimed breach, default or event of default by the Borrower
thereunder, and the action being taken or proposed to be taken with respect
thereto.


6.16   Proxy
Statements, Etc.   Promptly after the sending
or filing thereof, send copies of all proxy statements, financial statements
and reports which the Borrower sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements which
the Borrower  files with the Securities
and Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange.


6.17   ERISA.   Give
prompt notice to the Lender of any of the following: (i) of any event or
condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, a Termination Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA
or otherwise of any withdrawal liability assessed against the Borrower, any of
its subsidiaries or any of its ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning
of Title IV of ERISA); (iii) the failure to make full payment on or before
the due date (including extensions) thereof of all amounts which the Borrower
or any of its subsidiaries or ERISA Affiliate is required to contribute to each
Plan pursuant to its terms and as required to meet the minimum funding standard
set forth in ERISA and the Code with respect thereto; or (iv) any change
in the funding status of any Plan that could have a material adverse effect on
the Borrower’s financial condition; together, with a description of any such
event or condition or a copy of any such notice and a statement by the
principal financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any, which has
been or is being taken or is proposed to be taken by the Borrower with respect
thereto. Promptly upon request, the Borrower shall furnish to the Lender such
additional information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto
required to file with the Department of Labor or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each “plan year” (within the
meaning of Section 3(39) of ERISA). Such notice shall be given in any
event within five (5) Business Days after the occurrence of any event that
Borrower is required to report to the Lender under this clause.


6.18   Place
of Business; Location of Records.   Each of the Persons
comprised by the term Borrower shall maintain its chief executive office, and
the office where its records are kept, at it’s the respective addresses stated
in Schedules 5.1-1 through  5.1-2. The Borrower shall
provide the Lender with fourteen (14) days’ advance written notice of any
change in the location of its chief executive office or the office at which its
records are kept.


6.19   Payments
to the Borrower.   If the Borrower has assigned
Payments under any Government Contract to the Lender, remit to the Lender
promptly any Payments erroneously sent directly to the Borrower by the
Government, and until so remitted, hold those Payments in trust for the Lender.


6.20   Depository
Accounts.   Maintain primary operating and depository
accounts with the Lender, including, without limitation, the Operating Account.


ARTICLE 7.               BORROWER’S
NEGATIVE COVENANTS.


Until all obligations of the Borrower under this
Agreement and the other Loan Documents are paid in full and performed, the
Borrower covenants and agrees that it shall not, unless the Lender otherwise
consents in advance in writing:


7.1   Debt.   Create,
incur, assume or suffer to exist any Debt, except (a) trade debt incurred
in the ordinary course of Borrower’s business; (b) Debt between the
entities comprising the term Borrower; (c) Debt not otherwise permitted by
this Section 7.1 in an amount not to exceed, in the aggregate, the sum of
Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), at any one time.


7.2   Encumbrances. Create,
incur, assume or suffer to exist any Encumbrance upon any of its properties or
assets (including without limitation, the Collateral), whether now owned or
hereafter acquired, except (a) Encumbrances in favor of the Lender;
(b) Encumbrances for taxes, assessments or 











other governmental charges
which are not past due or the validity of which are being contested by Borrower
in good faith by appropriate proceedings and with respect to which the Borrower
has set aside on its books adequate reserves therefor and for which the
Borrower has made arrangements acceptable to Lender to secure payment thereof,
as determined in Lender’s sole and absolute discretion; (c) Encumbrances
disclosed in Schedule 7.2 attached hereto and incorporated herein by
reference; (d) deposits or pledges required in the ordinary course of
Borrower’s business to secure obligations under worker’s compensation or social
security laws, or with respect to unemployment insurance; (e) mechanic’s,
workers’ or materialmen’s Encumbrances arising in the Borrower’s ordinary
course of business with respect to obligations that are not overdue more than thirty
(30) days from their respective due dates or that are being contested in good
faith and for which Borrower has set aside on its books adequate reserves
therefor and for which the Borrower has made arrangements acceptable to Lender
to secure payment thereof, as determined in Lender’s sole and absolute
discretion; and (f) Encumbrances placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof; provided that
(1) Borrower’s purchase of such fixed assets shall be in Borrower’s
ordinary course of business, (2) such Encumbrances shall not extend to or
encumber any property of the Borrower other than the property being so
purchased and (3) the aggregate amount of the Debt secured by such
Encumbrances incurred as a result of such purchases shall not at any time
exceed the amount provided for in Section 7.1(c) of this Agreement.
Notwithstanding anything in this Section 7.2 to the contrary, the total
amount of Encumbrances under Section 7.2(c) plus the total amount of
Encumbrances under Section 7.2 (f) shall not, at any time, exceed
Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00).


7.3   Fundamental
Changes.   Amend its Articles or
Certificate of Incorporation by any amendment which would adversely affect the
Borrower’s ability to perform or comply with any of the terms, conditions or
agreements to be performed or complied with by the Borrower hereunder or to
perform any of the transactions contemplated hereby; change its state of
incorporation; change its fiscal year or corporate name; change its Chief Executive
Officer or Chief Financial Officer; convert its organizational form into
another entity form or establish any new entity to perform the business or
similar business of the Borrower; reorganize, consolidate or merge with any
other entity, whether in a single transaction or a series of transactions.


7.4   Acquisitions.   Purchase,
lease or otherwise acquire the assets, business, goodwill or securities of any
other Person, including, without limitation, shares of stock in corporations,
partnership interests in general or limited partnerships or membership
interests in limited liability companies, or acquire any other business, other
than (a) transfers between any of the Persons comprised by the term
Borrower, and (b) transfers disclosed on Schedule 7.4 attached
hereto and made a part hereof, which transfers were agreed to prior to the date
of this Agreement.


7.5   Transfer
of Assets.   Sell, lease, assign, pledge
or otherwise dispose of any of its properties, stock or assets (including
without limitation, the Collateral), whether now owned or hereafter acquired,
except in the ordinary course of business and for fair market value.


7.6   Investments.   Purchase
or hold any stock, or evidence of indebtedness of any other Person or entity
except investments in direct obligations of the United States Government and
certificates of deposit of United States commercial banks insured by the
Federal Deposit Insurance Corporation, other than the Borrower’s investments in
the following:


1.      Government
securities due within one year after the date of the making of the investment;


2.      Readily
marketable direct obligations of any State of the United States of America
given on the date of such investment a credit rating of at least Aa by Moody’s
Investors Service, Inc. or AA by Standard & Poor’s Corporation,
in each case due within one year from the making of the investment;


3.      Certificates
of deposit issued by, bank deposits in, eurodollar deposits through, and
bankers’ acceptances of any bank having on the date of such investment a
commercial paper credit rating of at least P1 by Moody’s Investors
Service, Inc. and A1 by Standard & Poor’s Corporation, in each case
due within one year after the date of the making of the investment; and













4.      Readily
marketable commercial paper of corporations doing business in and incorporated
under the Laws of the United States of America or any State thereof having on
the date of such investment a commercial paper credit rating of at least P1 by
Moody’s Investors Service, Inc. and A1 by Standard & Poor’s
Corporation, in each case due within Two Hundred Seventy (270) days after the
date of the making of the investment.


7.7   Loans.   Make
loans or advances to any Person or Persons that exceed in the aggregate the sum
of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) outstanding at
any time, except (1) reasonable advances for business expenses of the
Borrower’s employees that would be reimbursable under the Borrower’s existing
expense reimbursement policy; and (2) loans and advances between any of
the Persons comprised by the term Borrower.


7.8   Guaranty.   Guaranty
or provide surety or pledge or hypothecate assets for the obligation of any
other Person or Persons.


7.9   Repurchase
of Securities.   Purchase, redeem or
otherwise acquire any of its own capital stock or purchase, acquire, redeem,
retire or make any payment on account of the principal of any indebtedness of
the Borrower, except at the stated maturity of such indebtedness, and except
payments of indebtedness incurred under this Agreement.


7.10 Use of
Proceeds.   Use, or allow the use of,
the proceeds of the Revolving Loan for any purpose which would cause this
Agreement to violate any Regulations of the Board of Governors of the Federal
Reserve System; or for any purpose other than the purposes or purposes
specified hereinabove.


7.11   Other Agreements.   Enter into any agreement or undertaking
containing any provision which would be violated or breached by the Borrower’s
performance of its obligations under the Loan Documents.


7.12   Sale and Leaseback.   Enter into any
arrangement whereby the Borrower sells or transfers all or any substantial part
of its fixed assets then owned by it and thereupon, or within one (1) year
thereafter, rents or leases the assets so sold or transferred from the
purchaser or transferor (or their respective successors in interest).


7.13   Capital Expenditures.   Make capital
expenditures in excess of One Million Three Hundred Thousand and 00/100 Dollars
($1,300,000.00) in any fiscal year.


7.14   Dividends.   Declare or pay dividends on account of any
class of stock in the Borrower, or make any distribution of  assets to the Borrower’s stockholders,
whether in cash, assets or obligations of the Borrower.


7.15   Transactions with Affiliates.   Except as
specifically permitted by the terms of this Agreement, enter into any
transaction, including without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower’s
business and upon fair and reasonable terms no less favorable to the Borrower
than would be applicable in a comparable arm’s-length transaction with a
Person not an Affiliate.


ARTICLE 8.               COLLECTION, DEPOSIT AND
ASSIGNMENT OF PAYMENTS.


8.1   Cash
Collateral Account.   Upon
request of Lender, Borrower shall cause all Payments to be deposited into the
Cash Collateral Account. In furtherance of this covenant, Borrower shall
instruct all Customers to make all Payments either by electronic funds transfer
directly to the Cash Collateral Account or by check to a post office box or
other collection facility under the Lender’s control for deposit into the Cash
Collateral Account. If any Payments are made directly to the Borrower or
otherwise come into the Borrower’s possession, the Borrower shall not commingle
any such Payment with the Borrower’s other funds or property, but shall hold
the Payment separate and apart in trust for the Lender and shall promptly
deliver the Payment to the Lender (appropriately endorsed, if the Payment is in
the form of a check) for deposit into the Cash Collateral Account. Interest (if
any) earned on sums on deposit in the Cash 











Collateral Account shall
be added to the Cash Collateral Account. The Borrower hereby appoints the
Lender and any officer, employee or agent of the Lender as the Lender may from
time to time designate as attorneys-in-fact for the Borrower to
endorse and sign the name of the Borrower on all checks, drafts, money orders
or other Items delivered to the Lender for deposit into the Cash Collateral
Account. The Cash Collateral Account shall constitute part of the Collateral,
and funds on deposit in the Cash Collateral Account shall be applied towards
the amounts due and owing under the Revolving Note, this Agreement and/or the
other Loan Documents as determined by the Lender in its sole and absolute
discretion, and provided no Event of Default has occurred and remains uncured,
the remaining funds shall be deposited into the Borrower’s Operating Account. If
an Event of Default has occurred and remains uncured, Payments received by
Lender shall be applied as the Lender may determine in its sole discretion. Borrower
retains sole responsibility for assuring that Borrower’s Operating Account
contains sufficient funds to pay any Items that may be presented for payment
from the Operating Account.


However, if an Event of Default has occurred and
remains uncured, Payments received by the Lender shall be applied as the Lender
may determine in its sole discretion. The Borrower retains sole responsibility
for assuring that the Borrower’s Operating Account contains sufficient funds to
pay any Items that may be presented for payment from the Operating Account.


8.2   Overdrafts.   At the Lender’s sole option in each instance,
the Lender may do one of the following:


1.      The
Lender may make Advances under the Revolving Note to prevent or to cover an
overdraft on account of the Borrower with the Lender. Each such Advance will
accrue interest from the date of the Advance or the date on which the account
is overdrawn, whichever occurs first, at the interest rate described in the
Revolving Note. The Lender may make such Advances even if the Advances may
cause the balance owing under the Revolving Note to exceed the Maximum
Revolving Commitment Amount.


2.      The
Lender may reduce the amount of credit otherwise available under the Revolving
Note by the amount of any overdraft on any account of the Borrower with the
Lender.


This section shall not be deemed to authorize Borrower
to create overdrafts on any of Borrower’s accounts with Lender.


ARTICLE 9.               EVENTS OF DEFAULT AND REMEDIES.


9.1   Events of Default.   The occurrence of any one or more of the
following events shall constitute an Event of Default under this Agreement:


1.      The
Borrower shall fail to pay, when due, any sum payable under the Revolving Note;
or


2.      any
representation or warranty made by or on behalf of the Borrower herein or in
any of the other Loan Documents which, in the Lender’s judgment, shall prove to
have been materially inaccurate or breached in any respect on or as of any date
as of which made; or


3.      a decree
or order for relief of the Borrower shall be entered by a court of competent
jurisdiction in any involuntary case involving the Borrower under any
bankruptcy, insolvency or similar law now or hereafter in effect, or a
receiver, liquidator or other similar agent for the Borrower or for any
substantial part of the Borrower’s assets or property shall be appointed, or
the winding up or liquidation of the Borrower’s affairs shall be ordered, or
any action by any creditor (other than the Lender) of the Borrower preparatory
to or for the purpose of commencing any such involuntary case, appointment,
winding up or liquidation shall be taken, and such proceeding shall not have
been dismissed within thirty (30) days after the date it commenced; or


4.      The
Borrower shall commence a voluntary case under any bankruptcy, insolvency or
similar law now or hereafter in effect, or the Borrower shall consent to the
entry of an order for relief in an involuntary case under any such law or to
the appointment of or taking possession by a receiver, liquidator or other
similar agent for the Borrower or for any substantial part of the Borrower’s
assets 











or property, or the
Borrower shall make any general assignment for the benefit of creditors, or the
Borrower shall take any action preparatory to or otherwise in furtherance of
any of the foregoing, or the Borrower shall fail generally to pay its debts as
such debts come due; or


5.      Any
indebtedness or obligation of the Borrower to any third party in excess of One
Hundred Thousand and 00/100 Dollars ($100,000.00) shall have been declared due
prior to its scheduled date of maturity as a result of the occurrence of a
default or event of default thereunder; or


6.      one or
more judgments or decrees in an amount of more than One Hundred Thousand and
00/100 Dollars ($100,000.00) shall be entered against the Borrower (not paid or
fully covered by insurance) and all such judgments or decrees have not been
vacated, discharged, stayed or bonded pending appeal within fifteen (15) days
from the entry thereof, or any attachment or garnishment shall be issued
against the Borrower or the Borrower’s property, and any such attachment shall
not have been vacated, discharged, stayed or bonded pending trial in a manner
satisfactory to Lender; or


7.      any
material change in the business, operations, property, assets or condition
(financial or otherwise) of the Borrower shall occur which adversely affects
the ability of the Borrower to meet and carry out its obligations under this
Agreement or any of the other Loan Documents or to perform the transactions
contemplated herein or thereby, the materiality of such change to be determined
by the Lender in its sole discretion; or


8.      any
investigative proceeding, audit or other action shall be initiated by or on
behalf of any Customer, which is based upon a claim or contest with respect to
any Government Contract or Government Account that, if adversely determined to
the Borrower, would have a material adverse effect on the Borrower’s financial
condition, as determined by the Lender in its sole discretion; or


9.      the
issuance to the Borrower of any cure notice, show-cause notice, or notice
of whole or partial termination, for default or alleged default, under any
contract which is either a Government Contract or is a subcontract (at any
tier) which is related to a contract between a third party and the Government;
provided that the events described in this subparagraph shall not constitute an
Event of Default if the default or alleged default is curable and the Borrower
cures the grounds for such issuance within thirty (30) days of issuance of such
notice, or if such grounds are not curable within such thirty (30) day period
the Borrower provides evidence satisfactory to the Lender that the Borrower has
commenced to cure within such period, and the Borrower diligently proceeds with
such cure and provides evidence that such cure shall be completed within a time
period acceptable to Lender, as determined by Lender in its sole and absolute
discretion; or


10.   with
respect to the Borrower, the occurrence of any debarment or suspension from
contracting or subcontracting with the Government; or


11.   any
material default by the Borrower occurs under the terms of any Government
Contract or any breach in the Borrower’s performance obligations occurs under
any Government Contract; or


12.   any
Government Contract is terminated for default; or


13.   any loss,
theft, damage or destruction of any material portion of the Collateral for
which there is either no insurance coverage or for which, in the opinion of the
Lender, there is insufficient insurance coverage; or


14.   the
majority voting control in the Borrower is directly or indirectly sold,
assigned, transferred, encumbered or otherwise conveyed without the prior
written consent of the Lender; said majority voting control meaning, in the
aggregate, a twenty percent (20%) or greater interest in the Borrower is sold,
assigned, transferred, encumbered or otherwise conveyed to a single Person, or
any relative or Affiliate of such Person, or any combination thereof; or


15.   any of the following
events or conditions shall occur: (1) any “accumulated funding deficiency,”
as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, shall exist with respect to any Plan, or any
lien shall arise on the assets of the Borrower or 











any of its subsidiaries or
any ERISA Affiliate in favor of the PBGC or a Plan; (2) a Termination
Event shall occur with respect to a Single Employer Plan, which, in the Lender’s
opinion, is likely to result in the termination of such Plan for purposes of
Title IV of ERISA; (3) a Termination Event shall occur with respect to a
Multiemployer Plan or Multiple Employer Plan, which in the Lender’s opinion, is
likely to result in (i) the termination of such Plan for purposes of Title
IV of ERISA, or (ii) the Borrower or any of its subsidiaries or any ERISA
Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or
insolvency or (within the meaning of Section 4245 of ERISA) such Plan; or (4) any
prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975
of the Code) or breach of fiduciary responsibility shall occur which may
subject the Borrower or any of its subsidiaries or any ERISA Affiliate to any
liability under Section 406, 409, 502(i), or 502(l) of ERISA or Section 4975
of the Code, or under any agreement or other instrument pursuant to which the
Borrower or any of its subsidiaries or any ERISA Affiliate has agreed or is
required to indemnify any Person against any such liability; or


16.   The
Borrower or any other Person standing as a guarantor for the Loan or providing
security for the Loan shall fail to observe or perform any other term, covenant
or agreement contained in this Agreement or in any other Loan Document or in
any other agreement (including, without limitation, any Swap Agreement) with
the Lender or any of the Lender’s Affiliates to be observed or performed on its
part and such default shall continue unremedied for a period of ten (10) Business
Days after written notice of the existence of such default is given by the
Lender. The cure period described in this paragraph is inapplicable to the
Events of Default listed in the paragraphs above.


If one of the foregoing events or circumstances occurs
to which a cure period applies, the Lender will not exercise its rights and
remedies under this Agreement to collect the Loans except as the Lender
reasonably deems necessary to protect its interests in the Collateral, but
Lender shall not be required to make any new Advances or other financial
accommodations unless and until the default is timely cured under this
Agreement. Notwithstanding anything in this Agreement to the contrary, any
right to cure a default is applicable only to defaults for which a cure period
has been provided. The Borrower shall have no right to cure  any default for which no cure period has been
provided..


9.2   Rights and Remedies of the Lender.   Upon the occurrence
of any Event of Default, the Lender may, at its option, exercise any one or
more of the following rights and remedies:


1.      Declare
this Agreement and the Lender’s obligation to make or extend any Advances on
the Revolving Loan to be terminated, and declare the entire unpaid principal
amounts of the Revolving Loan, all interest accrued and unpaid thereon, and all
other amounts payable under this Agreement and the other Loan Documents to be
accelerated, and to be immediately due and payable (except that upon the
occurrence of an Event of Default arising out of voluntary or involuntary
bankruptcy proceedings in which the Borrower is the debtor, such acceleration
shall occur automatically and immediately without any declaration or other
action on the part of the Lender) whereupon the Revolving Loan, all such accrued
interest, and all such amounts shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower, anything contained herein or
in any of the other Loan Documents to the contrary notwithstanding;


2.      Take
possession or control of, store, lease, operate, manage, sell or otherwise
dispose of all or any part of the Collateral in accordance with the remedies
provided to secured parties under the Uniform Commercial Code, this Agreement,
the Loan Documents or other applicable law. In taking possession of the
Collateral, the Lender may enter the Borrower’s premises and otherwise proceed
without legal process, and the Borrower shall on the Lender’s demand, promptly
assemble and make the Collateral available to the Lender at a place designated
by the Lender. The Lender shall be entitled to immediate possession of all
books and records evidencing or pertaining to any of the Collateral. In the
event of any sale or other disposition of the Collateral, the Lender may
disclaim any 











warranty relating to
title, possession, quiet enjoyment or any other warranty of the like, including
without limitation, any warranty of merchantability or fitness for a particular
purpose.;


3.      Notify
any or all Customers to make any Payments due to the Borrower from such
Customers directly to the Lender, and render performance to or for the benefit
of the Lender of any obligations of such Customer(s) to the Borrower. To
facilitate direct collection, the Borrower hereby appoints the Lender, acting
through any officer or employee of the Lender, as the Lender may from time to
time designate, as attorney-in-fact for the Borrower to (i) receive, open
and dispose of all mail addressed to the Borrower and take therefrom any
Payments on or proceeds of Accounts; (ii) take over the Borrower’s post
office boxes or make such other arrangements, in which Borrower shall
cooperate, to receive the Borrower’s mail, including notifying the post office
authorities to change the address for delivery of mail addressed to the
Borrower to such address as the Lender shall designate; provided that Lender
shall promptly remit to the Borrower any mail so received which does not relate
to the Collateral; (iii) endorse the name of the Borrower in favor of the
Lender upon any and all checks, drafts, money orders, notes, acceptances or
other evidences of payment or Collateral that may come into the Lender’s
possession; (iv) sign and endorse the name of the Borrower on any invoice
or bill of lading relating to any of the Accounts, on verifications of Accounts
sent to any Customer, to drafts against any Customer, to assignments of
Accounts, and to notices to any Customer; and (v) do all acts and things
necessary to carry out this Agreement and the transactions contemplated hereby,
including signing the name of the Borrower on any instruments required by law
in connection with the transactions contemplated hereby and on financing
statements as permitted under the Uniform Commercial Code of any appropriate
state. The Borrower hereby ratifies and approves all acts of such
attorneys-in-fact, and neither the Lender nor any other such attorney-in-fact
shall be liable for any acts of commission or omission, or for any error of
judgment or mistake of fact or law of any such attorney-in-fact, except for
acts of gross negligence or wilful misconduct of the Lender. This power, being
coupled with an interest and given to secure an obligation, is irrevocable so
long as the Revolving Loan remains unsatisfied, or any Loan Document remains
effective, as solely determined by the Lender. The Lender shall have no
obligation or duty to pursue any Person other than the Borrower for the amounts
owing under or in connection with the Revolving Loan, this Agreement or the
other Loan Documents, including without limitation any guarantors or Persons
pledging property to secure the Loans. To the extent such rights may now or
hereafter exist, the Borrower waives the right to require Lender to pursue any
Persons other than the Borrower to pay the amounts owing under the Revolving
Note, Loan Agreement or other Loan Documents;


4.      In the
Lender’s own name, or in the name of the Borrower, demand, collect, receive,
sue for and give receipts and releases for, any and all amounts due on
Accounts, but the Lender shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any Accounts or any instrument received in payment thereof or for
any damage resulting therefrom;


5.      Endorse
as the agent of the Borrower any Chattel Paper, Documents or Instruments
forming all or any part of the Collateral;


6.      Make
formal application for the transfer of all of the Borrower’s permits, licenses,
approvals, agreements and the like relating to the Collateral or to the
Borrower’s business to the Lender or to any assignee of the Lender or to any
purchaser of any of the Collateral;


7.      Obtain
appointment of a receiver for all or any of the Collateral, the Borrower hereby
consenting to the appointment of such a receiver and agreeing not to oppose any
such appointment. Any receiver so appointed shall have such powers as may be
conferred by the appointing authority including any or all of the powers,
rights and remedies which the Lender is authorized to exercise by the Loan
Documents, and shall have the right to incur such obligations and to issue such
certificates therefor as the appointing authority shall authorize;


 













8.      Take any
other action consistent with applicable law which the Lender deems necessary or
desirable to protect and realize upon its security interest in the Collateral;


9.      File any
legal action or lawsuit and obtain a judgement for any and all amounts owing
under the Revolving Note, this Agreement or the other Loan Documents, and in
conjunction with any such action, the Lender may pursue any ancillary remedies
provided by law, including without limitation, attachment, garnishment,
execution and levy;


10.   The
Borrower acknowledges that any failure to comply with its obligation regarding
the Collateral, including (without limiting the generality of the foregoing)
granting of Assignments and collection of the Accounts, shall cause irreparable
harm to the Lender for which the Lender has no adequate remedy at law, and
agrees that the Lender shall be entitled to specific performance, an injunction
or other equitable relief to enforce the Borrower’s obligations under this
Agreement; and


11.   In addition
to the foregoing, and not in substitution therefor, exercise any one or more of
the rights and remedies exercisable by the Lender under other provisions of
this Agreement, under any of the other Loan Documents, or provided by
applicable law (including, without limiting the generality of the foregoing,
the Uniform Commercial Code), including without limitation, generally enforcing
any or all of the Borrower’s rights and remedies against any Customers;
provided that the Lender shall be under no obligation to do so.


9.3   Application
of Proceeds. Any proceeds from the collection or sale or other
disposition of the Collateral shall be applied in the following order of
priority:


First, to the payment of all
expenses of retaking, holding, preparing for disposition, processing,
collecting, storing, leasing, operating, managing, selling or disposing of the
Collateral, and to the payment of all sums which the Lender may be required or
may elect to pay, if any, for taxes, assessments, insurance and other charges
upon such Collateral or any part thereof, and of all other payments which the
Lender may be required or authorized to make under any provision of this
Agreement or of any other Loan Document (including in each such case legal
costs and attorneys’ fees and expenses);


Second, to the payment of all
obligations on the Revolving Loan under this Agreement, and under the other
Loan Documents, and to the payment of any other obligations due to the Lender,
in such order as the Lender may determine in its sole discretion; and


Third, to the payment of any surplus
then remaining to the Borrower, unless otherwise provided by law or directed by
a court of competent jurisdiction; provided that the Borrower shall be liable
for any deficiency if the proceeds of the Collateral are insufficient to
satisfy all obligations due to the Lender.


9.4   Collection/Enforcement
Costs.   The Borrower shall pay all
costs and expenses incurred by the Lender in connection with the enforcement or
defense of its rights under this Agreement and the other Loan Documents,
including without limitation, legal costs and attorneys’ fees (whether or not
suit is instituted), paralegal and expert witness fees and costs, and
arbitration fees and costs, and in connection with the collection of any sums
from the Borrower.


ARTICLE 10.            MISCELLANEOUS
PROVISIONS.


10.1 Additional Actions and Documents.   The
Borrower shall take or cause to be taken such further actions, shall execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments, and shall obtain such consents as may be necessary
or as the Lender may reasonably request in order fully to effectuate the
purposes, terms and conditions of this Agreement and the other Loan Documents,
whether before, at or after the closing of transactions contemplated hereby and
thereby or the occurrence of an Event of Default hereunder, including without
limitation, executing such documents and taking such further actions as
requested by the Lender to evidence or perfect the security interest(s) granted
in accordance with this Agreement, to maintain a first priority security interest
in the Collateral for the benefit of the Lender, or to effectuate the rights of
the Lender hereunder.











10.2     Expenses.   The
Borrower shall, whether or not the transactions contemplated hereby are
consummated, (i) reimburse the Lender and save the Lender harmless against
liability for the payment of all out-of-pocket expenses arising in connection
with: (a) the preparation, execution, delivery or filing of this Agreement
or any of the Loan Documents; or (b) the administration, defense or
enforcement of this Agreement or any of the Loan Documents; or (c) the
preservation or exercise of any rights (including the right to collect and
dispose of the Collateral) under this Agreement or any of the other Loan
Documents; and (ii) pay and hold the Lender and each subsequent holder of
the Note harmless from and against, any and all present and future stamp taxes
or similar document taxes or recording taxes and any and all charges with
respect to or resulting from any delay in paying, or failure to pay, such taxes.
Without limiting the generality of the foregoing, the expenses covered by this
paragraph include the Lender’s legal fees, the costs of audits or examinations
conducted by the Lender’s employees and any arbitration fees or court costs.


10.3     Notices.   Except
as may otherwise be provide herein, all notices, demands, requests or other
communications provided for herein or in the other Loan Documents shall be in
writing and shall be deemed to be effective one (1) day after dispatch if
sent by Federal Express or any other commercially recognized overnight delivery
service or two (2) days after dispatch if sent by registered or certified
mail, return receipt requested and addressed as follows:


If to the Borrower:


EFJ, Inc.

1232 22nd Street, NW, Sixth Floor

Washington, D.C. 20037-1292

Attention: Massoud Safavi, Senior Vice President and Chief Financial Officer


With copies to:


Andrew Massey, Esquire

General Counsel to EFJ, Inc.

4800 North West 1st Street

Lincoln, Nebraska 68521


and


Andrew Erskine, Esquire

Manatt, Phelps & Phillips, LLP

11355 W. Olympic Boulevard

Los Angeles, California 90064


If to the Lender:


Bank of America, N.A.

1101 Wootton Parkway, 4th Floor

Rockville, Maryland 20852

Attention:  Michael J. Landini, Senior
Vice President


With copy to:


Joseph P. Corish, Esquire

Bean, Kinney & Korman, P.C.

2000 N. 14th Street, Suite 100

Arlington, Virginia 22201


If the Borrower comprises more than one Person, notice
to the Borrower at the address specified above in this section for EFJ, Inc.
shall constitute notice to all such Persons, and each Person signing below as
the Borrower hereby irrevocably appoints EFJ, Inc. as that Person’s agent
to receive notices from the Lender under this Agreement or the other Loan
Documents.













Each party may designate by notice in writing a new
address to which any notice, demand, request or communication thereafter may be
so given, served or sent. Each notice, demand, request or communication which
is mailed, delivered or transmitted in the manner described above shall be
deemed sufficiently given, served, sent or received for all purposes at such
time as it is delivered: (i) to the United States Postal Service, in the
case of a notice given by certified mail; (ii) to Federal Express or any
other commercially recognized overnight delivery service, in accordance with
the terms and procedures for such delivery


Any notices required under the Uniform Commercial Code
with respect to the sale or other disposition of the Collateral shall be deemed
reasonable if mailed by the Lender to the Persons entitled thereto at their
last known address at least ten (10) days prior to disposition of the
Collateral.


10.4     Severability.   If
fulfillment of any provision of the Loan Documents or performance of any
transaction related thereto, at the time such fulfillment or performance shall
be due, shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled or performed shall be reduced to the limit
of such validity; and if any clause or provision contained in any Loan Document
operates or would operate prospectively to invalidate any Loan Document, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein or therein contained, and the remainder of the Loan
Documents shall remain operative and in full force and effect.


10.5     Survival. It is the express
intention and agreement of the parties hereto that all covenants, agreements,
statements, representations, warranties and indemnities made by the Borrower in
the Loan Documents shall survive the execution and delivery of the Loan
Documents and the making of all Advances and extensions of credit thereunder.


10.6  Waivers.   No
waiver by the Lender of, or consent by the Lender to, a variation from the
requirements of any provision of the Loan Documents shall be effective unless
made in a written instrument duly executed on behalf of the Lender by its duly
authorized officer, and any such waiver shall be limited solely to those rights
or conditions expressly waived.


10.7     Rights Cumulative.   The
rights and remedies of the Lender described in any of the Loan Documents are
cumulative and not exclusive of any other rights or remedies which the Lender
or the then holder of the Revolving Note otherwise would have at law or in
equity or otherwise. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other notice or demand in similar or other
circumstances.


10.8     Entire Agreement; Modification; Benefit.   This
Agreement, the Schedules hereto, and the other Loan Dozuments constitute the
entire agreement of the parties hereto with respect to the matters contemplated
herein, supersede all prior oral and written agreements with respect to the
matters contemplated herein, and may not be modified, deleted or amended except
by written instrument executed by the parties. All terms of this Agreement and
of the other Loan Documents shall be binding upon, and shall inure to the
benefit of and be enforceable by, the parties hereto and their respective
successors and assigns; however, the Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of the
Lender. In the event of any conflict between the terms of this Agreement and
the terms of the other Loan Documents, the terms of this Agreement shall
control.


10.9     Setoff.   In
addition to any rights or remedies of the Lender provided by law, upon the
occurrence of any Event of Default hereunder, or any event or circumstance
which, with the giving of notice or the passage of time or both, would
constitute an Event of Default hereunder, the Lender is irrevocably authorized,
at any time or times without prior notice to the Borrower, to set off,
appropriate and apply any and all deposits, credits, indebtedness or claims at
any time held or owing by the Lender to or for the credit or the account of the
Borrower, in such amounts as the Lender may elect, against and on account of
the obligations and liabilities of the Borrower to the Lender hereunder or
under any of the other Loan Documents, whether or not the Lender has made any
demand for payment, and although such obligations and liabilities may be
contingent or unmatured.











10.10   Construction.   This
Agreement and the other Loan Documents, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed
by and construed in accordance with the laws of the State of Maryland
(excluding the choice of law rules thereof) except to the extent that the
UCC provides for either (a) the application of the laws of the state in
which the Borrower maintains its chief executive office, (b) the
application of the laws of the state in which the collateral is located, (c) the
application of the laws of the state in which the Debtor is located or (d) otherwise
mandates the application of the laws of another state or jurisdiction.  Each party hereto hereby acknowledges that all
parties hereto participated equally in the negotiation and drafting of this
Agreement and that, accordingly, no court construing this Agreement shall
construe it more stringently against one party than against the other.


10.11   Pronouns.   All
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the Person may
require.


10.12   Headings.   Article,
section and subsection headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.


10.13   Payments.   If
any payment or performance of any of the obligations under this Agreement or
any of the other Loan Documents becomes due on a day other than a Business Day,
the due date shall be extended to the next succeeding Business Day, and
interest thereon (if applicable) shall be payable at the then applicable rate
during such extension.


10.14   Execution.   To
facilitate execution, this Agreement and any of the other Loan Documents may be
executed in as many counterparts as may be required; and it shall not be
necessary that the signature of, or on behalf of, each party, or the signatures
of all Persons required to bind any party, appear on each counterpart; but it
shall be sufficient that the signature of, or on behalf of, each party, or the
signatures of the Persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement or any
other Loan Document to produce or account for any particular number of
counterparts; but rather any number of counterparts shall be sufficient so long
as those counterparts contain the respective signatures of, or on behalf of,
all of the parties hereto.


10.15   Consent to Jurisdiction.   Subject
to any provision of this Agreement requiring that disputes be submitted to
arbitration, the Borrower irrevocably consents to the jurisdiction of any state
or federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Agreement or the other Loan
Documents. The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that the Borrower may now or hereafter have to the laying of
venue of any such suit, action, or proceeding brought in any such court, or any
claim that any such suit, action, or proceeding brought in any such court has
been brought in an inconvenient forum. Final judgment in any such suit, action,
or proceeding brought in any such court shall be conclusive and binding upon
the Borrower.


10.16   Service of Process.   The
Borrower consents to process being served in any suit, action or proceeding by
mailing a copy thereof by registered or certified mail postage prepaid, return
receipt requested, to the Borrower’s address specified in or designated in this
Agreement. The Borrower agrees that such service (i) shall be deemed in
every respect effective service of process upon the Borrower in any such suit,
action or proceeding and (ii) shall, to the fullest extent permitted by
law, be taken and held to be valid personal service upon and personal delivery
to the Borrower. Nothing in this Section shall affect the right of the
Lender to serve process in any manner permitted by law, or limit any right that
the Lender may have to bring proceedings against the Borrower in the courts of
any jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.


10.17   Assignment; Sale of Loan Documents;
Disclosure of Information.   The Borrower hereby consents to and agrees that
the Lender may disclose to any Person any and all information connected with or
related to the Revolving Loan or other Loan Documents for the purpose of
selling or assigning any rights of the Lender in the Loan Documents. The
information which may be disclosed by the Lender 











includes but is not
limited to all Loan Documents, credit files and correspondence files and all
other writings and oral communications which Lender wishes to disclose, in its
sole and absolute discretion. The Borrower also hereby consents to and agrees
that the Lender may sell or assign any rights of the Lender in any or all of
the Loan Documents pursuant to such terms and conditions as may be acceptable
to the Lender in its sole and absolute discretion, to any interested Person,
and nothing in this Agreement or the other Loan Documents shall prevent, delay
or otherwise impede or affect the right of the Lender to immediately sell or
assign any rights of the Lender in the Loan Documents on such terms as it deems
acceptable. The Borrower shall not be entitled to assign its interest in this
Agreement without the prior written consent of the Lender, and any such attempt
of the Borrower to assign its interest without the prior written consent of the
Lender shall be null and void.


10.18   WAIVER OF JURY TRIAL.   BY
AGREEING TO BINDING ARBITRATION, BORROWER AND LENDER IRREVOCABLY AND
VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
A CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT TO
ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, THE PARTIES IRREVOCABLY
AND VOLUNTARILY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.


10.19   ARBITRATION.


This paragraph concerns the resolution of any
controversies or claims between the Borrower and the Lender, whether arising in
contract, tort or by statute, including but not limited to controversies or
claims that arise out of or relate to: (i) this Agreement (including any
renewals, extensions or modifications); or (ii) any document related to
this Agreement; (collectively a “Claim”).


At the request of the Borrower or the Lender, any
Claim shall be resolved by binding arbitration in accordance with the Federal
Arbitration Act (Title 9, U.S. Code) (the “Act”). The Act will apply even
though this Agreement provides that it is governed by the law of a specified
state.


Arbitration proceedings will be determined in
accordance with the Act, the applicable rules and procedures for the
arbitration of disputes of JAMS or any successor thereof (“JAMS”), and the
terms of this paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.


The arbitration shall be administered by JAMS and
conducted in any U.S. state where real or tangible personal property collateral
for this credit is located or if there is no such collateral, in Maryland.  All Claims shall be determined by one
arbitrator; however, if Claims exceed Five Million and 00/100 Dollars
($5,000,000.00), upon the request of any party, the Claims shall be decided by
three arbitrators. All arbitration hearings shall commence within ninety (90)
days of the demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within thirty
(30) days of the close of the hearing. However, the arbitrator(s), upon a
showing of good cause, may extend the commencement of the hearing for up to an additional
sixty (60) days. The arbitrator(s) shall provide a concise written statement of
reasons for the award. The arbitration award may be submitted to any court
having jurisdiction to be confirmed and enforced.


The arbitrator(s) will have the authority to decide
whether any Claim is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules of
a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute
concerning this arbitration provision or whether a claim is arbitrable shall be
determined by the arbitrator(s). The arbitrator(s) shall have the power to
award legal fees pursuant to the terms of this Agreement.


This paragraph does not limit the right of the
Borrower or the Lender to: (i) exercise self-help remedies, such as but
not limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure
against any real or personal property collateral; (iii) exercise any
judicial or power of sale rights, or (iv) act in a court of law 











to obtain an interim
remedy, such as but no limited to, injunctive relief, writ of possession or
appointment of a receiver, or additional or supplementary remedies.


IN WITNESS WHEREOF, the
undersigned have duly executed this Agreement, or have caused this Agreement to
be duly executed on their behalf, as of the day and year first hereinabove set
forth.


	
   

  	
  EFJ, INC., a Delaware
  corporation

  
	
   

  	
  By:

  	
  /s/ Michael E.
  Jalbert

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael E. Jalbert

  
	
   

  	
   

  	
  Chief Executive Officer and
  President

  
	
   

  	
  E. F. JOHNSON
  COMPANY, a Minnesota corporation

  
	
   

  	
  By:

  	
  /s/ Michael E.
  Jalbert

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael E. Jalbert

  
	
   

  	
   

  	
  Chief Executive Officer and
  President

  
	
   

  	
  BANK OF AMERICA,
  N.A.

  
	
   

  	
  By:

  	
  /s/ Michael J. Landini

  	
  (SEAL)

  
	
   

  	
   

  	
  Michael J. Landini

  
	
   

  	
   

  	
  Senior Vice President