Unassociated Document


    
      Exhibit
10.13

      
 

    

    Loan
and Security Agreement

    


    Dated
as of _____________, 2009

    


    by
and between

    


    ygbfkm,
llc

    
 

    and

    
 

    Active
Apparel Group, Inc.

    Total
Apparel group, Inc.

    International Apparel Group, Inc.
 

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
 

    ygbfkm,
llc

    and
Active Apparel Group, Inc.,

    Total
Apparel Group, Inc., and

    interanational
apparel group, inc.

    Loan
and Security Agreement

    
 

    Table of
Contents

    


    
      
        
          
            
              	
                      1.

                    	
                      Definitions
      And Terms

                    	
                      1

                    
	
                      2.

                    	
                      Loans:  Disbursements,
      Interest Rates, Loan Requests and Fees

                    	
                      6

                    
	
                      2.1

                    	
                      Loans

                    	
                      6

                    
	
                      2.2

                    	
                      Interest
      Rates on Loans

                    	
                      6

                    
	
                      2.3

                    	
                      Computation
      of Interest

                    	
                      6

                    
	
                      2.4

                    	
                      Equity

                    	
                      6

                    
	
                      3.

                    	
                      Loans:  General
      Terms

                    	
                      7

                    
	
                      3.1

                    	
                      Payments.

                    	
                      7

                    
	
                      3.2

                    	
                      Late
      Payment Provision

                    	
                      7

                    
	
                      3.3

                    	
                      No
      Notes

                    	
                      7

                    
	
                      3.4

                    	
                      One
      Loan

                    	
                      7

                    
	
                      3.5

                    	
                      Use
      of Loan Proceeds

                    	
                      7

                    
	
                      3.6

                    	
                      Term

                    	
                      8

                    
	
                      3.7

                    	
                      Representation
      and Warranty

                    	
                      8

                    
	
                      3.8

                    	
                      Authorization
      to Disburse

                    	
                      8

                    
	
                      3.9

                    	
                      Payment
      of Costs, Fees and Expenses

                    	
                      8

                    
	
                      3.10

                    	
                      Debit
      of Accounts

                    	
                      8

                    
	
                      3.11

                    	
                      Intentionally
      Omitted

                    	
                      8

                    
	
                      3.12

                    	
                      Letters
      of Credit

                    	
                      8

                    
	
                      4.

                    	
                      Collateral:  General
      Terms

                    	
                      9

                    
	
                      4.1

                    	
                      Grant
      of Security Interest

                    	
                      9

                    
	
                      4.2

                    	
                      Supplemental
      Documentation

                    	
                      10

                    
	
                      4.3

                    	
                      Inspections
      and Verifications

                    	
                      10

                    
	
                      4.4

                    	
                      Liens/Collateral
      Locations

                    	
                      10

                    
	
                      4.5

                    	
                      Assignment
      of Competing Security Interest

                    	
                      11

                    
	
                      4.6

                    	
                      Special
      Collateral

                    	
                      11

                    
	
                      4.7

                    	
                      Additional
      Collateral

                    	
                      11

                    
	
                      4.8

                    	
                      No
      Custom or Waiver

                    	
                      11

                    
	
                      4.9

                    	
                      Lien
      on Acquired Realty

                    	
                      11

                    
	
                      5.

                    	
                      Attorney
      and Agent-In-Fact

                    	
                      12

                    
	
                      5.1

                    	
                      Eligible
      Accounts

                    	
                      12

                    
	
                      6.

                    	
                      Collateral:  Inventory

                    	
                      12

                    
	
                      6.1

                    	
                      Representations,
      Warranties and Covenants

                    	
                      12

                    
	
                      6.2

                    	
                      Sale
      of Inventory

                    	
                      12

                    
	
                      6.3

                    	
                      Responsibility
      for Inventory

                    	
                      13

                    
	
                      7.

                    	
                      Equipment

                    	
                      13

                    
	
                      7.1

                    	
                      Representations,
      Warranties and Covenants

                    	
                      13

                    
	
                      7.2

                    	
                      Maintenance
      of Equipment

                    	
                      13

                    
	
                      7.3

                    	
                      Evidence
      of Ownership

                    	
                      13

                    
	
                      7.4

                    	
                      Records
      and Schedules of Equipment

                    	
                      13

                    


            

          

        

      

    


    
      
         


      

      
        ii

        
          

        

      

      
         


      

    

    
 

    
      
        
          
            
              	
                      8.

                    	
                      Insurance
      and Taxes

                    	
                      13

                    
	
                      8.1

                    	
                      Insurance

                    	
                      13

                    
	
                      8.2

                    	
                      Taxes

                    	
                      14

                    
	
                      9.

                    	
                      Representations,
      Warranties and Covenants:  General

                    	
                      14

                    
	
                      9.1

                    	
                      Representations
      and Warranties

                    	
                      14

                    
	
                      9.2

                    	
                      Covenants

                    	
                      17

                    
	
                      9.3

                    	
                      Negative
      Covenants

                    	
                      20

                    
	
                      9.4

                    	
                      Intentionally
      Omitted

                    	
                      21

                    
	
                      9.5

                    	
                      Financial
      Reporting

                    	
                      21

                    
	
                      10.

                    	
                      Conditions
      Precedent

                    	
                      22

                    
	
                      10.1

                    	
                      Conditions
      to Initial Funding

                    	
                      22

                    
	
                      10.2

                    	
                      Conditions
      to Subsequent Fundings

                    	
                      22

                    
	
                      11.

                    	
                      Event
      of Default; Remedies

                    	
                      23

                    
	
                      11.1

                    	
                      Events
      of Default

                    	
                      23

                    
	
                      11.2

                    	
                      Cumulative
      Remedies

                    	
                      24

                    
	
                      11.3

                    	
                      Discontinuing
      Advances

                    	
                      24

                    
	
                      11.4

                    	
                      Remedies

                    	
                      25

                    
	
                      11.5

                    	
                      Assembling
      Collateral

                    	
                      25

                    
	
                      11.6

                    	
                      Notice
      of Sale

                    	
                      25

                    
	
                      11.7

                    	
                      Postponement
      of Sale

                    	
                      25

                    
	
                      12.

                    	
                      General

                    	
                      25

                    
	
                      12.1

                    	
                      Intentionally
      Omitted

                    	
                      25

                    
	
                      12.2

                    	
                      Application
      of Payments

                    	
                      25

                    
	
                      12.3

                    	
                      Additional
      Representations, Warranties and Covenants

                    	
                      26

                    
	
                      12.4

                    	
                      Modification
      and Assignment of Loan Documents

                    	
                      26

                    
	
                      12.5

                    	
                      Waiver
      of Defaults

                    	
                      26

                    
	
                      12.6

                    	
                      Severability

                    	
                      26

                    
	
                      12.7

                    	
                      Successors
      and Assigns

                    	
                      26

                    
	
                      12.8

                    	
                      Incorporation
      of Other Agreements; Exhibits; and Schedules

                    	
                      26

                    
	
                      12.9

                    	
                      Survival
      of Termination

                    	
                      27

                    
	
                      12.10

                    	
                      Waiver
      of Notices

                    	
                      27

                    
	
                      12.11

                    	
                      Authority
      to Execute and Borrow

                    	
                      27

                    
	
                      12.12

                    	
                      Costs,
      Fees and Expenses

                    	
                      27

                    
	
                      12.13

                    	
                      Binding
      Agreement; Governing Law

                    	
                      27

                    
	
                      12.14

                    	
                      Notices

                    	
                      28

                    
	
                      12.15

                    	
                      Release
      of Claims

                    	
                      28

                    
	
                      12.16

                    	
                      Intentionally
      Omitted

                    	
                      28

                    
	
                      12.17

                    	
                      Headings

                    	
                      28

                    
	
                      12.18

                    	
                      Maximum
      Interest

                    	
                      28

                    
	
                      12.19

                    	
                      Construction

                    	
                      29

                    
	
                      12.20

                    	
                      Revival
      of Liabilities

                    	
                      29

                    
	
                      12.21

                    	
                      General
      Indemnity

                    	
                      30

                    
	
                      12.22

                    	
                      Environmental
      and Safety and Health Indemnity

                    	
                      30

                    
	
                      12.23

                    	
                      Completion
      of Loan Agreement and Other Agreements

                    	
                      30

                    
	
                      12.24

                    	
                      Intentionally
      Omitted

                    	
                      30

                    
	
                      12.25

                    	
                      Disclosure
      of Information

                    	
                      30

                    
	
                      12.26

                    	
                      Merger
      Clause

                    	
                      30

                    
	
                      12.27

                    	
                      SERVICE
      OF PROCESS

                    	
                      30

                    
	
                      12.28

                    	
                      JURISDICTION;
      VENUE

                    	
                      31

                    
	
                      12.29

                    	
                      JURY
      WAIVER

                    	
                      31

                    


            

          

        

      

    
 

    
      
         


      

      
        iii

        
          

        

      

      
         


      

    

    
 

    Schedules and
Exhibits

    
 

    
      	
              Schedule
      1.1 

            	
              Permitted
      Liens

            


    

    
      	
              Schedule
      4.4 

            	
              Chief
      Executive Office and Collateral
Locations

            


    

    
      	
              Schedule
      9.1(Q) 

            	
              Borrower
      and its Affiliates’ Company
Information

            


    

    


    
      	
              Exhibit
      A 

            	
              Form
      of Guaranty

            


    
 

    
      
         


      

      
        iv

        
          

        

      

      
         


      

    


    Loan and Security
Agreement

    


    This Loan and Security Agreement (this
“Loan Agreement”) is made and entered into as of February 20, 2009, by and
between YGBFKM, LLC, an Illinois limited liability company (“Lender”), and Total
Apparel Group, Inc., a Nevada corporation (“TAG”), International Apparel Group,
Inc., a Nevada corporation (“IAG”) and Active Apparel Group, Inc., a Florida
corporation (“AAG”).  TAG, IAG and AAG are collectively referred to as
the “Borrower”.

    


    WITNESSETH:

    


    Whereas, Borrower desires Lender
to provide certain extensions of credit, loans or other financial accommodations
to Borrower in accordance with this Loan Agreement (collectively the “Financial
Accommodations”); and

    


    Whereas, Lender is willing to
provide the Financial Accommodations to Borrower, but solely on the terms and
subject to the conditions set forth in this Loan Agreement and the other
documents, instruments and agreements executed and delivered pursuant to this
Loan Agreement or referenced herein.

    


    Now
Therefore, in consideration of the
Financial Accommodations, the mutual promises and understandings of Lender and
Borrower set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
hereby agree as set forth in this Loan Agreement.

     

    
      1. 
 Definitions
And Terms

    

    
 

    The
following words, terms or phrases shall have the following
meanings:

    


    “Account”,
“Account
Debtor”, “Chattel
Paper”, “Commercial
Tort Claims”, “Deposit
Account”, “Document”,
“Document
of Title”, “Electronic
Chattel Paper”, “
Equipment”, “Fixture”,
“General
Intangibles”, “Goods”,
“Instrument”, “Inventory”,
“Investment
Property”, “Letter
of Credit Rights”, “Payment
Intangibles”, “Proceeds”,
“Supporting
Obligations” and “Tangible
Chattel Paper”: shall have their respective meanings as set forth in the
Illinois Uniform Commercial Code, as amended or restated from time to
time.

    


    “Affiliate”:
shall mean any Person that directly or indirectly, through one or more
intermediaries, owns, controls or is controlled by, or is under common control
with, a Borrower. A Person shall be presumed to control a Borrower if such
Person is the direct or indirect legal or beneficial owner of more than ten
percent (10%) of the outstanding Equity Interests of a
Borrower.

    


    “Business
Day”: shall mean any day other than a Saturday, a Sunday or any day that
banks in Chicago, Illinois are required or permitted to close.

    


    “Charges”:  shall
mean all national, federal, state, county, city, municipal or other governmental
(including, but not limited to, any instrumentality, division, agency, body or
department thereof) taxes, levies, assessments, charges, liens, claims
or  encumbrances upon or relating to the Collateral, the Liabilities,
Borrower’s business, ownership or use of any of its assets, or Borrower’s income
or gross receipts.

    


    “Collateral”:  shall
have the meaning ascribed to such term in Section 4.1 below.


    
      
         


      

      
        1

        
          

        

      

      
         


      

    

    
 

    “Constituent
Documents”: shall mean, for a Borrower, as applicable, Borrower’s
articles or certificate of incorporation or formation, by-laws, operating
agreement, limited partnership agreement, general partnership agreement and any
other similar documents, agreements or certificates relating to Borrower’s legal
formation.

    


    “Covenants”:  shall
mean all now existing and hereafter arising covenants, duties, obligations and
agreements of Borrower to and with Lender, whether pursuant to this Loan
Agreement, the Other Agreements or otherwise.

    


    


    “Default
Rate”:  shall mean, for each Loan, three percent (3%) per
annum in excess of the otherwise applicable interest rate for such Loan, and for
all other Liabilities, shall mean three percent (3%) per annum in excess of
the Prime Rate.

    


    “Designated
Person”:  shall mean any officer of Borrower and any other
Person designated as a “Designated Person” in writing to Lender.

    


    “Environmental
Laws”:  shall mean all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, as may be amended
from time to time, including, but not limited to, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Toxic Substances Control Act, the Clean Water Act,
the River and Harbor Act, Water Pollution Control Act, the Marine Protection
Research and Sanctuaries Act, the Deep-Water Port Act, the Safe Drinking Water
Act, the SuperFund Amendments and Reauthorization Act of 1986, the Federal
Insecticide, Fungicide and Rodenticide Act, the Mineral Lands and Leasing Act,
the Surface Mining Control and Reclamation Act, state and federal superlien and
environmental clean up programs and laws, and U.S. Department of Transportation
regulations.

    


    “Equity
Interests”:  shall mean any and all shares and other equity and
ownership interests, however designated, of or in a Person, whether or not
voting, including, but not limited to, common stock, warrants, membership
interests, preferred stock, convertible debentures and all agreements,
instruments and documents convertible, in whole or in part, into any one or more
of the foregoing.

    


    “ERISA”:  shall
mean the Employee Retirement Income Security Act of 1974 and all rules and
regulations from time to time promulgated thereunder.

    


    “Event
of Default”:  shall have the meaning ascribed to such term in
Section 11.1 below.

    


    “Financials”:  shall
mean all year-end financial statements, projections, interim financial
statements, tax returns, reports and similar documentation and information
previously delivered by Borrower to Lender and the documents described in
Section 9.5 below, individually or collectively.

    


    “GAAP”:  shall
mean generally accepted accounting principles consistently applied from time to
time.

    


    “Global”:  shall
mean Global Brands (Football) Pte., Ltd.

    


    “Global
Vendors”:  shall mean Global approved apparel
manufacturers.


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

    
 

    “Guaranties”:
shall have the meaning set forth in Section 4.10.

    


    “Hazardous
Substances”:  shall have the meaning set forth in 42 USC §
9601(14), 42 USC § 9601(33) and 42 USC § 6991(8) or any state or local
counterpart Environmental Law.

    


    “Indebtedness”:  shall
mean all obligations and liabilities of Borrower to any Person other than
Lender, including, but not limited to, (1) all Indebtedness whether primary
or secondary, direct or indirect, absolute or contingent, liquidated or
unliquidated, insured or uninsured, fixed or otherwise, heretofore, now or from
time to time hereafter owing, due or payable, however evidenced, created,
incurred or acquired, and howsoever arising, whether by written or oral
agreement, operation of law or otherwise; (2) all obligations or
liabilities of any Person that are secured by any lien, claim, encumbrance or
security interest upon the Collateral or other assets of Borrower, whether or
not Borrower has assumed or become liable for the payment thereof; (3) all
Capitalized Lease Obligations; (4) all unfunded pension obligations; and
(5) all deferred taxes.

    


    “Indemnified
Liabilities”:  shall have the meaning ascribed to such term in
Section 12.21 below.

    


    “Indemnitees”:  shall
have the meaning ascribed to such term in Section 12.21 below.

    


    “Issuer”:  shall
mean the bank issuing a Letter of Credit, as designated by Lender, and which
shall initially be The Northern Trust Company.

    


    “Letter
of Credit” and “Letters of Credit”: shall mean, respectively, a
commercial letter of credit and all such letters of credit issued by the Issuer
and arranged by Lender, in its sole discretion from time to time.

    


    “Letter
of Credit Application”: shall mean, with respect to any request for the
issuance of a Letter of Credit, a letter of credit application in the form being
used by the Issuer at the time of such request for the type of Letter of Credit
requested.

    


    “Letter
of Credit Maturity Date”: shall mean the date set forth in a Letter of
Credit, which shall not exceed six months from the date of issuance without
Lender’s prior written consent.

    


    “Letter
of Credit Obligations”: shall mean, at any time, an amount equal to the
aggregate of the original face amounts of all Letters of Credit (including
amounts drawn thereunder) minus the sum of (i) the amount of any reductions in
the original face amount of any Letter of Credit which did not result from a
draw thereunder, (ii) the amount of any payments made by the Lender with respect
to any draws made under a Letter of Credit for which the Borrower has reimbursed
the Lender, and (iii) the portion of any issued but expired Letter of Credit
which has not been drawn by the beneficiary thereunder.  For purposes
of determining the outstanding Letter of Credit Obligations at any time, the
Issuer’s acceptance of a draft from the beneficiaries pursuant to a Letter of
Credit shall constitute a draw on the applicable Letter of Credit at the time of
such acceptance.

    


    “Liabilities”:  shall
mean any and all obligations, liabilities, indebtedness, fees, costs and
expenses, now or hereafter owed or owing by Borrower to Lender, including, but
not limited to, all principal, interest, debts, claims and indebtedness of any
and every kind and nature, howsoever created, arising or evidenced, whether
primary or secondary, direct or indirect, absolute or contingent, insured or
uninsured, liquidated or unliquidated, or otherwise, and whether arising or
existing under written or oral agreement or by operation of law, together with
all costs, fees and expenses of Lender, including, but not limited to, (1)
Letter of Credit Obligations; (2) attorneys’ and paralegals’ fees or charges
relating to the preparation of this Loan Agreement and the Other Agreements and
the enforcement of Lender’s rights and remedies pursuant to this Loan Agreement
and the Other Agreements; and (3) all other Liabilities or amounts payable to
Lender by Borrower under any of the Other Agreements.


    
      
         


      

      
        3

        
          

        

      

      
         


      

    

    
 

    “Loan
or Loans”: shall mean, individually and collectively, all Letters of
Credit arranged and secured by Lender and issued for the benefit of the
Borrower, and any other loans provided by Lender to the Borrower from time to
time.

    


    “Loan
Documents”: shall mean this Loan Agreement, as amended, renewed, restated
or replaced from time to time, together with the Other Agreements.

    


    “Lockbox”:
shall mean the Lockbox established at Issuer pursuant to the Lockbox
Agreement.

    


    “Lockbox
Account”: shall mean the Borrower’s account at Issuer, pledged to and
controlled by Lender, to which all receipts of the Lockbox shall be
deposited.

    


    “Lockbox
Agreement”: shall mean the Lockbox Agreement between Lender, Borrower and
Issuer.

    


    “Multiemployer
Plan”:  shall have the meaning ascribed to such term in Section
4001(a)(3) of ERISA.

    


    “Officers”:  shall
mean the individual key officers of the Borrower, namely Janon Costley, Don
Jones, and Duarte DaSilveira

    


    “Other
Agreements”:  shall mean all agreements, instruments and
documents, including, but not limited to, guaranties, mortgages, deeds of trust,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to Lender in connection with the Liabilities or any of the
transactions contemplated herein, together with any amendments, modifications,
extensions or renewals thereto, including, but not limited to the (1) the
Account Pledge Agreement, (2) the Guaranties, (3) the Lockbox Agreement, and
(4) the Collateral Assignment of Contract.

    


    “Parent”:  shall
mean any Person, now or at any time or times hereafter, owning or controlling,
directly or indirectly, at least a majority of the issued and outstanding Equity
Interests of a Borrower or any Subsidiary.

    


    “Permitted
Indebtedness”:  shall mean (1) trade payables arising in
the ordinary course of Borrower’s business, (2) other Indebtedness of
Borrower incurred in the ordinary course of Borrower’s business as presently
conducted that are not (a) past due, or (b) incurred through the
borrowing of money or the obtaining of credit, (3) Indebtedness in respect
of taxes, assessments, governmental charges or levies and claims for labor,
materials and supplies that is incurred in the ordinary course of Borrower’s
business as presently conducted and is not past due, (4) Indebtedness in
respect of judgments or awards which do not constitute an Event of Default
hereunder, and (5) Indebtedness in respect of employee benefit plans and
programs that is incurred in the ordinary course of Borrower’s business as
presently conducted and is not past due.
 

    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    “Permitted
Liens”: shall mean (1) liens for current taxes and duties not
delinquent or for taxes being contested in good faith, by appropriate
proceedings which do not involve, in the sole determination of Lender, any
material danger of the sale or loss of any of the Collateral and with respect to
which Borrower has provided for and are maintaining adequate reserves in
accordance with GAAP, (2) liens in Lender’s favor, (3) liens incurred
in the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other statutory obligations, provided that such
obligations are not past due and owing, (4) easements, rights of way,
restrictions and other similar charges or encumbrances with respect to real
property not interfering in any material respect with the ordinary conduct of
Borrower’s business, and (5) the junior security interests and liens of
Serec of California.

    


    “Person”:  shall
mean any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or foreign or United States government,
whether federal, state, county, city, municipal or otherwise, including, but not
limited to, any instrumentality, division, agency, body or department
thereof.

    


    “Plan”:  shall
mean an employee benefit plan now or hereafter maintained for employees of
Borrower that is covered by Title IV of ERISA.

    


    “Prohibited
Transaction”:  shall mean any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.

    


    “Reportable
Event”:  shall mean any of the events set forth in Section
4043(b) of ERISA.

    


    “Restricted
Payments”:  shall
mean any of the following: (1) any dividend, distribution or return of
capital to any shareholder, member or other owner of Borrower or its Parent, or
any other payment or delivery of property or cash to any of Borrower’s members
or other owners, or any redemption, retirement, purchase or other acquisition of
all or any portion of the Equity Interests of Borrower, and (2) any loan or
advance to any Affiliate, Subsidiary, Parent, employee, officer, director,
member or manager of a Borrower.

    


    “Special
Collateral”:  shall mean that portion of the Collateral
evidenced by Chattel Paper, Instruments or Documents.

    


    “Subordinated
Debt”:  shall mean Borrower’s Indebtedness which is
subordinated to the payment of all of the Liabilities to Lender pursuant to a
written subordination agreement in form and substance acceptable to Lender,
which subordination agreement specifically states that Borrower’s Indebtedness
is Subordinated Debt under this Loan Agreement.

    


    “Subsidiary”:  shall
mean any Person who is under the direct or indirect ownership or control of a
Borrower.

    


    “Supplemental
Documentation”:  shall have the meaning set forth in Section
4.2 below.

    


    “Term”:  shall have the
meaning set forth in Section 3.6 below.

    


    “Unmatured Event
of Default”:  shall mean the occurrence or existence of any
event or condition which with notice, lapse of time or both would constitute an
Event of Default.

    


    1.2           Except
as otherwise defined in this Loan Agreement or the Other Agreements, any
accounting terms used in this Loan Agreement which are not specifically defined
herein shall have the meanings customarily given them in accordance with
GAAP.  Unless the context indicates otherwise, all other words, terms
or phrases used herein shall be defined by the applicable definition therefor,
if any, in the Uniform Commercial Code as adopted by the State of Illinois from
time to time.


    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    
      2. 
 Loans:  Disbursements,
Interest Rates, Loan Requests and Fees

    

    
 

    
      	 	
              2.1 

            	
              Letter
      of Credit Loans.

            


    

    


    Upon the
execution hereof and from time to time thereafter during the Term, Lender may,
in its sole discretion, arrange for and secure commercial Letters of Credit to
be issued by Issuer to Global or a Global Vendor for the benefit of and at the
request of Borrower.  No Letter of Credit shall have an expiration
date later than the Letter of Credit Maturity Date or the termination date
hereof.  In the event Lender elects not to arrange a Letter of Credit
requested by Borrower with respect to any customer purchase order, Borrower may
finance such Letter of Credit with another lender.  However, Borrower
shall offer the Lender the first opportunity to arrange and secure all Letters
of Credit required by the Borrower and its Affiliates, and may only use
alternate financing sources for letters of credit rejected by
Lender.  Each such Letter of Credit shall be arranged or rejected at
the sole discretion of the Lender.  Each request for a Letter of
Credit by Borrower shall be made by written notice from Borrower to Lender,
given not later than 3:00 P.M. (Chicago time) at least twenty-one (21) Business
Days prior to the date that Borrower needs such Letter of
Credit.  Such notice shall be accompanied by an executed copy of the
customer purchase order(s) for which such Letter of Credit Loan is
requested.

    


    The
amount of any draws made by a beneficiary under a Letter of Credit shall be paid
and reimbursed to Lender upon the earlier of (a) within three (3) days after
payment of the purchase order(s) for which such Letter of Credit was made; or
(b) within forty (40) days after Borrower ships the goods covered by such
applicable purchase order(s).  As a condition to the issuance of any
Letter of Credit, Lender may require the Borrower to obtain Credit Insurance on
the applicable customer purchase orders.

    


    
      	 	
              2.2 

            	
              Interest
      Rates on Loans.

            


    

    


    Borrower
hereby promises to pay interest on the unpaid principal amount of the aggregate
Letter of Credit Obligations outstanding from time to time in the manner
provided in Section 3.1 below at the fixed rate of two percent (2%) per
month.  The first four months of interest (8%) on each Letter of
Credit shall be deemed fully earned upon the issuance of such Letter of Credit
(the “Minimal Charge”).  Notwithstanding the foregoing, upon the
occurrence of an Event of Default, the unpaid principal amount of the Letter of
Credit Obligations shall, at Lender’s option, bear interest after such Event of
Default at the Default Rate.

    


    
      
        	 	
                2.3

              	
                Computation
      of Interest.  Interest
      on the Loans shall be computed for the actual number of days elapsed on
      the basis of a three hundred sixty (360) day
      year.

              


      

    

     

    
      
        	 	
                2.4

              	
                Equity.  Immediately
      upon the issuance of any Letter of Credit hereunder, Borrower shall issue
      to Lender, as additional consideration for such Letter of Credit, shares
      of common stock of Borrower with a fair value equal to 1% of the face
      amount of such Letter of Credit. As used herein, fair value shall mean 80%
      of the “bid” price of such
stock.

              


      

    
 

    
      
         


      

      
        6

        
          

        

      

      
         


      

    

     

    
      3. 
 Loans:  General
Terms

    

    
 

    
      3.1          
Payments.

    

    


    (A)          Scheduled
Payments.  Except as otherwise provided in this Loan Agreement
or the Other Agreements, (1) the principal amount of the Letter of Credit Loans
shall be paid as set forth in Section 2.1 above; (2) all accrued and unpaid
interest in the amount set forth in Section 2.2 above shall be paid in monthly
installments on or before the last day of each month; (3) all costs, fees and
expenses payable pursuant to this Loan Agreement and the Other Agreements shall
be payable by Borrower to Lender, or to such other Persons designated by Lender,
on demand; and (4) any other Liabilities shall be payable by Borrower to Lender
on demand.  All such amounts shall be paid from the Lockbox Account as
set forth in Section 3.1(C) below but if insufficient funds are available in
such Lockbox Account, such amounts shall be paid by Borrower.

    


    (B)           Optional
Prepayment.  Except as otherwise provided in this Loan
Agreement or any of the Other Agreements, the Borrower may from time to time
prepay a Letter of Credit at any time, in whole or in part, without penalty,
provided that Borrower shall pay the unpaid portion of the Minimum Charge in the
event such Letter of Credit is outstanding less than four (4) full
months.

    


    (C)           Lockbox.  All
payments from customers of Borrower shall be paid into the Lockbox maintained by
Issuer for the benefit of the parties hereto, pursuant to the Lockbox Agreement
attached hereto as Exhibit
A.  All amounts due to Lender hereunder shall be paid from the
Lockbox Account, unless the balance of such Lockbox Account is insufficient, in
which case such amounts shall be paid by Borrower.

    


    3.2           Late
Payment Provision.  If
any payment required under this Loan Agreement is ten (10) days or more
late Borrower will be charged a late fee of 5% of the amount than
due.

    


    3.3           No
Notes.  Loans made by Lender to Borrower pursuant to this Loan
Agreement shall not be evidenced by notes or other instruments issued or
executed and delivered by Borrower to Lender.  Such Loans are not so
evidenced, such Loans shall be evidenced by entries upon the ledgers, books,
records or computer records of Lender maintained for that
purpose.  Lender’s failure to record any portion of the Liabilities on
such books and records shall not limit or otherwise affect the obligations and
liabilities of Borrower to repay the Liabilities due and owing to Lender
pursuant to this Loan Agreement and the Other Agreements.

    


    3.4           One
Loan.  All of the Liabilities shall constitute one loan secured
by Lender’s security interest and lien in the Collateral and by all other
security interests, liens, mortgages, claims and encumbrances heretofore, now or
from time to time hereafter granted by Borrower to Lender.

    


    3.5           Use of
Loan Proceeds.  Borrower represents, warrants and covenants
unto Lender that Borrower shall use the proceeds of all Loans made by Lender to
Borrower pursuant to this Loan Agreement and the Other Agreements as follows:
(A) the Letters of Credit shall solely be issued to Global and Global Vendors to
secure the Borrower’s purchase of Inventory pursuant to the Distribution
Agreement between Borrower and Global; (B) proceeds of the Loans shall be
used solely for proper business purposes and consistent with all applicable laws
and statutes.  Borrower further represents and warrants to Lender that
Borrower does not and will not at any time hereafter own any margin securities,
and that none of the proceeds of the Loans shall be used for the purpose of
(1) purchasing or carrying any margin securities, (2) reducing or
retiring any indebtedness which was originally incurred to purchase any margin
securities, or (3) any other purpose not permitted by Regulation U of the
Board of Governors of the Federal Reserve System, as in effect from time to
time.


    
      
         


      

      
        7

        
          

        

      

      
         


      

    

    
 

    3.6           Term.  The
term of this Loan Agreement (“Term”) shall commence on the date first set forth
above and shall continue until the latest of: (a) 60 days after either party
provides written notice of termination to the other; provided, however that
Borrower may not provide such notice until one year after the expiration or
termination of all licenses, distribution agreements or other contracts to sell
or distribute goods to which Borrower or any of its Affiliates now are (or
during the Term become) a party; and (b) the date that all Liabilities are
irrevocably paid in full.  The parties intend that as long as Borrower
or its Affiliates have or may have any need for third-party financing, this
Agreement shall continue and Lender shall have a right of first refusal to
provide such financing as set forth in Section 2.1 above.

    


    3.7           Representation
and Warranty.  Each request for a Loan advance made by Borrower
to Lender pursuant to this Loan Agreement and the Other Agreements shall
constitute an automatic representation and warranty by Borrower to Lender that
there does not then exist an Unmatured Event of Default or Event of
Default.

    


    3.8           Authorization
to Disburse.  Borrower hereby authorizes and requests Lender to
obtain and disburse for and on behalf of Borrower, and for the Borrower’s
account, Letters of Credit pursuant to this Loan Agreement to such Person or
Persons as Borrower or any Person specified in Section 12.11 of this Loan
Agreement shall direct, whether in writing or orally.

    


    3.9           Payment
of Costs, Fees and Expenses.  Lender, in its discretion, may
pay any costs, fees, expenses or other amounts required to be paid by Borrower
and not timely paid, or to pay any Person as Lender deems necessary to insure
that the security interest and lien granted to Lender in the Collateral shall at
all times be a first priority, perfected security interest and
lien.  Any such amounts advanced by Lender shall be immediately due
and payable by Borrower.

    


    3.10         Debit of
Accounts.  Borrower hereby irrevocably authorizes Lender to
debit the Lockbox Account for the principal, interest and other costs, fees and
expenses arising under or pursuant to this Loan Agreement and the Other
Agreements, or otherwise.

    


    3.11         Intentionally
Omitted.

    


    3.12         Letters
of Credit.  (a) All Letters of Credit shall bear (in addition
to the interest forth herein) such application, issuance, renewal, negotiation
and other fees and charges as charged by the Issuer.  Borrower shall
pay all such amounts to Lender upon demand.

    


    (b)           In
addition to amounts payable as elsewhere provided in this Loan Agreement,
Borrower hereby agrees to protect, indemnify, pay and save Lender, and keep
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable attorneys’
fees) arising from the claims of third parties against Lender as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit other than as a
result of Lender’s gross negligence or willful misconduct, as determined by a
court of competent jurisdiction; or (ii) the failure of Issuer to honor a
drawing under such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called “Government
Acts”).


    
      
         


      

      
        8

        
          

        

      

      
         


      

    

    
 

    (c)           As
between Borrower and Lender, Borrower assumes all risks of the acts and
omissions of, or misuse of such Letters of Credit by, the respective
beneficiaries of the Letters of Credit.  In furtherance and not in
limitation of the foregoing, subject to the provisions of the Letter of Credit
applications, Lender shall not be responsible for (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of the Letters of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged, (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason,
(iii) failure of the beneficiary of a Letter of Credit to comply fully with
conditions required in the Letter of Credit in order to draw upon such Letter of
Credit, (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, facsimile or otherwise,
whether or not they be in cipher, (v) errors in interpretation of technical
terms, (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of the
proceeds thereof, (vii) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit, or (viii) any
consequences arising from causes beyond the control of Lender, including,
without limitation, any Government Acts.  None of the above shall
affect, impair, or prevent the vesting of any of Lender’s rights or powers under
this Loan Agreement.

    


    (d)           In
furtherance and extension and not in limitation of the specific provisions set
forth above, any action taken or omitted by Lender under or in connection with
the Letters of Credit or any related certificates, if taken or omitted in good
faith, shall not put Lender under any resulting liability to Borrower or relieve
Borrower of any of its obligations hereunder to any such Person.

     

    
      4. 
 Collateral:  General
Terms

    

     

    4.1           Grant of
Security Interest.  To secure the full and timely payment and
performance by Borrower to Lender of the Liabilities and the Covenants, Borrower
hereby grants to Lender a first position priority security interest and lien in
all of Borrower’s now existing or owned and hereafter arising or
acquired:  (1) Accounts (including the Lockbox Account pursuant
to the Account Pledge Agreement); (2) Goods for sale, lease or other
disposition by Borrower which have given rise to Accounts and have been returned
to or repossessed or stopped in transit by Borrower; (3) contract rights
and documents, instruments, contracts or other writings executed in connection
therewith, including, but not limited to, all real and personal property lease
rights; (4) Chattel Paper, Electronic Chattel Paper, Tangible Chattel
Paper, Documents of Title, Instruments, Documents, General Intangibles, Payment
Intangibles, Letter of Credit Rights, letters of credit and Supporting
Obligations (including the Collateral Assignment of the Distribution Agreement);
(5) patents, trademarks, trade names, trademark registrations and
copyrights, all applications therefor, service marks, trade secrets, goodwill,
inventions, processes, designs, formulas, and other intellectual or proprietary
rights or interests, of any kind, nature or description whatsoever, and all
registrations, licenses, franchises, customer lists, tax refund claims, claims
against carrier and shippers, insurance claims, guaranty claims, all other
claims, proof of claims filed in any bankruptcy, insolvency or other proceeding,
contract rights, chooses in action, security interests, security deposits and
rights to indemnification; (6) Goods, including, without limitation,
Inventory, Equipment, Fixtures, trade fixtures and vehicles; (7) Investment
Property; (8) deposits, cash and cash equivalents and any other property of
Borrower now or hereafter in the possession, custody or control of Lender,
whether for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise; (9) Commercial Tort Claims arising from time to time;
(10) deposit accounts held with Lender or any other depository institution;
(11) all other personal property of Borrower of any kind or nature; and
(12) additions and accessions to, substitutions for and replacements,
products and cash and non-cash Proceeds of all of the foregoing property,
including, but not limited to, Proceeds of all insurance policies insuring the
foregoing and all of Borrower’s books and records relating to any of the
foregoing and to Borrower’s business (all of the foregoing property, together
with all other real or personal property of any other Person now or hereafter
pledged to Lender to secure, either directly or indirectly, repayment of any of
the Liabilities, is collectively referred to as the
“Collateral”).  Borrower shall make appropriate entries upon its
financial statements and books and records disclosing Lender’s first position
priority security interest and lien in the Collateral.


    
      
         


      

      
        9

        
          

        

      

      
         


      

    

    
 

    4.2           Supplemental
Documentation.  Borrower shall execute and deliver to Lender,
at any time and from time to time, all agreements, instruments, documents and
other written matter (the “Supplemental Documentation”) that Lender may request,
in form and substance acceptable to Lender, to perfect and maintain perfected
Lender’s first position priority security interest and lien in the Collateral
and to consummate the transactions contemplated by this Loan Agreement and the
Other Agreements.  Borrower, irrevocably, hereby makes, constitutes
and appoints Lender, and all Persons designated by Lender for that purpose, as
Borrower’s true and lawful attorney and agent-in-fact, to sign the name of
Borrower on the Supplemental Documentation and to deliver such Supplemental
Documentation to such Persons as Lender may reasonably elect.  To the
extent permitted by law, Borrower agrees that a carbon, photographic,
photostatic copy or other reproduction of this Loan Agreement or of any
financing statement shall be sufficient as a financing statement.

    


    4.3           Inspections
and Verifications.  Borrower shall permit Lender, or any
Persons designated by Lender, to call at Borrower’s places of business at any
reasonable times, and, without hindrance or delay, to inspect the Collateral and
to inspect, audit, check and make extracts from Borrower’s books, records,
journals, orders, receipts and any correspondence and other data relating to
Borrower’s business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning Borrower’s
business as Lender may consider reasonable under the
circumstances.  Lender, at its discretion, will perform field audits
annually and at such other times as it shall deem advisable.  Borrower
shall furnish to Lender such information relevant to Lender’s rights under this
Loan Agreement as Lender shall at any time and from time to time
request.  Lender, through its officers, employees or agents shall have
the right, at any time and from time to time, in Lender’s name, to verify the
validity, amount or any other matter relating to any of Borrower’s Accounts, by
mail, telephone, telegraph or otherwise.  Borrower authorizes Lender
to discuss the affairs, finances and business of Borrower with any officers,
employees or directors of Borrower or with its Parent or any Affiliate or the
officers, employees or directors of its Parent or any Affiliate, and to discuss
the financial condition of Borrower with Borrower’s independent public
accountants.  Any such discussions shall be without liability to
Lender or to Borrower’s independent public accountants.  Borrower
shall pay to Lender all fees and all costs and out-of-pocket expenses incurred
by Lender in the exercise of its rights hereunder, and all such fees, costs and
expenses shall constitute Liabilities hereunder, shall be payable on demand and,
until paid, shall bear interest at the Default Rate.

    


    4.4          
Liens/Collateral
Locations. Borrower represents, warrants and covenants unto Lender that:
(A) Lender’s security interest and lien in the Collateral is now and at all
times hereafter shall be perfected and have a first priority; (B) except for the
Permitted Liens, the Collateral is and shall remain free and clear of all
security interests, liens and other encumbrances; (C) Borrower’s chief executive
office, all other offices and places of business and the offices and locations
where Borrower keeps the Collateral are at the locations specified on Schedule
4.4; (D) except with respect to the sale of Inventory in the ordinary course of
business, Borrower shall not remove the Collateral from the locations specified
on Schedule 4.4 and shall not keep any of the Collateral at any other office or
location unless Borrower give Lender thirty (30) days prior written notice; and
(E) the Collateral is and shall remain within the continental United States of
America. Borrower shall provide Lender with thirty (30) days prior written
notice of the opening of any new office or place of business, the closing of any
existing office or place of business or delivering any Collateral to a warehouse
or other storage facility not listed on Schedule 4.4. Borrower covenants unto
and agrees with Lender that any new office or place of business shall be within
the continental United States of America.
 

    
      
         


      

      
        10

        
          

        

      

      
         


      

    

    
 

    4.5           Assignment
of Competing Security Interest. Lender, in its
discretion, without waiving or releasing any obligation, liability or duty of
Borrower under this Loan Agreement and the Other Agreements or any Unmatured
Event of Default or Event of Default, may at any time or times hereafter, but
shall not be obligated to do so, pay, acquire or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any Person against the
Collateral.  All sums paid by Lender in connection therewith and all
costs, fees and expenses, including, but not limited to, attorneys’ fees, court
costs, expenses and other charges relating thereto incurred by Lender on account
thereof shall be part of the Liabilities, secured by the Collateral and payable
by Borrower to Lender on demand.

    


    4.6           Special
Collateral.  Immediately upon Borrower’s receipt of any Special
Collateral with a value of $10,000 or more, Borrower shall mark the same to show
that such Special Collateral is subject to a first position security interest
and lien in favor of Lender and shall deliver the original thereof to Lender,
together with an appropriate endorsement or other specific evidence of
assignment in form and substance acceptable to Lender.

    


    4.7           Additional
Collateral.  Upon the occurrence of an Unmatured Event of
Default or Event of Default, Lender may, in its discretion, retain as additional
Collateral, such portion of the monies, reserves and proceeds received by Lender
with respect to the Collateral as Lender may determine.  Borrower
hereby grants to Lender a first position priority security interest and lien in
all such monies, reserves and proceeds and other property of Borrower in the
possession of Lender at any time or times hereafter as additional Collateral
hereunder, and, in Lender’s discretion, may be held by Lender until the
Liabilities are indefeasibly paid in full or be applied by Lender on account of
the Liabilities.

    


    4.8           No Custom
or Waiver. No authorization given
by Lender pursuant to this Loan Agreement or the Other Agreements to sell any
specified portion of the Collateral or any items thereof, and no waiver by
Lender in connection therewith, shall establish a custom or constitute a waiver
of the prohibition contained in this Loan Agreement or the Other Agreements
against such sales, with respect to any portion of the Collateral or any item
thereof not covered by said authorization.

    


    4.9           Lien on
Acquired Realty.  Borrower represents and warrants to Lender
that Borrower is not the direct or indirect legal or beneficial owner of any
real property.  If Borrower shall acquire at any time or times
hereafter an interest in any real property, unless Lender otherwise agrees in
writing, Borrower agrees promptly to execute and deliver to Lender as additional
security and Collateral for the Liabilities, mortgages or other collateral
assignments satisfactory in form and substance to Lender, and its counsel
covering such real property.  Borrower shall deliver to Lender such
other documents as Lender and its counsel may reasonably request relating to any
such new real property.

    


    4.10      
  Guaranties.  All
obligations of Borrower hereunder or under the Other Agreements shall be
personally guaranteed by the Officers pursuant to Guaranties in form attached
hereto as Exhibit A.


    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    
      5. 
 Attorney
and Agent-In-Fact

    

    
 

    Borrower
irrevocably hereby designates, makes, constitutes and appoints Lender, and all
Persons designated by Lender, as Borrower’s true and lawful attorney and
agent-in fact, in Borrower’s or Lender’s name, to at any time after the
occurrence of an Event of Default or Unmatured Event of Default: (A) demand
payment of the Accounts and Special Collateral; (B) enforce payment of the
Accounts and Special Collateral by legal proceedings or otherwise;
(C) exercise all of Borrower’s rights and remedies with respect to the
collection of the Accounts and Special Collateral; (D) settle, adjust,
compromise, extend or renew the Accounts and Special Collateral;
(E) settle, adjust or compromise any legal proceedings brought to collect
the Accounts and Special Collateral; (F) sell or assign the Accounts and
Special Collateral upon such terms, for such amounts and at such time or times
as Lender deems advisable; (G) discharge and release the Accounts and
Special Collateral; (H) take control, in any manner, of any item of payment
or proceeds of the Collateral; (I) prepare, file and sign Borrower’s name
on any notice of lien, assignment or satisfaction of lien or similar document in
connection with the Accounts and Special Collateral; (J) prepare, file and
sign Borrower’s name on any Proof of Claim in bankruptcy or similar document
against any Account Debtor; (K) do all acts and things necessary, in
Lender’s sole discretion, to fulfill Borrower’s obligations under this Loan
Agreement; (L) endorse the name of Borrower upon any of the items of
payment or proceeds of the Collateral and to deposit the same on account of the
Liabilities; (M) endorse the name of Borrower upon any Chattel Paper,
Document, Instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Accounts and Special Collateral; and (N) sign
the name of Borrower to verifications of the Accounts and Special Collateral and
notices thereof to Account Debtors.

     

    
      6. 
 Collateral:  Inventory

    

    
 

    6.1           Representations,
Warranties and Covenants.  Borrower represents and warrants to
and covenants with Lender that:  (A) Borrower has and shall have good,
indefeasible and merchantable title, free and clear of all security interests,
claims and encumbrances to and ownership of the Inventory, except for the
Permitted Liens; (B) Borrower’s Inventory shall be kept only at the locations
specified on Schedule 4.4; (C) Borrower now keeps and hereafter at all
times shall keep correct and accurate records itemizing and describing the age,
kind, type and quantity of Inventory and Borrower’s stated actual cost therefor,
together with withdrawals therefrom and additions thereto for each month, all of
which records shall be available, upon demand, to any of Lender’s officers,
employees or agents for inspection and copying thereof; (D) any of Lender’s
officers, employees or agents shall, now and at any time or times hereafter,
have the right, upon demand, to inspect and examine the Inventory and to check
and test the same as to quality, quantity, value and condition; and (E) all
Inventory of Borrower (1) is not consigned to any Person; (2) is
subject to Lender’s first position priority preferred security interest and
lien; (3) is not slow moving or  obsolete Inventory; (4) does not
constitute work in process or supplies; (5) is in good and marketable condition;
and (6) is located at one of the locations specified on Schedule 4.4 or
such other location permitted pursuant to this Loan Agreement, and, if located
at a warehouse, other storage facility or leased facility, Lender has received
an original executed warehouse agreement or landlord agreement in form and
substance acceptable to Lender.  All costs, fees and expenses incurred
by Lender in connection with this Section 6, or which Lender becomes obligated
to pay, shall be part of the Liabilities, secured by the Collateral and payable
by Borrower to Lender on demand.

    


    6.2           Sale of
Inventory.  Until an Unmatured Event of Default or Event of
Default has occurred, Borrower may sell Inventory in the ordinary course of
business, but may not transfer any Inventory in partial or total satisfaction of
any of the Indebtedness.  In no event shall Borrower make any sale of
Inventory which would violate the terms and provisions of the Loan Agreement and
the Other Agreements.


    
      
         


      

      
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    6.3           Responsibility
for Inventory.  Borrower shall be liable or responsible for:
(A) the safekeeping of Inventory; (B) any loss, damage or destruction
to the Inventory occurring or arising in any manner or fashion; (C) any
diminution in the value thereof; or (D) any act or event of default of any
carrier, bailee or forwarding agency thereof or any other Person.

     

    
      7. 
 Equipment

    

    
 

    7.1           Representations,
Warranties and Covenants.  Borrower represents and warrants to
and covenants with Lender that (A) Borrower has and shall have good,
indefeasible and merchantable title, free and clear of all security interests,
claims and encumbrances to and ownership of the Equipment, except for the
Permitted Liens; and (B) the Equipment shall be kept and maintained solely
at Borrower’s places of business specified on Schedule 4.4.

    


    7.2           Maintenance
of Equipment.  Borrower shall keep and maintain the Equipment
in good operating condition and repair and shall make all necessary replacements
thereof and renewals thereto so that the value and operating efficiency of the
Equipment shall at all times be maintained and preserved.  Borrower
shall not permit any of the Equipment to become a Fixture to real estate or
accession to other personal property.

    


    7.3           Evidence
of Ownership.  Upon Lender’s request, Borrower shall deliver to
Lender any and all evidence of ownership to, including, without limitation,
certificates of title to and applications for title to, any of the
Equipment.

    


    7.4           Records
and Schedules of Equipment.  Borrower shall maintain accurate
records itemizing and describing the kind, type, quality, quantity and value of
its Equipment and all dispositions thereof, and shall furnish Lender with a
current schedule containing the foregoing information upon request by
Lender.

     

    
      8. 
 Insurance
and Taxes

    

    
 

    8.1           Insurance.

    


    (A)           Borrower,
at its sole cost and expense, shall keep and maintain: (1) the Collateral
insured for the full insurable value against loss or damage by fire, theft,
explosion, sprinklers and all other hazards and risks ordinarily insured against
by other owners or users of such properties in similar businesses; and
(2) business interruption insurance, workmen’s compensation insurance,
public liability insurance products liability and property damage insurance
relating to Borrower’s business and ownership and use of its
assets.

    


    (B)           All
such policies of insurance shall be in form and substance, in such amounts and
with insurers recognized as adequate by prudent business persons, as may be
satisfactory to Lender.  Borrower shall deliver to Lender the
original, or certified copy, of each policy of insurance or a certificate of
insurance, and evidence of payment of all premiums for each such
policy.  All property insurance policies shall contain an endorsement,
in form and substance acceptable to Lender, showing Lender as lender’s loss
payee and all liability insurance policies shall contain an endorsement, in form
and substance acceptable to Lender, showing Lender as additional
insured.  Such endorsement or independent instrument furnished to
Lender shall provide that the insurance companies will give Lender at least
thirty (30) days written notice before any such policy or policies of
insurance shall be altered or canceled and that no act or default of Borrower or
any other person shall affect the right of Lender to recover under such policy
or policies of insurance in case of loss or damage.


    
      
         


      

      
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    (C)           Borrower
hereby directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to Lender.  Borrower irrevocably, makes,
constitutes and appoints Lender, and all officers, employees or agents
designated by Lender, as Borrower’s true and lawful attorney and agent-in-fact
for the purpose of making, settling and adjusting claims under such policies of
insurance with respect to the Collateral, endorsing the name of Borrower on any
check, draft, instrument or other item of payment constituting the proceeds of
such policies of insurance with respect to the Collateral at any time or times
hereafter, and for making all determinations and decisions with respect to such
policies of insurance.  If Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Lender, without
waiving or releasing any obligation, Unmatured Event of Default or Event of
Default by Borrower hereunder, may at any time or times thereafter, but shall
not be obligated to do so, obtain and maintain such policies of insurance, pay
such premium and take any other action with respect thereto which Lender deems
advisable.  All sums so disbursed by Lender, including, but not
limited to, attorneys’ fees, court costs, expenses and other charges relating
thereto, shall be part of the Liabilities, secured by the Collateral and payable
by Borrower to Lender on demand.

    


    (D)           Borrower
hereby acknowledges that the following notice by Lender is required by and given
in full compliance with the Illinois Collateral Protection Act, 815 ILCS
180/15:

    


    Unless
Borrower provides Lender with evidence of the insurance coverage required by
this Loan Agreement, Lender may purchase insurance at Borrower’s expense to
protect Lender’s interest in the Collateral.  This insurance may, but
need not, protect Borrower’s interests.  The coverage that Lender
purchases may not pay any claim that Borrower makes or any claim that is made
against Borrower in connection with the Collateral.  Borrower may
later cancel any insurance purchased by Lender, but only after providing Lender
with evidence that Borrower has obtained insurance as required by this Loan
Agreement.  If Lender purchases insurance for the Collateral, Borrower
will be responsible for the cost of that insurance, including interest and any
other charges Lender may impose in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of the
insurance.  The cost of the insurance may be added to Borrower’s total
outstanding balance or obligation.  The cost of insurance may be more
than the cost of insurance Borrower may be able to obtain on its
own.

    


    8.2           Taxes.  Borrower
represents, warrants and covenants unto Lender that it shall fully and timely
pay, when due, all of the Charges, and that it shall not permit the Charges to
arise, or to remain, and will promptly discharge the same.  In the
event Borrower, at any time or times hereafter, shall fail to pay the Charges or
to obtain such discharges, Borrower shall so advise Lender thereof in
writing.  Lender may, without waiving or releasing any obligation or
liability of Borrower hereunder or any Event of Default, at any time or times
after Borrower’s failure to pay the Charges, make such payment, or any part
thereof, obtain such discharge or take any other action with respect thereto
which Lender deems advisable.  All sums so paid by Lender and any
expenses, including, but not limited to, attorneys’ fees, court costs, expenses
and other charges relating thereto, shall be part of the Liabilities, secured by
the Collateral and payable by Borrower to Lender on demand.

     

    
      9. 
 Representations,
Warranties and Covenants:  General

    

    
 

    9.1           Representations
and Warranties.  To induce Lender to enter into this Loan
Agreement and to make Loans hereunder, Borrower represents and warrants to
Lender that:


    
      
         


      

      
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    (A)          Organization
and Qualification.  Borrower is the type of legal entity set
forth in the first paragraph of this Loan Agreement for Borrower, duly organized
and existing and in good standing under the laws of the State of its formation
reflected in the first paragraph of this Loan Agreement, and qualified or
licensed to do business in all states in which the laws thereof require Borrower
to be so qualified or licensed.

    


    (B)           Company
Power and Authority.  Borrower has the right, power and
capacity and is duly authorized and empowered to enter into, execute, deliver
and perform this Loan Agreement and the Other Agreements.

    


    (C)           No
Violation of Law.  The execution, delivery and performance by
Borrower of this Loan Agreement and the Other Agreements do not and shall not,
by the lapse of time, the giving of notice or otherwise, constitute a violation
of any applicable law or breach of any provision contained in Borrower’s
Constituent Documents, or contained in any agreement, instrument or document to
which Borrower is a party or by which it is bound.

    


    (D)           Title to
Collateral. Borrower has good, indefeasible and merchantable title to and
ownership of the Collateral, free and clear of all liens, claims, security
interests and encumbrances, except for the Permitted Liens.

    


    (E)           Solvency.  Borrower
(1) was and is solvent, (2) had and has adequate cash flow to pay its
debts as they mature or otherwise become due, (3) had and has sufficient
capital to conduct its business in the ordinary course, and (4) has
property and assets which, if valued at fair market valuation, are greater than
the sum of Borrower’s debts and liabilities.

    


    (F)           Litigation.  There
are no actions or proceedings which are pending or threatened against Borrower
which might result in any material or adverse change in its financial condition
or materially affect Borrower’s assets or the Collateral.

    


    (G)           Indebtedness.  Borrower
has no Indebtedness, except Permitted Indebtedness.

    


    (H)          Distribution
Agreement.  The current version of the Distribution Agreement
with Global has been delivered to Lender by Borrower, and such Agreement remains
in full force and effect and no defaults exist thereunder.

    


    (I)      
     Adequate
Assets/Trademarks/Copyrights/Patents.  Borrower possesses
adequate assets, licenses, patents, copyrights, trademarks and trade names to
continue to conduct its business as now conducted by it.  Borrower
does not own any patents, trademarks or copyrights.

    


    (J)           Good
Standing.   Borrower has been and is in good standing with
respect to all governmental permits, certificates, consents and franchises
necessary to continue to conduct its business as previously conducted by it and
to own or lease and operate its properties as now owned or leased by it
and none of said permits, certificates, consents or franchises contain any
term, provision, condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or similar business as
Borrower.

    


    (K)          Burdensome
Agreements.  Borrower is not a party to any contract or
agreement or subject to any charge, restriction, judgment, decree or order
materially and adversely affecting its business, property, assets, operations or
condition, financial or otherwise.


    
      
         


      

      
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    (L)           Violation
of Law.  Borrower is not in violation of any applicable
statute, regulation or ordinance of the United States of America, any state,
city, town, municipality, county, or any other jurisdiction, or any agency
thereof, in any material respect affecting its business, property, assets,
operations or condition, financial or otherwise.

    


    (M)         Breach
of Other Loan Documents.  Borrower is not in default with
respect to any indenture, loan agreement, mortgage, deed or other similar
agreement relating to the borrowing of monies to which it is a party or by which
it is bound.

    


    (N)          Financial
Information.  The Financials delivered to Lender prior hereto
or contemporaneously herewith fairly and accurately present the information set
forth therein which may include, but is not limited to, the assets, liabilities,
financial conditions and results of operations of Borrower and such other
Persons described therein as of and for the period ending on such dates and have
been prepared in accordance with GAAP and such principles have been applied on a
basis consistently followed in all material respects throughout the periods
involved.

    


    (O)          Material
Adverse Change.  There has been no material adverse change in
the assets, liabilities or financial condition of Borrower since the date of the
most recent Financials for the Borrower delivered to Lender.

    


    (P)           Change
of Corporate Name or Structure.  Borrower has not within the
previous five (5) years changed its name, state of formation, identity,
corporate structure or chief executive office.

    


    (Q)          Capital
Structure.  Schedule  9.1(Q) attached hereto and made
a part hereof states (1) the correct name of each of the Subsidiaries of a
Borrower, and the jurisdiction of incorporation and the percentage of voting
Equity Interests owned by Borrower, (2) the name of each Borrower’s
corporate or joint venture Affiliates and the nature of the affiliation,
(3) the number, nature and holder of all outstanding Equity Interests of
each Parent, Borrower and each Subsidiary of a Borrower, and (4) the number
of authorized and issued Equity Interests of each Parent, Borrower and each
Subsidiary of a Borrower.  Borrower has good and marketable title to
all of the Equity Interests it purports to own of each Subsidiary, free and
clear in each case of any lien other than Permitted Liens.  All such
Equity Interests have been duly issued and are fully paid and
non-assessable.  Except as described on Schedule 9.1(Q), there are not
outstanding any options to purchase, or any rights or warrants to obligations
convertible into, or any powers of attorney relating to, shares of Equity
Interests of Borrower.  Except as described on Schedule 9.1(Q), there
are not outstanding any agreements or instruments binding upon any of Parent’s
or Borrower’s shareholders or members relating to the ownership of its Equity
Interests.

    


    (R)           Pension
Plans.  Borrower is in full compliance with all of the
requirements of ERISA and the regulations promulgated thereunder.  No
fact or situation that could lead to a material adverse change in the financial
condition of Borrower, including, but not limited to, any Reportable Event or
Prohibited Transaction, exists in connection with any Plan.  Borrower
has no withdrawal liability in connection with a Multiemployer
Plan.

    


    (S)           Labor
Relations.  Borrower is not a party to any collective
bargaining agreement, and there are no material grievances, disputes or
controversies with any union or any other organization of Borrower’s employees,
or threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization.
 

    
      
         


      

      
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    (T)           Trade
Relations.  There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially adversely affect
Borrower or prevent Borrower from conducting such business after the
consummation of the transaction contemplated by this Loan Agreement in
substantially the same manner in which it has heretofore been
conducted.

    


    (U)           Environmental
Matters.  Borrower is in compliance in all respects with all
applicable Environmental Laws.

    


    (V)           Encumbrances.  There
are no liens, claims or other encumbrances upon any of the Collateral, except
for the Permitted Liens.

    


    (W)         Levies
and Attachments.  There are no levies, attachments or
restraints affecting any of Borrower’s assets or the Collateral.

    


    (X)           Receiver,
Trustee or Assignee.  There is no receiver, trustee or assignee
for the benefit of creditors currently appointed to take possession of all or
any of Borrower’s assets or any of the Collateral.

    


    (Y)           Surety.  Except
for guarantees in favor of Lender, Borrower is not liable, whether through the
execution of a guaranty or otherwise, with respect to the obligations or
liabilities of any other Person except by endorsement of instruments or items of
payment for deposit to the general account of Borrower or for delivery to Lender
on account of the Liabilities.

    


    (Z)           Affiliate
Transactions.  Borrower has not entered into any transaction
with an Affiliate, except for transactions in the ordinary course of business
pursuant to the reasonable requirements of Borrower’s business and upon fair and
reasonable terms no less favorable to Borrower than Borrower would obtain in a
comparable arms-length transaction.

    


    9.2           Covenants.  Until
the termination of this Loan Agreement and thereafter until all Liabilities are
paid in full, Borrower agrees that, unless at any time Lender shall otherwise
expressly consent in writing:

    


    (A)          Organization
and Qualification.  Borrower at all times shall be the type of
legal entity specified for Borrower in the first paragraph of this Loan
Agreement, duly organized and existing and in good standing under the laws of
the State of its formation reflected in the first paragraph of this Loan
Agreement, and shall be qualified or licensed to do business in all states in
which the laws thereof require Borrower to be so qualified or
licensed.

    


    (B)           No
Violation of Law.  The execution, delivery and performance by
Borrower of this Loan Agreement and the Other Agreements shall not hereafter, by
the lapse of time, the giving of notice or otherwise, constitute a violation of
any applicable law or breach of any provision contained in Borrower’s
Constituent Documents, or contained in any agreement, instrument or document to
which Borrower is now or hereafter a party or by which it is or may become
bound.

    


    (C)           Title to
Collateral.  Borrower at all times hereafter shall have good,
indefeasible and merchantable title to and ownership of the Collateral, free and
clear of all liens, claims, security interests and encumbrances, except for the
Permitted Liens.

     

    
      
         


      

      
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    (D)           Solvency.  Borrower
shall at all times hereafter (1) remain solvent, (2) have adequate
cash flow to pay its debts as they mature or otherwise become due, (3) have
sufficient capital to conduct its business in the ordinary course, and
(4) have property and assets which, if valued at fair market valuation, are
greater than the sum of Borrower’s debts and liabilities.

    


    (E)           Litigation.  There
shall exist no actions or proceedings against Borrower which might result in any
material or adverse change in its financial condition or materially affect
Borrower’s assets or the Collateral.

    


    (F)           Adequate
Assets/Licenses/Trademarks/Copyrights/Patents.  Borrower shall
continue to possess adequate assets, licenses, patents, copyrights, trademarks
and trade names to continue to conduct its business as previously conducted by
it.  Borrower shall notify Lender if Borrower acquires ownership of or
a license or other interest in any patents, trademarks or copyrights and shall
execute and deliver such documents to Lender as Lender shall request to assign
to Lender as security Borrower’s interest in such patents, copyrights and
trademarks.

    


    (G)           Good
Standing.  Borrower shall remain in good standing with respect
to all governmental permits, certificates, consents and franchises necessary to
continue to conduct its business as previously conducted by it and to own or
lease and operate its properties as now owned or leased by it and none of
said permits, certificates, consents or franchises contain any term, provision,
condition or limitation more burdensome than such as are generally applicable to
persons engaged in the same or similar business as Borrower.

    


    (H)           Violation
of Law.  Borrower shall not be in violation of any applicable
statute, regulation or ordinance of the United States of America, any state,
city, town, municipality, county, or any other jurisdiction, or any agency
thereof, in any material respect affecting its business, property, assets,
operations or condition, financial or otherwise.

    


    (I)           Breach
of Other Loan Documents.  Borrower shall not be in default with
respect to any indenture, loan agreement, mortgage, deed or other similar
agreement relating to the borrowing of monies to which it is a party or by which
it is bound.

    


    (J)           Financial
Statements.  Borrower shall, from time to time, provide
Financials to Lender pursuant to Section 9.5 which fairly and accurately present
the assets, liabilities and financial conditions and results of operations of
Borrower and such other Persons described therein as of and for the period
ending on the dates described therein.  Such Financials will be,
unless otherwise indicated therein, prepared in accordance with GAAP and such
principles will be applied on a basis consistently followed in all material
respects throughout the periods involved.

    


    (K)           Material
Adverse Change.  There shall be no material adverse change in
the assets, liabilities or financial condition of Borrower since the date of the
most recent Financials for the Borrower delivered to Lender.

    


    (L)           Change
of Company Name or Structure.  Borrower shall not at any time
hereafter, without Lender’s prior written consent, change its name, identity,
organizational structure, ownership, chief executive office or state of
formation.

    


    (M)          Pension
Plans.  No fact or situation that could lead to a material
adverse change in the financial condition of Borrower, including, but not
limited to, any Reportable Event or Prohibited Transaction, shall exist in
connection with any Plan.  Borrower shall continue to have no
withdrawal liability in connection with a Multiemployer Plan.

     

    
      
         


      

      
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    (N)           Notices
to Lender.  Borrower shall notify Lender in writing:
(1) promptly after Borrower learns thereof, of the commencement of any
litigation affecting Borrower or any of its real or personal property, whether
or not the claim is considered by Borrower to be covered by insurance, and of
the institution of any administrative proceeding which may materially and
adversely affect Borrower’s operations, financial condition, real or personal
property or business or Lender’s Lien upon any of the Collateral; (2) at
least thirty (30) days prior thereto, of Borrower’s opening of any new
office or place of business or Borrower’s closing of any existing office or
place of business; (3) promptly after Borrower learns thereof, of any labor
dispute to which Borrower may become a party, any strikes or walkouts relating
to any of its plants or other facilities, and the expiration of any labor
contract to which it is a party or by which it is bound; (4) promptly after
Borrower learns thereof, of any material default by Borrower under any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Indebtedness of Borrower exceeding Ten Thousand and
no/100 Dollars ($10,000.00); (5) promptly after the occurrence thereof, of
any Unmatured Event of Default or Event of Default; (6) promptly after the
occurrence thereof, of any default by any obligor under any note or other
evidence of Indebtedness payable to Borrower; (7) promptly after the
rendition thereof, of any judgment rendered against Borrower or any of its
Subsidiaries; and (8) promptly after Borrower learns thereof, of any
material adverse finding of any state or federal government entity in connection
with all or any part of the Collateral.

    


     (O)          Subordinations.  Borrower
shall provide Lender with debt subordination agreements, in form and substance
satisfactory to Lender, executed by Borrower and any Person who is an officer,
director, member, manager or Affiliate of Borrower to whom Borrower is or
hereafter becomes indebted for borrowed money.

    


    (P)           Environmental
Matters.

    


      (1)           Borrower
shall and shall cause each of its Subsidiaries to (a) comply strictly and
in all respects with all applicable Environmental Laws, (b) take promptly
any remediation and/or corrective action necessary to cure any violation of
Environmental Laws of which Borrower has knowledge, (c) notify the proper
governmental agency promptly in the event of any release of any Hazardous
Substances reportable under 42 USC §9603, 42 USC §11044, 33 USC
§1321(b)(5) or any counterpart or similar state or local requirements,
(d) promptly forward to Lender, upon its request, a copy of any order,
notice, permit, application, or any other communication or report in connection
with any such release of any Hazardous Substance or any other material matter
relating to the Environmental Laws as they may affect their
premises.

    


      (2)           Borrower
shall indemnify Lender and hold Lender harmless from and against any loss,
liability, damage or expense, including reasonable attorneys’ fees, suffered or
incurred by Lender, whether as mortgagee pursuant to any mortgage, as mortgagee
in possession, or as successor in interest to Borrower or any of its
Subsidiaries as owner or lessee of any premises by virtue of foreclosure or
acceptance of deed in lieu of foreclosure (a) under or on account of the
Environmental Laws, including the assertion of any lien thereunder;
(b) with respect to any release of any Hazardous Substance reportable under
42 USC §9603, 42 USC §11044, 33 USC §1321(b)(5) or any counterpart or
similar state or local requirements, affecting such premises or the premises of
any other place, including any loss of value of such premises as a result of a
release of any Hazardous Substance; and (c) with respect to any other
environmental matter within the jurisdiction of any federal, state or municipal
official administering the Environmental Laws; provided, however, Borrower will
not be liable for such indemnification to Lender to the extent that any such
loss, liability, damage or expense results from the gross negligence or willful
misconduct of the Person who would otherwise be entitled to be indemnified
pursuant to this Section 9.2(P).  The procedures to be followed as to
any indemnity pursuant to this Section shall be as set forth in Section 12.21
hereof.

     

    
      
         


      

      
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      (3)           Borrower
shall provide Lender with such evidence, reports and/or other documentation as
reasonably requested by Lender to insure that Borrower is in compliance with the
terms of this Section 9.2(P).

    


    (Q)          Commercial
Tort Claims.    Borrower
will advise Lender of any new Commercial Tort Claim upon the filing of any such
action.  Borrower hereby authorizes Lender to amend Schedule 4.1 from
time to time to reflect such new Commercial Tort Claims and to prepare and file
any required Uniform Commercial Code financing statements or amendments and take
any other actions necessary for Lender to perfect its security interest in such
Commercial Tort Claims.

    


    9.3           Negative
Covenants.  Borrower
covenants unto Lender that Borrower shall not now or at any time hereafter,
unless Borrower obtains the prior written consent of Lender:

    


    (A)           Additional
Encumbrances.  Grant a security interest in, assign, sell or
transfer any of the Collateral to any Person except as permitted herein or
permit, grant, or suffer a lien, claim or encumbrance upon any of the
Collateral, except for the Permitted Liens.

    


    (B)           Levies
and Attachments.  Permit or suffer any levy, attachment or
restraint to be made affecting any of its assets or the Collateral.

    


    (C)           Receiver,
Trustee or Assignee.  Permit or suffer any receiver, trustee or
assignee for the benefit of creditors to be appointed to take possession of all
or any of Borrower’s assets or any of the Collateral.

    


    (D)           Mergers
and Acquisitions.  Merge, consolidate with or acquire any
Person.

    


    (E)           Ordinary
Course of Business.  Enter into any transaction not in the
ordinary course of its business as presently conducted.

    


    (F)           Investments.  Other
than in the ordinary course of business, make any investment in the securities
of any Person; provided, however, notwithstanding the foregoing, Borrower may
make investments in certificates of deposit of Lender or in securities of the
United States of America or commercial paper with a P1 rating (all of the
foregoing maturing within one year).

    


    (G)           Surety.  Except
for guarantees in favor of Lender, guaranty or otherwise, in any way, become
liable with respect to the obligations or liabilities of any Person except by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or for delivery to Lender on account of the
Liabilities.

    


    (H)           Capital
Structure.  Make any material change in Borrower’s capital
structure or in any of its business objectives, purposes and operations which
might in any way adversely affect the repayment of the Liabilities.

    


    (I)            Encumbrance
or Sale.  Encumber, sell (other than the sale of Inventory in
the ordinary course of business), pledge, mortgage, lease, or otherwise dispose
of or transfer, whether by merger, consolidation or otherwise, any of Borrower’s
assets, except Permitted Liens and as otherwise expressly permitted
herein.

     

    
      
         


      

      
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    (J)       
    Sale of
Equity Interests.  Sell or issue any Equity Interests of
Borrower, except as set forth herein and in the Lease with Serec of
California.

    


    (K)           Indebtedness.  Incur
Indebtedness, except Permitted Indebtedness.

    


    (L)           Restricted
Payments.  Make any Restricted Payments.

    


    (M)          Constituent
Documents/Fiscal Year End.  Amend or restate Borrower’s
Constituent Documents or change Borrower’s fiscal year-end from December
31.

    


    (N)           Affiliate
Transactions.  Enter into any transaction with an Affiliate,
except for transactions in the ordinary course of business pursuant to the
reasonable requirements of Borrower’s business and upon fair and reasonable
terms no less favorable to Borrower than Borrower would obtain in a comparable
arms-length transaction.

    


    9.4           Intentionally
Omitted.

    


    9.5           Financial
Reporting.  Borrower represents, warrants and covenants unto
Lender that it will deliver to Lender the following financial information, all
of which shall accurately reflect the financial condition of each Borrower at
and for the periods of time described therein and shall be prepared in
accordance with GAAP:

    


    (A)           As
soon as available but in no event later than one hundred twenty (120) days
after the close of each fiscal year of Borrower: the reviewed financial
statements of Borrower including, but not limited to, (1) a balance sheet,
(2) a statement of income and retained earnings, and (3) a statement
of cash flows, prepared by a firm of independent certified public accountants
selected by Borrower and approved by Lender in writing.

    


    (B)           As
soon as available but in no event later than forty-five (45) days after the
end of each fiscal quarter, Borrower’s internally prepared consolidated and
consolidating financial statements, including, but not limited to, (1) a
balance sheet, and (2) a statement of income and retained earnings for the
previous quarter and year to date.

    


    (C)           As
soon as available, but in no event later than twenty (20) days after the end of
each month, the following reports for Borrower dated as of the last day of the
immediately preceding month: (1) Accounts receivable aging,
(2) Accounts payable aging, and (3) Inventory report.

    


    (D)           As
soon as available, but in no event later than thirty (30) days after the end of
each calendar year, a personal financial statement for each of the Members,
certified by such Member to be true and accurate, and in form and substance
acceptable  to the Lender.

    


    (E)           Such
other data and information, financial and otherwise as Lender, from time to
time, may request.


    
      
         


      

      
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      10.
Conditions
Precedent

    

    


    10.1         Conditions
to Initial Funding.  Lender’s obligation to make the initial
Loan pursuant to this Loan Agreement and the Other Agreements is subject to the
full and timely performance of the following covenants prior to or
contemporaneously with the making of the initial Loan.

    


    (A)           Lender
shall have received each of the following, in form and substance satisfactory to
Lender and its counsel:

    


    (1)           A
fully executed original of this Loan Agreement.

    


    (2)           Copies
of the Uniform Commercial Code, tax lien and pending suit and judgment searches
from such jurisdictions as Lender deems necessary, which shall not have
disclosed any prior lien or security interest in the Collateral, except for the
Permitted Liens.

    


    (3)           Certificates
of insurance with lender’s loss payable, additional insured and mortgagee
clauses covering all collateral for the Liabilities and meeting the requirements
of this Loan Agreement and the Other Agreements.

    


    (4)           A
fully executed original of a Warehouse Agreement with Serec of
California.

    


    (5)           Receipt
of duly executed guaranties from the Officers, in form and substance acceptable
to Lender.

    


    (6)           Receipt
of a duly executed Lockbox Agreement, in the form provided by
Lender.

    


    (7)           Receipt
of a duly executed Account Pledge Agreement, in the form provided by
Lender.

    


    (8)           Receipt
of the duly executed Collateral Assignment of the Distribution Agreement,
consented to by Global.

    


    (9)           Such
other documents, instruments or agreements as Lender may request.

    


    (B)           No
Unmatured Event of Default or Event of Default shall have occurred and be
continuing.

    


    (C)           There
shall have been no material or adverse change in the business, financial
condition or results of operations since the date of Borrower’s then most
recently delivered Financials.

    


    (D)           The
representations and warranties contained in this Loan Agreement shall be true
and correct as of the making of the initial Loan.

    


    10.2         Conditions
to Subsequent Fundings.  Lender’s obligation to make any
subsequent Loans pursuant to this Loan Agreement and the Other Agreements is
subject to the full and timely performance of each of the following covenants
either prior to or contemporaneously with the making of each subsequent
Loan.

    


    (A)           No
Unmatured Event of Default or Event of Default shall have occurred and be
continuing.

     

    
      
         


      

      
        22

        
          

        

      

      
         


      

    


    (B)           No
claims, litigation, arbitration proceedings or governmental proceedings not
disclosed in writing to Lender prior to the date of the last previous Loan shall
be pending or known to be threatened against Borrower and no known material
development not so disclosed shall have occurred in any claims, litigation,
arbitration proceedings or governmental proceedings so disclosed which in the
opinion of Lender is likely to materially or adversely affect the financial
position or business of Borrower or capability of Borrower to pay the
Liabilities.

    


    (C)           There
shall have been no material or adverse change in the business, financial
condition or results of operations since the date of Borrower’s then most
recently delivered Financials or the previous Loan advance.

    


    (D)           The
representations and warranties of Borrower contained in this Loan Agreement
shall be true and correct as of the making of any subsequent Loan, with the same
effect as though made on such date of each subsequent Loan.

     

    
      11.
Event of
Default; Remedies

    

    


    11.1         Events of
Default.  The occurrence of any one of the following events
shall constitute a default (an “Event of Default”) by Borrower under this
Loan Agreement:

    


    (A)           Borrower
fail to fully and timely pay any of the Liabilities, when due and payable or
declared due and payable;

    


    (B)           Borrower
fails or neglects to perform, keep or observe any of the Covenants;

    


    (C)           any
representation, warranty, statement, report or certificate made or delivered by
Borrower, or any of its officers, members, managers, employees, or agents, to
Lender is not true and correct in all material respects, whether made in this
Loan Agreement, the Other Agreements or otherwise;

    


    (D)           any
assets of Borrower are attached, seized, subjected to a writ or distress
warrant, or are levied upon, or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors;

    


    (E)           a
petition under the United States Bankruptcy Code or any similar federal, state
or local law, statute or regulation shall be filed by Borrower;

    


    (F)           a
petition under the United States Bankruptcy Code or any similar federal, state
or local law, statute or regulation shall be filed against
Borrower;

    


    (G)           Borrower
shall make an assignment for the benefit of creditors, or an application is made
by Borrower for the appointment of a receiver, trustee, custodian or conservator
for Borrower or any of its assets;

    


    (H)           an
application is made against Borrower for the appointment of a receiver, trustee,
custodian or conservator for Borrower or any of its assets;

    
 

    (I)
           Borrower is
enjoined, restrained or in any way prevented by court order from conducting any
part of its business affairs;

     

    
      
         


      

      
        23

        
          

        

      

      
         


      

    


    (J)        
   a lawsuit or other proceeding is filed against Borrower
claiming damages in excess of Ten Thousand and no/100 Dollars
($10,000.00) of Borrower’s assets;

    


    (K)           a
notice of a lien, levy or assessment is filed of record with respect to any of
the assets of Borrower by the United States of America or any department, agency
or instrumentality thereof, or by any state, county, municipal or other
governmental department, agency, or instrumentality, including without
limitation, the Pension Benefit Guaranty Corporation;

    


    (L)           Borrower
defaults in the payment of any of its other obligations or liabilities which are
in excess of $10,000, and such default is not cured within the time, if any,
specified therefor;

    


    (M)          the
occurrence of a breach, default or event of default under any agreement,
instrument or document executed and delivered by any Person to Lender pursuant
to which such Person has guarantied to Lender the payment of all or any portion
of the Liabilities or provided collateral to secure all or any portion of the
Liabilities, or such Person terminates or purports to terminate its guaranty of
the Liabilities to Lender;

    


    (N)           a
breach, default or event of default occurs under any of the Other Agreements,
after the expiration of applicable grace or cure periods;

    


    (O)           there
shall be entered against Borrower one or more judgments or decrees in excess of
Ten Thousand and no/100 Dollars ($10,000.00) in the aggregate at any one
time outstanding for Borrower, excluding those judgments or decrees
(i) that shall have been stayed, vacated or bonded, (ii) that shall
have been outstanding less than 30 days from the entry thereof, or
(iii) for and to the extent to which Borrower is insured and with respect
to which the insurer specifically has assumed responsibility in
writing;

    


    (P)           the
failure of the Officers to maintain their current positions within the
Borrower;

    


    (Q)           Lender,
in good faith, believes its prospect of payment or performance of the
Liabilities or the Covenants is impaired or it deems itself insecure for
whatever reason.

    


    11.2         Cumulative
Remedies.  All of Lender’s rights and remedies under this Loan
Agreement and the Other Agreements are cumulative and
non-exclusive.

    


    11.3         Discontinuing
Credit. Upon the occurrence of an Unmatured Event of Default or Event of
Default, without notice or demand by Lender to Borrower, Lender shall have no
further obligation to and may immediately cease extending credit to or for the
benefit of Borrower under this Loan Agreement and the Other
Agreements.  Upon the occurrence of an Event of Default under Sections
11.1(E) or 11.1(F) hereof, without notice or demand by Lender to
Borrower, the Liabilities shall be immediately due and payable, including,
without limitation, all of Borrower’s contingent liabilities with respect to any
letters of credit issued by Lender at Borrower’s request.  Upon the
occurrence of any Event of Default (other than an Event of Default under
Sections 11.1(E) or 11.1(F)), at the election of Lender without notice or
demand by Lender to Borrower, the Liabilities shall be immediately due and
payable, including, without limitation, all of Borrower’s contingent liabilities
with respect to any letters of credit issued by Lender at Borrower’s
request.  ANY ADVANCES MADE BY LENDER TO BORROWER AFTER THE OCCURRENCE
OF AN UNMATURED EVENT OF DEFAULT OR AN EVENT OF DEFAULT SHALL NOT ESTABLISH A
CUSTOM OR COURSE OF DEALING AND LENDER SHALL BE ENTITLED TO CEASE MAKING
ADVANCES AT ANY TIME THEREAFTER.

     

    
      
         


      

      
        24

        
          

        

      

      
         


      

    


    11.4         Remedies.  Upon
the occurrence of an Event of Default, Lender, in its discretion, may declare
all Liabilities immediately due and payable and, in addition,
may:  (A) exercise any one or more of the rights and remedies
accruing to a “secured party” under the Uniform Commercial Code of Illinois and
any other applicable law upon a default by a debtor; (B) enter, with or
without process of law and without breach of the peace, any premises where the
Collateral is or may be located, and without charge or liability to Lender
therefor, seize and remove the Collateral from said premises or remain upon said
premises and use the same for the purpose of collecting, preparing and disposing
of the Collateral; (C) sell or otherwise dispose of the Collateral at
public or private sale for cash or credit, provided, however, that Borrower
shall be credited with the net proceeds of such sale only when such proceeds are
actually received by Lender; (D) take control, in any manner, of any item
of payment or proceeds of the Collateral and to direct all Account Debtors to
make payments directly to Lender; (E) notify any or all Account Debtors
that the Accounts and Special Collateral have been assigned to Lender and that
Lender has a first position priority security interest and lien therein;
(F) direct such Account Debtors to make all payments due from them to
Borrower upon the Accounts and Special Collateral directly to Lender;
(G) enforce payment of and collect, by legal proceedings or otherwise, the
Accounts and Special Collateral in the name of Lender and Borrower; and
(H) apply all amounts in the Lockbox Account to the Liabilities, in any
manner Lender shall determine.

    


    11.5         Assembling
Collateral.  Upon an Event of Default, Borrower, immediately
upon demand by Lender, shall assemble the Collateral and make it available to
Lender at a place or places to be designated by Lender which are reasonably
convenient to Lender and Borrower.  Borrower recognizes that if it
fails to perform, observe or discharge any of its obligations or liabilities
under this Loan Agreement or the Other Agreements, no remedy of law will provide
adequate relief to Lender, and Borrower agrees that Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.

    


    11.6         Notice of
Sale.  Any notice required to be given by Lender of a sale,
lease or other disposition of the Collateral or any other intended action by
Lender, if provided not less than ten (10) days prior to such proposed
action, shall constitute commercially reasonable and fair notice to Borrower
thereof.

    


    11.7         Postponement
of Sale.  Borrower agrees that Lender may, if Lender deems it
reasonable, postpone or adjourn any such sale of the Collateral from time to
time by an announcement at the time and place of sale, without being required to
give a new notice of sale.  Further, Borrower agrees that Lender has
no obligation to preserve rights against prior parties to the
Collateral.

     

    
      12.
General

    

    


    12.1         Intentionally
Omitted.

    


    12.2         Application
of Payments.  Borrower waives the right to direct the
application of any and all payments at any time or times hereafter received by
Lender on account of the Liabilities and Borrower agrees that Lender shall have
the continuing exclusive right to apply and re-apply any and all such payments
in such manner and in such order as Lender may deem advisable, including,
without limitation, to the payment of any costs, fees and expenses payable by
Borrower under this Loan Agreement, notwithstanding any entry by Lender upon any
of its books and records.

     

    
      
         


      

      
        25

        
          

        

      

      
         


      

    


    12.3         Additional
Representations, Warranties and Covenants.  Borrower
represents, warrants and covenants unto Lender that (A) all representations
and warranties of Borrower contained in this Loan Agreement and the Other
Agreements shall be true at the time of Borrower’s execution of this Loan
Agreement and the Other Agreements, shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein and shall be true as of the date of each borrowing under this
Loan Agreement, and (B) Borrower shall fully and timely comply and maintain
all covenants set forth in this Loan Agreement and the Other
Agreements.

    


    12.4         Modification
and Assignment of Loan Documents.  This Loan Agreement and the
Other Agreements may not be modified, altered or amended, except by an agreement
in writing signed by Borrower and Lender.  Borrower may not sell,
assign or transfer this Loan Agreement or the Other Agreements or any portion
thereof, including, without limitation, Borrower’s rights, titles, interests,
remedies, powers or duties thereunder.  Borrower hereby consents to
Lender’s sale, assignment, grant of participations, transfer or other
disposition, at any time and from time to time hereafter, of this Loan Agreement
and the Other Agreements or of any portion thereof, including, without
limitation, Lender’s rights, titles, interests, remedies, powers or
duties.

    


    12.5         Waiver of
Defaults.  Lender’s failure at any time or times hereafter to
require strict performance by Borrower of any provision of this Loan Agreement
shall not waive, affect or diminish any right of Lender thereafter to demand
strict compliance and performance therewith.  Any suspension or waiver
by Lender of an Unmatured Event of Default or Event of Default by Borrower under
this Loan Agreement or the Other Agreements shall not suspend, waive or affect
any other Unmatured Event of Default or Event of Default by Borrower under this
Loan Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type.  NONE OF THE
UNDERTAKINGS, AGREEMENTS, WARRANTIES, COVENANTS AND REPRESENTATIONS OF BORROWER
CONTAINED IN THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS AND NO EVENT OF DEFAULT
BY BORROWER UNDER THIS LOAN AGREEMENT OR THE OTHER AGREEMENTS SHALL BE DEEMED TO
HAVE BEEN SUSPENDED OR WAIVED BY LENDER UNLESS SUCH SUSPENSION OR WAIVER IS IN
WRITING SIGNED BY AN OFFICER OF LENDER AND DIRECTED TO BORROWER SPECIFYING SUCH
SUSPENSION OR WAIVER.

    


    12.6         Severability.  Wherever
possible, each provision of this Loan Agreement shall be interpreted in such
manner as to be valid and enforceable under applicable law, but if any provision
of this Loan Agreement is held to be invalid or unenforceable by a court of
competent jurisdiction, such provision shall be severed herefrom and such
invalidity or unenforceability shall not affect any other provision of this Loan
Agreement, the balance of which shall remain in and have its intended full force
and effect.  Provided, however, if such provision may be modified so
as to be valid and enforceable as a matter of law, such provision shall be
deemed to be modified so as to be valid and enforceable to the maximum extent
permitted by law.

    


    12.7         Successors
and Assigns.  This Loan Agreement and the Other Agreements
shall be binding on Borrower and upon the successors of Borrower, and shall
inure to the benefit of Lender, its successors, assigns, affiliates, divisions
and parents and may be assigned by Lender without notice to
Borrower.  This provision, however, shall not be deemed to modify
Section 12.4 hereof.

    


    12.8         Incorporation
of Other Agreements; Exhibits; and Schedules.  The terms and
provisions of the Other Agreements are incorporated herein by this reference
thereto.  The Exhibits and Schedules referred to herein are attached
hereto, made a part hereof and incorporated herein by this reference
thereto.

     

    
      
         


      

      
        26

        
          

        

      

      
         


      

    


    12.9         Survival
of Termination.  Except as otherwise provided in this Loan
Agreement or the Other Agreements, no termination or cancellation of this Loan
Agreement or the Other Agreements shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of Borrower or Lender in any way or
respect relating to (A) any transaction or event occurring prior to such
termination or cancellation, (B) the Collateral, or (C) any of the
undertakings, agreements, covenants, warranties and representations of Borrower
contained in this Loan Agreement or the Other Agreements.  All such
undertakings, agreements, representations, warranties and covenants shall
survive such termination or cancellation.

    


    12.10       Waiver of
Notices.  Except as otherwise expressly provided herein,
Borrower waives any and all notices or demands which Borrower might be entitled
to receive with respect to this Loan Agreement or the Other Agreements by virtue
of any applicable law, statute or regulation, and waives presentment, demand,
protest, notice, default, dishonor, non-payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, Accounts,
contract rights, Documents, Instruments, Chattel Paper and guaranties at any
time held by Lender on which Borrower may in any way be liable, and hereby
ratifies and confirms whatever Lender may do in this regard.

    


    12.11       Authority
to Execute and Borrow.  Until Lender is notified by Borrower to
the contrary, the signature upon this Loan Agreement or upon any of the Other
Agreements of (A) a Designated Person, or (B) any other Person
designated in writing to Lender by any of the foregoing, shall bind Borrower and
be deemed to be the duly authorized act of Borrower.  Each Designated
Person shall have the authority to borrow funds on behalf of Borrower pursuant
to the terms of this Loan Agreement.

    


    12.12       Costs,
Fees and Expenses.  Borrower shall reimburse Lender for all
costs, fees and expenses incurred by Lender, or for which Lender becomes
obligated, whether before or after the occurrence of an Unmatured Event of
Default or Event of Default, in connection with the negotiation, preparation,
administration, enforcement and conclusion of this Loan Agreement and the Other
Agreements, including, but not limited to, reasonable attorneys’ and paralegals’
fees, costs and expenses, other professional fees, search fees, costs and
expenses, filing and recording fees, all taxes payable in connection with this
Loan Agreement or the Other Agreements, and any costs and fees incurred in
connection with any proceeding to protect, collect, sell, liquidate or otherwise
dispose of any of the Collateral.  Borrower shall further reimburse
Lender, upon demand, for the costs, fees and expenses incurred or charged by
Lender, its agents or employees, with respect to audits or other business
analysis performed in the administration of this Loan Agreement, plus all of the
out-of-pocket costs or expenses incurred by Lender in the performance of such
audit or analysis.  All such costs, fees and expenses referenced in
this Section shall be part of the Liabilities payable by Borrower to Lender upon
demand with interest at the Default Rate until actually paid.  Without
limiting the generality of the foregoing, such costs and expenses shall include
the fees, expenses and charges of attorneys, paralegals, accountants, investment
bankers, appraisers, valuation and other specialists, experts, expert witnesses,
auctioneers, court reporters, telegram, management consultants, telex and
telefax charges, overnight delivery services, messenger services and expenses
for travel, lodging and meals.

    


    12.13       Binding
Agreement; Governing Law.  This Loan Agreement and the Other
Agreements are submitted by Borrower to Lender, for Lender’s acceptance or
rejection thereof, at Lender’s office in Chicago, Illinois, as an offer by
Borrower to borrow monies from Lender and shall not be binding upon Lender or
become effective until and unless accepted by Lender, in writing, at said place
of business.  THIS LOAN AGREEMENT AND THE OTHER AGREEMENTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND UNDER THE LAWS OF THE STATE OF
ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND
IN ALL OTHER RESPECTS INCLUDING, BUT NOT LIMITED TO, THE LEGALITY OF THE
INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING ILLINOIS’ CHOICE OF LAW
PROVISIONS.


    
      
         


      

      
        27

        
          

        

      

      
         


      

    


    12.14       Notices.  Any
and all notices, demands, requests, consents, designations, waivers and other
communications required or desired hereunder shall be in writing and shall be
deemed effective upon personal delivery, upon confirmed facsimile transmission,
upon receipted delivery by reputable overnight carrier, or three (3) days
after mailing if mailed by registered or certified mail, return receipt
requested, postage prepaid, to Borrower or Lender at the following addresses or
facsimile numbers or such other addresses and facsimile numbers as Borrower or
Lender may specify in like manner; provided, however, that notices of a change
of address or facsimile number shall be effective only upon receipt thereof.


    


    
      	
               If
      to Borrower, then to:

            	
              If
      to Lender, then to:

            
	 
      	 
      
	
               _______________________________

            	
              YGBFKM,
      LLC

            
	
               _______________________________

            	
              ____________________________

            
	
               _______________________________

            	
              ____________________________

            
	
               Attention:______________________

            	
              Attention:
      Thomas Farrell

            
	
               Facsimile
      No.:__________________

            	
              Facsimile
      No.: _______________

            
	 
      	 
      
	
               With
      a copy to:

            	
              With
      a copy to:

            
	 
      	 
      
	
               __________________________

            	
              Nisen
      & Elliott, LLC

            
	
               __________________________

            	
              200
      W. Adams Street, Suite 2500

            
	
               __________________________

            	
              Chicago,
      Illinois  60606-5232

            
	
               Attention:__________________

            	
              Attention:
      William G. Daluga, Jr., Esq.

            
	
               Facsimile
      No.:_______________

            	
              Facsimile
      No.:  (312) 346-2325

            


    

     

    12.15       Release
of Claims.  Excepting only causes of action or claims for
Lender’s willful misconduct, Borrower hereby releases Lender from any and all
causes of action or claims which Borrower may now or hereafter have for any
asserted loss or damage to Borrower caused by or arising
from:  (A) any failure of Lender to protect, enforce or collect
in whole or in part any of the Collateral; (B) Lender’s notification to any
Account Debtor of Lender’s security interest and lien in the Accounts and
Special Collateral; (C) Lender directing any Account Debtor to pay any sums
owing to Borrower directly to Lender; and (D) any other act or omission to
act on the part of Lender, its officers, agents or employees.

    


    12.16       Intentionally
Omitted.

    


    12.17       Headings.  The
captions contained in this Loan Agreement are inserted only as a matter of
convenience and shall in no way define, limit or extend the scope or intent of
this Loan Agreement or any provision of this Loan Agreement, and shall not
affect the construction or interpretation of this Loan Agreement.

    


    12.18       Maximum
Interest.  It is the intent of Borrower and Lender that the
rate of interest and the other charges of Borrower under this Loan Agreement
shall be lawful; therefore, if for any reason, the interest or other charges
payable under this Loan Agreement are found by a court of competent jurisdiction
to exceed the limit which Lender may lawfully charge Borrower, then the
obligation to pay interest and other charges shall automatically be reduced to
such limits.  If Borrower has paid an amount in excess of such limit,
then such amount shall be applied to reduce the principal portion of the
Liabilities.

     

    
      
         


      

      
        28

        
          

        

      

      
         


      

    


    12.19       Construction.  Any
provision of this Loan Agreement which requires a party to perform any act shall
be construed as requiring the party to perform the act or cause such act to be
performed.  Any provision of this Loan Agreement which requires a
party to refrain from taking any act shall be construed as requiring the party
to refrain from taking the act, to refrain from causing such act to be taken and
to cause those under his/her control from taking the act.  Wherever
the term “including” is used, the same shall be deemed to mean, “including, but
not limited to”.  “Any” shall be deemed to mean “any and all ”
whenever applicable.  The singular shall be deemed to include the
plural, and the plural shall be deemed to include the singular.  The
masculine pronoun shall be deemed to include the feminine and neuter pronouns,
and vice versa.  “Copies” means photostatic or other reproduced
originals which accurately, truly, correctly and completely present the original
of the document copied.  References to “this Loan Agreement” shall be
deemed to reference this Loan Agreement, as amended or restated from time to
time.  If more than one entity constitutes the Borrower under this
Loan Agreement, all representations, covenants and obligations shall be deemed
to be the joint and several representations, covenants and obligations of each
such entity.

     

    12.20       Revival
of Liabilities.  To the extent that Lender receives any payment
on account of the Liabilities, or any proceeds of the Collateral are applied on
account of the Liabilities, and any such payment or proceeds or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid by Lender to Borrower, its estate, trustee,
receiver or any other party under the United States Bankruptcy Code or any
similar federal, state or local law, statute or regulation, then, to the extent
of such payment or proceeds received, the Liabilities shall be revived and
continue in full force and effect, as if such payment or proceeds had not been
received by Lender and applied on account of the Liabilities.

    


    12.21       General
Indemnity.  In addition to the payment of expenses pursuant to
Section 12.12, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender and its
successors and assigns and the officers, directors, employees, agents, and
affiliates of Lender and its successors and assigns (collectively the
“Indemnitees”), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee in any manner relating to or
arising out of the Loan Documents or any other agreements executed and delivered
by Borrower or any guarantor of the Liabilities in connection herewith, the
statements contained in any commitment or proposal letter delivered by Lender,
Lender’s agreement to make the Loans or the use or intended use of the proceeds
of any of the Loans hereunder (collectively the “Indemnified Liabilities”);
provided that Borrower shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnitee.  To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.  The
provisions of the undertakings and indemnification set out in this
Section shall survive satisfaction and payment of the Liabilities and
termination of this Loan Agreement.

     

    
      
         


      

      
        29

        
          

        

      

      
         


      

    


    12.22       Environmental
and Safety and Health Indemnity.  Borrower hereby agrees to
indemnify Lender and agrees to hold Lender and its predecessors and successors
in interest, and its affiliates, employees, agents, directors and officers
harmless from and against any and all losses, liabilities, damages, injuries,
costs, expenses and claims of any and every kind whatsoever (including, without
limitation, court costs, consulting fees, costs of investigation and reasonable
attorneys’ fees) which at any time or from time to time may be paid,
incurred or suffered by, or asserted against, Lender for, with respect to, or as
a direct or indirect result of (A) the violation or alleged violation by
Borrower or any of its predecessors in interest of any Environmental Laws
regarding past, present or future property or operations; (B) the presence
on or under, or the release from, at or to, properties utilized by Borrower
and/or any predecessor in interest of any Hazardous Substances; (C) the
existence of any unsafe or unhealthful condition on or at any premises utilized
by Borrower or any predecessor in interest in the past, present or future;
(D) transport, treatment, recycling, storage, disposal, or release or
threatened release, or arrangement therefor, to, at or from any facility owned
or operated by another Person, of any Hazardous Substances generated by Borrower
or its predecessors in interest; (E) any remedial action or corrective
action arising out of, related to, or in connection with any past, present or
future property or operations of Borrower or any of its predecessors in
interest; (F) asbestos-containing material, in or at any past, present or
future property of Borrower or any of its predecessors in interest;
(G) failure to comply with any representations, warranties, covenants,
terms or conditions of this Loan Agreement that relate to Environmental Laws or
Hazardous Substances; and (H) any environmental, health or safety
investigation or review conducted by or on behalf of Lender in connection with
this Loan Agreement; provided that Borrower shall have no obligation to Lender
hereunder with respect to any such liabilities arising from the gross negligence
or willful misconduct of Lender.  The provisions of and undertakings
and indemnification set out in this Section shall survive satisfaction and
payment of the Liabilities and termination of this Loan Agreement and shall
expressly cover time periods when Lender may have come into possession or
control of any of the property of Borrower at any time thereafter.

    


    12.23       Completion
of Loan Agreement and Other Agreements.  Borrower hereby
authorizes Lender to correct any patent errors set forth in this Loan Agreement
and the Other Agreements and to complete all blanks in this Loan Agreement and
the Other Agreements.

    


    12.24       Intentionally
Omitted.

    


    12.25       Disclosure
of Information.  Borrower agrees that Lender may provide any
information Lender may have about Borrower or about any matter relating to this
Loan Agreement, the Other Agreements and all or any portion of the Liabilities
to Lender’s subsidiaries or affiliates or their successors, or to any one or
more purchasers or potential purchasers of this Loan Agreement, the Other
Agreements and all or any portion of the Liabilities.

    


    12.26       Merger
Clause.  This Loan Agreement constitutes the entire agreement
between Lender and Borrower with regard to the subject matter hereof, and
supersedes all prior and contemporaneous communications, agreements and
assurances, whether verbal or written.

    


    12.27     
 SERVICE
OF PROCESS.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWER AS SET FORTH
HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR
OTHERWISE.

     

    
      
         


      

      
        30

        
          

        

      

      
         


      

    


    12.28       JURISDICTION;
VENUE.  BORROWER AND LENDER IRREVOCABLY AGREE, AND HEREBY
CONSENT AND SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE CIRCUIT COURT OF COOK
COUNTY, ILLINOIS, AND THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF ILLINOIS, EASTERN DIVISION, WITH REGARD TO ANY ACTIONS OR PROCEEDINGS ARISING
FROM, RELATING TO OR IN CONNECTION WITH THE LIABILITIES, THIS LOAN AGREEMENT,
THE OTHER AGREEMENTS OR THE COLLATERAL.  BORROWER HEREBY WAIVES ANY
RIGHT BORROWER MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION FILED
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS, OR THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION.

    


    12.29       JURY
WAIVER.  BORROWER AND LENDER HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED
TO THIS LOAN AGREEMENT OR ANY OF THE OTHER AGREEMENTS.  THIS PROVISION
IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN AND
IN THE OTHER AGREEMENTS.  BORROWER HEREBY REPRESENTS AND WARRANTS TO
LENDER THAT IT HAS CONSULTED WITH AND BEEN COUNSELED BY COMPETENT COUNSEL
CONCERNING THE WAIVER SET FORTH IN THIS SECTION AND HAS KNOWINGLY MADE SUCH
WAIVER.

    


    [signature
page follows]



    
      
         


      

      
        31

        
          

        

      

      
         


      

    


    In Witness
Whereof, Lender and Borrower have caused this Loan Agreement to be
executed and delivered by their duly authorized officers as of the date first
set forth above.

    


    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        YGBFKM,
      LLC

                                      	 	
                                        Total
      Apparel Group, Inc., a Nevada

                                      
	 
      	 	
                                        corporation

                                      
	 
      	 	 
      	 
      
	
                                        By:

                                      	 
      	 	
                                        By:

                                      	 
      
	
                                        Name:

                                      	 
      	 	
                                        Name:

                                      	 
      
	
                                        Title:

                                      	
                                        Manager

                                      	 	
                                        Title:

                                      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                        International
      Apparel Group, Inc., a Nevada

                                      
	 
      	 	
                                        corporation

                                      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                        By:

                                      	 
      
	 
      	 	
                                        Name:

                                      	 
      
	 
      	 	
                                        Title:

                                      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                        Active
      Group Apparel, Inc., a Florida

                                      
	 
      	 	
                                        corporation

                                      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                        By:

                                      	 
      
	 
      	 	
                                        Name:

                                      	 
      
	 
      	 	
                                        Title:

                                      	 
      


                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        32

        
          

        

      

      
         


      

    

     

    Schedule
1.1

     

    Permitted
Liens


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Schedule
4.4

     

    Chief Executive Office and
Collateral Locations


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Schedule
9.1(Q)

     

    Borrower and its Affiliates’
Company Information


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Exhibit
A

     

    Form
of Guaranty


    
      
         


      

      
        2