kl06021_ex10-1.htm


    
      

    

     

    Exhibit
      10.1

     

    
 

    


    


    


    


    


    


    


    


    CREDIT
      LINE AND SECURITY AGREEMENT

    


    


    


    


    By
      and between

    


    


    NEW
      WORLD BRANDS, INC.

    


    as
      Borrower

    ______________________

    


    


    P
      & S SPIRIT, LLC

    


    as
      Lender

    


    


    May
      31,
      2007

    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    TABLE
      OF CONTENTS

    


    


                                                                  Page

    
      	
              ARTICLE  I  DEFINITIONS

            	
               

            	1 
	
              1.1.

            	
              General
                Definitions

            	
              1

            
	
              1.2.

            	
              Accounting
                Terms

            	
              8

            
	
              1.3.

            	
              Other
                Definitional Terms

            	
              9

            
	 	 	 
	
              ARTICLE  II
                LOAN

            	 	
              9

            
	
              2.1.

            	
              Credit
                Line

            	
              9

            
	
              2.2.

            	
              Repayment
                of Loan

            	
              10

            
	
              2.3.

            	
              Use
                of Proceeds.

            	
              9

            
	
              2.4.

            	
              [Reserved]

            	
              10

            
	
              2.5.

            	
              Payments
                and Computations

            	
              10

            
	 	 	 
	
              ARTICLE  III
                INTEREST AND FEES

            	
               

            	10
	
              3.1.

            	
              Interest
                on Loans

            	
              10

            
	
              3.2.

            	
              Interest
                After Event of Default.

            	
              10

            
	 	 	 
	
              ARTICLE  IV
                COLLATERAL

            	
               

            	11
	
              4.1.

            	
              Description.

            	
              11

            
	
              4.2.

            	
              Lien
                Documents

            	
              12

            
	
              4.3.

            	
              Other
                Actions.

            	
              12

            
	
              4.4.

            	
              Searches
                and Certificates

            	
              13

            
	 	 	 
	
              ARTICLE  V
                CONDITIONS PRECEDENT

            	
               

            	
              13

            
	 	 	 
	
              ARTICLE  VI
                REPRESENTATIONS AND WARRANTIES

            	
               

            	15
	
              6.1.

            	
              Organization
                and Qualification.

            	
              15

            
	
              6.2.

            	
              Liens

            	
              15

            
	
              6.3.

            	
              No
                Conflict.

            	
              15

            
	
              6.4.

            	
              Enforceability.

            	
              16

            
	
              6.5.

            	
              Financial
                Data

            	
              16

            
	
              6.6.

            	
              Locations
                of Offices, Records and Inventory.

            	
              16

            
	
              6.7.

            	
              Business
                Names.

            	
              16

            
	
              6.8.

            	
              Affiliates
                and Subsidiaries.

            	
              16

            
	
              6.9.

            	
              Judgments
                or Litigation.

            	
              16

            


    

     

    i

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              6.10.

            	
              Defaults

            	
              17

            
	
              6.11.

            	
              Compliance
                with Law

            	
              17

            
	
              6.12.

            	
              Compliance
                with Environmental Laws.

            	
              17

            
	
              6.13.

            	
              Intellectual
                Property.

            	
              17

            
	
              6.14.

            	
              Licenses
                and Permits

            	
              18

            
	
              6.15.

            	
              Title
                to Property

            	
              18

            
	
              6.16.

            	
              Labor
                Matters.

            	
              18

            
	
              6.17.

            	
              Investment
                Company.

            	
              19

            
	
              6.18.

            	
              Margin
                Security

            	
              19

            
	
              6.19.

            	
              Taxes
                and Tax Returns.

            	
              19

            
	
              6.20.

            	
              Status
                of Accounts

            	
              19

            
	
              6.21.

            	
              Material
                Contracts

            	
              20

            
	
              6.22.

            	
              Accuracy
                and Completeness of Information

            	
              20

            
	
              6.23.

            	
              Solvency.

            	
              20

            
	
              6.24.

            	
              Commercial
                Tort Claims.

            	
              20

            
	
              6.25.

            	
              Letter
                of Credit Rights

            	
              20

            
	
              6.26.

            	
              Deposit
                Accounts

            	
              20

            
	
              6.27.

            	
              Anti-Terrorism
                Law

            	
              20

            
	
              6.28.

            	
              Survival
                of Representations

            	
              21

            
	 	 	 
	
              ARTICLE  VII
                AFFIRMATIVE COVENANTS

            	
               

            	
              21

            
	
              7.1.

            	
              Financial
                Information

            	
              21

            
	
              7.2.

            	
              Existence

            	
              22

            
	
              7.3.

            	
              Environmental
                Matters

            	
              22

            
	
              7.4.

            	
              Books
                and Records.

            	
              23

            
	
              7.5.

            	
              Collateral
                Records.

            	
              23

            
	
              7.6.

            	
              Changes
                in Locations

            	
              23

            
	
              7.7.

            	
              Insurance;
                Casualty Loss

            	
              23

            
	
              7.8.

            	
              Taxes.

            	
              24

            
	
              7.9.

            	
              Compliance
                With Laws.

            	
              24

            
	
              7.10.

            	
              Fiscal
                Year.

            	
              24

            
	
              7.11.

            	
              Notification
                of Certain Events

            	
              24

            
	
              7.12.

            	
              Collection
                of Accounts.

            	
              25

            
	
              7.13.

            	
              Trademarks

            	
              25

            
	
              7.14.

            	
              Maintenance
                of Property.

            	
              25

            
	
              7.15.

            	
              Commercial
                Tort Claims.

            	
              25

            
	
              7.16.

            	
              Letter
                of Credit Rights..

            	
              26

            
	 	 	 
	
              ARTICLE  VIII
                FINANCIAL COVENANTS

            	
               

            	26
	
              8.1.

            	
              Current
                Ratio.

            	
              26

            
	
              8.2.

            	
              Debt
                to Worth Ratio.

            	
              26

            


    

     

    ii

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

    
      	 	 	 
	
              ARTICLE  IX
                NEGATIVE COVENANTS

            	
               

            	26
	
              9.1.

            	
              Liens

            	
              26

            
	
              9.2.

            	
              Indebtedness.

            	
              26

            
	
              9.3.

            	
              Sale
                of Assets

            	
              26

            
	
              9.4.

            	
              Organizational
                Changes

            	
              26

            
	
              9.5.

            	
              Guarantees

            	
              27

            
	
              9.6.

            	
              Investments.

            	
              27

            
	
              9.7.

            	
              Affiliate
                Transactions

            	
              27

            
	
              9.8.

            	
              Third
                Party Loans

            	
              27

            
	
              9.9.

            	
              Issuance
                of Stock

            	
              27

            
	
              9.10.

            	
              Amendments
                of Material Contracts

            	
              27

            
	
              9.11.

            	
              Subordinated
                Debt

            	
              27

            
	
              9.12.

            	
              Licenses,
                Etc.

            	
              27

            
	
              9.13.

            	
              Anti-Terrorism
                Laws

            	
              27

            
	 	 	 
	
              ARTICLE  X
                APPOINTMENT AS ATTORNEY-IN-FACT

            	
               

            	
              27

            
	 	 	 
	
              ARTICLE  XI
                EVENTS OF DEFAULT AND REMEDIES

            	
               

            	28
	
              11.1.

            	
              Events
                of Default

            	
              28

            
	
              11.2.

            	
              Rights
                and Remedies upon a Default or an Event of Default

            	
              30

            
	
              11.3.

            	
              Nature
                of Remedies.

            	
              31

            
	 	 	 
	
              ARTICLE  XII
                TERMINATION

            	
               

            	
              31 

            
	 	 	 
	
              ARTICLE  XIII
                MISCELLANEOUS

            	
               

            	
              31

            
	
              13.1.

            	
              Waivers.

            	
              31

            
	
              13.2.

            	
              JURY
                TRIAL.

            	
              32

            
	
              13.3.

            	
              GOVERNING
                LAW; SUBMISSION TO JURISDICTION; VENUE

            	
              32

            
	
              13.4.

            	
              Notices

            	
              32

            
	
              13.5.

            	
              Assignability.

            	
              33

            
	
              13.6.

            	
              Payment
                of Expenses

            	
              33

            
	
              13.7.

            	
              Indemnification.

            	
              33

            
	
              13.8.

            	
              Entire
                Agreement, Successors and Assigns.

            	
              34

            
	
              13.9.

            	
              Amendments.

            	
              34

            
	
              13.10.

            	
              Non-Agency
                of Lender.

            	
              34

            
	
              13.11.

            	
              Counterparts.

            	
              34

            
	
              13.12.

            	
              Effectiveness.

            	
              34

            
	
              13.13.

            	
              Severability.

            	
              34

            
	
              13.14.

            	
              Headings
                Descriptive

            	
              35

            
	
              13.15.

            	
              Maximum
                Rate.

            	
              35

            
	
              13.16.

            	
              Information

            	
              35

            
	 	 	 


    

     

    iii

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBITS
      AND SCHEDULES

    


    EXHIBITS

    


    Exhibit
      A          
Form of Credit Line Note

    Exhibit
      B           
Form of Notice of Borrowing

    


    SCHEDULES

    


    Schedule
      1.1      Permitted
      Indebtedness

    Schedule
      1.2      Permitted
      Investments

    Schedule  1.3    
Permitted
      Liens

    
      Schedule
        1.4      Subordinated
        Debt

    

    Schedule
      6.6      Places of
      Business/Collateral Locations

    Schedule
      6.7      Business
      Names

    Schedule
      6.8      Subsidiaries
      and Affiliates

    Schedule
      6.9     
Litigation

    Schedule
      6.13    Intellectual
      Property

    Schedule
      6.15    Real Property
      Leases

    Schedule
      6.21    Material
      Contracts

    
      Schedule
        6.24    Commercial
        Tort Claims

    

    
      Schedule
        6.25    Letter
        of
        Credit Rights

    

    
      Schedule
        6.26    Depository
        Institutions/Deposit Accounts

    

     

     

     

    v

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    CREDIT
      LINE AND SECURITY AGREEMENT

    


    THIS
      CREDIT LINE AND SECURITY AGREEMENT is entered into as of May 31, 2007,
      between NEW WORLD BRANDS, INC. a Delaware corporation
      (“Borrower”),  and P & S SPIRIT, LLC, a
      Nevada limited liability company (“Lender”).

     

    Background

     

    WHEREAS,
      Borrower wish to obtain a revolving secured line of credit from Lender, and,
      upon the terms and subject to the conditions set forth herein, Lender is willing
      to make the line of credit available to Borrower.

     

    NOW,
      THEREFORE, Borrower and Lender, intending to be legally bound hereby, agree
      as
      follows:

     

    ARTICLE  I     DEFINITIONS

     

    1.1.  General
      Definitions.

     

    As
      used
      herein, the following terms shall have the meanings herein
      specified:

     

    “Accounts”
      shall mean all of Borrower’s “accounts” (as defined in the UCC), whether now
      existing or existing in the future, including, without limitation, all accounts
      receivable and all accounts created by or arising from all sales of goods or
      rendition of services made under Borrower’s legal name or Borrower’s trade names
      or styles or through Borrower’s divisions.

     

    “Advances”
      shall mean and include all loan advances made by Lender to Borrower under the
      Credit Line.

     

    “Affiliate”
      shall mean any entity which directly or indirectly controls, is controlled
      by,
      or is under common control with, Borrower.  For purposes of this
      definition, “control” shall mean the possession, directly or indirectly, of the
      power to (i) vote 20% or more of the securities having ordinary voting power
      for
      the election of directors of such Person, or (ii) direct or cause the direction
      of management and policies of a business, whether through the ownership of
      voting securities, by contract or otherwise and either alone or in conjunction
      with others or any group.

     

    “Anti-Terrorism
      Laws” shall mean any statute, treaty, law (including common law), ordinance,
      regulation, rule, order, opinion, release, injunction, writ, decree or award
      of
      any Official Body relating to terrorism or money laundering, including Executive
      Order No. 13224 and the USA Patriot Act.

     

    “Asset
      Disposition” shall mean any disposition (other than a disposition of
      Inventory in the ordinary course of Borrower’s business) of any existing or
      future Property of Borrower.

     

    “Authorized
      Person” means the Chief Executive Officer, President, any Vice President,
      Controller, or Chief Financial Officer of Borrower.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

     

    “Business
      Day” shall mean any day other than a Saturday, a Sunday, a legal holiday or
      a day on which banking institutions are authorized or required by law or other
      governmental action to close in Baltimore, Maryland.

     

    “Capital
      Expenditures” shall mean expenditures made or liabilities incurred for the
      acquisition of any fixed assets or improvements, replacements, substitutions
      or
      additions thereto which have a useful life of more than one year, including
      the
      total principal portion of Capitalized Lease Obligations, which, in accordance
      with GAAP, would be classified as capital expenditures.

     

    “Capitalized
      Lease Obligations”  shall mean any Indebtedness of Borrower
      represented by obligations under a lease that is required to be capitalized
      for
      financial reporting purposes in accordance with GAAP.

     

    “Capital
      Stock” shall mean (i) in the case of a corporation, capital stock, (ii) in
      the case of an association or business entity, any and all shares, interests,
      participations, rights or other equivalents (however designated) of capital
      stock, (iii) in the case of a partnership, partnership interests (whether
      general or limited), (iv) in the case of a limited liability company, membership
      interests and (v) any other equity interest or participation that confers
      on a Person the right to receive a share of the profits and losses of, or
      distributions of assets of, the issuing Person.

     

    “Casualty
      Loss” shall have the meaning given to such term in Section
      7.7.

     

    “Closing”
      shall mean the consummation of the making of the Credit Line available by Lender
      to Borrower under this Agreement.

     

    “Closing
      Date” shall mean the date on which the Closing occurs.

     

     “Collateral”
      shall mean any and all rights and interests in or to Property (including
      leasehold improvements) of Borrower, whether now owned or hereafter acquired,
      pledged from time to time as security for the Obligations pursuant to this
      Agreement or any of the other Loan Documents.

     

     “Contractual
      Obligations” shall mean, with respect to any Person, any term or provision
      of any securities issued by such Person, or any indenture, mortgage, deed of
      trust, contract, undertaking, document, instrument or other agreement to which
      such Person is a party or by which it or any of its properties is bound or
      to
      which it or any of its properties is subject.

     

    “Control
      Agreement” shall mean an agreement, in form and substance satisfactory to
      Lender, among Borrower, a Depository Institution and Lender pursuant to which
      such Depository Institution agrees, interalia, to transfer all
      funds of Borrower maintained in any deposit account with that Depository
      Institution to the control of Lender.

     

    “Credit
      Line” shall mean the secured line of credit provided for in Section
      2.1 of this Agreement.

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

     “Default”
      shall mean an event, condition or default which, with the giving of notice,
      the
      passage of time or both would be an Event of Default.

     

     “Depository
      Institution shall mean each depository institution where Borrower maintains
      a bank account and which institutions are set forth on Schedule 6.26,
      along with the numbers and title of each account maintained by Borrower at
      such
      institution.

     

    “Event(s)
      of Default” shall have the meaning provided for in Article
      XI.

     

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

     

    “Expenses”
      shall have the meaning given to such term in Section 13.6.

     

     “Financials”
      shall have the meaning given to such term in Section 6.5.

     

    “Financial
      Statements” shall mean the Financial Statements Borrower is obligated to
      deliver pursuant to Section 7.1 of this Agreement.

     

    “GAAP”
      shall mean generally accepted accounting principles in the United States of
      America, as in effect on the date hereof and applied on a consistent basis
      with
      the Financials.

     

    “Governmental
      Authority” shall mean any federal, state, local or foreign court or
      governmental agency, authority, instrumentality or regulatory body.

     

    “Guarantor”
      shall mean Qualmax and any other Person who may hereafter guarantee payment
      or
      performance of the whole or any part of the Obligations; “Guarantors” means
      collectively all such Persons.

     

    “Guaranty”
      shall mean any guaranty of the obligations of Borrower executed by a Guarantor
      in favor of Lender.

     

    “Highest
      Lawful Rate” shall mean, at any given time during which any Obligations
      shall be outstanding hereunder, the maximum nonusurious interest rate, if any,
      that at any time or from time to time may be contracted for, taken, reserved,
      charged or received on the indebtedness under this Agreement, under the laws
      of
      the State of Maryland (or the law of any other jurisdiction whose laws may,
      by
      order of court, be mandatorily applicable notwithstanding other provisions
      of
      this Agreement and the other Loan Documents), in any case after taking into
      account, to the extent permitted by applicable law, any and all relevant
      payments or charges under this Agreement and any other Loan Documents executed
      in connection herewith, and any available exemptions, exceptions and
      exclusions.

     

    "Indebtedness"
      of a Person at a particular date shall mean all obligations of such Person
      which
      in accordance with GAAP would be classified upon a balance sheet as liabilities
      (except

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    capital
      stock and surplus earned or otherwise) and in any event, without limitation
      by
      reason of enumeration, shall include all indebtedness, debt and other similar
      monetary obligations of such Person whether direct or guaranteed, and all
      premiums, if any, due at the required prepayment dates of such indebtedness,
      and  all indebtedness secured by a Lien on assets owned by such
      Person, whether or not such indebtedness actually shall have been created,
      assumed or incurred by such Person.  Any indebtedness of such Person
      resulting from the acquisition by such Person of any assets subject to any
      Lien
      shall be deemed, for the purposes hereof, to be the equivalent of the creation,
      assumption and incurring of the indebtedness secured thereby, whether or not
      actually so created, assumed or incurred.

     

    “Inventory”
      shall mean all of Borrower’s inventory, including without limitation,
      (i) all raw materials, work in process, parts, components, assemblies,
      supplies and materials used or consumed in Borrower’s business; (ii) all goods,
      wares and merchandise, finished or unfinished, held for sale or lease or leased
      or furnished or to be furnished under contracts of service; and (iii) all goods
      returned to or repossessed by Borrower.

     

    “Investment”
      in any Person shall mean (i) the acquisition (whether for cash, property,
      services, assumption of Indebtedness, securities or otherwise, but exclusive
      of
      the acquisition of inventory, supplies, equipment and other property or assets
      used or consumed in the ordinary course of business of Borrower and Capital
      Expenditures not otherwise prohibited hereunder) of assets, shares of Capital
      Stock, bonds, notes, debentures, partnership, joint ventures or other ownership
      interests or other securities of such Person, or (ii) any other capital
      contribution to or investment in such Person.  In determining the
      aggregate amount of Investments outstanding at any particular time,
      (a) there shall be deducted in respect of each such Investment any amount
      received as a return of capital (but only by repurchase, redemption, retirement,
      repayment, liquidating dividend or liquidating distribution); (b) there shall
      be
      deducted in respect of any Investment any cash amounts received as earnings
      on
      such Investment, whether as dividends, interest or otherwise; and (c) there
      shall not be deducted from or included in, as applicable, the aggregate amount
      of Investments any decrease or increase, as applicable, in the market value
      thereof.

     

    “I.P.Gear”
      shall mean I.P.Gear, Ltd., an Israeli corporation and a wholly-owned subsidiary
      of Borrower.

     

    “Lien(s)”
      shall mean any lien, charge, trust, pledge, security interest, deed of trust,
      mortgage, assignment or other claim or encumbrance of any kind or nature upon
      any interest in Property.

     

    “Loan
      Documents” shall mean, collectively, this Agreement, the Note, the
      Guarantees,  the Security Documents and all other documents,
      agreements, instruments, opinions and certificates executed and delivered in
      connection herewith or therewith, as the same may be modified, amended,
      extended, restated or supplemented from time to time.

     

    “Lockbox
      Account” shall have the meaning given to such term in Section
      2.5(b).

     

    “Material
      Adverse Change” shall mean a material adverse change in (i) the
      business,

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    operations,
      results of operations, assets, liabilities or condition (financial or otherwise)
      of Borrower, (ii) the Collateral, (iii) Borrower’s ability to perform its
      obligations under the Loan Documents, or (iv) the validity, enforceability
      or
      availability of rights and remedies of Lender hereunder, in each case as
      determined by Lender in its sole but reasonable discretion.

     

    “Material
      Adverse Effect” shall mean a material adverse effect on (i) the business,
      operations, results of operations, assets, liabilities or condition (financial
      or otherwise) of Borrower, (ii) the Collateral, (iii) Borrower’s ability to
      perform its respective obligations under the Loan Documents, or (iv) the
      validity, enforceability or availability of rights and remedies of Lender
      hereunder, in each case as determined by Lender in its sole but reasonable
      discretion.

     

    “Material
      Contract” shall mean any contract or other arrangement, whether written or
      oral, to which Borrower is a party as to which the breach, nonperformance,
      cancellation or failure to renew by any party thereto could reasonably be
      expected to have a Material Adverse Effect.

     

    “Maturity
      Date” shall mean June 1, 2011.

     

    “Maximum
      Credit” shall mean One Million Fifty Thousand Dollars
      ($1,050,000.00).

     

    “Net
      Cash Proceeds” shall mean the aggregate cash proceeds received by Borrower
      in respect of any Asset Disposition, net of (i) direct costs (including, without
      limitation, legal, accounting and investment banking fees, and sales
      commissions) and (ii) taxes paid or payable as a result thereof; it being
      understood that “Net Cash Proceeds” shall include, without limitation, any cash
      received upon the sale or other disposition of any non-cash consideration
      received by Borrower in any Asset Disposition.

     

    “Note”
      shall mean the Credit Line Note payable to the order of Lender, evidencing
      the
      Credit Line.

     

    “Obligations”
      shall mean the outstanding balance of the Credit Line, any other loans and
      advances or extensions of credit made or to be made at any time by Lender to
      Borrower, or to others for Borrower’s account in each case pursuant to the terms
      and provisions of this Agreement or any other Loan Document, or the Other Loan
      Documents, together with interest thereon (including interest which may accrue
      as post-petition interest in connection with any bankruptcy or similar
      proceeding), and expenses, liabilities and obligations of every kind or nature
      which may at any time be owing by Borrower to Lender pursuant to this Agreement,
      any other Loan Document, or the Other Loan Documents, or otherwise, whether
      now
      in existence, hereafter arising or incurred from time to time by Borrower,
      and
      all expenses incurred at any time by Lender, as well as expenditures to protect,
      preserve or defend any Collateral and Lender’s rights hereunder or in the
      Collateral, all of the foregoing, whether unsecured or secured, due or to become
      due, absolute or contingent, joint or several, matured or unmatured, direct
      or
      indirect, related or unrelated and whether Borrower is liable to Lender for
      such
      indebtedness as principal, surety, endorser, guarantor or
      otherwise.

     

    “Official
      Body” shall mean any national, federal, state, local or other government or
      political

     

     

     

    
      
        
        

      

      
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    subdivision
      or any agency, authority, bureau, central bank, commission, department or
      instrumentality of either, or any court, tribunal, grand jury or arbitrator,
      in
      each case whether domestic or foreign.

     

    “Other
      Loan Documents” shall mean that certain Term Loan and Security Agreement
      dated as of March 29, 2007 between Borrower and Lender (the “Term Loan
      Agreement”), that certain Term Note dated March 29, 2007 from Borrower payable
      to the order of Lender and all other “Loan Documents” as defined in the Term
      Loan Agreement, all evidencing, securing or relating to the Term
      Loan..

     

     “Permitted
      Indebtedness” shall mean the Indebtedness scheduled on Schedule 1.1
to this Agreement.

     

     “Permitted
      Investments” shall mean:

     

    (i)           interest-bearing
      demand or time deposits (including certificates of deposit) which are insured
      by
      the Federal Deposit Insurance Corporation (“FDIC”) or a similar federal
      insurance program; provided, however, that Borrower may, in the
      ordinary course of their business, maintain in their disbursement account from
      time to time amounts in excess of then applicable FDIC or other program
      insurance limits;

     

    (ii)           Investments
      existing on the Closing Date and set forth on Schedule 1.2 attached
      hereto;

     

    (iii)           marketable,
      direct obligations of the United States of America, its agencies and
      instrumentalities maturing within 365 days of the date of purchase;

     

    (iv)           commercial
      paper issued by corporations, each of which shall have a net worth of at least
      $100,000,000, and each of which conducts a substantial part of its business
      in
      the United States of America, maturing within 270 days from the date of the
      original issue thereof, and which at the time of acquisition has the highest
      rating by Moody’s Investors Service, Inc. or Standard and Poor’s
      Corporation;

     

    (v)           bankers’
      acceptances, and certificates of deposit maturing within 365 days of the date
      of
      purchase which are issued by, or time deposits maintained with, an eligible
      institution having capital, surplus and undivided profits totaling more than
      $100,000,000 and which have the highest rating by Moody’s Investors Service,
      Inc. or Standard and Poor’s Corporation; and

     

    (vi)           money
      market or similar funds that invest primarily in the types of investments
      referred to in clauses (i), (iii), (iv) and (v) above.

     

    “Permitted
      Liens” shall mean:

     

    (i)           Liens
      set forth on Schedule 1.3 attached hereto;

     

     

    
      
        
        

      

      
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    (ii)           Liens
      on fixed assets securing Indebtedness (including Capital Leases and purchase
      money Indebtedness); provided that (A) any such Lien attaches only to the
      assets to be financed and (B) a description of the assets so financed is
      furnished to Lender;

     

    (iii)           Liens
      of warehousemen, mechanics, materialmen, workers, repairmen, fillers, packagers,
      processors, common carriers, landlords and other similar Liens arising by
      operation of law or otherwise, not waived in connection herewith, for amounts
      that are not yet due and payable or which are being diligently contested in
      good
      faith by Borrower by appropriate proceedings, provided that in any such
      case an adequate reserve is being maintained by Borrower for the payment of
      same;

     

    (iv)           Liens
      for taxes, assessments or other governmental charges not yet due and payable
      or
      which are being diligently contested in good faith by Borrower by appropriate
      proceedings, provided that in any such case an adequate reserve is being
      maintained by Borrower for the payment of same in accordance with GAAP;
      and

     

    (v)           deposits
      or pledges to secure obligations under workmen’s compensation, social security
      or similar laws, or under unemployment insurance.

     

    “Person”
      shall mean any individual, sole proprietorship, partnership, joint venture,
      limited liability entity, trust, unincorporated organization, association,
      corporation, institution, entity, or government (including any division, agency
      or department thereof), and, as applicable, the successors, heirs and assigns
      of
      each.

     

    “Prime
      Rate” shall mean the U.S. Prime Rate as published in the Money Rates section
      of The Wall Street Journal as in effect from time to time.  The
      Prime Rate is a reference rate and does not necessarily represent the lowest
      or
      best rate actually charged to any borrower.

     

     “Property”
      shall mean all personal and real property of every kind and description (whether
      tangible or intangible) in which a Person has any right, title or
      interest.

     

    “Proprietary
      Rights” shall have the meaning given to such term in Section
      6.13.

     

    “Qualmax”
      shall mean Qualmax, Inc., a Delaware corporation and Borrower’s
      parent.

     

    “Security
      Documents” shall mean any existing or future agreement or document granting,
      creating or conferring any Lien in favor of Lender securing all or any portion
      of the Obligations, including, without limitation, the Stock Pledge
      Agreements.

     

    “Stock
      Pledge Agreement” shall mean, collectively and individually: (i) that
      certain Stock Pledge Agreement of even date herewith from Qualmax to Lender,
      pledging and granting to Lender a security interest and Lien in all shares
      of
      Preferred Capital Stock of Borrower held by Qualmax, subject to the Lien created
      by the  Other Loan Documents, and (ii) that certain Stock Pledge
      Agreement of even date herewith from Borrower to Lender, pledging and granting
      to Lender a security interest and Lien in 65% of Borrower’s interest in Capital
      Stock of I.P.Gear held by Borrower.

     

     

    
      
        
        

      

      
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    “Subordinated
      Debt” shall mean existing Indebtedness, if any, set forth and indicated as
      subordinated set forth on Schedule 1.1(e) hereto and unsecured
      Indebtedness hereafter incurred by Borrower, which, in each case, is expressly
      subordinated and made junior to the payment and performance in full of the
      Obligations and under a written agreement acceptable to Lender.

     

    “Subordination
      Agreements” shall mean the agreements entered into from time to time by and
      among Borrower, Lender, and a third party creditor of Borrower providing for
      the
      subordination of such third party creditor’s claims to those of Lender on terms
      and conditions satisfactory to Lender.

     

    “Subsidiary”
      shall mean, as to any Person, (i) any corporation more than 50% of whose Capital
      Stock of any class or classes having by the terms thereof ordinary voting power
      to elect a majority of the directors of such corporation (irrespective of
      whether or not at the time, any class or classes of such corporation shall
      have
      or might have voting power by reason of the happening of any contingency) is
      at
      the time owned by such Person directly or indirectly through Subsidiaries,
      (ii) any partnership, association, joint venture or other entity in which
      such Person directly or indirectly through Subsidiaries has more than a 50%
      interest in the total capital, total income and/or total ownership interests
      of
      such entity at any time and (iii) any partnership in which such Person is a
      general partner.

     

    “Tangible
      Net Worth” shall mean the value of Borrower’s total assets (including
      leaseholds and leasehold and reserves against assets but excluding goodwill,
      patents, trademarks, trade names, organization expense, unamortized debt
      discount and expense, capitalized or deferred research and development costs,
      deferred marketing expenses,, and other like intangibles, and monies due from
      affiliates, officers, directors, employees, shareholders, members or managers
      of
      Borrower) less total liabilities, including but not limited to accrued and
      deferred income taxes, but excluding the non-current portion of Subordinated
      Debt.

     

    “Taxes”
      shall mean any federal, state, local or foreign income, sales, use, transfer,
      payroll, personal, property, occupancy, franchise or other tax, levy, impost,
      fee, imposition, assessment or similar charge, together with any interest or
      penalties thereon.

     

    “Term
      Loan” shall mean that certain secured term loan in the principal amount of
      $1,000,000.00 from Lender to Borrower evidenced by the Other Loan
      Documents.

     

    “Third-Party
      Loan” shall mean any loan, advance, deposit or extension of credit made or
      granted by Borrower to any other Person.

     

    “UCC”
      shall mean the Uniform Commercial Code as in effect from time to time in the
      State of Maryland.

     

    “USA
      Patriot Act” shall mean the Uniting and Strengthening America by Providing
      Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
      Public Law 107-56, as the same has been, or shall hereafter be, renewed,
      extended, amended or replaced.

     

     

    
      
        
        

      

      
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    “Voting
      Stock” shall mean, with respect to any Person, Capital Stock issued by such
      Person the holders of which are ordinarily, in the absence of contingencies,
      entitled to vote for the election of directors (or persons performing similar
      functions) of such Person, even though the right so to vote has been suspended
      by the happening of such a contingency.

     

    1.2.  Accounting
      Terms.  Unless otherwise defined or specified herein, all
      accounting terms shall be construed herein and all accounting determinations
      for
      purposes of determining compliance with ArticleVIII hereof and otherwise to
      be
      made under this Agreement shall be made in accordance with GAAP applied on
      a
      basis consistent in all material respects with the Financials.  All
      Financial Statements required to be delivered hereunder from and after the
      Closing Date and all financial records shall be maintained in accordance with
      GAAP as in effect as of the date of the Financials.  If GAAP shall
      change from the basis used in preparing the Financials, the certificates
      required to be delivered pursuant to Section 7.1(c) demonstrating
      compliance with the covenants contained herein shall include calculations
      setting forth the adjustments necessary to demonstrate how Borrower is in
      compliance with the financial covenants based upon GAAP as in effect on the
      Closing Date.  If Borrower shall change its method of inventory
      accounting, all calculations necessary to determine compliance with the
      covenants contained herein shall be made as if such method of inventory
      accounting had not been so changed.

     

    1.3.  Other
      Definitional Terms.  Terms not otherwise defined herein
      which are defined in the UCC shall have the meanings given them in the
      UCC.  It is the specific intent of Borrower and Lender that references
      to terms defined in the UCC shall mean the definitions set forth in the UCC
      as
      the UCC is in effect from time to time.  The term “on the date hereof”
shall mean the date of this Agreement.  The words “hereof”, “herein”
and “hereunder” and words of similar import when used in this Agreement shall
      refer to the Agreement as a whole and not to any particular provision of this
      Agreement, unless otherwise specifically provided.  References in this
      Agreement to “Articles”, “Sections”, “Schedules” or “Exhibits” shall be to
      Articles, Sections, Schedules or Exhibits of or to this Agreement unless
      otherwise specifically provided.  Any of the terms defined in Section
      1.1 may, unless the context otherwise requires, be used in the singular or
      plural depending on the reference.  “Include”, “includes” and
“including” shall be deemed to be followed by “without limitation” whether or
      not they are in fact followed by such words or words of like
      import.  “Writing”, “written” and comparable terms refer to printing,
      typing, computer disk, e-mail and other means of reproducing words in a visible
      form.  References to any agreement or contract are to such agreement
      or contract as amended, modified or supplemented from time to time in accordance
      with the terms hereof and thereof.  References to any Person include
      the successors and permitted assigns of such Person.  References
“from” or “through” any date mean, unless otherwise specified, “from and
      including” or “through and including”, respectively.  References to
      any times herein shall refer to the applicable time in Baltimore,
      Maryland.

     

    ARTICLE  II     CREDIT
      LINE

     

    2.1.  Credit
      Line.  Absent an Event of Default and earlier termination, Lender
      hereby establishes for the benefit of Borrower, subject to the terms and
      conditions of this Agreement, a revolving line of credit in the amount of the
      Maximum Credit.  All requests for advances under the

     

     

    
      
        
        

      

      
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    Credit
      Line shall be directed to Lender pursuant to a Notice of Borrowing in the form
      of Exhibit B attached hereto, no more than one (1) Notice of Borrowing shall
      be
      issued within any 30 consecutive day period.  Requests for advances
      under the Credit Line shall be in the amount of $50,000 or even multiples
      thereof.  Borrower’s unconditional obligation to repay all advances
      under the Credit Line and to pay interest thereon shall be evidenced by the
      Note
      of Borrower set forth on Exhibit A attached hereto and representing the
      obligations of Borrower to pay Lender the outstanding amount of the Credit
      Line
      plus interest accrued thereon, as set forth herein.  In no event shall
      the outstanding principal balance under the Credit Line exceed the Maximum
      Credit.

     

    2.2.  Repayment
      of Credit Line.  Prior to the Maturity Date, Borrower may borrow,
      prepay and reborrow under the Credit Line.  The outstanding balance of
      the Credit Line shall be due and payable on or before the Maturity Date, subject
      to acceleration as herein provided.   Borrower shall pay
      principal, interest, and all other amounts payable hereunder without any
      deduction whatsoever, including, but not limited to, any deduction for any
      setoff or counterclaim, all of which are hereby waived.  Any
      prepayment of principal shall be in an amount of $100,000 or even multiples
      thereof, and shall be accompanied by accrued and unpaid interest on the amount
      prepaid to the date of such prepayment.

     

    2.3.  Use
      of
      Proceeds.  Borrower shall apply the proceeds of Advances to (i)
      pay fees and Expenses relating to this transaction, and (ii) working
      capital.  Without the prior consent of Lender, no Advance may be used,
      in whole or in part, for Capital Expenditures.

     

    2.4.  [Reserved.]

     

    2.5.  Payments
      and Computations.

     

    (a)  Borrower
      shall make each payment hereunder and under the Note not later than 2:00 P.M.
      on
      the day when due.  Any payment received after 2:00 P.M.
      (including any payment in full of the Obligations) shall be deemed received
      on
      the immediately following Business Day.  All prepayments of every kind
      on account of the Credit Line shall be first applied to accrued and unpaid
      interest and then to the principal balance thereof.

     

    (b)  At
      Lender’s request, all proceeds of Collateral shall be deposited by Borrower into
      either (i) a lockbox account or a blocked account (“Lockbox Account”)
      established at a Depository Institution, pursuant to a Control
      Agreement.  Lender assumes no responsibility for such blocked account
      arrangement, including any claim or accord and satisfaction or release with
      respect to deposits accepted by any Depository Institution
      thereunder.  Borrower hereby agrees to execute such agreements as
      Lender may require to establish the Lockbox Account.

     

    (c)  Borrower
      shall pay principal, interest and other amounts payable hereunder without any
      deduction, setoff, recoupment or counterclaim.

     

    (d)  Lender’s
      records of advances and payments under the Credit Line shall be deemed correct
      and binding upon Borrower except for manifest error.

     

     

    
      
        
        

      

      
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    ARTICLE  III     INTEREST
      AND FEES

     

    3.1.  Interest
      on Loans.  Interest on the outstanding principal amount of
      Advances under the Credit Line shall be paid in arrears on the first Business
      Day of each calendar month commencing July 1, 2007, at the per annum interest
      rate at all times equal to the Prime Rate then in effect plus two percent (2%)
      per annum (subject to adjustment in the manner provided herein and in the
      Note).

     

    3.2.  Interest
      After Event of Default.  Interest on the outstanding principal
      amount of Advances under the Credit Line as of the date an Event of Default
      occurs, and at all times thereafter until the earlier of the date upon which
      (a)
      all Obligations have been paid and satisfied in full or (b) such Event of
      Default shall have been cured or waived, shall be payable on demand at a rate
      equal to the rate or rates at which the Loan is then bearing interest,
plus 200 basis points.  In the event of any change in said
      applicable interest rate, the rate hereunder shall change, effective as of
      the
      day the applicable interest rate changes, so as to remain 200 basis points
      above
      the then applicable interest rate.  To the extent permitted by
      applicable law, interest shall accrue at the applicable contract rate(s)
      provided for in this Agreement notwithstanding the occurrence of any Event
      of
      Default, acceleration of the Obligations, the entry of any judgment, or the
      commencement of any bankruptcy, reorganization, receivership or other
      proceedings.

     

    ARTICLE  IV    COLLATERAL

     

    4.1.  Description.  As
      security for the payment of the Obligations, and satisfaction by Borrower of
      all
      covenants and undertakings contained in this Agreement and the other Loan
      Documents, Borrower hereby assigns and grants to Lender a continuing first
      (subject only to any Permitted Liens, if any) Lien on and security interest
      in,
      upon and to all of Borrower’s personal property, including, without limitation,
      all of the following personal property:

     

    (a)  Accounts
      - All of Borrower’s now owned and hereafter acquired, created, or arising
      Accounts;

     

    (b)  Inventory
      - All of Borrower’s now owned or hereafter acquired Inventory of every nature
      and kind, wherever located;

     

    (c)  General
      Intangibles - All of Borrower’s now owned and hereafter acquired, created or
      arising General Intangibles of every kind and description, including, without
      limitation, customer lists, choses in action, claims, books, records, goodwill,
      patents and patent applications, copyrights, trademarks, tradenames, service
      marks, tradestyles, trademark applications, trade secrets, contracts, contract
      rights, royalties, licenses, franchises, deposits, license, franchise and
      royalty agreements, formulae, tax and any other types of refunds, returned
      and
      unearned insurance premiums, rights and claims under insurance policies
      including without limitation, credit insurance and key man life insurance
      policies, and computer informa­tion, software, records and
      data;

     

    (d)  Equipment
      - All of Borrower’s now owned and hereafter acquired Equipment, including,
      without limitation, machinery, vehicles, furniture and Fixtures,
      wherever

     

     

     

    
      
        
        

      

      
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    located,
      and all replacements, parts, accessories, substitutions and additions
      thereto;

     

    (e)  Deposit
      Accounts - All of Borrower’s now existing and hereafter acquired or arising
      Deposit Accounts, reserves and credit balances of every nature, wherever
      located, and all documents and records associated therewith;

     

    (f)  Property
      in Lender’s Possession - All personal property of Borrower, now or hereafter
      in the possession of Lender;

     

    (g)  Investment
      Property - All of Borrower’s now owned or hereafter acquired Investment
      Property of every kind;

     

    (h)  Letter
      of Credit Rights– All of Borrower’s now owned or hereafter acquired Letter
      of Credit Rights;

     

    (i)  Commercial
      Tort Claims– All of Borrower’s now owned or hereafter acquired Commercial
      Tort Claims;

     

    (j)  Other
      Property - All of Borrower’s now owned or hereafter acquired or created
      Instruments and other notes receivable, Goods, Chattel Paper, Documents
      (including bills of lading, warehouse receipts and other documents of title),
      Payment Intangibles, guarantees, Supporting Obligations, letters of credit,
      rights of rescission, stoppage in transit, replevin, and reclamation, and
      returned, reclaimed and repossessed goods; and

     

    (k)  Proceeds
      - The Proceeds (including, without limitation, insurance proceeds), whether
      cash
      or non-cash, of all of the foregoing personal property and interests in personal
      property.

     

    4.2.  Lien
      Documents.  At Closing, and thereafter from time to time as Lender
      deems necessary, Borrower shall execute and/or deliver to Lender or authorize,
      as applicable, the following (all in form and substance satisfactory to
      Lender):

     

    (a)  Financing
      Statements - Financing statements, which Lender may file in any jurisdiction
      where any Collateral is or may be located and in any other jurisdiction that
      Lender deems appropriate; and

     

    (b)  Other
      Agreements - Any other agreements, documents, instruments and writings,
      including, without limitation, trademark , patent and/or copyright security
      agreements and amendments or supplements thereto, as may be required by Lender
      to evidence, create, perfect or protect Lender’s Liens and security interests in
      the Collateral.

     

    4.3.  Other
      Actions.  Borrower will defend the Collateral against all Liens
      (other than Permitted Liens), claims and demands of all Persons at any time
      claiming the same or any interest therein.  Borrower agrees to comply
      with the requirements of all state and federal laws and requests of Lender
      in
      order for Lender to have and maintain a valid and perfected first security
      interest

     

     

     

    
      
        
        

      

      
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    (subject
      only to Permitted Liens, if any) in the Collateral including, without
      limitation, executing such documents as Lender may require to obtain Control
      (as
      defined in the UCC) over all Letter of Credit Rights, Deposit Accounts and
      Investment Property.  Lender is hereby authorized by Borrower to file
      any financing statements covering the Collateral or an amendment that adds
      collateral covered by a financing statement or an amendment that adds a debtor
      to a financing statement, in each case whether or not Borrower’s signature
      appears thereon. Borrower hereby authorizes Lender to file financing statements
      and amendments to financing statements describing the Collateral in any filing
      office as Lender, in its reasonable discretion, may determine, including
      financing statements listing “All Assets” in the collateral description therein,
      as well as language indicating that the acquisition by a third party of any
      right, title or interest in or to the Collateral without Lender’s consent, shall
      be a violation of Lender’s rights.  In addition to the foregoing,
      Borrower shall perform all further acts that may be lawfully and reasonably
      required by Lender to secure Lender and effectuate the intentions and objects
      of
      this Agreement, including, but not limited to, the execution and delivery of
      continuation statements, amendments to financing statements, security
      agreements, contracts and any other documents required
      hereunder.  Borrower shall use commercially reasonable efforts to
      obtain acknowledgment and waiver agreements from the owner or lessor of any
      warehouse or distribution location and Borrower shall endeavor to obtain
      acknowledgment and waiver agreements from the owner or lessor of each showroom
      location.  At Lender’s request, Borrower shall immediately deliver to
      Lender all documents or items for which Lender must receive possession to obtain
      and/or maintain perfected security interests, including without limitation,
      all
      notes, letters of credit, certificates and documents of title, chattel paper,
      warehouse receipts, instruments, and any other similar Collateral.

     

    4.4.  Searches
      and Certificates.

     

    Borrower
      shall, prior to or at Closing, and thereafter as Lender may determine from
      time
      to time, at Borrower’s expense, obtain (and Lender may also do so, at its
      option, but at Borrower’s expense from time to time) the following searches (the
      results of which are to be consistent with the warranties made by Borrower
      in
      this Agreement and in any other Loan Document):

     

    (a)  UCC
      searches with the Secretary of State of Borrower’s jurisdiction of
      organization;

     

    (b)  Judgment,
      federal tax lien and state tax lien searches, in Borrower’s jurisdiction of
      organization and each state or other jurisdiction where Borrower maintains
      its
      executive office, a place of business, or any Property; and

     

    (c)  Searches
      of ownership and Lien status of intellectual property in the appropriate
      governmental offices.

     

    ARTICLE  V    CONDITIONS
      PRECEDENT

     

    The
      obligation of Lender to extend the Credit Line shall be subject to the
      satisfaction, on or prior to the Closing Date, of the following conditions
      precedent (all agreements and documents 

     

     

     

    
      
        
        

      

      
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    from
      Borrower or any other Person to be in form and substance acceptable to Lender,
      in its sole discretion):

     

    (a)  Executed
      Loan Documents.  Receipt by Lender of duly executed copies of:
      this Agreement, the Note, the Security Documents, and all other Loan
      Documents.

     

    (b)  Organizational
      Documents.  Receipt by Lender of the following:

     

    (i)  Charter
      Documents.  Copies of the articles or certificates of
      incorporation or other charter documents of Borrower and each Guarantor
      certified to be true and complete as of a recent date by the appropriate
      Governmental Authority of the state or other jurisdiction of its incorporation
      and certified by a secretary or assistant secretary of Borrower and each such
      Guarantor to be true and correct as of the Closing Date.

     

    (ii)  Bylaws/Operating
      Agreement.  A copy of the bylaws or operating agreement, as
      applicable, of Borrower and each such Guarantor certified by a secretary or
      assistant secretary of Borrower and such Guarantor to be true and correct as
      of
      the Closing Date.

     

    (iii)  Resolutions.  Copies
      of resolutions or unanimous written consent of the board of directors or
      members, as applicable, of Borrower and each Guarantor  approving and
      adopting the Loan Documents, the transactions contemplated therein and
      authorizing execution and delivery thereof, certified by a secretary or
      assistant secretary of Borrower and each such Guarantor to be true and correct
      and in force and effect as of the Closing Date.

     

    (iv)  Good
      Standing.  Copies of a certificate of good standing, existence or
      its equivalent with respect to Borrower and each Guarantor certified as of
      a
      recent date by the appropriate Governmental Authorities of the state or other
      jurisdiction of organization and each other jurisdiction in which the failure
      to
      so qualify and be in good standing could reasonably be expected to have a
      Material Adverse Effect.

     

    (v)  Incumbency.  An
      incumbency certificate of Borrower and each Guarantor, certified by a secretary
      or assistant secretary of Borrower and each such Guarantor to be true and
      correct as of the Closing Date.

     

    (c)  Financial
      Statements.  Receipt by Lender of Borrower’s preliminary,
      unaudited Financial Statements for the fiscal year ending December 31, 2006
      and
      such other information relating to Borrower as Lender may reasonably
      require.

     

    (d)  Opinions
      of Counsel.  Receipt by Lender of an opinion, or opinions (which
      shall cover, among other things, authority, legality, validity, binding effect,
      enforceability, absence of conflict with laws, organizational documents, and
      attachment and perfection of liens), satisfactory to Lender, addressed to Lender
      and dated the Closing Date, from legal counsel to Borrower.

     

    (e)  Personal
      Property Collateral.  Lender shall have received duly authorized
      or, if required executed, UCC financing statements and other lien documents
      for
      filing including all

     

     

     

    
      
        
        

      

      
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    necessary
      documents (including lien termination documents by any existing lender) to
      perfect Lender’s security interest in the Collateral, all as may be required by
      Lender.

     

    (f)  Priority
      of Liens.  Lender shall have received satisfactory evidence that
      (i) Lender holds a perfected Lien on all Collateral and (ii) none of the
      Collateral is subject to any other Liens other than Permitted
      Liens.

     

    (g)  Evidence
      of Insurance.  Receipt by Lender of copies of insurance policies
      or certificates of insurance (on Acord form 27) of Borrower evidencing liability
      and casualty insurance meeting the requirements set forth in the Loan Documents,
      including, without limitation, naming Lender as loss payee (as to property
      and
      casualty coverage) and as additional insured (as to liability
      coverage).

     

    (h)  Consents.  Receipt
      by Lender of evidence that all governmental, shareholder, member and third
      party
      consents and approvals required in connection with the transactions contemplated
      hereby and expiration of all applicable waiting periods without any action
      being
      taken by any authority that could restrain, prevent or impose any material
      adverse conditions on such transactions or that could seek or threaten any
      of
      the foregoing, and no law or regulation shall be applicable which in the
      judgment of Lender could have such effect.

     

    (i)  Fees
      and Expenses.  Payment by Borrower of all fees and Expenses owed
      to Lender.

     

    (j)  Term
      Loan.   No Event of Default under the Other Loan Documents
      shall have occurred and no Default under the Other Loan Documents shall have
      occurred and remain outstanding or uncured.

     

    (k)  Other.  Receipt
      by Lender of such other documents, instruments, agreements or information as
      are
      required to be provided herein or under any other Loan Documents or as may
      otherwise be or have been requested by Lender.

     

    ARTICLE  VI     REPRESENTATIONS
      AND WARRANTIES

     

    In
      order
      to induce Lender to enter into this Agreement and to make available the Loan
      contemplated hereby, Borrower hereby represents and warrants to
      Lender.

     

    6.1.  Organization
      and Qualification.   Borrower (i) is a corporation
      duly organized, validly existing and in good standing under the laws of the
      state of its incorporation or organization, (ii) has the power and authority
      to
      own its Property and assets and to transact the businesses in which it is
      presently, or proposes to be, engaged, and (iii) is duly qualified and is
      authorized to do business and is in good standing in every jurisdiction in
      which
      the failure to be so qualified could  reasonably be expected to have a
      Material Adverse Effect.

     

    6.2.  Liens.   There
      are no Liens in favor of any Person with respect to any Property of Borrower
      other than Permitted Liens.

     

     

    
      
        
        

      

      
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    6.3.  No
      Conflict.   The execution and delivery by Borrower of
      this Agreement and each of the other Loan Documents executed and delivered
      in
      connection herewith and the performance of the obligations of Borrower hereunder
      and thereunder and the consummation by Borrower of the transactions contemplated
      hereby and thereby: (i) are within the powers of Borrower; (ii) are duly
      authorized by the Board of Directors of Borrower and, if necessary, its
      stockholders or members; (iii) are not in contravention of the terms of the
      articles or certificate of incorporation or bylaws of Borrower or of any
      Contractual Obligations; (iv) do not require the consent, registration or
      approval of any Governmental Authority or any other Person; (v) do not
      contravene any statute, law, ordinance regulation, rule, order or other
      governmental restriction applicable to or binding upon Borrower; and
      (vi) will not, except as contemplated herein for the benefit of Lender,
      result in the imposition of any Liens upon any Property of Borrower under any
      existing indenture, mortgage, deed of trust, loan or agreement or other material
      agreement or instrument to which Borrower is a party or by which it or any
      of
      its Property may be bound or affected.

     

    6.4.  Enforceability.  The
      Agreement and all of the other Loan Documents are the legal, valid and binding
      obligations of Borrower, and are enforceable against Borrower in accordance
      with
      their terms.

     

    6.5.  Financial
      Data.  Borrower shall have furnished to Lender and Lender
      the following Financial Statements (the “Financials”):  (i) the
      consolidated balance sheet of Borrower as of, and statements of income, retained
      earnings and changes in financial position for the fiscal year ended December
      31, 2005, audited by independent certified public accountants, and (ii) the
      unaudited consolidated and consolidating balance sheet of Borrower as of, and
      statement of income, and retained earnings for the fiscal year ending December
      31, 2006,  prepared by the chief financial officer of
      Borrower.  The Financials are in accordance with the books and records
      of Borrower and fairly present the financial condition of Borrower at the dates
      thereof and the results of operations for the periods indicated (subject, in
      the
      case of unaudited Financial Statements, to normal year end adjustments), and
      such Financial Statements have been prepared in conformity with GAAP
      consistently applied throughout the periods involved.  Since December
      31, 2006, there have been no changes in the condition, financial or otherwise,
      of Borrower as shown on the respective balance sheets of Borrower described
      above, except (a) as contemplated herein and (b) for changes which individually
      or in the aggregate do not constitute a Material Adverse Change.

     

    6.6.  Locations
      of Offices, Records and Inventory.  Borrower’s chief
      executive office and all other places of business (with a separate itemization
      for warehouse locations) are set forth in Schedule 6.6 hereto, and
      the books and records of Borrower and all chattel paper and all records of
      accounts are located at the chief executive offices of
      Borrower.  There is no address in which Borrower has any Collateral
      other than the addresses as set forth on Schedule
      6.6.  Schedule 6.6 also contains a true, correct and
      complete list of (i) the legal names and addresses of each landlord,
      warehouseman, filler, processor and packer at which Inventory is stored, or
      equipment is located.  None of the receipts received by Borrower from
      any warehouseman, filler, processor or packer states that the goods covered
      thereby are to be delivered to bearer or to the order of a named person or
      to a
      named person and such named person’s assigns.

     

     

    
      
        
        

      

      
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    6.7.  Business
      Names.  Borrower has not used any legal or fictitious name during
      the five (5) years preceding the date hereof, other than the legal name shown
      on
      its Articles or Certificate of Incorporation or Articles, as it may be amended
      to the date hereof, delivered to Lender and those names as set forth on
Schedule 6.7.

     

    6.8.  Affiliates
      and Subsidiaries.  There are no Affiliates or direct or indirect
      Subsidiaries of Borrower except as set forth on Schedule 6.8.
Borrower is not a party to any partnership or joint venture except
      as set
      forth on Schedule 6.8.

     

    6.9.  Judgments
      or Litigation.  Except as set forth on Schedule 6.9,
      there is no material (a) judgment, order, writ or decree outstanding against
      Borrower or (b) pending or, to the best of Borrower’s knowledge, threatened
      litigation, contested claim, governmental, administrative or regulatory
      investigation, arbitration, or governmental audit (for taxes or otherwise)
      or
      proceeding by or against Borrower.  No judgment, order, writ, decree,
      pending or threatened litigation, contested claim, investigation, arbitration
      and governmental proceeding pertaining to Borrower (individually or in the
      aggregate) could reasonably be expected to have a Material Adverse
      Effect.

     

    6.10.  Defaults.  Borrower
      is not in default under any Contractual Obligations which default could
      reasonably be expected to have a Material Adverse Effect.

     

    6.11.  Compliance
      with Law.  Borrower has not violated or failed to comply with
      (including without limitation in the ownership and use of its Property and
      the
      conduct of its business) any statute, law, ordinance, regulation, rule or order
      of any foreign, federal, state or local government, or any other Governmental
      Authority or any self regulatory organization, or any judgment, decree or order
      of any court, applicable to its business or operations which failure or
      violation could reasonably be expected to have a Material Adverse
      Effect.  Borrower has not received any notice to the effect that, or
      otherwise been advised that, it is not in compliance with, and Borrower has
      no
      reason to anticipate that any currently existing circumstances are likely to
      result in the violation of any such statute, law, ordinance, regulation, rule,
      judgment, decree or order which failure or violation could reasonably be
      expected to have a Material Adverse Effect.

     

    6.12.  Compliance
      with Environmental Laws.  The operations of Borrower materially
      comply with all applicable federal, state or local environmental, health and
      safety statutes, regulations, directions, ordinances, criteria or guidelines;
      and none of the operations of Borrower are the subject of any material judicial
      or administrative proceeding alleging the violation of any federal, state or
      local environmental, health or safety statute, regulation, direction, ordinance,
      criteria or guidelines.  None of the operations of Borrower are the
      subject of any federal or state investigation evaluating whether Borrower
      disposed any hazardous or toxic waste, substance or constituent or other
      substance at any site that may require remedial action, or any federal or state
      investigation evaluating whether any remedial action is needed to respond to
      a
      release of any hazardous or toxic waste, substance or constituent, or other
      substance into the environment.  Borrower has not filed or received
      any notice under any federal or state law indicating past or present treatment,
      storage or disposal of a hazardous waste or reporting a spill or release of
      a
      hazardous or toxic waste, substance or constituent, or other substance into
      the
      environment.  Borrower has no contingent liability of

     

     

    
      
        
        

      

      
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    which
      Borrower have knowledge or reasonably should have knowledge in connection with
      any release of any hazardous or toxic waste, substance or constituent, or other
      substance into the environment, nor has Borrower received any notice, letter
      or
      other indication of potential liability arising from the disposal of any
      hazardous or toxic waste, substance or constituent or other substance into
      the
      environment.

     

    6.13.  Intellectual
      Property.  Borrower possesses adequate licenses, patents, patent
      applications, copyrights, service marks, trademarks and tradenames to continue
      to conduct its business as heretofore conducted by
      it.  Schedule 6.13 attached hereto sets forth (a) all of
      the federal, state and foreign registrations of trademarks, service marks and
      other marks, trade names or other trade rights of Borrower, and all pending
      applications for any such registrations, (b) all of the registered patents
      and
      copyrights of Borrower and all pending applications therefore and (c) all other
      registered trademarks, service marks and other marks, trade names and other
      trade rights used by Borrower in connection with their business (collectively,
      the “Proprietary Rights”).  Borrower is the owner of each of the
      Proprietary Rights set forth on Schedule 6.13 as indicated on such
      schedule, and except as set forth on Schedule 6.13 no other Person has
      the right to use any of such Proprietary Rights.  Each of the
      Proprietary Rights set forth on Schedule 6.13 is federally registered, having
      the registration number and issue date set forth on
Schedule 6.13.  The Proprietary Rights set forth on
Schedule 6.13 are all those used in the businesses of
      Borrower.  Except as set forth on Schedule 6.13, no Person has
      a right to receive any royalty or similar payment in respect of any Proprietary
      Rights pursuant to any contractual arrangements entered into by Borrower, and
      no
      Person otherwise has a right to receive any royalty or similar payment in
      respect of any such Proprietary Rights except as set forth on Schedule
      6.13.   Borrower has not granted any license or sold or
      otherwise transferred any interest in any of the Proprietary Rights to any
      other
      Person.  The use of each of the Proprietary Rights by Borrower is not
      infringing upon or otherwise violating the rights of any third party in or
      to
      such Proprietary Rights, and no proceeding has been instituted against or notice
      received by Borrower that are presently outstanding alleging that the use of
      any
      of the Proprietary Rights infringes upon or otherwise violates the rights of
      any
      third party in or to any of the Proprietary Rights.  Borrower has not
      given notice to any Person that it is infringing on any of the Proprietary
      Rights and to the best of Borrower’s knowledge, no Person is infringing on any
      of the Proprietary Rights.  All of the Proprietary Rights of Borrower
      are valid and enforceable rights of Borrower and will not cease to be valid
      and
      in full force and effect by reason of the execution and delivery of this
      Agreement or the Loan Documents or the consummation of the transactions
      contemplated hereby or thereby.

     

    6.14.  Licenses
      and Permits.  Borrower has obtained and holds in full force and
      effect all material franchises, licenses, leases, permits, certificates,
      authorizations, qualifications, easements, rights of way and other rights and
      approvals which are necessary or appropriate for the operation of its business
      as presently conducted and as proposed to be conducted.  Borrower is
      not in violation of the terms of any such franchise, license, lease, permit,
      certificate, authorization, qualification, easement, right of way, right or
      approval which in any such case could reasonably be expected to have a Material
      Adverse Effect.

     

     

    
      
        
        

      

      
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    6.15.  Title
      to Property.  Borrower has (i) valid leasehold interests in all of
      the real property it occupies as a tenant, (all such real property and the
      nature of Borrower’s interest therein is set forth on Schedule 6.15)
      and (ii) good, marketable and exclusive title to all of the other Property
      it purports to own  (including without limitation, all real and
      personal Property in each case as reflected in the Financial Statements
      delivered to Lender hereunder), other than, with respect to Property described
      in clause (ii) above, properties disposed of in the ordinary course of
      business or in any manner otherwise permitted under this Agreement since the
      date of the most recent audited  balance sheet of Borrower, and in
      each case subject to no claims, options, rights or interests of any other
      Person.  Borrower enjoys peaceful and undisturbed possession of all
      its real property, and there is no pending or, to the best of its knowledge,
      threatened condemnation proceeding relating to any such real
      property.  The leases with respect to the leased property, together
      with any leases of real property entered into by Borrower after the date hereof,
      are referred to collectively as the “Leases”.  None of the Leases
      contains provisions which have or could reasonably be expected to have a
      Material Adverse Effect.  No material default exists under any
      Lease.

     

    6.16.  Labor
      Matters.  Borrower is not engaged in any unfair labor
      practice.  There is (a) no material unfair labor practice complaint
      pending against Borrower or, to the best knowledge of Borrower, threatened
      against Borrower, before the National Labor Relations Board, and no grievance
      or
      arbitration proceeding with any employee, or group or committee representing
      any
      employees, or arising out of or under collective bargaining agreements that
      has
      or could reasonably be expected to have a Material Adverse Effect is so pending
      against Borrower or, to the best knowledge of Borrower, threatened against
      Borrower, (b) no strike, labor dispute, slowdown or stoppage pending or, to
      the
      best knowledge of Borrower, threatened against Borrower, and (c) no union
      representation questions with respect to the employees of Borrower and no union
      organizing activities.

     

    6.17.  Investment
      Company.   Borrower is not (a) an “investment company”
or a company “controlled” by an “investment company” within the meaning of the
      Investment Company Act of 1940, as amended, (b) a “holding company” or a
“subsidiary company” of a “holding company,” or an “affiliate” of a “holding
      company” or of a “subsidiary company” of a “holding company,” within the meaning
      of the Public Utility Holding Company Act of 1935, as amended, or (c) subject
      to
      any other law which purports to regulate or restrict its ability to borrow
      money
      or to consummate the transactions contemplated by this Agreement or the other
      Loan Documents or to perform its obligations hereunder or
      thereunder.

     

    6.18.  Margin
      Security.  Borrower does not own any margin stock and no portion
      of the proceeds of any Advance shall be used by Borrower for the purpose of
      purchasing or carrying any “margin stock” (as defined in Regulation U of the
      Board of Governors of the Federal Reserve System) or for any other purpose
      which
      violates the provisions or Regulation U, T, or X of said Board of Governors
      or
      for any other purpose in violation of any applicable statute or regulation,
      or
      of the terms and conditions of this Agreement.

     

    6.19.  Taxes
      and Tax Returns.

     

     

    
      
        
        

      

      
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    (a)  Borrower
      has timely filed (inclusive of any permitted extensions) with the appropriate
      taxing authorities all returns (including, without limitation, information
      returns and other material information) in respect of Taxes required to be
      filed
      through the date hereof and will timely file (inclusive of any permitted
      extensions) any such returns required to be filed on and after the date hereof
      except where the failure to file could not reasonably be expected to have a
      Material Adverse Effect.  The information filed is complete and
      accurate in all material respects.

     

    (b)  (i)
      All
      Taxes, in respect of periods beginning prior to the date hereof, have been
      timely paid, or will be timely paid, or an adequate reserve has been established
      therefore, as set forth in the Financial Statements, and (ii) Borrower has
      no
      material liability for such Taxes for such periods in excess of the amounts
      so
      paid or reserves so established.  No material deficiencies for Taxes
      have been claimed, proposed or assessed by any taxing or other Governmental
      Authority against Borrower except those that are paid or contested within the
      time limits designated by law or the applicable Governmental Authority and
      no
      material tax Liens have been filed.

     

    6.20.  Status
      of Accounts.  Each Account is based on an actual and bona fide
      sale and delivery of goods or rendition of services to customers, made by
      Borrower in the ordinary course of its business; the goods and Inventory being
      sold and the Accounts created are Borrower’s exclusive property and are not and
      shall not be subject to any Lien, consignment arrangement, encumbrance, security
      interest or financing statement whatsoever (other than Liens securing the Term
      Loan), and Borrower’s customers have accepted the goods or services, owe and are
      obligated to pay the full amounts stated in the invoices according to their
      terms, without any dispute, offset, defense, counterclaim or
      contra.  Borrower confirms to Lender that any and all taxes or fees
      relating to its business, its sales, the Accounts or the goods relating thereto,
      are its sole responsibility and that same will be paid by Borrower when due
      (unless duly contested and adequately reserved for) and that none of said taxes
      or fees is or will become a lien on or claim against the Accounts.

     

    6.21.  Material
      Contracts.   Schedule 6.21 sets forth a true, correct
      and complete list of all the Material Contracts currently in effect on the
      date
      hereof.  None of the Material Contracts contains provisions which have
      or could reasonably be expected to have a Material Adverse
      Effect.  All of the Material Contracts are in full force and effect,
      and no material defaults currently exist thereunder.

     

    6.22.  Accuracy
      and Completeness of Information.  All factual information
      heretofore, contemporaneously or hereafter furnished by or on behalf of Borrower
      in writing to Lender for purposes of or in connection with this Agreement or
      any
      Loan Documents, or any transaction contemplated hereby or thereby, is or will
      be
      true and accurate in all material respects on the date as of which such
      information is dated or certified and not incomplete by omitting to state any
      material fact necessary to make such information not misleading at such
      time.  There is no fact now known to any officer of Borrower which
      has, or would have, a Material Adverse Effect which fact has not been set forth
      herein, in the Financials, or any certificate, opinion or other written
      statement made or furnished by Borrower to Lender.

     

     

     

    
      
        
        

      

      
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    6.23.  Solvency.  After
      giving effect to the transactions contemplated under this Agreement, Borrower
      is
      able to pay its respective debts as they become due, and has capital sufficient
      to carry on its respective business and all businesses in which it is about
      to
      engage, and now owns Property having a value both at fair valuation and at
      present fair salable value greater than the amount required to pay Borrower’s
      debts.  Borrower will not be rendered insolvent by the execution and
      delivery of this Agreement or any of the other Loan Documents executed in
      connection with this Agreement or by the transactions contemplated hereunder
      or
      thereunder.

     

    6.24.  Commercial
      Tort Claims.  Borrower has no Commercial Tort Claims except as set
      forth on Schedule 6.24 attached hereto and made a part
      hereof.

     

    6.25.  Letter
      of Credit Rights.  Borrower has no Letter of Credit Rights except
      as set forth on Schedule 6.25 attached hereto and made a part
      hereof.

     

    6.26.  Deposit
      Accounts.  All Deposit Accounts of Borrower and each Depository
      Institution are set forth on Schedule 6.26  attached
      hereto and made a part hereof.

     

    6.27.  Anti-Terrorism
      Law.

     

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

     

    (b)  Executive
      Order No. 13224 Neither Borrower nor any Affiliate of Borrower, or to
      Borrower’s knowledge, any of their respective agents acting or benefiting in any
      capacity in connection with the Loan or other transactions hereunder, is any
      of
      the following (each a “Blocked Person”):

     

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

     

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

     

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

     

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

     

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

     

     

    
      
        
        

      

      
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    (vi)  a
      Person
      who is affiliated with a Person listed above.

     

    6.28.  Survival
      of Representations.  All representations made by Borrower in this
      Agreement and in any other Loan Document shall survive the execution and
      delivery hereof and thereof.

     

    


    ARTICLE  VII    AFFIRMATIVE
      COVENANTS

     

    Until
      termination of this Agreement and
      the payment and satisfaction of all Obligations, Borrower covenants and agrees
      as follows:

    


    7.1.  Financial
      Information     Borrower will furnish to
      Lender the following information within the following time periods:

     

    (a)  within
      120 days after the close of each fiscal year of Borrower, the consolidated
      and
      consolidating audited balance sheets and statements of income and retained
      earnings and of changes in cash flow of Borrower, for such year, each in
      reasonable detail, each setting forth in comparative form the corresponding
      figures for the preceding year, prepared in accordance with GAAP, and
      accompanied by a report and unqualified opinion of an independent accountant
      selected by Borrower and acceptable to Lender and concurrently with the delivery
      of such financial statements, a consolidated and consolidating unaudited balance
      sheet of Borrower for such year, in reasonable detail, setting forth in
      comparative form the corresponding figures from the preceding year, prepared
      in
      accordance with GAAP;

     

    (b)  within
      45
      days after the end of each fiscal quarter of Borrower, consolidated and
      consolidating unaudited Financial Statements and divisional operating income
      analyses similar to those required by clause (a) above as of the end of such
      period and for such period then ended and for the period from the beginning
      of
      the current fiscal year to the end of such period, setting forth in comparative
      form the corresponding figures for the comparable period in the preceding fiscal
      year, prepared in accordance with GAAP (except that such quarterly statements
      need not include footnotes) and certified by an Authorized Person described
      in
      paragraph (c) below; and

     

    (c)  at
      the
      time of submission of the quarterly Financial Statements (for the first three
      fiscal quarters in any fiscal year) and the annual Financial Statement of
      Borrower, a certificate executed by an Authorized Person, certifying that,
      following a review of the Agreement, no Event of Default is outstanding and
      demonstrating compliance with the financial covenants contained in Article
      VIII
      by calculation thereof as of the end of each such fiscal quarter.

     

    (d)  Such
      other reports, certificates, schedules, documents, data or information
      concerning Borrower’s finances and Property as Lender may reasonably request
      from time to time.

     

    7.2.  Existence.  Borrower
      (a) will maintain its corporate existence, (b) will maintain in full force
      and
      effect all material licenses, bonds, franchise, leases, trademarks and
      qualifications to do business, (c) will obtain or maintain patents, contracts
      and other rights necessary or desirable to the

     

     

     

    
      
        
        

      

      
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    profitable
      conduct of its business, (d) will continue in, and limit its operations to,
      the
      same general lines of business as that presently conducted by it and (e) will
      comply with all applicable laws, rules and regulations of any federal, state
      or
      local Governmental Authority, except in the case of (b), (c) and (e) where
      noncompliance could not reasonably be expected to have a Material Adverse
      Effect.

     

    7.3.  Environmental
      Matters.  Borrower will conduct its business so as to
      comply in all material respects with all environmental laws, regulations,
      directions, ordinances, criteria and guidelines in all jurisdictions in which
      any of them is or may at any time be doing business including, without
      limitation, environmental land use, occupational safety or health laws,
      regulations, directions, ordinances, criteria, guidelines, requirements or
      permits in all jurisdictions in which it is or may at any time be doing
      business, except to the extent that Borrower is contesting, in good faith by
      appropriate legal proceedings, any such law, regulation, direction, ordinance,
      criteria, guideline, or interpretation thereof or application thereof; provided,
      further, that Borrower will comply with the order of any court or other
      governmental body of the applicable jurisdiction relating to such laws unless
      Borrower shall currently be prosecuting an appeal or proceedings for review
      and
      shall have secured a stay of enforcement or execution or other arrangement
      postponing enforcement or execution pending such appeal or proceedings for
      review.  If Borrower shall (a) receive notice that any violation of
      any federal, state or local environmental law, regulation, direction, ordinance,
      criteria or guideline may have been committed or is about to be committed by
      Borrower, (b) receive notice that any administrative or judicial complaint
      or
      order has been filed or is about to be filed against Borrower alleging
      violations of any federal, state or local environmental law, regulation,
      direction, ordinance, criteria or guideline or requiring Borrower to take any
      action in connection with the release of toxic or hazardous substances into
      the
      environment or (c) receive any notice from a federal, state, or local
      governmental agency or private party alleging that Borrower may be liable or
      responsible for costs associated with a response to or cleanup of a release
      of a
      toxic or hazardous substance into the environment or any damages caused thereby,
      Borrower will provide Lender with a copy of such notice within 5 days after
      the
      receipt thereof.

     

    7.4.  Books
      and Records.  Borrower will maintain books and records pertaining
      to the Collateral in such detail, form and scope as is consistent with good
      business practice.  Borrower agrees that Lender or its agent may, upon
      prior notice, enter upon the premises of Borrower, during normal business hours,
      for the purpose of (a) enabling Lender’s auditors to conduct (at Borrower’s
      expense) field examinations, (b) inspecting and verifying the Collateral,
      (c) inspecting and/or copying (at Borrower’s expense) any and all records
      pertaining thereto, and (d) discussing the affairs, finances and business of
      Borrower or with any officers, employees and directors of Borrower or with
      Borrower’s independent accountant.

     

    7.5.  Collateral
      Records.  Borrower will execute and deliver to Lender, from time
      to time, solely for Lender’s convenience in maintaining a record of the
      Collateral, such written statements and schedules as Lender may reasonably
      require.

     

    7.6.  Changes
      in Locations.  Borrower agrees to afford Lender 30 days prior
      written notice of any change in Borrower’s jurisdiction of organization or the
      location of any Collateral

     

     

     

    
      
        
        

      

      
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    (other
      than Inventory held for shipment by third Persons, Inventory in transit, or
      Inventory held for processing by third Persons) or in the location of its chief
      executive office or place of business. 

     

    7.7.  Insurance;
      Casualty Loss.  Borrower will maintain public liability insurance,
      third party property damage insurance and replacement value insurance on the
      Collateral under such policies of insurance, with such insurance companies,
      in
      such amounts and covering such risks as are at all times customary for
      businesses of this type and satisfactory to Lender in its commercially
      reasonable judgment.  All policies covering the Collateral are to name
      Lender as an additional insured (as to liability coverage) and lender’s loss
      payee (as to casualty and property coverage), as its interests may appear,
      and
      are to contain such other provisions as Lender may reasonably require to fully
      protect Lender’s interest in the Collateral and to any payments to be made under
      such policies.  True copies of all original insurance policies or
      certificates of insurance evidencing such insurance covering the Collateral
      are
      to be delivered to Lender on or prior to the Closing Date, with such premiums
      paid in accordance with each insurance carrier’s requirements with the lender’s
      loss payable endorsement in Lender’s favor, and shall provide for not less than
      30 days prior written notice to Lender, of the exercise of any right of
      cancellation.  In the event Borrower fail to respond in a timely and
      appropriate manner (as determined by Lender in its sole but reasonable
      discretion) with respect to collecting under any insurance policies required
      to
      be maintained hereunder, Lender shall have the right, in the name of Lender
      or
      Borrower, to file claims under such insurance policies, to receive and give
      acquittance for any payments that may be payable thereunder, and to execute
      any
      and all endorsements, receipts, releases, assignments, reassignments or other
      documents that may be necessary to effect the collection, compromise or
      settlement of any claims under any such insurance policies.  Borrower
      will provide written notice to Lender of the occurrence of any of the following
      events within 5 Business Days after the occurrence of such event: any Property
      owned or used by Borrower is (i) materially damaged or destroyed, or suffers
      any
      other loss which is in excess of $25,000 or (ii) is condemned, confiscated
      or otherwise taken, in whole or in part, or the use thereof is otherwise
      diminished so as to render impracticable or unreasonable the use of such asset
      or property for the purpose to which such asset or property were used
      immediately prior to such condemnation, confiscation or taking, by exercise
      of
      the powers of condemnation or eminent domain or otherwise, and in either case
      the amount of the damage, destruction, loss or diminution in value of the
      Collateral which is in excess of $25,000 (collectively, a “Casualty
      Loss”).  Borrower will diligently file and prosecute its claim or
      claims for any award or payment in connection with a Casualty
      Loss.  In the event of a Casualty Loss, Borrower will pay to Lender,
      promptly upon receipt thereof, any and all insurance proceeds and payments
      received by Borrower on account of damage, destruction or loss of all or any
      portion of the Collateral.  Lender may, at its election and in its
      sole discretion, either (a) apply the proceeds realized from Casualty
      Losses to payment of accrued and unpaid interest or outstanding principal of
      Advances under the Credit Line or (b) pay such proceeds to Borrower to be used
      to repair, replace or rebuild the Property or portion thereof that was the
      subject of the Casualty Loss.  After the occurrence and during the
      continuance of an Event of Default, (i) no settlement on account of any
      such Casualty Loss shall be made without the consent of Lender and (ii) Lender
      may participate in any such proceedings and Borrower will deliver to Lender
      such
      documents as may be requested by Lender to permit such participation and will
      consult with Lender and its attorneys in the making and prosecution of such
      claim or claims.  Borrower hereby irrevocably authorizes and appoints
      Lender as its attorney-in-fact, to collect and receive for

     

     

    
      
        
        

      

      
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    any
      such
      award or payment and to file and prosecute such claim or claims, which power
      of
      attorney shall be irrevocable and shall be deemed to be coupled with an
      interest, and Borrower shall, upon demand of Lender, make, execute and deliver
      any and all assignments and other instruments sufficient for the purpose of
      assigning any such award or payment to Lender free and clear of any encumbrances
      of any kind or nature whatsoever.

     

    7.8.  Taxes. 
      Borrower will pay, when due and in any event prior to delinquency, all Taxes
      lawfully levied or assessed against Borrower or any of the Collateral; provided,
      however, that unless such Taxes have become a federal tax or ERISA Lien on
      any
      of the assets of Borrower, no such Tax need be paid if the same is being
      contested in good faith, by appropriate proceedings promptly instituted and
      diligently conducted and if an adequate reserve or other appropriate provision
      shall have been made therefore as required in order to be in conformity with
      GAAP.

     

    7.9.  Compliance
      With Laws.  Borrower will comply with all acts, rules,
      regulations, orders, directions and ordinances of any legislative,
      administrative or judicial body or official applicable to the Collateral or
      any
      part thereof, and to the operation of its business except where the failure
      to
      so comply could not reasonably be expected to have a Material Adverse
      Effect.

     

    7.10.  Fiscal
      Year.  Borrower agrees that it will not change its fiscal
      year from a year ending December 31 unless required by law, in which case
      Borrower will give Lender at least 30 days prior written notice
      thereof.

     

    7.11.  Notification
      of Certain Events.  Borrower agrees that it will promptly
      notify Lender in writing of the occurrence of any of the following events (but
      in no event shall such notice from Borrower be received by Lender later than
      5
      Business Days after the occurrence of any such event):

     

    (a)  any
      Material Contract of Borrower is terminated or amended in any material respect
      or any new Material Contract is entered into (in which event Borrower shall
      provide Lender with a copy of such Material Contract);

     

    (b)  the
      institution of any litigation, proceeding(s) or investigation against Borrower
      in any federal, state, local or foreign court or before any commission or other
      regulatory body (federal, state, local or foreign) in which a claim of at least
      $25,000 or claims in the aggregate of $100,000 has been or is reasonably likely
      to be asserted against Borrower;

     

    (c)  any
      notification of violation of any material law or regulation shall have been
      received by Borrower from any local, state, federal or foreign Governmental
      Authority or agency accompanied by a copy of any such notice;

     

    7.12.  Collection
      of Accounts.  Unless an Event of Default is outstanding, Borrower
      may and will (subject to its reasonable business discretion) enforce and collect
      all amounts owing on the Accounts, for Lender’s benefit and on Lender’s behalf
      but at Borrower’s expense; such privilege shall terminate at Lender’s option,
      without notice to Borrower, which is hereby expressly waived by Borrower, upon
      the occurrence of any Event of Default which has not otherwise been waived
      by
      Lender.  At Lender’s request, before or after the occurrence of any
      Event of Default, any checks,

     

     

     

    
      
        
        

      

      
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    cash,
      notes or other instruments or property received by Borrower with respect to
      any
      Accounts shall be held by Borrower in trust for the benefit of Lender, separate
      from Borrower’s own property and funds, and immediately turned over to Lender
      with proper assignments or endorsements.  Checks, drafts or other
      instruments received by Lender shall not constitute final payment unless and
      until such instruments have actually been collected.  Nothing
      contained in this Section 7.12 shall be construed to limit or affect the
      provisions of Section 2.5(b) of this Agreement.

     

    7.13.  Trademarks.  Borrower
      will do and cause to be done all things necessary (as determined in their
      reasonable business judgment) to preserve and keep in full force and effect
      all
      registrations of trademarks, service marks and other marks, trade names or
      other
      trade rights.

     

    7.14.  Maintenance
      of Property.  Borrower will keep all property useful and
      necessary to its business in good working order and condition (ordinary wear
      and
      tear excepted) in accordance with its past operating practices and not to commit
      or suffer any waste with respect to any of its properties, except for properties
      which either individually or in the aggregate are not material.

     

    7.15.  Commercial
      Tort Claims.   Borrower shall provide written notice to
      Lender within 30 days of the date it shall arise any such Commercial Tort Claim
      to which Borrower is or becomes a party or which otherwise inures to the benefit
      of Borrower.  Such notice shall contain a sufficient description of
      the Commercial Tort Claim including the parties, the court in which the claim
      was commenced (if applicable), the docket number assigned to the case (if
      applicable) and a detailed explanation of the events giving rise to such
      claim.  Borrower shall grant Lender a security interest in such
      Commercial Tort Claim to secure payment of the Obligations.  Borrower
      shall execute and deliver such instruments, documents and agreements as Lender
      may reasonably require in order to obtain and perfect such security interest
      including, without limitation, a security agreement or amendment to this
      Agreement all in form and substance satisfactory to Lender.  Borrower
      authorize Lender to file (without Borrower’s signature), financing statements or
      amendments to existing financing statements as Lender deems necessary to perfect
      the security interest.

     

    7.16.  Letter
      of Credit Rights.  Borrower shall provide written notice to Lender
      within 30 days of the date it shall arise of any Letters of Credit for which
      Borrower is the beneficiary.  Borrower shall execute and deliver such
      instruments, documents and agreements and take such actions as Lender reasonably
      may require in order to obtain and perfect its security interest in such Letter
      of Credit Rights.

     

    ARTICLE  VIII     FINANCIAL
      COVENANTS

     

    Until
      termination of this Agreement and payment and satisfaction of all Obligations
      due or to become due hereunder, Borrower further covenant and agree as
      follows:

     

    8.1           Current
      Ratio.  Borrower shall cause to be maintained on a consolidated
      basis a ratio of current assets to current liabilities of not less than 1.2
      to
      1.

     

    8.2           Debt
      to Worth Ratio.  Borrower shall cause to be maintained on a
      consolidated basis a ratio of total Indebtedness (excluding the current portion
      of Subordinated Debt) to Tangible Net Worth of not greater than 2.5 to
      1.

     

     

    
      
        
        

      

      
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    ARTICLE  IX    NEGATIVE
      COVENANTS

     

    Until
      termination of this Agreement and payment and satisfaction of all Obligations,
      Borrower agrees that, unless otherwise agreed in writing by Lender, it will
      not:

     

    9.1.  Liens.  Mortgage,
      assign, pledge, transfer or otherwise permit any Lien of any kind to exist
      at
      any time on any of its Property, except for Permitted Liens.

     

    9.2.  Indebtedness.  Incur,
      create or be liable for any Indebtedness other than Permitted
      Indebtedness.

     

    9.3.  Sale
      of Assets.  Sell, lease, assign, transfer or otherwise dispose of
      any Property other than (a) sales of Inventory in the ordinary course of
      business, (b) sales or other dispositions in the ordinary course of business
      of
      equipment that is obsolete or that is no longer used or useful in the conduct
      of
      Borrower’s business, (c) sales in the ordinary course of business of Property
      used in Borrower’s business that is worn out or in need of replacement and that
      is replaced with Property of reasonably equivalent value or utility, and
      (d) other sales of fixed assets, the net proceeds of which, shall not
      exceed $100,000 in the aggregate in any fiscal year of Borrower.

     

    9.4.  Organizational
      Changes.  Merge or consolidate with any Person, alter or modify
      Borrower’s Articles or Certificate of Incorporation change Borrower’s
      jurisdiction of organization or formation, without at least thirty (30) days’
prior written notice to Lender alter or modify any legal names, mailing
      addresses, principal places of business, without at least thirty (30) days
      prior
      written notice to Lender alter or modify Borrower’s corporate structure, status
      or existence, or enter into or engage in any business, operation or activity
      materially different from that presently being conducted by
      Borrower.

     

    9.5.  Guarantees.
      Except for Permitted Indebtedness, assume, guarantee, endorse, or otherwise
      become liable upon the obligations of any other Person, except by the
      endorsement of negotiable instruments in the ordinary course of
      business.

     

    9.6.  Investments.  Make
      any Investment other than Permitted Investments.

     

    9.7.  Affiliate
      Transactions.  Except as permitted by this Agreement, enter
      into any transaction with, including, without limitation, the purchase, sale
      or
      exchange of property or the rendering of any service to an Affiliate of Borrower
      except in the ordinary course of and pursuant to the reasonable requirements
      of
      Borrower’s business and upon fair and reasonable terms no less favorable to
      Borrower than could be obtained in a comparable arm’s-length transaction with an
      unaffiliated Person.

     

    9.8.  Third
      Party Loans.  Make any Third Party Loan.

     

     

    
      
        
        

      

      
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    9.9.  Issuance
      of Stock.  Without not less than fifteen (15) days prior written
      notice to Lender, issue or distribute any Capital Stock or other securities
      for
      consideration or otherwise.

     

    9.10.  Amendments
      of Material Contracts.  Amend, modify, cancel or terminate or
      permit the amendment, modification, cancellation or termination of any Material
      Contract.

     

    9.11.  Subordinated
      Debt.  Effect or permit any change in or amendment to any
      document or instrument pertaining to the subordination, terms of payment or
      other terms or provisions of any Subordinated Debt, give any notice of optional
      redemption or optional prepayment or offer to repurchase under any such document
      or instrument, or, directly or indirectly, make any payment of principal of
      or
      interest on or in redemption, retirement or repurchase of any Subordinated
      Debt.

     

    9.12.  Licenses,
      Etc.  Enter into licenses of, or otherwise restrict the use
      of, any patents, trademarks or copyrights which would prevent Borrower from
      selling, transferring, encumbering or otherwise disposing of any such patent,
      trademark or copyright.

     

    9.13.  Anti-Terrorism
      Laws.  Borrower and its agents shall not knowingly (i)
      conduct any business or engage in any transaction or dealing with any Blocked
      Person, including making or receiving any contribution of funds, goods or
      services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise
      engage in any transaction relating to, any property or interests in property
      blocked pursuant to the Executive Order No. 13224; or (iii) engage in or
      conspire to engage in any transaction that evades or avoids, or has the purpose
      of evading or avoiding, or attempts to violate, any of the prohibitions set
      forth in the Executive Order No. 13224 or the USA Patriot
      Act.  Borrower shall deliver to Lender any certification or other
      evidence reasonably requested from time to time by Lender in its sole
      discretion, confirming Borrower’s compliance with this Section
      9.13.

     

    ARTICLE  X    APPOINTMENT
      AS ATTORNEY-IN-FACT

     

    Borrower
      hereby irrevocably authorizes and appoints Lender, or any Person as Lender
      may
      designate, as Borrower’s attorney-in-fact, at Borrower’s cost and expense, to
      exercise all of the following powers upon the occurrence of an Event of Default,
      which being coupled with an interest, shall be irrevocable until all of the
      Obligations to Lender have been paid and satisfied in full:

    


    10.1.           To
      receive, take, endorse, sign, assign and deliver, all in the name of Lender
      or
      Borrower, as the case may be, any and all checks, notes, drafts, and other
      documents or instruments relating to the Collateral and to apply such amount
      to
      the Obligations in accordance with this Agreement;

    


    10.2.           To
      receive, open and dispose of all mail addressed to Borrower in connection with
      a
      Lockbox and upon the occurrence of an Event of Default to notify postal
      authorities to change the address for delivery thereof to such address as Lender
      may designate;

    


    10.3.           To
      request periodically from customers indebted on Accounts, in the name of


     

     

    
      
        
        

      

      
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    Borrower or a third party designee of Lender, information
      concerning the Accounts and the amounts owing thereon;


    10.4.           To
      give customers indebted on Accounts notice of Lender’s interest therein, and/or
      to instruct such customers to make payment directly to Lender for Borrower’s
      account;

    


    10.5.           To
      take or bring, in the name of Lender or Borrower, all steps, actions, suits
      or
      proceedings deemed by Lender necessary or desirable to enforce or effect
      collection of the Accounts; 

    


    10.6           To
      file financing statements in any office deemed appropriate by Lender for such
      purpose and execute, file, record and register any or all of Lender’s security
      interest in any intellectual property of Borrower with the United States Patent
      and Trademark Office; and

    


    10.7.           To
      do all other acts and things as Lender may deem reasonable to protect or
      preserve Lender’s interest under this Agreement or to fulfill Borrower’s
      obligations under this Agreement.

    


    ARTICLE  XI    EVENTS
      OF DEFAULT AND REMEDIES

     

    11.1.  Events
      of Default.  The occurrence of any of the following events shall
      constitute an “Event of Default” hereunder:

     

    (a)  failure
      of Borrower to pay (i) any interest or fees when due hereunder, in each case
      whether at stated maturity, by acceleration, or otherwise, (ii) any principal
      outstanding under the Credit Line when due, whether at stated maturity, by
      acceleration or otherwise or (iii) any Expenses hereunder within 5 Business
      Days
      after receipt by Borrower from Lender or any applicable Lender of notice that
      such Expenses are payable;

     

    (b)  any
      representation or warranty, contained in this Agreement, the other Loan
      Documents or any other agreement, document, instrument or certificate between
      Borrower and Lender or executed by Borrower in favor of Lender shall prove
      untrue in any material respect on or as of the date it was made or was deemed
      to
      have been made;

     

    (c)  failure
      of Borrower to perform, comply with or observe any term, covenant or agreement
      applicable to it contained in Article IX, or Sections 7.1, 7.2, 7.6, 7.7, 7.8,
      7.11, 7.15,  7.16, or 13.6..

     

    (d)  failure
      of Borrower to comply with any other covenant contained in this Agreement,
      the
      other Loan Documents or any other agreement, document, instrument or certificate
      between Borrower and Lender or executed by Borrower in favor of Lender and,
      in
      the event such breach or failure to comply is capable of cure, such breach
      or
      failure to comply is not cured within 10 days of its occurrence;

     

     

    
      
        
        

      

      
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    (e)  dissolution,
      liquidation, winding up or cessation of the business (or any material portion
      of
      the business) of Borrower, or the failure of Borrower to meet its debts
      generally as they mature, or the calling of a meeting of Borrower’s creditors
      for purposes of compromising Borrower’s debts;

     

    (f)  the
      commencement by or against Borrower of any bankruptcy, insolvency, arrangement,
      reorganization, receivership or similar proceedings with respect to it under
      any
      federal or state law and, in the event any such proceeding is commenced against
      Borrower, such proceeding is not dismissed within 60 days;

     

    (g)  the
      occurrence of a default or event of default (in each case which shall continue
      beyond the expiration of any applicable grace periods) under, or the occurrence
      of any event that results in or would permit the acceleration of the maturity
      of
      any note, agreement or instrument evidencing (i) the Term Loan, (ii) any
      Subordinated Debt or (iii) any other Indebtedness of Borrower and the aggregate
      principal amount of all such Indebtedness with respect to which a default or
      an
      event of default has occurred, or the maturity of which is accelerated or
      permitted to be accelerated, exceeds $100,000;

     

    (h)  any
      party
      (other than Lender) to any Loan Document shall deny or disaffirm its obligations
      under any of the Loan Documents, or an Event of Default shall have occurred
      or
      a  Default shall occurred and not been cured within any contractual
      cure period under any other Loan Document, or any Loan Document shall be
      canceled, terminated, revoked or rescinded without the express prior written
      consent of Lender, or any action or proceeding shall have been commenced by
      any
      Person (other than Lender) seeking to invalidate, declare unenforceable, cancel,
      revoke, rescind or disaffirm the obligations of any party to any Loan
      Document;

     

    (i)  (i)
      any
      holder of Subordinated Debt alleges (or any Governmental Authority with
      applicable jurisdiction determines) that the Subordinated Debt is not
      subordinated to any of the Obligations or (ii) the subordination provisions
      in
      any agreement relating to Subordinated Debt shall, in whole or in part,
      terminate, cease to be effective or cease to be legally valid, binding and
      enforceable as to any holder of the Subordinated Debt;

     

    (j)  one
      or
      more judgments or decrees shall be entered against Borrower involving a
      liability of $25,000 or more individually or in the aggregate (to the extent
      not
      paid or covered by insurance (i) provided by a carrier who has acknowledged
      coverage and has the ability to perform or (ii) as determined by Lender in
      its reasonable discretion) and any such judgments or decrees shall not have
      been
      vacated, satisfied, discharged or stayed or bonded pending appeal within 30
      days
      from the entry thereof;

     

    (k)  a
      Material Adverse Change occurs; or

     

    (l)  Borrower
      is indicted or convicted of the commission of a crime or any proceeding of
      any
      kind is pending or threatened which would reasonably be likely to result in
      the
      forfeiture of any material portion of the Property of Borrower to any
      Governmental Authority.

     

     

     

    
      
        
        

      

      
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    11.2.  Rights
      and Remedies upon a Default or an Event of Default.

     

    (a)  Upon
      the
      occurrence of any Event of Default, any obligation of Lender to make loan
      advances under the Credit Line shall terminate and Lender may take any or all
      of
      the following actions: declare all Obligations to be immediately due and payable
      (except with respect to any Event of Default set forth in Section 11.1(f)
      in which case all Obligations shall automatically become immediately due and
      payable without the necessity of any action, decision, notice or demand) without
      presentment, demand, protest or any other action or obligation of
      Lender.

     

    (b)  Upon
      acceleration of the Obligations, Lender may at any time, and from time to time,
      take any and all such action as Lender may elect to enforce any and all rights
      and interests created and existing under the Loan Documents, or arising under
      applicable law, including without limitation, all rights and remedies existing
      under the Security Documents, all rights of setoff and the following rights
      (the
      enumeration of any such rights not intended to be exhaustive and the exercise
      of
      any right shall not preclude the exercise of any other rights):

     

    (i)  The
      right
      to take possession of, send notices regarding and collect directly the
      Collateral, with or without judicial process (including, without limitation,
      the
      right to notify the United States postal authorities to redirect mail addressed
      to Borrower or to an address designated by Lender);or

     

    (ii)  By
      its
      own means or with judicial assistance, enter any or all of Borrower’s premises
      and take possession of the Collateral, or render it unusable, or dispose of
      the
      Collateral on such premises, without any liability to Borrower for rent,
      storage, utilities or other sums, and Borrower shall not resist or interfere
      with such action; or

     

    (iii)  Require
      Borrower at Borrower’s expense to assemble all or any part of the Collateral and
      make it available to Lender at any place designated by Lender.

     

    (c)  Borrower
      agrees that a notice received by it at least 10 days before the time of any
      intended public sale or of the time, after which any private sale or other
      disposition of the Collateral is to be made, shall be deemed to be reasonable
      notice of such sale or other disposition.  If permitted by applicable
      law, any perishable Inventory or other Collateral which threatens to speedily
      decline in value or which is sold on a recognized market may be sold immediately
      by Lender without prior notice to Borrower.  Borrower covenants and
      agrees not to interfere with or impose any obstacle to Lender’s exercise of its
      rights and remedies hereunder with respect to the Collateral.  Lender
      shall have no obligation to clean up or prepare the Collateral for sale except
      as is required by applicable law.  If Lender sells any of the
      Collateral upon credit, Borrower will only be credited with payments actually
      made by the purchaser that are received by Lender and applied to the
      Obligations.  Lender may in connection with any sale of the Collateral
      specifically disclaim any warranties of title or the like.

     

    11.3.  Nature
      of Remedies.  All rights and remedies granted Lender hereunder and
      under the other Loan Documents, or otherwise available at law or in equity,
      shall be deemed concurrent

     

     

     

    
      
        
        

      

      
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    and
      cumulative, and not alternative remedies, and Lender may proceed with any number
      of remedies at the same time or at different times until all Obligations are
      satisfied in full.  The exercise of any one right or remedy shall not
      be deemed a waiver or release of any other right or remedy, and Lender, upon
      or
      at any time after the occurrence of an Event of Default, may proceed against
      Borrower, any Guarantor, or their Property at any time, under any agreement,
      with any available remedy and in any order.  Nothing contained in this
      Agreement or the other Loan Documents shall be deemed to compel Lender at any
      time to accept a cure of any Event of Default hereunder.  In no event
      shall prior recourse to any Collateral be a prerequisite to Lender’s right to
      demand payment of any Obligation from Borrower or any Guarantor upon the
      occurrence and during the continuance of any Event of Default.

     

    11.4.  Application
      of Proceeds.  The proceeds from the sale or disposition of any
      Collateral shall be applied first to Expenses incurred by Lender and then to
      the
      Obligations that are then due and payable, in such order or manner as Lender
      may
      determine in the reasonable exercise of discretion.

     

    ARTICLE  XII   TERMINATION

     

    All
      Advances made hereunder shall automatically become due and payable in full
      on
      the Maturity Date.  All of Lender’s rights, liens and security
      interests in and to Borrower’s Property shall continue after any termination
      until (a) all Obligations have been indefeasibly paid and satisfied in full
      unless otherwise prohibited under any applicable federal or state law,
      (b) Lender shall have received a written agreement (in form and substance
      acceptable to Lender in its sole and absolute discretion) executed by Borrower
      and by a Person whose loans or advances to Borrower are used in whole or in
      part
      to satisfy the Obligations, indemnifying Lender from any loss or damage, or
      (c)
      Lender shall have retained such monetary reserves necessary to pay in full
      all
      Obligations for such period of time, in its reasonable discretion.

     

    ARTICLE  XIII    MISCELLANEOUS

     

    13.1.  Waivers.  Except
      as is otherwise provided herein, Borrower hereby waive due diligence, demand,
      presentment and protest and any notices thereof as well as notice of
      nonpayment.  No delay or omission of Lender to exercise any right or
      remedy hereunder, whether before or after the happening of any Event of Default,
      shall impair any such right or shall operate as a waiver thereof or as a waiver
      of any such Event of Default.  No single or partial exercise by Lender
      of any right or remedy shall preclude any other or further exercise thereof,
      or
      preclude any other right or remedy.

     

    13.2.  JURY
      TRIAL.  TO THE EXTENT ANY DISPUTE IS NOT SUBJECT TO ARBITRATION,
      LENDER AND BORROWER EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
      ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
      OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.

     

     

    
      
        
        

      

      
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    13.3.  GOVERNING
      LAW; SUBMISSION TO JURISDICTION; VENUE

     

    (a)  THIS
      AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
      PARTIES HEREUNDER AND THEREUNDER, AND ALL MATTERS ARISING HEREUNDER OR
      THEREUNDER OR RELATED HERETO OR THERETO, SHALL BE GOVERNED BY AND CONSTRUED
      AND
      INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.  Any
      legal action or proceeding with respect to this Agreement or any other Loan
      Document shall be brought in the courts of the State of Maryland or of the
      United States District Court for the District of Maryland, and, by execution
      and
      delivery of this Agreement,  Borrower, and Lender hereby irrevocably
      accept for themselves and in respect of their property, generally and
      unconditionally, the nonexclusive jurisdiction of such
      courts.  Borrower further irrevocably consents to the service of
      process out of any of the aforementioned courts in any such action or proceeding
      by the mailing of copies thereof by registered or certified mail return receipt
      requested, postage prepaid, or by nationally recognized overnight courier to
      it
      at the address set out for notices pursuant to Section 13.4, such service
      to become effective 3 days (or 1 day if sent by such courier) after such
      mailing.  Nothing herein shall affect the right of any party hereto to
      serve process in any other manner permitted by law or to commence legal
      proceedings or to otherwise proceed against a party hereto in any other
      jurisdiction.

     

    (b)  Borrower
      hereby irrevocably waives any objection which it may now or hereafter have
      to
      the laying of venue of any of the aforesaid actions or proceedings arising
      out
      of or in connection with this Agreement or any other Loan Document brought
      in
      the courts referred to in subsection (a) above and hereby further irrevocably
      waives and agrees not to plead or claim in any such court that any such action
      or proceeding brought in any such court has been brought in an inconvenient
      forum.

     

    13.4.  Notices.  Except
      as otherwise provided herein, all notices and correspondences hereunder shall
      be
      in writing and sent by certified or registered mail return receipt requested,
      by
      overnight delivery service, with all charges prepaid, or by facsimile (with
      transmission certification), if to Lender or Borrower to the addresses or by
      facsimile transmission set forth on the signature hereto.  All such
      notices and correspondence shall be deemed given (i) if sent by certified or
      registered mail, 3 Business Days after being postmarked, (ii) if sent by
      overnight delivery service, when received at the above stated addresses or
      when
      delivery is refused and (iii) if sent by facsimile transmission, when receipt
      of
      such transmission is acknowledged; provided that all notices to Lender shall
      not
      be effective until actually received.

     

    13.5.  Assignability.  Borrower
      shall not have the right to assign or delegate their obligations and duties
      under this Agreement or any other Loan Documents or any interest therein except
      with the prior written consent of Lender.

     

    13.6.  Payment
      of Expenses.  Borrower agrees to: (a) pay on demand all
      out-of-pocket costs and expenses (whether paid or incurred) of Lender in
      connection with (i) the negotiation,

     

     

     

    
      
        
        

      

      
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    preparation,
      execution and delivery and, to the extent customarily charged to its customers,
      administration of this Agreement and the other Loan Documents and the documents
      and instruments referred to therein (including, without limitation, the
      reasonable fees and expenses of counsel to Lender); (ii) searches, title
      examinations, filings and recordings (including, without limitation, all stamp
      or recording taxes or charges), and all other actions pertaining to the
      Collateral; (iii) any amendment, waiver or consent relating hereto and thereto
      including, without limitation, any such amendments, waivers or consents
      resulting from or related to any work-out, re-negotiation or restructure
      relating to the performance by Borrower under this Agreement; and (iv) the
      defense of all claims, cross-claims or counterclaims asserted at any time by
      Borrower or any other Person in connection with the rights, claims, liens and/or
      interests of Lender under this Agreement or the other Loan Documents or the
      Credit Line described herein and (b) upon demand, pay to Lender all costs and
      expenses (including the reasonable fees and disbursements of counsel and other
      professionals) paid or incurred by Lender in (i) enforcing, protecting,
      preserving or defending its rights under or in respect of this Agreement, the
      other Loan Documents or any other document or instrument now or hereafter
      executed and delivered in connection herewith; (ii) in collecting the
      Obligations following the occurrence of an Event of Default; (iii) in
      foreclosing or otherwise collecting upon the Collateral or any part thereof;
      and
      (iv) obtaining any legal, accounting or other advice in connection with any
      of the foregoing.  Borrower’s obligations under this Section
      13.6 shall survive any termination of this Agreement and the other Loan
      Documents and the payment in full of the Obligations, and are in addition to,
      and not in substitution of, any other of their Obligations set forth in this
      Agreement.  All such costs and expenses described in this Section
      13.6 are referred to collectively as “Expenses.”

     

    13.7.  Indemnification.  Borrower
      shall indemnify, defend and hold harmless Lender, its  directors,
      officers, members, managers, representatives, agents, employees, accountants,
      counsel, successors and assigns, and their respective Affiliates  from
      and against (a) any and all losses, claims, damages, liabilities,
      deficiencies, judgments or expenses incurred by any of them (except to the
      extent that it is finally judicially determined to have resulted from their
      own
      gross negligence or willful misconduct) arising out of or by reason of any
      litigation, investigation, claim or proceeding which arises out of or is in
      any
      way related to (i) this Agreement, the other Loan Documents, the Collateral
      or
      the transactions contemplated thereby, (ii) any actual or proposed use by
      Borrower of the proceeds of the Credit Line, (iii) Lender entering into,
      performing under or enforcing this Agreement, the other Loan Documents or any
      other agreements and documents relating hereto, including, without limitation,
      amounts paid in settlement, court costs and the fees and disbursements of
      counsel incurred in connection with any such litigation, investigation, claim
      or
      proceeding or any advice rendered in connection with any of the foregoing,
      or
      (iv) the breach by Borrower of any warranty, undertaking or covenant made
      at any time hereunder or under any other Loan Document and (b) any such losses,
      claims, damages, liabilities, deficiencies, judgments or expenses incurred
      in
      connection with any remedial or other action taken by Borrower or Lender in
      connection with compliance by Borrower with any federal, state or local
      environmental laws, acts, rules, regulations, orders, directions, ordinances,
      criteria or guidelines.  If and to the extent that the obligations of
      Borrower hereunder are unenforceable for any reason, Borrower hereby agrees
      to
      make the maximum contribution to the payment and satisfaction of such
      obligations which is permissible under applicable law.  Borrower’s
      obligations under this Section 13.7 shall survive any

     

     

    
      
        
        

      

      
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    termination
      of this Agreement and the other Loan Documents and the payment in full of the
      Obligations, and are in addition to, and not in substitution of, any other
      of
      their Obligations set forth in this Agreement.

     

    13.8.  Entire
      Agreement, Successors and Assigns.  This Agreement along
      with the other Loan Documents constitutes the entire agreement between Borrower
      and Lender regarding the subject matter hereof, supersedes any prior agreements
      among them, and shall bind and benefit Borrower and Lender and their respective
      successors and permitted assigns.  No rights are intended to be
      created hereunder or under any other Loan Documents for the benefit of any
      Person not a signatory hereto or thereto.

     

    13.9.  Amendments.  Neither
      the amendment or waiver of any provision of this Agreement or any other Loan
      Document, nor the consent to any departure by Borrower therefrom, shall in
      any
      event be effective unless the same shall be in writing and signed by Lender
      and
      each such amendment, waiver or consent shall be effective only in the specific
      instance and for the specific purpose for which given.

     

    13.10.  Non-Agency
      of Lender.  The relationship between Borrower on the one hand and
      Lender on the other hand shall be solely that of Borrower and
      Lender.  Lender shall not have any fiduciary responsibilities to
      Borrower or be deemed to have entered into any partnership or joint venture
      with
      Borrower.  Lender shall not undertake any responsibility to Borrower
      to review, evaluate or inform Borrower of any matter in connection with any
      phase of Borrower’s business or operations.

     

    13.11.  Counterparts.  This
      Agreement may be executed in any number of counterparts and by the different
      parties hereto in separate counterparts, each of which when so executed and
      delivered shall be an original, but all of which shall together constitute
      one
      and the same instrument.  Signature by facsimile shall bind the
      parties hereto.

     

    13.12.  Effectiveness.  This
      Agreement shall become effective on the date on which all of the conditions
      to
      effectiveness contained herein have been satisfied (as determined by Lender
      in
      its sole and absolute discretion) and all of the parties have signed a copy
      hereof (whether the same or different copies) and Lender shall have received
      executed originals of this Agreement and the other Loan Documents.

     

    13.13.  Severability.  In
      case any provision in or obligation under this Agreement or the Note or the
      other Loan Documents shall be invalid, illegal or unenforceable in any
      jurisdiction, the validity, legality and enforceability of the remaining
      provisions or obligations, or of such provision or obligation in any other
      jurisdiction, shall not in any way be affected or impaired thereby.

     

    13.14.  Headings
      Descriptive.  The headings of the several sections and subsections
      of this Agreement, and the Table of Contents, are inserted for convenience
      only
      and shall not in any way affect the meaning or construction of any provision
      of
      this Agreement.

     

     

     

    
      
        
        

      

      
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    13.15.  Maximum
      Rate.  Notwithstanding anything to the contrary contained
      elsewhere in this Agreement or in any other Loan Document, Borrower and Lender
      hereby agree that all agreements among them under this Agreement and the other
      Loan Documents, whether now existing or hereafter arising and whether written
      or
      oral, are expressly limited so that in no contingency or event whatsoever shall
      the amount paid, or agreed to be paid, to Lender  for the use,
      forbearance, or detention of the money loaned to Borrower and evidenced hereby
      or thereby or for the performance or payment of any covenant or obligation
      contained herein or therein, exceed the Highest Lawful Rate. If due to any
      circumstance whatsoever, fulfillment of any provisions of this Agreement or
      any
      of the other Loan Documents at the time performance of such provision shall
      be
      due shall exceed the Highest Lawful Rate, then, automatically, the obligation
      to
      be fulfilled shall be modified or reduced to the extent necessary to limit
      such
      interest to the Highest Lawful Rate, and if from any such circumstance any
      Lender should ever receive anything of value deemed interest by applicable
      law
      which would exceed the Highest Lawful Rate, such excessive interest shall be
      applied (as determined by Lender) to the reduction of the principal amount
      then
      outstanding hereunder or on account of any other then outstanding Obligations
      and not to the payment of interest, or if such excessive interest exceeds the
      principal unpaid balance then outstanding hereunder and such other then
      outstanding Obligations, such excess shall be refunded to
      Borrower.  All sums paid or agreed to be paid to Lender for the use,
      forbearance, or detention of the Obligations and other indebtedness of Borrower
      to Lender shall, to the extent permitted by applicable law, be amortized,
      prorated, allocated and spread throughout the full term of such indebtedness
      until payment in full so that the actual rate of interest on account of all
      such
      indebtedness does not exceed the Highest Lawful Rate throughout the entire
      term
      of such indebtedness.  The terms and provisions of this Section shall
      control every other provision of this Agreement and all agreements between
      Borrower and Lender.

     

    13.16.  Subordination.

     

    (a)  The
      payment of any principal or interest under the Credit Line is expressly
      subordinated to the Term Loan to the extent and in the manner set forth herein.
      Until the Term Loan is paid in full, Borrower shall not make any payments of
      principal of or interest under the Credit Line, provided however , that
      so long as no Event of Default hereunder has occurred, and if no Default or
      Event of Default hereunder would result from the making of any such payment(s),
      Borrower shall pay scheduled payments on account of accrued and unpaid interest
      in accordance with the terms of the Note and this Agreement.

     

    (b)  The
      Liens
      created by this Agreement and the other Loan Documents  on Collateral
      securing the Obligations under the Credit Line shall be junior and subordinate
      to the Liens on the same Collateral created by the Other Loan Documents, to
      the
      extent said Collateral secures payment of the Term Loan.

     

    13.17.  Information.  At
      Borrower’s written request, Lender agrees to keep confidential any information
      furnished or made available to it by Borrower pursuant to this Agreement;
      provided that nothing herein shall prevent Lender from disclosing such
      information (a) to any other Person if reasonably incidental to the
      administration of the credit facility provided herein, (b) as required
      by

     

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

     

    any
      law,
      rule, or regulation, (c) upon the order of any court or administrative
      agency; provided, however, if allowed by applicable law, rule, regulation or
      order, Lender shall use commercially reasonable efforts to notify Borrower
      of
      such order to allow Borrower to seek court relief to block or limit such
      disclosure, (d) upon the request or demand of any regulatory agency or
      authority; provided, however, if allowed by applicable law, rule, regulation
      or
      order, Lender shall use commercially reasonable efforts to notify Borrower
      of
      such order to allow Borrower to seek court relief to block or limit such
      disclosure, (e) that is or becomes available to the public or that is or
      becomes available to Lender other than as a result of a disclosure by Lender
      prohibited by this Agreement, (f) in connection with any litigation to
      which Lender or any of its Affiliates may be a party relating to this Agreement
      or the transactions contemplated hereunder, (g) to the extent necessary in
      connection with the exercise of any remedy under this Agreement or any other
      Loan Document, and (h) any information with respect to the U.S. federal income
      tax treatment and U.S. federal income tax structure of the transactions
      contemplated hereby and all materials of any kind (including opinions or other
      tax analyses) that are provided to Lender relating to such tax treatment and
      tax
      structure.

     

    13.18.  SPECIAL
      OREGON NOTICE:

     

    (a)  UNDER
      OREGON LAW ORAL AGREEMENTS OR ORAL COMMITMENTS TO (1) LOAN MONEY, (2) EXTEND
      CREDIT, (3) MODIFY OR AMEND ANY TERMS OF LOAN DOCUMENTS, (4) RELEASE ANY
      GUARANTOR, (5) FOREBEAR FROM ENFORCING REPAYMENT OF ANY LOAN OR THE EXERCISE
      OF
      ANY REMEDY UNDER LOAN DOCUMENTS, OR (6) MAKE ANY OTHER FINANCIAL ACCOMMODATION
      PERTAINING TO ANY LOAN ARE ALL UNENFORCEABLE.

     

    


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    Dated
      the
      date and year first written above.

     

    
      	
              BORROWER:

            	
              NEW
                WORLD BRANDS, INC.

               

              By:        /s/ M.
                David Kamrat

              Name: 
                M. David Kamrat

              Title:     CEO

              340
                W. 5th
                Avenue

              Eugene,
                Oregon  97401

               

               

            
	
              LENDER:

            	
              P
                & S SPIRIT, LLC

               

              By:          /s/
                Selvin Passen, M.D.

              Name:     Selvin
                Passen, M.D.

              Title:       Managing
                Director

              2700
                Lighthouse Point East

              Suite
                626

              Baltimore,
                Maryland 21224

            


    

    


     

     

    [SIGNATURE
      PAGE TO LOAN AND SECURITY AGREEMENT]

    
 

    S-1

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


     

    SCHEDULE
      1.1 Permitted Indebtedness

    


    


    All
      Indebtedness incurred in the ordinary course of Borrower’s business, including
      without limitation trade debt relating to purchase or lease of inventory,
      services, equipment or tools, operating leases, leasehold improvements and
      furnishings, attorneys’, accountants’ or other professional advisors’ fees,
      insurance, and the like.

    


    All
      Indebtedness incurred in relation to use or availability of automatic
      clearinghouse or merchant bank card services.

    


    All
      Indebtedness to the Israel Office of the Chief Scientist.

    


    All
      Indebtedness relating to the capital leases listed on Schedule
      6.21.

    


    All
      amounts due to shareholders as disclosed on the Borrower’s financial statements
      for the fiscal quarter ending March 31, 2007.

    


    All
      payroll and tax obligations.

    


    All
      amounts due as of the date hereof or in the future pursuant to the Term Note
      dated March 29, 2007 among Borrower, as Maker, and Lender, as
      Payee..

    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      1.2 Permitted Investments (Revised)

    


    


    Investments
      in existing subsidiary.

    


    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      1.3 Permitted Liens

    


    


    None
      other than as provided in Section 1.1, or pursuant to the Term Loan and Security
      Agreement dated March 29, 2007, or related documentation.

    


    


    


    


    


    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.6

    


    Location
      1 (no warehouse space, computer and office equipment only):

    


    Leased
      commercial premises at:

    340
      W.
      5th
      Avenue

    Eugene,
      OR 97401

    Landlord:
      Tim and Jean Clancy (individuals, as TBTE)

    Landlord
      address: 350 W. 5th Avenue,
      Eugene, OR
      97401

    


    Location
      2 (warehouse, computer and office equipment, including telecom computer
      equipment):

    


    Leased
      commercial premises at:

    488
      Lincoln Street

    Eugene,
      OR 97401

    Landlord:
      Simons Investment Properties, LLC (an Oregon limited liability
      company)

    Landlord
      address: 215 W. 5th Avenue,
      Eugene, OR
      97401

    


     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.7

    


    Names
      currently in use:

    


    New
      World
      Brands, Inc.

    IP
      Gear

    IP
      Gear
      Connect

    Qualmax,
      Inc.

    


    Names
      no
      longer in use, but used within past 5 years:

    


    Qualmax
      Professional Services, LLC

    Rent
      IT
      Telecom, LLC

    iNode
      Corporation

     

    
 

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.8

    


    Non-subsidiary
      affiliates:

    Qualmax,
      Inc. (holder of approximately 76% voting control)

    


    Subsidiaries:

    IP
      Gear,
      Ltd., an Israel company (wholly owned subsidiary of Borrower)

    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.9

    


     

    From
      our
      current (as of 3-23-07) draft form 10-KSB for year ending 12-31-06:

    


    The
      Singer Litigation.

    


    We
      are a
      defendant in a lawsuit filed by a former employee, who has made claims for
      unpaid salary and for certain previously granted stock options.  Via
      mediation in January, 2006, we have settled this lawsuit, and as part of the
      settlement we have agreed that Mr. Singer holds options to purchase up to 70,000
      shares of the Company’s common stock at a price of $0.10 per share, which
      options were issued to Mr. Singer during his association with the Company prior
      to 2002.  However, as of the time of filing we have not received final
      documentation dismissing the lawsuit and settling and releasing
      claims.  We expect to conclude final documentation within a matter of
      weeks.

    


    The
      MPI Litigation.

    


    As
      a
      result of the Reverse Acquisition the Company assumed the liabilities of
      Qualmax.  Qualmax was named as a defendant in certain litigation filed
      in France before the Trade Tribunal of Nanterre against B.O.S. Better Online
      Systems, Ltd. (“BOS”) by a former distributor of BOS, Media Partners
      International (“MPI,” and the “MPI Litigation”), whose contract with BOS
      allegedly related to certain distribution rights for the product division
      Qualmax purchased from BOS on December 31, 2005.  Pursuant to the
      asset purchase agreement between Qualmax and BOS, BOS agreed to indemnify and
      hold harmless Qualmax from liability, without limitation, arising from the
      claims raised in the MPI Litigation, and BOS has undertaken defense of Qualmax
      at BOS’s expense.  The litigation is in its early stages, and at last
      report from counsel the French court had not yet made definitive rulings as
      to
      venue and jurisdiction (whether the matter is properly before the French court,
      or whether it should be subject to Israeli jurisdiction).  We believe
      that no action has been taken in this matter since November, 2006.  At
      present, based upon the limited progress in the matter and without the benefit
      of completion of factual discovery, management believes this litigation does
      not
      pose a financial risk to the Company.

    


    The
      Blackstone Litigation. 

    


    Qualmax
      was named as a defendant a lawsuit entitled Capital Securities, LLC and
      Blackstone Communications Company v. Carlos Bertonnatti, Worldwide PIN Payment
      Corp. and Qualmax, Inc., Case No. 2006-15824-CA-01, in the Circuit Court of
      the
      11th Judicial
      Circuit in and for Miami-Dade County, Florida (the “Blackstone Litigation”),
      filed August 10, 2006.  The facts underlying the proceeding relate to
      a contract between defendant Worldwide PIN Payment Corp. and plaintiffs, and
      a
      third party, to plaintiff’s allegations of misappropriation of trade secrets and
      corporate opportunity, and to claims that defendants, or some of them,
      tortiously interfered with plaintiffs’ contract with a third
      party.  Plaintiffs seek monetary damages.  Management
      believes it is not entirely clear from the pleadings filed to date whether
      plaintiff’s claim that Qualmax misappropriated trade secrets, or tortiously
      interfered with a third party contract, or whether Qualmax is alleged to be
      liable under some other theory.  No formal discovery requests have
      been made of the Company, and the Company has not yet filed any responsive
      pleadings.  Co-defendants have answered and filed

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

    counterclaims
      and third party claims, but none of the claims of co-defendants are against
      Qualmax nor do they allege wrongdoing by Qualmax as a defense to claims against
      them by plaintiffs.  The Company is still investigating the claims
      against it, and the facts surrounding the claims against co-defendants, but
      that
      investigation is in its early stages and is incomplete.  Further, it
      is not yet clear how aggressively plaintiffs will pursue Qualmax as a defendant,
      and to date plaintiffs have not pursued Qualmax vigorously.  Based on
      the limited information available to management at this point, management does
      not believe Qualmax or the Company is liable for any wrongdoing, act or
      omission, in relation to the litigation, and management believes that Qualmax
      is
      not properly a party to the litigation.  However, management does not
      have sufficient information to provide a meaningful assessment of all the facts
      and circumstances relating to the claims against Qualmax and co-defendants
      nor
      to determine how costly and time-consuming defense of the matter may be
      regardless of the merits of the Company’s defense.  In addition, the
      Company believes it has viable claims for indemnification and damages against
      co-defendants but has not yet formally raised those claims or made a full
      determination of their value or role in the litigation.

     

    
 

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.13

    


    Our
      wholly owned Israeli subsidiary is subject to a royalty payable to the Israel
      Office of the Chief Scientist (“OCS”), as consideration for sums previously
      advanced to the company’s predecessor in interest in relation to development of
      our Claro software.  The OCS obligation is a royalty, paid at the rate
      of 3.5% of gross sales of the Claro product line.  The total royalty is
      capped at $2,183,647 and as of end of 2006 we had paid a total of $802,836,
      leaving $1,380,822 open balance.

    


    Pending
      trademark registration applications (or common law trademark
      rights):

    


    IP
      Gear

    IP
      Gear
      Connect

    Claro

    Better
      VoIP, Better Business

    


     

    
 

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.15

    


    See
      Schedule 6.6 for description of leased premises.  We own no real
      property.

    


     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.21

    


    


    Office
      lease 340 W. 5th Avenue,
      Eugene,
      Oregon

    


    Office
      lease 488 Lincoln Street, Eugene, Oregon

    


    Equipment
      lease (Equilease, 052659-001, “Konfer”)

    


    Equipment
      lease (Citicapital, 200162587, “Porta”)

    


    Equipment
      lease (Citicapital, 200176737, “WPP”)

    


    Equipment
      lease (Citicapital, 200186001, “Netsuite”)

    


    Netsuite
      license agreement

    


    Property
      and casualty insurance policy (Hartford, Cramer & Giles)

    


    D&O
      insurance policy (Chubb, Diversified)

    


    Subscription
      and Loan Agreements (P&S Spirit)

    


    Term
      Loan
      and Security Agreement (P&S Spirit)

    


     

    


    


    


    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.24

    


    See
      Schedule 6.9.

    


     

     

    
 

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      6.26

    


    


    
      	
              New
                World Brands, Inc.

            	 	 
	
              Cash
                Balance Report

            	 	 
	
              30-May-07

            	 	 
	
               

            	 	 
	 	 	 
	
              Account

            	
              Amount

            	
              Bank

            	
              Account

            
	
              Bank

            	 	 	 
	
              100300
                - Cash in Bank - NWB PCB

            	 	 	 
	
              100310
                - Cash in Bank - NWB PCB Corp

            	
              $19,648.20

            	
              Pacific
                Continental

            	
              24161754

            
	
              100320
                - Cash in Bank - NWB PCB IPG

            	
              $99,350.47

            	
              Pacific
                Continental

            	
              24161770

            
	
              100350
                - Cash in Bank - NWB PCB IPGC

            	
              $104,403.92

            	
              Pacific
                Continental

            	
              24161762

            
	
              100610
                - Cash in Bank - NWB PCB Payroll

            	
              $220.23

            	
              Pacific
                Continental

            	
              24161739

            
	
              Total
                - 100300 - Cash in Bank - NWB PCB

            	
              $223,622.82

            	 	 
	
              100450
                - Cash In Bank - Colonial - Inode

            	
              $1,016.38

            	
              Colonial
                Bank

            	
              8030996600

            
	
              100510
                - Cash in Bank - Stonegate - NWB

            	
              $11,921.09

            	
              Stonegate
                Bank

            	
              1004555

            
	
              100750
                - Cash in Bank - Deutsche Bank

            	
              $212.22

            	
              Deutsche
                Bank (Germany)

            	
              3000825
                00

            
	
              100800
                - Cash in Bank - HSBC

            	 	 	 
	
              100800
                - Cash in Bank - HSBC

            	
              ($6.97)

            	
              HSBC

            	
              389-06666-4

            
	
              100820
                - Cash in Bank - HSBC IPG

            	
              ($6.37)

            	
              HSBC

            	
              389-06669-9

            
	
              100850
                - Cash in Bank - HSBC IPGC

            	
              ($6.97)

            	
              HSBC

            	
              389-06681-8

            
	
              100890
                - Cash in Bank - HSBC Payroll

            	
              ($6.97)

            	
              HSBC

            	
              389-06667-2

            
	
              Total
                - 100800 - Cash in Bank - HSBC

            	
              ($27.28)

            	 	 
	
              101110
                - Money Market OCCU

            	
              $1,435.19

            	
              Oregon
                Community Credit Union

            	
              475696
                S19

            
	
              101210
                - Savings OCCU

            	
              $9.11

            	
              Oregon
                Community Credit Union

            	
              475696
                S3

            
	
              101310
                - Money Market Pershing OCCU

            	
              $53,847.87

            	
              Oregon
                Community Credit Union

            	
              4Y4-221430

            
	
              101610
                - Money Market NWB PCB

            	
              $348,463.48

            	
              Pacific
                Continental

            	
              24161747

            
	
              101710
                - Money Market Reserve NWB PCB

            	
              $251,746.68

            	
              Pacific
                Continental

            	
              20039582

            
	
              Total
                - Bank

            	
              $892,247.56