Document:

Exhibit 10.2

                               FINANCING AGREEMENT

      Effective  as  of  October  16,  2007  (the  "Effective  Date"),  THE  CIT
GROUP/COMMERCIAL SERVICES, INC., a New York corporation, with offices located at
Two  Wachovia  Center,  Suite 2500,  301 South Tryon  Street,  Charlotte,  North
Carolina  28202  (hereinafter  "CIT"),  is  pleased  to  confirm,  the terms and
conditions  under which CIT shall make loans and other financial  accommodations
to CONCORD  KEYSTONE SALES CORP.,  an Illinois  corporation,  with its principal
office located at the address set forth in Section 1(e) of the Schedule  (herein
the "Company").

SECTION 1 DEFINITIONS As used in this Agreement:

      Accounts shall mean any and all of the Company's  present and future:  (a)
accounts (as defined in the UCC);  (b)  instruments,  documents,  chattel  paper
(including electronic chattel paper) (all as defined in the UCC) relating to the
foregoing;  (c)  unpaid  seller's  or  lessor's  rights  (including  rescission,
replevin,  reclamation,  repossession  and stoppage in transit)  relating to the
foregoing or arising  therefrom;  (d) rights to any goods  represented by any of
the foregoing, including rights to returned, reclaimed or repossessed goods; (e)
reserves  and credit  balances  arising in  connection  with or pursuant to this
Agreement; (f) guaranties, other supporting obligations, payment intangibles and
letter of credit  rights  (all as  defined  in the UCC)  relating  to any of the
foregoing;  (g) insurance  policies or rights  relating to any of the foregoing;
(h) general intangibles  pertaining to any of the foregoing (including rights to
payment,  including  those arising in connection  with bank and non-bank  credit
cards), and all books and records and any electronic media and software relating
thereto; (i) notes,  deposits or other property of the Company's account debtors
securing the obligations  owed by such account  debtors to the Company;  and (j)
all Proceeds of any of the foregoing.

      Agreement shall mean this Financing Agreement,  together with the Schedule
and any other schedules,  exhibits, supplements or annexes hereto, all as may be
renewed, amended, restated or supplemented from time to time.

      Availability  shall mean, at any time,  the amount by which (a) the lesser
of the Revolving Credit Limit or the Borrowing Base at such time exceeds (b) the
sum at such time of the  outstanding  balance of the Revolving Loan Account plus
the undrawn amount of all outstanding Letters of Credit.

      Availability  Reserve  shall  mean an amount  equal to the sum of: (a) any
reserve which CIT may establish  from time to time pursuant to the express terms
of this Agreement; plus (b) any additional reserves identified in Section 2.3 of
the Schedule;  plus (c) such other reserves  against  Availability  as CIT deems
necessary in the exercise of its reasonable business judgment as a result of (i)
negative forecasts and/or trends in the Company's business, industry, prospects,
profits,  operations or financial condition or (ii) other issues,  circumstances
or facts that could  otherwise  negatively  impact the Company or its  business,
prospects, profits, operations, industry, financial condition or assets.

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      Base Rate shall mean the rate of interest per annum  announced by JPMorgan
Chase Bank (or its  successor)  from time to time as its prime rate in effect at
its principal  office in New York City, which rate is not intended as the lowest
rate of interest charged by JPMorgan Chase Bank to its borrowers.

      Base Rate Loan shall mean a loan outstanding under this Agreement when the
interest rate applicable thereto is based upon the Base Rate.

      Borrowing  Base shall  have the  meaning  set forth in Section  2.2 of the
Schedule.

      Business Day shall mean any day on which CIT is open for business.

      CIT's Bank Account  shall mean CIT's bank  account at JPMorgan  Chase Bank
(or its successor) in New York, New York or such other account of CIT as CIT may
designate from time to time.

      CIT's  System  shall mean CIT's  StuckyNet  or other  internet-based  loan
accounting and reporting system.

      Collateral  shall  mean  all  present  and  future  Accounts,   Inventory,
Documents of Title and Other Collateral.

      Default shall mean any event  specified in Section 8.1 hereof,  regardless
of whether any requirement for the giving of notice, the lapse of time, or both,
or any other condition, event or act has occurred or been satisfied.

      Depository  Account shall mean each bank account (and the related lockbox,
if any) subject to CIT's control that is established by CIT, at CIT's option, or
the Company pursuant to Section 2.1.2 or Section 5.1.11 hereof.

      Documents  of Title  shall mean all of the  Company's  present  and future
documents  (as  defined  in the  UCC)  relating  to  Inventory,  and any and all
warehouse  receipts,  bills  of  lading,  shipping  documents,   chattel  paper,
instruments and similar documents relating to Inventory,  all whether negotiable
or non-negotiable, and all Proceeds of any of the foregoing.

      Eligible  Accounts  shall  mean the gross  amount of the  Company's  Trade
Accounts  that are  subject  to a valid,  exclusive,  first  priority  and fully
perfected  security  interest in favor of CIT,  which conform to the  warranties
contained  herein and which,  at all times,  continue to be acceptable to CIT in
the exercise of its reasonable business judgment, less, without duplication, the
sum of:

            (a)  actual  returns,  discounts,   claims,  disputes,  credits  and
allowances  of  any  nature  (whether  issued,   owing,   granted,   claimed  or
outstanding), plus

            (b) reserves for such Trade Accounts that arise from, or are subject
to or include:  (i) sales to the United  States of  America,  any state or other
governmental entity or to any

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agency,  department or division  thereof,  except for any such sales as to which
the Company has complied with the  Assignment of Claims Act of 1940 or any other
applicable statute, rules or regulation to CIT's satisfaction in the exercise of
its reasonable  business  judgment;  (ii) foreign sales,  other than sales which
otherwise  comply with all of the other criteria for  eligibility  hereunder and
are (x) secured by letters of credit (in form and substance satisfactory to CIT)
issued or confirmed  by, and payable at, banks  acceptable to CIT having a place
of business in the United  States of America,  or (y) to  customers  residing in
Canada; provided that, such Accounts are payable in United States Dollars; (iii)
Accounts  that  remain  unpaid  more than the  earlier of ninety  (90) days from
invoice date or sixty (60) days from due date; (iv) contra  accounts;  (v) sales
to any  subsidiary  (direct or indirect)  or parent  (direct or indirect) of the
Company, or to any other person or entity otherwise  affiliated with the Company
or with any  shareholder,  subsidiary  (direct or indirect) or parent (direct or
indirect)  of the Company in any way;  (vi) bill and hold  (deferred  shipment),
consignment sales,  guaranteed sales, sale and return, sale on approval or other
terms  under  which  payment  by  the  account  debtor  may  be  conditional  or
contingent;  (vii) sales to any customer which is either (w) insolvent,  (x) the
debtor in any bankruptcy, insolvency, arrangement, reorganization,  receivership
or similar  proceedings under any federal or state law, (y) negotiating,  or has
called a meeting of its creditors for purposes of  negotiating,  a compromise of
its  debts,  or (z)  financially  unacceptable  to CIT  or has a  credit  rating
unacceptable to CIT; (viii) all sales to any customer if fifty-percent  (50%) or
more of the aggregate dollar amount of all outstanding invoices to such customer
are unpaid more than the earlier of ninety (90) days from  invoice date or sixty
(60)  days  from due  date;  (ix) the  amount  at any  time  that the  aggregate
outstanding  sales to Walgreen  Co.  and/or its  affiliates  exceeds  forty-five
percent (45%) or more of all Eligible  Accounts at such time;  (x) the amount at
any time that the aggregate outstanding sales to Wal-Mart Stores Inc. and/or its
affiliates  exceeds sixty percent (60%) or more of all Eligible Accounts at such
time;  (xi) the amount at any time that the aggregate  outstanding  sales to any
customer (other than Wal-Mart Stores Inc. or Walgreen Co.) and/or its affiliates
exceeds  twenty  percent  (20%) or more of all  Eligible  Accounts at such time;
(xii) pre-billed receivables and receivables arising from progress billings; and
(xiii) sales not payable in United States currency; plus

            (c)  reserves  established  by CIT to account for  increases  in the
dilution of the Company's Trade Accounts above the Company's historical dilution
levels as determined by CIT in the exercise of its reasonable business judgment;
plus

            (d)  such  other  reserves  against  Trade  Accounts  as  CIT  deems
necessary  in the  exercise of its  reasonable  business  judgment and which are
customary either in the commercial  finance industry or in the lending practices
of CIT.

It is understood and agreed that:

            (1) CIT may, but shall not be obligated  to,  increase  from time to
time the  concentration  percentages  contained in clauses  (b)(ix),  (b)(x) and
(b)(xi) above if requested by the Company,  such  increases to be in amounts and
for periods of time determined by CIT in its reasonable credit judgment based on
information provided to CIT by the Company; and

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            (2) CIT may reduce the  percentage  contained in clause (b)(x) above
based on CIT's  reasonable  credit  judgment  but not below  forty-five  percent
(45%).

      Eligible Inventory shall mean the gross amount of the Company's  Inventory
that is  subject  to a valid,  exclusive,  first  priority  and fully  perfected
security interest in favor of CIT and that conforms to the warranties  contained
herein and that, at all times, continues to be acceptable to CIT in the exercise
of  its  reasonable  business  judgment,  less,  without  duplication:  (a)  all
work-in-process;  (b) all supplies (other than raw materials); (c) all Inventory
not present in the United States of America  except for Inventory  in-transit to
the  Company's  customers  located  in Canada;  (d) all  Inventory  returned  or
rejected by the  Company's  customers  (other than goods that are  undamaged and
resalable  in the normal  course of  business)  and goods to be  returned to the
Company's suppliers;  (e) all Inventory in the possession of, or located with, a
warehouseman,  bailee,  third party processor,  or other third party (other than
carriers engaged by the Company), unless such warehouseman,  bailee, third party
processor or third party has executed a notice of security interest agreement or
waiver agreement (in form and substance satisfactory to CIT); and (f) the amount
of such other reserves against  Inventory as CIT deems necessary in the exercise
of its reasonable business judgment, including, without limitation, reserves for
special order, or private label goods, Inventory subject to a license agreement,
discontinued,  slow-moving and obsolete Inventory,  market value declines,  bill
and hold (deferred  shipment),  shrinkage and any applicable  customs,  freight,
duties and taxes.

      Eligible In-Transit Inventory shall mean the gross amount of the Company's
finished  goods  Inventory  that is in transit to the United  States of America,
that conforms to the warranties contained herein, that at all times continues to
be acceptable  to CIT in the exercise of its  reasonable  business  judgment and
that meets the following additional requirements:  (a) such Inventory is shipped
via shipping  terms that  provide for the passage of title of such  Inventory to
the Company at or prior to the time such Inventory is loaded on the carrier; (b)
all documents  issued by the carrier or bailee thereof are negotiable and issued
in the name of CIT; (c) such Inventory is covered by cargo insurance  reasonably
acceptable to CIT with CIT as loss payee; and (d) a bailment agreement,  in form
and content  satisfactory  in all  respects to CIT,  has been duly  executed and
delivered to CIT by each freight forwarder or customs agent with respect to such
Inventory or related Documents of Title,  less such reserves against  in-transit
Inventory  as CIT deems  necessary in the  exercise of its  reasonable  business
judgment,  including,  without limitation,  reserves for any applicable customs,
freight, duties and taxes.

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

      Event of Default  shall have the meaning given to such term in Section 8.1
hereof.

      GAAP shall mean  generally  accepted  accounting  principles in the United
States of America as in effect  from time to time and for the period as to which
such accounting principles are to apply.

      Inventory shall mean all of the Company's  present and hereafter  acquired
inventory (as defined in the UCC) including, without limitation, all merchandise
and inventory in all stages of

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production (from raw materials through  work-in-process  to finished goods), and
all  additions,   substitutions  and  replacements  thereof,  wherever  located,
together  with  all  goods  and  materials  used  or  usable  in  manufacturing,
processing,  packaging, selling, promoting or shipping of the foregoing, and all
Proceeds of any of the foregoing.

      Inventory  Formula Amount shall mean the lesser of (a) sixty percent (60%)
of the aggregate value of the Eligible Inventory, valued at the lower of cost or
market on a first in, first out basis or (b)  eighty-five  percent  (85%) of the
Net Forced Liquidation Value.

      In-Transit  Inventory  Formula  Amount  shall mean the lesser of (a) sixty
percent  (60%) of the  aggregate  value of the  Eligible  In-Transit  Inventory,
valued at cost,  (b)  eighty-five  percent  (85%) of the Net Forced  Liquidation
Value.

      Issuing  Institution  shall  mean CIT,  any  affiliate  of CIT or any bank
issuing a Letter of Credit for the Company.

      Letters of Credit shall mean all letters of credit issued for or on behalf
of the Company with the  assistance  of CIT by an Issuing  Institution,  and any
banker's  acceptances  covered by a Letter of Credit Guaranty in accordance with
Section 2.2 hereof.

      Letter of Credit  Guaranty  shall mean any  guaranty or similar  agreement
delivered  by CIT to an  Issuing  Institution  of  the  Company's  reimbursement
obligation under such Issuing Institution's reimbursement agreement, application
for letter of credit or other like document.

      Letter of Credit  Sub-Line  shall mean the commitment of CIT to assist the
Company  in  obtaining  Letters  of Credit in an  aggregate  amount set forth in
Section 2.4 of the Schedule.

      LIBOR  Rate  shall  mean at any  time of  determination,  and  subject  to
availability,  for each  calendar  month,  the  higher of the  one-month  London
Interbank  Offered  Rate paid in London on dollar  deposits  from other banks as
published  under  "Money  Rates" in the New York City edition of the Wall Street
Journal  or, if there is no such  publication  or  statement  therein  as to the
London Interbank Offered Rate, then in any publication used in the New York City
financial community.

      LIBOR Rate Loan shall mean a loan  outstanding  under this  Agreement when
the interest rate applicable thereto is based upon the LIBOR Rate.

      Loan  Documents  shall mean this  Agreement,  the other closing  documents
executed by the Company,  and any other  ancillary loan and security  agreements
executed by the Company from time to time in connection with this Agreement, all
as may be renewed, amended, restated or supplemented from time to time.

      Net Forced Liquidation Value shall mean, at any time of determination, the
product  of (a)  the  cost  of  all  of the  Eligible  Inventory  at  such  time
(determined on a first-in,  first-out basis) multiplied by (b) the percentage of
the cost of the Eligible Inventory that was determined by the

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most recent appraisal of all of the Company's  Inventory conducted in accordance
with Section 6.8 hereof to be the net forced  liquidation value of such Eligible
Inventory.

      Obligations  shall mean: (a) all loans,  advances and other  extensions of
credit  made  by CIT to the  Company  or to  others  for the  Company's  account
(including,  without limitation,  all Revolving Loans and all obligations of CIT
under  Letter  of  Credit  Guaranties);  (b)  any and  all  other  indebtedness,
obligations and liabilities  which may be owed by the Company to CIT and arising
out of, or incurred in connection  with, this Agreement or any of the other Loan
Documents (including all Out-of-Pocket  Expenses),  whether (i) now in existence
or incurred by the Company from time to time hereafter,  (ii) secured by pledge,
lien upon or security interest in any of the Company's assets or property or the
assets or property of any other person, firm, entity or corporation,  (iii) such
indebtedness is absolute or contingent,  joint or several, matured or unmatured,
direct or indirect,  or (iv) the Company is liable to CIT for such  indebtedness
as principal,  surety,  endorser,  guarantor or otherwise; (c) all indebtedness,
obligations and liabilities owed by the Company to CIT under any other agreement
or  arrangement  now or hereafter  entered into between the Company,  on the one
hand,  and CIT, on the other hand,  whether or not such agreement or arrangement
relates to the transactions  contemplated by this Agreement (including,  without
limitation,  indebtedness  for goods and services  purchased by the Company from
any party whose  accounts  are factored or financed by CIT);  (d)  indebtedness,
obligations  and  liabilities  incurred  by, or  imposed  on, CIT as a result of
environmental  claims  relating to the Company's  operations,  premises or waste
disposal  practices or disposal sites;  (e) the Company's  liabilities to CIT as
maker or endorser on any promissory note or other  instrument for the payment of
money; and (f) the Company's liabilities to CIT under any instrument of guaranty
or indemnity,  or arising under any guaranty,  endorsement or undertaking  which
CIT may  make or  issue to  others  for the  Company's  account,  including  any
accommodations  extended  by CIT with  respect to  applications  for  Letters of
Credit,  CIT's  acceptance  of  drafts  or CIT's  endorsement  of notes or other
instruments for the Company's account and benefit.

      Other  Collateral  shall mean:  (a) all present and hereafter  established
lockbox,  blocked account and other deposit accounts maintained with any bank or
financial  institution  into  which the  proceeds  of  Collateral  are or may be
deposited (including the Depository Accounts); (b) all cash and other monies and
property in the possession or control of CIT (including negative balances in the
Revolving  Loan  Account  and  cash  collateral  held  by CIT  pursuant  to this
Agreement);  (c) all books, records, invoices, ledger cards, bills of lading and
other shipping evidence, statements, correspondence, credit files and other data
relating  to the  Collateral  or any  account  debtor,  disks and  related  data
processing software at any time evidencing or containing information relating to
any of the Collateral  described herein or otherwise necessary or helpful in the
collection  thereof or realization  thereon;  and (d) all Proceeds of any of the
foregoing.

      Out-of-Pocket  Expenses  shall mean all of CIT's present and future costs,
fees and expenses  incurred from third parties in connection with this Agreement
and the other Loan Documents,  including,  without  limitation,  (a) the cost of
lien  searches  (including  tax  lien  and  judgment  lien  searches),   pending
litigation  searches and similar items, (b) fees and taxes imposed in connection
with the filing of any financing  statements or other personal property security
documents; (c) all costs and expenses incurred by CIT in opening and maintaining
the  Depository  Accounts  and any related  lockboxes,  depositing  checks,  and
receiving and

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transferring  funds (including  charges imposed on CIT for "insufficient  funds"
and the return of deposited  checks);  (d) note taxes and intangible  taxes; (e)
all appraisal fees and expenses payable by the Company under Section 6.8 hereof,
and all reasonable  costs,  fees and expenses incurred by CIT in connection with
any action taken under Section 6.7 hereof, including reasonable travel, meal and
lodging  expenses of CIT personnel;  (f) all reasonable costs that CIT may incur
to maintain the insurance  required hereunder and all reasonable costs, fees and
expenses incurred by CIT in connection with the collection of insurance proceeds
with respect to the Collateral;  (g) all reasonable  costs,  fees,  expenses and
disbursements  of outside  counsel hired by CIT to consummate  the  transactions
contemplated by this Agreement  (including the  documentation and negotiation of
this  Agreement,  the other Loan Documents and all  amendments,  supplements and
restatements  thereto or thereof),  and to advise CIT as to matters  relating to
the  transactions   contemplated  hereby;  and  (h)  without  duplication,   all
reasonable  costs,  fees and  expenses  incurred by CIT in  connection  with the
administration,  collection, liquidation, enforcement, protection and defense of
the  Obligations,   the  Collateral  and  CIT's  rights  under  this  Agreement,
including,   without  limitation,  all  reasonable  costs,  fees,  expenses  and
disbursements  of  outside  counsel  to CIT  incurred  as a result of a workout,
restructuring,  reorganization,  liquidation,  insolvency  proceeding and in any
appeals  arising  therefrom,  whether  incurred  before,  during  or  after  the
termination  of this Agreement or the  commencement  of any case with respect to
the  Company or any  subsidiary  of the  Company  (as the case may be) under the
United States Bankruptcy Code or any similar statute.

      Parent shall mean Concord Camera Corp., a New Jersey corporation.

      Permitted  Encumbrances shall mean: (a) liens existing on the Closing Date
and set forth in Section 1(g) of the Schedule;  (b) statutory liens of landlords
and liens of carriers,  warehousemen,  bailees, mechanics, materialmen and other
like  liens  imposed by law,  created in the  ordinary  course of  business  and
securing  amounts not yet due (or which are being  contested  in good faith,  by
appropriate  proceedings  or other  appropriate  actions which are sufficient to
prevent imminent  foreclosure of such liens), and with respect to which adequate
reserves or other appropriate  provisions are being maintained by the Company in
accordance  with GAAP; (c) deposits made (and the liens thereon) in the ordinary
course of business  of the  Company  (including,  without  limitation,  security
deposits  for  leases,  indemnity  bonds,  surety  bonds  and  appeal  bonds) in
connection with workers' compensation, unemployment insurance and other types of
social  security  benefits  or to  secure  the  performance  of  tenders,  bids,
contracts  (other than for the  repayment  or  guarantee  of  borrowed  money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government  contracts;  (d) liens
granted to CIT by the Company;  (e) liens of judgment creditors;  provided that,
such liens do not exceed $100,000 in the aggregate at any time (other than liens
bonded or insured to the reasonable  satisfaction of CIT); and (g) Permitted Tax
Liens.

      Permitted Tax Liens shall mean liens for taxes not yet due and payable and
liens for taxes that the Company is  contesting  in good faith,  by  appropriate
proceedings which are sufficient to prevent imminent  foreclosure of such liens,
and with respect to which adequate  reserves are being maintained by the Company
in accordance  with GAAP;  provided that, in either case, such liens (a) are not
filed of record in any  public  office,  (b) are not senior in  priority  to the
liens  granted  by the  Company to CIT,  or (c) do not secure  taxes owed to the
United States

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of  America  (or any  departmental  or  agency  thereof)  or any  State or State
authority,  if applicable  State law provides for the priority of tax liens in a
manner similar to the laws of the United States of America.

      Proceeds shall have the meaning given to such term in the UCC,  including,
without limitation, all (a) payments or other proceeds from an insurance carrier
with  respect to any loss,  casualty or damage to  Collateral,  and (b) payments
received  on account of any  condemnation  or other  governmental  taking of any
Collateral.

      Renewal Date shall mean, initially, the date set forth in Section 6 of the
Schedule and, subsequently, the same date in every year thereafter.

      Revolving  Credit  Limit shall mean the amount set forth in Section 2.1 of
the Schedule.

      Revolving  Line  of  Credit  shall  mean  the  commitment  of CIT to  make
Revolving Loans pursuant to Section 2.1 hereof and assist the Company in opening
Letters of Credit pursuant to Section 2.2 hereof,  in an aggregate amount not to
exceed the Revolving Credit Limit.

      Revolving  Loan  Account  shall mean the  account on CIT's  books,  in the
Company's  name,  in which the Company will be charged with all  Obligations  in
accordance with Section 2.1.3 hereof.

      Revolving  Loans shall mean the loans made from time to time to or for the
account of the Company by CIT pursuant to Section 2.1 of this Agreement.

      Schedule shall mean the Schedule  attached hereto and incorporated  herein
by reference.

      Subordinated  Debt shall mean all  indebtedness  of the  Company  (and the
note(s)  evidencing such indebtedness) that is subordinated to the prior payment
and  satisfaction  of the  Obligations  pursuant  to a  subordination  agreement
between the subordinating creditor and CIT.

      Trade  Accounts  shall mean that portion of the Company's  Accounts  which
arises from the sale of Inventory  or the  rendition of services in the ordinary
course of the Company's business.

      UCC shall mean the Uniform  Commercial Code as the same may be amended and
in effect from time to time in the State of New York.

SECTION 2 FINANCIAL COMMITMENTS

Subject to the terms and conditions set forth in this  Agreement,  CIT agrees to
make the following financial accommodations to the Company:

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2.1   Revolving Loans and Collections

      2.1.1  Amounts and Requests.  Subject to the terms and  conditions of this
Agreement, CIT may make in its discretion loans and advances to the Company on a
revolving  basis in amounts  requested by the Company,  but not in excess of the
Availability  on the date of the request  therefor or the funding  thereof.  All
requests by the  Company  for a Revolving  Loan must be received by CIT no later
than 11:00 a.m.,  Charlotte,  North  Carolina  time on the  Business  Day that a
Revolving Loan is required.  The Company hereby authorizes CIT to make Revolving
Loans to the Company based upon a telephonic or e-mail request (or, if permitted
by CIT,  based upon a request  posted on CIT's  System)  made by any  officer or
other  employee of the Company  that the  Company has  authorized  in writing to
request  Revolving  Loans  hereunder,   as  reflected  by  CIT's  records.  Each
telephonic,  e-mail or posted request by the Company shall be  irrevocable,  and
the Company agrees to confirm any such request for a Revolving Loan in a writing
approved by CIT and signed by such  authorized  officer or employee,  within one
(1)  Business  Day of CIT's  request for such  confirmation.  CIT shall have the
right to rely on any  telephonic,  e-mail or posted request for a Revolving Loan
made by anyone purporting to be an officer or other employee of the Company that
the Company has  authorized  in writing to request  Revolving  Loans  hereunder,
without further investigation.

      2.1.2 Handling of Proceeds of Collateral; Cash Dominion.

            (a) Collection of Accounts and Other Proceeds.  The Company,  at its
expense,  will  enforce  and collect  payments  and other  amounts  owing on all
Accounts in the ordinary course of the Company's  business  subject to the terms
hereof.  The Company  agrees to direct its  account  debtors and any credit card
processors  to send  payments on all Accounts  directly to a lockbox  associated
with a Depository  Account or the Depository  Account directly,  as the case may
be,  and to  include  on all of the  Company's  invoices  the  address of such a
lockbox as the sole  address  for  remittance  of payment.  Notwithstanding  the
foregoing,  should the Company  ever  receive any payment on an Account or other
Proceeds of the sale of Collateral, including checks, cash, receipts from credit
card sales and receipts,  notes or other instruments or property with respect to
any  Collateral,  the  Company  agrees to hold such  proceeds  in trust for CIT,
separate  from the  Company's  other  property  and funds,  and to deposit  such
proceeds directly into a Depository  Account not more than two (2) Business Days
after receipt.

            (b) Transfer of Funds from Depository  Accounts.  Funds remaining on
deposit in a Depository  Account shall be  transferred  to CIT's Bank Account on
each  Business Day (except  Veterans  Day),  and the Company  agrees to take all
actions reasonably  required by CIT or any bank at which a Depository Account is
maintained in order to effectuate the transfer of funds in this manner.  Subject
to Section 3.2.3 hereof,  all amounts received from a Depository Account and any
other  proceeds of the  Collateral  deposited  into CIT's Bank Account will, for
purposes of calculating  Availability and interest, be credited to the Revolving
Loan Account on the date of deposit in CIT's Bank Account. No checks,  drafts or
other  instruments  received by CIT shall constitute final payment to CIT unless
and until such instruments have actually been collected.

                                       9
<PAGE>

            (c) New  Depository  Accounts.  The  Company  agrees not to open any
lockbox  or new  bank  account  into  which  Proceeds  of  Collateral  are to be
delivered  or  deposited  unless  concurrently  with the opening of such lockbox
and/or bank  account,  CIT,  the Company and the bank which will  maintain  such
lockbox  or at which  such  account  will be  maintained,  execute a  depository
account  control  agreement,  in form  and  substance  satisfactory  to CIT with
respect to such lockbox and/or related bank account.  Upon  compliance  with the
terms set forth above,  such  lockbox  and/or bank  account  shall  constitute a
Depository Account for purposes of this Agreement.

      2.1.3 Revolving Loan Account.  CIT shall charge the Revolving Loan Account
for all loans  and  advances  made by CIT to the  Company  or for the  Company's
account, and at CIT's option for any other Obligations,  including Out-of-Pocket
Expenses, interest and fees when due and payable hereunder. The Company confirms
that any charges  which CIT may make to the  Revolving  Loan Account as provided
herein  will be made as an  accommodation  to the  Company  and  solely at CIT's
discretion,  without  notice to the Company.  If a credit  balance exists in the
Revolving Loan Account,  such credit balance shall not accrue  interest in favor
of the  Company  but shall be  available  to the Company at any time or times so
long as no Default or Event of Default exists.

      2.1.4 Repayment of Overadvances. If at any time the sum of the outstanding
balance of the  Revolving  Loan  Account and the undrawn  amount of  outstanding
Letters of Credit exceed either the  Revolving  Credit Limit (or any  applicable
sublimits thereof) or the Borrowing Base at such time, the amount of such excess
shall be immediately  due and payable,  unless CIT otherwise  agrees in writing.
Should CIT for any reason  honor  requests  for loans or  advances  in excess of
Availability,  such loans or advances shall be made in CIT's sole discretion and
subject to any additional terms CIT deems necessary.

      2.1.5  Application  of  Proceeds  of  Collateral.  Unless  this  Financing
Agreement  expressly  provides  otherwise,  so long as no Event of Default shall
have  occurred and remain  outstanding,  CIT agrees to apply (i) all Proceeds of
Trade  Accounts and Inventory to the  Revolving  Loan Account and (ii) any other
payment  received  by CIT with  respect  to the  Obligations,  in such order and
manner as CIT may elect in its sole  discretion.  If an Event of  Default  shall
have occurred and remain  outstanding,  CIT may apply all Proceeds of Collateral
and all other payments received by CIT to the payment of the Obligations in such
manner and in such order as CIT may elect in its sole discretion.

      2.1.6  Monthly  Statement.  Within ten (10) Business Days after the end of
each month,  CIT agrees to prepare and make  available to the Company (by access
to CIT's  System or as otherwise  mutually  agreed to by the Company and CIT), a
statement  showing the  accounting  for the charges,  loans,  advances and other
transactions  occurring  between CIT and the Company  during that month.  Absent
manifest error,  each monthly statement shall be deemed correct and binding upon
the Company and shall  constitute an account  stated between the Company and CIT
unless CIT receives a written  statement of  exception  from the Company  within
thirty (30) days of the date of such monthly statement.

                                       10
<PAGE>

      2.1.7 Access to CIT's System.  CIT shall provide to the Company  access to
CIT's System during  normal  business  hours,  for the purposes of (i) obtaining
information  regarding loan balances and Availability,  and (ii) if permitted by
CIT,  making  requests  for  Revolving  Loans  and  submitting   borrowing  base
certificates.  Such access shall be subject to the following  terms, in addition
to all terms set forth on the website for CIT's System:

            (a) CIT shall provide to the Company an initial password for secured
access to CIT's  System.  The Company  shall provide CIT with a list of officers
and employees that are authorized from time to time to access CIT's System,  and
the Company  agrees to limit  access to the  password  and CIT's  System to such
authorized  officers and employees.  After the initial access, the Company shall
be solely  responsible  for (i) changing and  maintaining  the  integrity of the
Company's  password and (ii) any unauthorized  use of the Company's  password or
CIT's System by the Company's officers and employees.

            (b) The Company shall use CIT's System and the Company's information
thereon  solely for the  purposes  permitted  above,  and shall not access CIT's
System for the benefit of third parties or provide any information obtained from
CIT's System to third parties.  CIT makes no representation that loan balance or
Availability information is or will be available, accurate, complete, correct or
current at all times.  CIT's System may be inoperable or inaccessible  from time
to time, whether for required website maintenance,  upgrades to CIT's System, or
for other  reasons,  and in any such event the Company  must obtain loan balance
and  Availability  information,  and (if  permitted  by CIT) make  requests  for
Revolving  Loans and submit  borrowing base  certificates  using other available
means.

            (c) The Company hereby confirms and agrees that CIT's System consist
of proprietary  software,  data,  tools,  scripts,  algorithms,  business logic,
website designs and interfaces and related  intellectual  property,  information
and documentation.  CIT's System and related intellectual property,  information
and  documentation  are the sole and exclusive  property of CIT, and the Company
shall  have no right,  title or  interest  therein  or  thereto,  except for the
limited  right to access  CIT's System for the purposes  permitted  above.  Upon
termination  of this  Agreement,  the  Company  agrees to cease any use of CIT's
System.

            (d) All  agreements,  covenants and  representations  and warranties
made by the Company in any borrowing base certificate  submitted to CIT by means
of CIT's System are incorporated herein by reference.

2.2   Letters of Credit

      2.2.1  Amounts  and Form.  Subject  to the terms  and  conditions  of this
Agreement, CIT agrees to either issue Letters of Credit or assist the Company in
establishing or opening Letters of Credit with an Issuing Institution by joining
in the  applications  for such  Letters of Credit,  and/or  issuing  one or more
Letter of Credit  Guaranties;  provided that, the face amount of any such Letter
of Credit shall not exceed  Availability on the date of the request  therefor or
the issuance thereof and the aggregate undrawn amount of all outstanding Letters
of Credit shall not at any time exceed the Letter of Credit Sub-Line. The terms,
form and purpose of each Letter of

                                       11
<PAGE>

Credit  and all  documentation  in  connection  therewith,  and any  amendments,
modifications  or  extensions  thereof must be mutually  acceptable  to CIT, the
Issuing Institution and the Company.

      2.2.2  Authority to Charge  Revolving  Loan  Account.  The Company  hereby
authorizes  CIT,  without  notice to the Company,  to charge the Revolving  Loan
Account with the amount of all indebtedness,  liabilities and obligations of any
kind  incurred  by CIT under a Letter  of  Credit or Letter of Credit  Guaranty,
including  the  charges  of  an  Issuing  Institution,   as  such  indebtedness,
liabilities and  obligations are charged to or paid by CIT, or if earlier,  upon
the occurrence of an Event of Default.

      2.2.3 Compliance of Goods,  Documents and Shipments with Agreed Terms. CIT
shall not be responsible for: (a) the existence,  character,  quality, quantity,
condition,  packing, value or delivery of the goods purporting to be represented
by any  documents  relating  to any  Letter of  Credit;  (b) any  difference  or
variation in the character,  quality,  quantity,  condition,  packing,  value or
delivery of the goods from that expressed in such  documents;  (c) the validity,
sufficiency or genuineness  of such  documents or of any  endorsements  thereon,
even  if  such  documents  should  in fact  prove  to be in any or all  respects
invalid,  insufficient,  fraudulent or forged;  (d) the time,  place,  manner or
order in which shipment is made; (e) partial or incomplete shipment,  or failure
or omission to ship any or all of the goods referred to in the Letters of Credit
or documents relating thereto;  (f) any deviation from instructions;  (g) delay,
default, or fraud by the shipper and/or anyone else in connection with the goods
or the shipping  thereof;  or (h) any breach of contract  between the shipper or
vendors and the Company.

      2.2.4 Handling of Goods, Documents and Shipments.  The Company agrees that
any  action  taken by CIT in good  faith,  or any  action  taken by the  Issuing
Institution of whatever nature,  under or in connection with a Letter of Credit,
a Letter of Credit  Guaranty,  drafts or acceptances  relating to such Letter of
Credit or the goods subject  thereto,  shall be binding on the Company and shall
not result in any liability whatsoever of CIT to the Company. CIT shall have the
full  right  and   authority   to  (a)  clear  and  resolve  any   questions  of
non-compliance of documents, (b) give instructions as to acceptance or rejection
of any  documents  or goods,  (c) execute  steamship or airway  guaranties  (and
applications therefor), indemnities or delivery orders, (d) grant any extensions
of the  maturity  of,  time of payment  for,  or  presentation  of, any  drafts,
acceptances or documents, and (e) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, Letter of Credit Guaranties or drafts or
acceptances  relating  to  Letters of Credit.  An Issuing  Institution  shall be
entitled to comply with and honor any  documents or  instruments  executed by or
received  solely  from CIT,  without  notice  to or  consent  from the  Company.
Notwithstanding  any prior  course of  conduct or  dealing  with  respect to the
foregoing (including amendments to and non-compliance with any documents, and/or
the Company's  instructions with respect  thereto),  CIT may exercise its rights
hereunder in its sole but reasonable  business judgment.  The Company agrees not
to, without CIT's prior written consent, which consent shall not be unreasonably
withheld:  (a) execute any  applications  for  steamship  or airway  guaranties,
indemnities  or delivery  orders;  (b) grant any  extensions of the maturity of,
time of payment  for, or time of  presentation  of, any drafts,  acceptances  or
documents;  (c) agree to any amendments,  renewals,  extensions,  modifications,
changes or cancellations of any terms or conditions of any applications, Letters
of Credit, drafts, or

                                       12
<PAGE>

acceptances;  (d) clear or resolve any questions of non-compliance of documents;
or (e) give any  instructions as to acceptances or rejection of any documents or
goods.

      2.2.5  Compliance  with Laws;  Payment of Levies  and Taxes.  The  Company
agrees  that (a) all  necessary  import and  export  licenses  and  certificates
necessary  for the  import  or  handling  of the  Collateral  will  be  promptly
procured,  (b) all foreign and domestic  governmental  laws and  regulations  in
regard to the  shipment  and  importation  of the  Collateral  or the  financing
thereof will be promptly and fully  complied  with,  and (c) any  certificate in
that regard that CIT may at any time request will be promptly  furnished to CIT.
In  connection  herewith,  the Company  represents  and warrants to CIT that all
shipments made under any Letter of Credit are and will be in compliance with the
laws and  regulations  of the  countries in which the  shipments  originate  and
terminate, and are not prohibited by any such laws and regulations.  The Company
assumes  all risk,  liability  and  responsibility  for,  and  agrees to pay and
discharge,  all  present  and future  local,  state,  federal or foreign  taxes,
duties,  or levies pertaining to the importation and delivery of the Collateral.
Any embargo, restriction, law, custom or regulation of any country, state, city,
or other political  subdivision,  where the Collateral is or may be located,  or
wherein  payments are to be made,  or wherein  drafts may be drawn,  negotiated,
accepted,   or  paid,  shall  be  solely  the  Company's  risk,   liability  and
responsibility.

      2.2.6 Subrogation Rights. Upon any payments made to an Issuing Institution
under a Letter of Credit Guaranty, CIT shall acquire by subrogation, any rights,
remedies,  duties or obligations  granted to or undertaken by the Company to the
Issuing  Institution  in any  application  for Letters of Credit,  any  standing
agreement  relating  to Letters of Credit,  under the UCC or  otherwise,  all of
which shall be deemed to have been  granted to CIT and apply in all  respects to
CIT and shall be in  addition  to any rights,  remedies,  duties or  obligations
contained herein.

SECTION 3 INTEREST, FEES AND EXPENSES

3.1   Interest

      3.1.1 Interest on Revolving Loan Account.  During the month or months that
Revolving Loans are Base Rate Loans,  interest on the daily debit balance of the
Revolving  Loan  Account at the close of each day during each month shall be due
and  payable  monthly on the first day of the  immediately  following  month and
shall accrue interest at the Base Rate plus 0.25% per annum. During the month or
months that  Revolving  Loans are LIBOR Rate Loans,  interest on the daily debit
balance of the Revolving Loan Account at the close of each day during each month
shall be due and payable monthly on the first day of the  immediately  following
month and shall accrue interest at the LIBOR Rate plus 2.25% per annum.

3.1.2 Selection of Interest Rate. The Company may select the interest rate
(i.e., either the Base Rate or the LIBOR Rate) that will apply to all Revolving
Loans for a particular calendar month by giving notice to CIT not later than
11:00 a.m. (New York time) on the third (3rd) Business Day prior to the first
day of such month. The Base Rate or the LIBOR Rate applicable to any month will
be the Base Rate or the LIBOR Rate on the first day of such month, and such Base
Rate or LIBOR Rate will remain constant throughout such month and will not
fluctuate. If the Company does not notify CIT of its selection of the applicable
interest rate (i.e., either the

                                       13
<PAGE>

Base Rate or the LIBOR Rate) for any month by 11:00 a.m.  (New York time) on the
third (3rd) Business Day prior to the first day of such month,  the Company will
be deemed to have  selected  for the next  month  the rate of  interest  then in
effect, which rate will be reset to the Base Rate or the LIBOR Rate in effect on
the first day of such month.  For the  calendar  month in which the Closing Date
occurs,  all  Revolving  Loans shall be deemed to be  outstanding  as LIBOR Rate
Loans. In the event of a Default or Event of Default, all Revolving Loans shall,
at CIT's option,  be deemed to be converted to Base Rate Loans,  and the Company
shall not be  permitted  to  select  the LIBOR  Rate as the  applicable  rate of
interest.  All interest  rates shall be  calculated  based on a 360-day year and
actual days elapsed.

      3.1.3 Default  Interest Rate.  Upon the occurrence of an Event of Default,
all  Obligations  may, at the election of CIT,  bear interest at a rate equal to
two percent (2.0%) per annum greater than the  applicable  interest rate charged
under this Section 3.1 until such Event of Default is waived by CIT.

      3.1.4  Inability  to  Determine  LIBOR  Rate.  Notwithstanding  any  other
provision  of this  Agreement  to the  contrary,  (a) if CIT  determines  in the
exercise of its  reasonable  business  judgment  (which  determination  shall be
conclusive  and  binding  upon the  Company)  that by  reason  of  circumstances
affecting the interbank LIBOR market, adequate and reasonable means do not exist
for  ascertaining  the  LIBOR  Rate or (b) if any  law,  regulation,  treaty  or
directive shall make it unlawful for CIT to make or maintain any LIBOR Rate Loan
or shall result in increasing the cost to CIT of making or maintaining any LIBOR
Rate Loan, CIT shall give written notice of such  determination  to the Company,
all LIBOR Rate Loans outstanding shall convert  automatically to Base Rate Loans
and the obligation of CIT  thereafter to continue  making LIBOR Rate Loans shall
be suspended until CIT determines that adequate and reasonable  means once again
exist  for  ascertaining  the  LIBOR  Rate or such  law,  regulation,  treaty or
directive ceases to be in effect and CIT rescinds the earlier notice.

3.2   Fees and Expenses

      3.2.1 Loan Facility Fee. The Company agrees to pay CIT a Loan Facility Fee
in the amount set forth in Section 3.2 of the  Schedule,  which shall be due and
payable as set forth in  Section  3.2 of the  Schedule,  and fully  earned  upon
execution of this Agreement by CIT and the Company.

      3.2.2 Line of Credit  Fee.  On the first day of each  month,  the  Company
agrees to pay to CIT a Line of Credit  Fee equal to the  following:  (a) (i) the
Revolving  Credit Limit minus (ii) the average  daily  balance of the  Revolving
Loan  Account  and the  average  daily  undrawn  amount  of  Letters  of  Credit
outstanding during the immediately preceding month,  multiplied by, (b) the rate
per annum set forth in Section 3.3 of the Schedule  divided by twelve (12). Such
Line of Credit Fee shall be  calculated  based on a 360-day year and actual days
elapsed.

      3.2.3 Annual Renewal Fee. Unless this Agreement is terminated  pursuant to
Section 9 hereof,  the  Company  agrees to pay CIT an Annual  Renewal Fee in the
amount set forth in Section 3.4 of the Schedule,  which shall be due and payable
as set forth in Section 3.4 of the Schedule,  and fully earned upon each Renewal
Date.

                                       14
<PAGE>

      3.2.4 Letter of Credit Guaranty Fees and Charges.  In consideration of CIT
providing its assistance in obtaining  Letters of Credit pursuant to Section 2.2
hereof,  the Company  agrees to pay CIT: (a) the Letter of Credit  Guaranty Fees
equal to the rates and in the manner set forth in Section  3.5 of the  Schedule;
(b) all standard  fees imposed by CIT for  processing,  amending,  cancelling or
handling the Letters of Credit and any drafts thereunder as set forth in Annex C
attached  hereto;  and (c) any amounts paid or incurred by CIT or charged to CIT
by an  Issuing  Institution  under any  Letter  of  Credit or the  reimbursement
agreement  relating  thereto,  any application for Letters of Credit,  Letter of
Credit  Guaranty  or other like  document  which  pertains  either  directly  or
indirectly  to Letters of Credit.  CIT may change the fees that are set forth in
Annex C attached hereto from time to time upon notice to the Company;  provided,
however,  any failure to give the Company  such  notice  does not  constitute  a
breach of this Agreement and does not impair CIT's ability to institute any such
change.  To effectuate  any such change in such fees,  CIT may in its discretion
send or transmit to the  Company a new Annex C which  shall  replace  Annex C in
effect on the date thereof.

      3.2.5  Standard   Operational  Fees.  In  addition  to  all  Out-of-Pocket
Expenses,  the Company  agrees to pay CIT (a) CIT's standard fees for the use of
CIT's in-house legal department relating to any and all modifications,  waivers,
releases,  legal file  reviews or  additional  collateral  with  respect to this
Agreement, the Collateral and/or the Obligations, (b) CIT's standard charges for
any  employee  of CIT used to conduct  any of the  examinations,  verifications,
inspections,  physical counts and other valuations (currently $1,000 per person,
per day), and (c) CIT's  standard  charges for each wire transfer made by CIT to
or for the benefit of the Company (currently $30 per wire);  provided that, such
standard  charges may be increased by CIT from time to time.  Such charges shall
be due and payable in accordance  with CIT's  standard  practices,  as in effect
from time to time.

      3.2.6 Out-of-Pocket  Expenses.  The Company agrees to reimburse or pay CIT
for all Out-of-Pocket Expenses when charged to or paid by CIT.

SECTION 4 COLLATERAL

4.1 Grant of Security  Interest.  As security for the prompt  payment in full of
all  Obligations,  the Company  hereby  pledges  and grants to CIT a  continuing
general lien upon, and security interest in, all of the Collateral. The security
interests  granted  hereunder shall extend and attach to all Collateral which is
presently in  existence or hereafter  acquired and which is owned by the Company
or in which the  Company  has any  interest,  whether  held by the Company or by
others for the Company's account, and wherever located.

4.2 Nature of Security  Interest.  (a) The rights and security interests granted
to CIT hereunder  shall continue in full force and effect,  notwithstanding  the
termination  of this  Agreement or the fact that the Revolving Loan Account may,
from time to time, be temporarily in a credit position, until the termination of
this  Agreement  and  the  full  and  final  payment  and  satisfaction  of  the
Obligations.  Any  reserves  or  balances  to the credit of the  Company (in the
Revolving  Loan Account or  otherwise),  and any other property or assets of the
Company in the  possession of CIT, may be held by CIT as Other  Collateral,  and
applied in whole or partial

                                       15
<PAGE>

satisfaction  of  such  Obligations  when  due,  subject  to the  terms  of this
Agreement.  The liens and security interests granted to CIT herein and any other
lien or security  interest which CIT may have in any other assets of the Company
secure payment and performance of all present and future Obligations.

      (b)  Notwithstanding  CIT's security  interests in the Collateral,  to the
extent  that the  Obligations  are now or  hereafter  secured  by any  assets or
property other than the Collateral, or by the guaranty,  endorsement,  assets or
property of any other person, CIT shall have the right in its sole discretion to
determine  which rights,  security,  liens,  security  interests or remedies CIT
shall at any time pursue,  foreclose upon,  relinquish,  subordinate,  modify or
take any other action with respect to, without in any way modifying or affecting
any of such rights,  security,  liens, security interests or remedies, or any of
CIT's rights under this Agreement.

4.3 Limited  License.  Regardless of whether CIT's security  interests in any of
the General  Intangibles  has  attached  or is  perfected,  the  Company  hereby
irrevocably  grants  to CIT a  royalty-free,  non-exclusive  license  to use the
Company's trademarks, copyrights, patents and other proprietary and intellectual
property rights, in connection with the (i) advertisement for sale, and the sale
or other  disposition of, any finished goods Inventory by CIT in accordance with
the  provisions of this  Agreement,  and (ii) if  applicable,  the  manufacture,
assembly, completion and preparation for sale of any unfinished Inventory by CIT
in accordance with the provisions of this Agreement.

4.4 Collateral  Reporting.  Until the termination of this Agreement and the full
and final payment and  satisfaction  of the  Obligations,  the Company agrees to
furnish to CIT the reports,  documents and information  listed in Section 4.1 of
the Schedule.

4.5 Collateral Representations, Warranties and Covenants.

      4.5.1  Generally.  The Company  represents,  warrants and agrees that: (a)
upon the filing of UCC  financing  statements  covering  the  Collateral  in all
required  jurisdictions,  this  Agreement  creates a valid,  perfected and first
priority security interest in the Collateral in which a security interest may be
perfected by filing of a UCC  financing  statement in the  appropriate  state or
jurisdiction and the security  interests  granted herein constitute and shall at
all times  constitute  the first and only  liens on the  Collateral  except  for
Permitted  Encumbrances;  (b) the Company is, or will be at the time  additional
Collateral is acquired by the Company, the absolute owner of the Collateral with
full right to pledge,  sell,  transfer and create a security  interest  therein,
free and  clear of any and all  claims or liens in favor of  others  except  for
Permitted  Encumbrances;  and (c) the  Company  will,  at its  expense,  forever
warrant  and,  at CIT's  request,  defend  the same from any and all  claims and
demands of any other person.

      4.5.2  Agreements  Regarding  Accounts  and  Inventory.  (a)  The  Company
represents  and warrants to CIT that: (i) each Trade Account is, or will be when
an additional  Trade  Account is created,  based on an actual and bona fide sale
and delivery of Inventory  or  rendition of services to  customers,  made by the
Company in the ordinary course of its business; (ii) the invoices evidencing any
such  Trade  Accounts  are and will at all times be in the name of the  Company;
(iii) the customers of the Company have accepted the Inventory or services,  owe
and

                                       16
<PAGE>

are obligated to pay the full amounts stated in the invoices  according to their
terms,  without dispute,  offset,  defense,  counterclaim or contra,  except for
disputes and other matters  arising in the ordinary course of business which the
Company has notified CIT pursuant to Section 4.4 hereof;  and (iv) the Company's
Inventory  is and will at all  times be  marketable  in  ordinary  course of the
Company's  business,  and no Inventory has been or will be produced in violation
of the Fair Labor Standards Act (29 U.S.C. ss.201 et seq.), as amended.

            (b) The  Company  agrees to issue  credit  memoranda  promptly  upon
accepting  returns or granting  allowances  and to deliver to CIT copies of such
credit  memoranda as and when required to do so under Section 4.4 hereof.  In no
event shall prior recourse to any Account or other security granted to or by the
Company  be a  prerequisite  to CIT's  right  to  demand  payment  of any of the
Obligations.  In addition,  the Company agrees that CIT shall have no obligation
whatsoever  to  perform  in  any  respect  any  of the  Company's  contracts  or
obligations relating to the Accounts.

            (c) The Company agrees not to acquire any Inventory on a consignment
basis,  nor co-mingle its Inventory with any goods of its customers or any other
person  (whether  pursuant to any bill and hold sale or otherwise).  The Company
agrees to  safeguard,  protect and hold all  Inventory  for CIT's account and to
make no sale or other  disposition  thereof except in the ordinary course of its
business,  on open account and on commercially  reasonable terms consistent with
the  Company's  past  practices.  Notwithstanding  the  ordinary  course  of the
Company's  business and the Company's past practices,  the Company agrees not to
sell  Inventory  on a  consignment  basis,  nor retain  any lien on or  security
interest in any Inventory  sold by the Company.  As to any such sale,  transfer,
lease or other disposition of Inventory,  CIT shall have all of the rights of an
unpaid  seller,  including  stoppage  in  transit,   replevin,   rescission  and
reclamation.  Upon the  occurrence  of an Event of  Default  which  has not been
waived in  accordance  with this  Agreement  and on notice from CIT, the Company
agrees that all returned, reclaimed or repossessed merchandise or goods shall be
set aside by the Company,  marked with CIT's name (as secured party) and held by
the Company for CIT's account.

            (d)   Anything  in  this   Financing   Agreement   to  the  contrary
notwithstanding,   CIT  and  the   Company   acknowledge   and  agree  that  the
private-label  Inventory  manufactured  by  the  Company  for  Walgreen  Co.  is
impressed with a trademark owned by Walgreen Co., and thus the sale and/or other
disposition  thereof  may be subject to certain  limitations  and  restrictions.
There is no written  agreement  between the Company and Walgreen Co. relating to
such production or restrictions.

      4.5.3 Agreements Regarding  Equipment.  The Company agrees to (i) maintain
its  equipment  (as  defined  in the UCC) in good  and  substantial  repair  and
condition,  reasonable  wear and tear excepted and (ii) make any and all repairs
and replacements when and where necessary.

      4.5.4 Agreements Regarding General Intangibles. The Company represents and
warrants to CIT that as of the date hereof,  the Company  possesses  all general
intangibles (as defined in the UCC) necessary to conduct the Company's  business
as presently conducted.  The Company agrees to maintain the Company's rights in,
and the value of, all such general intangibles, and to pay when due all payments
required to  maintain  in effect any  licensed  rights.

                                       17
<PAGE>

      4.5.5 Letter of Credit Rights.  The Company represents and warrants to CIT
that as of the date hereof,  the Company is not the beneficiary of any letter of
credit.

      4.5.6  Further   Assurances.   The  Company  agrees  to  comply  with  the
requirements  of all state and  federal  laws in order to grant to CIT valid and
perfected first priority  security  interests in the  Collateral.  CIT is hereby
authorized by the Company to file from time to time any financing  statements or
continuations,  or  amendments  upon  which  CIT and the  Company  have  agreed,
covering the Collateral  without the Company's  signature in accordance with the
provisions  of the UCC. CIT shall  provide the Company with notice of the filing
of any such financing  statements or amendments.  The Company hereby consents to
and ratifies the filing of any financing  statements  covering the Collateral by
CIT on or prior to the Effective Date. The Company agrees to do whatever CIT may
reasonably  request,  from time to time, by way of: (a) filing notices of liens,
financing  statements,  agreed  upon  amendments,   renewals  and  continuations
thereof; (b) cooperating with CIT's agents and employees; (c) keeping Collateral
records;  (d)  transferring  proceeds  of  Collateral  to  CIT's  possession  in
accordance  with  the  terms  hereof;  (e)  obtaining  waivers  from  landlords,
warehousemen,  third party  processors and  mortgagees;  and (f) performing such
further  acts as CIT may  reasonably  require in order to effect the purposes of
this Agreement.

SECTION 5 CONDITIONS PRECEDENT

5.1 Conditions  Precedent to Initial Funding.  Without limiting CIT's discretion
to make  loans and  financial  accommodations  hereunder,  CIT will not make the
initial  loans and  financial  accommodations  hereunder  unless  the  following
conditions precedent have been satisifed:

      5.1.1 Loan Documents. The Company shall have executed and delivered to CIT
this  Agreement  and  all  Loan  Documents  required  by CIT or its  counsel  to
consummate the lending arrangement contemplated between the Company and CIT.

      5.1.2 Lien Searches.  CIT shall have received tax,  judgment,  litigation,
and UCC searches  from all  jurisdictions  reasonably  required by CIT, and such
searches  shall verify that CIT has a first  priority  security  interest in the
Collateral and any other assets securing the  Obligations,  subject to Permitted
Encumbrances.

      5.1.3  Insurance.  The  Company  shall  have  delivered  to  CIT  evidence
satisfactory  to CIT that:  (i) all insurance  required by this  Agreement is in
full force and  effect  and (ii) CIT has been  named as loss payee with  respect
thereto in a manner satisfactory to CIT.

      5.1.4 UCC Filings.  All UCC  financing  statements  and similar  documents
required  to be  filed  in order  to  create  in  favor of CIT a first  priority
perfected  security interest in the Collateral and any other assets securing the
Obligations  (to the extent that such a security  interest may be perfected by a
filing under the UCC or applicable  law) shall have been properly  filed in each
office in each jurisdiction required. CIT shall have received (i) acknowledgment
copies of all such filings and (ii)  evidence  that all  necessary  filing fees,
taxes and other expenses related to such filings have been paid in full.

                                       18
<PAGE>

      5.1.5  Resolutions.  CIT shall have received a copy of the  resolutions of
the Board of Directors, members or managers of the Company (as the case may be),
authorizing  the  execution,  delivery and  performance  of the Loan  Documents,
certified as the date hereof by the  Secretary or manager of the Company (as the
case may be),  together with a certificate  of such Secretary or manager (as the
case may be) as to the  incumbency  and signature of the officers of the Company
executing such Loan Documents.

      5.1.6  Organizational  Documents.  CIT shall  have  received a copy of the
Certificate  or Articles  of  Incorporation  of the  Company,  certified  by the
Secretary of State of the state of its formation  and a copy of the by-laws,  as
amended through the date hereof, certified by the Secretary of the Company.

      5.1.7 Officer's Certificate. CIT shall have received an executed officer's
certificate  for  the  Company,  satisfactory  in  form  and  substance  to CIT,
certifying that as of the Effective Date, (a) the representations and warranties
contained herein are true and correct in all material respects,  (b) the Company
is in compliance  with all of the terms and  provisions set forth herein and (c)
no Default or Event of Default has occurred.

      5.1.8  Appraisals.  CIT  shall  have  received  and be  satisfied  with an
appraisal of the Company's Inventory conducted by an appraiser selected by CIT.

      5.1.9 Disbursement Authorizations. The Company shall have delivered to CIT
all wire  transfer  instructions  for the initial and  subsequent  loans  and/or
advances to be made under this Agreement in a form satisfactory to CIT.

      5.1.10  Examination  &  Verification.  CIT  shall  have  completed  and be
satisfied  with  an  updated  examination  and  verification  of  the  Accounts,
Inventory and books and records of the Company.

      5.1.11 Depository Accounts. The Company shall have established one or more
Depository  Accounts and CIT, the Company and each depository  bank  maintaining
such  Depository  Accounts shall have entered into a depository  account control
agreement, in form and substance satisfactory to CIT.

      5.1.12  Opinions.  Counsel for the Company shall have  delivered to CIT an
opinion letter, in form and substance satisfactory to CIT.

      5.1.13 Legal Restraints/Litigation.  As of the Effective Date, there shall
be no (x) injunction,  writ or restraining  order restraining or prohibiting the
consummation of the financing arrangements contemplated under this Agreement, or
(y) suit,  action,  investigation  or  proceeding  (judicial or  administrative)
pending  against  the  Company,  any  subsidiary  of the Company or any of their
assets,  which,  in the opinion of CIT, if  adversely  determined,  could have a
material adverse effect on the Company.

5.2 Conditions to Each Extension of Credit. Without limiting CIT's discretion to
make loans and financial  accommodations  hereunder, CIT will not make any loans
and financial  accommodations  hereunder  (including,  without  limitation,  the
initial  extension of credit)  unless

                                       19
<PAGE>

the following conditions precedent are satisfied:

      5.2.1  Representations  and Warranties.  Each of the  representations  and
warranties made by the Company in or pursuant to this  Agreement,  including all
representations  and warranties in a borrowing base  certificate,  shall be true
and  correct  in all  material  respects  on and as of the date of such  loan or
financial  accommodation  as though  made on and as of such date,  except to the
extent that such  representations  and  warranties  relate  solely to an earlier
date.

      5.2.2 No  Default  or  Material  Adverse  Change.  No  Default or Event of
Default shall have occurred and be continuing or would result from the making of
such loan or financial  accommodation  and no material adverse change shall have
occurred in the financial condition, business, prospects, profits, operations or
assets of the Parent, the Company or the Company's  affiliates since the date of
the latest financial statements delivered to CIT prior to the Effective Date.

SECTION 6 REPRESENTATIONS,  WARRANTIES AND COVENANTS. The Company represents and
warrants  to CIT as  follows,  and the  Company  covenants  that  the  following
representations will continue to be true, and that the Company will at all times
comply  with  all of the  following  covenants  until  the  termination  of this
Agreement and the full and final payment and satisfaction of the Obligations:

6.1  Organization  Matters;  Collateral  Locations.  Section  1 of the  Schedule
correctly and completely  sets forth (a) the Company's  exact name, as currently
reflected  by the  records  of the  Company's  State of  incorporation,  (b) the
Company's  State  of   incorporation,   (c)  the  Company's   federal   employer
identification  number and state organization  identification number and (d) the
address of the Company's chief executive  office and all locations of Collateral
other than Inventory in-transit.

6.2  Financial  Condition.  (a) The  amount  of the  Company's  assets,  at fair
valuation,  exceeds the book value of the Company's liabilities, (b) the Company
is generally  able to pay its debts as they become due and payable,  and (c) the
Company  does not have  unreasonably  small  capital to carry on its business as
currently  conducted  absent  extraordinary  and unforeseen  circumstances.  All
financial  statements of the Company  previously  or hereafter  furnished to CIT
present fairly, in all material respects, the financial condition of the Company
as of the date of such financial statements.

6.3 Power and  Authority;  Conflicts;  Enforceability.  (a) The Company has full
power and  authority  to execute and deliver this  Agreement  and the other Loan
Documents  to  which  it is a  party,  and  to  perform  all  of  the  Company's
obligations thereunder.

            (b) The execution and delivery by the Company of this  Agreement and
the other Loan  Documents  to which it is a party,  and the  performance  of the
Company's  obligations  thereunder,  have been duly  authorized by all necessary
corporate action, and do not (i) require any consent or approval of any director
or shareholder of the Company that has not been obtained, (ii) violate any term,
provision or covenant contained in the  organizational  documents of the Company
(such as the  certificate or articles of  incorporation  or the by-laws),  (iii)
violate,

                                       20
<PAGE>

or cause the Company to be in default under, any law, rule,  regulation,  order,
judgment or award  applicable to the Company or its assets,  or (iv) violate any
term,  provision,  covenant or  representation  contained  in, or  constitute  a
default under, or result in the creation of any lien under,  any loan agreement,
lease,  indenture,  mortgage,  deed of trust, note, security agreement or pledge
agreement  to which the Company is a signatory or by which the Company or any of
the Company's assets are bound or affected.

            (c) This Agreement and the other Loan Documents to which the Company
is a party  constitute  legal  valid and  binding  obligations  of the  Company,
enforceable in accordance  with their  respective  terms,  subject to applicable
bankruptcy, insolvency, moratorium, fraudulent transfer and other laws affecting
creditors'  rights  generally,  and  subject  to general  principles  of equity,
regardless of whether considered in a proceeding at law or in equity.

            (d) The  Company  agrees to  qualify to do  business,  and to remain
qualified to do business and in good standing,  in each  jurisdiction  where the
failure to so qualify or to remain  qualified or in good standing,  would have a
material adverse effect on the Company.

6.4 Compliance with Laws. The Company and the Company's  properties are and will
continue to be in compliance with all federal,  state and local acts,  rules and
regulations,  and  all  orders  of any  federal,  state  or  local  legislative,
administrative or judicial body or official, except to the extent the failure to
so comply would not have a material  adverse effect on the Company.  The Company
has   obtained  and  will   continue  to  maintain   all   permits,   approvals,
authorizations  and  licenses  necessary  to conduct its  business as  presently
conducted,  except to the extent the  failure to have such  permits,  approvals,
authorizations  or  licenses  would not have a  material  adverse  effect on the
Company.

6.5  Environmental  Matters.  (a) None of the  operations of the Company are the
subject of any federal,  state or local  investigation to determine  whether any
remedial   action  is  needed  to  address  the  presence  or  disposal  of  any
environmental  pollution,  hazardous  material or environmental  clean-up of any
real property now or previously owned or operated by the Company. No enforcement
proceeding,  complaint,  summons,  citation,  notice, order, claim,  litigation,
investigation,  letter or other  communication  from a  federal,  state or local
authority  has been filed  against or  delivered  to the  Company,  regarding or
involving any release of any  environmental  pollution or hazardous  material on
any real property now or previously owned or operated by the Company.

            (b) The Company has no known  contingent  liability  with respect to
any release of any  environmental  pollution or  hazardous  material on any real
property now or previously owned or operated by the Company.

            (c) The Company is and will  continue to be in  compliance  with all
environmental  statutes,  acts, rules,  regulations and orders applicable to the
operation of the Company's business, except to the extent that the failure to so
comply would not have a material adverse effect.  The Company agrees to promptly
notify CIT in writing of (i) any  expenditure  (actual or anticipated) in excess
of  $100,000   for   environmental   clean-up,   environmental

                                       21
<PAGE>

compliance or  environmental  testing and (ii) the  Company's  receipt of notice
from  any  local,  state  or  federal  authority  advising  the  Company  of any
environmental liability (real or potential).

6.6 Pending Litigation.  Except as previously disclosed by the Company to CIT in
writing,  there exist no actions, suits or proceedings of any kind by or against
the Company pending in any court or before any arbitrator or governmental  body,
or to the best of the Company's knowledge threatened against the Company,  that,
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
material adverse effect on the Company.

6.7  Maintenance  of  Financial  Records;  Inspections.  The  Company  agrees to
maintain  books and  records  pertaining  to the  Collateral  and the  Company's
financial matters in such detail, form and scope as CIT reasonably shall require
and agrees  that such books and  records  will  reflect  CIT's  interest  in the
Collateral. The Company agrees that CIT or its agents, upon at least twenty-four
(24)  hours  prior  notice  from CIT to the  Company  (except  that  during  the
occurrence of a Default or Event of Default,  no such notice shall be required),
may enter upon the Company's  premises at any time during normal business hours,
and from time to time, in order to (i) examine and inspect the books and records
of the Company,  and make copies thereof and take extracts  therefrom,  and (ii)
verify,  inspect  and  perform  physical  counts  and  other  valuations  of the
Collateral and any and all records pertaining  thereto.  The Company irrevocably
authorizes all accountants and third parties to disclose and deliver directly to
CIT, at the Company's expense, all financial statements and information,  books,
records,  work  papers  and  management  reports  generated  by them or in their
possession  regarding the Company or the Collateral.  All  out-of-pocket  costs,
fees  and  expenses  incurred  by  CIT in  connection  with  such  examinations,
inspections, physical counts and other valuations shall constitute Out-of-Pocket
Expenses.

6.8 Asset  Appraisals.  From time to time upon the  request of CIT,  the Company
agrees to permit CIT to  perform  appraisals  of the  Company's  Inventory.  The
Company  agrees to reimburse CIT for the costs and expenses  relating to (a) one
(1) Inventory  appraisal in each  calendar  year, so long as no Event of Default
shall have occurred and remain outstanding and (b) all such appraisals performed
while an Event of Default remains outstanding. To the extent that the Company is
required by this  Section  6.8 to  reimburse  CIT for CIT's  costs and  expenses
relating to appraisals,  such costs and expenses shall constitute  Out-of-Pocket
Expenses.

6.9 Insurance.  The Company  agrees to maintain  insurance,  including,  without
limitation,  insurance  on its  business  and  assets,  under such  policies  of
insurance,  with  such  insurance  companies,  in such  reasonable  amounts  and
covering such insurable  risks as are at all times  reasonably  satisfactory  to
CIT. All policies covering the Inventory are, to be made payable to CIT, in case
of loss, under a standard non-contributory "lender" or "secured party" clause or
endorsement,  and are to contain  such other  provisions  as CIT may  require to
fully  protect  CIT's  interest in the  Inventory and to any payments to be made
under such policies, including, without limitation,  provisions (x) for not less
than thirty (30) days prior  written  notice to CIT of the exercise of any right
of cancellation or material change and (y) that CIT's right to payment under any
property  insurance  policy will not be invalidated by any act or neglect of, or
any breach of warranty or condition  by, the Company or any party.  All original
policies or true copies  thereof are to be  delivered to CIT,  premium  prepaid,
with such loss  payable  endorsement  in CIT's  favor.  If the Company  fails to
maintain  such  insurance on its assets and  business,  CIT may arrange for

                                       22
<PAGE>

such insurance,  but at the Company's expense and without any  responsibility on
CIT's part for: (i) obtaining the insurance;  (ii) the solvency of the insurance
companies; (iii) the adequacy of the coverage; or (iv) the collection of claims.
CIT may apply any insurance  proceeds to the cost of repairs,  or replacement of
any Collateral  and/or, at CIT's option, to payment of any of the Obligations in
any order or manner as CIT determines.

6.10  Taxes.  The  Company  agrees  to pay when due all taxes  lawfully  levied,
assessed or imposed  upon the  Company or the  Collateral  (including  all sales
taxes  collected  by the  Company  on  behalf  of  the  Company's  customers  in
connection  with sales of  Inventory  and all  payroll  taxes  collected  by the
Company on behalf of the Company's employees),  unless the Company is contesting
such  taxes  in good  faith,  by  appropriate  proceedings,  and is  maintaining
adequate  reserves for such taxes in accordance with GAAP.  Notwithstanding  the
foregoing,  if a lien securing any taxes is filed in any public office, then the
Company  shall pay all taxes  secured by such lien  immediately  and remove such
lien of record  promptly.  Pending the payment of such taxes and removal of such
lien,  CIT may,  at its  election  and  without  curing or waiving  any Event of
Default  which  may  have  occurred  as  a  result  thereof,  (i)  establish  an
Availability  Reserve in the  amount of such taxes (or such other  amount as CIT
shall deem appropriate in the exercise of its reasonable  business  judgment) or
(ii) pay such taxes on behalf of the  Company,  and the amount paid by CIT shall
become an Obligation which is due and payable on demand by CIT.

6.11  Anti-Money  Laundering  and Terrorism  Regulations.  The Company agrees to
comply with all applicable anti-money laundering and terrorism laws, regulations
and executive orders in effect from time to time (including, without limitation,
the USA Patriot Act (Pub. L. No. 107-56). The Company also agrees to ensure that
no person who owns a controlling  interest in or otherwise  controls the Company
is a person  designated  under Section 1(b),  (c) or (d) of Executive  Order No.
13224  (issued  September 23, 2001) or any other similar  Executive  Order.  The
Company  acknowledges that CIT's performance  hereunder is subject to compliance
with all such laws,  regulations and executive orders, and in furtherance of the
foregoing,  the  Company  agrees to  provide  to CIT all  information  about the
Company's ownership,  officers,  directors,  customers and business structure as
CIT reasonably may require to comply with, such laws,  regulations and executive
orders.

6.12 Financial and Other  Reporting.  The Company agrees that it will deliver to
CIT: (a) on a timely basis, the financial  statements and/or  information listed
in Section 5.1 of the Schedule;  (b) notice of the  occurrence of any Default or
Event of Default immediately upon knowledge thereof;  and (c) from time to time,
such further information  regarding the business affairs and financial condition
of the Company as CIT may reasonably  request.  In addition,  should the Company
modify its  accounting  principles  and  procedures  from those in effect on the
Effective  Date,  the Company agrees to prepare and deliver to CIT statements of
reconciliation in form and substance reasonably satisfactory to CIT.

6.13 Negative Covenants. The Company agrees not to:

      6.13.1  Indebtedness.  Incur or create  any  indebtedness,  except for (a)
current  indebtedness  maturing  in less than one (1) year and  incurred  in the
ordinary course of business for inventory,  supplies, equipment, services, taxes
or labor, (b) Subordinated  Debt, (c)

                                       23
<PAGE>

indebtedness  arising under the Letters of Credit and this Agreement and (d) any
other indebtedness to which CIT has expressly consented in writing.

      6.13.2 Sale of Assets. Sell, lease, assign,  transfer or otherwise dispose
of (i) Collateral, except as otherwise specifically permitted by this Agreement,
or  (ii)  all or any  substantial  part of its  assets,  if  any,  which  do not
constitute Collateral.

      6.13.3 Pledge of Assets.  Mortgage,  assign, pledge, transfer or otherwise
permit any lien, charge, security interest,  encumbrance or judgment (whether as
a result of a purchase money or title retention  transaction,  or other security
interest, or otherwise) to exist on any of the Collateral,  whether now owned or
hereafter acquired, except for Permitted Encumbrances.  6.13.4 Corporate Change.
Merge,  consolidate or otherwise alter or modify its corporate  name,  principal
place of  business,  structure,  or  existence,  or enter  into or engage in any
operation or activity  materially  different from that presently being conducted
by the Company.

      6.13.5 Guaranty  Obligations.  Assume,  guarantee,  endorse,  or otherwise
become liable upon the obligations of any person,  firm,  entity or corporation,
except by the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;

      6.13.6  Dividends  and  Distributions.  Declare  or pay  any  dividend  or
distributions of any kind on, or purchase, acquire, redeem or retire, any of its
equity interests (of any class or type), except for (a) dividends payable solely
in stock or other  equity  interests  and (b) so long as no  Default or Event of
Default  remains  outstanding,  dividends  payable to the Parent in the ordinary
course of business and in accordance with past practices.

      6.13.7  Restricted  Payments.  Make any  payment of the  principal  of, or
interest on, any  Subordinated  Debt, or purchase,  acquire or redeem any of the
Subordinated Debt, unless (x) such payment, purchase,  acquisition or redemption
is expressly  permitted by the terms of the applicable  subordination  agreement
and  (y) no  Default  or  Event  of  Default  shall  have  occurred  and  remain
outstanding  on the date on which such payment or transaction  occurs,  or would
occur as a result thereof.

      6.13.8 Investments. (a) Create any new subsidiary, or (b) make any advance
or loan to, or any investment in, any firm,  entity,  person or corporation,  or
(c) acquire all or  substantially  all of the assets of, or any capital stock or
any equity  interests in, any firm,  entity or  corporation,  other than current
investments of the Company in existing  subsidiaries  and, so long as no Default
or  Event  of  Default  remains  outstanding,  loans to the  Parent  and/or  the
Company's  affiliates in the ordinary  course of business and in accordance with
past practices.

      6.13.9  Related  Party  Transactions.  (a)  Enter  into  any  transaction,
including,  without limitation,  any purchase,  sale, lease, loan or exchange of
property, with any shareholder,  officer, director, parent (direct or indirect),
subsidiary  (direct or indirect) or other person or entity otherwise  affiliated
with the  Company,  unless  (i) such  transaction  otherwise  complies  with the
provisions of this Agreement,  (ii) such transaction is for the purchase or sale
of goods or services rendered in the ordinary course of business and pursuant to
the  reasonable  requirements  of the

                                       24
<PAGE>

Company,  and upon standard terms and conditions and fair and reasonable  terms,
no less  favorable to the Company than the Company  could obtain in a comparable
arms length  transaction  with an unrelated third party, and (iii) no Default or
Event of Default  shall have  occurred and remain  outstanding  at the time such
transaction  occurs, or would occur after giving effect to such transaction,  or
(b) pay any  management,  consulting or other  similar fees to any  shareholder,
director,  subsidiary  (direct or indirect) or other person or entity  otherwise
affiliated with the Company other than the Parent.

SECTION 7 POWERS

      The  Company  hereby  authorizes  CIT,  or any  person  or  agent  CIT may
designate,  at the Company's cost and expense,  to exercise all of the following
powers, which authority shall be irrevocable until termination of this Agreement
and the full and final  payment  and  satisfaction  of all  Obligations:  (a) to
receive,  take, endorse, sign, assign and deliver, all in the name of CIT or the
Company,  any and all checks,  notes, drafts, and other documents or instruments
relating  to the  Collateral;  (b) to  receive,  open  and  dispose  of all mail
addressed to the Company and to notify postal  authorities to change the address
for delivery  thereof to such address as CIT may designate;  (c) to request from
customers  indebted  on  Accounts  at any time,  in the name of CIT  information
concerning  the amounts  owing on the  Accounts;  (d) to request from  customers
indebted on Accounts at any time,  in the name of the Company,  in the name of a
certified  public  accountant  designated  by CIT or any other  designee of CIT,
information  concerning  the amounts owing on the  Accounts;  (e) to transmit to
customers  indebted on Accounts  notice of CIT's interest  therein and to notify
customers indebted on Accounts to make payment directly to CIT for the Company's
account; and (f) to take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect collection of the Accounts. The powers set forth in clauses (b), (c), (e)
and (f) of this  Section 7 may only be  exercised  if an Event of Default  shall
have occurred and remain outstanding.

SECTION 8 EVENTS OF DEFAULT AND REMEDIES

8.1 Events of Default.  Each of the following  events shall constitute an "Event
of Default":

      8.1.1 The failure of the Company to pay any of the Obligations when due;

      8.1.2 The  cessation  of the  business  of the Company or the calling of a
meeting of the creditors of the Company for purposes of  compromising  its debts
and obligations;

      8.1.3 The  commencement  by the  Company  of any  bankruptcy,  insolvency,
arrangement,  reorganization,   receivership,  assignment  for  the  benefit  of
creditors or similar proceedings under any federal or state law;

      8.1.4 The commencement against the Company of any bankruptcy,  insolvency,
arrangement,  reorganization,   receivership,  assignment  for  the  benefit  of
creditors or similar  proceeding  under any federal or state law by creditors of
the Company,  but only if such proceeding is not contested by the Company within
ten  (10)  days  and  not  dismissed  or  vacated

                                       25
<PAGE>

within thirty (30) days of commencement,  or any of the actions or relief sought
in any such proceeding shall occur or be authorized by the Company;

      8.1.5 Any  representation  or warranty made or furnished by the Company to
CIT in this Financing  Agreement,  any other Loan Document or any certificate or
financial  statement  proves to have been false or  misleading  in any  material
respect when made or furnished or when reaffirmed pursuant to Section 5.2.1;

      8.1.6 The breach or violation by the Company of any covenant  contained in
this Financing  Agreement (other than those referred to in Section 8.1.7 below),
provided  that such  breach or  violation  shall not be deemed to be an Event of
Default  unless the  Company  fails to cure such  breach or  violation  to CIT's
reasonable  satisfaction within thirty (30) days from the date of such breach or
violation;

      8.1.7  The  breach  or   violation   by  the  Company  of  any   warranty,
representation  or covenant  contained in Sections 2.1.2,  4.4, 4.5.6,  6.12 and
6.13;

      8.1.8 The  occurrence  of any  default or event of default  (after  giving
effect to any  applicable  grace or cure  period)  under  any of the other  Loan
Documents,  or any of the other Loan Documents  ceases to be valid,  binding and
enforceable in accordance with its terms;

      8.1.9 The  Company  shall (i) engage in any  "prohibited  transaction"  as
defined in ERISA, (ii) incur any "accumulated  funding deficiency" as defined in
ERISA,  (iii) incur any "reportable  event" as defined in ERISA,  (iv) terminate
any  "plan",  as defined in ERISA or (v) become  involved in any  proceeding  in
which the Pension Benefit Guaranty  Corporation  shall seek  appointment,  or is
appointed,  as trustee or administrator of any "plan",  as defined in ERISA, and
with respect this subsection  8.1.9,  such event or condition either (x) remains
uncured for a period of thirty (30) days from date of occurrence  and (y) could,
in CIT's reasonable  business judgment,  subject the Company to any tax, penalty
or other liability having a material adverse effect on the Company;

      8.1.10 The Parent  ceases to own and control 100% of the voting  equity of
the Company;

      8.1.11 A final judgment for the payment of money in excess of $100,000 (to
the extent not covered by insurance as to which the carrier has been notified of
the potential  claims and has not disputed  coverage) shall be rendered  against
the Company;

      8.1.12 The  occurrence  of any default or event of default  (after  giving
effect  to any  applicable  grace  or cure  periods)  under  any  instrument  or
agreement  evidencing  or  governing  (x)  Subordinated  Debt or (y)  any  other
indebtedness of the Company having a principal amount in excess of $100,000;

      8.1.13 The Company shall modify the terms or provisions of any  agreement,
instrument or other  document  relating to any  Subordinated  Debt without CIT's
prior written  consent or make any payment,  purchase,  acquire or redeem of any
Subordinated  Debt  which is not

                                       26
<PAGE>

expressly not permitted by the terms of the subordination agreement with respect
to such Subordinated Debt in favor of CIT; or

      8.1.14  Any  other  event  shall  have  occurred  that  has  had or  could
reasonably  be expected  to have a material  adverse  effect on the Parent,  the
Company or its affiliates.

8.2 Remedies With Respect to Outstanding  Obligations.  Upon the occurrence of a
Default or an Event of Default,  at the option of CIT,  all loans,  advances and
extensions of credit  provided for in Section 2 hereof shall be thereafter  made
in CIT's sole discretion,  and the obligation of CIT to make Revolving Loans and
to assist the  Company in opening  Letters of Credit,  shall  cease  unless such
Default is cured to CIT's  reasonable  satisfaction  or such Event of Default is
waived in accordance herewith.  In addition,  upon the occurrence of an Event of
Default, CIT may, at its option (a) declare all Obligations  immediately due and
payable,   (b)  charge  the  Company  the  default   rate  of  interest  on  all
then-outstanding  or  thereafter-incurred  Obligations  in lieu of the  interest
provided  for in  Section  3.1.3  hereof,  and (c)  immediately  terminate  this
Agreement upon notice to the Company.  Notwithstanding the foregoing,  (x) CIT's
commitment  to make loans,  advances and  extensions  of credit  provided for in
Section 2 hereof  automatically shall terminate without any declaration,  notice
or demand by CIT upon the  commencement of any proceeding  described in Sections
8.1.3 or 8.1.4 hereof, and (y) this Agreement  automatically shall terminate and
all  Obligations   shall  become  due  and  payable   immediately   without  any
declaration,  notice or demand by CIT, upon the  commencement  of any proceeding
described in Section 8.1.3 hereof or the occurrence of an Event of Default under
Section 8.1.4  hereof.  The exercise of any option is not exclusive of any other
option that may be exercised at any time by CIT.

8.3 Remedies With Respect to Collateral.  Immediately after the occurrence of an
Event of Default,  CIT may, at its option, to the extent permitted by applicable
law:  (a) remove from any  premises  where same may be located any and all books
and records,  computers,  electronic media and software programs associated with
any  Collateral   (including   electronic  records,   contracts  and  signatures
pertaining  thereto),  documents,  instruments and files, and any receptacles or
cabinets  containing  same,  relating to the  Accounts,  and CIT may use, at the
Company's  expense,  such of the Company's  personnel,  supplies or space at the
Company's  places of  business or  otherwise,  as may be  necessary  to properly
administer  and  control  the  Accounts  or  the  handling  of  collections  and
realizations  thereon;  (b) bring suit,  in the name of the Company or CIT,  and
generally  shall  have all other  rights  respecting  the  Accounts,  including,
without  limitation,  the right to (i) accelerate or extend the time of payment,
(ii) settle,  compromise,  release in whole or in part any amounts  owing on any
Accounts  and (iii) issue  credits in the name of the Company or CIT;  (c) sell,
assign and deliver the  Collateral  and any returned,  reclaimed or  repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at CIT's sole option and discretion,  and CIT may bid or
become a purchaser at any such sale,  free from any right of  redemption,  which
right is hereby  expressly  waived by the Company;  (d) foreclose CIT's security
interests  in the  Collateral  by any  available  judicial  procedure,  or  take
possession of any or all of the  Collateral  without  judicial  process,  and to
enter any premises where any Collateral may be located for the purpose of taking
possession  of or  removing  the same;  and (e)  exercise  any other  rights and
remedies  provided in law, in equity,  by contract or otherwise.  CIT shall have
the right, without notice or advertisement, to sell, lease, or otherwise dispose
of all or

                                       27
<PAGE>

any part of the  Collateral  whether  in its  then  condition  or after  further
preparation or processing,  in the name of the Company or CIT, or in the name of
such other party as CIT may  designate,  either at public or private  sale or at
any broker's board, in lots or in bulk, for cash or for credit,  with or without
warranties or  representations  (including,  without  limitation,  warranties of
title, possession,  quiet enjoyment and the like), and upon such other terms and
conditions as CIT in its sole discretion may deem advisable,  and CIT shall have
the  right  to  purchase  at any  such  sale.  If any  Inventory  shall  require
rebuilding,  repairing, maintenance or preparation, CIT shall have the right, at
its option,  to do such of the  aforesaid  as is  necessary,  for the purpose of
putting the Inventory in such saleable form as CIT shall deem  appropriate.  The
Company agrees, at the request of CIT, to assemble the Inventory, and to make it
available to CIT at premises of the Company or elsewhere  and to make  available
to CIT the  premises  and  facilities  of the  Company  for the purpose of CIT's
taking  possession  of,  removing or putting the Inventory in saleable  form. If
notice of  intended  disposition  of any  Collateral  is  required by law, it is
agreed that ten (10) days notice shall  constitute  reasonable  notification and
full  compliance  with  the law.  The net cash  proceeds  resulting  from  CIT's
exercise of any of the  foregoing  rights  (after  deducting  all  Out-of-Pocket
Expenses  relating  thereto)  shall  be  applied  by CIT to the  payment  of the
Obligations,  whether due or to become due, in such order as CIT may elect,  and
the Company  shall remain  liable to CIT for any  deficiencies,  and CIT in turn
agrees  to remit to the  Company  or its  successors  or  assigns,  any  surplus
resulting therefrom.  The enumeration of the foregoing rights is not intended to
be  exhaustive  and the exercise of any right shall not preclude the exercise of
any other right of CIT under applicable law or the other Loan Documents,  all of
which shall be cumulative.

SECTION 9 TERMINATION

      Except as otherwise provided in Section 8.2 hereof, CIT may terminate this
Agreement  and the  Revolving  Line of  Credit  only  as of the  initial  or any
subsequent  Renewal  Date,  and then only by giving the Company at least  thirty
(30) days prior written  notice of  termination.  The Company may terminate this
Agreement  at any time prior to any  Renewal  Date upon  thirty  (30) days prior
written notice to CIT. THIS  AGREEMENT,  UNLESS  TERMINATED AS HEREIN  PROVIDED,
SHALL AUTOMATICALLY  CONTINUE FROM RENEWAL DATE TO RENEWAL DATE. All Obligations
shall become due and payable in full on the date of any  termination  hereunder.
Pending a final accounting of the Obligations, unless supplied with an indemnity
satisfactory  to CIT,  the  Company  shall pay to CIT in  immediately  available
funds,  or CIT may withhold any credit balances in the Revolving Loan Account as
a cash reserve,  an amount  sufficient to cover any contingent  Obligation  then
outstanding,  including,  but not limited to, an amount equal to one hundred ten
percent (110%) of the face amount of any outstanding  Letters of Credit.  All of
CIT's  rights,  liens  and  security  interests  granted  pursuant  to the  Loan
Documents  shall  continue after any  termination  of this  Agreement  until all
Obligations have been fully and finally paid and satisfied.

SECTION 10 GENERAL INDEMNITY

      In addition to the Company's  agreement to reimburse CIT for Out-of-Pocket
Expenses,  but without  duplication,  the Company hereby agrees to indemnify CIT
and  its  officers,  directors,   employees,  attorneys  and  agents  (each,  an
"Indemnified Party") from, and to defend and hold

                                       28
<PAGE>

each  Indemnified  Party  harmless  against,  any and all  losses,  liabilities,
obligations, claims, actions, judgments, suits, damages, penalties, costs, fees,
expenses (including  reasonable  attorney's fees) of any kind or nature which at
any time may be imposed on,  incurred by, or asserted  against,  any Indemnified
Party:

      (a) as a result of CIT's exercise of (or failure to exercise) any of CIT's
rights and remedies hereunder,  including,  without limitation,  (i) any sale or
transfer  of  the  Collateral,  (ii)  the  preservation,   repair,  maintenance,
preparation  for sale or  securing of any  Collateral,  and (iii) the defense of
CIT's  interests in the  Collateral  (including the defense of claims brought by
the Company, as a  debtor-in-possession  or otherwise,  any secured or unsecured
creditors of the Company, or any trustee or receiver in bankruptcy);

      (b) as a result of any  environmental  pollution,  hazardous  material  or
environmental  clean-up relating to any real property now or previously owned or
operated by the Company,  the  Company's  operation and use of any real property
now or previously owned or operated by the Company,  and the Company's  off-site
disposal practices;

      (c) arising from or relating to (i) the  maintenance  and operation of any
Depository  Account,  (ii) any agreement or document  relating to any Depository
Account to which any  Indemnified  Party is party and (iii) any action taken (or
failure to act) by any Indemnified Party with respect thereto;

      (d) arising from any  transactions  or occurrences  relating to Letters of
Credit established or opened for the Company's account,  the Collateral relating
thereto and any drafts or acceptance thereunder,  including any such loss, claim
or liability arising from any error, omission,  negligence,  misconduct or other
action taken by an Issuing Institution;

      (e) in connection with any regulatory  investigation  or proceeding by any
regulatory authority or agency having jurisdiction over the Company; and

      (f) otherwise relating to or arising out of the transactions  contemplated
by this Agreement and the other Loan Documents,  or any action taken (or failure
to act) by any Indemnified Party with respect thereto;

provided that, an Indemnified  Party's conduct in connection with the any of the
foregoing matters does not constitute gross negligence or willful misconduct, as
finally determined by a court of competent  jurisdiction,  and provided further,
that the Company shall have no indemnification  obligations under the Section 10
with  respect  to  any  losses,  liabilities,   obligations,   claims,  actions,
judgments,  suits,  damages,  penalties,  costs, fees and expenses to the extent
attributable  to the  failure  by CIT or any of its  employees,  agents or other
representatives  to act in a commercially  reasonable  manner in connection with
exercise by CIT of its rights and remedies with respect to the Collateral.  This
indemnification  shall survive the termination of this Agreement and the payment
and  satisfaction  of the  Obligations.  CIT may  from  time  to time  establish
Availability  Reserves with respect to this  indemnity as CIT may deem advisable
in the exercise of its reasonable  business  judgment,  and upon  termination of
this Agreement, CIT may hold such reserves as cash reserves as security for this
indemnity.

                                       29
<PAGE>

SECTION 11 MISCELLANEOUS

11.1 Waivers. The Company hereby waives diligence, demand, presentment,  protest
and any notices  thereof as well as notices of nonpayment,  intent to accelerate
and  acceleration.  No waiver of an Event of Default  by CIT shall be  effective
unless  such  waiver is in writing and signed by CIT. No delay or failure of CIT
to exercise any right or remedy hereunder, whether before or after the happening
of any Event of Default, shall impair any such right or remedy, or shall operate
as a waiver of such right or remedy, or as a waiver of such Event of Default.  A
waiver on any one  occasion  shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.  No single or partial exercise by CIT of
any  right or  remedy  precludes  any  other or  further  exercise  thereof,  or
precludes any other right or remedy.

11.2 Entire Agreement; Amendments; Sale of Interest.

      (a) This Agreement and the other Loan Documents: (a) constitute the entire
agreement  between the  Company  and CIT;  (b)  supersede  any prior  agreements
(including  the  agreements  set  forth in any  commitment  letter);  (c) may be
amended only by a writing  signed by the Company and CIT; and (d) shall bind and
benefit the Company and CIT and their respective successors and assigns,  except
that the  Company  shall not have the right to assign  (by  operation  of law or
otherwise) its rights or obligations hereunder without the prior written consent
of CIT.  Should the  provisions  of any other Loan  Document  conflict  with the
provisions of this  Agreement,  the provisions of this Agreement shall apply and
govern.

      (b) The Company hereby consents to CIT's participation,  sale, assignment,
transfer or other disposition, at any time or times hereafter, of this Agreement
and any of the other  Loan  Documents,  or of any  portion  hereof  or  thereof,
including, without limitation, CIT's rights, title, interests, remedies, powers,
and duties hereunder or thereunder.  In the case of an assignment,  the assignee
shall have,  to the extent of such  assignment,  the same  rights,  benefits and
obligations as it would if it were "CIT"  hereunder,  and CIT shall be relieved,
to the extent of any such assignment, of all obligations hereunder upon any such
assignment.  The Company  agrees that it will use its best efforts to assist and
cooperate with CIT in any manner reasonably  requested by CIT to effect the sale
of  participations in or assignments of any of the Loan Documents or any portion
thereof or interest therein,  including,  without  limitation,  assisting in the
preparation of appropriate disclosure documents. The Company further agrees that
CIT may disclose credit information regarding Borrower and its affiliates to any
potential  participant or assignee,  provided,  that, before disclosing any then
confidential  and non-public  information  concerning the Borrower or any of its
affiliates to any potential participant or assignee, CIT shall obtain in writing
from each such recipient appropriate confidentiality undertakings. .

11.3 Usury Limit. In no event shall the Company,  upon demand by CIT for payment
of any indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise,  be  obligated  to pay  interest  and fees in  excess  of the  amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest  on any  indebtedness  relating  hereto,  any  amount  in excess of the
maximum  amount  of  interest  permissible  under  applicable  law.  If CIT ever
receives,  collects  or applies  any such  excess,  it shall be deemed a partial
repayment of principal and treated as such.

                                       30
<PAGE>

If as a result,  the entire principal amount of the Obligations is paid in full,
any remaining  excess shall be refunded to the Company.  This Section 11.3 shall
control every other provision of the Agreement, the other Loan Documents and any
other agreement made in connection herewith.

11.4 Severability. If any provision hereof or of any other Loan Document is held
to be illegal or unenforceable, such provision shall be fully severable, and the
remaining  provisions of the applicable agreement shall remain in full force and
effect and shall not be affected by such provision's severance.  Furthermore, in
lieu of any such provision,  there shall be added automatically as a part of the
applicable  agreement a legal and  enforceable  provision as similar in terms to
the severed provision as may be possible.

11.5 WAIVER OF JURY TRIAL; JUDICIAL REFERENCE; SERVICE OF PROCESS.

      (a) TO THE EXTENT  PERMITTED BY  APPLICABLE  LAW, THE COMPANY AND CIT EACH
HEREBY  WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR  PROCEEDING  ARISING
OUT OF OR  RELATING  TO THE  LOAN  DOCUMENTS  OR THE  TRANSACTIONS  CONTEMPLATED
THEREUNDER.

      (b) THE COMPANY HEREBY  IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED  MAIL,  RETURN RECEIPT
REQUESTED.  IN NO EVENT WILL  EITHER  PARTY BE LIABLE FOR LOST  PROFITS OR OTHER
SPECIAL OR CONSEQUENTIAL DAMAGES.

11.6  Notices.  Except  as  otherwise  herein  provided,  any  notice  or  other
communication required hereunder shall be in writing (messages sent by e-mail or
other electronic  transmission (other than by telecopier) shall not constitute a
writing,  however  any  signature  on  a  document  or  other  writing  that  is
transmitted  by e-mail or  telecopier  shall  constitute a valid  signature  for
purposes  hereof),  and shall be deemed to have been  validly  served,  given or
delivered when received by the recipient if hand  delivered,  sent by commercial
overnight courier or sent by facsimile, or three (3) Business Days after deposit
in the United States mail, with proper first class postage prepaid and addressed
to the party to be notified as follows:

      (a) if to CIT, at:         The CIT Group/Commercial Services, Inc.
                                 Two Wachovia Center, Suite 2500
                                 301 South Tryon Street
                                 Charlotte, North Carolina  28282
                                 Attention: Account Executive - Concord Keystone
                                 Facsimile: (704) 339-2910

      (b) if to the Company, at: Concord Keystone Sales Corp.
                                 4000 Hollywood Boulevard
                                 Hollywood, Florida 33021
                                 Attention: Vice President, General Counsel
                                 Facsimile: (954) 989-4103; or

                                       31
<PAGE>

      (c)                        to such other address as any party
                                 may designate for itself by like
                                 notice.

11.7 Counterparts;  Electronic Execution.  This Agreement may be executed in any
number of counterparts and by different parties on separate  counterparts,  each
of which,  when executed and delivered,  shall be deemed to be an original,  and
all of  which,  when  taken  together,  shall  constitute  but one and the  same
Agreement.   Delivery  of  an  executed   counterpart   of  this   Agreement  by
telefacsimile  or by electronic  transmission  in "pdf" or other imaging  format
shall be equally as effective as delivery of an original executed counterpart of
this Agreement.  Any party delivering an executed  counterpart of this Agreement
by  telefacsimile  or  electronic  transmission  also shall  deliver an original
executed  counterpart  of this  Agreement but the failure to deliver an original
executed  counterpart shall not affect the validity,  enforceability and binding
effect of this Agreement.

11.8  CHOICE  OF LAW.  THE  VALIDITY,  INTERPRETATION  AND  ENFORCEMENT  OF THIS
AGREEMENT  AND THE OTHER LOAN  DOCUMENTS  SHALL BE  GOVERNED  BY THE LAWS OF THE
STATE OF NEW YORK EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT  INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION. 11.8

                                       32
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective by their proper and duly authorized officers as of the
date set forth above.

CONCORD KEYSTONE SALES CORP.                    THE CIT GROUP/COMMERCIAL
                                                 SERVICES, INC.

By: /s/ Blaine Robinson                         By: /s/ Dan Upchurch
    ------------------------------------------      ----------------------------
    Blaine Robinson, Vice President - Finance,      Dan Upchurch, Vice President
    Treasurer and Assistant Secretary

                              [Financing Agreement]

<PAGE>

                         SCHEDULE TO FINANCING AGREEMENT
                                     BETWEEN
                          CONCORD KEYSTONE SALES CORP.
                                       AND
                     THE CIT GROUP/COMMERCIAL SERVICES, INC.

SECTION 1  COMPANY INFORMATION

(a) Name of Company:                    Concord Keystone Sales Corp.

(b) Type of Entity and State            An Illinois corporation
of Incorporation/Formation:

(c) Federal Employer ID No.:            36-3727995

(d) State Organization No.:             56066748

(e) Chief Executive Office Address:     4000 Hollywood Boulevard
                                        6th Floor North Tower
                                        Hollywood, Florida  33021

(f) Address where Collateral is         (i)    301 Westmont Drive
located, if different than above:              San Pedro, California 90731

                                        (ii)   5388 Airways Boulevard
                                               Memphis, Tennessee  38116

(g) Existing Liens:                     N/A

SECTION 2 FINANCIAL COMMITMENTS

2.1 Revolving Credit Limit:             $15,000,000

2.2  Borrowing Base:                    At any time,  an amount equal to the sum
                                        at such time of:

                                        (a)  90%  of  the  outstanding  Eligible
                                        Accounts; plus

                                        (b)  the   lesser  of  (i)  the   amount
                                        described   in   clause   (a)  of   this
                                        definition   or  (ii)  the  sum  of  the
                                        Inventory   Formula   Amount   plus  the
                                        In-Transit   Inventory  Formula  Amount;
                                        minus

                                   Schedule 1
<PAGE>

                                        (c)  the  amount  of  the   Availability
                                        Reserve in effect at such time.

                                        Notwithstanding  the  foregoing  to  the
                                        contrary,   the   In-Transit   Inventory
                                        Formula  Amount  shall  comprise no more
                                        than  thirty-five  percent  (35%) of the
                                        amount described in the foregoing clause
                                        (b).

2.3 Additional Availability             A reserve  equal to (i) three (3) months
    Reserves:                           rental  payments or similar  charges for
                                        any of the Company's  leased premises or
                                        other  Collateral  locations (other than
                                        the Company's  headquarters  location on
                                        the date of this Financing Agreement and
                                        the Company's  premises subleased by the
                                        Company on the Effective Date), and (ii)
                                        three  (3)  months  estimated   payments
                                        (plus any other fees or charges owing by
                                        the    Company)   to   any    applicable
                                        warehousemen  or third  party  processor
                                        (as determined by CIT in the exercise of
                                        its   reasonable   business   judgment);
                                        provided  that,  any  of  the  foregoing
                                        amounts  shall be adjusted  from time to
                                        time  hereafter  upon delivery to CIT of
                                        an  acceptable  waiver  agreement.

2.4 Letter of Credit Sub-Line:          $10,000,000

SECTION 3  INTEREST, FEES AND EXPENSES

3.2 Loan Facility Fee:                  $56,250 on the Effective Date.

3.3  Line of Credit Fee:                0.20% per annum

3.4  Annual Renewal Fee:                $28,125 on each Renewal Date.
3.5  Letter of Credit Guaranty Fee:

     (a) Documentary Letters of         On the first day of each  month,  0.167%
         Credit:                        on the daily average outstanding balance
                                        during the  immediately  preceding month
                                        (but in no event less than $100.00)

     (b) Standby Letters of Credit:     On the first day of each  month,  0.167%
                                        on the daily average outstanding balance
                                        during the immediately preceding month

                                   Schedule 2
<PAGE>

SECTION 4  COLLATERAL

4.1  Collateral Reporting:              See Annex A attached hereto.

SECTION 5  REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1  Financial Reporting:               (a)  within  sixty  (60) days  after the
                                        Effective Date,  monthly  projections of
                                        the   Company's   consolidated   balance
                                        sheet,  and  consolidated  statements of
                                        profits  and loss  and cash  flow of the
                                        Company,  prepared  in  accordance  with
                                        GAAP,  as  well  as  monthly   projected
                                        Availability  for  the  Company  for the
                                        first and second fiscal  quarters of the
                                        Company's 2008 fiscal year;

                                        (b)  by  November  30,   2007,   monthly
                                        projections     of     the     Company's
                                        consolidated    balance    sheet,    and
                                        consolidated  statements  of profits and
                                        loss  and  cash  flow  of  the  Company,
                                        prepared  in  accordance  with GAAP,  as
                                        well as monthly  projected  Availability
                                        for the Company for the third and fourth
                                        fiscal  quarters of the  Company's  2008
                                        fiscal year;

                                        (c)  within  ninety  (90) days after the
                                        end of each fiscal year of the Parent, a
                                        consolidated  balance  sheet  as at  the
                                        close  of such  year,  and  consolidated
                                        statements  of profit  and loss and cash
                                        flow  of  the   Parent  for  such  year,
                                        prepared  in  accordance  with  GAAP and
                                        audited    by     independent     public
                                        accountants  selected  by the Parent and
                                        satisfactory  to CIT,  together with (i)
                                        the    unqualified    opinion   of   the
                                        accountants   preparing  such  financial
                                        statements,     (ii)    an     officer's
                                        certificate  substantially  in the  form
                                        set  forth on Annex B  attached  hereto,
                                        signed   by  the   treasurer   or  chief
                                        financial  officer of the  Company,  and
                                        (iii)  if  requested  by CIT  after  the
                                        occurrence  of a  Default  or  Event  of
                                        Default,  such  accountants'  management
                                        practice letter;

                                        (d)  within  forty-five  (45) days after
                                        the end of each  fiscal  quarter  of the
                                        Parent, a consolidated  balance sheet as
                                        at the close of such fiscal quarter, and
                                        consolidated  statements  of profit  and
                                        loss and  cash  flow of the  Parent  for
                                        such  fiscal  quarter and for the period
                                        commencing  on  the  first  day  of  the
                                        current  fiscal year  through the end of
                                        such   fiscal   quarter,   prepared   in
                                        accordance  with GAAP

                                   Schedule 3
<PAGE>

                                        and  certified by the treasurer or chief
                                        financial  officer of the Parent (or any
                                        other authorized officer satisfactory to
                                        CIT);

                                        (e)  within  thirty  (30) days after the
                                        end of each fiscal month of the Company,
                                        (i) a  consolidated  balance sheet as at
                                        the end of such month, (ii) consolidated
                                        statements  of profit  and loss and cash
                                        flow of the  Company  for such month and
                                        for the period  commencing  on the first
                                        day of the current  fiscal year  through
                                        the end of such month, (iii) comparative
                                        statements  of profit  and loss and cash
                                        flow of the  Company  for the same month
                                        and same fiscal  year-to-date  period in
                                        the  prior  fiscal  year,   prepared  in
                                        accordance  with GAAP and  certified  by
                                        the treasurer or chief financial officer
                                        of the Company (or any other  authorized
                                        officer  satisfactory  to CIT), and (iv)
                                        an officer's  certificate  substantially
                                        in  the  form  set   forth  on  Annex  B
                                        attached hereto, signed by the treasurer
                                        or  chief   financial   officer  of  the
                                        Company;

                                        (f) as and when  filed  by the  Company,
                                        copies  of all  (i)  financial  reports,
                                        registration    statements   and   other
                                        documents  filed by the Company with the
                                        U.S. Securities and Exchange Commission,
                                        as and when  filed by the  Company,  and
                                        (ii) upon CIT's request,  annual reports
                                        filed  pursuant  to ERISA in  connection
                                        with each  benefit  plan of the  Company
                                        subject to ERISA; and

                                        (g) no later than thirty (30) days prior
                                        to the  beginning of each fiscal year of
                                        the Company,  monthly projections of the
                                        Company's  consolidated  balance  sheet,
                                        and  consolidated  statements of profits
                                        and loss and cash  flow of the  Company,
                                        prepared  in  accordance  with GAAP,  as
                                        well as monthly  projected  Availability
                                        for the Company for such fiscal year.

SECTION 6:  TERMINATION

Initial Renewal Date:                   October 16, 2008

                                   Schedule 4
<PAGE>

                    ANNEX A - Collateral Reporting Provisions

A.    The Company agrees to furnish to CIT:

      (1) At least once each week (but more  frequently  upon  CIT's  reasonable
request),  a borrowing base  certificate in form and substance  satisfactory  to
CIT,  certified by the treasurer or chief  financial  officer of the Company (or
any other  authorized  officer  satisfactory to CIT),  updating Elgible Accounts
weekly  and  Eligible  Inventory  and  Eligible  In-Transit  Inventory  monthly,
together  with  such  confirmatory  schedules  of  Trade  Accounts  (in form and
substance  satisfactory  to CIT)  weekly  and  such  confirmatory  schedules  of
Inventory (in form and substance  satisfactory to CIT) monthly, in each case, as
CIT reasonably may request. CIT, in its sole discretion,  may permit the Company
to access  CIT's  System  for the  purpose  (in  addition  to those set forth in
Section 2.1.7 of the  Agreement) of completing  and  submitting  borrowing  base
certificates when required hereunder.

      (2) On or  before  the  fifteenth  (15th)  day of  each  month  (but  more
frequently upon CIT's reasonable  request),  a summary of Inventory  (containing
such detail from the Company's perpetual inventory as CIT may require) as of the
last Business Day of the preceding week, together with information sufficient to
allow CIT to update the amount of ineligible Inventory.

      (3) On or  before  the  fifteenth  (15th)  day of  each  month  (but  more
frequently upon CIT's reasonable  request),  a detailed and summary aging report
of Trade  Accounts  existing  as of the last day of the  preceding  month  and a
roll-forward of Trade Accounts from the first day of the preceding month through
the last day of the preceding  month,  all in such form as CIT reasonably  shall
require,  certified  by the  treasurer  or the chief  financial  officer  of the
Company (or any other authorized officer satisfactory to CIT), together with (x)
a  reconciliation,  as of the last day of the preceding  month, of the Company's
Trade Accounts aging report to the Company's general ledger, and (y) if required
by CIT, such other information  sufficient to allow CIT to (A) reconcile,  as of
the date of such  report,  the  Company's  Trade  Accounts  aging  report to the
applicable  borrowing base  certificate  delivered by the Company to CIT and (B)
update  the amount of  Eligible  Accounts,  Eligible  In-Transit  Inventory  and
Eligible Inventory.

      (4) On or  before  the  fifteenth  (15th)  day of  each  month  (but  more
frequently  upon CIT's  reasonable  request),  an aged trial  balance of all the
Company's accounts payable as of the last day of the preceding month.

      (5) Prompt written  disclosure of (x) all matters adversely  affecting the
value,  enforceability  or  collectibility of the Trade Accounts of the Company,
(y) all customer disputes, offsets, defenses, counterclaims, returns, rejections
and all  reclaimed  or  repossessed  merchandise  or goods,  and (z) all matters
adversely  affecting the value or  marketability  of the Inventory,  all in such
detail and format as CIT  reasonably  may require;  provided that, to the extent
that any such matter  would not have a material  adverse  effect on the Company,
the Company may disclose

                                    Annex A-1
<PAGE>

such  matter  to CIT when the  Company  provides  CIT  with the  borrowing  base
certificate described in clause (1) above.

      (6) Prior written  notice of any change in the location of any  Collateral
and any material change in type, quantity, quality or mix of the Inventory.

      (7) From  time to time,  access  to the  Company's  computers,  electronic
media,  software  programs  (including  any  electronic  records,  contracts and
signatures) and such other  documentation and information  relating to the Trade
Accounts, Inventory and other Collateral as CIT reasonably may require.

B. The Company may deliver to CIT any  borrowing  base  certificate,  collateral
report or other  material  that the  Company is required to deliver to CIT under
clauses  (1),  (2) and (3) of  Section  A of this  Annex A by  e-mail  or  other
electronic transmission (an "Electronic Transmission"), subject to the following
terms:

      (1) Each  Electronic  Transmission  must be sent by the treasurer or chief
financial officer of the Company (or any other authorized  officer  satisfactory
to CIT), and must be addressed to the loan officer and the collateral analyst of
CIT that handle the Company's  account,  as designated by CIT from time to time.
If any Electronic  Transmission is returned to the sender as undeliverable,  the
material  included in such  Electronic  Transmission  must be  delivered  to the
intended recipient in the manner required by Section 11.6 of the Agreement.

      (2) Each certificate,  collateral report or other material contained in an
Electronic  Transmission  must be in a "pdf" or other imaging format and, to the
extent that such  material  must be certified by an officer of the Company under
this  Annex  A,  must  contain  the  signature  of the  officer  submitting  the
Electronic  Transmission.  As  provided  in Section  11.7,  any  signature  on a
certificate,  collateral  report or other  material  contained in an  Electronic
Transmission  shall  constitute a valid signature for purposes  hereof.  CIT may
rely upon, and assume the authenticity of, any such signature,  and any material
containing  such  signature  shall  constitute  an  "authenticated"  record  for
purposes of the Uniform  Commercial  Code and shall satisfy the  requirements of
any applicable statute of frauds.

      (3)  The  Company  agrees  to  maintain  the  original   versions  of  all
certificates,  collateral reports and other materials  delivered to CIT by means
of an  Electronic  Transmission  and  agrees  to  furnish  to CIT such  original
versions  within five (5)  Business  Days of CIT's  request for such  materials,
signed  and  certified  (to  the  extent  required  hereunder)  by  the  officer
submitting the Electronic Transmission.

C. The Company  hereby  authorizes  CIT to regard the Company's  printed name or
rubber stamp signature on assignment  schedules or invoices as the equivalent of
a manual signature by one of the Company's  authorized  officers or agents.  The
Company's failure to promptly deliver to CIT any schedule,  report, statement or
other information set forth in this Annex A shall not affect,  diminish,  modify
or otherwise limit CIT's security interests in the Collateral.

                                    Annex A-2
<PAGE>

                                     ANNEX B
                         FORM OF COMPLIANCE CERTIFICATE

                                     [Date]

The CIT Group/Commercial Services, Inc.
Two Wachovia Center, Suite 2500
301 South Tryon Street
Charlotte, North Carolina  28282

      RE:   Financing  Agreement  dated as of October 16, 2007 (as amended,  the
            "Financing  Agreement") between The CIT  Group/Commercial  Services,
            Inc. ("CIT") and Concord Keystone Sales Corporation (the "Company")

Ladies and Gentlemen:

      Reference  is made to the  Financing  Agreement.  Capitalized  terms  used
herein and not specifically  defined shall have the meanings given to such terms
in the Financing Agreement.

      Pursuant to Sections 4.4 and 6.12 of the Financing  Agreement,  I enclose:
(a) the Company's financial  statements for the month ended _______,  200__ (the
"Reporting Month") and the fiscal year-to-date period ended _______,  200__; and
(b) a borrowing  base  certificate  as of the last day of the  Reporting  Month,
together with a detailed and summary aging report of Trade Accounts  existing as
of the last day of the Reporting Month and a roll-forward of Trade Accounts from
the first  day of the  Reporting  Month  through  the last day of the  Reporting
Month.

      As the  ________ of the  Company,  I hereby  certify to CIT that:  (a) the
financial  statement(s) fairly and accurately  represent the Company's financial
condition  at the  end of the  particular  accounting  periods  covered  by such
financial  statements,  as well as the Company's  operating  results during such
accounting periods, subject to year-end accountant reviewed adjustments; (b) the
borrowing base certificate is true, correct, and based on information  contained
in the  Company's  own financial  accounting  records;  (c) during the Reporting
Month,  (i) to my  knowledge,  there has occurred no Default or Event of Default
under the Financing Agreement, or, if I have knowledge that any Default or Event
of Default has occurred during such period,  a detailed  description  thereof is
set forth on the  Exhibit  __  attached  hereto,  and (ii) the  Company  has not
received  any notice of  cancellation  with  respect to its  property  insurance
policies;  and (d) Exhibit __ attached  hereto sets forth detailed  calculations
showing  compliance  with all  financial  covenants  contained in the  Financing
Agreement,  for the periods of measurement  covered by or ending on the last day
of the Reporting Month.

                                           Very truly yours,

                          [attach appropriate exhibits]

<PAGE>

                                     ANNEX C

                          CIT STANDARD FEE SCHEDULE FOR
                          DOCUMENTARY LETTERS OF CREDIT

            Transaction                                   Fee

Issuance
    (a) Processing Fee                          $70.00
    (b) Cable Fee                               $35.00

Amendments
    (a)  L/C Amount Increase                    0.25% of the increased amount
    (b)  Processing Fee
           - First Four Amendments              $95.00
           - After Fourth Amendment             $130.00
    (c) Cable Fee $10.00

Guarantees                                      $50.00
    Plus:  Processing Fee                       $50.00

Discrepancies                                   $75.00

Cancellations                                   $50.00

Unutilized L/C Fee                              $100.00

Payments
    (a) Sight                                   $20.00  plus  0.125%  of  amount
                                                (but  in  no  event   less  than
                                                $55.00 per set)

    (b) Time                                    $30.00  plus  1.5% per  annum on
                                                draft amount for term (but in no
                                                event less than $70.00)exv4w07

 

Exhibit 4.07

GLU MOBILE INC.

2008 Equity Inducement Plan

(adopted by the Committee on March 13, 2008)

     1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose potential contributions are important to the success of the
Company, and any Parents and Subsidiaries that exist now or in the future, by offering them an
opportunity to participate in the Company’s future performance through the grant of Awards.
Capitalized terms not defined elsewhere in the text are defined in Section 19.

     2. SHARES SUBJECT TO THE PLAN.

          2.1 Number of Shares Available. Subject to Section 2.3 and any other applicable
provisions hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan as of the Effective Date of the Plan, is 600,000 Shares, plus Shares subject
to Awards, and Shares issued upon exercise of Awards, will again be available for grant and
issuance in connection with subsequent Awards under this Plan to the extent such Shares: (i) are
subject to issuance upon exercise of an Option granted under this Plan but which cease to be
subject to the Option for any reason other than exercise of the Option; (ii) are subject to Awards
granted under this Plan that are forfeited or are repurchased by the Company at the original issue
price; (iii) are surrendered pursuant to an Exchange Program; or (iv) are subject to Awards granted
under this Plan that otherwise terminate without such Shares being issued. Shares used to pay the
exercise price of an Award or to satisfy the tax withholding obligations related to an Award will
become available for future grant or sale under the Plan. To the extent an Award under the Plan is
paid out in cash rather than Shares, such cash payment will not result in reducing the number of
Shares available for issuance under the Plan.

          2.2 Minimum Share Reserve. At all times the Company shall reserve and keep available
a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding
Awards granted under this Plan and all other outstanding but unvested Awards granted under this
Plan.

          2.3 Adjustment of Shares. If the number of outstanding Shares is changed by a stock
dividend, recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company, without consideration,
then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in
Section 2.1 and (b) the Exercise Prices of and number of Shares subject to outstanding Awards,
shall be proportionately adjusted, subject to any required action by the Board or the stockholders
of the Company and in compliance with applicable securities laws; provided that fractions of a
Share will not be issued.

     3. ELIGIBILITY. Awards may be granted only to persons who (a) were not previously an
employee or director of the Company or any Parent or Subsidiary of the Company or (b) have
completed a period of bona fide non-employment by the Company, and any Parent or Subsidiary of the
Company; and then only as an incentive material to such persons entering into employment with the
Company or any Parent or Subsidiary of the Company. A person eligible for an Award under this Plan
may be granted more than one Award under this Plan.

     4. ADMINISTRATION.

          4.1 Committee Composition; Authority. This Plan will be administered by the Committee
or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of
this Plan, and to the direction of the Board, the Committee will have full power to

 

 

implement and
carry out this Plan. Notwithstanding the foregoing, the grant of any Award shall not be effective
unless: (i) if the grant is made by the Board, then it must be approved by a majority of the
Outside Directors on the Board; and (ii) if the grant is made by the Committee, then the Committee
must be comprised solely of Outside Directors (except as otherwise permitted under the rules of the
NASD). The Committee will have the authority to:

               (a) construe and interpret this Plan, any Award Agreement and any other agreement or document
executed pursuant to this Plan;

               (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

               (c) select persons to receive Awards;

               (d) determine the form and terms and conditions, not inconsistent with the terms of the Plan,
of any Award granted hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Awards may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each case on such factors
as the Committee will determine;

               (e) determine the number of Shares or other consideration subject to Awards;

               (f) determine the Fair Market Value in good faith, if necessary;

               (g) determine whether Awards will be granted singly, in combination with, in tandem with, or
as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;

               (h) grant waivers of Plan or Award conditions;

               (i) determine the vesting, exercisability and payment of Awards;

               (j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any
Award or any Award Agreement;

               (k) determine whether an Award has been earned;

               (l) determine the terms and conditions of any, and to institute any Exchange Program;

               (m) reduce or waive any criteria with respect to Performance Factors;

               (n) adjust Performance Factors to take into account changes in law and accounting or tax rules
as the Committee deems necessary or appropriate; and

               (o) make all other determinations necessary or advisable for the administration of this Plan.

          4.2 Committee Interpretation and Discretion. Any determination made by the Committee
with respect to any Award shall be made in its sole discretion at the time of grant of the Award
or, unless in contravention of any express term of the Plan or Award, at any later time, and such
determination shall be final and binding on the Company and all persons having an interest in any
Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement
shall be submitted by the Participant or Company to the Committee for review. The resolution of
such a dispute by

 

 

the Committee shall be final and binding on the Company and the Participant. The
Committee may delegate to one or more executive officers the authority to review and resolve
disputes with respect to Awards held by Participants who are not Insiders, and such resolution
shall be final and binding on the Company and the Participant.

          4.3 Section 16 of the Exchange Act. Awards granted to Insiders must be approved by
two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of
the Exchange Act).

     5. OPTIONS. The Committee may grant Options to Participants, which will be
Nonqualified Stock Options (“NQSOs”) and will determine the number of Shares subject to the Option,
the Exercise Price of the Option, the period during which the Option may be exercised, and all
other terms and conditions of the Option, subject to the following:

          5.1 Option Grant. Each Option granted under this Plan will be an NQSO. An Option may
be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance
Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is
being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine
the nature, length and starting date of any Performance Period for each Option; and (y) select from
among the Performance Factors to be used to measure the performance, if any. Performance Periods
may overlap and Participants may participate simultaneously with respect to Options that are
subject to different performance goals and other criteria.

          5.2 Date of Grant. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option, or a specified future date. The Award
Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.

          5.3 Exercise Period. Options may be exercisable within the times or upon the
conditions as set forth in the Award Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of six (6) years from the
date the Option is granted. The Committee also may provide for Options to become exercisable at
one time or from time to time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines.

          5.4 Exercise Price. The Exercise Price of an Option will be determined by the
Committee when the Option is granted. Payment for the Shares purchased may be made in accordance with Section 6. The Exercise Price of a NQSO may be less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant in the Committee’s discretion.

          5.5 Method of Exercise. Any Option granted hereunder will be exercisable according to
the terms of the Plan and at such times and under such conditions as determined by the Committee
and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An
Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as
the Committee may specify from time to time) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised (together with
applicable withholding taxes). Full payment may consist of any consideration and method of payment
authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon
exercise of an Option will be issued in the name of the Participant. Until the Shares are issued
(as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights as a stockholder
will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will
issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 2.3 of the Plan. Exercising an Option in any
manner will decrease the number of Shares thereafter

 

 

available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is exercised.

          5.6 Termination. The exercise of an Option will be subject to the following (except
as may be otherwise provided in an Award Agreement):

               (a) If the Participant is Terminated for any reason except for Cause or the Participant’s
death or Disability, then the Participant may exercise such Participant’s Options only to the
extent that such Options would have been exercisable by the Participant on the Termination Date no
later than three (3) months after the Termination Date (or such shorter time period or longer time
period not exceeding five (5) years as may be determined by the Committee), but in any event no
later than the expiration date of the Options.

               (b) If the Participant is Terminated because of the Participant’s death (or the Participant
dies within three (3) months after a Termination other than for Cause or because of the
Participant’s Disability), then the Participant’s Options may be exercised only to the extent that
such Options would have been exercisable by the Participant on the Termination Date and must be
exercised by the Participant’s legal representative, or authorized assignee, no later than twelve
(12) months after the Termination Date (or such shorter time period not less than six (6) months or
longer time period not exceeding five (5) years as may be determined by the Committee), but in any
event no later than the expiration date of the Options.

               (c) If the Participant is Terminated because of the Participant’s Disability, then the
Participant’s Options may be exercised only to the extent that such Options would have been
exercisable by the Participant on the Termination Date and must be exercised by the Participant (or
the Participant’s legal representative or authorized assignee) no later than twelve (12) months
after the Termination Date, but in any event no later than the expiration date of the Options.

               (d) If the Participant is Terminated for Cause, then Participant’s Options shall expire on
such Participant’s Termination Date, or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration
date of the Options.

          5.7 Limitations on Exercise. The Committee may specify a minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum number will not
prevent any Participant from exercising the Option for the full number of Shares for which it is
then exercisable.

          5.8 Modification, Extension or Renewal. The Committee may modify, extend or renew
outstanding Options and authorize the grant of new Options in substitution therefor, provided that
any such action may not, without the written consent of a Participant, impair any of such
Participant’s rights under any Option previously granted.

     6. PAYMENT FOR SHARE PURCHASES.

          Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or
by check or, where expressly approved for the Participant by the Committee and where permitted by
law (and to the extent not otherwise set forth in the applicable Award Agreement):

               (a) by cancellation of indebtedness of the Company to the Participant;

               (b) by surrender of shares of the Company held by the Participant that have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said
Award will be exercised or settled;

               (c) by waiver of compensation due or accrued to the Participant for services rendered or to be
rendered to the Company or a Parent or Subsidiary of the Company;

 

 

               (d) by consideration received by the Company pursuant to a broker-assisted and/or same day
sale (or other) cashless exercise program implemented by the Company in connection with the Plan;

               (e) by any combination of the foregoing; or

               (f) by any other method of payment as is permitted by applicable law.

     7. WITHHOLDING TAXES.

          7.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards
granted under this Plan, the Company may require the Participant to remit to the Company an amount
sufficient to satisfy applicable federal, state, local and international withholding tax
requirements prior to the delivery of Shares pursuant to exercise of any Award. Whenever payments
in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net
of an amount sufficient to satisfy applicable federal, state, local and international withholding
tax requirements.

          7.2 Stock Withholding. The Committee, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may require or permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i)
paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having
a Fair Market Value equal to the minimum statutory amount required to be withheld, or (iii)
delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum
statutory amount required to be withheld. The Fair Market Value of the Shares to be withheld or
delivered will be determined as of the date that the taxes are required to be withheld.

     8. TRANSFERABILITY. Unless determined otherwise by the Committee, an Award may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will
or by the laws of descent or distribution. If the Committee makes an Award transferable, such
Award will contain such additional terms and conditions as the Committee deems appropriate. All
Awards shall be exercisable: (i) during the Participant’s lifetime only by (A) the Participant, or
(B) the Participant’s guardian or legal representative; and (ii) after the Participant’s death, by
the legal representative of the Participant’s heirs or legatees

     9. PRIVILEGES OF STOCK OWNERSHIP; VOTING AND DIVIDENDS. No Participant will have any
of the rights of a shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be a shareholder and
have all the rights of a shareholder with respect to such Shares, including the right to vote and
receive all dividends or other distributions made or paid with respect to such Shares.

     10. CERTIFICATES. All certificates for Shares or other securities delivered under
this Plan will be subject to such stock transfer orders, legends and other restrictions as the
Committee may deem necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other requirements of the SEC or any
stock exchange or automated quotation system upon which the Shares may be listed or quoted.

     11. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares,
the Committee may require the Participant to deposit all certificates representing Shares, together
with stock powers or other instruments of transfer approved by the Committee, appropriately
endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Participant who is permitted
to execute a promissory note as partial or full consideration for the purchase of Shares under this
Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased
as collateral to secure the payment of the Participant’s obligation to the Company under the
promissory note; provided, however, that the Committee may require or accept other
or additional forms of collateral to secure the payment of such obligation and, in

 

 

any event, the
Company will have full recourse against the Participant under the promissory note notwithstanding
any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the
Shares, the Participant will be required to execute and deliver a written pledge agreement in such
form as the Committee will from time to time approve. The Shares purchased with the promissory
note may be released from the pledge on a pro rata basis as the promissory note is paid.

     12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective
unless such Award is in compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary or advisable; and/or
(b) completion of any registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be necessary or advisable.
The Company will be under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability for any inability or
failure to do so. This Plan shall not take effect until the fifteen (15) day period provided
pursuant to Nasdaq rule 4310(c)(17) has expired.

     13. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this
Plan will confer or be deemed to confer on any Participant any right to continue in the employ of,
or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company
or limit in any way the right of the Company or any Parent or Subsidiary of the Company to
terminate Participant’s employment or other relationship at any time.

     14. CORPORATE TRANSACTIONS.

          14.1 Assumption or Replacement of Awards by Successor. In the event of a Corporate
Transaction any or all outstanding Awards may be assumed or replaced by the successor corporation,
which assumption or replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in place of
outstanding Shares of the Company held by the Participant, substantially similar shares or other
property subject to repurchase restrictions no less favorable to the Participant. In the event
such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute
Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other
provision in this Plan to the contrary, such Awards will expire on such transaction at such time
and on such conditions as the Board (or, the Committee, if so designated by the Board) will
determine; the Board (or, the Committee, if so designated by the Board) may, in its sole
discretion, accelerate the vesting of such Awards in connection with a Corporate Transaction. In
addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert,
replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee
will notify the Participant in writing or electronically that such Award will be exercisable for a
period of time determined by the Committee in its sole discretion, and such Award will terminate
upon the expiration of such period. Awards need not be treated similarly in a Corporate
Transaction.

     Notwithstanding anything to the contrary in this Section 14.1, the Committee, in its sole
discretion, may grant Awards that provide for acceleration upon a Corporate Transaction or in other
events in the specific Award Agreements.

          14.2 Assumption of Awards by the Company. The Company, from time to time, also may
substitute or assume outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in

 

 

substitution of such other company’s award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award granted under this
Plan.

     15. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will become
effective on the Effective Date and will terminate ten (10) years from the date this Plan is
adopted by the Committee. This Plan and all Awards granted hereunder shall be governed by and
construed in accordance with the laws of the State of Delaware.

     16. AMENDMENT OR TERMINATION OF PLAN. The Board or Committee may at any time
terminate or amend this Plan in any respect, including, without limitation, amendment of any form
of Award Agreement or instrument to be executed pursuant to this Plan; provided,
however, that the Board or Committee will not, without the approval of the shareholders of
the Company, amend this Plan in any manner that requires such shareholder approval; provided
further, that a Participant’s Award shall be governed by the version of this Plan then in
effect at the time such Award was granted.

     17. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Committee,
nor any provision of this Plan, will be construed as creating any limitations on the power of the
Board or Committee to adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock awards and bonuses otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable only in specific
cases.

     18. INSIDER TRADING POLICY. Each Participant who receives an Award shall comply with
any policy adopted by the Company from time to time covering transactions in the Company’s
securities by Employees, officers and/or directors of the Company.

     19. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the
following terms will have the following meanings:

     “Award” means an Option awarded under the Plan.

     “Award Agreement” means, with respect to each Award, the written or electronic agreement
between the Company and the Participant setting forth the terms and conditions of the Award, which
shall be in substantially a form (which need not be the same for each Participant) that the
Committee has from time to time approved, and will comply with and be subject to the terms and
conditions of this Plan.

     “Board” means the Board of Directors of the Company.

     “Cause” means (a) the commission of an act of theft, embezzlement, fraud, dishonesty, (b) a
breach of fiduciary duty to the Company or a Parent or Subsidiary, or (c) a failure to materially
perform the customary duties of Employee’s employment.

     “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.

     “Committee” means the Compensation Committee of the Board or those persons to whom
administration of the Plan, or part of the Plan, has been delegated as permitted by law, or an
“independent compensation committee” (as such term is defined for purposes of the rules of the
National Association of Securities Dealers, Inc.).

     “Company” means Glu Mobile Inc., or any successor corporation.

     “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner”
(as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power represented by the
Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by
the Company of all or

 

 

substantially all of the Company’s assets; or (iii) the consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving entity or its parent
outstanding immediately after such merger or consolidation.

     “Director” means a member of the Board.

     “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code,
provided, however, that the Committee in its discretion may determine whether a total and permanent
disability exists in accordance with non-discriminatory and uniform standards adopted by the
Committee from time to time, whether temporary or permanent, partial or total, as determined by the
Committee.

     “Effective Date” means the expiration of the fifteen (15) day waiting period following the
adoption of the Plan by the Committee, as set forth in Section 12.

     “Employee” means any person, including Officers, employed by the Company or any Parent or
Subsidiary of the Company and who meets the eligibility requirements as set forth in Section 3.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Exercise Price” means the price at which a holder of an Award may purchase the Shares
issuable upon exercise of an Award.

     “Exchange Program” means a program pursuant to which outstanding Awards are surrendered,
cancelled or exchanged for cash, the same type of Award or a different Award (or combination
thereof).

     “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock
determined as follows:

          (a) if such Common Stock is publicly traded and is then listed on a national securities
exchange, its closing price on the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street
Journal or such other source as the Board or the Committee deems reliable;

          (b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a
national securities exchange, the average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal or such other source as the Board or the
Committee deems reliable; or

          (c) if none of the foregoing is applicable, by the Board or the Committee in good faith.

     “Insider” means an officer or director of the Company or any other person whose transactions
in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

     “Option” means an award of an option to purchase Shares pursuant to Section 5.

     “Outside Director” means a Director who is not an Employee of the Company or any Parent or
Subsidiary and who is an “independent” director under the rules of the Nasdaq Stock Market, as may
be amended from time to time.

     “Parent” means any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of such corporations other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of
the other

 

 

corporations in such chain.

     “Participant” means a newly hired Employee who receives an Award under this Plan at the time
of his or her employment. The term “Participant” shall include individuals who were previously
employed by the Company, or any Parent or Subsidiary of the Company, who have undergone a bona fide
period of non-employment by the Company. The term “Participant” shall also include individuals who
become Employees of the Company, or any Parent or Subsidiary of the Company, as the result of a
merger or acquisition.

     “Performance Factors” means the factors selected by the Committee, which may include, but are
not limited to the, the following measures (whether or not in comparison to other peer companies)
to determine whether the performance goals established by the Committee and applicable to Awards
have been satisfied:

	 	•	 	Net revenue and/or net revenue growth;
	 
	 	•	 	Earnings per share and/or earnings per share growth;
	 
	 	•	 	Earnings before income taxes and amortization and/or earnings before income
taxes and amortization growth;
	 
	 	•	 	Operating income and/or operating income growth;
	 
	 	•	 	Net income and/or net income growth;
	 
	 	•	 	Total stockholder return and/or total stockholder return growth;
	 
	 	•	 	Return on equity;
	 
	 	•	 	Operating cash flow return on income;
	 
	 	•	 	Adjusted operating cash flow return on income;
	 
	 	•	 	Economic value added;
	 
	 	•	 	Individual business objectives; and
	 
	 	•	 	Company specific operational metrics.

     “Performance Period” means the period of service determined by the Committee, not to exceed
five (5) years, during which years of service or performance is to be measured for the Award.

     “Plan” means this Glu Mobile Inc. 2008 Equity Inducement Plan.

     “SEC” means the United States Securities and Exchange Commission.

     “Securities Act” means the United States Securities Act of 1933, as amended.

     “Shares” means shares of the Company’s Common Stock, as adjusted pursuant to Sections 2 and
14, and any successor security.

     “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation
in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.

 

 

     “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant,
that the Participant has for any reason ceased to provide services as an employee of the Company or
a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide
services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee; provided, that such leave is for a period of not more than 90
days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or
unless provided otherwise pursuant to formal policy adopted from time to time by the Company and
issued and promulgated to employees in writing. In the case of any employee on an approved leave
of absence, the Committee may make such provisions respecting suspension of vesting of the Award
while on leave from the employ of the Company or a Parent or Subsidiary of the Company as it may
deem appropriate, except that in no event may an Award be exercised after the expiration of the
term set forth in the applicable Award Agreement. The Committee will have sole discretion to
determine whether a Participant has ceased to be employed and the effective date on which the
Participant ceased to be so employed (the “Termination Date”).

 

 

GLU MOBILE INC.

2008 EQUITY INDUCEMENT PLAN

NOTICE OF STOCK OPTION GRANT

	 	 	 	 	 
	 
	 	Name:	 	 	 
	 
	 	Address:	 	 	 
	 
	 	 	 	 	 
	 	 	 

     You (the “Participant”) have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Notice of Stock Option Grant (the “Notice”), the 2008
Equity Inducement Plan, as amended from time to time (the “Plan”) and the Stock Option Award
Agreement (the “Option Agreement”) attached hereto, as follows. The terms defined in the Plan
shall have the same meanings in this Notice.

	 	 	 	 	 
	 
	 	Grant Number	 	 	 
	 
	 	Date of Grant	 	 	 
	 
	 	Vesting Commencement Date	 	 	 
	 
	 	Exercise Price per Share	 	 	 
	 
	 	Total Number of Shares	 	 	 
	 
	 	Total Exercise Price	 	 	 
	 
	 	Type of Option	 	Non-Qualified Stock Option
	 
	 	Expiration Date	 	 	 
	 
	 	Post-Termination Exercise Period:	 	Termination for Cause = None

Voluntary Termination = 3 Months

Termination without Cause = 3 Months

Disability = 12 Months

Death = 12 Months

 

Vesting Schedule:

     Subject to the limitations set forth in this Notice, the Plan and the Option Agreement, the
Option will vest and may be exercised, in whole or in part, in accordance with the following
schedule:

     [INSERT VESTING SCHEDULE]

     You acknowledge receipt of a copy of the Plan and the Option Agreement, and represent that you
are familiar with the terms and provisions thereof, and hereby accept the Option subject to all of
the terms and provisions hereof. You understand that your employment with the Company is for an
unspecified duration and can be terminated at any time (i.e., is “at-will”), and that nothing in
this Notice, the Stock Option Award Agreement or the Plan changes the at-will nature of that
relationship. You acknowledge that the vesting of shares pursuant to this Notice is earned only by
your continuing service as an Employee of the Company.

	 	 	 
	 
	PARTICIPANT:
	 	GLU MOBILE INC.
	 
	Signature: 
	 	By: 

	 
	Print Name: 
	 	Its: 

	 
	Date: 
	 	Date: 

 

GLU MOBILE INC.

STOCK OPTION AWARD AGREEMENT

2008 EQUITY INDUCEMENT PLAN

Unless
otherwise defined herein, the terms defined in the Company’s
2008 Equity Inducement Plan (the “Plan”) shall have the same defined meanings in this Award Agreement (the “Agreement”).

Participant
has been granted an option to purchase Shares (the
“Option”), subject to the terms and conditions of the Plan, the Notice of Stock Option Grant (“Notice of Grant”) and this Agreement.

     1. Vesting Rights. Subject to the applicable provisions of the Plan and this
Agreement, this Option may be exercised, in whole or in part, in accordance with the schedule set
forth in the Notice of Grant.

     2. Termination Period.

          (a) General Rule. Except as provided below, and subject to the Plan, this Option may
be exercised for 3 months after termination of Participant’s employment with the Company. In no
event shall this Option be exercised later than the Term/Expiration Date set forth in the Notice of
Grant.

          (b) Death; Disability. Upon the termination of Participant’s employment with the
Company by reason of his or her Disability or death, or if a Participant dies within three months
of the Termination Date, this Option may be exercised for twelve months in the case of death, and
six months in the case of Disability, after the Termination Date, provided that in no event shall
this Option be exercised later than the Term/Expiration Date set forth in the Notice of Grant.

          (c) Cause. Upon the termination of Participant’s employment by the Company for Cause,
the Option shall expire on such date of Participant’s Termination Date.

     3. Grant of Option. The Participant named in the Notice of Grant has been granted an
Option for the number of Shares set forth in the Notice of Grant at the exercise price per Share
set forth in the Notice of Grant (the “Exercise Price”). In the event of a conflict between the
terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and
conditions of the Plan shall prevail.

     4. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and
this Agreement. In the event of Participant’s death, Disability, Termination for Cause or other
Termination, the exercisability of the Option is governed by the applicable provisions of the Plan,
the Notice of Stock Option Grant and this Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
(the “Exercise Notice”), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other
representations and agreements as may be required by the Company pursuant to the provisions of the
Plan. The Exercise

 

 

Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other
authorized method to the Secretary of the Company or other person designated by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by such aggregate Exercise Price.

          (c) No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with all relevant provisions of law and the requirements of any stock exchange or
quotation service upon which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Participant on the date the
Option is exercised with respect to such Exercised Shares.

     5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Participant:

          (a) cash; or

          (b) check; or

          (c) a “broker-assisted” or “same day sale” (as described in Section 11(d) of the Plan); or

          (d) other method authorized by the Company.

     6. Non-Transferability of Option. This Option may not be transferred in any manner
other than by will or by the laws of descent or distribution or court order and may be exercised
during the lifetime of Participant only by the Participant. The terms of the Plan and this
Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the
Participant.

     7. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Notice of Grant,
the Plan and the terms of this Agreement.

     8. U.S. Tax Consequences. For Participants subject to U.S. income tax, some of the
federal tax consequences relating to this Option, as of the date of this Option, are set forth
below. All other Participants should consult a tax advisor for tax consequences relating to this
Option in their respective jurisdiction. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS
AND REGULATIONS ARE SUBJECT TO CHANGE. THE PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (a) Exercising the Option. Each Option granted hereunder is intended to be a
Nonqualified Stock Option (“NSO”). The Participant may incur regular federal income tax liability
upon exercise of a NSO. The Participant will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Participant
is an Employee or a former Employee, the Company will be required to withhold from his or her
compensation or collect from Participant and pay to the applicable taxing authorities an amount in
cash equal to a percentage of this compensation income at the time of exercise, and may refuse to
honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at
the time of exercise.

2

 

          (b) Disposition of Shares. If the Participant holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term capital gain for
federal income tax purposes.

          (c) Possible Effect of Section 409A of the Code. Section 409A of the Code applies to
arrangements that provide for the deferral of compensation. Generally, a stock option granted with
an exercise price per share of not less than the “fair market value” (determined in a manner
consistent with Section 409A of the Code and the regulations and other guidance promulgated
thereunder) per share on the date of grant of the stock option and with no other feature providing
for the deferral of compensation will not be subject to Section 409A of the Code. However, if the
exercise price of the stock option is less than such “fair market value” or the stock option has
another feature for the deferral of compensation, then if the stock option is not administered
within the parameters established under Section 409A the optionholder will be subject to additional
taxes. Also, the amount deemed to be deferred compensation under Section 409A of the Code will be
subject to ordinary income and employment taxes (in this respect the IRS has not yet indicated how
it will calculate the amount of deferred compensation subject to tax and the timing and frequency
of taxation, but it seems likely that the income will be measured and taxes imposed at least on the
vesting dates of the stock option). If Section 409A of the Code does apply to this Option, then
special rules apply to the timing of making and effecting certain amendments of this Option with
respect to distribution of any deferred compensation.

     9. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan, the Notice of Grant, and this Agreement constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject matter hereof, and may
not be modified adversely to the Participant’s interest except by means of a writing signed by the
Company and Participant. This agreement is governed by Delaware law except for that body of law
pertaining to conflict of laws.

     10. No Rights as Employee. Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to
terminate Participant’s employment, for any reason, with or without cause.

     By your signature and the signature of the Company’s representative on the Notice of Grant,
you and the Company agree that this Option is granted under and governed by the terms and
conditions of the Plan, the Notice of Grant, and this Agreement. Participant has reviewed the
Plan, the Notice of Grant, and this Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing the Notice of Grant, and fully understands all provisions
of the Plan, the Notice of Grant, and this Agreement. Participant hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Committee upon any questions
relating to the Plan, the Notice of Grant, and the Agreement. Participant further agrees to notify
the Company upon any change in the residence address indicated on the Notice of Grant.

3

 

No.           

GLU MOBILE INC.

2008 EQUITY INDUCEMENT PLAN

STOCK OPTION EXERCISE AGREEMENT

     This Stock Option Exercise Agreement (the “Exercise Agreement”) is made and entered into as of
______________, _______(the “Effective Date”) by and between Glu Mobile Inc., a Delaware
corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms
not defined herein shall have the meanings ascribed to them in the Company’s 2008 Equity Inducement
Plan (the “Plan”).

	 	 	 
	Purchaser:

	 	 
	 	 	 
	 	 	 
	 	 	 
	Social Security Number:
	 	 
	 	 	 
	 	 	 
	 	 	 
	Address:
	 	 
	 	 	 
	Total Number of Shares:
	 	 
	 	 	 
	Exercise Price Per Share:
	 	 
	 	 	 
	Type of Stock Option:

	 	Nonqualified Stock Option

     1. EXERCISE OF OPTION.

          1.1 Exercise. Pursuant to exercise of that certain option (the “Option”) granted to
Purchaser under the Plan and subject to the terms and conditions of this Exercise Agreement,
Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total
Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, at the Exercise
Price Per Share set forth above (the “Exercise Price”). As used in this Exercise Agreement, the
term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all
securities received (i) in replacement of the Shares, (ii) as a result of stock dividends or stock
splits with respect to the Shares, and (iii) all securities received in replacement of the Shares
in a merger, recapitalization, reorganization or similar corporate transaction.

          1.2 Title to Shares. The exact spelling of the name(s) under which Purchaser will
take title to the Shares is:

	 
	 	 	 	 
	 
	 	 	 	 

          Purchaser desires to take title to the Shares as follows:

	 	 	 	o Individual, as separate property

4

 

	 	 	 	o Husband and wife, as community property

	 	 	 	 

	 	 	 	o Joint Tenants

	 	 	 	 

	 	 	 	o Other; please specify:
     
     
     
     
     
     
     
     

          1.3 Payment.
Purchaser hereby delivers payment of the Exercise Price in the manner
permitted in the Stock Option Agreement as follows (check and complete as appropriate):

	 	 	 	o in cash (by check) in the amount of $___________, receipt of
which is acknowledged by the Company;

	 
	 	 	 	o
by delivery of ________ fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Purchaser which
have been paid for within the meaning of SEC Rule 144, (if purchased
by use of a promissory note, such note has been fully paid with
respect to such vested shares), or obtained by Purchaser in the open
public market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current fair market
value of
$__________ per share;

	 
	 	 	 	o through a “broker-assisted” or “same day sale” program, commitment
from the Purchaser or Authorized Transferee and an NASD Dealer
meeting the requirements set forth by the Company; or

	 
	 	 	 	o through a “margin” commitment from Purchaser or Authorized
Transferee and an NASD Dealer meeting the requirements of the
Company’s “margin” procedures and in accordance with law.

     2. DELIVERY.

          2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company (i) this
Exercise Agreement and (ii) the Exercise Price and payment or other provision for any applicable
tax obligations.

          2.2 Deliveries by the Company. Upon its receipt of the Exercise Price, payment or
other provision for any applicable tax obligations and all the documents to be executed and
delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed
stock certificate evidencing the Shares in the name of Purchaser.

     3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to
the Company that:

          3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the
Stock Option Agreement, has read and understands the terms of the Plan, the Stock Option Agreement
and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser
acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares,
and that Purchaser should consult a tax adviser
prior to such exercise or disposition.

          3.2 Access to Information. Purchaser has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and financial condition that
Purchaser reasonably considers important in making the decision to purchase the Shares, and
Purchaser

5

 

has had ample opportunity to ask questions of the Company’s representatives concerning
such matters and this investment.

          3.3 Understanding of Risks. Purchaser has received and reviewed the Form S-8
prospectus for the Plan and Shares and is fully aware of: (i) the highly speculative nature of the
investment in the Shares; (ii) the financial hazards involved; (iii) the qualifications and
backgrounds of the management of the Company; and (iv) the tax consequences of investment in the
Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser’s own interests in this transaction and is financially capable of
bearing a total loss of this investment.

     4. COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and acknowledges that the
exercise of any rights to purchase any Shares is expressly conditioned upon compliance with the
Securities Act and all applicable state securities laws. Purchaser agrees to cooperate with the
Company to ensure compliance with such laws.

     5. RESTRICTED SECURITIES.

          5.1 No Transfer Unless Registered or Exempt. Purchaser understands that Purchaser may
not transfer any Shares except when such Shares are registered under the Securities Act or
qualified under applicable state securities laws or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC and that the
Company is under no obligation to do so with respect to the Shares, and may withdraw any such
registration statement at any time after filing. Purchaser has also been advised that exemptions
from registration and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.

          5.2 SEC Rule 144. If Purchaser is an “affiliate” for purposes of Rule 144 promulgated
under the Securities Act, then in addition, Purchaser has been advised that Rule 144 requires that
the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they
have been purchased and paid for (within the meaning of Rule 144). Purchaser understands
that Rule 144 may impose limitations on the volume of shares that can be sold, and may indefinitely
restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if
“current public information” about the Company (as defined in Rule 144) is not publicly available.

     6. RIGHTS AS A STOCKHOLDER. Subject to the terms and conditions of this Exercise
Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to
the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser
disposes of the Shares.

     7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

          7.1 Legends. Purchaser understands and agrees that the Company will place any legends
that may be required by state or U.S. Federal securities laws, the Company’s Certificate of
Incorporation or Bylaws, any other agreement between Purchaser and the Company or, subject to the
assent of the Company, any agreement between Purchaser and any third party.

          7.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure compliance with any
restrictions imposed by this Exercise Agreement, the Company may issue appropriate “stop-transfer”
instructions to its transfer agent, if any, and if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

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          7.3 Refusal to Transfer. The Company will not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of any of the provisions
of this Exercise Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

     8. TAX CONSEQUENCES. PURCHASER UNDERSTANDS AND REPRESENTS: (i) THAT PURCHASER HAS
REVIEWED THE PROSPECTUS PREPARED FOR THE PLAN AND CONSULTED PURCHASER’S PERSONAL TAX ADVISER IN
CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON
THE COMPANY FOR ANY TAX ADVICE. SET FORTH BELOW IS A BRIEF SUMMARY AS OF THE DATE THE PLAN WAS
ADOPTED BY THE BOARD OF SOME OF THE U.S. FEDERAL TAX CONSEQUENCES OF EXERCISE OF THE OPTION AND
DISPOSITION OF THE SHARES. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT THE PROSPECTUS AND PURCHASER’S
PERSONAL TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          8.1 Exercise of Nonqualified Stock Option. There may be a regular U.S. Federal income
tax liability upon the exercise of the Option. Purchaser will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If Purchaser is or was
an employee of the Company, the Company may be required to withhold from Purchaser’s compensation
or collect from Purchaser and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.

          8.2 Disposition of Shares. The following tax consequences may apply upon disposition
of the Shares.

               (a) Nonqualified Stock Options. If the Shares are held for more than twelve (12)
months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain
realized on disposition of the Shares will be treated as long-term capital gain.

               (b) Withholding. The Company may be required to withhold from the Purchaser’s
compensation or collect from the Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.

     9. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the Shares will
be subject to and conditioned upon compliance by the Company and Purchaser with all applicable
state and federal laws and regulations and with all applicable requirements of any stock exchange
or automated quotation system on which the Company’s Common Stock may be listed or quoted at the
time of such issuance or transfer.

     10. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this
Exercise Agreement. No other party to this Exercise Agreement may assign, whether voluntarily or
by operation of law, any of its rights and obligations under this Exercise Agreement, except with
the prior written consent of the Company. This Exercise Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this Exercise Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives,
successors and assigns.

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     11. GOVERNING LAW. This Exercise Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to that body of laws
pertaining to conflict of laws.

     12. NOTICES. Any and all notices required or permitted to be given to a party
pursuant to the provisions of this Exercise Agreement will be in writing and will be effective and
deemed to provide such party sufficient notice under this Exercise Agreement on the earliest of the
following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) business
day after deposit with an express overnight courier for United States deliveries, or two (2)
business days after such deposit for deliveries outside of the United States, with proof of
delivery from the courier requested; or (iii) three (3) business days after deposit in the United
States mail by certified mail (return receipt requested) for United States deliveries. All notices
for delivery outside the United States will be sent by express courier. All notices not delivered
personally will be sent with postage and/or other charges prepaid and properly addressed to the
party to be notified at the address set forth below the signature lines of this Exercise Agreement,
or at such other address as such other party may designate by one of the indicated means of notice
herein to the other parties hereto. Notices to the Company will be marked “Attention: Stock Plan
Administration”.

     13. FURTHER ASSURANCES. The parties agree to execute such further documents and
instruments and to take such further actions as may be reasonably necessary to carry out the
purposes and intent of this Exercise Agreement.

     14. TITLES AND HEADINGS. The titles, captions and headings of this Exercise Agreement
are included for ease of reference only and will be disregarded in interpreting or construing this
Exercise Agreement. Unless otherwise specifically stated, all references herein to “sections” will
mean “sections” to this Exercise Agreement.

     15. ENTIRE AGREEMENT. The Plan, the Notice, the Stock Option Agreement and this
Exercise Agreement constitute the entire agreement and understanding of the parties with respect to
the subject matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between or among the parties hereto with respect to the
specific subject matter hereof.

     16. COUNTERPARTS. This Exercise Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an original, and all of
which together shall constitute one and the same agreement.

     17. SEVERABILITY. If any provision of this Exercise Agreement is determined by any
court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such provision will be enforced to the maximum extent possible given the intent of the
parties hereto. If such clause or provision cannot be so enforced, such provision shall be
stricken from this Exercise Agreement and the remainder of this Exercise Agreement shall be
enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not
enforceable) never been contained in this Exercise Agreement. Notwithstanding the forgoing, if the
value of this Exercise Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such
provision(s) through good faith negotiations.

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     IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be executed in
triplicate by its duly authorized representative and Purchaser has executed this Exercise Agreement
as of the Effective Date, indicated above.

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	GLU MOBILE INC.
	 	PURCHASER
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By: 
	 	(Signature)

	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	(Please print name)
	 	(Please print name)
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	(Please print title)
	 	 	 	 
	 
	 	 	 	 	 	 
	Address:
	 	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	Fax No.: 
	 	Fax No. 

	Phone
No.: 
	 	Phone
No.: 

[Signature page to Glu Mobile Inc. Stock Option Exercise Agreement]

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