Document:

bofagmt.htm

    [BANK
      OF AMERICA] 

    

    LOAN
      AGREEMENT

    

    This
      Agreement dated as of September 18, 2007, is among Bank of America, N.A. (the
      "Bank"), Air T, Inc.; Csa Air, Inc.; Mountain Air Cargo, Inc.; MAC Aviation
      Services LLC; Global Ground Support, LLC and Global Aviation Services, LLC;
      are
      sometimes referred to collectively as the "Borrowers" and individually as the
      “Borrower”).

    

    1.           DEFINITIONS

    

    In
      addition to the terms which are defined elsewhere in this Agreement, the
      following terms have the meanings indicated for the purposes of this
      Agreement:

    

    1.1           "Borrowing
      Base" means the sum of:

    

    (a)           85%
      of the Prime Government Receivables; and

    

    (b)           85%
      Commercial Receivables; and

    

    
      	
              (c)

            	
              50%
                of the Unbilled Receivables; and

            

    

    

    
      	
              (d)

            	
              The
                lesser of Two Million Five Hundred Thousand and 00/100 Dollars
                ($2,500,000.00) or a percentage of the value of Eligible Inventory
                calculated by adding together:

            

    

    

    
      	
               

            	
              (i)

            	
              50%
                of the value of Eligible Inventory consisting of raw materials;
                and

            

    

    

    
      	
               

            	
              (ii)

            	
              40%
                of the value of Eligible Inventory consisting of finished
                goods.

            

    

    

    
      	
              (e)

            	
              less
                the amount of the letters of credit outstanding at any one time (including
                the drawn and unreimbursed amounts of the letters of
                credit).

            

    

    

    In
      determining the value of Eligible Inventory to be included in the Borrowing
      Base, the Bank will use the lowest of (i) the Borrower's cost, (ii) the
      Borrower's estimated market value, or (iii) the Bank's independent determination
      of the resale value of such inventory in such quantities and on such terms
      as
      the Bank deems appropriate.

    

    After
      calculating the Borrowing Base as provided above, the Bank may deduct such
      reserves as the Bank may establish from time to time in its reasonable credit
      judgment, including, without limitation, reserves for rent at leased locations
      subject to statutory or contractual landlord’s liens, inventory shrinkage,
      dilution, customs charges, warehousemen’s or bailees’ charges, liabilities to
      growers of agricultural products which are entitled to lien rights under the
      federal Perishable Agricultural Commodities Act or any applicable state law,
      and
      the amount of estimated maximum exposure, as determined by the Bank from time
      to
      time, under any interest rate contracts which the Borrower enters into with
      the
      Bank (including interest rate swaps, caps, floors, options thereon, combinations
      thereof, or similar contracts).  In addition to the foregoing, the
      Bank may deduct from the Borrowing Base two (2) times the monthly rent/lease
      payment for the leased property located at 540 East 56 Highway, Olathe, Kansas,
      if the principal amount outstanding under the Facility No. 1 commitment exceeds
      70% of the Borrowing Base for any ninety (90) day period.

    

    
      	
              1.2  

            	
              "Borrowing
                Base Certificate" means a report in the format shown as Exhibit A,
                calculated by the Borrower and setting forth the Borrowing Base on
                which
                the requested extension of credit is to be
                based.

            

    

    

    
      	
              1.3  

            	
              "Credit
                Limit" means the amount of Seven Million and 00/100 Dollars
                ($7,000,000.00).

            

    

    

    
      	
              1.4  

            	
              "Eligible
                Inventory" means inventory which satisfies the following
                requirements:

            

    

    

    (a)           The
      inventory is owned by the Borrower free of any title defects or any liens or
      interests of others except thesecurity interest in favor of the
      Bank.  This does not prohibit any statutory liens which may exist in
      favor of thegrowers of agricultural products which are purchased by the
      Borrower.

    

    
      	
              (b)

            	
              The
                inventory is located at locations which the Borrower has disclosed
                to the
                Bank and which are acceptable to the Bank.  If the inventory is
                covered by a negotiable document of title (such as a warehouse receipt)
                that document must be delivered to the Bank.  Inventory which is
                in transit is not acceptable unless it is covered by a commercial
                letter
                of credit issued by the Bank, the seller of the inventory is required
                to
                present shipping or title documents to the Bank as a condition to
                obtaining payment, and the final destination of such inventory is
                a
                location acceptable to the Bank.

            

    

    

    
      	
              (c)

            	
              The
                inventory is held for sale or use in the ordinary course of the Borrower's
                business and is of good and merchantable quality.  Display
                items, work-in-process, parts, samples, and packing and shipping
                materials
                are not acceptable.  Inventory which is obsolete, unsalable,
                damaged, defective, used, discontinued or slow-moving, or which has
                been
                returned by the buyer, is not
                acceptable.

            

    

    

    
      	
              (d)

            	
              The
                inventory is covered by insurance as required in the "Covenants"
                section
                of this Agreement.

            

    

    

    
      	
              (e)

            	
              The
                inventory has not been manufactured to the specifications of a particular
                account debtor.

            

    

    

    
      	
              (f)

            	
              The
                inventory is not subject to any licensing agreements which would
                prohibit
                or restrict in any way the ability of the Bank to sell the inventory
                to
                third parties.

            

    

    

    
      	
              (g)

            	
              The
                inventory has been produced in compliance with the requirements of
                the
                U.S. Fair Labor Standards Act (29 U.S.C. §§201 et
                seq.).

            

    

    

    
      	
              (h)

            	
              The
                inventory is not placed on
                consignment.

            

    

    

    (i)           The
      inventory is otherwise acceptable to the Bank.

    

    1.6           "Eligible
      Receivables" means an account receivable that satisfies the following
      requirements:

    

    
      	
              (a)

            	
              The
                account is based upon an enforceable order or contract, written or
                oral,
                for inventory shipped or for services performed and the same were
                shipped
                or performed by the Borrower in accordance with such order or contract
                and
                in the ordinary course of the Borrower's business and without any
                further
                obligation on the part of the Borrower to service, repair, or maintain
                any
                such goods sold and does not relate to any warranty claim or
                obligation.

            

    

    

    
      	
              (b)

            	
              There
                are no conditions which must be satisfied before the Borrower is
                entitled
                to receive payment of the account.  Accounts arising from COD
                sales, consignments, bill and hold sales, sale or return, guaranteed
                sales
                or on the basis of any other understanding are not
                acceptable.

            

    

    

    
      	
              (c)

            	
              The
                debtor upon the account does not claim any present or contingent
                (and no
                fact exists which is the basis for any future) claim, deduction or
                dispute
                or defense in law or equity to payment of the
                account.

            

    

    

    
      	
              (d)

            	
              The
                account balance does not include the amount of any counterclaims,
                offsets,
                claims for credits, allowances, or adjustments because of returned,
                inferior, or damaged inventory or unsatisfactory services, or for
                any
                other reason including, without limitation, those arising on account
                of a
                breach of any express or implied representation or warranty which
                have
                been or may be asserted against the Borrower by the account debtor
                (including offsets for any "contra accounts" owed by the Borrower
                to the
                account debtor for goods purchased by the Borrower or for services
                performed for the Borrower).  To the extent any counterclaims,
                offsets, or contra accounts exist in favor of the account debtor,
                such
                amounts shall be deducted from the account
                balance.

            

    

    

    
      	
              (e)

            	
              Except
                for Unbilled Receivables, the account is evidenced by an invoice
                or other
                documentation in form acceptable to the Bank, dated no later than
                the date
                of shipment or performance and containing only terms normally offered
                by
                the Borrower.

            

    

    

    
      	
              (f)

            	
              The
                amount shown on the books of the Borrower and on any invoice, certificate,
                schedule or statement delivered to the Bank is owing to such Borrower
                and
                no partial payment has been received unless reflected with that
                delivery.

            

    

    

    
      	
              (g)

            	
              The
                account represents a genuine obligation of the account debtor for
                goods
                sold to and accepted by the account debtor, or for services performed
                for
                and accepted by the account debtor.  To the extent any credit
                balances exist in favor of the account debtor, such credit balances
                represent customary credits, adjustments and/or discounts given to
                an
                account debtor by the Borrower in the ordinary course of its business
                and
                shall be deducted from the account
                balance.

            

    

    

    
      	
              (h)

            	
              The
                account balance does not arise from services under or related to
                any
                warranty obligation of the Borrower or out of any finance charges,
                services charges or other fees for the time value of money, payable
                by the
                account debtor.  To the extent any such charges are included,
                such amounts shall be deducted from the account
                balance.

            

    

    

    
      	
              (i)

            	
              With
                respect to Commercial Receivables only, the Borrower is not prohibited
                by
                the laws of the state where the account debtor is located from bringing
                an
                action in the courts of that state to enforce the account debtor's
                obligation to pay the account.  The Borrower has taken all
                appropriate actions to ensure access to the courts of the state where
                the
                account debtor is located, including, where necessary, the filing
                of a
                Notice of Business Activities Report or other similar filing with
                the
                applicable state agency or the qualification by the Borrower as a
                foreign
                corporation authorized to transact business in such
                state.

            

    

    

    
      	
              (j)

            	
              The
                account is owned by the Borrower free of any title defects or any
                liens or
                interests of others except the security interest in favor of the
                Bank.  The Borrower has the full and unqualified right and power
                to assign and grant a security interest in, and lien on, the account
                to
                the Bank as security and collateral for the payment of the obligations
                under this Agreement, which lien is perfected as to the account by
                the
                filing of financing statements and which lien upon such filing constitutes
                a first priority security interest and
                lien.

            

    

    

    (k)           The
      account debtor upon the account is not any of the following:

    

    
      	
               

            	
              (i)

            	
              An
                employee, affiliate, parent or subsidiary of the Borrower, or an
                entity
                which has common officers or directors with the
                Borrower.

            

    

    

    
      	
              (ii)  

            	
              Any
                person or entity located, incorporated or primarily conducting business
                in
                a foreign country.

            

    

    

    
      	
              (iii)  

            	
              The
                U.S. government or any agency or department of the U.S. government
                unless
                the Bank agrees in writing to accept the obligation, the Borrower complies
                with the procedures in the Federal Assignment of Claims Act of 1940
                (41
                U.S.C. § 15) with respect to the obligation, and the underlying contract
                expressly provides that neither the U.S. government nor any agency
                or
                department thereof shall have the right of set-off against the
                Borrower.

            

    

    

    (l)           The
      account is not in default.  An account will be considered in default
      if any of the following occur:

    

    (m)           the
      account is not paid within sixty (60) days from its due date;

    

    (ii)           the
      account debtor obligated upon the account suspends business, makes a general
      assignment for the benefit of creditors, fails to pay its debts generally as
      they come due, or any petition is filed by or against the account debtor
      obligated upon the account under any bankruptcy law or any other law or laws
      for
      the relief of debtors in the United States, any state or territory thereof,
      or
      any foreign jurisdiction;

    

    (iii)           there
      is an appointment of a receiver or trustee for the account debtor or for any
      of
      the assets of the account debtor, including, without limitation, the appointment
      of or taking possession by a “custodian,” as defined in the Federal Bankruptcy
      Code;

    

    (iv)           the
      initiation by or against the account debtor of any other type of any formal
      or
      informal proceeding for the insolvency, dissolution or liquidation of,
      settlement of claims against, or winding up of affairs of, the account
      debtor;

    

    (v)           the
      death or judicial declaration of incompetency of an account debtor who is an
      individual;

    

    (vi)           the
      sale, assignment, or transfer of all or any material part of the assets of
      the
      account debtor.

    

    (n)           The
      account is not owing by any account debtor for which the Bank has deemed fifty
      percent (50%) or more of such account debtor's other accounts (or any portion
      thereof) due to the Borrower, to be non-Eligible Receivables.

    

    
      	
              (o)

            	
              The
                account does not arise from the sale of goods which remain in the
                Borrower's possession or under the Borrower's
                control.

            

    

    

    
      	
              (p)

            	
              The
                account is not evidenced by a promissory note or chattel paper, is
                not
                secured by any letter of credit nor is the account debtor obligated
                to the
                Borrower under any other obligation which is evidenced by a promissory
                note.

            

    

    

    
      	
              (q)

            	
              No
                bond or other undertaking by a guarantor or surety has been or is
                required
                to be obtained, supporting the performance of the Borrower or any
                other
                Obligor in respect of the Borrower’s agreements with the account
                debtor.

            

    

    

    
      	
              (r)

            	
              The
                account is not subject to a restriction that forbids or makes void
                or
                unenforceable the assignment or grant of a security interest by the
                Borrower to the Bank, unless the Borrower has obtained any necessary
                consents.

            

    

    

    
      	
              (s)

            	
              No
                part of the account represents a final billing or a
                retainage.

            

    

    

    
      	
              (t)

            	
              The
                Bank in the good faith exercise of its sole and absolute discretion
                has
                not deemed the account ineligible because of uncertainty as to the
                creditworthiness of the account debtor or because the Bank otherwise
                considers the collateral value of such account to the Bank to be
                impaired
                or its ability to realize such value to be
                insecure.

            

    

    

    
      	
              (u)

            	
              The
                account is otherwise acceptable to the
                Bank.

            

    

    

    In
      addition to the foregoing limitations, the dollar amount of accounts included
      as
      Eligible Receivables which are the obligations of a single account debtor
      (excluding accounts from any governmental authority) shall not exceed the
      concentration limit established for that account debtor.  To the
      extent the total of such accounts exceeds an account debtor's concentration
      limit, the amount of any such excess shall be excluded.  The
      concentration limit for each account debtor shall be equal to twenty-five
      percent (25%) of the total amount of the Borrower's Eligible Receivables at
      that
      time.

    

    It
      is
      provided, however, that if the account debtor obligated upon an account is
      one
      of the account debtors listed below, the concentration limit applicable to
      each
      such account debtor will be increased to the percentage set forth
      below:

    

    Account
      Debtor                                           Concentration
      Limit

    Federal
      Express                                                      40%

    United
      States Air
      Force                                        40%

    

    1.7           "Unbilled
      Receivables" means Eligible Receivables, notwithstanding their unbilled
      status which have resulted from unbilled costs actually incurred and arising
      out
      of work actually performed during the last week of the most previous month
      by
      the Borrower under written contracts with Federal Express which (i) have been
      accepted by Federal Express and (ii) are properly billable to Federal Express
      in
      accordance with the applicable contract.

    

    1.8           "Prime
      Government Receivables" means Eligible Receivables which have resulted from
      an amount due and owing directly from the U.S. Government or any department
      or
      agency thereof.

    

    1.9           "Commercial
      Receivables" means Eligible Receivables other than Prime Government
      Receivables, Sub Contractor or Other Government Receivables, or Unbilled
      Receivables which have resulted from an amount due owing from account
      debtors.

    

    2.           FACILITY
      NO. 1: LINE OF CREDIT AMOUNT AND TERMS

    

    2.1           Line
      of Credit Amount.

    

    
      	
              (a)

            	
              During
                the availability period described below, the Bank will provide a
                line of
                credit to the Borrowers.  The amount of the line of credit (the
                "Facility No. 1 Commitment") is equal to the lesser of (i) the Credit
                Limit or (ii) the Borrowing Base.

            

    

    

    
      	
              (b)

            	
              This
                is a revolving line of credit.  During the availability period,
                the Borrowers may repay principal amounts and reborrow
                them.

            

    

    

    
      	
               (c)

            	
              The
                Borrowers agree not to permit the principal balance outstanding to
                exceed
                the Facility No. 1 Commitment.  If the Borrowers exceed this
                limit, the Borrowers will immediately pay the excess to the Bank
                upon the
                Bank's demand.

            

    

    

    2.2           Availability
      Period.  The line of credit is available between the date of this
      Agreement and August 31, 2009, or such earlier date as the availability may
      terminate as provided in this Agreement (the "Facility No. 1 Expiration
      Date").

    

    The
      availability period for this line of credit will be considered renewed if and
      only if the Bank has sent to the Borrowers a written notice of renewal effective
      as of the Facility No. 1 Expiration Date for the line of credit (the “Renewal
      Notice”).  If this line of credit is renewed, it will continue to be
      subject to all the terms and conditions set forth in this Agreement except
      as
      modified by the Renewal Notice.  The Borrower specifically understands
      and agrees that the interest rate applicable to this line of credit may be
      increased upon renewal and that the new interest rate will apply to the entire
      outstanding principal balance of the line of credit.  If this line of
      credit is renewed, the term “Expiration Date” shall mean the date set forth in
      the Renewal Notice as the Expiration Date and the same process for renewal
      will
      apply to any subsequent renewal of this line of credit.  A renewal fee
      may be charged at the Bank’s option.  If so, the amount will be
      specified in the Renewal Notice.

    

    2.3           Repayment
      Terms.

    

    
      	
              (a)

            	
              The
                Borrowers will pay interest on September 30, 2007, and then on the
                same
                day of each month thereafter until payment in full of any principal
                outstanding under this facility.

            

    

    

    
      	
              (b)

            	
              The
                Borrowers will repay in full any principal, interest or other charges
                outstanding under this facility no later than the Facility No. 1
                Expiration Date.

            

    

    

    2.4           Interest
      Rate.

    

    
      	
              (a)

            	
              The
                interest rate is a rate per year equal to the BBA LIBOR Daily Floating
                plus 1.37 percentage point(s).

            

    

    

    
      	
              (b)

            	
              The
                BBA LIBOR Daily Floating Rate is a fluctuating rate of interest equal
                to
                the rate per annum equal to
                the British
                Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or
                other commercially available source providing quotations of BBA LIBOR
                as
                selected by the Bank from time to time as determined for each
                banking day at approximately 11:00 a.m. London time two (2) London
                Banking
                Days prior to the date in question, for U.S.
                Dollar
                deposits (for delivery on the first day of such interest period)
                with a
                one month term, as adjusted from time to time in the Bank’s sole
                discretion for reserve requirements, deposit insurance assessment
                rates
                and other regulatory costs.  If such rate is not
                available at
                such time for any reason, then the rate for that interest period
                will be determined by such alternate method as reasonably selected
                by the
                Bank.  A "London Banking Day" is a day on which banks in London
                are open for business and dealing in offshore
                dollars.

            

    

    

    3.           COLLATERAL

    

    3.1           Personal
      Property.  The personal property listed below now owned or owned
      in the future by the parties listed below will secure the Borrowers’ obligations
      to the Bank under this Agreement.  The collateral is further defined
      in security agreement(s) executed by the owners of the collateral.  In
      addition, all personal property collateral owned by any of the Borrowers
      securing this Agreement shall also secure all other present and future
      obligations of any of the Borrowers to the Bank (excluding any consumer credit
      covered by the federal Truth in Lending law, unless the Borrowers have otherwise
      agreed in writing or received written notice thereof).  All personal
      property collateral securing any other present or future obligations of any
      of
      the Borrowers to the Bank shall also secure this Agreement.

    

    
      	
              (a)

            	
              Equipment
                owned by the Borrowers.

            

    

    

    
      	
              (b)

            	
              Inventory
                owned by the Borrowers.

            

    

    

    
      	
              (c)

            	
              Receivables
                owned by the Borrowers.

            

    

    

    
      	
              (d)

            	
              Transport
                equipment including aircraft and
                vehicles.

            

    

    

    4.           FEES
      AND EXPENSES

    

    4.1           Fees.

    

    
      	
              (a)

            	
              Waiver
                Fee.  If the Bank, at its discretion, agrees to waive or
                amend any terms of this Agreement, the Borrowers will, at the Bank's
                option, pay the Bank a fee for each waiver or amendment in an amount
                advised by the Bank at the time the Borrowers request the waiver
                or
                amendment.  Nothing in this paragraph shall imply that the Bank
                is obligated to agree to any waiver or amendment requested by the
                Borrowers.  The Bank may impose additional requirements as a
                condition to any waiver or
                amendment.

            

    

    

    
      	
              (b)

            	
              Late
                Fee.  To the extent permitted by law, the Borrowers agree to
                pay a late fee in an amount not to exceed four percent (4%) of any
                payment
                that is more than fifteen (15) days late.  The imposition and
                payment of a late fee shall not constitute a waiver of the Bank’s rights
                with respect to the default.

            

    

    

    4.2           Expenses.  The
      Borrowers agree to immediately repay the Bank for expenses that include, but
      are
      not limited to, filing, recording and search fees, appraisal fees, title report
      fees, and documentation fees.

    

    4.3           Reimbursement
      Costs.

    

    
      	
              (a)

            	
              The
                Borrowers agree to reimburse the Bank for any expenses it incurs
                in the
                preparation of this Agreement and any agreement or instrument required
                by
                this Agreement.  Expenses include, but are not limited to,
                reasonable attorneys' fees, including any allocated costs of the
                Bank's
                in-house counsel to the extent permitted by applicable
                law.

            

    

    

    
      	
              (b)

            	
              The
                Borrower agrees to reimburse the Bank for the cost of periodic field
                examinations of the Borrower's books, records and collateral, and
                appraisals of the collateral, at such intervals as the Bank may reasonably
                require.  The actions described in this paragraph may be
                performed by employees of the Bank or by independent
                appraisers.

            

    

    

    5.           DISBURSEMENTS,
      PAYMENTS AND COSTS

    

    5.1           Disbursements
      and Payments.

    

    
      	
              (a)

            	
              Each
                payment by the Borrowers will be made in U.S. Dollars and immediately
                available funds by direct debit to a deposit account as specified
                below
                or, for payments not required to be made by direct debit, by mail
                to the
                address shown on the Borrowers' statement or at one of the Bank’s banking
                centers in the United States.

            

    

    

    
      	
              (b)

            	
              Each
                disbursement by the Bank and each payment by the Borrowers will be
                evidenced by records kept by the Bank.  In addition, the Bank
                may, at its discretion, require the Borrowers to sign one or more
                promissory notes.

            

    

    

    5.2           Requests
      for Credit; Equal Access by all Borrowers.  If there is more than
      one Borrower, any Borrower (or a person or persons authorized by any one of
      the
      Borrowers), acting alone, can borrow up to the full amount of credit provided
      under this Agreement.  Each Borrower will be liable for all extensions
      of credit made under this Agreement to any other Borrower.

    

    5.3           Telephone
      and Telefax Authorization.

    

    
      	
              (a)

            	
              The
                Bank may honor telephone or telefax instructions for advances or
                repayments given, or purported to be given, by any one of the individuals
                authorized to sign loan agreements on behalf of any of the Borrowers,
                or
                any other individual designated by any one of such authorized
                signers.

            

    

    

    
      	
              (b)

            	
              Advances
                will be deposited in and repayments will be withdrawn from account
                number
                NC-000510028053 owned by the Borrowers or such other of the Borrowers'
                accounts with the Bank as designated in writing by the
                Borrowers.

            

    

    

    
      	
              (c)

            	
              The
                Borrowers will indemnify and hold the Bank harmless from all liability,
                loss, and costs in connection with any act resulting from telephone
                or
                telefax instructions the Bank reasonably believes are made by any
                individual authorized by the Borrowers to give such
                instructions.  This paragraph will survive this Agreement's
                termination, and will benefit the Bank and its officers, employees,
                and
                agents.

            

    

    

    5.4           Direct
      Debit.

    

    
      	
              (a)

            	
              The
                Borrowers agree that interest and principal payments and any fees
                will be
                deducted automatically on the due date from account number NC-000510028053
                owned by the Borrowers or such other of the Borrowers' accounts with
                the
                Bank as designated in writing by the
                Borrowers.

            

    

    

    
      	
              (b)

            	
              The
                Borrowers will maintain sufficient funds in the account on the dates
                the
                Bank enters debits authorized by this Agreement.  If there are
                insufficient funds in the account on the date the Bank enters any
                debit
                authorized by this Agreement, the Bank may reverse the
                debit.

            

    

    

    
      	
              (c)

            	
              The
                Borrowers may terminate this direct debit arrangement at any time
                by
                sending written notice to the Bank at the address specified at the
                end of
                this Agreement.  If the Borrowers terminate this arrangement,
                then the principal amount outstanding under this Agreement will at
                the
                option of the Bank bear interest at a rate per annum which is 0.5
                percentage point(s) higher than the rate of interest otherwise provided
                under this Agreement.

            

    

    

    5.5           Banking
      Days.  Unless otherwise provided in this
      Agreement, a banking day is a day other than a Saturday, Sunday or other day
      on
      which commercial banks are authorized to close, or are in fact closed, in the
      state where the Bank's lending office is located, and, if such day relates
      to
      amounts bearing interest at an offshore rate (if any), means any such day on
      which dealings in dollar deposits are conducted among banks in the offshore
      dollar interbank market.  All payments and disbursements which would
      be due on a day which is not a banking day will be due on the next banking
      day.  All payments received on a day which is not a banking day will
      be applied to the credit on the next banking day.

    

    5.6           Interest
      Calculation.  Except as otherwise stated in this Agreement, all
      interest and fees, if any, will be computed on the basis of a 360-day year
      and
      the actual number of days elapsed.  This results in more interest or a
      higher fee than if a 365-day year is used.  Installments of principal
      which are not paid when due under this Agreement shall continue to bear interest
      until paid.

    

    5.7           Default
      Rate.  Upon the occurrence of any default or after maturity or
      after judgement has been rendered on any obligation under this Agreement, all
      amounts outstanding under this Agreement, including any interest, fees, or
      costs
      which are not paid when due, will at the option of the Bank bear interest at
      a
      rate which is 6.0 percentage point(s) higher than the rate of interest otherwise
      provided under this Agreement.  This may result in compounding of
      interest.  This will not constitute a waiver of any
      default.

    

    5.8           Overdrafts.  At
      the Bank's sole option in each instance, the Bank may do one of the
      following:

    

    
      	
              (a)

            	
              The
                Bank may make advances under this Agreement to prevent or cover an
                overdraft on any account of any Borrower with the Bank.  Each
                such advance will accrue interest from the date of the advance or
                the date
                on which the account is overdrawn, whichever occurs first, at the
                interest
                rate described in this Agreement.  The Bank may make such
                advances even if the advances may cause any credit limit under this
                Agreement to be exceeded.

            

    

    

    
      	
              (b)

            	
              The
                Bank may reduce the amount of credit otherwise available under this
                Agreement by the amount of any overdraft on any account of any Borrower
                with the Bank.

            

    

    

    This
      paragraph shall not be deemed to authorize the Borrowers to create overdrafts
      on
      any of the Borrowers' accounts with the Bank.

    

    5.9           Payments
      in Kind.  If the Bank requires delivery in kind of the proceeds of
      collection of the Borrowers' accounts receivable, such proceeds shall be
      credited to interest, principal, and other sums owed to the Bank under this
      Agreement in the order and proportion determined by the Bank in its sole
      discretion.  All such credits will be conditioned upon collection and
      any returned items may, at the Bank's option, be charged to the
      Borrowers.

    

    6.           CONDITIONS

    

    Before
      the Bank is required to extend any credit to the Borrowers under this Agreement,
      it must receive any documents and other items it may reasonably require, in
      form
      and content acceptable to the Bank, including any items specifically listed
      below.

    

    6.1           Authorizations.  If
      any Borrower or any guarantor is anything other than a natural person, evidence
      that the execution, delivery and performance by such Borrower and/or such
      guarantor of this Agreement and any instrument or agreement required under
      this
      Agreement have been duly authorized.

    

    6.2           Governing
      Documents.  If required by the Bank, a copy of the Borrowers'
      organizational documents.

    

    6.3           Security
      Agreements.  Signed original security agreements covering the
      personal property collateral which the Bank requires.

    

    6.4           Perfection
      and Evidence of Priority. Evidence that the security interests and liens in
      favor of the Bank are valid, enforceable, properly perfected in a manner
      acceptable to the Bank and prior to all others' rights and interests, except
      those the Bank consents to in writing.  All title documents for motor
      vehicles which are part of the collateral must show the Bank's
      interest.

    

    6.5           Payment
      of Fees.  Payment of all fees and other amounts due and owing to
      the Bank, including without limitation payment of all accrued and unpaid
      expenses incurred by the Bank as required by the paragraph entitled
      "Reimbursement Costs."

    

    6.6           Good
      Standing.  Certificates of good standing for each Borrower as
      applicable from its state of formation and from any other state in which such
      Borrowers is  required to qualify to conduct its
      business.

    

    6.7           Insurance.  Evidence
      of insurance coverage, as required in the "Covenants" section of this
      Agreement.

    

    7.           REPRESENTATIONS
      AND WARRANTIES

    

    When
      the
      Borrowers sign this Agreement, and until the Bank is repaid in full, the
      Borrowers make the following representations and warranties.  Each
      request for an extension of credit constitutes a renewal of these
      representations and warranties as of the date of the request:

    

    7.1           Formation.  If
      any Borrower is anything other than a natural person, it is duly formed and
      existing under the laws of the state or other jurisdiction where
      organized.

    

    7.2           Authorization.  This
      Agreement, and any instrument or agreement required hereunder, are within each
      Borrower's powers, have been duly authorized, and do not conflict with any
      of
      its organizational papers.

    

    7.3           Enforceable
      Agreement.  This Agreement is a legal, valid and binding agreement
      of each Borrower, enforceable against each Borrower in accordance with its
      terms, and any instrument or agreement required hereunder, when executed and
      delivered, will be similarly legal, valid, binding and enforceable.

    

    7.4           Good
      Standing.  In each state in which each Borrower does business, it
      is properly licensed, in good standing, and, where required, in compliance
      with
      fictitious name statutes.

    

    7.5           No
      Conflicts.  This Agreement does not conflict with any law,
      agreement, or obligation by which any Borrower is bound.

    

    7.6           Financial
      Information.  All financial and other information that has been or
      will be supplied to the Bank is sufficiently complete to give the Bank accurate
      knowledge of the Borrowers' (and any guarantor's) financial condition, including
      all material contingent liabilities.  Since the date of the most
      recent financial statement provided to the Bank, there has been no material
      adverse change in the business condition (financial or otherwise), operations,
      properties or prospects of any Borrower (or any guarantor).  If any
      Borrower is comprised of the trustees of a trust, the foregoing representations
      shall also pertain to the trustor(s) of the trust.

    

    7.7           Lawsuits.  There
      is no lawsuit, tax claim or other dispute pending or threatened against any
      Borrower which, if lost, would impair such Borrower’s financial condition or
      ability to repay the loan, except as have been disclosed in writing to the
      Bank.

    

    7.8           Collateral.  All
      collateral required in this Agreement is owned by the grantor of the security
      interest free of any title defects or any liens or interests of others, except
      those which have been approved by the Bank in writing.

    

    7.9           Permits,
      Franchises.  Each Borrower possesses all permits, memberships,
      franchises, contracts and licenses required and all trademark rights, trade
      name
      rights, patent rights, copyrights and fictitious name rights necessary to enable
      it to conduct the business in which it is now engaged.

    

    7.10           Other
      Obligations.  No Borrower is in default on any obligation for
      borrowed money, any purchase money obligation or any other material lease,
      commitment, contract, instrument or obligation, except as have been disclosed
      in
      writing to the Bank.

    

    7.11           Tax
      Matters.  No Borrower has any knowledge of any pending assessments
      or adjustments of its income tax for any year and all taxes due have been paid,
      except as have been disclosed in writing to the Bank.

    

    7.12           No
      Event of Default.  There is no event which is, or with notice or
      lapse of time or both would be, a default under this Agreement.

    

    7.13           Insurance.  Each
      Borrower has obtained, and maintained in effect, the insurance coverage required
      in the "Covenants" section of this Agreement.

    

    7.14           Merchantable
      Inventory; Compliance with FLSA.  All inventory which is included
      in the Borrowing Base is of good and merchantable quality and free from defects,
      and has been produced in compliance with the requirements of the U.S. Fair
      Labor
      Standards Act (29 U.S.C. §§201 et seq.).

    

    7.15           Prime
      Government Receivables and Unbilled Receivables.  With respect to
      all Prime Government Receivables and Unbilled Receivables, to the best of the
      Borrower’s knowledge (a) there has been no default or cancellation with respect
      thereto, (b) Prime Government Receivables and Unbilled Receivables are not
      dependent on any future appropriations, (c) the assignment of all sums due
      thereunder does not violate any law, statute, or regulation and is permissible,
      (d) the Borrower has the right to assign all monies due thereunder, (e) any
      prior assignment with respect thereto have been terminated; and (f) the Borrower
      is not subject to any pending or threatened debarment proceedings.

    

    7.16           Assignment
      of Claims Act.  The Borrower hereby covenants and agrees that the
      Borrower will promptly, upon request by the Bank, comply with any and all of
      the
      requirements of the Assignment of Claims Act (Title 31 Section 3727 and Title
      41
      Section 15 of the United States Code), where such statutes are applicable to
      any
      Eligible Receivables, and shall take all such other action as may be necessary
      to facilitate the direct assignment to the Bank of the payments due or to become
      due under any Eligible Receivables which has at least One Million Dollars and
      00/100 Dollars ($1,000,000.00) in payment obligations to the Borrower and which
      has a duration of at least twelve (12) months, and such further action as may
      be
      necessary to facilitate the creation and perfection of the Bank’s security
      interest in such payments..

    

    8.           COVENANTS

    

    The
      Borrowers agree, so long as credit is available under this Agreement and until
      the Bank is repaid in full:

    

    8.1           Use
      of Proceeds.

    

    
      	
              (a)

            	
              To
                use the proceeds of Facility No. 1 only for working
                capital.

            

    

    

    
      	
              (b)

            	
              The
                proceeds of the credit extended under this Loan Agreement may not
                be used
                directly or indirectly to purchase or carry any "margin stock" as
                that
                term is defined in Regulation U of the Board of Governors of the
                Federal
                Reserve System, or extend credit to or invest in other parties for
                the
                purpose of purchasing or carrying any such "margin stock," or to
                reduce or
                retire any indebtedness incurred for such
                purpose.

            

    

    

    8.2           Financial
      Information.  To provide the following financial information and
      statements in form and content acceptable to the Bank, and such additional
      information as requested by the Bank from time to time.  The Bank
      reserves the right, upon written notice to the Borrowers, to require the
      Borrowers to deliver financial information and statements to the Bank more
      frequently than otherwise provided below, and to use such additional information
      and statements to measure any applicable financial covenants in this
      Agreement.

    

    
      	
              (a)

            	
              Within
                one hundred fifty (150) days of the fiscal year end, the annual financial
                statements of the Borrowers.  These financial statements must be
                audited (with an opinion satisfactory to the Bank) by a Certified
                Public
                Accountant acceptable to the Bank.  The statements shall be
                prepared on a consolidated basis.

            

    

    

    
      	
              (b)

            	
              Within
                sixty (60) days of the period's end, quarterly financial statements
                of the
                Borrowers, certified and dated by an authorized financial
                officer.  These financial statements may be
                company-prepared.  The statements shall be prepared on a
                consolidated basis.

            

    

    

    
      	
              (c)

            	
              Within
                150 days of the end of each fiscal
                year and within 60 days of the
                end of each quarter, a compliance certificate of the Borrower in
                the
                format as shown in Exhibit B, signed by an authorized financial officer
                and setting forth whether there existed as of the date of such financial
                statements and whether there exists as of the date of the certificate,
                any
                default under this Agreement and, if any such default exists, specifying
                the nature thereof and the action the Borrower is taking and proposes
                to
                take with respect thereto.

            

    

    

    
      	
              (d)

            	
              Upon
                the Bank’s request, a detailed aging of the Borrower’s receivables by
                invoice or a summary aging by account debtor as specified by the
                Bank.

            

    

    

    (e)           Upon
      the Bank’s request, a Borrowing Base Certificate as of the last day of each
      month.  Bank mayalso request copies of the invoices or the record
      of invoices from the Borrower's sales journal for EligibleReceivables included
      in the Borrowing Base Certificate (including a listing of the names and
      addresses of the account debtors obligated there under).

    

    
      	
              (f)

            	
              Upon
                the Bank’s request, a summary aging by vendor of accounts payable as
                specified by the Bank.

            

    

    

    
      	
              (g)

            	
              Upon
                the Bank’s request, an inventory listing as specified by the
                Bank.  The listing must include a description of the inventory,
                its location and cost, and such other information as the Bank may
                require.

            

    

    

    
      	
              (h)

            	
              Promptly
                upon the Bank's request, such other books, records, statements, lists
                of
                property and accounts, budgets, forecasts or reports as to the Borrowers
                and as to each guarantor of the Borrowers' obligations to the Bank
                as the
                Bank may request.

            

    

    

    8.3           Debt
      to Worth Ratio.  To maintain on a consolidated basis a ratio of
      Total Liabilities (excluding the non-current portion of Subordinated
      Liabilities) to Tangible Net Worth not exceeding 1.5:1.0.

    

    "Total
      Liabilities" means the sum of current liabilities plus long term
      liabilities.

    

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

    

    "Subordinated
      Liabilities" means liabilities subordinated to the Borrowers' obligations to
      the
      Bank in a manner acceptable to the Bank in its sole discretion.

    

    8.4           Funded
      Debt to EBITDA Ratio.  To maintain on a consolidated basis a ratio
      of Funded Debt to EBITDA not exceeding 3:1.0.

    

    “Funded
      Debt” means all outstanding liabilities for borrowed money and other
      interest-bearing liabilities, including current long term debt, less the
      non-current portion of Subordinated Liabilities.

    

    ''EBITDA''
      means net income, less income or plus loss from discontinued operations and
      extraordinary items, plus income taxes, plus interest expense, plus
      depreciation, depletion, and amortization.  This ratio will be
      calculated at the end of each reporting period for which the Bank requires
      financial statements, using the results of the twelve-month period ending with
      that reporting period.

    

    This
      ratio will be calculated at the end of each reporting period for which the
      Bank
      requires financial statements, using the results of the twelve-month period
      ending with that reporting period.

    

    ''Subordinated
      Liabilities'' means liabilities subordinated to the Borrower's obligations
      to
      the Bank in a manner acceptable to the Bank in its sole discretion.

    

    8.5           Bank
      as Principal Depository.  To maintain the Bank as their principal
      depository bank, including for the maintenance of business, cash management,
      operating and administrative deposit accounts.

    

    8.6           Other
      Debts.  Not to have outstanding or incur any direct or contingent
      liabilities or lease obligations (other than those to the Bank), or become
      liable for the liabilities of others, without the Bank's written consent. This
      does not prohibit:

    

    (a)        Acquiring
      goods, supplies, or merchandise on normal trade credit.

    

    (b)        Endorsing
      negotiable instruments received in the usual course of business.

    

    (c)        Obtaining
      surety bonds in the usual course of business.

    

    (d)        Liabilities,
      lines of credit and leases in existence on the date of this Agreement disclosed
      in writing to the Bank.

    

    8.7           Other
      Liens.  Not to create, assume, or allow any security interest or
      lien (including judicial liens) on property any Borrower now or later owns,
      except:

    

    (a)        Liens
      and security interests in favor of the Bank.

    

    (b)        Liens
      for taxes not yet due.

    

    (c)        Liens
      outstanding on the date of this Agreement disclosed in writing to the
      Bank.

    

    

    8.8           Maintenance
      of Assets.

    

    (a)        Not
      to sell, assign, lease, transfer or otherwise dispose of any part of any
      Borrower's business or any Borrower's assets except in the ordinary course
      of
      business.

    

    (b)        Not
      to sell, assign, lease, transfer or otherwise dispose of any assets for less
      than fair market value, or enter into any agreement to do so.

    

    (c)        Not
      to enter into any sale and leaseback agreement covering any of its fixed
      assets.

    

    (d)        To
      maintain and preserve all rights, privileges, and franchises the Borrowers
      now
      have.

    

    (e)        To
      make any repairs, renewals, or replacements to keep the Borrowers' properties
      in
      good working condition.

    

    8.9           Investments.  Not
      to have any existing, or make any new, investments in any individual or entity,
      or make any capital contributions or other transfers of assets to any individual
      or entity, except for:

    

    
      	
              (a)

            	
              Existing
                investments disclosed to the Bank in
                writing.

            

    

    

    
      	
              (b)

            	
              Investments
                in the Borrowers' current
                subsidiaries.

            

    

    

    
      	
              (c)

            	
              Investments
                in any of the following:

            

    

    

    
      	
               

            	
              (i)

            	
              certificates
                of deposit;

            

    

    

    
      	
               

            	
              (ii)

            	
              U.S.
                treasury bills and other obligations of the federal
                government;

            

    

    

    
      	
               

            	
              (iii)

            	
              readily
                marketable securities (including commercial paper, but excluding
                restricted stock and stock subject to the provisions of Rule 144
                of the
                Securities and Exchange
                Commission).

            

    

    

    8.10           Loans.  Not
      to make any loans, advances or other extensions of credit to any individual
      or
      entity, except for:

    

    
      	
              (a)

            	
              Existing
                extensions of credit disclosed to the Bank in
                writing.

            

    

    

    
      	
              (b)

            	
              Extensions
                of credit to the Borrowers' current
                subsidiaries.

            

    

    

    
      	
              (c)

            	
              Extensions
                of credit in the nature of accounts receivable or notes receivable
                arising
                from the sale or lease of goods or services in the ordinary course
                of
                business to non-affiliated
                entities.

            

    

    

    8.11           Change
      of Management.  Not to make any substantial change in the present
      executive or management personnel of the Borrowers.

    

    8.12           Change
      of Ownership.  Not to cause, permit, or suffer any change in
      capital ownership such that there is a change of more than twenty-five percent
      (25%) in the direct or indirect capital ownership of any Borrower.

    

    8.13           Additional
      Negative Covenants.  Not to, without the Bank's written
      consent:

    

    (a)        Enter
      into any consolidation, merger, or other combination, or become a partner in
      a
      partnership, a member of a joint venture, or a member of a limited liability
      company.

    

    (b)        Acquire
      or purchase a business or its assets.

    

    (c)        Engage
      in any business activities substantially different from each Borrower's present
      business.

    

    (d)        Liquidate
      or dissolve any Borrower's business.

    

    8.14           Notices
      to Bank.  To promptly notify the Bank in writing of:

    

    
      	
              (a)

            	
              Any
                lawsuit over Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
                against any Borrower (or any guarantor or, if any Borrower is comprised
                of
                the trustees of a trust, any
                trustor).

            

    

    

    
      	
              (b)

            	
              Any
                substantial dispute between any governmental authority and any Borrower
                (or any guarantor or, if any Borrower is comprised of the trustees
                of a
                trust, any trustor).

            

    

    

    
      	
              (c)

            	
              Any
                event of default under this Agreement, or any event which, with notice
                or
                lapse of time or both, would constitute an event of
                default.

            

    

    

    
      	
              (d)

            	
              Any
                material adverse change in any Borrower's (or any guarantor’s, or, if any
                Borrower is comprised of the trustees of a trust, any trustor’s) business
                condition (financial or otherwise), operations, properties or prospects,
                or ability to repay the credit.

            

    

    

    
      	
              (e)

            	
              Any
                change in any Borrower's name, legal structure, place of business,
                or
                chief executive office if such Borrower has more than one place of
                business.

            

    

    

    
      	
              (f)

            	
              Any
                actual contingent liabilities of any Borrower (or any guarantor or,
                if any
                Borrower is comprised of the trustees of a trust, any trustor), and
                any
                such contingent liabilities which are reasonably
                foreseeable.

            

    

    

    8.15           Insurance.

    

    
      	
              (a)

            	
              General
                Business Insurance.  To maintain insurance satisfactory to
                the Bank as to amount, nature and carrier covering property damage
                (including loss of use and occupancy) to any of the Borrowers' properties,
                business interruption insurance, public liability insurance including
                coverage for contractual liability, product liability and workers'
                compensation, and any other insurance which is usual for the Borrowers'
                business.  Each policy shall provide for at least 30 days prior
                notice to the Bank of any cancellation
                thereof.

            

    

    

    
      	
              (b)

            	
              Insurance
                Covering Collateral.  To maintain all risk property damage
                insurance policies (including without limitation windstorm coverage,
                and
                hurricane coverage as applicable) covering the tangible property
                comprising the collateral.  Each insurance policy must be for
                the full replacement cost of the collateral and include a replacement
                cost
                endorsement. The insurance must be issued by an insurance company
                acceptable to the Bank and must include a lender's loss payable
                endorsement in favor of the Bank in a form acceptable to the
                Bank

            

    

    

    
      	
              (c)

            	
              Evidence
                of Insurance.  Upon the request of the Bank, to deliver to
                the Bank a copy of each insurance policy, or, if permitted by the
                Bank, a
                certificate of insurance listing all insurance in
                force.

            

    

    

    8.16           Compliance
      with Laws.  To comply with the laws (including any fictitious or
      trade name statute), regulations, and orders of any government body with
      authority over any Borrower's business.  The Bank shall have no
      obligation to make any advance to any Borrowers except in compliance with all
      applicable laws and regulations and any Borrowers shall fully cooperate with
      the
      Bank in complying with all such applicable laws and regulations.

    

    8.17           ERISA
      Plans.  Promptly during each year, to pay and cause any
      subsidiaries to pay contributions adequate to meet at least the minimum funding
      standards under ERISA with respect to each and every Plan; file each annual
      report required to be filed pursuant to ERISA in connection with each Plan
      for
      each year; and notify the Bank within ten (10) days of the occurrence of any
      Reportable Event that might constitute grounds for termination of any capital
      Plan by the Pension Benefit Guaranty Corporation or for the appointment by
      the
      appropriate United States District Court of a trustee to administer any
      Plan.  "ERISA" means the Employee Retirement Income Security Act of
      1974, as amended from time to time.  Capitalized terms in this
      paragraph shall have the meanings defined within ERISA.

    

    8.18           Books
      and Records.  To maintain adequate books and records.

    

    8.19           Audits.  To
      allow the Bank and its agents to inspect each Borrower's properties and examine,
      audit, and make copies of books and records at any reasonable
      time.  If any of the Borrowers' properties, books or records are in
      the possession of a third party, the Borrowers authorize that third party to
      permit the Bank or its agents to have access to perform inspections or audits
      and to respond to the Bank's requests for information concerning such
      properties, books and records.

    

    8.20           Perfection
      of Liens.  To help the Bank perfect and protect its security
      interests and liens, and reimburse it for related costs it incurs to protect
      its
      security interests and liens.

    

    8.21           Cooperation.  To
      take any action reasonably requested by the Bank to carry out the intent of
      this
      Agreement.

    

    8.22           Assignment
      Of Claims Act.  To promptly comply, upon request by the Bank, with
      any and all of the requirements of Title 31 Section 3727 and Title 41 Section
      15
      of the United States Code and all rules and regulations relating thereto, as
      amended, where such statutes, rules and regulations are, at the option of the
      Bank, applicable to particular contracts, and shall at all times take all such
      other action as may be necessary to facilitate and/or ensure perfection of
      the
      Bank’s security interest in and the assignment of the contracts.

    

    9.           DEFAULT
      AND REMEDIES

    

    If
      any of
      the following events of default occurs, the Bank may do one or more of the
      following: declare the Borrowers in default, stop making any additional credit
      available to the Borrowers, and require the Borrowers to repay their entire
      debt
      immediately and without prior notice.  If an event which, with notice
      or the passage of time, will constitute an event of default has occurred and
      is
      continuing, the Bank has no obligation to make advances or extend additional
      credit under this Agreement.  In addition, if any event of default
      occurs, the Bank shall have all rights, powers and remedies available under
      any
      instruments and agreements required by or executed in connection with this
      Agreement, as well as all rights and remedies available at law or in
      equity.  If an event of default occurs under the paragraph entitled
      "Bankruptcy," below, with respect to any Borrower, then the entire debt
      outstanding under this Agreement will automatically be due
      immediately.

    

    9.1           Failure
      to Pay.  The Borrowers fail to make a payment under this Agreement
      when due.

    

    9.2           Other
      Bank Agreements.  Any default occurs under any other agreement any
      Borrower (or any Obligor) or any of the Borrowers' related entities or
      affiliates has with the Bank or any affiliate of the Bank.  For
      purposes of this Agreement, “Obligor” shall mean any guarantor, any party
      pledging collateral to the Bank, or, if any Borrower is comprised of the
      trustees of a trust, any trustor.

    

    9.3           Cross-default.  Any
      default occurs under any agreement in connection with any credit any Borrower
      (or any Obligor) or any of the Borrowers’ related entities or affiliates has
      obtained from anyone else or which any Borrower (or any Obligor) or any of
      the
      Borrowers’ related entities or affiliates has guaranteed.

    

    9.4           False
      Information.  Any Borrower or any Obligor has given the Bank false
      or misleading information or representations.

    

    9.5           Bankruptcy.  Any
      Borrower, any Obligor, or any general partner of any Borrower or of any Obligor
      files a bankruptcy petition, a bankruptcy petition is filed against any of
      the
      foregoing parties, or any Borrower, any Obligor, or any general partner of
      any
      Borrower or of any Obligor makes a general assignment for the benefit of
      creditors.

    

    9.6           Receivers.  A
      receiver or similar official is appointed for a substantial portion of any
      Borrower's or any Obligor's business, or the business is terminated, or, if
      any
      Obligor is anything other than a natural person, such Obligor is liquidated
      or
      dissolved.

    

    9.7           Lien
      Priority.  The Bank fails to have an enforceable first lien
      (except for any prior liens to which the Bank has consented in writing) on
      or
      security interest in any property given as security for this Agreement (or
      any
      guaranty).

    

    9.8           Judgments.  Any
      judgments or arbitration awards are entered against any Borrower or any Obligor,
      or any Borrower or any Obligor enters into any settlement agreements with
      respect to any litigation or arbitration, in an aggregate amount of Two Hundred
      Fifty Thousand and 00/100 Dollars ($250,000.00) or more in excess of any
      insurance coverage.

    

    9.9           Material
      Adverse Change.  A material adverse change occurs, or is
      reasonably likely to occur, in any Borrower's (or any Obligor's) business
      condition (financial or otherwise), operations, properties or prospects, or
      ability to repay the credit; or the Bank determines that it is insecure for
      any
      other reason.

    

    9.10           Government
      Action.  Any government authority takes action that the Bank
      believes materially adversely affects any Borrower's or any Obligor's financial
      condition or ability to repay.

    

    9.11           Default
      under Related Documents.  Any default occurs under any guaranty,
      subordination agreement, security agreement, deed of trust, mortgage, or other
      document required by or delivered in connection with this Agreement or any
      such
      document is no longer in effect, or any guarantor purports to revoke or disavow
      the guaranty.

    

    9.12           ERISA
      Plans.  Any one or more of the following events occurs with
      respect to a Plan of any Borrower subject to Title IV of ERISA, provided such
      event or events could reasonably be expected, in the judgment of the Bank,
      to
      subject any Borrower to any tax, penalty or liability (or any combination of
      the
      foregoing) which, in the aggregate, could have a material adverse effect on
      the
      financial condition of such Borrower:

    

    
      	
              (a)

            	
              A
                reportable event shall occur under Section 4043(c) of ERISA with
                respect
                to a Plan.

            

    

    

    
      	
              (b)

            	
              Any
                Plan termination (or commencement of proceedings to terminate a Plan)
                or
                the full or partial withdrawal from a Plan by any Borrower or any
                ERISA
                Affiliate.

            

    

    

    9.13           Other
      Breach Under Agreement.  A default occurs under any other term or
      condition of this Agreement not specifically referred to in this
      Article.  This includes any failure or anticipated failure by any
      Borrower (or any other party named in the Covenants section) to comply with
      the
      financial covenants set forth in this Agreement, whether such failure is
      evidenced by financial statements delivered to the Bank or is otherwise known
      to
      the Borrowers or the Bank.

    

    9.14           Material
      Default Under any Eligible Receivables.  A material default by the
      Borrower occurs under the terms of any Eligible Receivables or any breach in
      the
      Borrower’s performance obligations occurs under any Eligible
      Receivables.

    

    9.15           Termination
      of Eligible Receivables.   Any Eligible Receivable is
      terminated for default.

    

    10.           ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

    

    10.1           GAAP.  Except
      as otherwise stated in this Agreement, all financial information provided to
      the
      Bank and all financial covenants will be made under generally accepted
      accounting principles, consistently applied.

    

    10.2           North
      Carolina Law.  This Agreement shall be governed by and construed
      in accordance with the laws of North Carolina.  To the extent that the
      Bank has greater rights or remedies under federal law, whether as a national
      bank or otherwise, this paragraph shall not be deemed to deprive the Bank of
      such rights and remedies as may be available under federal law.

    

    10.3           Successors
      and Assigns.  This Agreement is binding on the Borrowers’ and the
      Bank's successors and assignees.  The Borrowers agree that they may
      not assign this Agreement without the Bank's prior consent.  The Bank
      may sell participations in or assign this loan, and may exchange information
      about the Borrowers (including, without limitation, any information regarding
      any hazardous substances) with actual or potential participants or
      assignees.  If a participation is sold or the loan is assigned, the
      purchaser will have the right of set-off against the Borrowers.

    

    10.4           Dispute
      Resolution Provision.  This paragraph, including the subparagraphs
      below, is referred to as the “Dispute Resolution Provision.”  This
      Dispute Resolution Provision is a material inducement for the parties entering
      into this agreement.

    

    
      	
              (a)

            	
              This
                Dispute Resolution Provision concerns the resolution of any controversies
                or claims between the parties, whether arising in contract, tort
                or by
                statute, including but not limited to controversies or claims that
                arise
                out of or relate to: (i) this agreement (including any renewals,
                extensions or modifications); or (ii) any document related to this
                agreement (collectively a "Claim").  For the purposes of this
                Dispute Resolution Provision only, the term “parties” shall include any
                parent corporation, subsidiary or affiliate of the Bank involved
                in the
                servicing, management or administration of any obligation described
                or
                evidenced by this agreement.

            

    

    

    
      	
              (b)

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

            

    

    

    
      	
              (c)

            	
              Arbitration
                proceedings will be determined in accordance with the Act, the
                then-current rules and procedures for the arbitration of financial
                services disputes of the American Arbitration Association or any
                successor
                thereof ("AAA"), and the terms of this Dispute Resolution
                Provision.  In the event of any inconsistency, the terms of this
                Dispute Resolution Provision shall control.  If AAA is unwilling
                or unable to (i) serve as the provider of arbitration or (ii) enforce
                any
                provision of this arbitration clause, the Bank may designate another
                arbitration organization with similar procedures to serve as the
                provider
                of arbitration.

            

    

    

    
      	
              (d)

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

            

    

    

    
      	
              (e)

            	
              The
                arbitrator(s) will give effect to statutes of limitation in determining
                any Claim and may dismiss the arbitration on the basis that the Claim
                is
                barred. For purposes of the application of any statutes of limitation,
                the
                service on AAA under applicable AAA rules of a notice of Claim is
                the
                equivalent of the filing of a lawsuit.  Any dispute concerning
                this arbitration provision or whether a Claim is arbitrable shall
                be
                determined by the arbitrator(s), except as set forth at subparagraph
                (h)
                of this Dispute Resolution Provision.  The arbitrator(s) shall
                have the power to award legal fees pursuant to the terms of this
                agreement.

            

    

    

    
      	
              (f)

            	
              This
                paragraph does not limit the right of any party to: (i) exercise
                self-help
                remedies, such as but not limited to, setoff; (ii) initiate judicial
                or
                non-judicial foreclosure against any real or personal property collateral;
                (iii) exercise any judicial or power of sale rights, or (iv) act
                in a
                court of law to obtain an interim remedy, such as but not limited
                to,
                injunctive relief, writ of possession or appointment of a receiver,
                or
                additional or supplementary
                remedies.

            

    

    

    
      	
              (g)

            	
              The
                filing of a court action is not intended to constitute a waiver of
                the
                right of any party, including the suing party, thereafter to require
                submittal of the Claim to
                arbitration.

            

    

    

    
      	
              (h)

            	
              Any
                arbitration or trial by a judge of any Claim will take place on an
                individual basis without resort to any form of class or representative
                action (the “Class Action Waiver”).  Regardless of anything else
                in this Dispute Resolution Provision, the validity and effect of
                the Class
                Action Waiver may be determined only by a court and not by an
                arbitrator.  The parties to this Agreement acknowledge that the
                Class Action Waiver is material and essential to the arbitration
                of any
                disputes between the parties and is nonseverable from the agreement
                to
                arbitrate Claims. If the Class Action Waiver is limited, voided or
                found
                unenforceable, then the parties’ agreement to arbitrate shall be null and
                void with respect to such proceeding, subject to the right to appeal
                the
                limitation or invalidation of the Class Action
                Waiver.  The Parties acknowledge and agree that under no
                circumstances will a class action be
                arbitrated.

            

    

    

    
      	
              (i)

            	
              By
                agreeing to binding arbitration, the parties irrevocably and voluntarily
                waive any right they may have to a trial by jury in respect of any
                Claim.  Furthermore, without intending in any way to limit this
                agreement to arbitrate, to the extent any Claim is not arbitrated,
                the
                parties irrevocably and voluntarily waive any right they may have
                to a
                trial by jury in respect of such Claim.  This waiver of jury
                trial shall remain in effect even if the Class Action Waiver is limited,
                voided or found unenforceable.  WHETHER THE CLAIM IS
                DECIDED BY ARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE
                AND
                UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING
                UP
                THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BY
                LAW.

            

    

    

    10.5           Severability;
      Waivers.  If any part of this Agreement is not enforceable, the
      rest of the Agreement may be enforced.  The Bank retains all rights,
      even if it makes a loan after default.  If the Bank waives a default,
      it may enforce a later default.  Any consent or waiver under this
      Agreement must be in writing.

    

    10.6           Attorneys'
      Fees.  The Borrowers shall reimburse the Bank for any reasonable
      costs and attorneys' fees incurred by the Bank in connection with the
      enforcement or preservation of any rights or remedies under this Agreement
      and
      any other documents executed in connection with this Agreement, and in
      connection with any amendment, waiver, "workout" or restructuring under this
      Agreement.  In the event of a lawsuit or arbitration proceeding, the
      prevailing party is entitled to recover costs and reasonable attorneys' fees
      incurred in connection with the lawsuit or arbitration proceeding, as determined
      by the court or arbitrator.  In the event that any case is commenced
      by or against the Borrowers under the Bankruptcy Code (Title 11, United States
      Code) or any similar or successor statute, the Bank is entitled to recover
      costs
      and reasonable attorneys' fees incurred by the Bank related to the preservation,
      protection, or enforcement of any rights of the Bank in such a
      case.  As used in this paragraph, "attorneys' fees" includes the
      allocated costs of the Bank's in-house counsel.

    

    10.7           Joint
      and Several Liability.  This paragraph shall apply if two or more
      Borrowers sign this agreement:

    

    
      	
              (a)

            	
              Each
                Borrower agrees that it is jointly and severally liable to the Bank
                for
                the payment of all obligations arising under this Agreement, and
                that such
                liability is independent of the obligations of the other Borrower(s).
                Each
                obligation, promise, covenant, representation and warranty in this
                Agreement shall be deemed to have been made by, and be binding upon,
                each
                Borrower, unless this Agreement expressly provides
                otherwise.  The Bank may bring an action against any Borrower,
                whether an action is brought against the other
                Borrower(s).

            

    

    

    
      	
              (b)

            	
              Each
                Borrower agrees that any release which may be given by the Bank to
                the
                other Borrower(s) or any guarantor will not release such Borrower
                from its
                obligations under this Agreement.

            

    

    

    
      	
              (c)

            	
              Each
                Borrower waives any right to assert against the Bank any defense,
                setoff,
                counterclaim, or claims which such Borrower may have against the
                other
                Borrower(s) or any other party liable to the Bank for the obligations
                of
                the Borrowers under this Agreement.

            

    

    

    
      	
              (d)

            	
              Each
                Borrower waives any defense by reason of any other Borrower’s or any other
                person's defense, disability, or release from liability.  The
                Bank can exercise its rights against each Borrower even if any other
                Borrower or any other person no longer is liable because of a statute
                of
                limitations or for other reasons.

            

    

    

    
      	
              (e)

            	
              Each
                Borrower agrees that it is solely responsible for keeping itself
                informed
                as to the financial condition of the other Borrower(s) and of all
                circumstances which bear upon the risk of nonpayment.  Each
                Borrower waives any right it may have to require the Bank to disclose
                to
                such Borrower any information which the Bank may now or hereafter
                acquire
                concerning the financial condition of the other
                Borrower(s).

            

    

    

    
      	
              (f)

            	
              Each
                Borrower waives all rights to notices of default or nonperformance
                by any
                other Borrower under this Agreement.  Each Borrower further
                waives all rights to notices of the existence or the creation of
                new
                indebtedness by any other Borrower and all rights to any other notices
                to
                any party liable on any of the credit extended under this
                Agreement.

            

    

    

    
      	
              (g)

            	
              The
                Borrowers represent and warrant to the Bank that each will derive
                benefit,
                directly and indirectly, from the collective administration and
                availability of credit under this Agreement.  The Borrowers
                agree that the Bank will not be required to inquire as to the disposition
                by any Borrower of funds disbursed in accordance with the terms of
                this
                Agreement.

            

    

    

    
      	
              (h)

            	
              Until
                all obligations of the Borrowers to the Bank under this Agreement
                have
                been paid in full and any commitments of the Bank or facilities provided
                by the Bank under this Agreement have been terminated, each Borrower
                (a)
                waives any right of subrogation, reimbursement, indemnification and
                contribution (contractual, statutory or otherwise), including without
                limitation, any claim or right of subrogation under the Bankruptcy
                Code
                (Title 11, United States Code) or any successor statute, which such
                Borrower may now or hereafter have against any other Borrower with
                respect
                to the indebtedness incurred under this Agreement; (b) waives any
                right to
                enforce any remedy which the Bank now has or may hereafter have against
                any other Borrower, and waives any benefit of, and any right to
                participate in, any security now or hereafter held by the
                Bank.

            

    

    

    
      	
              (i)

            	
              Each
                Borrower waives any right to require the Bank to proceed against
                any other
                Borrower or any other person; proceed against or exhaust any security;
                or
                pursue any other remedy.  Further, each Borrower consents to the
                taking of, or failure to take, any action which might in any manner
                or to
                any extent vary the risks of the Borrowers under this Agreement or
                which,
                but for this provision, might operate as a discharge of the
                Borrowers.

            

    

    

    10.8           One
      Agreement.  This Agreement and any related security or other
      agreements required by this Agreement, collectively:

    

    
      	
              (a)

            	
              represent
                the sum of the understandings and agreements between the Bank and
                the
                Borrowers concerning this credit;

            

    

    

    
      	
              (b)

            	
              replace
                any prior oral or written agreements between the Bank and the Borrowers
                concerning this credit; and

            

    

    

    
      	
              (c)

            	
              are
                intended by the Bank and the Borrowers as the final, complete and
                exclusive statement of the terms agreed to by
                them.

            

    

    

    In
      the
      event of any conflict between this Agreement and any other agreements required
      by this Agreement, this Agreement will prevail.  Any reference in any
      related document to a “promissory note” or a “note” executed by the Borrowers
      and dated as of the date of this Agreement shall be deemed to refer to this
      Agreement, as now in effect or as hereafter amended, renewed, or
      restated.

    

    10.9           Disposition
      of Schedules and Reports.  The Bank will not be obligated to
      return any schedules, invoices, statements, budgets, forecasts, reports or
      other
      papers delivered by the Borrowers.  The Bank will destroy or otherwise
      dispose of such materials at such time as the Bank, in its discretion, deems
      appropriate.

    

    10.10                      Returned
      Merchandise.  Until the Bank exercises its rights to collect the
      accounts receivable as provided under any security agreement required under
      this
      Agreement, the Borrowers may continue their present policies for returned
      merchandise and adjustments.  Credit adjustments with respect to
      returned merchandise shall be made immediately upon receipt of the merchandise
      by the Borrowers or upon such other disposition of the merchandise by the debtor
      in accordance with the Borrowers' instructions.  If a credit
      adjustment is made with respect to any Acceptable Receivable, the amount of
      such
      adjustment shall no longer be included in the amount of such Acceptable
      Receivable in computing the Borrowing Base.

    

    10.11                      Verification
      of Eligible Receivables.  The Bank may at any time, either orally
      or in writing, request confirmation from any debtor of the current amount and
      status of the Eligible Receivables upon which such debtor is
      obligated.

    

    10.12                      Waiver
      of Confidentiality.  The Borrowers authorize the Bank to discuss
      the Borrowers' financial affairs and business operations with any accountants,
      auditors, business consultants, or other professional advisors employed by
      the
      Borrowers, and authorize such parties to disclose to the Bank such financial
      and
      business information or reports (including management letters) concerning the
      Borrowers as the Bank may request.

    

    10.13                      Indemnification.  The
      Borrower will indemnify and hold the Bank harmless from any loss, liability,
      damages, judgments, and costs of any kind relating to or arising directly or
      indirectly out of (a) this Agreement or any document required hereunder, (b)
      any
      credit extended or committed by the Bank to the Borrower hereunder, (c) any
      claim, whether well-founded or otherwise, that there has been a failure to
      comply with any law regulating the Borrower's sales or leases to or performance
      of services for debtors obligated upon the Borrower's Eligible Receivables
      and
      disclosures in connection therewith, and (d) any litigation or proceeding
      related to or arising out of this Agreement, any such document, any such credit,
      or any such claim.  This indemnity includes but is not limited to
      attorneys' fees (including the allocated cost of in-house
      counsel).  This indemnity extends to the Bank, its parent,
      subsidiaries and all of their directors, officers, employees, agents,
      successors, attorneys, and assigns.  This indemnity will survive
      repayment of the Borrower's obligations to the Bank.  All sums due to
      the Bank hereunder shall be obligations of the Borrower, due and payable
      immediately without demand.

    

    10.14                      Notices.  Unless
      otherwise provided in this Agreement or in another agreement between the Bank
      and the Borrowers, all notices required under this Agreement shall be personally
      delivered or sent by first class mail, postage prepaid, or by overnight courier,
      to the addresses on the signature page of this Agreement, or sent by facsimile
      to the fax numbers listed on the signature page, or to such other addresses
      as
      the Bank and the Borrowers may specify from time to time in
      writing.  Notices and other communications shall be effective (i) if
      mailed, upon the earlier of receipt or five (5) days after deposit in the U.S.
      mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or
      (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram
      or mailgram), when delivered.

    

    10.15                      Headings.  Article
      and paragraph headings are for reference only and shall not affect the
      interpretation or meaning of any provisions of this Agreement.

    

    10.16                      Counterparts.  This
      Agreement may be executed in as many counterparts as necessary or convenient,
      and by the different parties on separate counterparts each of which, when so
      executed, shall be deemed an original but all such counterparts shall constitute
      but one and the same agreement.

    

    10.17                      Borrower
      Information; Reporting to Credit Bureaus.  The Borrower authorizes
      the Bank at any time to verify or check any information given by the Borrower
      to
      the Bank, check the Borrower’s credit references, verify employment, and obtain
      credit reports.  The Borrower agrees that the Bank shall have the
      right at all times to disclose and report to credit reporting agencies and
      credit rating agencies such information pertaining to the Borrower and/or all
      guarantors as is consistent with the Bank's policies and practices from time
      to
      time in effect.

    

    10.18                      Prior
      Agreement Superseded.  This Agreement supersedes the Loan
      Agreement entered into as of May 23, 2001, between the Bank and the Borrowers,
      and any credit outstanding thereunder shall be deemed to be outstanding under
      this Agreement.

    

    10.19                      Additional
      Remedy for Failure to Assign Payments as Requested.  The Borrower
      acknowledges that the Bank will be irreparably harmed if the Borrower fails,
      after request by the Bank, to promptly assign payments due or to become due
      under any Eligible Receivables when required by the Bank, pursuant to this
      Agreement, and that the Bank shall have no adequate remedy at
      law.  Therefore, the Borrower agrees that the Bank shall be entitled
      to the following remedies, in addition to all other remedies allowed by law
      or
      under this Agreement:

    

    
      	
              (a)

            	
              an
                injunction compelling the Borrower’s compliance with the provisions of
                this Agreement requiring the Borrower to assign payments due or to
                become
                due under any Eligible Receivables;

            

    

    

    
      	
              (b)

            	
              the
                appointment of a receiver, with instructions that the receiver shall
                comply, in the Borrower’s name and on its behalf, with the provisions of
                this Agreement requiring the Borrower to assign payments due or to
                become
                due under any Eligible Receivables;
                and

            

    

    

    
      	
              (c)

            	
              such
                other or further equitable relief as may be necessary or desirable
                to
                secure to the Bank the benefits of the rights of an assignee under
                the
                Assignment of Claims Act (Title 31 Section 3727 and Title 41 Section
                15 of
                the United States Code).

            

    

    

    

    This
      Agreement is executed as of the date stated at the top of the first
      page.

    
      	 	 	 	 
	 	 	 	 
	
              Borrower:

            	
              Bank:

            
	 	 
	
              Air
                T, Inc.

            	
              Bank
                of America, N.A.

            
	 	 
	 	 
	 	 
	 	 
	 	 
	
              By:

            	 /S/
              John Parry	
              (Seal)

            	
              By:
                ______________________________________

            
	 	
              John
                Parry, VP Finance

            	
                      Authorized
                Signer

            	 
	 	 	 	 
	
              Borrower:

            	 	 	 
	 	 	 	 
	
              Csa
                Air, Inc.

            	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
              By:

            	  /S/
              John Parry	
              (Seal)

            	 	 	 
	 	
              John
                Parry, VP Finance

            	 	 	 
	 	 	 

    

    

    
      	
              Borrower:

            
	 
	
              Mountain
                Air Cargo, Inc.

            
	 
	 
	 
	 
	 
	
              By:

            	  /S/
              John Parry	
              (Seal)

            
	 	
              John
                Parry, VP Finance

            

    

    

    
      	
            
	
              Borrower:

            
	 
	
              MAC
                Aviation Services LLC

            
	 
	 
	 
	 
	 
	
              By:

            	  /S/
              John Parry	
              (Seal)

            
	 	
              John
                Parry, Member

            

    

    
      	
              Borrower:

            
	 
	
              MAC
                Aviation Services LLC

            
	 
	 
	 
	 
	 
	
              By:

            	  /S/
              John Parry	
              (Seal)

            
	 	
              John
                Parry, Member

            

    
        
    Borrower:
 
    Global
      Ground Support,  LLC
     
    By:
 
    (Seal)
 
    John
      Parry, Member

     

    
      	
              Borrower:

            
	 
	
              Global
                Ground Support,  LLC

            
	 
	 
	 
	 
	 
	
              By:

            	 /S/
              John Parry	
              (Seal)

            
	 	
              John
                Parry, Member

               

            

    
 
    Borrower:

     

    Global
      Aviation Services, LLC

     

     

    By:  ________ /S/
      John Parry________________(Seal)

           Authorized
      Signer

     

    By:  ___________________________________(Seal)

           Authorized
      Signer

    Address
      where notices to Borrowers are to be sent:

     
 
    Address
      where notices to Bank are to be sent:
          
    3524
      Airport Road
 
    Bank
      of
      America, N.A.

    Maiden,
      NC  28650
 
    GCIB
      Credit Services
  
    1075
      Main
      Street, 2nd
      Floor

    Telephone:  (828)
      464-8741
 
    Waltham,
      MA 02451

    Facsimile:   (828)  465-5281
     
    
    

    Affiliate
      Sharing Notice.  Notice to Individual Borrowers, Guarantors and
      Pledgors (“Obligors”):  From time to time Bank of America, N.A. (the
“Bank”) may share information about the Obligor’s experience with Bank of
      America Corporation (or any successor company) and its subsidiaries and
      affiliated companies (the “Affiliates”).  The Bank may also share with
      the Affiliates credit-related information contained in any applications, from
      credit reports and information it may obtain about the Obligor from outside
      sources.  If the Obligor is an individual, the Obligor may instruct
      the Bank not to share this information with the Affiliates.  The
      Obligor can make this election by (1) calling the Bank at 1.888.341.5000, (2)
      visiting the Bank online at www.bankofamerica.com, selecting “Privacy
& Security,” and then selecting “Set Your Privacy Preferences," or (3)
      contacting the Obligor’s client manager or local banking center.  To
      help the Bank complete the Obligor’s request, the Obligor should include the
      Obligor’s name, address, phone number, account number(s) and social security
      number.  If the Obligor makes this election, certain products or
      services may not be made available to the Obligor.  This request will
      apply to information from applications, consumer reports and other outside
      sources only, and may take six to eight weeks to be fully
      effective.  Through the normal course of doing business, including
      servicing the Obligor’s accounts and better serving the Obligor’s financial
      needs, the Bank will continue to share transaction and account experience
      information, as well as other general information among the
      Affiliates.  The Bank may change this policy from time to
      time.  Visit our website, www.bankofamerica.com, for the latest
      policy.

    

    USA
      Patriot Act Notice.  Federal law requires all financial
      institutions to obtain, verify and record information that identifies each
      person who opens an account or obtains a loan.  The Bank will ask for
      the Borrower’s legal name, address, tax ID number or social security number and
      other identifying information.  The Bank may also ask for additional
      information or documentation or take other actions reasonably necessary to
      verify the identity of the Borrower, guarantors or other related
      persons.exhibit_10-1.htm

    

      
        

      

    

    
 

    FIFTH
      AMENDMENT TO LOAN AGREEMENT

    

    THIS
      FIFTH AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered
      into and effective as of September 19, 2007 (the “Amendment Closing
      Date”), by and among WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association (the “Bank”), FOSSIL
      PARTNERS, L.P. (the “Borrower”), FOSSIL, INC.
      (the “Company”), FOSSIL INTERMEDIATE, INC. (“Fossil
      Intermediate”), FOSSIL TRUST (“Fossil Trust”),
FOSSIL STORES I, INC. (“Fossil I”), ARROW
      MERCHANDISING, INC. (“Arrow Merchandising”) and FOSSIL
      HOLDINGS, LLC (“Fossil Holdings”) (the Company, Fossil
      Intermediate, Fossil Trust, Fossil I, Arrow Merchandising and Fossil Holdings
      are sometimes referred to herein individually as a “Guarantor” and
      collectively as the “Guarantors”).

     

    RECITALS

    

    WHEREAS,
      the Bank, the Borrower and the Guarantors are parties to that certain Loan
      Agreement, dated as of September 23, 2004 (as amended, modified or
      supplemented, from time to time, the “Agreement”); and

     

    WHEREAS,
      the Bank, the Borrower and the Guarantors desire to amend the Agreement and
      the
      other Loan Documents as herein set forth.

     

    NOW,
      THEREFORE, in consideration of the premises herein contained and other good
      and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties, intending to be legally bound, agree as
      follows:

     

    ARTICLE
      I.

     

    Definitions

     

    Section
      1.01.  Capitalized
      terms used in this Amendment are defined in the Agreement, as amended hereby,
      unless otherwise stated.

     

    ARTICLE
      II.

     

    Amendments

     

    Section
      2.01.  Amendment
      to Section 12(a).  Effective as of the Amendment Closing Date,
Section 12(a) of the Agreement is hereby amended and restated in its
      entirety to read as follows:

    
      
        	
                “(a)                      Annual
                  Financial Statements.  Furnish the Bank, within one hundred
                  (100) days after the end of each fiscal year of the Company, (i)
                  a copy of
                  the Company’s audited consolidated financial statements, consisting of at
                  least a balance sheet and related statement of income, retained
                  earnings
                  and changes in financial condition of the Company prepared in conformity
                  with generally accepted accounting principles, applied on a basis
                  consistent with that of the preceding year, and certified by an
                  independent certified public accountant selected by the Company
                  and
                  reasonably satisfactory to the Bank and (ii) a copy of the consolidating
                  financial statements of the Company prepared by the
                  Company.”

              

      

    

     

    Section
      2.02.  Amendment
      to Section 12(b).  Effective as of the Amendment Closing Date,
Section 12(b) of the Agreement is hereby amended and restated in its
      entirety to read as follows:

    
      
        	
                “(b)           Quarterly
                  Financial Statements.  Furnish the Bank, within fifty (50) days
                  after the end of any fiscal quarter of the Company during the term
                  hereof
                  (other than the fiscal quarter ending on the last day of the fiscal
                  year
                  of Company), a copy of its unaudited consolidated financial statements
                  for
                  such fiscal quarter, consisting of at least a balance sheet and
                  related
                  statement of income, materially prepared in conformity with generally
                  accepted accounting principles (“GAAP”) and certified by an authorized
                  officer of the Company.”

              

      

    

     

    Section
      2.03.  Amendment
      to Section 12(c).  Effective as of the Amendment Closing Date,
Section 12(c) of the Agreement is hereby amended and restated in its
      entirety to read as follows:

    
      
        	
                “(c)           Compliance
                  Certificate.  Furnish the Bank, concurrently with the delivery
                  of the financial statements required to be delivered pursuant to
                  clauses
                  (a) and (b) above, a Compliance Certificate in a form similar to
                  the
                  Compliance Certificate attached hereto as Exhibit C, but including
                  all representations and warranties to the satisfaction of the Bank,
                  signed
                  by an authorized officer of the Borrower and the
                  Company.”

              

      

    

     

    Section
      2.04.  Amendment
      to Section 16.  Effective as of the Amendment Closing Date, the
      reference to “Susan K. Nugent” contained in Section 16 of the Agreement
      is deleted in its entirety and replaced with “Susan N. Jenull”.

     

    ARTICLE
      III.

     

    Conditions
      Precedent

     

    Section
      3.01.  Conditions
      to Effectiveness.  The effectiveness of this Amendment is subject
      to the satisfaction of the following conditions precedent, unless specifically
      waived in writing by the Bank:

     

    (a)  The
      Bank
      shall have received this Amendment, duly executed by the Borrower and each
      Guarantor;

     

    (b)  There
      shall have been no material adverse change in the business or financial
      condition of the Borrower, Company and the Guarantors, taken as a
      whole;

     

    (c)  There
      shall be no material adverse litigation, either pending or threatened, against
      the Borrower or any Guarantor that could reasonably be expected to have a
      material adverse effect on the business or financial condition of the Borrower,
      Company and the Guarantors, taken as a whole;

     

    (d)  The
      representations and warranties contained herein and in the Agreement and the
      other Loan Documents, as each is amended hereby, shall be true and correct
      in
      all material respects as of the date hereof, as if made on the date hereof,
      except to the extent such representations were made as of a specific
      date;

     

    (e)  No
      default or Event of Default under the Agreement, as amended hereby, shall have
      occurred and be continuing, unless such default or Event of Default has been
      specifically waived in writing by the Bank; and

     

    (f)  All
      requisite corporate, partnership or trust proceedings, as appropriate, shall
      have been taken the Borrower and each Guarantor to authorize the execution,
      delivery and performance of this Amendment, and such proceedings and other
      legal
      matters incident thereto shall be satisfactory to the Bank and its legal
      counsel.

     

    ARTICLE
      IV.

     

    No
      Waiver

     

    Section
      4.01.  Nothing
      contained herein shall be construed as a waiver by the Bank of any covenant
      or
      provision of the Agreement, the other Loan Documents, this Amendment, or of
      any
      other contract or instrument between the Borrower and/or the Guarantors and
      the
      Bank, and the failure of the Bank at any time or times hereafter to require
      strict performance by the Borrower and/or any Guarantor of any provision thereof
      shall not waive, affect or diminish any right of the Bank to thereafter demand
      strict compliance therewith.  The Bank hereby reserves all rights
      granted under the Agreement, the other Loan Documents, this Amendment and any
      other contract or instrument between the Borrower and/or the Guarantors and
      the
      Bank.

     

    ARTICLE
      V.

     

    Ratifications,
      Representations and Warranties, Covenants

     

    Section
      5.01.  General
      Ratifications.  The terms and provisions set forth in this
      Amendment shall modify and supersede all inconsistent terms and provisions
      set
      forth in the Agreement and the other Loan Documents, and, except as expressly
      modified and superseded by this Amendment, the terms and provisions of the
      Agreement and the other Loan Documents are ratified and confirmed and shall
      continue in full force and effect.  The parties hereto agree that the
      Agreement and the other Loan Documents, as amended hereby, shall continue to
      be
      legal, valid, binding and enforceable in accordance with their respective
      terms.

     

    Section
      5.02.  Ratification
      of Guaranties.  Each of the Guarantors hereby acknowledges and
      consents to all of the terms and conditions of this Amendment and hereby
      ratifies and confirms the Guaranty Agreement to which it is a party to or for
      the benefit of the Bank.  Each of the Guarantors hereby represents and
      acknowledges that it has no claims, counterclaims, offsets, credits or defenses
      to the Loan Documents or the performance of its obligations
      thereunder.  Furthermore, each Guarantor agrees that nothing contained
      in this Amendment shall adversely affect any right or remedy of the Bank under
      the Guaranty Agreement to which such Guarantor is a party.  Each
      Guarantor hereby agrees that with respect to the Guaranty Agreement to which
      it
      is a party, all references in such Guaranty Agreement to the “Guaranteed
      Obligations” shall include, without limitation, the obligations of the Borrower
      to the Bank under the Agreement, as amended hereby.  Finally, each of
      the Guarantors hereby represents and acknowledges that the execution and
      delivery of this Amendment and the other Loan Documents executed in connection
      herewith shall in no way change or modify its obligations as a guarantor,
      debtor, pledgor, assignor, obligor and/or grantor under its respective Guaranty
      Agreement (except as specifically provided in this Section 5.02) and
      shall not constitute a waiver by the Bank of any of the Bank’s rights against
      such Guarantor.

     

    Section
      5.03.  Ratification
      of Security Interests.  The Company hereby agrees that the Stock
      Pledge Agreement is hereby expressly amended such that the definition of
“Secured Obligations” contained therein includes, without limitation, all
      indebtedness and other obligations of the Borrower now or hereafter existing
      hereunder the Agreement, as amended hereby.  Furthermore, the Company
      hereby ratifies and reaffirms its obligations under the Stock Pledge Agreement,
      as the same is amended hereby, and represents and acknowledges that the Stock
      Pledge Agreement is not subject to any claims, counterclaims, defenses or
      offsets.  Finally, the Company hereby represents and acknowledges that
      the execution and delivery of this Amendment and the other Loan Documents
      executed in connection herewith shall in no way change or modify its obligations
      as a debtor, pledgor, assignor, obligor and/or grantor under the Stock Pledge
      Agreement (except as specifically provided in this Section 5.03) and
      shall not constitute a waiver by the Bank of any of the Bank’s rights against
      the Company.

     

    Section
      5.04.  Representations
      and Warranties.  The Borrower and each of the Guarantors hereby
      jointly and severally represent and warrant to the Bank that (a) the execution,
      delivery and performance of this Amendment and any and all other Loan Documents
      executed and/or delivered in connection herewith have been duly authorized
      by
      all requisite corporate, partnership or trust proceedings, as appropriate,
      and
      will not contravene, or constitute a default under, any provision of applicable
      law or regulation or of the Agreement of Limited Partnership, Articles of
      Incorporation, By-Laws or Trust Agreement, as applicable, of the Borrower or
      any
      Guarantor, or of any mortgage, indenture, material contract, material agreement
      or other material instrument, or any judgment, order or decree, binding upon
      the
      Borrower or any Guarantor; (b) the officer(s) of the Borrower and each Guarantor
      executing and delivering this Amendment and any and all other Loan Documents
      executed and/or delivered in connection herewith are duly elected and are
      authorized, by resolution of the board of directors, board of managers or
      trustees (or other applicable governing body) of the Borrower and each such
      Guarantor, to execute on behalf of each such entity this Amendment and any
      and
      all other Loan Documents executed and/or delivered in connection herewith;
      (c)
      the representations and warranties contained in the Agreement and the other
      Loan
      Documents, as amended hereby, are true and correct in all material respects
      on
      and as of the date hereof and on and as of the date of execution hereof as
      though made on and as of each such date, except to the extent such
      representations were made as of a specific date; (d) no default or Event of
      Default under the Agreement, as amended hereby, has occurred and is continuing,
      unless such default or Event of Default has been specifically waived in writing
      by the Bank; and (e) the Borrower and the Guarantors are in full compliance
      with
      all covenants and agreements contained in the Agreement and the other Loan
      Documents, as amended hereby.

     

    ARTICLE
      VI.

     

    Miscellaneous
      Provisions

     

    Section
      6.01.  Survival
      of Representations and Warranties.  All representations and
      warranties made in the Agreement or any other Loan Documents, including, without
      limitation, any document furnished in connection with this Amendment, shall
      survive the execution and delivery of this Amendment and the other Loan
      Documents to be executed in connection herewith, and no investigation by the
      Bank or any closing shall affect the representations and warranties or the
      right
      of the Bank to rely upon them.

     

    Section
      6.02.  Reference
      to Agreement.  Each of the Agreement and the other Loan Documents,
      and any and all other agreements, documents or instruments now or hereafter
      executed and delivered pursuant to the terms hereof or pursuant to the terms
      of
      the Agreement, as amended hereby, are hereby amended so that any reference
      in
      the Agreement and such other Loan Documents to the Agreement, shall mean a
      reference to the Agreement, as amended hereby.

     

    Section
      6.03.  Expenses
      of the Bank.  As provided in the Agreement, the Borrower agrees to
      pay on demand all reasonable costs and expenses incurred by the Bank in
      connection with the preparation, negotiation, and execution of this Amendment
      and the other Loan Documents executed pursuant hereto and any and all
      amendments, modifications, and supplements hereto or thereto, including, without
      limitation, the costs and fees of the Bank’s legal counsel, and all costs and
      expenses incurred by the Bank in connection with the enforcement or preservation
      of any rights under the Agreement or any other Loan Document, in each case
      as
      amended hereby, including, without, limitation, the costs and fees of the Bank’s
      legal counsel.

     

    Section
      6.04.  Severability.  Any
      provision of this Amendment held by a court of competent jurisdiction to be
      invalid or unenforceable shall not impair or invalidate the remainder of this
      Amendment and the effect thereof shall be confined to the provision so held
      to
      be invalid or unenforceable.

     

    Section
      6.05.  Successors
      and Assigns.  This Amendment is binding upon and shall inure to
      the benefit of the Borrower, the Guarantors and the Bank and their respective
      successors and assigns.

     

    Section
      6.06.  Counterparts.  This
      Amendment may be executed in one or more counterparts, each of which when so
      executed shall be deemed to be an original, but all of which when taken together
      shall constitute one and the same instrument.

     

    Section
      6.07.  Effect
      of Waiver.  No consent or waiver, express or implied, by the Bank
      to or for any breach of or deviation from any covenant or condition by the
      Borrower or any Guarantor shall be deemed a consent to or waiver of any other
      breach of the same or any other covenant, condition or duty.

     

    Section
      6.08.  Headings.  The
      headings, captions and arrangements used in this Amendment are for convenience
      only and shall not affect the interpretation of this Amendment.

     

    Section
      6.09.  Applicable
      Law.  THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED PURSUANT
      HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL
      BE
      GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
      TEXAS.

     

    Section
      6.10.  Final
      Agreement.  THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS
      AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT
      TO
      THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED.  THE
      AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE
      CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
      OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
      PARTIES.  NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF
      ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT
      SIGNED BY THE BORROWER, THE GUARANTORS AND THE BANK.

     

    Section
      6.11.  Agreement
      for Binding Arbitration.  The parties agree to be
      bound by the terms and provisions of the Bank’s current Arbitration Program
      which is incorporated herein by reference and is acknowledged as received by
      the
      parties pursuant to which any and all disputes shall be resolved by mandatory
      binding arbitration upon the request of any party.

     

    

    

    [Remainder
      of page intentionally left blank.]

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF, this Amendment has been executed and is effective as of the
      date first above-written.

     

    

    
      	
              “BANK”

            
	 
	
              WELLS
                FARGO BANK,

            
	
              NATIONAL
                ASSSOCIATION

            
	 
	 
	
              By:  /s/
                Susan N. Jenull    

            
	
              Susan
                N. Jenull,

            
	
              Vice
                President

            
	 
	 
	
              “BORROWER”

            
	 
	
              FOSSIL
                PARTNERS, L.P.

            
	 
	
              By:

            
	
              Fossil,
                Inc., its general partner

            
	 
	 
	
              By:  /s/
                Michael Barnes    

            
	
              Michael
                Barnes,

            
	
              President

            
	 
	 
	
              “GUARANTORS”

            
	 
	
              FOSSIL,
                INC.

            
	 
	 
	
              By:  /s/
                Michael Barnes    

            
	
              Michael
                Barnes,

            
	
              President

            
	 
	 
	
              FOSSIL
                INTERMEDIATE, INC.

            
	 
	 
	
              By:  /s/
                Mike L. Kovar    

            
	
              Mike
                L. Kovar, Treasurer

            
	 
	 
	
              FOSSIL
                TRUST

            
	 
	 
	
              By:  /s/
                Mike L. Kovar    

            
	
              Mike
                L. Kovar, Treasurer

            
	 
	 
	
              FOSSIL
                STORES I, INC.

            
	 
	 
	
              By:  /s/
                Mike L. Kovar    

            
	
              Mike
                L. Kovar, Treasurer

            
	 
	 
	
              ARROW
                MERCHANDISING, INC.

            
	 
	 
	
              By:  /s/
                Mike L. Kovar    

            
	
              Mike
                L. Kovar, Treasurer

            
	 
	 
	
              FOSSIL
                HOLDINGS, LLC

            
	 
	 
	
              By:  /s/
                Mike L. Kovar    

            
	
              Mike
                L. Kovar, Treasurer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]