Document:

MODTECH
      HOLDINGS, INC.,

     

    as
      Borrower

     

      
        

      

      
        
          

        

      

    

     

    LOAN
      AND SECURITY AGREEMENT

     

    Dated
      as
      of March 31, 2006

     

    $25,000,000

     

    
      
        

      

      
        
          

        

      

    

     

    CERTAIN
      FINANCIAL INSTITUTIONS,

     

    as
      Lenders

     

    and

     

    BANK
      OF AMERICA, N.A.,

     

    as
      Agent

     

    
      
        

      

       

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

    

      
        	 	 	Page 
	 	 	 
	
                SECTION
                  1.

              	
                DEFINITIONS;
                  RULES OF CONSTRUCTION

              	
                1

              
	 	 	 
	
                1.1

              	
                Definitions

              	
                1

              
	
                1.2

              	
                Accounting
                  Terms

              	
                24

              
	
                1.3

              	
                Certain
                  Matters of Construction

              	
                24

              
	 	 	 
	
                SECTION
                  2.

              	
                CREDIT
                  FACILITIES

              	
                25

              
	 	 	 
	
                2.1

              	
                Revolver
                  Commitment

              	
                25

              
	
                2.2

              	
                [Intentionally
                  Omitted]

              	
                27

              
	
                2.3

              	
                Letter
                  of Credit Facility

              	
                27

              
	 	 	 
	
                SECTION
                  3.

              	
                INTEREST,
                  FEES AND CHARGES

              	
                29

              
	 	 	 
	
                3.1

              	
                Interest

              	
                29

              
	
                3.2

              	
                Fees

              	
                31

              
	
                3.3

              	
                Computation
                  of Interest, Fees, Yield Protection

              	
                32

              
	
                3.4

              	
                Reimbursement
                  Obligations

              	
                32

              
	
                3.5

              	
                Illegality

              	
                32

              
	
                3.6

              	
                Increased
                  Costs

              	
                33

              
	
                3.7

              	
                Capital
                  Adequacy

              	
                34

              
	
                3.8

              	
                Mitigation

              	
                34

              
	
                3.9

              	
                Funding
                  Losses

              	
                34

              
	
                3.10

              	
                Maximum
                  Interest

              	
                34

              
	 	 	 
	
                SECTION
                  4.

              	
                LOAN
                  ADMINISTRATION

              	
                35

              
	 	 	 
	
                4.1

              	
                Manner
                  of Borrowing and Funding Revolver Loans

              	
                35

              
	
                4.2

              	
                Defaulting
                  Lender

              	
                37

              
	
                4.3

              	
                Number
                  and Amount of LIBOR Loans; Determination of Rate

              	
                37

              
	
                4.4

              	
                Borrower
                  Agent

              	
                37

              
	
                4.5

              	
                One
                  Obligation

              	
                38

              
	
                4.6

              	
                Effect
                  of Termination

              	
                38

              
	 	 	 
	
                SECTION
                  5.

              	
                PAYMENTS

              	
                38

              
	 	 	 
	
                5.1

              	
                General
                  Payment Provisions

              	
                38

              
	
                5.2

              	
                Repayment
                  of Revolver Loans

              	
                38

              
	
                5.3

              	
                [Intentionally
                  Omitted]

              	
                39

              
	
                5.4

              	
                Payment
                  of Other Obligations

              	
                39

              
	
                5.5

              	
                Marshaling;
                  Payments Set Aside

              	
                39

              
	
                5.6

              	
                Post-Default
                  Allocation of Payments

              	
                39

              
	
                5.7

              	
                Application
                  of Payments

              	
                40

              
	
                5.8

              	
                Loan
                  Account; Account Stated

              	
                40

              
	
                5.9

              	
                Taxes

              	
                40

              
	
                5.10

              	
                Withholding
                  Tax Exemption

              	
                41

              
	
                5.11

              	
                Nature
                  and Extent of Each Borrower’s Liability

              	
                41

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

    

     

    TABLE
      OF CONTENTS

    
      (continued)

    

     

     

    
      	 	 	Page
	 	 	 
	
              SECTION
                6.

            	
              CONDITIONS
                PRECEDENT

            	
              44

            
	 	 	 
	
              6.1

            	
              Conditions
                Precedent to Initial Loans

            	
              44

            
	
              6.2

            	
              Conditions
                Precedent to All Credit Extensions

            	
              45

            
	
              6.3

            	
              Limited
                Waiver of Conditions Precedent

            	
              46

            
	
              6.4

            	
              Conditions
                Subsequent

            	
              46

            
	 	 	 
	
              SECTION
                7.

            	
              COLLATERAL

            	
              46

            
	 	 	 
	
              7.1

            	
              Grant
                of Security Interest

            	
              46

            
	
              7.2

            	
              Lien
                on Deposit Accounts; Cash Collateral

            	
              47

            
	
              7.3

            	
              Real
                Estate Collateral

            	
              48

            
	
              7.4

            	
              Other
                Collateral

            	
              48

            
	
              7.5

            	
              No
                Assumption of Liability

            	
              49

            
	
              7.6

            	
              Further
                Assurances

            	
              49

            
	
              7.7

            	
              Foreign
                Subsidiary Stock

            	
              49

            
	 	 	 
	
              SECTION
                8.

            	
              COLLATERAL
                ADMINISTRATION

            	
              49

            
	 	 	 
	
              8.1

            	
              Borrowing
                Base Certificates

            	
              49

            
	
              8.2

            	
              Administration
                of Accounts

            	
              49

            
	
              8.3

            	
              Administration
                of Inventory

            	
              50

            
	
              8.4

            	
              Administration
                of Equipment

            	
              51

            
	
              8.5

            	
              Administration
                of Deposit Accounts

            	
              51

            
	
              8.6

            	
              General
                Provisions

            	
              52

            
	
              8.7

            	
              Power
                of Attorney

            	
              53

            
	 	 	 
	
              SECTION
                9.

            	
              REPRESENTATIONS
                AND WARRANTIES

            	
              54

            
	 	 	 
	
              9.1

            	
              General
                Representations and Warranties

            	
              54

            
	
              9.2

            	
              Complete
                Disclosure

            	
              60

            
	 	 	 
	
              SECTION
                10.

            	
              COVENANTS
                AND CONTINUING AGREEMENTS

            	
              60

            
	 	 	 
	
              10.1

            	
              Affirmative
                Covenants

            	
              60

            
	
              10.2

            	
              Negative
                Covenants

            	
              63

            
	
              10.3

            	
              Financial
                Covenants

            	
              68

            
	 	 	 
	
              SECTION
                11.

            	
              EVENTS
                OF DEFAULT; REMEDIES ON DEFAULT

            	
              68

            
	 	 	 
	
              11.1

            	
              Events
                of Default

            	
              68

            
	
              11.2

            	
              Remedies
                upon Default

            	
              70

            
	
              11.3

            	
              License

            	
              71

            
	
              11.4

            	
              Setoff

            	
              71

            
	
              11.5

            	
              Remedies
                Cumulative; No Waiver

            	
              71

            
	 	 	 
	
              SECTION
                12.

            	
              AGENT

            	
              72

            
	 	 	 
	
              12.1

            	
              Appointment,
                Authority and Duties of Agent

            	
              72

            
	
              12.2

            	
              Agreements
                Regarding Collateral and Field Examination Reports

            	
              73

            

    

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    
      

        TABLE
          OF CONTENTS

        (continued)

         

      

    

    
      	 	 	Page
	 	 	 
	
              12.3

            	
              Reliance
                By Agent

            	
              74

            
	
              12.4

            	
              Action
                Upon Default

            	
              74

            
	
              12.5

            	
              Ratable
                Sharing

            	
              74

            
	
              12.6

            	
              Indemnification
                of Agent Indemnitees

            	
              75

            
	
              12.7

            	
              Limitation
                on Responsibilities of Agent

            	
              75

            
	
              12.8

            	
              Successor
                Agent and Co-Agents

            	
              76

            
	
              12.9

            	
              Due
                Diligence and Non-Reliance

            	
              76

            
	
              12.10

            	
              Replacement
                of Certain Lenders

            	
              77

            
	
              12.11

            	
              Remittance
                of Payments and Collections

            	
              77

            
	
              12.12

            	
              Agent
                in its Individual Capacity

            	
              78

            
	
              12.13

            	
              Agent
                Titles

            	
              78

            
	
              12.14

            	
              No
                Third Party Beneficiaries

            	
              78

            
	 	 	 
	
              SECTION
                13.

            	
              BENEFIT
                OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

            	
              78

            
	 	 	 
	
              13.1

            	
              Successors
                and Assigns

            	
              78

            
	
              13.2

            	
              Participations

            	
              79

            
	
              13.3

            	
              Assignments

            	
              79

            
	
              13.4

            	
              Tax
                Treatment

            	
              80

            
	
              13.5

            	
              Representation
                of Lenders

            	
              80

            
	 	 	 
	
              SECTION
                14.

            	
              MISCELLANEOUS

            	
              80

            
	 	 	 
	
              14.1

            	
              Consents,
                Amendments and Waivers

            	
              80

            
	
              14.2

            	
              Indemnity

            	
              81

            
	
              14.3

            	
              Notices
                and Communications

            	
              81

            
	
              14.4

            	
              Performance
                of Borrowers’ Obligations

            	
              82

            
	
              14.5

            	
              Credit
                Inquiries

            	
              82

            
	
              14.6

            	
              Severability

            	
              82

            
	
              14.7

            	
              Cumulative
                Effect; Conflict of Terms

            	
              83

            
	
              14.8

            	
              Counterparts;
                Facsimile Signatures

            	
              83

            
	
              14.9

            	
              Entire
                Agreement

            	
              83

            
	
              14.10

            	
              Obligations
                of Lenders

            	
              83

            
	
              14.11

            	
              Confidentiality

            	
              83

            
	
              14.12

            	
              [Intentionally
                Omitted]

            	
              84

            
	
              14.13

            	
              GOVERNING
                LAW

            	
              84

            
	
              14.14

            	
              Consent
                to Forum; Arbitration

            	
              84

            
	
              14.15

            	
              Waivers
                by Borrowers

            	
              85

            
	
              14.16

            	
              Patriot
                Act Notice

            	
              86

            

    

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

    

      TABLE
        OF CONTENTS

      (continued)

       

    

    LIST
      OF EXHIBITS AND
      SCHEDULES

     

    

      
        	
                Exhibit
                  A

              	
                Assignment
                  and Acceptance

              
	
                Exhibit
                  B

              	
                Assignment
                  Notice

              
	 	 
	
                Schedule
                  1.1

              	
                Commitments
                  of Lenders

              
	
                Schedule
                  8.5

              	
                Deposit
                  Accounts

              
	
                Schedule
                  8.6.1

              	
                Business
                  Locations

              
	
                Schedule
                  9.1.4

              	
                Names
                  and Capital Structure

              
	
                Schedule
                  9.1.5

              	
                Former
                  Names and Companies

              
	
                Schedule
                  9.1.8

              	
                Disclosed
                  Losses

              
	
                Schedule
                  9.1.10

              	
                Taxes
                  Owed by Subsidiaries

              
	
                Schedule
                  9.1.12

              	
                Patents,
                  Trademarks, Copyrights and Licenses

              
	
                Schedule
                  9.1.15

              	
                Environmental
                  Matters

              
	
                Schedule
                  9.1.16

              	
                Restrictive
                  Agreements

              
	
                Schedule
                  9.1.17

              	
                Litigation

              
	
                Schedule
                  9.1.19

              	
                Pension
                  Plans

              
	
                Schedule
                  9.1.21

              	
                Labor
                  Contracts

              
	
                Schedule
                  10.2.2

              	
                Existing
                  Liens

              
	
                Schedule
                  10.2.17

              	
                Existing
                  Affiliate Transactions

              

      

    

     

    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

    

    LOAN
      AND SECURITY AGREEMENT

     

    THIS
      LOAN AND SECURITY AGREEMENT
      is dated
      as of March 31, 2006, among MODTECH HOLDINGS, INC., a Delaware corporation
      (“Borrower
      Agent”)
      and
      those Subsidiaries of Borrower Agent set forth on the signature pages hereto
      or
      which hereafter become parties hereto (individually, a “Borrower”
and
      collectively, “Borrowers”),
      the
      financial institutions party to this Agreement from time to time as lenders
      (collectively, “Lenders”),
      and
BANK
      OF AMERICA, N.A.,
      a
      national banking association, as agent for the Lenders (“Agent”).

     

    R
      E C I T A L S:

     

    Borrowers
      have requested that Lenders make available a credit facility, to be used by
      Borrowers to finance their mutual and collective business enterprise. Lenders
      are willing to provide such credit facility on the terms and conditions set
      forth in this Agreement.

     

    NOW,
      THEREFORE, for valuable consideration hereby acknowledged, the parties agree
      as
      follows:

     

    SECTION
      1.
      DEFINITIONS; RULES OF CONSTRUCTION

     

    1.1 Definitions.
      As used
      herein, the following terms have the meanings set forth below:

     

    Account
      - as
      defined in the UCC, including all rights to payment for goods sold or leased,
      or
      for services rendered.

     

    Account
      Debtor
      - a
      Person who is obligated under an Account, Chattel Paper or General
      Intangible.

     

    Accounts
      Formula Amount
      - 85% of
      the Value of Eligible Accounts; provided,
      however,
      that
      such percentage shall be reduced by two-tenths of one percent for each one-tenth
      of one percent that the Dilution Percent exceeds 7.5%.

     

    Adjusted
      LIBOR
      - for
      any Interest Period, with respect to LIBOR Loans, the per annum rate of interest
      (rounded upward, if necessary, to the nearest 1/8th of 1%) appearing on Telerate
      Page 3750, or if such page is unavailable, the Reuters Screen LIBO Page (or
      any
      successor page of either, as applicable), as the London interbank offered rate
      for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
      Days prior to the first day of such Interest Period for a term comparable to
      such Interest Period; provided,
      however,
      if the
      Reuters Screen LIBO Page is used and more than one rate is shown on such page,
      the applicable rate shall be the arithmetic mean thereof. If for any reason
      none
      of the foregoing rates is available, the Offshore Base Rate shall be the rate
      per annum determined by Agent as the rate of interest at which Dollar deposits
      in the approximate amount of the applicable LIBOR Loan would be offered to
      major
      banks in the offshore Dollar market at or about 11:00 a.m. (London time) two
      Business Days prior to the first day of such Interest Period for a term
      comparable to such Interest Period. If the Board of Governors shall impose
      a
      Reserve Percentage with respect to LIBOR deposits, then Adjusted LIBOR shall
      equal the amount determined above, divided by 1 minus the Reserve
      Percentage.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Affiliate
      - with
      respect to any Person, another Person (a) who directly, or indirectly through
      one or more intermediaries, controls, is controlled by or is under common
      control with such first Person; (b) who beneficially owns 10% or more of the
      voting securities or any class of Equity Interests of such first Person; (c)
      at
      least 10% of whose voting securities or any class of Equity Interests is
      beneficially owned, directly or indirectly, by such first Person; or (d) who
      is
      an officer, director, partner or managing member of such first Person.
“Control”
means
      the possession, directly or indirectly, of the power to direct or cause
      direction of the management and policies of a Person, whether through ownership
      of Equity Interests, by contract or otherwise.

     

    Agent
      Indemnitees
      - Agent
      and its officers, directors, employees, Affiliates, agents and
      attorneys.

     

    Agent
      Professionals
      -
      attorneys, accountants, appraisers, auditors, business valuation experts,
      environmental engineers or consultants, turnaround consultants, and other
      professionals and experts retained by Agent.

     

    Allocable
      Amount
      - as
      defined in Section
      5.11.3.

     

    Anti-Terrorism
      Laws
      - any
      laws relating to terrorism or money laundering, including the Patriot
      Act.

     

    Applicable
      Law
      - all
      laws, rules, regulations and governmental guidelines applicable to the Person,
      conduct, transaction, agreement or matter in question, including all applicable
      statutory law, common law and equitable principles, and all provisions of
      constitutions, treaties, statutes, rules, regulations, orders and decrees of
      Governmental Authorities.

     

    Applicable
      Margin
      - with
      respect to any Type of Loan, the margin set forth below, as determined by the
      EBITDA (measured on the first day of each Fiscal Quarter, on a trailing 12
      month
      basis) for the immediately preceding Fiscal Quarter:

     

    
      	
              Level

            	 	
              EBITDA

            	 	
              Base
                Rate Revolver Loans

            	 	
              LIBOR
                Revolver Loans

            	 
	
              I

            	 	
               

            	
              
                <
10,000,000

              

            	 	 	
              0.75

            	
              %

            	 	
              3.00

            	
              %

            
	
              II

            	 	
               

            	
              >10,000,000
                and < $12,000,000

            	 	 	
              0.50

            	
              %

            	 	
              2.75

            	
              %

            
	
              III

            	 	
               

            	
              >12,000,000
                and < $15,000,000

            	 	 	
              0.25

            	
              %

            	 	
              2.50

            	
              %

            
	
              IV

            	 	
               

            	
              >15,000,000
                and < $25,000,000

            	 	 	
              0.00

            	
              %

            	 	
              2.25

            	
              %

            
	
              V

            	 	
               

            	
              ≥
                25,000,000

            	 	 	
              0.00

            	
              %

            	 	
              2.00

            	
              %

            
	 	 	 	 	 	 	 	 	 	 	 

    

     

    Until
      October 1, 2006, margins shall be determined as if Level III were applicable.
      Effective October 1, 2006, the margins shall be subject to increase or decrease
      based on the EBITDA (measured on a trailing 12 month basis) as set forth in
      the
      financial statements and corresponding Compliance Certificate for the
      immediately preceding Fiscal Quarter, which change shall be effective on the
      first Business Day of the calendar month that occurs more than 10 days following
      receipt. If, by the first Business Day of a month following any Fiscal Quarter,
      any financial statements and Compliance Certificate due in the preceding month
      have not been received, then the margins shall be determined as if Level I
      were
      applicable, from such day until the first Business Day of the Fiscal Quarter
      following actual receipt.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    To
      the
      extent that at any time of determination the aggregate amount of outstanding
      Obligations exceeds an amount equal to the sum of the Eligible Accounts
      Component and Eligible Inventory Component at such time (as determined by
      Agent), then such excess shall bear interest at a rate per annum equal to the
      rate of interest otherwise applicable as set forth in this definition, plus
      0.25%. 

     

    Approved
      Fund
      - any
      Person (other than a natural person) that is engaged in making, holding or
      investing in extensions of credit in its ordinary course of business and is
      administered or managed by a Lender, an entity that administers or manages
      a
      Lender, or an Affiliate of either.

     

    Asset
      Disposition
      - a
      sale, lease, license, consignment, transfer or other disposition of Property
      of
      an Obligor, including a disposition of Property in connection with a
      sale-leaseback transaction or synthetic lease.

     

    Assignment
      and Acceptance
      - an
      assignment agreement between a Lender and Eligible Assignee, in the form of
      Exhibit
      A.

     

    Availability
      -
      determined as of any date, the amount that Borrowers are entitled to borrow
      as
      Revolver Loans, being the Borrowing Base minus the principal balance of all
      Revolver Loans.

     

    Availability
      Reserve
      - the
      sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges
      Reserve; (c) the LC Reserve; (d) the Bank Product Reserve; (e) the aggregate
      amount of liabilities secured by Liens upon Collateral that are senior to
      Agent’s Liens (but imposition of any such reserve shall not waive an Event of
      Default arising therefrom); (f) the Payable Reserve; and (g) such additional
      reserves, in such amounts and with respect to such matters, as Agent in its
      discretion may elect to impose from time to time.

     

    Bank
      of America
      - Bank
      of America, N.A., a national banking association, and its successors and
      assigns.

     

    Bank
      of America Indemnitees
      - Bank
      of America and its officers, directors, employees, Affiliates, agents and
      attorneys.

     

    Bank
      Product
      - any of
      the following products, services or facilities extended to any Borrower or
      Subsidiary by Bank of America or any of its Affiliates: (a) Cash Management
      Services; (b) products under Hedging Agreements; (c) commercial credit card
      and
      merchant card services; and (d) other banking products or services as may be
      requested by any Borrower or Subsidiary, other than Letters of
      Credit.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Bank
      Product Debt
      - Debt
      and other obligations of an Obligor relating to Bank Products.

     

    Bank
      Product Reserve
      - the
      aggregate amount of reserves established by Agent from time to time in its
      discretion in respect of Bank Product Debt.

     

    Bankruptcy
      Code
      - Title
      11 of the United States Code.

     

    Base
      Rate
      - the
      rate of interest announced by Bank of America from time to time as its prime
      rate. Such rate is a reference rate only and Bank of America may make loans
      or
      other extensions of credit at, above or below it. Any change in the prime rate
      announced by Bank of America shall take effect at the opening of business on
      the
      effective date specified in the public announcement of the change.

     

    Base
      Rate Loan
      - any
      Loan that bears interest based on the Base Rate.

     

    Base
      Rate Revolver Loan
      - a
      Revolver Loan that bears interest based on the Base Rate.

     

    Board
      of Governors
      - the
      Board of Governors of the Federal Reserve System.

     

    Bonded
      Accounts
      -
      Accounts of a Borrower, arising in the ordinary course of business of the
      Borrower with respect to a contract which requires the Borrower to have a bond
      posted on its behalf to secure the Borrower’s performance of such contract.

     

    Borrowed
      Money
      - with
      respect to any Obligor, without duplication, its (a) Debt that (i) arises from
      the lending of money by any Person to such Obligor, (ii) is evidenced by notes,
      drafts, bonds, debentures, credit documents or similar instruments, (iii)
      accrues interest or is a type upon which interest charges are customarily paid
      (excluding trade payables owing in the Ordinary Course of Business), or (iv)
      was
      issued or assumed as full or partial payment for Property; (b) Capital Leases;
      (c) reimbursement obligations with respect to letters of credit; and (d)
      guaranties of any Debt of the foregoing types owing by another
      Person.

     

    Borrower
      Agent
      - as
      defined in the Recitals to this Agreement.

     

    Borrowing
      - a
      group of Loans of one Type that are made on the same day or are converted into
      Loans of one Type on the same day.

     

    Borrowing
      Base
      - on any
      date of determination, an amount equal to the lesser of (a) the aggregate amount
      of Revolver Commitments, minus
      the LC
      Reserve; or (b) the sum of the Accounts Formula Amount, plus
      the
      Inventory Formula Amount, plus,
      the
      Fixed Asset Formula Amount, minus
      the
      Availability Reserve.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Borrowing
      Base Certificate
      - a
      certificate, in form and substance satisfactory to Agent, by which Borrowers
      certify calculation of the Borrowing Base.

     

    Business
      Day
      - any
      day (a) excluding Saturday, Sunday and any other day on which banks are
      permitted to be closed under the laws of the States of North Carolina and
      California; and (b) when used with reference to a LIBOR Loan, also excluding
      any
      day on which banks do not conduct dealings in Dollar deposits on the London
      interbank market.

     

    Capital
      Adequacy Regulation
      - any
      law, rule, regulation, guideline, request or directive of any central bank
      or
      other Governmental Authority, whether or not having the force of law, regarding
      capital adequacy of a bank or any Person controlling a bank.

     

    Capital
      Expenditures
      - all
      liabilities incurred, expenditures made or payments due (whether or not made)
      by
      a Borrower or Subsidiary for the acquisition of any fixed assets, or any
      improvements, replacements, substitutions or additions thereto with a useful
      life of more than one year, including the principal portion of Capital
      Leases.

     

    Capital
      Lease
      - any
      lease that is required to be capitalized for financial reporting purposes in
      accordance with GAAP.

     

    Cash
      Collateral
      - cash,
      and any interest or other income earned thereon, that is delivered to Agent
      to
      Cash Collateralize any Obligations.

     

    Cash
      Collateral Account
      - a
      demand deposit, money market or other account established by Agent at such
      financial institution as Agent may select in its discretion, which account
      shall
      be subject to Agent’s Liens for the benefit of Secured Parties.

     

    Cash
      Collateralize
      - the
      delivery of cash to Agent, as security for the payment of Obligations, in an
      amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC
      Obligations, and (b) with respect to any inchoate or contingent Obligations
      (including Obligations arising under Bank Products), Agent’s good faith estimate
      of the amount due or to become due, including all fees and other amounts
      relating to such Obligations. “Cash
      Collateralization”
has
      a
      correlative meaning.

     

    Cash
      Equivalents
      - (a)
      marketable obligations issued or unconditionally guaranteed by, and backed
      by
      the full faith and credit of, the United States government, maturing within
      12
      months of the date of acquisition; (b) certificates of deposit, time deposits
      and bankers’ acceptances maturing within 12 months of the date of acquisition,
      and overnight bank deposits, in each case which are issued by a commercial
      bank
      organized under the laws of the United States or any state or district thereof,
      rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at the time of
      acquisition, and (unless issued by a Lender) not subject to offset rights;
      (c)
      repurchase obligations with a term of not more than 30 days for underlying
      investments of the types described in clauses (a) and (b) entered into with
      any
      bank meeting the qualifications specified in clause (b); (d) commercial paper
      rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing
      within nine months of the date of acquisition; and (e) shares of any money
      market fund that has substantially all of its assets invested continuously
      in
      the types of investments referred to above, has net assets of at least
      $500,000,000 and has the highest rating obtainable from either Moody’s or
      S&P.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Cash
      Management Services
      - any
      services provided from time to time by Bank of America or any of its Affiliates
      to any Borrower or Subsidiary in connection with operating, collections,
      payroll, trust, or other depository or disbursement accounts, including
      automatic clearinghouse, controlled disbursement, depository, electronic funds
      transfer, information reporting, lockbox, stop payment, overdraft and/or wire
      transfer services.

     

    CERCLA
      - the
      Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
      Sec. 9601 et seq.).

     

    Chattel
      Paper
      - as
      defined in the UCC.

     

    Claims
      - all
      liabilities, obligations, losses, damages, penalties, judgments, proceedings,
      costs and expenses of any kind (including remedial response costs, reasonable
      attorneys’ fees and Extraordinary Expenses) at any time (including after Full
      Payment of the Obligations, resignation or replacement of Agent, or replacement
      of any Lender) incurred by or asserted against any Indemnitee in any way
      relating to (a) any Loan Documents or transactions relating thereto, (b) any
      action taken or omitted to be taken by any Indemnitee in connection with any
      Loan Documents, (c) the existence or perfection of any Liens, or realization
      upon any Collateral, (d) exercise of any rights or remedies under any Loan
      Documents or Applicable Law, or (e) failure by any Obligor to perform or observe
      any terms of any Loan Document, in each case including all costs and expenses
      relating to any investigation, litigation, arbitration or other proceeding
      (including an Insolvency Proceeding or appellate proceedings), whether or not
      the applicable Indemnitee is a party thereto.

     

    Closing
      Date
      - as
      defined in
      Section 6.1.

     

    Collateral
      - all
      Property described in Section
      7.1,
      all
      Property described in any Security Documents as security for any Obligations,
      and all other Property that now or hereafter secures (or is intended to secure)
      any Obligations.

     

    Commercial
      Tort Claim
      - as
      defined in the UCC.

     

    Commitment
      - for
      any Lender, the amount of such Lender’s Revolver Commitment. “Commitments”
means
      the aggregate amount of all Revolver Commitments.

     

    Commitment
      Termination Date
      - the
      earliest to occur of (a) the Revolver Termination Date; (b) the date on which
      Borrowers terminate the Revolver Commitments pursuant to Section
      2.1.4;
      or (c)
      the date on which the Revolver Commitments are terminated pursuant to
Section
      11.2.

     

    Compliance
      Certificate
      - a
      certificate, in form and substance satisfactory to Agent, by which Borrowers
      certify compliance with Sections
      10.2.3
      and
10.3
      and
      calculate the applicable Level for the Applicable Margin.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Contingent
      Obligation
      - any
      obligation of a Person arising from a guaranty, indemnity or other assurance
      of
      payment or performance of any Debt, lease, dividend or other obligation
      (“primary
      obligations”)
      of
      another obligor (“primary
      obligor”)
      in any
      manner, whether directly or indirectly, including any obligation of such Person
      under any (a) guaranty, endorsement, co-making or sale with recourse of an
      obligation of a primary obligor; (b) obligation to make take-or-pay or similar
      payments regardless of nonperformance by any other party to an agreement; and
      (c) arrangement (i) to purchase any primary obligation or security therefor,
      (ii) to supply funds for the purchase or payment of any primary obligation,
      (iii) to maintain or assure working capital, equity capital, net worth or
      solvency of the primary obligor, (iv) to purchase Property or services for
      the
      purpose of assuring the ability of the primary obligor to perform a primary
      obligation, or (v) otherwise to assure or hold harmless the holder of any
      primary obligation against loss in respect thereof. The amount of any Contingent
      Obligation shall be deemed to be the stated or determinable amount of the
      primary obligation (or, if less, the maximum amount for which such Person may
      be
      liable under the instrument evidencing the Contingent Obligation) or, if not
      stated or determinable, the maximum reasonably anticipated liability with
      respect thereto.

     

    CWA
      - the
      Clean Water Act (33 U.S.C. Sec.Sec. 1251 et seq.).

     

    Debt
      - as
      applied to any Person, without duplication, (a) all items that would be included
      as liabilities on a balance sheet in accordance with GAAP, including Capital
      Leases, but excluding trade payables incurred and being paid in the Ordinary
      Course of Business; (b) all Contingent Obligations; (c) all reimbursement
      obligations in connection with letters of credit issued for the account of
      such
      Person; and (d) in the case of a Borrower, the Obligations. The Debt of a Person
      shall include any recourse Debt of any partnership in which such Person is
      a
      general partner or joint venturer.

     

    Default
      - an
      event or condition that, with the lapse of time or giving of notice, would
      constitute an Event of Default.

     

    Default
      Rate
      - for
      any Obligation (including, to the extent permitted by law, interest not paid
      when due), 2% plus the interest rate otherwise applicable thereto.

     

    Deposit
      Account
      - as
      defined in the UCC.

     

    Deposit
      Account Control Agreements
      - the
      Deposit Account control agreements to be executed by each institution
      maintaining a Deposit Account for a Borrower, in favor of Agent, for the benefit
      of Secured Parties, as security for the Obligations.

     

    Dilution
      Percent
      - the
      percent, determined for Borrowers’ most recent Fiscal Quarter, equal to (a) bad
      debt write-downs or write-offs, discounts, returns, promotions, credits, credit
      memos and other dilutive items with respect to Accounts, divided by
      (b)
      gross sales.

     

    Distribution
      - any
      declaration or payment of a distribution, interest or dividend on any Equity
      Interest (other than payment-in-kind); any distribution, advance or repayment
      of
      Debt to a holder of Equity Interests; or any purchase, redemption, or other
      acquisition or retirement for value of any Equity Interest.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Document
      - as
      defined in the UCC.

     

    Dollars
      - lawful
      money of the United States.

     

    Dominion
      Account
      - a
      special account established by Borrowers at Bank of America or another bank
      acceptable to Agent, over which Agent has exclusive control for withdrawal
      purposes.

     

    EBITDA
      -
      determined on a consolidated basis for Borrowers and Subsidiaries, net income,
      calculated before interest expense, provision for income taxes, depreciation
      and
      amortization expense, gains or losses arising from the sale of capital assets,
      gains arising from the write-up of assets, non-cash gains or losses, and any
      extraordinary gains (in each case, to the extent included in determining net
      income).

     

    Eligible
      Account
      - an
      Account owing to a Borrower that arises in the Ordinary Course of Business
      from
      the sale of goods, is
      payable in Dollars and is deemed by Agent, in its discretion, to be an Eligible
      Account. Without limiting the foregoing, no Account shall be an Eligible Account
      if (a) it is a Bonded Account, (b) it is unpaid for more than
      60 days
      after the original due date, or more than 90 days
      after the original invoice date; (c)  50% or more of the Accounts owing by
      the Account Debtor are not Eligible Accounts under the foregoing clause (b);
      (d) when aggregated with other Accounts owing by the Account Debtor, it
      exceeds 15% of
      the
      aggregate Eligible Accounts (or such higher percentage as Agent may establish
      for the Account Debtor from time to time, including, but not limited to Williams
      Scottsman and Resun Leasing with respect to each of which such percentage shall
      be 30%); (e) it does not conform with a covenant or representation herein;
      (f) it is owing by a creditor or supplier, or is otherwise subject to a
      counterclaim, dispute, deduction, discount, recoupment, reserve, defense,
      chargeback, credit or allowance (but ineligibility shall be limited to the
      amount thereof) or a potential offset; (g) an Insolvency Proceeding has
      been commenced by or against the Account Debtor; or the Account Debtor has
      failed, has suspended or ceased doing business, is liquidating, dissolving
      or
      winding up its affairs, or is not Solvent; (h) the Account Debtor is
      organized or has its principal offices or assets outside the United States
      or
      Canada; (i) it is owing by a Government Authority, unless (1) otherwise
      approved by Agent (as of the Closing Date, for the purposes of this subsection
      (i) Agent has approved Accounts owing by any Governmental Authority which is
      a
      school district in the States of Florida or California), or (2) the Account
      Debtor is the United States or any department, agency or instrumentality thereof
      and the Account has been assigned to Agent in compliance with the Assignment
      of
      Claims Act; (j) it is not subject to a duly perfected, first priority Lien
      in favor of Agent, or is subject to any other Lien other than the Lien arising
      under the Existing Subordinated Debt Documents; (k) except as set forth in
      subsection (n) below, the goods giving rise to it have not been delivered to
      and
      accepted by the Account Debtor, the services giving rise to it have not been
      accepted by the Account Debtor, or it otherwise does not represent a final
      sale;
      (l) it is evidenced by Chattel Paper or an Instrument of any kind, or has
      been reduced to judgment; (m) its payment has been extended, the Account
      Debtor has made a partial payment, or it arises from a sale on a
      cash-on-delivery basis; (n) it arises from a sale to an Affiliate, or from
      a sale on a bill-and-hold (except for those sales on a bill-and-hold basis
      for
      which the applicable invoices indicate that title to sold goods shall pass
      from
      Borrower to its customer once production of the goods is completed and they
      become available to be accepted by or delivered to the customer), guaranteed
      sale, sale-or-return, sale-on-approval, consignment, or other repurchase or
      return basis; (o) it represents a progress billing or retainage;
      (p) it includes a billing for interest, fees or late charges, but
      ineligibility shall be limited to the extent thereof; or (q) it arises from
      a retail sale to a Person who is purchasing for personal, family or household
      purposes. In calculating delinquent portions of Accounts under clauses (a)
      and
      (b), credit balances more than 90 days old will be excluded.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Eligible
      Accounts Component
      - as of
      any date of determination, the amount of the Borrowing Base attributable to
      Eligible Accounts, after taking into account any Availability Reserves
      applicable thereto, as each of the foregoing is determined by
      Agent.

     

    Eligible
      Assignee
      - a
      Person that is (a) a Lender, U.S.-based Affiliate of a Lender or Approved
      Fund; (b) any other financial institution approved by Agent and Borrower
      Agent (which approval by Borrower Agent shall not be unreasonably withheld
      or
      delayed, and shall be deemed given if no objection is made within two Business
      Days after notice of the proposed assignment), that is organized under the
      laws
      of the United States or any state or district thereof, has total assets in
      excess of $5 billion, extends asset-based lending facilities in its ordinary
      course of business and whose becoming an assignee would not constitute a
      prohibited transaction under Section 4975 of ERISA or any other Applicable
      Law;
      and (c) during any Event of Default, any Person acceptable to Agent in its
      discretion.

     

    Eligible
      Equipment
      -
      Equipment owned by a Borrower that Agent, in its discretion, deems to be
      Eligible Equipment.

     

    Eligible
      Inventory
      -
      Inventory owned by a Borrower that Agent, in its discretion, deems to be
      Eligible Inventory. Without limiting the foregoing, no Inventory shall be
      Eligible Inventory unless it (a) is raw materials, and not finished goods,
      work-in-process, packaging or shipping materials, labels, samples, display
      items, bags, or replacement parts; (b) is not held on consignment; (c) is in
      new
      and saleable condition and is not damaged, defective, shopworn or otherwise
      unfit for sale; (d) is not slow-moving, obsolete or unmerchantable, and does
      not
      constitute returned or repossessed goods; (e) meets all standards imposed by
      any
      Governmental Authority, and does not constitute hazardous materials under any
      Environmental Law; (f) conforms with the covenants and representations herein;
      (g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien
      other than the Lien arising under the Existing Subordinated Debt Documents;
      (h)
      is within the continental United States or Canada, is not in transit except
      between locations of Borrowers, and is not consigned to any Person; (i) is
      not
      subject to any warehouse receipt or negotiable Document; (j) is not subject
      to
      any License or other arrangement that restricts such Borrower’s or Agent’s right
      to dispose of such Inventory, unless Agent has received an appropriate Lien
      Waiver; and (k) is not located on leased premises or in the possession of a
      warehouseman, processor, repairman, mechanic, shipper, freight forwarder or
      other Person, unless the lessor or such Person has delivered a Lien Waiver
      or an
      appropriate Rent and Charges Reserve has been established; and (l) is reflected
      in the details of a current perpetual inventory report once Borrowers have
      established a perpetual inventory reporting system satisfactory to
      Agent.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Eligible
      Inventory Component
      - as of
      any date of determination, the amount of the Borrowing Base attributable to
      Eligible Inventory, after taking into account any Availability Reserves
      applicable thereto, as each of the foregoing is determined by
      Agent.

     

    Enforcement
      Action
      - any
      action to enforce any Obligations or Loan Documents or to realize upon any
      Collateral (whether by judicial action, self-help, notification of Account
      Debtors, exercise of setoff or recoupment, or otherwise).

     

    Environmental
      Agreement
      - each
      agreement of Borrowers with respect to any Real Estate subject to a Mortgage,
      pursuant to which Borrowers agree to indemnify and hold harmless Agent and
      Lenders from liability under any Environmental Laws.

     

    Environmental
      Laws
      - all
      Applicable Laws (including all programs, permits and guidance promulgated by
      regulatory agencies), relating to public health (but excluding occupational
      safety and health, to the extent regulated by OSHA) or the protection or
      pollution of the environment, including CERCLA, RCRA and CWA.

     

    Environmental
      Notice
      - a
      notice (whether written or oral) from any Governmental Authority or other Person
      of any possible noncompliance with, investigation of a possible violation of,
      litigation relating to, or potential fine or liability under any Environmental
      Law, or with respect to any Environmental Release, environmental pollution
      or
      hazardous materials, including any complaint, summons, citation, order, claim,
      demand or request for correction, remediation or otherwise.

     

    Environmental
      Release
      - a
      release as defined in CERCLA or under any other Environmental Law.

     

    Equipment
      - as
      defined in the UCC, including all machinery, apparatus, equipment, fittings,
      furniture, fixtures, motor vehicles and other tangible personal Property (other
      than Inventory), and all parts, accessories and special tools therefor, and
      accessions thereto.

     

    Equity
      Interest
      - the
      interest of any (a) shareholder in a corporation, (b) partner in a partnership
      (whether general, limited, limited liability or joint venture), (c) member
      in a
      limited liability company, or (d) other Person having any other form of equity
      security or ownership interest.

     

    ERISA
      - the
      Employee Retirement Income Security Act of 1974.

     

    Event
      of Default
      - as
      defined in
      Section 11.

     

    Excluded
      Tax
      - Tax on
      the overall net income or gross receipts of a Lender imposed by the jurisdiction
      in which such Lender’s principal executive office is located.

     

    Existing
      Subordinated Credit Agreement
      - that
      certain Securities Purchase Agreement dated as of December 31, 2004 providing
      for the issuance of convertible senior subordinated notes by Borrower Agent
      (as
      amended, supplemented, modified, extended, renewed, replaced or refinanced
      from
      time to time).

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Existing
      Subordinated Debt
      - the
      Debt incurred by Borrower Agent pursuant to the Existing Subordinated Debt
      Documents.

     

    Existing
      Subordinated Debt Collateral Agent
      -
      Amphora Limited, an exempt company organized under the laws of the Cayman
      Islands.

     

    Existing
      Subordinated Debt Documents
      - the
      Existing Subordinated Credit Agreement, the Subordinated Convertible Notes
      and
      the Transaction Documents (as defined in the Existing Subordinated Debt Credit
      Agreement) and each of the other agreements, documents and instruments providing
      for or evidencing or related to the Existing Subordinated Debt Obligations,
      and
      any other agreement, writing, document or instrument executed or delivered
      at
      any time in connection with the Existing Subordinated Debt Obligations,
      including any intercreditor or joinder agreement among the holders of the
      Existing Subordinated Debt Obligations, as each may be amended, restated,
      supplemented, modified, renewed, extended or refinanced from time to
      time.

     

    Existing
      Subordinated Debt Lenders
      - the
“Lenders” as defined in the Existing Subordinated Debt Credit Agreement, and any
      successors and assigns. 

     

    Existing
      Subordinated Debt Letter of Credit
      - the
      irrevocable standby letter of credit no.SLCLSTL01562, dated December 31, 2004,
      issued by U.S. Bank National Association for the Borrower Agent’s account for
      the benefit of Existing Subordinated Debt Collateral Agent, in the maximum
      amount of $10,000,000 to secure certain of the Existing Subordinated Debt
      Obligations.

     

    Existing
      Subordinated Debt Notes
      - the
      Senior Subordinated Secured Convertible Notes, dated as of December 31, 2004,
      issued by the Borrower Agent in favor of the Existing Subordinated Debt Lenders,
      in the original aggregate principal amount of $25,000,000, as amended, restated,
      supplemented, modified, renewed, extended or refinanced from time to time in
      accordance with the terms of the Intercreditor Agreement.

     

    Existing
      Subordinated Debt Obligations
      - all
      obligations of Borrower Agent, whether outstanding or contingent, evidenced
      by
      or arising under: (i) the Existing Subordinated Credit Agreement and/or (ii)
      any
      of the other Existing Subordinated Debt Documents. 

     

    Extraordinary
      Expenses
      - all
      costs, expenses or advances that Agent may incur during a Default or Event
      of
      Default, or during the pendency of an Insolvency Proceeding of an Obligor,
      including those relating to (a) any audit, inspection, repossession, storage,
      repair, appraisal, insurance, manufacture, preparation or advertising for sale,
      sale, collection, or other preservation of or realization upon any Collateral;
      (b) any action, arbitration or other proceeding (whether instituted by or
      against Agent, any Lender, any Obligor, any representative of creditors of
      an
      Obligor or any other Person) in any way relating to any Collateral (including
      the validity, perfection, priority or avoidability of Agent’s Liens with respect
      to any Collateral), Loan Documents or Obligations, including any lender
      liability or other Claims; (c) the exercise, protection or enforcement of any
      rights or remedies of Agent in, or the monitoring of, any Insolvency Proceeding;
      (d) settlement or satisfaction of any taxes, charges or Liens with respect
      to
      any Collateral; (e) any Enforcement Action; (f) negotiation and documentation
      of
      any modification, waiver, workout, restructuring or forbearance with respect
      to
      any Loan Documents or Obligations; or (g) Protective Advances. Such costs,
      expenses and advances include transfer fees, taxes, storage fees, insurance
      costs, permit fees, utility reservation and standby fees, legal fees, appraisal
      fees, brokers’ fees and commissions, auctioneers’ fees and commissions,
      accountants’ fees, environmental study fees, wages and salaries paid to
      employees of any Obligor or independent contractors in liquidating any
      Collateral, and travel expenses.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Fiscal
      Quarter
      - each
      period of three months, commencing on the first day of a Fiscal
      Year.

     

    Fiscal
      Year
      - the
      fiscal year of Borrowers and Subsidiaries for accounting and tax purposes,
      ending on December 31 of each year.

     

    Fixed
      Asset Formula Amount
      - the
      lesser of (a) the Fixed Asset Sublimit, or (b) the sum of (i) 
70% of the fair market value of the Mortgaged Property, as determined by an
      appraisal satisfactory to Agent, and (ii) 80% of the orderly liquidation
      value of Eligible Equipment, as determined by an appraisal satisfactory to
      Agent.

     

    Fixed
      Asset Sublimit
      - an
      amount equal to $3,700,000, which amount shall be reduced quarterly in the
      amount of $108,340 with the first such reduction occurring on July 1, 2006
      and
      subsequent reductions continuing on the first day of each quarter
      thereafter.

     

    Fixed
      Charge Coverage Ratio
      - the
      ratio, determined on a consolidated basis for Borrowers and Subsidiaries, for
      any measurement period, of (a) EBITDA to (b) Fixed
      Charges.

     

    Fixed
      Charges
      - the
      sum of interest expense (other than payment-in-kind), principal payments made
      on
      Borrowed Money, cash payments made with respect to a reduction of the Fixed
      Asset Sublimit (determined on a monthly basis), unfinanced Capital Expenditures
      and cash taxes paid.

     

    FLSA
      - the
      Fair Labor Standards Act of 1938.

     

    Foreign
      Lender
      - any
      Lender that is organized under the laws of a jurisdiction other than the laws
      of
      the United States, or any state or district thereof.

     

    Foreign
      Plan
      - any
      employee benefit plan or arrangement maintained or contributed to by any Obligor
      or Subsidiary that is not subject to the laws of the United States, or any
      employee benefit plan or arrangement mandated by a government other than the
      United States for employees of any Obligor or Subsidiary.

     

    Foreign
      Subsidiary
      - a
      Subsidiary that is a “controlled foreign corporation” under Section 957 of the
      Internal Revenue Code, such that a guaranty by such Subsidiary of the
      Obligations or a Lien on the assets of such Subsidiary to secure the Obligations
      would result in material tax liability to Borrowers.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Full
      Payment
      - with
      respect to any Obligations, (a) the full and indefeasible cash payment thereof,
      including any interest, fees and other charges accruing during an Insolvency
      Proceeding (whether or not allowed in the proceeding); (b) if such Obligations
      are LC Obligations or inchoate or contingent in nature, Cash Collateralization
      thereof (or delivery of a standby letter of credit acceptable to Agent in its
      discretion, in the amount of required Cash Collateral); and (c) a release of
      any
      Claims of Obligors against Agent, Lenders and Issuing Bank arising on or before
      the payment date. No Loans shall be deemed to have been paid in full until
      all
      Commitments related to such Loans have expired or been terminated.

     

    GAAP
      -
      generally accepted accounting principles in the United States in effect from
      time to time.

     

    General
      Intangibles
      - as
      defined in the UCC, including choses in action, causes of action, company or
      other business records, inventions, blueprints, designs, patents, patent
      applications, trademarks, trademark applications, trade names, trade secrets,
      service marks, goodwill, brand names, copyrights, registrations, licenses,
      franchises, customer lists, permits, tax refund claims, computer programs,
      operational manuals, internet addresses and domain names, insurance refunds
      and
      premium rebates, all rights to indemnification, and all other intangible
      Property of any kind.

     

    Goods
      - as
      defined in the UCC.

     

    Governmental
      Approvals
      - all
      authorizations, consents, approvals, licenses and exemptions of, registrations
      and filings with, and required reports to, all Governmental
      Authorities.

     

    Governmental
      Authority
      - any
      federal, state, municipal, foreign or other governmental department, agency,
      commission, board, bureau, court, tribunal, instrumentality, political
      subdivision, or other entity or officer exercising executive, legislative,
      judicial, regulatory or administrative functions for or pertaining to any
      government or court, in each case whether associated with the United States,
      a
      state, district or territory thereof, or a foreign entity or
      government.

     

    Guarantor
      Payment
      - as
      defined in Section
      5.11.3.

     

    Guarantors
      - each
      Person who guarantees payment or performance of any Obligations. There are
      no
      Guarantors as of the Closing Date. 

     

    Guaranty
      - each
      guaranty agreement executed by a Guarantor in favor of Agent.

     

    Hedging
      Agreement
      - an
      agreement relating to any swap, cap, floor, collar, option, forward, cross
      right
      or obligation, or combination thereof or similar transaction, with respect
      to
      interest rate, foreign exchange, currency, commodity, credit or equity
      risk.

     

    Indemnitees
      - Agent
      Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Bank of America
      Indemnitees.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Insolvency
      Proceeding
      - any
      case or proceeding commenced by or against a Person under any state, federal
      or
      foreign law for, or any agreement of such Person to, (a) the entry of an order
      for relief under the Bankruptcy Code, or any other insolvency, debtor relief
      or
      debt adjustment law; (b) the appointment of a receiver, trustee, liquidator,
      administrator, conservator or other custodian for such Person or any part of
      its
      Property; or (c) an assignment or trust mortgage for the benefit of
      creditors.

     

    Instrument
      - as
      defined in the UCC.

     

    Insurance
      Assignment
      - each
      collateral assignment of insurance pursuant to which an Obligor assigns to
      Agent, for the benefit of Secured Parties, such Obligor’s rights under business
      interruption or other insurance policies as Agent deems appropriate, as security
      for the Obligations.

     

    Intellectual
      Property
      - all
      intellectual and similar Property of a Person, including inventions, designs,
      patents, patent applications, copyrights, trademarks, service marks, trade
      names, trade secrets, confidential or proprietary information, customer lists,
      know-how, software and databases; all embodiments or fixations thereof and
      all
      related documentation, registrations and franchises; all books and records
      describing or used in connection with the foregoing; and all licenses or other
      rights to use any of the foregoing.

     

    Intellectual
      Property Claim
      - any
      claim or assertion (whether in writing, by suit or otherwise) that a Borrower’s
      or Subsidiary’s ownership, use, marketing, sale or distribution of any
      Inventory, Equipment, Intellectual Property or other Property violates another
      Person’s Intellectual Property.

     

    Intercreditor
      Agreement
      - the
      Intercreditor Agreement of even date herewith, in form and substance
      satisfactory to Agent, between the Existing Subordinated Debt Collateral Agent
      and Agent, relating to the Existing Subordinated Debt, as may be amended,
      modified, supplemented or restated from time to time.

     

    Interest
      Period
      - as
      defined in Section
      3.1.3.

     

    Interest
      Rate Contract
      - any
      interest rate swap, collar or cap agreement, or other agreement or arrangement
      by any Borrower or Subsidiary with Bank of America that is designed to protect
      against fluctuations in interest rates.

     

    Inventory
      - as
      defined in the UCC, including all goods intended for sale, lease, display or
      demonstration; all work in process; and all raw materials, and other materials
      and supplies of any kind that are or could be used in connection with the
      manufacture, printing, packing, shipping, advertising, sale, lease or furnishing
      of such goods, or otherwise used or consumed in a Borrower’s business (but
      excluding Equipment).

     

    Inventory
      Formula Amount
      - the
      lesser of (a) $10,000,000; or (b) 60% of the Value of Eligible
      Inventory.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Inventory
      Reserve
      -
      reserves established by Agent to reflect factors that may negatively impact
      the
      Value of Inventory, including change in salability, obsolescence, seasonality,
      theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor
      chargebacks.

     

    Investment
      - any
      acquisition of all or substantially all assets of a Person; any acquisition
      of
      record or beneficial ownership of any Equity Interests of a Person; or any
      advance or capital contribution to or other investment in a Person.

     

    Investment
      Property
      - as
      defined in the UCC.

     

    Issuing
      Bank
      - Bank
      of America or an Affiliate of Bank of America.

     

    Issuing
      Bank Indemnitees
      -
      Issuing Bank and its officers, directors, employees, Affiliates, agents and
      attorneys.

     

    LC
      Application
      - an
      application by Borrower Agent to Issuing Bank for issuance of a Letter of
      Credit, in form and substance satisfactory to Issuing Bank.

     

    LC
      Conditions
      - the
      following conditions necessary for issuance of a Letter of Credit: (a) each
      of
      the conditions set forth in Section
      6;
      (b)
      after giving effect to such issuance, total LC Obligations do not exceed the
      Letter of Credit Subline, no Overadvance exists and, if no Revolver Loans are
      outstanding, the LC Obligations do not exceed the Borrowing Base (without giving
      effect to the LC Reserve for purposes of this calculation); (c) the expiration
      date of such Letter of Credit is (i) no more than 365 days from issuance, in
      the
      case of standby Letters of Credit, (ii) no more than 120 days from issuance,
      in
      the case of documentary Letters of Credit, and (iii) at least 20 Business Days
      prior to the Revolver Termination Date; (d) the Letter of Credit and payments
      thereunder are denominated in Dollars; and (e) the form of the proposed Letter
      of Credit is satisfactory to Agent and Issuing Bank in their
      discretion.

     

    LC
      Documents
      - all
      documents, instruments and agreements (including LC Requests and LC
      Applications) delivered by Borrowers or any other Person to Issuing Bank or
      Agent in connection with issuance, amendment or renewal of, or payment under,
      any Letter of Credit.

     

    LC
      Obligations
      - the
      sum (without duplication) of (a) all amounts owing by Borrowers for any drawings
      under Letters of Credit; (b) the aggregate undrawn amount of all outstanding
      Letters of Credit; and (c) all fees and other amounts owing with respect to
      Letters of Credit.

     

    LC
      Request
      - a
      request for issuance of a Letter of Credit, to be provided by Borrower Agent
      to
      Issuing Bank, in form satisfactory to Agent and Issuing Bank.

     

    LC
      Reserve
      - the
      aggregate of all LC Obligations, other than (a) those that have been Cash
      Collateralized, and (b) if no Default or Event of Default exists, those
      constituting charges owing to the Issuing Bank.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Lender
      Indemnitees
      -
      Lenders and their officers, directors, employees, Affiliates, agents and
      attorneys.

     

    Lenders
      - as
      defined in the preamble to this Agreement, including Agent in its capacity
      as a
      provider of Swingline Loans and any other Person who hereafter becomes a
“Lender” pursuant to an Assignment and Acceptance.

     

    Letter
      of Credit
      - any
      standby or documentary letter of credit issued by Issuing Bank for the account
      of a Borrower, or any indemnity, guarantee, exposure transmittal memorandum
      or
      similar form of credit support issued by Agent or Issuing Bank for the benefit
      of a Borrower.

     

    Letter-of-Credit
      Right
      - as
      defined in the UCC.

     

    Letter
      of Credit Subline
      -
      $12,000,000.

     

    LIBOR
      Loan
      - each
      set of LIBOR Revolver Loans having a common length and commencement of Interest
      Period.

     

    LIBOR
      Revolver Loan
      - a
      Revolver Loan that bears interest based on Adjusted LIBOR.

     

    License
      - any
      license or agreement under which an Obligor is authorized to use Intellectual
      Property in connection with any manufacture, marketing, distribution or
      disposition of Collateral, any use of Property or any other conduct of its
      business.

     

    Licensor
      - any
      Person from whom an Obligor obtains the right to use any Intellectual
      Property.

     

    Lien
      - any
      Person’s interest in Property securing an obligation owed to, or a claim by,
      such Person, whether such interest is based on common law, statute or contract,
      including liens, security interests, pledges, hypothecations, statutory trusts,
      reservations, exceptions, encroachments, easements, rights-of-way, covenants,
      conditions, restrictions, leases, and other title exceptions and encumbrances
      affecting Property.

     

    Lien
      Waiver
      - an
      agreement, in form and substance satisfactory to Agent, by which (a) for any
      material Collateral located on leased premises, the lessor waives or
      subordinates any Lien it may have on the Collateral, and agrees to permit Agent
      to enter upon the premises and remove the Collateral or to use the premises
      to
      store or dispose of the Collateral; (b) for any Collateral held by a
      warehouseman, processor, shipper or freight forwarder, such Person waives or
      subordinates any Lien it may have on the Collateral, agrees to hold any
      Documents in its possession relating to the Collateral as agent for Agent,
      and
      agrees to deliver the Collateral to Agent upon request; (c) for any Collateral
      held by a repairman, mechanic or bailee, such Person acknowledges Agent’s Lien,
      waives or subordinates any Lien it may have on the Collateral, and agrees to
      deliver the Collateral to Agent upon request; and (d) for any Collateral subject
      to a Licensor’s Intellectual Property rights, the Licensor grants to Agent the
      right, vis-à-vis such Licensor, to enforce Agent’s Liens with respect to the
      Collateral, including the right to dispose of it with the benefit of the
      Intellectual Property, whether or not a default exists under any applicable
      License.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    Loan
      - a
      Revolver Loan.

     

    Loan
      Account
      - the
      loan account established by each Lender on its books pursuant to Section
      5.8.

     

    Loan
      Documents
      - this
      Agreement, Other Agreements and Security Documents.

     

    Loan
      Year
      - each
      calendar year commencing on the Closing Date and on each anniversary of the
      Closing Date.

     

    Margin
      Stock
      - as
      defined in Regulation U of the Board of Governors.

     

    Material
      Adverse Effect
      - the
      effect of any event or circumstance that, taken alone or in conjunction with
      other events or circumstances, (a) has or could be reasonably expected to
      have a material adverse effect on the business, operations, Properties,
      prospects or condition (financial or otherwise) of any Obligor, on the value
      of
      any material Collateral, on the enforceability of any Loan Documents, or on
      the
      validity or priority of Agent’s Liens on any Collateral; (b) materially
      impairs the ability of any Obligor to perform any obligations under the Loan
      Documents, including repayment of any Obligations; or (c) otherwise impairs
      the ability of Agent or any Lender to enforce or collect any Obligations or
      to
      realize upon any Collateral.

     

    Material
      Contract
      - any
      agreement or arrangement to which a Borrower or Subsidiary is party (other
      than
      the Loan Documents) (a) that is deemed to be a material contract under any
      securities law applicable to such Obligor, including the Securities Act of
      1933,
      (b) for which breach, termination, nonperformance or failure to renew could
      reasonably be expected to have a Material Adverse Effect, (c) the Existing
      Subordinated Debt Documents, or (d) that relates to Debt in an aggregate
      amount of $750,000 or more.

     

    Moody’s
      -
      Moody’s Investors Service, Inc., and its successors.

     

    Mortgage
      - each
      mortgage, deed of trust or deed to secure debt pursuant to which a Borrower
      grants to Agent, for the benefit of Secured Parties, Liens upon the Real Estate
      owned by such Borrower, as security for the Obligations.

     

    Mortgaged
      Property
      - the
      Real Estate located in Hillsborough County, Florida and subject to a
      Mortgage.

     

    Multiemployer
      Plan
      - any
      employee benefit plan or arrangement described in Section 4001(a)(3) of ERISA
      that is maintained or contributed to by any Obligor or Subsidiary.

     

    Net
      Proceeds
      - with
      respect to an Asset Disposition, proceeds (including, when received, any
      deferred or escrowed payments) received by a Borrower or Subsidiary in cash
      from
      such disposition, net of (a) reasonable and customary costs and expenses
      actually incurred in connection therewith, including legal fees and sales
      commissions; (b) amounts applied to repayment of Debt secured by a Permitted
      Lien senior to Agent’s Liens on Collateral sold; (c) transfer or similar taxes;
      and (d) reserves for indemnities, until such reserves are no longer
      needed.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    Notes
      - each
      Revolver Note, or other promissory note executed by a Borrower to evidence
      any
      Obligations.

     

    Note
      Transaction
      - the
      transactions contemplated and consummated pursuant to the Existing Subordinated
      Debt Documents.

     

    Notice
      of Borrowing
      - a
      Notice of Borrowing to be provided by Borrower Agent to request the funding
      of a
      Borrowing of Revolver Loans, in form satisfactory to Agent.

     

    Notice
      of Conversion/Continuation
      - a
      Notice of Conversion/Continuation to be provided by Borrower Agent to request
      a
      conversion or continuation of any Loans as LIBOR Loans, in form satisfactory
      to
      Agent.

     

    Obligations
      - all
      (a) principal of and premium, if any, on the Loans, (b) LC Obligations and
      other
      obligations of Obligors with respect to Letters of Credit, (c) interest,
      expenses, fees and other sums payable by Obligors under Loan Documents, (d)
      obligations of Obligors under any indemnity for Claims, (e) Extraordinary
      Expenses, (f) Bank Product Debt, and (g) other Debts, obligations and
      liabilities of any kind owing by Obligors pursuant to the Loan Documents,
      whether now existing or hereafter arising, whether evidenced by a note or other
      writing, whether allowed in any Insolvency Proceeding, whether arising from
      an
      extension of credit, issuance of a letter of credit, acceptance, loan, guaranty,
      indemnification or otherwise, and whether direct or indirect, absolute or
      contingent, due or to become due, primary or secondary, or joint or
      several.

     

    Obligor
      - each
      Borrower, Guarantor, or other Person that is liable for payment of any
      Obligations or that has granted a Lien in favor of Agent on its assets to secure
      any Obligations.

     

    Ordinary
      Course of Business
      - the
      ordinary course of business of any Borrower or Subsidiary, consistent with
      past
      practices and undertaken in good faith.

     

    Organic
      Documents
      - with
      respect to any Person, its charter, certificate or articles of incorporation,
      bylaws, articles of organization, limited liability agreement, operating
      agreement, members agreement, shareholders agreement, partnership agreement,
      certificate of partnership, certificate of formation, voting trust agreement,
      or
      similar agreement or instrument governing the formation or operation of such
      Person.

     

    OSHA
      - the
      Occupational Safety and Hazard Act of 1970.

     

    Other
      Agreement
      - each
      Note; LC Document; Lien Waiver; Intercreditor Agreement; Real Estate Related
      Document Borrowing Base Certificate, Compliance Certificate, financial statement
      or report delivered hereunder; or other document, instrument or agreement (other
      than this Agreement or a Security Document) now or hereafter delivered by an
      Obligor or other Person to Agent or a Lender in connection with any transactions
      relating hereto.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Overadvance
      - as
      defined in Section
      2.1.5.

     

    Overadvance
      Loan
      - a Base
      Rate Revolver Loan made when an Overadvance exists or is caused by the funding
      thereof.

     

    Participant
      - as
      defined in Section
      13.2.

     

    Patriot
      Act
      - the
      Uniting and Strengthening America by Providing Appropriate Tools Required to
      Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat.
      272
      (2001).

     

    Payable
      Reserve
      - a
      reserve equal to aggregate amount of Borrowers’ accounts payable which at any
      time remain unpaid more than 90 days past the invoice date thereof (but not
      including retention hold-backs for subcontractors which coincide with the
      accounts receivable retention that customers of the Borrowers impose on the
      Borrowers). 

     

    Payment
      Intangible
      - as
      defined in the UCC.

     

    Payment
      Item
      - each
      check, draft or other item of payment payable to a Borrower, including those
      constituting proceeds of any Collateral.

     

    Permitted
      Asset Disposition
      - as
      long as no Default or Event of Default exists and all Net Proceeds are remitted
      to Agent, an Asset Disposition that is (a) a sale of Inventory in the
      Ordinary Course of Business; (b) a disposition of Equipment that, in the
      aggregate during any 12 month period, has a fair market or book value (whichever
      is more) of $250,000 or less; (c) a disposition of Inventory that is
      obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of
      Business; (d) termination of a lease of real or personal Property that is
      not necessary for the Ordinary Course of Business, could not reasonably be
      expected to have a Material Adverse Effect and does not result from an Obligor’s
      default; or (e) approved in writing by Agent and Required
      Lenders.

     

    Permitted
      Contingent Obligations
      -
      Contingent Obligations (a) arising from endorsements of Payment Items for
      collection or deposit in the Ordinary Course of Business; (b) arising from
      Hedging Agreements permitted hereunder; (c) existing on the Closing Date,
      and any extension or renewal thereof that does not increase the amount of such
      Contingent Obligation when extended or renewed; (d) incurred in the
      Ordinary Course of Business with respect to surety, appeal or performance bonds,
      or other similar obligations; (e) arising from customary indemnification
      obligations in favor of purchasers in connection with dispositions of Equipment
      permitted hereunder; (f) arising under the Loan Documents; or (g) in
      an aggregate amount of $250,000 or less at any time.

     

    Permitted
      Lien
      - as
      defined in Section
      10.2.2.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    Permitted
      Purchase Money Debt
      -
      Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured
      only by a Purchase Money Lien, as long as the aggregate amount does not exceed
      $250,000 at any time and its incurrence does not violate Section
      10.2.3.

     

    Person
      - any
      individual, corporation, limited liability company, partnership, joint venture,
      joint stock company, land trust, business trust, unincorporated organization,
      Governmental Authority or other entity.

     

    Plan
      - an
      employee pension benefit plan that is covered by Title IV of ERISA or subject
      to
      the minimum funding standards under Section 412 of the Internal Revenue Code
      and
      that is either (a) maintained by a Borrower or Subsidiary for employees or
      (b) maintained pursuant to a collective bargaining agreement, or other
      arrangement under which more than one employer makes contributions and to which
      a Borrower or Subsidiary is making or accruing an obligation to make
      contributions or has within the preceding five years made or accrued such
      contributions.

     

    Pro
      Rata
      - with
      respect to any Lender, a percentage (expressed as a decimal, rounded to the
      ninth decimal place) determined (a) while Revolver Commitments are
      outstanding, by dividing the amount of such Lender’s Revolver Commitment by the
      aggregate amount of all Revolver Commitments; and (b) at any other time, by
      dividing the amount of such Lender’s Loans and LC Obligations by the aggregate
      amount of all outstanding Loans and LC Obligations.

     

    Properly
      Contested
      - with
      respect to any obligation of an Obligor, (a) the obligation is subject to a
      bona
      fide dispute regarding amount or the Obligor’s liability to pay; (b) the
      obligation is being properly contested in good faith by appropriate proceedings
      promptly instituted and diligently pursued; (c) appropriate reserves have been
      established in accordance with GAAP; (d) non-payment could not have a Material
      Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor;
      (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to
      the
      satisfaction of Agent; and (f) if the obligation results from entry of a
      judgment or other order, such judgment or order is stayed pending appeal or
      other judicial review.

     

    Property
      - any
      interest in any kind of property or asset, whether real, personal or mixed,
      or
      tangible or intangible.

     

    Protective
      Advances
      - as
      defined in Section
      2.1.6.

     

    Purchase
      Money Debt
      - (a)
      Debt (other than the Obligations) for payment of any of the purchase price
      of
      fixed assets; (b) Debt (other than the Obligations) incurred within 10 days
      before or after acquisition of any fixed assets, for the purpose of financing
      any of the purchase price thereof; and (c) any renewals, extensions or
      refinancings (but not increases) thereof.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    Purchase
      Money Lien
      - a Lien
      that secures Purchase Money Debt, encumbering only the fixed assets acquired
      with such Debt and constituting a Capital Lease or a purchase money security
      interest under the UCC.

     

    RCRA
      - the
      Resource Conservation and Recovery Act (42 U.S.C. Sec.Sec.
      6991-6991i).

     

    Real
      Estate
      - all
      right, title and interest (whether as owner, lessor or lessee) in any real
      Property or any buildings, structures, parking areas or other improvements
      thereon.

     

    Refinancing
      Conditions
      - the
      following conditions for Refinancing Debt: (a) it is in an aggregate principal
      amount that does not exceed the principal amount of the Debt being extended,
      renewed or refinanced; (b) it has a final maturity no sooner than, a weighted
      average life no less than, and an interest rate no greater than, the Debt being
      extended, renewed or refinanced; (c) it is subordinated to the Obligations
      at
      least to the same extent as the Debt being extended, renewed or refinanced;
      (d)
      the representations, covenants and defaults applicable to it are no less
      favorable to Borrowers than those applicable to the Debt being extended, renewed
      or refinanced; (e) no additional Lien is granted to secure it; (f) no additional
      Person is obligated on such Debt; and (g) upon giving effect to it, no Default
      or Event of Default exists.

     

    Refinancing
      Debt
      -
      Borrowed Money that is the result of an extension, renewal or refinancing of
      Debt permitted under Section
      10.2.1(b),
      (d)
      or
(f).

     

    Reimbursement
      Date
      - as
      defined in Section
      2.3.2.

     

    Related
      Real Estate Documents
      - with
      respect to any Real Estate subject to a Mortgage, the following, in form and
      substance satisfactory to Agent and received by Agent for review at least 15
      days prior to the effective date of the Mortgage: (a) a mortgagee title policy
      (or binder therefor) covering Agent’s interest under the Mortgage, in a form and
      amount and by an insurer acceptable to Agent, which must be fully paid on such
      effective date; (b) such assignments of leases, estoppel letters, attornment
      agreements, consents, waivers and releases as Agent may require with respect
      to
      other Persons having an interest in the Real Estate; (c) a current, as-built
      survey of the Real Estate, containing a metes-and-bounds property description
      and flood plain certification, and certified by a licensed surveyor acceptable
      to Agent; (d) flood insurance in an amount, with endorsements and by an insurer
      acceptable to Agent, if the Real Estate is within a flood plain; (e) a current
      appraisal of the Real Estate, prepared by an appraiser acceptable to Agent,
      and
      in form and substance satisfactory to Required Lenders; (f) an environmental
      assessment, prepared by environmental engineers acceptable to Agent, and
      accompanied by such reports, certificates, studies or data as Agent may
      reasonably require, which shall all be in form and substance satisfactory to
      Required Lenders; and (g) an Environmental Agreement and such other documents,
      instruments or agreements as Agent may reasonably require with respect to any
      environmental risks regarding the Real Estate.

     

    Rent
      and Charges Reserve
      - the
      aggregate of (a) all past due rent and other amounts owing by an Obligor to
      any
      landlord, warehouseman, processor, repairman, mechanic, shipper, freight
      forwarder or other Person who possesses any Collateral or could assert a Lien
      on
      any Collateral; and (b) a reserve at least equal to three months rent and other
      charges that could be payable to any such Person, unless it has executed a
      Lien
      Waiver.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Report
      - as
      defined in Section
      12.2.3.

     

    Reportable
      Event
      - any
      event set forth in Section 4043(b) of ERISA.

     

    Required
      Lenders
      -
      Lenders (subject to Section
      4.2)
      having
      (a) Revolver Commitments and in excess of 50% of the aggregate Revolver
      Commitments; and (b) if the Revolver Commitments have terminated, Loans in
      excess of 50% of all outstanding Loans.

     

    Reserve
      Percentage
      - the
      reserve percentage (expressed as a decimal, rounded upward to the nearest 1/8th
      of 1%) applicable to member banks under regulations issued from time to time
      by
      the Board of Governors for determining the maximum reserve requirement
      (including any emergency, supplemental or other marginal reserve requirement)
      with respect to Eurocurrency funding (currently referred to as “Eurocurrency
      liabilities”).

     

    Restricted
      Investment
      - any
      Investment by a Borrower or Subsidiary, other than (a) Investments in
      Subsidiaries to the extent existing on the Closing Date; (b) Cash Equivalents
      that are subject to Agent’s Lien and control, pursuant to documentation in form
      and substance satisfactory to Agent; and (c) loans and advances permitted under
      Section
      10.2.7.

     

    Restrictive
      Agreement
      - an
      agreement (other than a Loan Document) that conditions or restricts the right
      of
      any Borrower, Subsidiary or other Obligor to incur or repay Borrowed Money,
      to
      grant Liens on any assets, to declare or make Distributions, to modify, extend
      or renew any agreement evidencing Borrowed Money, or to repay any intercompany
      Debt.

     

    Revolver
      Commitment
      - for
      any Lender, its obligation to make Revolver Loans and to participate in LC
      Obligations up to the maximum principal amount shown on Schedule
      1.1,
      or as
      specified hereafter in the most recent Assignment and Acceptance to which it
      is
      a party. “Revolver
      Commitments”
means
      the aggregate amount of such commitments of all Lenders.

     

    Revolver
      Loan
      - a loan
      made pursuant to Section
      2.1,
      and any
      Swingline Loan, Overadvance Loan or Protective Advance.

     

    Revolver
      Termination Date
      - March
      31, 2009.

     

    Royalties
      - all
      royalties, fees, expense reimbursement and other amounts payable by a Borrower
      under a License.

     

    S&P
      -
      Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
      Inc., and its successors.

     

    Secured
      Parties
      - Agent,
      Issuing Bank, Lenders and providers of Bank Products.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Security
      Documents
      - the
      Guaranties, Mortgages, Trademark Security Agreements, Deposit Account Control
      Agreements, and
      all
      other documents, instruments and agreements now or hereafter securing (or given
      with the intent to secure) any Obligations.

     

    Senior
      Officer
      - the
      chairman of the board, president, chief executive officer or chief financial
      officer of a Borrower or, if the context requires, an Obligor.

     

    Settlement
      Report
      - a
      report delivered by Agent to Lenders summarizing the Revolver Loans and
      participations in LC Obligations outstanding as of a given settlement date,
      allocated to Lenders on a Pro Rata basis in accordance with their Revolver
      Commitments.

     

    Software
      - as
      defined in the UCC.

     

    Solvent
      - as to
      any Person, such Person (a) owns Property whose fair salable value is greater
      than the amount required to pay all of its debts (including contingent,
      subordinated, unmatured and unliquidated liabilities); (b) owns Property whose
      present fair salable value (as defined below) is greater than the probable
      total
      liabilities (including contingent, subordinated, unmatured and unliquidated
      liabilities) of such Person as they become absolute and matured; (c) is able
      to
      pay all of its debts as they mature; (d) has capital that is not unreasonably
      small for its business and is sufficient to carry on its business and
      transactions and all business and transactions in which it is about to engage;
      (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy
      Code; and (f) has not incurred (by way of assumption or otherwise) any
      obligations or liabilities (contingent or otherwise) under any Loan Documents,
      or made any conveyance in connection therewith, with actual intent to hinder,
      delay or defraud either present or future creditors of such Person or any of
      its
      Affiliates. “Fair
      salable value”
means
      the amount that could be obtained for assets within a reasonable time, either
      through collection or through sale under ordinary selling conditions by a
      capable and diligent seller to an interested buyer who is willing (but under
      no
      compulsion) to purchase.

     

    Statutory
      Reserves
      - the
      percentage (expressed as a decimal) established by the Board of Governors as
      the
      then stated maximum rate for all reserves (including those imposed by Regulation
      D of the Board of Governors, all basic, emergency, supplemental or other
      marginal reserve requirements, and any transitional adjustments or other
      scheduled changes in reserve requirements) applicable to any member bank of
      the
      Federal Reserve System in respect of Eurocurrency Liabilities (or any successor
      category of liabilities under Regulation D).

     

    Subordinated
      Convertible Notes
      - the
      Notes issued pursuant to the Existing Subordinated Debt Documents in the
      original aggregate principal amount of $25,000,000, as amended, restated,
      supplemented, modified, renewed, extended or refinanced from time to time in
      accordance with the terms hereof and thereof.

     

    Subsidiary
      - any
      entity at least 50% of whose voting securities or Equity Interests is owned
      by a
      Borrower or any combination of Borrowers (including indirect ownership by a
      Borrower through other entities in which the Borrower directly or indirectly
      owns 50% of the voting securities or Equity Interests).

     

    Supporting
      Obligation
      - as
      defined in the UCC.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    Swingline
      Loan
      - any
      Borrowing of Base Rate Revolver Loans funded with Agent’s funds, until such
      Borrowing is settled among Lenders pursuant to Section
      4.1.3.

     

    Taxes
      - any
      taxes, levies, imposts, duties, fees, assessments, deductions, withholdings
      or
      other charges of whatever nature, including income, receipts, excise, property,
      sales, use, transfer, license, payroll, withholding, social security, franchise,
      intangibles, stamp or recording taxes imposed by any Governmental Authority,
      and
      all interest, penalties and similar liabilities relating thereto.

     

    Trademark
      Security Agreement
      - each
      trademark security agreement pursuant to which an Obligor grants to Agent,
      for
      the benefit of Secured Parties, a Lien on such Obligor’s interests in
      trademarks, as security for the Obligations.

     

    Transferee
      - any
      actual or potential Eligible Assignee, Participant or other Person acquiring
      an
      interest in any Obligations.

     

    Type
      - any
      type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest
      option and, in the case of LIBOR Loans, the same Interest Period.

     

    UCC
      - the
      Uniform Commercial Code as in effect in the State of California or, when the
      laws of any other jurisdiction govern the perfection or enforcement of any
      Lien,
      the Uniform Commercial Code of such jurisdiction.

     

    Upstream
      Payment
      - a
      Distribution by a Subsidiary of a Borrower to such Borrower.

     

    Value
      -
      (a) for Inventory, its value determined on the basis of the lower of cost
      or market, calculated on a first-in, first-out basis; and (b) for an
      Account, its face amount, net of any returns, rebates, discounts (calculated
      on
      the shortest terms), credits, allowances or Taxes (including sales, excise
      or
      other taxes) that have been or could be claimed by the Account Debtor or any
      other Person.

     

    1.2 Accounting
      Terms.
      Under
      the Loan Documents (except as otherwise specified herein), all accounting terms
      shall be interpreted, all accounting determinations shall be made, and all
      financial statements shall be prepared, in accordance with GAAP applied on
      a
      basis consistent with the most recent audited financial statements of Borrowers
      delivered to Agent before the Closing Date and using the same inventory
      valuation method as used in such financial statements, except for any change
      required or permitted by GAAP if Borrowers’ certified public accountants concur
      in such change, the change is disclosed to Agent, and Section
      10.3
      is
      amended in a manner satisfactory to Required Lenders to take into account the
      effects of the change.

     

    1.3 Certain
      Matters of Construction.
      The
      terms “herein,” “hereof,” “hereunder” and other words of similar import refer to
      this Agreement as a whole and not to any particular section, paragraph or
      subdivision. Any pronoun used shall be deemed to cover all genders. In the
      computation of periods of time from a specified date to a later specified date,
      “from” means “from and including,” and “to” and “until” each mean “to but
      excluding.” The terms “including” and “include” shall mean “including, without
      limitation” and, for purposes of each Loan Document, the parties agree that the
      rule of ejusdem
      generis
      shall
      not be applicable to limit any provision. Section titles appear as a matter
      of
      convenience only and shall not affect the interpretation of any Loan Document.
      All references to (a) laws or statutes include all related rules, regulations,
      interpretations, amendments and successor provisions; (b) any document,
      instrument or agreement include any amendments, waivers and other modifications,
      extensions or renewals (to the extent permitted by the Loan Documents); (c)
      any
      section mean, unless the context otherwise requires, a section of this
      Agreement; (d) any exhibits or schedules mean, unless the context otherwise
      requires, exhibits and schedules attached hereto, which are hereby incorporated
      by reference; (e) any Person include successors and assigns; (f) time of day
      mean time of day at Agent’s notice address under Section
      14.3.1;
      or (g)
      discretion of Agent, Issuing Bank or any Lender mean the sole and absolute
      discretion of such Person. All calculations of Value, fundings of Loans,
      issuances of Letters of Credit and payments of Obligations shall be in Dollars
      and, unless the context otherwise requires, all determinations (including
      calculations of Borrowing Base and financial covenants) made from time to time
      under the Loan Documents shall be made in light of the circumstances existing
      at
      such time. Borrowing Base calculations shall be consistent with historical
      methods of valuation and calculation, and otherwise satisfactory to Agent (and
      not necessarily calculated in accordance with GAAP). Borrowers shall have the
      burden of establishing any alleged negligence, misconduct or lack of good faith
      by Agent, Issuing Bank or any Lender under any Loan Documents. No provision
      of
      any Loan Documents shall be construed against any party by reason of such party
      having, or being deemed to have, drafted the provision. Whenever the phrase
“to
      the best of Borrowers’ knowledge” or words of similar import are used in any
      Loan Documents, it means actual knowledge of a Senior Officer, or knowledge
      that
      a Senior Officer would have obtained if he or she had engaged in good faith
      and
      diligent performance of his or her duties, including reasonably specific
      inquiries of employees or agents and a good faith attempt to ascertain the
      matter to which such phrase relates.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    SECTION
      2.
      CREDIT FACILITIES

     

    2.1 Revolver
      Commitment.

     

    2.1.1
      Revolver
      Loans.
      Each
      Lender agrees, severally on a Pro Rata basis up to its Revolver Commitment,
      on
      the terms set forth herein, to make Revolver Loans to Borrowers from time to
      time through the Commitment Termination Date. The Revolver Loans may be repaid
      and reborrowed as provided herein. In no event shall Lenders have any obligation
      to honor a request for a Revolver Loan if the unpaid balance of Revolver Loans
      outstanding at such time (including the requested Loan) would exceed the
      Borrowing Base.

     

    2.1.2
      Revolver
      Notes.
      The
      Revolver Loans made by each Lender and interest accruing thereon shall be
      evidenced by the records of Agent and such Lender. At the request of any Lender,
      Borrowers shall deliver a Revolver Note to such Lender.

     

    2.1.3
      Use
      of
      Proceeds.
      The
      proceeds of Revolver Loans shall be used by Borrowers solely (a) to satisfy
      existing Debt; (b) to pay fees and transaction expenses associated with the
      closing of this credit facility; (c) to pay Obligations in accordance with
      this
      Agreement; and (d) for working capital and other lawful corporate purposes
      of
      Borrowers.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    2.1.4
      Termination
      of Revolver Commitments.

     

    (a) The
      Revolver Commitments shall terminate on the Revolver Termination Date, unless
      sooner terminated in accordance with this Agreement. Upon at least 90 days
      prior
      written notice to Agent at any time after the first Loan Year, Borrowers may,
      at
      their option, terminate the Revolver Commitments and this credit facility.
      Any
      notice of termination given by Borrowers shall be irrevocable. On the
      termination date, Borrowers shall make Full Payment of all
      Obligations.

     

    (b) [Intentionally
      Omitted].

     

    (c) Concurrently
      with a termination of the Revolving Commitments, for whatever reason (including
      an Event of Default), Borrowers shall pay to Agent, for the Pro Rata benefit
      of
      Lenders and as liquidated damages for loss of bargain (and not as a penalty),
      an
      amount equal to (i) if the termination occurs during the first Loan Year, 2.0%
      of the Revolver Commitments; (ii) if it occurs during the second Loan Year,
      1.0%
      of the Revolver Commitments; and (iii) if it occurs thereafter, 0.0% of the
      Revolver Commitments. No termination charge shall be payable if termination
      occurs on the Revolver Termination Date or in connection with a refinancing
      of
      this credit facility by Bank of America or any of its Affiliates.

     

    2.1.5
      Overadvances.
      If the
      aggregate Revolver Loans exceed the Borrowing Base (“Overadvance”)
      or the
      aggregate Revolver Commitments at any time, the excess amount shall be payable
      by Borrowers on demand by Agent, but all such Revolver Loans shall nevertheless
      constitute Obligations secured by the Collateral and entitled to all benefits
      of
      the Loan Documents. Unless its authority has been revoked in writing by Required
      Lenders, Agent may require Lenders to honor requests for Overadvance Loans
      and
      to forbear from requiring Borrowers to cure an Overadvance, (a) when no other
      Event of Default is known to Agent, as long as (i) the Overadvance does not
      continue for more than 30 consecutive days (and no Overadvance may exist for
      at
      least five consecutive days thereafter before further Overadvance Loans are
      required), and (ii) the Overadvance is not known by Agent to exceed $500,000;
      and (b) regardless of whether an Event of Default exists, if Agent discovers
      an
      Overadvance not previously known by it to exist, as long as from the date of
      such discovery the Overadvance (i) is not increased by more than $50,000, and
      (ii) does not continue for more than 30 consecutive days. In no event shall
      Overadvance Loans be required that would cause the outstanding Revolver Loans
      and LC Obligations to exceed the aggregate Revolver Commitments. Any funding
      of
      an Overadvance Loan or sufferance of an Overadvance shall not constitute a
      waiver by Agent or Lenders of the Event of Default caused thereby. In no event
      shall any Borrower or other Obligor be deemed a beneficiary of this Section
      nor
      authorized to enforce any of its terms.

     

    2.1.6
      Protective
      Advances.
      Agent
      shall be authorized, in its discretion, at any time that a Default or Event
      of
      Default exists or any conditions in Section 6
      are not
      satisfied, and without regard to the aggregate Commitments, to make Base Rate
      Revolver Loans (“Protective
      Advances”)
      (a) up
      to an aggregate amount of $100,000 outstanding at any time, if Agent deems
      such
      Loans necessary or desirable to preserve or protect any Collateral, or to
      enhance the collectibility or repayment of Obligations; or (b) to pay any other
      amounts chargeable to Obligors under any Loan Documents, including costs, fees
      and expenses. All Protective Advances shall be Obligations, secured by the
      Collateral, and shall be treated for all purposes as Extraordinary Expenses.
      Each Lender shall participate in each Protective Advance on a Pro Rata basis.
      Required Lenders may at any time revoke Agent’s authorization to make further
      Protective Advances by written notice to Agent. Absent such revocation, Agent’s
      determination that funding of a Protective Advance is appropriate shall be
      conclusive. 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    2.2 [Intentionally
      Omitted].

     

    2.3 Letter
      of Credit Facility.

     

    2.3.1
      Issuance
      of Letters of Credit.
      Issuing
      Bank agrees to issue Letters of Credit from time to time until 30 days prior
      to
      the Revolver Termination Date (or until the Commitment Termination Date, if
      earlier), on the terms set forth herein, including the following:

     

    (a) Each
      Borrower acknowledges that Issuing Bank’s willingness to issue any Letter of
      Credit is conditioned upon Issuing Bank’s receipt of a LC Application with
      respect to the requested Letter of Credit, as well as such other instruments
      and
      agreements as Issuing Bank may customarily require for issuance of a letter
      of
      credit of similar type and amount. Issuing Bank shall have no obligation to
      issue any Letter of Credit unless (i) Issuing Bank receives a LC Request and
      LC
      Application at least three Business Days prior to the requested date of
      issuance; and (ii) each LC Condition is satisfied. If Issuing Bank receives
      written notice from a Lender at least one Business Day before issuance of a
      Letter of Credit that any LC Condition has not been satisfied, Issuing Bank
      shall have no obligation to issue the requested Letter of Credit (or any other)
      until such notice is withdrawn in writing by that Lender or until Required
      Lenders have waived such condition in accordance with this Agreement. Prior
      to
      receipt of any such notice, Issuing Bank shall not be deemed to have knowledge
      of any failure of LC Conditions.

     

    (b) Letters
      of Credit may be requested by a Borrower only (i) to support obligations of
      such
      Borrower incurred in the Ordinary Course of Business; or (ii) for other purposes
      as Agent and Lenders may approve from time to time in writing. The renewal
      or
      extension of any Letter of Credit shall be treated as the issuance of a new
      Letter of Credit, except that delivery of a new LC Application shall be required
      at the discretion of Issuing Bank.

     

    (c) Borrowers
      assume all risks of the acts, omissions or misuses of any Letter of Credit
      by
      the beneficiary. In connection with issuance of any Letter of Credit, none
      of
      Agent, Issuing Bank or any Lender shall be responsible for the existence,
      character, quality, quantity, condition, packing, value or delivery of any
      goods
      purported to be represented by any Documents; any differences or variation
      in
      the character, quality, quantity, condition, packing, value or delivery of
      any
      goods from that expressed in any Documents; the form, validity, sufficiency,
      accuracy, genuineness or legal effect of any Documents or of any endorsements
      thereon; the time, place, manner or order in which shipment of goods is made;
      partial or incomplete shipment of, or failure to ship, any goods referred to
      in
      a Letter of Credit or Documents; any deviation from instructions, delay, default
      or fraud by any shipper or other Person in connection with any goods, shipment
      or delivery; any breach of contract between a shipper or vendor and a Borrower;
      errors, omissions, interruptions or delays in transmission or delivery of any
      messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
      otherwise; errors in interpretation of technical terms; the misapplication
      by a
      beneficiary of any Letter of Credit or the proceeds thereof; or any consequences
      arising from causes beyond the control of Issuing Bank, Agent or any Lender,
      including any act or omission of a Governmental Authority. The rights and
      remedies of Issuing Bank under the Loan Documents shall be cumulative. Issuing
      Bank shall be fully subrogated to the rights and remedies of each beneficiary
      whose claims against Borrowers are discharged with proceeds of any Letter of
      Credit.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (d) In
      connection with its administration of and enforcement of rights or remedies
      under any Letters of Credit or LC Documents, Issuing Bank shall be entitled
      to
      act, and shall be fully protected in acting, upon any certification, notice
      or
      other communication in whatever form believed by Issuing Bank, in good faith,
      to
      be genuine and correct and to have been signed, sent or made by a proper Person.
      Issuing Bank may consult with and employ legal counsel, accountants and other
      experts to advise it concerning its obligations, rights and remedies, and shall
      be entitled to act upon, and shall be fully protected in any action taken in
      good faith reliance upon, any advice given by such experts. Issuing Bank may
      employ agents and attorneys-in-fact in connection with any matter relating
      to
      Letters of Credit or LC Documents, and shall not be liable for the negligence
      or
      misconduct of any such agents or attorneys-in-fact selected with reasonable
      care.

     

    2.3.2
      Reimbursement;
      Participations.

     

    (a) If
      Issuing Bank honors any request for payment under a Letter of Credit, Borrowers
      shall pay to Issuing Bank, on the same day (“Reimbursement
      Date”),
      the
      amount paid by Issuing Bank under such Letter of Credit, together with interest
      at the interest rate for Base Rate Revolver Loans from the Reimbursement Date
      until payment by Borrowers. The obligation of Borrowers to reimburse Issuing
      Bank for any payment made under a Letter of Credit shall be absolute,
      unconditional, irrevocable, and joint and several, and shall be paid without
      regard to any lack of validity or enforceability of any Letter of Credit or
      the
      existence of any claim, setoff, defense or other right that Borrowers may have
      at any time against the beneficiary. Whether or not Borrower Agent submits
      a
      Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing
      of
      Base Rate Revolver Loans in an amount necessary to pay all amounts due Issuing
      Bank on any Reimbursement Date and each Lender agrees to fund its Pro Rata
      share
      of such Borrowing whether or not the Commitments have terminated, an Overadvance
      exists or is created thereby, or the conditions in Section
      6
      are
      satisfied.

     

    (b) Upon
      issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably
      and unconditionally purchased from Issuing Bank, without recourse or warranty,
      an undivided Pro Rata interest and participation in all LC Obligations relating
      to the Letter of Credit. If Issuing Bank makes any payment under a Letter of
      Credit and Borrowers do not reimburse such payment on the Reimbursement Date,
      Agent shall promptly notify Lenders and each Lender shall promptly (within
      one
      Business Day) and unconditionally pay to Agent, for the benefit of Issuing
      Bank,
      the Lender’s Pro Rata share of such payment. Upon request by a Lender, Issuing
      Bank shall furnish copies of any Letters of Credit and LC Documents in its
      possession at such time.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (c) The
      obligation of each Lender to make payments to Agent for the account of Issuing
      Bank in connection with Issuing Bank’s payment under a Letter of Credit shall be
      absolute, unconditional and irrevocable, not subject to any counterclaim,
      setoff, qualification or exception whatsoever, and shall be made in accordance
      with this Agreement under all circumstances, irrespective of any lack of
      validity or unenforceability of any Loan Documents; any draft, certificate
      or
      other document presented under a Letter of Credit having been determined to
      be
      forged, fraudulent, invalid or insufficient in any respect or any statement
      therein being untrue or inaccurate in any respect; or the existence of any
      setoff or defense that any Obligor may have with respect to any Obligations.
      Issuing Bank does not assume any responsibility for any failure or delay in
      performance or any breach by any Borrower or other Person of any obligations
      under any LC Documents. Issuing Bank does not make to Lenders any express or
      implied warranty, representation or guaranty with respect to the Collateral,
      LC
      Documents or any Obligor. Issuing Bank shall not be responsible to any Lender
      for any recitals, statements, information, representations or warranties
      contained in, or for the execution, validity, genuineness, effectiveness or
      enforceability of any LC Documents; the validity, genuineness, enforceability,
      collectibility, value or sufficiency of any Collateral or the perfection of
      any
      Lien therein; or the assets, liabilities, financial condition, results of
      operations, business, creditworthiness or legal status of any
      Obligor.

     

    (d) No
      Issuing Bank Indemnitee shall be liable to any Lender or other Person for any
      action taken or omitted to be taken in connection with any LC Documents except
      as a result of its actual gross negligence or willful misconduct. Issuing Bank
      shall not have any liability to any Lender if Issuing Bank refrains from any
      action under any Letter of Credit or LC Documents until it receives written
      instructions from Required Lenders.

     

    2.3.3
      Cash
      Collateral.
      If any
      LC Obligations, whether or not then due or payable, shall for any reason be
      outstanding at any time (a) that an Event of Default exists, (b) that
      Availability is less than zero, (c) after the Commitment Termination Date,
      or
      (d) within 20 Business Days prior to the Revolver Termination Date, then
      Borrowers shall, at Issuing Bank’s or Agent’s request, pay to Issuing Bank the
      amount of all outstanding LC Obligations consisting of drawings under Letters
      of
      Credit and all fees related thereto, and Cash Collateralize the outstanding
      undrawn amount of any Letters of Credit. If Borrowers fail to Cash Collateralize
      outstanding Letters of Credit as required herein, Lenders may (and shall upon
      direction of Agent) advance, as Revolver Loans, the amount of the Cash
      Collateral required (whether or not the Commitments have terminated, an
      Overadvance exists, or the conditions in Section
      6
      are
      satisfied).

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    SECTION
      3.
      INTEREST, FEES AND CHARGES

     

    3.1 Interest.

     

    3.1.1
      Rates
      and Payment of Interest.

     

    (a) The
      Obligations shall bear interest (i) if a Base Rate Loan, at the Base Rate in
      effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan,
      at
      Adjusted LIBOR for the applicable Interest Period, plus the Applicable Margin;
      and (iii) if any other Obligation (including, to the extent permitted by law,
      interest not paid when due), at the Base Rate in effect from time to time,
      plus
      the Applicable Margin for Base Rate Revolver Loans. Interest shall accrue from
      the date the Loan is advanced or the Obligation is incurred or payable, until
      paid by Borrowers. If a Loan is repaid on the same day made, one day’s interest
      shall accrue.

     

    (b) During
      an
      Insolvency Proceeding with respect to any Borrower, or during any other Event
      of
      Default if Agent or Required Lenders in their discretion so elect, Obligations
      shall bear interest at the Default Rate. Each Borrower acknowledges that the
      cost and expense to Agent and each Lender due to an Event of Default are
      difficult to ascertain and that the Default Rate is a fair and reasonable
      estimate to compensate Agent and Lenders for such added cost and
      expense.

     

    (c) Interest
      accrued on the Loans shall be due and payable in arrears, (i) on the first
      day
      of each month and, for any LIBOR Loan, the last day of its Interest Period;
      (ii)
      on any date of prepayment, with respect to the principal amount of Loans being
      prepaid; and (iii) on the Commitment Termination Date. Interest accrued on
      any
      other Obligations shall be due and payable as provided in the Loan Documents
      and, if no payment date is specified, shall be due and payable on
      demand.
      Notwithstanding the foregoing, interest accrued at the Default Rate shall be
      due
      and payable on
      demand.

     

    3.1.2
      Application
      of Adjusted LIBOR to Outstanding Loans.

     

    (a) Borrowers
      may on any Business Day, subject to delivery of a Notice of
      Conversion/Continuation, elect to convert any portion of the Base Rate Loans
      to,
      or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
      Loan. During any Default or Event of Default, Agent may (and shall at the
      direction of Required Lenders) declare that no Loan may be made, converted
      or
      continued as a LIBOR Loan.

     

    (b) Whenever
      Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent
      shall give Agent a Notice of Conversion/Continuation, no later than 11:00 a.m.
      at least two Business Days before the requested conversion or continuation
      date.
      Promptly after receiving any such notice, Agent shall notify each Lender
      thereof. Each Notice of Conversion/Continuation shall be irrevocable, and shall
      specify the aggregate principal amount of Loans to be converted or continued,
      the conversion or continuation date (which shall be a Business Day), and the
      duration of the Interest Period (which shall be deemed to be one month if not
      specified). If, upon the expiration of any Interest Period in respect of any
      LIBOR Loans, Borrowers shall have failed to deliver a Notice of
      Conversion/Continuation, they shall be deemed to have elected to convert such
      Loans into Base Rate Loans.

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    3.1.3
      Interest
      Periods.
      In
      connection with the making, conversion or continuation of any LIBOR Loans,
      Borrowers shall select an interest period (“Interest
      Period”)
      to
      apply, which interest period shall be one, two, three or six months;
provided,
      however,
      that:

     

    (a) the
      Interest Period shall commence on the date the Loan is made or continued as,
      or
      converted into, a LIBOR Loan, and shall expire on the numerically corresponding
      day in the calendar month at its end;

     

    (b) if
      any
      Interest Period commences on a day for which there is no corresponding day
      in
      the calendar month at its end or if such corresponding day falls after the
      last
      Business Day of such month, then the Interest Period shall expire on the last
      Business Day of such month; and if any Interest Period would expire on a day
      that is not a Business Day, the period shall expire on the next Business Day;
      and

     

    (c) no
      Interest Period shall extend beyond the Revolver Termination Date.

     

    3.1.4
      Interest
      Rate Not Ascertainable.
      If
      Agent shall determine that on any date for determining Adjusted LIBOR, due
      to
      any circumstance affecting the London interbank market, adequate and fair means
      do not exist for ascertaining such rate on the basis provided herein, then
      Agent
      shall immediately notify Borrowers of such determination. Until Agent notifies
      Borrowers that such circumstance no longer exists, the obligation of Lenders
      to
      make LIBOR Loans shall be suspended, and no further Loans may be converted
      into
      or continued as LIBOR Loans.

     

    3.2 Fees.

     

    3.2.1
      Unused
      Line Fee.
      Borrowers shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal
      to the per annum percentage set forth below, as determined by the EBITDA
      (measured on the first day of each Fiscal Quarter, on a trailing twelve month
      basis) for the immediately preceding Fiscal Quarter, times the amount by which
      the Revolver Commitments exceed the average daily balance of Revolver Loans
      and
      stated amount of Letters of Credit during any month. Such fee shall be payable
      in arrears, on the first day of each month and on the Commitment Termination
      Date.

     

    
      	
              Level

            	 	
              EBITDA

            	 	
              Unused
                

              Line
                

              Fee

            	 
	
              I

            	 	
               

            	
              <
                10,000,000

            	 	 	
              0.375

            	
              %

            
	
              II

            	 	
               

            	
              >10,000,000
                and < $12,000,000

            	 	 	
              0.250

            	
              %

            
	
              III

            	 	
               

            	
              >12,000,000
                and < $15,000,000

            	 	 	
              0.250

            	
              %

            
	
              IV

            	 	
               

            	
              >15,000,000
                and < $25,000,000

            	 	 	
              0.250

            	
              %

            
	
              V

            	 	 	
              ≥$25,000,000

            	 	 	
              0.250

            	
              %

            
	 	 	 	 	 	 	 	 

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    Until
      October 1, 2006, the unused line fee shall be determined as if Level III were
      applicable. Effective October 1, 2006, the unused line fee shall be subject
      to
      increase or decrease based on the EBITDA (measured on a trailing 12 month basis)
      as set forth in the financial statements and corresponding Compliance
      Certificate for the immediately preceding Fiscal Quarter, which change shall
      be
      effective on the first Business Day of the calendar month that occurs more
      than
      10 days following receipt. If, by the first Business Day of a month following
      any Fiscal Quarter, any financial statements and Compliance Certificate due
      in
      the preceding month have not been received, then the unused line fee shall
      be
      determined as if Level I were applicable, from such day until the first Business
      Day of the Fiscal Quarter following actual receipt.

     

    3.2.2
      LC
      Facility Fees.
      Borrowers shall pay (a) to Agent, for the Pro Rata benefit of Lenders, a fee
      equal to the Applicable Margin in effect for LIBOR Revolver Loans times the
      average daily stated amount of Letters of Credit, which fee shall be payable
      monthly in arrears, on the first day of each month; (b) to Agent, for its own
      account, a fronting fee equal to 0.125% of the stated amount of each Letter
      of
      Credit, which fee shall be payable upon issuance of the Letter of Credit and
      on
      each anniversary date of such issuance, and shall be payable on any increase
      in
      stated amount made between any such dates; and (c) to Issuing Bank, for its
      own
      account, all customary charges associated with the issuance, amending,
      negotiating, payment, processing, transfer and administration of Letters of
      Credit, which charges shall be paid as and when incurred. During an Event of
      Default, the fee payable under clause (a) shall be increased by 2% per
      annum.

     

    3.2.3
      Closing
      Fee.
      Borrowers shall pay to Agent, for the Pro Rata benefit of the Lenders, a closing
      fee equal to the greater of (i) $187,500, or (ii) 0.75% of the total Commitments
      of all Lenders as of the Closing Date, which shall be paid on the Closing
      Date.

     

    3.3 Computation
      of Interest, Fees, Yield Protection.
      All
      interest, as well as fees and other charges calculated on a per annum basis,
      shall be computed for the actual days elapsed, based on a year of 360 days.
      Each
      determination by Agent of any interest, fees or interest rate hereunder shall
      be
      final, conclusive and binding for all purposes, absent manifest error. All
      fees
      shall be fully earned when due and shall not be subject to rebate or refund,
      nor
      subject to proration except as specifically provided herein. All fees payable
      under Section 3.2
      are
      compensation for services and are not, and shall not be deemed to be, interest
      or any other charge for the use, forbearance or detention of money. A
      certificate as to amounts payable by Borrowers under Section 3.4,
      3.6, 3.7, 3.9
      or
5.9,
      submitted to Borrowers by Agent or the affected Lender, as applicable, shall
      be
      final, conclusive and binding for all purposes, absent manifest
      error.

     

    3.4 Reimbursement
      Obligations.
      Borrowers shall reimburse Agent for all Extraordinary Expenses. Borrowers shall
      also reimburse Agent for all reasonable legal, accounting, appraisal,
      consulting, and other fees, costs and expenses incurred by it in connection
      with
      (a) negotiation and preparation of any Loan Documents, including any amendment
      or other modification thereof; (b) administration of and actions relating to
      any
      Collateral, Loan Documents and transactions contemplated thereby, including
      any
      actions taken to perfect or maintain priority of Agent’s Liens on any
      Collateral, to maintain any insurance required hereunder or to verify
      Collateral; and (c) subject to the limits of Section 10.1.1(b),
      each
      inspection, audit or appraisal with respect to any Obligor or Collateral,
      whether prepared by Agent’s personnel or a third party. All legal, accounting
      and consulting fees shall be charged to Borrowers by Agent’s professionals at
      their full hourly rates, regardless of any reduced or alternative fee billing
      arrangements that Agent, any Lender or any of their Affiliates may have with
      such professionals with respect to this or any other transaction. All amounts
      reimbursable by Borrowers under this Section shall constitute Obligations
      secured by the Collateral and shall be payable on
      demand.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    3.5 Illegality.
      Notwithstanding anything to the contrary herein, if (a) any change in any law
      or
      interpretation thereof by any Governmental Authority makes it unlawful for
      a
      Lender to make or maintain a LIBOR Loan or to maintain any Commitment with
      respect to LIBOR Loans or (b) a Lender determines that the making or continuance
      of a LIBOR Loan has become impracticable as a result of a circumstance that
      adversely affects the London interbank market or the position of such Lender
      in
      such market, then such Lender shall give notice thereof to Agent and Borrowers
      and may (i) declare that LIBOR Loans will not thereafter be made by such Lender,
      whereupon any request for a LIBOR Loan from such Lender shall be deemed to
      be a
      request for a Base Rate Loan unless such Lender’s declaration has been withdrawn
      (and it shall be withdrawn promptly upon cessation of the circumstances
      described in clause (a) or (b) above); and/or (ii) require that all outstanding
      LIBOR Loans made by such Lender be converted to Base Rate Loans immediately,
      in
      which event all outstanding LIBOR Loans of such Lender shall be immediately
      converted to Base Rate Loans.

     

    3.6 Increased
      Costs.
      If, by
      reason of (a) the introduction of or any change (including any change by way
      of
      imposition or increase of Statutory Reserves or other reserve requirements)
      in
      any law or interpretation thereof, or (b) the compliance with any guideline
      or
      request from any Governmental Authority or other Person exercising control
      over
      banks or financial institutions generally (whether or not having the force
      of
      law):

     

    (i) a
      Lender
      shall be subject to any Tax with respect to any LIBOR Loan or Letter of Credit
      or its obligation to make LIBOR Loans, issue Letters of Credit or participate
      in
      LC Obligations, or a change shall result in the basis of taxation of any payment
      to a Lender with respect to its LIBOR Loans or its obligation to make LIBOR
      Loans, issue Letters of Credit or participate in LC Obligations (except for
      Excluded Taxes); or

     

    (ii) any
      reserve (including any imposed by the Board of Governors), special deposits
      or
      similar requirement against assets of, deposits with or for the account of,
      or
      credit extended by, a Lender shall be imposed or deemed applicable, or any
      other
      condition affecting a Lender’s LIBOR Loans or obligation to make LIBOR Loans,
      issue Letters of Credit or participate in LC Obligations shall be imposed on
      such Lender or the London interbank market;

     

    and
      as a
      result there shall be an increase in the cost to such Lender of agreeing to
      make
      or making, funding or maintaining LIBOR Loans, Letters of Credit or
      participations in LC Obligations (except to the extent already included in
      determination of Adjusted LIBOR), or there shall be a reduction in the amount
      receivable by such Lender, then the Lender shall promptly notify Borrowers
      and
      Agent of such event, and Borrowers shall, within five days following demand
      therefor, pay such Lender the amount of such increased costs or reduced
      amounts.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    If
      a
      Lender determines that, because of circumstances described above or any other
      circumstances arising hereafter affecting such Lender, the London interbank
      market or the Lender’s position in such market, Adjusted LIBOR or its Applicable
      Margin, as applicable, will not adequately and fairly reflect the cost to such
      Lender of funding LIBOR Loans, issuing Letters of Credit or participating in
      LC
      Obligations, then (A) the Lender shall promptly notify Borrowers and Agent
      of
      such event; (B) such Lender’s obligation to make LIBOR Loans, issue Letters of
      Credit or participate in LC Obligations shall be immediately suspended, until
      each condition giving rise to such suspension no longer exists; and (C) such
      Lender shall make a Base Rate Loan as part of any requested Borrowing of LIBOR
      Loans, which Base Rate Loan shall, for all purposes, be considered part of
      such
      Borrowing.

     

    3.7 Capital
      Adequacy.
      If a
      Lender determines that any introduction of or any change in a Capital Adequacy
      Regulation, any change in the interpretation or administration of a Capital
      Adequacy Regulation by a Governmental Authority charged with interpretation
      or
      administration thereof, or any compliance by such Lender or any Person
      controlling such Lender with a Capital Adequacy Regulation, increases the amount
      of capital required or expected to be maintained by such Lender or Person
      (taking into consideration its capital adequacy policies and desired return
      on
      capital) as a consequence of such Lender’s Commitments, Loans, participations in
      LC Obligations or other obligations under the Loan Documents, then Borrowers
      shall, within five days following demand therefor, pay such Lender an amount
      sufficient to compensate for such increase. A Lender’s demand for payment shall
      set forth the nature of the occurrence giving rise to such compensation and
      a
      calculation of the amount to be paid. In determining such amount, the Lender
      may
      use any reasonable averaging and attribution method.

     

    3.8 Mitigation.
      Each
      Lender agrees that, upon becoming aware that it is subject to Section 3.5,
      3.6, 3.7
      or
5.9,
      it will
      take reasonable measures to reduce Borrowers’ obligations under such Sections,
      including funding or maintaining its Commitments or Loans through another
      office, as long as use of such measures would not adversely affect the Lender’s
      Commitments, Loans, business or interests, and would not be inconsistent with
      any internal policy or applicable legal or regulatory restriction.

     

    3.9 Funding
      Losses.
      If for
      any reason (other than default by a Lender) (a) any Borrowing of, or conversion
      to or continuation of, a LIBOR Loan does not occur on the date specified
      therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether
      or not withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on
      a
      day other than the end of its Interest Period, or (c) Borrowers fail to repay
      a
      LIBOR Loan when required hereunder, then Borrowers shall pay to Agent its
      customary administrative charge and to each Lender all losses and expenses
      that
      it sustains as a consequence thereof, including any loss or expense arising
      from
      liquidation or redeployment of funds or from fees payable to terminate deposits
      of matching funds. Lenders shall not be required to purchase Dollar deposits
      in
      the London interbank market or any other offshore Dollar market to fund any
      LIBOR Loan, but the provisions hereof shall be deemed to apply as if each Lender
      had purchased such deposits to fund its LIBOR Loans.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    3.10 Maximum
      Interest.
      In no
      event shall interest, charges or other amounts that are contracted for, charged
      or received by Agent and Lenders pursuant to any Loan Documents and that are
      deemed interest under Applicable Law (“interest”)
      exceed
      the highest rate permissible under Applicable Law (“maximum
      rate”).
      If,
      in any month, any interest rate, absent the foregoing limitation, would have
      exceeded the maximum rate, then the interest rate for that month shall be the
      maximum rate and, if in a future month, that interest rate would otherwise
      be
      less than the maximum rate, then the rate shall remain at the maximum rate
      until
      the amount of interest actually paid equals the amount of interest which would
      have accrued if it had not been limited by the maximum rate. If, upon Full
      Payment of the Obligations, the total amount of interest actually paid under
      the
      Loan Documents is less than the total amount of interest that would, but for
      this Section, have accrued under the Loan Documents, then Borrowers shall,
      to
      the extent permitted by Applicable Law, pay to Agent, for the account of
      Lenders, (a) the lesser of (i) the amount of interest that would have been
      charged if the maximum rate had been in effect at all times, or (ii) the amount
      of interest that would have accrued had the interest rate otherwise set forth
      in
      the Loan Documents been in effect, minus
      (b) the
      amount of interest actually paid under the Loan Documents. If a court of
      competent jurisdiction determines that Agent or any Lender has received interest
      in excess of the maximum amount allowed under Applicable Law, such excess shall
      be deemed received on account of, and shall automatically be applied to reduce,
      Obligations other than interest (regardless of any erroneous application thereof
      by Agent or any Lender), and upon Full Payment of the Obligations, any balance
      shall be refunded to Borrowers. In determining whether any excess interest
      has
      been charged or received by Agent or any Lender, all interest at any time
      charged or received from Borrowers in connection with the Loan Documents shall,
      to the extent permitted by Applicable Law, be amortized, prorated, allocated
      and
      spread in equal parts throughout the full term of the Obligations.

     

    SECTION
      4.
      LOAN ADMINISTRATION

     

    4.1 Manner
      of Borrowing and Funding Revolver Loans.

     

    4.1.1
      Notice
      of Borrowing.
      

     

    (a) Whenever
      Borrowers desire funding of a Borrowing of Revolver Loans, Borrower Agent shall
      give Agent a Notice of Borrowing. Such notice must be received by Agent no
      later
      than 11:00 a.m. (i) on the Business Day of the requested funding date, in the
      case of Base Rate Loans, and (ii) at least two Business Days prior to the
      requested funding date, in the case of LIBOR Loans. Notices received after
      11:00
      a.m. shall be deemed received on the next Business Day. Each Notice of Borrowing
      shall be irrevocable and shall specify (A) the principal amount of the
      Borrowing, (B) the requested funding date (which must be a Business Day), (C)
      whether the Borrowing is to be made as Base Rate Loans or LIBOR Loans, and
      (D)
      in the case of LIBOR Loans, the duration of the applicable Interest Period
      (which shall be deemed to be one month if not specified).

     

    (b) Unless
      payment is otherwise timely made by Borrowers, the becoming due of any
      Obligations (whether principal, interest, fees or other charges, including
      Extraordinary Expenses, LC Obligations, Cash Collateral and Bank Product Debt)
      shall be deemed to be a request for Base Rate Revolver Loans on the due date,
      in
      the amount of such Obligations. The proceeds of such Revolver Loans shall be
      disbursed as direct payment of the relevant Obligation.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    (c) If
      Borrowers establish a controlled disbursement account with Agent or any
      Affiliate of Agent, then the presentation for payment of any check or other
      item
      of payment drawn on such account at a time when there are insufficient funds
      to
      cover it shall be deemed to be a request for Base Rate Revolver Loans on the
      date of such presentation, in the amount of the check and items presented for
      payment. The proceeds of such Revolver Loans may be disbursed directly to the
      controlled disbursement account or other appropriate account.

     

    4.1.2
      Fundings
      by Lenders.
      Each
      Lender shall timely honor its Revolver Commitment by funding its Pro Rata share
      of each Borrowing of Revolver Loans that is properly requested hereunder. Except
      for Borrowings to be made as Swingline Loans, Agent shall endeavor to notify
      Lenders of each Notice of Borrowing (or deemed request for a Borrowing) by
      12:00
      noon on the proposed funding date for Base Rate Loans or by 3:00 p.m. at least
      two Business Days before any proposed funding of LIBOR Loans. Each Lender shall
      fund to Agent such Lender’s Pro Rata share of the Borrowing to the account
      specified by Agent in immediately available funds not later than 2:00 p.m.
      on
      the requested funding date, unless Agent’s notice is received after the times
      provided above, in which event Lender shall fund its Pro Rata share by 11:00
      a.m. on the next Business Day. Subject to its receipt of such amounts from
      Lenders, Agent shall disburse the proceeds of the Revolver Loans as directed
      by
      Borrower Agent. Unless Agent shall have received (in sufficient time to act)
      written notice from a Lender that it does not intend to fund its Pro Rata share
      of a Borrowing, Agent may assume that such Lender has deposited or promptly
      will
      deposit its share with Agent, and Agent may disburse a corresponding amount
      to
      Borrowers. If a Lender’s share of any Borrowing is not in fact received by
      Agent, then Borrowers agree to repay to Agent on demand the amount of such
      share, together with interest thereon from the date disbursed until repaid,
      at
      the rate applicable to such Borrowing.

     

    4.1.3
      Swingline
      Loans; Settlement.

     

    (a) Agent
      may, but shall not be obligated to, advance Swingline Loans to Borrowers out
      of
      Agent’s own funds, up to an aggregate outstanding amount of $5,000,000, unless
      the funding is specifically required to be made by all Lenders hereunder. Each
      Swingline Loan shall constitute a Revolver Loan for all purposes, except that
      payments thereon shall be made to Agent for its own account. The obligation
      of
      Borrowers to repay Swingline Loans shall be evidenced by the records of Agent
      and need not be evidenced by any promissory note. 

     

    (b) To
      facilitate administration of the Revolver Loans, Lenders and Agent agree (which
      agreement is solely among them, and not for the benefit of or enforceable by
      any
      Borrower) that settlement among them with respect to Swingline Loans and other
      Revolver Loans may take place periodically on a date determined from time to
      time by Agent, which shall occur at least once every five Business Days. On
      each
      settlement date, settlement shall be made with each Lender in accordance with
      the Settlement Report delivered by Agent to Lenders. Between settlement dates,
      Agent may in its discretion apply payments on Revolver Loans to Swingline Loans,
      regardless of any designation by Borrower or any provision herein to the
      contrary. Each Lender’s obligation to make settlements with Agent is absolute
      and unconditional, without offset, counterclaim or other defense, and whether
      or
      not the Commitments have terminated, an Overadvance exists, or the conditions
      in
Section
      6
      are
      satisfied. If, due to an Insolvency Proceeding with respect to a Borrower or
      otherwise, any Swingline Loan may not be settled among Lenders hereunder, then
      each Lender shall be deemed to have purchased from Agent a Pro Rata
      participation in each unpaid Swingline Loan and shall transfer the amount of
      such participation to Agent, in immediately available funds, within one Business
      Day after Agent’s request therefor. In its discretion, Agent may on any
      settlement date permit Swingline Loans in an aggregate principal amount not
      to
      exceed $1,000,000 to remain outstanding, while requiring settlement of the
      other
      outstanding Swingline Loans among the Lenders.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    4.1.4
      Notices.
      Each
      Borrower authorizes Agent and Lenders to extend, convert or continue Loans,
      effect selections of interest rates, and transfer funds to or on behalf of
      Borrowers based on telephonic or e-mailed instructions. Borrowers shall confirm
      each such request by prompt delivery to Agent of a Notice of Borrowing or Notice
      of Conversion/Continuation, if applicable, but if it differs in any material
      respect from the action taken by Agent or Lenders, the records of Agent and
      Lenders shall govern. Neither Agent nor any Lender shall have any liability
      for
      any loss suffered by a Borrower as a result of Agent or any Lender acting upon
      its understanding of telephonic or e-mailed instructions from a person believed
      in good faith by Agent or any Lender to be a person authorized to give such
      instructions on a Borrower’s behalf.

     

    4.2 Defaulting
      Lender.
      If a
      Lender fails to make any payment to Agent that is required hereunder, Agent
      may
      (but shall not be required to), in its discretion, retain payments that would
      otherwise be made to such defaulting Lender hereunder, apply the payments to
      such Lender’s defaulted obligations or readvance the funds to Borrowers in
      accordance with this Agreement. The failure of any Lender to fund a Loan or
      to
      make a payment in respect of a LC Obligation shall
      not
      relieve any other Lender of its obligations hereunder, and no Lender shall
      be
      responsible for default by another Lender. Lenders and Agent agree (which
      agreement is solely among them, and not for the benefit of or enforceable by
      any
      Borrower) that, solely for purposes of determining a defaulting Lender’s right
      to vote on matters relating to the Loan Documents and to share in payments,
      fees
      and Collateral proceeds thereunder, a defaulting Lender shall not be deemed
      to
      be a “Lender” until all its defaulted obligations have been cured.

     

    4.3 Number
      and Amount of LIBOR Loans; Determination of Rate.
      For ease
      of administration, all LIBOR Revolver Loans having the same length and beginning
      date of their Interest Periods shall be aggregated together, and such Loans
      shall be allocated among Lenders on a Pro Rata basis. No more than 4 aggregated
      LIBOR Loans may be outstanding at any time, and each aggregate LIBOR Loan when
      made, continued or converted shall be in a minimum amount of $1,000,000, or
      an
      increment of $500,000 in excess thereof. Upon determining Adjusted LIBOR for
      any
      Interest Period requested by Borrowers, Agent shall promptly notify Borrowers
      thereof by telephone or electronically and, if requested by Borrowers, shall
      confirm any telephonic notice in writing.

     

    4.4 Borrower
      Agent.
      Each
      Borrower hereby designates Borrower Agent as its representative and agent for
      all purposes under the Loan Documents, including requests for Loans and Letters
      of Credit, designation of interest rates, delivery or receipt of communications
      with Agent, Issuing Bank or any Lender, preparation and delivery of Borrowing
      Base and financial reports, receipt and payment of Obligations, requests for
      waivers, amendments or other accommodations, actions under the Loan Documents
      (including in respect of compliance with covenants), and all other dealings
      with
      Agent, Issuing Bank or any Lender. Borrower Agent hereby accepts such
      appointment. Agent and Lenders shall be entitled to rely upon, and shall be
      fully protected in relying upon, any notice or communication (including any
      notice of borrowing) delivered by Borrower Agent on behalf of any Borrower.
      Agent and Lenders may give any notice or communication with a Borrower hereunder
      to Borrower Agent on behalf of such Borrower. Agent shall have the right, in
      its
      discretion, to deal exclusively with Borrower Agent for any or all purposes
      under the Loan Documents. Each Borrower agrees that any notice, election,
      communication, representation, agreement or undertaking made on its behalf
      by
      Borrower Agent shall be binding upon and enforceable against it.

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    4.5 One
      Obligation.
      The
      Loans, LC Obligations and other Obligations shall constitute one general
      obligation of Borrowers and (unless otherwise expressly provided in any Loan
      Document) shall be secured by Agent’s Lien upon all Collateral; provided,
      however,
      that
      Agent and each Lender shall be deemed to be a creditor of, and the holder of
      a
      separate claim against, each Borrower to the extent of any Obligations jointly
      or severally owed by such Borrower.

     

    4.6 Effect
      of Termination.
      On the
      effective date of any termination of the Commitments, all Obligations shall
      be
      immediately due and payable, and any Lender may terminate its and its
      Affiliates’ Bank Products (including, with the consent of Agent, any Cash
      Management Services). All undertakings of Borrowers contained in the Loan
      Documents shall survive any termination, and Agent shall retain its Liens in
      the
      Collateral and all of its rights and remedies under the Loan Documents until
      Full Payment of the Obligations. Notwithstanding Full Payment of the
      Obligations, Agent shall not be required to terminate its Liens in any
      Collateral unless, with respect to any damages Agent may incur as a result
      of
      the dishonor or return of Payment Items applied to Obligations, Agent receives
      (a) a written agreement, executed by Borrowers and any Person whose advances
      are
      used in whole or in part to satisfy the Obligations, indemnifying Agent and
      Lenders from any such damages; or (b) such Cash Collateral as Agent, in its
      discretion, deems necessary to protect against any such damages. The provisions
      of Sections 2.3,
      3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 12, 14.2
      and this
      Section, and the obligation of each Obligor and Lender with respect to each
      indemnity given by it in any Loan Document, shall survive Full Payment of the
      Obligations and any release relating to this credit facility.

     

    SECTION
      5.
      PAYMENTS

     

    5.1 General
      Payment Provisions.
      All
      payments of Obligations shall be made in Dollars, without offset, counterclaim
      or defense of any kind, free of (and without deduction for) any Taxes, and
      in
      immediately available funds, not later than 12:00 noon on the due date. Any
      payment after such time shall be deemed made on the next Business Day. Borrowers
      may, at the time of payment, specify to Agent the Obligations to which such
      payment is to be applied, but Agent shall in all events retain the right to
      apply such payment in such manner as Agent, subject to the provisions hereof,
      may determine to be appropriate. If any payment under the Loan Documents shall
      be stated to be due on a day other than a Business Day, the due date shall
      be
      extended to the next Business Day and such extension of time shall be included
      in any computation of interest and fees. Any payment of a LIBOR Loan prior
      to
      the end of its Interest Period shall be accompanied by all amounts due under
      Section 3.9.
      Any
      prepayment of Loans shall be applied first to Base Rate Loans and then to LIBOR
      Loans.

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    5.2 Repayment
      of Revolver Loans.
      Revolver
      Loans shall be due and payable in full on the Revolver Termination Date, unless
      payment is sooner required hereunder. Revolver Loans may be prepaid from time
      to
      time, without penalty or premium. If any Asset Disposition includes the
      disposition of Accounts or Inventory, then Net Proceeds equal to the greater
      of
      (a) the net book value of such Accounts and Inventory, or (b) the reduction
      in
      the Borrowing Base upon giving effect to such disposition, shall be applied
      to
      the Revolver Loans. Notwithstanding anything herein to the contrary, if an
      Overadvance exists, Borrowers shall, on the sooner of Agent’s demand or the
      first Business Day after any Borrower has knowledge thereof, repay the
      outstanding Revolver Loans in an amount sufficient to reduce the principal
      balance of Revolver Loans to the Borrowing Base.

     

    5.3 [Intentionally
      Omitted].

     

    5.4 Payment
      of Other Obligations.
      Obligations other than Loans, including LC Obligations and Extraordinary
      Expenses, shall be paid by Borrowers as provided in the Loan Documents or,
      if no
      payment date is specified, on
      demand.

     

    5.5 Marshaling;
      Payments Set Aside.
      None of
      Agent or Lenders shall be under any obligation to marshal any assets in favor
      of
      any Obligor or against any Obligations. If any Obligor makes a payment to Agent
      or Lenders, or if Agent or any Lender receives payment from the proceeds of
      Collateral, exercise of setoff or otherwise, and such payment is subsequently
      invalidated or required to be repaid to a trustee, receiver or any other Person,
      then the Obligations originally intended to be satisfied, and all Liens, rights
      and remedies therefor, shall be revived and continued in full force and effect
      as if such payment had not been received and any enforcement or setoff had
      not
      occurred.

     

    5.6 Post-Default
      Allocation of Payments.

     

    5.6.1
      Allocation.
      Notwithstanding anything herein to the contrary, during an Event of Default,
      monies to be applied to the Obligations, whether arising from payments by
      Obligors, realization on Collateral, setoff or otherwise, shall be allocated
      as
      follows:

     

    (a) first,
      to all
      costs and expenses, including Extraordinary Expenses, owing to
      Agent;

     

    (b) second,
      to all
      amounts owing to Agent on Swingline Loans or Protective Advances;

     

    (c) third,
      to all
      amounts owing to Issuing Bank on LC Obligations;

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    (d) fourth,
      to all
      Obligations constituting fees (excluding amounts relating to Bank
      Products);

     

    (e) fifth,
      to all
      Obligations constituting interest (excluding amounts relating to Bank
      Products);

     

    (f) sixth,
      to
      provide Cash Collateral for outstanding Letters of Credit;

     

    (g) seventh,
      to all
      other Obligations, other than Bank Product Debt; and

     

    (h) last,
      to Bank
      Product Debt.

     

    Amounts
      shall be applied to each category of Obligations set forth above until Full
      Payment thereof and then to the next category. If amounts are insufficient
      to
      satisfy a category, they shall be applied on a pro rata basis among the
      Obligations in the category. The allocations set forth in this Section are
      solely to determine the rights and priorities of Agent and Lenders as among
      themselves, and may be changed by agreement among them without the consent
      of
      any Obligor. This Section is not for the benefit of or enforceable by any
      Borrower.

     

    5.6.2
      Erroneous
      Application.
      Agent
      shall not be liable for any application of amounts made by it in good faith
      and,
      if any such application is subsequently determined to have been made in error,
      the sole recourse of any Lender or other Person to which such amount should
      have
      been made shall be to recover the amount from the Person that actually received
      it (and, if such amount was received by any Lender, such Lender hereby agrees
      to
      return it).

     

    5.7 Application
      of Payments.
      The
      ledger balance in the main Dominion Account as of the end of a Business Day
      shall be applied to the Obligations at the beginning of the next Business Day.
      Each Borrower irrevocably waives the right to direct the application of any
      payments or Collateral proceeds, and agrees that Agent shall have the
      continuing, exclusive right to apply and reapply same against the Obligations,
      in such manner as Agent deems advisable, notwithstanding any entry by Agent
      in
      its records. If, as a result of Agent’s receipt of Payment Items or proceeds of
      Collateral, a credit balance exists, the balance shall not accrue interest
      in
      favor of Borrowers and shall be made available to Borrowers as long as no
      Default or Event of Default exists.

     

    5.8 Loan
      Account; Account Stated.

     

    5.8.1
      Loan
      Account.
      Agent
      shall maintain in accordance with its usual and customary practices an account
      or accounts (“Loan
      Account”)
      evidencing the Debt of Borrowers resulting from each Loan or issuance of a
      Letter of Credit from time to time. Any failure of Agent to record anything
      in
      the Loan Account, or any error in doing so, shall not limit or otherwise affect
      the obligation of Borrowers to pay any amount owing hereunder. Agent may
      maintain a single Loan Account in the name of Borrower Agent, and each Borrower
      confirms that such arrangement shall have no effect on the joint and several
      character of its liability for the Obligations.

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

     

    5.8.2
      Entries
      Binding.
      Entries
      made in the Loan Account shall constitute presumptive evidence of the
      information contained therein. If any information contained in the Loan Account
      is provided to or inspected by any Person, then such information shall be
      conclusive and binding on such Person for all purposes absent manifest error,
      except to the extent such Person notifies Agent in writing within 30 days after
      receipt or inspection that specific information is subject to
      dispute.

     

    5.9 Taxes.
      If any
      Taxes (except Excluded Taxes) shall be payable by any party due to the
      execution, delivery, issuance or recording of any Loan Documents, or the
      creation or repayment of any Obligations, Borrowers shall pay (and shall
      promptly reimburse Agent and Lenders for their payment of) all such Taxes,
      including any interest and penalties thereon, and will indemnify and hold
      harmless Indemnitees against all liability in connection therewith. If Borrowers
      shall be required by Applicable Law to withhold or deduct any Taxes (except
      Excluded Taxes) with respect to any sum payable under any Loan Documents, (a)
      the sum payable to Agent or such Lender shall be increased as may be necessary
      so that, after making all required withholding or deductions, Agent or such
      Lender (as the case may be) receives an amount equal to the sum it would have
      received had no such withholding or deductions been made; (b) Borrowers shall
      make such withholding or deductions; and (c) Borrowers shall pay the full amount
      withheld or deducted to the relevant taxing or other authority in accordance
      with Applicable Law.

     

    5.10 Withholding
      Tax Exemption.
      At
      least five Business Days prior to the first date for payment of interest or
      fees
      hereunder to a Foreign Lender, the Foreign Lender shall deliver to Borrowers
      and
      Agent two duly completed copies of IRS Form W-8BEN or W-8ECI (or any subsequent
      replacement or substitute form therefor), certifying that such Lender can
      receive payment of Obligations without deduction or withholding of any United
      States federal income taxes. Each Foreign Lender shall deliver to Borrowers
      and
      Agent two additional copies of such form before the preceding form expires
      or
      becomes obsolete or after the occurrence of any event requiring a change in
      the
      form, as well as any amendments, extensions or renewals thereof as may be
      reasonably requested by Borrowers or Agent, in each case, certifying that the
      Foreign Lender can receive payment of Obligations without deduction or
      withholding of any such taxes, unless an event (including any change in treaty
      or law) has occurred that renders such forms inapplicable or prevents the
      Foreign Lender from certifying that it can receive payments without deduction
      or
      withholding of such taxes. During any period that a Foreign Lender does not
      or
      is unable to establish that it can receive payments without deduction or
      withholding of such taxes, other than by reason of an event (including any
      change in treaty or law) that occurs after it becomes a Lender, Agent may
      withhold taxes from payments to such Foreign Lender at the applicable statutory
      and treaty rates, and Borrowers shall not be required to pay any additional
      amounts under this Section as a result of such withholding.

     

    5.11 Nature
      and Extent of Each Borrower’s Liability.

     

    5.11.1
      Joint
      and Several Liability.
      Each
      Borrower agrees that it is jointly and severally liable for, and absolutely
      and
      unconditionally guarantees to Agent and Lenders the prompt payment and
      performance of, all Obligations and all agreements under the Loan Documents.
      Each Borrower agrees that its guaranty obligations hereunder constitute a
      continuing guaranty of payment and performance and not of collection, that
      such
      obligations shall not be discharged until Full Payment of the Obligations,
      and
      that such obligations are absolute and unconditional, irrespective of (a) the
      genuineness, validity, regularity, enforceability, subordination or any future
      modification of, or change in, any Obligations or Loan Document, or any other
      document, instrument or agreement to which any Obligor is or may become a party
      or liable; (b) the absence of any action to enforce this Agreement (including
      this Section) or any other Loan Document, or any waiver, consent or indulgence
      of any kind by Agent or any Lender with respect thereto; (c) the existence,
      value or condition of, or failure to perfect a Lien or to preserve rights
      against, any security or guaranty for the Obligations or any action, or the
      absence of any action, by Agent or any Lender in respect thereof (including
      the
      release of any security or guaranty); (d) the insolvency of any Obligor; (e)
      any
      election by Agent or any Lender in an Insolvency Proceeding for the application
      of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of
      a
      Lien by any other Borrower, as debtor-in-possession under Section 364 of the
      Bankruptcy Code or otherwise; (g) the disallowance of any claims of Agent or
      any
      Lender against any Obligor for the repayment of any Obligations under Section
      502 of the Bankruptcy Code or otherwise; or (h) any other action or
      circumstances that might otherwise constitute a legal or equitable discharge
      or
      defense of a surety or guarantor, except Full Payment of all
      Obligations.

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    5.11.2
      Waivers.

     

    (a) Each
      Borrower expressly waives all rights that it may have now or in the future
      under
      any statute, at common law, in equity or otherwise, to compel Agent or Lenders
      to marshal assets or to proceed against any Obligor, other Person or security
      for the payment or performance of any Obligations before, or as a condition
      to,
      proceeding against such Borrower. It is agreed among each Borrower, Agent and
      Lenders that the provisions of this Section are of the essence of the
      transaction contemplated by the Loan Documents and that, but for such
      provisions, Agent and Lenders would decline to make Loans and issue Letters
      of
      Credit. Notwithstanding anything to the contrary in any Loan Document, and
      except as set forth in Section 5.11.3,
      each
      Borrower expressly waives all rights at law or in equity to subrogation,
      reimbursement, exoneration, contribution, indemnification or set off, as well
      as
      all defenses available to a surety, guarantor or accommodation co-obligor.
      Each
      Borrower acknowledges that its guaranty pursuant to this Section is necessary
      to
      the conduct and promotion of its business, and can be expected to benefit such
      business.

     

    (b) Agent
      and
      Lenders may, in their discretion, pursue such rights and remedies as they deem
      appropriate, including realization upon Collateral or any Real Estate by
      judicial foreclosure or non-judicial sale or enforcement, without affecting
      any
      rights and remedies under this Section
      5.11.
      If, in
      the exercise of any rights or remedies, Agent or any Lender shall forfeit any
      of
      its rights or remedies, including its right to enter a deficiency judgment
      against any Borrower or any other Person, whether because of any applicable
      laws
      pertaining to “election of remedies” or otherwise, each Borrower consents to
      such action by Agent or such Lender and waives any claim based upon such action,
      even if the action may result in loss of any rights of subrogation that any
      Borrower might otherwise have had but for such action. Any election of remedies
      that results in denial or impairment of the right of Agent or any Lender to
      seek
      a deficiency judgment against any Borrower shall not impair any other Borrower’s
      obligation to pay the full amount of the Obligations. Each Borrower waives
      all
      rights and defenses arising out of an election of remedies, such as nonjudicial
      foreclosure with respect to any security for the Obligations, even though that
      election of remedies destroys such Borrower’s rights of subrogation against any
      other Person. If Agent bids at any foreclosure or trustee’s sale or at any
      private sale, Agent may bid all or a portion of the Obligations and the amount
      of such bid need not be paid by Agent but shall be credited against the
      Obligations. The amount of the successful bid at any such sale, whether Agent
      or
      any other Person is the successful bidder, shall be conclusively deemed to
      be
      the fair market value of the Collateral, and the difference between such bid
      amount and the remaining balance of the Obligations shall be conclusively deemed
      to be the amount of the Obligations guaranteed under this Section 5.11,
      notwithstanding that any present or future law or court decision may have the
      effect of reducing the amount of any deficiency claim to which Agent or any
      Lender might otherwise be entitled but for such bidding at any such
      sale.

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    5.11.3
      Extent
      of Liability; Contribution.

     

    (a) Notwithstanding
      anything herein to the contrary, each Borrower’s liability under this
Section 5.11
      shall be
      limited to the greater of (i) all amounts for which such Borrower is primarily
      liable, as described below, and (ii) such Borrower’s Allocable
      Amount.

     

    (b) If
      any
      Borrower makes a payment under this Section 5.11
      of any
      Obligations (other than amounts for which such Borrower is primarily liable)
      (a
“Guarantor
      Payment”)
      that,
      taking into account all other Guarantor Payments previously or concurrently
      made
      by any other Borrower, exceeds the amount that such Borrower would otherwise
      have paid if each Borrower had paid the aggregate Obligations satisfied by
      such
      Guarantor Payments in the same proportion that such Borrower’s Allocable Amount
      bore to the total Allocable Amounts of all Borrowers, then such Borrower shall
      be entitled to receive contribution and indemnification payments from, and
      to be
      reimbursed by, each other Borrower for the amount of such excess, pro rata
      based
      upon their respective Allocable Amounts in effect immediately prior to such
      Guarantor Payment. The “Allocable
      Amount”
for
      any
      Borrower shall be the maximum amount that could then be recovered from such
      Borrower under this Section 5.11
      without
      rendering such payment voidable or avoidable under Section 548 of the Bankruptcy
      Code or under any applicable state fraudulent transfer or conveyance act, or
      similar statute or common law.

     

    (c) Nothing
      contained in this Section 5.11
      shall
      limit the liability of any Borrower to pay Loans made directly or indirectly
      to
      that Borrower (including Loans advanced to any other Borrower and then re-loaned
      or otherwise transferred to, or for the benefit of, such Borrower), LC
      Obligations relating to Letters of Credit issued to support such Borrower’s
      business, and all accrued interest, fees, expenses and other related Obligations
      with respect thereto, for which such Borrower shall be primarily liable for
      all
      purposes hereunder. Agent and Lenders shall have the right, at any time in
      their
      discretion, to condition Loans and Letters of Credit upon a separate calculation
      of borrowing availability for each Borrower and to restrict the disbursement
      and
      use of such Loans and Letters of Credit to such Borrower.

     

    5.11.4
      Joint
      Enterprise.
      Each
      Borrower has requested that Agent and Lenders make this credit facility
      available to Borrowers on a combined basis, in order to finance Borrowers’
business most efficiently and economically. Borrowers’ business is a mutual and
      collective enterprise, and Borrowers believe that consolidation of their credit
      facility will enhance the borrowing power of each Borrower and ease the
      administration of their relationship with Lenders, all to the mutual advantage
      of Borrowers. Borrowers acknowledge and agree that Agent’s and Lenders’
willingness to extend credit to Borrowers and to administer the Collateral
      on a
      combined basis, as set forth herein, is done solely as an accommodation to
      Borrowers and at Borrowers’ request.

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    5.11.5
      Subordination.
      Each
      Borrower hereby subordinates any claims, including any right of payment,
      subrogation, contribution and indemnity, that it may have at any time against
      any other Obligor, howsoever arising, to the Full Payment of all
      Obligations.

     

    SECTION
      6.
      CONDITIONS PRECEDENT

     

    6.1 Conditions
      Precedent to Initial Loans.
      In
      addition to the conditions set forth in Section
      6.2,
      Lenders
      shall not be required to fund any requested Loan, issue any Letter of Credit,
      or
      otherwise extend credit to Borrowers hereunder, until the date (“Closing
      Date”)
      that
      each of the following conditions has been satisfied:

     

    (a) Each
      other Loan Document shall have been duly executed and delivered to Agent by
      each
      of the signatories thereto, and each Obligor shall be in compliance with all
      terms thereof.

     

    (b) Agent
      shall have received acknowledgments of all filings or recordations necessary
      to
      perfect its Liens in the Collateral, as well as UCC and Lien searches and other
      evidence satisfactory to Agent that such Liens are the only Liens upon the
      Collateral, except Permitted Liens.

     

    (c) Agent
      shall have received the Related Real Estate Documents for all Real Estate
      subject to a Mortgage.

     

    (d) Agent
      shall have received certificates, in form and substance satisfactory to it,
      from
      a knowledgeable Senior Officer of each Borrower certifying that, after giving
      effect to the initial Loans and transactions hereunder, (i) such Borrower is
      Solvent; (ii) no Default or Event of Default exists; (iii) the representations
      and warranties set forth in Section 9
      are true
      and correct; and (iv) such Borrower has complied with all agreements and
      conditions to be satisfied by it under the Loan Documents.

     

    (e) Agent
      shall have received a certificate of a duly authorized officer of each Obligor,
      certifying (i) that attached copies of such Obligor’s Organic Documents are true
      and complete, and in full force and effect, without amendment except as shown,
      (ii) that an attached copy of resolutions authorizing execution and delivery
      of
      the Loan Documents is true and complete, and that such resolutions are in full
      force and effect, were duly adopted, have not been amended, modified or revoked,
      and constitute all resolutions adopted with respect to this credit facility,
      and
      (iii) to the title, name and signature of each Person authorized to sign the
      Loan Documents. Agent may conclusively rely on this certificate until it is
      otherwise notified by the applicable Obligor in writing.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    (f) Agent
      shall have received a written opinion of Haddan & Zepfel, LLP, as well as
      any local counsel to Borrowers or Agent (if requested by Agent), in form and
      substance satisfactory to Agent.

     

    (g) Agent
      shall have received copies of the charter documents of each Obligor, certified
      as appropriate by the Secretary of State or another official of such Obligor’s
      jurisdiction of organization. Agent shall have received good standing
      certificates for each Obligor, issued by the Secretary of State or other
      appropriate official of such Obligor’s jurisdiction of organization and each
      jurisdiction where such Obligor’s conduct of business or ownership of Property
      necessitates qualification.

     

    (h) Agent
      shall have received copies of policies or certificates of insurance for the
      insurance policies carried by Borrowers, all in compliance with the Loan
      Documents.

     

    (i) Agent
      shall have completed its business, financial and legal due diligence of
      Obligors, including a roll-forward of its previous field examination, with
      results satisfactory to Agent. No material adverse change in the financial
      condition of any Obligor or in the quality, quantity or value of any Collateral
      shall have occurred since September 30, 2005.

     

    (j) Borrowers
      shall have paid all fees and expenses to be paid to Agent and Lenders on the
      Closing Date.

     

    (k) Agent
      shall have received a Borrowing Base Certificate prepared as of a date not
      more
      than 2 days prior to the Closing Date. 

     

    (l) Upon
      giving effect to the initial funding of Loans and issuance of Letters of Credit,
      and the payment by Borrowers of all fees and expenses incurred in connection
      herewith and taking into account all Availability Reserves in existence as
      of
      the Closing Date, Availability shall be at least $3,000,000.

     

    (m) Agent
      shall have received evidence that Borrowers’ invoices indicate that title to
      sold goods shall pass from Borrower to its customer once production of the
      goods
      are completed and they become available to be accepted by or delivered to the
      customer.

     

    (n) Agent
      shall have received copies of Existing Subordinated Debt Documents and the
      other
      Material Contracts as in effect on the Closing Date.

     

    (o) Agent
      shall have received a certification from the Borrower Agent that no default
      or
      event of default has occurred and is continuing under the Existing Subordinated
      Debt Documents.

     

    (p) Agent
      shall have received duly executed agreements establishing each Dominion Account
      and related lockbox with the Borrowers’ current cash management bank, in form
      and substance satisfactory to Agent.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    6.2 Conditions
      Precedent to All Credit Extensions.
      Agent,
      Issuing Bank and Lenders shall not be required to fund any Loans, arrange for
      issuance of any Letters of Credit or grant any other accommodation to or for
      the
      benefit of Borrowers, unless the following conditions are
      satisfied:

     

    (a) No
      Default or Event of Default shall exist at the time of, or result from, such
      funding, issuance or grant;

     

    (b) The
      representations and warranties of each Obligor in the Loan Documents shall
      be
      true and correct on the date of, and upon giving effect to, such funding,
      issuance or grant (except for representations and warranties that expressly
      relate to an earlier date);

     

    (c) All
      conditions precedent in any other Loan Document shall be satisfied;

     

    (d) No
      event
      shall have occurred or circumstance exist that has or could reasonably be
      expected to have a Material Adverse Effect; and

     

    (e) With
      respect to issuance of a Letter of Credit, the LC Conditions shall be
      satisfied.

     

    Each
      request (or deemed request) by Borrowers for funding of a Loan, issuance of
      a
      Letter of Credit or grant of an accommodation shall constitute a representation
      by Borrowers that the foregoing conditions are satisfied on the date of such
      request and on the date of such funding, issuance or grant. As an additional
      condition to any funding, issuance or grant, Agent shall have received such
      other information, documents, instruments and agreements as it deems appropriate
      in connection therewith.

     

    6.3 Limited
      Waiver of Conditions Precedent.
      If
      Agent, Issuing Bank or Lenders fund any Loans, arrange for issuance of any
      Letters of Credit or grant any other accommodation when any conditions precedent
      are not satisfied (regardless of whether the lack of satisfaction was known
      or
      unknown at the time), it shall not operate as a waiver of (a) the right of
      Agent, Issuing Bank and Lenders to insist upon satisfaction of all conditions
      precedent with respect to any subsequent funding, issuance or grant; nor (b)
      any
      Default or Event of Default due to such failure of conditions or
      otherwise.

     

    6.4 Conditions
      Subsequent.
      

     

    6.4.1
      Within 30 days after the Closing Date, Agent shall receive evidence that the
      Dominion Account and related lockbox have been established with Bank of America,
      in form and substance, and with financial institutions, satisfactory to
      Agent.

     

    6.4.2
      Within 60 days after the Closing Date, Agent shall have received vehicle titles
      for all vehicles owned by Borrowers together with all documents deemed necessary
      by Agent to perfect its security interest in such vehicles.

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    SECTION
      7.
      COLLATERAL

     

    7.1 Grant
      of Security Interest.
      To
      secure the prompt payment and performance of all Obligations, each Borrower
      hereby grants to Agent, for the benefit of Secured Parties, a continuing
      security interest in and Lien upon all Property of such Borrower, including
      all
      of the following Property, whether now owned or hereafter acquired, and wherever
      located:

     

    (a) all
      Accounts;

     

    (b) all
      Chattel Paper, including electronic chattel paper;

     

    (c) all
      Commercial Tort Claims;

     

    (d) all
      Deposit Accounts;

     

    (e) all
      Documents;

     

    (f) all
      General Intangibles, including Payment Intangibles, Software and Intellectual
      Property;

     

    (g) all
      Goods, including Inventory, Equipment and fixtures;

     

    (h) all
      Instruments;

     

    (i) all
      Investment Property;

     

    (j) all
      Letter-of-Credit Rights;

     

    (k) all
      Supporting Obligations;

     

    (l) all
      monies, whether or not in the possession or under the control of Agent, a
      Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash
      Collateral;

     

    (m) all
      accessions to, substitutions for, and all replacements, products, and cash
      and
      non-cash proceeds of the foregoing, including proceeds of and unearned premiums
      with respect to insurance policies, and claims against any Person for loss,
      damage or destruction of any Collateral; and

     

    (n) all
      books
      and records (including customer lists, files, correspondence, tapes, computer
      programs, print-outs and computer records) pertaining to the
      foregoing.

     

    7.2 Lien
      on Deposit Accounts; Cash Collateral.

     

    7.2.1
      Deposit
      Accounts.
      To
      further secure the prompt payment and performance of all Obligations, each
      Borrower hereby grants to Agent, for the benefit of Secured Parties, a
      continuing security interest in and Lien upon all of such Borrower’s right,
      title and interest in and to each Deposit Account of such Borrower and any
      deposits or other sums at any time credited to any such Deposit Account,
      including any sums in any blocked or lockbox accounts or in any accounts into
      which such sums are swept. Each Borrower authorizes and directs each bank or
      other depository to deliver to Agent, on a daily basis, all balances in each
      Deposit Account maintained by such Borrower with such depository for application
      to the Obligations then outstanding. Each Borrower irrevocably appoints Agent
      as
      such Borrower’s attorney-in-fact to collect such balances to the extent any such
      delivery is not so made.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    7.2.2
      Cash
      Collateral.
      Any
      Cash Collateral, including Cash Collateral provided pursuant to Section
      2.3.3,
      may be
      invested, in Agent’s discretion, in Cash Equivalents, but Agent shall have no
      duty to do so, regardless of any agreement, understanding or course of dealing
      with any Borrower, and shall have no responsibility for any investment or loss.
      Each Borrower hereby grants to Agent, for the benefit of Secured Parties, a
      security interest in all Cash Collateral held from time to time and all proceeds
      thereof, as security for the Obligations, whether such Cash Collateral is held
      in the Cash Collateral Account or elsewhere. Agent may apply Cash Collateral
      to
      the payment of any Obligations, in such order as Agent may elect, as they become
      due and payable. The Cash Collateral Account and all Cash Collateral shall
      be
      under the sole dominion and control of Agent. No Borrower or other Person
      claiming through or on behalf of any Borrower shall have any right to any Cash
      Collateral, until Full Payment of all Obligations.

     

    7.3 Real
      Estate Collateral.

     

    7.3.1 Lien
      on Real Estate.
      The
      Obligations shall also be secured by Mortgages upon all Real Estate owned by
      Borrowers, including the Mortgaged Property. The Mortgages shall be duly
      recorded, at Borrowers’ expense, in each office where such recording is required
      to constitute a fully perfected Lien on the Real Estate covered thereby. If
      any
      Borrower acquires Real Estate hereafter, Borrowers shall, within 30 days,
      execute, deliver and record a Mortgage sufficient to create a first priority
      Lien in favor of Agent on such Real Estate, and shall deliver all Related Real
      Estate Documents.

     

    7.3.2 Collateral
      Assignment of Leases.
      To
      further secure the prompt payment and performance of all Obligations, each
      Borrower hereby transfers and assigns to Agent, for the benefit of Secured
      Parties, all of such Borrower’s right, title and interest in, to and under all
      now or hereafter existing leases of real Property to which such Borrower is
      a
      party, whether as lessor or lessee, and all extensions, renewals and
      modifications thereof.

     

    7.4 Other
      Collateral.

     

    7.4.1
      Commercial
      Tort Claims.
      Borrowers shall promptly notify Agent in writing if any Borrower has a
      Commercial Tort Claim (other than, as long as no Default or Event of Default
      exists, a Commercial Tort Claim for less than $100,000) and, upon Agent’s
      request, shall promptly execute such documents and take such actions as Agent
      deems appropriate to confer upon Agent (for the benefit of Secured Parties)
      a
      duly perfected, first priority Lien upon such claim.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    7.4.2
      Certain
      After-Acquired Collateral.
      Borrowers shall promptly notify Agent in writing if, after the Closing Date,
      any
      Borrower obtains any interest in any Collateral consisting of Deposit Accounts,
      Chattel Paper, Documents, Instruments, Intellectual Property, Investment
      Property or Letter-of-Credit Rights and, upon Agent’s request, shall promptly
      execute such documents and take such actions as Agent deems appropriate to
      effect Agent’s duly perfected, first priority Lien upon such Collateral,
      including obtaining any appropriate possession, control agreement or Lien
      Waiver. If any Collateral is in the possession of a third party, at Agent’s
      request, Borrowers shall obtain an acknowledgment that such third party holds
      the Collateral for the benefit of Agent.

     

    7.5 No
      Assumption of Liability.
      The
      Lien on Collateral granted hereunder is given as security only and shall not
      subject Agent or any Lender to, or in any way modify, any obligation or
      liability of Borrowers relating to any Collateral.

     

    7.6 Further
      Assurances.
      Promptly upon request, Borrowers shall deliver such instruments, assignments,
      title certificates, or other documents or agreements, and shall take such
      actions, as Agent deems appropriate under Applicable Law to evidence or perfect
      its Lien on any Collateral, or otherwise to give effect to the intent of this
      Agreement. Each Borrower authorizes Agent to file any financing statement that
      indicates the Collateral as “all assets” or “all personal property” of such
      Borrower, or words to similar effect, and ratifies any action taken by Agent
      before the Closing Date to effect or perfect its Lien on any
      Collateral.

     

    7.7 Foreign
      Subsidiary Stock.
      Notwithstanding Section 7.1,
      the
      Collateral shall include only 65% of the voting stock of any Foreign
      Subsidiary.

     

    SECTION
      8.
      COLLATERAL ADMINISTRATION

     

    8.1 Borrowing
      Base Certificates.
      By
      Tuesday of each week, Borrowers shall deliver to Agent (and Agent shall promptly
      deliver same to Lenders) a Borrowing Base Certificate prepared as of the close
      of business of the previous week, and at such other times (either more
      frequently or less frequently) as Agent may request. All calculations of
      Availability in any Borrowing Base Certificate shall originally be made by
      Borrowers and certified by a Senior Officer, provided that Agent may from time
      to time review and adjust any such calculation (a) to reflect its reasonable
      estimate of declines in value of any Collateral, due to collections received
      in
      the Dominion Account or otherwise; (b) to adjust advance rates to reflect
      changes in dilution, quality, mix and other factors affecting Collateral; and
      (c) to the extent the calculation is not made in accordance with this Agreement
      or does not accurately reflect the Availability Reserve.

     

    8.2 Administration
      of Accounts.

     

    8.2.1
      Records
      and Schedules of Accounts.
      Each
      Borrower shall keep accurate and complete records of its Accounts, including
      all
      payments and collections thereon, and shall submit to Agent a monthly sales
      and
      collections report, by the 20th
      day of
      the following month, in form satisfactory to Agent. Each Borrower shall also
      provide to Agent, on or before the 20th
      day of
      each month, a detailed aged trial balance of all Accounts (separately listing
      Bonded Accounts) as of the end of the preceding month, specifying each Account’s
      Account Debtor name and address, amount, invoice date and due date, showing
      any
      discount, allowance, credit, authorized return or dispute, and including such
      proof of delivery, copies of invoices and invoice registers, copies of related
      documents, repayment histories, status reports and other information as Agent
      may reasonably request. If Accounts in an aggregate face amount of $500,000
      or
      more cease to be Eligible Accounts, Borrowers shall notify Agent of such
      occurrence promptly (and in any event within one Business Day) after any
      Borrower has knowledge thereof.

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

    8.2.2
      Taxes.
      If an
      Account of any Borrower includes a charge for any Taxes, Agent is authorized,
      in
      its discretion, to pay the amount thereof to the proper taxing authority for
      the
      account of such Borrower and to charge Borrowers therefor; provided,
      however,
      that
      neither Agent nor Lenders shall be liable for any Taxes that may be due from
      Borrowers or with respect to any Collateral.

     

    8.2.3
      Account
      Verification.
      Whether
      or not a Default or Event of Default exists, Agent shall have the right at
      any
      time, in the name of Agent, any designee of Agent or any Borrower to verify
      the
      validity, amount or any other matter relating to any Accounts of Borrowers
      by
      mail, telephone or otherwise. Borrowers shall cooperate fully with Agent in
      an
      effort to facilitate and promptly conclude any such verification
      process.

     

    8.2.4
      Maintenance
      of Dominion Account.
      Borrowers shall maintain Dominion Accounts pursuant to lockbox or other
      arrangements acceptable to Agent. Borrowers shall obtain an agreement (in form
      and substance satisfactory to Agent) from each lockbox servicer and Dominion
      Account bank, establishing Agent’s control over and Lien in the lockbox or
      Dominion Account, requiring immediate deposit of all remittances received in
      the
      lockbox to a Dominion Account and, if such Dominion Account is not maintained
      with Bank of America, requiring immediate transfer of all funds in the Dominion
      Account to a Dominion Account maintained with Bank of America, and waiving
      offset rights of such servicer or bank against any funds in the lockbox or
      Dominion Account, except offset rights for customary administrative charges.
      Neither Agent nor Lenders assume any responsibility to Borrowers for any lockbox
      arrangement or Dominion Account, including any claim of accord and satisfaction
      or release with respect to any Payment Items accepted by any bank.

     

    8.2.5
      Proceeds
      of Collateral.
      Borrowers shall request in writing and otherwise take all reasonable steps
      to
      ensure that all payments on Accounts or otherwise relating to Collateral are
      made directly to a Dominion Account (or a lockbox relating to a Dominion
      Account). If any Borrower or Subsidiary receives cash or Payment Items with
      respect to any Collateral, it shall hold same in trust for Agent and promptly
      (not later than the next Business Day) deposit same into a Dominion
      Account.

     

    8.3 Administration
      of Inventory.

     

    8.3.1
      Records
      and Reports of Inventory.
      Each
      Borrower shall keep accurate and complete records of its Inventory, including
      costs and daily withdrawals and additions, and shall submit to Agent inventory
      reports in form satisfactory to Agent, on a monthly basis by no later than
      the
      20th day of the following month. Until a perpetual inventory reporting system
      satisfactory to Agent has been established by each Borrower, each Borrower
      shall
      conduct a physical inventory count at least once per calendar quarter (and
      on a
      more frequent basis if requested by Agent when an Event of Default exists)
      and
      periodic cycle counts consistent with historical practices, and shall provide
      to
      Agent a report based on each such inventory and count promptly upon completion
      thereof, together with such supporting information as Agent may request. Once
      a
      perpetual inventory reporting system has been established by each Borrower,
      such
      physical inventory shall be conducted at least once per year Agent may
      participate in and observe each inventory or physical count.

     

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

     

    8.3.2
      Returns
      of Inventory.
      No
      Borrower shall return any Inventory to a supplier, vendor or other Person,
      whether for cash, credit or otherwise, unless (a) such return is in the Ordinary
      Course of Business; (b) no Default, Event of Default or Overadvance exists
      or
      would result therefrom; (c) Agent is promptly notified if the aggregate Value
      of
      all Inventory returned in any month exceeds $100,000; and (d) any payment
      received by a Borrower for a return is promptly remitted to Agent for
      application to the Obligations.

     

    8.3.3
      Acquisition,
      Sale and Maintenance.
      No
      Borrower shall acquire or accept any Inventory on consignment or approval,
      and
      shall take all steps to assure that all Inventory is produced in accordance
      with
      Applicable Law, including the FLSA. No Borrower shall sell any Inventory on
      consignment or approval or any other basis under which the customer may return
      or require a Borrower to repurchase such Inventory. Borrowers shall use, store
      and maintain all Inventory with reasonable care and caution, in accordance
      with
      applicable standards of any insurance and in conformity with all Applicable
      Law,
      and shall make current rent payments (within applicable grace periods provided
      for in leases) at all locations where any Collateral is located.

     

    8.4 Administration
      of Equipment.

     

    8.4.1
      Records
      and Schedules of Equipment.
      Each
      Borrower shall keep accurate and complete records of its Equipment, including
      kind, quality, quantity, cost, acquisitions and dispositions thereof, and shall
      submit to Agent, on such periodic basis as Agent may request, a current schedule
      thereof, in form satisfactory to Agent. Promptly upon request, Borrowers shall
      deliver to Agent evidence of their ownership or interests in any
      Equipment.

     

    8.4.2
      Dispositions
      of Equipment.
      No
      Borrower shall sell, lease or otherwise dispose of any Equipment, without the
      prior written consent of Agent, other than (a) a Permitted Asset Disposition;
      and (b) replacement of Equipment that is worn, damaged or obsolete with
      Equipment of like function and value, if the replacement Equipment is acquired
      substantially contemporaneously with such disposition and is free of
      Liens.

     

    8.4.3
      Condition
      of Equipment.
      The
      Equipment is in good operating condition and repair, and all necessary
      replacements and repairs have been made so that the value and operating
      efficiency of the Equipment is preserved at all times, reasonable wear and
      tear
      excepted. Each Borrower shall ensure that the Equipment is mechanically and
      structurally sound, and capable of performing the functions for which it was
      designed, in accordance with the manufacturer’s published and recommended
      specifications. No Borrower shall permit any Equipment to become affixed to
      real
      Property unless any landlord or mortgagee delivers a Lien Waiver or similar
      instrument.

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

    

     

    8.5 Administration
      of Deposit Accounts.
      Schedule 8.5
      sets
      forth all Deposit Accounts maintained by Borrowers, including all Dominion
      Accounts. Each Borrower shall take all actions necessary to establish Agent’s
      control of each such Deposit Account (other than an account exclusively used
      for
      payroll, payroll taxes or employee benefits, or an account containing not more
      that $10,000 at any time). Each Borrower shall be the sole account holder of
      each Deposit Account and shall not allow any other Person (other than Agent)
      to
      have control over a Deposit Account or any Property deposited therein. Each
      Borrower shall promptly notify Agent of any opening or closing of a Deposit
      Account and, with the consent of Agent, will amend Schedule
      8.5
      to
      reflect same.

     

    8.6 General
      Provisions.

     

    8.6.1
      Location
      of Collateral.
      All
      tangible items of Collateral, other than Inventory in transit, shall at all
      times be kept by Borrowers at the business locations set forth in Schedule 8.6.1,
      except
      that Borrowers may (a) make sales or other dispositions of Collateral in
      accordance with Section 10.2.6;
      and (b)
      move Collateral to another location in the United States, upon 30 Business
      Days
      prior written notice to Agent.

     

    8.6.2
      Insurance
      of Collateral; Condemnation Proceeds.

     

    (a) Each
      Borrower shall maintain insurance with respect to the Collateral, covering
      casualty, hazard, public liability, theft, malicious mischief, and such other
      risks, in such amounts, with such endorsements, and with such insurers (rated
      A+
      or better by A.M. Best Rating Guide) as are satisfactory to Agent. All proceeds
      under each policy shall be payable to Agent. From time to time upon request,
      Borrowers shall deliver to Agent the originals or certified copies of its
      insurance policies and updated flood plain searches. Unless Agent shall agree
      otherwise, each policy shall include satisfactory endorsements (i) showing
      Agent
      as sole loss payee or additional insured, as appropriate; (ii) requiring 30
      days
      prior written notice to Agent in the event of cancellation of the policy for
      any
      reason whatsoever; and (iii) specifying that the interest of Agent shall not
      be
      impaired or invalidated by any act or neglect of any Borrower or the owner
      of
      the Property, nor by the occupation of the premises for purposes more hazardous
      than are permitted by the policy. If any Borrower fails to provide and pay
      for
      such insurance, Agent may, at its option, but shall not be required to, procure
      the insurance and charge Borrowers therefor. Each Borrower agrees to deliver
      to
      Agent, promptly as rendered, copies of all reports made to insurance companies.
      While no Event of Default exists, Borrowers may settle, adjust or compromise
      any
      insurance claim, as long as the proceeds are delivered to Agent. If an Event
      of
      Default exists, only Agent shall be authorized to settle, adjust and compromise
      such claims.

     

    (b) Subject
      to subsection (b) below, Any proceeds of insurance (other than proceeds from
      workers’ compensation or D&O insurance) and any awards arising from
      condemnation of any Collateral shall be paid to Agent. Any such proceeds or
      awards shall first be applied to payment of the Revolver Loans, and then to
      any
      other Obligations outstanding, and if there are no outstanding Obligations,
      then
      to Borrower Agent.

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    (c) If
      requested by Borrowers in writing within 15 days after Agent’s receipt of any
      insurance proceeds or condemnation awards relating to any loss or destruction
      of
      Equipment or Real Estate, Borrowers may use such proceeds or awards to repair
      or
      replace such Equipment or Real Estate (and until so used, the proceeds shall
      be
      held by Agent as Cash Collateral) as long as (i) no Default or Event of Default
      exists; (ii) such repair or replacement is promptly undertaken and concluded,
      in
      accordance with plans satisfactory to Agent; (iii) replacement buildings are
      constructed on the sites of the original casualties and are of comparable size,
      quality and utility to the destroyed buildings; (iv) the repaired or replaced
      Property is free of Liens, other than Permitted Liens that are not Purchase
      Money Liens; (v) Borrowers comply with disbursement procedures for such repair
      or replacement as Agent may reasonably require; and (vi) the aggregate amount
      of
      such proceeds or awards from any single casualty or condemnation does not exceed
      $1,000,000.

     

    8.6.3
      Protection
      of Collateral.
      All
      expenses of protecting, storing, warehousing, insuring, handling, maintaining
      and shipping any Collateral, all Taxes payable with respect to any Collateral
      (including any sale thereof), and all other payments required to be made by
      Agent to any Person to realize upon any Collateral, shall be borne and paid
      by
      Borrowers. Agent shall not be liable or responsible in any way for the
      safekeeping of any Collateral, for any loss or damage thereto (except for
      reasonable care in its custody while Collateral is in Agent’s actual
      possession), for any diminution in the value thereof, or for any act or default
      of any warehouseman, carrier, forwarding agency or other Person whatsoever,
      but
      the same shall be at Borrowers’ sole risk.

     

    8.6.4
      Defense
      of Title to Collateral.
      Each
      Borrower shall at all times defend its title to Collateral and Agent’s Liens
      therein against all Persons, claims and demands whatsoever, except Permitted
      Liens.

     

    8.7 Power
      of Attorney.
      Each
      Borrower hereby irrevocably constitutes and appoints Agent (and all Persons
      designated by Agent) as such Borrower’s true and lawful attorney (and
      agent-in-fact) for the purposes provided in this Section. Agent, or Agent’s
      designee, may, without notice and in either its or a Borrower’s name, but at the
      cost and expense of Borrowers:

     

    (a) Endorse
      a
      Borrower’s name on any Payment Item or other proceeds of Collateral (including
      proceeds of insurance) that come into Agent’s possession or control;
      and

     

    (b) During
      an
      Event of Default, (i) notify any Account Debtors of the assignment of their
      Accounts, demand and enforce payment of Accounts, by legal proceedings or
      otherwise, and generally exercise any rights and remedies with respect to
      Accounts; (ii) settle, adjust, modify, compromise, discharge or release any
      Accounts or other Collateral, or any legal proceedings brought to collect
      Accounts or Collateral; (iii) sell or assign any Accounts and other Collateral
      upon such terms, for such amounts and at such times as Agent deems advisable;
      (iv) take control, in any manner, of any proceeds of Collateral; (v) prepare,
      file and sign a Borrower’s name to a proof of claim or other document in a
      bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction
      of
      Lien or similar document; (vi) receive, open and dispose of mail addressed
      to a
      Borrower, and notify postal authorities to change the address for delivery
      thereof to such address as Agent may designate; (vii) endorse any Chattel Paper,
      Document, Instrument, invoice, freight bill, bill of lading, or similar document
      or agreement relating to any Accounts, Inventory or other Collateral; (viii)
      use
      a Borrower’s stationery and sign its name to verifications of Accounts and
      notices to Account Debtors; (ix) use the information recorded on or contained
      in
      any data processing equipment and computer hardware and software relating to
      any
      Collateral; (x) make and adjust claims under policies of insurance; (xi) take
      any action as may be necessary or appropriate to obtain payment under any letter
      of credit or banker’s acceptance for which a Borrower is a beneficiary; and
      (xii) take all other actions as Agent deems appropriate to fulfill any
      Borrower’s obligations under the Loan Documents.

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

     

    SECTION
      9.
      REPRESENTATIONS AND WARRANTIES

     

    9.1 General
      Representations and Warranties.
      To
      induce Agent and Lenders to enter into this Agreement and to make available
      the
      Commitments, Loans and Letters of Credit, each Borrower represents and warrants
      that:

     

    9.1.1
      Organization
      and Qualification.
      Each
      Borrower is duly organized, validly existing and in good standing under the
      laws
      of the jurisdiction of its organization. Each Borrower is duly qualified,
      authorized to do business and in good standing as a foreign corporation in
      each
      jurisdiction where failure to be so qualified could reasonably be expected
      to
      have a Material Adverse Effect.

     

    9.1.2
      Power
      and Authority.
      Each
      Obligor is duly authorized to execute, deliver and perform its Loan Documents.
      The execution, delivery and performance of the Loan Documents have been duly
      authorized by all necessary action, and do not (a) require any consent or
      approval of any holders of Equity Interests of any Obligor, other than those
      already obtained; (b) contravene the Organic Documents of any Obligor; (c)
      violate or cause a default under any Applicable Law or Material Contract; or
      (d)
      result in or require the imposition of any Lien (other than Permitted Liens)
      on
      any Property of any Obligor.

     

    9.1.3
      Enforceability.
      Each
      Loan Document is a legal, valid and binding obligation of each Obligor party
      thereto, enforceable in accordance with its terms, except as enforceability
      may
      be limited by bankruptcy, insolvency or similar laws affecting the enforcement
      of creditors’ rights generally.

     

    9.1.4
      Capital
      Structure.
      Schedule 9.1.4
      shows,
      for each Borrower and Subsidiary, its name, its jurisdiction of organization,
      its authorized and issued Equity Interests, the holders of its Equity Interests,
      and all agreements binding on such holders with respect to their Equity
      Interests. Each Borrower has good title to its Equity Interests in its
      Subsidiaries, subject only to Agent’s Lien, and all such Equity Interests are
      duly issued, fully paid and non-assessable. Except as shown on Schedule
      9.1.4,
      there
      are no outstanding options to purchase, warrants, subscription rights,
      agreements to issue or sell, convertible interests, phantom rights or powers
      of
      attorney relating to any Equity Interests of any Borrower or Subsidiary. Each
      of
      the Borrower Agent’s Subdisiaries in existence as of the date hereof are
      inactive and have no assets, operations or income.

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

     

    9.1.5
      Corporate
      Names; Locations.
      During
      the five years preceding the Closing Date, except as shown on Schedule 9.1.5,
      no
      Borrower or Subsidiary has been known as or used any corporate, fictitious
      or
      trade names, has been the surviving corporation of a merger or combination,
      or
      has acquired any substantial part of the assets of any Person. The chief
      executive offices and other places of business of Borrowers and Subsidiaries
      are
      shown on Schedule 8.6.1.
      During
      the five years preceding the Closing Date, no Borrower or Subsidiary has had
      any
      other office or place of business.

     

    9.1.6
      Title
      to Properties; Priority of Liens.
      Each
      Borrower and Subsidiary has good and marketable title to (or valid leasehold
      interests in) all of its Real Estate, and good title to all of its personal
      Property, including all Property reflected in any financial statements delivered
      to Agent or Lenders, in each case free of Liens except Permitted Liens. Except
      as set forth in Schedule
      9.1.6,
      each
      Borrower and Subsidiary has paid and discharged all lawful claims that, if
      unpaid, could become a Lien on its Properties, other than Permitted Liens.
      All
      Liens of Agent in the Collateral are duly perfected, first priority Liens,
      subject only to Permitted Liens that are expressly allowed to have priority
      over
      Agent’s Liens.

     

    9.1.7
      Accounts.
      Agent
      may rely, in determining which Accounts are Eligible Accounts, on all statements
      and representations made by Borrowers with respect thereto. Borrowers warrant,
      with respect to each Account at the time it is shown as an Eligible Account
      in a
      Borrowing Base Certificate, that:

     

    (a) it
      is
      genuine and in all respects what it purports to be, and is not evidenced by
      a
      judgment;

     

    (b) it
      arises
      out of a completed, bona
      fide
      sale and
      delivery of goods in the Ordinary Course of Business, and substantially in
      accordance with any purchase order, contract or other document relating
      thereto;

     

    (c) it
      is for
      a sum certain, maturing as stated in the invoice covering such sale, a copy
      of
      which has been furnished or is available to Agent on request;

     

    (d) it
      is not
      subject to any offset, Lien (other than Agent’s Lien), deduction, defense,
      dispute, counterclaim or other adverse condition except as arising in the
      Ordinary Course of Business and disclosed to Agent; and it is absolutely owing
      by the Account Debtor, without contingency in any respect;

     

    (e) no
      purchase order, agreement, document or Applicable Law restricts assignment
      of
      the Account to Agent (regardless of whether, under the UCC, the restriction
      is
      ineffective);

     

    (f) no
      extension, compromise, settlement, modification, credit, deduction or return
      has
      been authorized with respect to the Account, except discounts or allowances
      granted in the Ordinary Course of Business for prompt payment that are reflected
      on the face of the invoice related thereto and in the reports submitted to
      Agent
      hereunder; and

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

     

    (g) to
      the
      best of Borrowers’ knowledge, (i) there are no facts or circumstances that are
      reasonably likely to impair the enforceability or collectibility of such
      Account; (ii) the Account Debtor had the capacity to contract when the Account
      arose, continues to meet the applicable Borrower’s customary credit standards,
      is Solvent, is not contemplating or subject to an Insolvency Proceeding, and
      has
      not failed, or suspended or ceased doing business; and (iii) there are no
      proceedings or actions threatened or pending against any Account Debtor that
      could reasonably be expected to have a material adverse effect on the Account
      Debtor’s financial condition.

     

    9.1.8
      Financial
      Statements.
      The
      consolidated and consolidating balance sheets, and related statements of income,
      cash flow and shareholder’s equity, of Borrowers and Subsidiaries that have been
      and are hereafter delivered to Agent and Lenders, are prepared in accordance
      with GAAP, and fairly present the financial positions and results of operations
      of Borrowers and Subsidiaries at the dates and for the periods indicated
      subject, in the case of interim statements, to customary year-end adjustments.
      All projections delivered from time to time to Agent and Lenders have been
      prepared in good faith, based on reasonable assumptions in light of the
      circumstances at such time. Except for the losses as of December 31, 2005
      disclosed by Borrower Agent in Schedule
      9.1.8 since
      September 30, 2005, there has been no change in the condition, financial or
      otherwise, of any Borrower or Subsidiary that could reasonably be expected
      to
      have a Material Adverse Effect. No financial statement delivered to Agent or
      Lenders at any time contains any untrue statement of a material fact, nor fails
      to disclose any material fact necessary to make such statement not materially
      misleading. Each Borrower is Solvent. There has been no material adverse change
      in the Fixed Charge Coverage Ratio of Borrowers for the month of February 2006
      as set forth in the projections delivered to Agent prior to the Closing
      Date.

     

    9.1.9
      Surety
      Obligations.
      No
      Borrower or Subsidiary is obligated as surety or indemnitor under any bond
      or
      other contract that assures payment or performance of any obligation of any
      Person, except as permitted hereunder.

     

    9.1.10
      Taxes.
      Except
      as disclosed in Schedule
      9.1.10,
      each
      Borrower and Subsidiary has filed all federal, state and local tax returns
      and
      other reports that it is required by law to file, and has paid, or made
      provision for the payment of, all Taxes upon it, its income and its Properties
      that are due and payable, except to the extent being Properly Contested. The
      provision for Taxes on the books of each Borrower and Subsidiary is adequate
      for
      all years not closed by applicable statutes, and for its current Fiscal
      Year.

     

    9.1.11
      Brokers.
      There
      are no brokerage commissions, finder’s fees or investment banking fees payable
      in connection with any transactions contemplated by the Loan
      Documents.

     

    9.1.12
      Intellectual
      Property.
      Each
      Borrower and Subsidiary owns or has the lawful right to use all Intellectual
      Property necessary for the conduct of its business, without conflict with any
      rights of others. There is no pending or, to any Borrower’s knowledge,
      threatened Intellectual Property Claim with respect to any Borrower, any
      Subsidiary or any of their Property (including any Intellectual Property).
      Except as disclosed on Schedule 9.1.12,
      no
      Borrower or Subsidiary pays or owes any Royalty or other compensation to any
      Person with respect to any Intellectual Property. All Intellectual Property
      owned, used or licensed by, or otherwise subject to any interests of, any
      Borrower or Subsidiary is shown on Schedule 9.1.12.

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

     

    9.1.13
      Governmental
      Approvals.
      Each
      Borrower and Subsidiary has, is in compliance with, and is in good standing
      with
      respect to, all Governmental Approvals necessary to conduct its business and
      to
      own, lease and operate its Properties, except where noncompliance could not
      reasonably be expected to have a Material Adverse Effect. All necessary import,
      export or other licenses, permits or certificates for the import or handling
      of
      any goods or other Collateral have been procured and are in effect, and
      Borrowers and Subsidiaries have complied with all foreign and domestic laws
      with
      respect to the shipment and importation of any goods or Collateral, except
      where
      noncompliance could not reasonably be expected to have a Material Adverse
      Effect.

     

    9.1.14
      Compliance
      with Laws.
      Each
      Borrower and Subsidiary has duly complied, and its Properties and business
      operations are in compliance, in all material respects with all Applicable
      Law,
      except where noncompliance could not reasonably be expected to have a Material
      Adverse Effect. There have been no citations, notices or orders of material
      noncompliance issued to any Borrower or Subsidiary under any Applicable Law.
      No
      Inventory has been produced in violation of the FLSA.

     

    9.1.15
      Compliance
      with Environmental Laws.
      Except
      as disclosed on Schedule
      9.1.15,
      no
      Borrower’s or Subsidiary’s past or present operations, Real Estate or other
      Properties are subject to any federal, state or local investigation to determine
      whether any remedial action is needed to address any known environmental
      pollution, hazardous material or environmental clean-up. Except as disclosed
      on
Schedule
      9.1.15,
      no
      Borrower or Subsidiary has received any Environmental Notice. No Borrower or
      Subsidiary has any contingent liability with respect to any Environmental
      Release, environmental pollution or hazardous material on any Real Estate now
      or
      previously owned, leased or operated by it. The representations and warranties
      contained in the Environmental Agreement are true and correct on the Closing
      Date.

     

    9.1.16
      Burdensome
      Contracts.
      No
      Borrower or Subsidiary is a party or subject to any contract, agreement or
      charter restriction that could reasonably be expected to have a Material Adverse
      Effect. No Borrower or Subsidiary is party or subject to any Restrictive
      Agreement, except as shown on Schedule 9.1.16,
      none of
      which prohibit the execution or delivery of any Loan Documents by an Obligor
      nor
      the performance by an Obligor of any obligations thereunder.

     

    9.1.17
      Litigation.
      Except
      as shown on Schedule 9.1.17,
      there
      are no proceedings or investigations pending or, to any Borrower’s knowledge,
      threatened against any Borrower or Subsidiary, or any of their businesses,
      operations, Properties, prospects or conditions, that (a) relate to any Loan
      Documents or transactions contemplated thereby; or (b) could reasonably be
      expected to have a Material Adverse Effect if determined adversely to any
      Borrower or Subsidiary. No Borrower or Subsidiary is in default with respect
      to
      any order, injunction or judgment of any Governmental Authority.

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

     

    9.1.18
      No
      Defaults.
      No
      event or circumstance has occurred or exists that constitutes a Default or
      Event
      of Default. No Borrower or Subsidiary is in default, and no event or
      circumstance has occurred or exists that with the passage of time or giving
      of
      notice would constitute a default, under any Material Contract or in the payment
      of any Borrowed Money. There is no basis upon which any party (other than a
      Borrower or Subsidiary) could terminate a Material Contract for cause prior
      to
      its scheduled termination date. 

     

    9.1.19
      ERISA.
      Except
      as disclosed on Schedule 9.1.19,
      no
      Borrower or Subsidiary has any Multiemployer Plan or Foreign Plan. Each Borrower
      and Subsidiary is in full compliance with the requirements of all Applicable
      Law, including ERISA, relating to each Multiemployer Plan and Foreign Plan.
      No
      fact or situation exists that could reasonably be expected to result in a
      Material Adverse Effect in connection with any Multiemployer Plan or Foreign
      Plan. No Borrower or Subsidiary has any withdrawal liability in connection
      with
      a Multiemployer Plan or Foreign Plan. All employer and employee contributions
      to
      Foreign Plans, to the extent required by law or the terms of such plans, have
      been made or accrued in accordance with normal accounting principles. The fair
      market value of the assets of each funded Foreign Plan, the liability of each
      insurer for any Foreign Plan funded through insurance and/or the book reserve
      established for each Foreign Plan, together with any accrued contributions,
      are
      sufficient to provide the accrued benefit obligations of all participants in
      such plans according to the actuarial assumptions and valuations most recently
      used to account for such obligations in accordance with applicable generally
      accepted accounting principles. Each Foreign Plan required to be registered
      has
      been registered and is maintained in good standing with all applicable
      regulatory authorities.

     

    9.1.20
      Trade
      Relations.
      There
      exists no actual or threatened termination, limitation or modification of any
      business relationship between any Borrower or Subsidiary and any customer or
      supplier, or any group of customers or suppliers, who individually or in the
      aggregate are material to the business of such Borrower or Subsidiary. There
      exists no condition or circumstance that could reasonably be expected to impair
      the ability of any Borrower or Subsidiary to conduct its business at any time
      hereafter in substantially the same manner as conducted on the Closing
      Date.

     

    9.1.21
      Labor
      Relations.
      Except
      as described on Schedule 9.1.21,
      no
      Borrower or Subsidiary is party to or bound by any collective bargaining
      agreement, management agreement or consulting agreement. There are no material
      grievances, disputes or controversies with any union or other organization
      of
      any Borrower’s or Subsidiary’s employees, or, to any Borrower’s knowledge, any
      asserted or threatened strikes, work stoppages or demands for collective
      bargaining.

     

    9.1.22
      Payable
      Practices.
      No
      Borrower or Subsidiary has made any material change in its historical accounts
      payable practices from those in effect on the Closing Date.

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

    

     

    9.1.23
      Not
      a
      Regulated Entity.
      No
      Obligor is (a) an “investment company” or a “person directly or indirectly
      controlled by or acting on behalf of an investment company” within the meaning
      of the Investment Company Act of 1940; (b) a “holding company,” a “subsidiary
      company” of a “holding company,” or an “affiliate” of either, within the meaning
      of the Public Utility Holding Company Act of 1935; or (c) subject to regulation
      under the Federal Power Act, the Interstate Commerce Act, any public utilities
      code or any other Applicable Law regarding its authority to incur
      Debt.

     

    9.1.24
      Margin
      Stock.
      No
      Borrower or Subsidiary is engaged, principally or as one of its important
      activities, in the business of extending credit for the purpose of purchasing
      or
      carrying any Margin Stock. No Loan proceeds or Letters of Credit will be used
      by
      Borrowers to purchase or carry, or to reduce or refinance any Debt incurred
      to
      purchase or carry, any Margin Stock or for any related purpose governed by
      Regulations T, U or X of the Board of Governors.

     

    9.1.25
      Plan
      Assets.
      No
      Borrower is an entity deemed to hold “plan assets” within the meaning of 29
      C.F.R. Sec.2510.3-101 of any “employee benefit plan” (as defined in Section 3(3)
      of ERISA) that is subject to Title I of ERISA or any “plan” (within the meaning
      of Section 4975 of the Internal Revenue Code), and neither the execution of
      this
      Agreement nor the funding of any Loans gives rise to a prohibited transaction
      within the meaning of Section 406 of ERISA or Section 4975 of the Internal
      Revenue Code.

     

    9.1.26
       The
      Note Transaction.
      (i) The
      Borrower has delivered to the Agent a complete and correct copy of the Existing
      Subordinated Debt Documents, including all schedules and exhibits thereto,
      (ii)
      the Existing Subordinated Debt Documents set forth the entire agreement and
      understanding of the parties thereto relating to the subject matter thereof,
      and
      there are no other agreements, arrangements or understandings, written or oral,
      relating to the matters covered thereby, (iii) no Existing Subordinated Debt
      Document has been amended or otherwise modified prior to the date hereof, (iv)
      the execution, delivery and performance of each of the Existing Subordinated
      Debt Documents has been duly authorized by all necessary action on the part
      of
      the applicable Borrowers, (v) the Note Transaction has been effected in
      accordance with the terms of the Existing Subordinated Debt Documents and all
      applicable law, (vi) the Borrowers have not incurred or assumed any liabilities
      or obligations pursuant to or in connection with the Note Transaction other
      than
      the Existing Subordinated Debt Documents, (vii) the execution, delivery and
      performance of this Agreement and the other Loan Documents and the funding
      of
      the Loans or issuance of any Letter of Credit do not violate any term or
      provision of any of the Existing Subordinated Debt Documents, and (viii) each
      Existing Subordinated Debt Document is the legal, valid and binding obligation
      of the parties thereto, enforceable against such parties in accordance with
      its
      terms, except as may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or other laws affecting creditors’ rights generally
      and by general principals of equity.

     

    9.1.27
       Existing
      Subordinated Debt.
      The
      Borrower Agent has the power and authority to incur the Debt provided for under
      the Existing Subordinated Debt Documents and has duly authorized, executed
      and
      delivered the Existing Subordinated Debt Documents. The Borrower Agent has
      issued, pursuant to due authorization, the Subordinated Convertible Notes under
      the Existing Subordinated Debt Documents. The Subordinated Convertible Notes
      constitute the legal, valid and binding obligation of the Borrower Agent
      enforceable against the Borrower Agent in accordance with their terms. The
      subordination provisions of the Intercreditor Agreement and the Subordinated
      Convertible Notes are and will be enforceable against the holders of the
      Subordinated Convertible Notes by the holders of any Senior Indebtedness (as
      defined in the Intercreditor Agreement). All Obligations, including, without
      limitation, those to pay principal of and interest (including post-petition
      interest) on the Loan, the LC Obligations and fees, indemnities and expenses
      in
      connection therewith, constitute Senior Indebtedness (as defined in the
      Intercreditor Agreement), and all such Obligations are entitled to the benefits
      of the subordination and lien priorities created by the Intercreditor Agreement.
      The Borrower Agent acknowledges that the Agent and the Lenders are entering
      into
      this Agreement, and extending their Commitments, in reliance upon the
      subordination provisions of the Intercreditor Agreement and this Section
      9.1.27.

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

    

     

    9.2 Complete
      Disclosure.
      No Loan
      Document contains any untrue statement of a material fact, nor fails to disclose
      any material fact necessary to make the statements contained therein not
      materially misleading. There is no fact or circumstance that any Obligor has
      failed to disclose to Agent in writing that could reasonably be expected to
      have
      a Material Adverse Effect.

     

    SECTION
      10.
      COVENANTS AND CONTINUING AGREEMENTS

     

    10.1 Affirmative
      Covenants.
      For so
      long as any Commitments or Obligations are outstanding, each Borrower shall,
      and
      shall cause each Subsidiary to:

     

    10.1.1
      Inspections;
      Appraisals.

     

    (a) Permit
      Agent from time to time, subject (except when a Default or Event of Default
      exists) to reasonable notice and normal business hours, to visit and inspect
      the
      Properties of any Borrower or Subsidiary, inspect, audit and make extracts
      from
      any Borrower’s or Subsidiary’s books and records, and discuss with its officers,
      employees, agents, advisors and independent accountants such Borrower’s or
      Subsidiary’s business, financial condition, assets, prospects and results of
      operations. Lenders may participate in any such visit or inspection, at their
      own expense. Neither Agent nor any Lender shall have any duty to any Borrower
      to
      make any inspection, nor to share any results of any inspection, appraisal
      or
      report with any Borrower. To the extent any appraisal or other information
      is
      shared by Agent or a Lender with any Borrower, such Borrower acknowledges that
      it was prepared by Agent and Lenders for their purposes and Borrowers shall
      not
      be entitled to rely upon it.

     

    (b) Reimburse
      Agent for all reasonable charges, costs and expenses of Agent in connection
      with
      (i) examinations of any Obligor’s books and records or any other financial or
      Collateral matters as Agent deems appropriate, up to four times per Loan Year;
      and (ii) appraisals of Inventory, Equipment and Real Estate, up to one time
      per Loan Year; provided,
      however,
      that if
      an examination or appraisal is initiated during a Default or Event of Default,
      all such charges, costs and expenses therefor shall be reimbursed by Borrowers
      without regard to such limits. Subject to the foregoing, Borrowers shall pay
      Agent’s then standard charges for each day that an employee of Agent or its
      Affiliates is engaged in any examination activities (such charge is currently
      $850 per day (or portion thereof) for each person retained or employed by the
      Agent with respect to each field examination or audit, but is subject to change
      without notice by Agent), and shall pay the standard charges of Agent’s internal
      appraisal group. This Section shall not be construed to limit Agent’s right to
      conduct examinations or to obtain appraisals at any time in its discretion,
      nor
      to use third parties for such purposes.

     

    
      
        
        

      

      
        60

        
          

        

      

      
        
        

      

    

     

    10.1.2
      Financial
      and Other Information.
      Keep
      adequate records and books of account with respect to its business activities,
      in which proper entries are made in accordance with GAAP reflecting all
      financial transactions; and furnish to Agent and Lenders:

     

    (a) as
      soon
      as available, and in any event within 90 days after the close of each Fiscal
      Year, balance sheets as of the end of such Fiscal Year and the related
      statements of income, cash flow and shareholders’ equity for such Fiscal Year,
      on consolidated and consolidating bases for Borrowers and Subsidiaries, which
      consolidated statements shall be audited and certified (without qualification
      as
      to scope, “going concern” or similar items) by a firm of independent certified
      public accountants of recognized standing selected by Borrowers and acceptable
      to Agent (Borrower’s current accountants are deemed acceptable by Agent as of
      the Closing Date), and shall set forth in comparative form corresponding figures
      for the preceding Fiscal Year and other information acceptable to
      Agent;

     

    (b) as
      soon
      as available, and in any event within 30 days after the end of each month (and
      by no later than February 28 of each year with respect to the financial
      statements for the month of January of such year), unaudited balance sheets
      as
      of the end of such month and the related statements of income and cash flow
      for
      such month and for the portion of the Fiscal Year then elapsed, on consolidated
      and consolidating bases for Borrowers and Subsidiaries, setting forth in
      comparative form corresponding figures for the preceding Fiscal Year and
      certified by the chief financial officer of Borrower Agent as prepared in
      accordance with GAAP and fairly presenting the financial position and results
      of
      operations for such month and period, subject to normal year-end adjustments
      and
      the absence of footnotes, all acceptable to Agent;

     

    (c) as
      soon a
      available, and in any event within 45 days after the end of each quarter, a
      copy
      of 10-Q quarterly report of the Borrowing Agent as filed with the Securities
      and
      Exchange Commission;

     

    (d) concurrently
      with delivery of financial statements under clauses (a) and (b) above, or more
      frequently if requested by Agent while a Default or Event of Default exists,
      a
      Compliance Certificate executed by the chief financial officer of Borrower
      Agent
      and acceptable to Agent;

     

    (e) concurrently
      with delivery of financial statements under clause (a) above, copies of all
      management letters and other material reports submitted to Borrowers by their
      accountants in connection with such financial statements, all acceptable to
      Agent;

     

    (f) not
      later
      than 30 days prior to the end of each Fiscal Year, projections of Borrowers’
consolidated balance sheets, results of operations, cash flow and Availability
      for the next two Fiscal Years, month by month for the first Fiscal Year, all
      acceptable to Agent;

     

    
      
        
        

      

      
        61

        
          

        

      

      
        
        

      

    

     

    (g) at
      Agent’s request, a listing of each Borrower’s trade payables, specifying the
      trade creditor and balance due, and a detailed trade payable aging, all in
      form
      satisfactory to Agent;

     

    (h) promptly
      after the sending or filing thereof, copies of any proxy statements, financial
      statements or reports that any Borrower has made generally available to its
      shareholders; copies of any regular, periodic and special reports or
      registration statements or prospectuses that any Borrower files with the
      Securities and Exchange Commission or any other Governmental Authority, or
      any
      securities exchange; and copies of any press releases or other statements made
      available by a Borrower to the public concerning material changes to or
      developments in the business of such Borrower;

     

    (i) promptly
      after the sending or filing thereof, copies of any annual report to be filed
      in
      connection with each Plan or Foreign Plan;

     

    (j) such
      other reports and information (financial or otherwise) as Agent may reasonably
      request from time to time in connection with any Collateral or any Borrower’s,
      Subsidiary’s or other Obligor’s financial condition or business; 

     

    (k) as
      soon
      as available, and in any event within 120 days after the close of each Fiscal
      Year, financial statements for each Guarantor, if any, in form and substance
      satisfactory to Agent; and

     

    (l) together
      with the monthly financial statements delivered as set forth in Section
      10.1.2(b),
      all
      material stop notices and release of stop notices, explanations of short paids,
      list of cost overruns by job, report of production of goods scheduled as
      compared to actual production, and all notices of any claims for liquidated
      damages.

     

    Simultaneously
      with retaining accountants for their annual audit, Borrowers shall send a letter
      to the accountants, with a copy to Agent and Lenders, notifying the accountants
      that one of the primary purposes for retaining their services and obtaining
      audited financial statements is for use by Agent and Lenders. Agent is
      authorized to send such notice if Borrowers fail to do so for any
      reason.

     

    10.1.3
      Notices.
      Notify
      Agent and Lenders in writing, promptly after a Borrower’s obtaining knowledge
      thereof, of any of the following that affects an Obligor: (a) the threat or
      commencement of any proceeding or investigation, whether or not covered by
      insurance, if an adverse determination could have a Material Adverse Effect;
      (b)
      any pending or threatened labor dispute, strike or walkout, or the expiration
      of
      any material labor contract; (c) any default under or termination of a Material
      Contract; (d) the existence of any Default or Event of Default; (e) any judgment
      in an amount exceeding $1,000,000; (f) the assertion of any Intellectual
      Property Claim, if an adverse resolution could have a Material Adverse Effect;
      (g) any violation or asserted violation of any Applicable Law (including ERISA,
      OSHA, FLSA, or any Environmental Laws), if an adverse resolution could have
      a
      Material Adverse Effect; (h) any Environmental Release by an Obligor or on
      any
      Property owned, leased or occupied by an Obligor; or receipt of any
      Environmental Notice; (i) the discharge of or any withdrawal or resignation
      by
      Borrowers’ independent accountants; or (j) any opening of a new office or place
      of business, at least 30 days prior to such opening.

     

    
      
        
        

      

      
        62

        
          

        

      

      
        
        

      

    

     

    10.1.4
      Landlord
      and Storage Agreements.
      Upon
      request, provide Agent with copies of all existing agreements, and promptly
      after execution thereof provide Agent with copies of all future agreements,
      between an Obligor and any landlord, warehouseman, processor, shipper, bailee
      or
      other Person that owns any premises at which any Collateral may be kept or
      that
      otherwise may possess or handle any Collateral.

     

    10.1.5
      Compliance
      with Laws.
      Comply
      with all Applicable Laws, including ERISA, Environmental Laws, FLSA, OSHA,
      Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and
      maintain all Governmental Approvals necessary to the ownership of its Properties
      or conduct of its business, unless failure to comply (other than failure to
      comply with Anti-Terrorism Laws) or maintain could not reasonably be expected
      to
      have a Material Adverse Effect. Without limiting the generality of the
      foregoing, if any Environmental Release occurs at or on any Properties of any
      Borrower or Subsidiary, it shall act promptly and diligently to investigate
      and
      report to Agent and all appropriate Governmental Authorities the extent of,
      and
      to make appropriate remedial action to eliminate, such Environmental Release,
      whether or not directed to do so by any Governmental Authority.

     

    10.1.6
      Taxes.
      Pay and
      discharge all Taxes prior to the date on which they become delinquent or
      penalties attach, unless such Taxes are being Properly Contested.

     

    10.1.7
      Insurance.
      In
      addition to the insurance required hereunder with respect to Collateral,
      maintain insurance with insurers (rated A+ or better by Best Rating Guide)
      satisfactory to Agent, (a) with respect to the Properties and business of
      Borrowers and Subsidiaries of such type (including product liability, workers’
compensation, larceny, embezzlement, or other criminal misappropriation
      insurance), in such amounts, and with such coverages and deductibles as are
      customary for companies similarly situated, and (b) business interruption
      insurance in an amount not less than $10,000,000, with deductibles and subject
      to an Insurance Assignment satisfactory to Agent.

     

    10.1.8
      Licenses.
      Keep
      each License affecting any Collateral (including the manufacture, distribution
      or disposition of Inventory) or any other material Property of Borrowers and
      Subsidiaries in full force and effect; promptly notify Agent of any proposed
      modification to any such License, or entry into any new License, in each case
      at
      least 30 days prior to its effective date; pay all Royalties when due; and
      notify Agent of any default or breach asserted by any Person to have occurred
      under any License.

     

    10.1.9
      Future
      Subsidiaries.
      Promptly notify Agent upon any Person becoming a Subsidiary and, if such Person
      is not a Foreign Subsidiary, cause it to guaranty the Obligations in a manner
      satisfactory to Agent, and to execute and deliver such documents, instruments
      and agreements and to take such other actions as Agent shall require to evidence
      and perfect a Lien in favor of Agent (for the benefit of Secured Parties) on
      all
      assets of such Person, including delivery of such legal opinions, in form and
      substance satisfactory to Agent, as it shall deem appropriate.

     

    
      
        
        

      

      
        63

        
          

        

      

      
        
        

      

    

     

    10.2 Negative
      Covenants.
      For so
      long as any Commitments or Obligations are outstanding, each Borrower shall
      not,
      and shall cause each Subsidiary not to:

     

    10.2.1
      Permitted
      Debt.
      Create,
      incur, guarantee or suffer to exist any Debt, except:

     

    (a) the
      Obligations;

     

    (b) The
      Subordinated Convertible Notes in the aggregate outstanding principal amount
      of
      $25,900,000 as of the Closing Date, as shall be reduced by principal repayments
      thereon from time to time;

     

    (c) Permitted
      Purchase Money Debt;

     

    (d) Borrowed
      Money (other than the Obligations, the Existing Subordinated Debt and Permitted
      Purchase Money Debt), but only to the extent outstanding on the Closing Date
      and
      not satisfied with proceeds of the initial Loans;

     

    (e) Bank
      Product Debt;

     

    (f) Permitted
      Contingent Obligations;

     

    (g) Refinancing
      Debt as long as each Refinancing Condition is satisfied; and

     

    (h) Debt
      that
      is not included in any of the preceding clauses of this Section, is not secured
      by a Lien and does not exceed $500,000 in the aggregate at any
      time.

     

    10.2.2
      Permitted
      Liens.
      Create
      or suffer to exist any Lien upon any of its Property, except the following
      (collectively, “Permitted
      Liens”):

     

    (a) Liens
      in
      favor of Agent;

     

    (b) Purchase
      Money Liens securing Permitted Purchase Money Debt;

     

    (c) Liens
      for
      Taxes not yet due or being Properly Contested;

     

    (d) statutory
      Liens (other than Liens for Taxes or imposed under ERISA) arising in the
      Ordinary Course of Business, but only if (i) payment of the obligations secured
      thereby is not yet due or is being Properly Contested, and (ii) such Liens
      do
      not materially impair the value or use of the Property or materially impair
      operation of the business of any Borrower or Subsidiary;

     

    (e) Liens
      incurred or deposits made in the Ordinary Course of Business to secure the
      performance of tenders, bids, leases, contracts (except those relating to
      Borrowed Money), statutory obligations and other similar obligations, or arising
      as a result of progress payments under government contracts, as long as such
      Liens are at all times junior to Agent’s Liens;

     

    
      
        
        

      

      
        64

        
          

        

      

      
        
        

      

    

     

    (f) Liens
      arising by virtue of a judgment or judicial order against any Borrower or
      Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens
      are (i) in existence for less than 20 consecutive days or being Properly
      Contested, and (ii) at all times junior to Agent’s Liens;

     

    (g) easements,
      rights-of-way, restrictions, covenants or other agreements of record, and other
      similar charges or encumbrances on Real Estate, that do not secure any monetary
      obligation and do not interfere with the Ordinary Course of
      Business;

     

    (h) normal
      and customary rights of setoff upon deposits in favor of depository
      institutions, and Liens of a collecting bank on Payment Items in the course
      of
      collection; 

     

    (i) Liens
      arising under the Existing Subordinated Debt Documents to the extent such Liens
      are permitted by and subject to the Intercreditor Agreement; and

     

    (j) existing
      Liens shown on Schedule
      10.2.2.

     

    10.2.3
      [Intentionally
      Omitted].
      

     

    10.2.4
      Distributions;
      Upstream Payments.
      Declare
      or make any Distributions, except Upstream Payments; or create or suffer to
      exist any encumbrance or restriction on the ability of a Subsidiary to make
      any
      Upstream Payment, except for restrictions under the Loan Documents, under
      Applicable Law or in effect on the Closing Date as shown on Schedule 9.1.16.

     

    10.2.5
      Restricted
      Investments.
      Make
      any Restricted Investment.

     

    10.2.6
      Disposition
      of Assets.
      Make
      any Asset Disposition, except a Permitted Asset Disposition, a disposition
      of
      Equipment under Section 8.4.2,
      or a
      transfer of Property by a Subsidiary or Obligor to a Borrower.

     

    10.2.7
      Loans.
      Make
      any loans or other advances of money to any Person, except (a) advances to
      an
      officer or employee for salary, travel expenses, commissions and similar items
      in the Ordinary Course of Business; (b) prepaid expenses and extensions of
      trade
      credit made in the Ordinary Course of Business; (c) deposits with financial
      institutions permitted hereunder; and (d) as long as no Default or Event of
      Default exists, intercompany loans by a Borrower to another
      Borrower.

     

    10.2.8
      Restrictions
      on Payment of Certain Debt.
      Make
      any payments (whether voluntary or mandatory, or a prepayment, redemption,
      retirement, defeasance or acquisition) with respect to (a) the Existing
      Subordinated Debt, except as set forth in the Intercreditor Agreement or herein
      (and a Senior Officer of Borrower Agent shall certify to Agent in writing,
      not
      less than 5 Business Days prior to the date of payment, that all conditions
      under such Intercreditor Agreement or hereunder have been satisfied); or
      (b) any Borrowed Money (other than the Obligations) prior to its due date
      under the agreements evidencing such Debt as in effect on the Closing Date
      (or
      as amended thereafter with the consent of Agent).

     

    
      
        
        

      

      
        65

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      the above:

     

    (a) the
      Existing Subordinated Debt Lenders may (1) at any time exercise any and all
      rights under the Existing Subordinated Debt Documents to convert or redeem
      any
      of the Existing Subordinated Debt Notes into common equity of the Borrower
      Agent, and (2) so long as no Default or Event of Default exists or will exist
      as
      a result thereof, receive payment of principal and regularly scheduled interest,
      in cash, at the final scheduled maturity date of the Existing Subordinated
      Debt
      Obligations; and

     

    (b) so
      long
      as no Default or Event of Default exists or will exist as a result thereof
      and
      immediately before and after giving effect to such payment Availability exceeds
      $3,000,000, the Existing Subordinated Debt Lenders shall have the right to
      cause
      the Borrower Agent to redeem, and the Borrower Agent shall redeem up to the
      following principal amount(s) of Existing Subordinated Debt Notes on each of
      the
      following redemption dates by delivering written notice of the exercise of
      such
      right to the Borrower Agent no later than the August 8th prior to the redemption
      dates: (i) up to $8,330,000 on August 31, 2006 (“First
      Redemption Date”),
      (ii) up to $9,230,000 on August 31, 2007 (“Second
      Redemption Date”),
      and
      (iii) up to $8,330,000 on September 2, 2008 (“Third
      Redemption Date”,
      and
      together with the First Redemption Date and the Second Redemption Date,
      collectively, the “Redemption
      Dates”).

     

    (i) If
      the
      Existing Subordinated Debt Lenders elect to redeem any of the Existing
      Subordinated Debt Notes on the applicable Redemption Dates, the Existing
      Subordinated Debt Lenders will be required to first use at least $5,000,000
      of
      cash collateral supporting the Existing Subordinated Debt Letter of Credit
      as
      repayment proceeds for the First Redemption Date and Second Redemption Date,
      respectively, to consummate the redemption; provided,
      that
      such Existing Subordinated Debt Letter of Credit is automatically reduced by
      the
      amount of any cash collateral which is released;

     

    (ii) In
      the
      event the Borrower Agent is required to redeem any portion of the Existing
      Subordinated Debt Notes on one of the applicable Redemption Dates, which
      redemption, under the terms of the Existing Subordinated Debt Documents,
      (i) triggers the release of cash collateral for the Existing Subordinated
      Debt Letter of Credit and (ii) thereby reduces the Existing Subordinated
      Debt Letter of Credit by a corresponding amount of such released cash
      collateral, the Existing Subordinated Debt Lenders shall be permitted a right
      of
      redemption for an amount up to the additional $3,330,000 then called for
      redemption on the applicable Redemption Date, so long as (A) no greater
      than (1) $3,330,000 of redemption proceeds, on the First Redemption Date, and
      (2) $4,230,000 of redemption proceeds, on the Second Redemption Date, are
      derived from Borrowings hereunder, (B) the Borrower Agent has met the
      conditions referenced in Section
      10.2.8(b)(iii)
      below,
      (C) with respect to the applicable Redemption Date, the Existing
      Subordinated Debt Lenders have used at least $5,000,000 of cash collateral
      securing the Existing Subordinated Debt Letter of Credit towards redemption
      of
      the Existing Subordinated Debt Notes on such specific Redemption Date (with
      the
      corresponding reduction to the Existing Subordinated Debt Letter of Credit),
      and
      (D) no Default or Event of Default then exists, or would result from such
      payment;

     

    
      
        
        

      

      
        66

        
          

        

      

      
        
        

      

    

     

    (iii) The
      redemption conditions referenced above shall be: (i) with respect to the
      First Redemption Date, the Borrower Agent meeting one hundred percent (100%)
      of
      its budgeted EBITDA as disclosed to the Agent on the date hereof for
      the
      trailing six-month period ending on June 30, 2006, as evidenced by the delivery
      of financial statements in compliance with Section
      10.1.2
      together
      with a certificate signed by the chief financial officer of the Borrower Agent
      certifying as to such evidence, and (ii) with respect to the Second
      Redemption Date, the Borrower Agent meeting the requirements set out in clause
      (i) above and meeting at least ninety percent (90%) of its budgeted EBITDA
      as
      disclosed to the Agent on the date hereof for
      the
      trailing twelve-month period ending on June 30, 2007, as evidenced by the
      delivery of financial statements in compliance with Section
      10.1.2
      together
      with a certificate signed by the chief financial officer of the Borrower Agent
      certifying as to such evidence.

     

    10.2.9
      Fundamental
      Changes.
      Merge,
      combine or consolidate with any Person, or liquidate, wind up its affairs or
      dissolve itself, in each case whether in a single transaction or in a series
      of
      related transactions, except for mergers or consolidations of a wholly-owned
      Subsidiary with another wholly-owned Subsidiary or into a Borrower; change
      its
      name or conduct business under any fictitious name; change its tax, charter
      or
      other organizational identification number; or change its form or state of
      organization. Nothing in this Section
      10.2.9
      shall
      limit Borrowers’ ability to issue common capital stock upon conversion of the
      Subordinated Convertible Notes in accordance with its terms of the Intercreditor
      Agreement or exercise of the warrants issued in connection with the Subordinated
      Convertible Notes.

     

    10.2.10
      Subsidiaries.
       Form
      or
      acquire any Subsidiary after the Closing Date, except in accordance with
Sections 10.1.9
      and
10.2.5;
      or
      permit any existing Subsidiary to issue any additional Equity Interests except
      director’s qualifying shares.

     

    10.2.11
      Organic
      Documents.
      Amend,
      modify or otherwise change any of its Organic Documents as in effect on the
      Closing Date.

     

    10.2.12
      Tax
      Consolidation.
      File or
      consent to the filing of any consolidated income tax return with any Person
      other than Borrowers and Subsidiaries.

     

    10.2.13
      Accounting
      Changes.
      Make
      any material change in accounting treatment or reporting practices, except
      as
      required by GAAP and in accordance with Section 1.2;
      or
      change its Fiscal Year.

     

    10.2.14
      Restrictive
      Agreements.
      Become
      a party to any Restrictive Agreement, except (a) a Restrictive Agreement as
      in
      effect on the Closing Date and shown on Schedule 9.1.16;
      (b) a
      Restrictive Agreement relating to secured Debt permitted hereunder, if such
      restrictions apply only to the collateral for such Debt; and (c) customary
      provisions in leases and other contracts restricting assignment
      thereof.

     

    
      
        
        

      

      
        67

        
          

        

      

      
        
        

      

    

     

    10.2.15
      Hedging
      Agreements.
      Enter
      into any Hedging Agreement, except to hedge risks arising in the Ordinary Course
      of Business and not for speculative purposes.

     

    10.2.16
      Conduct
      of Business.
      Engage
      in any business, other than its business as conducted on the Closing Date and
      any activities incidental thereto.

     

    10.2.17
      Affiliate
      Transactions.
      Enter
      into or be party to any transaction with an Affiliate, except (a) transactions
      contemplated by the Loan Documents; (b) payment of reasonable compensation
      to
      officers and employees for services actually rendered, and loans and advances
      permitted by Section 10.2.7;
      (c)
      payment of customary directors’ fees and indemnities; (d) transactions solely
      among Borrowers; (e) transactions with Affiliates that were consummated prior
      to
      the Closing Date, as shown on Schedule 10.2.17;
      and (f)
      transactions with Affiliates in the Ordinary Course of Business, upon fair
      and
      reasonable terms fully disclosed to Agent and no less favorable than would
      be
      obtained in a comparable arm’s-length transaction with a
      non-Affiliate.

     

    10.2.18
      Plans.
      Become
      party to any Multiemployer Plan or Foreign Plan, other than any in existence
      on
      the Closing Date.

     

    10.2.19
      Amendments
      to Existing Subordinated Debt.
      Amend,
      supplement or otherwise modify any document, instrument or agreement relating
      to
      the Existing Subordinated Debt Documents except as set forth in the
      Intercreditor Agreement.

     

    10.3 Financial
      Covenants.
      For so
      long as any Commitments or Obligations are outstanding, Borrowers
      shall:

     

    10.3.1
      Fixed
      Charge Coverage Ratio.
      Maintain a Fixed Charge Coverage Ratio of at least the ratio set forth opposite
      each period below measured monthly as of the last day of each
      month.

     

    
      	
              Period

            	 	
              Minimum
                Fixed Charge Coverage Ratio

            
	 	 	 
	
              Month
                ending February 28, 2006 measured on a trailing 2 month
                basis

            	 	
              0.90:1.00

            
	 	 	 
	
              Month
                ending March 31, 2006, measured on a year-to-date basis

            	 	
              1.10:1.00

            
	 	 	 
	
              Month
                ending April 30, 2006, measured on a year-to-date basis

            	 	
              1.30:1.00

            
	 	 	 
	
              Months
                ending May 31, 2006 through December 31, 2006, measured on a year-to-date
                basis

            	 	
              1.50:1.00

            
	 	 	 
	
              Month
                ending January 31, 2007 and each month thereafter measured on a trailing
                12 month basis

            	 	
              1.50:1.00

            

    

    

    
      
        
        

      

      
        68

        
          

        

      

      
        
        

      

    

     

    SECTION
      11. EVENTS
      OF DEFAULT; REMEDIES ON DEFAULT

     

    11.1 Events
      of Default.
      Each of
      the following shall be an “Event
      of Default”
      hereunder, if the same shall occur for any reason whatsoever, whether voluntary
      or involuntary, by operation of law or otherwise:

     

    (a) Any
      Borrower fails to pay any Obligations when due (whether at stated maturity,
      on
      demand, upon acceleration or otherwise);

     

    (b) Any
      representation, warranty or other written statement of any Obligor made in
      connection with any Loan Documents or transactions contemplated thereby is
      incorrect or misleading in any material respect when given;

     

    (c) Any
      Borrower breaches or fail to perform any covenant contained in Sections 7.2,
      7.3, 7.4, 7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.1.7, 10.1.8,
      10.2
      or
10.3;

     

    (d) Any
      Obligor breaches or fails to perform any other covenant contained in any Loan
      Documents, and such breach or failure is not cured within 15 days after a Senior
      Officer of such Obligor has knowledge thereof or receives notice thereof from
      Agent, whichever is sooner; provided,
      however,
      that
      such notice and opportunity to cure shall not apply if the breach or failure
      to
      perform is not capable of being cured within such period or is a willful breach
      by an Obligor;

     

    (e) Any
      Guarantor repudiates, revokes or attempts to revoke its Guaranty; any Obligor
      denies or contests the validity or enforceability of any Loan Documents or
      Obligations, or the perfection or priority of any Lien granted to Agent; or
      any
      Loan Document ceases to be in full force or effect for any reason (other than
      a
      waiver or release by Agent and Lenders);

     

    (f) Any
      breach or default of an Obligor occurs under any document, instrument or
      agreement to which it is a party or by which it or any of its Properties is
      bound, relating to any Debt (other than the Obligations) in excess of
      $1,000,000, if the maturity of or any payment with respect to such Debt may
      be
      accelerated or demanded due to such breach;

     

    (g) Any
      judgment or order for the payment of money is entered against an Obligor in
      an
      amount that exceeds, individually or cumulatively with all unsatisfied judgments
      or orders against all Obligors, $1,000,000 (net of any insurance coverage
      therefor acknowledged in writing by the insurer), unless a stay of enforcement
      of such judgment or order is in effect, by reason of a pending appeal or
      otherwise;

     

    (h) Any
      loss,
      theft, damage or destruction occurs with respect to any Collateral if the amount
      not covered by insurance exceeds $500,000;

     

    
      
        
        

      

      
        69

        
          

        

      

      
        
        

      

    

     

    (i) Any
      Obligor is enjoined, restrained or in any way prevented by any Governmental
      Authority from conducting any material part of its business; any Obligor suffers
      the loss, revocation or termination of any material license, permit, lease
      or
      agreement necessary to its business; there is a cessation of any material part
      of an Obligor’s business for a material period of time; any material Collateral
      or Property of an Obligor is taken or impaired through condemnation; any Obligor
      agrees to or commences any liquidation, dissolution or winding up of its
      affairs; or any Obligor ceases to be Solvent;

     

    (j) Any
      Insolvency Proceeding is commenced by any Obligor; an Insolvency Proceeding
      is
      commenced against any Obligor and: such Obligor consents to the institution
      of
      the proceeding against it, the petition commencing the proceeding is not timely
      controverted by such Obligor, such petition is not dismissed within 30 days
      after its filing, or an order for relief is entered in the proceeding; a trustee
      (including an interim trustee) is appointed to take possession of any
      substantial Property of or to operate any of the business of any Obligor; or
      any
      Obligor makes an offer of settlement, extension or composition to its unsecured
      creditors generally;

     

    (k) A
      Reportable Event occurs that constitutes grounds for termination by the Pension
      Benefit Guaranty Corporation of any Multiemployer Plan or appointment of a
      trustee for any Multiemployer Plan; any Multiemployer Plan is terminated or
      any
      such trustee is requested or appointed; any Obligor is in “default” (as defined
      in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
      Plan
      resulting from any withdrawal therefrom; or any event similar to the foregoing
      occurs or exists with respect to a Foreign Plan;

     

    (l) Any
      Obligor or any of its Senior Officers is criminally indicted or convicted for
      (i) a felony committed in the conduct of such Obligor’s business, or (ii) any
      state or federal law (including the Controlled Substances Act, Money Laundering
      Control Act of 1986 and Illegal Exportation of War Materials Act) that could
      lead to forfeiture of any material Property or any Collateral; 

     

    (m) A
      “default” or “event of default” (as defined in the Existing Subordinated Debt
      Documents) shall occur under the Existing Subordinated Debt Documents;

     

    (n) the
      subordination and/or lien priority provisions contained in the Intercreditor
      Agreement shall for any reason be revoked or invalidated, or otherwise cease
      to
      be in full force and effect, or (i) any Person shall contest in any manner
      the
      validity or enforceability of the Intercreditor Agreement, deny that it has
      any
      further liability or obligation thereunder, or take any action in violation
      thereof or fail to take any action required by the terms thereof, or (ii) the
      Obligations or Liens granted herein, for any reason shall not have the priority
      contemplated by this Agreement, or the Intercreditor Agreement; or 

     

    (o) the
      bonding or surety industry requires or is granted or deemed to have, collateral
      or subrogation rights with respect to any assets other than solely with respect
      to accounts receivable arising directly from the lone project which such bonding
      or surety company completed such project and not any other project which such
      bonding or surety company may also be providing bonds; or

     

    
      
        
        

      

      
        70

        
          

        

      

      
        
        

      

    

     

    (p) Any
      event
      occurs or condition exists that has a Material Adverse Effect.

     

    11.2 Remedies
      upon Default.
      If an
      Event of Default described in Section 11.1(j)
      occurs
      with respect to any Borrower, then to the extent permitted by Applicable Law,
      all Obligations shall become automatically due and payable and all Commitments
      shall terminate, without any action by Agent or notice of any kind. In addition,
      or if any other Event of Default exists, Agent may in its discretion (and shall
      upon written direction of Required Lenders) do any one or more of the following
      from time to time:

     

    (a) declare
      any Obligations immediately due and payable, whereupon they shall be due and
      payable without diligence, presentment, demand, protest or notice of any kind,
      all of which are hereby waived by Borrowers to the fullest extent permitted
      by
      law;

     

    (b) terminate,
      reduce or condition any Commitment, or make any adjustment to the Borrowing
      Base;

     

    (c) require
      Obligors to Cash Collateralize LC Obligations, Bank Product Debt and other
      Obligations that are contingent or not yet due and payable, and, if Obligors
      fail promptly to deposit such Cash Collateral, Agent may (and shall upon the
      direction of Required Lenders) advance the required Cash Collateral as Revolver
      Loans (whether or not an Overadvance exists or is created thereby, or the
      conditions in Section
      6
      are
      satisfied); and

     

    (d) exercise
      any other rights or remedies afforded under any agreement, by law, at equity
      or
      otherwise, including the rights and remedies of a secured party under the UCC.
      Such rights and remedies include the rights to (i) take possession of any
      Collateral; (ii) require Borrowers to assemble Collateral, at Borrowers’
expense, and make it available to Agent at a place designated by Agent; (iii)
      enter any premises where Collateral is located and store Collateral on such
      premises until sold (and if the premises are owned or leased by a Borrower,
      Borrowers agree not to charge for such storage); and (iv) sell or otherwise
      dispose of any Collateral in its then condition, or after any further
      manufacturing or processing thereof, at public or private sale, with such notice
      as may be required by Applicable Law, in lots or in bulk, at such locations,
      all
      as Agent, in its discretion, deems advisable. Agent shall have the right to
      conduct such sales on any Obligor’s premises, without charge, and such sales may
      be adjourned from time to time in accordance with Applicable Law. Agent shall
      have the right to sell, lease or otherwise dispose of any Collateral for cash,
      credit or any combination thereof, and Agent may purchase any Collateral at
      public or, if permitted by law, private sale and, in lieu of actual payment
      of
      the purchase price, may set off the amount of such price against the
      Obligations.

     

    11.3 License.
      Agent
      is hereby granted an irrevocable, non-exclusive license or other right to use,
      license or sub-license (without payment of royalty or other compensation to
      any
      Person) any or all Intellectual Property of Borrowers, computer hardware and
      software, trade secrets, brochures, customer lists, promotional and advertising
      materials, labels, packaging materials and other Property, in advertising for
      sale, marketing, selling, collecting, completing manufacture of, or otherwise
      exercising any rights or remedies with respect to, any Collateral. Each
      Borrower’s rights and interests under Intellectual Property shall inure to
      Agent’s benefit.

     

    
      
        
        

      

      
        71

        
          

        

      

      
        
        

      

    

     

    11.4 Setoff.
      Agent,
      Lenders and their Affiliates are each authorized by Borrowers at any time during
      an Event of Default, without notice to Borrowers or any other Person, to set
      off
      and to appropriate and apply any deposits (general or special), funds, claims,
      obligations, liabilities or other Debt at any time held or owing by Agent,
      any
      Lender or any such Affiliate to or for the account of any Obligor against any
      Obligations, whether or not demand for payment of such Obligation has been
      made,
      any Obligations have been declared due and payable, are then due, or are
      contingent or unmatured, or the Collateral or any guaranty or other security
      for
      the Obligations is adequate.

     

    11.5 Remedies
      Cumulative; No Waiver.

     

    11.5.1
      Cumulative
      Rights.
      All
      covenants, conditions, provisions, warranties, guaranties, indemnities and
      other
      undertakings of Borrowers contained in the Loan Documents are cumulative and
      not
      in derogation or substitution of each other. In particular, the rights and
      remedies of Agent and Lenders are cumulative, may be exercised at any time
      and
      from time to time, concurrently or in any order, and shall not be exclusive
      of
      any other rights or remedies that Agent and Lenders may have, whether under
      any
      agreement, by law, at equity or otherwise.

     

    11.5.2
      Waivers.
      The
      failure or delay of Agent or any Lender to require strict performance by
      Borrowers with any terms of the Loan Documents, or to exercise any rights or
      remedies with respect to Collateral or otherwise, shall not operate as a waiver
      thereof nor as establishment of a course of dealing. All rights and remedies
      shall continue in full force and effect until Full Payment of all Obligations.
      No modification of any terms of any Loan Documents (including any waiver
      thereof) shall be effective, unless such modification is specifically provided
      in a writing directed to Borrowers and executed by Agent or the requisite
      Lenders, and such modification shall be applicable only to the matter specified.
      No waiver of any Default or Event of Default shall constitute a waiver of any
      other Default or Event of Default that may exist at such time, unless expressly
      stated. If Agent or any Lender accepts performance by any Obligor under any
      Loan
      Documents in a manner other than that specified therein, or during any Default
      or Event of Default, or if Agent or any Lender shall delay or exercise any
      right
      or remedy under any Loan Documents, such acceptance, delay or exercise shall
      not
      operate to waive any Default or Event of Default nor to preclude exercise of
      any
      other right or remedy. It is expressly acknowledged by Borrowers that any
      failure to satisfy a financial covenant on a measurement date shall not be
      cured
      or remedied by satisfaction of such covenant on a subsequent date.

     

    SECTION
      12. AGENT

     

    12.1 Appointment,
      Authority and Duties of Agent.

     

    12.1.1
      Appointment
      and Authority.
      Each
      Lender appoints and designates Bank of America as Agent hereunder. Agent may,
      and each Lender authorizes Agent to, enter into all Loan Documents to which
      Agent is intended to be a party and accept all Security Documents, for Agent’s
      benefit and the Pro Rata benefit of Lenders. Each Lender agrees that any action
      taken by Agent or Required Lenders in accordance with the provisions of the
      Loan
      Documents, and the exercise by Agent or Required Lenders of any rights or
      remedies set forth therein, together with all other powers reasonably incidental
      thereto, shall be authorized and binding upon all Lenders. Without limiting
      the
      generality of the foregoing, Agent shall have the sole and exclusive authority
      to (a) act as the disbursing and collecting agent for Lenders with respect
      to
      all payments and collections arising in connection with the Loan Documents;
      (b)
      execute and deliver as Agent each Loan Document, including any intercreditor
      or
      subordination agreement, and accept delivery of each Loan Document from any
      Obligor or other Person; (c) act as collateral agent for Secured Parties for
      purposes of perfecting and administering Liens under the Loan Documents, and
      for
      all other purposes stated therein; (d) manage, supervise or otherwise deal
      with
      Collateral; and (e) exercise all rights and remedies given to Agent with respect
      to any Collateral under the Loan Documents, Applicable Law or otherwise. The
      duties of Agent shall be ministerial and administrative in nature, and Agent
      shall not have a fiduciary relationship with any Lender, Secured Party,
      Participant or other Person, by reason of any Loan Document or any transaction
      relating thereto. Agent alone shall be authorized to determine whether any
      Accounts or Inventory constitute Eligible Accounts or Eligible Inventory, or
      whether to impose or release any reserve, which determinations and judgments,
      if
      exercised in good faith, shall exonerate Agent from liability to any Lender
      or
      other Person for any error in judgment.

     

    
      
        
        

      

      
        72

        
          

        

      

      
        
        

      

    

     

    12.1.2
      Duties.
      Agent
      shall not have any duties except those expressly set forth in the Loan
      Documents, nor be required to initiate or conduct any Enforcement Action except
      to the extent directed to do so by Required Lenders while an Event of Default
      exists. The conferral upon Agent of any right shall not imply a duty on Agent’s
      part to exercise such right, unless instructed to do so by Required Lenders
      in
      accordance with this Agreement.

     

    12.1.3
      Agent
      Professionals.
      Agent
      may perform its duties through agents and employees. Agent may consult with
      and
      employ Agent Professionals, and shall be entitled to act upon, and shall be
      fully protected in any action taken in good faith reliance upon, any advice
      given by an Agent Professional. Agent shall not be responsible for the
      negligence or misconduct of any agents, employees or Agent Professionals
      selected by it with reasonable care.

     

    12.1.4
      Instructions
      of Required Lenders.
      The
      rights and remedies conferred upon Agent under the Loan Documents may be
      exercised without the necessity of joinder of any other party, unless required
      by Applicable Law. Agent may request instructions from Required Lenders with
      respect to any act (including the failure to act) in connection with any Loan
      Documents, and may seek assurances to its satisfaction from Lenders of their
      indemnification obligations under Section 12.6
      against
      all Claims that could be incurred by Agent in connection with any act. Agent
      shall be entitled to refrain from any act until it has received such
      instructions or assurances, and Agent shall not incur liability to any Person
      by
      reason of so refraining. Instructions of Required Lenders shall be binding
      upon
      all Lenders, and no Lender shall have any right of action whatsoever against
      Agent as a result of Agent acting or refraining from acting in accordance with
      the instructions of Required Lenders. Notwithstanding the foregoing,
      instructions by and consent of all Lenders shall be required in the
      circumstances described in Section 14.1.1,
      and in
      no event shall Required Lenders, without the prior written consent of each
      Lender, direct Agent to accelerate and demand payment of Loans held by one
      Lender without accelerating and demanding payment of all other Loans, nor to
      terminate the Commitments of one Lender without terminating the Commitments
      of
      all Lenders. In no event shall Agent be required to take any action that, in
      its
      opinion, is contrary to Applicable Law or any Loan Documents or could subject
      any Agent Indemnitee to personal liability.

     

    
      
        
        

      

      
        73

        
          

        

      

      
        
        

      

    

     

    12.2 Agreements
      Regarding Collateral and Field Examination Reports.

     

    12.2.1
      Lien
      Releases; Care of Collateral.
      Lenders
      authorize Agent to release any Lien with respect to any Collateral (a) upon
      Full
      Payment of the Obligations, (b) that is the subject of an Asset Disposition
      which Borrowers certify in writing to Agent is a Permitted Asset Disposition
      or
      a Lien which Borrowers certify is a Permitted Lien entitled to priority over
      Agent’s Liens (and Agent may rely conclusively on any such certificate without
      further inquiry), (c) that does not constitute a material part of the
      Collateral, or (d) with the written consent of all Lenders. Agent shall have
      no
      obligation whatsoever to any Lenders to assure that any Collateral exists or
      is
      owned by a Borrower, or is cared for, protected, insured or encumbered, nor
      to
      assure that Agent’s Liens have been properly created, perfected or enforced, or
      are entitled to any particular priority, nor to exercise any duty of care with
      respect to any Collateral.

     

    12.2.2
      Possession
      of Collateral.
      Agent
      and Lenders appoint each other Lender as agent for the purpose of perfecting
      Liens (for the benefit of Secured Parties) in any Collateral that, under the
      UCC
      or other Applicable Law, can be perfected by possession. If any Lender obtains
      possession of any such Collateral, it shall notify Agent thereof and, promptly
      upon Agent’s request, deliver such Collateral to Agent or otherwise deal with
      such Collateral in accordance with Agent’s instructions.

     

    12.2.3
      Reports.
      Agent
      shall promptly, upon receipt thereof, forward to each Lender copies of the
      results of any field audit or other examination or any appraisal prepared by
      or
      on behalf of Agent with respect to any Obligor or Collateral (“Report”).
      Each
      Lender agrees (a) that neither Bank of America nor Agent makes any
      representation or warranty as to the accuracy or completeness of any Report,
      and
      shall not be liable for any information contained in or omitted from any Report;
      (b) that the Reports are not intended to be comprehensive audits or
      examinations, and that Agent or any other Person performing any audit or
      examination will inspect only specific information regarding Obligations or
      the
      Collateral and will rely significantly upon Borrowers’ books and records as well
      as upon representations of Borrowers’ officers and employees; and (c) to keep
      all Reports confidential and strictly for such Lender’s internal use, and not to
      distribute any Report (or the contents thereof) to any Person (except to such
      Lender’s Participants, attorneys and accountants) or use any Report in any
      manner other than administration of the Loans and other Obligations. Each Lender
      agrees to indemnify and hold harmless Agent and any other Person preparing
      a
      Report from any action such Lender may take as a result of or any conclusion
      it
      may draw from any Report, as well as any Claims arising in connection with
      any
      third parties that obtain all or any part of a Report through such
      Lender.

     

    12.3 Reliance
      By Agent.
      Agent
      shall be entitled to rely, and shall be fully protected in relying, upon any
      certification, notice or other communication (including those by telephone,
      telex, telegram, telecopy or e-mail) believed by it to be genuine and correct
      and to have been signed, sent or made by the proper Person, and upon the advice
      and statements of Agent Professionals.

     

    
      
        
        

      

      
        74

        
          

        

      

      
        
        

      

    

     

    12.4 Action
      Upon Default.
      Agent
      shall not be deemed to have knowledge of any Default or Event of Default unless
      it has received written notice from a Lender or Borrower specifying the
      occurrence and nature thereof. If any Lender acquires knowledge of a Default
      or
      Event of Default, it shall promptly notify Agent and the other Lenders thereof
      in writing. Each Lender agrees that, except as otherwise provided in any Loan
      Documents or with the written consent of Agent and Required Lenders, it will
      not
      take any Enforcement Action, accelerate its Obligations, or exercise any right
      that it might otherwise have under Applicable Law to credit bid at foreclosure
      sales, UCC sales or other similar dispositions of Collateral. Notwithstanding
      the foregoing, however, a Lender may take action to preserve or enforce its
      rights against an Obligor where a deadline or limitation period is applicable
      that would, absent such action, bar enforcement of Obligations held by such
      Lender, including the filing of proofs of claim in an Insolvency
      Proceeding.

     

    12.5 Ratable
      Sharing.
      If any
      Lender shall obtain any payment or reduction of any Obligation, whether through
      set-off or otherwise, in excess of its share of such Obligation, determined
      on a
      Pro Rata basis or in accordance with Section
      5.6.1,
      as
      applicable, such Lender shall forthwith purchase from Agent, Issuing Bank and
      the other Lenders such participations in the affected Obligation as are
      necessary to cause the purchasing Lender to share the excess payment or
      reduction on a Pro Rata basis or in accordance with Section
      5.6.1,
      as
      applicable. If any of such payment or reduction is thereafter recovered from
      the
      purchasing Lender, the purchase shall be rescinded and the purchase price
      restored to the extent of such recovery, but without interest.

     

    12.6 Indemnification
      of Agent Indemnitees.

     

    12.6.1
      Indemnification.
      EACH LENDER
      SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES, TO THE EXTENT NOT
      REIMBURSED BY OBLIGORS (BUT WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS
      OF
      OBLIGORS UNDER ANY LOAN DOCUMENTS), ON A PRO RATA BASIS, AGAINST ALL CLAIMS
      THAT
      MAY BE INCURRED BY OR ASSERTED AGAINST ANY AGENT
      INDEMNITEE.
      If Agent
      is sued by any receiver, trustee in bankruptcy, debtor-in-possession or other
      Person for any alleged preference from an Obligor or fraudulent transfer, then
      any monies paid by Agent in settlement or satisfaction of such proceeding,
      together with all interest, costs and expenses (including attorneys’ fees)
      incurred in the defense of same, shall be promptly reimbursed to Agent by
      Lenders to the extent of each Lender’s Pro Rata share.

     

    12.6.2
      Proceedings.
      Without
      limiting the generality of the foregoing, if at any time (whether prior to
      or
      after the Commitment Termination Date) any proceeding is brought against any
      Agent Indemnitees by an Obligor, or any Person claiming through an Obligor,
      to
      recover damages for any act taken or omitted by Agent in connection with any
      Obligations, Collateral, Loan Documents or matters relating thereto, or
      otherwise to obtain any other relief of any kind on account of any transaction
      relating to any Loan Documents, each Lender agrees to indemnify and hold
      harmless Agent Indemnitees with respect thereto and to pay to Agent Indemnitees
      such Lender’s Pro Rata share of any amount that any Agent Indemnitee is required
      to pay under any judgment or other order entered in such proceeding or by reason
      of any settlement, including all interest, costs and expenses (including
      attorneys’ fees) incurred in defending same. In Agent’s discretion, Agent may
      reserve for any such proceeding, and may satisfy any judgment, order or
      settlement, from proceeds of Collateral prior to making any distributions of
      Collateral proceeds to Lenders.

     

    
      
        
        

      

      
        75

        
          

        

      

      
        
        

      

    

     

    12.7 Limitation
      on Responsibilities of Agent.
      Agent
      shall not be liable to Lenders for any action taken or omitted to be taken
      under
      the Loan Documents, except for losses directly and solely caused by Agent’s
      gross negligence or willful misconduct. Agent does not assume any responsibility
      for any failure or delay in performance or any breach by any Obligor or Lender
      of any obligations under the Loan Documents. Agent does not make to Lenders
      any
      express or implied warranty, representation or guarantee with respect to any
      Obligations, Collateral, Loan Documents or Obligor. No Agent Indemnitee shall
      be
      responsible to Lenders for any recitals, statements, information,
      representations or warranties contained in any Loan Documents; the execution,
      validity, genuineness, effectiveness or enforceability of any Loan Documents;
      the genuineness, enforceability, collectibility, value, sufficiency, location
      or
      existence of any Collateral, or the validity, extent, perfection or priority
      of
      any Lien therein; the validity, enforceability or collectibility of any
      Obligations; or the assets, liabilities, financial condition, results of
      operations, business, creditworthiness or legal status of any Obligor or Account
      Debtor. No Agent Indemnitee shall have any obligation to any Lender to ascertain
      or inquire into the existence of any Default or Event of Default, the observance
      or performance by any Obligor of any terms of the Loan Documents, or the
      satisfaction of any conditions precedent contained in any Loan
      Documents.

     

    12.8 Successor
      Agent and Co-Agents.

     

    12.8.1
      Resignation;
      Successor Agent.
      Subject
      to the appointment and acceptance of a successor Agent as provided below, Agent
      may resign at any time by giving at least 30 days written notice thereof to
      Lenders and Borrowers. Upon receipt of such notice, Required Lenders shall
      have
      the right to appoint a successor Agent which shall be (a) a Lender or an
      Affiliate of a Lender; or (b) a commercial bank that is organized under the
      laws
      of the United States or any state or district thereof, has a combined capital
      surplus of at least $200,000,000 and (provided no Default or Event of Default
      exists) is reasonably acceptable to Borrowers. If no successor agent is
      appointed prior to the effective date of the resignation of Agent, then Agent
      may appoint a successor agent from among Lenders. Upon acceptance by a successor
      Agent of an appointment to serve as Agent hereunder, such successor Agent shall
      thereupon succeed to and become vested with all the powers and duties of the
      retiring Agent without further act, and the retiring Agent shall be discharged
      from its duties and obligations hereunder but shall continue to have the
      benefits of the indemnification set forth in Sections 12.6
      and
14.2.
      Notwithstanding any Agent’s resignation, the provisions of this Section 12
      shall
      continue in effect for its benefit with respect to any actions taken or omitted
      to be taken by it while Agent. Any successor by merger or acquisition of the
      stock or assets of Bank of America shall continue to be Agent hereunder without
      further act on the part of the parties hereto, unless such successor resigns
      as
      provided above.

     

    
      
        
        

      

      
        76

        
          

        

      

      
        
        

      

    

     

    12.8.2
      Separate
      Collateral Agent.
      It is
      the intent of the parties that there shall be no violation of any Applicable
      Law
      denying or restricting the right of financial institutions to transact business
      in any jurisdiction. If Agent believes that it may be limited in the exercise
      of
      any rights or remedies under the Loan Documents due to any Applicable Law,
      Agent
      may appoint an additional Person who is not so limited, as a separate collateral
      agent or co-collateral agent. If Agent so appoints a collateral agent or
      co-collateral agent, each right and remedy intended to be available to Agent
      under the Loan Documents shall also be vested in such separate agent. Every
      covenant and obligation necessary to the exercise thereof by such agent shall
      run to and be enforceable by it as well as Agent. Lenders shall execute and
      deliver such documents as Agent deems appropriate to vest any rights or remedies
      in such agent. If any collateral agent or co-collateral agent shall die or
      dissolve, become incapable of acting, resign or be removed, then all the rights
      and remedies of such agent, to the extent permitted by Applicable Law, shall
      vest in and be exercised by Agent until appointment of a new agent.

     

    12.9 Due
      Diligence and Non-Reliance.
      Each
      Lender acknowledges and agrees that it has, independently and without reliance
      upon Agent or any other Lenders, and based upon such documents, information
      and
      analyses as it has deemed appropriate, made its own credit analysis of each
      Obligor and its own decision to enter into this Agreement and to fund Loans
      and
      participate in LC Obligations hereunder. Each Lender has made such inquiries
      concerning the Loan Documents, the Collateral and each Obligor as such Lender
      feels necessary. Each Lender further acknowledges and agrees that the other
      Lenders and Agent have made no representations or warranties concerning any
      Obligor, any Collateral or the legality, validity, sufficiency or enforceability
      of any Loan Documents or Obligations. Each Lender will, independently and
      without reliance upon the other Lenders or Agent, and based upon such financial
      statements, documents and information as it deems appropriate at the time,
      continue to make and rely upon its own credit decisions in making Loans and
      participating in LC Obligations, and in taking or refraining from any action
      under any Loan Documents. Except for notices, reports and other information
      expressly requested by a Lender, Agent shall have no duty or responsibility
      to
      provide any Lender with any notices, reports or certificates furnished to Agent
      by any Obligor or any credit or other information concerning the affairs,
      financial condition, business or Properties of any Obligor (or any of its
      Affiliates) which may come into possession of Agent or any of Agent’s
      Affiliates.

     

    12.10 Replacement
      of Certain Lenders.
      In the
      event that any Lender (a) fails to fund its Pro Rata share of any Loan or LC
      Obligation hereunder, and such failure is not cured within two Business Days,
      (b) defaults in performing any of its obligations under the Loan Documents,
      or
      (c) fails to give its consent to any amendment, waiver or action for which
      consent of all Lenders was required and Required Lenders consented, then, in
      addition to any other rights and remedies that any Person may have, Agent may,
      by notice to such Lender within 120 days after such event, require such Lender
      to assign all of its rights and obligations under the Loan Documents to Eligible
      Assignee(s) specified by Agent, pursuant to appropriate Assignment and
      Acceptance(s) and within 20 days after Agent’s notice. Agent is irrevocably
      appointed as attorney-in-fact to execute any such Assignment and Acceptance
      if
      the Lender fails to execute same. Such Lender shall be entitled to receive,
      in
      cash, concurrently with such assignment, all amounts owed to it under the Loan
      Documents, including all principal, interest and fees through the date of
      assignment (but excluding any prepayment charge).

     

    
      
        
        

      

      
        77

        
          

        

      

      
        
        

      

    

     

    12.11 Remittance
      of Payments and Collections.

     

    12.11.1
      Remittances
      Generally.
      All
      payments by any Lender to Agent shall be made by the time and on the day set
      forth in this Agreement, in immediately available funds. If no time for payment
      is specified or if payment is due on demand by Agent and request for payment
      is
      made by Agent by 11:00 a.m. on a Business Day, payment shall be made by Lender
      not later than 2:00 p.m. on such day, and if request is made after 11:00 a.m.,
      then payment shall be made by 11:00 a.m. on the next Business Day. Payment
      by
      Agent to any Lender shall be made by wire transfer, in the type of funds
      received by Agent. Any such payment shall be subject to Agent’s right of offset
      for any amounts due from such Lender under the Loan Documents.

     

    12.11.2
      Failure
      to Pay.
      If any
      Lender fails to pay any amount when due by it to Agent pursuant to the terms
      hereof, such amount shall bear interest from the due date until paid at the
      rate
      determined by Agent as customary in the banking industry for interbank
      compensation. In no event shall Borrowers be entitled to receive credit for
      any
      interest paid by a Lender to Agent.

     

    12.11.3
      Recovery
      of Payments.
      If
      Agent pays any amount to a Lender in the expectation that a related payment
      will
      be received by Agent from an Obligor and such related payment is not received,
      then Agent may recover such amount from each Lender that received it. If Agent
      determines at any time that an amount received under any Loan Document must
      be
      returned to an Obligor or paid to any other Person pursuant to Applicable Law
      or
      otherwise, then, notwithstanding any other term of any Loan Document, Agent
      shall not be required to distribute such amount to any Lender. If any amounts
      received and applied by Agent to any Obligations are later required to be
      returned by Agent pursuant to Applicable Law, Lenders shall pay to Agent, on
      demand, such Lender’s Pro Rata share of the amounts required to be
      returned.

     

    12.12 Agent
      in its Individual Capacity.
      As a
      Lender, Bank of America shall have the same rights and remedies under the other
      Loan Documents as any other Lender, and the terms “Lenders,” “Required Lenders”
or any similar term shall include Bank of America in its capacity as a Lender.
      Each of Bank of America and its Affiliates may accept deposits from, maintain
      deposits or credit balances for, invest in, lend money to, provide Bank Products
      to, act as trustee under indentures of, serve as financial or other advisor
      to,
      and generally engage in any kind of business with, Obligors and their
      Affiliates, as if Bank of America were any other bank, without any duty to
      account therefor (including any fees or other consideration received in
      connection therewith) to the other Lenders. In their individual capacity, Bank
      of America and its Affiliates may receive information regarding Obligors, their
      Affiliates and their Account Debtors (including information subject to
      confidentiality obligations), and each Lender agrees that Bank of America and
      its Affiliates shall be under no obligation to provide such information to
      Lenders, if acquired in such individual capacity and not as Agent
      hereunder.

     

    12.13 Agent
      Titles.
      Each
      Lender, other than Bank of America, that is designated (on the cover page of
      this Agreement or otherwise) by Bank of America as an “Agent” or “Arranger” of
      any type shall not have any right, power, responsibility or duty under any
      Loan
      Documents other than those applicable to all Lenders, and shall in no event
      be
      deemed to have any fiduciary relationship with any other Lender.

     

    
      
        
        

      

      
        78

        
          

        

      

      
        
        

      

    

     

    12.14 No
      Third Party Beneficiaries.
      This
Section 12
      is
      an
      agreement solely among Lenders and Agent, and, except with respect to the notice
      requirement provided in Section
      12.8.1,
      does
      not confer any rights or benefits upon Borrowers or any other Person. As between
      Borrowers and Agent, any action that Agent may take under any Loan Documents
      shall be conclusively presumed to have been authorized and directed by Lenders
      as herein provided.

     

    SECTION
      13. BENEFIT
      OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

     

    13.1 Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of Borrowers, Agent
      and
      Lenders and their respective successors and assigns, except that (a) no Borrower
      shall have the right to assign its rights or delegate its obligations under
      any
      Loan Documents, and (b) any assignment by a Lender must be made in compliance
      with Section 13.3.
      Agent
      may treat the Person which made any Loan as the owner thereof for all purposes
      until such Person makes an assignment in accordance with Section 13.3.
      Any
      authorization or consent of a Lender shall be conclusive and binding on any
      subsequent transferee or assignee of such Lender.

     

    13.2 Participations.

     

    13.2.1
      Permitted
      Participants; Effect.
      Any
      Lender may, in the ordinary course of its business and in accordance with
      Applicable Law, at any time sell to a financial institution (“Participant”) a
      participating interest in the rights and obligations of such Lender under any
      Loan Documents. Despite any sale by a Lender of participating interests to
      a
      Participant, such Lender’s obligations under the Loan Documents shall remain
      unchanged, such Lender shall remain solely responsible to the other parties
      hereto for performance of such obligations, such Lender shall remain the holder
      of its Loans and Commitments for all purposes, all amounts payable by Borrowers
      shall be determined as if such Lender had not sold such participating interests,
      and Borrowers and Agent shall continue to deal solely and directly with such
      Lender in connection with the Loan Documents. Each Lender shall be solely
      responsible for notifying its Participants of any matters under the Loan
      Documents, and Agent and the other Lenders shall not have any obligation or
      liability to any such Participant. A Participant that would be a Foreign Lender
      if it were a Lender shall not be entitled to the benefits of Section 5.9
      unless
      Borrowers agree otherwise in writing.

     

    13.2.2
      Voting
      Rights.
      Each
      Lender shall retain the sole right to approve, without the consent of any
      Participant, any amendment, waiver or other modification of any Loan Documents
      other than that which forgives principal, interest or fees, reduces the stated
      interest rate or fees payable with respect to any Loan or Commitment in which
      such Participant has an interest, postpones the Commitment Termination Date
      or
      any date fixed for any regularly scheduled payment of principal, interest or
      fees on such Loan or Commitment, or releases any Borrower, Guarantor or
      substantial portion of the Collateral.

     

    
      
        
        

      

      
        79

        
          

        

      

      
        
        

      

    

     

    13.2.3
      Benefit
      of Set-Off.
      Borrowers agree that each Participant shall have a right of set-off in respect
      of its participating interest to the same extent as if such interest were owing
      directly to a Lender, and each Lender shall also retain the right of set-off
      with respect to any participating interests sold by it. By exercising any right
      of set-off, a Participant agrees to share with Lenders all amounts received
      through its set-off, in accordance with Section 12.5
      as if
      such Participant were a Lender.

     

    13.3 Assignments.

     

    13.3.1
      Permitted
      Assignments.
      A
      Lender may assign to any Eligible Assignee any of its rights and obligations
      under the Loan Documents, as long as (a) each assignment is of a constant,
      and
      not a varying, percentage of the transferor Lender’s rights and obligations
      under the Loan Documents and, in the case of a partial assignment, is in a
      minimum principal amount of $5,000,000 (unless otherwise agreed by Agent in
      its
      discretion) and integral multiples of $1,000,000 in excess of that amount;
      (b)
      except in the case of an assignment in whole of a Lender’s rights and
      obligations, the aggregate amount of the Commitments retained by the transferor
      Lender be at least $5,000,000 (unless otherwise agreed by Agent in its
      discretion); and (c) the parties to each such assignment shall execute and
      deliver to Agent, for its acceptance and recording, an Assignment and
      Acceptance. Nothing herein shall limit the right of a Lender to pledge or assign
      any rights under the Loan Documents to (i) any Federal Reserve Bank or the
      United States Treasury as collateral security pursuant to Regulation A of the
      Board of Governors and any Operating Circular issued by such Federal Reserve
      Bank, or (ii) counterparties to swap agreements relating to any Loans;
provided,
      however,
      that
      any payment by Borrowers to the assigning Lender in respect of any Obligations
      assigned as described in this sentence shall satisfy Borrowers’ obligations
      hereunder to the extent of such payment, and no such assignment shall release
      the assigning Lender from its obligations hereunder.

     

    13.3.2
      Effect;
      Effective Date.
      Upon
      delivery to Agent of an assignment notice in the form of Exhibit B
      and a
      processing fee of $5,000, such assignment shall become effective as specified
      in
      the notice, if it complies with this Section 13.3.
      From
      the effective date of such assignment, the Eligible Assignee shall for all
      purposes be a Lender under the Loan Documents, and shall have all rights and
      obligations of a Lender thereunder. Upon consummation of an assignment, the
      transferor Lender, Agent and Borrowers shall make appropriate arrangements
      for
      issuance of replacement and/or new Notes, as appropriate.

     

    13.4 Tax
      Treatment.
      If any
      interest in a Loan Document is transferred to a Transferee that is organized
      under the laws of any jurisdiction other than the United States or any state
      or
      district thereof, the transferor Lender shall cause such Transferee,
      concurrently with the effectiveness of such transfer, to comply with the
      provisions of Section
      5.10.

     

    13.5 Representation
      of Lenders.
      Each
      Lender represents and warrants to each Borrower, Agent and other Lenders that
      none of the consideration used by it to fund its Loans or to participate in
      any
      other transactions under this Agreement constitutes for any purpose of ERISA
      or
      Section 4975 of the Internal Revenue Code assets of any “plan” as defined in
      Section 3(3) of ERISA or Section 4975 of the Internal Revenue Code and the
      interests of such Lender in and under the Loan Documents shall not constitute
      plan assets under ERISA.

     

    
      
        
        

      

      
        80

        
          

        

      

      
        
        

      

    

     

    SECTION
      14. MISCELLANEOUS

     

    14.1 Consents,
      Amendments and Waivers.

     

    14.1.1
      Amendment.
      No
      modification of any Loan Document, including any extension or amendment of
      a
      Loan Document or any waiver of a Default or Event of Default, shall be effective
      without the prior written agreement of Agent, with the consent of Required
      Lenders, and each Obligor party to such Loan Document; provided,
      however,
      that

     

    (a) without
      the prior written consent of Agent, no modification shall be effective with
      respect to any provision in a Loan Document that relates to any rights, duties
      or discretion of Agent;

     

    (b) without
      the prior written consent of Issuing Bank, no modification shall be effective
      with respect to any LC Obligations or Section 2.3;

     

    (c) without
      the prior written consent of each affected Lender, no modification shall be
      effective that would (i) increase the Commitment of such Lender; or (ii) reduce
      the amount of, or waive or delay payment of, any principal, interest or fees
      payable to such Lender; and

     

    (d) without
      the prior written consent of all Lenders (except a defaulting Lender as provided
      in Section 4.2),
      no
      modification shall be effective that would (i) extend the Revolver
      Termination Date; (ii) alter Section 5.6,
      7.1
      (except
      to add Collateral), or 14.1.1;
      (iii) amend the definitions of Borrowing Base (and the defined terms used
      in such definition), Pro Rata or Required Lenders; (iv) increase any
      advance rate, or increase total Commitments; (vi) release Collateral with a
      book value greater than $500,000 during any calendar year, except as currently
      contemplated by the Loan Documents; or (vii) release any Obligor from
      liability for any Obligations, if such Obligor is Solvent at the time of the
      release.

     

    14.1.2
      Limitations.
      The
      agreement of Borrowers shall not be necessary to the effectiveness of any
      modification of a Loan Document that deals solely with the rights and duties
      of
      Lenders, Agent and/or Issuing Bank as among themselves. Only the consent of
      the
      parties to any agreement relating to a Bank Product shall be required for any
      modification of such agreement, and no Affiliate of a Lender that is party
      to a
      Bank Product agreement shall have any other right to consent to or participate
      in any manner in modification of any other Loan Document. The making of any
      Loans during the existence of a Default or Event of Default shall not be deemed
      to constitute a waiver of such Default or Event of Default, nor to establish
      a
      course of dealing. Any waiver or consent granted by Lenders hereunder shall
      be
      effective only if in writing, and then only in the specific instance and for
      the
      specific purpose for which it is given.

     

    14.1.3
      Payment
      for Consents.
      No
      Borrower will, directly or indirectly, pay any remuneration or other thing
      of
      value, whether by way of additional interest, fee or otherwise, to any Lender
      (in its capacity as a Lender hereunder) as consideration for agreement by such
      Lender with any modification of any Loan Documents, unless such remuneration
      or
      value is concurrently paid, on the same terms, on a Pro Rata basis to all
      Lenders providing their consent.

     

    
      
        
        

      

      
        81

        
          

        

      

      
        
        

      

    

     

    14.2 Indemnity.
      EACH
      BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS
      THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE (OTHER THAN CLAIMS
      BROUGHT BY ONE INDEMNITEE AGAINST ANOTHER), INCLUDING CLAIMS ARISING FROM THE
      NEGLIGENCE OF AN INDEMNITEE.
      In no
      event shall any party to a Loan Document have any obligation thereunder to
      indemnify or hold harmless an Indemnitee with respect to a Claim that is (i)
      determined in a final, non-appealable judgment by a court of competent
      jurisdiction to result from the gross negligence or willful misconduct of such
      Indemnitee, or (ii) for a personal injury.

     

    14.3 Notices
      and Communications.

     

    14.3.1
      Notice
      Address.
      Subject
      to Section 4.1.4,
      all
      notices, requests and other communications by or to a party hereto shall be
      in
      writing and shall be given to any Borrower, at Borrower Agent’s address shown on
      the signature pages hereof, and to any other Person at its address shown on
      the
      signature pages hereof (or, in the case of a Person who becomes a Lender after
      the Closing Date, at the address shown on its Assignment and Acceptance), or
      at
      such other address as a party may hereafter specify by notice in accordance
      with
      this Section 14.3.
      Each
      such notice, request or other communication shall be effective only (a) if
      given
      by facsimile transmission, when transmitted to the applicable facsimile number,
      if confirmation of receipt is received; (b) if given by mail, three Business
      Days after deposit in the U.S. mail, with first-class postage pre-paid,
      addressed to the applicable address; or (c) if given by personal delivery,
      when
      duly delivered to the notice address with receipt acknowledged. Notwithstanding
      the foregoing, no notice to Agent pursuant to Section 2.1.4,
      2.3, 3.1.2, 4.1.1
      or
5.3.3
      shall be
      effective until actually received by the individual to whose attention at Agent
      such notice is required to be sent. Any written notice, request or other
      communication that is not sent in conformity with the foregoing provisions
      shall
      nevertheless be effective on the date actually received by the noticed party.
      Any notice received by Borrower Agent shall be deemed received by all
      Borrowers.

     

    14.3.2
      Electronic
      Communications; Voice Mail.
      Electronic mail and internet websites may be used only for routine
      communications, such as financial statements, Borrowing Base Certificates and
      other information required by Section 10.1.2,
      administrative matters, distribution of Loan Documents for execution, and
      matters permitted under Section 4.1.4.
      Agent
      and Lenders make no assurances as to the privacy and security of electronic
      communications. Electronic and voice mail may not be used as effective notice
      under the Loan Documents.

     

    14.3.3
      Non-Conforming
      Communications.
      Agent
      and Lenders may rely upon any notices purportedly given by or on behalf of
      any
      Borrower even if such notices were not made in a manner specified herein, were
      incomplete or were not confirmed, or if the terms thereof, as understood by
      the
      recipient, varied from a later confirmation. Each Borrower shall indemnify
      and
      hold harmless each Indemnitee from any liabilities, losses, costs and expenses
      arising from any telephonic communication purportedly given by or on behalf
      of a
      Borrower.

     

    14.4 Performance
      of Borrowers’ Obligations.
      Agent
      may, in its discretion at any time and from time to time, at Borrowers’ expense,
      pay any amount or do any act required of a Borrower under any Loan Documents
      or
      otherwise lawfully requested by Agent to (a) enforce any Loan Documents or
      collect any Obligations; (b) protect, insure, maintain or realize upon any
      Collateral; or (c) defend or maintain the validity or priority of Agent’s Liens
      in any Collateral, including any payment of a judgment, insurance premium,
      warehouse charge, finishing or processing charge, or landlord claim, or any
      discharge of a Lien. All payments, costs and expenses (including Extraordinary
      Expenses) of Agent under this Section shall be reimbursed to Agent by Borrowers,
      on
      demand,
      with
      interest from the date incurred to the date of payment thereof at the Default
      Rate applicable to Base Rate Revolver Loans. Any payment made or action taken
      by
      Agent under this Section shall be without prejudice to any right to assert
      an
      Event of Default or to exercise any other rights or remedies under the Loan
      Documents.

     

    
      
        
        

      

      
        82

        
          

        

      

      
        
        

      

    

     

    14.5 Credit
      Inquiries.
      Each
      Borrower hereby authorizes Agent and Lenders (but they shall have no obligation)
      to respond to usual and customary credit inquiries from third parties concerning
      any Borrower or Subsidiary.

     

    14.6 Severability.
      Wherever possible, each provision of the Loan Documents shall be interpreted
      in
      such manner as to be valid under Applicable Law. If any provision is found
      to be
      invalid under Applicable Law, it shall be ineffective only to the extent of
      such
      invalidity and the remaining provisions of the Loan Documents shall remain
      in
      full force and effect.

     

    14.7 Cumulative
      Effect; Conflict of Terms.
      The
      provisions of the Loan Documents are cumulative. The parties acknowledge that
      the Loan Documents may use several different limitations, tests or measurements
      to regulate the same or similar matters, and they agree that these are
      cumulative and that each must be performed as provided. Except as otherwise
      specifically provided in another Loan Document (by specific reference to the
      applicable provision of this Agreement), if any provision contained herein
      is in
      direct conflict with any provision in another Loan Document, the provision
      herein shall govern and control.

     

    14.8 Counterparts;
      Facsimile Signatures.
      Any
      Loan Document may be executed in counterparts, each of which taken together
      shall constitute one instrument. Loan Documents may be executed and delivered
      by
      facsimile, and they shall have the same force and effect as manually signed
      originals. Agent may require confirmation by a manually-signed original, but
      failure to request or deliver same shall not limit the effectiveness of any
      facsimile signature.

     

    14.9 Entire
      Agreement.
      Time is
      of the essence of the Loan Documents. The Loan Documents embody the entire
      understanding of the parties with respect to the subject matter thereof and
      supersede all prior understandings regarding the same subject
      matter.

     

    14.10 Obligations
      of Lenders.
      The
      obligations of each Lender hereunder are several, and no Lender shall be
      responsible for the obligations or Commitments of any other Lender. Amounts
      payable hereunder to each Lender shall be a separate and independent debt,
      and
      each Lender shall be entitled, to the extent not otherwise restricted hereunder,
      to protect and enforce its rights arising out of the Loan Documents. It shall
      not be necessary for Agent or any other Lender to be joined as an additional
      party in any proceeding for such purposes. Nothing in this Agreement and no
      action of Agent or Lenders pursuant to the Loan Documents shall be deemed to
      constitute Agent and Lenders to be a partnership, association, joint venture
      or
      any other kind of entity, nor to constitute control of any Borrower. Each
      Borrower acknowledges and agrees that in connection with all aspects of any
      transaction contemplated by the Loan Documents, Borrowers, Agent, Issuing Bank
      and Lenders have an arms-length business relationship that creates no fiduciary
      duty on the part of Agent, Issuing Bank or any Lender, and each Borrower, Agent,
      Issuing Bank and Lender expressly disclaims any fiduciary
      relationship.

     

    
      
        
        

      

      
        83

        
          

        

      

      
        
        

      

    

     

    14.11 Confidentiality.
      During
      the term of this Agreement and for 12 months thereafter, Agent and Lenders
      agree
      to take reasonable precautions to maintain the confidentiality of any
      information that Borrowers deliver to Agent and Lenders and identify as
      confidential at the time of delivery, except that Agent and any Lender may
      disclose such information (a) to their respective officers, directors,
      employees, Affiliates and agents, including legal counsel, auditors and other
      professional advisors; (b) to any party to the Loan Documents from time to
      time;
      (c) pursuant to the order of any court or administrative agency; (d) upon the
      request of any Governmental Authority exercising regulatory authority over
      Agent
      or such Lender (Agent or any Lender who receives such request shall provide
      notice thereof to Borrower Agent); (e) which ceases to be confidential, other
      than by an act or omission of Agent or any Lender, or which becomes available
      to
      Agent or any Lender on a nonconfidential basis; (f) to the extent reasonably
      required in connection with any litigation relating to any Loan Documents or
      transactions contemplated thereby, or otherwise as required by Applicable Law;
      (g) to the extent reasonably required for the exercise of any rights or remedies
      under the Loan Documents; (h) to any actual or proposed party to a Bank Product
      or to any Transferee, as long as such Person agrees to be bound by the
      provisions of this Section; (i) to the National Association of Insurance
      Commissioners or any similar organization, or to any nationally recognized
      rating agency that requires access to information about a Lender’s portfolio in
      connection with ratings issued with respect to such Lender; (j) to any investor
      or potential investor in an Approved Fund that is a Lender or Transferee, but
      solely for use by such investor to evaluate an investment in such Approved
      Fund,
      or to any manager, servicer or other Person in connection with its
      administration of any such Approved Fund; or (k) with the consent of Borrowers.
      Any party to whom confidential information of Borrowers is disclosed shall
      be
      advised of the confidential nature of the information, and except in the case
      of
      (c) and (d) above, shall have agreed to or be deemed to be subject to the
      confidentiality provisions of this Section. Notwithstanding the foregoing,
      Agent
      and Lenders may issue and disseminate to the public general information
      describing this credit facility, including the names and addresses of Borrowers
      and a general description of Borrowers’ businesses, and may use Borrowers’ names
      in advertising and other promotional materials.

     

    14.12 [Intentionally
      Omitted].

     

    14.13 GOVERNING
      LAW.
      THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL
      BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
      ANY
      CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO
      NATIONAL BANKS).

     

    
      
        
        

      

      
        84

        
          

        

      

      
        
        

      

    

     

    14.14 Consent
      to Forum; Arbitration.

     

    14.14.1 Forum. EACH
      BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR
      STATE COURT SITTING IN OR WITH JURISDICTION OVER CALIFORNIA, IN ANY PROCEEDING
      OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH
      PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER
      IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE
      REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR
      INCONVENIENT FORUM.
      Nothing
      herein shall limit the right of Agent or any Lender to bring proceedings against
      any Obligor in any other court. Nothing in this Agreement shall be deemed to
      preclude enforcement by Agent of any judgment or order obtained in any forum
      or
      jurisdiction.

     

    14.14.2
      Arbitration.
      Notwithstanding any other provision of this Agreement to the contrary, any
      controversy or claim among the parties relating in any way to any Obligations
      or
      Loan Documents, including any alleged tort, shall at the request of any party
      hereto be determined by binding arbitration conducted in accordance with the
      United States Arbitration Act (Title 9 U.S. Code). 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 (“AAA”), and the terms of this Section. In the event of any
      inconsistency, the terms of this Section shall control. If AAA is unwilling
      or
      unable to serve as the provider of arbitration or to enforce any provision
      of
      this Section, Agent may designate another arbitration organization with similar
      procedures to serve as the provider of arbitration. The arbitration proceedings
      shall be conducted in Los Angeles or Pasadena, California. The arbitration
      hearing shall commence within 90 days of the arbitration demand and close within
      90 days thereafter. The arbitration award must be issued within 30 days after
      close of the hearing (subject to extension by the arbitrator for up to 60 days
      upon a showing of good cause), and shall include a concise written statement
      of
      reasons for the award. The arbitrator shall give effect to applicable statutes
      of limitation in determining any controversy or claim, and for these purposes,
      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 Section or whether
      a
      controversy or claim is arbitrable shall be determined by the arbitrator. The
      arbitrator shall have the power to award legal fees to the extent provided
      by
      this Agreement. Judgment upon an arbitration award may be entered in any court
      having jurisdiction. The institution and maintenance of an action for judicial
      relief or pursuant to a provisional or ancillary remedy shall not constitute
      a
      waiver of the right of any party, including the plaintiff, to submit the
      controversy or claim to arbitration if any other party contests such action
      for
      judicial relief. No controversy or claim shall be submitted to arbitration
      without the consent of all parties if, at the time of the proposed submission,
      such controversy or claim relates to an obligation secured by Real Estate,
      but
      if all parties do not consent to submission of such a controversy or claim
      to
      arbitration, it shall be determined as provided in the next sentence. At the
      request of any party, a controversy or claim that is not submitted to
      arbitration as provided above shall be determined by judicial reference; and
      if
      such an election is made, the parties shall designate to the court a referee
      or
      referees selected under the auspices of the AAA in the same manner as
      arbitrators are selected in AAA sponsored proceedings and the presiding referee
      of the panel (or the referee if there is a single referee) shall be an active
      attorney or retired judge; and judgment upon the award rendered by such referee
      or referees shall be entered in the court in which proceeding was commenced.
      None of the foregoing provisions of this Section shall limit the right of Agent
      or Lenders to exercise self-help remedies, such as setoff, foreclosure or sale
      of any Collateral or to obtain provisional or ancillary remedies from a court
      of
      competent jurisdiction before, after or during any arbitration proceeding.
      The
      exercise of a remedy does not waive the right of any party to resort to
      arbitration or reference. At Agent’s option, foreclosure under a Mortgage may be
      accomplished either by exercise of power of sale thereunder or by judicial
      foreclosure.]

     

    
      
        
        

      

      
        85

        
          

        

      

      
        
        

      

    

     

    14.15 Waivers
      by Borrowers.
      To the
      fullest extent permitted by Applicable Law, each Borrower waives (a) the right
      to trial by jury (which Agent and each Lender hereby also waives) in any
      proceeding, claim or counterclaim of any kind relating in any way to any Loan
      Documents, Obligations or Collateral; (b) presentment, demand, protest, notice
      of presentment, default, non-payment, maturity, release, compromise, settlement,
      extension or renewal of any commercial paper, accounts, contract rights,
      documents, instruments, chattel paper and guaranties at any time held by Agent
      on which a Borrower may in any way be liable, and hereby ratifies anything
      Agent
      may do in this regard; (c) notice prior to taking possession or control of
      any
      Collateral; (d) any bond or security that might be required by a court prior
      to
      allowing Agent to exercise any rights or remedies; (e) the benefit of all
      valuation, appraisement and exemption laws; (f) any claim against Agent or
      any
      Lender, on any theory of liability, for special, indirect, consequential,
      exemplary or punitive damages (as opposed to direct or actual damages) in any
      way relating to any Enforcement Action, Obligations, Loan Documents or
      transactions relating thereto; and (g) notice of acceptance hereof.
      Each
      Borrower acknowledges that the foregoing waivers are a material inducement
      to
      Agent and Lenders entering into this Agreement and that Agent and Lenders are
      relying upon the foregoing in their dealings with Borrowers. Each Borrower
      has
      reviewed the foregoing waivers with its legal counsel and has knowingly and
      voluntarily waived its jury trial and other rights following consultation with
      legal counsel. In the event of litigation, this Agreement may be filed as a
      written consent to a trial by the court.

     

    14.16 Patriot
      Act Notice.
      Agent
      and Lenders hereby notify Borrowers that pursuant to the requirements of the
      Patriot Act, Agent and Lenders are required to obtain, verify and record
      information that identifies each Borrower, including its legal name, address,
      tax ID number and other information that will allow Agent and Lenders to
      identify it in accordance with the Patriot Act. Agent and Lenders will also
      require information regarding each personal guarantor, if any, and may require
      information regarding Borrowers’ management and owners, such as legal name,
      address, social security number and date of birth.

     

    [Remainder
      of page intentionally left blank; signatures begin on following
      page]

     

    

    
      
        
        

      

      
        86

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
        A

       

      to

       

      Loan
        and
        Security Agreement

       

      ASSIGNMENT
        AND ACCEPTANCE

       

      Reference
        is made to the Loan and Security Agreement dated as of March __, 2006, as
        amended (“Loan
        Agreement”),
        among
        MODTECH HOLDINGS, INC., a Delaware corporation (“Borrower
        Agent”)
        and
        these Subsidiaries of Borrower Agent parties thereto (individually, a
“Borrower”
and
        collectively “Borrowers”),
        BANK
        OF AMERICA, N.A.,
        as
        agent (“Agent”)
        for
        the financial institutions from time to time party to the Loan Agreement
        (“Lenders”),
        and
        such Lenders. Terms are used herein as defined in the Loan
        Agreement.

       

      ______________________________________
        (“Assignor”)
        and
        ______________________________________ “Assignee”)
        agree
        as follows:

       

      1. Assignor
        hereby assigns to Assignee and Assignee hereby purchases and assumes from
        Assignor (a) a principal amount of $________ of Assignor’s outstanding Revolver
        Loans and $___________ of Assignor’s participations in LC Obligations, and (b)
        the amount of $__________ of Assignor’s Revolver Commitment (which represents
        (____%) of the total Revolver Commitments); and (the foregoing items being,
        collectively, the “Assigned
        Interest”),
        together with an interest in the Loan Documents corresponding to the Assigned
        Interest. This Agreement shall be effective as of the date (“Effective
        Date”)
        indicated in the corresponding Assignment Notice delivered to Agent, provided
        such Assignment Notice is executed by Assignor, Assignee, Agent and Borrower
        Agent, if applicable. From and after the Effective Date, Assignee hereby
        expressly assumes, and undertakes to perform, all of Assignor’s obligations in
        respect of the Assigned Interest, and all principal, interest, fees and other
        amounts which would otherwise be payable to or for Assignor’s account in respect
        of the Assigned Interest shall be payable to or for Assignee’s account, to the
        extent such amounts accrue on or after the Effective Date.

       

      2. Assignor
        (i) represents that as of the date hereof, prior to giving effect to this
        assignment, its Revolver Commitment is $__________, and the outstanding balance
        of its Revolver Loans and participations in LC Obligations is $__________;
        (ii) makes no representation or warranty and assumes no responsibility with
        respect to any statements, warranties or representations made in or in
        connection with the Loan Agreement or the execution, legality, validity,
        enforceability, genuineness, sufficiency or value of the Loan Agreement or
        any
        other instrument or document furnished pursuant thereto, other than that
        Assignor is the legal and beneficial owner of the interest being assigned
        by it
        hereunder and that such interest is free and clear of any adverse claim;
        and
        (iii) makes no representation or warranty and assumes no responsibility
        with respect to the financial condition of Borrowers or the performance by
        Borrowers of their obligations under the Loan Documents. [Assignor
        is attaching the
        Note[s] held by it and requests that Agent exchange such Note[s] for new
        Notes
        payable to Assignee [and Assignor].]

       

      
        
          
          

        

        
          87

          
            

          

        

        
          
          

        

      

       

      3. Assignee
        (i) represents and warrants that it is legally authorized to enter into this
        Assignment and Acceptance; (ii) confirms that it has received copies of the
        Loan
        Agreement and such other Loan Documents and information as it has deemed
        appropriate to make its own credit analysis and decision to enter into this
        Assignment and Acceptance; (iii) agrees that it shall, independently and
        without
        reliance upon Assignor and based on such documents and information as it
        shall
        deem appropriate at the time, continue to make its own credit decisions in
        taking or not taking action under the Loan Documents; (iv) confirms that
        it is
        an Eligible Assignee; (v) appoints and authorizes Agent to take such action
        as
        agent on its behalf and to exercise such powers under the Loan Agreement
        as are
        delegated to Agent by the terms thereof, together with such powers as are
        incidental thereto; (vi) agrees that it will observe and perform all obligations
        that are required to be performed by it as a “Lender” under the Loan Documents;
        and (vii) represents and warrants that the assignment evidenced hereby will
        not
        result in a non-exempt “prohibited transaction” under Section 406 of
        ERISA.

       

      4. Assignee
        acknowledges and agrees that it will not sell or otherwise dispose of the
        Assigned Interest or any portion thereof, or grant any participation therein,
        in
        a manner which, or take any action in connection therewith which, would violate
        the terms of any Loan Documents.

       

      5. This
        Agreement and all rights and obligations shall be interpreted in accordance
        with
        and governed by the laws of the State of ________________. If any provision
        hereof would be invalid under Applicable Law, then such provision shall be
        deemed to be modified to the extent necessary to render it valid while most
        nearly preserving its original intent; no provision hereof shall be affected
        by
        another provision’s being held invalid.

       

      6. Each
        notice or other communication hereunder shall be in writing, shall be sent
        by
        messenger, by telecopy or facsimile transmission or by first-class mail,
        shall
        be deemed given when sent and shall be sent as follows:

       

      (a) If
        to
        Assignee, to the following address (or to such other address as Assignee
        may
        designate from time to time):

       

      (b) If
        to
        Assignor, to the following address (or to such other address as Assignor
        may
        designate from time to time):

       

      Payments
        hereunder shall be made by wire transfer of immediately available Dollars
        as
        follows:

       

      If
        to
        Assignee, to the following account (or to such other account as Assignee
        may
        designate from time to time):

       

      ABA
        No._______________________

      Account
        No.____________________

      Reference:
        _____________________

       

       

      
        
          
          

        

        
          88

          
            

          

        

        
          
          

        

      

       

      If
        to
        Assignor, to the following account (or to such other account as Assignor
        may
        designate from time to time):

       

      ABA
        No._______________________

      Account
        No.____________________

      Reference:
        _____________________

       

      IN
        WITNESS WHEREOF,
        this
        Assignment and Acceptance is executed as of _____________.

       

      (“Assignee”)

       

      By___________________________________

      Title:

       

      (“Assignor”)

       

      By___________________________________

      Title:

       

      

      
        
          
          

        

        
          89

          
            

          

        

        
          
          

        

      

      EXHIBIT
        B

       

      to

       

      Loan
        and
        Security Agreement

       

      ASSIGNMENT
        NOTICE

       

      Reference
        is made to (i) the Loan and Security Agreement dated as of March __, 2006,
        as
        amended (“Loan
        Agreement”),
        among MODTECH
        HOLDINGS, INC., a Delaware corporation (“Borrower
        Agent”)
        and
        these Subsidiaries of Borrower Agent parties thereto (individually, a
“Borrower”
and
        collectively “Borrowers”),
        BANK
        OF AMERICA, N.A.,
        as
        agent (“Agent”)
        for
        the financial institutions from time to time party to the Loan Agreement
        (“Lenders”),
        and
        such Lenders; and (ii) the Assignment and Acceptance dated as of ____________,
        20__ (“Assignment
        Agreement”)
        between __________________ (“Assignor”)
        and
        ____________________ (“Assignee”).
        Terms
        are used herein as defined in the Loan Agreement.

       

      Assignor
        hereby notifies Borrowers and Agent of Assignor’s intent to assign to Assignee
        pursuant to the Assignment Agreement (a) a principal amount of $________ of
        Assignor’s outstanding Revolver Loans and $___________ of Assignor’s
        participations in LC Obligations, and (b) the amount of $__________ of
        Assignor’s Revolver Commitment (which represents (____%) of the total Revolver
        Commitments) (the foregoing items being, collectively, the “Assigned
        Interest”),
        together with an interest in the Loan Documents corresponding to the Assigned
        Interest. This Agreement shall be effective as of the date (“Effective
        Date”)
        indicated below, provided this Assignment Notice is executed by Assignor,
        Assignee, Agent and Borrower Agent, if applicable. Pursuant to the Assignment
        Agreement, Assignee has expressly assumed all of Assignor’s obligations under
        the Loan Agreement to the extent of the Assigned Interest, as of the Effective
        Date.

       

      For
        purposes of the Loan Agreement, Agent shall deem Assignor’s Revolver Commitment
        to be reduced by $_________, and Assignee’s Revolver Commitment to be increased
        by $_________.

       

      The
        address of Assignee to which notices and information are to be sent under
        the
        terms of the Loan Agreement is:

       

      The
        address of Assignee to which payments are to be sent under the terms of the
        Loan
        Agreement is shown in the Assignment and Acceptance.

       

      This
        Notice is being delivered to Borrowers and Agent pursuant to Section
        13.3
        of the
        Loan Agreement. Please acknowledge your acceptance of this Notice by executing
        and returning to Assignee and Assignor a copy of this Notice.

       

       

      
        
          
          

        

        
          90

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF,
        this
        Assignment Notice is executed as of _____________.

       

      (“Assignee”)

       

      By___________________________________

      Title:

       

      (“Assignor”)

       

      By___________________________________

      Title:

       

      ACKNOWLEDGED
        AND AGREED,

      AS
        OF THE
        DATE SET FORTH ABOVE:

       

      BORROWER
        AGENT:*

       

      MODTECH
        HOLDINGS, INC.

       

      By_______________________________

      Title:

       

      
        	4.  	
                No
                  signature required if Assignee is a Lender, U.S.-based Affiliate
                  of a
                  Lender or Approved Fund, or if an Event of Default
                  exists.

              

      

       

      BANK
        OF AMERICA, N.A.,

      as
        Agent

       

      By_______________________________

      Title:

       

      

      
        
          
          

        

        
          91

          
            

          

        

        
          
          

        

      

       

    

    SCHEDULE
      1.1

     

    to

     

    Loan
      and
      Security Agreement

     

    COMMITMENTS
      OF LENDERS

     

    

    
      	
              Lender

            	
              Revolver
                Commitment

            	
              Total
                Commitments

            
	
              Bank
                of America, N.A.

            	
              $25,000,000

            	
              $25,000,000

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	
               

            

    

    

    

    
      
        
        

      

      
        92

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      8.5

     

    to

     

    Loan
      and
      Security Agreement

     

    DEPOSIT
      ACCOUNTS

     

    

    
      	
              Depository
                Bank

            	
              Type
                of Account

            	
              Account
                Number

            
	
              Union
                Bank of California

            	
              Concentration

            	
              2100703044

            
	
              Union
                Bank of California

            	
              Payroll

            	
              2100703052

            
	
              Union
                Bank of California

            	
              Checking

            	
              9080009213

            
	
              Bank
                of America

            	
              Concentration

            	
              1496202541

            
	
              Bank
                of America

            	
              Payroll/taxes

            	
              1496002542

            

    

    

    

    
      
        
        

      

      
        93

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      8.6.1

     

    to

     

    Loan
      and
      Security Agreement

     

    BUSINESS
      LOCATIONS

    
       

      
        
          
             

            
              	
                      1.

                    	
                      Borrowers
                        currently have the following business locations, and no
                        others:

                    

            

             

          

        

      

    

    Chief
      Executive Office: 2830
      Barrett Avenue, Perris, CA 92571

     

    Other
      Locations: 310 Gibbs Blvd., Glen Rose, TX. 76043; 5301 W. Madison, Phoenix,
      AZ
      85043; 1602 Industrial Park Dr., Plant City, FL 33566; 517A
      Fyffe Avenue, Stockton, CA 95203

     

    
      	
              2.

            	
              Borrowers
                maintain their books and records relating to Accounts and General
                Intangibles at: 2830 Barrett Avenue, Perris, CA
                92571

            

    

     

    

     

    
      	
              3.

            	
              Borrowers
                have had no office, place of business or agent for process located
                in any
                county other than as set forth above, except:
                N/A

            

    

     

    

     

    
      	
              4.

            	
              Each
                Subsidiary currently has the following business locations, and no
                others:

            

    

     

    Chief
      Executive Office: N/A

     

    Other
      Locations: N/A

     

    
      	
              5.

            	
              Each
                Subsidiary maintains its books and records relating to Accounts and
                General Intangibles at: N/A; all dormant; no assets or books and
                records

            

    

     

    

     

    
      	
              6.

            	
              Each
                Subsidiary has had no office, place of business or agent for process
                located in any county other than as set forth above, except:
                N/A

            

    

     

    

     

    
      	
              7.

            	
              The
                following bailees, warehouseman, similar parties and consignees hold
                inventory of a Borrower or one of its Subsidiaries:
                N/A

            

    

     

    
      	
              Name
                and Address of Party

            	
              Nature
                of

              Relationship

            	
              Amount
                of Inventory

            	
              Owner
                of Inventory

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

    

    
      
        
        

      

      
        94

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.4

     

    to

     

    Loan
      and
      Security Agreement

     

    NAMES
      AND CAPITAL STRUCTURE

     

    
      	
              1.

            	
              The
                corporate names, jurisdictions of incorporation, and authorized and
                issued
                Equity Interests of each Borrower and Subsidiary are as
                follows:

            

    

     

    

    
      	
              Name

            	
              Jurisdiction

            	
              Number
                and Class

              of
                Authorized Shares

            	
              Number
                and Class

              of
                Issued Shares

            
	
              Innovative
                Modular Structures, Inc.

            	
              Florida
                

            	
              2,000

            	
              1,000

            
	
              Coastal
                Modular Buildings, Inc.

            	
              Delaware

            	
              100

            	
              100

            
	
              Trac
                Modular Manufacturing, Inc.

            	
              Arizona

            	
              50,000

            	
              5,000

            
	
              Miller
                Acquisition Corp.

            	
              Delaware

            	
              100

            	
              0

            
	
              Modtech
                Merger Corp.

            	
              Delaware

            	
              100

            	
              0

            

    

    

    
      	 	
              Innovative
                and Trac Modular have had their corporate charters either suspended
                or
                revoked due to the failure to pay the annual minimum franchise tax.
                Both
                Miller Acquisition Corp and Modtech Merger Corp. were formed to be
                used in
                connection with a proposed merger with Miller Building Systems, Inc.
                that
                was to take place in 1999- 2000, but did not occur. All of the
                subsidiaries are inactive and have no assets, operations or income.
                

            

    

    

    
      	
              2.

            	
              The
                record holders of Equity Interests of each Borrower and Subsidiary
                are as
                follows: Borrower is a publicly traded company with approximately
                66
                record shareholders. Modtech Holdings, Inc. owns all of the outstanding
                shares of common stock of Innovative Modular Structures, Inc. and
                Coastal
                Modular Buildings, Inc. It owns 4,000 shares of the outstanding common
                stock of Trac Modular Manufacturing, Inc. Raymond Schmuck, Jr. and
                Christine Cobb own 400 and 600 shares, respectively, of Trac Modular
                Manufacturing, Inc.

            

    

     

     

    
      	
              Name

            	
              Class
                of Stock

            	
              Number
                of Shares

            	
              Record
                Owner

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

     

     

    
      
        
        

      

      
        95

        
          

        

      

      
        
        

      

    

     

    
 

    
      	
              3.

            	
              All
                agreements binding on holders of Equity Interests of Borrowers and
                Subsidiaries with respect to such interests are as follows:
                N/A

            

    

     

    
      	
              4.

            	
              The
                name of each Affiliate of a Borrower and the nature of the affiliation
                are
                as follows: N/A

            

    

     

    
      	
              5.

            	
               A
                total of approximately 22 individuals and institutions hold warrants
                to
                acquire 1,460,268 shares of common stock of Modtech Holdings, Inc.
                The
                warrants contain customary anti-dilution provisions which, if triggered,
                will increase the number of shares that can be purchased upon exercise
                of
                the warrants. 

            

    

    

    
      	
              6.
                

            	
              Officers,
                directors and employees of Modtech Holdings, Inc. hold options issued
                pursuant to the company's stock option plans which as of March 1,
                2006 are
                exercisable, in the aggregate, for 1,373,300shares of the company's
                common
                stock.

            

    

     

    

    
      
        
        

      

      
        96

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.5

     

    to

     

    Loan
      and
      Security Agreement

     

    FORMER
      NAMES AND COMPANIES

     

    
      	
              1.

            	
              Each
                Borrower’s and Subsidiary’s correct corporate name, as registered with the
                Secretary of State of its state of incorporation, is shown on Schedule
                9.1.4.

            

    

     

    
      	
              2.

            	
              In
                the conduct of their businesses during five years preceding the Closing
                Date, Borrowers and Subsidiaries have used the following
                names:

            

    

     

    
      	
              Entity

            	
              Fictitious,
                Trade or Other Name

            
	
              Modtech
                Holdings, Inc.

            	
              Modtech

            
	
              Modtech
                Holdings, Inc.

            	
              United
                Modular

            
	
              Modtech
                Holdings, Inc.

            	
              Modtech
                Inc.

            
	
              Modtech
                Holdings, Inc.

            	
              United
                Modular Technology

            
	
              Modtech
                Holdings, Inc.

            	
              Modcrete

            
	
              Modtech
                Holdings, Inc.

            	
              Modtech
                Telecom

            
	
              Modtech
                Holdings, Inc. 

            	
              Coastal
                Modular Buildings 

            
	
              Modtech
                Holdings, Inc. 

            	
              Innovative
                Modular Structures 

            
	
              Modtech
                Holdings, Inc. 

            	
              Office
                Master of Texas 

            
	
              Modtech
                Holdings, Inc.

            	
              SPI
                Holdings 

            
	
              SPI
                Manufacturing Inc.

            	
              Rosewood
                Enterprises

            
	
              Modtech
                Holdings, Inc.

            	
              Rancho

            
	
              Modtech
                Holdings, Inc.

            	
              Trac

            
	
              Modtech
                Holdings, Inc.

            	
              Trac
                Modular Manufacturing 

            
	
              Modtech
                Holdings, Inc.

            	
              Arizona
                Millwork

            
	
              Arizona
                Millwork Inc.

            	
              Rosewood
                Installation Services

            
	
              Arizona
                Millwork Inc.

            	
              Rosewood
                Enterprises, The Shed Shop

            
	
              Modtech
                Holdings, Inc.

            	
              Miller
                Structures Co., Inc. of California 

            
	
              Modtech
                Inc.

            	
              Del
                Tech

            
	
              Ronfran
                Inc.

            	
              Standard
                Pacific Industries 

            

    

    

    Office
      Master of Texas, Inc., Coastal Modular Buildings, Inc., Innovative Modular
      Structures, Inc., and Trac Modular Manufacturing, Inc. and Rosewood Enterprises,
      Inc., SPI Holdings, Inc. were at one time operating subsidiaries of Modtech
      Holdings, Inc. All such subsidiaries have either been merged with and into
      Modtech Holdings, Inc. dissolved or had their corporate charters suspended,
      revoked or declared inactive for failure to pay the annual minimum franchise
      tax. 

    

    
      	
              3.

            	
              In
                the five years preceding the Closing Date, no Borrower or Subsidiary
                has
                been the surviving corporation of a merger or combination,
                except:

            

    

     

    Modtech
      Holdings, Inc.

     

    
      	
              4.

            	
              In
                the five years preceding the Closing Date, no Borrower or Subsidiary
                has
                acquired any substantial part of the assets of any Person, except:
                N/A

            

    

     

    

    
      
        
        

      

      
        97

        
          

        

      

      
        
        

      

    

    
 

    
      SCHEDULE
        9.1.8

       

      to

       

      Loan
        and
        Security Agreement

       

      LOSSES

    

    
 

    Modtech
      Holdings, Inc. incurred a net loss of $9.0 million for the 3-month period ended
      December 31, 2005 and a net loss of $21.1 million for 12-month period ended
      December 31, 2005.

     

     

    
      
        
        

      

      
        98

        
          

        

      

      
        
        

      

    

    
      
 

      
        SCHEDULE
          9.1.10

         

        to

         

        Loan
          and
          Security Agreement

         

        TAXES

      

      
 

      Innovative
        Modular Structures, Inc. and Trac Modular Manufacturing, Inc. have not filed
        federal or state tax returns in years and have not paid any taxes, including,
        without limitation, the minimum annual franchise tax in years. The corporations
        have not have any operations or income during the period they have not paid
        taxes or filed returns.

       

       

      
        
          
          

        

        
          99

          
            

          

        

        
          
          

        

      

       

    

     

     

    SCHEDULE
      9.1.12

     

    to

     

    Loan
      and
      Security Agreement

     

    PATENTS,
      TRADEMARKS, COPYRIGHTS AND LICENSES

     

    
      	
              1.

            	
              Borrowers’
                and Subsidiaries’ patents: N/A

            

    

     

    
      	
              Patent

            	
              Owner

            	
              Status
                in

              Patent
                Office

            	
              Federal
                Registration

              Number

            	
              Registration

              Date

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

    

    
      	
              2.

            	
              Borrowers’
                and Subsidiaries’ trademarks: 

            

    

     

    
      	
              Trademark

            	
              Owner

            	
              Status
                in

              Trademark
                Office

            	
              Federal
                Registration

              Number

            	
              Registration

              Date

            
	
              Modcrete

            	
              Modtech
                Holdings, Inc.

            	
              
                Registered,
                  possibly abandoned

              

            	
              78208029

            	
              1/28/03

            
	
              Modtech
                Telecom

            	
              Modtech
                Holdings, Inc.

            	
              
                
                  Registered,
                    possibly abandoned

                

              

            	
              76371867

            	
              2/14/02

            
	
              United
                Modular

            	
              Modtech
                Holdings, Inc.

            	
              
                
                  Registered,
                    possibly abandoned

                

              

            	
              2598642

            	
              7/23/02

            
	
              Modtech

            	
              Modtech
                Holdings, Inc.

            	
              
                Registered

              

            	
              2699855

            	
              3/25/03

            
	
              United
                Modular Technology

            	
              Modtech
                Holdings, Inc.

            	
              
                
                  Registered,
                    possibly abandoned

                

              

            	
              75866601

            	
              12/7/99

            
	
              The
                Right Space, At the Right Time, For the Right Price

            	
              Modtech
                Holdings, Inc.

            	
              
                Registered

              

            	
              78680057

            	
              7/27/05

            

    

    

    Modtech
      Holdings, Inc. currently only uses the trademarks "Modtech" and "The Right
      Space, At the Right Time, For the Right Price" in its business. The other marks
      are no longer in use. 

    

    
      	
              3.

            	
              Borrowers’
                and Subsidiaries’ copyrights: N/A

            

    

     

    
      
        	
                Copyrights

              	
                Owner

              	
                Status
                  in

                Copyright
                  Office

              	
                Federal
                  Registration

                Number

              	
                Registration

                Date

              
	
                Architectural
                  Plans & Drawings for 2 story relocatable building 30' x
                  33'

              	
                Modtech
                  Holdings, Inc.

              	
                Registered

              	
                VA1160334

              	
                September
                  26, 2002

              
	
                Architectural
                  Plans & Drawings for 2 story relocatable building 48' x
                  40'

              	
                Modtech
                  Holdings, Inc.

              	
                Registered

              	
                VA1149006

              	
                September
                  25, 2002

              
	
                Architectural
                  Plans & Drawings for relocatable classroom building 30' x 32'
                  expandable to 270' x 32' 

              	
                Modtech
                  Holdings, Inc.

              	
                Registered

              	
                VA1149005

              	
                September
                  25, 2002

              
	
                Architectural
                  Plans & Drawings for relocatable classroom building 24' x 40'
                  expandable to 144'' x 40' 

              	
                Modtech
                  Holdings, Inc.

              	
                Registered

              	
                VA1147591

              	
                September
                  23, 2002

              
	
                Architectural
                  Plans & Drawings for relocatable building 24' x 40'' 

              	
                Modtech,
                  Inc. (predecessor to Modtech Holdings, Inc.)

              	
                Registered

              	
                VA902842

              	
                July
                  20, 1998

              
	
                Architectural
                  Plans & Drawings for relocatable classroom building 24' x 40'
                  

              	
                Modtech,
                  Inc. (predecessor to Modtech Holdings, Inc.)

              	
                Registered

              	
                VA902841

              	
                July
                  20, 1998

              
	
                Architectural
                  Plans & Drawings for relocatable building for model 24' x 40'
                  

              	
                Modtech,
                  Inc. (predecessor to Modtech Holdings, Inc.)

              	
                Registered

              	
                VA880041

              	
                April
                  15, 1998

              

      

    

    
 

     

    
      
        
        

      

      
        100

        
          

        

      

      
        
        

      

    

     

    4.
      Borrowers’ and Subsidiaries’ licenses (other than routine business licenses,
      authorizing them to transact business in local jurisdictions): N/A

     

    
      	
              Licensor

            	
              Description
                of License

            	
              Term
                of License

            	
              Royalties
                Payable

            
	
              None

            	 	 	 
	 	 	 	 
	 	 	 	 

    

    

    
      
        
        

      

      
        101

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.15

     

    to

     

    Loan
      and
      Security Agreement

     

    ENVIRONMENTAL
      MATTERS

     

    

     

    Borrower's
      leased facility at 5301 West Madison, Phoenix, Arizona is located within a
      25
      square mile are listed by the Arizona Department of Environmental Quality on
      the
      state priority list for contaminated sites. According to a 1998 environmental
      site assessment report pertaining to the facility, neither Borrower nor the
      prior operators or owners of the property have been identified as potentially
      responsible parties at the site. The report identified no historical activity
      on
      the property that was likely to have been a source of the contaminants at the
      site. 

     

    One
      of
      Borrower's former subsidiaries, Innovative Modular, Inc. owned property in
      Florida. The property was sold in 2004 and the buyer was advised of the
      requirement by Florida Department of Environmental Protection that a Declaration
      of Restrictive Covenant be recorded against the property as a result of prior
      contamination. The contamination was the result of crushed asphalt being used
      as
      fill in the parking lot. The restriction which was requested in 2001, but never
      filed prior to the sale, prohibited residential use of the
      property.

     

    Innovative
      has since ceased all operations, currently has no known assets or liabilities
      and has been suspended in Florida for failure to pay the minimum annual
      franchise tax. 

     

     

     

    
      
        
        

      

      
        102

        
          

        

      

      
        
        

      

    

    

     

    SCHEDULE
      9.1.16

     

    to

     

    Loan
      and
      Security Agreement

     

    RESTRICTIVE
      AGREEMENTS

     

    N/A

     

    
      	
              Entity

            	
              Agreement

            	
              Restrictive
                Provisions

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

    

    
      
        
        

      

      
        103

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.17

     

    to

     

    Loan
      and
      Security Agreement

     

    LITIGATION

     

    
      	
              1.

            	
              Proceedings
                and investigations pending against Borrowers or
                Subsidiaries:

            

    

     

    The
      following is a list of all proceedings and investigations currently pending
      against Borrower. With the exception of the TRICO PIPES case described below,
      Borrower does not believe that an adverse decision in any of these cases is
      reasonably likely to have a Material Adverse Effect. 

    

    1.1 Title
      of
      Action: BAYSIDE
      SOLUTIONS, INC.
      v.
MODTECH
      HOLDINGS, INC., LIBERTY UNION HIGH SCHOOL DISTRICT, LIBERTY MUTUAL INSURANCE
      COMPANY.

    

    Nature
      of
      Action: The plaintiff alleges that Modtech failed to pay Bayside Solutions
      $300,000 for the temporary labor staff Bayside provided on the Heritage High
      School project.

    

    Complaining
      Parties: Bayside Solutions, Inc., a California corporation.

    

    Jurisdictional
      or Tribunal: Contra Costa County Superior Court

    Case
      #CO6
      00636

    

    1.2 Title
      of
      Action: TRICO PIPES, ARAM HODESS and MICAH LONG on behalf of themselves and
      all
      other similarly situated persons; and PLUMBERS AND STEAMFITTERS LOCAL UNION
      NO.
      159 v. MODTECH HOLDINGS, INC; BAYSIDE SOLUTIONS, INC; and DOES 1 through 50,
      inclusive.

    

    Nature
      of
      Action: Lawsuit

    

    Plaintiffs
      allege that they worked on a public works project and that Bayside, a temporary
      labor service used by Modtech, did not pay them properly and violated the wage
      and hour laws for public work projects. These individuals worked on the Liberty
      Union (Heritage project); plaintiffs further allege that local apprentices
      were
      not used on the same project and that others employed by Modtech on various
      public works projects are similarly situated and have not been paid properly.
      This has been filed as a Class Action suit, but has not yet been certified
      as a
      Class Action.

     

    Complaining
      Parties: TRICO PIPES, ARAM HODESS and MICAH LONG, and PLUMBERS AND STEAMFITTERS
      LOCAL UNION NO. 159.

    

    Jurisdictional
      or Tribunal: Superior Court, County of Alameda

    Case
      No.
      RG 06252511

    

    
      
        
        

      

      
        104

        
          

        

      

      
        
        

      

    

     

    1.3
      Title
      of Action: HERIBERTO LEPEZ, SILVIA LOPEZ, PEDRO GALAVIZ on behalf of themselves
      and in the interest of the general public, v. LEONARD CAMPBELL, INC., dba LC
      CONTRACTORS, MODTECH HOLDINGS, INC., dba MODTECH and DOES 1 through 50
      inclusive.

    

    Nature
      of
      Action: Lawsuit

    

    Plaintiffs
      allege that they provided labor to Campbell on various public works projects
      where Campbell was acting as a sub to Modtech. Plaintiffs claim that they were
      not paid a prevailing wage by Campbell and are seeking to recover damages from
      both Campbell and Modtech. Plaintiffs have yet to state the amount of damages
      they are claiming.

    

    Complaining
      Parties: HERIBERTO LEPEZ, SILVIA LOPEZ, and PEDRO GOLAVIZ

    

    Jurisdictional
      or Tribunal: Superior Court of California, County of Sacramento.

    Case
      No.
      05AS00514

    

    1.4 Title
      of
      Action: TNT Construction Services v. Modtech Holdings, Inc. aka Modtech, Inc.,
      and Does 1 through 100, inclusive.

    

    Nature
      of
      Action: Lawsuit

     

    Plaintiff
      is a subcontractor to Modtech Holdings, Inc. Plaintiff alleges that Modtech
      breached its contract with TNT by having others complete its scope of work
      and
      that TNT was not paid for change order work it completed.

     

    Complaining
      Parties: TNT Construction Services

    

    Jurisdictional
      or Tribunal: Riverside County Superior Court

    Case
      No.
      RIC439652

    

    1.5 Title
      of
      Action: Contractors & Employees 401k Plan as sponsored by Leonard Campbell,
      Inc.

    

    Nature
      of
      Action: Investigation

    

    The
      US
      Department of Labor is investigating to determine if Leonard Campbell made
      appropriate contributions to the required pension plans.

     

    Complaining
      Parties: Unknown

    Jurisdictional
      or Tribunal: Investigative authority of the Secretary of Labor.

    

    
      
        
        

      

      
        105

        
          

        

      

      
        
        

      

    

     

    1.6 Title
      of
      Action: NORMAN S. WRIGHT MECHANICAL EQUIPMENT CORP. v. TRAHAN MECHANICAL, INC.,
      a business entity, form unknown, purporting to be a California corporation;
      MODTECH HOLDINGS, INC., a business entity, form unknown, purporting to be a
      Delaware corporation; LIBERTY MUTUAL INSURANCE COMPANY, a business entity,
      form
      unknown, purporting to be a Massachusetts corporation; LIBERTY UNION HIGH SCHOOL
      DISTRICT, a public entity; and DOES 1-50, inclusive.

    

    Nature
      of
      Action: Lawsuit

    

    Being
      sued by Plaintiff, NORMAN S. WRIGHT MECHANICAL EQUIPMENT CORP., a California
      corporation , for breach of contract; monies due; quantum meruit; account
      stated; action on payment bond, foreclosure of stop notice by Trahan Mechanical,
      Inc. a subcontractor for Modtech Holdings, Inc.

    

    Complaining
      Parties: NORMAN S. WRIGHT MECHANICAL EQUIPMENT CORP.

    

    Jurisdictional
      or Tribunal: Contra Costa County Superior Court

    Case
      No.
      C06-00242

    

    1.7 Title
      of
      Action: DIRECT DIGITAL CONTROLS v. TRAHAN MECHANICAL, INC.; MODTECH, INC.;
      LIBERTY UNION HIGH SCHOOL DISTRICT; LIBERTY MUTUAL INSURANCE COMPANUY; and
      DOES
      1 through 10, inclusive.

    

    Nature
      of
      Action: Lawsuit

    

    Being
      sued by Plaintiff Direct Digital Controls, Inc., for complaint for damages
      for
      breach of contract; to enforce stop notice and for recovery on Contractor’s
      payment bond against Trahan Mechanical, a subcontractor for Modtech Holdings,
      Inc.

    

    Complaining
      Parties: DIRECT DIGITAL CONTROLS, INC.

    

    Jurisdictional
      or Tribunal: Contra Costa County Superior Court

    Case
      No.
      C06-00149

     

    
      	
              2.

            	
              The
                only threatened proceedings or investigations of which any Borrower
                or
                Subsidiary is aware are as follows:
                N/A

            

    

     

    

    
      
        
        

      

      
        106

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.19

     

    to

     

    Loan
      and
      Security Agreement

     

    PENSION
      PLANS 

     

    N/A

     

    
      	
              1.

            	
              Borrowers
                and Subsidiaries have the following Multiemployer Plans:
                N/A

            

    

     

    

    
      	
              Party

            	
              Type
                of Multiemployer Plan

            
	 	 
	 	 
	 	 
	 	 

    

    

    
      	
              2.

            	
              Borrowers
                and Subsidiaries have the following Foreign Plans:
                N/A

            

    

     

    

    
      	
              Party

            	
              Description
                of Plan

            
	 	 
	 	 
	 	 
	 	 

    

    

    

    
      
        
        

      

      
        107

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      9.1.21

     

    to

     

    Loan
      and
      Security Agreement

     

    LABOR
      CONTRACTS

     

    N/A

     

    Borrowers
      and Subsidiaries are party to the following collective bargaining agreements,
      management agreements and consulting agreements:

     

    N/A

    

    
      	
              Parties

            	
              Type
                of Agreement

            	
              Term
                of Agreement

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

    

    
      
        
        

      

      
        108

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      10.2.2

     

    to

     

    Loan
      and
      Security Agreement

     

    EXISTING
      LIENS

     

    

     

    The
      following parties have Liens against some or all of Borrower's
      assets:

     

    Citicorp
      Vendor Finance, Inc. (equipment lease)

     

    Amphora
      Limited (all assets)

     

    U.S.
      National Bank Association (certificate of deposit)

     

    Fortress
      Credit Corp. (all assets) 

     

    

    
      
        
        

      

      
        109

        
          

        

      

      
        
        

      

    

    

    SCHEDULE
      10.2.17

     

    to

     

    Loan
      and
      Security Agreement

     

    EXISTING
      AFFILIATE TRANSACTIONS

     

    N/A

     

    

     

    

    
      
        
        

      

      
        110AMENDMENT
      AGREEMENT

     

    AMENDMENT AGREEMENT
      (this
      "
      Amendment"),
      dated
      as of March 31, 2006, by and among Modtech
      Holdings, Inc.,
      a
      Delaware corporation, with headquarters located at 2830 Barrett Avenue, Perris,
      California 92571 (the "Company")
      and
Amphora
      Limited
      (the
      "Investor").

     

    WHEREAS:

     

    A.
       The
      Company and the Investor entered into that certain Securities Purchase
      Agreement, dated as of December 31, 2004, as amended (the "Securities
      Purchase Agreement"),
      pursuant to which, among other things, the Investor purchased from the Company
      an Amended and Restated Senior Secured Convertible Note dated as of August
      5,
      2005 (the "Note"),
      which
      is convertible into shares of the Company's common stock, par value $0.01 per
      share (the "Common
      Stock"),
      in
      accordance with the terms thereof.

     

    B.
       The
      Company and the Investor desire to enter into this Amendment pursuant to which
      the Note shall be amended to revise certain terms and conditions set forth
      therein.

     

    C.
       Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings ascribed to them in the Note.

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing recitals and the mutual promises hereinafter
      set
      forth, the Company and the Investors hereby agree as follows:

     

    
      	 	
              1.
                

            	
              AMENDMENTS
                TO NOTE.

            

    

     

    (a)
       Section
      9
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    "(9) HOLDER'S
      RIGHT OF OPTIONAL REDEMPTION.

    

    (a) The
      Holder shall have the right, in its sole discretion to require that the Company
      redeem a portion of this Note (a "Holder
      Optional Redemption")
      by
      delivering written notice thereof (a "Holder
      Optional Redemption Notice"
      and,
      collectively with the Event of Default Redemption Notice, the Change of Control
      Redemption Notice and the Mandatory Redemption Notice, the "Redemption
      Notices"
      and
      each a "Redemption
      Notice")
      to the
      Company no later than the August 8th
      prior to
      any Optional Redemption Date. The Holder Optional Redemption Notice shall
      indicate the Conversion Amount the Holder is electing to have redeemed on such
      Optional Redemption Date (the "Holder
      Optional Redemption Amount");
      provided, however, that such Holder Optional Redemption Amount indicated shall
      not exceed the applicable Optional Redemption Amount. The portion of this Note
      subject to redemption pursuant to this Section 9(a) shall be redeemed by the
      Company in cash at a price equal to the Conversion Amount being redeemed (the
      "Holder
      Optional Redemption Price"
      and,
      collectively with the Event of Default Redemption Price, the Change of Control
      Redemption Price and the Mandatory Redemption Price, the "Redemption
      Prices"
      and,
      each a "Redemption Price");
      provided, however, that, only with respect to the First Optional Redemption
      Date
      and the Second Optional Redemption Date, in the event the Company is prohibited
      by the terms of the Current Credit Facility and/or the Intercreditor Agreement
      to redeem in cash (and the Company has not otherwise received any necessary
      consent of the requisite parties thereunder to take such action) all or any
      portion of the Holder Optional Redemption Amount (such amount not able to be
      redeemed, the "Optional
      Redemption Shortfall Amount"),
      the
      Company may, at its option, and so long as the Equity Conditions shall have
      been
      satisfied (or waived in writing by the Holder) during the period from and
      including the Company Conversion Notice Due Date through and including the
      applicable Optional Redemption Date, satisfy its obligations under this Section
      9 with respect to the redemption of all or any portion of such Optional
      Redemption Shortfall Amount by delivery of shares of Common Stock to the Holder
      (the "Company
      Conversion Option").
      If
      the Company exercises the Company Conversion Option, it shall deliver to the
      Holder an irrevocable notice (the "Company
      Conversion Notice")
      no
      later than the August 15th
      prior to
      the applicable Optional Redemption Date (the "Company
      Conversion Notice Due Date")
      (A)
      stating that the Company is exercising such conversion option, (B) stating
      the
      portion of the Optional Redemption Shortfall Amount that is the subject of
      the
      Company Conversion Option (the "Company
      Conversion Amount")
      and
      (C) only with respect to the First Optional Redemption Date and the Second
      Optional Redemption Date, certifying that the applicable condition set forth
      in
      Section 4.3(d) of the Intercreditor Agreement has not been met (the
      "Intercreditor
      Condition").
      In
      the event that the Intercreditor Condition has not been met, unless the Company
      has in good faith determined that such failure to meet the Intercreditor
      Condition does not constitute material, nonpublic information relating to the
      Company and its Subsidiaries, the Company shall, prior to or contemporaneously
      with the delivery of the relevant Company Conversion Notice, make publicly
      available (on a Current Report on Form 8-K or otherwise) the fact that such
      condition has not been met for the applicable Optional Redemption Date. If
      the
      Company determines that no public disclosure is required pursuant to the
      foregoing sentence, the Holder shall be allowed to presume that such failure
      to
      meet the Intercreditor Condition does not constitute material, nonpublic
      information relating to the Company and its Subsidiaries. On the day immediately
      following the last day of the Company Conversion Measuring Period, the Company
      shall provide notice to the Holder of the applicable Company Conversion Price.
      Any Company Conversion Amount shall be converted as of the applicable Optional
      Redemption Date by dividing such Company Conversion Amount by the Company
      Conversion Price. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    (b) In
      the
      event there is an Optional Redemption Shortfall Amount and the Equity Conditions
      shall not have been satisfied as required (or waived), the Holder may, at its
      option, require the Company to convert all or any portion of the Optional
      Redemption Shortfall Amount (such amount, the "Holder
      Optional Conversion Amount")
      on the
      applicable Optional Redemption Date by delivering shares of Common Stock to
      the
      Holder (the "Holder
      Optional Conversion Option").
      The
      Holder shall state in each Holder Optional Redemption Notice delivered at any
      time when the Holder is electing the Holder Optional Conversion Option whether
      such Holder will exercise the Holder Optional Conversion Option in the event
      there is an Optional Redemption Shortfall Amount. Any Holder Optional Conversion
      Amount shall be converted as of the applicable Optional Redemption Date by
      dividing such Holder Optional Conversion Amount by the Company Conversion Price.
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    (c) Redemptions
      required by this Section 9 shall be made in accordance with the provisions
      of
      Section 13 and any conversions required by this Section upon election by the
      Company of the Company Conversion Option or the Holder of the Holder Optional
      Conversion Option shall be made in accordance with the provisions of Section
      3(c). Notwithstanding anything to the contrary in this Section 9, but subject
      to
      Section 3(d), until the Holder receives the Redemption Price and/or the shares
      deliverable in connection with any Company Conversion Amount or Holder Optional
      Conversion Amount, the Holder Optional Redemption Amount may be converted,
      in
      whole or in part, by the Holder into Common Stock pursuant to Section 3, and
      any
      such conversion shall reduce the Holder Optional Redemption Amount in the manner
      set forth by the Holder in the applicable Conversion Notice."

    

    (b)
       Section
      15(e)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    "(e)  Financial
      Covenants.
      On and
      after February 1, 2006, the Company shall satisfy or otherwise comply with
      each
      of the financial covenants set forth in the Exhibit
      II hereto
      in
      each calendar month. The Company shall (i) provide to the Holder a certificate
      certifying compliance with these financial covenants, contemporaneously with
      the
      delivery of any similar compliance certificate the Company is required to
      provide to the lenders or designated agent under the Current Credit Facility,
      and (ii) prior to or simultaneously with the delivery to the Holder of any
      such
      compliance certificate stating that the Company has failed to satisfy any
      financial covenant hereunder, publicly disclose such failure."

    

    (c)
       Section
      17
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    "REDUCTION
      OF LETTER OF CREDIT AMOUNT.
      The
      Letter of Credit Amount shall be reduced by $5,000,000 if on any Optional
      Redemption Date either (a) the holders of the Notes exercise the Holder Optional
      Redemption on an Optional Redemption Date for the Aggregate Optional Redemption
      Amount or (b) (i) if the Holder Optional Redemption has not been fully exercised
      by each Holder on any Optional Redemption Date and (ii) (x) on the First
      Optional Redemption Date, the Company has been Profitable for two (2) Calendar
      Quarters prior to such First Optional Redemption Date, (y) on the Second
      Optional Redemption Date, the Company has been Profitable for two (2) Calendar
      Quarters during the period beginning after the First Optional Redemption Date
      through the Second Optional Redemption Date, or (z) on the Third Optional
      Redemption Date, the Company has been Profitable for one (1) Calendar Quarter
      during the period beginning after the Second Optional Redemption Date through
      the Third Optional Redemption Date (each of the foregoing (x), (y) and (z),
      a
      "Profitability
      Target").
      In
      the event that the holders of the Notes exercise the Holder Optional Redemption
      for less than the Aggregate Optional Redemption Amount on any Optional
      Redemption Date and the Profitability Target for such Optional Redemption Date
      has not been met, the Letter of Credit Amount shall be reduced by an amount
      equal to the product of (1) $5,000,000, multiplied by (2) a fraction (A) the
      numerator of which is the aggregate Conversion Amount redeemed by all holders
      on
      such Optional Redemption Date and (B) the denominator of which is the Aggregate
      Optional Redemption Amount."

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
 

    (d)
       Section
      31(k)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""Company
      Conversion Price"
      means,
      as of any date of determination, that price which shall be computed as 90%
      of
      the arithmetic average of the Weighted Average Price of the Common Stock during
      each of the thirty (30) consecutive Trading Days of the thirty (30) Trading
      Day
      period commencing on the Trading Day immediately following the Company
      Conversion Notice Due Date (such period, the "Company
      Conversion Measuring Period")."

    

    (e)
       Section
      31(m)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""Current
      Credit Facility"
      means
      the Loan and Security Agreement, dated as of March 31, 2006, among the Company,
      as borrower, the lenders from time to time party thereto and Bank of America,
      N.A., as Agent, together with any amendments, restatements, renewals,
      refundings, refinancings or other extensions thereof."

    

    (f)
       Section
      31(r)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""First
      Optional Redemption Date"
      means
      August 31, 2006; provided,
      however, that in the event that the Company shall pay the Optional Redemption
      Shortfall Amount in shares of Common Stock, such Optional Redemption Shortfall
      Amount shall be due on
      September 28, 2006."

    

    (g)
       Section
      31(v)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""Intercreditor
      Agreement"
      means
      that certain intercreditor agreement dated as of March 31, 2006 among the
      Company, Bank of America, N.A., as first lien collateral agent, and Amphora
      Limited, as second lien collateral agent."

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
 

    (h)
       Section
      31(mm)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""Second
      Optional Redemption Date"
      means
      August 31, 2007; provided, however, that in the event that the Company shall
      pay
      the Optional Redemption Shortfall Amount in shares of Common Stock, such
      Optional Redemption Shortfall Amount shall be due on October 1, 2007."

    

    (i)
       Section
      31(rr)
      of the
      Note is hereby amended and restated to read in its entirety as
      follows:

     

    ""Third
      Optional Redemption Date"
      means
      September 2, 2008." 

    

    (j)
       A
      new
Section
      32
      is
      hereby added to the Note reading as follows:

     

    "(32) DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or its Subsidiaries, the Company shall within one
      Business Day after any such receipt or delivery publicly disclose such material,
      nonpublic information on a Current Report on Form 8-K or otherwise. In the
      event
      that the Company believes that a notice contains material, nonpublic
      information, relating to the Company or its Subsidiaries, the Company shall
      indicate to the Holder contemporaneously with delivery of such notice, and
      in
      the absence of any such indication, the Holder shall be allowed to presume
      that
      all matters relating to such notice do not constitute material, nonpublic
      information relating to the Company or its Subsidiaries."

    

    (k)
       Exhibit
      II
      of the
      Note is hereby amended and restated in its entirety by Exhibit
      II
      attached
      hereto.

     

    
      	 	
              2.
                

            	
              DISCLOSURE
                OF AMENDMENT.

            

    

     

    On
      or
      before 8:30 a.m., New York Time, on the
      first
      (1st)
      Business Day following the Effective Date (as defined below), the Company shall
      file a Current Report on Form 8-K describing the terms of this Amendment and
      attaching a copy of the form of this Amendment. 

     

    
      	 	
              3.
                

            	
              CONDITIONS
                TO EFFECTIVENESS.

            

    

     

    This
      Amendment shall not become effective (the "Effective
      Date")
      until
      the satisfaction of each of the following conditions, provided that such
      conditions are for the Investor's sole benefit and may be waived by the Investor
      at any time in its sole discretion by providing the Company with written notice
      thereof:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (a)
       The
      Company shall have duly executed this Amendment and delivered the same to the
      Investor.

     

    (b)
       The
      Board
      of Directors of the Company shall have adopted resolutions authorizing and
      approving this Amendment and the transactions contemplated hereby.

     

    
      	 	
              4.
                

            	
              MISCELLANEOUS.

            

    

     

    (a)
       Expenses.
      The
      Company shall reimburse the Investor for its reasonable legal expenses incurred
      in connection with the
      execution of this Amendment and any and all documents executed in connection
      therewith. 

     

    (b)
       Counterparts.
      This
      Amendment may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c)
       Headings.
      The
      headings of this Amendment are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Amendment.

     

    (d)
       Severability.
      If any
      provision of this Amendment shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Amendment in that jurisdiction or
      the
      validity or enforceability of any provision of this Amendment in any other
      jurisdiction.

     

    (e)
       No
      Third Party Beneficiaries.
      This
      Amendment is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    (f)
       Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Amendment and the consummation of the transactions contemplated
      hereby.

     

    (g)
       No
      Strict Construction.
      The
      language used in this Amendment will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    (h)
       Governing
      Law.
      This
      Amendment shall be construed and enforced in accordance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Amendment shall be governed by, the internal laws of the State of New York,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of New York or any other jurisdictions) that would cause
      the application of the laws of any jurisdictions other than the State of New
      York.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (i)
       Reaffirmation.
      The
      Company hereby: (1) confirms and agrees that, except as expressly amended or
      modified hereby, the Note, the Securities Purchase Agreement and each other
      Transaction Document to which it is a party is, and shall continue to be, in
      full force and effect and is hereby ratified and confirmed in all respects,
      except that on and after the Amendment Effective Date all references in any
      such
      Transaction Document to "the Note", "thereto", "thereof", "thereunder" or words
      of like import referring to the Note shall mean the Note as amended by this
      Amendment; and (ii) confirms and agrees that to the extent that any such
      Transaction Document purports to assign or pledge to the Amphora Limited, in
      its
      capacity as collateral agent (the "Collateral
      Agent")
      for
      the Investor and the holders of the Securities, or to grant to the Collateral
      Agent a security interest in or lien on, any collateral as security for the
      obligations of the Company from time to time existing in respect of the Note
      and
      any other Transaction Document, such pledge, assignment and/or grant of the
      security interest or lien is hereby ratified and confirmed.

     

    [Signature
      Page Follows]

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      the
      Investor and the Company have caused their respective signature page to this
      Amendment to be duly executed as of the date first written above.

     

    
      
        	 	 	 
	 	
                COMPANY:

                 

                MODTECH HOLDINGS,
                  INC.

              
	 
 	 
 	 
 
	
              	By:  	 
	 	
                

                Name:
                  

              
	 	Title 

      

    

      [Signature
        Page to Amendment Agreement]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

    

    IN
      WITNESS WHEREOF,
      the
      Investor and the Company have caused their respective signature page to this
      Amendment to be duly executed as of the date first written above.

    
       

      
        
          	 	 	 
	 	
                  INVESTOR:

                   

                  AMPHORA LIMITED

                
	 
 	 
 	 
 
	
                	By:  	 
	 	
                  

                  Name:
                    

                
	 	Title 

        

      

        [Signature
          Page to Amendment Agreement]

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

    

    EXHIBIT
      II

    

    FINANCIAL
      COVENANTS

    

    So
      long
      as any principal of or interest on this Note (whether or not due) shall remain
      unpaid or outstanding, the Company shall:

    

    (a) Fixed
      Charge Coverage Ratio.
      Maintain a Fixed Charge Coverage Ratio of at least the ratio set forth opposite
      each period below measured monthly as of the last day of each
      month.

    

    
      	
              Period

            	 	
              Minimum
                Fixed Charge Coverage Ratio

            
	 	 	 
	
              Month
                ending February 28, 2006 measured on a trailing 2 month
                basis

            	 	
              0.81:1.00

            
	 	 	 
	
              Month
                ending March 31, 2006, measured on a year-to-date basis

            	 	
              0.99:1.00

            
	 	 	 
	
              Month
                ending April 30, 2006, measured on a year-to-date basis

            	 	
              1.17:1.00

            
	 	 	 
	
              Months
                ending May 31, 2006 through December 31, 2006, measured on a year-to-date
                basis

            	 	
              1.35:1.00

            
	 	 	 
	
              Month
                ending January 31, 2007 and each month thereafter measured on a trailing
                12 month basis

            	 	
              1.35:1.00

            

    

    

    

    Capitalized
      terms used in this Exhibit
      II
      and not
      otherwise define in this Note shall have the respective meanings ascribed to
      them in the Current Credit Facility, as in effect on March 31,
      2006.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00101-of-00352.parquet"}]]