Document:

Exhibit 10.22

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                     AEROSPACE PRODUCTS INTERNATIONAL, INC.,

                                   as Borrower

                      AEROSPACE PRODUITS INTERNATIONAL LTEE
                  (d/b/a AEROSPACE PRODUCTS INTERNATIONAL LTD.)

                             as Affiliate Guarantor

================================================================================

             SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

                          Dated as of January 11, 2007

                                   $28,000,000

================================================================================

                               TD BANKNORTH, N.A.,

                                    as Lender

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<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                -----------------

                                                                                                               Page

  <S>    <C>   <C>                                                                                               <C>
  Section 1.   DEFINITIONS; RULES OF CONSTRUCTION.................................................................2
         1.1.     Definitions.....................................................................................2
         1.2.     Accounting Terms...............................................................................21
         1.3.     Certain Matters of Construction................................................................21
  Section 2.   CREDIT FACILITIES.................................................................................22
         2.1.     Revolver Commitment............................................................................22
         2.2.     CAPX Loan Facility.............................................................................23
         2.3.     Letter of Credit Facility......................................................................24
  Section 3.   INTEREST, FEES AND CHARGES........................................................................25
         3.1.     Interest.......................................................................................25
         3.2.     Fees...........................................................................................27
         3.3.     Computation of Interest, Fees, Yield Protection................................................27
         3.4.     Reimbursement Obligations......................................................................27
         3.5.     Illegality.....................................................................................27
         3.6.     Increased Costs................................................................................28
         3.7.     Capital Adequacy...............................................................................28
         3.8.     Mitigation.....................................................................................29
         3.9.     Funding Losses.................................................................................29
         3.10.    Maximum Interest...............................................................................29
         3.11.    Currency Indemnity.............................................................................29
  Section 4.   LOAN ADMINISTRATION...............................................................................30
         4.1.     Manner of Borrowing and Funding Revolver Loans.................................................30
         4.2.     Manner of Borrowing and Funding CAPX Loans.....................................................31
         4.3.     Number and Amount of LIBOR Loans; Determination of Rate........................................31
         4.4.     One Obligation.................................................................................31
         4.5.     Effect of Termination..........................................................................31
  Section 5.   PAYMENTS..........................................................................................32
         5.1.     General Payment Provisions.....................................................................32
         5.2.     Repayment of Revolver Loan and CAPX Loans......................................................32
         5.3.     Repayment of Converted CAPX Loan...............................................................32
         5.4.     Payment of Other Obligations...................................................................33
         5.5.     Marshaling; Payments Set Aside.................................................................33
         5.6.     Post-Default Allocation of Payments............................................................33
         5.7.     Application of Payments........................................................................34
         5.8.     Loan Account; Account Stated...................................................................34
         5.9.     Taxes..........................................................................................34
  Section 6.   CONDITIONS PRECEDENT..............................................................................34
         6.1.     Conditions Precedent to Initial Loans..........................................................34
         6.2.     Conditions Precedent to All Credit Extensions..................................................36
         6.3.     Limited Waiver of Conditions Precedent.........................................................36
  Section 7.   COLLATERAL........................................................................................36
         7.1.     Grant of Security Interest.....................................................................36
         7.2.     Lien on Deposit Accounts; Cash Collateral......................................................37
         7.3.     Other Collateral...............................................................................38
         7.4.     No Assumption of Liability.....................................................................38
         7.5.     Further Assurances.............................................................................38
  Section 8.   COLLATERAL ADMINISTRATION.........................................................................38
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>

  <S>    <C>   <C>                                                                                               <C>
         8.1.     Borrowing Base Certificates....................................................................38
         8.2.     Administration of Accounts.....................................................................38
         8.3.     Administration of Inventory....................................................................39
         8.4.     Administration of Equipment....................................................................40
         8.5.     Administration of Deposit Accounts.............................................................40
         8.6.     General Provisions.............................................................................40
         8.7.     Power of Attorney..............................................................................42
  Section 9.   REPRESENTATIONS AND WARRANTIES....................................................................42
         9.1.     General Representations and Warranties.........................................................42
         9.2.     Complete Disclosure............................................................................47
  Section 10.  COVENANTS AND CONTINUING AGREEMENTS...............................................................47
         10.1.    Affirmative Covenants..........................................................................47
         10.2.    Negative Covenants.............................................................................50
         10.3.    Financial Covenants............................................................................52
  Section 11.  GUARANTY OF AFFILIATE GUARANTOR...................................................................53
         11.1.    Guaranty of Payment and Performance............................................................53
         11.2.    Affiliate Guarantor's Agreement to Pay Enforcement Costs, Etc..................................53
         11.3.    Waivers by Affiliate Guarantor; Lender's Freedom to Act........................................53
         11.4.    Unenforceability of Obligations Against Borrower...............................................54
         11.5.    Subrogation; Subordination.....................................................................54
         11.6.    Termination; Reinstatement.....................................................................54
  Section 12.  EVENTS OF DEFAULT; REMEDIES ON DEFAULT............................................................55
         12.1.    Events of Default..............................................................................55
         12.2.    Remedies upon Default..........................................................................56
         12.3.    License........................................................................................57
         12.4.    Setoff.........................................................................................57
         12.5.    Remedies Cumulative; No Waiver.................................................................57
  Section 13.  BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS..............................................58
         13.1.    Successors and Assigns.........................................................................58
         13.2.    Assignments and Participations.................................................................58
  Section 14.  MISCELLANEOUS.....................................................................................58
         14.1.    Amendments and Waivers.........................................................................58
         14.2.    Indemnity......................................................................................59
         14.3.    Notices and Communications.....................................................................59
         14.4.    Performance of Obligations.....................................................................59
         14.5.    Credit Inquiries...............................................................................60
         14.6.    Severability...................................................................................60
         14.7.    Cumulative Effect; Conflict of Terms...........................................................60
         14.8.    Counterparts; Facsimile Signatures.............................................................60
         14.9.    Entire Agreement...............................................................................60
         14.10.   GOVERNING LAW..................................................................................60
         14.11.   CONSENT TO FORUM...............................................................................60
         14.12.   CERTAIN WAIVERS BY BORROWER....................................................................61
         14.13.   Patriot Act Notice.............................................................................61
         14.14.   NO ORAL AGREEMENT..............................................................................61
         14.15.   COMMERICAL TRANSACTION; PREJUDGEMENT REMEDY WAIVER.............................................62
         14.16.   Effective Date.................................................................................62
         14.17.   Restatement....................................................................................62
</TABLE>

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<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES
                         ------------------------------

Exhibit A                  Revolver Note
Exhibit B                  CAPX Note
Exhibit C                  Converted CAPX Note

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 9.1.12            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

                                      iii

<PAGE>

             SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
             -------------------------------------------------------

     THIS  SECOND  AMENDED  AND  RESTATED  LOAN  AND  SECURITY  AGREEMENT  (this
"Agreement")  is dated as of January 11, 2007, by and among  AEROSPACE  PRODUCTS
INTERNATIONAL,  INC., a Delaware  corporation  ("Borrower"),  AEROSPACE PRODUITS
INTERNATIONAL  LTEE (d/b/a  AEROSPACE  PRODUCTS  INTERNATIONAL  LTD.), a company
constituted under Part IA of the Companies Act (Quebec) ("Affiliate  Guarantor")
and TD BANKNORTH, N.A., a national banking association ("Lender").

                                R E C I T A L S:
                                ----------------

     WHEREAS, Borrower and Lender, as successor by merger to Hudson United Bank,
are parties to that certain Amended and Restated  Commercial  Revolving Loan and
Security  Agreement dated as of July 29, 2005 (such agreement,  as supplemented,
amended and modified from time to time,  the "Original  LSA")  pursuant to which
Lender has  extended  to  Borrower a revolving  loan  facility in the  principal
amount  of up to  $25,000,000  (the  "Revolving  Loan  Facility")  and a line of
credit/term loan facility in the principal amount of up to $3,000,000; and

     WHEREAS,  as security for the payment and performance of Borrower's present
and future indebtedness and obligations to Lender, including without limitation,
Borrower's indebtedness and obligations to Lender arising under or by virtue the
Original  LSA,  Borrower  has  granted  in favor of  Lender a  continuing  first
priority  security  interest in all of its tangible and intangible  personal and
fixture property pursuant to the Original LSA; and

     WHEREAS,  Borrower and Affiliate Guarantor are wholly-owned subsidiaries of
First Aviation Services,  Inc., a Delaware  corporation ("Parent Guarantor") and
are an integral part of a consolidated  enterprise that are Borrower,  Affiliate
Guarantor, Parent Guarantor and the other Subsidiaries of Parent Guarantor; and

     WHEREAS,  Borrower and Affiliate  Guarantor have each requested Lender, and
Lender has  agreed,  to (a)  extend  the  maturity  date of the  Revolving  Loan
Facility from  September 1, 2007 to September 1, 2008,  (b) provide a $1,000,000
sublimit under the Revolving Loan Facility for the issuance of letters of credit
for the account of Borrower,  (c) extend to Borrower a revolving  loan/term loan
facility  for  capital  expenditures  in the maximum  principal  amount of up to
$3,000,000,  (d) permit  Borrower to use the proceeds of Loans made hereunder to
finance the working  capital and general  corporate  requirements  of  Affiliate
Guarantor  and, in connection  therewith,  allow  Borrower to include within the
Borrowing  Base any and all Eligible  Accounts and Eligible  Inventory  (each as
defined  below) of Affiliate  Guarantor,  and (e) amend  certain other terms and
conditions of the Original LSA; and

     WHEREAS,  Borrower and Lender  desire to amend,  restate and  supersede the
Original  LSA in its  entirety  as more  fully set forth  herein and to have all
Loans  (including,  but not limited to, all existing  Loans made pursuant to the
Original LSA) be governed by the terms and conditions of this Agreement.

     NOW,  THEREFORE,  Borrower and Lender agree that on the Effective Date, the
Original LSA shall be amended,  restated and supplemented in its entirety as set
forth  herein to provide  (subject to the terms set forth  herein) (a) a working
capital  revolving  credit  facility of up to  $25,000,000  which will include a
$1,000,000  sublimit  for the  issuance  of  letters  of  credit,  (b) a capital
expenditures revolving loan/term loan facility of up to $3,000,000, and (c) that
all of Borrower's  present and future  indebtedness  and  obligations to Lender,
including without  limitation,  Borrower's  present and future  indebtedness and
obligations  to  Lender  arising  under or by virtue  the  Original  LSA,  shall

<PAGE>

continue to be secured by a first priority security interest in all tangible and
intangible personal and fixture property of Borrower.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants  herein contained and to induce Lender to continue to extend credit to
Borrower, 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 - 80% of the Value of Eligible Accounts.

                -----------------------

                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  Prime
         Rate  shall be the rate per annum  determined  by Lender 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.

                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.

                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.

                                       2

<PAGE>

                Applicable Margin - with respect to any Type of Loan (other than
         the FHLB Rate Loan),  the margin set forth below,  as determined by the
         Debt Service  Coverage Ratio for the relevant  Fiscal Quarter or Fiscal
         Quarters, as the case may be:

                        Debt Service
         Level         Coverage Ratio    Prime Rate Loans      LIBOR Loans
         -----         --------------    ----------------      -----------

          I               > 1.50                 0%               1.50%
          II         < 1.50 (but not in          0%               1.75%
                          default)

         The Applicable Margin for Prime Rate Loans outstanding on the Effective
         Date shall be 0%. The Applicable  Margin for LIBOR Loans outstanding as
         of the  Effective  Date shall be as  determined  under the Original LSA
         until the Interest Periods applicable  thereto expire.  With respect to
         all Loans made,  continued or converted to another Type on or after the
         Effective  Date,  until the first day of the calendar  month  following
         Lender's  receipt  of  the  financial   statements  and   corresponding
         Compliance  Certificate  for the  Fiscal  Quarter  of Parent  Guarantor
         ending on October 31, 2006, the  Applicable  Margin shall be determined
         as if  Level  II were  applicable.  Thereafter,  the  margins  shall be
         subject to  increase  or decrease  upon  receipt by Lender  pursuant to
         Section 10.1.2 of the financial statements and corresponding Compliance
         Certificate  for  the  last  Fiscal  Quarter,  which  change  shall  be
         effective on the first day of the calendar month following receipt.  If
         Lender  fails to receive the  financial  statements  and  corresponding
         Compliance Certificate for any Fiscal Quarter of Parent Guarantor, then
         commencing  on the first day of the calendar  month  following the date
         upon which such financial  statements and Compliance  Certificate  were
         due to be  delivered,  the margins  shall be  determined as if Level II
         were  applicable,  from such day until  the first  Business  Day of the
         calendar month following actual receipt.

                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 Lender,
         an entity  that  administers  or manages  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.

                Availability  -  determined  as  of  any  date,  the amount that
         Borrower is 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
         amount  of any  reserves  established  pursuant  to the  definition  of
         Eligible  Accounts;  (b)  the  LC  Reserve;  and  (c)  such  additional
         reserves,  in such amounts and with respect to such matters,  as Lender
         in its discretion may elect to impose from time to time.

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

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

                                       3

<PAGE>

                Bankruptcy Code - Title 11 of the United States Code.

                Blocked  Account -  a special account established by Borrower at
         Lender or another  bank  acceptable  to Lender,  over which  Lender has
         exclusive control for withdrawal purposes.

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

                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.

                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 Revolver Commitment,  minus the LC Reserve; or
         (b) the sum of the Accounts Formula Amount,  plus the Inventory Formula
         Amount, minus the Availability Reserve.

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

                Borrowing Base Obligor - Borrower or Affiliate Guarantor.

                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 State of  Connecticut;  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.

                Canadian Dollars - lawful money of Canada.

                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 Parent  Guarantor or any
         of its  Subsidiaries  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.

                CAPX Loan - a loan made pursuant to Section 2.2.

                CAPX Loan Commitment - Lender's obligation to make CAPX Loans up
         to the maximum aggregate principal amount of $3,000,000.

                                       4

<PAGE>

                CAPX Loan Commitment Termination Date - the earliest to occur of
         (a) the CAPX Loan  Termination  Date; or (b) the date on which the CAPX
         Loan Commitment is terminated pursuant to Section 12.2.

                CAPX  Loan  Note - a  promissory note to be executed by Borrower
         in favor of Lender in the form of Exhibit B, which shall  evidence  the
         CAPX Loans (but not the Converted CAPX Loan) made by Lender hereunder.

                CAPX Loan Termination Date - September 1, 2008.

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

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

                Cash Collateralize - the delivery of cash to Lender, 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),  Lender'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 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.

                Cash  Management  Services  - any services provided from time to
         time by Lender or any of its  Affiliates  to any Obligor 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. ss. 9601 et seq.).

                Change  of  Control - (a)  Parent  Guarantor  ceases  to own and
         control,  beneficially  and of record,  100% of all Equity Interests in
         Borrower and in Affiliate  Guarantor;  (b) First Equity Group,  Inc., a
         Delaware  corporation,  ceases to own and control,  beneficially and of

                                       5

<PAGE>

         record, at least 25% of all Equity Interests in Parent Guarantor; (c) a
         change in the majority of directors of Borrower, unless approved by the
         then  majority  of  directors;  or  (d)  all  or  substantially  all of
         Borrower's assets are sold or transferred.

                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  or  replacement  of 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 - the first date on which the conditions set  forth
         in Sections  5.01 and 5.02 of the Original LSA were  satisfied  and any
         Loan was made thereunder.

                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.

                Commitments  -  the  Revolver  Commitment  and  the  CAPX   Loan
         Commitment.

                Compliance  Certificate  -  a certificate, in form and substance
         satisfactory  to Lender,  by which Borrower  certifies  compliance with
         Section 10.2.3 and 10.3 and  calculates  the  applicable  Level for the
         Applicable Margin.

                Confirmation  Agreement. The  Confirmation and  Reaffirmation of
         Loan  Documents,  dated or to be dated on or before the Effective Date,
         among Borrower,  Parent  Guarantor and Lender and in form and substance
         satisfactory to Lender.

                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

                                       6

<PAGE>

         reasonably anticipated liability with respect thereto.

                Converted CAPX Loan - as defined in Section 2.2.4.

                Converted CAPX Loan Maturity Date - September 1, 2013.

                Converted CAPX  Loan  Note - a promissory note to be executed by
         Borrower  in favor of  Lender in the form of  Exhibit  C,  which  shall
         evidence the Converted CAPX Loan made by Lender.

                CWA - the Clean Water Act (33 U.S.C. ss.ss. 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 and
         salaries  owing to employees  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 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.

                Debt  Service  Coverage  Ratio  -  the  ratio,  determined  on a
         consolidated  basis for Parent  Guarantor and its  Subsidiaries for the
         relevant Fiscal Quarter or Fiscal Quarters,  as the case may be, of (a)
         EBITDA,  minus all cash  taxes  paid (net of any cash  refunds),  minus
         Capital   Expenditures  (except  those  financed  with  Borrowed  Money
         (including   CAPX  Loans)  other  than  Revolver   Loans),   minus  all
         Distributions (other than Distributions made to Parent Guarantor by any
         of its Subsidiaries) to (b) Fixed Charges.

                Debt   Subordination  Agreement  -  the  Amended   and  Restated
         Subordination  Agreement  dated as of July 29, 2005 by and among Parent
         Guarantor,  Borrower and Lender  relating to the Existing  Subordinated
         Debt.

                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), 3% plus the Prime Rate.

                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  Borrower,  in favor of Lender,  for the benefit of Secured
         Parties, as security for the Obligations.

                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.

                Document - as defined in the UCC.

                                       7

<PAGE>

                Dollars - lawful money of the United States.

                EBITDA  -   determined  on  a   consolidated  basis  for  Parent
         Guarantor and its 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
         or losses  arising from the write-up of assets,  and any  extraordinary
         gains or losses (in each case,  to the extent  included in  determining
         net income).

                Effective Date - as defined in Section 6.1.

                Eligible Account - an Account owing to a Borrowing Base  Obligor
         that arises in the Ordinary  Course of Business from the sale of goods,
         is payable in Dollars or Canadian  Dollars and is deemed by Lender,  in
         its  discretion,  to be  an  Eligible  Account.  Without  limiting  the
         foregoing,  no Account  shall be an Eligible  Account if (a) it is more
         than  90  days  after  the  original  invoice  date or if it is a dated
         invoice more than 60 days after the original due date, whichever occurs
         first;  (b) 50% or more of the Accounts owing by the Account Debtor and
         its  Affiliates are not Eligible  Accounts under the foregoing  clause;
         (c) it does not conform with a covenant or representation  herein;  (d)
         it is owing by a creditor or  supplier,  or is  otherwise  subject to a
         potential   offset,   counterclaim,   dispute,   deduction,   discount,
         recoupment,  reserve,  defense,  chargeback,  credit or allowance  (but
         ineligibility  shall  be  limited  to  the  amount  thereof);   (e)  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;  (f) the Account  Debtor is organized or has its principal
         offices  or assets  outside  the United  States or  Canada,  unless the
         subject goods shall have been shipped  after receipt by such  Borrowing
         Base Obligor from the Account Debtor,  of (1) an irrevocable  letter of
         credit, which letter of credit shall have been issued or confirmed by a
         financial  institution  acceptable  to Lender  and shall be in form and
         substance  acceptable to Lender and shall be  transferred,  assigned or
         otherwise made payable to Lender in form and substance  satisfactory to
         Lender,  or (2) credit insurance in form and substance and issued by an
         insurer  satisfactory  to  Lender;  (g)  it is  owing  by a  Government
         Authority,  unless the Account Debtor is the United States or Canada or
         any department,  agency or instrumentality  thereof and the Account has
         been assigned to Lender in compliance with the Assignment of Claims Act
         or the Financial Administration Act (Canada), as applicable;  (h) it is
         not  subject  to a duly  perfected,  first  priority  Lien in  favor of
         Lender,  or is subject to any other Lien;  (i) 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;  (j) it is
         evidenced by Chattel  Paper or an  Instrument  of any kind, or has been
         reduced to  judgment;  (k) 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; (l) it arises from a sale to an Affiliate,  or
         from  a  sale  on a  bill-and-hold,  guaranteed  sale,  sale-or-return,
         sale-on-approval, consignment, or other repurchase or return basis; (m)
         it  represents  a progress  billing  or  retainage;  (n) it  includes a
         billing for interest,  fees or late charges, but ineligibility shall be
         limited to the extent thereof; or (o) 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 60 days old will be excluded.

                Lender  may  determine, on  a daily basis,  whether  any Account
         constitutes   an  Eligible   Account,   and  if  an  Eligible   Account
         subsequently  becomes  ineligible its ineligibility  shall be immediate
         and Lender  shall set such  reserves  as Lender  deems  reasonable  and
         necessary,  and at any  time at  which  the  Borrowing  Base  Obligors'
         collective  dilution  exceeds five percent (5%) based on the results of
         Lender's periodic field  examinations,  establish a dilution reserve of

                                       8

<PAGE>

         one percent (1%) for each percentage point or fraction thereof by which
         the Borrowing Base Obligors'  collective  dilution exceeds five percent
         (5%).

                Eligible  Equipment - equipment which (a) is or was purchased by
         Borrower on or after February 1, 2006 for use in the Ordinary Course of
         Business;  (b) is in possession of Borrower or Affiliate  Guarantor and
         located (i) on premises  owned by Borrower or Affiliate  Guarantor,  or
         (ii) on leased  premises  with  respect  to which an  appropriate  Lien
         Waiver has been  executed and  delivered  to Lender;  (c) is subject to
         Lender's duly perfected, first priority Lien, and no other Lien, (d) at
         all times  pertinent  hereto is of good and  merchantable  quality free
         from defects and of a type which Lender, in its discretion, deems to be
         Eligible  Equipment,  and  (e)  meets  all  standards  imposed  by  any
         Governmental Authority.

                Eligible Inventory - Inventory owned by a Borrowing Base Obligor
         that Lender, in its discretion, deems to be Eligible Inventory. Without
         limiting the foregoing, no Inventory shall be Eligible Inventory unless
         it (a) is finished  goods,  and not raw  materials or  work-in-process,
         packaging or shipping materials,  labels, samples, display items, bags,
         replacement parts, manufacturing supplies or considered a "core" on the
         books and  records  of a  Borrowing  Base  Obligor;  (b) is not held on
         consignment,  nor subject to any deposit or down payment; (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 Lender's duly perfected, first priority Lien, and no other Lien; (h)
         is within the  continental  United States or Canada,  is not in transit
         except between  locations of the Borrowing  Base  Obligors,  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 a Borrowing Base Obligor's or Lender's right
         to dispose of such Inventory, unless Lender 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 Availability Reserve has been
         established.

                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  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.

                                       9

<PAGE>

                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.

                Equivalent  Amount -  on any date of determination, with respect
         to amounts denominated in Canadian Dollars, the amount of Dollars which
         would result from the  conversion  of Canadian  Dollars into Dollars at
         the 12:00 noon  (Toronto  time) rate quoted on the Reuters  Screen Page
         BOFC on the date of the most recent Borrowing Base Certificate required
         to be delivered  hereunder or, at the  discretion of Lender,  on a more
         recent date (or if such display or service  ceases to exist,  any other
         display and service in existence as of the relevant time  designated by
         Lender).

                ERISA - the Employee Retirement Income Security Act of 1974.

                Event of Default - as defined in Section 12.

                Exchange Act - the Securities Exchange Act of 1934, as amended.

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

                Existing  Subordinated  Debt -  the  Subordinated Debt  owing by
         Borrower to Parent Guarantor.

                Extraordinary  Expenses -  all costs,  expenses or advances that
         Lender 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 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 Lender'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 Lender 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.

                FHLB  Rate - a fixed rate  per annum equal to the sum of (a) the
         yield on  Federal  Home Loan  Bank  consolidated  obligations  having a

                                       10

<PAGE>

         maturity and  amortization  schedule of up to five (5) years, as quoted
         by the Federal Home Loan Bank on and for the date of the Converted CAPX
         Loan Note or any subsequent  date with respect to which Borrower elects
         to have the Converted CAPX Loan bears interest at the FHLB Rate, as the
         case may be, plus (ii) two hundred twenty (220) basis points.

                FHLB  Rate Loan -  the Converted CAPX Loan in the event Borrower
         elects such Loan to bear interest at the FHLB Rate.

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

                Fiscal  Year -  the  fiscal  year of  Parent  Guarantor and  its
         Subsidiaries  for accounting and tax purposes,  ending on January 31 of
         each year.

                Fixed  Charges  -  the  sum   of   interest  expense (other than
         payment-in-kind)  and principal  payments made on Borrowed Money (other
         than on account of the Revolver Loans).

                FLSA - the Fair Labor Standards Act of 1938.

                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.

                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 Lender in its
         discretion,  in the  amount of  required  Cash  Collateral);  and (c) a
         release of any Claims of Obligors  against  Lender arising on or before
         the  payment  date.  No Loans shall be deemed to have been paid in full
         until the Commitments 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,  provincial,
         municipal,   foreign   or  other   governmental   department,   agency,

                                       11

<PAGE>

         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 - Affiliate Guarantor, Parent Guarantor and each other
         Person who guarantees payment or performance of any Obligations.

                Guaranty  -  each guaranty  agreement executed by a Guarantor in
         favor of Lender, whether now existing or hereafter arising,  including,
         but not  limited  to, the  Guaranty of Parent  Guarantor  executed  and
         delivered to Lender on or prior to the Closing Date.

                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.

                Hypothec  -  the  Movable  Hypothec,  dated or to be dated on or
         prior to the  Effective  Date, by and between  Affiliate  Guarantor and
         Lender  and in  form  and  substance  satisfactory  to the  Lender,  as
         amended, restated, reaffirmed or otherwise modified from time to time.

                Indemnitees - Lender Indemnitees.

                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,  including,  but not  limited to, the  Bankruptcy  and
         Insolvency Act (Canada) or the  Companies'  Creditors  Arrangement  Act
         (Canada);  (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  Lender,  for the  benefit of
         Secured  Parties,  such Obligor's  rights under key-man life,  business
         interruption or other insurance  policies as Lender deems  appropriate,
         as security for the Obligations.

                Intangible Assets - at any particular date, all assets of Parent
         Guarantor and its  Subsidiaries  that, in accordance  with GAAP,  would
         properly be classified as intangible assets on the consolidated balance
         sheet  of  Parent  Guarantor,  but  in  any  event  including,  without
         limitation,   goodwill,  franchises,   licenses,  patents,  trademarks,
         copyrights,  service  marks,  brand  names,  costs in excess of the net
         asset value of acquired companies and the amount of any write-up in the
         book value of any asset  resulting from any  revaluation  thereof after
         the date hereof.

                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.

                                       12

<PAGE>

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

                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 Borrower or Subsidiary
         with  Lender,  whether  now  existing  or  hereafter  arising,  that is
         designed to protect against fluctuations in interest rates.

                Internal Control  Event - a material  weakness in, or fraud that
         involves  management or other employees who have a significant role in,
         Parent Guarantor's internal controls over financial reporting,  in each
         case as described in the Securities Laws.

                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  Borrower's  business  (but  excluding
         Equipment).

                Inventory Formula Amount - the lesser of (a) $15,000,000; or (b)
         50% of the Value of Eligible Inventory.

                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.

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

                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 then outstanding
         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,  and (ii) no more than 180 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 Lender in their discretion.

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

                LC  Obligations  -  the  sum  (without  duplication)  of (a) all
         amounts owing by Borrower 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.

                                       13

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

                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 Lender.

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

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

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

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

                Letter of Credit Subline - $1,000,000.

                LIBOR  Loan  -  any  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 Lender, 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 Lender 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 Lender,  and agrees
         to  deliver  the  Collateral  to  Lender  upon  request;  (c)  for  any
         Collateral  held  by a  repairman,  mechanic  or  bailee,  such  Person
         acknowledges Lender's Lien, waives or subordinates any Lien it may have
         on the Collateral,  and agrees to deliver the Collateral to Lender upon
         request;   and  (d)  for  any   Collateral   subject  to  a  Licensor's
         Intellectual  Property rights, the Licensor grants to Lender the right,
         vis-a-vis such Licensor,  to enforce Lender'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.

                                       14

<PAGE>

                Loan - a Revolver Loan, an CAPX Loan or the Converted CAPX Loan,
         as the context requires.

                Loan  Account  -  the loan  account established by 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 Effective Date
         and on each anniversary of the Effective 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 Lender's  Liens on any
         Collateral;  (b)  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 Lender to enforce
         or collect any Obligations or to realize upon any Collateral.  Material
         Contract - any agreement or arrangement to which 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,  or (c) that  relates to
         Subordinated Debt, or Debt in an aggregate amount of $500,000 or more.

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

                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 Borrower, Affiliate Guarantor or any Subsidiary of either of them 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  Lender's  Liens on  Collateral
         sold; (c) transfer or similar taxes;  and (d) reserves for indemnities,
         until such reserves are no longer needed.

                Note - the Revolver Note, the CAPX Loan Note, the Converted CAPX
         Loan Note or any other promissory note executed by Borrower to evidence
         any Obligations.

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

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

                                       15

<PAGE>

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

                Ordinary Course of Business - the ordinary course of business of
         Borrower,  Affiliate  Guarantor  or any  Subsidiary  of either of them,
         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, Debt
         Subordination   Agreement,   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 Lender in connection with any  transactions  relating hereto,
         or each other "Loan  Document"  (as defined  under the Original LSA) to
         the extent  such Loan  Document  was not  superseded  and  replaced  by
         another Loan Document.

                Overadvance - as defined in Section 2.1.5.

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

                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).

                Payment Intangible - as defined in the UCC.

                Payment  Item  -  each  check,  draft  or  other item of payment
         payable  to   Borrower  or   Affiliate   Guarantor,   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 Lender,  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 $500,000  or less;  (c) a  disposition  of  Inventory  that is

                                       16

<PAGE>

         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 Lender.

                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  Effective  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
         $500,000 or less at any time.

                Permitted Lien - as defined in Section 10.2.2.

                Permitted Purchase Money Debt  - Purchase Money Debt of Borrower
         and Affiliate Guarantor 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.

                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
         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  Borrower  or
         Subsidiary is making or accruing an obligation to make contributions or
         has within the preceding five years made or accrued such contributions.

                Prime Rate - the rate of interest announced from time to time by
         Lender as the  index  for  setting  loan  rates and is not  necessarily
         Lender's lowest or most favorable rate. The Prime Rate will be based on
         the rate published in the most recent edition preceding the time of any
         interest  rate  determination  of  the  Wall  Street  Journal,  Eastern
         Edition,  under the  heading  "Money  Rates" and  defined as the "Prime
         Rate",  or in the event  that such rate is no longer  published  in the
         Wall Street Journal,  a comparable  index or reference rate selected by
         Lender,  in its sole  discretion.  If there is more than one Prime Rate
         (or comparable  reference rate), the highest of such rates shall be the
         Prime Rate.

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

                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  Lender;  and  (f) if the

                                       17

<PAGE>

         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.

                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 or a leasing  agreement,  installment sale or sale with a
         right of redemption governed by the Civil Code of Quebec.

                RCRA - the Resource Conservation and Recovery Act (42 U.S.C.
          ss.ss. 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  Borrower  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), (c), (d) or (f).

                Registered Public Accounting Firm - has the meaning specified in
         the Securities  Laws and shall be  independent  of Parent  Guarantor as
         prescribed by the Securities Laws.

                Reimbursement Date - as defined in Section 2.3.2.

                Report - as defined in Section 12.2.3.

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

                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 Borrower, Affiliate

                                       18

<PAGE>

         Guarantor  or  any  Subsidiary  of  either  of  them,  other  than  (a)
         Investments  in  Subsidiaries  to the extent  existing on the Effective
         Date;  (b) Cash  Equivalents  that are  subject  to  Lender's  Lien and
         control,  pursuant to documentation in form and substance  satisfactory
         to Lender; 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  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 - Lender's obligation to make Revolver Loans
         and  issue  Letters  of Credit up to the  maximum  aggregate  principal
         amount of $25,000,000.

                Revolver Commitment Termination Date - the earliest to occur  of
         (a) the  Revolver  Termination  Date;  (b) the date on  which  Borrower
         terminates the Revolver  Commitment  pursuant to Section 2.1.4;  or (c)
         the date on which the Revolver  Commitment  is  terminated  pursuant to
         Section 12.2.

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

                Revolver Note - a promissory note to be executed by  Borrower in
         favor of Lender in the form of  Exhibit  A, which  shall  evidence  the
         Revolver Loans made by Lender hereunder.

                Revolver Termination Date - September 1, 2008.

                Rolling Period - with respect to any fiscal quarter of Borrower,
         such  fiscal  quarter  and  the  three   consecutive   fiscal  quarters
         immediately prior thereto.

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

                Sarbanes-Oxley - the Sarbanes-Oxley Act of 2002.

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

                SEC  -  the United States Securities and Exchange Commission, or
         any  Governmental   Authority   succeeding  to  any  of  its  principal
         functions.

                Secured  Parties  -  Lender and Affiliates of Lender who provide
         Bank Products to Borrower.

                Securities  Act  -  the  Securities  Act of 1933, amended and in
         effect on any applicable date hereunder.

                "Securities  Laws"  -  the  Securities  Act,  the  Exchange Act,
         Sarbanes-Oxley and the applicable  accounting and auditing  principles,
         rules, standards and practices promulgated, approved or incorporated by
         the SEC or the Public Company  Accounting  Oversight  Board, as each of
         the  foregoing  may be  amended  and in effect on any  applicable  date
         hereunder.

                                       19

<PAGE>

                Security Agreement - The General Security Agreement, dated or to
         be dated on or prior to the Effective  Date,  by and between  Affiliate
         Guarantor  and Lender  and in form and  substance  satisfactory  to the
         Lender,  as amended,  restated,  reaffirmed or otherwise  modified from
         time to time.

                Security Documents - the Guaranties, the Confirmation Agreement,
         the Security Agreement,  the Hypothec,  Insurance Assignments,  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 Borrower  or, if the
         context requires, an Obligor.

                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  Debt  -  Debt  incurred  by  Borrower or Affiliate
         Guarantor that is expressly  subordinate and junior in right of payment
         to Full Payment of all Obligations and is on terms (including maturity,
         interest, fees, repayment, covenants and subordination) satisfactory to
         Lender, the Subordinated Debt owing by Borrower to Parent Guarantor.

                Subsidiary - any entity at least 50% of whose  voting securities
         or Equity Interests is owned by Borrower  (including indirect ownership
         by 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.

                Tangible  Capital  Base  -  as of any date of determination, (a)
         Tangible Net Worth as of such date,  plus (b) the  principal  amount of
         all Subordinated Debt outstanding as of such date.

                                       20

<PAGE>

                Tangible Net Worth - as of any date of determination,  (a) Total
         Assets as of such date,  minus (b) the sum of (i) Total  Liabilities as
         of such date, and (ii) Intangible Assets as of such date.

                Total  Assets   -   as  of  any  date  of  determination without
         duplication,  all assets of Parent Guarantor and its Subsidiaries that,
         in accordance with GAAP,  would properly be classified as assets on the
         consolidated balance sheet of Parent Guarantor.

                Total  Liabilities   -   as  of   any  particular  date  without
         duplication, all Debt and other liabilities of Parent Guarantor and its
         Subsidiaries   that,  in  accordance  with  GAAP,   would  properly  be
         classified as liabilities on the  consolidated  balance sheet of Parent
         Guarantor as of such date.

                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.

                Type  - any type of a Loan (i.e., Prime 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
         Connecticut  or,  when the laws of any other  jurisdiction  govern  the
         perfection or enforcement of any Lien, the Uniform  Commercial  Code of
         such jurisdiction.

                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 (with  Accounts  designated in
         Canadian Dollars being converted into an Equivalent Amount of Dollars),
         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 Parent  Guarantor  delivered to Lender
before the Effective Date and using the same inventory  valuation method as used
in such  financial  statements,  except for any change  required or permitted by
GAAP if Parent  Guarantor's  certified public accountants concur in such change,
the change is  disclosed  to  Lender,  and  Section  10.3 is amended in a manner
satisfactory to Lender 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,

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<PAGE>

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  Lender's  notice  address  under  Section
14.3.1;  or (g)  discretion  of Lender mean the sole and absolute  discretion of
Lender.  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  Lender  (and  not  necessarily
calculated  in  accordance  with  GAAP).  Borrower  shall  have  the  burden  of
establishing any alleged negligence,  misconduct or lack of good faith by 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 Borrower's 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.

SECTION 2. CREDIT FACILITIES

                  2.1. Revolver Commitment.

                2.1.1.  Revolver  Loans.  Lender  agrees,  up  to  the  Revolver
Commitment,  on the terms set forth herein,  to make Revolver  Loans to Borrower
from  time to time from the  Effective  Date  through  the  Revolver  Commitment
Termination  Date.  The Revolver  Loans may be repaid and reborrowed as provided
herein.  In no event shall Lender 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  Note.  The  Revolver  Loans made by Lender and
interest  accruing  thereon  shall be evidenced by the records of Lender and the
Revolver Note.

                2.1.3. Use of Proceeds.  The proceeds of Revolver Loans shall be
used by Borrower solely for working capital and other lawful corporate  purposes
of Borrower and to fund the working capital and other lawful corporate  purposes
of Affiliate Guarantor.

                2.1.4.   Voluntary   Reduction   or   Termination   of  Revolver
Commitment.

                (a)     The Revolver Commitment shall terminate  on the Revolver
Termination  Date,  unless sooner  terminated in accordance with this Agreement.
Upon at least 30 days prior written notice to Lender at any time,  Borrower may,
at its option,  terminate the Revolver Commitment and this credit facility.  Any
notice of termination given by Borrower shall be irrevocable. On the termination
date,  Borrower shall make Full Payment of all Obligations  (including,  but not
limited to, all Revolver Loans and CAPX Loans and, if applicable,  the Converted
CAPX Loan).

                (b)     Borrower  may permanently reduce the Revolver Commitment
from time to time upon written notice to Lender,  which notice shall specify the
amount of the  reduction,  shall be  irrevocable  once given,  shall be given at
least five  Business  Days prior to the end of a month and shall be effective as

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<PAGE>

of the first day of the next month.  Each reduction shall be in a minimum amount
of $1,000,000, or an increment of $1,000,000 in excess thereof.

                (c)     If  termination  of the Revolver  Commitment by Borrower
occurs on or before the first  anniversary  date of this Agreement,  then at the
effective date of such termination, Borrower shall pay to Lender (in addition to
the then outstanding  principal,  accrued interest and other charges owing under
the terms of this  Agreement and any of the other Loan  Documents) as liquidated
damages  for the loss of the bargain  and not as a penalty,  an amount  equal to
one-quarter of one percent (0.25%) of the total Revolver Commitment. If any such
termination  occurs  after  the first  anniversary  date of this  Agreement,  no
termination charges shall be payable.

                2.1.5. Overadvances.  If the aggregate Revolver Loans exceed the
Borrowing Base  ("Overadvance"),  the excess amount shall be payable by Borrower
on demand by Lender, but all such Revolver Loans shall  nevertheless  constitute
Obligations  secured by the  Collateral and entitled to all benefits of the Loan
Documents.  Any  sufferance of an  Overadvance  shall not constitute a waiver by
Lender of the Event of Default caused thereby.

                2.1.6. Protective Advances.  Lender 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 Revolver
Commitment, to make Prime Rate Loans ("Protective Advances") (a) in such amounts
as Lender deems 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.

                2.2. CAPX Loan Facility.

                2.2.1.   CAPX  Loans.   Lender  agrees,  up  to  the  CAPX  Loan
Commitment,  on the terms set forth herein,  to make CAPX Loans to Borrower from
time  to  time  from  the  Effective  Date  through  the  CAPX  Loan  Commitment
Termination  Date;  provided,  however that in no event shall (a) the  aggregate
original principal amount of all CAPX Loans exceed the CAPX Loan Commitment; (b)
any one request by  Borrower  for CAPX Loans be in an  aggregate  amount of less
than One  Hundred  Thousand  Dollars  ($100,000),  and (c) the amount of any one
request by  Borrower  for CAPX Loans  exceed 80% of the  so-called  "hard"  cost
(invoice price less taxes and all amounts attributable to installation, freight,
handling,  software,  rebates,  chargebacks  and other amounts which in Lender's
reasonable  discretion  do not  constitute  "hard"  costs  of  purchase)  of the
particular Eligible Equipment being purchased.  The CAPX Loans may be repaid and
reborrowed as provided herein

                2.2.2.  CAPX  Loan  Note.  The CAPX  Loans  made by  Lender  and
interest  accruing  thereon  shall be evidenced by the records of Lender and the
CAPX Loan Note.

                2.2.3. Use of Proceeds. The proceeds of CAPX Loans shall be used
by Borrower solely to finance Borrower's purchase of Eligible Equipment.

                2.2.4.  Conversion to Converted  CAPX Loan;  Converted CAPX Loan
Note.  So long as  Borrower is in  compliance  with all of the terms of the Loan
Documents, no Default has occurred and is continuing and the Revolver Commitment
has not been  terminated,  on the CAPX  Loan  Termination  Date,  the  aggregate
principal  amount of all CAPX Loans then  outstanding  shall  convert  into term
indebtedness  (the "Converted CAPX Loan") with a final maturity on the Converted
CAPX Loan Maturity Date. With respect to the Converted CAPX Loan, Borrower shall
have the option, on written notice delivered to Lender at least two (2) Business

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<PAGE>

Days  prior  to CAPX  Loan  Termination  Date (or any  subsequent  date on which
Borrower desires and Lender agrees to have the Converted CAPX Loan bear interest
at the  FHLB  Rate),  to have the  Converted  CAPX  Loan  bear  interest  on the
outstanding principal amount thereof at a fixed rate per annum equal to the FHLB
Rate.  In the event of any such  election,  the right of  Borrower to select any
other pricing option for such Converted CAPX Loan shall cease.  On and after the
CAPX Loan  Termination  Date,  Borrower  shall have no ability to  request,  and
Lender shall have no obligation to make, any further CAPX Loans.  As a condition
precedent to the  conversion of  outstanding  CAPX Loans to the  Converted  CAPX
Loan,  Borrower shall execute and deliver to Lender the Converted CAPX Note. The
Converted  CAPX Loan and  interest  accruing  thereon  shall be evidenced by the
records of Lender and the Converted CAPX Loan Note.

                2.3. Letter of Credit Facility.

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

                (a)     Borrower acknowledges that Lender's willingness to issue
any Letter of Credit is  conditioned  upon Lender's  receipt of a LC Application
with  respect  to the  requested  Letter  of  Credit,  as  well  as  such  other
instruments and agreements as Lender may  customarily  require for issuance of a
letter of credit of similar type and amount.  Lender shall have no obligation to
issue any  Letter of Credit  unless (i)  Lender  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.

                (b)    Letters of Credit may be requested  by Borrower  only (i)
to support  obligations of Borrower incurred in the Ordinary Course of Business;
or (ii) for other  purposes as Lender 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 Lender.

                (c)     Borrower  assumes  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,  Lender  shall not 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  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 Lender,  including any act or omission
of a  Governmental  Authority.  The rights and remedies of Lender under the Loan
Documents  shall be cumulative.  Lender shall be fully  subrogated to the rights
and remedies of each  beneficiary  whose claims against  Borrower are discharged
with proceeds of any Letter of Credit.

                (d)     In connection with its administration of and enforcement
of rights or remedies under any Letters of Credit or LC Documents,  Lender shall
be  entitled  to  act,  and  shall  be  fully  protected  in  acting,  upon  any
certification,  notice or other  communication  in  whatever  form  believed  by
Lender,  in good faith, to be genuine and correct and to have been signed,  sent
or made by a

                                       24

<PAGE>

proper Person. Lender 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. Lender 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.  If Lender honors any request for payment
under a  Letter  of  Credit,  Borrower  shall  pay to  Lender,  on the  same day
("Reimbursement  Date"),  the amount paid by Lender under such Letter of Credit,
together  with  interest  at the  interest  rate for Prime  Rate  Loans from the
Reimbursement  Date until  payment by Borrower.  The  obligation  of Borrower to
reimburse  Lender  for any  payment  made  under a  Letter  of  Credit  shall be
absolute, unconditional and irrevocable, 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  Borrower  may have at any time
against the beneficiary.  Whether or not Borrower submits a Notice of Borrowing,
Borrower shall be deemed to have requested a Borrowing of Prime Rate Loans in an
amount necessary to pay all amounts due Lender on any Reimbursement Date.

                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
Revolver  Commitment  Termination  Date, or (d) within 20 Business Days prior to
the Revolver  Termination Date, then Borrower shall, at Lender's request, pay to
Lender the amount of all outstanding LC Obligations and Cash  Collateralize  all
outstanding   Letters  of  Credit.  If  Borrower  fails  to  Cash  Collateralize
outstanding  Letters  of Credit as  required  herein,  Lender  may  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).

SECTION 3. INTEREST, FEES AND CHARGES

                  3.1. Interest.

                3.1.1. Rates and Payment of Interest.

                (a)     Subject to the limitation  on Revolving  Loans set forth
below,  the  Obligations  shall bear  interest (i) if a Prime Rate Loan,  at the
Prime 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;  (iii) if the FHLB Rate Loan, at the FHLB Rate;  and (iv) if
any other Obligation  (including,  to the extent permitted by law,  interest not
paid  when  due),  at the  Prime  Rate in  effect  from  time to time,  plus the
Applicable Margin for Prime Rate Loans.  Interest shall accrue from the date the
Loan is  advanced  or the  Obligation  is  incurred  or  payable,  until paid by
Borrower.  If a Loan is repaid on the same day made,  one day's  interest  shall
accrue.  Notwithstanding anything herein to the contrary,  Borrower acknowledges
and agrees that not less than  $1,000,000 of  outstanding  Revolver Loans (or if
the aggregate  principal  amount of Revolver Loans then outstanding is less than
$1,000,000, then all such Revolver Loans) shall be Prime Rate Loans.

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

                                       25

<PAGE>

                (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 Revolver  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)     Subject to the limits of Section 3.1.1,  Borrower may on
any Business  Day,  subject to delivery of a Notice of  Conversion/Continuation,
elect to convert  any  portion of the Prime  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,  Lender  may  declare  that no Loan may be made,
converted or continued as a LIBOR Loan.

                (b)     Whenever Borrower  desires to convert or continue  Loans
as LIBOR Loans, Borrower shall give Lender a Notice of  Conversion/Continuation,
no later  than 11:00  a.m.  at least two  Business  Days  before  the  requested
conversion or continuation date. 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, Borrower shall have failed to deliver a Notice of
Conversion/Continuation,  they shall be deemed to have  elected to convert  such
Loans into Prime Rate Loans.

                3.1.3.   Interest  Periods.   In  connection  with  the  making,
conversion or continuation of any LIBOR Loans, Borrower shall select an interest
period ("Interest  Period") to apply, which interest period shall be one, two or
three 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;

                (c)     with respect to Revolver Loans, no Interest Period shall
extend beyond the Revolver Termination Date;

                (d)     with  respect  to  CAPX Loans, no  Interest Period shall
extend beyond the CAPX Loan Termination Date; and

                (e)     with  respect  to the Converted  CAPX Loan, no  Interest
Period shall extend beyond (i) the next regularly  scheduled  principal  payment
date set forth in the Note evidencing such Loan,  unless at the time of any such
election and after giving effect  thereto a portion of the  Converted  CAPX Loan
remains  as a Prime  Rate  Loan in an  amount  at least  equal to the sum of all
installments  of  principal  due  thereunder  prior  to the  expiration  of such
Interest Period, or (ii) the Converted CAPX Loan Maturity Date.

                                       26

<PAGE>

                3.1.4.   Interest  Rate  Not  Ascertainable.   If  Lender  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 Lender
shall immediately notify Borrower of such  determination.  Until Lender notifies
Borrower that such  circumstance  no longer exists,  the obligation of Lender 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.  Commencing  for the monthly  period in
which the  Effective  Date occurs,  Borrower  shall pay to Lender a fee equal to
..25% per annum  times the amount by which the  Revolver  Commitment  exceeds the
average daily balance of Revolver  Loans and aggregate  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 Revolver Commitment Termination Date.

                3.2.2. LC Facility Fees.  Borrower shall pay to Lender (a) a fee
equal to 1.5% per annum  times the  average  daily  stated  amount of Letters of
Credit,  which fee shall be payable  quarterly  in arrears,  on the first day of
each fiscal quarter of Borrower;  and (b) 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 3% per annum.

                  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 Lender 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 Borrower  under
Section 3.4,  3.6,  3.7, 3.9 or 5.9,  submitted to Borrower by Lender,  shall be
final,  conclusive and binding for all purposes,  absent manifest error. For the
purposes of the Interest Act (Canada) and  disclosure  thereunder,  whenever any
interest  or any fee to be paid  hereunder  or in  connection  herewith is to be
calculated on the basis of a 360-day year,  the yearly rate of interest to which
the rate used in such  calculation is equivalent is the rate so used  multiplied
by the  actual  number of days in the  calendar  year in which the same is to be
ascertained and divided by 360.

                  3.4.   Reimbursement   Obligations.  Borrower  and   Affiliate
Guarantor  jointly and severally agree to reimburse Lender for all Extraordinary
Expenses.  Borrower and Affiliate  Guarantor also jointly and severally agree to
reimburse Lender for all legal,  accounting,  appraisal,  consulting,  and other
fees,  costs  and  expenses  actually  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  Lender'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 Lender's personnel or a third party. All amounts reimbursable by Borrower and
Affiliate  Guarantor under this Section shall constitute  Obligations secured by
the Collateral and shall be payable on demand.

                  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 Lender to make or maintain a LIBOR

                                       27

<PAGE>

Loan or to maintain either  Commitment with respect to LIBOR Loans or (b) 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 Lender in such  market,  then Lender shall
give notice  thereof to Borrower  and may (i) declare  that LIBOR Loans will not
thereafter be made by Lender, whereupon any request for a LIBOR Loan from Lender
shall  be  deemed  to be a  request  for  a  Prime  Rate  Loan  unless  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 Lender be converted to
Prime Rate Loans  immediately,  in which  event all  outstanding  LIBOR Loans of
Lender shall be immediately converted to Prime 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) Lender shall be subject to any Tax with respect to any
         LIBOR Loan,  or Letter of Credit or its  obligation to make LIBOR Loans
         or issue  Letters of Credit,  or a change  shall result in the basis of
         taxation of any  payment to Lender  with  respect to its LIBOR Loans or
         its obligation to make LIBOR Loans,  or issue Letters of Credit (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,  Lender
         shall be imposed or deemed applicable, or any other condition affecting
         Lender's  LIBOR  Loans or the Letters of Credit or  obligation  to make
         LIBOR  Loans or issue  Letters of Credit  shall be imposed on Lender or
         the London interbank market;

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

         If Lender determines that, because of circumstances  described above or
any other circumstances arising hereafter affecting 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 Lender
of funding  LIBOR  Loans or issuing  Letters  of Credit,  then (A) Lender  shall
promptly  notify Borrower of such event;  (B) Lender's  obligation to make LIBOR
Loans or issue  Letters of Credit  shall be  immediately  suspended,  until each
condition giving rise to such suspension no longer exists;  and (C) Lender shall
make a Prime Rate Loan as part of any requested  Borrowing of LIBOR Loans, which
Prime Rate Loan shall, for all purposes, be considered part of such Borrowing.

                  3.7.  Capital   Adequacy.  If  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  Lender  or any  Person  controlling  Lender  with a Capital
Adequacy Regulation,  increases the amount of capital required or expected to be
maintained by Lender or Person (taking into  consideration  its capital adequacy
policies and desired return on capital) as a consequence  of either  Commitment,
the Loans,  the LC Obligations or other  obligations  under the Loan  Documents,
then Borrower shall,  within five days following demand therefor,  pay Lender an
amount  sufficient to compensate for such increase.  Lender's demand for payment

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<PAGE>

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,  Lender
may use any reasonable averaging and attribution method.

                  3.8. Mitigation. 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  Borrower's  obligations  under such  Sections,  including  funding or
maintaining either Commitment or Loans through another office, as long as use of
such measures would not adversely affect either Commitment,  the 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
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) Borrower  prepays all or any portion of the FHLB Rate Loan, then
Borrower  shall pay to Lender all losses and expenses that it actually  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.  Lender 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 Lender had purchased such
deposits to fund its LIBOR Loans.

                  3.10. Maximum Interest. In no event shall interest, charges or
other amounts that are contracted for, charged or received by Lender 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
Borrower  shall, to the extent  permitted by Applicable Law, pay to Lender,  for
the account of Lender,  (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 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 Lender), and upon
Full Payment of the Obligations,  any balance shall be refunded to Borrower.  In
determining  whether any excess interest has been charged or received by Lender,
all interest at any time charged or received from  Borrower 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.

                  3.11. Currency  Indemnity. If, for the  purposes of  obtaining
judgment in any court in any jurisdiction  with respect to this Agreement or any
other Loan Document,  it becomes  necessary to convert into the currency of such
jurisdiction  (the  "Judgment  Currency") any amount due under this Agreement or
under any other Loan Document in any currency  other than the Judgment  Currency
(the  "Currency  Due"),  then  conversion  shall be made at the rate of exchange
prevailing  on the Business Day before the day on which  judgment is given.  For
this purpose  "rate of exchange"  means the rate at which Lender is able, on the
relevant  date,  to purchase  the  Currency  Due with the  Judgment  Currency in
accordance  with its normal  practice at its head office in Portland,  Maine. In

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<PAGE>

the event that there is a change in the rate of exchange  prevailing between the
Business  Day  before  the day on which  the  judgment  is given and the date of
receipt by Lender of the amount due, the applicable Obligor will, on the date of
receipt by Lender,  pay such  additional  amounts,  if any,  or be  entitled  to
receive reimbursement of such amount, if any, as may be necessary to ensure that
the  amount  received  by  Lender on such  date is the  amount  in the  Judgment
Currency which when converted at the rate of exchange  prevailing on the date of
receipt by Lender is the amount then due under this Agreement or such other Loan
Document in the Currency  Due. If the amount of the Currency Due which Lender is
so able to purchase is less than the amount of the Currency Due  originally  due
to it, the applicable  Obligor shall indemnify and save Lender harmless from and
against  all  loss or  damage  arising  as a  result  of such  deficiency.  This
indemnity shall constitute an obligation separate and independent from the other
obligations contained in this Agreement and the other Loan Documents, shall give
rise to a separate and independent cause of action,  shall apply irrespective of
any  indulgence  granted by the Lender  from time to time and shall  continue in
full force and effect notwithstanding any judgment or order for a liquidated sum
in respect of an amount due under this  Agreement or any other Loan  Document or
under any judgment or order.

SECTION 4. LOAN ADMINISTRATION

                  4.1. Manner of Borrowing and Funding Revolver Loans.

                4.1.1. Notice of Borrowing.

                (a)     Whenever  Borrower  desire  funding  of  a  Borrowing of
Revolver  Loans,  Borrower shall give Lender a Notice of Borrowing.  Such notice
must be received by Lender no later than 11:00 a.m.  (i) on the  Business Day of
the requested  funding date, in the case of Prime 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 Prime 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 Borrower, 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 Prime Rate 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.

                (c)     If   Borrower  establishes  a  controlled   disbursement
account  with  Lender or any  Affiliate  of Lender,  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 Prime  Rate  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. Notices. Borrower authorizes Lender to extend, convert or
continue Revolver Loans, effect selections of interest rates, and transfer funds
to or on  behalf of  Borrower  based on  telephonic  or  e-mailed  instructions.
Borrower  shall  confirm  each such  request by prompt  delivery  to Lender 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 Lender,  the records
of Lender  shall  govern.  Lender  shall not be liable to Borrower  for any loss
suffered  by Borrower as a result of Lender  acting  upon its  understanding  of
telephonic  or  e-mailed  instructions  from a person  believed in good faith by

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<PAGE>

Lender to be a person authorized to give such instructions on Borrower's behalf.

                  4.2. Manner of Borrowing and Funding CAPX Loans.

                4.2.1. Notice of Borrowing; Supporting Documents.

                (a)     Whenever Borrower desire funding of a Borrowing  of CAPX
Loans,  Borrower  shall give Lender a Notice of  Borrowing.  Such notice must be
received  by Lender no later  than  11:00 a.m.  (i) on the  Business  Day of the
requested  funding date, in the case of Prime 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 Prime 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)     Prior to the funding of any  CAPX  Loan, Borrower  shall
provide Lender with copies of the invoices or other comparable documentation for
any such  proposed  purchase of Equipment,  together with such other  supporting
details as requested by Lender.

                4.2.2. Notices. Borrower authorizes Lender to extend, convert or
continue CAPX Loans,  effect selections of interest rates, and transfer funds to
or on behalf of Borrower based on telephonic or e-mailed instructions.  Borrower
shall  confirm  each such  request by prompt  delivery  to Lender 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 Lender,  the records of Lender
shall  govern.  Lender shall not be liable to Borrower for any loss  suffered by
Borrower as a result of Lender  acting upon its  understanding  of telephonic or
e-mailed  instructions  from a person  believed  in good faith by Lender to be a
person authorized to give such instructions on Borrower's behalf.

                  4.3. Number and Amount of LIBOR Loans; Determination  of Rate.
For ease of administration, all LIBOR Loans having the same length and beginning
date of their Interest Periods shall be aggregated together.  No more than seven
(7)  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
$500,000,  or an  increment  of $250,000  in excess  thereof.  Upon  determining
Adjusted  LIBOR for any Interest  Period  requested  by  Borrower,  Lender shall
promptly  notify  Borrower  thereof  by  telephone  or  electronically  and,  if
requested by Borrower, shall confirm any telephonic notice in writing.

                  4.4. One  Obligation. The  Loans,  LC  Obligations  and  other
Obligations  shall  constitute  one general  obligation  of Borrower and (unless
otherwise  expressly provided in any Loan Document) shall be secured by Lender's
Lien upon all Collateral.

                  4.5. Effect  of Termination.  On  the  effective  date  of any
termination of the Revolver  Commitment,  all  Obligations  (including,  but not
limited to, any and all Loans then  outstanding)  shall be  immediately  due and
payable.  All  undertakings  of Borrower  contained in the Loan Documents  shall
survive any termination, and Lender 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,  Lender shall
not be required to terminate its Liens in any Collateral unless, with respect to
any  damages  Lender may incur as a result of the  dishonor or return of Payment
Items applied to Obligations,  Lender receives (a) a written agreement, executed
by  Borrower  and any  Person  whose  advances  are  used in whole or in part to
satisfy the Obligations,  indemnifying Lender from any such damages; or (b) such

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Cash Collateral as Lender, in its discretion, deems necessary to protect against
any such damages.  The  provisions of Section 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.  Borrower  may, at the time of
payment,  specify  to Lender  the  Obligations  to which  such  payment is to be
applied,  but Lender shall in all events  retain the right to apply such payment
in such manner as Lender,  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 Prime  Rate Loans and then to LIBOR  Loans.
Lender shall be entitled  (but shall not be  obligated) to charge any account of
Borrower with Lender for any sum due and payable by Borrower to Lender hereunder
or under any of the other Loan Documents.

                  5.2. Repayment of Revolver Loan and CAPX Loans. Revolver Loans
shall  be due and  payable  in full on the  Revolver  Termination  Date,  unless
payment is sooner  required  hereunder.  CAPX Loans  shall be due and payable in
full on the CAPX Loan  Termination  Date,  unless  payment  is  sooner  required
hereunder  or the CAPX  Loans  are  converted  into the  Converted  CAPX Loan as
provided  hereunder.  Except as otherwise  provided in Section  2.1.4,  Revolver
Loans  and CAPX  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,
Borrower shall, on the sooner of Lender's demand or the first Business Day after
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. Repayment of Converted CAPX Loan.

                5.3.1.  Payment  of  Principal.  The  principal  amount  of  the
Converted  CAPX Loan shall be repaid on the first  Business Day of each month in
consecutive  60 equal  monthly  installments,  commencing on October 1, 2008 and
continuing  until the  Converted  CAPX Loan  Maturity  Date,  on which  date all
principal,  interest and other amounts owing with respect to the Converted  CAPX
Loan shall be due and payable in full.  Once repaid,  whether such  repayment is
voluntary or required, the Converted CAPX Loan may not be reborrowed.

                5.3.2. Mandatory Prepayments.

                (a)      Concurrently with  any Permitted  Asset Disposition  of
Equipment  purchased by Borrower,  in whole or in part,  with proceeds of one or
more CAPX Loans,  Borrower  shall  prepay the  Converted  CAPX Loan in an amount

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<PAGE>

equal to the Net Proceeds of such disposition;

                (b)     Concurrently   with  the  receipt  of  any  proceeds  of
insurance or condemnation  awards paid in respect of any Equipment  purchased by
Borrower, in whole or in part, with proceeds of one or more CAPX Loans, Borrower
shall  prepay  the  Converted  CAPX  Loan in an amount  equal to such  proceeds,
subject to Section 8.6.2; and

                (c)     On  the  Revolver  Commitment Termination Date, Borrower
shall prepay the Converted CAPX Loan (unless sooner repaid hereunder).

                5.3.3.  Optional  Prepayments.  Borrower may, at its option from
time to time,  prepay  the  Converted  CAPX Loan in whole or in part.  Borrowers
shall give written  notice to Lender of an intended  prepayment of the Converted
CAPX Loan,  which notice shall  specify the amount of the  prepayment,  shall be
irrevocable once given, shall be given at least 5 Business Days prior to the end
of a month and shall be effective as of the first day of the next month.

                5.3.4.  Premium;  Interest;  Application  of  Prepayments.  Each
prepayment of the Converted CAPX Loan (whether  mandatory or voluntary) shall be
accompanied  by all  interest  accrued  thereon  and any amounts  payable  under
Section 3.9, and shall be applied to principal in inverse order of maturity.

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

                  5.5. Marshaling; Payments Set Aside. Lender shall not be under
any  obligation  to marshal  any assets in favor of any  Obligor or against  any
Obligations.  If any Obligor  makes a payment to Lender,  or if 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 Lender;

                (b)    second,  to  all  amounts  owing  to Lender on Protective
Advances;

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

                (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

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                (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 Lender and the other Secured
Parties 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 Borrower.

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

                  5.8. Loan Account; Account Stated.

                5.8.1.  Loan Account.  Lender shall maintain in accordance  with
its usual and  customary  practices  an account  or  accounts  ("Loan  Account")
evidencing the Debt of Borrower resulting from each Loan or issuance of a Letter
of Credit  from time to time.  Any  failure of Lender to record  anything in the
Loan Account,  or any error in doing so, shall not limit or otherwise affect the
obligation of Borrower to pay any amount owing hereunder.

                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
Lender 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,  Borrower
shall pay (and shall  promptly  reimburse  Lender 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 Borrower
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 Lender shall be increased as may be necessary so that,  after
making all required  withholding or deductions,  Lender receives an amount equal
to the sum it would have received had no such  withholding  or  deductions  been
made; (b) Borrower shall make such  withholding or deductions;  and (c) Borrower
shall pay the full amount  withheld or deducted to the relevant  taxing or other
authority in accordance with Applicable Law.

SECTION 6. CONDITIONS PRECEDENT

                  6.1. Conditions  Precedent to  Initial Loans. Lender shall not
be required to amend and restate the  Original  LSA in its  entirety as provided
herein and to fund any requested  Loan,  issue any Letter of Credit or otherwise
extend credit to Borrower hereunder, until the date ("Effective Date") that each
of the following conditions has been satisfied:

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<PAGE>

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

                (b)     Lender  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 Lender that
such Liens are the only Liens upon the Collateral, except Permitted Liens.

                (c)     Lender shall have received   duly  executed   agreements
establishing  each Blocked Account and related  lockbox,  in form and substance,
and with financial institutions, satisfactory to Lender.

                (d)     Lender shall have  received certificates,  in  form  and
substance  satisfactory to it, from a  knowledgeable  Senior Officer of Borrower
certifying  that,  after  giving  effect to the initial  Loans and  transactions
hereunder,  (i) 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) Borrower has complied with all agreements and conditions to be
satisfied by it under the Loan Documents.

                (e)     Lender 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.  Lender may  conclusively
rely on this  certificate  until  it is  otherwise  notified  by the  applicable
Obligor in writing.

                (f)     Lender shall have received  a written  opinion  of legal
counsel of Obligors in form and substance satisfactory to Lender.

                (g)     Lender  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.  Lender 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)     Lender   shall   have  received   copies of  policies or
certificates of insurance for the insurance policies carried by Borrower, all in
compliance with the Loan Documents.

                (i)     Borrower  shall have  paid all  fees and  expenses to be
paid to Lender on the Effective Date.

                (j)     Lender shall have received a Borrowing Base  Certificate
prepared as of the Effective  Date.  Upon giving effect to all Loans  (including
the initial funding of Loans hereunder) and all Letters of Credit (including the
initial issuance of Letters of Credit hereunder), and the payment by Borrower of
all fees and expenses  incurred in  connection  herewith as well as any payables
stretched beyond their customary  payment  practices,  Availability  shall be at
least $500,000.

                (k)     Lender  shall have  received a duly executed Lien Waiver
with respect to Borrower's  leased premises at 8655 Commerce  Drive,  Suite 105,
Southaven, Mississippi.

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                (l)     Lender shall have received a duly executed reaffirmation
and confirmation agreement in form and substance satisfactory to Lender from the
Parent Guarantor with respect to its obligations under its Guaranty and the Debt
Subordination Agreement.

                  6.2.  Conditions  Precedent  to  All Credit Extensions. Lender
shall not be  required to fund any Loans,  issue any Letters of Credit,  convert
the CAPX Loans to the Converted CAPX Loan or grant any other accommodation to or
for the  benefit of  Borrower,  in each case  whether on or after the  Effective
Date, 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, conversion 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;

                (e)     With  respect to the conversion of the CAPX Loans to the
Converted  CAPX Loan,  a  Converted  CAPX Loan Note shall have been  executed by
Borrower and delivered to Lender; and

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

Each request (or deemed request) by Borrower for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrower 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, Lender 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 Lender funds
any Loan, issues any Letter of Credit or grants 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  Lender  to  insist  upon  satisfaction  of all  conditions
precedent with respect to any subsequent funding,  issuance,  creation or grant;
nor (b) any Default or Event of Default  due to such  failure of  conditions  or
otherwise.

SECTION 7. COLLATERAL

                  7.1.  Grant of Security Interest. To secure the prompt payment
and performance of all  Obligations,  Borrower hereby grants to Lender,  for the
benefit of Secured Parties, a continuing  security interest in and Lien upon all
personal Property of 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;

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                  (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 Lender or a bailee or  Affiliate  of 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,  Borrower hereby grants to Lender,  for the
benefit of Secured Parties, a continuing  security interest in and Lien upon all
of  Borrower's  right,  title and  interest  in and to each  Deposit  Account of
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.  Borrower  authorizes  and directs each
bank or other depository to deliver to Lender, on a daily basis, all balances in
each Deposit Account maintained by Borrower with such depository for application
to the Obligations then  outstanding.  Borrower  irrevocably  appoints Lender as
Borrower's  attorney-in-fact  to collect  such  balances  to the extent any such
delivery is not so made.

                7.2.2. Cash Collateral.  Any Cash Collateral may be invested, in
Lender's  discretion,  in Cash Equivalents,  but Lender shall have no duty to do
so,  regardless  of any  agreement,  understanding  or  course of  dealing  with
Borrower,  and shall have no responsibility for any investment or loss. Borrower
hereby grants to Lender, 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. Lender may apply Cash Collateral to the payment
of any  Obligations,  in such order as Lender 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 Lender.  Neither  Borrower nor any Person  claiming
through or on behalf of  Borrower  shall have any right to any Cash  Collateral,
until Full Payment of all Obligations.

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                  7.3. Other Collateral.

                7.3.1.  Commercial  Tort Claims.  Borrower shall promptly notify
Lender in writing if 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 Lender's request,  shall promptly execute such documents and
take such  actions as Lender  deems  appropriate  to confer upon Lender (for the
benefit of Secured  Parties) a duly  perfected,  first  priority  Lien upon such
claim.

                7.3.2.  Certain   After-Acquired   Collateral.   Borrower  shall
promptly notify Lender in writing if, after the Effective Date, 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 Lender's request, shall promptly execute such
documents and take such actions as Lender deems  appropriate to effect  Lender'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 Lender's  request,  Borrower  shall
obtain an  acknowledgment  that such third  party holds the  Collateral  for the
benefit of Lender.

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

                  7.5. Further Assurances. Promptly upon request, Borrower shall
deliver such instruments, assignments, title certificates, or other documents or
agreements,  and shall take such  actions,  as Lender  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.  Borrower  authorizes  Lender to
file any financing  statement  that  indicates the Collateral as "all assets" or
"all personal  property" of Borrower,  or words to similar effect,  and ratifies
any action taken by Lender  before the  Effective  Date to effect or perfect its
Lien on any Collateral.

SECTION 8. COLLATERAL ADMINISTRATION

                  8.1. Borrowing Base Certificates.  By the close of business on
the 20th day of each month,  Borrower  shall deliver to Lender a Borrowing  Base
Certificate prepared as of the close of business of the last Business Day of the
preceding month, and at such other times as Lender may request. All calculations
of Availability in any Borrowing Base  Certificate  shall  originally be made by
Borrower and certified by a Senior  Officer,  provided that Lender 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 Blocked 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. Borrower and Affiliate
Guarantor  shall keep accurate and complete  records of its Accounts,  including
all payments and collections  thereon,  and Borrower shall submit to Lender,  on
such periodic basis as Lender may request,  a sales and collections  reports for
Borrower and Affiliate Guarantor, in form satisfactory to Lender. Borrower shall
also  provide  to Lender,  on or before the 20th day of each month and  together
with each monthly Borrowing Base  Certificate,  a detailed aged trial balance of
all Accounts of Borrower and Affiliate  Guarantor 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

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<PAGE>

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 Lender may reasonably  request.  If Accounts in
an  aggregate  face amount of  $100,000  or more cease to be Eligible  Accounts,
Borrower  shall  notify  Lender of such  occurrence  promptly  (and in any event
within one Business Day) after Borrower has knowledge thereof.

                8.2.2.  Taxes. If an Account of Borrower or Affiliate  Guarantor
includes a charge for any Taxes, Lender is authorized, in its discretion, to pay
the amount  thereof to the proper  taxing  authority for the account of Borrower
and to charge Borrower  therefor;  provided,  however,  that Lender shall not be
liable for any Taxes that may be due from  Borrower or  Affiliate  Guarantor  or
with respect to any Collateral.

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

                8.2.4.  Maintenance of Blocked  Account.  Borrower and Affiliate
Guarantor  shall  maintain  Blocked  Accounts   pursuant  to  lockbox  or  other
arrangements  acceptable to Lender.  Borrower shall obtain an agreement (in form
and  substance  satisfactory  to Lender) from each lockbox  servicer and Blocked
Account  bank,  establishing  Lender's  control  over and Lien in the lockbox or
Blocked Account,  requiring immediate deposit of all remittances received in the
lockbox to a Blocked Account and, if such Blocked Account is not maintained with
Lender,  requiring  immediate  transfer of all funds in the Blocked Account to a
Blocked  Account  maintained  with  Lender,  and waiving  offset  rights of such
servicer or bank  against any funds in the  lockbox or Blocked  Account,  except
offset  rights  for  customary   administrative   charges.   Lender  assumes  no
responsibility to Borrower or Affiliate Guarantor for any lockbox arrangement or
Blocked 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.  Borrower and Affiliate Guarantor
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 Blocked Account (or a lockbox relating to a Blocked Account).  If Borrower,
Affiliate Guarantor or any Subsidiary of either of them receives cash or Payment
Items with respect to any Collateral, it shall hold same in trust for Lender and
promptly  (not later than the next  Business  Day)  deposit  same into a Blocked
Account.

                  8.3. Administration of Inventory.

                8.3.1. Records and Reports of Inventory.  Borrower and Affiliate
Guarantor shall keep accurate and complete  records of its Inventory,  including
costs and daily withdrawals and additions, and Borrower shall provide to Lender,
on or before the 20th day of each month and together with each monthly Borrowing
Base Certificate, inventory reports for Borrower and Affiliate Guarantor in form
satisfactory to Lender, on such periodic basis as Lender may request.

                8.3.2.  Returns of  Inventory.  Neither  Borrower nor  Affiliate
Guarantor  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) Lender is promptly notified if the aggregate Value
of all  Inventory  returned in any month exceeds  $100,000;  and (d) any payment
received by Borrower or Affiliate Guarantor for a return is promptly remitted to

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Lender for application to the Obligations.

                8.3.3. Acquisition,  Sale and Maintenance.  Neither Borrower nor
Affiliate  Guarantor  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.  Neither  Borrower  nor
Affiliate  Guarantor  shall sell any Inventory on consignment or approval or any
other  basis  under  which the  customer  may  return  or  require  Borrower  to
repurchase such Inventory. Borrower and Affiliate Guarantor 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.   Borrower  and
Affiliate  Guarantor shall keep accurate and complete  records of its Equipment,
including kind, quality,  quantity, cost, acquisitions and dispositions thereof,
and shall submit to Lender,  on such  periodic  basis as Lender may  request,  a
current schedule thereof, in form satisfactory to Lender. Promptly upon request,
Borrower  and  Affiliate  Guarantor  shall  deliver  to Lender  evidence  of its
ownership or interests in any Equipment.

                8.4.2. Dispositions of Equipment. Neither Borrower nor Affiliate
Guarantor shall sell, lease or otherwise  dispose of any Equipment,  without the
prior written consent of Lender,  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 of Borrower and
Affiliate Guarantor 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.  Borrower and Affiliate  Guarantor  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.  Neither  Borrower nor  Affiliate  Guarantor  shall
permit any Equipment to become  affixed to real Property  unless any landlord or
mortgagee delivers a Lien Waiver or similar instrument.

                  8.5.  Administration of  Deposit  Accounts. Schedule  8.5 sets
forth all Deposit  Accounts  maintained  by Borrower  and  Affiliate  Guarantor,
including all Blocked Accounts.  Borrower and Affiliate Guarantor shall take all
actions  necessary to establish  Lender'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). Borrower
or Affiliate Guarantor,  as the case may be, shall be the sole account holder of
each Deposit Account and shall not allow any other Person (other than Lender) to
have control over a Deposit Account or any Property deposited therein.  Borrower
and Affiliate  Guarantor  shall promptly notify Lender of any opening or closing
of a Deposit Account and, with the consent of Lender, 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  Borrower  or
Affiliate Guarantor,  as the case may be, at the business locations set forth in
Schedule 8.6.1,  except that Borrower and Affiliate Guarantor may (a) make sales
or other  dispositions of Collateral in accordance with Section 10.2.6;  and (b)

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move  Collateral  to another  location in the United  States or Canada,  upon 30
Business Days prior written notice to Lender.

                8.6.2. Insurance of Collateral; Condemnation Proceeds.

                  (a)     Borrower  and   Affiliate  Guarantor  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 Lender.  All proceeds  under each policy
shall be payable  to  Lender.  From time to time upon  request,  Borrower  shall
deliver to Lender the originals or certified  copies of its  insurance  policies
and updated  flood plain  searches.  Unless Lender shall agree  otherwise,  each
policy shall include  satisfactory  endorsements (i) showing Lender as sole loss
payee or  additional  insured,  as  appropriate;  (ii)  requiring  30 days prior
written  notice to Lender in the event of  cancellation  of the  policy  for any
reason whatsoever; and (iii) specifying that the interest of Lender shall not be
impaired  or  invalidated  by any act or neglect of 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 Borrower or Affiliate  Guarantor fail to provide
and pay for such insurance, Lender may, at its option, but shall not be required
to, procure the insurance and charge Borrower  therefor.  Borrower and Affiliate
Guarantor  agree to deliver  to  Lender,  promptly  as  rendered,  copies of all
reports made to insurance companies.  While no Event of Default exists, Borrower
and Affiliate Guarantor may settle, adjust or compromise any insurance claim, as
long as the proceeds are  delivered  to Lender.  If an Event of Default  exists,
only Lender shall be authorized to settle, adjust and compromise such claims.

                (b)     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 Lender.  Any such  proceeds  or awards that
relate to Inventory  shall be applied to payment of the Revolver  Loans and then
to any other Obligations outstanding.  Subject to clause (c) below, any proceeds
or awards that relate to Equipment or Real Estate shall be applied to payment of
the Revolver Loans and then to any other Obligations outstanding.

                (c)     If  requested  by  Borrower  or  Affiliate  Guarantor in
writing  within 15 days after  Lender's  receipt of any  insurance  proceeds  or
condemnation  awards  relating to any loss or  destruction  of Equipment or Real
Estate,  Borrower  or  Affiliate  Guarantor  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 Lender 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 Lender;  (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) Borrower or Affiliate  Guarantor,  as the case
may be, complies with disbursement  procedures for such repair or replacement as
Lender may reasonably require; and (vi) the aggregate amount of such proceeds or
awards from any single casualty or condemnation does not exceed $250,000.

                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 Lender to any Person to
realize upon any Collateral,  shall be borne and paid by Borrower.  Lender 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 Lender'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  Borrower's  or
Affiliate Guarantor's sole risk.

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                8.6.4.  Defense of Title to  Collateral.  Borrower and Affiliate
Guarantor  shall at all times defend its title to Collateral  and Lender's Liens
therein against all Persons,  claims and demands  whatsoever,  except  Permitted
Liens.

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

                (a)     Endorse such Obligor's name on any Payment Item or other
proceeds of Collateral (including proceeds of insurance) that come into Lender'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 Lender
deems  advisable;  (iv)  take  control,  in  any  manner,  of  any  proceeds  of
Collateral;  (v) prepare,  file and sign such Obligor'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 such  Obligor,  and notify postal  authorities  to
change the address for delivery thereof to such address as Lender 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 such Obligor'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 such  Obligor is a  beneficiary;  and (xii) take all other  actions as
Lender deems  appropriate to fulfill each Obligor's  obligations  under the Loan
Documents.

SECTION 9. REPRESENTATIONS AND WARRANTIES

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

                9.1.1.  Organization  and  Qualification.  Each  Obligor is duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization.  Each Obligor 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.

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                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
Obligor,  its name and the name of each Subsidiary of such Obligor, its and each
Subsidiary's jurisdiction of organization,  its and each Subsidiaries 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
Obligor has good title to its Equity Interests in its Subsidiaries, subject only
to Lender's Lien, and all such Equity Interests are duly issued,  fully paid and
non-assessable.   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 Borrower or
Affiliate Guarantor.

                9.1.5.  Corporate  Names;  Locations.   During  the  five  years
preceding the Effective Date, except as shown on Schedule 9.1.5, neither Obligor
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 each Obligor are shown on Schedule 8.6.1. During the
five years  preceding the Effective Date, no Obligor has had any other office or
place of business.

                9.1.6.  Title to  Properties;  Priority of Liens.  Borrower  and
Affiliate  Guarantor  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 Lender,  in each case free of Liens  except  Permitted  Liens.  Borrower  and
Affiliate  Guarantor has paid and  discharged all lawful claims that, if unpaid,
could become a Lien on its Properties,  other than Permitted Liens. All Liens of
Lender in the Collateral are duly perfected,  first priority Liens, subject only
to Permitted  Liens that are  expressly  allowed to have  priority over Lender's
Liens.

                9.1.7. Accounts.  Lender may rely, in determining which Accounts
are Eligible Accounts,  on all statements and  representations  made by Borrower
and Affiliate  Guarantor with respect thereto.  Borrower and Affiliate Guarantor
warrant,  with respect to each of its own Accounts 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 or rendition  of services 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 or rendition of services,  a copy of which has been
furnished or is available to Lender on request;

                (d)     it  is  not  subject to  any  offset,  Lien (other  than
Lender's  Lien),  deduction,  defense,  dispute,  counterclaim  or other adverse
condition  except as arising in the Ordinary Course of Business and disclosed to
Lender; 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 Lender (regardless of whether, under the
UCC, the restriction is ineffective);

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                (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 Lender hereunder; and

                (g)     to the best of such Obligor's  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   Obligor'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  Parent  Guarantor  and its  Subsidiaries  that  have  been  and are
hereafter  delivered to Lender, are prepared in accordance with GAAP, and fairly
present the financial  positions  and results of operations of Parent  Guarantor
and its Subsidiaries at the dates and for the periods indicated. All projections
delivered from time to time to Lender have been prepared in good faith, based on
reasonable assumptions in light of the circumstances at such time. Since October
31, 2006, there has been no change in the condition,  financial or otherwise, of
Parent  Guarantor or any of its Subsidiary that could  reasonably be expected to
have a Material  Adverse Effect and no Internal  Control Event has occurred.  No
financial  statement  delivered  to  Lender  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 of Borrower and Affiliate
Guarantor is Solvent.

                9.1.9.  Surety  Obligations.   Neither  Borrower  nor  Affiliate
Guarantor 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.  Borrower and Affiliate  Guarantor has filed all
federal,  state,  provincial  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
Borrower  and  Affiliate  Guarantor  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. Borrower and Affiliate Guarantor
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  Borrower's  or  Affiliate  Guarantor's  knowledge,  threatened
Intellectual Property Claim with respect to Borrower, Affiliate Guarantor or any
of their Property (including any Intellectual Property).  Except as disclosed on
Schedule  9.1.12,  neither  Borrower nor  Affiliate  Guarantor  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,  Borrower  or  Affiliate  Guarantor  is shown on
Schedule 9.1.12.

                9.1.13. Governmental Approvals. Borrower and Affiliate Guarantor
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.  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 Borrower and  Affiliate  Guarantor  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

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reasonably be expected to have a Material Adverse Effect.

                9.1.14.  Compliance with Laws.  Borrower and Affiliate Guarantor
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
Borrower or Affiliate  Guarantor 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, neither Borrower's nor Affiliate Guarantor'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  environmental  pollution,   hazardous  material  or  environmental
clean-up.   Neither   Borrower  nor   Affiliate   Guarantor   has  received  any
Environmental   Notice.   Neither  Borrower  nor  Affiliate  Guarantor  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.

                9.1.16.  Burdensome  Contracts.  Neither  Borrower nor Affiliate
Guarantor  is  a  party  or  subject  to  any  contract,  agreement  or  charter
restriction that could reasonably be expected to have a Material Adverse Effect.
Neither Borrower nor Affiliate  Guarantor 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  Borrower's or Affiliate
Guarantor's  knowledge,  threatened against Borrower or Affiliate Guarantor,  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 Borrower or Affiliate  Guarantor.  Neither  Borrower nor  Affiliate
Guarantor is in default with respect to any order, injunction or judgment of any
Governmental Authority.

                9.1.18.  No Defaults.  No event or circumstance  has occurred or
exists that  constitutes  a Default or Event of Default.  Neither  Borrower  nor
Affiliate Guarantor 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  Borrower  or  Affiliate
Guarantor)   could  terminate  a  Material   Contract  prior  to  its  scheduled
termination date.

                9.1.19.  ERISA. Except as disclosed on Schedule 9.1.19,  neither
Borrower nor  Affiliate  Guarantor has any  Multiemployer  Plan or Foreign Plan.
Borrower and Affiliate  Guarantor 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.  Neither  Borrower nor  Affiliate  Guarantor  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

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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
Borrower or Affiliate  Guarantor  and any customer or supplier,  or any group of
customers or suppliers, who individually or in the aggregate are material to the
business  of Borrower or  Affiliate  Guarantor.  There  exists no  condition  or
circumstance that could reasonably be expected to impair the ability of Borrower
or  Affiliate  Guarantor  to  conduct  its  business  at any time  hereafter  in
substantially the same manner as conducted on the Effective Date.

                9.1.21. Labor Relations. Except as described on Schedule 9.1.21,
neither Borrower nor Affiliate  Guarantor 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 Borrower's or Affiliate Guarantor's employees, or, to Borrower's
or Affiliate  Guarantor's  knowledge,  any asserted or threatened strikes,  work
stoppages or demands for collective bargaining.

                9.1.22.  Payable  Practices.   Neither  Borrower  nor  Affiliate
Guarantor  has made any  material  change  in its  historical  accounts  payable
practices from those in effect on the Effective Date.

                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.  Neither Borrower nor Affiliate Guarantor
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 or other credit  extension  hereunder will
be used by Borrower 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. Neither Borrower nor Parent Guarantor is an
entity  deemed  to  hold  "plan   assets"   within  the  meaning  of  29  C.F.R.
ss.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.  Joint Enterprise.  Borrower and Affiliate Guarantor are
an integral  part of a  consolidated  enterprise  that are  Borrower,  Affiliate
Guarantor, Parent Guarantor and Parent Guarantor's other Subsidiaries,  and that
each of Borrower  and  Affiliate  Guarantor  will  receive  direct and  indirect
benefits from the  availability  of the credit  facilities  provided for herein.
Affiliate  Guarantor  recognizes that credit  available to it as a result of the
credit  facilities  provided for herein is in excess of and on better terms than
it otherwise could obtain on and for its own account and that one of the reasons
therefor is its  agreement to execute and deliver to Lender this  Agreement  and
the other Loan Documents to which Affiliate Guarantor is a party.

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                  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 Lender 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 either Commitment
or any Obligations are outstanding,  Borrower and Affiliate Guarantor shall, and
shall cause each Subsidiary to:

                10.1.1. Inspections; Appraisals.

                (a)     Permit Lender 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 Borrower or Affiliate  Guarantor,
inspect,  audit and make extracts from Borrower's or Affiliate Guarantor's books
and records,  and discuss with its  officers,  employees,  agents,  advisors and
independent accountants Borrower's or Affiliate Guarantor's business,  financial
condition,  assets,  prospects and results of  operations.  Lender shall have no
duty to Borrower or Affiliate Guarantor to make any inspection, nor to share any
results of any  inspection or report with Borrower or Affiliate  Guarantor  (but
agrees  to share  the  results  of any  appraisal  with  Borrower  or  Affiliate
Guarantor). To the extent any appraisal or other information is shared by Lender
with  Borrower or Affiliate  Guarantor,  such Obligor  acknowledges  that it was
prepared by Lender for its purposes  and such  Obligor  shall not be entitled to
rely upon it.

                (b)     Reimburse Lender for all charges and out-of-pocket costs
and  expenses of Lender in  connection  with (i)  examinations  of its books and
records  or  any  other   financial  or  Collateral   matters  as  Lender  deems
appropriate,  up to three  times per Loan Year (with such  charges not to exceed
$15,000,  in  the  aggregate,  per  Loan  Year,  plus  out-of-pocket  costs  and
expenses);  and (ii)  full  appraisals  of  Inventory  one  time per Loan  Year;
provided,  however,  that if an examination  or appraisal is initiated  during a
Default or Event of Default,  all charges,  costs and expenses therefor shall be
reimbursed by Borrower without regard to such limits.  Subject to the foregoing,
Borrower shall pay Lender's then standard  charges for each day that an employee
of Lender or its Affiliates is engaged in any examination activities,  and shall
pay the standard  charges of Lender's  internal  appraisal  group.  This Section
shall not be construed to limit  Lender's  right to conduct  examinations  or to
obtain  appraisals at any time in its  discretion,  nor to use third parties for
such purposes.

                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 or cause to be furnished to Lender:

                (a)     as  soon as  available,  but in any event within 92 days
after the end of each  Fiscal  Year (but no later than the date on which  Parent
Guarantor  is  required  to  file  a  Form  10-K  under  the  Exchange  Act),  a
consolidated  and  consolidating  balance  sheet  of  Parent  Guarantor  and its
Subsidiaries as at the end of such Fiscal Year, and the related consolidated and
consolidating statements of income or operations,  shareholders' equity and cash
flows for such Fiscal Year,  setting forth in each case in comparative  form the
figures for the previous Fiscal Year, all prepared in accordance with Regulation
S-X under the  Securities  Act and  accompanied by (i) a report and opinion of a
Registered Public Accounting Firm of nationally  recognized  standing reasonably
acceptable  to Lender,  which report and opinion shall be prepared in accordance
with GAAP and applicable  Securities Laws and shall not be subject to any "going
concern" or like qualification or exception or any qualification or exception as
to the scope of such audit and (ii) if applicable, an attestation report of such

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Registered  Public  Accounting  Firm  as to  the  Borrower's  internal  controls
pursuant to Section  404 of  Sarbanes-Oxley  expressing  a  conclusion  to which
Lender does not object, and such consolidating statements to be certified by the
chief financial  officer of Parent  Guarantor to the effect that such statements
are fairly stated in all material  respects  when  considered in relation to the
consolidated financial statements of Parent Guarantor and its Subsidiaries;

                (b)     as soon as  available,  but in any event  within 47 days
after the end of each Fiscal Quarter of Parent  Guarantor (but no later than the
date on which  Borrower is required to file a Form 10-Q under the Exchange Act),
commencing  with the Fiscal  Quarter ended October 31, 2006,  (i) a consolidated
and  consolidating  balance sheet of Parent Guarantor and its Subsidiaries as at
the end of such Fiscal Quarter,  and the related  consolidated and consolidating
statements of income or operations, shareholders' equity and cash flows for such
fiscal quarter and for the portion of the Fiscal Year then ended,  setting forth
in each  case in  comparative  form the  figures  for the  corresponding  Fiscal
Quarter  of the  previous  Fiscal  Year  and the  corresponding  portion  of the
previous  fiscal year, all prepared in accordance  with Regulation S-X under the
Securities Act and accompanied by a certificate of the chief  financial  officer
of Parent Guarantor stating that such consolidated statements fairly present the
financial condition, results of operations,  shareholders' equity and cash flows
of Parent Guarantor and its  Subsidiaries in accordance with GAAP,  subject only
to normal year-end audit adjustments and the absence of footnotes, and that such
consolidating  statements  are  fairly  stated  in all  material  respects  when
considered  in  relation  to the  consolidated  financial  statements  of Parent
Guarantor and its Subsidiaries;

                (c)     as  soon as available,  and in any event  within 30 days
after  the end of each  month,  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  bases for each of  Borrower  and
Affiliate Guarantor, setting forth in comparative form corresponding figures for
the  preceding  Fiscal  Year and  certified  by the chief  financial  officer of
Borrower or Affiliate  Guarantor 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;

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

                (e)     concurrently with  delivery  of  the  annual   financial
statements  under clause (a) above,  copies of the final  management  letter and
other  material  reports  submitted to Parent  Guarantor by its  accountants  in
connection with such financial statements;

                (f)     not later  than  90 days after the  end of  each  Fiscal
Year,  projections of Parent Guarantor's  consolidated and consolidating balance
sheets, results of operations, cash flow and Availability for the current Fiscal
Year, month by month;

                (g)     on or  before  the 20th  day of each month and  together
with each monthly Borrowing Base  Certificate,  a listing of each Borrowing Base
Obligor's trade  payables,  specifying the trade creditor and balance due, and a
detailed trade payable aging, all in form satisfactory to Lender;

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

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

                (j)     such   other  reports  and  information   (financial  or
otherwise)  as  Lender  may  request  from time to time in  connection  with any
Collateral or any Obligor's financial condition or business.

                10.1.3.  Notices.  Notify  Lender  in  writing,  promptly  after
Borrower's or Affiliate  Guarantor'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 $150,000;  (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  Parent  Guarantor's
independent accountants; (j) of the occurrence of any Internal Control Event; or
(k) any opening of a new office or place of business,  at least 30 days prior to
such opening.

                10.1.4. Landlord and Storage Agreements.  Upon request,  provide
Lender with copies of all  existing  agreements,  and promptly  after  execution
thereof provide Lender with copies of all future agreements, between Borrower or
Affiliate Guarantor 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  Borrower  or
Affiliate  Guarantor,  it shall act promptly and diligently to  investigate  and
report to Lender 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 Lender  with  respect to the
Properties  and  business  of  Borrower  and  Affiliate  Guarantor  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.

                10.1.8.  Licenses.  Keep each License  affecting any  Collateral
(including  the  manufacture,  distribution  or disposition of Inventory) or any
other  material  Property of Borrower and Affiliate  Guarantor in full force and
effect; promptly notify Lender of any proposed modification to any such License,
or  entry  into any new  License,  in each  case at  least 30 days  prior to its

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effective  date; pay all Royalties when due; and notify Lender of any default or
breach asserted by any Person to have occurred under any License.

                10.1.9.  Future  Subsidiaries.  Promptly  notify Lender upon any
Person  becoming a  Subsidiary  and cause it to guaranty  the  Obligations  in a
manner  satisfactory  to Lender,  and to execute  and  deliver  such  documents,
instruments  and  agreements  and to take such  other  actions  as Lender  shall
require to  evidence  and  perfect a Lien in favor of Lender (for the benefit of
Secured Parties) on all assets of such Person,  including delivery of such legal
opinions,  in form and  substance  satisfactory  to  Lender,  as it  shall  deem
appropriate.

                  10.2.  NegativeCovenants.  For so long as either Commitment or
any Obligations are outstanding, neither Borrower nor Affiliate Guarantor shall:

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

                (a)     the Obligations;

                (b)     Subordinated Debt;

                (c)     Permitted Purchase Money Debt;

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

                (e)     Bank Product Debt;

                (f)     Permitted Contingent Obligations; and

                (g)     Refinancing  Debt as long as each  Refinancing Condition
is satisfied.

                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 Lender;

                (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  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 Lender's
Liens;

                (f)     Liens arising by virtue of a judgment or judicial  order
against  Borrower  or  Affiliate  Guarantor,  or any  Property  of  Borrower  or
Affiliate Guarantor, as long as such Liens are (i) in existence for less than 20

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consecutive  days or being Properly  Contested,  and (ii) at all times junior to
Lender's Liens;

                (g)     easements,  rights-of-way,    restrictions,  servitudes,
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; and

                (i)     existing Liens shown on Schedule 10.2.2.

                10.2.3.  Capital Expenditures.  Make Capital Expenditures during
any Fiscal Year which, when aggregated with all other Capital  Expenditures made
during such Fiscal Year by Parent Guarantor and its other  Subsidiaries,  are in
excess of $4,000,000 during such Fiscal Year.

                10.2.4. Distributions. Declare or make any Distributions.

                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  Borrower  to  Affiliate  Guarantor  or to
Borrower by Affiliate Guarantor.

                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; and (c) deposits with financial institutions permitted hereunder.

                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 any (a)  Subordinated
Debt, except to the extent permitted under any subordination  agreement relating
to such Debt (and a Senior Officer of Borrower shall certify to Lender, not less
than five Business Days prior to the date of payment,  that all conditions under
such  agreement  have been  satisfied);  or (b)  Borrowed  Money (other than the
Obligations) prior to its due date under the agreements  evidencing such Debt as
in effect on the Effective  Date (or as amended  thereafter  with the consent of
Lender).

                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;  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.

                10.2.10. Subsidiaries.  Form or acquire any Subsidiary after the
Effective Date,  except in accordance with Section 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 Effective Date.

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

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                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
Effective  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.

                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 Effective  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  between  Borrower  and  Affiliate   Guarantor;   (e)  transactions  with
Affiliates  that  were  consummated  prior to the  Effective  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 Lender 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 Effective Date.

                10.2.19.  Amendments to Subordinated Debt. Amend,  supplement or
otherwise  modify  any  document,   instrument  or  agreement  relating  to  any
Subordinated  Debt, if such  modification  (a) increases any required payment of
principal or interest;  (b)  accelerates  the date on which any  installment  of
principal  or any  interest is due, or adds any  additional  redemption,  put or
prepayment  provisions;  (c)  shortens  the  final  maturity  date or  otherwise
accelerates amortization; (d) increases the interest rate; (e) increases or adds
any  fees or  charges;  (f)  modifies  any  covenant  in a  manner  or adds  any
representation,  covenant or default that is more onerous or  restrictive in any
material  respect for  Borrower or  Affiliate  Guarantor,  or that is  otherwise
materially adverse to Borrower, Affiliate Guarantor or Lender; or (g) results in
the  Obligations  not being  fully  benefited  by the  subordination  provisions
thereof.

                  10.3. Financial Covenants. For so long as either Commitment or
any Obligations are outstanding:

                10.3.1.  Debt Service  Coverage  Ratio.  Parent  Guarantor shall
maintain a Debt Service  Coverage  Ratio of at least (a) 1.05 to 1.0  calculated
for the Fiscal  Quarter  ending on January 31, 2007,  (b) 1.15 to 1.0 calculated
for the two Fiscal Quarters ending on April 30, 2007, (c) 1.15 to 1.0 calculated
for the  three  Fiscal  Quarters  ending on June 30,  2007,  and (d) 1.15 to 1.0
calculated  at the end of each  Fiscal  Quarter  thereafter  for the four Fiscal
Quarters then ending.

                10.3.2. Tangible Capital Base. Parent Guarantor shall maintain a
Tangible Capital Base of not less than $28,000,000,  such amount to be increased
annually  on January 31 of each year  commencing  January  31, 2007 by an amount
equal to fifty percent (50%) of positive net income, if any, for the Fiscal Year
then ended, measured quarterly.

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<PAGE>

                10.3.3.  Minimum  Excess  Availability.  Borrower shall maintain
excess Availability of at least $500,000 at all times.

SECTION 11. GUARANTY OF AFFILIATE GUARANTOR

                  11.1.  Guaranty  of  Payment  and  Performance.  As  Affiliate
Guarantor expects to receive  substantial  direct and indirect benefits from the
extensions  of credit  by Lender to  Borrower,  for value  received  and  hereby
acknowledged, and as an inducement to Lender to make the Loans and issue Letters
of Credit,  Affiliate  Guarantor  hereby  guarantees  to the Lender the full and
punctual payment when due (whether at stated maturity,  by required  prepayment,
by  acceleration  or  otherwise),  as  well  as the  performance,  of all of the
Obligations  including  all such which would become due but for the operation of
the automatic  stay pursuant to Section  362(a) of the  Bankruptcy  Code and the
operation of Sections 502(b) and 506(b) of the Bankruptcy  Code. The Guaranty of
Affiliate  Guarantor   contained  herein  is  an  absolute,   unconditional  and
continuing  guaranty of the full and punctual  payment and performance of all of
the  Obligations  and  not  of  their  collectability  only  and  is in  no  way
conditioned upon any requirement that Lender first attempt to collect any of the
Obligations from Borrower or resort to any collateral security or other means of
obtaining  payment.  If an Event of Default shall occur,  the obligations of the
Affiliate  Guarantor hereunder with respect to such Obligations in default shall
become  immediately  due and payable to Lender,  without demand or notice of any
nature, all of which are expressly waived by the Affiliate  Guarantor.  Payments
by the Affiliate  Guarantor hereunder may be required by Lender on any number of
occasions.

                  11.2.  Affiliate  Guarantor's  Agreement  to  Pay  Enforcement
Costs,  Etc..  Affiliate  Guarantor further agrees, as the principal obligor and
not as a guarantor  only,  to pay to Lender,  on demand,  all costs and expenses
(including court costs and legal expenses) incurred or expended by the Lender in
connection with the Obligations,  the Guaranty of Affiliate  Guarantor contained
herein  and  the  enforcement   thereof,   together  with  interest  on  amounts
recoverable  under this Section 11.2 from the time when such amounts  become due
until  payment,  whether before or after  judgment,  at the rate of interest for
overdue  principal set forth in this  Agreement,  provided that if such interest
exceeds the maximum amount  permitted to be paid under applicable law, then such
interest shall be automatically reduced to such maximum permitted amount.

                  11.3. Waivers by Affiliate Guarantor; Lender's Freedom to Act.
Affiliate  Guarantor  agrees  that the  Obligations  will be paid and  performed
strictly in  accordance  with their  respective  terms,  regardless  of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of Lender with respect thereto.  Affiliate Guarantor
waives  promptness,   diligence,   presentment,   demand,   protest,  notice  of
acceptance,  notice of any  Obligations  incurred  and all other  notices of any
kind,  all defenses  which may be available  by virtue of any  valuation,  stay,
moratorium  law or other  similar law now or hereafter  in effect,  any right to
require the marshalling of assets of Borrower,  any other Guarantor or any other
entity or other person  primarily or  secondarily  liable with respect to any of
the Obligations,  and all suretyship  defenses  generally.  Without limiting the
generality of the foregoing, Affiliate Guarantor agrees to the provisions of any
Loan Document or other instrument evidencing,  securing or otherwise executed in
connection  with any  Obligation  and agrees that the  obligations  of Affiliate
Guarantor hereunder shall not be released or discharged, in whole or in part, or
otherwise affected by (a) the failure of Lender to assert any claim or demand or
to enforce any right or remedy against  Borrower,  Parent Guarantor or any other
entity or other Person  primarily or  secondarily  liable with respect to any of
the Obligations; (b) any extensions, compromise,  refinancing,  consolidation or
renewals  of any  Obligation;  (c) any  change in the  time,  place or manner of
payment  of any of the  Obligations  or any  rescissions,  waivers,  compromise,
refinancing,  consolidation,  amendments or modifications of any of the terms or
provisions of this Agreement,  the Notes, the other Loan Documents,  any Hedging
Agreements, or any other agreement evidencing, securing or otherwise executed in

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connection  with  any of the  Obligations;  (d) the  addition,  substitution  or
release of any entity or other Person  primarily or  secondarily  liable for any
Obligation,  (e) the  adequacy of any rights  which  Lender may have against any
collateral  security  or  other  means  of  obtaining  repayment  of  any of the
Obligations;   (f)  the  impairment  of  any  collateral  securing  any  of  the
Obligations, including without limitation the failure to perfect or preserve any
rights which Lender might have in such collateral  security or the substitution,
exchange,  surrender,  release,  loss  or  destruction  of any  such  collateral
security;  or (g) any other act or omission  which might in any manner or to any
extent vary the risk of Affiliate Guarantor or otherwise operate as a release or
discharge of  Affiliate  Guarantor,  all of which may be done without  notice to
Affiliate Guarantor. To the fullest extent permitted by law, Affiliate Guarantor
hereby  expressly waives any and all rights or defenses arising by reason of (i)
any "one action" or  "anti-deficiency"  law which would otherwise prevent Lender
from bringing any action,  including  any claim for a deficiency,  or exercising
any other right or remedy  (including any right of set-off),  against  Affiliate
Guarantor before or after Lender's commencement or completion of any foreclosure
action, whether judicially,  by exercise of power of sale or otherwise,  or (ii)
any other law which in any other way would  otherwise  require  any  election of
remedies by Lender.

                  11.4. Unenforceability of Obligations Against Borrower. If for
any reason  Borrower has no legal  existence or is under no legal  obligation to
discharge  any of the  Obligations,  or if any of the  Obligations  have  become
irrecoverable  from Borrower by reason of Borrower's  insolvency,  bankruptcy or
reorganization  or by  other  operation  of law or for  any  other  reason,  the
Guaranty contained herein shall  nevertheless be binding on Affiliate  Guarantor
to the same  extent  as if the  Affiliate  Guarantor  at all  times had been the
principal obligor on all such Obligations. In the event that acceleration of the
time for  payment  of any of the  Obligations  is  stayed  upon the  insolvency,
bankruptcy or  reorganization  of Borrower,  or for any other  reason,  all such
amounts otherwise subject to acceleration under the terms of this Agreement, the
Notes, the other Loan Documents or any other agreement  evidencing,  securing or
otherwise  executed in connection  with any Obligation  shall be immediately due
and payable by Affiliate Guarantor.

                  11.5. Subrogation;  Subordination.  Until the  Full Payment of
all of the Obligations  and any and all other  obligations of Borrower to Lender
or any Affiliate of Lender,  Affiliate  Guarantor  shall not exercise any rights
against  Borrower  arising  as a  result  of  payment  by the  Parent  Guarantor
hereunder, by way of subrogation,  reimbursement,  restitution,  contribution or
otherwise,  and will not  prove  any claim in  competition  with  Lender or such
Affiliate in respect of any payment  hereunder in any bankruptcy,  insolvency or
reorganization  case or proceedings of any nature;  Affiliate Guarantor will not
claim any setoff,  recoupment or counterclaim against Borrower in respect of any
liability of Affiliate Guarantor to Borrower; and Affiliate Guarantor waives any
benefit of and any right to participate in any collateral  security which may be
held by  Lender or any such  Affiliate.  The  payment  of any  amounts  due with
respect to any  indebtedness  of Borrower  now or  hereafter  owed to  Affiliate
Guarantor  is  hereby  subordinated  to the  prior  Full  Payment  of all of the
Obligations  and any and all  other  obligations  of  Borrower  to Lender or any
Affiliate of Lender.  Affiliate  Guarantor  agrees that, after the occurrence of
any Default or Event or Default, Affiliate Guarantor will not demand, sue for or
otherwise  attempt to collect any such  indebtedness  of  Borrower to  Affiliate
Guarantor until Full Payment of all of the Obligations.  If, notwithstanding the
foregoing sentence,  Affiliate  Guarantor shall collect,  enforce or receive any
amounts  in respect  of such  indebtedness,  such  amounts  shall be  collected,
enforced and  received by Affiliate  Guarantor as trustee for Lender and be paid
over to Lender on account of the Obligations without affecting in any manner the
liability  of Affiliate  Guarantor  under the other  provisions  of the guaranty
contained herein.

                11.6.  Termination;  Reinstatement.  The  Guaranty of  Affiliate
Guarantor contained herein shall remain in full force and effect until Lender is
given  written  notice of Affiliate  Guarantor's  intention to  discontinue  the
guaranty contained herein, notwithstanding any intermediate or temporary payment

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or settlement of the whole or any part of the Obligations.  No such notice shall
be effective  unless  received and  acknowledged  by an officer of Lender at the
address of Lender for notices set forth in this Agreement.  No such notice shall
affect any rights of Lender or of any Affiliate of Lender  hereunder,  including
without  limitation the rights set forth in Section 11.3 and 11.5,  with respect
to any  Obligations  incurred or accrued  prior to the receipt of such notice or
any  Obligations  incurred or accrued  pursuant to any contract or commitment in
existence prior to such receipt,  all of which  Obligations shall continue to be
unconditionally  guaranteed by Affiliate Guarantor.  All checks,  drafts, notes,
instruments (negotiable or otherwise) and writings made by or for the account of
Borrower  and drawn on Lender  purporting  to be dated on or before  the date of
receipt of such  notice,  although  presented  to and paid or accepted by Lender
after that date,  shall form part of the  Obligations  and shall  continue to be
unconditionally  guaranteed  by Affiliate  Guarantor.  The Guaranty of Affiliate
Guarantor  contained  herein shall  continue to be  effective or be  reinstated,
notwithstanding  any  such  notice,  if at any time  any  payment  made or value
received  with  respect to any  Obligation  is  rescinded  or must  otherwise be
returned by Lender upon the  insolvency,  bankruptcy  or  reorganization  of the
Borrower,  or  otherwise,  all as though such payment had not been made or value
received.

SECTION 12.       EVENTS OF DEFAULT; REMEDIES ON DEFAULT

                  12.1. 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)     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)     Borrower  or  Affiliate  Guarantor  breaches or  fail to
perform any covenant contained in Section 7.3, 7.5, 8.1, 8.2.4,  8.2.5,  10.1.1,
10.1.2, 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 Lender,  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)     Parent   Guarantor,  Affiliate  Guarantor or  any  other
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 Lender; or any
Loan Document  ceases to be in full force or effect for any reason (other than a
waiver or release by Lender);

                (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 $100,000,  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,

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$250,000 (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
$250,000;

                (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; or

                (m)     A  Change  of  Control  occurs;  or any  event occurs or
condition exists that has a Material Adverse Effect.

                  12.2. Remedies  upon Default. If an Event of Default described
in  Section  12.1(j)  occurs  with  respect to any  Obligor,  then to the extent
permitted by Applicable Law, all Obligations shall become  automatically due and
payable and the  Commitments  shall  terminate,  without any action by Lender or
notice of any kind. In addition, or if any other Event of Default exists, Lender
may in its discretion 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 Borrower to the
fullest extent permitted by law;

                (b)     terminate, reduce  or condition either  or  both  of the
Commitments, or make any adjustment to the Borrowing Base;

                (c)     require  Borrower  to Cash Collateralize LC Obligations,

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<PAGE>

Bank Product Debt and other  Obligations  that are contingent or not yet due and
payable, and, if Borrower fails promptly to deposit such Cash Collateral, Lender
may 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  Borrower or  Affiliate
Guarantor to assemble  Collateral,  at Borrower's  and  Affiliate's  Guarantor's
expense,  and make it available to Lender at a place designated by Lender; (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 any  Obligor,
such Obligor agrees 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 Lender, in its discretion, deems advisable.  Borrower and Affiliate Guarantor
agrees  that  10 days  notice  of any  proposed  sale or  other  disposition  of
Collateral by Lender shall be reasonable. Lender 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. Lender shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit
or any combination thereof, and Lender 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.

                  12.3.  License.  Lender  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 Borrower and Affiliate  Guarantor,  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.  Borrower's
and Affiliate Guarantor's rights and interests under Intellectual Property shall
inure to Lender's benefit.

                  12.4. Setoff. Lender and its Affiliates are each authorized by
Borrower and Affiliate Guarantor at any time during an Event of Default, without
notice to Borrower,  Affiliate  Guarantor 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 Lender or
any such  Affiliate  to or for the account of Borrower  or  Affiliate  Guarantor
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.

                  12.5. Remedies Cumulative; No Waiver.

                12.5.1.   Cumulative   Rights.   All   covenants,    conditions,
provisions,  warranties,  guaranties, indemnities and other undertakings of each
Obligor  contained in the Loan Documents are cumulative and not in derogation or
substitution of each other. In particular, the rights and remedies of Lender 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
Lender may have, whether under any agreement, by law, at equity or otherwise.

                12.5.2.  Waivers.  The  failure  or delay of Lender  to  require
strict  performance by any Obligor with any terms of the Loan  Documents,  or to
exercise any rights or remedies with respect to  Collateral or otherwise,  shall

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<PAGE>

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 Borrower and Affiliate Guarantor
and executed by Lender,  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 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 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 Borrower and Affiliate
Guarantor  that any  failure of any  financial  covenant  to be  satisfied  on a
measurement date shall not be cured or remedied by satisfaction of such covenant
on a subsequent date.

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 Borrower, Affiliate Guarantor, Lender and their
respective  successors and assigns,  except that neither  Borrower nor Affiliate
Guarantor  shall have the right to assign its rights or delegate its obligations
under any Loan Documents.

                  13.2. Assignments  and Participations.  Borrower and Affiliate
Guarantor hereby consents to Lender's participation,  sale, assignment, transfer
or other disposition,  at any time or times hereafter, of this Agreement and any
of the other Loan  Documents,  or of any portion  hereof or thereof,  including,
without limitation,  Lender's rights, title,  interests,  remedies,  powers, and
duties hereunder or thereunder. In the case of an assignment, the assignee shall
have,  to  the  extent  of  such  assignment,  the  same  rights,  benefits  and
obligations  as it would  if it were  "Lender"  hereunder  and  Lender  shall be
relieved of all obligations  hereunder upon any such  assignments.  Borrower and
Affiliate  Guarantor  agrees  that it will use its best  efforts  to assist  and
cooperate with Lender in any manner reasonably requested by Lender to effect the
sale of  participations  in or  assignments  of any of the Loan Documents or any
portion thereof or interest therein, including, without limitation, assisting in
the preparation of appropriate disclosure documents.  Nothing herein shall limit
the right of 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
Borrower to Lender in respect of any  Obligations  assigned as described in this
sentence shall satisfy  Borrower's  obligations  hereunder to the extent of such
payment,  and no such  assignment  shall  release  Lender  from its  obligations
hereunder.

SECTION 14. MISCELLANEOUS

                  14.1. 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 Lender and each Obligor party to such Loan Document.

                14.1.2.  Limitations.  No Affiliate of 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

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<PAGE>

course of dealing.  Any waiver or consent  granted by Lender  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.

                  14.2.  Indemnity.   BORROWER  AND  AFFILIATE  GUARANTOR  SHALL
JOINTLY AND SEVERALLY  INDEMNIFY AND HOLD HARMLESS THE  INDEMNITEES  AGAINST ANY
CLAIMS THAT MAY BE INCURRED BY OR  ASSERTED  AGAINST ANY  INDEMNITEE,  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  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.

                  14.3. Notices and Communications.

                14.3.1. Notice Address.  Subject to Section 4.1.2 and 4.2.2, all
notices,  requests and other  communications by or to a party hereto shall be in
writing and shall be given to Borrower and/or Affiliate Guarantor, at Borrower's
and/or Affiliate Guarantor's address shown on the signature pages hereof, and to
any other Person at its address shown on the signature pages hereof,  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  Lender
pursuant to Section 2.1.4,  2.3, 3.1.2,  4.1.1 or 5.3.3 shall be effective until
received by the individual to whose  attention at Lender such notice is required
to be sent unless such notice is sent to and  received by Laurie  Girmard at her
address at Lender at TD  Banknorth,  N.A., 5 Commerce Park Drive,  Bedford,  New
Hampshire  03110 or by facsimile  transmission  at (603)  621-0217.  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.

                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 4.1.2 and 4.2.2. Lender makes 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.  Lender may rely upon any
notices  purportedly  given by or on behalf of Borrower or  Affiliate  Guarantor
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. Borrower and Affiliate Guarantor shall jointly
and severally  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 Borrower or Affiliate Guarantor.

                  14.4.  Performance  of  Obligations.   Lender   may,  in   its
discretion  at any time  and from  time to time,  at  Borrower's  and  Affiliate
Guarantor's joint and several expense,  pay any amount or do any act required of
any Obligor under any Loan Documents or otherwise  lawfully  requested by Lender
to (a) enforce any Loan Documents or collect any Obligations,  in each case in a
commercially  reasonable manner; (b) protect,  insure,  maintain or realize upon
any  Collateral;  or (c) defend or maintain the validity or priority of Lender's
Liens in any Collateral, including any payment of a judgment, insurance premium,

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warehouse  charge,  finishing or processing  charge,  or landlord  claim, or any
discharge of a Lien. All payments,  costs and expenses (including  Extraordinary
Expenses) of Lender under this Section shall be reimbursed to Lender by Borrower
and Affiliate Guarantor,  on demand, with interest from the date incurred to the
date of payment thereof at the Default Rate applicable to Prime Rate Loans.  Any
payment  made or action  taken by Lender  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.

                  14.5.  Credit  Inquiries.  Borrower  and  Affiliate  Guarantor
hereby  authorizes  Lender (but Lender shall have no  obligation)  to respond to
usual and customary credit inquiries from third parties  concerning  Borrower or
Affiliate Guarantor.

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

                  14.11.  CONSENT  TO FORUM.  BORROWER  AND  AFFILIATE GUARANTOR
HEREBY CONSENTS TO THE NON-EXCLUSIVE  JURISDICTION OF ANY FEDERAL OR STATE COURT
SITTING IN OR WITH JURISDICTION  OVER CONNECTICUT,  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.  TO THE FULLEST  EXTENT ALLOWED
BY APPLICABLE  LAW,  BORROWER AND  AFFILIATE  GUARANTOR  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 Lender to bring proceedings  against any Obligor in any
other court.  Nothing in this Agreement shall be deemed to preclude  enforcement

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by Lender of any judgment or order obtained in any forum or jurisdiction.

                  14.12. CERTAIN  WAIVERS  BY  BORROWER. TO THE  FULLEST  EXTENT
PERMITTED  BY  APPLICABLE  LAW,  BORROWER  AND  AFFILIATE  GUARANTOR  KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY  WAIVES (A) ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY LITIGATION, ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS  AGREEMENT,  THE NOTES OR ANY OF THE OTHER LOAN  DOCUMENTS  OR ANY  HEDGING
AGREEMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND  OBLIGATIONS  OR ANY COURSE OF CONDUCT,  COURSE OF  DEALINGS,
STATEMENTS  (WHETHER  VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY,  INCLUDING ANY
COURSE OF CONDUCT, COURSE OF DEALINGS,  STATEMENTS OR ACTIONS OF LENDER RELATING
TO THE  ADMINISTRATION  OF THE LOANS OR  ENFORCEMENT  OF THE LOAN  DOCUMENTS AND
HEDGING  AGREEMENTS  AND AGREES  THAT IT WILL NOT SEEK TO  CONSOLIDATE  ANY SUCH
ACTION  WITH ANY OTHER  ACTION IN WHICH A JURY  TRIAL  CANNOT BE OR HAS NOT BEEN
WAIVED;  (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 LENDER ON WHICH  BORROWER OR AFFILIATE
GUARANTOR MAY IN ANY WAY BE LIABLE,  AND HEREBY RATIFIES  ANYTHING LENDER 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  LENDER TO  EXERCISE  ANY RIGHTS OR  REMEDIES;  (E) THE  BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (F) ANY CLAIM AGAINST 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.  Borrower and Affiliate Guarantor
acknowledges  that the  foregoing  waivers are a material  inducement  to Lender
entering  into this  Agreement  and that Lender is relying upon the foregoing in
its dealings  with  Borrower and  Affiliate  Guarantor.  Borrower and  Affiliate
Guarantor  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.

                  14.13. Patriot Act Notice. Lender hereby notifies Borrower and
Affiliate Guarantor that pursuant to the requirements of the Patriot Act, Lender
is required to obtain,  verify and record  information that identifies  Borrower
and Affiliate  Guarantor,  including its legal name, address,  tax ID number and
other  information  that will allow Lender to identify it in accordance with the
Patriot  Act.  Lender will also  require  information  regarding  each  personal
guarantor, if any, and may require information regarding Borrower's or Affiliate
Guarantor's management and owners, such as legal name, address,  social security
number and date of birth.

                  14.14. NO ORAL  AGREEMENT. THIS  AGREEMENT  AND THE OTHER LOAN
DOCUMENTS  REPRESENT  THE FINAL  AGREEMENT  BETWEEN  THE  PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

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<PAGE>

                  14.15. COMMERICAL TRANSACTION;   PREJUDGEMENT  REMEDY  WAIVER.
BORROWER AND AFFILIATE  GUARANTOR  REPRESENT,  WARRANT AND ACKNOWLEDGE  THAT THE
TRANSACTION OF WHICH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE A PART IS A
"COMMERCIAL  TRANSACTION"  WITHIN THE  MEANING OF  CHAPTER  903A OF  CONNECTICUT
GENERAL  STATUTES,  AS AMENDED.  BORROWER AND AFFILIATE  GUARANTOR  HEREBY WAIVE
THEIR RIGHT TO NOTICE AND PRIOR COURT  HEARING OR COURT ORDER UNDER  CONNECTICUT
GENERAL  STATUTES  SECTIONS 52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE
OR FEDERAL  LAW WITH  RESPECT  TO ANY AND ALL  PREJUDGMENT  REMEDIES  LENDER MAY
EMPLOY TO ENFORCE  ITS RIGHTS AND  REMEDIES  HEREUNDER  AND UNDER THE OTHER LOAN
DOCUMENTS AND THE HEDGING AGREEMENTS. MORE SPECIFICALLY,  BORROWER AND AFFILIATE
GUARANTOR  ACKNOWLEDGE THAT LENDER'  ATTORNEY MAY,  PURSUANT TO CONN. GEN. STAT.
ss.52-278f,  ISSUE A WRIT FOR A  PREJUDGMENT  REMEDY  WITHOUT  SECURING  A COURT
ORDER.  BORROWER AND AFFILIATE GUARANTOR  ACKNOWLEDGE AND RESERVE THEIR RIGHT TO
NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY
AS AFORESAID AND LENDER ACKNOWLEDGES  BORROWER'S AND AFFILIATE GUARANTOR'S RIGHT
TO SAID HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.  BORROWER AND AFFILIATE
GUARANTOR FURTHER WAIVE THEIR RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR
WITHOUT SURETY, TO PROTECT BORROWER OR AFFILIATE  GUARANTOR AGAINST DAMAGES THAT
MAY BE CAUSED BY ANY  PREJUDGMENT  REMEDY SOUGHT OR OBTAINED BY LENDER AND WAIVE
ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY OBTAINED BY THE LENDER.

                  14.16. Effective Date. This Agreement  shall become  effective
among the parties hereto as of the Effective Date. Until the Effective Date, the
terms of the Original LSA shall remain in full force and effect.

                  14.17.  Restatement.  This  Agreement  amends,   restates  and
supersedes  the Original LSA. All  references in the Loan Documents or any other
document or  instrument  executed or  delivered in  connection  therewith to the
Original LSA shall hereafter be deemed to be references to this Agreement. It is
the intention of the parties hereto that this  Agreement  shall not constitute a
novation or discharge  of the  indebtedness  evidenced by the Original  LSA, nor
shall this Agreement affect or impair the priority of the security interests and
mortgages  created by the  Original  LSA, it being the  intention of the parties
hereto to preserve all security  interests and mortgages securing payment of the
Obligations, which security interests and mortgages are acknowledged by Borrower
to be valid and subsisting against the Collateral.

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         IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date set forth above.

                                             BORROWER:
                                             ---------

                                             AEROSPACE PRODUCTS INTERNATIONAL,
                                             INC.

                                          By: /s/ Aaron P. Hollander
                                              ----------------------------------
                                        Name: Aaron P. Hollander
                                       Title: Chief Executive Officer

                                             AFFILIATE GUARANTOR:
                                             -------------------

                                             AEROSPACE PRODUITS INTERNATIONAL
                                             LTEE

                                          By: /s/ Aaron P. Hollander
                                              ----------------------------------

                                             LENDER:
                                             -------

                                             TD BANKNORTH, N.A.

                                          By: /s/ Charles C. Thomas
                                              ----------------------------------
                                        Name: Charles C. Thomas
                                       Title: Senior Vice President

                                       63

<PAGE>

                                    EXHIBIT A
                                       to
             Second Amended and Restated Loan and Security Agreement

                                 (see attached)

<PAGE>

                                    EXHIBIT B
                                       to
             Second Amended and Restated Loan and Security Agreement

                                 (see attached)

<PAGE>

                                    EXHIBIT C
                                       to
             Second Amended and Restated Loan and Security Agreement

                                 (see attached)

<PAGE>

                                  SCHEDULE 8.5
                                       to
             Second Amended and Restated Loan and Security Agreement

                                DEPOSIT ACCOUNTS

Borrower:

--------------------------------------------------------------------------------
     Depository Bank             Type of Account             Account Number
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Affiliate Guarantor:

--------------------------------------------------------------------------------
     Depository Bank             Type of Account             Account Number
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 8.6.1
                                       to
             Second Amended and Restated Loan and Security Agreement

                               BUSINESS LOCATIONS

1.      Borrower currently has the following business locations, and no others:

        Chief Executive Office:

        Other Locations:

2.      Borrower maintains its books and records relating to Accounts and
        General Intangibles at:

3.      Borrower has had no office, place of business or agent for process
        located in any county other than as set forth above, except:

4.      Affiliate Guarantor currently has the following business locations, and
        no others:

        Chief Executive Office:

        Other Locations:

5.      Affiliate Guarantor maintains its books and records relating to
        Accounts and General Intangibles at:

6.      Affiliate Guarantor has had no office, place of business or agent for
        process located in any county other than as set forth above, except:

7.      The following bailees, warehouseman, similar parties and consignees hold
        inventory of Borrower or Affiliate Guarantor:

--------------------------------------------------------------------------------
                            Nature of
Name and Address of Party  Relationship  Amount of Inventory  Owner of Inventory
-------------------------  ------------  -------------------  ------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 9.1.4
                                       to
             Second Amended and Restated Loan and Security Agreement

                           NAMES AND CAPITAL STRUCTURE

1.      The corporate names, jurisdictions of incorporation, and authorized and
        issued Equity Interests of each Obligor are as follows:

--------------------------------------------------------------------------------
                                         Number and Class       Number and Class
        Name          Jurisdiction     of Authorized Shares     of Issued Shares
        ----          ------------     --------------------     ----------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

2.      The record holders of Equity Interests of each Obligor are as follows:

--------------------------------------------------------------------------------
        Name        Class of Stock     Number of Shares      Record Owner
        ----        --------------     ----------------      ------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

3.      All agreements binding on holders of Equity Interests of any Obligor
        with respect to such interests are as follows:

4.      The name of each Affiliate of Borrower and Affiliate Guarantor and the
        nature of the affiliation are as follows:

<PAGE>

                                 SCHEDULE 9.1.5
                                       to
             Second Amended and Restated Loan and Security Agreement

                           FORMER NAMES AND COMPANIES

1.      Each Obligor's correct corporate name, as registered with the Secretary
        of State of its state of incorporation (or the like), is shown on
        Schedule 9.1.4.

2.      In the conduct of their businesses during five years preceding the
        Effective Date, Obligors have used the following names:

--------------------------------------------------------------------------------
            Entity                      Fictitious, Trade or Other Name
            ------                      -------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

3.      In the five years preceding the Effective Date, no Obligor has been the
        surviving corporation of a merger or combination, except:

4.      In the five years preceding the Effective Date, no Obligor has acquired
        any substantial part of the assets of any Person, except:

<PAGE>

                                 SCHEDULE 9.1.12
                                       to
             Second Amended and Restated Loan and Security Agreement

                  PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

1.      Borrower's and Affiliate Guarantor's patents:

--------------------------------------------------------------------------------
Patent          Owner         Status in           Federal         Registration
------          -----       Patent Office       Registration          Date
                            -------------          Number         ------------
                                                ------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

2.      Borrower's and Affiliate Guarantor's trademarks:

--------------------------------------------------------------------------------
Trademark       Owner         Status in           Federal         Registration
---------       -----      Trademark Office     Registration          Date
                           ----------------        Number         ------------
                                                ------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

3.      Borrower's and Affiliate Guarantor's copyrights:

--------------------------------------------------------------------------------
Copyrights      Owner         Status in           Federal         Registration
----------      -----      Copyright Office     Registration          Date
                           ----------------        Number         ------------
                                                ------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

4.      Borrower's and Affiliate Guarantor's licenses (other than routine
        business licenses, authorizing them to transact business in local
        jurisdictions):

--------------------------------------------------------------------------------
Licensor       Description of License     Term of License     Royalties Payable
--------       ----------------------     ---------------     -----------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 9.1.15
                                       to
             Second Amended and Restated Loan and Security Agreement

                              ENVIRONMENTAL MATTERS
                              ---------------------

<PAGE>

                                 SCHEDULE 9.1.16
                                       to
             Second Amended and Restated Loan and Security Agreement

                             RESTRICTIVE AGREEMENTS
                             ----------------------

--------------------------------------------------------------------------------
       Entity                     Agreement               Restrictive Provisions
       ------                     ---------               ----------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 9.1.17
                                       to
             Second Amended and Restated Loan and Security Agreement

                                   LITIGATION
                                   ----------

1.      Proceedings and investigations pending against Borrower or Affiliate
        Guarantor:

--------------------------------------------------------------------------------
Title of Action  Nature of Action  Complaining Parties  Jurisdiction or Tribunal
---------------  ----------------  -------------------  ------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

2.      The only threatened proceedings or investigations of which Borrower or
        Affiliate Guarantor is aware are as follows:

<PAGE>

                                 SCHEDULE 9.1.19
                                       to
             Second Amended and Restated Loan and Security Agreement

                                  PENSION PLANS
                                  -------------

1.      Borrower and Affiliate Guarantor have the following Multiemployer Plans:

--------------------------------------------------------------------------------
                Party                    Type of Multiemployer Plan
                -----                    --------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

2.      Borrower and Affiliate Guarantor have the following Foreign Plans:

--------------------------------------------------------------------------------
                Party                       Description of Plan
                -----                       -------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 9.1.21
                                       to
             Second Amended and Restated Loan and Security Agreement

                                 LABOR CONTRACTS
                                 ---------------

Borrower and Affiliate Guarantor are party to the following collective
bargaining agreements, management agreements and consulting agreements:

--------------------------------------------------------------------------------
     Parties             Type of Agreement            Term of Agreement
     -------             -----------------            -----------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                                 SCHEDULE 10.2.2
                                       to
             Second Amended and Restated Loan and Security Agreement

                                 EXISTING LIENS
                                 --------------

<PAGE>

                                SCHEDULE 10.2.17
                                       to
             Second Amended and Restated Loan and Security Agreement

                         EXISTING AFFILIATE TRANSACTIONS
                         -------------------------------Exhibit 10.23

               RATIFICATION, CONFIRMATION AND AMENDMENT AGREEMENT
               --------------------------------------------------

     This RATIFICATION, CONFIRMATION AND AMENDMENT AGREEMENT (this "Agreement"),
dated as of January 11, 2007, is by and among FIRST AVIATION  SERVICES,  INC., a
Delaware corporation ("First Aviation"), AEROSPACE PRODUCTS INTERNATIONAL, INC.,
a Delaware corporation ("Borrower"),  and TD BANKNORTH, N.A., a national banking
association ("Lender"), as successor by merger to Hudson United Bank.

                                    PREAMBLE
                                    --------

     WHEREAS,  Borrower  and Lender  are  parties to that  certain  Amended  and
Restated  Commercial  Revolving Loan and Security Agreement dated as of July 29,
2005 (such agreement,  as supplemented,  amended and modified from time to time,
the  "Original  LSA")  pursuant  to which  Lender  has  extended  to  Borrower a
revolving  loan  facility  in the  principal  amount of up to  $25,000,000  (the
"Revolving  Loan  Facility")  and a line of  credit/term  loan  facility  in the
principal amount of up to $3,000,000; and

     WHEREAS,  First  Aviation has  unconditionally  guaranteed  the payment and
performance  of all  indebtedness,  obligations  and  liabilities of Borrower to
Lender pursuant to that certain  Amended and Restated  Guaranty dated as of July
29, 2005 from First Aviation in favor of Lender (the "Guaranty"); and

     WHEREAS,  First Aviation has also  previously  subordinated to the full and
final payment and performance of all  indebtedness,  obligations and liabilities
of  Borrower  to  Lender  (including,  but not  limited  to,  the  indebtedness,
obligations  and  liabilities  of Borrower to Lender  arising under the Original
LSA)  the  payment  and  performance  of  all   indebtedness,   obligations  and
liabilities of Borrower to First Aviation  pursuant to the terms of that certain
Amended and Restated  Subordination  Agreement  dated as of July 29, 2005 by and
among Borrower, Lender and First Aviation (the "Subordination Agreement"); and

     WHEREAS,  Borrower  and its  wholly-owned  subsidiary,  Aerospace  Produits
International  Ltee, a company  constituted  under Part 1A of the  Companies Act
(Quebec) (the "Affiliate Guarantor"), have each requested Lender, and Lender has
agreed,  to (a) extend the maturity  date of the  Revolving  Loan  Facility from
September 1, 2007 to September 1, 2008, (b) provide a $1,000,000  sublimit under
the  Revolving  Loan  Facility  for the  issuance  of  letters of credit for the
account of Borrower,  (c) extend to Borrower a revolving loan/term loan facility
for capital  expenditures in the maximum  principal  amount of up to $3,000,000,
(d) permit  Borrower to use the proceeds of Loans made  hereunder to finance the
working capital and general corporate  requirements of Affiliate Guarantor,  and
(e) amend certain other terms and conditions of the Original LSA; and

     WHEREAS,  in  order  to  memorialize  their  agreements  set  forth  above,
Borrower,  Affiliate  Guarantor  and Lender have entered  into a certain  Second
Amended and Restated Loan and Security Agreement dated as of the date hereof (as

<PAGE>

amended  and  in  effect  from  time  to  time,  the  "Replacement  LSA")  which
Replacement  LSA,  among other  things,  amends,  restates  and  supersedes  the
Original LSA in its entirety; and

     WHEREAS,  it  is a  condition  precedent  to  Lender's  entering  into  the
Replacement LSA and making any loans or otherwise  extending  credit to Borrower
thereunder that First Aviation, Borrower and Lender enter into this agreement.

     NOW,  THEREFORE,  in order to induce  Lender to enter into the  Replacement
LSA, and for other good and valuable consideration,  the receipt and sufficiency
of which hereby are acknowledged, the parties hereto hereby agree as follows:

     1. Defined Terms. All capitalized terms used herein without  definition but
which are defined in or by reference in the  Replacement LSA shall have the same
meanings herein as therein.

     2.  Ratification  of Agreements,  Obligations  and  Liabilities.  Except as
expressly set forth herein,  the Guaranty and the Subordination  Agreement shall
remain in full force and effect in accordance  with their terms.  First Aviation
(a)  acknowledges  receipt of a copy of the  Replacement  LSA and the other Loan
Documents,  consents to the Borrower's and the Affiliate  Guarantor's  execution
and delivery thereof and consents to the amendments set forth in this Agreement,
(b)  ratifies  and  confirms  all  of its  respective  payment  and  performance
obligations,   contingent  or  otherwise,  under  the  Guaranty  and  that  such
obligations and liabilities extend to the Obligations, (c) acknowledges that any
and all of the  Obligations  constitute  "Senior  Obligations"  (as such term is
defined  under  the  Subordination  Agreement),  and (d)  affirms  that  nothing
contained  in the  Replacement  LSA shall  limit in any respect  whatsoever  its
agreements, obligations and liabilities under the Guaranty and the Subordination
Agreement.  In addition, each of First Aviation and Borrower hereby ratifies and
confirms all of its respective agreements, obligations and liabilities under the
Subordination  Agreement.  Although  First  Aviation  has been  informed  of the
matters set forth herein and has acknowledged and agreed to same, First Aviation
understands  that the Lender has no obligation to inform First  Aviation of such
matters in the future or to seek First Aviation's acknowledgment or agreement to
future amendments,  waivers or consents,  and nothing herein shall create such a
duty.

     3. Amendments to Guaranty.

        a.     Any  and  all  references  in the  Guaranty to (i) the term "Loan
Agreement"  shall mean the Replacement LSA, (ii) the term "Notes" shall mean the
Notes as such  term is  defined  in the  Replacement  LSA,  and  (iii)  the term
"Obligations"  shall  mean  the  Obligations  as  such  term is  defined  in the
Replacement LSA.

        b.     The  definitions  of "Leverage  Ratio",  "Tangible Net Worth" and
"Total  Liabilities"  set  forth on  pages 2 and 3 of the  Guaranty  are  hereby
deleted in their entirety.

        c.     Section  1  of  the  Guaranty  is  hereby amended and restated as
follows:

                                      -2-

<PAGE>

     1.  Guaranty.  The Guarantor  hereby  guarantees to the Lender the full and
punctual payment when due (whether at stated maturity,  by required pre-payment,
by  acceleration  or  otherwise),  as  well  as the  performance,  of all of the
Obligations  including  all such which would become due but for the operation of
the automatic stay pursuant to ss.362(a) of the Federal  Bankruptcy Code and the
operation  of  ss.ss.502(b)  and 506(b) of the  Federal  Bankruptcy  Code.  This
Guaranty is an absolute,  unconditional and continuing  guaranty of the full and
punctual  payment and  performance  of all of the  Obligations  and not of their
collectibility  only and is in no way conditioned  upon any requirement that the
Lender first attempt to collect any of the Obligations  from the Borrower or any
other guarantor of the Obligations or resort to any collateral security or other
means of  obtaining  payment.  Should the  Borrower  default  in the  payment or
performance  of  any of  the  Obligations,  the  obligations  of  the  Guarantor
hereunder with respect to such Obligations in default shall,  upon demand by the
Lender,  become  immediately  due and payable to the Lender,  without  demand or
notice of any  nature,  all of which  are  expressly  waived  by the  Guarantor.
Payments by the Guarantor  hereunder may be required by the Lender on any number
of  occasions.  All  payments by the  Guarantor  hereunder  shall be made to the
Lender in the manner and at the place of payment specified  therefor in the Loan
Agreement.  The Guarantor  further agrees, as the principal obligor and not as a
guarantor  only,  to pay to the  Lender,  on  demand,  all  costs  and  expenses
(including court costs and legal expenses) incurred or expended by the Lender in
connection  with  this  Guaranty  and the  enforcement  thereof,  together  with
interest  on amounts  recoverable  under this  Section 1 from the time when such
amounts become due until payment,  whether before or after judgment, at the rate
of interest for overdue principal set forth in the Loan Agreement, provided that
if  such  interest  exceeds  the  maximum  amount  permitted  to be  paid  under
applicable  law, then such interest  shall be reduced to such maximum  permitted
amount.

        d.     Section  6.1 of the Guaranty is hereby  amended by deleting  said
section in its entirety and substituting the following in lieu thereof:

     6.1 Leverage Ratio. Intentionally Deleted.

        e.     Notice is hereby given under Section 9 of the  Guaranty  changing
the address of First Aviation for notice  purposes to First  Aviation  Services,
Inc., 15 Riverside Avenue,  Westport,  Connecticut  06880,  Attention:  Aaron P.
Hollander, Chairman and Chief Executive Officer.

        f.     Notice is hereby given under Section 9 of the  Guaranty  changing
the address of the Lender for notice  purposes to TD Banknorth,  N.A.,  102 West
Main  Street,  New Britain,  Connecticut  06050,  Attention:  Charles C. Thomas,
Senior Vice President.

                                       -3-
<PAGE>

     4. Amendments to Subordination Agreement.

        a.     Any and all references in the Subordination  Agreement to (i) the
term "Loan  Agreement" shall mean the Replacement LSA, and (ii) the term "Notes"
shall mean the Notes as such term is defined in the Replacement LSA.

        b.     Section 2.b. of the Subordination Agreement is hereby amended and
restated as follows:

     b. Without the Lender's written consent, unless and until all of the Senior
Obligations have been fully paid in cash, all financing arrangements between the
Lender and the Borrower have been  terminated and all Bank Products  extended to
the Borrower by the Lender (or any Affiliate thereof) have been terminated,  the
Subordinated  Creditor will not ask for,  demand,  sue for, take or receive from
the  Borrower or any  successor  or assign of the  Borrower,  including  without
limitation, a receiver,  trustee or debtor in possession,  and the Borrower will
not make, give or permit, directly or directly, by set-off, redemption, purchase
or in any other manner, any payment on the whole or any part of the Junior Debt;
provided, however, that notwithstanding the foregoing, so long as (i) no default
or event of default under or within the meaning of the Loan Agreement shall have
occurred  and be  continuing  at the time of such  payment,  whether  or not the
Lender has provided the Subordinated  Creditor with written notice thereof,  and
(ii) no  default or event of  default  under or within  the  meaning of the Loan
Agreement  would  occur as a result  of,  and after  giving  effect to, any such
payment,  the  Borrower  may  pay  to  the  Subordinating   Creditor,   and  the
Subordinating Creditor may accept and retain from the Borrower, monthly payments
of interest  (but no  principal) at the contract rate (but not the default rate)
on the  interest  payment  dates set forth in the Junior Debt  Instruments.  The
Subordinated  Creditor  acknowledges and agrees that the terms and provisions of
this  Agreement  do not violate any term or  provision of any of the Junior Debt
Instruments; and to the extent any of the terms and provisions of this Agreement
are  inconsistent  with  any of the  terms  or  provisions  of the  Junior  Debt
Instruments,  the terms and provisions of the Junior Debt  Instruments  shall be
deemed to have been superseded by this Agreement.

        c.     Section  2.c. of the Subordination Agreement is hereby deleted in
its entirety.

        d.     Section 16 of  the Subordination Agreement is hereby  amended and
restated as follows:

                                       -4-

<PAGE>

        Section 16.      Continuing Agreement of Subordination; Modifications of
        Senior Obligations.

        a.     This Agreement is a continuing agreement of subordination and the
               Lender  may  continue,  at any time  and  without  notice  to the
               Subordinated  Creditor,  to  extend  credit  or  other  financial
               accommodations  to or for the benefit of the Borrower in reliance
               hereon. Without limiting the generality of the foregoing,  in the
               administration  and  servicing  of the  Senior  Obligations,  the
               Subordinated Creditor acknowledges and agrees that the Lender may
               at any time  and from  time to  time,  either  before  or after a
               demand,  default or event of default  under or within the meaning
               of the Loan Agreement and/or the Junior Debt Instruments, proceed
               in its sole discretion,  including without limitation, raising or
               lowering  loan  advances,   interest  rates  or  fees,   charging
               additional fees,  declining to make further  advances,  extending
               additional  loans  or  other  financing   accommodations  to  the
               Borrower,  increasing the dollar amounts of any of the Borrower's
               credit   limits,   extending   credit   terms   and   maturities,
               compromising claims, exchanging, releasing, selling, surrendering
               or otherwise  dealing with any or all of the  collateral or other
               obligors, and otherwise amending, modifying or otherwise altering
               the terms of any of the Senior  Obligations;  all without  notice
               and with no duty to the Subordinated Creditor, and no such action
               shall affect the  subordination or other provisions herein in any
               manner.

        b.     This Agreement  shall remain in full force and effect and may not
               be terminated or otherwise  revoked by the Subordinated  Creditor
               until any and all of the Senior  Obligations have been fully paid
               and satisfied,  all financing  arrangements  between the Borrower
               and  the  Lender  have  been  terminated  and all  Bank  Products
               extended  to the  Borrower by the Lender (or  Affiliate  thereof)
               have been  terminated.  This Agreement  shall be binding upon the
               Subordinated   Creditor,   the  Borrower  and  their   respective
               successors  and  assigns  and  inure to the  benefit  of,  and be
               enforceable   by,  the  Bank  and  its   respective   successors,
               transferees and assigns.

     5.  Representations and Warranties.  First Aviation represents and warrants
to the  Lender  that all of the  representations  and  warranties  made by First
Aviation in the Guaranty and the Subordination Agreement are true and correct on
the date  hereof as if made on and as of the date  hereof,  except to the extent
that any of such representations and warranties relate by their terms to a prior
date and as otherwise disclosed in writing to the Lender.

     6. No  Defenses.  First  Aviation  hereby  represents  and warrants to, and
covenants  with the Lender that,  as of the date hereof,  (a) it has no defense,
offset or counterclaim of any kind or nature whatsoever  against the Lender with
respect to any of the Loans or any of the other Obligations,  or any of the Loan
Documents to which it is a party, or any action previously taken or not taken by
the Lender with respect thereto, and (b) that the Lender has fully performed all
obligations  to the  Borrower  which  it may  have had or has on and of the date
hereof.

                                       -5-

<PAGE>

     7.   Counterparts.   This   Agreement  may  be  executed  in  one  or  more
counterparts,  each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.

     IN WITNESS  WHEREOF,  the  undersigned  have  caused this  Agreement  to be
executed as of the date first above written.

                                            FIRST AVIATION SERVICES, INC.

                                            By: /s/ Aaron P. Hollander
                                                --------------------------------
                                                Name:  Aaron P. Hollander
                                                Title: Chief Executive Officer

                                            AEROSPACE PRODUCTS INTERNATIONAL,
                                            INC.

                                            By: /s/ Aaron P. Hollander
                                                --------------------------------
                                                Name:  Aaron P. Hollander
                                                Title: Chief Executive Officer

                                            TD BANKNORTH, N.A.

                                            By: /s/ Charles C. Thomas
                                                --------------------------------
                                                Name:  Charles C. Thomas
                                                Title: Senior Vice President

                                      -6-

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