Document:

Exhibit 10.10

                               SECURITY AGREEMENT
                               ------------------

     THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of September 7, 2005, by and between IN VERITAS MEDICAL
DIAGNOSTICS, INC., a Colorado corporation with its principal place of business
located at The Green House, Beechwood Business Park North, Inverness - Scotland
L2 IV2 3BL (the "Company"), and the BUYER(S) listed on Schedule I attached to
the Securities Purchase Agreement dated the date hereof (the "Secured Party").

     WHEREAS, the Company and the Buyer(s) entered into a certain Subscription
Agreement dated as of April 15, 2005 (the "Subscription Agreement") pursuant to
which the Buyer(s) purchased from the Company an aggregate of 863,845 units (the
"Units"), each Unit consisting of one share of 5% convertible preferred stock of
the Company, par value $.001 per share (the "Preferred Stock"), and one warrant
(the "Warrants") to purchase one share of the Company's Common Stock (as defined
below). In addition, the Buyer(s) received a warrant to purchase an additional
Unit (the "Unit Warrants"). The Units, the Preferred Stock, the Warrants and the
Unit Warrants are hereafter referred to herein as the "Securities";

     WHEREAS, the Buyer(s) desires to exchange the Securities which they
purchased from the Company pursuant to the Subscription Agreement for the
Convertible Debentures (as defined below);

     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Five Hundred Fifty Six
Thousand Five Hundred Dollars ($556,500) of secured convertible debentures (the
"Convertible Debentures"), which shall be convertible into shares of the
Company's common stock, par value $0.001 (the "Common Stock") (as converted, the
"Conversion Shares") in the respective amounts set forth opposite each Buyer(s)
name on Schedule I attached to the Securities Purchase Agreement;

     WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Convertible Debentures,
the Investor Registration Rights Agreement of even date herewith between the
Company and the Secured Party (the "Investor Registration Rights Agreement"),
the Intercreditor Agreement of even date herewith between the Company, the
Secured Party and Montgomery Equity Partners, LTD (the "Intercreditor
Agreement"), (collectively referred to as the "Transaction Documents"), the
Company hereby grants to the Secured Party a second priority security interest
in and to the pledged property identified on Exhibit A hereto (collectively
referred to as the "Pledged Property") until the satisfaction of the
Obligations, as defined herein below.

     WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Intercreditor
Agreement substantially in the form attached hereto as Exhibit C (the
"Intercreditor Agreement") pursuant to which the Buyer agreed that its security
interest in the Pledged Collateral (as this term is defined in this Agreement)
to secure the Company's obligations under this Agreement, the Securities

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Purchase Agreement, the Convertible Debenture, the Investor Registration Rights
Agreement, or any other obligations of the Company to the Buyer, shall be second
in priority to the security interest of Montgomery Equity Partners, LTD in the
Pledged Collateral.

     NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                   ARTICLE 1.

                         DEFINITIONS AND INTERPRETATIONS
                         -------------------------------

     Section 1.1. Recitals.

     The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.

     Section 1.2. Interpretations.

     Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.

     Section 1.3. Obligations Secured.

     The obligations secured hereby are any and all obligations of the Company
now existing or hereinafter incurred to the Secured Party, whether oral or
written and whether arising before, on or after the date hereof including,
without limitation, those obligations of the Company to the Secured Party under
this Agreement, the Transaction Documents, and any other amounts now or
hereafter owed to the Secured Party by the Company thereunder or hereunder
(collectively, the "Obligations").

                                   ARTICLE 2.

                 PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
                      AND TERMINATION OF SECURITY INTEREST
                ------------------------------------------------

     Section 2.1. Pledged Property.

     (a) Company hereby pledges to the Secured Party, and creates in the Secured
Party for its benefit, a security interest for such time until the Obligations
are paid in full, in and to all of the property of the Company as set forth in
Exhibit "A" attached hereto and the products thereof and the proceeds of all
such items (collectively, the "Pledged Property"), which is second in priority
to the security interest of Montgomery Equity Partners, LTD in the Pledged
Property under the terms and conditions set forth in the Intercreditor
Agreement:

     (b) Simultaneously with the execution and delivery of this Agreement, the
Company shall make, execute, acknowledge, file, record and deliver to the
Secured Party any documents reasonably requested by the Secured Party to perfect
its second priority security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be

                                       2
<PAGE>

necessary to effectuate, complete or perfect, or to continue and preserve, the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.

     Section 2.2. Rights; Interests; Etc.

     (a) So long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing:

          (i) the Company shall be entitled to exercise any and all rights
     pertaining to the Pledged Property or any part thereof for any purpose not
     inconsistent with the terms hereof; and

          (ii) the Company shall be entitled to receive and retain any and all
     payments paid or made in respect of the Pledged Property.

     (b) Upon the occurrence and during the continuance of an Event of Default
and subject to the terms of the Intercreditor Agreement:

          (i) All rights of the Company to exercise the rights which it would
     otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
     to receive payments which it would otherwise be authorized to receive and
     retain pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all
     such rights shall thereupon become vested in the Secured Party who shall
     thereupon have the sole right to exercise such rights and to receive and
     hold as Pledged Property such payments; provided, however, that if the
     Secured Party shall become entitled and shall elect to exercise its right
     to realize on the Pledged Property pursuant to Article 5 hereof, then all
     cash sums received by the Secured Party, or held by Company for the benefit
     of the Secured Party and paid over pursuant to Section 2.2(b)(ii) hereof,
     shall be applied against any outstanding Obligations; and

          (ii) All interest, dividends, income and other payments and
     distributions which are received by the Company contrary to the provisions
     of Section 2.2(b)(i) hereof shall be received in trust for the benefit of
     the Secured Party, shall be segregated from other property of the Company
     and shall be forthwith paid over to the Secured Party; or

          (iii) The Secured Party in its sole discretion shall be authorized to
     sell any or all of the Pledged Property at public or private sale in order
     to recoup all of the outstanding principal plus accrued interest owed
     pursuant to the Convertible Debenture as described herein

     (c) An "Event of Default" shall be deemed to have occurred under this
Agreement upon an Event of Default under the Convertible Debentures.

                                       3
<PAGE>

                                   ARTICLE 3.

                          ATTORNEY-IN-FACT; PERFORMANCE
                          -----------------------------

     Section 3.1. Secured Party Appointed Attorney-In-Fact.

     Upon the occurrence of an Event of Default, the Company hereby appoints the
Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Property or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property to make
payments directly to the Secured Party.

     Section 3.2. Secured Party May Perform.

     Subject to the terms of the Intercreditor Agreement, if the Company fails
to perform any agreement contained herein, the Secured Party, at its option, may
itself perform, or cause performance of, such agreement, and the expenses of the
Secured Party incurred in connection therewith shall be included in the
Obligations secured hereby and payable by the Company under Section 8.3.

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     Section 4.1. Authorization; Enforceability.

     Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.

     Section 4.2. Ownership of Pledged Property.

     The Company warrants and represents that it is the legal and beneficial
owner of the Pledged Property free and clear of any lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement.

                                       4
<PAGE>

                                   ARTICLE 5.

                    DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL
                    ----------------------------------------

     Section 5.1. Default and Remedies.

     (a) If an Event of Default occurs, then in each such case the Secured Party
may declare the Obligations to be due and payable immediately, by a notice in
writing to the Company, and upon any such declaration, the Obligations shall
become immediately due and payable.

     (b) Subject to the terms of the Intercreditor Agreement, upon the
occurrence of an Event of Default, the Secured Party shall: (i) be entitled to
receive all distributions with respect to the Pledged Property, (ii) to cause
the Pledged Property to be transferred into the name of the Secured Party or its
nominee, (iii) to dispose of the Pledged Property, and (iv) to realize upon any
and all rights in the Pledged Property then held by the Secured Party.

     Section 5.2. Method of Realizing Upon the Pledged Property: Other Remedies.

     Subject to the terms of the Intercreditor Agreement, upon the occurrence of
an Event of Default, in addition to any rights and remedies available at law or
in equity, the following provisions shall govern the Secured Party's right to
realize upon the Pledged Property:

     (a) Any item of the Pledged Property may be sold for cash or other value in
any number of lots at brokers board, public auction or private sale and may be
sold without demand, advertisement or notice (except that the Secured Party
shall give the Company ten (10) days' prior written notice of the time and place
or of the time after which a private sale may be made (the "Sale Notice")),
which notice period is hereby agreed to be commercially reasonable. At any sale
or sales of the Pledged Property, the Company may bid for and purchase the whole
or any part of the Pledged Property and, upon compliance with the terms of such
sale, may hold, exploit and dispose of the same without further accountability
to the Secured Party. The Company will execute and deliver, or cause to be
executed and delivered, such instruments, documents, assignments, waivers,
certificates, and affidavits and supply or cause to be supplied such further
information and take such further action as the Secured Party reasonably shall
require in connection with any such sale.

     (b) Any cash being held by the Secured Party as Pledged Property and all
cash proceeds received by the Secured Party in respect of, sale of, collection
from, or other realization upon all or any part of the Pledged Property shall be
applied as follows:

          (i) to the payment of all amounts due the Secured Party for the
     expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3
     hereof;

          (ii) to the payment of the Obligations then due and unpaid.

          (iii) the balance, if any, to the person or persons entitled thereto,
     including, without limitation, the Company.

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<PAGE>

     (c) In addition to all of the rights and remedies which the Secured Party
may have pursuant to this Agreement, the Secured Party shall have all of the
rights and remedies provided by law, including, without limitation, those under
the Uniform Commercial Code.

          (i) If the Company fails to pay such amounts due upon the occurrence
     of an Event of Default which is continuing, then the Secured Party may
     institute a judicial proceeding for the collection of the sums so due and
     unpaid, may prosecute such proceeding to judgment or final decree and may
     enforce the same against the Company and collect the monies adjudged or
     decreed to be payable in the manner provided by law out of the property of
     Company, wherever situated.

          (ii) The Company agrees that it shall be liable for any reasonable
     fees, expenses and costs incurred by the Secured Party in connection with
     enforcement, collection and preservation of the Transaction Documents,
     including, without limitation, reasonable legal fees and expenses, and such
     amounts shall be deemed included as Obligations secured hereby and payable
     as set forth in Section 8.3 hereof.

     Section 5.3. Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relating to the Company or the property of the Company or of
such other obligor or its creditors, the Secured Party (irrespective of whether
the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders and Cornell Capital Partners, L.P.,
shall be entitled and empowered, by intervention in such proceeding or
otherwise:

          (i) to file and prove a claim for the whole amount of the Obligations
     and to file such other papers or documents as may be necessary or advisable
     in order to have the claims of the Secured Party (including any claim for
     the reasonable legal fees and expenses and other expenses paid or incurred
     by the Secured Party permitted hereunder and of the Secured Party allowed
     in such judicial proceeding), and

          (ii) to collect and receive any monies or other property payable or
     deliverable on any such claims and to distribute the same; and any
     custodian, receiver, assignee, trustee, liquidator, sequestrator or other
     similar official in any such judicial proceeding is hereby authorized by
     the Secured Party to make such payments to the Secured Party and, in the
     event that the Secured Party shall consent to the making of such payments
     directed to the Secured Party, to pay to the Secured Party any amounts for
     expenses due it hereunder.

     Section 5.4. Duties Regarding Pledged Property.

     The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.

                                       6
<PAGE>

                                   ARTICLE 6.

                              AFFIRMATIVE COVENANTS
                              ---------------------

     The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):

     Section 6.1. Existence, Properties, Etc.

     (a) The Company shall do, or cause to be done, all things, or proceed with
due diligence with any actions or courses of action, that may be reasonably
necessary (i) to maintain Company's due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve and
keep in full force and effect all qualifications, licenses and registrations in
those jurisdictions in which the failure to do so could have a Material Adverse
Effect (as defined below); and (b) the Company shall not do, or cause to be
done, any act impairing the Company's corporate power or authority (i) to carry
on the Company's business as now conducted, and (ii) to execute or deliver this
Agreement or any other document delivered in connection herewith, including,
without limitation, any UCC-1 Financing Statements required by the Secured Party
to which it is or will be a party, or perform any of its obligations hereunder
or thereunder. For purpose of this Agreement, the term "Material Adverse Effect"
shall mean any material and adverse affect as determined by Secured Party in its
sole discretion, whether individually or in the aggregate, upon (a) the
Company's assets, business, operations, properties or condition, financial or
otherwise; (b) the Company's to make payment as and when due of all or any part
of the Obligations; or (c) the Pledged Property.

     Section 6.2. Financial Statements and Reports.

     The Company shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably request, including,
without limitation, the following:

     (a) The balance sheet of the Company as of the close of each fiscal year,
the statement of earnings and retained earnings of the Company as of the close
of such fiscal year, and statement of cash flows for the Company for such fiscal
year, all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied, certified by the chief executive and
chief financial officers of the Company as being true and correct and
accompanied by a certificate of the chief executive and chief financial officers
of the Company, stating that the Company has kept, observed, performed and
fulfilled each covenant, term and condition of this Agreement during such fiscal
year and that no Event of Default hereunder has occurred and is continuing, or
if an Event of Default has occurred and is continuing, specifying the nature of
same, the period of existence of same and the action the Company proposes to
take in connection therewith;

     (b) A balance sheet of the Company as of the close of each month, and
statement of earnings and retained earnings of the Company as of the close of
such month, all in reasonable detail, and prepared substantially in accordance
with generally accepted accounting principles consistently applied, certified by
the chief executive and chief financial officers of the Company as being true
and correct; and

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<PAGE>

     (c) Copies of all accountants' reports and accompanying financial reports
submitted to the Company by independent accountants in connection with each
annual examination of the Company.

     Section 6.3. Accounts and Reports.

     The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:

     (a) as soon as available, a copy of any notice or other communication
alleging any nonpayment or other material breach or default, or any foreclosure
or other action respecting any material portion of its assets and properties,
received respecting any of the indebtedness of the Company in excess of $15,000
(other than the Obligations), or any demand or other request for payment under
any guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $15,000,
including any received from any person acting on behalf of the Secured Party or
beneficiary thereof; and

     (b) within fifteen (15) days after the making of each submission or filing,
a copy of any report, financial statement, notice or other document, whether
periodic or otherwise, submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental authority involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Property; or (iv) any of the
transactions contemplated in this Agreement or the Loan Instruments.

     Section 6.4. Maintenance of Books and Records; Inspection.

     The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.

     Section 6.5. Maintenance and Insurance.

     (a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.

     (b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably necessary to the Company's business, (i) adequate
to insure all assets and properties of the Company, which assets and properties
are of a character usually insured by persons engaged in the same or similar
business against loss or damage resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by the Transaction
Documents and/or applicable law and (iv) as may be reasonably requested by
Secured Party, all with adequate, financially sound and reputable insurers.

                                       8
<PAGE>

     Section 6.6. Contracts and Other Collateral.

     The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.

     Section 6.7. Defense of Collateral, Etc.

     The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.

     Section 6.8. Payment of Debts, Taxes, Etc.

     The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due

     Section 6.9. Taxes and Assessments; Tax Indemnity.

     The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.

     Section 6.10. Compliance with Law and Other Agreements.

     The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.

                                       9
<PAGE>

     Section 6.11. Notice of Default.

     The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.

     Section 6.12. Notice of Litigation.

     The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.

                                   ARTICLE 7.

                               NEGATIVE COVENANTS
                               ------------------

     The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:

     Section 7.1. Indebtedness.

     The Company shall not directly or indirectly permit, create, incur, assume,
permit to exist, increase, renew or extend on or after the date hereof any
indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing, other
than the sale of convertible debentures to Cornell Capital Partners, L.P.

     Section 7.2. Liens and Encumbrances.

     Other than the first priority security interest in the Pledged Property
granted by the Company to Cornell Capital Partners, L.P., the Company shall not
directly or indirectly make, create, incur, assume or permit to exist any
assignment, transfer, pledge, mortgage, security interest or other lien or
encumbrance of any nature in, to or against any part of the Pledged Property or
of the Company's capital stock, or offer or agree to do so, or own or acquire or
agree to acquire any asset or property of any character subject to any of the
foregoing encumbrances (including any conditional sale contract or other title
retention agreement), or assign, pledge or in any way transfer or encumber its
right to receive any income or other distribution or proceeds from any part of
the Pledged Property or the Company's capital stock; or enter into any
sale-leaseback financing respecting any part of the Pledged Property as lessee,
or cause or assist the inception or continuation of any of the foregoing.

                                       10
<PAGE>

     Section 7.3. Certificate of Incorporation, By-Laws, Mergers,
Consolidations, Acquisitions and Sales.

     Without the prior express written consent of the Secured Party, the Company
shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b) issue or
sell its stock, stock options, bonds, notes or other corporate securities or
obligations; (c) be a party to any merger, consolidation or corporate
reorganization, (d) purchase or otherwise acquire all or substantially all of
the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, (e) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (f) create
any subsidiaries nor convey any of its assets to any subsidiary.

     Section 7.4. Management, Ownership.

     The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.

     Section 7.5. Dividends, Etc.

     The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.

     Section 7.6. Guaranties; Loans.

     The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except for (i) the indebtedness currently secured by the liens
identified on the Pledged Property identified on Exhibit A hereto and (ii) the
endorsement of negotiable instruments payable to the Company for deposit or
collection in the ordinary course of business. The Company shall not make any
loan, advance or extension of credit to any person other than in the normal
course of its business.

     Section 7.7. Debt.

     The Company shall not create, incur, assume or suffer to exist any
additional indebtedness, other than the sale of convertible debentures to
Cornell Capital Partners, L.P, of any description whatsoever in an aggregate
amount in excess of $25,000 (excluding any indebtedness of the Company to the
Secured Party, trade accounts payable and accrued expenses incurred in the
ordinary course of business and the endorsement of negotiable instruments
payable to the Company, respectively for deposit or collection in the ordinary
course of business).

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     Section 7.8. Conduct of Business.

     The Company will continue to engage, in an efficient and economical manner,
in a business of the same general type as conducted by it on the date of this
Agreement.

     Section 7.9. Places of Business.

     The location of the Company's chief place of business is The Green House,
Beechwood Business Park North, Inverness - Scotland L2 IV2 3BL. The Company
shall not change the location of its chief place of business, chief executive
office or any place of business disclosed to the Secured Party or move any of
the Pledged Property from its current location without thirty (30) days' prior
written notice to the Secured Party in each instance.

                                   ARTICLE 8.

                                  MISCELLANEOUS
                                  -------------

     Section 8.1. Notices.

     All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:

If to the Company:           In Veritas Medical Diagnostics, inc.
                             The Green House
                             Beechwood Business Park North
                             Inverness - Scotland L2 IV2 3BL
                             Telephone:  +44 (0) 146-366-7347
                             Facsimile:  +44 (0) 146-366-7310

With a copy to:              Sichenzia Ross Friedman Ference LLP
                             1065 Avenue of the Americas
                             New York, NY 10018
                             Attention:  Richard Friedman, Esq.
                             Telephone:  (212) 930-9700
                             Facsimile:  (212) 930-9725

     Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

                                       12
<PAGE>

     Section 8.2. Severability.

     If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.

     Section 8.3. Expenses.

     In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.

     Section 8.4. Waivers, Amendments, Etc.

     The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.

     Section 8.5. Continuing Security Interest.

     This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.

     Section 8.6. Independent Representation.

     Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.

                                       13
<PAGE>

     Section 8.7. Applicable Law: Jurisdiction.

     This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New Jersey without regard to the principles of conflict of
laws. The parties further agree that any action between them shall be heard in
Hudson County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in Hudson County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.

     Section 8.8. Waiver of Jury Trial.

     AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

     Section 8.9. Entire Agreement.

     This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       14
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.

                                          COMPANY:
                                          IN VERITAS MEDICAL DIAGNOSTICS, INC.

                                    By:    /s/ John Fuller
                                           -------------------------------------
                                   Name:   John Fuller
                                  Title:   Chief Executive Officer

SECURED PARTIES:

LONGVIEW FUND L.P.

By:      /s/ S. Michael Rudolph
         ---------------------------------
Name:    S. Michael Rudolph
Title:   General Partner

WHALEHAVEN CAPITAL FUND LTD.

By:
         ---------------------------------
Name:
Title:

THE RUBIN FAMILY IRREVOCABLE STOCK TRUST

By:
         ---------------------------------
Name:
Title:

TRIUMPH RESEARCH PARTNERS, L.L.C.

By:      /s/ Kenneth Orr
         ---------------------------------
Name:    Kenneth Orr
Title:

                                       15
<PAGE>

                                    EXHIBIT A
                         DEFINITION OF PLEDGED PROPERTY

     For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:

     (a) all goods of the Company, including, without limitation, machinery,
equipment, furniture, furnishings, fixtures, signs, lights, tools, parts,
supplies and motor vehicles of every kind and description, now or hereafter
owned by the Company or in which the Company may have or may hereafter acquire
any interest, and all replacements, additions, accessions, substitutions and
proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;

     (b) all inventory of the Company, including, but not limited to, all goods,
wares, merchandise, parts, supplies, finished products, other tangible personal
property, including such inventory as is temporarily out of Company's custody or
possession and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any of
the foregoing;

     (c) all contract rights and general intangibles of the Company, including,
without limitation, goodwill, trademarks, trade styles, trade names, leasehold
interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;

     (d) all documents, warehouse receipts, instruments and chattel paper of the
Company whether now owned or hereafter created;

     (e) all accounts and other receivables, instruments or other forms of
obligations and rights to payment of the Company (herein collectively referred
to as "Accounts"), together with the proceeds thereof, all goods represented by
such Accounts and all such goods that may be returned by the Company's
customers, and all proceeds of any insurance thereon, and all guarantees,
securities and liens which the Company may hold for the payment of any such
Accounts including, without limitation, all rights of stoppage in transit,
replevin and reclamation and as an unpaid vendor and/or lienor, all of which the
Company represents and warrants will be bona fide and existing obligations of
its respective customers, arising out of the sale of goods by the Company in the
ordinary course of business;

     (f) to the extent assignable, all of the Company's rights under all present
and future authorizations, permits, licenses and franchises issued or granted in
connection with the operations of any of its facilities;

     (g) all products and proceeds (including, without limitation, insurance
proceeds) from the above-described Pledged Property.

                                      A-1Loan and Security Agreement between Collectors Universe and California Bank
& Trust

    EXHIBIT
      10.32

     

    CALIFORNIA
      BANK & TRUST

     

    Loan
      and Security Agreement

     

    Borrower:      
       Collectors
      Finance Corporation

     

    Address:    1921
      East Alton Avenue

            Santa
      Ana, California 92705

     

    Date:       June
      30, 2005

     

    THIS
      LOAN
      AND SECURITY AGREEMENT (“Agreement”), dated the date set forth above, is entered
      into by and between the borrower named above (the “Borrower”), whose address is
      set forth above and CALIFORNIA BANK & TRUST (“CB&T”), whose address is
      550 South Hope Street, 3rd Floor, Los Angeles, California 90071.

     

    1.  LOANS.

     

    1.1  Total
      Facility.
      Upon
      the terms and conditions set forth herein and provided that no Event of Default
      (as defined herein) or event which, with the giving of notice or the passage
      of
      time, or both, would constitute an Event of Default, shall have occurred and
      be
      continuing, CB&T shall, upon Borrower's request, make advances to Borrower
      from time to time in an aggregate outstanding principal amount not to exceed
      the
      Total Facility amount (the “Total Facility”) set forth on the schedule hereto
      (the “Schedule”). The Schedule is an integral part of this Agreement and all
      references to “herein”, “herewith” and words of similar import shall for all
      purposes be deemed to include the Schedule.

     

    1.2  Loans.
      Advances under the Total Facility (“Loans”) shall be comprised of the amounts
      shown on the Schedule.

     

    1.3  Overlines.
      If at
      any time or for any reason the outstanding amount of advances made pursuant
      hereto exceeds any of the dollar or percentage limitations contained in the
      Schedule (any such excess, an “Overline”), then Borrower shall, upon CB&T's
      demand, immediately pay to CB&T, in cash, the full amount of such Overline.
      Without limiting Borrower's obligation to repay to CB&T on demand the amount
      of any Overline, Borrower agrees to pay CB&T interest on the outstanding
      principal amount of any Overline, on demand, at the rate set forth on the
      Schedule.

     

    1.4  Loan
      Account.
      All
      advances made hereunder shall be added to and deemed part of the Obligations
      when made. CB&T may from time to time charge all Obligations of Borrower to
      Borrower's loan account with CB&T.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    2.  CONDITIONS
      PRECEDENT.

     

    2.1  Initial
      Advance.
      The
      obligation of CB&T to make the initial advance hereunder, is subject to the
      fulfillment, to the satisfaction of CB&T and its counsel, of each of the
      following conditions on or prior to the date set forth on the
      Schedule:

     

    (a)  Loan
      Documents.
      CB&T shall have received each of the following Loan Documents:
      (i) Guaranty executed by the Guarantor; and (ii) such other documents,
      instruments and agreements in connection herewith as CB&T shall require,
      executed, certified and/or acknowledged by such parties as CB&T shall
      designate;

     

    (b)  Charter
      Documents.
      CB&T shall have received copies of Borrower's By-laws and Articles of
      Incorporation, as amended, modified, or supplemented to the Closing Date,
      certified by the Secretary of Borrower;

     

    (c)  Good
      Standing.
      CB&T shall have received a certificate of corporate status with respect to
      Borrower, dated within ten (10) days of the Closing Date, by the Secretary
      of
      State of the state of incorporation of Borrower, which certificate shall
      indicate that Borrower is in good standing in such state;

     

    (d)  Foreign
      Qualification.
      CB&T shall have received certificates of corporate status with respect to
      Borrower and each other Loan Party, each dated within ten (10) days of the
      Closing Date, issued by the Secretary of State of each state in which such
      party's failure to be duly qualified or licensed would have a material adverse
      effect on its financial condition or assets, indicating that such party is
      in
      good standing;

     

    (e)  Authorizing
      Resolutions and Incumbency.
      CB&T shall have received a certificate from the Secretary of Borrower
      attesting to (i) the adoption of resolutions of Borrower's Board of
      Directors authorizing the borrowing of money from CB&T and execution and
      delivery of this Agreement and the other Loan Documents to which Borrower is
      a
      party, and authorizing specific officers of Borrower to execute same, and
      (ii) the authenticity of original specimen signatures of such
      officers;

     

    (f)  Insurance.
      CB&T shall have received the insurance certificates and certified copies of
      policies required by Section 4.4 hereof, in form and substance satisfactory
      to CB&T and its counsel;

     

    (g)  Searches;
      Certificates of Title.
      CB&T shall have received searches reflecting the filing of its financing
      statements and fixture filings in such jurisdictions as it shall determine,
      and
      shall have received certificates of title with respect to the Collateral which
      shall have been duly executed in a manner sufficient to perfect all of the
      security interests granted to CB&T;

     

    (h)  Fees.
      Borrower shall have paid all fees payable by it on the Closing Date pursuant
      to
      this Agreement;

     

    
      
        
           

        

        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    (i)  Officer
      Certificate.
      CB&T shall have received a certificate of the President and the Chief
      Financial Officer or similar official of Borrower, attesting to the accuracy
      of
      each of the representations and warranties of Borrower set forth in this
      Agreement and the fulfillment of all conditions precedent to the initial advance
      hereunder;

     

    (j)  Other
      Matters.
      All
      other documents and legal matters in connection with the transactions
      contemplated by this Agreement shall have been delivered, executed or recorded
      and shall be in form and substance satisfactory to CB&T and its
      counsel.

     

    2.2  Subsequent
      Advances.
      The
      obligation of CB&T to make any advance, including the initial advance, shall
      be subject to the further conditions precedent that, on and as of the date
      of
      such advance.

     

    (a)  the
      representations and warranties of Borrower set forth in this Agreement shall
      be
      accurate, before and after giving effect to such advance and to the application
      of any proceeds thereof;

     

    (b)  no
      Event
      of Default and no event which, with notice or passage of time or both, would
      constitute an Event of Default has occurred and is continuing, or would result
      from such advance or from the application of any proceeds thereof;

     

    (c)  no
      material adverse change has occurred in the Borrower's or any Guarantor’s
      business, operations, financial condition, or assets or in the prospect of
      repayment of the Obligations; and

     

    (d)  CB&T
      shall have received such other approvals or documents as CB&T shall
      reasonably request.

     

    3.  INTEREST
      RATE AND OTHER CHARGES.

     

    3.1  Interest.
      The
      unpaid principal balance of the Loans shall bear interest at the applicable
      rate
      per annum provided below:

     

    (a)  Interest
      Rate Options.
      Subject
      to the terms and conditions hereof, all or portions of the Loans shall be
      outstanding as Prime Rate Borrowings or LIBOR Rate Borrowings, in each case,
      as
      selected by Borrower.

     

    (i)  Each
      Prime Rate Borrowing shall bear interest at the Prime Rate, plus,
      a
      quarter of one percent (0.25%) per annum;

     

    (ii)  Each
      LIBOR Rate Borrowing shall bear interest at the LIBOR Rate, plus,
      two and
      a half percent (2.50%) per annum;

     

    
      
        
           

        

        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    provided,
      however,
      that no
      more than three (3) LIBOR Rate Borrowings shall be outstanding at any time;
      provided,
      further,
      all
      LIBOR Rate Borrowings shall be in a minimum amount of One Hundred Thousand
      Dollars ($100,000) each. Borrower shall select the type of Borrowing and
      Interest Period, if any, applicable to such Borrowing. Any Loan, or any portion
      thereof, as to which Borrower has not duly specified a type of Borrowing as
      provided herein shall be deemed a Prime Rate Borrowing. A LIBOR Rate Borrowing
      shall not be available until three (3) Business Days after the Closing
      Date.

     

    (b)  Interest
      Periods for LIBOR Rate Borrowings.
      In
      connection with each LIBOR Rate Borrowing, Borrower, by giving notice to
      CB&T no later than 12:00 p.m., Los Angeles, California time, two (2)
      Business Days prior to the day on which such LIBOR Rate Borrowing is to be
      made,
      shall elect an interest period (each, an “Interest Period”) to be applicable to
      such LIBOR Rate Borrowing, which Interest Period shall be a period of one (1),
      two (2), three (3), six (6), or twelve (12) months, though the actual length
      of
      such periods shall be calculated as follows:

     

    (i)  the
      initial Interest Period, unless commenced on the first Business Day of a month,
      shall, notwithstanding the length of the Interest Period selected by the
      Borrower, (i) for Interest Periods beginning before the 25th of each calendar
      month, end on the first Business Day of the month following commencement of
      the
      initial Interest Period, and (ii) for Interest Periods beginning on or after
      the
      25th of each calendar month, end on the first Business Day of the second month
      following commencement of the initial Interest Period;

     

    (ii)  all
      subsequent Interest Periods shall commence on the first Business Day of the
      relevant month and end on the first Business Day of the month determined by
      the
      length of the Interest Period selected by Borrower; 

     

    (iii)  no
      Interest Period shall extend beyond the Term; and

     

    (iv)  CB&T’s
      calculation pursuant to this Section
      3.1(b)
      shall be
      in its sole and absolute discretion and shall conclusively bind the Borrower
      absent manifest error.

     

    (c)  Default
      Rate.
      Upon
      the occurrence and during the continuance of an Event of Default, (i) Borrower
      shall no longer have the option to request LIBOR Rate Borrowings, (ii) all
      outstanding LIBOR Rate Borrowings shall bear interest at a rate per annum equal
      to three percent (3%) in excess of the rate then applicable to such Borrowings;
      and (iii) all outstanding Prime Rate Borrowings shall bear interest at a rate
      per annum equal to three percent (3%) in excess of the rate then applicable
      to
      such Borrowings. Interest shall continue to accrue on the Obligations after
      the
      filing by or against Borrower of any petition seeking any relief in bankruptcy
      or under any act or law pertaining to insolvency or debtor relief, whether
      state, federal or foreign.

     

    

     

    

     

    
      
        
           

        

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

     

    (d)  Interest
      Payments and Computation.
      Interest on each Prime Rate Borrowing shall be payable in arrears on the last
      Business Day of each month commencing April 31, 2005; and interest on each
      LIBOR
      Rate Borrowing shall be payable on the last day of each Interest Period
      applicable thereto, and if such Interest Period extends over one (1) month,
      at
      the end of each month during such Interest Period. All interest with respect
      to
      Prime Rate Borrowings shall be computed on the basis of a 365-day year or
      366-day year, as applicable, and assessed for the actual number of days elapsed.
      All interest with respect to LIBOR Rate Borrowings and all other interest rates,
      fees and commissions provided hereunder shall be computed on the basis of a
      360-day year and assessed for the actual number of days elapsed. In the event
      that the Prime Rate announced is, from time to time, changed, adjustment in
      the
      rate of interest payable hereunder on all Prime Rate Borrowings shall be made
      as
      of 12:01 a.m. (Los Angeles, California time) on the effective date of the change
      in the Prime Rate. Interest shall accrue from the Closing Date to the date
      of
      repayment of the Loans in accordance with the provisions of this Agreement;
      provided
      however,
      if a
      Loan is repaid on the same day on which it is made, then one (1) day's interest
      shall be paid on that Loan. Any and all interest not paid when due shall
      thereafter be deemed to be a Prime Rate Borrowing and shall bear interest
      thereafter at the default rate set forth herein.

     

    (e)  Maximum
      Interest Rate.
      In no
      event shall the interest rate and other charges hereunder exceed the highest
      rate permissible under any law which a court of competent jurisdiction shall,
      in
      a final determination, deem applicable hereto. In the event that such a court
      determines that Bank has received interest and other charges hereunder in excess
      of the highest rate applicable hereto, such excess shall be deemed received
      on
      account of, and shall automatically be applied to reduce, the Obligations,
      other
      than interest, in the inverse order of maturity, and the provisions hereof
      shall
      be deemed amended to provide for the highest permissible rate. If there are
      no
      Obligations outstanding, Bank shall refund to Borrower such excess.

     

    3.2  LIBOR
      Costs.

     

    (a)  Reimbursement
      for Increase in CB&T’s Costs.
      Borrower shall reimburse CB&T, within ten (10) days after demand by
      CB&T, for any increase in CB&T's costs (which shall include, but not be
      limited to, taxes, other than taxes imposed on the overall net income of
      CB&T), or any loss or expense (including, without limitation, any loss or
      expense incurred by reason of the liquidation or re-employment of deposits
      or
      other funds acquired by CB&T to fund or maintain outstanding the principal
      amount of the Loans) incurred by it directly or indirectly resulting from the
      making of any LIBOR Rate Borrowing due to: (i) the existence, application,
      modification, adoption, or enactment of any law, regulation or treaty or the
      interpretation thereof by any governmental or other authority (whether or not
      having the force of law); (ii) the modification or new application of any law,
      regulation or treaty or the interpretation thereof by any governmental or other
      authority (whether or not having the force of law) which becomes effective
      after
      the date hereof; (iii) compliance by CB&T with any request or directive
      (whether or not having the force of law) of any monetary or fiscal agency or
      authority; (iv) any violation by Borrower of the terms of this Agreement; (v)
      any prepayment (whether voluntary or 

     

    
      
        
           

        

        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    involuntary)
      of a LIBOR Rate Borrowing at any time prior to the end of the applicable
      Interest Period; or (vi) any failure to complete a Borrowing.

     

    (b)  Reasonable
      Averaging Methods.
      In
      attributing CB&T's general costs relating to its eurocurrency operations to
      any transaction under this Agreement or averaging any costs over a period of
      time, CB&T may use any reasonable attribution or averaging methods which it
      deems appropriate and practical.

     

    (c)  No
      Representation as to Source of Funding.
      Nothing
      in this Agreement shall be deemed to obligate CB&T to obtain the funds for
      any Loan in any particular place or manner, or constitute a representation
      by
      CB&T that it has obtained or will obtain the funds for any Loan in any
      particular place or manner.

     

    3.3  Special
      LIBOR Circumstances; Increased Risk-Based Capital Cost.

     

    (a)  Special
      LIBOR Circumstances.
      In the
      event that any law, regulation, treaty or directive, or any change therein
      or in
      the interpretation or application thereof, shall at any time in the opinion
      of
      CB&T make it unlawful or impractical for CB&T to fund or maintain a
      LIBOR Rate Borrowing in the interbank LIBOR market or to continue such funding,
      or to determine or charge interest rates based upon any appropriate LIBOR Rate,
      then CB&T shall promptly notify Borrower thereof, and (i) in the case of any
      LIBOR Rate Borrowing which is outstanding, Borrower shall, if requested by
      CB&T, prepay such LIBOR Rate Borrowing, together with interest accrued
      thereon, either (A) on the last day of the then current Interest period
      for
      the LIBOR Rate Borrowing if CB&T may lawfully continue to maintain and fund
      such LIBOR Rate Borrowing to such day, or (B) immediately if CB&T
      determines that it may not lawfully continue to maintain and fund such LIBOR
      Rate Borrowing to such day, and concurrent with any such prepayment, CB&T
      shall make a Prime Rate Borrowing, to Borrower in the principal amount equal
      to
      the principal amount of the LIBOR Rate Borrowings so prepaid, and (ii) CB&T
      shall not be obligated to make any further LIBOR Rate Borrowings until CB&T
      determines that it would no longer be unlawful or impractical to do so. Any
      such
      prepayment shall be made from the proceeds of such Prime Rate Borrowing.
      Notwithstanding anything herein to the contrary,

     

    (i)  if
      CB&T is unable to determine the LIBOR Rate, the right of Borrower to select
      or maintain the LIBOR Rate for such Borrowing or any subsequent Borrowing shall
      be suspended until CB&T notifies Borrower that the circumstances causing
      such suspension no longer exists, and each Loan comprising such Borrowing shall
      be a Prime Rate Borrowing, and

     

    (ii)  if
      CB&T shall, at least one (1) Business Day before the first day of any
      Interest Period, determine that the LIBOR Rate for Loans comprising such
      Borrowing will not adequately reflect the cost to CB&T of making the Loan
      for such Borrowing, the right of Borrower to select the LIBOR Rate for such
      Borrowing shall be suspended until CB&T shall notify Borrower that the
      circumstances causing such suspension no longer exist, and each Loan comprising
      such Borrowing shall be a Prime Rate Borrowing.

     

    
      
        
           

        

        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b)  Increased
      Risk-Based Capital Cost.
      If the
      amount of capital required or expected to be maintained by CB&T or any
      Person directly or indirectly owning or controlling CB&T (each a
“Control
      Person”)
      shall
      be affected by:

     

    (i)  the
      introduction or phasing in of any law, rule or regulation after the date
      hereof,

     

    (ii)  any
      change after the date hereof in the interpretation of any existing law, rule
      or
      regulation by any central bank or United States or foreign governmental
      authority charged with the administration thereof, or

     

    compliance
      by CB&T or such Control Person with any directive, guideline or request from
      any central bank or United States or foreign governmental authority (whether
      or
      not having the force of law) promulgated or made after the date hereof, and
      CB&T shall have determined that such introduction, phasing in, change or
      compliance shall have had or will thereafter have the effect of reducing (x)
      the
      rate of return on CB&T's or Control Person's capital, or (y) the asset value
      to CB&T or such Control Person of the Revolving Loans made or maintained by
      CB&T, in either case to a level below that which CB&T or such Control
      Person could have achieved or would thereafter be able to achieve on any then
      outstanding LIBOR Rate Borrowing but for such introduction, phasing in, change
      or compliance (after taking into account CB&T's or such Control Person's
      policies regarding capital), and such change is not given effect in the
      determination of the LIBOR Rate, then, within ten (10) days after demand by
      CB&T, Borrower shall pay to CB&T or such Control Person such additional
      amount or amounts as shall be sufficient to compensate CB&T or such Control
      Person, as the case may be, for such reduction actually suffered.

     

    A
      certificate of CB&T claiming compensation under this Section 3.3(b) and
      setting forth the additional amount or amounts to be paid to it hereunder and
      calculations therefor shall be provided to Borrower at the time of any such
      demand. In determining such amount, CB&T may use any reasonable averaging
      and attribution methods. If CB&T demands compensation under this
      Section 3.3(b), Borrower may at any time, upon at least five Business
      Days’
      prior notice to CB&T, prepay in full the then outstanding affected LIBOR
      Rate Borrowing, together with accrued interest thereon to the date of
      prepayment. Concurrently with prepaying such LIBOR Rate Borrowing, Borrower
      shall borrow a Prime Rate Borrowing, or a LIBOR Rate Borrowing not so affected,
      from CB&T in the principal amount equal to the principal amount of the LIBOR
      Rate Borrowings so prepaid, and CB&T shall make such Prime Rate Borrowing in
      such amount.

     

    3.4  Fees.
      Borrower shall pay CB&T the fees set forth on the Schedule.

     

    3.5  Examination
      Fees.
      Borrower agrees to pay to CB&T an examination fee in the amount set forth on
      the Schedule in connection with each audit or examination of Borrower performed
      by CB&T after the date hereof. In addition, Borrower shall pay to CB&T
      an initial examination fee in an amount equal to One Thousand Nine Hundred
      Fifty
      Dollars ($1,950). Such initial examination fee shall be deemed fully earned
      at
      the time of payment and due and 

     

    
      
        
           

        

        
        

      

      
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    payable
      upon the closing of this transaction, and shall be deducted from any good faith
      deposit paid by Borrower to CB&T prior to the date of this
      Agreement.

     

    4.  COLLATERAL.

     

    4.1  Security
      Interest in the Collateral.
      To
      secure the payment and performance of the Obligations when due, Borrower hereby
      grants to CB&T a security interest in all of Borrower's now owned or
      hereafter acquired or arising Inventory, Investment Property, Equipment,
      Receivables, and General Intangibles, including, without limitation, all of
      Borrower's Deposit Accounts, Fixtures, Goods, Documents, Instruments, Letter
      of
      Credit Rights, Supporting Obligations, Commercial Tort Claims, money, cash,
      cash
      equivalents, any and all General Intangibles (including without limitation
      all
      Intellectual Property, Payment Intangibles, contract rights, choses in action
      and Software) property now or at any time hereafter in CB&T's possession
      (including claims and credit balances), and all proceeds (including proceeds
      of
      any insurance policies, proceeds of proceeds and claims against third parties),
      all products and all books and records related to any of the foregoing (all
      of
      the foregoing, together with all other property in which CB&T may be granted
      a lien or security interest, is referred to herein, collectively, as the
“Collateral”). The term “Collateral” shall also include, without limitation,
      Borrower’s interest in and rights to, all present and future Customer
      Receivables, Customer Loan Collateral, and Customer Loan Documents. CB&T
      acknowledges that Collateral does not include the Customer Loan Collateral
      as
      Borrower does not own, or have title to, the Customer Loan Collateral, and
      that
      Borrower’s sole rights therein are as a secured party pursuant to the Customer
      Loan Documents.

     

    4.2  Perfection
      and Protection of Security Interest.
      Borrower shall, at its expense, take all actions at any time to perfect,
      maintain, protect and enforce CB&T's security interest and other rights in
      the Collateral and the priority thereof from time to time, including, without
      limitation, (i) executing and filing financing or continuation statements
      and amendments thereof and executing and delivering such documents and titles
      in
      connection with motor vehicles as CB&T shall require, all in form and
      substance satisfactory to CB&T, (ii) if requested by CB&T,
      delivering to CB&T warehouse receipts covering any portion of the Collateral
      located in warehouses and for which warehouse receipts are issued, (iii) if
      requested by CB&T, placing notations on Borrower's books of account to
      disclose CB&T's security interest therein, and (iv) if requested by
      CB&T, delivering to CB&T all letters of credit on which Borrower is
      named beneficiary and (v) if requested by CB&T, with respect to any
      Customer who is in default of its obligations under the Customer Loan Documents,
      assigning to CB&T all UCC financing statements, fixture filings, mortgages,
      trust deeds and all other evidences of security interests or assignments filed
      in any public record against any Customer Loan Collateral of such Customer
      or
      any other asset of such Customer, Customer Obligors or other account debtors
      and
      delivering to the possession of CB&T all original loan agreements,
      promissory notes, stock certificates and all other chattel paper and
      instruments. CB&T may file, without Borrower's signature, one or more
      financing statements disclosing CB&T's security interest under this
      Agreement. Borrower agrees that a carbon, photographic, photostatic or other
      reproduction of this Agreement or of a financing statement is sufficient as
      a
      financing statement. If any Collateral is at any time in the possession or
      control of any warehouseman, bailee or any of Borrower's agents or processors,
      Borrower shall notify such Person of CB&T's security interest in such
      Collateral and, upon CB&T's request, instruct them to hold all such
      Collateral for CB&T's account subject to CB&T's 

     

    
      
        
           

        

        
        

      

      
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    instructions.
      From time to time, Borrower shall, upon CB&T's request, execute and deliver
      confirmatory written instruments pledging the Collateral to CB&T, but
      Borrower's failure to do so shall not affect or limit CB&T's security
      interest or other rights in and to the Collateral. Until the Obligations have
      been fully satisfied and CB&T's obligation to make further advances
      hereunder has terminated, CB&T's security interest in the Collateral shall
      continue in full force and effect.

     

    4.3  Preservation
      of Collateral.
      CB&T may, upon the occurrence and during the continuation of an Event of
      Default, discharge any lien or encumbrance on the Collateral or bond the same,
      pay any insurance, maintain guards, pay any service bureau, obtain any record
      or
      take any other action to preserve the Collateral and charge the cost thereof
      to
      Borrower's loan account as an Obligation.

     

    4.4  Insurance.
      Borrower will maintain and deliver evidence to CB&T of such insurance as is
      reasonably required by CB&T, written by insurers and in amounts reasonably
      satisfactory to CB&T. All premiums with respect to such insurance shall be
      paid by Borrower as and when due. Accurate and complete copies of the policies
      shall be delivered by Borrower to CB&T. If Borrower fails to comply with
      this Section, CB&T, after five (5) Business Days prior notice to Borrower,
      may (but shall not be required to) procure such insurance at Borrower's expense
      and charge the cost thereof to Borrower's loan account as an
      Obligation.

     

    5.  EXAMINATION
      OF RECORDS; FINANCIAL REPORTING.

     

    5.1  Examinations.
      CB&T shall at all reasonable times have full access to and the right to
      examine, audit, make abstracts and copies from and inspect Borrower's records,
      files, books of account and all other documents, instruments and agreements
      relating to the Collateral and the right to check, test and appraise the
      Collateral. Borrower shall deliver to CB&T any instrument necessary for
      CB&T to obtain records from any service bureau maintaining records for
      Borrower. CB&T may, at any time after the occurrence of an Event of Default,
      remove from Borrower's premises Borrower's books and records (or copies thereof)
      or require Borrower to deliver such books and records or copies to CB&T.
      CB&T may, without expense to CB&T, use such of Borrower's personnel,
      supplies and premises as may be reasonably necessary for maintaining or
      enforcing CB&T's security interest.

     

    5.2  Reporting
      Requirements.
      Borrower shall furnish CB&T, such information and statements as CB&T
      shall reasonably request from time to time regarding Borrower's business
      affairs, financial condition and the results of its operations. Without limiting
      the generality of the foregoing, Borrower shall provide CB&T
      with:

     

    (i)  on
      or
      prior to the date set forth on the Schedule, monthly agings of payables reports,
      and company prepared financial statements (including balance sheet, income
      statement, and statement of cash flows) with respect to the prior month prepared
      on a basis consistent with such statements prepared in prior months and
      otherwise in accordance with generally accepted accounting principles,
      consistently applied;

     

    
      
        
           

        

        
        

      

      
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    (ii)  notice
      of
      an overadvance to any of Borrower's Customers within ten (10) days of such
      overadvance;

     

    (iii)  notice
      of
      acceleration of any Customer Receivables within five (5) days of such
      acceleration;

     

    (iv)  annual
      financial statements, prepared in accordance with generally accepted accounting
      principles applied on a basis consistent with the most recent Prepared
      Financials provided to CB&T by Borrower, as soon as available, and in any
      event, within ninety (90) days after the end of each of Borrower's fiscal years;
      and

     

    (v)  such
      certificates relating to the foregoing as CB&T may reasonably request,
      including, without limitation, (a) a monthly certificate in the form
      of
      Exhibit 5.2 attached hereto, from the president or the chief financial
      officer of Borrower showing Borrower's compliance with each of the financial
      covenants set forth in this Agreement, and stating whether any Event of Default
      has occurred or event which, with giving of notice or the passage of time,
      or
      both, would constitute an Event of Default, and if so, the steps being taken
      to
      prevent or cure such Event of Default, and (b) a monthly certificate
      from
      the president or the chief financial officer of Borrower stating that, except
      as
      otherwise noted, Customers and Customer Obligors are in compliance with each
      of
      their respective material loan covenants set forth in their respective Customer
      Loan Documents.

     

    5.3  Guarantor's
      Financial Statements and Tax Returns.
      Borrower shall cause the Guarantor to deliver to CB&T, within ninety (90)
      days of the end of each fiscal year, the Guarantor's audited annual financial
      statement (in form acceptable to CB&T) and, within fifteen (15) days of the
      filing therein, a copy of the Guarantor's federal income tax return with respect
      to the corresponding year, in each case on the date when such tax return is
      due
      (or, if the return is on extension, the date the extension expires) or, if
      earlier, on the date when available.

     

    6.  COLLATERAL
      REPORTING.

     

    6.1  Instruments.
      In the
      event any Receivable is or becomes evidenced by a promissory note, trade
      acceptance or any other instrument for the payment of money, Borrower shall,
      if
      requested by CB&T, immediately deliver such instrument to CB&T
      appropriately endorsed to CB&T as Collateral for the
      Obligations.

     

    7.  PRINCIPAL
      PAYMENTS; PROCEEDS OF COLLATERAL.

     

    7.1  Principal
      Payments.
      Except
      where evidenced by notes or other instruments issued or made by Borrower to
      CB&T specifically containing payment provisions which are in conflict with
      this Section 7.1 (in which event the conflicting provisions of said
      notes
      or other instruments shall govern and control), that portion of the Obligations
      consisting of principal payable on account of Receivable Loans shall be payable
      by Borrower to CB&T immediately upon the earliest of (i) the receipt by
      CB&T or Borrower of any proceeds of any of the Collateral, to the extent of
      said proceeds, (ii) the occurrence of an Event of Default in consequence
      of
      which CB&T elects to accelerate the maturity and payment of such loans, or

     

    
      
        
           

        

        
        

      

      
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    (iii) any
      termination of this Agreement pursuant to Section 15 hereof; provided,
      however,
      that
      any Overline shall be payable on demand pursuant to the provisions of
      Section 1.3 hereof.

     

    7.2  Collections.
      CB&T or its designee may, at any time upon the occurrence and continuation
      of an Event of Default, notify Customers, Customer Obligors, and other account
      debtors that the Receivables have been assigned to CB&T and of CB&T's
      security interest therein, and may collect the Receivables directly and charge
      the collection costs and expenses to Borrower's loan account.

     

    7.3  
      Payments Without Deductions.
      Borrower shall pay principal, interest, and all other amounts payable hereunder,
      or under any related agreement, without any deduction whatsoever, including,
      but
      not limited to, any deduction for any setoff or counterclaim.

     

    7.4  Periodic
      Accountings.
      CB&T shall provide Borrower with notices of or copies of receipts, records
      or documents reflecting advances, charges, expenses and payments made pursuant
      to this Agreement. CB&T may periodically provide Borrower with an account of
      such advances, charges, expenses and payments. Such account shall be deemed
      correct, accurate and binding on Borrower and an account stated (except for
      reverses and reapplications of payments made and corrections of errors
      discovered by CB&T), unless Borrower notifies CB&T in writing to the
      contrary within thirty (30) days after each account is rendered, describing
      the
      nature of any alleged errors or admissions.

     

    8.  POWER
      OF ATTORNEY.

     

    Borrower
      appoints CB&T and its designees as Borrower's attorney, with the power to
      endorse Borrower's name on any checks, notes, acceptances, money orders or
      other
      forms of payment or security that come into CB&T's possession; to sign
      Borrower's name on any invoice or bill of lading relating to any Receivable,
      on
      drafts against customers, on assignments of Receivables, on notices of
      assignment, financing statements and other public records, on verifications
      of
      accounts and on notices to Customers, Customer Obligors, or other account
      debtors; to send requests for verification of Receivables to Customers, Customer
      Obligors, or other account debtors; after the occurrence and continuation of
      any
      Event of Default, to notify the post office authorities to change the address
      for delivery of Borrower's mail to an address designated by CB&T and to open
      and dispose of all mail addressed to Borrower; and to do all other things
      CB&T deems necessary or desirable to carry out the terms of this Agreement.
      Borrower hereby ratifies and approves all acts of such attorney. Neither
      CB&T nor any of its designees shall be liable for any acts or omissions nor
      for any error of judgment or mistake of fact or law while acting as Borrower's
      attorney unless such act, omission, error or mistake was caused by the gross
      negligence or willful misconduct of CB&T or any such designee. This power,
      being coupled with an interest, is irrevocable until the Obligations have been
      fully satisfied and CB&T's obligation to provide loans hereunder shall have
      terminated.

     

    
      
        
           

        

        
        

      

      
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    9.  CUSTOMER
      RECEIVABLES.

     

    9.1  Eligibility.
      Borrower represents and warrants that each Customer Receivable covers and shall
      cover a bona fide loan by Borrower in the ordinary course of its business,
      and
      shall be for a liquidated amount and CB&T's security interest shall not be
      subject to any offset, 

     

    deduction,
      counterclaim, rights of return or cancellation, lien or other condition. If
      any
      representation or warranty herein is breached as to any Customer Receivable
      or
      any Customer Receivable ceases to be an Eligible Customer Receivable for any
      reason other than payment thereof, then CB&T may, in addition to its other
      rights hereunder, designate any and all Customer Receivables owing by that
      Customer as not Eligible Customer Receivables; provided,
      that
      CB&T shall in any such event retain its security interest in all Customer
      Receivables, whether or not Eligible Customer Receivables, until the Obligations
      have been fully satisfied and CB&T's obligation to provide loans hereunder
      has terminated.

     

    9.2  Disputes.
      Borrower shall notify CB&T promptly of all disputes or claims with Customer
      or Customer Obligators and settle or adjust such disputes or claims at no
      expense to CB&T, but no discount, credit or allowance shall be granted to
      any account debtor and no returns of merchandise shall be accepted by Borrower
      without CB&T's consent, except for discounts, credits and allowances made or
      given in the ordinary course of Borrower's business. CB&T may, at any time
      after the occurrence of an Event of Default, settle or adjust disputes or claims
      directly with Customers, Customer Obligors, or other account debtors for amounts
      and upon terms which CB&T considers advisable in its reasonable credit
      judgment and, in all cases, CB&T shall credit Borrower's loan account with
      only the net amounts received by CB&T in payment of any
      Receivables..

     

    10.  OTHER
      LIENS; NO DISPOSITION OF COLLATERAL.

     

    Borrower
      represents, warrants and covenants that (a) all Collateral (other than Customer
      Loan Collateral) is and shall continue to be owned by it free and clear of
      all
      liens, claims and encumbrances whatsoever (except for CB&T's security
      interest, Permitted Encumbrances, and such other liens, claims and encumbrances
      as may be permitted by CB&T in its sole discretion from time to time in
      writing), and (b) Borrower shall not, without CB&T's prior written
      approval, sell, encumber or dispose of or permit the sale, encumbrance or
      disposal of any Collateral or any interest of Borrower therein, except for
      the
      sale of Inventory in the ordinary course of Borrower's business, the release
      of
      Customer Loan Collateral in the ordinary course of Borrower’s business or
      pursuant to a foreclosure or other disposition of Collateral constituting
      Customer Loan Collateral. The proceeds of any such sales shall be remitted
      to
      CB&T pursuant to this Agreement for application to the
      Obligations.

     

    
      
        
           

        

        
        

      

      
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    11.  GENERAL
      REPRESENTATIONS AND WARRANTIES.

     

    Borrower
      represents and warrants that:

     

    11.1  Due
      Organization.
      It is a
      corporation duly organized, validly existing and in good standing under the
      laws
      of the State set forth on the Schedule, is qualified and authorized to do
      business and is in good standing in all states in which such qualification
      and
      good standing are necessary in order for it to conduct its business and own
      its
      property, and has all requisite power and authority to conduct its business
      as
      presently conducted, to own its property and to execute and deliver each of
      the
      Loan Documents to which it is a party and perform all of its Obligations
      thereunder, and has not taken any steps to wind-up, dissolve or otherwise
      liquidate its assets;

     

    11.2  Other
      Names.
      Borrower has not, during the preceding five (5) years, been known by or used
      any
      other corporate or fictitious name except as set forth on the Schedule, nor
      has
      Borrower been the surviving corporation of a merger or consolidation or acquired
      all or substantially all of the assets of any person during such
      time;

     

    11.3  Due
      Authorization.
      The
      execution, delivery and performance by Borrower of the Loan Documents to which
      it is a party have been authorized by all necessary corporate action and do
      not
      and shall not constitute a violation of any applicable law or of Borrower's
      Articles of Incorporation or By-Laws or any other document, agreement or
      instrument to which Borrower is a party or by which Borrower or its assets
      are
      bound;

     

    11.4  Binding
      Obligation.
      Each of
      the Loan Documents to which Borrower is a party is the legal, valid and binding
      obligation of Borrower enforceable against Borrower in accordance with its
      terms;

     

    11.5  Intangible
      Property.
      Borrower possesses adequate assets, licenses, patents, patent applications,
      copyrights, trademarks, trademark applications and trade names for the present
      and planned future conduct of its business without any known conflict with
      the
      rights of others, and each is valid and has been duly registered or filed with
      the appropriate governmental authorities;

     

    11.6  Capital.
      Borrower has capital sufficient to conduct its business, is able to pay its
      debts as they mature and owns property having a fair salable value greater
      than
      the amount required to pay all of its debts (including contingent
      debts);

     

    11.7  Material
      Litigation.
      Borrower has no pending or overtly threatened litigation, actions or proceedings
      which would materially and adversely affect its business, assets, operations,
      prospects or condition, financial or otherwise, or the Collateral or any of
      CB&T's interests therein;

     

    
      
        
           

        

        
        

      

      
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    11.8  Title;
      Security Interests of CB&T.
      Borrower has good, indefeasible and merchantable title to the Collateral and,
      upon the filing of UCC-1 Financing Statements, the recording of any mortgages
      or
      deeds of trust with respect to real property, in each case in the appropriate
      offices, and the delivery of documents as requested by CB&T, this Agreement
      and such documents shall create valid and perfected first priority liens in
      the
      Collateral, subject only to Permitted Encumbrances;

     

    11.9  Restrictive
      Agreements; Labor Contracts.
      Borrower is not a party or subject to any contract or subject to any charge,
      corporate restriction, judgment, decree or order materially and adversely
      affecting its business, assets, operations, prospects or condition, financial
      or
      otherwise, or which restricts its right or ability to incur Indebtedness, and
      it
      is not party to any labor dispute. In addition, no labor contract is scheduled
      to expire during the Term of this Agreement, except as disclosed to CB&T in
      writing prior to the date hereof;

     

    11.10  Laws.
      Borrower is not in violation of any applicable statute, regulation, ordinance
      or
      any order of any court, tribunal or governmental agency, in any respect
      materially and adversely affecting the Collateral or its business, assets,
      operations, prospects or condition, financial or otherwise;

     

    11.11  Consents.
      Borrower has obtained or caused to be obtained or issued any required consent
      of
      a governmental agency or other Person in connection with the financing
      contemplated hereby;

     

    11.12  Defaults.
      Borrower is not in default with respect to any note, indenture, loan agreement,
      mortgage, lease, deed or other agreement to which it is a party or by which
      it
      or its assets are bound, nor has any event occurred which, with the giving
      of
      notice or the lapse of time, or both, would cause such a default;

     

    11.13  Financial
      Condition.
      The
      Prepared Financials fairly present Borrower's financial condition and results
      of
      operations and those of such other Persons described therein as of the date
      thereof; there are no material omissions from the Prepared Financials or other
      facts or circumstances not reflected in the Prepared Financials; and there
      has
      been no material and adverse change in such financial condition or operations
      since the date of the initial Prepared Financials delivered to CB&T
      hereunder;

     

    11.14  ERISA.
      None of
      Borrower, any ERISA Affiliate, or any Plan is or has been in violation of any
      of
      the provisions of ERISA, any of the qualification requirements of IRC
      Section 401(a) or any of the published interpretations thereunder, nor
      has
      Borrower or any ERISA Affiliate received any notice to such effect. No notice
      of
      intent to terminate a Plan has been filed under Section 4041 of ERISA,
      nor
      has any Plan been terminated under ERISA. The PBGC has not instituted
      proceedings to terminate, or appointed a trustee to administer, a Plan. No
      lien
      upon the assets of Borrower has arisen with respect to a Plan. No prohibited
      transaction 

     

    
      
        
           

        

        
        

      

      
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    or
      Reportable Event has occurred with respect to a Plan. Neither Borrower nor
      any
      ERISA Affiliate has incurred any withdrawal liability with respect to any
      Multiemployer Plan. Borrower and each ERISA Affiliate have made all
      contributions required to be made by them to any Plan or Multiemployer Plan
      when
      due. There is no accumulated funding deficiency in any Plan, whether or not
      waived;

     

    11.15  Taxes.
      Borrower has filed all tax returns and such other reports as it is required
      by
      law to file and has paid or made adequate provision for the payment on or prior
      to the date when due of all taxes, assessments and similar charges that are
      due
      and payable;

     

    11.16  Locations.
      Borrower's chief executive office and the offices and locations where it keeps
      the Collateral are at the locations set forth on the Schedule, except to the
      extent that such locations may have been changed after notice to CB&T in
      accordance with Section 12.5 below;

     

    11.17  Business
      Relationships.
      There
      exists no actual or threatened termination, cancellation or limitation of,
      or
      any modification or change in, the business relationship between Borrower and
      any customer or any group of customers whose purchases individually or in the
      aggregate are material to the business of Borrower, or with any material
      supplier, and there exists no present condition or state of facts or
      circumstances which would materially and adversely affect Borrower or prevent
      Borrower from conducting such business after the consummation of the
      transactions contemplated by this Agreement in substantially the same manner
      in
      which it has heretofore been conducted; and

     

    11.18  Reaffirmations.
      Each
      request for a loan made by Borrower pursuant to this Agreement shall constitute
      (i) an automatic representation and warranty by Borrower to CB&T that
      there does not then exist any Event of Default and (ii) a reaffirmation
      as
      of the date of said request of all of the representations and warranties of
      Borrower contained in this Agreement and the other Loan Documents.

     

    12.  AFFIRMATIVE
      COVENANTS.

     

    Borrower
      covenants that, so long as any Obligation remains outstanding and this Agreement
      is in effect, it shall:

     

    12.1  Expenses.
      Promptly reimburse CB&T for all out-of-pocket costs, fees and expenses
      incurred by CB&T in connection with the negotiation, preparation, execution,
      delivery, administration and enforcement of each of the Loan Documents,
      including, but not limited to, the attorneys' and paralegals' fees of outside
      counsel, expert witness fees, lien, title search and insurance fees, appraisal
      fees, all charges and expenses incurred in connection with any and all
      environmental reports and environmental remediation activities, and all other
      costs, expenses, taxes and filing or recording fees payable in connection with
      the transactions contemplated by this Agreement, including without limitation
      all such costs, fees and expenses as CB&T shall incur or for which CB&T
      shall become obligated in connection with (i) any inspection or
      verification of the Collateral, (ii) any proceeding relating to the
      Loan
      Documents or the Collateral, (iii) actions taken with respect to the
      Collateral and CB&T's security interest therein, 

     

    
      
        
           

        

        
        

      

      
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    including,
      without limitation, the defense or prosecution of any action involving CB&T
      and Borrower or any third party, (iv) enforcement of any of CB&T's
      rights and remedies with respect to the Obligations or Collateral, and
      (v) consultation with CB&T's attorneys and participation in any
      workout, bankruptcy or other insolvency or other proceeding involving any Loan
      Party or any Affiliate, whether or not suit is filed. Borrower shall also pay
      all CB&T charges in connection with bank wire transfers, forwarding of loan
      proceeds, deposits of checks and other items of payment, returned checks,
      establishment and maintenance of lockboxes and other Blocked Accounts, if any,
      and all other bank and administrative matters, in accordance with CB&T's
      schedule of bank and administrative fees and charges in effect from time to
      time;

     

    12.2  Taxes.
      File
      all tax returns and pay or make adequate provision for the payment of all taxes,
      assessments and other charges on or prior to the date when due;

     

    12.3  Notice
      of Litigation.
      Promptly notify CB&T in writing of any litigation, suit or administrative
      proceeding which may materially and adversely affect the Collateral or
      Borrower's business, assets, operations, prospects or condition, financial
      or
      otherwise, whether or not the claim is covered by insurance;

     

    12.4  ERISA.
      Notify
      CB&T in writing (i) promptly upon the occurrence of any event described
      in Paragraph 4043 of ERISA, other than a termination, partial termination
      or merger of a Plan or a transfer of a Plan's assets and (ii) prior
      to any
      termination, partial termination or merger of a Plan or a transfer of a Plan's
      assets;

     

    12.5  Change
      in Location.
      Notify
      CB&T in writing forty-five (45) days prior to any change in the location of
      Borrower's chief executive office or the location of any Collateral, or
      Borrower's opening or closing of any other place of business;

     

    12.6  Corporate
      Existence.
      Maintain its corporate existence and its qualification to do business and good
      standing in all states necessary for the conduct of its business and the
      ownership of its property and maintain adequate assets, licenses, patents,
      copyrights, trademarks and trade names for the conduct of its
      business;

     

    12.7  Labor
      Disputes.
      Promptly notify CB&T in writing of any labor dispute to which Borrower is or
      may become subject and the expiration of any labor contract to which Borrower
      is
      a party or bound;

     

    12.8  Violations
      of Law.
      Promptly notify CB&T in writing of any violation of any law, statute,
      regulation or ordinance of any governmental entity, or of any agency thereof,
      applicable to Borrower which may materially and adversely affect the Collateral
      or Borrower's business, assets, prospects, operations or condition, financial
      or
      otherwise;

     

    12.9  Defaults.
      Notify
      CB&T in writing within ten (10) business days of Borrower's default under
      any note, indenture, loan agreement, mortgage, lease or other agreement to
      which
      Borrower is a party or by which Borrower is bound, or of any other default
      under
      any Indebtedness of Borrower;

     

    
      
        
           

        

        
        

      

      
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    12.10  Capital
      Expenditures.
      Promptly notify CB&T in writing of the making of any Capital Expenditure
      materially affecting Borrower's business, assets, prospects, operations or
      condition, financial or otherwise;

     

    12.11  Books
      and Records.
      Keep
      adequate records and books of account with respect to its business activities
      in
      which proper entries are made in accordance with generally accepted accounting
      principles consistently applied, reflecting all of its financial
      transactions;

     

    12.12  Leases;
      Warehouse Agreements.
      Provide
      CB&T with (i) copies of all agreements between Borrower and any
      landlord or warehouseman which owns any premises at which any Collateral may,
      from time to time, be located, and (ii) landlord and mortgagee waivers
      in
      form acceptable to CB&T with respect to all locations where any Collateral
      is hereafter located;

     

    12.13  Additional
      Documents.
      At
      CB&T's request, promptly execute or cause to be executed and delivered to
      CB&T any and all documents, instruments or agreements deemed necessary by
      CB&T to facilitate the collection of the Obligations or the Collateral or
      otherwise to give effect to or carry out the terms or intent of this Agreement
      or any of the other Loan Documents.

     

    13.  NEGATIVE
      COVENANTS.

     

    Without
      CB&T's prior written consent, which consent CB&T may withhold in its
      sole discretion, so long as any Obligation remains outstanding and this
      Agreement is in effect, Borrower shall not:

     

    13.1  Mergers.
      Merge
      or consolidate with or acquire any other Person, or make any other material
      change in its capital structure or in its business or operations which might
      adversely affect the repayment of the Obligations other than the Permitted
      Acquisitions;

     

    13.2  Loans.
      Except
      in the ordinary course of Borrower's business, make advances, loans or
      extensions of credit to, or invest in, any Person;

     

    13.3  Dividends.
      Except
      for dividends or distributions to the Guarantor, declare or pay cash dividends
      upon any of its stock or distribute any of its property or redeem, retire,
      purchase or acquire directly or indirectly any of its stock;

     

    13.4  Change
      in Control.
      Cause
      or permit to occur, directly or indirectly, any change in the ownership of
      its
      capital stock which would cause (i) any Person to own less than twenty-five
      percent (25%) of the outstanding capital stock entitled to vote for the election
      of directors, or (ii) any Person to have a lien on, security interest
      in or
      pledge of any capital stock of Borrower;

     

    13.5  Adverse
      Transactions.
      Enter
      into any transaction which materially and adversely affects the Collateral
      or
      its ability to repay the Obligations in full as and when due;

     

    
      
        
           

        

        
        

      

      
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    13.6  Indebtedness
      of Others.
      Become
      directly or contingently liable for the Indebtedness of any Person, except
      by
      endorsement of instruments for deposit;

     

    13.7  Repurchase.
      Except
      with respect to the foreclosure sale of any Customer Loan Collateral, make
      a
      sale to any customer on a bill-and-hold, guaranteed sale, sale and return,
      sale
      on approval, consignment, or any other repurchase or return basis;

     

    13.8  Name.
      Use any
      corporate or fictitious name other than its corporate name as set forth in
      its
      Articles of Incorporation on the date hereof or as set forth on the
      Schedule;

     

    13.9  Prepayment.
      Prepay
      any Indebtedness other than trade payables and other than the
      Obligations;

     

    13.10  Affiliate
      Transactions.
      Except
      as set forth below, sell, transfer, distribute or pay any money or property
      to
      any Affiliate, or invest in (by capital contribution or otherwise) or purchase
      or repurchase any stock or Indebtedness, or any property, of any Affiliate,
      or
      become liable on any guaranty of the indebtedness, dividends or other
      obligations of any Affiliate. Notwithstanding the foregoing, Borrower may
      reimburse Guarantor for allocated shared expenses and may borrow money from,
      and
      repay money to, Guarantor at any time prior to the occurrence of an Event of
      Default.

     

    13.11  Nature
      of Business.
      Enter
      into any new business or make any material change in any of Borrower's business
      objectives, purposes or operations;

     

    13.12  CB&T's
      Name.
      Use the
      name of CB&T in connection with any of Borrower's business or activities,
      except in connection with internal business matters or as required in dealings
      with governmental agencies and financial institutions or with trade creditors
      of
      Borrower, solely for credit reference purposes; or

     

    13.13  Margin
      Security.
      Own,
      purchase or acquire (or enter into any contract to purchase or acquire) any
      “margin security” as defined by any regulation of the Federal Reserve Board as
      now in effect or as the same may hereafter be in effect.

     

    14.  ENVIRONMENTAL
      MATTERS.

     

    14.1  Definitions.
      The
      following definitions apply to the provisions of this
      Section 14:

     

    (a)  the
      term
“Applicable Law” shall include, but shall not be limited to, each statute named
      or referred to in this Section 14.1 and all rules and regulations
      thereunder, and any other local, state and/or federal laws, rules, regulations
      or ordinances, whether currently in existence or hereafter enacted, which
      govern, to the extent applicable to the Property or to Borrower, (i) the
      existence, cleanup and/or remedy of contamination on real property;
      (ii) the protection of the environment from soil, air or water pollution,
      or from spilled, deposited or 

     

    
      
        
           

        

        
        

      

      
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    otherwise
      emplaced contamination; (iii) the emission or discharge of hazardous
      substances into the environment; (iv) the control of hazardous wastes;
      or
      (v) the use, generation, transport, treatment, removal or recovery of
      Hazardous Substances;

     

    (b)  The
      term
“Hazardous Substance” shall mean (i) any oil, flammable substance,
      explosives, radioactive materials, hazardous wastes or substances, toxic wastes
      or substances or any other wastes, materials or pollutants which either pose
      a
      hazard to the Property or to persons on or about the Property or cause the
      Property to be in violation of any Applicable Law; (ii) asbestos in
      any
      form which is or could become friable, urea formaldehyde foam insulation,
      transformers or other equipment which contain dielectric fluid containing levels
      of polychlorinated biphenyls, or radon gas; (iii) any chemical, material
      or
      substance defined as or included in the definition of “hazardous
      substances,”“waste,” “hazardous
      wastes,”“hazardous materials,”“extremely hazardous waste,”“restricted hazardous
      waste,” or “toxic substances' or words of similar import under any Applicable
      Law, including, but not limited to, the Comprehensive Environmental Response,
      Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq.;
      the
      Resource Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901
et
      seq.;
      the
      Hazardous Materials Transportation Act, 49 USC §§ 1801 et seq.;
      the
      Federal Water Pollution Control Act, 33 USC §§ 1251 et
      seq.;
      the
      California Hazardous Waste Control Law (“HWCL”), Cat. Health & Safety
§§ 25100 et
      seq.;
      the
      Underground Storage of Hazardous Substances Act (Cal. Health & Safety
§§ 25280 et
      seq.;
      Hazardous Substance Account Act (“HSAA”), Cal. Health & Safety Code
§§ 25300 et
      seq.;
      the
      Porter-Cologne Water Quality Control Act (the “Porter-Cologne Act”), Cal. Water
      Code §§ 13000 et
      seq.;
      the
      Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65);
      Title 22 of the California Code of Regulations, Division 4,
      Chapter 30; (iv) any other chemical, material or substance, exposure
      to which is prohibited, limited or regulated by any governmental authority
      which
      may or could pose a hazard to the health or safety of the occupants of the
      Property or the owners and/or occupants of property adjacent to or surrounding
      the Property, or any other person coming upon the Property or adjacent property;
      and (v) any other chemical, materials or substance which may or could
      pose
      a hazard to the environment; and

     

    (c)  the
      term
“Property” shall mean all real property, wherever located, in which Borrower or
      any Affiliate of Borrower has any right, title or interest, whether now existing
      or hereafter arising, and including, without limitation, as owner, lessor or
      lessee.

     

    14.2  Covenants
      and Representations.

     

    (a)  Borrower
      represents and warrants that there have not been during the period of Borrower's
      possession of any interest in the Property and, to the best of its knowledge
      after reasonable inquiry, there have not been at any other times, any activities
      on the Property involving, directly or indirectly, the use, generation,
      treatment, storage or disposal of any Hazardous Substances by Borrower or its
      Affiliates except in compliance with Applicable Law (i) under, on or
      in the
      land included in the Property, whether contained in soil, tanks, sumps, ponds,
      lagoons, barrels, cans or other containments, structures or equipment,
      (ii) incorporated in the buildings, structures or improvements included
      in
      the Property, including any building material containing asbestos, or
      (iii) used in connection with any operations on or in the
      Property.

     

    
      
        
           

        

        
        

      

      
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    (b)  Without
      limiting the generality of the foregoing and to the extent not included within
      the scope of this Section 14.2, Borrower represents and warrants that
      it is
      in full compliance with Applicable Law and has received no notice from any
      person or any governmental agency or other entity of any violation by Borrower
      or its Affiliates of any Applicable Law.

     

    (c)  Borrower
      shall be solely responsible for and agrees to indemnify CB&T, protect and
      defend CB&T with counsel reasonably acceptable to CB&T, and hold
      CB&T harmless from and against any claims, actions, administrative
      proceedings, judgments, damages, punitive damages, penalties, fines, costs,
      liabilities (including sums paid in settlements of claims), interest or losses,
      attorneys' fees (including any fees and expenses incurred in enforcing this
      indemnity), consultant fees, expert fees, and other out-of-pocket costs or
      expenses actually incurred by CB&T (collectively, the “Environmental
      Costs”), that may, at any time or from time to time, arise directly or
      indirectly from or in connection with: (i) the presence, suspected
      presence, release or suspected release of any Hazardous Substance whether into
      the air, soil, surface water or groundwater of or at the Property, or any other
      violation of Applicable Law, or (ii) any breach of the foregoing
      representations and covenants; except to the extent any of the foregoing result
      from the actions of CB&T, its employees, agents and representatives. If
      Borrower fails to so indemnify CB&T, CB&T may, after thirty (30) days
      prior written notice to Borrower, pay Environmental Costs incurred by CB&T,
      in which event all Environmental Costs so paid by CB&T shall be deemed to be
      made by CB&T in good faith and shall constitute Obligations
      hereunder.

     

    15.  TERM;
      TERMINATION.

     

    15.1  Term.
      The
      initial term of this Agreement shall be for two (2) years from the Closing
      Date
      (the “Term”) unless earlier terminated as provided herein or in the
      Schedule.

     

    15.2  Early
      Termination.
      This
      Agreement may be terminated prior to the end of the Term as follows: (a) by
      Borrower, effective three (3) Business Days after written notice of termination
      is given to CB&T; (b) by CB&T at any time after the occurrence of an
      Event of Default, without notice, effective immediately.

     

    15.3  Payment
      in Full.
      Upon
      the effective date of termination, the Obligations shall become immediately
      due
      and payable in full in cash.

     

    16.  DEFAULT.

     

    16.1  Events
      of Default.
      Any one
      or more of the following events shall constitute an Event of Default under
      this
      Agreement:

     

    (a)  Borrower
      fails to pay when due and payable any portion of the Obligations at stated
      maturity, upon acceleration or otherwise;

     

    
      
        
           

        

        
        

      

      
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    (b)  Borrower
      or any other Loan Party fails or neglects to perform, keep, or observe any
      Obligation including, but not limited to, any term, provision, condition,
      covenant or agreement contained in any Loan Document to which Borrower or such
      other Loan Party is a party and such default shall have continued for a period
      of five (5) Business Days after notice thereof is provided to Borrower;
provided,
      however,
      that
      the failure of the Guarantor to observe Section 16(a), (b) or (e) of
      its
      Guaranty as a result of a merger, consolidation or acquisition not approved
      by
      CB&T, shall not be an Event of Default until such failure shall have
      continued for a period of three (3) months after the occurrence
      thereof;

     

    (c)  Any
      material adverse change occurs in Borrower's business, assets, operations,
      prospects or condition, financial or otherwise;

     

    (d)  The
      prospect of repayment of any portion of the Obligations or the value or priority
      of CB&T's security interest in the Collateral is materially
      impaired;

     

    (e)  Any
      material portion of Borrower' s assets is seized, attached, subjected to a
      writ
      or distress warrant, is levied upon or comes into the possession of any judicial
      officer;

     

    (f)  Borrower
      shall generally not pay its debts as they become due or shall enter into any
      agreement (whether written or oral), or offer to enter into any agreement,
      with
      all or a significant number of its creditors regarding any moratorium or other
      indulgence with respect to its debts or the participation of such creditors
      or
      their representatives in the supervision, management or control of the business
      of Borrower;

     

    (g)  Any
      bankruptcy or other insolvency proceeding is commenced by Borrower, or any
      such
      proceeding is commenced against Borrower and remains undischarged or unstayed
      for thirty (30) days;

     

    (h)  Any
      notice of lien, levy or assessment for an amount in excess of Fifty Thousand
      Dollars ($50,000) is filed of record with respect to any of Borrower's assets
      and remains undischarged for fifteen (15) days;

     

    (i)  Any
      final
      judgments (after the expiration of all times to appeal therefrom) are entered
      against Borrower in an aggregate amount exceeding Fifty Thousand Dollars
      ($50,000) and remains undischarged for thirty (30) days unless the same shall
      be
      covered by insurance;

     

    (j)  Any
      default shall occur under any material agreement between Borrower and any third
      party including, without limitation, any default which would result in a right
      by such third party to accelerate the maturity of any Indebtedness of Borrower
      in excess of $100,000 to such third party;

     

    
      
        
           

        

        
        

      

      
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    (k)  Any
      representation or warranty made or deemed to be made by Borrower, any Affiliate
      or any other Loan Party in any Loan Document or any other statement, document
      or
      report made or delivered to CB&T in connection therewith shall prove to have
      been misleading in any material respect;

     

    (l)  Any
      Prohibited Transaction or Reportable Event shall occur with respect to a Plan
      which could have a material adverse effect on the financial condition of
      Borrower; any lien upon the assets of Borrower in connection with any Plan
      shall
      arise; Borrower or any of its Affiliates shall fail to make full payment when
      due of all amounts which Borrower or any of its Affiliates may be required
      to
      pay to any Plan or any Multiemployer Plan as one or more contributions thereto;
      Borrower or any of its Affiliates creates or permits the creation of any
      accumulated funding deficiency, whether or not waived; or

     

    (m)  Any
      transfer of more than twenty-five percent (25%) of the issued and outstanding
      shares of common stock or other evidence of ownership of Borrower.

     

    16.2  Remedies.
      Upon
      the occurrence of an Event of Default, CB&T may, at its option and in its
      sole discretion and in addition to all of its other rights under the Loan
      Documents, terminate this Agreement and declare all of the Obligations to be
      immediately payable in full. CB&T shall also have all of its rights and
      remedies under applicable law, including, without limitation, the default rights
      and remedies of a secured party under the Code. Further, CB&T may, at any
      time, take possession of the Collateral and keep it on Borrower's premises,
      at
      no cost to CB&T, or remove any part of it to such other place(s) as CB&T
      may desire, or Borrower shall, upon CB&T's demand, at Borrower's sole cost,
      assemble the Collateral and make it available to CB&T at a place reasonably
      convenient to CB&T. CB&T may sell and deliver any Collateral at public
      or private sales, for cash, upon credit or otherwise, at such prices and upon
      such terms as CB&T deems advisable, at CB&T's discretion, and may, if
      CB&T deems it reasonable, postpone or adjourn any sale of the Collateral by
      an announcement at the time and place of sale or of such postponed or adjourned
      sale without giving a new notice of sale. Notwithstanding anything to the
      contrary contained in this Agreement, CB&T shall have no right to sell
      Customer Loan Collateral (as opposed to CB&T’s right, upon the occurrence of
      an Event of Default as provided herein or at law, to foreclose on Borrower’s
      interest as a secured creditor to such Customer Loan Collateral) except as
      permitted under the Customer Loan Documents. Borrower agrees that CB&T has
      no obligation to preserve Borrower’s rights to the Collateral or marshall any
      Collateral (other than Customer Loan Collateral) for the benefit of any Person.
      CB&T is hereby granted a license or other right to use, without charge,
      Borrower's labels, patents, copyrights, name, trade secrets, trade names,
      trademarks and advertising matter, or any similar property, in completing
      production, advertising or selling any Collateral and Borrower's rights under
      all licenses and all franchise agreements shall inure to CB&T's benefit. Any
      requirement of reasonable notice shall be met if such notice is mailed postage
      prepaid to Borrower at its address set forth in the heading to this Agreement
      at
      least ten (10) days before sale or other disposition. The proceeds of sale
      shall
      be applied, first, to all attorneys fees and other expenses of sale, and second,
      to the Obligations in such order as CB&T shall elect, in its sole
      discretion. CB&T shall return any excess to Borrower and Borrower shall
      remain liable for any deficiency to the fullest extent permitted by
      law.

     

    
      
        
           

        

        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

     

    16.3  Standards
      for Determining Commercial Reasonableness.
      Borrower and CB&T agree that the following conduct by CB&T with respect
      to any disposition of Collateral shall conclusively be deemed commercially
      reasonable (but other conduct by CB&T, including, but not limited to,
      CB&T's use in its sole discretion of other or different times, places and
      manners of noticing and conducting any disposition of Collateral shall not
      be
      deemed unreasonable): Any public or private disposition (i) as to which
      on
      no later than the tenth calendar day prior thereto written notice thereof is
      mailed or personally delivered to Borrower and, with respect to any public
      disposition, on no later than the tenth calendar day prior thereto notice
      thereof describing in general non-specific terms, the Collateral to be disposed
      of is published once in a newspaper of general circulation in the county where
      the sale is to be conducted (provided that no notice of any public or private
      disposition need be given to the Borrower if the Collateral is perishable or
      threatens to decline speedily in value or is of a type customarily sold on
      a
      recognized market); (ii) which is conducted at any place designated
      by
      CB&T, with or without the Collateral being present; and (iii) which
      commences at any time between 8:00 a.m. and 5:00 p.m. Without
      limiting
      the generality of the foregoing, Borrower expressly agrees that, with respect
      to
      any disposition of accounts, instruments and general intangibles, it shall
      be
      commercially reasonable for CB&T to direct any prospective purchaser thereof
      to ascertain directly from Borrower any and all information concerning the
      same,
      including, but not limited to, the terms of payment, aging and delinquency,
      if
      any, the financial condition of any obligor or account debtor thereon or
      guarantor thereof, and any collateral therefor.

     

    17.  DEFINITIONS.

     

    17.1  Defined
      Terms.
      As used
      in this Agreement, the following terms have the definitions set forth
      below:

     

    “Affiliate”
      means
      any Person controlling, controlled by or under common control with Borrower.
      For
      purposes of this definition, “control” means the possession, directly or
      indirectly, of the power to direct or cause direction of the management and
      policies of any Person, whether through ownership of common or preferred stock
      or other equity interests, by contract or otherwise. Without limiting the
      generality of the foregoing, each of the following shall be an Affiliate: any
      officer or director of Borrower, any shareholder or subsidiary of Borrower,
      and
      any other Person with whom or which Borrower has common shareholders, officers
      or directors.

     

    “Base
      LIBOR”
      means,
      for any Interest Period, the published rate per annum, if any, determined by
      Bank (rounded upward, if necessary, to the nearest one-sixteenth of one percent
      (.0625%)) at which U.S. Dollar deposits in an amount equal or comparable to
      the
      proposed LIBOR Rate Borrowing and for a term equal to such Interest Period
      are
      offered in the London interbank market as set forth in the Wall Street Journal,
      on the day which is two (2) Business Days prior to the first day of such
      Interest Period.

     

    “Borrowing”
      means a
      borrowing under this Agreement consisting of a LIBOR Rate Borrowing or a Prime
      Rate Borrowing provided to Borrower in accordance with the provisions set forth
      herein.

     

    
      
        
           

        

        
        

      

      
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    “Business
      Day”
      means
      any day on which commercial banks in Los Angeles, California are open for
      business.

     

    “Capital
      Expenditures”
      means
      all expenditures made and liabilities incurred for the acquisition of any fixed
      asset or improvement, replacement, substitution or addition thereto which has
      a
      useful life of more than one year and including, without limitation, those
      arising in connection with Capital Leases.

     

    “Capital
      Lease”
      means
      any lease of property by Borrower that, in accordance with generally accepted
      accounting principles, should be capitalized for financial reporting purposes
      and reflected as a liability on the balance sheet of Borrower.

     

    “Closing
      Date”
      means
      the date of the initial advance made by CB&T pursuant to this
      Agreement.

     

    “Code”
      means
      the Uniform Commercial Code as adopted and in effect in the State of California
      from time to time.

     

    “Collateral”
      has the
      meaning set forth in Section 4.1 above.

     

    “Commercial
      Tort Claim”
      means
      all “commercial tort claims,” as such term is defined in the Code, now owned or
      hereafter acquired by Borrower.

     

    “Current
      Assets”
      at any
      date means the amount at which the current assets of Borrower would be shown
      on
      a balance sheet of Borrower as at such date, prepared in accordance with
      generally accepted accounting principles, provided
      that
      amounts due from Affiliates and investments in Affiliates shall be excluded
      therefrom.

     

    “Current
      Liabilities”
      at any
      date means the mount at which the current liabilities of Borrower would be
      shown
      on a balance sheet of Borrower as at such date, prepared in accordance with
      generally accepted accounting principles.

     

    “Customer”
      means a
      borrower to which Borrower has made available loans or other extensions of
      credit pursuant to Customer Loan Documents.

     

    “Customer
      Loan Collateral”
      means
      any and all property (whether personal property, real property, or both, and
      whether owned by a Customer or any other person) that secures a Customer’s
      obligations under Customer Loan Documents or any Customer Obligor’s guaranty of
      a Customer’s obligations under Customer Loan Documents.

     

    “Customer
      Loan Documents”
      means,
      collectively, each loan agreement, security agreement, promissory note or other
      agreement including amendments or modifications thereof between Borrower and
      a
      Customer providing for loans or extensions of credit by Borrower to or the
      benefit of such Customer and evidencing, or otherwise providing for, such
      Customer’s 

     

    
      
        
           

        

        
        

      

      
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    obligation
      to repay such loans or extension of credit to Customer and all instruments,
      security agreements, deeds of trust, mortgages, guaranties, financing statements
      and other documents evidencing any security for such obligations.

     

    “Customer
      Obligor”
      means a
      guarantor, pledgor or other person (other than a Customer) obligated on a
      Customer Receivable.

     

    “Customer
      Overadvances”
      means
      extension of credit made to a Customer by Borrower which exceed the dollar
      or
      percentage limitations on advances set forth in the relevant Customer Loan
      Documents.

     

    “Customer
      Receivables”
      means
      all obligations and indebtedness (including without limitation obligations
      for
      unpaid principal, accrued interest, fees, cost reimbursements and other
      obligations) from time to time owing to Borrower by Customers under Customer
      Loan Documents.

     

    “Deposit
      Accounts”
      has the
      meaning set forth in the Code.

     

    “Documents”
      means
      all “documents,” as such term is defined in the Code, now owned or hereafter
      acquired by Borrower, wherever located, including all bills of lading, dock
      warrants, dock receipts, warehouse receipts, and other documents of title,
      whether negotiable or non-negotiable.

     

    “Earnings
      Before Interest and Taxes”
      for any
      fiscal period of Borrower means the net income of Borrower for such fiscal
      period, plus interest expense and provision for income taxes for such fiscal
      period, and minus non-recurring miscellaneous income and expense, all calculated
      in accordance with generally accepted accounting principles, consistently
      applied.

     

    “Eligible
      Customer Receivables”
      means
      Customer Receivables arising in the ordinary course of Borrower's business
      from
      the loans made by Borrower, which CB&T, in its sole judgment, shall deem
      eligible based on such considerations as CB&T may from time to time deem
      appropriate. Without limiting the foregoing, a Customer Receivable shall not
      be
      deemed to be an Eligible Customer Receivable if a Customer Receivable derives
      from (i) Customer Receivables in which the Customer is in default of
      or has
      breached its obligations under Customer Loan Documents, or with respect to
      which
      any scheduled payment of interest, principal or fees is more than thirty (30)
      days past due, irrespective of whether such delinquency is an event of default
      under the Customer Loan Documents or such default has been waived;
      (ii) Customer Receivables with respect to which Borrower has not properly
      perfected its liens or security interests with respect to the underlying
      Customer Loan Collateral (and shall be free of any liens or security interests
      other than Borrower’s liens or security interests); (iii)  any Customer
      Receivable that has a term in excess of ninety (90) days; (iv) any Customer
      Receivable that has been renewed more than once or renewed without the prior
      verification of the renewal criteria by CB&T; (v) Customer Receivables with
      respect to which the Customer (or an affiliate of the Customer) is an officer,
      shareholder, director, employee or agent of Borrower, or is a subsidiary of,
      related to or affiliated with, or has common officers or directors with the
      

     

    
      
        
           

        

        
        

      

      
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    Borrower;
      (vi) Customer Receivables with respect to which the Customer is the United
      States, or any department, agency or instrumentality of the United States;
      (vii) Customer Receivables with respect to which there is asserted a
      defense, counterclaim, discount or setoff, whether well founded or otherwise;
      (viii) Customer Receivables with respect to which the Customer or any Customer
      Obligor, is insolvent in any way; (ix) Customer Receivables documented
      with
      Customer Loan Documents that differ in any material way from the forms thereof
      that have been previously approved by CB&T; (x) that portion of
      Eligible Customer Receivables consisting of Customer Overadvances or designated
      as “unearned interest”; (xi) that portion of Customer Receivables
      consisting of extensions of credit to a Customer other than revolving advances
      or Customer term loans in excess of ninety (90) days; and (xii) all
      other
      Customer Receivables or portions of Customer Receivables deemed ineligible
      by
      CB&T in its reasonable discretion.

     

    “Equipment”
      means
      all of Borrower's present and hereafter acquired machinery, molds, machine
      tools, motors, furniture, equipment, furnishings, fixtures, trade fixtures,
      motor vehicles, tools, parts, dies, jigs, goods and other tangible personal
      property (other than Inventory) of every kind and description used in Borrower's
      operations or owned by Borrower and any interest in any of the foregoing, and
      all attachments, accessories, accessions, replacements, substitutions, additions
      or improvements to any of the foregoing, wherever located.

     

    “ERISA”
      means
      the Employment Retirement Income Security Act of 1974, as mended, and the
      regulations thereunder.

     

    “ERISA
      Affiliate”
      means
      each trade or business (whether or not incorporated and whether or not foreign)
      which is or may hereafter become a member of a group of which Borrower is a
      member and which is treated as a single employer under ERISA
      Section 4001(b)(1), or IRC Section 414.

     

    “Event
      of Default”
      means
      any of the events set forth in Section 16.1 of this Agreement.

     

    “Fixtures”
      means
      all “fixtures” as such term is defined in the Code, now owned or hereafter
      acquired by Borrower.

     

    “General
      Intangibles”
      means
      all general intangibles of Borrower, whether now owned or hereafter created
      or
      acquired by Borrower, including, without limitation, all choses in action,
      causes of action, corporate or other business records, Deposit Accounts,
      inventions, designs, drawings, blueprints, patents, patent applications,
      trademarks and the goodwill of the business symbolized thereby, names, trade
      names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
      customer lists, security and other deposits, rights in all litigation presently
      or hereafter pending for any cause or claim (whether in contract, tort or
      otherwise), and all judgments now or hereafter arising therefrom, all claims
      of
      Borrower against CB&T, rights to purchase or sell real or personal property,
      rights as a licensor or licensee of any kind, royalties, telephone numbers,
      proprietary information, purchase orders, and all insurance policies and claims
      (including without limitation credit, liability, property and other insurance)
      tax refunds and claims, computer programs, discs, tapes and tape files, claims
      under any 

     

    
      
        
           

        

        
        

      

      
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    Customer
      Loan Collateral or under any other guaranties, security interests or other
      security held by or granted to Borrower to secure payment of any of the
      Receivables by an account debtor, all rights to indemnification and all other
      intangible property of every kind and nature (other than
      Receivables).

     

    “Goods”
      means
      all “goods,” as such term is defined in the Code, now owned or hereafter
      acquired by Borrower, wherever located, including embedded software to the
      extent included in “goods” as defined in the Code, manufactured homes, standing
      timber that is cut and removed for sale and unborn young of
      animals.

     

    “Guarantor”
      means
      Collectors Universe, Inc., a Delaware corporation.

     

    “Indebtedness”
      means
      all of Borrower's present and future obligations, liabilities, debts, claims
      and
      indebtedness, contingent, fixed or otherwise, however evidenced, created,
      incurred, acquired, owing or arising, whether under written or oral agreement,
      operation of law or otherwise, and includes, without limiting the foregoing
      (i) the Obligations, (ii) obligations and liabilities of any
      Person
      secured by a lien, claim, encumbrance or security interest upon property owned
      by Borrower, even though Borrower has not assumed or become liable therefor,
      (iii) obligations and liabilities created or arising under any lease
      (including Capital Leases) or conditional sales contract or other title
      retention agreement with respect to property used or acquired by Borrower,
      even
      though the rights and remedies of the lessor, seller or lender are limited
      to
      repossession, (iv) all unfunded pension fund obligations and liabilities
      and (v) deferred taxes.

     

    “Intellectual
      Property”
      means
      all of the following now owned or hereafter acquired by Borrower: (a) patents,
      trademarks, trade dress, trade names, service marks, copyrights, trade secrets
      and all other intellectual property or Licenses thereof; and (b) all Proceeds
      of
      the foregoing.

     

    “Interest
      Period”
      shall
      have the meaning set forth in Section 3.1(b).

     

    “Inventory”
      means
      all of Borrower's now owned and hereafter acquired goods, merchandise or other
      personal property, wherever located, to be furnished under any contract of
      service or held for sale or lease, all raw materials, work in process, finished
      goods and materials and supplies of any kind, nature or description which are
      or
      might be used or consumed in Borrower’s business or used in connection with the
      manufacture, packing, shipping, advertising, selling or finishing of such goods,
      merchandise or other personal property, and all documents of title or other
      documents representing them.

     

    “Investment
      Property”
      has the
      meaning set forth in the Code.

     

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

     

    “Letter
      of Credit Rights”
      means
“letter-of-credit rights” as such term is defined in the Code, now owned or
      hereafter acquired by Borrower, including rights to payment or performance
      under
      a letter of credit, whether or not Borrower, as beneficiary, has demanded or
      is
      entitled to demand payment or performance.

     

    
      
        
           

        

        
        

      

      
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    “LIBOR
      Rate”
      means,
      as of the date of determination thereof, the rate per annum (rounded upward,
      if
      necessary, to the nearest one-hundredth of one percent (.01%)), determined
      as
      the quotient of: (i) the Base LIBOR for the relevant Interest Period; divided
      by
      (ii) the number equal to one hundred percent (100%) minus the LIBOR Reserve
      Percentage as of such date. The LIBOR Rate shall be adjusted automatically
      on
      the effective date of any change in the LIBOR Reserve Percentage, such
      adjustment to affect any LIBOR Rate Borrowings outstanding on such effective
      date. Each determination of a LIBOR Rate by Bank shall be conclusive and final
      in the absence of manifest error.

     

    “LIBOR
      Rate Borrowing”
      means
      any Borrowing designated by Borrower as bearing the LIBOR Rate.

     

    “LIBOR
      Reserve Percentage”
      means,
      as of the date of determination thereof, the percentage, as determined by Bank
      in accordance with its usual procedures (which determination shall be conclusive
      in the absence of manifest error), which is in effect on such date as prescribed
      by the Board of Governors of the Federal Reserve System for determining the
      reserve requirements (including, without limitation, supplemental, marginal,
      and
      emergency reserve requirements) with respect to eurocurrency funding (currently
      referred to as “eurocurrency liabilities”) of a member bank in the Federal
      Reserve System.

     

    “License”
      means
      any license under any written agreement now owned or hereafter acquired by
      Borrower granting the right to use any Intellectual Property or other license
      of
      rights or interests now held or hereafter acquired by Borrower.

     

    “Loan
      Documents”
      means,
      collectively, this Agreement, any note or notes executed by Borrower and payable
      to CB&T, and any other agreement entered into in connection with this
      Agreement (which does not include any Customer Loan Document), together with
      all
      alterations, amendments, changes, extensions; modifications, refinancings,
      refundings, renewals, replacements, restatements, or supplements, of or to
      any
      of the foregoing.

     

    “Loan
      Party”
      means
      Borrower, each Guarantor, and each other party (other than CB&T) to any Loan
      Document.

     

    “Multiemployer
      Plan”
      means a
“multiemployer plan” as defined in ERISA Sections 3(37) or 4001(a)(3) or
      IRC Section 414(0 which covers employees of Borrower or any ERISA
      Affiliate.

     

    “Net
      Worth”
      at any
      date means the Borrower's net worth as determined in accordance with generally
      accepted accounting principles, consistently applied.

     

    “Obligations”
      means
      all present and future loans, advances, debts, liabilities, obligations,
      covenants, duties and indebtedness at any time owing by Borrower to CB&T,
      whether evidenced by this Agreement, any note or other instrument or document,
      whether arising from an extension of credit, opening of a letter of credit,
      banker's acceptance, loan, guaranty, indemnification or otherwise, whether
      direct or indirect (including, without limitation, those acquired by assignment
      and any participation by CB&T in Borrower's debts owing to others),

     

    
      
        
           

        

        
        

      

      
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    absolute
      or contingent, due or to become due, including, without limitation, all
      interest, charges, expenses, fees, attorney's fees, expert witness fees,
      examination fees, collateral monitoring fees, closing fees, facility fees,
      Minimum Interest Charges and any other sums chargeable to Borrower hereunder
      or
      under any other agreement with CB&T.

     

    “Overlines”
      has the
      meaning set forth in Section 1.3 hereof.

     

    “Payment
      Intangibles”
      means
      all “payment intangibles” as such term is defined in the Code, now owned or
      hereafter acquired by Borrower.

     

    “PBGC”
      means
      the Pension Benefit Guarantee Corporation.

     

    “Permitted
      Acquisitions”
      means
      acquisitions made by the Borrower that do not exceed $5,000,000 in the aggregate
      in any fiscal year.

     

    “Permitted
      Encumbrance”
      means
      each of the liens, mortgages and other security interests set forth on the
      Schedule and incorporated herein by this reference.

     

    “Person”
      means
      any individual, sole proprietorship, partnership, joint venture, trust,
      unincorporated organization, association, corporation, government, or any agency
      or political division thereof, or any other entity.

     

    “Plan”
      means
      any plan described in ERISA Section 3(2) maintained for employees of
      Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

     

    “Prepared
      Financials”
      means
      the opening balance sheet of Borrower as of the date set forth in the Schedule,
      and as of each subsequent date on which balance sheets are delivered to CB&T
      from time to time hereunder, and the related statements of operations, changes
      in stockholder's equity and changes in cash flow for the periods ended on such
      dates.

     

    “Prime
      Rate”
      means
      the variable rate of interest per annum as adjusted from time to time,
      corresponding to the rate most recently announced by CB&T at its
      headquarters office as its “prime rate”, with the understanding that CB&T’s
“prime rate” is only one of CB&T’s base rates and serves as a basis upon
      which effective rates of interest are calculated for loans making reference
      thereto and may not be the lowest of CB&T’s base rates. In the event that
      the Prime Rate announced is, from time to time, changed, adjustment in the
      rate
      of interest payable hereunder on all outstanding Loans shall be made as of
      12:01
      a.m., Los Angeles, California time, on the effective date of the change in
      the
      Prime Rate.

     

    “Prime
      Rate Borrowing”
      means
      any Borrowing designated by Borrower as bearing the Prime Rate.

     

    “Prohibited
      Transaction”
      means
      any transaction described in Section 406 of ERISA which is not exempt
      by
      reason of Section 408 of ERISA, and any transaction described in
      Section 4975(c) of the IRC which is not exempt by reason of
      Section 4975(c)(2) of the IRC.

     

    
      
        
           

        

        
        

      

      
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    “Receivable
      Loans”
      has the
      meaning set forth in the Schedule.

     

    “Receivables”
      means
      all of Borrower's now owned and hereafter acquired accounts (whether or not
      earned by performance), proceeds of any letters of credit naming Borrower as
      beneficiary, contract rights, chattel paper, instruments, documents and all
      other forms of obligations at any time owing to Borrower (including all Customer
      Receivables), all guaranties and other security therefor, whether secured or
      unsecured, all merchandise returned to or repossessed by Borrower, and all
      rights of stoppage in transit and all other rights or remedies of an unpaid
      vendor, lienor or secured party.

     

    “Reportable
      Event”
      means a
      reportable event described in Section 4043 of ERISA or the regulations
      thereunder, a withdrawal from a Plan described in Section 4063 of ERISA,
      or
      a cessation of operations described in Section 4068 of ERISA.

     

    “Supporting
      Obligations”
      means
      all “supporting obligations” as such term is defined in the Code, including
      letters of credit and guaranties issued in support of Accounts, Chattel Paper,
      Documents, General Intangibles, Instruments, or Investment
      Property.

     

    “Term”
      has the
      meaning set forth on the Schedule.

     

    “Total
      Facility”
      has the
      meaning set forth on the Schedule.

     

    17.2  Other
      Terms.
      All
      accounting terms used in this Agreement, unless otherwise indicated, shall
      have
      the meanings given to such terms in accordance with generally accepted
      accounting principles, consistently applied. All other terms contained in this
      Agreement, unless otherwise indicated, shall have the meanings provided by
      the
      Code, to the extent such terms are defined therein.

     

    18.  MISCELLANEOUS.

     

    18.1  Recourse
      to Security; Certain Waivers.
      All
      Obligations shall be payable by Borrower as provided for herein and, in full,
      at
      the termination of this Agreement; recourse to security shall not be required
      at
      any time. Borrower waives presentment and protest of any instrument and notice
      thereof, notice of default and, to the extent permitted by applicable law,
      all
      other notices to which Borrower might otherwise be entitled.

     

    18.2  No
      Waiver by CB&T.
      Neither
      CB&T's failure to exercise any right, remedy or option under this Agreement,
      any supplement, the Loan Documents or other agreement between CB&T and
      Borrower nor any delay by CB&T in exercising the same shall operate as a
      waiver. No waiver by CB&T shall be effective unless in writing and then only
      to the extent stated. No waiver by CB&T shall affect its right to require
      strict performance of this Agreement. CB&T's rights and remedies shall be
      cumulative and not exclusive.

     

    18.3  Binding
      on Successor and Assigns.
      All
      terms, conditions, promises, covenants, provisions and warranties shall inure
      to
      the benefit of and bind CB&T's and Borrower's respective representatives,
      successors and assigns.

     

    
      
        
           

        

        
        

      

      
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    18.4  Severability.
      If any
      provision of this Agreement shall be prohibited or invalid under applicable
      law,
      it shall be ineffective only to such extent, without invalidating the remainder
      of this Agreement.

     

    18.5  Amendments;
      Assignments.
      This
      Agreement may not be modified, altered or amended, except by an agreement in
      writing signed by Borrower and CB&T. Borrower may not sell, assign or
      transfer any interest in this Agreement or any other Loan Document, or any
      portion thereof, including, without limitation, any of Borrower's rights, title,
      interests, remedies, powers and duties hereunder or thereunder. Borrower hereby
      consents to CB&T'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, CB&T's rights, title, interests, remedies, powers and duties
      hereunder or thereunder. In connection therewith, CB&T may disclose all
      documents and information which CB&T now or hereafter may have relating to
      Borrower or Borrower's business. To the extent that CB&T assigns its rights
      and obligations hereunder to a third party, CB&T shall thereafter be
      released from such assigned obligations to Borrower and such assignment shall
      effect a novation between Borrower and such third party.

     

    18.6  Integration.
      This
      Agreement, together with the Schedule (which is a part hereof) and the other
      Loan Documents, reflect the entire understanding of the parties with respect
      to
      the transactions contemplated hereby.

     

    18.7  Governing
      Law; Waivers.
      EXCEPT
      AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
      INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT
      AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
      THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
      THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
      IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS
      OF
      LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY
      CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN LOS ANGELES
      COUNTY, CALIFORNIA SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
      ANY
      CLAIMS OR DISPUTES BETWEEN BORROWER AND CB&T PERTAINING TO THIS AGREEMENT OR
      ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
      AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED,
      THAT
      CB&T, AND BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
      TO BE HEARD BY A COURT LOCATED OUTSIDE OF LOS ANGELES COUNTY, CALIFORNIA;
AND
      FURTHER PROVIDED,
      THAT
      NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE CB&T FROM
      BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
      THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
      OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR 

     

    
      
        
           

        

        
        

      

      
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    OTHER
      COURT ORDER IN FAVOR OF CB&T. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
      ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
      AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK
      OF
      PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS
      AND
      HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
      APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
      SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
      AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE
      BY
      REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH
      ON
      THE FIRST PAGE OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
      COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE DAYS
      AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

     

    18.8  Survival.
      All of
      the representations and warranties of Borrower contained in this Agreement
      shall
      survive the execution, delivery and acceptance of this Agreement by the parties.
      No termination of this Agreement or of any guaranty of the Obligations shall
      affect or impair the powers, obligations, duties, rights, representations,
      warranties or liabilities of the parties hereto and all shall survive any such
      termination.

     

    18.9  Evidence
      of Obligations.
      Each
      Obligation may, in CB&T's discretion, be evidenced by notes or other
      instruments issued or made by Borrower to CB&T. If not so evidenced, such
      Obligation shall be evidenced solely by entries upon CB&T's books and
      records.

     

    18.10  Collateral
      Security.
      The
      Obligations shall constitute one loan secured by the Collateral. CB&T may,
      in its sole discretion, (i) exchange, enforce, waive or release any
      of the
      Collateral, (ii) apply Collateral and direct the order or manner of
      sale
      thereof as it may determine, and (iii) settle, compromise, collect or
      otherwise liquidate any Collateral in any manner without affecting its right
      to
      take any other action with respect to any other Collateral.

     

    18.11  Application
      of Collateral.
      Except
      as otherwise provided herein, CB&T shall have the continuing and exclusive
      right to apply or reverse and re-apply any and all payments to any portion
      of
      the Obligations in such order and manner as CB&T shall determine in its sole
      discretion. To the extent that Borrower makes a payment or CB&T receives any
      payment or proceeds of the Collateral for Borrower's benefit which is
      subsequently invalidated, declared to be fraudulent or preferential, set aside
      or required to be repaid to a trustee, debtor in possession, receiver or any
      other party under any bankruptcy law, common law or equitable cause, then,
      to
      such extent, the Obligations or part thereof intended to be satisfied shall
      be
      revived and continue as if such payment or proceeds had not been received by
      CB&T.

     

    18.12  Loan
      Requests.
      Each
      oral or written request for a loan by any Person who is an officer of Borrower,
      or has been designated in writing by an officer of Borrower, shall be made
      to
      CB&T on or prior to 11:00 a.m., Los Angeles time, on the Business Day
      on which the proceeds thereof are requested to be paid to Borrower and shall
      be
      conclusively presumed to be 

     

    
      
        
           

        

        
        

      

      
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    made
      by a
      Person authorized by Borrower to do so and the crediting of a loan to Borrower's
      operating account shall conclusively establish Borrower's obligation to repay
      such loan. Unless and until Borrower otherwise directs CB&T in writing, all
      loans shall be wired to Borrower's operating account set forth on the
      Schedule.

     

    18.13  Notices.
      Any
      notice required hereunder shall be in writing and addressed to the Borrower
      and
      CB&T at their addresses set forth at the beginning of this Agreement.
      Notices hereunder shall be deemed received on the earlier of receipt, whether
      by
      mail, personal delivery, facsimile, or otherwise, or three (3) Business Days
      after deposit in the United States mail, postage prepaid.

     

    18.14  Brokerage
      Fees.
      Borrower represents and warrants to CB&T that, with respect to the financing
      transaction herein contemplated, no Person, other than Houlihan, Lokey, Howard
      & Zukin, is entitled to any brokerage fee or other commission and Borrower
      agrees to indemnify and hold CB&T harmless against any and all such
      claims.

     

    18.15  Disclosure.
      No
      representation or warranty made by Borrower in this Agreement, or in any
      financial statement, report, certificate or any other document furnished in
      connection herewith contains any untrue statement of a material fact or omits
      to
      state any material fact necessary to make the statements herein or therein
      not
      misleading. There is no fact known to Borrower or which reasonably should be
      known to Borrower which Borrower has not disclosed to CB&T in writing with
      respect to the transactions contemplated by this Agreement which materially
      and
      adversely affects the business, assets, operations, prospects or condition
      (financial or otherwise), of Borrower.

     

    18.16  Captions.
      The
      Section titles contained in this Agreement are without substantive meaning
      and
      are not part of this Agreement.

     

    18.17  Injunctive
      Relief.
      Borrower recognizes that, in the event Borrower fails to perform, observe or
      discharge any of its Obligations under this Agreement, any remedy at law may
      prove to be inadequate relief to CB&T. Therefore, CB&T, if it so
      requests, shall be entitled to temporary and permanent injunctive relief in
      any
      such ease without the necessity of proving actual damages.

     

    18.18  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which taken
      together shall constitute one and the same instrument.

     

    18.19  Construction.
      The
      parties acknowledge that each party and its counsel have reviewed this Agreement
      and that the normal rule of construction to the effect that any ambiguities
      are
      to be resolved against the drafting party shall not be employed in the
      interpretation of this Agreement or any amendments or exhibits
      hereto.

     

    18.20  Time
      of Essence.
      Time is
      of the essence for the performance by Borrower of the Obligations set forth
      in
      this Agreement.

     

    18.21  Limitation
      Of Actions.
      Borrower agrees that any claim or cause of action by Borrower against CB&T,
      or any of CB&T's directors, officers, employees, agents, accountants or
      attorneys, based upon, arising from, or relating to this Agreement, or any
      other
      present or future 

     

    
      
        
           

        

        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    agreement,
      or any other transaction contemplated hereby or thereby or relating hereto
      or
      thereto, or any other matter, cause or thing whatsoever, whether or not relating
      hereto or thereto, occurred, done, omitted or suffered to be done by CB&T,
      or by CB&T's directors, officers, employees, agents, accountants or
      attorneys, whether sounding in contract or in tort or otherwise, shall be barred
      unless asserted by Borrower by the commencement of an action or proceeding
      in a
      court of competent jurisdiction by the filing of a complaint within one year
      after the first act, occurrence or omission upon which such claim or cause
      of
      action, or any part thereof, is based and service of a summons and complaint
      on
      an officer of CB&T or any other person authorized to accept service of
      process on behalf of CB&T, within 30 days thereafter. Borrower agrees that
      such one-year period of time is a reasonable and sufficient time for Borrower
      to
      investigate and act upon any such claim or cause of action. The one-year period
      provided herein shall not be waived, tolled, or extended except by a specific
      written agreement of CB&T. This provision shall survive any termination of
      this Loan Agreement or any other agreement.

     

    18.22  Liability.
      Neither
      CB&T nor any CB&T Affiliate shall be liable for any indirect, special,
      incidental or consequential damages in connection with any breach of contract,
      tort or other wrong relating to this Agreement or the Obligations or the
      establishment, administration or collection thereof (including without
      limitation damages for loss of profits, business interruption, or the like),
      whether such damages are foreseeable or unforeseeable, even if CB&T has been
      advised of the possibility of such damages. Neither CB&T, nor any CB&T
      Affiliate shall be liable for any claims, demands, losses or damages, of any
      kind whatsoever, made, claimed, incurred or suffered by the Borrower through
      the
      ordinary negligence of CB&T, or any CB&T Affiliate. “CB&T Affiliate”
      shall mean CB&T's directors, officers, employees, agents, attorneys or other
      person or entity affiliated with or representing CB&T.

     

    
      
        
           

        

        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    

     

    18.23  Notice
      Of Breach By CB&T.
      Borrower agrees to give CB&T written notice of (i) any action or
      inaction by CB&T or any attorney of CB&T in connection with any Loan
      Documents that may be actionable against CB&T or any attorney of CB&T or
      (ii) any defense to the payment of the Obligations for any reason,
      including, but not limited to, commission of a tort or violation of any
      contractual duty or duty implied by law. Borrower agrees that unless such notice
      is fully given as promptly as possible (and in any event within thirty (30)
      days) after Borrower has knowledge, or with the exercise of reasonable diligence
      should have had knowledge, of any such action, inaction or defense, Borrower
      shall not assert, and Borrower shall be deemed to have waived, any claim or
      defense arising therefrom.

     

    BORROWER:

    

    COLLECTORS
      FINANCE CORPORATION

    

    
      	
              By:

            
	
              Title:

            

    

    

     

    Federal
      Employer Identification No.: ____________________

     

    

    CALIFORNIA
      BANK & TRUST

    

    
      	
              By:

            
	
              Title:

            

    

    

    

    

    

     

    

    
      
        
           

        

        
        

      

      
        35

        
          

        

      

      
        
        

        
        

      

    

    CALIFORNIA
      BANK & TRUST

     

    Schedule
      to

    Loan
      and Security Agreement

     

    Borrower:    Collectors
      Finance Corporation

     

    Address:            
      1921
      East Alton Avenue

                               
      Santa Ana, California 92705

     

    Date:      
June 30,
      2005

     

    This
      Schedule forms an integral part of the Loan and Security Agreement between
      the
      above Borrower and CALIFORNIA BANK & TRUST (“CB&T”) dated the above date
      (the “Loan Agreement”), and all references herein and therein to “this
      Agreement” shall be deemed to refer to said Loan Agreement and to this Schedule.
      In the event of any inconsistencies between the Loan Agreement and this
      Schedule, the terms and provisions of this Schedule shall prevail.

     

    TOTAL
      FACILITY (Section 1.1): $7,000,000

     

    1.  LOANS
      (Section 1.2):

     

    A.  Revolving
      Loan:
      A
      revolving line of credit consisting of loans against Borrower's Eligible
      Customer Receivables (“Receivable Loans”) in an aggregate outstanding principal
      amount not to exceed the lesser of:

     

    
      	(i)          
                	
              the
                amount of the Total Facility, or

            

    

     

    
      	 	
              (ii)

            	
              85%
                of the aggregate principal amount of all Eligible Customer
                Receivables.

            

    

     

    2.  CONDITIONS
      PRECEDENT (Section 2.1):

     

    The
      obligation of CB&T to make the initial advance hereunder is subject to the
      fulfillment, to the satisfaction of CB&T and its counsel, of each of the
      following conditions, in addition to the conditions set forth in
      Sections 2.1 and 2.2 above: (a) CB&T shall have received a
      landlord waiver, in form and substance acceptable to CB&T in its sole
      discretion, for the property located on 1921 East Alton Avenue, Santa Ana,
      California 92705, (b) there shall have been no material adverse change
      in
      the business, operations, profits or prospects of Borrower or 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    any
      Guarantor, or in the condition of the assets of Borrower or any Guarantor,
      between December 31, 2004 and the date hereof; and (c) Borrower shall
      cause
      the conditions precedent set forth in Section 2.1 of this Agreement
      and set
      forth above in this Schedule to be satisfied on or before _________,
      2005.

     

    3.  FEES
      (Section 3.4):

     

    A.  Unused
      Line Fee.
      On the
      first day of each quarter commencing after the date hereof, Borrower shall
      pay
      to CB&T an unused line fee equal to a quarter of one percent (0.25%), per
      annum, of the average daily unused portion of the Total Facility during the
      preceding quarter. The unused line fee will be prorated for the first quarter
      if
      the Facility is available for less than the full quarter.

     

    B.  Commitment
      Fee.
      Borrower agrees to pay to CB&T a commitment fee in the amount of $10,000,
      which fee shall be fully earned and payable on the Closing Date.

     

    C.  Examination
      Fees.
      Borrower agrees to pay to CB&T an examination fee in the amount of $750 per
      person per day, plus reasonable out of pocket expenses, in connection with
      each
      audit or examination of Borrower performed by CB&T prior to or after the
      date hereof.

     

    D.  Transaction
      Fee.
      On or
      prior to the closing of the transactions under this Agreement, Borrower shall
      reimburse CB&T for any reasonable out of pocket expenses incurred prior to
      the Closing Date less any amounts previously deposited with
      CB&T.

     

    4.  REPORTING
      REQUIREMENTS (Section 5.2):

     

    A.  Within
      ninety (90) days after the end of each fiscal year, Borrower shall provide
      CB&T with the Borrower’s annual financial statements.

     

    B.  Within
      thirty (30) days after the end of each month, Borrower shall provide CB&T
      with the Borrower’s interim financial statements.

     

    C.  Within
      fifteen (15) days after the filing thereof, Borrower shall provide CB&T with
      the Borrower’s federal and state income tax returns.

     

    D.  Within
      thirty (30) days following the end of each month, Borrower shall provide
      CB&T with a monthly borrowing base certificate detailing Eligible Customer
      Receivables and Borrower’s borrowing availability under the Total
      Facility.

     

    E.  Within
      thirty (30) days following the end of each month, Borrower shall provide
      CB&T monthly with an officer's certificate regarding compliance by Customers
      and Customer Obligors with the requirements of their Customer Loan Documents
      as
      required by Section 5.2(viii)(b) of the Agreement.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    F.  Within
      ten (10) days of such acceleration, Borrower shall provide CB&T with notice
      of any acceleration by Borrower of the Customer Receivables owed to Borrower
      by
      any of its Customers.

     

    G.  Within
      ninety (90) days of the end of each fiscal year, Borrower shall cause Guarantor
      to provide CB&T with the Guarantor’s annual audited financial
      statement.

     

    H.  Within
      thirty (30) days of the end of each month, Borrower shall cause Guarantor to
      provide CB&T with the Guarantor’s interim financial statements.

     

    I.  Within
      fifteen (15) days after the filing thereof, Borrower shall cause Guarantor
      to
      provide CB&T with the Guarantor’s federal and state income tax
      returns.

     

    J.  Borrower
      shall upon request from CB&T provide CB&T the originals of (i) all
      executed Customer Loan Documents for each Customer Receivable; and (ii) any
      amendment to any Customer Loan Document pertaining to existing Customer
      Receivables prior to delivering such amendment.

     

    K.  Within
      thirty (30) days of the end of each month, Borrower shall provide CB&T loan
      summary status reports, which reports shall include: Customer Receivable and
      accounts payable agings.

     

    L.  Borrower
      shall provide CB&T such other collateral or portfolio reports as CB&T
      may reasonably request.

     

    5.  BORROWER
      INFORMATION:

     

    Borrower's
      State of Incorporation (Section 11.1):  
      California

     

    Fictitious
      Names/Prior Corporate Names (Section 11.2): None

     

    Borrower
      Locations (Section 11.16):         1921
      East
      Alton Avenue

                                                                                              
      Santa
      Ana, California 92705

    

    Permitted
      Encumbrances (Section 17.1): None, other than (i) liens for current
      taxes
      not yet due and payable, (ii) carriers’, warehousemen’s, mechanics’,
      materialmen’s, repairmen’s, landlord’s and other similar liens if payment is not
      yet due on the underlying obligation, (iii) liens arising in the ordinary
      course of business in compliance with workers’ compensation, unemployment
      insurance and other social security laws or regulations, (iv) liens
      related
      to any interest or title of a vendor or lessor in property subject to an
      operating lease and vendors’ liens on inventory arising in the ordinary course
      of business; or (v) liens incidental to the conduct of the Borrower’s
      business or the lease of real property, including easements, rights of way,
      zoning and similar restrictions, and subleases granted to others.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

     

    6.  DISBURSEMENT
      (Section 18.12):

     

    Unless
      and until Borrower otherwise directs CB&T in writing, all loans shall be
      credited to Borrower's operating account number __________________ at
      CB&T.

     

    7.  ADDITIONAL
      PROVISIONS:

     

    In
      additional to all other terms and conditions in this Agreement, Borrower further
      agrees and warrants to the following:

     

    A.  The
      Borrower is primarily engaged in the business of making short term loans secured
      by personal property that in connection with such loans had been submitted
      for
      certification to Guarantor or one of its Affiliates

     

    B.  Borrower
      warrants and represents that all present and future Customer Loans have been
      and
      will be made in accordance with the laws of the State of California including,
      without limitation, the laws governing commercial finance lenders and brokers,
      also known as the Finance Lenders' Law.

     

    C.  Prior
      to
      the initial funding, Borrower will submit to CB&T copies of its standard
      Customer Loan Documents. Further, prior to funding by CB&T against any
      Eligible Customer Receivables, Borrower will submit to CB&T a copy of the
      final form of the Customer Loan Documents for the respective Eligible Customer
      Receivable.

     

    D.  Borrower
      may amend, modify, waive or give any consent under the provisions of the
      Customer Loan Documents, or perform or permit performance in any manner other
      than as contemplated in the provisions of the Customer Loan Documents, so long
      as Borrower notifies CB&T of and delivers to CB&T the Customer Loan
      Documents evidencing such amendment, modification, waiver or consent immediately
      thereafter.

     

    E.  Borrower
      is the sole owner of the Customer Loan Documents and all rights thereunder,
      free
      and clear of all liens, security interests, mortgages, adverse claims or
      challenges of any kind whatsoever.

     

    F.  Borrower
      has full power and authority to assign, transfer and grant a security interest
      in its rights to the Customer Loan Documents, the Customer Receivables, and
      the
      Customer Loan Collateral to CB&T.

     

    G.  The
      Customer Loan Documents have been duly executed and delivered by the respective
      Customers and Customer Obligors to Borrower for valuable consideration and
      the
      same constitute the valid, legal and binding obligations of the Customers or
      Customer Obligors in respect thereof, free and clear of all known defenses,
      disputes, claims, offsets or counterclaims of any kind.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

     

    H.  Borrower
      has a first priority perfected security interest in the Customer Loan
      Collateral. 

     

    I.  Each
      of
      the Customer Loan Documents is genuine and bears the original signature of
      a
      Customer or Customer Obligor in respect thereof.

     

    J.  There
      are
      no representations, warranties, terms, covenants or conditions, whether oral
      or
      written, that vary any of the representations, warranties, terms, covenants
      or
      conditions in any of the Customer Loan Documents.

     

    K.  Except
      as
      Borrower may from time to time notify CB&T in writing within three (3) days
      after Borrower' s knowledge thereof, neither Borrower nor any Customer or
      Customer Obligor (a) is in default or breach of its monetary obligations
      under any of the Customer Loan Documents, (b) is in default or breach
      of
      its obligations under any of the Customer Loan Documents which would result
      in
      an acceleration of such obligations or a termination or decrease in the amount
      of advances available under such Customer Loan Documents or (c) will
      dissolve or become insolvent or unable to pay their respective debts as they
      mature.

     

    
      	
              BORROWER:

            	 	
              CB&T:

            
	
              COLLECTORS FINANCE CORPORATION

               

            	 	
              CALIFORNIA
                BANK & TRUST

               

            
	
              By:

            	 	
              By:

            
	
              Title:

            	 	
              Title:

            

    

    

    

     

    
      
        
        

      

      
        5

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