Document:

exhib10-1.htm

    
      
        

        

      

      Sanders|Ortoli|Vaughn-Flam|Rosenstadt llp

      501 Madison Avenue - 14th
Floor

      New York, NY 10022

      212-588-0022 (main)

      212-829-8937
(direct)

      212-826-9307(fax)

      wsr@sovrlaw.com

      www.sovrlaw.com

    

     

    
 

                                                   July 8, 2008

     

    BY EMAIL AND FIRST CLASS
U.S. MAIL

    Independence
Energy Corporation

    4750
Paton Street

    Vancouver,
BC V6C 2J1

    

    Attn:
Cameron King, Chief Executive Officer

              Email:
cking@endeavorenergy.com

    

    
      	
               
      

            	
              Re:

            	
              Termination
      of the share exchange agreement between Independence Energy Corporation
      f/k/a Endeavor Energy Corporation (“Endeavor”) and Atlantic Wine Agencies,
      Inc. (“Atlantic”) dated May 16, 2008 (“Exchange
  Agreement”)

            

    

    

    Dear Mr.
King:

     

    In our
capacity as counsel for Atlantic, we are advising you that as a result of
Endeavor’s failure to provide various material due diligence items to the
satisfaction of Atlantic’s management, including but not limited to audited
financials statements for the period ending December 31, 2007 as well as forms
of opinion as to the title of the various assets owned by Endeavor, Atlantic is
hereby terminating the Exchange Agreement pursuant to Section 9.15
thereof.

    

    The Exchange Agreement is deemed
terminated except for any provision which may survive the termination of the
Exchange Agreement as provided therein. Atlantic strictly reserves the right to
seek and enforce any remedies available to it whether in law or
equity.

    

    Notwithstanding
the above, we wish you the best of luck in your efforts to build Endeavor into a
successful company.

    

                            Very truly
yours,

                                               /s/
William S. Rosenstadt

                                                            William S.
Rosenstadtexhibit10_1.htm

    
      

    

     

     

    
       

       877
North 8th West, Riverton, WY  82501, Ph: (307) 856-9271, Fx: (307)
857-3050, www.usnrg.com

      

      

      For
Immediate Release

      

      U.S.
ENERGY CORP. RETAINS SRK CONSULTING TO PREPARE RESOURCE ESTIMATE FOR LUCKY JACK
PROJECT

      

      NI
43-101 COMPLIANT ESTIMATE TO SUPPORT EXPANDED CAPITAL MARKETS
STRATEGY

      

      RIVERTON,
Wyoming – July 9, 2008 - U.S. Energy Corp. (NASDAQ Capital Market: “USEG”)
(“USE” or the “Company”), a natural resources exploration and development
company with interests in molybdenum, uranium, oil and gas, gold, and real
estate, today announced that it has retained Denver, Colorado-based SRK
Consulting to review historic drill hole and underground data for the purposes
of preparing an NI 43-101 compliant mineral resource estimate on the Company’s
Lucky Jack Molybdenum project located in Gunnison County, Colorado. The Company
intends to use the report as part of its application to the TSX Group for a
listing on the Toronto Stock Exchange (“TSX”).

      

      “Preparation
of a NI 43-101 compliant mineral resource estimate is another important step
forward in our objective to list on the TSX,” said Keith Larsen, Chief Executive
Officer of U.S. Energy Corp.  “We remain committed to advancing this
project as we continue to seek out potential partners with the added expertise
and resources to take it through the next phase of development.”

      

      To date,
more than $160 million has been spent on engineering, design, technical studies,
permitting and approximately 200,000 feet of core drilling.

      

      To
support its expanded capital market initiatives, the Company has also retained
the Equicom Group Inc., a leading provider of investor relations and related
corporate communication services in Canada.

      

      “We
recognize that the TSX is one of the preeminent resource exchanges in the
world,” said Mark Larsen, President of U. S. Energy Corp.  “Obtaining
a listing will allow us to access a broader minerals sector
audience.  Barring unforeseen delay, we expect to list on the TSX by
the end of October 2008 or sooner,” he added.

      

      

      * * * *
*

      

       

      
        
          
          

        

        
          
          

        

        
          
            
              

            

          

          
            Press
Release

            July 8, 2008

            Page 2 of 3

          

        

      

      
 

      About
U.S. Energy Corp.

      

      U.S.
Energy Corp. is a diversified natural resource company with interests in
molybdenum, oil and gas, gold, and real estate.  The Company is
headquartered in Riverton, Wyoming, and its common stock is listed on The NASDAQ
Capital Market under the symbol “USEG”.

      

      

      Disclosure
Regarding Mineral Resources

      Under
SEC and Canadian Regulations;

      and
Forward-Looking Statements

      

      The
Company owns or may come to own stock in companies which are traded on foreign
exchanges, and may have agreements with some of these companies to acquire
and/or develop the Company’s mineral properties.  An example is Sutter
Gold Mining Inc.  These other companies are subject to the reporting
requirements of other jurisdictions.

      

      United
States residents are cautioned that some of the information available about our
mineral properties, which is reported by the other companies in foreign
jurisdictions, may be materially different from what the Company is permitted to
disclose in the United States.

      

      This
news release includes statements which may constitute “forward-looking”
statements, usually containing the words “believe,” “estimate,” “project,”
“expect," or similar expressions.  These statements are made pursuant
to the safe harbor provision of the Private Securities Litigation Reform Act of
1995.  Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements.  Factors that would cause or contribute to
such differences include, but are not limited to, future trends in mineral
prices, the availability of capital, competitive factors, and other
risks.  By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revision or changes
after the date of this release.

      

      For
further information on the differences between the reporting limitations of the
United States, compared to reports filed in foreign jurisdictions, and also
concerning forward-looking statements, please see the Company’s Form 10-K
(“Disclosure Regarding Forward-Looking Statements”; “Disclosure Regarding
Mineral Resources under SEC and Canadian Regulation”; and “Risk Factors”); and
similar disclosures in the Company’s Forms 10-Q.

      

      *
* * *

      

      For
further information, please contact:

      Keith
G. Larsen, CEO or Mark J. Larsen, President

      U.S.
Energy Corp. (307) 856-9271Exhibit 10.1

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (this "Agreement") is entered into  as
of  the  Effective Date set forth on Schedule A by and between  Halifax
Corporation  of  Virginia,  a  Virginia Corporation  ("Borrower"),  and
Textron  Financial  Corporation ("Lender").  All  terms  used  in  this
Agreement and defined in the Uniform Commercial Code as in effect  from
time  to  time  in Oregon (the "UCC") and not otherwise defined  herein
shall  have the meanings assigned to such terms in the UCC.  References
to  a  "person"  in this Agreement are not limited to individuals,  but
also  include any corporation, partnership, limited liability  company,
trust  or any other entity. References to "including" in this Agreement
shall not be construed to be limited but shall mean "including, but not
limited to" or "including, without limitation."

In  reliance  upon  the representations, warranties  and  covenants  of
Borrower  set forth in this Agreement, Lender agrees with  Borrower  as
follows:

1.   LOANS, RENEWAL AND TERMINATION

  Lender,  subject  to  the terms and conditions  hereof,  will  extend
credit to Borrower up to the Credit Limit set forth on Schedule A under
a   revolving  credit  facility  (the  "Credit  Facility").    Borrower
unconditionally promises to pay when due the principal  amount  of  all
Revolving  Loans  (defined in Section 1.1), and all  other  Obligations
(defined in Section 1.7) incurred by it in accordance with the terms of
this Agreement.

  1.1. Revolving Credit Facility.  Provided that there has not been  an
Event  of  Default  on the part of Borrower under  this  Agreement  and
Borrower's financial condition and business prospects are acceptable to
Lender,  Lender  will,  subject to the terms  and  conditions  of  this
Agreement,  make  loans  to  Borrower (the  "Revolving  Loans")  in  an
aggregate  amount at any time outstanding not to exceed  the  Borrowing
Base  (as defined in this Section).  The Borrowing Base shall be  equal
to  the  lesser of:  (a) the Credit Limit set forth on Schedule  A;  or
(b) the sum of:  (i) up to the Eligible Accounts Advance Rate set forth
on  Schedule A of the aggregate amount of Eligible Accounts (as defined
in  Section  1.2) and (ii) up to the Eligible Pre-Billed Accounts  Rate
set  forth  on  Schedule A of the aggregate amount   of  Eligible  Pre-
Billed Accounts (as defined in Section 1.3), in an amount not to exceed
the  Eligible  Pre-Billed Accounts Sublimit set forth  on  Schedule  A.
Lender may establish such reserves against the Borrowing Base as Lender
determines  in  its  sole discretion are necessary to  reflect  events,
conditions,  contingencies or risks which may affect the Collateral  or
the  financial  condition of Borrower.  In the event Lender  determines
that  Borrower's  Dilution (as defined below) at any time  exceeds  the
Maximum  Dilution Percentage set forth on Schedule A, Lender may,  upon
notice  to Borrower, reduce the Eligible Accounts Advance Rate to  such
lesser  amount  as  Lender  determines in  its  sole  credit  judgment.
"Dilution"  means, for any period, the percentage obtained by  dividing
(i)  the sum of non-cash credits against Accounts of Borrower for  such
period by (ii) total invoiced sales of Borrower for such period.

1.2. Eligible Accounts.  "Eligible Accounts" is that portion of
Borrower's Accounts (and shall not include Instruments, Chattel Paper
or General Intangibles) arising from the sale and delivery of Inventory
or from services rendered by Borrower in the ordinary course of
Borrower's business that Lender determines, in Lender's sole
discretion, is to be included in the calculation of the Borrowing Base.
An Account shall not be an Eligible Account unless such Account:
(i) is subject to Lender's perfected first priority security interest
and no other encumbrance, claim, assignment, levy, subrogation right,
lien or other security interest; (ii) is evidenced by an invoice or
other evidence satisfactory to Lender; (iii) is unconditionally due and
payable in U.S. dollars; and (iv) conforms to the warranties regarding
Accounts contained in this Agreement.  Without limiting Lender's
absolute discretion, the following Accounts will not be Eligible
Accounts:  (a) Accounts that are unpaid more than sixty (60) days from
their respective original due dates; (b) Accounts that are unpaid more
than ninety (90) days from their respective original invoice dates;
(c) Accounts relating to any Account Debtor, or affiliated group of
Account Debtors, for which 50% or more of the dollar amount of such
Accounts are not Eligible Accounts pursuant to clause (a) above or are
unpaid more than sixty (60) days from their respective original invoice
dates; (d) Except to the extent otherwise permitted with respect to
Account Debtors listed in Schedule 1.2 attached hereto (as such
schedule may be amended from time to time by a writing signed by
Lender), Accounts owed by an Account Debtor, or affiliated group of
Account Debtors, which is obligated to Borrower respecting Accounts,
the aggregate unpaid balance of which exceeds the lesser of $500,000 or
the Maximum Concentration Percentage set forth on Schedule A of the
aggregate unpaid balance of all otherwise Eligible Accounts owed to
Borrower at such time by all of Borrower's Account Debtors, but only to
the extent of such excess; (e) Accounts owed by an Account Debtor to
which Borrower is indebted in any way, or which is subject to any
contra account or any right of setoff or recoupment by the Account
Debtor; (f) Accounts relating to any Account Debtor who has, or claims
to have, any defense, right of set-off or counterclaim; (g) Accounts
relating to any Account Debtor located outside of the United States of
America, unless such Accounts are supported by security acceptable to
Lender, or to any Account Debtor located in any state requiring that
Borrower qualify to do business in such state or file a Notice of
Business Activities Report or similar document in order to bring suit
or otherwise enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state, unless Borrower
has qualified to do business in such state, has properly filed a Notice
of Business Activities Report or similar document as appropriate for
the then applicable year, or is exempt from such filing requirement;
(h) Accounts for which the Account Debtor is an employee, agent, owner,
partner or shareholder of Borrower (an "Interested Party") or for which
the Account Debtor controls, is controlled by, or is under common
control with Borrower or an Owner of Borrower (a "Borrower Affiliate");
(i) Accounts for which the Account Debtor is the government of the
United States of America, any state, or any political subdivision of
either of the foregoing, unless Borrower assigns its right to payment
of such Accounts to Lender in compliance with the provisions of the
Assignment of Claims Act of 1940 (the "ACA") or any other applicable
laws and the governmental entity acknowledges such assignment in
writing; (j) Accounts arising from the sale of Goods or rendition of
services by Borrower to any Account Debtor purchasing such Goods or
services primarily for personal, family or household purposes, or on a
sale or return or other conditional basis; (k) Accounts for which the
Account Debtor's financial condition is unsatisfactory to Lender or for
which the Account Debtor is the subject of bankruptcy, insolvency,
receivership or other similar proceedings; (l) Accounts that (i) arise
from uncompleted performance on the part of Borrower, (ii) constitute
progress billings, advance billings, any retention amount or retainage,
(iii) are a guaranteed sale, a sale and return, or other repurchase or
return basis; (iv) are a "bill and hold" or involve a sale of Goods,
and all such Goods have not been lawfully shipped and invoiced to the
Account Debtor (or if requested by Lender, copies of all invoices,
together with all shipping documents and delivery receipts evidencing
such shipment have not been delivered to Lender) or (v) arise from an
Account Debtor to whom Goods or services are provided on a "cash on
delivery" or C.O.D. basis;  (m) Accounts that Lender believes are, or
will be, impaired as the result of actual or potential liens, claims or
other risks; or (n) Accounts for which the Virginia Department of
Transportation is the Account Debtor.

1.3. Eligible Pre-Billed Accounts. "Eligible Pre-Billed Accounts" is
that portion of Borrower's Accounts arising from invoices for services
to be performed during the 30-day period following the invoice date
which (except for the fact that performance is uncompleted) would
otherwise be considered an Eligible Account.

1.4. Requests for Revolving Loans.  Borrower may, from time to time,
request Revolving Loans in an amount which, when added to the amount of
outstanding Revolving Loans, does not exceed the lesser of (i) the
Revolving Credit Limit less Reserves, or (ii) the Borrowing Base less
Reserves.  Any such request shall be made by an authorized employee of
Borrower and shall be accompanied by a borrowing base certificate.
Borrower shall make no more than 1 request for Revolving Loans per
business day.  Lender shall process such requests on the same business
day if received before 10:00 a.m. (Portland, Oregon time) and on the
next business day if received after 10:00 a.m. (Portland, Oregon time).
Borrower shall reimburse Lender for and hold Lender harmless from any
loss or expense which Lender may sustain or incur as a consequence of
the failure of Borrower to borrow Revolving Loans after Borrower has
given (or is deemed to have given) notice thereof to Lender, including
any such loss or expense arising from the liquidation or re-employment
of funds obtained by Lender to maintain the Revolving Loans or from
fees payable to terminate the deposits from which such funds were
obtained.

1.5. Intentionally Deleted.

1.6. Payment of Interest and Principal.  Interest shall accrue on the
outstanding principal balance of the Revolving Loans at a variable
rate, adjusted daily, equal to the Interest Rate set forth on
Schedule A.  All interest accrued on the outstanding principal balance
of the Revolving Loans shall be calculated on the basis of a year of
360 days and the actual number of days elapsed in each month.  Borrower
shall pay accrued interest monthly, in arrears, on the first day of the
month following the month in which such interest accrues.  Accrued
interest, and the fees described in Section 2 hereof, will be added to
the unpaid principal amount of the  Revolving Loans on the day such
amounts are due to the extent permitted by law, unless Lender elects to
invoice Borrower for such amounts.  Immediately upon the occurrence of
an Event of Default on the part of Borrower under this Agreement and
for so long as such default continues, Borrower shall pay interest on
the unpaid principal balance of the Revolving Loans at a rate of
interest equal to the Default Interest Rate set forth on Schedule A.
Borrower promises to and shall pay all the outstanding principal amount
of all Revolving Loans and all other Obligations (defined in Section
1.7 below) on the date that the Credit Facility is terminated under
Section 1.8 or 10.2 of this Agreement.  Notwithstanding the outstanding
balance of Borrower's Revolving Loans or the actual interest due on the
unpaid principal balance thereof, Borrower shall pay a minimum interest
charge each month on the Revolving Loans equal to the Minimum Monthly
Interest Charge set forth on Schedule A.

1.7. Allocation of Payments and Limit of Interest.  All revenues,
payments and collections received by Lender from or on behalf of
Borrower or from the Collateral shall be applied to the Obligations (as
defined below) under this Agreement and/or under the terms of any other
agreements between Borrower and Lender or its affiliates (the "Other
Agreements"), in such manner as Lender shall determine in Lender's sole
discretion.  "Obligations" means all Revolving Loans, advances,
indebtedness, principal, interest (including any interest that but for
the provision of Title 11 of the United States Code (as in effect from
time to time, the "Bankruptcy Code") would have accrued), contingent
obligations, obligations, fees, charges, costs, expenses,
indemnification obligations, lease payments and liabilities owing, or
due or payable by Borrower or any guarantor of the Obligations or any
person granting security for the Obligations to Lender or its
affiliates of any kind or nature, present or future, whether or not
evidenced by any note, draft, letter of credit, guaranty, instrument or
document and whether arising under this Agreement or any other Loan
Document (as defined in Section 6.1) or any Other Agreement, whether
direct or indirect, acquired by assignment or otherwise, absolute or
contingent, liquidated or unliquidated, due or to become due, now
existing or arising hereafter and however acquired or incurred,
(including late charges, collection costs, attorneys' fees and other
amounts chargeable under this Agreement, any other Loan Document or any
Other Agreement), and any and all amendments, extensions, or other
modifications thereof and therefore, both prior to and subsequent to
any bankruptcy or other insolvency proceedings.  It is the intention of
Lender not to charge interest pursuant to this Agreement the other Loan
Documents or the Other Agreements at a rate in excess of the highest
rate permitted by applicable law.  In making such determination,
interest on any outstanding principal balance shall be spread over the
entire period that such principal balance is outstanding.  Any interest
charges paid by Borrower to Lender in excess of the highest rate
permitted by applicable law shall be applied to reduce the principal
amount outstanding under the Revolving Loans and/or other amounts owing
under this Agreement the other Loan Documents or the Other Agreements.
After such application, any remaining excess shall be refunded to
Borrower.

1.8. Renewal and Termination.  The Credit Facility is for the Initial
Term set forth on Schedule A and will be automatically renewed for
additional one year periods (each, a "Renewal Term"), unless terminated
by Lender or Borrower in accordance with the terms of this Section.
Borrower may terminate the Credit Facility, effective at the end of the
Initial Term or any Renewal Term, by giving written notice of such
termination to Lender at least ninety (90) days prior to the end of the
relevant term.  Lender may terminate the Credit Facility:  (i) at the
expiration of the Initial Term or at the end of each Renewal Term by
giving written notice of such termination to Borrower at least sixty
(60) days prior to the effective date of such termination; and (ii) at
any time during the existence of an Event of Default.  Borrower agrees
that sixty (60) days is a commercially reasonable period for Borrower
to find an alternate source of financing for its business.
Notwithstanding the foregoing, Borrower may terminate the Credit
Facility in connection with Borrower's prepayment of the entire
principal balance of the Revolving Loans, provided that Borrower pays
the Early Termination Fee described in Section 2.5 (subject to the
provisions of this Agreement that survive such termination).  In the
event of any termination of the Credit Facility, Borrower shall be
required to pay in full in cash, no later than the effective date of
such termination, the Revolving Loans and all other Obligations owing
to Lender pursuant to this Agreement, the other Loan Documents and the
Other Agreements.  Notwithstanding the payment in full of the Revolving
Loans, all accrued and unpaid interest and fees, any early termination
fee, and all other Obligations outstanding, Lender shall not be
required to terminate its security interests against the Collateral
unless, with respect to any loss or damage Lender may incur as a result
of dishonored checks or other items of payment received by Lender from
Borrower or any Account Debtor and applied to the Obligations, Lender
shall (i) have received a written agreement, executed by Borrower and
by any new lender whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Lender from
any such loss or damage; or (ii) have retained such monetary reserves
and its security interest for such period of time as Lender, in its
reasonable discretion, may deem necessary to protect Lender from any
such loss or damage.

1.9. Intentionally Deleted.

2.   FEES

  2.1.  Monthly  Servicing Fee.  Borrower agrees to pay to  Lender  the
Monthly Servicing Fee set forth on Schedule A for each month or partial
month  during  the term of this Agreement.  Such Monthly Servicing  Fee
shall be payable on the first day of each month during the term of this
Agreement, including any and all renewal terms.  The Monthly  Servicing
Fee shall be earned by Lender, in full, on the due dates therefore.

2.2. Credit Facility Fees.  In order to induce Lender to enter into
this Agreement and to consider Borrower's requests for Revolving Loans,
Borrower agrees to pay to Lender the Credit Facility Fees set forth on
Schedule A.  The Credit Facility Fees shall be earned by Lender, in
full, on the due dates therefore.

2.3. Field Examination Fee.  For each field examination of the books,
records, inventory or other assets of Borrower performed by one or more
employees or agents of Lender, Borrower shall pay to Lender a field
examination fee set forth in Schedule A (the "Field Examination Fee").
Lender may perform field examinations once each quarter, unless an
Event of Default (as defined in Section 10.1) has occurred, in which
case the frequency of Lender's field examinations shall not be limited.
Each Field Examination Fee shall be payable by Borrower to Lender, in
whole or in part, as appropriate, on the date(s) on which such field
examination was performed.

2.4. Unused Credit Facility Fee.  In consideration of Lender's
administrative and other costs incurred in making the Revolving Loans
available to Borrower, Borrower shall pay to Lender, on the first day
of the month following the date of this Agreement and on the first day
of each month thereafter, the Unused Credit Facility Fee set forth on
Schedule A.

2.5. Early Termination Fee.  The unpaid principal balance of the
Revolving Loans may be prepaid in whole or in part by Borrower at any
time.  Notwithstanding the preceding, if for any reason the Credit
Facility is terminated prior to the end of the then current term
(whether the Initial Term or any Renewal Term), in view of the
impracticality and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation
of lost profits of Lender as a result thereof, Borrower agrees to pay
to Lender, upon the effective date of such termination, the Early
Termination Fee set forth on Schedule A.  Such early termination fee
shall be presumed to be the amount of damages sustained by Lender as a
result of such early termination and Borrower agrees that it is
reasonable under the circumstances currently existing.  In addition,
Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Section 10.1(h) hereof,
even if Lender does not exercise its right to terminate the Credit
Facility, but elects, at its option, to provide financing to Borrower
or permits the use of cash collateral under the Bankruptcy Code.  The
Early Termination Fee provided for in this Section 2.5 shall be deemed
included in the Obligations.

2.6. Lockbox Maintenance Fee.  Borrower agrees to pay Lender the
Lockbox Maintenance Fee as set forth on Schedule A.

2.7. Wire/ACH Transfer Fee.  For each wire or ACH transfer initiated by
Lender to Borrower, or for the benefit of Borrower, Borrower shall pay
to Lender the Wire/ACH Transfer Fee set forth on Schedule A.

2.8. Delinquent Reporting Fee.  For each item that is late, Borrower
agrees to pay Lender the Delinquent Reporting Fee set forth on
Schedule A for each day that Borrower is late in delivering to Lender
any of the financial statements required under Section 7.1 or any of
the Collateral reporting information required under Section 7.7.

2.9. Overadvance Fees.  Borrower shall pay to Lender an Overadvance fee
in the amount of $500 for each day or portion thereof during which an
Overadvance exists, regardless of how the Overadvance arises and
regardless of whether or not the Overadvance has been consented to by
Lender.  "Overadvance" means the amount by which the outstanding
principal balance of the Revolving Loans exceeds the lesser of the
(i) Revolving Credit Limit less Reserves, or (ii) the then-existing
Borrowing Base less Reserves.

3.   GRANT OF SECURITY INTEREST

  3.1.  Grant  of  Security  Interest and  Description  of  Collateral.
Borrower grants to Lender a first priority security interest in all  of
the  personal  property of Borrower, including  all  of  the  following
property  of  Borrower,  whether now owned  or  existing  or  hereafter
acquired,  created  or arising, and wherever now or  hereafter  located
(collectively  the  "Collateral"):  (a) all Accounts;  (b)  all  liens,
security  interests, rights and remedies relating to  any  Accounts  or
other  Collateral, including (i) rights and remedies under or  relating
to guaranties, contracts of suretyship, letters of credit and insurance
related  to  any  Collateral,  (ii)  rights  of  stoppage  in  transit,
replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, (iii) all goods or other Collateral the sale or lease of
which  has  given  rise  to any Account or other Collateral,  including
returned,  repossessed and reclaimed goods, and (iv)  deposits  by  and
property of any Account Debtor or other person securing obligations  to
Borrower;  (c) all General Intangibles (including payment  intangibles,
patents,  trademarks,  service marks, copyrights,  trade  names,  trade
secrets,  choses in action and other claims), Chattel Paper,  Documents
and  Instruments; (d) all monies, securities, credit balances, deposits
and other property of Borrower now or hereafter held or received by  or
in  transit  to  Lender or any of its affiliates;  (e)  all  Inventory;
(f)  all Deposit Accounts; (g) all Investment Property; (h) all Letter-
of-Credit  Rights; (i) all Commercial Tort Claims, if  any,  listed  on
Schedule  6.3  attached  hereto; (j) all  Goods,  including  Equipment,
vehicles,  furniture,  and  Fixtures, together  with  all  attachments,
accessions  and property now or hereafter affixed thereto  or  used  in
connection  therewith, and all substitutions and replacements  thereof;
(k)  all  books and records of every kind, nature and medium (including
computerized  data) relating to any of the Collateral or to  Borrower's
business;  and (l) all products and Proceeds of the foregoing,  in  any
form, including insurance proceeds and claims against third parties for
loss of or damage to any or all of the foregoing.

3.2. Obligations Secured by the Collateral.  Each item of Collateral
shall secure the payment and performance by Borrower of all present and
future indebtedness and Obligations owing to Lender and its affiliates
of every kind and nature whatsoever, whether under this Agreement, the
other Loan Documents, the Other Agreements or otherwise.

4.   PERFECTION OF SECURITY INTERESTS

4.1. Filing of Financing Statement.  Borrower authorizes Lender to file
at any time and from time to time financing statements (whether initial
financing statements, continuation statements or amendments) and  other
notices of Lender's rights to the Collateral in such filing offices  as
Lender deems appropriate to evidence Lender's security interests in the
Collateral.  Such financing statements may include an "all  assets"  of
debtor or "all personal property" of debtor collateral description.  In
addition,  Borrower hereby ratifies and approves any and all  financing
statements  previously filed by Lender relating  to   Borrower  or  the
Collateral.

4.2. Possession.  Borrower shall have possession of the Collateral,
except where expressly otherwise provided in this Agreement or where
Lender chooses to perfect its security interest by possession of
Instruments, Chattel Paper, Investment Property or similar Collateral
in addition to the filing of a financing statement or other notices.
Where Collateral is in the possession of a third party, Borrower will
join with Lender in notifying the third party of Lender's security
interest and assist Lender in obtaining an acknowledgment from the
third party that the third party is holding the Collateral for the
benefit of Lender.

4.3. Control.  Borrower will cooperate with and assist Lender in
obtaining control (with any agreements establishing control to be in
form and substance satisfactory to Lender) with respect to Collateral
consisting of:  (a) Deposit Accounts; (b) Letter-of-Credit rights;
(c) Investment Property; and (d) Electronic Chattel Paper.

4.4. Marking of Chattel Paper.  Borrower will not create any Chattel
Paper without placing a legend on the Chattel Paper acceptable to
Lender indicating that Lender has a security interest in the Chattel
Paper.

5.   REVENUES, ACCOUNTS AND COLLECTIONS

  5.1. Borrower's Revenues.  Borrower shall pay to Lender, or as directed
by Lender from time to time, all revenues received by Borrower from all
sources,  whether  such revenues are received in cash,  by  wire,  ACH,
check or by other instrument (the "Revenues").  Following the date upon
which  Lender receives credit for collected funds, Lender shall,  after
the  number of Float Days set forth on Schedule A, apply the amount  of
such  funds to the principal balance of the Revolving Loans;  provided,
however, that such Float Day collections shall be deemed to be credited
to Borrower's account upon the date on which Lender receives credit for
such  funds  for  the  purpose of determining  availability  hereunder.
Lender  shall be entitled to charge Borrower for the Float Days at  the
Interest Rate on all collections that are received.  This float  charge
is  acknowledged by the parties as an integral aspect of the pricing of
the  financing and shall apply irrespective of whether or not there are
any outstanding Obligations.

5.2. Collection of Accounts.  Borrower shall utilize a lockbox
arrangement for collection of Accounts at a bank designated by Lender
and pursuant to documentation satisfactory to Lender.  Borrower shall
instruct all Account Debtors to make all payments directly to the
address established for such service.  If, notwithstanding such
instructions, Borrower receives any proceeds of Accounts, draws on
letters of credit or other Collateral, it shall receive such payments
as Lender's trustee, and shall immediately deliver such payments to
Lender in their original form, duly endorsed in blank.  All collections
received in the lockbox shall be subject to Lender's sole control
pursuant to documentation satisfactory to Lender and shall be applied
by Lender on account of the Revolving Loans and other Obligations of
Borrower.  Lender or its designee may, at any time, in Lender's sole
discretion, collect Accounts directly from the related Account Debtors
and charge the collection costs and expenses to Borrower as additional
Revolving Loans.

5.3. Costs of Collection.  Borrower will pay all costs associated with
the collection of Accounts and other Collateral and will cooperate
fully with Lender to insure that the Accounts are timely collected and
paid to Lender.

5.4. Statements.  Lender shall deliver to Borrower each month a
statement(s) showing all Revolving Loans, charges and payments.  Each
such statement shall be subject to subsequent adjustment by Lender but
shall, absent manifest errors or omissions, be considered correct and
deemed accepted by Borrower and conclusively binding upon Borrower
unless Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within thirty (30) days after the date
such statement has been mailed by Lender to Borrower.  Any such notice
from Borrower to Lender shall only constitute an objection to the items
specifically identified.

6.   REPRESENTATIONS AND WARRANTIES

  Borrower  represents and warrants to Lender, as of  the  date  hereof
and  as  of  the  various times that Lender makes  Revolving  Loans  to
Borrower, as follows:

  6.1.  Existence, Authority and Enforceability; State of Organization;
Name.   Borrower  is  duly  organized, validly  existing  and  in  good
standing  under  the  laws of the State or Commonwealth  identified  on
Schedule  6.1  and its state organizational identification  number  and
employer  tax  identification number (as applicable) are identified  on
Schedule   6.1.    Borrower  is  qualified  to  do  business   in   all
jurisdictions in which the nature of its business or the  ownership  of
its  property so requires.  Borrower has no Borrower Affiliates  except
as  set  forth on Schedule 6.1.  Borrower has all requisite  power  and
authority  to  borrow the Revolving Loans, to execute and deliver,  and
perform  its obligations under, all agreements and documents associated
with the Revolving Loans (the "Loan Documents"), and to own and operate
its  property  and  carry  on its business as  presently  conducted  by
Borrower.   Each  of  the  Loan Documents  has  been  duly  authorized,
executed  and  delivered  by  Borrower  and  is  a  valid  and  binding
obligation of Borrower, enforceable against Borrower in accordance with
its  terms.  Borrower's exact legal name is as set forth in  the  first
paragraph of this Agreement and as identified on Schedule 6.1.   Except
as  set  forth  on Schedule 6.1, Borrower has not, during  the  past  5
years, been known by or used any trade name or fictitious name, or been
a   party  to  any  merger  or  consolidation,  or  acquired   all   or
substantially all of the assets of any person, or acquired any  of  its
property  outside  of  the  ordinary  course  of  business,   or   been
incorporated  or registered in any jurisdiction other  than  the  state
identified on Schedule 6.1 as its current jurisdiction of incorporation
or  registration.  The outstanding shares of equity issued by  Borrower
have been duly and validly issued and are fully paid and nonassessable,
and the owners of five percent (5%) or more of such stock or membership
interests  are  set  forth on Schedule 6.1 and there  are  no  existing
warrants,  options,  or commitments of any kind or  nature  convertible
into  capital  stock or membership interest of Borrower except  as  set
forth on Schedule 6.1.

6.2. No Default or Conflict.  Borrower is not in default under any
indenture, mortgage, deed of trust, agreement or other instrument to
which Borrower is a party or by which Borrower or any of its property
is bound.  All approvals and consents from all parties required in
connection with the execution and delivery of the Loan Documents, and
the performance of the transactions contemplated thereby, have been
obtained and all required notices or other filings have been made.  The
execution and delivery of the Loan Documents, and the performance of
the transactions contemplated thereby, do not violate, conflict with,
result in the breach of, or constitute a default under any applicable
law, the organizational documents of Borrower or any agreement or
instrument to which Borrower is a party, or result in the creation or
imposition of any lien, charge or encumbrance upon any assets of
Borrower (other than Lender's lien pursuant to this Agreement),
pursuant to the terms of any agreement or instrument to which Borrower
is a party or by which Borrower or any of its assets are bound.

6.3. Absence of Litigation.  Except as set forth on Schedule 6.3, there
are no actions, proceedings or investigations pending or threatened
against Borrower, whether or not covered by insurance, which may
result, either individually or in the aggregate, in any material
adverse change in the assets, financial condition or business prospects
of Borrower.  Borrower has no Commercial Tort Claims pending against
any person or entity other than those set forth on Schedule 6.3
attached hereto, as such Schedule 6.3 may be amended from time to time.

6.4. Taxes and Returns.  Borrower has timely filed all tax returns that
Borrower is required by law to file or has obtained valid extensions.
All taxes and other sums owing by Borrower to any governmental
authority have been fully paid and Borrower maintains adequate reserves
to pay such tax liabilities as they accrue.

6.5. Lien Priority and Nature of Certain Collateral.  Lender has a
perfected first priority security interest in the Collateral and the
Collateral is free of any lien, encumbrance or adverse interest of any
kind whatsoever, with the exception of:  (i) any prior security
interests identified on Schedule 6.5 in the Collateral described on
Schedule 6.5 (the "Permitted Prior Encumbrances"), (ii) any security
interests to finance Purchase Money Equipment, and liens for taxes,
assessments or similar charges incurred in the ordinary course of
business that are not yet due and payable, or encumbrances consisting
of zoning restrictions, easements, or other restrictions on the use of
real property, none of which materially impairs the use of such
property by Borrower in the operation of its business, and none of
which is violated in any material respect by existing or proposed
structures or land use; and (iii) liens permitted under the terms of
any Intercreditor Agreement (defined in Schedule 9.1(e)) (collectively,
the "Permitted Liens").  Borrower has good title to all of the
Collateral which Borrower has indicated to Lender is the property of
Borrower.  Each Account which Borrower represents to Lender as an
Eligible Account or Eligible Pre-Billed Account has arisen from the
sale and delivery of Inventory or from services rendered or to be
rendered by Borrower, is genuine, complete and, in all other respects,
what it purports to be, and is not otherwise ineligible under the
standards set forth in Section 1.2 of this Agreement.

6.6. Collateral and Business Locations.  Borrower's principal place of
business or, if Borrower has more than one principal place of business,
Borrower's chief executive office, is located at the address specified
on Schedule 6.6.  All books and records pertaining to the Collateral
are kept by Borrower at its principal place of business or, if Borrower
has one, its chief executive office.  Borrower conducts its business,
and the Collateral is located at, Borrower's business locations
identified on Schedule 6.6.  Except as set forth in Schedule 6.6,
during the past 5 years Borrower's principal place of business, chief
executive office, and business locations have continually been as
identified on Schedule 6.6.

6.7. Financial and Other Information.  All financial and other
information furnished by Borrower to Lender represents true and correct
extracts from the books and records of Borrower.  Financial statements
furnished by Borrower to Lender present fairly the financial condition
of Borrower as of the date of such statements and for the relevant
periods then ended.

6.8. Compliance with Laws.  Borrower is in compliance with all
applicable federal, state and local laws, regulations and ordinances,
including all laws relating to the environment or the health and
welfare of the general public.  No "hazardous substance," as defined in
the Comprehensive Environmental Response, Compensation, and Liability
Act, has been generated, treated, stored, or disposed of at, or
discharged from, any of Borrower's business locations or any of
Borrower's past property or operations, except as authorized pursuant
to applicable law and disclosed by Borrower to Lender in writing.

6.9. Intangible Assets.  Borrower owns or possesses the right to use
all trade secrets, trademarks, trade names, copyrights, patents, patent
rights, service marks, computer software, licenses and other intangible
assets, if any, used in the conduct of Borrower's business as presently
operated, and no such property, to the best knowledge of Borrower
following due inquiry thereof, conflicts with the valid trademark,
trade name, copyright, patent right or other intangible asset of any
other person.

6.10.     Employee Pension Benefit Plans.  Any and all Employee Pension
Benefit Plans, as defined in the Employee Retirement Income Security
Act of 1974 as amended ("ERISA"), of Borrower meet, as of the date
hereof, the minimum funding standards of 29 U.S.C.A. Section 1082
(Section 302 of ERISA), and no Reportable Event or Prohibited
Transaction, as defined in ERISA, has occurred with respect to any
Employee Benefit Plan (as defined in ERISA) of Borrower.

7.   AFFIRMATIVE COVENANTS

  Borrower covenants and agrees with Lender as follows:

  7.1.  Financial Statements.  Borrower shall deliver to Lender, within
ninety  (90)  days following the end of each of its fiscal  years,  the
Financial  Statements set forth on Schedule A.  Borrower shall  deliver
to  Lender  such  other financial information as Lender shall  request,
including,  (a)  within thirty (30) days after the end of  each  month,
reasonably   detailed   monthly  and  fiscal   year-to-date   financial
statements  prepared  in accordance with generally accepted  accounting
principles,  certified  by the chief financial  officer,  president  or
chief  executive officer of Borrower as presenting fairly the financial
condition  of  Borrower,  which  shall  also  include  a  covenant  and
compliance  certificate in form satisfactory to Lender that provides  a
calculation  of, and certification of Borrower's compliance  with,  the
financial  covenants described in Section 8.6 hereof and the status  of
all  other monetary covenants set forth in Sections 7 and 8 hereof  for
such  period,  (b)  no  later than April 30th of  each  calendar  year,
completed tax returns together with all schedules thereto provided that
if  Borrower has not filed its tax returns and schedules by such  time,
Borrower  shall deliver evidence that it has obtained an extension  for
such  filing and shall deliver copies of such tax returns and schedules
thereto  within fifteen (15) days after such returns and schedules  are
actually  filed  but in any event no later than October  31st  of  each
calendar  year, and (c) at least sixty (60) days prior to  the  end  of
Borrower's fiscal year, an annual operating budget showing a  projected
income statement, balance sheet and cash flows as of each month end for
the  forthcoming fiscal year.  In addition to the above, Borrower shall
deliver  final audited financial statements for the fiscal year  ending
March  31, 2008 to Lender within 45 days after the Effective Date,  and
such  financial  statements  shall be satisfactory  to  Lender  in  all
respects and shall not be materially different (as determined by Lender
in   its  sole  discretion)  from  the  internal  financial  statements
previously delivered to Lender by Borrower.

7.2. Books and Records.  Borrower shall keep accurate and complete
records of the Collateral and permit Lender to:  (a) visit Borrower's
business locations at intervals to be determined by Lender;
(b) inspect, audit and make extracts from or copies of Borrower's
books, records, journals, receipts, computer tapes and disks; and
(c) temporarily remove any of the items identified in the foregoing
clause (b), where necessary, for the purpose of making copies thereof.
All governmental authorities are authorized to furnish Lender with
copies of reports of examinations of Borrower made by such parties.
Banks, Account Debtors and other third parties with whom Borrower has
contractual relationships pertaining to the Collateral or the Loan
Documents, are authorized to furnish Lender with copies of such
contracts and related materials.  Lender is authorized, in its own name
or any other name, to communicate with Account Debtors in order to
verify the existence, amount and terms of any Account.

7.3. Additional Documentation.  Borrower shall execute and deliver to
Lender all additional documents, which Lender may, from time to time,
determine are necessary or appropriate to evidence the Revolving Loans
or to continue or perfect Lender's security interest in the Collateral.

7.4. Existence, Name and Chief Executive Office.  Borrower shall
maintain its corporate existence in good standing and shall deliver to
Lender written notice, at least sixty (60) days in advance, of any
proposed change in any of the following:  Borrower's trade name (or the
use of any new trade names), Borrower's business locations, the
location of Borrower's principal place of business or chief executive
office, the location of any Inventory or Equipment, or the location of
Borrower's books and records.  Borrower shall execute any and all
documents that Lender requests in connection with any such change.

7.5. Compliance with Laws and Taxes.  Borrower shall comply with all
applicable laws and regulations.  Borrower shall pay all real and
personal property taxes, assessments and charges, and all franchise,
income, unemployment, social security, withholding, sales and all other
taxes assessed against Borrower or the Collateral, at such times and in
such manner so as to avoid any penalty from accruing against Borrower
or any lien or charge from attaching to the Collateral.  Borrower shall
promptly deliver to Lender, upon request, receipted bills evidencing
payment of such taxes and assessments.

7.6. Performance of Obligations.  Borrower shall perform, in a timely
manner, all of its obligations pursuant to leases, mortgages, deeds of
trust or other agreements to which Borrower is a party, and shall pay
when due all debt owed by Borrower and all claims of mechanics,
materialmen, carriers, landlords, warehousemen and other like persons.

7.7. Reporting as to Revenues and Accounts.  With such frequency as
Lender shall direct, Borrower shall deliver to Lender such information
as Lender shall request with respect to the Revenues, Accounts and
Inventory, including:  (a) no less than once per week, a borrowing base
certificate based on the Accounts as of the end of the preceding week,
each borrowing base certificate to be accompanied by a detailed summary
of the sources of all of the Revenues of Borrower, including sales of
Inventory and credits and collections associated with Accounts; (b) no
later than the 15th of each month, a detailed reconciliation of the
last borrowing base of the previous month to the aging of Accounts for
the same period; (c) no later than the 15th of each month, detailed
schedules showing the aging of Accounts and Borrower's accounts payable
as of the end of the preceding month; (d) no later than the 15th of
each month, a list of all invoices over $5,000, with copies of such
invoices and proof of delivery by Borrower of the goods subject to such
invoice; and (e) no later than ten (10) days following Lender's
request, a complete and updated list of Borrower's customers, including
the name, address and telephone number of each customer.
  Borrower  shall  notify  Lender immediately  if:   (a)  any  Eligible
Account  or  Eligible Pre-Billed Account arises out of a contract  with
the  United  States of America, any State, or any political subdivision
of  either of the foregoing, and Borrower shall execute all instruments
and  take  all steps necessary to insure that all amounts  due  and  to
become due under such contract are properly assigned to Lender pursuant
to  the ACA or otherwise; (b) Borrower receives information with regard
to  the Collateral which might in any material way adversely affect the
value  of  the  Collateral or the rights and remedies  of  Lender  with
respect  thereto;  or (c) any amounts due and owing in  excess  of  the
Maximum Disputed Amount set forth on Schedule A are in dispute  by  any
Account  Debtor  on an Eligible Account or Eligible Pre-Billed  Account
and  Borrower  shall explain in detail the reason for the dispute,  all
claims related to the dispute, and the amount in controversy.

  7.8. Borrowing Base.  If, at any time, the aggregate unpaid principal
amount  of  the Revolving Loans exceeds the Borrowing Base, or  if  any
portion  of  the  Revolving  Loans exceeds any  applicable  limitation,
Borrower shall immediately pay to Lender the amount of any such  excess
and all accrued interest and other charges owing to Lender with respect
thereto.

7.9. Breach or Default.  Borrower shall notify Lender immediately upon
the occurrence of any circumstance which:  (a) makes any representation
or warranty of Borrower, any guarantor or any other obligor contained
in this Agreement or any other Loan Document incorrect or materially
misleading; (b) puts Borrower, any guarantor or any other obligor other
than in full compliance with all of Borrower's covenants and agreements
contained in this Agreement or any other Loan Document; or
(c) constitutes an Event of Default under this Agreement.

7.10.     Maintenance of Assets.  Borrower shall maintain all of its
real and personal property in good repair, working order and condition,
shall make all necessary replacements to such property so that the
value and the operating efficiency of such property will be preserved,
shall prevent any personal property from becoming a fixture to real
estate, and will pay or cause to be paid all rental or mortgage
payments due on its real property.

7.11.     Insurance.  Borrower shall procure and continuously maintain
the following insurance with such companies and in form and substance
satisfactory to Lender:  (a) "All Risk Extended Coverage" property
insurance covering Borrower's tangible personal property for the full
replacement value thereof; (b) "All Risk Extended Coverage" business
interruption insurance in an amount acceptable to Lender; (c) liability
insurance in an amount acceptable to Lender; (d) "key man" life
insurance insuring the lives of the Key Men set forth on Schedule A, in
each case in an amount equal to or exceeding the Minimum Key Man Life
Insurance Amount set forth on Schedule A; and (e) such other customary
insurance coverages as are specified by Lender from time to time.  The
key man life insurance and the business interruption insurance shall be
assigned to Lender pursuant to documentation acceptable to Lender.
Each property and business interruption insurance policy shall contain
a "standard" or "long form" (as opposed to open) Lender's Loss Payable
Endorsement or other form of endorsement acceptable to Lender in favor
of Lender, providing for, among other things, thirty (30) days prior
written notice to Lender of any cancellation, non-renewal or
modification of such coverage.  Borrower shall deliver to Lender
certified copies of such policies and all required endorsements and
other evidence of such insurance acceptable to Lender.  All policies of
liability insurance shall name Lender as an additional insured.
Borrower hereby directs all insurers under such policies of insurance
described above to pay all proceeds payable thereunder directly to
Lender (subject, however, to the rights of holders of any Permitted
Prior Encumbrances with priority over Lender's security interest).
Borrower irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as Borrower's true
and lawful attorney and agent-in-fact for the purpose of making,
settling and adjusting claims under such policies of insurance,
endorsing the name of Borrower on any check, draft, instrument or other
item of payment for the proceeds of such policies of insurance and
making all determinations and decisions with respect to such policies
of insurance; provided, however, that Lender shall exercise such rights
only upon the occurrence of an Event of Default.  All amounts received
by Lender from any such insurance policies may be applied by Lender to
the Revolving Loans or to other amounts owing from Borrower to Lender.
If Borrower fails to procure required insurance or such insurance is
canceled or otherwise lapses, then Lender may procure such insurance
and add the cost of such insurance to the principal balance of the
Revolving Loans.
                                WARNING

 UNLESS  BORROWER  PROVIDES  LENDER WITH EVIDENCE  OF  THE  INSURANCE
 COVERAGE   AS  REQUIRED  BY  THIS  AGREEMENT,  LENDER  MAY  PURCHASE
 INSURANCE AT BORROWER'S EXPENSE TO PROTECT LENDER'S INTEREST.   THIS
 INSURANCE  MAY, BUT NEED NOT, ALSO PROTECT BORROWER'S INTEREST.   IF
 THE  COLLATERAL BECOMES DAMAGED, THE COVERAGE LENDER  PURCHASES  MAY
 NOT PAY ANY CLAIM BORROWER MAKES OR ANY CLAIM MADE AGAINST BORROWER.
 BORROWER MAY LATER CAUSE LENDER TO CANCEL THIS COVERAGE BY PROVIDING
 EVIDENCE THAT BORROWER HAS OBTAINED THE REQUIRED COVERAGE ELSEWHERE.

 BORROWER  IS RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED  BY
 LENDER.   THE  COST  OF  THIS INSURANCE MAY BE ADDED  TO  BORROWER'S
 LIABILITIES.   IF  THE COST IS ADDED TO BORROWER'S LIABILITIES,  THE
 DEFAULT INTEREST RATE PROVIDED IN THIS AGREEMENT WILL APPLY TO  THIS
 ADDED  AMOUNT.   THE  EFFECTIVE DATE OF COVERAGE  MAY  BE  THE  DATE
 BORROWER'S  PRIOR  COVERAGE LAPSED OR THE DATE  BORROWER  FAILED  TO
 PROVIDE PROOF OF COVERAGE.

 THE  COVERAGE  LENDER PURCHASES MAY BE CONSIDERABLY  MORE  EXPENSIVE
 THAN  INSURANCE BORROWER CAN OBTAIN ON ITS OWN AND MAY  NOT  SATISFY
 ANY  NEED  FOR  PROPERTY DAMAGE COVERAGE OR ANY MANDATORY  LIABILITY
 INSURANCE REQUIREMENTS IMPOSED BY APPLICABLE LAW.

  7.12.      Inventory Appraisals.  At least once every calendar  year,
Borrower shall, at its sole cost and expense, cause an appraisal to  be
performed  of  Borrower's  Inventory by an  appraiser  satisfactory  to
Lender  in its sole discretion and deliver such Inventory appraisal  to
Lender.  In addition to any Inventory appraisals required above, if  an
Event of Default has occurred and is continuing, Borrower shall, if and
when  requested by Lender in writing, deliver to Lender, at  Borrower's
sole  cost  and  expense,  such additional or more  frequent  Inventory
appraisals performed by an appraiser satisfactory to Borrower.

7.13.     Indemnification.  Borrower agrees to indemnify, save and hold
harmless Lender and its directors, officers, agents, attorneys and
employees (collectively the "Indemnitees") from and against:(i) any
claim, demand, action or cause of action arising out of or relating to
the use or contemplated use of the proceeds of any of the Revolving
Loans, any transaction contemplated by this Agreement or any Loan
Document, or any relationship with Borrower or any other party to this
Agreement or the Loan Documents; (ii) any administrative or
investigative proceeding by any governmental agency arising out of or
related to a claim, demand, action or cause of action described in
clause (i) above; and (iii) any and all liabilities, losses, costs or
expenses (including reasonable attorneys' fees and disbursements and
other professional services) that any Indemnitee suffers or incurs as a
result of any foregoing claim, demand, action, cause of action or
proceeding; provided, however, that no Indemnitee shall be entitled to
indemnification for any loss caused by its own negligence or willful
misconduct.  Any obligation or liability of Borrower to any Indemnitee
under this Section shall survive the expiration or termination of the
Credit Facility, the repayment of the Obligations and the payment and
performance of all other obligations required pursuant to the Loan
Documents.

8.   BORROWER'S NEGATIVE COVENANTS

  Borrower covenants and agrees with Lender as follows:

  8.1.  Business,  Management and Organization.   Borrower  shall  not:
(a)  change  the jurisdiction where Borrower is organized, incorporated
or  registered;  (b) make any material change in its management,  which
includes  the  Key  Employees or Agents as set  forth  on  Schedule  A;
(c)  make  any  material  change in the nature  of  the  business  that
Borrower presently conducts; (d) change its legal name; (e) enter  into
any  merger  or  consolidation, or liquidate, wind up or  dissolve  (or
suffer  any  liquidation  or  dissolution),  or  convey,  lease,  sell,
transfer  or  otherwise dispose of, in one transaction or a  series  of
transactions,  any  substantial  portion  of  Borrower's  business   or
property,  whether  now or hereafter acquired; (f) enter  into  limited
liability  companies,  partnerships or joint ventures  with  any  other
entity;  (g) acquire all or substantially all of the assets or business
of  any  other company, person or entity; (h) create, acquire or permit
to exist any new subsidiaries; or (i) except as permitted in accordance
with Section 7.4, conduct business under any trade names other than the
trade names of Borrower as of the Effective Date.

8.2. Disposition of Assets.  Borrower shall not, without Lender's
written consent:  (a) encumber the Collateral in favor of any person
other than Lender, whether voluntarily or involuntarily, other than
(i) the Permitted Prior Encumbrances on Equipment which is financed
after the date hereof by a person other than Lender on a purchase money
basis to the extent permitted under this Agreement ("Purchase Money
Equipment"); or (ii) liens permitted under the terms of any
Intercreditor Agreements or (b) sell, consign, lease, license or remove
from Borrower's business locations any of Borrower's assets except
that, so long as no Event of Default has occurred on the part of
Borrower under this Agreement, Borrower may sell Inventory in the
ordinary course of its business (any sale or exchange of Inventory in
satisfaction of indebtedness of Borrower shall not be a sale of
Inventory in the ordinary course of business) and may sell or dispose
of obsolete assets which Borrower has determined, in good faith, not to
be useful in the conduct of its business and which, in any fiscal year
of Borrower, do not have an aggregate fair market value in excess of
the Maximum Sales Amount set forth on Schedule A.

8.3. Indebtedness; Loans and Guarantees.  Borrower shall not make any
loan or contribute money, goods or services to any person, or borrow
money or incur any indebtedness from any person, or guaranty or agree
to become liable for any obligation of, any person, including any
Borrower Affiliate or any Interested Party, other than:  (a) loans to
employees of Borrower for reimbursable expenses incurred by such
employees in the normal course of Borrower's business; (b) extensions
of credit in the ordinary course of business to customers of Borrower,
excluding any Borrower Affiliate or Interested Party; (c) purchase
money indebtedness incurred solely for the purchase of Equipment; and
(d) indebtedness identified on Schedule 6.5.

8.4. Capital Expenditures and Investments.  Borrower shall not:
(a) make capital expenditures of any kind or nature, including leases
of property which are required to be capitalized on Borrower's balance
sheet, in an aggregate amount in excess of the Maximum Capital
Expenditure Amount set forth on Schedule A in any fiscal year of
Borrower; or (b) invest in, or purchase the obligations of, any entity,
other than the United States of America, any commercial bank having a
net worth in excess of $100,000,000, or the commercial paper of any
corporation which is rated A-1 by Standard & Poor's and P-1 by Moody's.

8.5. Corporate Distributions and Salaries.  Borrower shall not:
(a) declare or pay any dividend upon, make any distribution with
respect to, or purchase, redeem or otherwise acquire any of Borrower's
capital stock; provided that in each of Borrower's fiscal years in
which it is an "S" Corporation for federal income tax purposes,
Borrower may declare and pay dividends in an amount not to exceed the
amount of total shareholder federal tax liability for such fiscal year
with respect to the taxable income of Borrower for such fiscal year
end, provided that Borrower shall require such shareholders for any
fiscal year end in which it shall have net taxable losses deductible by
such shareholders which result in an income tax benefit to such
shareholders to contribute the dollar amount of such income tax benefit
to Borrower as shareholder capital for such fiscal year; or
(b) increase, whether by election, promotion or otherwise, the
aggregate salaries and other compensation paid to its officers by more
than 10% in any fiscal year of Borrower.

8.6. Financial Covenants.  Except as otherwise expressly provided
below, all calculations and amounts referenced in this Section 8.6
shall be determined in accordance with generally accepted accounting
principles.

    (a)   Adjusted Tangible Net Worth.  Borrower shall not  permit  its
  Adjusted  Tangible  Net Worth to be less than  the  Minimum  Adjusted
  Tangible  Net  Worth  Amount set forth on  Schedule  A  at  any  time
  hereafter.  Adjusted Tangible Net Worth shall be determined as of the
  last  day  of  each month.  "Adjusted Tangible Net Worth"  means  the
  stockholders'  equity  of  Borrower  and  Borrower's  debt  that   is
  subordinated  to the Obligations of Borrower to Lender on  terms  and
  pursuant to documentation approved by Lender, minus the sum of all of
  the  following:  (a) intangible assets (to the extent  not  reflected
  below);  (b)  amounts  owing to Borrower by any Interested  Party  or
  Borrower  Affiliate; (c) prepaid expenses; (d) deposits, (e) employee
  advances;  (f)  the excess of cost over the value of  net  assets  of
  purchased  businesses, rights, and other similar  intangible  assets;
  (g)  goodwill;  (h) deferred expenses, deferred charges  or  deferred
  financing costs; (i) non-compete agreements; (j) any surplus resulting
  from any write-up of assets; and (k) all other assets of Borrower not
  readily convertible into money, as determined by Lender.

(b)  Accounts Receivable Turnover Days.  Borrower shall not permit its
Accounts Receivable Turnover Days to exceed the Maximum Accounts
Receivable Turnover Days set forth on Schedule A.  The Accounts
Receivable Turnover Days shall be determined as of the last day of each
month for the 3-month period ending on such date.  "Accounts Receivable
Turnover Days" means the quotient of (a) 90, divided by (b) the
Trailing 3-Month Account Turnover.  "Trailing 3-Month Account Turnover"
means the total sales for such period divided by the average month-end
balance of Accounts for such period.

  8.7. Change of Control.  Borrower shall not cause, permit, or suffer,
directly or indirectly, any Change of Control.  "Change of Control" for
purposes  of  this  Section  8.7 means the occurrence  of  any  of  the
following events:  (i) the sale or transfer of all or substantially all
of  the assets of Borrower (or any entity controlling Borrower)  as  an
entirety  to  any  person or related group of  persons  other  than  an
affiliate  or Borrower Affiliate (or any entity controlling  Borrower);
(ii)  any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")),
other than the Control Group set forth on Schedule A, is or becomes the
beneficial  owner  (as  defined in Rules  13d-3  and  13d-5  under  the
Exchange  Act), directly or indirectly, of 51% or more  of  the  voting
stock  of Borrower (or any entity controlling Borrower); (iii) Borrower
(or   any   entity  controlling  Borrower)  engages  in   any   merger,
consolidation,  sale  of  capital stock, or any  other  transaction  or
series of transactions with any other person, with the effect that  the
stockholders   of   Borrower  (or  any  entity  controlling   Borrower)
immediately  prior  thereto  own,  directly  or  indirectly,   in   the
aggregate, less than 75% of the total voting power entitled to vote  in
the  election of directors of (x) Borrower if Borrower is the surviving
entity, or (y) the surviving or resulting entity if Borrower is not the
surviving entity, in each such case immediately after such transaction;
or  (iv)  Borrower (or any entity controlling Borrower) is  liquidated,
dissolved,  or adopts a plan of liquidation pursuant to the  Bankruptcy
Code or any other bankruptcy law.

8.8. Affiliate Transactions.  Borrower shall not enter into or be a
party to any agreement or transaction with any Interested Party or
Borrower Affiliate except in the ordinary course of, and pursuant to
the reasonable requirements of, Borrower's business and upon fair and
reasonable terms that are no less favorable to Borrower than it would
obtain in a comparable arms length transaction with a person not a
Borrower Affiliate or Interested Party, and on terms consistent with
the business relationship of Borrower and such Borrower Affiliate or
Interested Party prior to the date of this Agreement and fully
disclosed to Lender.

8.9. Bank Accounts.  Borrower shall not maintain or have any operating
accounts or other accounts at any bank, depositary source or other
financial institution where money or proceeds of Collateral are
deposited or maintained, other than the accounts set forth on
Schedule 8.9, or such other accounts acceptable to Lender in its sole
discretion.

8.10.     Subordinated Debt.  Borrower shall not make any payment with
respect to any indebtedness that has been subordinated to the
Obligations except as and when specifically permitted by the terms of
an Intercreditor Agreement.

9.   CONDITIONS PRECEDENT

  9.1.  Conditions  Precedent.  Each of the  conditions  set  forth  on
Schedule  9.1  is a condition precedent to Lender making the  Revolving
Loans  pursuant to this Agreement, including the making of the  initial
and any future Revolving Loans contemplated hereunder (any of which may
be waived, in whole or in part, only by Lender in writing).

10.  EVENTS OF DEFAULT AND REMEDIES

 10.1.    Events of Default.  The occurrence or existence of any one or
more  of  the  following  events or conditions,  whether  voluntary  or
involuntary,  shall  constitute  an  "Event  of  Default"  under   this
Agreement:

  (a)  Borrower fails to make, when due, any payment associated with the
  Revolving Loans, or otherwise required of Borrower by this Agreement or
  any  other Loan Documents or pursuant to any of the Other Agreements,
  whether or not Lender is an original party to such agreement;

(b)  Borrower fails to make payment for any obligation incurred by
Lender on behalf of Borrower within five (5) days of Lender's demand
upon Borrower for such amount;

(c)  Borrower, any guarantor or other obligor, or any Intercreditor
Agreement party, fails to perform or observe any other covenant,
obligation or agreement contained in this Agreement, the other Loan
Documents, the Other Agreements or in any guaranty or any Intercreditor
Agreement;

(d)  Any representation or warranty made by Borrower, any guarantor or
any other obligor, or other information provided by Borrower to Lender,
was incorrect or materially misleading at the time it was made or
provided;

(e)  Borrower or any Borrower Affiliate defaults:  (i) whether as
primary or secondary obligor, in the payment of any principal or
interest on any obligation for borrowed money or other indebtedness
beyond any applicable grace period or, if such obligation is payable on
demand, fails to pay such obligation upon demand; or (ii) in the
observance of any covenant, term or condition contained in any
agreement, if the effect of such default is to cause, or to permit any
other party to such obligation to cause, all or part of such obligation
to become due before its stated maturity;

(f)  A writ of attachment, garnishment, execution, distraint or similar
process is issued against Borrower, any Borrower Affiliate, any
guarantor, any other obligor or any of their respective properties;

(g)  Lender determines, in its sole discretion, that an adverse change
has occurred in the financial condition or business prospects of any
guarantor, any Borrower, or Borrower and Borrower Affiliates when taken
as a whole, or that the prospect for payment or performance of any
covenant, agreement or obligation under this Agreement, the other Loan
Documents or the Other Agreements is impaired;

(h)  Borrower, any guarantor or other obligor becomes insolvent or
bankrupt; makes an assignment for the benefit of creditors or consents
to the appointment of a trustee or receiver; a trustee or a receiver is
appointed for Borrower or for a significant portion of Borrower's
assets; bankruptcy, reorganization or insolvency proceedings are
instituted by or against Borrower; or if any of the foregoing occurs
with respect to any guarantor or other person liable for any of the
Obligations of Borrower;

(i)  A settlement, judgment or order for the payment of money in excess
of the Maximum Judgment Amount set forth on Schedule A is entered into
by or against Borrower, any guarantor or any other obligor;

(j)  Any Loan Document is terminated other than as provided for in this
Agreement or becomes void or unenforceable, or Lender's security
interest in the Collateral ceases to be a valid and perfected first
priority security interest in any portion of the Collateral, other than
as a result of the Permitted Prior Encumbrances or prior interests of
other parties in Equipment which is financed on a purchase money basis
after the date hereof;

(k)  Borrower, any guarantor or other obligor conceals, removes, or
permits to be concealed or removed, any part of its assets with the
intent to hinder, delay or defraud Lender or any of Borrower's other
creditors;

(l)  Any guarantor, surety or endorser for any of the Obligations of
Borrower dies, defaults on any Obligation, or prospectively terminates
such guaranty or surety;

(m)  Any loss, theft, damage or destruction of any item or items of
Collateral or other property of Borrower, guarantor or any other
obligor occurs which materially and adversely affects the property,
business, operations, prospects, or condition of Borrower or any
guarantor, surety or endorser of Borrower or any other obligor
hereunder;

(n)  Borrower makes any payment on any subordinated indebtedness that
was not specifically permitted by the terms of the Intercreditor
Agreement or that has not been authorized in writing by Lender;

(o)  There is filed against Borrower or any guarantor or other person
liable for any of the Obligations of Borrower any civil or criminal
action, suit or proceeding under any federal or state racketeering
statute (including the Racketeer Influenced and Corrupt Organization
Act of 1970), which action, suit or proceeding could result in the
confiscation or forfeiture of any material portion of the Collateral;

(p)  Any Reportable Event, as defined in Title IV of ERISA, which
Lender determines constitutes grounds for the termination of any
Employee Pension Benefit Plan (as defined in ERISA) of Borrower or any
Borrower Affiliate by the Pension Benefit Guaranty Corporation or for
the appointment by the appropriate United States District Court of a
trustee to administer or liquidate any Employee Pension Benefit Plan
shall have occurred; or a decision shall have been made by Borrower or
any Borrower Affiliate, or any member of the "controlled group of
corporations" (as defined in Section 1563(a)(4) of the Internal Revenue
Code determined without regard to Sections 1563(a) and (e)(3)(c) of
such Code) of which Borrower or such Borrower Affiliate is a part, to
terminate, file a notice of termination with respect to, or withdraw
from, any Employee Pension Benefit Plan; or a trustee shall be
appointed by the appropriate United States District Court to administer
any Employee Pension Benefit Plan of Borrower or any Borrower
Affiliate; or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any Employee Pension Benefit Plan of Borrower
or any Borrower Affiliate or to appoint a trustee to administer any
such Employee Pension Benefit Plan, and in case of the occurrence of
any event described above, and the liability of Borrower or such
Borrower Affiliate is not covered in full, for its benefit, by
insurance;

(q)  An Overadvance arises in any manner on terms not otherwise
approved in advance by Lender in writing;

(r)  Borrower guarantees any obligations of any person or entity, other
than any guaranty issued in favor of Lender; or

(s)  Borrower moves any Collateral to, or stores or maintains any
Collateral at, any location not identified as a current business
location on Schedule 6.6 without the prior written consent of Lender.

10.2. Lender's  Remedies.  In addition to any other  rights  and
remedies  which  Lender may have, upon the occurrence of an Event of
Default under this Agreement, Lender may:

    (a)  Without notice to, or demand upon, Borrower:

  (i)  discontinue making any further Revolving Loans;

(ii) terminate the Credit Facility;

(iii) declare all Revolving Loans and other Obligations of Borrower
to be immediately due and payable;

(iv) take possession of all or any portion of the Collateral, wherever
located, and enter on any of the premises where any of the Collateral
may be and remove, repair and store any of the Collateral until it is
sold or otherwise disposed of, and Lender shall have the right to
store, without charge, all or any portion of the Collateral at any of
Borrower's business locations;

(v)  use, without charge, Borrower's patents, copyrights, trade names,
trade secrets, trademarks, advertising materials or any license
therefore or any property of a similar nature, in advertising for sale
and selling any of the Collateral;

(vi) renew, modify or extend any Account, grant waivers or indulgences
with respect to any Account, accept partial payments on any Account,
release, surrender or substitute any security for payment of any
Account or compromise with, or release, any person liable on any
Account in such a manner as Lender may, in its sole discretion deem
advisable, all without affecting or diminishing the Obligations of
Borrower; and

(vii) obtain the appointment of a receiver, trustee, or similar
official over Borrower to effect all of the transactions contemplated
by this Agreement or as is otherwise necessary to perform this
Agreement;

    (b)  With notice to Borrower:

  (i)   require  Borrower,  at  Borrower's  expense,  to  assemble  the
Collateral  and  make the Collateral available to Lender  at  locations
reasonably convenient to Lender and Borrower; and

(ii) sell or otherwise dispose of all or any portion of the Collateral
at public or private sale for cash or credit, with such notice as may
be required by law (in the absence of any contrary requirement,
Borrower agrees that ten (10) days prior notice of a public or private
sale of the Collateral is reasonable), in lots or in bulk, all as
Lender, in its sole discretion, may deem advisable.  Lender shall have
the right to conduct any such sales, without charge, at Borrower's
business locations.  Lender shall have no obligation to clean up or
otherwise prepare the Collateral for sale.  Lender may comply with any
applicable state or federal law requirements in connection with a
disposition of the Collateral.  Lender may sell the Collateral without
giving any warranties as to the Collateral.  Lender may specifically
disclaim any warranties of title or the like.  If Lender sells any of
the Collateral upon credit, Borrower will be credited only with
payments actually made by the purchaser, received by Lender and applied
to the indebtedness of the Purchaser.  In the event the purchaser fails
to pay for the Collateral, Lender may resell the Collateral.  In the
event Lender purchases any of the Collateral being sold, Lender may pay
for the Collateral by crediting some or all of the Obligations of
Borrower.  Lender may purchase all or any portion of the Collateral at
public sale and, if permitted by law, at private sale and, in lieu of
actual payment of the purchase price, may offset the amount of such
price against the outstanding amount of the Revolving Loans and any
other amounts owing from Borrower to Lender.  Proceeds realized from
the sale of any Collateral will be applied in the following order:
(a) to the costs, expenses and attorneys' fees incurred by Lender in
connection with the collection, acquisition, protection and sale of the
Collateral; (b) to any accrued and unpaid interest owing from Borrower
to Lender; and (c) to any other amounts owing from Borrower to Lender.
Borrower agrees that the procedures set forth in this Section 10.2(b)
will not adversely affect the commercial reasonableness of any sale of
the Collateral.  Borrower agrees that Borrower will remain fully liable
for any deficiency owing to Lender after the proceeds of the Collateral
have been applied to the Revolving Loans and all other amounts owing
from Borrower to Lender;

    (c)  Exercise all such other remedies as may be available under this
  Agreement  or  any Other Agreement, Loan Document or applicable  law,
  including all rights of a secured party under the UCC.  All  remedies
  will be cumulative; and

(d)  If any of the Collateral shall require repairing, maintenance,
preparation, or the like, or is in process or other unfinished state,
Lender shall have the right, but not the obligation, to do such
repairing, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable form
as Lender shall deem appropriate, but Lender shall have the right to
sell or dispose of such Collateral with or without such processing.

11.  MISCELLANEOUS

  11.1.   Power of Attorney.  Borrower irrevocably appoints Lender, and
any person designated by Lender, as Borrower's true and lawful attorney-
in-fact to:  (a) endorse for Borrower, in Lender's or Borrower's  name,
any  draft or other order for the payment of money payable to Borrower;
and  (b)  execute, in Lender's or Borrower's name, financing statements
or other public notices describing the Collateral.  Lender shall not be
liable to Borrower for any action taken by Lender or its designee under
this power of attorney, except for action taken in bad faith.  Borrower
agrees that a carbon, photographic or other reproduction of a financing
statement  or this Agreement or other public notices may  be  filed  by
Lender as a financing statement.

11.2.     Outstanding Revolving Loans.  The outstanding principal
amount of, and accrued interest on, the Revolving Loans and the
Interest Rate applicable to the Revolving Loans from time to time,
shall be, at all times, ascertained from the records of Lender and
shall be conclusive absent manifest error.

11.3.     Modifications and Course of Dealing.  This Agreement
constitutes the entire agreement of Borrower and Lender relative to the
subject matter hereof.  No modification of, or supplement to, this
Agreement shall bind Lender unless in writing and signed by an
authorized officer of Lender.  The enumeration in this Agreement of
Lender's rights and remedies is not intended to be exclusive, and such
rights and remedies are in addition to and not by way of limitation of
any other rights or remedies that Lender may have under the UCC or
other applicable law.  No course of dealing and no delay or failure of
Lender to exercise any right, power or privilege under this Agreement,
any other Loan Document or any Other Agreement will affect any other or
future exercise of such right, power or privilege.  The exercise of any
one right, power or privilege shall not preclude the exercise of any
others, all of which shall be cumulative.

11.4.     Assignment and Participation.  Borrower may not assign or
transfer any of its rights or delegate any of its obligations under
this Agreement.  Lender shall have the right, from time to time,
without notice to Borrower, to sell, assign or otherwise transfer its
interest in the Loan Documents and the Revolving Loans, either in whole
or in part, to any other person or enter into participation
arrangements with any other person.  Borrower authorizes Lender to
deliver to potential assignees or participants Borrower's financial
information and all other information delivered to Lender pursuant to
the terms of this Agreement.

11.5.     Delegation of Duties.  Lender may execute any of its duties
under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact.  Lender shall not be responsible for
the negligence or misconduct of any agent or attorney-in-fact selected
by Lender as long as such selection was made without gross negligence
or willful misconduct.

11.6.     Notices.  All notices, requests, demands and other
communications pursuant to this Agreement (the "Notices") shall be in
writing and shall be sent by e-mail, facsimile, certified mail or
overnight courier, return receipt requested.  All of the Notices must
be sent to the applicable party at the address (or e-mail address or
facsimile) for such party set forth on the signature page to this
Agreement or to such other address as such party may designate from
time to time.

11.7.     Expenses.  Borrower will pay service charges, analysis fees,
and all costs and expenses incidental to or in connection with this
Agreement (including the documentation, consummation, administration,
and enforcement of this Agreement, the Loan Documents or any Other
Agreements), any service provided by Lender to or on behalf of
Borrower, any amendment or modification of this Agreement, the Loan
Documents, or any Other Agreements, any sale or attempted sale of any
interest herein to a participant or co-lender, and any litigation,
contest, dispute, proceeding or action in any way relating to the
Collateral, this Agreement, the Loan Documents, or any Other
Agreements, whether arising prior to the Effective Date or after
maturity, the occurrence of an Event of Default, or the rendering of a
judgment.  Such costs and expenses will include, but not be limited to,
attorneys' fees, including both Lender's in-house and outside
attorneys' and paralegals' fees and expenses, whether or not a lawsuit
or other court action is actually filed (including, but not limited to
bankruptcy and reorganization proceedings, and appellate and review
proceedings), filing fees and associated taxes, lien and judgment
search fees, fees of examiners and appraisers, and fees and charges
associated with lockboxes and blocked accounts.  All such amounts will
constitute Revolving Loans, will be repayable upon demand, and will be
secured by the Collateral.

11.8.     Authorization to Charge Borrower's Account.  Borrower hereby
authorizes Lender, in its sole discretion, to charge any of Borrower's
accounts or advance Revolving Loans to make any payments of principal,
interest, fees, costs or expenses required to be made by Borrower under
this Agreement.
11.9.     Assignment of Accounts and Inventory.  This Agreement may be

supplemented by separate assignments of Accounts and, if such
assignments are executed, the rights and interests given by Borrower
pursuant to such assignments shall be in addition to, and not in
limitation of, the rights and security interests given by Borrower
under this Agreement.  Lender will not be responsible for the
safekeeping of any Inventory delivered to Lender, for the collection of
proceeds of any of the Collateral, or for losses of collected proceeds
held by Borrower in trust for Lender.

11.10.    Confidentiality.   Borrower agrees to keep confidential, and
shall cause its respective directors, officers, shareholders,
employees, agents, and attorneys to keep confidential, the terms and
conditions of this Agreement, all documents referenced herein and the
respective terms thereof, and any communication between the parties
regarding this Agreement, except to the extent that:  (a) Borrower
makes any disclosure to its auditors, attorneys or other professional
advisors; (b) any disclosure is otherwise required by law or pursuant
to any rule or regulation of any federal, state or other governmental
authority or regulatory agency; or (c) Borrower is in receipt of the
prior written consent of Lender.

11.11.    Intentionally Deleted.

11.12.    Binding Effect, Severability and Governing Law.  This
Agreement shall not be deemed to create any right in any person except
as provided herein and shall inure to the benefit of, and be binding
upon, the successors and assigns of Borrower (and any person or entity
that becomes bound as a debtor under the UCC) and Lender.  All of
Borrower's obligations under this Agreement are absolute and
unconditional, shall not be subject to any offset or deduction
whatsoever, and if there is more than one Borrower, are joint and
several.  The provisions of this Agreement are intended to be
severable.  If any provision of this Agreement is held invalid or
unenforceable in whole or in part, such provision will be ineffective
to the extent of such invalidity or unenforceability without in any
manner effecting the validity or enforceability of the remaining
provisions of this Agreement.  This Agreement has been accepted by
Lender in the State of Oregon.  THE PROVISIONS OF THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF OREGON, WITHOUT REFERENCE TO APPLICABLE CONFLICT OF LAW PRINCIPLES.
BORROWER CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF OREGON COURTS IN
CONNECTION WITH THE RESOLUTION OF ANY DISPUTES RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR OTHER AGREEMENTS.  BORROWER
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR OTHER
AGREEMENTS.

  BORROWER  HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS  UPON
IT  AND  CONSENTS  THAT  ALL SUCH SERVICE OF PROCESS  MAY  BE  MADE  BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER AT  THE
ADDRESS  SET  FORTH BELOW AND SERVICE SO MADE SHALL  BE  DEEMED  TO  BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED  IN
THE  U.S.  MAILS.  NOTHING CONTAINED HEREIN SHALL AFFECT THE  RIGHT  OF
LENDER TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

  11.13.     Waiver  of  Jury  Trial;  Limitation  of  Liability.    IN
RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH MAY RESULT FROM A  JURY
TRIAL,  THE  PARTIES  WAIVE ANY RIGHT TO TRIAL BY JURY  OF  ANY  CLAIM,
DEMAND,  ACTION OR CAUSE OF ACTION:  (A) ARISING HEREUNDER; OR  (B)  IN
ANY  WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT  OR
TORT  OR  OTHERWISE;  AND  EACH  PARTY  FURTHER  WAIVES  ANY  RIGHT  TO
CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED  WITH
ANY  OTHER  ACTION  IN WHICH A JURY TRIAL CANNOT BE  OR  HAS  NOT  BEEN
WAIVED; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH  CLAIM,
DEMAND,  ACTION  OR  CAUSE OF ACTION SHALL BE DECIDED  BY  COURT  TRIAL
WITHOUT  A  JURY,  AND  THAT  ANY PARTY HERETO  MAY  FILE  AN  ORIGINAL
COUNTERPART  OR  A  COPY  OF THIS SECTION WITH  ANY  COURT  AS  WRITTEN
EVIDENCE  OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER  OF  THEIR
RIGHT  TO  TRIAL  BY  JURY.  BORROWER AGREES THAT IT  WILL  NOT  ASSERT
AGAINST  LENDER  ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL,  SPECIAL,  OR
PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE  OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.   NO
OFFICER  OF  LENDER HAS AUTHORITY TO WAIVE, CONDITION, OR  MODIFY  THIS
PROVISION.

11.14.    Final Agreement.  This Agreement and the other Loan Documents
and Other Agreements are intended by Borrower and Lender to be the
final, complete, and exclusive expression of the agreement between
them.  This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof.  No modification,
rescission, waiver, release, or amendment of any provision of this
Agreement or any other Loan Document or Other Agreement shall be made,
except by a written agreement signed by Borrower and a duly authorized
officer of Lender.  In the event of any conflict between this Agreement
and any other Loan Document or Other Agreement, the terms and
provisions of this Agreement shall govern and prevail.

11.15.    Counterparts.  This Agreement may be executed in any number
of counterparts, and by Lender and Borrower in separate counterparts,
each of which shall be an original, but all of which shall taken
together constitute one and the same agreement.

11.16.    Captions.  The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and
should not be construed to modify, enlarge, or restrict any provision.

  11.17.     Access to Textron's System.  Lender shall provide Borrower
with  access  to  Textron's  System for the purpose  of  (a)  obtaining
information regarding the administration and status of its account, and
(b) if permitted by Lender, submitting billing and other information in
connection  with  funding  requests  and  account  administration.   At
Lender's  discretion,  the  submission of  borrowing  base  information
through  Textron's  System may replace the borrowing  base  certificate
otherwise required under this Agreement.  "Textron's System" means  the
system  used  by  Lender  to provide internet-based  reporting  to  its
clients.   Such  access  shall be subject to the  following  terms,  in
addition to all terms set forth on the website for Textron's System:

  (a) Lender shall provide initial password(s) to Borrower for secured
  access to Textron's System.  Borrower shall provide Lender with a list
  of  officers and employees that are authorized from time to  time  to
  access  Textron's System, and Borrower agrees to limit access to  the
  password(s)  and  Textron's System to such  authorized  officers  and
  employees.   After  the  initial access,  Borrower  shall  be  solely
  responsible  for  (A)  changing  and  maintaining  the  integrity  of
  Borrower's  password(s) and (B) any unauthorized  use  of  Borrower's
  password(s)  or  Textron's System by any of Borrower's  officers  and
  employees.

(b)  Borrower shall use Textron's System and Borrower's information
thereon solely for the purposes permitted above, and shall not access
Textron's System for the benefit of third parties or provide any
information obtained from Textron's System to third parties.  Lender
makes no representation that billing or collection information or other
account information on Textron's System is or will be available,
accurate, complete, correct or current at all times.  Textron's System
may be inoperable or inaccessible from time to time, whether for
required website maintenance, upgrades to Textron's System, or for
other reasons, and in any such event Borrower must obtain billing or
collection information or other account information and (if permitted
by Lender) make funding requests and submit required information using
other available means.

(c)  Borrower hereby confirms and agrees that Textron's System consists
of software, data, tools, scripts, algorithms, business logic, website
designs and interfaces and related intellectual property, information
and documentation.  Textron's System and related intellectual property,
information and documentation are the sole and exclusive property of
Lender, and Borrower shall have no right, title or interest therein or
thereto, except for the limited right to access Textron's System for
the purposes permitted above.  Upon termination of Borrower's funding
facility with Lender, Borrower agrees to cease any use of Textron's
System.

(d)  In the event of a conflict between the terms of this Section of
the Agreement and the terms set forth on the website for Textron's
System, the terms set forth on the website for Textron's System shall
govern.

(e)  All agreements, covenants and representations and warranties
contained in and required under Borrower's transaction agreements with
Lender shall apply to and shall be deemed to be made by Borrower to
Lender with respect to any information that Borrower submits or any
funding request that Borrower makes through Textron's System.  For
purposes of illustration and not limitation, each time Borrower submits
borrowing base information to Lender through Textron's System, Borrower
certifies that: 1) each of the invoices/claims/billings reported
through Textron's System is evidenced by a true and correct bona fide
invoice issued by Borrower for goods sold or services rendered, each
Account that Borrower presents to Lender as an Eligible Account or
Eligible Pre-Billed Account, meets the requirements for eligibility set
forth in this Agreement and all inventory that Borrower represents to
Lender as Eligible Inventory meets the requirements for eligibility set
forth in this Agreement; 2) no Event of Default exists and no fact or
circumstance exists that, with notice, or the passage of time, or both,
would constitute an Event of Default; and 3) all of Borrower's
representations and warranties contained in this Agreement, in any Loan
Document, and in any other certificate, instrument, or document
submitted by Borrower to Lender are true and accurate in all material
respects, subject only to such exceptions disclosed to Lender in
writing and acknowledged by Lender in writing before Borrower's
submission of such documents to Lender.

  11.18.    Schedules.  The Schedules attached to this Agreement are an
integral part of this Agreement and are incorporated herein.

  The   undersigned,  pursuant  to  due  authority,  have  caused  this
Agreement to be executed as of the Effective Date.

  UNDER  OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE  BY
LENDER  CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT  FOR
PERSONAL,  FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY BORROWER'S
RESIDENCE  MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE  SIGNED  BY
LENDER TO BE ENFORCEABLE.

SIGNATURES ON THE FOLLOWING PAGE<PAGE>

LENDER:                           BORROWER:

Textron Financial Corporation     Halifax Corporation of Virginia

/s/ Jennifer Grable               /s/ Joseph Sciacca
By: Jennifer Grable               By:  Joseph Sciacca

Title: Vice President - Operations   Title: Vice President - Finance

Address:                          Address:

4949 S.W. Meadows Road            5250 Cherokee Avenue
Suite 500                         Alexandria, VA 22312
Lake Oswego, OR 97035
Facsimile No. (503) 675-5776      Facsimile No. (703) 658-2444
Telephone No. (503) 675-5762       Telephone No. (702) 750-2202
Attn: Attn: SVP-ABL Credit/Operations Attn: President

<PAGE>

                           List of Schedules

Schedule A:    Supplemental Terms and Conditions

Schedule 1.2   Concentration Limits

Schedule 6.1   Organizational Information

Schedule 6.3   Commercial Tort Claims and Litigation

Schedule 6.5   Permitted Prior Encumbrances and Permitted Indebtedness

Schedule 6.6   Collateral and Business Locations

Schedule 8.9   Bank Accounts

Schedule 9.1   Conditions Precedent

<PAGE>

                              Schedule A
                   Supplemental Terms and Conditions

Introductory Paragraph

     Effective Date:  June        , 2008

Section 1.1-Revolving Credit Facility

     Credit Limit:  $4,000,000

     Eligible Accounts Advance Rate:  90%

     Eligible Pre-Billed Accounts Advance Rate:  25%

     Eligible Pre-Billed Accounts Sublimit: Least of the following (i)
     $400,000; (ii) 150% of the net orderly liquidation value of
     Borrower's Inventory, as determined by any appraisal conducted
     pursuant to Section 7.12 of this Agreement; or (iii) 15% of the
     aggregate amount of all Eligible Accounts.

     Maximum Dilution Percentage:  3%

Section 1.2-Eligible Accounts

     Maximum Concentration Percentage:  15%

Section 1.6-Payment of Interest and Principal

     Interest Rate:  Prime plus 2.75%.

     Prime:  "Prime" means the greater of (i) 5.00%, or (ii) the  prime
commercial rate of interest per annum as announced from time to time on-
line  by  the Wall Street Journal as the prevailing "Prime Rate,"  from
time   to  time  in  effect,  with  each  change  in  the  Prime   Rate
automatically  and  immediately  changing  the  interest  rate  on  the
Revolving  Loans without notice to Borrower, subject to any maximum  or
minimum interest rate limitation specified by applicable law.   If  the
Prime  Rate  is  reflected as a range, then the Prime Rate  as  defined
herein  shall be the highest amount in said range.  Lender  shall  have
the  right, from time to time, to designate any other money center bank
as  the  reference  bank for purposes of determining Prime  under  this
Agreement.

     Default Interest Rate:  Interest Rate plus 3 %.

     Minimum Monthly Interest Charge:  N/A

Section 1.8-Renewal and Termination

     Initial Term:  3 year period commencing as of the Effective Date.

Section 2.1-Monthly Servicing Fee

     Monthly Servicing Fee:  $2,500 payable in advance

     Section 2.2-Credit Facility Fees

     Credit  Facility Fees:  1.00% of the Credit Limit on the Effective
Date  due  and  payable on the Effective Date and 0.50% of  the  Credit
Limit  on  each  anniversary  of  the  Effective  Date  prior  to   the
termination  of  the  Credit Facility (due and  payable  on  each  such
anniversary).

Section 2.3-Field Examination Fees

      Field  Examination Fee:  The standard rate established by  Lender
from  time to time (which standard rate is currently in an amount equal
to  $950  for  each day spent by each employee or agent  of  Lender  in
performing   and/or  summarizing  the  results  of  such   examination,
including all necessary travel time) plus all "out of pocket" expenses.

Section 2.4 Unused Credit Facility Fee

     Unused Credit Facility Fee:  N/A

Section 2.5-Early Termination Fee

     Early Termination Fee:

<TABLE>

<CAPTION>

           Amount                        Period

<C>                           <S>
(i)  2% of the Credit Limit   From the Effective Date to
                              and including the first
                              year anniversary of the
                              Effective Date.
                              Notwithstanding the
                              foregoing, if the
                              termination is caused by a
                              Change of Control, Lender
                              shall reduce the Early
                              Termination Fee to 1%.

(ii) 1% of the Credit Limit   From any time after the
                              first year anniversary
                              date, including any Renewal
                              Term.

</TABLE>

Section 2.6-Lockbox Maintenance fee.

     Lockbox Maintenance Fee:  $50.00 per lockbox or such higher
amount as Lender shall establish from time to time.

Section 2.7-Wire /ACH Transfer Fee

     Wire Transfer Fee:  $25.00 or such higher amount as Lender shall
establish from time to time.

     ACH Transfer Fee:  $7.50 or such higher amount as Lender shall
establish from time to time.

Section 2.8-Delinquent Reporting Fee

     Delinquent Reporting Fee:  $50 per day

Section 5.1-Borrower's Revenues

     Float Days:  3 business days

Section 7.1 - Financial Statements

     Financial  Statements:   Borrower's audited  financial  statements
certified   by  a  recognized  firm  of  certified  public  accountants
acceptable  to  Lender  as  having been  prepared  in  accordance  with
generally  accepted accounting principles and as presenting fairly  the
financial  condition  of Borrower as of the date thereof  and  for  the
period then ended (and including any management letter to Borrower from
such accountants).

Section 7.7-Reporting as to Revenues, Accounts and Inventory

     Maximum Disputed Amount:  $50,000

Section 7.11-Insurance

     Key Men:  N/A

Section 8.1-Business, Management and Organization

     Key Employees or Agents:  Charles McNew and Joseph Sciacca

Section 8.2-Disposition of Assets

     Maximum Sales Amount:  $100,000

Section 8.4-Capital Expenditures and Investments

     Maximum Capital Expenditure Amount:  $250,000

Section 8.6-Financial Covenants

     Minimum Adjusted Tangible Net Worth Amount:  $0

     Maximum Accounts Receivable Turnover Days:   75 days

Section 8.7-Change of Control

     Control Group:  N/A

Section 9.1-Conditions Precedent

    Guarantors:  Charles McNew (Fraud and Validity guaranty only)
    Joseph Sciacca (Fraud and Validity guaranty only)
    Halifax Engineering, Inc. (Collateralized Corporate Guaranty)
    Halifax Realty, Inc. (Collateralized Corporate Guaranty)
    Halifax-Alphanational Acquisition, Inc.  (Collateralized Corporate
    Guaranty)

     Intercreditor Agreement Parties (other than Borrower and Lender):
    N/A

    Subordination Agreement Parties: Nancy Scurlock
                                     Arch C. Scurlock Children's Trust

     Minimum Excess Availability Amount: $350,000 as of the Effective
Date, and $200,000 at all times thereafter

Section 10.1-Events of Default

     Maximum Judgment Amount:  $100,000

<PAGE>

                             Schedule 1.2
                         Concentration Limits

<TABLE>

<CAPTION>

                Aggregate Percentage of Borrower's
                 Aggregate Accounts Owing By This
Debtor        Account Debtor Which May Be Included In
                         Eligible Accounts

  <C>         <C>

  IBM          Lessor of $3M or 40% of the eligible
                               A/R*

  Sun              Lessor of $2.5M or 35% of the
Microsystems               eligible A/R*

  Wincor       Lessor of $1M or 20% of the eligible
                               A/R*

</TABLE>

*Notwithstanding the foregoing, the aggregate amount of Accounts owing
by IBM, Sun Microsystems and Wincor which may be included in Eligible
Accounts and Eligible Pre-Billed Accounts may not exceed 66% of the
aggregate unpaid balance of all otherwise Eligible Accounts and
Eligible Pre-Billed Accounts owed to Borrower at such time by all of
Borrower's Account Debtors.

<PAGE>

                             Schedule 6.1
                      Organizational Information

Borrower's State of Organization

  Current State of Organization:  Virginia

  State(s) of Organization in past 5 years if different from current
state of organization: N/A

Borrower's Exact Legal Name

  Current Legal Name:  Halifax Corporation of Virginia

  Legal name(s) in past 5 years if different from current legal name:
Halifax Corporation

Borrower's State Identification Number:  0111634-2

Borrower's Employer Tax Identification Number:  54-0829246

Trade Names

  Current Trade Names:  N/A

  Trade Name(s) used in past 5 years if different than above:  N/A

Borrower Affiliates:  Halifax Engineering, Inc., Halifax Realty, Inc.,
and Halifax-Alphanational Acquisition, Inc.

Prior Mergers, Consolidations or Acquisitions:  N/A

Capitalization:

Shareholders:                      Type of Shares:   Number of Shares/
                                                     %Ownership:

Nancy Scurlock                          Common         14%
The Arch C. Scurlock Children's Trust   Common         14%
Jai Gupta, RJJS                         Common         6%
Gary Lowkowski                          Common         5%
Myron Arnold                            Common         5%

<PAGE>

                             Schedule 6.3
                 Commercial Tort Claims and Litigation

Commercial Tort Claims of Borrower Against any Person or Entity:  None

Actions or Proceedings Against Borrower:  None

<PAGE>

                             Schedule 6.5
        Permitted Prior Encumbrances and permitted indebtedness

<TABLE>

<CAPTION>

Secured Party/Lender           Approximate    Description of
                               Indebtedness   Collateral

<C>                            <S>            <S>

Eplus Government, Inc.         $0             Computer Equipment

Citizens Leasing Corporation   $0             Computer Equipment

Hewlett-Packard Financial      $750,000       Computer Equipment
Services

Unisys Corporation             $100,000       Computer Equipment

</TABLE>

<PAGE>

                             Schedule 6.6
                   Collateral and Business Locations

Borrower's Principal Place of Business or Chief Executive Office

  Current Principal Place of Business:  5250 Cherokee Ave.,
Alexandria, VA 22312

  Principal Place of Business in past 5 years if different from
current location:  N/A

Borrower's Other Business Location(s)

  Current Other Business Location(s):
    5040 Louise Drive, Mechanicsburg, PA
    629 Lowther Road, Lewisberry, PA
    8570 Megallan Parkway, Richmond, VA
    2501 E Loop, Ft. Worth, TX
    1064 Gardner Rd., Charleston, SC
    6651 S 215th St., Tukwilla, WA

  Business Location(s) in past 5 years if different from current Other
Business location:  N/A

<PAGE>

                             Schedule 8.9
                             Bank Accounts

Bank:                Account Type:               Account No.:

Provident Bank       OPERATING ACCOUNT           2065310679

Provident Bank       PAYROLL ACCOUNT             2065310687

Provident Bank       ACCOUNTS PAYABLE ACCOUNT    2065310695

Provident Bank       COLLATERAL ACCOUNT          7665310763

<PAGE>

                             Schedule 9.1
                         Conditions Precedent

  (A)  Lender shall have received, in form and substance satisfactory to
  Lender, all documents as Lender may request to evidence Lender's first
  and   exclusive   security  interest  (other  than  Permitted   Prior
  Encumbrances) in the Collateral;

(b)  Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first
security interest in all of the Collateral except as otherwise
permitted herein;

(c)  Lender shall have received, in form and substance satisfactory to
Lender, all documents from third persons that Lender may deem necessary
or desirable in order to effectuate the provisions or purposes of this
Agreement;

(d)  Lender shall have received the continuing unconditional and
unlimited personal guaranties of the Guarantors set forth on Schedule
A;

(e)  Lender shall have received, in form and substance satisfactory to
Lender, a subordination agreement or intercreditor agreement, as
applicable, between Lender and each of the parties set forth on
Schedule A, in each case duly authorized, executed and delivered by
Borrower and such other party (each such agreement referred to herein
as an "Intercreditor Agreement");

(f)  Borrower shall have established a blocked account or lockbox (as
specified in Section 5.2) for its collections and the transfer thereof
to Lender, which shall be in form and substance acceptable to Lender;

(g)  The excess availability, as determined by Lender, shall be in an
amount not less than the Minimum Excess Availability Amount set forth
on Schedule A, with Borrower's accounts payable and cash balances in a
condition satisfactory to Lender;

(h)  Lender shall have received evidence of insurance, assignments and
loss payee endorsements required under this Agreement, in form and
substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee, as
appropriate, all at Borrower's cost and expense;

(i)  Lender shall have received and reviewed a copy of the agreement
between Borrower and IBM and shall have found such agreement in form
and substance acceptable to Lender in its sole discretion;

  (j)  Lender shall have received and reviewed a copy of the agreement
  between  Borrower  and  Sun Microsystems and shall  have  found  such
  agreement  in  form and substance acceptable to Lender  in  its  sole
  discretion;

(k)   Lender shall have received and reviewed a copy of the agreement
between Borrower and Wincor and shall have found such agreement in form
and substance acceptable to Lender in its sole discretion;

(l)  Lender shall have received a landlord waiver agreement in form and
satisfactory to Lender for Borrower's location at 5250 Cherokee Ave.,
Alexandria, VA 221312;

(m)  Lender shall have received and reviewed the response from the
American Stock Exchange addressing Borrower's noncompliance and
potential delisting and shall have found such response in form and
substance acceptable to Lender in its sole discretion;

  (n)  Lender shall have received background checks on Borrower and each
  of  the  Guarantors and found such background checks satisfactory  to
  Lender in its sole discretion;

(o)  Lender shall have received and reviewed an appraisal of Borrower's
Inventory and found such appraisal satisfiactory to Lender in its sole
discretion;

(p)  This Agreement and all instruments and documents related hereto
shall have been duly authorized, executed and delivered to Lender, in
form and substance satisfactory to Lender;

(q)  All representations and warranties of Borrower contained herein
shall be true and correct in all respects;

  (r)  No Event of Default shall have occurred and no event shall have
  occurred or condition be existing which, with notice or passage of time
  or both, would constitute an Event of Default;

(s)  No adverse change shall have occurred with respect to Borrower,
its assets, financial condition or business prospects, since the
completion of Lender's field review conducted prior to loan approval;

(t)  Lender shall have completed a final field review of the records
and other information with respect to the Collateral as Lender may
require to determine the amount of the Revolving Loans available to
Borrower, the results of which shall be satisfactory to Lender; and

(u)  Lender shall have received such other documents or information as
  it may reasonably request.

<PAGE>

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