Document:

FORM
      OF

    UNITED
      STATES NATURAL GAS FUND, LP

    AUTHORIZED
      PURCHASER AGREEMENT

    

    This
      United States Natural Gas Fund, LP Authorized Purchaser Agreement (the
“Agreement”), dated as of ____________, is entered into by and between Victoria
      Bay Asset Management, LLC, a Delaware limited liability company and General
      Partner of United States Natural Gas Fund, LP (the “General Partner”), on behalf
      of itself and as General Partner of United States Natural Gas Fund, LP, and
      _________________, a [state]
      [type of business organization]
      (the
“Authorized Purchaser”).

    

    SUMMARY

    

    The
      General Partner serves in its capacity as General Partner of United States
      Natural Gas Fund, LP (the “Fund”) pursuant to the Limited Partnership Agreement
      dated as of the day the first Creation Basket is sold and the proceeds are
      invested (substantially in the form attached hereto) between the General Partner
      and the Limited Partners of the Fund (the “Partnership Agreement”). As provided
      in the Partnership Agreement and described in the Fund’s prospectus (the
“Prospectus”), Units of fractional undivided beneficial interest in and
      ownership of the limited partnership (the “Units”) may be created or redeemed
      through the Marketing Agent by the Authorized Purchaser in aggregations of
      one
      hundred thousand (100,000) Units (each aggregation, a “Creation Basket” or
“Redemption Basket,” respectively; collectively, “Baskets”). Creation Baskets
      are offered only pursuant to the registration statement of the Fund on Form
      S-1,
      as amended (Registration No.: 333-137871), as declared effective by the
      Securities and Exchange Commission (the “SEC”) and as the same may be amended
      from time to time thereafter (collectively, the “Registration Statement”).
      Authorized Purchasers are the only persons that may place orders to create
      and
      redeem Creation
      Baskets or Redemption Baskets. 

    

    Capitalized
      terms used but not defined in this Agreement shall have the meanings assigned
      to
      such terms in the Prospectus. To the extent there is a conflict between any
      provision of this Agreement and the provisions of the Prospectus, the provisions
      of the Prospectus shall control. 

    

    To
      give
      effect to the foregoing premises and in consideration of the mutual covenants
      and agreements set forth below, the parties hereto agree as
      follows:

    

    Section
      1. Order Placement. 

     

    To
      place
      an order for the creation or redemption of one or more Baskets, an Authorized
      Purchaser must follow the procedures for creation and redemption referred to
      in
      Section 3 of this Agreement and attached to this Agreement as Exhibit A;
      provided, however, that in the case of an Authorized Purchaser’s initial order
      to purchase one or more Creation Baskets on the first day the Baskets are to
      be
      offered and sold, the procedures for creation will be as attached to this
      Agreement as Exhibit A-1.

    

    Section
      2. Status and Obligations of Authorized Purchaser. 

     

    The
      Authorized Purchaser represents and warrants and covenants the following:

    

    (a) The
      Authorized Purchaser is a participant of the Depository Trust Company (“DTC”)
      (as such a participant, a “DTC Participant”). If the Authorized Purchaser ceases
      to be a DTC Participant, the Authorized Purchaser shall give immediate notice
      to
      the General Partner of such event, and this Agreement shall terminate
      immediately as of the date the Authorized Purchaser ceased to be a DTC
      Participant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (b) Unless
      Section 2(c) applies, the Authorized Purchaser either (i) is registered as
      a
      broker-dealer under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and is a member in good standing of the National Association of
      Securities Dealers, Inc. (the “NASD”), or (ii) is exempt from being, or
      otherwise is not required to be, licensed as a broker-dealer or a member of
      the
      NASD, and in either case is qualified to act as a broker or dealer in the states
      or other jurisdictions where the nature of its business so requires. The
      Authorized Purchaser will maintain any such registrations, qualifications and
      membership in good standing and in full force and effect throughout the term
      of
      this Agreement. The Authorized Purchaser will comply with all applicable federal
      law, the laws of the states or other jurisdictions concerned, and the rules
      and
      regulations promulgated thereunder, including, but not limited to those
      applicable to securities and commodities transactions, and with the
      Constitution, By-Laws and Conduct Rules of the NASD (if it is a NASD member),
      and is solely responsible for determining the application of any such laws
      or
      regulations in all cases at its own expense. The Authorized Purchaser will
      not
      directly or indirectly offer, sell or deliver Units in or from any state or
      jurisdiction where they may not lawfully be offered, sold and/or
      delivered.

    

    (c) If
      the
      Authorized Purchaser is offering or selling Units in jurisdictions outside
      the
      several states, territories and possessions of the United States and is not
      otherwise required to be registered, qualified or a member of the NASD as set
      forth in Section 2(b) above, the Authorized Purchaser will (i) observe the
      applicable laws of the jurisdiction in which such offer and/or sale is made,
      (ii) comply with the full disclosure requirements of the Securities Act of
      1933,
      as amended (the “1933 Act”) and the Commodities Exchange Act (the “CEA”), and
      the rules and regulations promulgated thereunder, and (iii) conduct its business
      in accordance with the spirit of the NASD Conduct Rules. 

    

    (d) The
      Authorized Purchaser is in compliance with the money laundering and related
      provisions of the Uniting and Strengthening America by Providing Appropriate
      Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “PATRIOT
      Act”), and the regulations promulgated thereunder, if the Authorized Purchaser
      is subject to the requirements of the PATRIOT Act. 

    

    (e) The
      Authorized Purchaser has the capability to send and receive communications
      via
      an authenticated telecommunication facility to and from the General Partner,
      ALPS Distributors, Inc. (the “Marketing Agent”) and Brown Brothers Harriman
& Co., who shall act as both administrator (the “Administrator”) and
      custodian (the “Custodian”) for the Fund. The Authorized Purchaser shall confirm
      such capability to the satisfaction of the General Partner and the Marketing
      Agent by the end of the Business Day (as defined below) before placing its
      first
      order with the Marketing Agent (whether such order is to create or to redeem
      Baskets). If required by the Marketing Agent, the Administrator or the Custodian
      with respect to authorized telecommunications by telephonic facsimile, the
      Authorized Purchaser shall enter into a separate agreement with the Marketing
      Agent, the Administrator or the Custodian, as the case may be, indemnifying
      such
      party with respect to its communications by telephonic facsimile. 

     

    
      
        
        

      

      
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    (f) Because
      new Baskets can be created and Units therein issued on an ongoing basis, at
      any
      point during the life of the partnership, a “distribution,” as such term is used
      in the 1933 Act, may be occurring with respect to resales of these Units. The
      Authorized Purchaser is cautioned that some of its activities may result in
      its
      being deemed a participant in a distribution in a manner that would render
      it a
      statutory underwriter and subject it to the prospectus-delivery and liability
      provisions of the 1933 Act. The Authorized Purchaser should review the “What is
      the Plan of Distribution?” portion of the Prospectus and consult with its own
      counsel in connection with entering into this Agreement and placing an Order
      (as
      defined below). In addition to satisfying the prospectus-delivery and disclosure
      requirements of the 1933 Act, the Authorized Purchaser and any other participant
      in the distribution of the Units purchased by the Authorized Purchaser also
      has
      the obligation to comply with the disclosure delivery requirements under the
      CEA, including, with respect to the CEA, the requirement that it provide an
      acknowledgement of receipt of the Prospectus (the “CEA Acknowledgement”) as set
      forth in Section 11, to the Fund, directly or through its agent, the Marketing
      Agent, prior to payment of the purchase price for any Creation Basket to the
      Fund. To the extent the Authorized Purchaser has distributed a Preliminary
      Prospectus to prospective investors, if there are material changes made to
      that
      document as compared to the final Prospectus, the Authorized Purchaser shall
      give notice to any prospective investor who received the Preliminary Prospectus
      of such material change prior to a sale.

    

    Section
      3. Orders. 

     

    (a) All
      orders to create or redeem Baskets shall be made in accordance with the terms
      of
      the Prospectus, this Agreement and the creation and redemption procedures
      attached hereto as Exhibit A (the “Procedures”), except in the case of an
      Authorized Purchaser’s initial order to purchase one or more Creation Baskets on
      the first day the Baskets are to be offered and sold which will be governed
      by
      the procedures set forth in Exhibit A-1. Each party will comply with such
      foregoing terms to the extent applicable to it. The General Partner may issue
      additional or other procedures from time to time relating to the manner of
      creating or redeeming Baskets and the Authorized Purchaser will comply with
      such
      procedures. The Authorized Purchaser hereby consents to the use of recorded
      telephone lines. 

    

    (b) The
      Authorized Purchaser acknowledges and agrees it is acting solely as principal
      and not on behalf of any party for which it is acting (whether such party is
      a
      customer or otherwise), and that each order to create a Basket (a “Purchase
      Order”) and each order to redeem a Basket (a “Redemption Order”, and each
      Purchase Order and Redemption Order, an “Order”) may not be withdrawn by the
      Authorized Purchaser. A form of Purchase/Redemption Order is attached hereto
      as
      Exhibit B.

    

    (c) The
      General Partner acting by itself or through the Marketing Agent shall have
      the
      absolute right, but shall have no obligation, to reject any Purchase Order
      or
      Creation Basket Deposit (as defined in Section 6) (i) determined by the General
      Partner not to be in proper form; (ii) that the General Partner has determined
      would have adverse tax consequences to the Fund; (iii) the acceptance or receipt
      of which would, in the opinion of counsel to the General Partner, be unlawful;
      or (iv) if circumstances outside the control of the General Partner, the
      Marketing Agent or the Custodian make it for all practical purposes not feasible
      to process creations of Creation Baskets. None of the General Partner, the
      Marketing Agent or the Custodian shall be liable to any person by reason of
      the
      rejection of any Purchase Order or Creation Basket Deposit (as defined in
      Section 6).

     

    
      
        
        

      

      
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    (d) The
      General Partner acting by itself or through the Marketing Agent may, in its
      sole
      discretion, reject any Redemption Order (i) determined by the General Partner
      not to be in proper form (ii) the fulfillment of which its counsel advises
      may
      be illegal under applicable laws and regulations, or (iii) if the General
      Partner determines that circumstances outside the control of the General
      Partner, the Marketing Agent or the Custodian make it unlikely that the
      Units to be delivered under the Redemption Order will be delivered.

    

    Section
      4. Fees. 

     

    In
      connection with each Order by an Authorized Purchaser to create or redeem one
      or
      more Baskets, the General Partner shall charge, and the Authorized Purchaser
      shall pay to the General Partner, the Transaction Fee prescribed in the
      Prospectus applicable to such creation or redemption. The initial Transaction
      Fee shall be one thousand dollars ($1,000). The Transaction Fee may be adjusted
      from time to time as set forth in the Prospectus. 

    

    Section
      5. Authorized Persons. 

     

    Concurrently
      with the execution of this Agreement and from time to time thereafter, the
      Authorized Purchaser shall deliver to the General Partner and the Marketing
      Agent, notarized and duly certified as appropriate by its secretary or other
      duly authorized official, a certificate in the form of Exhibit C setting forth
      the names and signatures of all persons authorized to give instructions relating
      to activity contemplated hereby or by any other notice, request or instruction
      given on behalf of the Authorized Purchaser (each, an “Authorized Person”). The
      General Partner or the Marketing Agent may accept and rely upon such certificate
      as conclusive evidence of the facts set forth therein and shall consider such
      certificate to be in full force and effect until the General Partner receives
      a
      superseding certificate bearing a subsequent date. Upon the termination or
      revocation of authority of any Authorized Person by the Authorized Purchaser,
      the Authorized Purchaser shall give immediate written notice of such fact to
      the
      General Partner and the Marketing Agent, and such notice shall be effective
      upon
      receipt by the General Partner. 

    

    Section
      6. Creation Procedures.

     

    On
      any
      Business Day, an Authorized Purchaser may place an order with the Marketing
      Agent to create one or more Creation Baskets in accordance with this Section
      6
      and the Procedures. For purposes of processing Purchase and Redemption Orders,
      a
“Business Day” means any day other than a day when any of the American Stock
      Exchange, the New York Mercantile Exchange or the New York Stock Exchange is
      closed for regular trading. Purchase orders must be placed by 12:00 PM New
      York
      time or the close of regular trading on the American Stock Exchange, whichever
      is earlier, except in the case of an Authorized Purchaser’s initial order to
      purchase one or more Creation Baskets on the first day the Baskets are to be
      offered and sold, when such orders shall be placed by 9:00 AM New
      York
      Time on the day agreed to by the General Partner and the Authorized Purchaser.
      The day on which the Marketing Agent receives a valid Purchase Order is the
      Purchase Order date. By placing a Purchase Order, an Authorized Purchaser agrees
      to deposit Treasuries, cash, or a combination of Treasuries and cash with the
      Custodian of the Fund. Prior to the delivery of Baskets for a Purchase Order,
      the Authorized Purchaser must also have wired to the Custodian the
      non-refundable transaction fee due for the Purchase Order. “Treasuries” shall be
      any U.S. treasury security with two years or less remaining to maturity with
      an
      aggregate market value, as determined in the sole discretion of the
      Administrator using the valuation procedures set forth in Exhibit D, that
      together with any cash amount, will equal the purchase price of the Creation
      Basket being purchased.

     

    
      
        
        

      

      
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    The
      total
      deposit required to create each basket (“Creation Basket Deposit”) will be an
      amount of Treasuries and cash that is in the same proportion to the total assets
      of the Fund (net of estimated accrued but unpaid fees, expenses and other
      liabilities) on the date the order to purchase is properly received as the
      number of Units to be created under the Purchase Order is in proportion to
      the
      total number of Units outstanding on the date the order is received. The General
      Partner determines, directly in its sole discretion or in consultation with
      the
      Administrator, the requirements for Treasuries and the amount of cash, including
      the maximum permitted remaining maturity of a Treasury and proportions of
      Treasuries and cash that may be included in deposits to create baskets. The
      Marketing Agent will publish such requirements at the beginning of each business
      day. The amount of cash deposit required will be the difference between the
      aggregate market value of the Treasuries required to be included in a Creation
      Basket Deposit as of 4:00 p.m. New York time on the date the order to purchase
      is properly received and the total required deposit.

    

    The
      General Partner determines, directly in its sole discretion, or in consultation
      with the Administrator, the requirements for Treasuries and/or the amount of
      cash, including the maximum permitted remaining maturity of a Treasury and
      the
      proportions of Treasury and cash, that may be included in deposits to create
      Baskets. The Marketing Agent will publish such requirements at the beginning
      of
      each Business Day. Unless otherwise determined by the General Partner, if
      Treasuries and cash are to be deposited, the amount of the cash deposit required
      will be the difference between (i) the aggregate market value of the Treasuries
      required to be included in a Creation Basket Deposit as of 4:00 PM New York
      time
      on the Purchase Order date and (ii) the total required deposit.

    

    An
      Authorized Purchaser who places a Purchase Order is responsible for transferring
      to the Fund’s account with the Custodian the required amount of Treasuries
      and/or cash by the end of the third Business Day following the Purchase Order
      date, except in the case of an Authorized Purchaser’s initial order to purchase
      one or more Creation Baskets on the first day the Baskets are to be offered
      and
      sold when the Creation Basket Deposit will be due by 12:00 PM New York time
      on
      the date the Purchase Order was accepted by the Marketing Agent. Upon receipt
      of
      the deposit amount, the Administrator will direct DTC to credit the number
      of
      Baskets ordered to the Authorized Purchaser’s DTC account on the third Business
      Day following the Purchase Order date, except in the case of an Authorized
      Purchaser’s initial order to purchase one or more Creation Baskets, when the
      Administrator will direct DTC to credit the number of Baskets so ordered upon
      confirmation by the Custodian that the Creation Basket Deposit has been received
      by the Custodian. The expense and risk of delivery and ownership of Treasuries
      until such Treasuries have been received by the Custodian on behalf of the
      Fund
      shall be borne solely by the Authorized Purchaser.

    

    Section
      7. Redemption Procedures. 

     

    On
      any
      Business Day, an Authorized Purchaser may place an order with the Marketing
      Agent to redeem one or more Redemption Baskets in accordance with this Section
      7
      and the Procedures. Redemption Orders must be placed by 12:00 PM New York time
      or the close of regular trading on the American Stock Exchange, whichever is
      earlier. A Redemption Order so received is effective on the date it is received
      in satisfactory form by the Marketing Agent. The day on which the Marketing
      Agent receives a valid Redemption Order is the Redemption Order date. By placing
      a Redemption Order, an Authorized Purchaser agrees to deliver the Redemption
      Basket to be redeemed through DTC’s book-entry system to the Fund’s account with
      the Custodian not later than 3:00 PM New York time on the third Business Day
      following the effective date of the Redemption Order. Prior to the delivery
      of
      the redemption distribution for a Redemption Order, the Authorized Purchaser
      must also have wired to the Fund’s account at the Custodian the non-refundable
      Transaction Fee due for the Redemption Order.

     

    
      
        
        

      

      
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    The
      redemption distribution from the Fund consists of a transfer to the redeeming
      Authorized Purchaser of an amount of Treasuries and/or cash with a value that
      is
      in the same proportion to the total assets of the Fund (net of estimated accrued
      but unpaid fees, expenses and other liabilities) on the date the order to redeem
      is properly received as the number of Units to be redeemed under the Redemption
      Order is in proportion to the total number of Units outstanding on the date
      the
      order is received. The General Partner, directly or in consultation with the
      Administrator, will determine the requirements for Treasuries and/or the amount
      of cash, including the maximum permitted remaining maturity of a Treasury,
      and
      the proportions of Treasuries and cash, that may be included in distributions
      to
      redeem Baskets. The Marketing Agent will publish such requirements as of 4:00
      PM
      New York time on the Redemption Order date.

    

    The
      redemption distribution due from the Fund is delivered to the Authorized
      Purchaser on the third Business Day following the Redemption Order date if,
      by
      3:00 PM New York time on such third Business Day, the Fund’s DTC account has
      been credited with the Baskets to be redeemed. If the Fund’s DTC account has not
      been credited with all of the Baskets to be redeemed by such time, the
      redemption distribution is delivered to the extent of whole Baskets received.
      Any remainder of the redemption distribution is delivered on the next Business
      Day to the extent of remaining whole Baskets received if the Fund receives
      the
      fee applicable to the extension of the redemption distribution date which the
      General Partner may, from time to time, determine and the remaining Baskets
      to
      be redeemed are credited to the Fund’s DTC account by 9:00 AM New York time on
      such next Business Day. Any further outstanding amount of the Redemption Order
      may be cancelled at the election of the General Partner. Pursuant to instruction
      from the General Partner, the Custodian may also deliver the redemption
      distribution notwithstanding that the Baskets to be redeemed are not credited
      to
      the Fund’s DTC account by 3:00 PM New York time on the third Business Day
      following the Redemption Order date if the Authorized Purchaser has
      collateralized its obligation to deliver the Baskets through DTC’s book entry
      system on such terms as the General Partner may from time to time
      determine.

    

    The
      General Partner may, in its discretion, suspend the right of redemption, or
      postpone the redemption settlement date, (1) for any period during which the
      American Stock Exchange or the New York Mercantile Exchange is closed other
      than
      customary weekend or holiday closings, or trading on the American Stock Exchange
      or the New York Mercantile Exchange is suspended or restricted, (2) for any
      period during which an emergency exists as a result of which delivery, disposal
      or evaluation of Treasuries or other assets of the Fund is not reasonably
      practicable, or (3) for such other period as the General Partner determines
      to be necessary for the protection of the limited partners. None of the General
      Partner, the Marketing Agent, the Administrator or the Custodian will be liable
      to any person or in any way for any loss or damages that may result from any
      such suspension or postponement.

     

    
      
        
        

      

      
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    Section
      8. Role of Authorized Purchaser. 

     

    (a) The
      Authorized Purchaser acknowledges that, for all purposes of this Agreement,
      the
      Authorized Purchaser is and shall be deemed to be an independent contractor
      and
      has and shall have no authority to act as agent for the Fund, the Marketing
      Agent, the Administrator, the Custodian or the General Partner in any matter
      or
      in any respect, except as set forth in Section 2(f). 

    

    (b) The
      Authorized Purchaser will make itself and its employees available, upon request,
      during normal business hours to consult with the General Partner and the
      Marketing Agent concerning the performance of the Authorized Purchaser’s
      responsibilities under this Agreement. 

    

    (c) The
      Authorized Purchaser will maintain records of all sales of Creation Baskets
      made
      by or through it and will furnish copies of such records to the General Partner
      upon the reasonable request of the General Partner. 

    

    Section
      9. Indemnification. 

     

    (a) Indemnification
      of Authorized Purchaser. The General Partner agrees to indemnify, defend and
      hold harmless the Authorized Purchaser, its partners, stockholders, members,
      directors, officers and employees and any Affiliate of the foregoing, and the
      successors and assigns of all of the foregoing persons, from and against any
      loss, damage, expense, liability or claim (including the reasonable cost of
      investigation) which the Authorized Purchaser or any such person may incur
      under
      the 1933 Act, the Exchange Act, the CEA, the common law or otherwise, insofar
      as
      such loss, damage, expense, liability or claim arises out of or is based
      upon:

    

    (1) any
      untrue statement or alleged untrue statement of a material fact contained in
      the
      Registration Statement (or in the Registration Statement as amended or
      supplement) or in a Prospectus (the term Prospectus for the purpose of this
      Section 6 being deemed to include the Prospectus and the Prospectus as amended
      or supplemented), or arises out of or is based upon any omission or alleged
      omission to state a material fact required to be stated in either such
      Registration Statement or such Prospectus or necessary to make the statements
      made therein not misleading, except insofar as any such loss, damage, expense,
      liability or claim arises out of or is based upon any untrue statement or
      alleged untrue statement of a material fact contained in and in conformity
      with
      information concerning the Authorized Purchaser furnished in writing by or
      on
      behalf of the Authorized Purchaser to the General Partner expressly for use
      in
      such Registration Statement;

    

    (2) any
      untrue statement or alleged untrue statement of a material fact or breach by
      the
      General Partner of any representation or warranty contained in this
      Agreement;

     

    
      
        
        

      

      
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    (3) the
      failure by the General Partner to perform when and as required, any agreement
      or
      covenant contained herein;

    

    (4) the
      Authorized Purchaser’s performance of its duties under this Agreement except in
      the case of this clause (4), for any loss, damage, expense, liability or claim
      resulting from the gross negligence or willful misconduct of the Authorized
      Purchaser.

    

    In
      no
      case is the indemnity of the General Partner in favor of the Authorized
      Purchaser and such other persons as are specified in this Section 9(a) to be
      deemed to protect the Authorized Purchaser and such persons against any
      liability to the General Partner or the Fund to which the Authorized Purchaser
      would otherwise be subject by reason of willful misfeasance, bad faith or gross
      negligence in the performance of its duties or by reason of its reckless
      disregard of its obligations and duties under this Agreement.

    

    If
      any
      action, suit or proceeding (each, a “Proceeding”) is brought against the
      Authorized Purchaser or any such person in respect of which indemnity may be
      sought against the General Partner pursuant to the foregoing paragraph, the
      Authorized Purchaser or such person shall promptly notify the General Partner
      in
      writing of the institution of such Proceeding and the General Partner shall
      assume the defense of such Proceeding, including the employment of counsel
      reasonably satisfactory to such indemnified party and payment of all fees and
      expenses; provided, however, that the omission to so notify the General Partner
      shall not relieve the General Partner from any liability which it may have
      to
      the Authorized Purchaser or any such person except to the extent that it has
      been materially prejudiced by such failure and has not otherwise learned of
      such
      Proceeding. The Authorized Purchaser or such person shall have the right to
      employ its own counsel in any such case, but the fees and expenses of such
      counsel shall be at the expense of the Authorized Purchaser or of such person
      unless the employment of such counsel shall have been authorized in writing
      by
      the General Partner in connection with the defense of such Proceeding or the
      General Partner shall not have, within a reasonable period of time in light
      of
      the circumstances, employed counsel to have charge of the defense of such
      Proceeding or such indemnified party or parties shall have reasonably concluded
      that there may be defenses available to it or them which are different from,
      additional to or in conflict with those available to the General Partner (in
      which case the General Partner shall not have the right to direct the defense
      of
      such Proceeding on behalf of the indemnified party or parties), in any of which
      events such fees and expenses shall be borne by the General Partner and paid
      as
      incurred (it being understood, however, that the General Partner shall not
      be
      liable for the expenses of more than one separate counsel (in addition to any
      local counsel) in any one Proceeding or series of related Proceedings in the
      same jurisdiction representing the indemnified parties who are parties to such
      Proceeding). 

    

    The
      General Partner shall not be liable for any settlement of any Proceeding
      effected without the General Partner’s written consent but if settled with the
      General Partner’s written consent, the General Partner agrees to indemnify and
      hold harmless the Authorized Purchaser and any such person from and against
      any
      loss or liability by reason of such settlement. Notwithstanding the foregoing
      sentence, if at any time an indemnified party shall have requested an
      indemnifying party to reimburse the indemnified party for fees and expenses
      of
      counsel as contemplated by the second sentence of this paragraph, then the
      indemnifying party agrees that it shall be liable for any settlement of any
      Proceeding effected without its written consent if (i) such settlement is
      entered into more than 60 Business Days after receipt by such indemnifying
      party
      of the aforesaid request, (ii) such indemnifying party shall not have fully
      reimbursed the indemnified party in accordance with such request prior to the
      date of such settlement and (iii) such indemnified party shall have given the
      indemnifying party at least 30 Business Days’ prior notice of its intention to
      settle. No indemnifying party shall, without the prior written consent of the
      indemnified party, effect any settlement of any pending or threatened Proceeding
      in respect of which any indemnified party is or could have been a party and
      indemnity could have been sought hereunder by such indemnified party, unless
      such settlement includes an unconditional release of such indemnified party
      from
      all liability on claims that are the subject matter of such Proceeding and
      does
      not include an admission of fault, culpability or a failure to act, by or on
      behalf of such indemnified party.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    (b) The
      Authorized Purchaser agrees to indemnify, defend and hold harmless each of
      the
      Fund, the General Partner and its partners, stockholders, members, directors,
      officers, employees and any person who controls the General Partner within
      the
      meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act, and
      the
      successors and assigns of all of the foregoing persons, from and against any
      loss, damage, expense, liability or claim (including the reasonable cost of
      investigation) which the General Partner any such person may incur under the
      1933 Act, the Exchange Act, the CEA, the common law or otherwise, insofar as
      such loss, damage, expense, liability or claim arises out of or is based upon
      any untrue statement or alleged untrue statement of a material fact contained
      in
      and in conformity with information furnished in writing by or on behalf of
      the
      Authorized Purchaser to the General Partner expressly for use in the
      Registration Statement (or in the Registration Statement as amended or
      supplemented by any post-effective amendment thereof) or in a Prospectus, or
      arises out of or is based upon any omission or alleged omission to state a
      material fact in connection with such information required to be stated in
      such
      Registration Statement or such Prospectus or necessary to make such information
      not misleading.

    

    The
      Authorized Purchaser will also indemnify the General Partner as stated above
      insofar as such loss, damage, expense, liability or claim arises out of or
      is
      based upon the Authorized Purchaser’s performance of its duties under this
      Agreement, except in the case of any loss, damage, expense, liability or claim
      resulting from the gross negligence or willful misconduct of the General
      Partner. In no case is the indemnity of the Authorized Purchaser in favor of
      the
      General Partner to be deemed to protect the General Partner and such persons
      against any liability to the Authorized Purchaser to which the General Partner
      would otherwise be subject by reason of willful misfeasance, bad faith or gross
      negligence in the performance of its duties or by reason of its reckless
      disregard of its obligations and duties under this Agreement.

    

    If
      any
      Proceeding is brought against the General Partner or any person referred to
      in
      the preceding paragraph in respect of which indemnity may be sought against
      the
      Authorized Purchaser pursuant to the foregoing paragraph, the General Partner
      or
      such person shall promptly notify the Authorized Purchaser in writing of the
      institution of such Proceeding and the Authorized Purchaser shall assume the
      defense of such Proceeding, including the employment of counsel reasonably
      satisfactory to such indemnified party and payment of all fees and expenses;
      provided, however, that the omission to so notify the Authorized Purchaser
      shall
      not relieve the Authorized Purchaser from any liability which it may have to
      the
      General Partner or any such person except to the extent that it has been
      materially prejudiced by such failure and has not otherwise learned of such
      Proceeding. The General Partner or such person shall have the right to employ
      its own counsel in any such case, but the fees and expenses of such counsel
      shall be at the expense of the General Partner or such person unless the
      employment of such counsel shall have been authorized in writing by the
      Authorized Purchaser in connection with the defense of such Proceeding or the
      Authorized Purchaser shall not have, within a reasonable period of time in
      light
      of the circumstances, employed counsel to defend such Proceeding or such
      indemnified party or parties shall have reasonably concluded that there may
      be
      defenses available to it or them which are different from or additional to
      or in
      conflict with those available to the Authorized Purchaser (in which case the
      Authorized Purchaser shall not have the right to direct the defense of such
      Proceeding on behalf of the indemnified party or parties, but the Authorized
      Purchaser may employ counsel and participate in the defense thereof but the
      fees
      and expenses of such counsel shall be at the expense of the Authorized
      Purchaser), in any of which events such fees and expenses shall be borne by
      the
      Authorized Purchaser and paid as incurred (it being understood, however, that
      the Authorized Purchaser shall not be liable for the expenses of more than
      one
      separate counsel (in addition to any local counsel) in any one Proceeding or
      series of related Proceedings in the same jurisdiction representing the
      indemnified parties who are parties to such Proceeding). 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    The
      Authorized Purchaser shall not be liable for any settlement of any such
      Proceeding effected without the written consent of the Authorized Purchaser
      but
      if settled with the written consent of the Authorized Purchaser, the Authorized
      Purchaser agrees to indemnify and hold harmless the General Partner and any
      such
      person from and against any loss or liability by reason of such settlement.
      Notwithstanding the foregoing sentence, if at any time an indemnified party
      shall have requested an indemnifying party to reimburse the indemnified party
      for fees and expenses of counsel as contemplated by the second sentence of
      the
      preceding paragraph, then the indemnifying party agrees that it shall be liable
      for any settlement of any Proceeding effected without its written consent if
      (i)
      such settlement is entered into more than 60 Business Days after receipt by
      such
      indemnifying party of the aforesaid request, (ii) such indemnifying party shall
      not have reimbursed the indemnified party in accordance with such request prior
      to the date of such settlement and (iii) such indemnified party shall have
      given
      the indemnifying party at least 30 Business Days’ prior notice of its intention
      to settle. No indemnifying party shall, without the prior written consent of
      the
      indemnified party, effect any settlement of any pending or threatened Proceeding
      in respect of which any indemnified party is or could have been a party and
      indemnity could have been sought hereunder by such indemnified party, unless
      such settlement includes an unconditional release of such indemnified party
      from
      all liability on claims that are the subject matter of such
      Proceeding.

    

    (c) The
      indemnity agreements contained in this Section 9 and the covenants, warranties
      and representations of the General Partner contained in this Agreement shall
      remain in full force and effect regardless of any investigation made by or
      on
      behalf of the Authorized Purchaser, its partners, stockholders, members,
      directors, officers, employees and or any person (including each partner,
      stockholder, member, director, officer or employee of such person) who controls
      the Authorized Purchaser within the meaning of Section 15 of the 1933 Act or
      Section 20 of the Exchange Act, or by or on behalf of each of the General
      Partner, the Fund, their partners, stockholders, members, directors, officers,
      employees or any person who controls the General Partner or the Fund within
      the
      meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act, and
      shall survive any termination of this Agreement or the initial issuance and
      delivery of the Units. The General Partner and the Authorized Purchaser agree
      promptly to notify each other of the commencement of any Proceeding against
      it
      and, in the case of the General Partner, against any of the General Partner’s
      officers or directors in connection with the issuance and sale of the Units,
      or
      in connection with the Registration Statement or the Prospectus.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    Section
      10.

     

    (a) Limitation
      of Liability. 

     

    None
      of
      the General Partner, the Authorized Purchaser, the Marketing Agent, the
      Administrator, or the Custodian, shall be liable to each other or to any other
      person, including any party claiming by, through or on behalf of the Authorized
      Purchaser, for any losses, liabilities, damages, costs or expenses arising
      out
      of any mistake or error in data or other information provided to any of them
      by
      each other or any other person or out of any interruption or delay in the
      electronic means of communications used by them.

    

    (b) Tax
      Liability. 

     

    The
      Authorized Purchaser shall be responsible for the payment of any transfer tax,
      sales or use tax, stamp tax, recording tax, value added tax and any other
      similar tax or government charge applicable to the creation or redemption of
      any
      Basket made pursuant to this Agreement, regardless of whether or not such tax
      or
      charge is imposed directly on the Authorized Purchaser. To the extent the
      General Partner or the Fund is required by law to pay any such tax or charge,
      the Authorized Purchaser agrees to promptly indemnify such party for any such
      payment, together with any applicable penalties, additions to tax or interest
      thereon.

    

    Section
      11. Acknowledgment. 

     

    The
      Authorized Purchaser acknowledges receipt of a copy of the Prospectus and
      represents that it has reviewed and understands such document. 

    

    Section
      12. Effectiveness and Termination.

     

    Upon
      the
      execution of this Agreement by the parties hereto, this Agreement shall become
      effective in this form as of the date first set forth above, and may be
      terminated at any time by any party upon thirty (30) days’ prior written notice
      to the other parties unless earlier terminated: (i) in accordance with Section
      2(a); (ii) upon notice to the Authorized Purchaser by the General Partner in
      the
      event of a breach by the Authorized Purchaser of this Agreement or the
      procedures described or incorporated herein; or (iii) at such time as the Fund
      is terminated. 

    

    Section
      13. Marketing Materials; Representations Regarding Baskets; Identification
      in
      Registration Statement. 

     

    (a) The
      Authorized Purchaser represents, warrants and covenants that (i), without the
      written consent of the General Partner, the Authorized Purchaser will not make,
      or permit any of its representatives to make, any representations concerning
      the
      Units or the General Partner, the Fund or any person indemnified by the
      Authorized Purchaser (the “AP Indemnified Person”) other than representations
      contained (A) in the then-current Prospectus of the Fund, (B) in printed
      information approved by the General Partner as information supplemental to
      such
      Prospectus or (C) in any promotional materials or sales literature
      furnished to the Authorized Purchaser by the General Partner, and (ii) the
      Authorized Purchaser will not furnish or cause to be furnished to any person
      or
      display or publish any information or material relating to the Baskets, any
      AP
      Indemnified Person or the Fund that is not consistent with the Fund’s then
      current Prospectus. Copies of the then-current Prospectus of the Fund and any
      such printed supplemental information will be supplied by the General Partner
      to
      the Authorized Purchaser in reasonable quantities upon request. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    (b) The
      Authorized Purchaser agrees to comply with the prospectus and disclosure
      delivery requirements of the federal securities and commodities laws. In
      connection therewith, the Authorized Purchaser will provide each prospective
      purchaser with a copy of the Fund’s Prospectus and, to the extent required under
      the CEA or regulations promulgated thereunder, obtain (or require any
      participant in the distribution of Units in a Creation Basket the Authorized
      Purchaser has purchased to obtain) the CEA Acknowledgment from any such
      purchaser prior to receipt of payment from the purchaser. The Authorized
      Purchaser shall (or shall require any participant in distribution of such Units
      in a Creation Basket the Authorized Purchaser has purchased) maintain each
      such
      CEA Acknowledgement until the termination of this Agreement, and provide a
      copy
      to the General Partner upon reasonable request.

    

    (c) The
      Authorized Purchaser hereby agrees that for the term of this Agreement the
      General Partner or its agent, the Marketing Agent, may deliver the then-current
      Prospectus, and any supplements or amendments thereto or recirculation thereof,
      to the Authorized Purchaser in Portable Document Format (“PDF”) via electronic
      mail or facsimile in lieu of delivering the Prospectus in paper form. The
      Authorized Purchaser may revoke the foregoing agreement at any time by
      delivering written notice to the General Partner and, whether or not such
      agreement is in effect, the Authorized Purchaser may, at any time, request
      reasonable quantities of the Prospectus, and any supplements or amendments
      thereto or recirculation thereof, in paper form from the General Partner or
      its
      agent, the Marketing Agent. The Authorized Purchaser acknowledges that it has
      the capability to access, view, save and print material provided to it in PDF
      and that it will incur no appreciable extra costs by receiving the Prospectus
      in
      PDF instead of in paper form. The General Partner will, when requested by the
      Authorized Purchaser, make available at no cost the software and technical
      assistance necessary to allow the Authorized Purchaser to access, view and
      print
      the PDF version of the Prospectus.

    

    (d) For
      as
      long as this Agreement is effective, the Authorized Purchaser agrees to be
      identified as an authorized purchaser of the Fund at the General Partner’s
      discretion (i) in the section of the Prospectus included within the Registration
      Statement entitled “Creation and Redemption of Units,” and in any other section
      as may be required by the SEC and (ii) on the Fund’s website. Upon the
      termination of this Agreement, (i) during the period prior to when the
      General Partner qualifies and elects to file on Form S-3, the General Partner
      will remove such identification from the Prospectus in the amendment of the
      Registration Statement next occurring after the date of the termination of
      this
      Agreement and, during the period after when the General Partner qualifies and
      elects to file on Form S-3, the General Partner will promptly file a current
      report on Form 8-K indicating the withdrawal of the Authorized Purchaser as
      an
      authorized purchaser of the Fund and (ii) the General Partner will promptly
      update the Fund’s website to remove any identification of the Authorized
      Purchaser as an authorized purchaser of the Fund. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    Section
      14. Certain Covenants of the General Partner.
      

     

    The
      General Partner, on its own behalf and on behalf of the Fund, covenants and
      agrees: 

    

    (a) to
      advise
      the Authorized Purchaser promptly of the happening of any event during the
      term
      of this Agreement which could require the making of any change in the Prospectus
      then being used so that the Prospectus would not include an untrue statement
      of
      material fact or omit to state a material fact necessary to make the statements
      therein, in the light of the circumstances under which they are made, not
      misleading, and, during such time, to prepare and furnish, at the expense of
      the
      Fund, to the Authorized Purchaser promptly such amendments or supplements to
      such Prospectus as may be necessary to reflect any such change; 

    

    (b) to
      cause
      Spicer Jeffries LLP, accountants to the Fund, to deliver, at each time (i)
      the
      Registration Statement or the Prospectus is amended or supplemented by the
      filing of a post-effective amendment, (ii) a new Registration Statement is
      filed
      to register additional Baskets in reliance on Rule 429, and (iii) there is
      financial information incorporated by reference into the Registration Statement
      or the Prospectus, letters dated such dates and addressed to the Authorized
      Purchaser, containing statements and information of the type ordinarily included
      in accountants’ letters to underwriters with respect to the financial statements
      and other financial information contained in or incorporated by reference into
      the Registration Statement and the Prospectus; 

    

    (c) to
      deliver to the Authorized Purchaser, at each time (i) the Registration Statement
      or the Prospectus is amended or supplemented by the filing of a post-effective
      amendment, (ii) a new Registration Statement is filed to register additional
      Baskets in reliance on Rule 429, and (iii) there is financial information
      incorporated by reference into the Registration Statement or the Prospectus,
      a
      certification by a duly authorized officer of the General Partner in the form
      attached hereto as Exhibit E. In addition, any certificate signed by any officer
      of the General Partner and delivered to the Authorized Purchaser or counsel
      for
      the Authorized Purchaser pursuant hereto shall be deemed to be a representation
      and warranty by the General Partner as to matters covered thereby to the
      Authorized Purchaser; 

    

    (d) to
      furnish directly or through the Marketing Agent to the Authorized Purchaser,
      at
      each time (i) the Registration Statement or the Prospectus is amended or
      supplemented by the filing of a post-effective amendment, (ii) a new
      Registration Statement is filed to register additional Baskets in reliance
      on
      Rule 429, and (iii) there is financial information incorporated by reference
      into the Registration Statement or the Prospectus, such documents and
      certificates in the form as reasonably requested; and 

    

    (e) to
      cause
      the Fund to file a post-effective amendment to the Registration Statement no
      less frequently than once per calendar quarter on or about the same time that
      the Fund files a quarterly or annual report pursuant to Section 13 or 15(d)
      of
      the Exchange Act (including the information contained in such report), until
      such time as the Fund’s reports filed pursuant to Section 13 or 15(d) of the
      Exchange Act are incorporated by reference in the Registration
      Statement.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    Section
      15. Third Party Beneficiaries. 

     

    Each
      AP
      Indemnified Person, to the extent it is not a party to this Agreement, is a
      third-party beneficiary of this Agreement (each, a “Third Party Beneficiary”)
      and may proceed directly against the Authorized Purchaser (including by bringing
      proceedings against the Authorized Purchaser in its own name) to enforce any
      obligation of the Authorized Purchaser under this Agreement which directly
      or
      indirectly benefits such Third Party Beneficiary.

    

    Section
      16. Force Majeure. 

     

    No
      party
      to this Agreement shall incur any liability for any delay in performance, or
      for
      the non-performance, of any of its obligations under this Agreement by reason
      of
      any cause beyond its reasonable control. This includes any act of God or war
      or
      terrorism, any breakdown, malfunction or failure of transmission in connection
      with or other unavailability of any wire, communication or computer facilities,
      any transport, port, or airport disruption, industrial action, acts and
      regulations and rules of any governmental or supra national bodies or
      authorities or regulatory or self-regulatory organization or failure of any
      such
      body, authority or organization for any reason, to perform its obligations.
      

    

    Section
      17. Miscellaneous.
      

     

    (a) Entire
      Agreement. This Agreement (including any schedules and exhibits attached hereto
      and thereto) contains all of the agreements among the parties hereto (and
      thereto) with respect to the transactions contemplated hereby (and thereby)
      and
      supersedes all prior agreements or understandings, whether written or oral,
      among the parties with respect thereto.

    

    (b) Amendment
      and Modification. This Agreement may be amended, modified or supplemented only
      by a written instrument executed by all the parties.

    

    (c) Successors
      and Assigns; Assignment. All the terms and provisions of this Agreement shall
      be
      binding upon and inure to the benefit of the parties and their respective
      successors and permitted assigns. This Agreement shall not be assigned by any
      party without the prior written consent of the other parties and any assignment
      without such consent shall be null and void.

    

    (d) Waiver
      of
      Compliance. Except as otherwise provided in this Agreement, any failure of
      any
      of the parties to comply with any obligation, covenant, agreement or condition
      herein may be waived by the party entitled to the benefits thereof only by
      a
      written instrument signed by the party granting such waiver, but any such
      waiver, or the failure to insist upon strict compliance with any obligation,
      covenant, agreement or condition herein, shall not operate as a waiver of,
      or
      estoppel with respect to, any subsequent or other failure or
      breach.

    

    (e) Severability.
      The parties hereto desire that the provisions of this Agreement be enforced
      to
      the fullest extent permissible under the law and public policies applied in
      each
      jurisdiction in which enforcement is sought. Accordingly, in the event that
      any
      provision of this Agreement would be held in any jurisdiction to be invalid,
      prohibited or unenforceable for any reason, such provision, as to such
      jurisdiction, shall be ineffective, without invalidating the remaining
      provisions of this Agreement or affecting the validity or enforceability of
      such
      provision in any other jurisdiction. Notwithstanding the foregoing, if such
      provision could be more narrowly drawn so as not to be invalid, prohibited
      or
      unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
      narrowly drawn, without invalidating the remaining provisions of this Agreement
      or affecting the validity or enforceability of such provision in any other
      jurisdiction.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    (f) Notices.
      All notices, waivers, or other communications pursuant to this Agreement shall
      be in writing and shall be deemed to be sufficient if delivered personally, by
      facsimile (and, if sent by facsimile, followed by delivery by
      nationally-recognized express courier), sent by nationally-recognized express
      courier or mailed by registered or certified mail (return receipt requested),
      postage prepaid, to the parties at the following addresses (or at such other
      address for a party as shall be specified by like notice):

    

    (1)     
       if
      to
      General Partner, to:

    

    Victoria
      Bay Asset Management, LLC

    c/o
      Nicholas D. Gerber

    P.O.
      Box
      6919

    Morago,
      CA 94570

    

    (2)      
       if
      to the
      Authorized Purchaser, to:

    

    [please
      provide]

    

    All
      such
      notices and other communications shall be deemed to have been delivered and
      received (i) in the case of personal delivery or delivery by facsimile or
      e-mail, on the date of such delivery if delivered during business hours on
      a
      Business Day or, if not delivered during business hours on a Business Day,
      the
      first Business Day thereafter, (ii) in the case of delivery by
      nationally-recognized express courier, on the first Business Day following
      dispatch, and (iii) in the case of mailing, on the third Business Day following
      such mailing.

    

    (g) Governing
      Law; Jurisdiction.

    

    (1) All
      questions concerning the construction, interpretation and validity of this
      Agreement shall be governed by and construed and enforced in accordance with
      the
      domestic laws of the State of New York, without giving effect to any choice
      or
      conflict of law provision or rule (whether in the State of New York or any
      other
      jurisdiction) that would cause the application of the laws of any jurisdiction
      other than the State of New York. In furtherance of the foregoing, the internal
      law of the State of New York will control the interpretation and construction
      of
      this Agreement, even if under such jurisdiction’s choice of law or conflict of
      law analysis, the substantive law of some other jurisdiction would ordinarily
      or
      necessarily apply.

    

    (2) Each
      party irrevocably consents and agrees, for the benefit of the other parties,
      that any legal action, suit or proceeding against it with respect to its
      obligations, liabilities or any other matter arising out of or in connection
      with this Agreement or any related agreement may be brought in the courts of
      the
      State of New York and hereby irrevocably consents and submits to the
      non-exclusive jurisdiction of each such court in personam, generally and
      unconditionally with respect to any action, suit or proceeding for itself and
      in
      respect of its properties, assets and revenues. Each party irrevocably waives
      any immunity to jurisdiction to which it may otherwise be entitled or become
      entitled (including sovereign immunity, immunity to pre-judgment attachment
      and
      execution) in any legal suit, action or proceeding against it arising out of
      or
      based on this Agreement or any related agreement or the transactions
      contemplated hereby or thereby which is instituted in any court of the State
      of
      New York.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    The
      provisions of this Section 17(g) shall survive any termination of this
      Agreement, in whole or in part.

    

    (h) No
      Partnership. Nothing in this Agreement is intended to, or will be construed
      to
      constitute the General Partner or the Fund, on the one hand, and the Authorized
      Purchaser or any of its Affiliates, on the other hand, as partners or joint
      venturers; it being intended that the relationship between them will at all
      times be that of independent contractors.

    

    (i) Interpretation.
      The article and section headings contained in this Agreement are solely for
      the
      purpose of reference, are not part of the agreement of the parties and shall
      not
      in any way affect the meaning or interpretation of this Agreement.

    

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

    

    (k)
       Counterparts;
      Facsimile Signatures. This Agreement may be executed in two or more
      counterparts, each of which shall be deemed an original but all of which
      together shall constitute one and the same instrument. Facsimile counterpart
      signatures to this Agreement shall be acceptable and binding.

    

    (l) Other
      Usages. The following usages shall apply in interpreting this Agreement: (i)
      references to a governmental or quasigovernmental agency, authority or
      instrumentality shall also refer to a regulatory body that succeeds to the
      functions of such agency, authority or instrumentality; and (ii) “including”
means “including, but not limited to.”

    

    Section
      18. Confidentiality.

    

    
      	 	
              (a)

            	
              The
                General Partner and the Authorized Purchaser shall during the Term
                and for
                one (1) year thereafter maintain in confidence, use only for the
                purposes
                provided for in this Agreement, and not disclose to any third party,
                without first obtaining the other party’s consent in writing, any and all
                Confidential Information (as defined below) such party receives from
                the
                other party; provided, however, that either party may disclose
                Confidential Information received from the other party to those of
                its
                Representatives as may be necessary for such party to carry out its
                obligations under this Agreement. 

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    
      	 	 	
              “Confidential
                Information” shall mean all information or data of a party that is
                disclosed to or received by the other party, whether orally, visually
                or
                in writing, in any form, including, without limitation, information
                or
                data which relates to such party’s business or operations, research and
                development, marketing plans or activities, or actual or potential
                products.

            

    

    

    
      	 	
              (b)

            	
              Notwithstanding
                the provisions of this Agreement to the contrary, a party shall have
                no
                liability to the other party for the disclosure or use of any Confidential
                Information of the other party if the Confidential
                Information:

            

    

    

    
      	 	 	
              (i)

            	
              is
                known to such party at the time of disclosure other than as the result
                of
                a breach of this Section 18 by such
                party;

            

    

    

    
      	 	 	
              (ii)

            	
              has
                been or becomes publicly known, other than as the result of a breach
                of
                this Section 18 by such party, or has been or is publicly disclosed
                by the
                other party;

            

    

    

    
      	 	 	
              (iii)

            	
              is
                received by such party after the date of this Agreement from a third
                party
                (unless such third party breaches an obligation of confidentiality
                to the
                other party); or

            

    

    

    
      	 	 	
              (iv)

            	
              is
                required to be disclosed by law or similar compulsion or in connection
                with any legal proceeding, provided that such party shall promptly
                inform
                the other party in writing of such requirement and that such disclosure
                shall be limited to the extent so required and, except to the extent
                prohibited by law, such party shall reasonably cooperate with the
                other
                party (at the expense of the other party) in seeking a protective
                order or
                other suitable confidentiality
                protections.

            

    

    

    
      	 	
              (c)

            	
              The
                parties recognize and acknowledge that a breach or threatened breach
                by a
                party of the provisions of this Section 18 may cause irreparable
                and
                material loss and damage to the other party which cannot be adequately
                remedied at law and that, accordingly, in addition to, and not in
                lieu of,
                any damages or other remedy to which the non-breaching party may
                be
                entitled, the issuance of an injunction or other equitable remedy
                (without
                the requirement that a bond or other security be posted) is an appropriate
                remedy for the non-breaching party for any breach or threatened breach
                of
                the obligations set forth in this Section
                18.

            

    

    

    
      	 	
              (d)

            	
              Each
                party agrees that it will use the same degree of care, but no less
                than a
                reasonable degree of care, in safeguarding the Confidential Information
                of
                the other party as it uses for its own Confidential Information of
                a
                similar nature. Each party shall promptly notify the other party
                in
                writing of any misuse, misappropriation or unauthorized disclosure
                of the
                Confidential Information of the other party that may come to such
                party’s
                attention.

            

    

    

    
      	 	
              (e)

            	
              Upon
                the termination of this Agreement, if requested in writing by the
                other
                party, each party shall, at such party’s option, promptly destroy or
                return to the other party all Confidential Information received from
                the
                other party, all copies and extracts of such Confidential Information
                and
                all documents or other media containing any such Confidential
                Information.

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Authorized Purchaser and the General Partner have caused
      this Agreement to be executed by their duly authorized representatives as of
      the
      date first set forth above. 

    

    

    VICTORIA
      BAY ASSET MANAGEMENT, LLC

    

    By: 

    
      

    

    Name:
        

    Title:
        

    Address:
      

    Telephone:
      

    Facsimile:
      

    

    

    [AUTHORIZED
      PURCHASER]

    

    
      By: 

      
        

      

    

    Name:
        

    Title:
        

    Address:
      

    Telephone:

    Facsimile:
      

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    UNITED
      STATES NATURAL GAS FUND, LP

    CREATION
      AND REDEMPTION PROCEDURES

    

    Scope
      of
      Procedures and Overview

    

    These
      procedures (the “Procedures”) describe the processes by which one or more
      Baskets of United States Natural Gas Fund, LP Units (the “Units”) may be
      purchased by an Authorized Purchaser, or, once Units have been issued, redeemed
      by an Authorized Purchaser. Units may be created or redeemed only in blocks
      of
      100,000 Units (each such block, a “Basket”).

    

    For
      purposes of these Procedures, a “Business Day” is defined as any day other than
      a day on which the American Stock Exchange (“AMEX”), the New York Mercantile
      Exchange (“NYMEX”) or the New York Stock Exchange (“NYSE”) is closed for regular
      trading. 

    

    Baskets
      are issued pursuant to the Prospectus, which will be delivered by the Marketing
      Agent to each Authorized Purchaser prior to its execution of the Authorized
      Purchaser Agreement, and are issued and redeemed in accordance with the
      Authorized Purchaser Agreement. Baskets may be issued and redeemed on any
      Business Day by the Marketing Agent in exchange for cash and/or Treasuries,
      which the Custodian receives from Authorized Purchasers or transfers to
      Authorized Purchasers, in each case on behalf of the Fund. 

    

    Upon
      acceptance of the Authorized Purchaser Agreement, the Marketing Agent will
      assign a personal identification number (a “PIN number”) to each Authorized
      Person authorized to act for the Authorized Purchaser. This will allow the
      Authorized Purchaser through its Authorized Person(s) to place Purchase Order(s)
      or Redemption Order(s) for Baskets. 

    

    Important
      Notes:

    

    ·  Any
      Order
      is subject to rejection by the General Partner or the Marketing Agent, as agent
      of the General Partner, for the reasons set forth in the Authorized Purchaser
      Agreement.

    

    ·  All
      Orders are subject to the provisions of the Partnership Agreement, the
      Prospectus and the Authorized Purchaser Agreement relating to unclear or
      ambiguous instructions.

    

    ·  The
      Authorized Purchaser, and each distributor offering and selling Units as part
      of
      the distribution of such Units, shall comply with the prospectus delivery and
      disclosure requirements of the 1933 Act as well as the analogous requirements
      under the CEA, including, the requirement that prospective investors provide
      an
      acknowledgement of receipt of such disclosure materials prior to the payment
      for
      any Units. 

    

    CREATION
      PROCESS

    

    An
      Order
      to purchase one or more Baskets placed by an Authorized Purchaser with the
      Marketing Agent by 12:00 PM New York time or the close of regular trading on
      the
      AMEX, whichever is earlier (the “Order Cut-Off Time”) on a Business Day (such
      day, “CREATION T”) results in the transfer to the Authorized Purchaser’s account
      at The Depository Trust Company (“DTC”) of Baskets the Authorized Purchaser has
      purchased, in most instances, by 9:00 AM New York time on CREATION T+3:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    CREATION
      PROCEDURES

    

    1. By
      the
      Order Cut-Off Time (the earlier of the close of regular trading on the AMEX
      or
      12:00 PM New York time), an Authorized Person of the Authorized Purchaser calls
      the Marketing Agent at (303) 623-2577 to notify such agent that the Authorized
      Purchaser wishes to place a Purchase Order to create an identified number of
      Baskets and to request that it be provided with an order number (an “Order
      Number”). The Authorized Person provides a PIN number as identification. The
      Marketing Agent provides the Authorized Purchaser with an Order Number for
      the
      Authorized Purchaser’s Purchase Order Form. The Authorized Purchaser then
      completes and faxes to the Marketing Agent the Purchase Order Form included
      as
      Exhibit B to the Authorized Purchaser Agreement. The Purchase Order Form must
      include the Authorized Person’s signature, the number of Baskets being
      purchased, and the Order Number. 

    

    2. If
      the
      Marketing Agent has not received the Purchase Order Form from the Authorized
      Purchaser within 15 minutes after the Marketing Agent receives the phone call
      from the Authorized Purchaser referenced in item (1) above, the Marketing Agent
      places a phone call to the Authorized Purchaser to enquire about the status
      of
      the Order. If the Authorized Purchaser does not fax the Purchase Order Form
      to
      the Marketing Agent within 15 minutes after the Marketing Agent’s phone call,
      the Authorized Purchaser’s Order is cancelled. The Marketing Agent will then
      notify the Authorized Purchaser that the Order has been cancelled via telephone
      call.

    

    3. If
      the
      Marketing Agent has received the Authorized Purchaser’s Purchase Order Form on
      time in accordance with the preceding timing rules, then by 1:00 PM New York
      time the Marketing Agent returns to the Authorized Purchaser a copy of the
      Purchase Order Form submitted, marking it “Affirmed.” 

    

      4. Based
        on
        the Purchase Orders placed with it on CREATION T, the Marketing Agent sends
        a
        facsimile to the Transfer Agent indicating the total number of creation Units
        and total amount of cash and/or Treasuries for which the Marketing Agent
        will
        require an allocation into the custodial accounts
        of,
        respectively, the Authorized Purchaser and the Fund on CREATION T+3. If the
        Marketing Agent rejects a Purchase Order pursuant to the Authorized Purchaser
        Agreement after the foregoing messages are given to the Custodian, the Marketing
        Agent will notify the Transfer Agent of such rejection as
        soon
        as practicable
        but, in
        any event, by 1:30 PM New York time the same day,
        identifying the Authorized Purchaser whose Purchase Order was rejected and
        the
        amount of Units contained in the rejected Purchase Order. The Transfer Agent
        will address any such rejection notifications received after 1:30 PM New
        York
        time only on a best efforts basis. 

    

    

    REDEMPTION
      PROCESS

    

    An
      order
      to redeem one or more Baskets placed by an Authorized Purchaser with the
      Marketing Agent by 12:00 PM New York time or the close of regular trading on
      the
      AMEX, whichever is earlier, on a Business Day (such day, “REDEMPTION T”) results
      in the following taking place by 3:00 p.m. New York time on REDEMPTION
      T+3:

    

    ·  Transfer
      to the account at DTC and the subsequent cancellation of the relevant number
      of
      the Authorized Purchaser’s Baskets; and

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    ·  Transfer
      to the Authorized Purchaser by credit to the Authorized Purchaser’s account of
      cash and Treasuries, if any, in the relevant amount(s) corresponding to the
      Baskets delivered for redemption (the “Redemption Distribution”).

    

    REDEMPTION
      PROCEDURES

    

    REDEMPTION
      T (REDEMPTION ORDER TRADE DATE)

    

    1. By
      the
      Order Cut-off Time, an Authorized Person of the Authorized Purchaser calls
      the
      Marketing Agent at (303)
      623−2577 to
      notify
      the Marketing Agent that the Authorized Purchaser wishes to place a Redemption
      Order with the Marketing Agent to redeem an identified number of Baskets and
      to
      request that the Marketing Agent provide an Order Number. The Authorized Person
      provides a PIN number as identification to the Marketing Agent. The Marketing
      Agent provides the Authorized Purchaser with an Order Number for the Authorized
      Purchaser’s Redemption Order Form. The Authorized Purchaser then completes and
      faxes to the Marketing Agent the Redemption Order Form included as Exhibit
      B to
      the Authorized Purchaser Agreement. The Redemption Order Form must include
      the
      Authorized Person’s signature, the number of Baskets being redeemed, and the
      Order Number previously provided by the Marketing Agent.

    

    2. If
      the
      Marketing Agent has not received the Redemption Order Form from the Authorized
      Purchaser within 15 minutes after the Marketing Agent receives the phone call
      from the Authorized Purchaser referenced in item (1) above, the Marketing Agent
      places a phone call to the Authorized Purchaser to enquire about the status
      of
      the Order. If the Authorized Purchaser does not fax the Redemption Order Form
      to
      the Marketing Agent within 15 minutes after the Marketing Agent’s phone call,
      the Authorized Purchaser’s Order is cancelled. The Marketing Agent will then
      notify the Authorized Purchaser that the Order has been cancelled via telephone
      call. 

    

    3. If
      the
      Marketing Agent has received the Authorized Purchaser’s Redemption Order Form on
      time in accordance with the preceding timing rules, then by 1:00 PM New York
      time the Marketing Agent returns to the Authorized Purchaser a copy of the
      Redemption Order Form submitted, marking it “Affirmed.” The Marketing Agent also
      indicates on the Redemption Order Form the amount of Treasuries and/or
      cash,
      if
      any, to be delivered in the Redemption Distribution, and provides details of
      the
      method of payment to be used for the Transaction Fee and the method of delivery
      of the Treasuries and/or
      cash
      portion, if any, of the Redemption Distribution. 

    

    4. By
      1:00
      PM New York time, the Marketing Agent sends a facsimile containing instructions
      to the Transfer Agent to transfer on REDEMPTION T+3 from the custodial accounts
      of, respectively, the Authorized Purchaser and the Fund (“deallocate”) the total
      number of creation Units and the total amount of cash and/or Treasuries required
      to settle the Redemption Orders received by the Marketing Agent on REDEMPTION
      T.
      If the Marketing Agent rejects a Redemption Order pursuant to the Authorized
      Purchaser Agreement after the foregoing message is sent, the Marketing Agent
      will notify the Transfer Agent of such rejection as
      soon as
      practicable
      but, in
      any event,
      by 1:30
      pm New York time the same day, identifying the Authorized Purchaser whose
      Redemption Order was rejected and the amount of Units contained in the rejected
      Redemption Order. The Transfer Agent will address any such rejection
      notifications received after 1:30 pm New York time only on a best efforts basis.
      

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    REDEMPTION
      T+3

     

    1. By
      3:00
      PM New York time, the Authorized Purchaser delivers free to the relevant account
      at DTC the Baskets to be redeemed. 

    

    2. If
      the
      Custodian does not receive from a redeeming Authorized Purchaser all Units
      comprising the Baskets being redeemed by 3:00 PM New York time, (i) the
      Custodian will, only upon instruction from the General Partner, settle the
      Redemption Order to the extent of whole Baskets received from the Authorized
      Purchaser and (ii) the Marketing Agent will keep the redeeming Authorized
      Purchaser’s Redemption Order open until 9:00 AM New York time on the following
      Business Day (REDEMPTION T+4) as to the balance of the Redemption Order (such
      balance, the “Suspended Redemption Order”). For each day (whether or not a
      Business Day) the Redemption Order is held open, the Authorized Purchaser will
      be charged the greater of $300 or $30 times the number of Units included in
      the
      Suspended Redemption Order, as determined in the sole discretion of the Fund.
      

    

    REDEMPTION
      T+4

     

    1. By
      9:00
      AM New York time, the redeeming Authorized Purchaser must deliver free to the
      account at DTC the Basket(s) comprising the Suspended Redemption Order. The
      Marketing Agent will settle the Suspended Redemption Order to the extent of
      whole Baskets received. Any balance of the Suspended Redemption Order may be
      cancelled at the discretion of the General Partner. 

    

    2. The
      sequence of instructions and events related to the settlement of the Suspended
      Redemption Order on REDEMPTION T+4 will be made in the manner provided for
      a
      Redemption Order under REDEMPTION T+3. 

    

    *
      * *
      *

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A-1

    

    UNITED
      STATES NATURAL GAS FUND, LP

    INITIAL
      CREATION PROCEDURES

    

    Scope
      of
      Procedures and Overview

    

    These
      procedures (the “Initial Procedures”) describe the process by which one or more
      Baskets of United States Natural Gas Fund, LP Units (the “Units”) may be
      purchased by an Authorized Purchaser. Units may be created only in blocks of
      100,000 Units (each such block, a “Basket”).

    

    For
      purposes of these Initial Procedures, a “Business Day” is defined as any day
      other than a day on which the American Stock Exchange (“AMEX”), the New York
      Mercantile Exchange (“NYMEX”) or the New York Stock Exchange (“NYSE”) is closed
      for regular trading. 

    

    Baskets
      are issued pursuant to the Prospectus, which will be delivered by the Marketing
      Agent to the Authorized Purchaser prior to its execution of the Authorized
      Purchaser Agreement, and are issued in accordance with the Authorized Purchaser
      Agreement. Baskets may be issued on any Business Day by the Marketing Agent
      in
      exchange for cash and/or Treasuries, which the Custodian receives from the
      Authorized Purchaser on behalf of the Fund. 

    

    Upon
      acceptance of the Authorized Purchaser Agreement, the Marketing Agent will
      assign a personal identification number (a “PIN number”) to the Authorized
      Person authorized to act for the Authorized Purchaser. This will allow the
      Authorized Purchaser through its Authorized Person(s) to place the initial
      Purchase Order for Baskets. 

     

    It
      is
      anticipated that on the effective date (the date the SEC declares the
      registration statement relating to the Fund effective), the
      initial Authorized Purchaser will, though it is under no obligation to do
      so, purchase one or more Creations Baskets at a price per Unit
      of $50.00  It is expected the proceeds of that purchase will be
      invested on that day and that Fund’s initial per unit net asset
      value will be established as of 4:00 p.m. New York City time that
      day.  The Units are expected to begin trading on the day following the
      effective date.  Units offered in Creation Baskets on any day after
      the effective date will be offered at the per Unit asset
      value as of the earlier of 4:00 p.m. New York time or the close of trading
      on the NYSE.

    

    Important
      Notes:

    

    ·  Any
      Order
      is subject to rejection by the General Partner or the Marketing Agent, as agent
      of the General Partner, for the reasons set forth in the Authorized Purchaser
      Agreement.

    

    ·  All
      Orders are subject to the provisions of the Partnership Agreement, the
      Prospectus and the Authorized Purchaser Agreement relating to unclear or
      ambiguous instructions.

    

    ·  The
      Authorized Purchaser, and each distributor offering and selling Units as part
      of
      the distribution of such Units, shall comply with the prospectus delivery and
      disclosure requirements of the 1933 Act as well as the analogous requirements
      under the CEA, including, the requirement that prospective investors provide
      an
      acknowledgement of receipt of such disclosure materials prior to the payment
      for
      any Units. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    CREATION
      PROCESS

    

    An
      Order
      to purchase one or more of the initial Baskets placed by the Authorized
      Purchaser with the Marketing Agent by 9:00 AM New York time (the “Order Cut-Off
      Time”) on a Business Day (such day, “CREATION T”) results in the transfer to the
      Authorized Purchaser’s account at The Depository Trust Company (“DTC”) of
      Baskets the Authorized Purchaser has purchased by 12:00 PM New York time on
      CREATION T+0 if payment for such Baskets has been received by the Custodian
      prior to that time: 

    

    CREATION
      PROCEDURES

    

    1. By
      the
      Order Cut-Off Time (the earlier of the close of regular trading on the AMEX
      or
      9:00 AM New York time), an Authorized Person of the Authorized Purchaser calls
      the Marketing Agent at (303) 623-2577 to notify such agent that the Authorized
      Purchaser wishes to place a Purchase Order to create an identified number of
      Baskets and to request that it be provided with an order number (an “Order
      Number”). The Authorized Person provides a PIN number as identification. The
      Marketing Agent provides the Authorized Purchaser with an Order Number for
      the
      Authorized Purchaser’s Purchase Order Form. The Authorized Purchaser then
      completes and faxes to the Marketing Agent the Purchase Order Form included
      as
      Exhibit B to the Authorized Purchaser Agreement. The Purchase Order Form must
      include the Authorized Person’s signature, the number of Baskets being
      purchased, and the Order Number. 

    

    2. If
      the
      Marketing Agent has not received the Purchase Order Form from the Authorized
      Purchaser within 15 minutes after the Marketing Agent receives the phone call
      from the Authorized Purchaser referenced in item (1) above, the Marketing Agent
      places a phone call to the Authorized Purchaser to enquire about the status
      of
      the Order. If the Authorized Purchaser does not fax the Purchase Order Form
      to
      the Marketing Agent within 15 minutes after the Marketing Agent’s phone call,
      the Authorized Purchaser’s Order is cancelled. The Marketing Agent will then
      notify the Authorized Purchaser that the Order has been cancelled via telephone
      call.

    

    3. If
      the
      Marketing Agent has received the Authorized Purchaser’s Purchase Order Form on
      time in accordance with the preceding timing rules, then by 10:00 AM New York
      time the Marketing Agent returns to the Authorized Purchaser a copy of the
      Purchase Order Form submitted, marking it “Affirmed.” 

    

    4. Based
      on
      the Purchase Orders placed with it on CREATION T, the Marketing Agent sends
      a
      facsimile to the Transfer Agent indicating the total number of creation Units
      and total amount of cash and/or Treasuries for which the Marketing Agent will
      require an allocation into the custodial accounts
      of,
      respectively, the Authorized Purchaser and the Fund on CREATION T+0 once the
      Custodian confirms to the Transfer Agent that the payment for such Baskets
      in
      same day funds has been received by it from the Authorized Purchaser. If the
      Marketing Agent rejects a Purchase Order pursuant to the Authorized Purchaser
      Agreement after the foregoing messages are given to the Custodian, the Marketing
      Agent will notify the Transfer Agent of such rejection as
      soon
      as practicable but, in any event, by 10:30 AM New York time the same
      day,
      identifying the amount of cash and/or Treasuries contained in the rejected
      Purchase Order. The Transfer Agent will address any such rejection notifications
      received after 10:30 AM New York time only on a best efforts basis.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    UNITED
      STATES NATURAL GAS FUND, LP

     

    
      

    

    PURCHASE/REDEMPTION
      ORDER FORM

    
      
 

    CONTACT
      INFORMATION FOR ORDER EXECUTION:

    
      
        	
                Telephone
                  order number:

                Facsimile
                  number:

              	
                Telex Number

                Business Number 

              
	 	 

    

    ALL
      ITEMS
      IN PART I MUST BE COMPLETED BY AN
      AUTHORIZED PURCHASER.
      THE
      GENERAL PARTNER AND/OR THE MARKETING AGENT, IN THEIR DISCRETION, MAY REJECT
      ANY
      ORDER NOT SUBMITTED IN COMPLETE FORM.

     

    I. TO
      BE COMPLETED BY AUTHORIZED PURCHASER:

     

    
      	Date:	 	
              Time:

            	 
	Broker
              Name:	 	Firm
              Name:	 
	NSCC
              Participant Number:	 	DTC
              Participant Number:	 
	Telephone
              Number:	 	Telex
              Number:	 
	Fax
              Number:	 	 	 

    

     

    Type
      of
      Order (Check One)

    

    Amount
      Created Units (100,000
      Units) ___________ 

    

    Amount
      Written Out    ___________

    

    Amount
      Redeemed Units (100,000 Units) _____________

    

    Amount
      Written Out:   ___________

    

    Order
      #: ____________________
      

    

    Authorized
      Person’s Signature  ________________________________

    

    II.  TO
      BE COMPLETED BY ALPS DISTRIBUTORS, INC.:

    

    This
      certifies that the above order has been:

    

    ___________
      Accepted by the Marketing Agent (for purchase or redemption) 

    

    ___________
      Declined - Reason: ________________________________________________

    

    ____________                    
      ____________         ______________________________

    Date    Time   Authorized
      Signature

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    

    UNITED
      STATES NATURAL GAS FUND, LP

    

    FORM
      OF
      CERTIFIED AUTHORIZED PERSONS 

    OF
      AUTHORIZED PURCHASER

    

    

    The
      following are the names, titles and signatures of all persons (each an
“Authorized Person”) authorized to give instructions relating to any activity
      contemplated by the United States Natural Gas Fund, LP Authorized Purchaser
      Agreement or any other notice, request or instruction on behalf of the
      Authorized Purchaser pursuant to the aforementioned agreement.

    

    Authorized
      Purchaser: _______________________

     

    Name: ____________________________

    

    Title: _____________________________

    

    Signature:
       _________________________

     

    

    Name:
       ____________________________

    

    Title:
       _____________________________

    

    Signature:
       _________________________

     

    

    Name: ____________________________

    

    Title: _____________________________

    

    Signature: _________________________

    

    

    The
      undersigned, [name], [title] of [company], does hereby certify that the persons
      listed above have been duly elected to the offices set forth beneath their
      names, that they presently hold such offices, that they have been duly
      authorized to act as Authorized Persons pursuant to the United States Natural
      Gas Fund, LP Authorized Purchaser Agreement by and between [Authorized
      Purchaser] and
      the
      General Partner of United States Natural Gas Fund, LP, dated
      ___________________, and that their signatures set forth above are their own
      true and genuine signatures. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the undersigned has hereby set his/her hand and the seal of
      [company] on the date set forth below. 

    

    Subscribed
      and sworn to before me

    this
      ___
      day of ___________, ______.

    

    

    By:

    

    Name: ____________________________

    

    Signature:
       _________________________

    
 

    Notary
      Public

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    

    EXHIBIT
      D

    

    BBH
      Pricing Policies

    Futures,
      Forwards, Swaps, Options and Treasuries

    

    The
      pricing policies stated below are used for all BBH clients ,
      including Mutual Fund Registered Investment Companies. These policies have
      been
      audited by numerous accounting firms during annual fund audits.

    

    Futures

    Futures
      traded on exchanges are valued using the closing settlement prices quoted on
      the
      relevant exchange and obtained from pricing sources, typically Bloomberg or
      Reuters. 

    

    Forward
      Currency Contracts

     

    BBH
      obtains
      the WM Reuters London Close closing spot rates and the WM Reuters London Close
      forward point rates on a daily basis. The currency forward contract pricing
      model derives the differential in point rates to the expiration date of the
      forward and calculates its present value. The forward is valued at the net
      of
      the present value and the spot rate.

    

    Swaps

     

    Swaps
      and
      other similar derivative or contractual type instruments are valued at a price
      provided by a single broker or dealer, typically the counterparty. If no such
      price is available, the contract is valued at a price at which the counterparty
      to such contract would repurchase the instrument or terminate the
      contract.

    

    Options

     

    Option
      contracts on securities, currencies, indices, futures contracts, commodities
      and
      other instruments shall be valued at the last sale price on the exchange or
      market that is the Primary Market. If a contract did not trade on the Primary
      Market, it shall be valued at the last sale price on another exchange or market
      where it did trade. If there is no such sale price, the value shall be the
      most
      recent bid quotation.

    

    Sale
      prices and bid quotations indicated above shall be supplied by a Pricing Service
      (Reuters, Bloomberg, IDC, etc.). If a Pricing Service is not able to provide
      such sale prices or bid quotations, the value shall be determined by taking
      the
      mean between the bid and the asked quotations provided by a single broker or
      dealer, unless the broker or dealer can only provide a bid quotation, in which
      case the value shall be such bid quotation.

    

    Except
      as
      provided below, OTC currency options are valued by uploading the applicable
      implied volatility rates from Reuters or Bloomberg. Other inputs are either
      uploaded (interest rates, spots) or are specified when the ticker symbols are
      set up (expiration date, strike). OTC currency options are then priced by using
      the Garman-Kohlhagen modified Black-Scholes formula, which adjusts for a
      constant yield versus a fixed dividend.

    

    Except
      as
      provided below, OTC equity/index options are priced according to the contract
      specifications (days to expiration, current spot index level, interest rates,
      dividends, strike price) using the Black-Scholes pricing model, modified for
      dividends. The volatility input assumption is interpolated from the previous
      day’s price.

     

    US
      Treasuries

     

    BBH
      uses
      an evaluated bid supplied by IDC for treasury prices.

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      E

    

    UNITED
      STATES NATURAL GAS FUND, LP

    

    OFFICER’S
      CERTIFICATE

    

    The
      undersigned, a duly authorized officer of Victoria Bay Asset Management, LLC,
      a
      Delaware limited liability company (the “General Partner”), and pursuant to
      Section 13(d) of the United States Natural Gas Fund, LP Authorized Purchaser
      Agreement (the “Agreement”), dated as of _____________________, by and between
      the General Partner and [Authorized
      Purchaser],
      (“the
      Authorized Purchaser”), hereby certifies that:

    

    1. Each
      of
      the following representations and warranties of the General Partner is true
      and
      correct in all material respects as of the date hereof:

    

    (a) the
      Prospectus does not contain an untrue statement of a material fact or omit
      to
      state a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading; the Registration Statement complies in all material respects
      with the requirements of the 1933 Act and the Prospectus complies in all
      material respects with the requirements of the 1933 Act and any statutes,
      regulations, contracts or other documents that are required to be described
      in
      the Registration Statement or the Prospectus or to be filed as exhibits to
      the
      Registration Statement have been so described or filed; the conditions to the
      use of Form S-1 or S-3, if applicable, have been satisfied; the Registration
      Statement does not contain an untrue statement of a material fact or omit to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading and the Prospectus does not contain an untrue
      statement of a material fact or omit to state a material fact required to be
      stated therein or necessary to make the statements therein, in light of the
      circumstances under which they were made, not misleading; provided, however,
      that the General Partner makes no warranty or representation with respect to
      any
      statement contained in the Registration Statement or any Prospectus in reliance
      upon and in conformity with information concerning the Authorized Purchaser
      and
      furnished in writing by or on behalf of the Authorized Purchaser to the General
      Partner expressly for use in the Registration Statement or such Prospectus;
      and
      neither the General Partner nor any person known to the General Partner acting
      on behalf of the Fund has distributed nor will distribute any offering material
      other than the Registration Statement or the Prospectus;

    

    (b) the
      Fund
      has been duly formed and is validly existing as an investment fund under the
      laws of the State of Delaware, as described in the Registration Statement and
      the Prospectus, and as described in the Prospectus, the Marketing Agent is
      authorized to issue and deliver the Baskets to the Authorized
      Purchaser;

    

    (c) the
      General Partner has been duly organized and is validly existing as a limited
      liability company in good standing under the laws of the State of Delaware,
      with
      full power and authority to conduct its business as described in the
      Registration Statement and the Prospectus, and has all requisite power and
      authority to execute and deliver this Agreement; 

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

    

    (d) the
      General Partner is duly qualified and is in good standing in each jurisdiction
      where the conduct of its business requires such qualification; and the Fund
      is
      not required to so qualify in any jurisdiction;

    

    (e) the
      outstanding Units have been duly and validly issued and are fully paid and
      non-assessable and free of statutory and contractual preemptive rights, rights
      of first refusal and similar rights; 

    

    (f) the
      Units
      conform in all material respects to the description thereof contained in the
      Registration Statement and the Prospectus and the holders of the Units will
      not
      be subject to personal liability by reason of being such holders; 

    

    (g) this
      Agreement has been duly authorized, executed and delivered by the General
      Partner and constitutes the valid and binding obligations of the General
      Partner, enforceable against the General Partner in accordance with its
      terms;

    

    (h) the
      General Partner is not in breach or violation of or in default under (nor has
      any event occurred which with notice, lapse of time or both would result in
      any
      breach or violation of, constitute a default under or give the holder of any
      indebtedness (or a person acting on such holder’s behalf) the right to require
      the repurchase, redemption or repayment of all or a part of such indebtedness
      under) its constitutive documents, or any indenture, mortgage, deed of trust,
      bank loan or credit agreement or other evidence of indebtedness, or any license,
      lease, contract or other agreement or instrument to which the General Partner
      is
      a party or by which any of them or any of their properties may be bound or
      affected, and the execution, delivery and performance of this Agreement, the
      issuance and sale of Units to the Authorized Purchaser hereunder and the
      consummation of the transactions contemplated hereby does not conflict with,
      result in any breach or violation of or constitute a default under (nor
      constitute any event which with notice, lapse of time or both would result
      in
      any breach or violation of or constitute a default under), respectively, the
      amended and restated limited liability company agreement of the General Partner,
      or any indenture, mortgage, deed of trust, bank loan or credit agreement or
      other evidence of indebtedness, or any license, lease, contract or other
      agreement or instrument to which the General Partner is a party or by which,
      respectively, the General Partner or any of its properties may be bound or
      affected, or any federal, state, local or foreign law, regulation or rule or
      any
      decree, judgment or order applicable to the General Partner or the Fund;

    

    (i) 
      no
      approval, authorization, consent or order of or filing with any federal, state,
      local or foreign governmental or regulatory commission, board, body, authority
      or agency is required in connection with the issuance and sale of Creation
      Baskets to the Authorized Purchaser hereunder or the consummation by the General
      Partner or the Fund of the transactions contemplated hereunder other than
      registration of the Units under the 1933 Act and the filing of the Prospectus
      with the National Futures Association, which has been effected, and any
      necessary qualification under the securities or blue sky laws of the various
      jurisdictions in which the Units are being offered or under the rules and
      regulations of the American Stock Exchange;

    

    (j) except
      as
      set forth in the Registration Statement and the Prospectus (i) no person has
      the
      right, contractual or otherwise, to cause the Fund to issue or sell to it any
      Units or other equity interests of the Fund, and (ii) no person has the right
      to
      act as an underwriter or as a financial advisor to the Fund in connection with
      the offer and sale of the Units, in the case of each of the foregoing clauses
      (i), and (ii), whether as a result of the filing or effectiveness of the
      Registration Statement or the sale of the Units as contemplated thereby or
      otherwise; no person has the right, contractual or otherwise, to cause the
      General Partner on behalf of the Fund or the Fund to register under the 1933
      Act
      any other equity interests of the Fund, or to include any such shares or
      interests in the Registration Statement or the offering contemplated thereby,
      whether as a result of the filing or effectiveness of the Registration Statement
      or the sale of the Units as contemplated thereby or otherwise; 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    (k) each
      of
      the General Partner and the Fund has all necessary licenses, authorizations,
      consents and approvals and has made all necessary filings required under any
      federal, state, local or foreign law, regulation or rule, and has obtained
      all
      necessary authorizations, consents and approvals from other persons, in order
      to
      conduct its respective business; the General Partner is not in violation of,
      or
      in default under, or has not received notice of any proceedings relating to
      revocation or modification of, any such license, authorization, consent or
      approval or any federal, state, local or foreign law, regulation or rule or
      any
      decree, order or judgment applicable to the General Partner; 

    

    (l) all
      legal
      or governmental proceedings, affiliate transactions, off-balance sheet
      transactions, contracts, licenses, agreements, leases or documents of a
      character required to be described in the Registration Statement or the
      Prospectus or to be filed as exhibits to the Registration Statement have been
      so
      described or filed as required; 

    

    (m) except
      as
      set forth in the Registration Statement and the Prospectus, there are no
      actions, suits, claims, investigations or proceedings pending or threatened
      or
      contemplated to which the General Partner or the Fund, or any of the General
      Partner’s directors or officers, is or would be a party or of which any of their
      respective properties are or would be subject at law or in equity, before or
      by
      any federal, state, local or foreign governmental or regulatory commission,
      board, body, authority or agency;

    

    (n) Spicer
      Jeffries LLP, whose report on the audited financial statements of the Fund
      is
      filed with the SEC as part of the Registration Statement and the Prospectus, are
      independent public accountants as required by the 1933 Act;

    

    (o) the
      audited financial statement(s) included in the Prospectus, together with the
      related notes and schedules, presents fairly the financial position of the
      Fund
      as of the date indicated and has been prepared in compliance with the
      requirements of the 1933 Act and in conformity with generally accepted
      accounting principles; there are no financial statements (historical or pro
      forma) that are required to be included in the Registration Statement and the
      Prospectus that are not included as required; and the Fund does not have any
      material liabilities or obligations, direct or contingent (including any
      off-balance sheet obligations), not disclosed in the Registration Statement
      and
      the Prospectus; 

    

    (p) subsequent
      to the respective dates as of which information is given in the Registration
      Statement and the Prospectus, there has not been (i) any material adverse
      change, (ii) any transaction which is material to the General Partner or
      the Fund taken as a whole, (iii) any obligation, direct or contingent (including
      any off-balance sheet obligations), incurred by the General Partner or the
      Fund,
      which is material to the Fund, (iv) any change in the Units purchased by the
      Authorized Purchaser or outstanding indebtedness of the General Partner or
      the
      Fund or (v) any dividend or distribution of any kind declared, paid or made
      on
      such Units; 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    (q) the
      Fund
      is not and, after giving effect to the offering and sale of the Units, will
      not
      be an “investment company” or an entity “controlled” by an “investment company,”
as such terms are defined in the Investment Company Act; 

    

    (r) except
      as
      set forth in the Registration Statement and the Prospectus, the General Partner
      and the Fund own, or have obtained valid and enforceable licenses for, or other
      rights to use, the inventions, patent applications, patents, trademarks (both
      registered and unregistered), tradenames, copyrights, trade secrets and other
      proprietary information described in the Registration Statement and the
      Prospectus as being owned or licensed by them or which are necessary for the
      conduct of their respective businesses, (collectively, “Intellectual Property”);

    

    (i)
      to
      the knowledge of the General Partner or the Fund, there are no third parties
      who
      have or will be able to establish rights to any Intellectual Property, except
      for the ownership rights of the owners of the Intellectual Property which is
      licensed to the General Partner or the Fund; 

    

    (ii)
      to
      the knowledge of the General Partner or the Fund, there is no infringement
      by
      third parties of any Intellectual Property; 

    

    (iii)
      there is no pending or, to the knowledge of the General Partner or the Fund,
      threatened action, suit, proceeding or claim by others challenging the General
      Partner or the Fund’s rights in or to any Intellectual Property, and the General
      Partner and the Fund are unaware of any facts which could form a reasonable
      basis for any such claim; 

    

    (iv)
      there is no pending or, to the knowledge of the General Partner or the Fund,
      threatened action, suit, proceeding or claim by others challenging the validity
      or scope of any Intellectual Property as to which the General Partner and the
      Fund have no knowledge of any such pending or threatened claims, and the General
      Partner and the Fund are unaware of any facts which could form a reasonable
      basis for any such claim; 

    

    (v)
      there
      is no pending or, to the knowledge of the General Partner or the Fund,
      threatened action, suit, proceeding or claim by others that the General Partner
      or the Fund infringes or otherwise violates any patent, trademark, copyright,
      trade secret or other proprietary rights of others, and the General Partner
      and
      the Fund are unaware of any facts which could form a reasonable basis for any
      such claim; and

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    (vi)
      to
      the knowledge of the General Partner or the Fund, there is no patent or patent
      application that contains claims that interfere with the issued or pending
      claims of any of the Intellectual Property; and 

    

    (s) all
      tax
      returns required to be filed by the General Partner have been filed, and all
      taxes and other assessments of a similar nature (whether imposed directly or
      through withholding) including any interest, additions to tax or penalties
      applicable thereto due or claimed to be due from such entities have been paid;
      and no tax returns or tax payments are due with respect to the Fund as of the
      date of this Agreement; 

    

    (t) the
      General Partner has not sent or received any communication regarding termination
      of, or intent not to renew, any of the contracts or agreements referred to
      or
      described in, or filed as an exhibit to, the Registration Statement, and no
      such
      termination or non-renewal has been threatened by the General Partner or any
      other party to any such contract or agreement; 

    

    (u) on
      behalf
      of the Fund, the General Partner has established and maintains disclosure
      controls and procedures (as such term is defined in Rule 13a-14 and 15d-14
      under
      the Exchange Act, giving effect to the rules and regulations, and SEC staff
      interpretations (whether or not public), thereunder)); such disclosure controls
      and procedures are designed to ensure that material information relating to
      the
      Fund, is made known to the General Partner, and such disclosure controls and
      procedures are effective to perform the functions for which they were
      established; on behalf of the Fund, the General Partner has been advised of:
      (i)
      any significant deficiencies in the design or operation of internal controls
      which could adversely affect the Fund’s ability to record, process, summarize,
      and report financial data; and (ii) any fraud, whether or not material, that
      involves management or other employees who have a role in the Fund’s internal
      controls; any material weaknesses in internal controls have been identified
      for
      the Fund’s auditors; 

    

    (w) any
      statistical and market-related data included in the Registration Statement
      and
      the Prospectus are based on or derived from sources that the General Partner
      believes to be reliable and accurate, and the General Partner has obtained
      the
      written consent to the use of such data from such sources to the extent
      required; and 

    

    (x) neither
      the General Partner, nor any of the General Partner’s directors, members,
      officers, affiliates or controlling persons has taken, directly or indirectly,
      any action designed, or which has constituted or might reasonably be expected
      to
      cause or result in, under the Exchange Act or otherwise, the stabilization
      or
      manipulation of the price of any security or asset of the Fund to facilitate
      the
      sale or resale of the Units. 

    

    For
      purposes hereof, the term “Registration Statement” shall mean the Registration
      Statement as amended or supplemented from time to time to the date hereof,
      the
      term “Preliminary Prospectus” shall mean the preliminary prospectus dated
      ______________, relating to the Units and any other prospectus dated prior
      to
      effectiveness of the Registration Statement relating to the Units, and the
      term
“Prospectus” shall mean the Prospectus as amended or supplemented from time to
      time to the date hereof. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    2. Each
      of
      the obligations of the General Partner to be performed by it on or before the
      date hereof pursuant to the terms of the Agreement, and each of the provisions
      thereof to be complied with by the General Partner on or before the date hereof,
      has been duly performed and complied with in all material respects. Capitalized
      terms used, but not defined herein shall have the meanings assigned to such
      terms in the Agreement.

    

    IN
      WITNESS WHEREOF, I have hereunto, on behalf of the General Partner, subscribed
      my name this ___ day of ________, ____.

    

    
      	 	 	 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            

    

    

    I,
      _______________, in my capacity as [title], hereby certify that _______________
      is the duly elected [title] of the General Partner, and that the signature
      set
      forth immediately above is [his/her] genuine signature. 

    

    IN
      WITNESS WHEREOF, I have hereunto set my hand as of the date first set forth
      above.

     

    
      	 	 	 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

            

    
      
        
        

      

      
        6LOAN
      AGREEMENT

     

    THIS
      AGREEMENT (as
      the
      same may be amended, restated or otherwise modified, the “Agreement”) is made
      this 8th day of March, 2007, between MOD-PAC
      CORP.,
      a New
      York corporation with offices at 1801 Elmwood Avenue, Buffalo, New York
      14207 (“Borrower”) and KEYBANK
      NATIONAL ASSOCIATION,
      a
      national banking association, with offices at 50 Fountain Plaza, Buffalo,
      New York 14202, and its successors and assigns (“Lender”).

    

    In
      consideration of the covenants and agreements contained herein, the Borrower
      and
      the Lender hereby mutually agree as follows:

    

    1. DEFINITIONS

     

    1.1. General.
      Any
      accounting term used but not specifically defined herein shall be construed
      in
      accordance with GAAP (as defined below). The definition of each agreement,
      document, and instrument set forth in Section 1.2 hereof shall be deemed to
      mean
      and include such agreement, document, or instrument as amended, restated, or
      modified from time to time.

     

    1.2. Defined
      Terms.
      As
      used
      in this Agreement:

     

    “Account”,
      “Account Debtor”. “Chattel Paper”, “Consumer Goods”, “Deposit Account”,
“Document”, “Equipment”, “Farm Products”, “General Intangible”, “Goods”,
“Instrument” and “Proceeds”, have the meanings as set forth in the New York
      Uniform Commercial Code, Sections 9-102(a) (2), (3) (11), (23), (29), (30),
      (33), (34), (42), (44), (47), (48) and (64) inclusive, as amended from time
      to
      time.

    

    “Affiliate”
      of any specified entity means any other entity directly or indirectly
      controlling or controlled by or under direct or indirect common control with
      such specified entity and “control”, when used with respect to any specified
      entity, means the power to direct the management and policies of such entity,
      directly or indirectly, whether through the ownership of voting securities,
      by
      contract or otherwise; and the terms “controlling” and “controlled” have
      meanings correlative to the foregoing.

    

    “Acquisition”
      means (whether in one transaction or a series of transactions) (i) any
      acquisition on a going concern basis (whether by purchase, lease or otherwise)
      of any assets (including, without limitation, Equipment), facility and/or
      business or business unit operated by any Person that is not a Subsidiary of
      Borrower, and (ii) acquisitions of a majority of the outstanding equity or
      other
      similar interests in any such Person (whether by merger, stock purchase or
      otherwise). 

    

    “Borrowing
      Base” means (a) 80% of Eligible Accounts plus (b) 40% of Eligible Inventory, but
      not to exceed One Million Five Hundred Thousand Dollars ($1,500,000.00),
      plus (c) 100% of Eligible Equipment, but not to exceed Two Million Dollars
      ($2,000,000.00).

    

    “Borrowing
      Base Certificate” means a certificate substantially in the form of attached
      Exhibit B.

    

    “Business
      Day” means a day of the year on which banks are not required or authorized to
      close in Cleveland, Ohio.

    

    “Capital
      Expenditures” means net fixed assets at the end of the period less net fixed
      assets at the beginning of the period plus depreciation expense for the period,
      excluding any fixed assets acquired through a Permitted
      Acquisition.

    

    “Cash
      Flow” means, with respect to any fiscal year, net income after taxes and/or
      dividends and other distributions (not including share repurchases permitted
      by
      this Agreement) , exclusive of extraordinary gains and losses, plus
      depreciation, amortization, non-cash goodwill impairment write-down, and
      non-cash option expense up to a maximum of $500,000.00, in each case for such
      fiscal year, minus current maturities of long term Indebtedness (but in no
      event
      the Revolving Credit) as of the last day of such fiscal year and Capital
      Expenditures, except to the extent financed by third-party debt, for such fiscal
      year.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Closing
      Costs” means costs and expenses incurred by Lender in connection with the
      closing of the transactions contemplated by this Agreement, including, without
      limitation, Lender’s attorneys’ fees and expenses, audit and appraisal
      expenses.

    

    “Code”
      shall mean the Internal Revenue Code of 1986, as amended, together with the
      rules and regulations promulgated thereunder.

    

    “Collateral”
      means the collateral in which Borrower has given the Lender a security interest
      pursuant to the Security Agreement dated of even date herewith, and any other
      instrument given to Lender to secure the Indebtedness and/or this
      Agreement.

    

    “Contract
      Right” means (a) any contract right, and (b) any right to payment under a
      contract not yet earned by performance and not evidenced by an Instrument or
      Chattel Paper.

    

    “Controlled
      Group” shall mean Borrower and each Person required to be aggregated with
      Borrower under Code Sections 414(b), (c), (m) or (o).

    

    “Deposit
      Account” means (a) any deposit account, and (b) any demand, time, savings,
      passbook, or a similar account maintained with a bank, savings and loan
      association, credit union, or similar organization, other than an account
      evidenced by a certificate of deposit.

    

    “EBITDA”
      means, with respect to any fiscal year, the net income of Borrower plus the
      aggregate amounts deducted in determining such net income in respect of interest
      expenses, taxes, depreciation, amortization, non-cash goodwill impairment
      write-down and non-cash option expense up to a maximum of $500,000.00, but
      not,
      however, giving effect to extraordinary losses or gains in calculating net
      income; in each case for such fiscal year. 

    

    “Eligible
      Accounts” mean all bona fide Accounts (up to 90 days from date of invoice) of
      Borrower, except the following:

    

    
      	 	
              (a)

            	
              Accounts
                subject to any pending claim for credit, allowance, or adjustment
                or any
                set off or counterclaim other than discounts granted in the ordinary
                course of business for prompt
                payment;

            

    

    
      	 	
              (b)

            	
              Intentionally
                Omitted.

            

    

    
      	 	
              (c)

            	
              Borrower
                has received notice of the financial impairment of the Account Debtor
                that
                may reasonably be expected to impact the Account Debtor’s ability to pay
                such Account;

            

    

    
      	 	
              (d)

            	
              Accounts
                subject to an assignment, pledge, claim, mortgage, Lien, or security
                interest of any type except that granted to or in favor of
                Lender;

            

    

    
      	 	
              (e)

            	
              the
                Goods which are the subject of the Account have been rejected, returned,
                or acceptance has been revoked or
                refused;

            

    

    
      	 	
              (f)

            	
              Accounts
                of the United States of America or any division or department thereof
                except if there has been compliance with the Assignment of Claims
                Act;

            

    

    
      	 	
              (g)

            	
              Accounts
                due from any Subsidiary, shareholder or employee of Borrower;
                

            

    

    
      	 	
              (h)

            	
              Accounts
                owed by Account Debtors that are not located in, and organized under
                the
                laws of, the United States or Canada, or a state or province thereof;
                

            

    

    
      	 	
              (i)

            	
              Accounts
                Lender deems unacceptable subject to standards of commercial
                reasonableness.

            

    

    

    “Eligible
      Equipment” means all Equipment except
      Equipment which is:

    

    
      	
            	(a)	
              located
                outside the United States;

            

    

    
      	
            	(b)	
              damaged,
                defective or obsolete;

            

    

    
      	
            	(c)	
              subject
                to a purchase money or other Lien except in favor of Lender;
                or

            

    

    
      	
            	(d)	
              determined
                by Lender, subject to standards of commercial reasonableness, to
                be
                unsatisfactory in any
                respect.

            

    

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    “Eligible
      Inventory” means all Inventory except
      Inventory which is:

    

    
      	 	
              (a)

            	
              work
                in process;

            

    

    
      	 	
              (b)

            	
              located
                outside the United States;

            

    

    
      	 	
              (c)

            	
              in
                the possession of a bailee or a third party, unless such bailee or
                third
                party has signed a waiver letter in form reasonably acceptable to
                Lender;

            

    

    
      	 	
              (d)

            	
              damaged,
                defective, or obsolete; 

            

    

    
      	 	
              (e)

            	
              held
                by Borrower or a third party on consignment;
                or

            

    

    
      	 	
              (f)

            	
              determined
                by Lender, subject to standards of commercial reasonableness, that
                the
                Inventory is unsatisfactory in any
                respect.

            

    

    

    “Environmental
      Law” means any federal, state or local statute, law, ordinance, code, rule,
      regulation, order or decree regulating, relating to, or imposing liability
      upon
      a Person in connection with the use, release or disposal of any hazardous,
      toxic
      or dangerous substance, waste or material.

    

    “ERISA”
      shall mean the Employee Retirement Income Security Act of 1974, as amended
      from
      time to time, and the regulations promulgated pursuant thereto.

    

    “ERISA
      Event” shall mean (a) with respect to an ERISA Plan, the imposition of an excise
      tax or any other liability on Borrower or the imposition of a Lien on the assets
      of Borrower; (b) the engagement by a Controlled Group member in a
      non-exempt “prohibited transaction” (as defined under ERISA Section 406 or Code
      Section 4975) or a breach of a fiduciary duty under ERISA that could result
      in
      liability to Borrower; (c) the application by a Controlled Group member for
      a waiver from the minimum funding requirements of Code Section 412 or ERISA
      Section 302 or the occurrence of an event or condition that requires a
      Controlled Group member to provide security under Code Section 401(a)(29) or
      ERISA Section 307; (d) the occurrence of a Reportable Event with respect to
      any
      Pension Plan as to which notice is required to be provided to the PBGC; (e)
      the
      withdrawal by a Controlled Group member from a Multiemployer Plan in a
“complete withdrawal” or a “partial withdrawal” (as such terms are defined in
      ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or
      occurrence or existence of any event or condition that makes likely the
      involvement of, a Multiemployer Plan in any reorganization under ERISA Section
      4241; (g) the failure of an ERISA Plan (and any related trust) that is
      intended to be qualified under Code Sections 401 and 501 to be so qualified
      or
      any “cash or deferred arrangement” under any such ERISA Plan to meet the
      requirements of Code Section 401(k); (h) the taking by the PBGC of any steps
      to
      terminate a Pension Plan or appoint a trustee to administer a Pension Plan,
      or
      the taking by a Controlled Group member of any steps to terminate a Pension
      Plan; (i) the failure by a Controlled Group member or an ERISA Plan to
      satisfy any requirements of law applicable to an ERISA Plan; (j) the
      commencement, existence or threatening of the incurrence by a Controlled Group
      member of a claim, action, suit, audit or investigation with respect to an
      ERISA
      Plan, other than a routine claim for benefits; or (k)  the incurrence by a
      Controlled Group member of any liability for post-retirement benefits under
      any
      Welfare Plan, other than as required by ERISA Section 601, et. seq.
      or Code
      Section 4980B.

    

    “ERISA
      Affiliate” means each Person (whether or not incorporated) which together with
      Borrower would be treated as a single employer under ERISA.

    

    “ERISA
      Plan” shall mean an “employee benefit plan” (within the meaning of ERISA Section
      3(3)) that a Controlled Group member at any time sponsors, maintains, or with
      respect to which a Controlled Group member, makes, or is obligated to make
      contributions, or has otherwise incurred liability.

    

    “Event
      of
      Default” means any one or more of the occurrences described in Section 6
      hereof.

    

    “GAAP”
      means generally accepted accounting principles as in effect from time to time,
      which shall include the official interpretations thereof by the Financial
      Accounting Standards Board, consistently applied, except any changes in
      generally accepted accounting principles shall not be taken into consideration
      for the purposes of covenant calculations under Sections 5.22 and 5.23 until
      such time as the Lender and Borrower have amended such covenants in light of
      such changes in generally accepted accounting principles such that the
      performance standards reflected by such covenants as so amended are
      substantially equivalent to those in effect on the date hereof applying
      generally accepted accounting principles as in effect on the date hereof.

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    “Guarantor”
      means each Person that now or hereafter guarantees any portion of the Borrower’s
      Indebtedness payable to the Lender, and such Person’s heirs, administrators,
      successors and assigns.

    

    “Guaranty”
      means any guaranty agreement executed by a Guarantor and delivered to
      Lender.

    

    “Indebtedness”
      shall mean, for any Person (excluding in all cases trade payables payable and
      accrued liabilities in the ordinary course of business by such Person), (a)
      all
      obligations to repay borrowed money, direct or indirect, incurred, assumed,
      or
      guaranteed, (b) all obligations for the deferred purchase price of capital
      assets, (c) all obligations under conditional sales or other title retention
      agreements, (d) all obligations (contingent or otherwise) under any letter
      of
      credit, banker’s acceptance, currency swap agreement, or Interest Rate
      Agreement, (e) all synthetic leases, (f) all lease obligations that have been
      or
      should be capitalized on the books of such Person in accordance with GAAP,
      (g)
      all obligations of such Person with respect to asset securitization financing
      programs to the extent that there is recourse against such Person or such Person
      is liable (contingent or otherwise) under any such program, (h) all obligations
      to advance funds to, or to purchase assets, property or services from, any
      other
      Person in order to maintain the financial condition of such Person, and (i)
      any
      other transaction (including forward sale or purchase agreements) having the
      commercial effect of a borrowing of money entered into by such Person to finance
      its operations or capital requirements.

    

    “Interest
      Rate Agreement” means any agreement for a derivative or hedging product,
      including, without limitation, interest rate or equity swaps, futures, options,
      caps, floors, collars, or forwards now or hereafter executed by and between
      Borrower and Lender or any Lender Affiliate. 

    

    “Inventory”
      is as defined in the UCC and means, without limitation, goods, merchandise
      and
      other personal property furnished under any contract of service or intended
      for
      sale or lease, including, without limitation, and all raw materials, work in
      process, finished goods and materials and supplies, of any kind, nature or
      description, that are used or consumed by Borrower’s business, or are or might
      be used in connection with the manufacture, packing, shipping, advertising,
      selling or finishing such goods, merchandise and other personal property, and
      all returned or repossessed goods now or hereafter in the possession of or
      under
      the control of Borrower, wherever located.

    

    “L/C
      Sublimit” means the aggregate undrawn face value of all Letters of Credit
      permitted in Paragraph 2.4.

    

    “Lender
      Affiliate” means any one or more bank or non-bank subsidiaries (other than the
      Lender) of KeyCorp and its successors.

    

    “Letter
      of Credit” means any outstanding letter of credit issued by Lender on behalf of
      Borrower.

    

    “Lien”
      means any mortgage, security interest, lien, charge, encumbrance on, pledge
      or
      deposit of, or conditional sale or other title retention agreement with respect
      to any property or asset.

    

    “Loan”
or
      “Loans” means the credit to the Borrower extended by the Lender in accordance
      with Section 2 hereof.

    

    “Loan
      Documents” means the collective reference to this Agreement and all other
      instruments, agreements and documents entered into from time to time, evidencing
      or securing the Loan or any obligation of payment thereof or performance of
      Borrower’s or Guarantor’s obligations in connection with the transaction
      contemplated hereunder, each as amended.

    

    “Margin
      Stock” shall have the meaning given to it under Regulation U of the Board of
      Governors of the Federal Reserve System, as amended from time to
      time.

    

    “Material
      Adverse Effect” means any condition or event that Lender reasonably determines
      has had or is reasonably likely to have a material adverse effect on (a) the
      business, operations, property or condition (financial or otherwise) or
      prospects of Borrower, (b) the business, operations, property, condition
      (financial or otherwise) or prospects of Borrower and its Subsidiaries, if
      any,
      taken as a whole, or (c) the validity or enforceability of this Agreement or
      any
      of the other Loan Documents or the rights and remedies of Lender hereunder
      or
      thereunder.

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    “Multiemployer
      Plan” shall mean a Pension Plan that is subject to the requirements of Subtitle
      E of Title IV of ERISA.

    

    “Note”
or
      “Notes” means, as the case may be, the promissory note(s) signed and delivered
      by the Borrower to evidence its Indebtedness to the Lender pursuant to Section
      2
      hereof . 

    

    “Obligation”
      or “Obligations” means, collectively, (a) all Indebtedness and other obligations
      incurred by Borrower to Lender pursuant to this Agreement and includes the
      principal of and interest on all Notes; (b) each extension, renewal or
      refinancing thereof in whole or in part; (c) the commitment and other fees,
      and
      any prepayment fees payable under this Agreement or any other Loan Document;
      (d)
      every other liability, now or hereafter owing to any Lender Affiliate by
      Borrower under any Interest Rate Agreement entered into by Borrower with such
      Lender Affiliate; and (e) every other liability to Lender, whether owing by
      only
      Borrower or by Borrower with one or more others in a several, joint or joint
      and
      several capacity, whether owing absolutely or contingently, whether created
      by
      note, overdraft, guaranty of payment, Interest Rate Agreement or other contract
      or by quasi-contract, tort, statute or other operation of law, whether incurred
      directly to Lender or acquired by Lender by purchase, pledge or otherwise and
      whether participated to or from Lender in whole or in part; and (e) all Related
      Expenses.

    

    “Obligor”
      shall mean (a) a Person whose credit or any of whose property is pledged to
      the
      payment of the Obligations and includes, without limitation, any Guarantor,
      and
      (b) any signatory to a Loan Document.

    

    “Organization”
      means a corporation, government or government subdivision or agency, business
      trust, estate, trust, partnership, association, two or more Persons having
      a
      joint or common interest, and any other legal or commercial entity.

    

    “PBGC”
      shall mean the Pension Benefit Guaranty Corporation, or its
      successor.

    

    “Pension
      Plan” shall mean an ERISA Plan that is a “pension plan” within the meaning of
      ERISA Section 3(2).

    

    “Permitted
      Acquisitions” means any Acquisition as to which all of the following conditions
      are satisfied:

    

    
      	 	
              (a)

            	
              such
                Acquisition involves a line or lines of business that will not
                substantially change the general nature of the business in which
                Borrower
                is engaged on the date of this Agreement.

            

    

     

    
      	 	
              (b)

            	
              no
                Event of Default or Potential Default shall exist prior to or immediately
                after giving effect to such
                Acquisition;

            

    

     

    
      	 	
              (c)

            	
              after
                giving effect to such Acquisition, the purchase price for Borrower’s total
                Acquisitions will not exceed Two Million Five Hundred Thousand Dollars
                ($2,500,000.00). For this purpose, “purchase price” means the amount of
                cash paid in such Acquisition (excluding amounts to be paid under
                any
                earn-out or similar provisions based on performance), plus the amount
                of
                any liabilities assumed other than trade payables and accrued liabilities
                incurred in the ordinary course of
                business.

            

    

     

    “Permitted
      Encumbrances” means, as of any particular time, (a) liens for ad valorem taxes
      and special assessments not then delinquent, (b) this Agreement, and any
      security interest or other lien created thereby, (c) any Permitted Encumbrances
      defined in any of the Loan Documents, including, without limitation, as defined
      in any Security Instrument, (d) any liens permitted by Section 5.15 hereof,
      and
      (e) such minor defects, irregularities, encumbrances and clouds on title as
      normally exist with respect to property similar in character to the Collateral
      and as do not materially interfere with or impair the use or value of the
      property affected thereby.

    

    “Person”
      means an individual or an Organization.

    

    “Plan”
      means any ERISA Plan (other than a Multiemployer Plan) in which the Borrower
      or
      any Subsidiary is, or has been at any time during the preceding two (2) years,
      an “employer” or a “substantial employer” as such terms are defined in
      ERISA.

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    “Potential
      Default” means any condition, action, or failure to act which, with the passage
      of time, service of notice, or both, will constitute an Event of Default under
      this Agreement.

    

    “Proceeds”
      means (a) any proceeds, and (b) whatever is received upon the sale, exchange,
      collection, or other disposition of Collateral or Proceeds, whether cash or
      non-cash. Cash Proceeds includes, without limitation, moneys, checks, and
      Deposit Accounts. Proceeds includes, without limitation, any Account arising
      when the right to payment is earned under a Contract Right, any insurance
      payable by reason of loss or damage to the Collateral, and any return or
      unearned premium upon any cancellation of insurance. Except as expressly
      authorized in the Agreement or the Security Instruments, Lender's right to
      Proceeds specifically set forth herein or indicated in any financing statement
      shall never constitute an express or implied authorization on the part of Lender
      to Borrower’s sale, exchange, collection, or other disposition of any or all of
      the Collateral.

    

    “Prohibited
      Transaction” means a “prohibited transaction” within the meaning of ERISA
      Section 406 or Code Section 4975, other than any transaction subject to a
      statutory or administrative exemption.

     

    “Quarters”
      or “Quarterly” means calendar quarters, being each of the three (3) calendar
      month periods ending 3/31, 6/30, 9/30 and 12/31 of each calendar
      year.

    

    “Related
      Expenses” means any and all costs, liabilities, and expenses (including, without
      limitation, losses, damages, penalties, claims, actions, reasonable attorney’s
      fees, legal expenses, judgments, suits and disbursements) reasonably incurred
      by, or imposed upon, or asserted against, Lender in any attempt by
      Lender:

    

    (a) to
      obtain, preserve, perfect, or enforce any security interest evidenced by (i)
      this Agreement, or (ii) any other pledge agreement, mortgage, deed of trust,
      hypothecation agreement, guaranty, security agreement, assignment, or security
      instrument executed or given by Borrower to or in favor of Lender;

    

    (b) to
      obtain
      payment, performance, and observance of any and all of the
      Obligations;

    

    (c) to
      maintain, insure, audit, inspect, collect, preserve, repossess, and dispose
      of
      any of the Collateral, including, without limitation, costs and expenses for
      appraisals, assessments, and audits of Borrower or the Collateral;
      or

    

    (d) incidental
      or related to (a) through (c) above, including, without limitation, interest
      thereupon from the date due and payable by Borrower at the rate payable as
      set
      forth in the Note, but in no event greater than the highest rate permitted
      by
      law;

    

    provided,
      however, under no circumstance shall Related Expenses include any Closing
      Cost.

    

    “Related
      Person” means any Person who (i) now or hereafter owns an equity interest in
      Borrower or Guarantor or (ii) has warrants, debentures, or similar rights to
      own
      any equity interest in Borrower or Guarantor, whether or not the same has vested
      or been delivered or (iii) is owned, in whole or in part, by Borrower or
      Guarantor. 

    

    “Reportable
      Event” shall mean a reportable event as that term is defined in Title IV of
      ERISA, except actions of general applicability by the Secretary of Labor under
      Section 110 of ERISA

    

    “Revolving
      Credit” means the Revolving Credit Facility described in Section 2.2 hereof,
      which Revolving Credit shall be payable in accordance with the terms of such
      Revolving Credit Facility and this Agreement.

    

    “SEC”
      means the United States Securities and Exchange Commission.

    

    “Security
      Instrument(s)” means the written document(s) listed in Exhibit A attached
      hereto, signed and delivered from time to time to the Lender in connection
      with
      Indebtedness owed by Borrower to the Lender.

    

    “Subsidiary”
      means any Person of which more than fifty percent (50%) of the following is,
      at
      the time, owned or controlled, directly or indirectly, by Borrower or one or
      more other Subsidiaries: (i) the voting stock or units entitling the holders
      thereof to elect a majority of the board of directors, managers, or trustees
      thereof, or (ii) the interest in the capital or profits of such
      Person.

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    “Termination
      Date” means March 8, 2010, or such earlier date that Lender has terminated the
      Revolving Credit under Section 7.1 hereof, or Borrower has terminated the
      Revolving Credit under Section 2.5 hereof.

    

    “Total
      Funded Debt” means the sum without duplication for Borrower and/or any of its
      subsidiaries of (1) all indebtedness for borrowed money, whether maturing in
      less than or more than one year, plus (2) all bonds, notes, debentures or
      similar debt instruments plus (3) all capitalized lease obligations plus (4)
      the
      present value of all basic rental obligations under any synthetic
      lease.

    

    “Welfare
      Plan” means an ERISA Plan that is a “welfare plan” within the meaning of ERISA
      Section 3(1).

     

    The
      foregoing definitions shall be applicable to the singulars and plurals of the
      foregoing defined terms.

     

    2. CREDIT
      FACILITIES

     

    2.1. Intentionally
      Omitted.
      

     

    2.2. Revolving
      Credit Facility.
      The
      Lender hereby agrees, subject to the terms and conditions of this Agreement
      and
      the Promissory Note of Borrower to the Lender of even date herewith, to extend
      the Revolving Credit to Borrower, at any time on or before the Termination
      Date,
      as follows: Lender will, upon request from Borrower, make loan advances to
      or
      for the account of Borrower up to but not exceeding an aggregate unpaid
      principal amount outstanding at any one time equal to the lesser of
      (i) Eight Million Dollars ($8,000,000.00) or (ii) the Borrowing Base.

     

    2.3. Fees.
      The
      Borrower shall pay the Lender the following fees:

     

    
      	 	
              (a)

            	
              A
                commitment fee on the actual daily Unused Portion (as defined below)
                on
                and from the date hereof to and including the Termination Date, at
                the
                rate of thirty basis points (0.30%) per annum (using a day rate based
                upon
                a year of 360 days and charged for the actual number of days elapsed),
                payable on the last day of each month commencing March 31, 2007, and
                upon termination or reduction of the Revolving Credit. The “Unused
                Portion” means, on any day, the maximum amount of the Revolving Credit (as
                the same may be reduced pursuant to Section 2.5 below) on such day,
                less
                the aggregate principal amount of the Loans and Letters of Credit
                outstanding on such day.

            

    

    

    
      	 	
              (b)

            	
              A
                facility fee equal to $48,000.00, payable on or prior to the date
                of
                execution of this Agreement.

            

    

    

    
      	 	
              (c)

            	
              Borrower
                agrees to pay Lender a letter of credit fee of 1.5% per annum of
                the
                amount of any issued and outstanding standby Letters of Credit, payable
                for each day the letter of credit is outstanding at a rate of
                1/360th
                of
                the applicable per annum rate, quarterly in advance. Borrower agrees
                to
                pay Lender a letter of credit fee for any trade letter of credit
                consistent with Lender’s standard fees for trade letters of
                credit.

            

    

    

    2.4. Letter
      of Credit.
      So long
      as no event of default has occurred and/or no demand for payment of the Note
      has
      been made, and subject to the other conditions of the Loan Documents, Borrower
      may request Lender to issue Letters of Credit under the Revolving Credit for
      the
      account of Borrower, provided that (a) the aggregate undrawn face value of
      all
      such Letters of Credit at any time outstanding does not exceed $1,500,000.00
      (“L/C Sublimit”), and (b) the L/C Sublimit when combined with the amount of
      advances outstanding under the Note, does not exceed the amount of the
      Note.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    
      	 	
              (a)

            	
              The
                following types of Letters of Credit can be issued hereunder:
                

            

    

    

    financial
      standby and trade Letters of Credit up to an aggregate of $1,500,000,

    

    
      	 	
              (b)

            	
              Whenever
                a Letter of Credit is drawn, unless the amount drawn is immediately
                reimbursed by Borrower, the amount of the draw shall be an advance
                under
                the Note. 

            

    

    

    
      	 	
              (c)

            	
              For
                each Letter of Credit required by Borrower and issued by Lender,
                Borrower
                agrees to execute and deliver to Lender an appropriate application
                and
                agreement in a form as required by Lender, and to pay such other
                service
                charges as are generally charged by Lender under its fee schedule
                in
                effect from time to time.

            

    

    

    
      	 	
              (d)

            	
              Each
                Letter of Credit issued hereunder shall be secured by any and all
                Collateral and any Guaranty agreement given to secure the
                Note.

            

    

    

    2.5
       Reduction
      of Line Limit.
      Borrower
      may, on written notice (each a “Reduction Notice”) to Lender, state its desire
      to reduce the maximum amount of the Revolving Credit available hereunder to
      any
      amount which is not less than the aggregate of the then outstanding principal
      amount of Loans and the undrawn face amount of Letters of Credit. Three (3)
      Business Days after receipt of such Reduction Notice, the obligation of Lender
      to make loans and issue Letters of Credit hereunder shall be limited to the
      amount set forth in such Reduction Notice. Any reductions of the maximum amount
      of the Revolving Credit shall be permanent and shall not be reinstated at any
      future date and any partial reduction shall be in the amount of not less than
      $1,000,000 and shall be in increments of $500,000 above such
      amount.

    

    3. WARRANTIES

     

    Borrower
      represents and warrants to the Lender (which representations and warranties
      will
      survive the delivery of the Note and the making of the Loans) that:

    

    3.1. Existence and Legal Authority.
      Borrower
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of New York and has all requisite power and authority to
      own
      its property and to carry on its business as now being conducted, to enter
      into
      the Loan Documents to which it is a party and the other agreements referred
      to
      herein and transactions contemplated thereby, and to carry out the provisions
      and conditions of such Loan Documents to which it is a party. Borrower is duly
      qualified to do business and is in good standing in every jurisdiction where
      the
      failure to so qualify would have a Material Adverse Effect.

     

    3.2. Due Execution and Delivery.
      Borrower
      has full power, authority and legal right to incur the obligations provided
      for
      in, and to execute and deliver and to perform and observe the terms and
      provisions of, the Loan Documents to which it is a party, and each of them
      has
      been duly executed and delivered by Borrower and has been authorized by all
      required action, and Borrower has obtained all requisite consents to the
      transactions contemplated thereby under any instrument to which it is a party,
      and the Loan Documents constitute the legal, valid and binding obligations
      of
      Borrower enforceable against Borrower in accordance with their respective terms,
      except as the enforceability thereof may be limited by applicable bankruptcy,
      insolvency or other similar laws affecting creditors' rights
      generally.

     

    3.3. No Breach of Other Instruments.
      Neither
      the execution and delivery of the Loan Documents, nor the compliance by Borrower
      with the terms and conditions of the Loan Documents, nor the consummation of
      the
      transactions contemplated thereby, will conflict with or result in a breach
      of
      the Articles of Incorporation or By-Laws, as applicable, or other governing
      documents of Borrower, or any of the terms, conditions or provisions of any
      agreement or instrument or any charter or other corporate restriction or law,
      regulation, rule or order of any governmental body or agency to which Borrower
      is now a party or is subject, or imposition of a lien, charge or encumbrance
      of
      any nature whatsoever upon any of the property or assets of Borrower pursuant
      to
      the terms of any such agreement or instrument.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    3.4. Government Authorization.
      No
      consent, approval, authorization or order of any court or governmental agency
      or
      body is required for the consummation by Borrower of the transactions
      contemplated by the Loan Documents.

     

    3.5. Ownership
      of Property.
      Except
      for Permitted Encumbrances or as otherwise permitted in the Security Instruments
      or this Agreement, Borrower has and will have good and marketable fee title
      to,
      or valid leasehold interests in, its real properties in accordance with the
      laws
      of the jurisdiction where located, and good and marketable title to
      substantially all its other property and assets, subject, however, in the case
      of real property, to title defects and restrictions which do not materially
      interfere with the operations conducted thereon by Borrower. Except for
      Permitted Encumbrances, the real property and all other property and assets
      of
      the Borrower is free from any liens or encumbrance securing Indebtedness and
      from any other liens, encumbrances, charges or security interests of any kind.
      Each lease, if any, to which Borrower is a party is in full force and effect,
      and no material default on the part of Borrower or, to its knowledge, any other
      party thereto exists.

     

    3.6. Absence of Defaults, etc.
      The
      Borrower is not (i) in material default under any indenture or contract or
      agreement to which it is a party or by which it is bound, (ii) in violation
      of
      its articles of incorporation or by -laws, as applicable, or any other governing
      document, (iii) in default with respect to any order, writ, injunction or decree
      of any court, or (iv) in default under any order or license of any federal
      or
      state governmental department, which in the case of any such default described
      in clauses (i) through and including (iv) has had or could be reasonably
      expected to have Material Adverse Effect . There exists no condition, event
      or
      act which constitutes, or after notice or lapse of time or both would
      constitute, an Event of Default.

     

    3.7. Indebtedness of Borrower.
      Borrower
      does not have outstanding on the date hereof, any Indebtedness for borrowed
      money, except for such Indebtedness identified in the financial statements
      referred to in Section 3.8 hereof.

     

    3.8. Financial
      Condition.
      The
      Borrower has furnished to the Lender financial statements which, in the opinion
      of Borrower, fairly and accurately reflect the financial operations of Borrower
      for the period covered thereby, and there has been no material adverse change
      in
      the Borrower’s financial prospects since the date of such financial statements
      which would require revision of the same. 

     

    3.9. No Adverse Change.
      Subsequent
      to the date of the financial statements referred to in Section 3.8 hereof,
      Borrower has not incurred or agreed to incur any material liabilities or
      obligations, direct or contingent, and there has not been any material increase
      in the anticipated aggregate amount of debt of Borrower, or any other event
      or
      condition that has had or could reasonably be expected to have a Material
      Adverse Effect. 

     

    3.10. Taxes.
      Except
      as
      set forth on Schedule 3.10 attached , Borrower has filed all tax returns which
      are to be filed and has paid, or has made adequate provision for the payment
      of,
      all taxes which have or may become due pursuant to said returns or to
      assessments received by them (except nothing herein shall require Borrower
      to
      pay any tax or assessment that Borrower is diligently contesting in good faith,
      and with respect to which Borrower has established adequate reserves on its
      books. The provisions for taxes reflected in the financial statements referred
      to in Section 3.8 are believed adequate to cover any and all accrued and unpaid
      taxes for which Borrower is liable for the period ended on the date of such
      balance sheet and all prior periods. Borrower knows of no deficiency assessment
      or proposed deficiency assessment of taxes for which Borrower may be liable,
      except as may be otherwise disclosed in writing to the Lender prior to the
      date
      hereof.

     

    3.11. Litigation.
      Except
      as
      set forth on Schedule 3.11 attached, prior to the date hereof, there are no
      actions, suits or proceedings pending, or to the actual knowledge of Borrower,
      threatened against or affecting Borrower or its respective property in any
      court, or before or by any federal, state or municipal or other governmental
      department, commission, board, bureau, agency or other instrumentality, domestic
      or foreign, except for actions, suits or proceedings of a character normally
      incident to the kind of business conducted by Borrower, none of which, either
      individually or in the aggregate has had or reasonably could be expected to
      result in a Material Adverse Effect.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    3.12. Environmental Matters.
      Borrower
      is in compliance with all Environmental Laws and all applicable federal, state
      and local health and safety laws, regulations, ordinances or rules, the failure
      to comply with has had or could be reasonably expected to have a Material
      Adverse Effect..

     

    3.13. Subsidiaries
      and Affiliates.
      Except
      as
      set forth on Schedule 3.13, Borrower does not have any Subsidiaries or any
      Affiliates. If Borrower has any additional Subsidiary or Affiliate at any time
      subsequent to the date of execution hereof, the term “Borrower” as used in
      Sections 5 and 6 shall include in its meaning Borrower and its Subsidiaries,
      for
      such period or periods that Borrower has any Subsidiaries, unless the context
      clearly requires otherwise. For any period during which Borrower has any
      Subsidiaries, all financial statements, accounts and reports submitted by the
      Borrower and all calculations hereunder based on same shall be consolidated
      and/or on a consolidating basis or combined and/or on a combining basis with
      such Subsidiaries, as the context required. 

     

    3.14. ERISA.
      No
      Reportable Event or Prohibited Transaction which could reasonably be expected
      to
      create a liability in excess of Five Hundred Thousand Dollars ($500,000.00)
      or
      result in a Material Adverse Effect has occurred and is continuing with respect
      to any Plan of Borrower, and Borrower has not incurred an “accumulated funding
      deficiency” (as that term is defined by ERISA) since the effective date of
      ERISA.

     

    3.15. Solvency.
      The
      Borrower is not insolvent as defined in any applicable state or federal
      fraudulent transfer, fraudulent conveyance or bankruptcy or similar creditors’
rights statute, nor will Borrower be rendered insolvent by the execution and
      delivery of this Agreement or any of the Loan Documents to Lender. The Borrower
      is not engaged or about to engage in any business or transaction for which
      the
      assets retained by it shall constitute an unreasonably small capital, taking
      into consideration the obligations to Lender incurred hereunder. Borrower does
      not intend to, nor does it believe that it will, incur debts beyond its ability
      to pay them as they mature.

     

    3.16. No
      Burdensome Restrictions.
      Borrower
      is not a party to any instrument or agreement or subject to any charter or
      other
      corporate restriction which would reasonably be expected to result in a Material
      Adverse Effect.

     

    3.17. Federal
      Reserve Regulations; Use of Loan Proceeds.
      Borrower is not engaged principally, or as one of its important activities,
      in
      the business of extending credit for the purpose of purchasing or carrying
      any
      Margin Stock. No part of the proceeds of the Loans will be used, directly or
      indirectly, for a purpose which violates any law, rule or regulation of any
      governmental body, including without limitation the provisions of Regulations
      G,
      U, or X of the Board of Governors of the Federal Reserve System, as amended.
      No
      part of the proceeds of the Loans will be used, directly or indirectly, to
      purchase or carry any Margin Stock or to extend credit to others for the purpose
      of purchasing or carrying any Margin Stock. 

     

    3.18. OFAC/USA
      PATRIOT Act Restrictions.
      Neither
      Borrower nor any Guarantor is (or will be) a person with whom Lender is
      restricted from doing business under regulations of the Office of Foreign Asset
      Control (“OFAC”) of the Department of the Treasury of the United States of
      America (“Treasury”) or under any list of known or suspected terrorists or
      terrorist organizations issued by any federal government agency and designated
      as such by Treasury in consultation with the federal functional regulators,
      or
      under any statute, executive order, or other governmental action, and neither
      Borrower nor any Guarantor is engaging, or shall engage, in any dealings or
      transactions or shall otherwise be associated with such persons. In addition,
      Borrower hereby agrees to provide to the Lender with any additional information
      that the Lender deems necessary from to time in order to ensure compliance
      with
      all applicable laws concerning money laundering and similar
      activities.

     

    4. CONDITIONS
      OF LENDING

     

    4.1. Loan
      Funding.
      The
      obligation of the Lender to close the transactions contemplated by this
      Agreement shall be subject to satisfaction of the following conditions, unless
      waived in writing by the Lender: (a) all legal matters and Loan Documents
      incident to the transactions contemplated hereby shall be reasonably
      satisfactory, in form and substance, to Lender's counsel; (b) the Lender shall
      have received (i) certificates by an authorized officer or representative of
      Borrower upon which the Lender may conclusively rely until superseded by similar
      certificates delivered to the Lender, certifying that (1) all requisite action
      taken in connection with the transactions contemplated hereby has been duly
      authorized and (2) the names, signatures, and authority of Borrower’s authorized
      signers executing the Loan Documents, and (ii) such other documents as the
      Lender may reasonably require to be executed by, or delivered on behalf of,
      Borrower to carry out the purposes of this Agreement; (c) the Lender shall
      have
      received the Note with all blanks appropriately completed, executed by an
      authorized signer for Borrower; (d) the Borrower shall have paid to the Lender
      the fee(s) then due and payable under this Agreement and the other Loan
      Documents; (e) no Material Adverse Effect shall have occurred; (f) the Lender
      shall have received the written opinion(s) of legal counsel for the Borrower
      selected by the Borrower and satisfactory to the Lender, dated the date of
      this
      Agreement and covering the Loan Documents and such other matter(s) as the Lender
      may reasonably require; (g) the Lender shall have received written instructions
      by the Borrower with respect to disbursement of the proceeds of the Loan; and
      (h) the Lender shall have received all Security Instruments duly executed by
      all
      parties thereto.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    4.2. Security.
      No Loan
      shall be made hereunder unless and until Borrower shall have supplied to Lender
      as security for repayment of any and all Loans made hereunder the Security
      Instruments listed on Exhibit A hereto, in form and substance reasonably
      acceptable to Lender. 

     

    4.3. Each
      Loan.
      The
      obligation of the Lender to make any Loan shall be subject to initial compliance
      with Sections 4.1 and 4.2 herein and also subject to satisfaction of the
      following conditions that at the date of making such Loan, and after giving
      effect thereto: (a) no Event of Default shall have occurred and continue to
      exist, (b) each representation and warranty set forth in Section 3 above is
      true
      and correct as if then made, and (c) for Loans under the Revolving Credit
      Facility, a true, accurate and complete Borrowing Base Certificate has been
      provided.

     

    5. COVENANTS

     

    As
      long
      as credit is available hereunder or until all principal of and interest on
      the
      Note have been paid, the Borrower covenants and agrees that it will comply
      with
      the following provisions:

    

    5.1. Accounting;
      Financial Statements and Other Information.
      Borrower shall maintain a standard system of accounting, established and
      administered in accordance with GAAP consistently followed throughout the
      periods involved, and will set aside on its books for each fiscal quarter and
      fiscal year, the proper amounts or accruals for depreciation, obsolescence,
      amortization, bad debts, current and deferred taxes, prepaid expenses, and
      for
      other purposes as shall be required by GAAP. Borrower will deliver or cause
      to
      be delivered to the Lender:

     

    (a) As
      soon
      as practicable after the end of each quarter in each fiscal year, except the
      last, and in any event within 45 days thereafter, financial statements,
      including income statement, balance sheet, statement of condition of the
      Borrower as of the end of such quarter, and statements of cash flow, changes
      in
      financial position, and common shareholder’s equity for such quarter;

    

    (b) As
      soon
      as practicable after the end of each fiscal year, and in any event within
      120 days thereafter, financial statements, including income statement,
      balance sheet, statement of condition of the Borrower as of the end of such
      year, and statement of cash flow and changes in financial position of the
      Borrower for such year, setting forth in each case in comparative form the
      figures for the previous fiscal year, all in reasonable detail and prepared
      by
      an independent certified public accountant, accompanied by a report and
      unqualified opinion of an independent certified public accountant of recognized
      standing,
      selected
      by Borrower and satisfactory to the Lender, and prepared in accordance with
      generally accepted auditing standards;

    

    (c) Together
      with each set of financial statements required under subparagraphs (a) and
      (b) a
      certificate in the form of Exhibit C, substantially in the form attached hereto,
      of the principal financial officer or other appropriate officer of Borrower
      (in
      his capacity as such officer on behalf of Borrower and not individually) stating
      (i) that the representations and warranties contained in this Agreement are
      true
      and correct in all material respects as of the date of the certificate, and
      whether or not there exists any Event of Default or Potential Default,
      specifying the nature and period of existence thereof and what action, if any,
      the Borrower is taking or proposes to take with respect thereto, and (ii) if
      such financials statements are quarterly financial statements, that such
      financial statements are complete and accurate in all material respects, subject
      to changes resulting from year-end adjustments;

    

    (d) Promptly
      and in any event within five (5) Business Days after the occurrence of a
      Reportable Event with respect to a Plan, a copy of any materials required to
      be
      filed with the PBGC with respect to such Reportable Event or those that would
      have been required to be filed if the thirty (30) day notice requirement to
      PBGC
      were not waived;

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (e) Promptly
      upon receipt, and in no event more 10 days after receipt, of a notice by
      Borrower or any ERISA Affiliate or any administrator of any Plan or
      Multiemployer Plan that the PBGC has instituted proceedings to terminate such
      Plan or to appoint a trustee to administer such Plan, a copy of such notice;
      

    

    (f) Promptly
      upon receipt thereof, copies of all written reports submitted to the Borrower
      by
      independent accountants in connection with any annual or interim compilation
      and/or review the books of Borrower;

    

    (g) At
      the
      time of each Loan request and within twenty (20) days of each month-end during
      which any amount of the revolving Credit is outstanding, a Borrowing Base
      Certificate in form attached hereto as Exhibit B, together with a detailed
      accounts receivable and inventory report in form satisfactory to
      Lender;

    

    (h) Promptly
      after transmission thereof or other filings with the SEC, copies of all annual,
      quarterly or current reports that Borrower is required to file with the SEC
      on
      Form 10-K, 10-Q or 8-K (or any successor form); and

    

    (i) Promptly
      after transmission thereof to its stockholders, copies of all annual, quarterly
      and other reports and all proxy statements that Borrower furnishes to its
      stockholders.

    

    5.2. Additional
      Financial Reports.
      Borrower shall, upon request of Lender, deliver to the Lender its annual
      federal, state and local tax returns and such other financial information as
      Lender may reasonably request. 

     

    5.3. Insurance;
      Maintenance of Properties.
      Borrower shall: (a) maintain with financially sound and reputable insurers,
      insurance with coverage and limits as may be required by law and of such
      character and amounts as are usually maintained by companies engaged in like
      business, including without limitation products liability insurance; (b) furnish
      to Lender upon the execution of this Agreement and, at the beginning of each
      fiscal year, insurance certificates and, if requested by Lender, copies of
      insurance policies; and (c) obtain other or additional insurance promptly,
      upon
      the reasonable request of Lender, to the extent that such insurance may be
      available and is customary for the type of business in which Borrower is
      engaged. Lender shall be named a loss payee under such policies to the extent
      of
      its interest. The policies shall provide that no cancellation shall occur
      without thirty (30) days prior written notice to Lender. Borrower shall provide
      to Lender updated insurance certificates at least fifteen (15) days prior to
      the
      date of expiration. Borrower will at least annually and upon any change, or
      more
      often upon the occurrence of an Event of Default, upon request of Lender,
      furnish to the Lender a schedule of all insurance carried by Borrower, setting
      forth in detail the amount and type of such insurance. Except as otherwise
      permitted in this Agreement, Borrower will maintain, in good repair, working
      order, and condition, all properties used in the business of the Borrower,
      subject to ordinary wear and tear. 

     

    5.4. Existence;
      Business.
      Borrower shall cause to be done all things necessary to preserve and keep in
      full force and effect its existence and rights, to conduct its business in
      a
      prudent manner, to maintain in full force and effect, and renew from time to
      time, its franchises, permits, licenses, patents, and trademarks that are
      necessary to operate its business. Borrower will comply in all material respects
      with all valid laws and regulations now in effect or hereafter promulgated
      by
      any properly constituted governmental authority having jurisdiction; provided,
      however, that Borrower shall not be required to comply with any law or
      regulation which it is contesting in good faith by appropriate proceedings
      as
      long as either the effect of such law or regulation is stayed pending the
      resolution of such proceedings or the effect of not complying with such law
      or
      regulation would not reasonably be expected to result in a Material Adverse
      Effect.

     

    5.5. Payment
      of Taxes.
      Borrower shall pay all taxes, assessments, and other governmental charges levied
      upon any of its properties or assets or in respect of its franchises, business,
      income, or profits before the same become delinquent, except that no such taxes,
      assessments, or other charges need be paid if contested in good faith and by
      appropriate proceedings promptly initiated and diligently conducted and if
      proper amounts, determined in accordance with GAAP, have been set aside for
      the
      payment of all such taxes, charges, and assessments.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    5.6. Adverse
      Changes.
      Borrower shall promptly notify the Lender in writing of (a) the occurrence
      of
      any event which, if it had existed on the date of this Agreement, would have
      required qualification of the representations and warranties set forth in
      Section 3 hereof and (b) any Material Adverse Effect.

     

    5.7. Notice
      of Default.
      Borrower shall promptly notify (but in no event more than five (5) days after
      the occurrence thereof) the Lender of any Event of Default or Potential Default
      hereunder and any demands made upon the Borrower by any Person for the
      acceleration and immediate payment of any Indebtedness owed to such Person,
      if
      the amount of such Indebtedness exceeds $500,000.00

     

    5.8. Inspection.
      Borrower shall make available for inspection by duly authorized representatives
      of the Lender, or its designated agent, Borrower’s books, records, and
      properties when reasonably requested to do so, and will furnish the Lender
      such
      information regarding its business affairs and financial condition within a
      reasonable time after written request therefor. 

     

    5.9. Environmental
      Matters. Borrower:

     

    (a) Shall
      comply in all respects with all Environmental Laws where a failure to comply
      could have a Material Adverse Effect;

    

    (b) Shall
      deliver promptly to Lender (i) copies of any significant documents received
      from
      the United States Environmental Protection Agency or any state, county, foreign,
      provincial or municipal environmental or health agency, and (ii) copies of
      any
      significant documents submitted by Borrower or any of its Subsidiaries to the
      United States Environmental Protection Agency or any state, county, foreign,
      provincial or municipal environmental or health agency concerning its
      operations; and

    

    (c) Shall
      promptly undertake and diligently pursue to completion all action recommended
      by
      any environmental audit report(s) issued and all action(s) necessary to correct
      any environmental problem or defect identified in any environmental audit
      report(s), unless Borrower contests in good faith any such determination and
      establishes within a reasonable time frame support for Borrower’s position based
      on a report of a qualified professional reasonably acceptable to
      Lender.

    

    Borrower
      shall indemnify the Lender and hold it harmless against any loss, costs,
      damages, or expense, including, but not limited to, reasonable attorney’s fees,
      that Lender may incur, directly or indirectly, as a result of or in connection
      with the assertion against Lender of any claim relating to the presence or
      removal of any environmental contamination on any premises utilized by Borrower
      (except if resulting from the gross negligence or willful misconduct of
      Lender).

    

    5.10. Health
      and Safety.
      Borrower shall be in compliance with all requirements of applicable federal,
      state, foreign, provincial and local environmental, health and safety laws,
      regulations, ordinances or rules which would, in the aggregate, if not complied
      with, result in a Material Adverse Effect.

     

    5.11. Extraordinary
      Services.
      In
      the
      event extraordinary services are required by Lender for inspections, appraisals,
      or for securing estimates of costs which, in the Lender’s reasonable judgment
      are not regular or routine, Lender may deduct the reasonable expense of such
      extraordinary services from any moneys due to Borrower hereunder or from any
      account maintained by Borrower with Lender or any Lender Affiliate.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    5.12. Commercial
      Operating Account.
      So long
      as credit is available hereunder or until all principal of and interest on
      the
      Note has been paid in full, the Borrower shall maintain with Lender and/or
      a
      Lender Affiliate, as its primary financial institution, corporate deposit,
      cash
      management and loan accounts, where applicable, except Borrower shall be allowed
      a commercially reasonable amount of time following the date of this Agreement
      to
      transfer its existing accounts to Lender. At the option of Lender, all Loan
      payments and fees will automatically be debited from the Borrower’s primary
      operating account and all disbursements of Loan proceeds shall be made by the
      Lender’s or Lender Affiliate’s crediting of such disbursements directly into the
      appropriate Borrower’s account. 

     

    5.13. Additional
      Assurance.
      Borrower shall upon request of Lender promptly take such action and promptly
      make, execute, and deliver all such additional and further items, deeds,
      assurances, and instruments as Lender may reasonably require, so as to
      completely vest in and ensure to Lender its rights hereunder and in or to the
      Collateral.

     

    

    5.14. Sale,
      Purchase of Assets.
      Borrower shall not, directly or indirectly, (a) purchase, lease, or otherwise
      acquire any assets except in the ordinary course of business (which shall not
      be
      deemed to include the purchase or acquisition of ten percent (10%) or more
      of
      the capital stock or assets of operating businesses unless expressly consented
      to by Lender in writing prior to such purchase or acquisition) except for
      Permitted Acquisitions, purchases of its shares pursuant to any share buy back
      program for an amount in the aggregate with all other Share purchases does
      not
      exceed $2,500,000 during the term of this Agreement, or as otherwise expressly
      permitted under this Agreement; or (b) sell, lease, transfer, or otherwise
      dispose of any assets except for (i) assets sold, leased, transferred or subject
      to other disposition for full and adequate consideration in the reasonable
      judgment of Borrower which Borrower has determined to be worn out or obsolete
      or
      not useful in the ordinary course of its business, and (ii) assets sold, leased,
      transferred or subject to other disposition in the ordinary course of business
      provided that Borrower receives full and adequate consideration in the
      reasonable judgment of Borrower in exchange for such assets sold, leased,
      transferred or otherwise subject to disposition. 

     

    5.15. Mortgages,
      Security Interests, and Liens.
      Borrower
      shall not, directly or indirectly, create, incur, assume, or permit to exist
      any
      Lien with respect to any property or assets of Borrower, whether now owned
      or
      hereafter acquired other than:

     

    (a) Liens
      for
      taxes, assessments, or governmental charges or levies the payment of which
      is
      not at the time required by Section 5.5 hereof;

     

    (b) Liens
      imposed by law, such as Liens of landlords, carriers, warehousemen, mechanics,
      and materialmen arising in the ordinary course of business for sums not yet
      due
      or being contested by appropriate proceedings promptly initiated and diligently
      conducted, provided other appropriate provision, if any, as shall be required
      by
      GAAP shall have been made therefor;

     

    (c) Liens
      incurred or deposits made in the ordinary course of business in connection
      with
      workers' compensation, unemployment insurance, and other types of social
      security, or to secure the performance of tenders, statutory obligations, and
      surety and appeal bonds, or to secure the performance and return of money bonds
      and other similar obligations, excluding obligations for the payment of borrowed
      money;

     

    (d) Any
      judgment Lien, provided that the judgment it secures shall, within thirty (30)
      days after the entry thereof, have been discharged or execution therefor stayed
      pending appeal, or shall have been discharged within thirty (30) days after
      the
      expiration of any such stay;

     

    (e) Liens
      that secure the Indebtedness of Borrower for the purchase price or improvement
      of any real or personal property and that only encumber the property purchased
      or improved, provided such Indebtedness is permitted under Section 5.16 hereof;
      

     

    (f) Liens
      that secure the repayment of Indebtedness of Borrower to the Lender or any
      Lender Affiliate; or

     

    (g) Liens
      set
      forth in Schedule 5.15, or evidenced by or permitted under the terms of Security
      Instruments only, and any other Permitted Encumbrances.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    5.16. Indebtedness
      .
      Borrower shall not (a) create, incur or assume additional indebtedness for
      borrowed money (not outstanding on the date hereof), including capital leases,
      in excess of the aggregate amount of $1,500,000 outstanding at any one time
      for
      Borrower and its Subsidiaries, except indebtedness to (i) to Lender contemplated
      by this Agreement or (ii) to any
      Subsidiary that is a Guarantor that has granted to Lender a security interest
      in
      all of its personal property pursuant to a security agreement substantially
      equivalent to the security agreement executed and delivered by Borrower to
      Lender or owing by
      such
      Subsidiary to Borrower, or (b) sell with recourse any of Borrower’s accounts,
      except to Lender. 

     

    5.17. Assumptions;
      Guaranties.
      Borrower shall not assume, guarantee, endorse, or otherwise become directly
      or
      contingently liable for (including, without limitation, liable by way of
      agreement, contingent or otherwise, to purchase, to provide funds for payment,
      to supply funds to, or otherwise invest in any debtor or otherwise to assure
      the
      creditor against loss) any obligation or Indebtedness of any other Person,
      except (i) guaranties by endorsement of negotiable instruments for deposit,
      collection, or similar transactions in the ordinary course of business, (ii)
      Indebtedness of Borrower to the Lender or any Lender Affiliate; (iii) a guaranty
      of any Indebtedness of Borrower or a Subsidiary of Borrower that is permitted
      under Section 5.16; and (iv) Borrower’s guaranty of the obligations of 1803-1807
      Elmwood Avenue LLC to NewBuff Associates LLC pursuant to a Net Lease, dated
      November 10, 2003, as may be amended from time to time. 

     

    5.18. Mergers;
      Consolidation; Sale of Borrower.
      Borrower
      shall not merge or consolidate with any Person, dissolve, wind up its affairs,
      or sell, assign, lease, or otherwise dispose of (whether in one transaction
      or
      in a series of transactions), all or substantially all of its assets (whether
      now owned or hereafter acquired) to any Person, except (a) a merger of a
      Subsidiary into Borrower, (b) a merger of a Person into Borrower in connection
      with a Permitted Acquisition or (c) or a merger with another Person that is
      or
      becomes a Borrower hereunder as of the date of such transaction and such further
      assurances with respect to any such transaction satisfactory to the Lender
      are
      delivered on or before the effective date of such transaction. 

     

    5.19. Investments;
      Loans. Borrower
      shall not, directly or indirectly, (a) purchase or otherwise acquire or own
      any
      stock or other securities of any other Person (other than as permitted under
      this Agreement) or (b) make or permit to be outstanding any loan or advance
      (other than trade advances in the ordinary course of business or as otherwise
      permitted under this Agreement) or enter into any arrangement to provide funds
      or credit, to any other Person, except that (i) it may purchase or otherwise
      acquire and own marketable U.S. Treasury and Agency obligations, and
      certificates of deposit and bankers acceptances issued or created by any
      domestic commercial bank, and the stock of any Subsidiaries identified in
      Section 3.13, (ii) it may engage in Permitted Acquisitions, (iii) it may
      makes loans and advances to any Subsidiary that is a Guarantor that has granted
      to Lender a security interest in all of its personal property pursuant to a
      security agreement substantially equivalent to the security agreement executed
      and delivered by Borrower to Lender; and (iv) it may make loans and advances
      in
      the aggregate not exceeding $500,000.

     

    5.20. Payment
      of Subordinated Debt.
      Borrower
      shall not make any payment upon any outstanding indebtedness which is
      subordinated to the Lender in violation of the terms of any applicable
      subordination agreement or terms of subordination applicable
      thereto

     

    5.21. Related
      Expenses.
      Borrower
      hereby authorizes Lender or Lender’s designated agent (but without obligation by
      Lender to do so) to incur Related Expenses (whether prior to, upon, or
      subsequent to any Event of Default), and Borrower shall promptly repay,
      reimburse, and indemnify Lender for any and all Related Expenses. Lender may,
      at
      its option, debit Related Expenses directly to the Loan Accounts or any Account
      of Borrower maintained with Lender or any Lender Affiliate; provided that Lender
      shall provide to Borrower supporting documentation for any Related Expenses
      so
      debited; and provided further that Lender is not so authorized to incur Related
      Expenses to perform any matter that Borrower has an obligation to perform unless
      Lender has provided notice to Borrower of Borrower’s failure to so perform and
      Borrower has not promptly corrected such failure. Borrower acknowledges that
      Lender’s routine inspection fees relating to the Borrowing Base are Related
      Expenses reimbursable by Borrower.

     

    5.22. Cash
      Flow Requirements.
      Borrower shall maintain Cash Flow of not less than the amount set forth, tested
      at the end of any fiscal year set forth below for the preceding 12-month
      period:

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    
      
        	
                Fiscal
                  Year End

              	
                Operating
                  Cash Flow

              
	 	 
	
                December
                  31, 2007

              	
                $
                  750,000.00

              
	
                December
                  31, 2008

              	
                $1,500,000.00

              
	
                December
                  31, 2009

              	
                $2,250,000.00

              

      

    

    

    5.23. Total
      Funded Debt to EBITDA Ratio.
      Borrower shall maintain a ratio of Total Funded Debt to EBITDA of not greater
      than the amount set forth, tested as of the end of any fiscal year, set forth
      below for the period of the previous four fiscal quarters:

     

    
      
        	
                Fiscal
                  Year End

              	
                Ratio

              
	 	 
	
                December
                  31, 2007

              	
                4.25
                  to 1.0

              
	
                December
                  31, 2008

              	
                3.5
                  to 1.0

              
	
                December
                  31, 2009

              	
                3.0
                  to 1.0

              

      

    

     

    6. EVENTS
      OF DEFAULT

     

    The
      occurrence of any one or more of the following events shall constitute an Event
      of Default under this Agreement:

    

    6.1. Payments.
      If
      (a) the interest on any Note or any commitment or other fee shall not be
      paid in full punctually when due and payable, or (b) the principal of any
      Note shall not be paid in full punctually when due and payable.

     

    6.2. Covenants.
      If
      Borrower or any Obligor fails to perform or observe any covenant or agreement
      (other than as referred to in Section 6.1 hereof) contained in this Agreement
      or
      in any other of the Loan Documents, and such failure remains unremedied for
      thirty (30) days after the Lender gives notice thereof to such Borrower or
      Obligor.

     

    6.3. Representations
      and Warranties.
      If any
      representation, warranty or statement made in or pursuant to this Agreement
      or
      any Loan Document or any other material information furnished by Borrower or
      any
      Obligor to Lender or any other holder of any Note, shall be false or erroneous
      in any material respect.

     

    6.4. Validity
      Of Loan Documents.
      If (a)
      any material provision, in the reasonable judgment of Lender, of any Loan
      Document shall at any time for any reason cease to be valid, binding and
      enforceable against Borrower or any Obligor; (b) the validity, binding effect
      or
      enforceability of any Loan Document against Borrower or any Obligor shall be
      contested by Borrower or any Obligor; (c) Borrower or any Obligor shall deny
      that it has any or further liability or obligation thereunder; or (d) any Loan
      Document shall be terminated, invalidated or set aside, or be declared
      ineffective or inoperative or in any way cease to give or provide to Lender
      the
      benefits purported to be created thereby.

     

    6.5. Loan
      Document Default.
      If
      any
      event of default shall occur under any other Loan Document, or if under any
      Loan
      Document any payment is required to be made by Borrower or any Obligor on demand
      of Lender, and such demand is made and has not been timely satisfied.

     

    6.6. Cross
      Default.
      If
      Borrower shall default in the payment of principal or interest due and owing
      upon any other obligation for borrowed money of more than $500,000, beyond
      any
      period of grace provided with respect thereto or in the performance or
      observance of any other agreement, term or condition contained in any agreement
      under which such obligation is created, if the effect of such default is to
      allow the acceleration of the maturity of such Indebtedness or to permit the
      holder thereof to cause such Indebtedness to become due prior to its stated
      maturity.

     

    6.7. ERISA
      Default.
      The
      occurrence of one or more ERISA Events that (a) could be reasonably expected
      to
      have a Material Adverse Effect, or (b) results in a Lien on any of the assets
      of
      Borrower. 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    6.8. Money
      Judgment.
      A
      final
      judgment or order for the payment of money in an amount in excess of $500,000
      shall be rendered against Borrower or any Obligor by a court of competent
      jurisdiction, that remains unpaid or unstayed and undischarged for a period
      (during which execution shall not be effectively stayed) of thirty (30) days
      after the date on which the right to appeal has expired.

     

    6.9. Intentionally
      Omitted.

     

    6.10. Intentionally
      Omitted.

     

    6.11. Solvency.
      If
      Borrower or any Obligor shall (a)  die or discontinue business,
      (b) generally not pay its debts as such debts become due, (c) make a
      general assignment for the benefit of creditors, (d) apply for or consent
      to the appointment of a receiver, a custodian, a trustee, an interim trustee
      or
      liquidator of all or a substantial part of its assets, (e) be adjudicated a
      debtor or have entered against it an order for relief under Title 11 of the
      United States Code, as the same may be amended from time to time, (f) file
      a voluntary petition in bankruptcy or file a petition or an answer seeking
      reorganization or an arrangement with creditors or seeking to take advantage
      of
      any other law (whether federal or state) relating to relief of debtors, or
      admit
      (by answer, by default or otherwise) the material allegations of a petition
      filed against it in any bankruptcy, reorganization, insolvency or other
      proceeding (whether federal or state) relating to relief of debtors,
      (g) suffer or permit to continue unstayed and in effect for 60 consecutive
      days any judgment, decree or order entered by a court of competent jurisdiction,
      that approves a petition seeking its reorganization or appoints a receiver,
      custodian, trustee, interim trustee or liquidator of all or a substantial part
      of its assets, or (h) take any action in order thereby to effect any of the
      foregoing, or omit to take, any action in order to prevent any of the
      foregoing.

     

    7. REMEDIES
      UPON DEFAULT

     

    7.1. Rights
      of Lender.
      If any
      Event of Default shall occur, Lender may, at its election, and without demand
      or
      notice of any kind, do any one or more of the following:

     

    (a)
       Declare
      all of the Borrower’s Obligations to Lender to be immediately due and payable,
      whereupon all unpaid principal, interest and fees in respect of such
      Obligations, together with all of Lender’s costs, expenses and attorneys’ fees
      related thereto, under the terms of the Loan Documents or otherwise, shall
      be
      immediately due and payable; 

    

    (b) Terminate
      any commitment to make any additional advances under any Loan;

    

    (c) Exercise
      any and all rights and remedies available to Lender under any applicable
      law;

    

    (d) Exercise
      any and all rights and remedies granted to Lender under the terms of this
      Agreement or any of the other Loan Documents; and/or

    

    (e) Set
      off
      the unpaid balance of the Obligations against any debt owing to Borrower by
      the
      Lender or by any Lender Affiliate, including, without limitation, any obligation
      under a repurchase agreement or any funds held at any time by the Lender or
      any
      Lender Affiliate, whether collected or in the process of collection, or in
      any
      time or demand deposit account maintained by Borrower at, or evidenced by any
      certificate of deposit issued by, the Lender or any Lender Affiliate. Borrower
      agrees, to the fullest extent it may effectively do so under applicable law,
      that any holder of a participation in the Note may exercise rights of set-off
      or
      counterclaim and other rights with respect to such participation as fully as
      if
      such holder of a participation were a direct creditor of Borrower pursuant
      to
      this Agreement in the amount of such participation.

    

    (f) With
      respect to Borrower’s Instruments, Documents and Chattel Paper, request in
      writing that Borrower immediately deliver or cause to be delivered to Lender
      or
      any Lender Affiliate, all of Borrower’s Instruments, Chattel Paper, and
      Documents, appropriately endorsed either, at Lender’s option, (i) to
      Lender’s order, without limitation or qualification. Lender, or Lender’s
      designated agent, is hereby constituted and appointed Borrower’s
      attorney-in-fact with authority and power to so endorse any and all Instruments,
      Documents, and Chattel Paper upon Borrower’s failure to do so. Such authority
      and power, being coupled with an interest, shall be (i) irrevocable until
      all Obligations are paid, performed and observed in full, (ii) exercisable
      by Lender at any time after the occurrence and during the continuance of an
      Event of Default and without any request upon Borrower by Lender to so endorse,
      and (iii) exercisable in Lender’s name or Borrower’s name.

    

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    7.2. No
      Waiver.
      The
      remedies in this Section 7 are in addition to, not in limitation of, any other
      right, power, privilege, or remedy, either in law, in equity, or otherwise,
      to
      which the Lender may be entitled. No failure or delay on the part of the Lender
      in exercising any right, power, or remedy will operate as a waiver thereof,
      nor
      will any single or partial exercise thereof preclude any other or further
      exercise thereof or the exercise of any other right hereunder. The remedies
      in
      this Agreement are in addition to, not in limitation of, any other right, power,
      privilege, or remedy, either in law, in equity, or otherwise, to which the
      Lender may be entitled. All Lender’s rights and remedies, whether evidenced by
      this Agreement or by any other agreement, instrument or document shall be
      cumulative and may be exercised singularly or concurrently. 

     

    8. MISCELLANEOUS

     

    8.1. Remedies;
      Waiver; Amendments.
      No
      waiver of any provision of this Agreement or the Note, or consent to departure
      therefrom, is effective unless in writing and signed by the Lender. No such
      consent or waiver extends beyond the particular case and purpose involved.
      No
      amendment to this Agreement is effective unless in writing and signed by the
      Borrower and the Lender. If at any time or times, by assignment or otherwise,
      Lender transfers any of the Obligations to another person, such transfer shall
      carry with it Lender’s powers and rights under this Agreement with respect to
      the Obligation or Collateral so transferred and the transferee shall have said
      powers and rights, whether or not they are specifically referred to in the
      transfer. 

     

    8.2. Expenses,
      Costs and Taxes.
      The
      Borrower shall pay on demand all of the following costs and expenses of Lender:
      (a) reasonable out of pocket expenses, including but not limited to attorneys’
fees and expenses, of Lender in connection with the administration of the Loan
      Documents, the collection and disbursement of all funds hereunder and the other
      instruments and documents to be delivered hereunder, (b) extraordinary expenses
      of Lender in connection with the administration of this Agreement, the Note
      and
      the other instruments and documents to be delivered hereunder following the
      occurrence and during the continuance of an Event of Default, (c) the reasonable
      fees and out-of-pocket expenses of special counsel for Lender, with respect
      to
      the foregoing, and of local counsel, if any, who may be retained by said special
      counsel with respect thereto, (d) all fees due hereunder or in any other Loan
      Documents, and (e) all costs and expenses, including reasonable attorneys’ fees,
      in connection with the determination of Lender’s lien priority in any collateral
      securing the Note, or the restructuring or enforcement of the Note or any other
      Loan Document. In addition, Borrower shall pay any and all stamp and other
      taxes
      and fees payable or determined to be payable in connection with the execution
      and delivery of any Loan Document, and the other instruments and documents
      to be
      delivered hereunder, and agrees to hold Lender harmless from and against any
      and
      all liabilities with respect to or resulting from any delay in paying or
      omission to pay such taxes or fees. Borrower authorizes Lender to debit such
      expenses, costs and taxes directly to Borrower’s Loan accounts or any account
      Borrower maintains with Lender or Lender Affiliate. Notwithstanding anything
      herein to the contrary, Borrower shall have no liability for Closing Costs
      incurred by Lender.

     

    8.3. Indemnification.
      The
      Borrower shall indemnify and hold the Lender harmless against any and all
      liabilities, losses, damages, costs, and expenses of any kind (including,
      without limitation, the reasonable fees and disbursements of counsel in
      connection with any investigative, administrative or judicial proceeding,
      whether or not the Lender shall be designated a party thereto) which may be
      incurred by the Lender relating to or arising out of this Agreement or any
      actual or proposed use of proceeds of any Loan hereunder; provided, that the
      Lender shall have no right to be indemnified hereunder for its own gross
      negligence or willful misconduct as determined by a court of competent
      jurisdiction. A certificate as to any such loss or expense shall be promptly
      submitted by the Lender to the Borrower and shall, in the absence of manifest
      error, be conclusive and binding as to the amount thereof.

     

    8.4. Construction.
      The
      provisions of this Agreement and the respective rights and duties of Borrower
      and Lender hereunder shall be governed by and construed in accordance with
      New
      York law and any applicable federal laws. Borrower hereby irrevocably submits
      to
      the non-exclusive jurisdiction of any New York state or federal court sitting
      in
      Erie County, over any action or proceeding arising out of or relating to this
      Agreement, or any document related to the Obligations, and Borrower hereby
      irrevocably agrees that all claims in respect of such action or proceeding
      may
      be heard and determined in such New York state or federal court. The Borrower
      hereby waives any objection that it may now or hereafter have to the venue
      of
      any such suit or any such court or that such suit is brought in an inconvenient
      court. The several captions to different Sections of this Agreement are inserted
      for convenience only and shall be ignored in interpreting the provisions hereof.
      Time is of the essence in the performance of the obligations under this
      Agreement. All grace periods in this Agreement and all other Loan Documents
      shall run concurrently. 

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    8.5. Extension
      of Time.
      If any
      payment comes due on a day that is not a Business Day, Borrower may make the
      payment on the first Business Day following the payment date and pay the
      additional interest accrued to the date of payment. 

     

    8.6. Notices.
      All
      notices, requests, demands or other communications provided for hereunder shall
      be in writing and, if to Borrower, mailed or delivered to it, addressed to
      it at
      the address specified on the signature pages of this Agreement, or if to Lender,
      mailed or delivered to it, addressed to the address of Lender specified on
      the
      signature pages of this Agreement. All notices, statements, requests, demands
      and other communications provided for hereunder shall be deemed to be given
      or
      made when delivered or three (3) Business Days after being deposited in the
      mails with postage prepaid by registered or certified mail, addressed as
      aforesaid, or sent by facsimile with telephonic confirmation of receipt, except
      that notices from Borrower to Lender pursuant to any of the provisions hereof
      shall not be effective until received by Lender. 

     

    8.7. Capital
      Adequacy.
      If
      Lender shall have determined, after the closing of the Loans, that the adoption
      of any applicable law, rule, regulation or guideline regarding capital adequacy,
      or any change therein, or any change in the interpretation or administration
      thereof by any governmental authority, central bank or comparable agency charged
      with the interpretation or administration thereof, or compliance by Lender
      (or
      its lending office) with any request or directive regarding capital adequacy
      (whether or not having the force of law) issued after the date hereof of any
      such authority, central bank or comparable agency, has or would have the effect
      of reducing the rate of return on Lender’s capital (or the capital of its
      holding company) as a consequence of its obligations hereunder to a level below
      that which Lender (or its holding company) could have achieved but for such
      adoption, change or compliance (taking into consideration Lender’s policies or
      the policies of its holding company with respect to capital adequacy) by an
      amount deemed by Lender to be material, then from time to time, within fifteen
      (15) days after demand by Lender, Borrower shall pay to Lender such additional
      amount or amounts as will compensate Lender (or its holding company) for such
      reduction. Lender shall designate a different lending office if such designation
      will avoid the need for, or reduce the amount of, such compensation and will
      not, in the judgment of Lender, be otherwise disadvantageous to Lender. A
      certificate of Lender claiming compensation under this Section and setting
      forth
      the additional amount or amounts to be paid to it hereunder shall be conclusive
      in the absence of manifest error. In determining such amount, Lender may use
      any
      reasonable averaging and attribution methods. Failure on the part of Lender
      to
      demand compensation for any reduction in return on capital with respect to
      any
      period shall not constitute a waiver of Lender’s rights to demand compensation
      for any reduction in return on capital in such period or in any other period.
      The protection of this Section shall be available to Lender regardless of any
      possible contention of the invalidity or inapplicability of the law, regulation
      or other condition that shall have been imposed but if so held invalid or
      inapplicable an adjustment shall be made with respect any period subsequent
      thereto, if Borrower has paid or would otherwise be paying such additional
      compensation for such period.

     

    8.8. Survival
      of Agreements; Relationship.
      All
      agreements, representations, and warranties made in this Agreement will survive
      the making of the extension of credit hereunder, and will bind and inure to
      the
      benefit of the Borrower and the Lender, and their respective successors and
      assigns; provided, that no subsequent holder of the Note shall by reason of
      acquiring that Note or Notes become obligated to make any Loan hereunder and
      no
      successor to or assignee of the Borrower may borrow hereunder without the
      Lender’s written assent. The Lender may transfer and assign this Agreement, and
      the Loans hereunder, and deliver the Collateral to the assignee, who shall
      thereupon have all of the rights of the Lender, provided, however, prior to
      the
      occurrence of an Event of Default, or event which, with the giving of notice
      or
      passage of time or both, would constitute an Event of Default, such assignment
      may be made only with the consent of Borrower, which consent shall not be
      unreasonably withheld. Borrower may not assign this Agreement or the right
      to
      receive any disbursements hereunder or any interest herein. The rights and
      powers given in this Agreement to the Lender are in addition to those otherwise
      created or existing in the same Collateral by virtue of other agreements or
      writings. The relationship between the Borrower and the Lender with respect
      to
      this Agreement, the Note and any other Loan Document is and shall be solely
      that
      of debtor and creditor, respectively, and the Lender has no fiduciary obligation
      toward the Borrower with respect to any such document or the transactions
      contemplated thereby.

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    8.9. Severability.
      If any
      provision of this Agreement or the Note, or any action taken hereunder, or
      any
      application thereof, is for any reason held to be illegal or invalid, such
      illegality or invalidity shall not affect any other provision of this Agreement
      or the Note, each of which shall be construed and enforced without reference
      to
      such illegal or invalid portion and shall be deemed to be effective or taken
      in
      the manner and to the full extent permitted by law.

     

    8.10. Entire
      Agreement.
      This
      Agreement, the Note, the Security Instruments and any other Loan Document
      executed in connection herewith integrate all the terms and conditions mentioned
      herein or incidental hereto and supersede all oral representations and
      negotiations and supersede, amend and restate prior writings with respect to
      the
      subject matter hereof. In this Agreement unless the context otherwise requires,
      words in the singular number include the plural, and in the plural number
      include the singular.

     

    8.11. Participation/Syndication.
      Borrower
      acknowledges that the Lender reserves the right to syndicate and/or participate
      its interest in the Loans and Borrower agrees to, at Lender’s reasonable
      request, execute such additional promissory notes and other instruments as
      may
      be appropriate to evidence its obligation under the Loans to such syndicate
      Lenders as may commit, in the future, to fund a portion of the Loans according
      to the terms of this Agreement; provided, however, prior to the occurrence
      of an
      Event of Default, or event which, with the giving of notice or passage of time
      or both, would constitute an Event of Default, Borrower shall have the right
      to
      approve any bank or other lender that is brought into the syndicate or as a
      participant, which approval shall not be unreasonably withheld.

     

    8.12. JURY
      TRIAL WAIVER.
      BORROWER AND LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
      ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN LENDER
      AND
      BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR
      ANY
      NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
      CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. 

     

    IN
      WITNESS WHEREOF, the Borrower and the Lender have each caused this Agreement
      to
      be executed by their duly authorized officers on the date first set forth
      above.

    

          

    
      	 	 	 
	Address:	Borrower:
	 	 
	1801
              Elmwood Avenue	MOD-PAC CORP.
	Buffalo,
              New York 14207	 
 	 
 
	 	By:  	/s/ David B. Lupp
	 	
              
David
              B. Lupp
	 	Vice
              President - Finance and Chief Financial
              Officer

    

     

    
      
        	 	 	 
	Address:	Lender:
	 	 
	50
                Fountain Plaza	KEYBANK NATIONAL ASSOCIATION
	Buffalo,
                New York	 
 	 
 
	
              	By:  	/s/ Mark F. Wachowiak
	 	
                
Mark
                F. Wachowiak
	 	Vice
                President

      

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

    

     

    Exhibit
      A

    

    Security
      Instruments

     

    

    Security
      Agreement between Borrower and Lender dated of even date herewith.

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      B

    

    

    BORROWING
      BASE CERTIFICATE

    

    

    The
      undersigned hereby certifies to KEYBANK
      NATIONAL ASSOCIATION
      (“Lender”), in accordance with the terms of the Loan Agreement between
MOD-PAC
      CORP.
      (“Borrower”) and Lender dated March 8, 2007, as may be amended from time to time
      (AAgreement@),
      that:

    

    A. RECEIVABLES       

     

    
      
        	
                (i)
                  Total Receivables

              	 	 	
              	 	
                $

              	
                 
                  

              	 
	
                Less:

              	 	 	 	 	 	 	 
	
                Ineligible
                  Receivables:

              	 	 	 	 	 	 	 
	
                Specific
                  Receivables > 90 days

              	 	 	 	 	 	 	 
	
                from
                  invoice date

              	 	 	  
	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Credit
                  Balances

              	 	 	
                 
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Contra
                  Account

              	 	 	
                  
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Accounts
                  Subject to Liens

              	 	 	
                 
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Subsidiary,
                  Shareholder 

              	 	 	 	 	 	 	 
	
                or
                  Employee

              	 	 	
                  
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Foreign
                  Receivables except

              	 	 	 	 	 	 	 
	
                from
                  a Canadian Account 

              	 	 	 	 	 	 	 
	
                Debtor

              	 	 	
                  
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Government
                  Receivables (without

              	 	 	 	 	 	 	 
	
                Assignment
                  of Claims Act

              	 	 	 	 	 	 	 
	
                Compliance)

              	 	 	
                  
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Other
                  Ineligibles

              	 	 	
                  
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Total
                  for Ineligibles:

              	 	 	
              	 	<$	
                 >
                  

              	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Total
                  Eligible Receivables

              	 	 	
                   
                  

              	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	
                x
                  80% Advance Rate

              	 	 	
              	 	
                x

              	
                 .80

              	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	
                RECEIVABLES
                  BORROWING BASE

              	 	 	
              	 	
                $

              	
                  
                  

              	 

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      
        B. 
          INVENTORY 

      

    

     

    
      
        	
                (i)
                  Total Inventory

              	 	
                $

              	
                  
                  

              	 	 	 
	 	 	 	 	 	 	 
	
                Less:

              	 	 	 	 	 	 
	
                Ineligible
                  Inventory

              	 	<$	
                 >

              	 	 	 
	 	 	 	 	 	 	 
	
                Total
                  Eligible Inventory

              	 	
                $

              	
                 
                  

              	 	 	 
	 	 	 	 	 	 	 
	
                x
                  40% Advance Rate  

              	 	
                x

              	.40	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
                INVENTORY
                  BORROWING BASE

              	 	
                $

              	
                   
                  

              	 	
                =
                  B

              	 
	
                INVENTORY
                  CAP

              	 	
                $

              	
                1,500,000

              	 	
                =
                  C

              	 
	
                LESSER
                  OF B OR C

              	 	
                $

              	 
 	
                 

              	
                =
                  D

              	 
	 	 	 	 	 	 	 
	
                C.
                  EQUIPMENT 

              	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
                EQUIPMENT
                  BORROWING BASE

              	 	
                $

              	
                2,000,000

              	 	
                =
                  E

              	 
	 	 	 	 	 	 	 
	
                D.
                  BORROWING CAPACITY 

              	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
                (i)Maximum
                  Loan = A+D+E above =

              	 	
                $

              	
                    
                  

              	 	 	 
	
                (not
                  in excess of $8,000,000)

              	 	 	 	 	 	 
	 	 	 	 	 	 	 
	
                Less:
                  Face Amount of Outstanding 

              	 	 	 	 	 	 
	
                Letters
                  of Credit

              	 	<$	
                 >

              	 	 	 
	 	 	 	 	 	 	 
	
                Sub-Total

              	 	
                $

              	
                 
                      

              	 	 	 
	 	 	 	 	 	 	 
	
                Less:
                  Current Balance

              	 	<$	
                 
                  >

              	 	 	 
	 	 	 	 	 	 	 
	
                Total
                  Availability

              	 	
                $

              	
                   
                  

              	 	 	 

      

    

     

     

    The
      undersigned certifies that to the best of the knowledge of the undersigned,
      the
      value of the undersigned’s Eligible Equipment has not fallen below
      $2,000,000.

    

    To
      the
      best knowledge of the undersigned, the undersigned is in compliance with all
      of
      the terms and provisions on its part to be observed or performed under the
      Agreement, and no event or circumstance which upon notice, lapse of time or
      both
      has occurred or is continuing would cause the undersigned to be out of
      compliance with the Agreement.

    

       

    

    
      	Dated: ______________________,
              ______	MOD-PAC CORP.
	 	 
	 	 
	 	By_________________________________
	 	Name:______________________________
	 	Title:_______________________________
	 	 
	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      C

    

    COMPLIANCE
      CERTIFICATE

     

    MOD-PAC
      CORP.
      (“Borrower”) hereby certifies to KEYBANK
      NATIONAL ASSOCIATION
      (“Lender”) pursuant to the Loan Agreement between Borrower and Lender dated as
      of March 8, 2007, as may be amended from time to time (“Agreement”)
      that:

     

    A. General:

    

    1. Capitalized
      terms not defined herein shall have the meanings set forth in the
      Agreement.

    

    2. There
      does not exist an Event of Default or an event which would with notice or the
      lapse of time, or both, constitutes an Event of Default .

    

    3. The
      representations and warranties contained in the Agreement are true, correct
      and
      complete in all material respects with the same effect as though such
      representations and warranties had been made on the date hereof.

    

    B. Financial
      Statements: 

    

    1. Any
      quarterly financial statements delivered with this Certificate are complete
      and
      accurate in all material respects, subject to changes resulting from year-end
      adjustments.

    

    C. Financial
      Covenants (Complete for Fiscal Year End Only Beginning FYE
      12/31/07):

    

    1. As
      of the
      date hereof or, for any fiscal year as may be designated below, the
      computations, ratios and calculations as set forth below in accordance with
      Sections 5.22 and 5.23 of the Agreement, are true and correct in all material
      respects:

     

    
      
        	
                (a)

              	
                Cash
                  Flow

              	 
	 	
                as
                  of __________________, _____:

              	
                $__________

              
	 	 	 
	
                (b)

              	
                Total
                  Funded Debt to EBITDA Ratio

              	 
	
              	
                as
                  of __________________, _____:

              	
                ___
                  to 1.0

              

      

    

     

    IN
      WITNESS WHEREOF, the undersigned, a duly authorized officer of Borrower, has
      executed and delivered this certificate in the name and on behalf of the
      Borrower on _______________________, 20___.

     

    
      
        	 	MOD-PAC CORP.
	 	 
	 	 
	 	By_________________________________
	 	Name:______________________________
	 	Title:_______________________________
	 	 
	 	 

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.10

    

    

    Federal
      income tax audit in process of tax years 2003, 2004, and 2005 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      3.11

    

    

    None.
      

    

    

 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      3.13

    

    

    1803
      -1807 Elmwood Avenue LLC, a New York Limited Liability Company

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      5.15

     

    

    
      	 	
              1.

            	
              HSBC
                Business Credit (USA) Inc. :
                Operating lease covering Heidelberg
                press;

            

    

    
      	 	
              2.

            	
              Kodak
                Polychrome Graphics, LLC:
                The following equipment is owned by Kodak, and the Borrower is permitted
                to use it in consideration of purchasing Kodak products --one thermal
                line, which includes 1 each of pre-bake oven, developer unit, post-bake
                oven, gum unit, plate stacker and 3 conveyor sections; and two sword
                lines, each includes 1 each of developer & gum unit, plate stacker and
                transfer conveyor;

            

    

    
      	 	
              3.

            	
              Hewlett-Packard
                Financial Services Company:
                Operating lease covering digital printing press;
                and

            

    

    
      	 	
              4.

            	
              Xpedx:
                Consignment of materials for use by Borrower -- consisting of aluminum
                plates and chemicals that are processed on the above Kodak-owned
                equipment. In addition, a similar consignment for use of paper products
                is
                under negotiation.

            

    

    
      	 	
              5.

            	
              HSBC
                Bank USA
                -
                Liens on equipment in favor of HSBC Bank USA securing obligations
                owing to
                HSBC Bank USA with respect to two letters of credit being replaced
                by
                Letters of Credit being issued by the Lender following signing of
                this
                Loan Agreement. These liens will be terminated once the HSBC letters
                of
                credit are returned to HSBC Bank
                USA.

            

    

    

    

    Certain
      of the above items may not constitute “Liens” that are required to be disclosed,
      but have been added to this disclosure schedule for informational
      purposes.

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