Document:

Exhibit 10.1

STOCK
OPTION AGREEMENT dated as of «Month» «day», «year»,
between BED BATH & BEYOND INC. (the “Company”) and «Name» (“you”).

1. Option Grant. The Company grants you an option (the “Option”)
to purchase up to «Shares» shares
of the Company’s Common Stock at a price of $«Price»
per share. The Option is not exercisable now but becomes exercisable in
installments, which are cumulative, so that «Vesting_»%
of the number of shares originally subject to the Option will vest and become
exercisable on each of the dates set forth on the Vesting Schedule below.

2. The Plan. The Option is entirely subject to the terms of the
Company’s 2004 Incentive Compensation Plan (the “Plan”). A description of the
key terms of the Plan is set forth in the Prospectus for the Plan.

3. Type of Option. The Option is a nonqualified option, not an “incentive
stock option (ISO)” for U.S. tax purposes.

4. Termination. The Option terminates on the eighth (8th) anniversary of the date of this Agreement and as otherwise provided
in the Plan. The Option will immediately terminate upon your termination of
employment or other service with the Company and its Affiliates (as defined in
the Plan), except that (i) if termination is because of your death,
Disability or Retirement (as those terms are defined in the Plan), the portion
of the Option that is vested and unexercised as of such termination date (the “Vested
Portion”) will remain exercisable for one year following termination and (ii) if
termination is for any other reason, excluding Cause (as defined in the Plan),
the Vested Portion will remain exercisable for 90 days after termination,
although in all cases the Option will never be exercisable after the eighth (8th) anniversary of this Agreement. Upon termination for Cause, the entire
Option (including any Vested Portion) terminates immediately. You will not be
deemed to have experienced a termination of employment or other service until
you no longer serve as either of (i) an employee of, or consultant to, the
Company or its Affiliates, or (ii) a Director (as defined in the Plan). Notwithstanding
any other provision of this Agreement, the provisions regarding the termination
of this Option (and the provisions regarding the termination of previously
granted options) shall be subject to the terms of any separate Employment
Agreement, Severance Agreement or other similar agreement entered into between
you and the Company.

5. Exercise. You may exercise the Option by delivering to the
Company your signed, written notice of the number of shares to be purchased by
your exercise, together with the full purchase price. Payment may be made by
certified check, bank draft or money order payable to the order of the Company
or, if permitted by the Committee that administers the Plan (the “Committee”),
through a broker-assisted cashless exercise or otherwise. The Committee may
require you to pay any applicable withholding taxes.

6. Transfer Restriction. Unless otherwise permitted by the
Committee, the Option is non-transferable, except that, in the event of your
death, it may be transferred by will or the laws of descent and distribution. Only
you (or your guardian or legal representative) may exercise the Option.

7. Notice. Any notice or communication to the Company concerning
the Option must be in writing and delivered in person, or by United States
mail, to the following address (or another address specified by the Company):

Bed Bath & Beyond Inc.

Finance Department — Stock
Administration
650 Liberty Avenue
Union, New Jersey 07083

	
  BED BATH & BEYOND
  INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Co-Chairman of the Board of Directors or Chief
  Executive Officer

  	
   

  	
  «Name»

  	
   

  

 

 

 

VESTING SCHEDULE

The date of grant of this Option is the date of this Agreement, first
written above.

Total Option Grant:  «Shares» shares

	
  Date on Which Installment First

  Vests and Becomes Exercisable

  	
   

  	
   

  	
   

  	
  Number of Shares in Installment

  
	
  «Month»
  «day», «vyear1»

  	
   

  	
  «Vesting_»%
  of the number of shares originally subject to the Option

  
	
   

  	
   

  	
   

  
	
  «Month»
  «day», «vyear2»

  	
   

  	
  «Vesting_»% of
  the number of shares originally subject to the Option

  
	
   

  	
   

  	
   

  
	
  «Month»
  «day», «vyear3»

  	
   

  	
  «Vesting_»%
  of the number of shares originally subject to the Option

  
	
   

  	
   

  	
   

  
	
  «Month»
  «day», «vyear4»

  	
   

  	
  «Vesting_»%
  of the number of shares originally subject to the Option

  
	
   

  	
   

  	
   

  
	
  «Month»
  «day», «vyear5»

  	
   

  	
  «Vesting_»% of the number of
  shares originally subject to the OptionExhibit 10(h)

 

 

LOAN AND
SECURITY AGREEMENT

 

 

among

 

 

VIDEO
DISPLAY CORPORATION

 

“Parent”

 

Parent’s
Subsidiaries That Are Parties Hereto

 

“Subsidiaries”

 

and

 

RBC CENTURA
BANK, as a lender

 

and

 

REGIONS
BANK, as a lender

 

and

 

RBC CENTURA
BANK, as Collateral
Agent

 

 

Dated: June    , 2006

 

 

LOAN AND
SECURITY AGREEMENT

 

THIS AGREEMENT (the “Agreement”), dated as of
June    , 2006 among VIDEO DISPLAY CORPORATION, a Georgia
corporation (“Parent”), LEXEL IMAGING SYSTEMS, INC. (“Lexel”), FOX
INTERNATIONAL, LTD., INC. (“Fox”), Z-AXIS, INC. (“Z-Axis”), TELTRON
TECHNOLOGIES, INC. (“Teltron”), AYDIN DISPLAYS, INC. (“Aydin”), MENGEL
INDUSTRIES, INC. (“Mengel”) and XKD CORPORATION (“XYD” and together with Lexel,
Fox, Z-Axis, Teltron, Aydin and Mengel, collectively, the “Subsidiaries”; and
the Subsidiaries, together with Parent, collectively, the “Borrower”), and RBC
CENTURA BANK (“RBC”), as a lender, and REGIONS BANK, as a lender (“Regions”
and, together with RBC in their capacities as lenders hereunder, the “Banks”), and
RBC CENTURA BANK, as collateral agent for the Banks (the “Collateral Agent”);

 

W I T N E S
S E T H:

 

In consideration of the premises and of the mutual
covenants herein contained and to induce each Bank (individually and severally,
and not
jointly) to extend credit to Borrower, the parties agree as follows:

 

1.             Definitions.

 

1.1.          Definitions.  Capitalized terms that are not
otherwise defined herein shall have the meanings set forth below.

 

“Account” means all “accounts” as defined in the
Code from time to time, together with any guaranties, Letters of Credit and
other security therefor.

 

“Account Debtor” means an “account debtor” as
defined in the Code from time to time.

 

“Adjusted Total Liabilities to Adjusted Tangible Net
Worth Ratio” means, as of any date of calculation, the ratio of Borrower’s
Adjusted Total Liabilities as of such date to its Adjusted Tangible Net Worth
as of such date.

 

“Adjusted Tangible Net Worth” means, as of any date
of calculation, Borrower’s Shareholder Equity, less its intangible assets, less
its leasehold improvements and loans receivable from related parties, plus its
Subordinated Debt, calculated on
consolidated basis and in accordance with GAAP.

 

“Adjusted Total Liabilities” means, as of any date
of calculation, Borrower’s Total Liabilities, including Contingent Liabilities,
less its Subordinated Debt, calculated
on a consolidated basis and (except with respect to Contingent Liabilities) in
accordance with GAAP.

 

“Advance” means an advance of proceeds of a
Revolving Loan to, or the issuance of a letter of credit for the account of,
Borrower pursuant to this Agreement.

 

“Advance Date” means the date on which an Advance is
made.

 

 

“Affiliate” means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person’s senior executive officers, directors and partners.

 

“Asset Coverage Ratio” means, as of any date of
calculation, the ratio of (a) the total amount of Borrower’s Obligations
outstanding under the RBC Primary Revolving Loan, the RBC Secondary Revolving
Loan, the Regions Primary Revolving Loan and the Regions Secondary Revolving
Loan, divided by (b) the sum of (i) Borrower’s Accounts, net of
allowance for doubtful Accounts, plus (ii) its Inventory, net of reserves
(such net Inventory capped at $20,000,000), less (iii) its accounts
payable.

 

“Authority” shall mean any governmental authority,
central bank or comparable agency charged with the interpretation or
administration of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof.

 

“Business Day” means any day that is not a Saturday,
Sunday or other day on which banks in the State of Georgia are authorized or
required to close.

 

“Capital Expenditures” means any amounts accrued or
paid in respect of any purchase or other acquisition for value of capital
assets and, for greater certainty, excludes amounts expended in respect of the
normal repair and maintenance of capital assets utilized in the ordinary course
of business.

 

“Capitalized Leases” means all leases that have been
or should be, in accordance with GAAP, recorded as capitalized leases.

 

“Change in Ownership” shall mean a transaction or
series of transactions in which any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient
number of shares of all classes of stock then outstanding of Borrower
ordinarily entitled to vote in the election of directors, empowering such
“person” or “group” to elect a majority of the Board of Directors of Borrower,
who did not have such power before such transaction.

 

“Change in Senior Management” shall mean
(a) any one or more of Ronald D. Ordway, Michael Boyd or Ervin Kuczogi
shall cease to be actively involved with the day-to-day management of Borrower
in an executive officer capacity, or (b) any two or more of David Mutcher,
Arthur Mengel, William Frohoff, Murray Fox or Carl Beacher shall cease to be
actively involved with the day-to-day management of Borrower in an executive officer
capacity.

 

“Change of Law” shall mean the adoption of any
applicable law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any Authority.

 

2

 

“Chattel Paper” means “chattel paper” as defined in
the Code from time to time, together with any guaranties, Letters of Credit and
other security therefor.

 

“Code” means the Uniform Commercial Code, as in
effect in Georgia from time to time.

 

“Collateral” means all assets and personal property
of Borrower, wherever located and whether now owned by Borrower or hereafter
acquired, including, without limitation, the following: (a) all Accounts;
(b) all General Intangibles; (c) all Chattel Paper, Documents and Instruments
and rights to payment evidenced thereby, (d) all Inventory; (e) all
Equipment and Fixtures; (f) all Investment Property; (g) all Deposit
Accounts; (h) all Letters of Credit and Letter of Credit Rights;
(i) any other collateral in which either or both Banks, or Collateral
Agent on behalf of Banks, may be hereafter granted a security interest or Lien;
and (j) all parts, replacements, substitutions, profits, products and cash
and non-cash Proceeds of any of the foregoing (including insurance proceeds
payable by reason of loss or damage thereto) in any form and wherever
located.  Collateral shall include all
written or electronically recorded books and records relating to any such
Collateral and other rights relating thereto.

 

“Collateral Agency Agreement” means the Collateral
Agency and Intercreditor Agreement, dated of even date herewith, among
Borrower, Banks and the Collateral Agent, as amended, modified, supplemented or
restated from time to time.

 

“Contingent Liabilities” means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any account, instrument, chattel paper, document, general
intangible, indebtedness, lease, dividend, letter of credit, letter of credit
right or other obligation of another Person, including, without limitation, any
such obligation directly or indirectly guaranteed, endorsed, co-made or
discounted or sold with recourse by that Person, or in respect of which that
person is otherwise directly or indirectly liable; (ii) any obligations
with respect to undrawn letters of credit issued for the account of that
Person; and (iii) all obligations arising under any Interest Rate
Agreement or other agreement or arrangement designated to protect a person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term “Contingent Obligation” shall not include
endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determined amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such person in good faith; provided, however,
that such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement.

 

“Corporate Distributions” means all payments to
(i) any shareholder (or other holder of an equity interest in Borrower),
director, executive or officer of the Borrower, (ii) any Affiliate or
holder of Subordinated Debt of the Borrower, or (iii) any shareholder (or
other holder of an equity interest in Borrower), director, executive or officer
of any Affiliate or holder of Subordinated Debt of the Borrower.  For greater certainty, it includes bonuses,
dividends, salaries (except salaries to officers or other employees in the
ordinary course of business), and repayment of Indebtedness or making of loans
to any such Person.

 

3

 

“Debt” means (a) all liabilities which would be
reflected on a balance sheet prepared in accordance with GAAP, (b) all
indebtedness for borrowed money or the deferred purchase price of property or
services, including without limitation reimbursement and other obligations with
respect to surety bonds and letters of credit, (c) all obligations
evidenced by notes, bonds, debentures or similar instruments, (d) all
capital lease obligations and (e) all Contingent Obligations.

 

“Default”  or
“default” means any of the events specified in Section 8.1, whether or not
any requirement in such Section for the giving of notice or the lapse of
time or the happening of any further condition, event or act shall have been
satisfied.

 

“Default Rate” means the “default rate” of interest
per annum specified in the applicable Note.

 

“Deposit Account” means “deposit account” as defined
in the Code from time to time.

 

“Document” means “document” as defined in the Code
from time to time.

 

“EBITDA” shall mean, as of any date of calculation,
Borrower’s net income, plus its Interest Expense, plus its income tax expense,
plus its depreciation and amortization, calculated on a consolidated basis and
in accordance with GAAP.

 

“Environmental Laws” means, collectively the
following acts and laws, as amended:  the
Comprehensive Environmental Response, Compensation and Liability Act of 1980;
the Superfund Amendments and Reauthorization Act of 1986; the Resource
Conservation and Recovery Act; the Toxic Substances Act; the Clean Water Act;
the Clean Air Act; the Oil Pollution and Hazardous Substances Control Act of
1978; and any other “Superfund” or “Superlien” law or any other federal, state
or local statute, law, ordinance, code, rule, regulation, order or decree
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect.

 

“Equipment” means “equipment” as defined in the Code
from time to time.

 

“Event of Default” means any event specified as such
in Section 8.1 hereof, provided that there shall have been satisfied any
requirement in connection with such event for the giving of notice or the lapse
of time, or both.

 

“First Priority Loans” has the meaning given to the
term in the Collateral Agency Agreement.

 

“Fixed Charge Coverage Ratio” means, as of any date
of calculation: (a) the sum of Borrower’s EBITDA, plus its rent and lease
expense, less its Unfunded Capital Expenditures, less its cash taxes, divided
by (b) the sum of Borrower’s rent and lease expense, plus its current
maturities of long term Funded Debt, plus its Interest Expense, plus its
Corporate Distributions, each calculated on a consolidated basis for the
trailing four quarter period and in accordance with

 

4

 

GAAP; provided, for the fiscal quarters
ending August 31, 2006 and November 30, 2006, the Fixed Charge Coverage
Ratio shall be calculated on an annualized basis.

 

“Fixtures” means “fixtures” as defined in the Code
from time to time.

 

“Funded Debt” means, at any time, all obligations
for borrowed money which bear interest or to which interest is imputed plus,
without duplication, all obligations for the deferred payment of the purchase
of property, all Capitalized Lease obligations and all Indebtedness secured by
purchase money security interests.

 

“GAAP” means generally accepted accounting
principles as in effect in the United States from time to time.

 

“General Intangibles” means “general intangibles” as
defined in the Code from time to time, including “payment intangibles” and
“software” (each as defined in the Code from time to time).

 

“Instrument” means “instrument” as defined in the
Code from time to time.

 

“Interest Expense” means the total of the costs of
advances outstanding under Indebtedness including (i) interest charges,
(ii) capitalized interest, (iii) the interest component of
Capitalized Leases, (iv) fees payable in respect of letters of credit and
letters of guarantee, and (v) discounts incurred and fees payable in
respect of bankers’ acceptances.

 

“Interest Rate Agreement” means any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
designed to protect a Person against fluctuations in interest rates or to hedge
such Person’s interest rate risk exposure, including any swap agreements as
defined in 11 U.S.C. §101, as amended.

 

“Inventory” means “inventory” as defined in the Code
from time to time.

 

“Investment” means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.

 

“Investment Property” means “investment property” as
defined in the Code from time to time.

 

“Letters of Credit” and “Letter of Credit Rights”
means “letters of credit” and “letter of credit rights”, respectively, each as
defined in the Code from time to time.

 

“Lien” means any mortgage, pledge, statutory lien or
other lien arising by operation of law, security interest, trust arrangement,
security deed, financing lease, collateral assignment or other encumbrance,
conditional sale or title retention agreement, or any other interest in
property designed to secure the repayment of Obligations, whether arising by
agreement or under any statute or law or otherwise.

 

5

 

“Loan Documents” means this Agreement, the Notes,
the Collateral Agency Agreement, the Shareholder Subordination Agreement, the
Negative Pledge Agreement, any Interest Rate Agreement, the Advance requests,
and all other documents and instruments now or hereafter evidencing,
describing, guaranteeing or securing the Obligations contemplated hereby or
delivered in connection herewith, as they may be modified.

 

“Loans” means the RBC Loans and the Regions Loans,
and “Loan” means any of such loans as the context may require.

 

“Material Adverse Effect” means any
(i) material adverse effect upon the validity, performance or
enforceability of any of the Loan Documents or any of the transactions
contemplated hereby or thereby, (ii) material adverse effect upon the
properties, business, prospects or condition (financial or otherwise) of
Borrower, any Subsidiary and/or any other Person obligated under any of the
Loan Documents, or (iii) material adverse effect upon the ability of
Borrower, any Subsidiary or any other Person to fulfill any obligation under
any of the Loan Documents.

 

“Negative Pledge Agreement” means that certain
Negative Pledge Agreement of even date herewith from Borrower in favor of the
Collateral Agent and Banks, as amended, modified, supplemented or restated from
time to time.

 

“Notes” means the RBC Notes and the Regions Notes,
and “Note” means any of such notes as the context may require.

 

“Obligations” 
means all obligations now or hereafter owed to a Bank by Borrower,
whether related or unrelated to the Loans, including, without limitation,
amounts owed or to be owed under the terms of the Loan Documents, or arising
out of the transactions described therein, including, without limitation, the
Loans, sums advanced to pay overdrafts on any account maintained by Borrower
with a Bank, reimbursement obligations for outstanding letters of credit or
banker’s acceptances issued for the account of Borrower or its Subsidiaries,
amounts paid by a Bank under letters of credit or drafts accepted by a Bank for
the account of Borrower or its Subsidiaries, together with all interest
accruing thereon, all obligations, whether now existing or hereafter arising,
under any Interest Rate Agreement, including any swap agreements as defined in
11 U.S.C. §101, as amended, between a Bank and Borrower whenever executed, all
fees, all costs of collection, attorneys’ fees and expenses of or advances by a
Bank which a Bank pays or incurs in discharge of obligations of Borrower,
whether such amounts are now due or hereafter become due, direct or indirect
and whether such amounts due are from time to time reduced or entirely
extinguished and thereafter re-incurred.

 

“Permitted Debt” means (a) the Obligations;
(b) Debt payable to suppliers and other trade creditors in the ordinary
course of business on ordinary and customary trade terms and which is not past
due; (c) Debt of any Subsidiary to Borrower or another Subsidiary;
(d) Capitalized Leases in effect on the date hereof; and
(e) endorsement of checks for collection in the ordinary course of
business.

 

6

 

“Permitted Investment” means: (i) Investments
existing on the date disclosed on Exhibit 1.1 hereto;
(ii) (A) Marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one year from the date of acquisition thereof,
(B) commercial paper maturing no more than one year from the date of
creation thereof and currently having a rating of at least A-2 or P-2 from
either Standard & Poor’s Corporation or Moody’s Investors Service,
(C) certificates of deposit maturing no more than one year from the date
of investment therein issued by a Bank, and (D) a Bank’s money market
accounts; (iii) Investments accepted in connection with Permitted
Transfers; (iv) Investments consisting of travel advances and employee
relocation loans and other employee loans and advances in the ordinary course
of business; (v) Investments (including Debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of Borrower’s business; and
(vi) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business, provided that this part shall not apply to
Investments of Borrower in any Subsidiary.

 

“Permitted Liens” 
means (a) Liens securing the Obligations; (b) Liens for taxes
and other statutory Liens, landlord’s Liens and similar Liens arising out of
operation of law so long as the obligations secured thereby are not past due or
are being contested and the proceedings contesting such obligations have the
effect of preventing the forfeiture or sale of the property subject to such
Lien; (c) Liens for deposits made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance, social security
and similar laws; (d) attachment, judgment and other similar non-tax Liens
arising in connection with court proceedings but only if and for so long as
(i) the execution or enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal, (ii) the validity and/or amount
of the claims secured thereby are being actively contested in good faith by
appropriate legal proceedings and (iii) such Liens do not, in the
aggregate, materially detract from the value of the assets of the Person whose
assets are subject to such Lien or materially impair the use thereof in the
operation of such Person’s business; (e) Liens securing Permitted Debt
described in clause (d) of the definition of Permitted Debt; and
(f) Liens in the nature of easements or other similar encumbrances or
restrictions (not securing Debt) on the use of Borrower’s properties, so long
as such Liens do not materially impair Borrower’s use of such property.

 

“Permitted Transfer” means the conveyance, sale,
lease, transfer or disposition by Borrower or any Subsidiary of:
(i) Inventory in the ordinary course of business; (ii) non-exclusive
licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business; (iii) surplus,
worn-out or obsolete Equipment in the ordinary and normal replacement program
for Equipment under which each Bank’s Lien, and Collateral Agent’s Lien on
behalf of Banks, priority continues in the replacement Equipment, or
(iv) its Wintron Technology unit.

 

“Person” means any natural person, corporation,
unincorporated organization, trust, joint-stock company, joint venture,
association, company, limited or general partnership, limited liability
company, any government or any agency or political subdivision of any
government, or any other entity or organization.

 

7

 

“Proceeds” means “proceeds” as defined in the Code
from time to time.

 

“RBC Loans” shall have the meaning set forth in
Section 2.1.

 

“RBC Maximum Primary Revolving Loan Amount” means
$8,500,000.

 

“RBC Maximum Secondary Revolving Loan Amount” means
$1,750,000.

 

“RBC Notes” shall have the meaning set forth in
Section 2.2.

 

“RBC Primary Revolving Loan” shall have the meaning
set forth in Section 2.1.

 

“RBC Secondary Revolving Loan” shall have the
meaning set forth in Section 2.1.

 

“RBC Term Loan” shall have the meaning set forth in
Section 2.1.

 

“RBC Term Loan Amount” means $1,500,000.

 

“Regions Loans” shall have the meaning set forth in
Section 2.1.

 

“Regions Maximum Primary Revolving Loan Amount”
means $8,500,000.

 

“Regions Maximum Secondary Revolving Loan Amount”
means $1,750,000.

 

“Regions Notes” shall have the meaning set forth in
Section 2.1.

 

“Regions Primary Revolving Loan” shall have the meaning
set forth in Section 2.1.

 

“Regions Secondary Revolving Loan” shall have the
meaning set forth in Section 2.1

 

“Regions Term Loan” shall have the meaning set forth
in Section 2.1.

 

“Regions Term Loan Amount” means $1,500,000.

 

“Regulated Materials” means any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.

 

“Revolving Loan Period” means the period from and
including the date of this Agreement to and including the Revolving Loan
Termination Date.

 

“Revolving Loans” means collectively, the RBC
Primary Revolving Loan, the RBC Secondary Revolving Loan, the Regions Primary
Revolving Loan and the Regions Secondary Revolving Loan.

 

8

 

“Revolving Loan Termination Date” or “Termination
Date” means June 30, 2008, as such date may be renewed from time to time
as provided herein.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of
2002, as amended from time to time.

 

“Second Priority Loans” has the meaning given to the
term in the Collateral Agency Agreement.

 

“Security Agreement” means this Agreement as it
relates to a security interest in the Collateral and any other mortgage,
security agreement or similar instrument now or hereafter executed by Borrower
or other Person granting either or both of Banks, or Collateral Agent on behalf
of Banks, a security interest in any Collateral to secure the Obligations
(including any arising under any Interest Rate Agreement).

 

“Shareholder Equity” means the total of
(i) share capital (excluding redeemable preferred shares and treasury
stock), (ii) contributed surplus, and (iii) retained earnings; and
for non-corporate organizations such as partnerships or limited liability
companies, equity accounts similar to those described herein for corporations.

 

“Shareholder Subordination Agreement” means that
certain Subordination Agreement, dated as of even date herewith, among Banks,
Collateral Agent, Ronald D. Ordway and Borrower, as amended, modified,
supplemented or restated from time to time.

 

“Solvent” 
means, as to any Person, that such Person has capital sufficient to
carry on its business and transactions in which it is currently engaged and all
business and transactions in which it is about to engage, is able to pay its
debts as they mature, and has assets having a fair valuation greater than its
liabilities, at fair valuation.

 

“Subordinated Debt” means Debt of Borrower that is
subordinated to the Obligations pursuant to a written agreement in form and
substance satisfactory to each Bank in its sole discretion.

 

“Subordinated Shareholder Note” means that certain
unsecured promissory note from Borrower in favor of Ronald D. Ordway in the
principal amount of $6,000,000.

 

“Subsidiary” 
means any corporation, partnership or other entity in which Borrower,
directly or indirectly, owns more than fifty percent (50%) of the stock,
capital or income interests, or other beneficial interests, or which is
effectively controlled by such Person.

 

“Third Priority Obligations” has the meaning given
to the term in the Collateral Agency Agreement.

 

“Total Liabilities” means all liabilities of a
Person, including Contingent Liabilities, exclusive of deferred tax
liabilities, calculated on a consolidated basis and in accordance with GAAP.

 

9

 

“Unfunded Capital Expenditures” means those Capital
Expenditures which are not financed by Funded Debt.

 

1.2.          Financial Terms.  All
financial terms used herein shall have the meanings assigned to them under GAAP
unless another meaning shall be specified

 

2.             The Loan Facility.

 

2.1.          The Loans.  Each Bank agrees, individually
and severally, and not
jointly, to extend the following credit to Borrower, subject to the terms set
forth herein:

 

(a)           RBC agrees, on the terms and conditions set
forth in this Agreement, to make revolving loan Advances (including issuing
letters of credit) to or for the account of Borrower from time to time during
the Revolving Loan Period in amounts such that the aggregate principal amount
of such revolving loan Advances (including the face amount of any letters of
credit) under this loan at any one time outstanding will not exceed the RBC
Maximum Primary Revolving Loan Amount (the “RBC Primary Revolving Loan”).
Within the foregoing limit, Borrower may borrow, prepay and reborrow such
Advances at any time during the Revolving Loan Period.

 

(b)           RBC agrees, on the terms and conditions set
forth in this Agreement, to make additional revolving loan Advances to or for
the account of Borrower under a second revolving loan facility from time to
time during the Revolving Loan Period in amounts such that the aggregate
principal amount of such revolving loan Advances at any one time outstanding will
not exceed the RBC Maximum Secondary Revolving Loan Amount (the “RBC Secondary
Revolving Loan”). Within the foregoing limit, Borrower may borrow, prepay and
reborrow such Advances at any time during the Revolving Loan Period.

 

(c)           RBC agrees, on the terms and conditions set
forth in this Agreement, to make a term loan to Borrower in an amount equal to
the RBC Term Loan Amount in a single advance on the date hereof (the “RBC Term
Loan” and together with the RBC Primary Revolving Loan and the RBC Secondary
Revolving Loan, the “RBC Loans”).  Once
repaid, principal of the RBC Term Loan cannot be reborrowed.

 

(d)           Regions agrees, on the terms and conditions
set forth in this Agreement, to make revolving loan Advances (including issuing
letters of credit) to or for the account of Borrower from time to time during
the Revolving Loan Period in amounts such that the aggregate principal amount
of such revolving loan Advances (including the face amount of any letters of
credit) under this loan at any one time outstanding will not exceed the Regions
Maximum Primary Revolving Loan Amount (the “Regions Primary Revolving Loan”).
Within the foregoing limit, Borrower may borrow, prepay and reborrow such
Advances at any time during the Revolving Loan Period.

 

(e)           Regions agrees, on the terms and conditions
set forth in this Agreement, to make additional revolving loan Advances to or
for the account of Borrower under a second revolving loan facility from time to
time during the Revolving Loan Period in amounts such that

 

10

 

the aggregate principal amount of such
revolving loan Advances at any one time outstanding will not exceed the Regions
Maximum Secondary Revolving Loan Amount (the “Regions Secondary Revolving
Loan”). Within the foregoing limit, Borrower may borrow, prepay and reborrow
such Advances at any time during the Revolving Loan Period.

 

(f)            Regions agrees, on the terms and conditions
set forth in this Agreement, to make a term loan to Borrower in an amount equal
to the Regions Term Loan Amount in a single advance on the date hereof (the
“Regions Term Loan” and together with the Regions Primary Revolving Loan and
the Regions Secondary Revolving Loan, the “Regions Loans”).  Once repaid, principal of the Regions Term
Loan cannot be reborrowed.

 

2.2.          Promissory Notes.

 

(a)           The RBC Primary Revolving Loan shall be
evidenced by a promissory note in the face amount of the RBC Maximum Primary
Revolving Loan Amount, dated of even date herewith, from Borrower to the order
of RBC (as amended, modified, supplemented, restated or renewed from time to
time, the “RBC Primary Revolving Note”).

 

(b)           The RBC Secondary Revolving Loan shall be
evidenced by a promissory note in the face amount of the RBC Maximum Secondary
Revolving Loan Amount, dated of even date herewith, from Borrower to the order
of RBC (as amended, modified, supplemented, restated or renewed from time to
time, the “RBC Secondary Revolving Note”).

 

(c)           The RBC Term Loan shall be evidenced by a
promissory note in the face amount of the RBC Term Loan Amount, dated of even
date herewith, from Borrower to the order of RBC (as amended, modified,
supplemented, restated or renewed from time to time, the “RBC Term Note” and
together with the RBC Revolving Note and the RBC Revolving Note, the “RBC
Notes”).

 

(d)           The Regions Primary Revolving Loan shall be
evidenced by a promissory note in the face amount of the Regions Maximum
Primary Revolving Loan Amount, dated of even date herewith, from Borrower to
the order of Regions (as amended, modified, supplemented, restated or renewed
from time to time, the “Regions Primary Revolving Note”).

 

(e)           The Regions Secondary Revolving Loan shall be
evidenced by a promissory note in the face amount of the Regions Maximum
Secondary Revolving Loan Amount, dated of even date herewith, from Borrower to
the order of Regions (as amended, modified, supplemented, restated or renewed
from time to time, the “Regions Secondary Revolving Note”).

 

(f)            The Regions Term Loan shall be evidenced by a
promissory note in the face amount of the Regions Term Loan Amount, dated of
even date herewith, from Borrower to the order of Regions (as amended,
modified, supplemented, restated or renewed from time to time, the “Regions
Term Note” and together with the Regions Revolving Note and the Regions
Revolving Note, the “Regions Notes”).

 

11

 

2.3.          Repayment of Loans.

 

(a)           The RBC Primary Revolving Loan shall be
repayable in accordance with the terms of the RBC Primary Revolving Note and
this Agreement.

 

(b)           The RBC Secondary Revolving Loan shall be
repayable in accordance with the terms of the RBC Secondary Revolving Note and
this Agreement.

 

(c)           The RBC Term Loan shall be repayable in
accordance with the terms of the RBC Term Note and this Agreement.

 

(d)           The Regions Primary Revolving Loan shall be
repayable in accordance with the terms of the Regions Primary Revolving Note
and this Agreement.

 

(e)           The Regions Secondary Revolving Loan shall be
repayable in accordance with the terms of the Regions Secondary Revolving Note
and this Agreement.

 

(f)            The Regions Term Loan shall be repayable in
accordance with the terms of the Regions Term Note and this Agreement.

 

(g)           Borrower shall make each required payment of
principal of and interest on the Loans and fees hereunder not later than 12:00
noon (local time Atlanta, Georgia) on the date when due, without set off,
counterclaim or other deduction, in immediately available funds to each Bank at
its address provided to Borrower from time to time.  Whenever any payment of principal of, or
interest on, the Loans or of fees shall be due on a day which is not a Business
Day, the date for payment thereof shall be extended to the next succeeding
Business Day.  If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.

 

2.4.          Extension of Termination Date. 
Banks may, in their sole and absolute discretion, extend the Termination
Date for successive one-year terms which shall terminate on the anniversary of
the then applicable Termination Date by giving written notice thereof to
Borrower at least one year prior to the then applicable Termination Date (an
“Extension Notice”); provided, unless Banks give such Extension Notice in
writing to Borrower at least one year prior to the then applicable Termination
Date, the Termination Date shall not be extended; provided, further, that the
Termination Date shall not be extended unless both Banks issue such Extension
Notices.

 

2.5.          Requests; Reconciliation. 
Borrower and Banks acknowledge and agree that the parties intend for the
Revolving Loans to be drawn on by the Borrower in equal amounts.  Borrower covenants and agrees to use its best
efforts to ensure that the amounts outstanding under the RBC Revolving Loans
and the Regions Revolving Loans at any given time are the same or approximately
the same.  Accordingly, each week, the
Borrower shall draw against either the RBC Revolving Loans or the Regions
Revolving Loan, as applicable and if necessary, to repay to either RBC or
Regions, as applicable, such amount as may be necessary to equalize

 

12

 

the amounts then outstanding under the RBC
Revolving Loans and the Regions Revolving Loans.

 

2.6.          Overdue Amounts.

 

(a)           Any payments not made as and when due shall
bear interest from the date due until paid at the Default Rate, in a Bank’s
discretion.

 

(b)           If any payments are not timely made, Borrower
shall also pay to each Bank a late charge equal to 5% of each payment past due
for 15 or more days to such Bank.  The
Borrower acknowledges that the late charge imposed herein represents a
reasonable estimate of the expenses of each Bank incurred because of such
lateness.  Acceptance by a Bank of any
late payment without an accompanying late charge shall not be deemed a waiver
of such Bank’s right to collect such late charge or to collect a late charge
for any subsequent late payment received.

 

2.7.          Calculation of Interest.  All
interest under the Notes or hereunder shall be calculated on the basis of the
Actual/360 Computation, as defined in the Notes.

 

2.8.          Letters of Credit.

 

(a)           At its discretion RBC may from time to time
issue, extend or renew letters of credit for the account of Borrower or its Subsidiaries;
provided, the stated expiration date thereof shall not be later than the
Revolving Loan Termination Date.  The
availability of Advances under the RBC Primary Revolving Loan shall be reduced
by outstanding obligations of RBC under any letters of credit.  All payments made by RBC under any such
letters of credit (whether or not Borrower is the account party) and all fees,
commissions, discounts and other amounts owed or to be owed to RBC in
connection therewith, shall be deemed to be Advances under the RBC Primary
Revolving Note, and shall be repaid on demand. 
Borrower shall complete and sign such applications and supplemental
agreements and provide such other documentation as RBC may require.  The form and substance of all letters of
credit, including expiration dates, shall be subject to RBC’s approval.  RBC may charge a fee or commission for each
issuance, renewal or extension of a letter of credit, such fee to be the
“Applicable Margin” (as defined in the RBC Primary Revolving Note) as then in
effect under the RBC Primary Revolving Note of the stated amount of such letter
of credit.  Borrower unconditionally
guarantees all obligations of any Subsidiary with respect to letters of credit
issued by RBC for the account of such Subsidiary.  Upon a Default, Borrower shall, on demand,
deliver to RBC (or the Collateral Agent on its behalf) good funds equal to 100%
of RBC’s maximum liability under all outstanding letters of credit, to be held
as cash collateral for Borrower’s reimbursement obligations and other
Obligations.

 

(b)           At its discretion Regions may from time to
time issue, extend or renew letters of credit for the account of Borrower or
its Subsidiaries; provided, the stated expiration date thereof shall not be
later than the Revolving Loan Termination Date. 
The availability of Advances under the Regions Primary Revolving Loan
shall be reduced by outstanding obligations of Regions under any letters of
credit.  All payments made by Regions
under any such letters of credit (whether or not Borrower is the account party)
and all fees, commissions,

 

13

 

discounts and other amounts owed or to be
owed to Regions in connection therewith, shall be deemed to be Advances under
the Regions Primary Revolving Note, and shall be repaid on demand.  Borrower shall complete and sign such
applications and supplemental agreements and provide such other documentation
as Regions may require.  The form and
substance of all letters of credit, including expiration dates, shall be
subject to Regions’ approval.  Regions
may charge a fee or commission for each issuance, renewal or extension of a
letter of credit, such fee to be the “Applicable Margin” (as defined in the
Regions Primary Revolving Note) as then in effect under the Regions Primary
Revolving Note of the stated amount of such letter of credit.  Borrower unconditionally guarantees all
obligations of any Subsidiary with respect to letters of credit issued by
Regions for the account of such Subsidiary. 
Upon a Default, Borrower shall, on demand, deliver to Regions (or the
Collateral Agent on its behalf) good funds equal to 100% of Regions’ maximum
liability under all outstanding letters of credit, to be held as cash
collateral for Borrower’s reimbursement obligations and other Obligations.

 

(c)           Any letter of credit issued hereunder shall
be governed by the International Standby Practices (1998) of the Institute of
International Banking Law & Practice, International Chamber of
Commerce Publication No. 590 (“ISP98”), as revised from time to time,
except to the extent that the terms of such publication would limit or diminish
rights granted to a Bank hereunder or in any other Loan Document.

 

2.9.          Statement of Account.  If a
Bank provides Borrower with a statement of account on a periodic basis, such
statement will be presumed complete and accurate and will be definitive and
binding on Borrower, unless objected to with specificity by Borrower in writing
within forty-five (45) days after receipt.

 

2.10.        Fees.

 

(a)           Borrower shall pay to RBC on or before the
date hereof a commitment fee in the amount of $29,375, which fee has been fully
earned by RBC and is non-refundable in its entirety.

 

(b)           Borrower shall pay to Regions on or before
the date hereof a commitment fee in the amount of $29,375, which fee has been
fully earned by Regions and is non-refundable in its entirety.

 

2.11.        Termination.  Upon at least thirty (30) days
prior written notice to Banks, Borrower may, at its option, terminate this
Agreement and repay the Loans in full.

 

2.12.        Increased Costs; Reduced Returns.

 

(a)           If after the date hereof, a Change of Law or
compliance by a Bank with any request or directive (whether or not having the
force of law) of any Authority either: (i) shall subject such Bank to any
tax, duty or other charge with respect to its Loans, its Notes or its
obligation to make Advances, or shall change the basis of taxation of payments
to it of the principal of or interest on its Loans or any other amounts due
under this Agreement or the other Loan Documents in respect of its Loans or its
obligation to make Advances (except for changes

 

14

 

in the rate of tax on its overall net income
imposed by the jurisdiction in which its principal executive office is
located); or (ii) shall impose, modify or deem applicable any reserve,
special deposit insurance or similar requirement (including, without
limitation, any such requirements imposed by the Board of Governors of the
Federal Reserve System) against assets of, deposits with or for the account of,
or credit extended by, it; or (iii) shall impose on it or the London
Interbank Market any other similar condition affecting its Loans, its Notes or
its obligation to make Advances; and the result of any of the foregoing is to
increase the cost to it of making or maintaining any of its Loans, or to reduce
the amount received or receivable by it under this Agreement, under its Notes
or under the other Loan Documents with respect thereto, by an amount deemed by
it to be material, then, within fifteen (15) days after demand by such Bank,
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.

 

(b)           If a Bank shall have determined that after
the date hereof the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof, or compliance by it with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any Authority, has or would have the effect of reducing the rate of
return on its capital as a consequence of its obligations with respect to such
adoption, change or compliance (taking into consideration its policies with
respect to capital adequacy), by an amount deemed by it to be material, then
from time to time, within fifteen (15) days after demand by such Bank, Borrower
shall pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction.

 

(c)           A Bank requiring compensation or
reimbursement under this Section shall promptly notify Borrower of any
event of which it has knowledge, occurring after the date hereof, which will
entitle it to compensation or reimbursement pursuant to this Section.  A certificate of such Bank 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, a Bank may use any reasonable averaging and attribution methods.  Notwithstanding anything to the contrary
herein, neither Bank may claim compensation or reimbursement for any period
more than twelve (12) months prior to the date any such demand for payment is
made under this Section 2.12, regardless of the cost to such Bank.

 

3.             Conditions Precedent to
Borrowing.

 

3.1.          Conditions Precedent to Initial Advance.  In
addition to any other requirement set forth in this Agreement, each Bank will
not make the initial Advance under its Revolving Loan unless and until the
following conditions shall have been satisfied:

 

(a)           Loan Documents. Borrower and each other party to any Loan
Document, as applicable, shall have executed and delivered this Agreement, the
Notes, the Collateral Agency Agreement, Negative Pledge Agreement, and other
required Loan Documents, all in form and substance satisfactory to Banks.

 

15

 

(b)           Supporting Documents. Borrower shall cause to be delivered to Banks
the following documents:

 

(i)              A copy of the governing instruments of
Borrower and its Subsidiaries, and a good standing certificate of Borrower and
Subsidiaries, certified by the appropriate official of its state of
incorporation, if different;

 

(ii)             Incumbency certificate and certified
resolutions of the board of directors (or other appropriate Persons) of
Borrower and each other Person executing any Loan Documents, signed by the
Secretary or another authorized officer of Borrower or such other Person,
authorizing the execution, delivery and performance of the Loan Documents;

 

(iii)            The legal opinion of Borrower’s legal counsel
addressed to Banks regarding such matters as each Bank and its counsel may
request;

 

(iv)           Satisfactory evidence of payment of all fees
due and reimbursement of all costs incurred by Banks, and evidence of payment
to other parties of all fees or costs which Borrower is required under this
Agreement to pay by the date of the initial Advance; and

 

(v)            UCC searches and other Lien searches showing
no existing security interests in or Liens on the Borrower’s or its
Subsidiaries’ assets, other than Permitted Liens.

 

(c)           Insurance. Borrower shall have delivered to Banks satisfactory evidence of
insurance meeting the requirements of Section 5.3.

 

(d)           Perfection of Liens. UCC-1 financing statements and, if
applicable, certificates of title covering the Collateral executed by Borrower
shall duly have been recorded or filed in the manner and places required by law
to establish, preserve, protect and perfect the interests and rights created or
intended to be created by the Security Agreement; and all taxes, fees and other
charges in connection with the execution, delivery and filing of the Security
Agreement and the financing statements shall duly have been paid.

 

(e)           Shareholder Subordinated Note. The Shareholder Subordinated Note shall be
on terms and in form and substance satisfactory to Banks in their sole
discretion, and Ronald D. Ordway and Borrower shall have executed and delivered
the Shareholder Subordination Agreement.

 

(f)            Additional Documents. Borrower shall have delivered to Banks all
additional opinions, documents, certificates and other assurances that Banks or
its counsel may require.

 

(g)           Payment of Fees. Borrower shall have paid all fees, costs
and expenses as required by the Loan Documents in connection with the Closing.

 

16

 

3.2.          Conditions Precedent to Each Revolving Loan
Advance.  The following conditions, in addition to any
other requirements set forth in this Agreement, shall have been met or
performed by the Advance Date with respect to any request for an Advance and
each request for an Advance (whether or not a written Advance request is
required) shall be deemed to be a representation that all such conditions have
been satisfied:

 

(a)           Advance Request. 
Borrower shall have delivered to each Bank a request for an Advance and
such other information as may be reasonably required by each Bank.

 

(b)           No Default.  No Default or Event of Default
shall have occurred and be continuing or could occur upon the making of the
Advance in question.

 

(c)           Correctness of Representations.  All
representations and warranties made by Borrower herein or otherwise in writing
in connection herewith shall be true and correct in all material respects with
the same effect as though the representations and warranties had been made on
and as of the proposed Advance Date.

 

(d)           No Adverse Change. 
There shall have been no event or condition which could have a Material
Adverse Effect since the date of the most recent financial statements of
Borrower delivered prior to date hereof.

 

(e)           Limitation on Advances. 
Borrower shall not draw on the RBC Primary Revolving Loan unless the RBC
Secondary Revolving Loan is fully funded, and Borrower shall not draw on the
Regions Primary Revolving Loan unless the Regions Secondary Revolving Loan is
fully funded

 

(f)            Further Assurances. 
Borrower shall have delivered such further documentation or assurances
as Bank may reasonably require.

 

4.             Representations and
Warranties.  In order to induce each Bank to enter into
this Agreement and to make the Loans provided for herein, Borrower hereby
represents and warrants (all of which shall survive the execution and delivery
of the Loan Documents and all of which shall be deemed made as of the date
hereof and as of the Advance Date), on behalf of it and each of its
Subsidiaries, that:

 

4.1.          Valid Existence and Power.  It
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified or licensed to transact
business in all places where the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect on it; the state of its
organization, its organization number in such state, if any, and its tax
identification number or other identifying number are as set forth in
Exhibit 4.1; and it has the power to make and perform the Loan Documents
executed by it, and all such instruments will constitute its legal, valid and
binding obligations, enforceable in accordance with their respective terms,
subject only to bankruptcy and similar laws affecting creditors’ rights
generally.

 

17

 

4.2.          Authority.  Its execution, delivery and
performance of the Loan Documents have been duly authorized by all necessary
action, and do not and will not violate any provision of law or regulation, or
any writ, order or decree of any court or Authority or any provision of its
governing instruments, and do not and will not, with the passage of time or the
giving of notice, result in a breach of, or constitute a default or require any
consent under, or result in the creation of any Lien upon any of its property
or assets pursuant to, any law, regulation, instrument or agreement to which it
is a party or by which it or its properties may be subject, bound or affected.

 

4.3.          Financial Condition. Other than as disclosed in financial
statements delivered on or prior to the date hereof to Banks, it has no direct
or contingent obligations or liabilities (including any guarantees or leases)
or any unrealized or anticipated losses from any of its commitments which could
reasonably be expected to have a Material Adverse Effect; all such financial
statements have been prepared in accordance with GAAP and fairly present its
financial condition as of the date thereof; and it is not aware of any adverse
fact (other than facts which are generally available to the public and not
particular to it, such as general economic or industry trends) concerning its
financial or business condition or future prospects which could reasonably be
expected to have a Material Adverse Effect and which has not been fully
disclosed to Banks, including any adverse change in its operations or financial
condition since the date of the most recent financial statements delivered to
Banks; and it is Solvent, and after consummation of the transactions set forth
in this Agreement and the other Loan Documents, it will be Solvent.

 

4.4.          Litigation.  There are no suits or
proceedings pending, or to its knowledge threatened, before any court or by or
before any governmental or regulatory authority, commission, bureau or agency
or public regulatory body against or affecting it or its assets which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.

 

4.5.          Agreements, Etc.  It is
not a party to any agreement or instrument or subject to any court order,
governmental decree or any charter or other corporate restriction, adversely
affecting its business, assets, operations or condition (financial or
otherwise), nor is it in default in the performance, observance or fulfillment
of any of the material obligations, covenants or conditions contained in any
agreement or instrument to which it is a party, or any law, regulation, decree,
order or the like.

 

4.6.          Authorizations.  All
authorizations, consents, approvals and licenses required under applicable law
or regulation for its ownership or operation of the property owned or operated
by it or for the conduct of any business in which it is engaged have been duly
issued and are in full force and effect, and it is not in default, nor has any
event occurred which with the passage of time or the giving of notice, or both,
would constitute a default, under any of the terms or provisions of any part
thereof, or under any order, decree, ruling, regulation, closing agreement or
other decision or instrument of any Authority having jurisdiction over it,
which default could reasonably be expected to have a Material Adverse
Effect.  Except as noted herein, no
approval, consent or authorization of, or filing or registration with, any
Authority or agency is required with respect to the execution, delivery or
performance of any Loan Document.

 

18

 

4.7.          Title.  It has good title to all of
the assets shown in its financial statements free and clear of all Liens,
except Permitted Liens, and it alone has full ownership rights in all Collateral.

 

4.8.          Collateral.  The security interests granted
to Banks and Collateral Agent herein and pursuant to any other Security
Agreement (a) constitute and, as to subsequently acquired property
included in the Collateral covered by the Security Agreement, will constitute,
security interests under the Code entitled to all of the rights, benefits and
priorities provided by the Code and (b) are, and as to such subsequently
acquired Collateral will be, fully perfected, superior and prior to the rights
of all third persons, now existing or hereafter arising, subject only to
Permitted Liens; and all of the Collateral is intended for use solely in its
business.

 

4.9.          Location.  Its chief executive office
where its business records are located, all of its other places of business and
any other places where any Collateral is kept, are all located at the addresses
indicated on Exhibit 4.9; the Collateral is located and shall at all times
be kept and maintained only at its location or locations as described on Exhibit 4.9
herein; and no such Collateral is attached or affixed to any real property so
as to be classified as a fixture unless Collateral Agent has otherwise agreed
in writing.

 

4.10.        Taxes.  It has filed all federal and
state income and other tax returns which are required to be filed, and have
paid all taxes as shown on said returns and all taxes, including withholding,
FICA and ad valorem taxes, shown on all assessments received by it to the
extent that such taxes have become due; and it is not subject to any federal,
state or local tax Liens nor has it received any notice of deficiency or other
official notice to pay any taxes; and it has paid all sales and excise taxes
payable by it.

 

4.11.        Labor Law Matters.  No
goods or services have been or will be produced by it in violation of any
applicable labor laws or regulations or any collective bargaining agreement or
other labor agreements or in violation of any minimum wage, wage-and-hour or
other similar laws or regulations.

 

4.12.        Judgment Liens. 
Neither it nor any of its assets are subject to any unpaid judgments
(whether or not stayed) or any judgment liens in any jurisdiction.

 

4.13.        Subsidiaries.  If
it has any Subsidiaries, they are listed on Exhibit 4.13.

 

4.14.        Environmental. 
Except for ordinary and customary amounts of solvents, cleaners and
similar materials used in the ordinary course of its business and in strict
compliance with all Environmental Laws, neither it, nor to its best knowledge
any other previous owner or operator of any real property currently owned or
operated by it, has generated, stored or disposed of any Regulated Material on
any portion of such property, or transferred any Regulated Material from such
property to any other location in violation of any applicable Environmental
Laws; no Regulated Material has been generated, stored or disposed of on any
portion of the real property currently owned or operated by it by any other
Person, or is now located on such property; and it is in full compliance with
all applicable Environmental Laws and it has not been notified of any action,
suit, proceeding or investigation which calls into question compliance by it
with any

 

19

 

Environmental Laws or which seeks to suspend,
revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Regulated Material.

 

4.15.        ERISA.  It has no unfunded liabilities
with respect to any pension, profit-sharing or other benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

4.16.        Investment Company Act.  It
is not an “investment company” as defined in the Investment Company Act of
1940, as amended.

 

4.17.        Names.  It currently conducts all
business only under its legal name as set forth above in the introductory
section of this Agreement; and during the preceding five (5) years it
has not (i) been known as or used any other corporate, fictitious or trade
name, (ii) been the surviving entity of a merger or consolidation or
(iii) acquired all or substantially all of the assets of any Person.

 

4.18.        Accounts.  Each Account, instrument,
Chattel Paper and other writing constituting any portion of the Collateral
(a) is genuine and enforceable in accordance with its terms except for
such limits thereon arising from bankruptcy and similar laws relating to
creditors’ rights; (b) is not subject to any deduction or discount (other
than as stated in the invoice), defense, set off, claim or counterclaim of a
material nature against it except as to which it has notified Banks and
Collateral Agent in writing; (c) is not subject to any other circumstances
that would impair the validity, enforceability or amount of such Collateral
except as to which it has notified Banks and Collateral Agent in writing;
(d) arises from a bona fide sale of goods or delivery of services in the
ordinary course and in accordance with the terms and conditions of any
applicable purchase order, contract or agreement; (e) is free of all Liens
other than Permitted Liens; and (f) is for a liquidated amount maturing as
stated in the invoice therefor.

 

4.19.        Intellectual Property.  It
possesses all licenses, certificates, franchises, permits and other
authorizations from governmental and political subdivisions or regulatory
authorities, and all patents, trademarks, service marks, trade names,
copyrights, franchises, licenses and other rights that are necessary for
ownership, maintenance and operation of any of their respective material
Properties and assets, and it is not in violation of any thereof, which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

4.20.        Insider.  It is not, and no Person
having “control” (as that term is defined in 12 U.S.C.
§  375(b)(5) or in regulations promulgated pursuant thereto) of
it is, an “executive officer,” “director,” or “principal shareholder” (as those
terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated
pursuant thereto) of Banks, of a bank holding company of which any Bank is a
subsidiary, or of any subsidiary of a bank holding company of which any Bank is
a subsidiary.

 

4.21.        Compliance with Covenants; No Default.  It
is, and upon funding of the Loans will be, in compliance with all of the
covenants hereof; and no Default or Event of Default

 

20

 

has occurred, and the execution, delivery and
performance of the Loan Documents and the funding of the Loans will not cause a
Default or Event of Default.

 

4.22.        Full Disclosure. 
There is no material fact which is known or which should be known by it
that it has not disclosed to Banks which could have a Material Adverse Effect;
and no Loan Document, nor any agreement, document, certificate or statement
delivered by it to Banks, contains any untrue statement of a material fact or
omits to state any material fact which is known or which should be known by it
necessary to keep the other statements from being misleading.

 

5.             Affirmative Covenants. 
Borrower covenants and agrees that from the date hereof and until
payment in full of the Obligations and the formal termination of this
Agreement, Borrower and each Subsidiary:

 

5.1.          Use of Loan Proceeds. 
Shall use the proceeds of the RBC Loans and the Regions Loans to
refinance existing indebtedness of the Borrower, other than the Subordinated
Shareholder Note.  The proceeds from the
RBC Primary Revolving Loan, the RBC Secondary Revolving Loan, the Regions
Primary Revolving Loan and the Regions Secondary Revolving Loan may also be use
to finance working capital needs and general corporate purposes of the
Borrower.  In each case, Borrower shall
furnish Banks all evidence that the Banks may reasonably require with respect
to such use.

 

5.2.          Maintenance of Business and Properties.  Shall
at all times maintain, preserve and protect its material property used or
useful in the conduct of its business, and keep the same in good repair,
working order and condition, and from time to time make, or cause to be made,
all material needful and proper repairs, renewals, replacements, betterments
and improvements thereto so that the business carried on in connection
therewith may be conducted properly and in accordance with standards generally
accepted in businesses of a similar type and size at all times, and maintain
and keep in full force and effect all licenses and permits necessary to the
proper conduct of its business.

 

5.3.          Insurance.  Shall maintain such liability
insurance, workers’ compensation insurance, business interruption insurance and
casualty insurance as may be required by law, customary and usual for prudent
businesses in its industry or as may be reasonably required by Bank and shall
insure and keep insured all of its material properties in good and responsible
insurance companies satisfactory to Banks.

 

5.4.          Notice of Default. Shall provide to Banks immediate notice of
(a) the occurrence of a Default or Event of Default and what action (if
any) it is taking to correct the same, (b) any material litigation or
material changes in existing litigation or any judgment against it or its
assets, (c) any damage or loss to property that could reasonably be
expected to have a Material Adverse Effect, (d) any notice from taxing
authorities as to claimed deficiencies or any tax lien or any notice relating
to alleged ERISA violations, (e) any Reportable Event, as defined in
ERISA, (f) any rejection, return, offset, dispute, loss or other
circumstance that could reasonably be expected to have a Material Adverse
Effect, (g)  the cancellation or termination of, or any default under, any
agreement to which it is a party or by which any of its properties are

 

21

 

bound, which cancellation or termination
could reasonably be expected to have a Material Adverse Effect, or any
acceleration of the maturity of any of its Debt, and (h) any loss or
threatened loss of licenses or permits, which loss could reasonably be expected
to have a Material Adverse Effect.

 

5.5.          Inspections.  Shall permit inspections of
its records, at such times and in such manner as may be reasonably required by
Banks and shall further permit such inspections, reviews and examinations of
its other records and its properties (with such reasonable frequency and at
such reasonable times as Banks may desire) by Banks as Banks may deem necessary
or desirable from time to time.  The cost
of any such examinations, reviews, verifications and inspections shall be borne
by Borrower.

 

5.6.          Financial Information. 
Shall maintain books and records in accordance with GAAP and shall
furnish to Banks the following periodic financial information:

 

(a)           Monthly Interim Statements. 
Within forty five (45) days after the end of each month, Borrower’s
consolidated unaudited balance sheet at the end of that period and its
consolidated income statement and statement of cash flows for the portion of
the fiscal year ending with such period, together with all supporting
schedules, setting forth in comparative form the figures for the same period of
the preceding fiscal year, together with an Accounts receivable summary and an
Inventory summary, and certified by its chief financial officer as true and
correct and fairly representing its and its Subsidiaries financial condition
and that such statements are prepared in accordance with GAAP, except without
footnotes and subject to normal year-end audit adjustments;

 

(b)           Annual Statement. 
Within one hundred fifty (150) days after the end of each fiscal year,
Borrower’s audited financial statements containing a consolidated balance sheet
at the end of that period and a consolidated income statement and statement of
cash flows for that period, setting forth in comparative form the figures for
the preceding fiscal year, together with all supporting schedules and
footnotes, and containing an unqualified audit opinion of independent certified
public accountants reasonably acceptable to Banks that the financial statements
were prepared in accordance with GAAP;

 

(c)           No Default Certificates. 
Within forty five (45) days after the end of each fiscal quarter, a
certificate of Borrower’s president or chief financial officer, in the form
attached hereto as Exhibit 5.6 (a “Compliance Certificate”), that no
Default or Event of Default then exists or if a Default or Event of Default exists,
the nature and duration thereof and its intention with respect thereto, and in
addition, shall cause its independent auditors (if applicable) to submit to
Banks, together with its audit report, a statement that, in the course of such
audit, it discovered no circumstances which it believes would result in a
Default or Event of Default or if it discovered any such circumstances, the
nature and duration thereof;

 

(d)           Budget. Annually, within thirty (30) days following the close of each fiscal
year, Borrower’s internally prepared budget for the following year, in form and
substance satisfactory to Banks;

 

22

 

(e)           Other Information.  Such
other information reasonably requested by Bank from time to time concerning its
business, properties or financial condition.

 

5.7.          Maintenance of Existence and Rights. 
Shall preserve and maintain its corporate existence, authorities to
transact business, rights and franchises, trade names, patents, trademarks and
permits necessary to the conduct of its business.

 

5.8.          Payment of Taxes, Etc.  Shall
pay before delinquent all of its Debts and taxes, except that Bank shall not
unreasonably withhold its consent to nonpayment of taxes being actively
contested in accordance with law (provided that Bank may require bonding or
other assurances).

 

5.9.          Subordination. 
Shall cause all Debt and other obligations now or hereafter owed to any
shareholder or Affiliate to be subordinated in right of payment and security to
the Obligations in accordance with subordination agreements satisfactory to
Banks.

 

5.10.        Compliance; Hazardous Materials. 
Shall strictly comply with all laws, regulations, ordinances and other
legal requirements, specifically including, without limitation, ERISA, all
securities laws, Sarbanes-Oxley (if applicable) and all laws relating to
hazardous materials and the environment; and unless approved in writing by
Banks, it shall not engage in the storage, manufacture, disposition,
processing, handling, use or transportation of any hazardous or toxic
materials, whether or not in compliance with applicable laws and regulations.

 

5.11.        Further Assurances. 
Shall take such further action and provide to Bank such further
assurances as may be reasonably requested to ensure compliance with the intent
of this Agreement and the other Loan Documents.

 

5.12.        Covenants Regarding Collateral. 
Shall, regarding the Collateral:

 

(a)           use the Collateral only in the ordinary
course of its business and will not permit the Collateral to be used in
violation of any applicable law or policy of insurance;

 

(b)           as agent for Collateral Agent and Banks, will
defend the Collateral against all claims and demands of all Persons, except for
Permitted Liens;

 

(c)           at Collateral Agent’s request, obtain and
deliver to Banks such waivers as Collateral Agent or Banks may require waiving
the landlord’s, mortgagee’s or other lienholder’s enforcement rights against
the Collateral and assuring Collateral Agent’s and Banks’ access to the
Collateral in the exercise of their rights hereunder;

 

(d)           promptly deliver to Collateral Agent all
promissory notes, drafts, trade acceptances, chattel paper, instruments or
documents of title which are Collateral, appropriately endorsed to Collateral
Agent’s order; and

 

23

 

(e)           except for sales of Inventory in the ordinary
course of business, not sell, assign, lease, transfer, pledge, hypothecate or
otherwise dispose of or encumber any Collateral or any interest therein.

 

5.13.        Deposit Account.  Shall
maintain its primary depository accounts and cash management accounts with RBC,
but Borrower shall be permitted to maintain secondary accounts with Regions.

 

6.             Negative Covenants. 
Borrower covenants and agrees that from the date hereof and until payment
in full of the Obligations and the formal termination of this Agreement,
neither Borrower nor any Subsidiary:

 

6.1.          Debt.  Shall create or permit to
exist any Debt, including any guaranties or other contingent obligations,
except Permitted Debt.

 

6.2.          Liens.  Shall create or permit any
Liens on any of its property except Permitted Liens.

 

6.3.          Corporate Distributions; Subordinated Debt. 
Shall pay or declare any dividends (other than stock dividends) or other
Corporate Distribution or make any payment on or otherwise acquire any
Subordinated Debt if any Default or Event of Default has occurred and is
continuing or would be caused thereby.

 

6.4.          Investments.  Shall directly or indirectly
acquire or own, or make any Investment in or to, any Person (including advances
of Loan proceeds to any Person not a Borrower), other than Permitted
Investments.

 

6.5.          Change in Business. 
Shall enter into any business which is substantially different from the
business in which it is presently engaged.

 

6.6.          Transactions with Affiliates. 
Shall directly or indirectly purchase, acquire or lease any property
from, or sell, transfer or lease any property to, pay any management fees to or
otherwise deal with, in the ordinary course of business or otherwise, any
Affiliate (other than a Subsidiary); provided, however, that any acts or
transactions prohibited by this Section may be performed or engaged in
after written notice to Banks if upon terms not less favorable to Borrower or
such Subsidiary than if no such relationship existed.

 

6.7.          No Change in Name, Offices; Removal of
Collateral.  Shall unless it shall have given 60 days’
advance written notice thereof to Collateral Agent and Banks: (a) change
its name or the location of its chief executive office or other office where books
or records are kept, (b) use any new trade or fictitious name (provided
its use of any trade or fictitious name shall be in compliance with all laws
regarding the use of such names), or (c) permit any Inventory or other
tangible Collateral to be located at any location other than as specified in
Section 4.9.

 

6.8.          No Sale, Leaseback. 
Shall enter into any sale-and-leaseback or similar transaction.

 

24

 

6.9.                              Margin Stock. Shall use any proceeds of the Loans to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of Federal Reserve System) or extend credit to others for
the purpose of purchasing or carrying any margin stock.

 

6.10.                        Tangible Collateral.
Shall, except as otherwise provided herein, allow any Inventory or other
tangible Collateral to be commingled with, or become an accession to or part of,
any property of any other Person so long as such property is Collateral; or
allow any tangible Collateral to become a fixture unless Collateral Agent shall
have given its prior written authorization.

 

6.11.                        Subsidiaries. Shall
acquire, form or dispose of any Subsidiaries or permit any Subsidiary to
issue capital stock except to its parent.

 

6.12.                        Dispositions. Shall
voluntarily or involuntarily through its direct actions or inactions, or
indirectly through the actions or inactions of others, do any one or more of
the following: sell, transfer, lease, liquidate, franchise, license, dispose of
or part with possession or control of all or any part of or interest
in (whether legal or equitable) any part of or any interest in its
business or properties (including any equity ownership interests in any
Subsidiary), including any of the Collateral or all of the Collateral, except
for Permitted Transfers.

 

6.13.                        Liquidation, Mergers, Consolidations, Acquisitions. Shall dissolve or liquidate, or become a
party to any merger or consolidation, or acquire by purchase, lease or otherwise,
all or any part of the assets of any Person.

 

6.14.                        Change in Ownership.
Shall have or permit a Change in Ownership without the prior written approval
of Banks.

 

6.15.                        Change of Fiscal Year or Accounting Methods. Shall change its fiscal year or its
accounting methods.

 

6.16.                        Foreign Corrupt Practices. Shall use any part of or all of the Loans, directly or
indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

 

6.17.                        Negative Pledge Agreements. Shall permit the inclusion in any contract to which it becomes a
party of any provisions that could restrict or invalidate the creation of a
security interest in Borrower’s rights and interests in any Collateral or its
other property.

 

7.                                       Financial Covenants. Borrower covenants and agrees that from the
date hereof and until payment in full of the Obligations and the formal
termination of this Agreement, it shall comply with the following provisions:

 

25

 

7.1.                              Fixed Charge Coverage Ratio. Borrower shall have a Fixed Charge Coverage
Ratio of at least 1.15 to 1.00 at August 31, 2006, 1.25 to 1.00 at November 30,
2006, and 1.35 to 1.00 at each fiscal quarter end thereafter.

 

7.2.                              Adjusted Total Liabilities to Adjusted
Tangible Net Worth Ratio.
Borrower shall have an Adjusted Total Liabilities to Adjusted Tangible Net
Worth Ratio of not greater than 1.50 to 1.0 at each fiscal quarter end.

 

7.3.                              Asset Coverage Ratio. Borrower shall have an Asset Coverage Ratio
of not greater than 1.0 to 1.0 at each fiscal quarter end.

 

7.4.                              EBITDA. Borrower shall have a quarterly EBITDA of not less than $550,000 at
the quarter ending May 31, 2006, $1,453,000 at the quarter ending August 31,
2006, $2,165,000 at the quarter ending November 30, 2006, and $2,413,000
at the quarter ending February 28, 2007.

 

8.                                       Default.

 

8.1.                              Events of Default. Each of the following shall constitute an
Event of Default:

 

(a)                                  There shall occur any default by Borrower in
the payment, when due, of any principal of or interest on the Notes, any
amounts due hereunder or any other Loan Document, or any other Obligations,
including under any Interest Rate Agreement; or

 

(b)                                 There shall occur any default by Borrower or
any other party to any Loan Document (other than Banks) in the performance of
any agreement, covenant or obligation contained in this Agreement or such Loan
Document or in any Interest Rate Agreement not provided for elsewhere in this Section 8;
or

 

(c)                                  Any representation or warranty made by
Borrower or any other party to any Loan Document (other than Banks) herein or
therein or in any certificate or report furnished in connection herewith or
therewith shall prove to have been untrue or incorrect in any material respect
when made; or

 

(d)                                 Any other obligation now or hereafter owed by
Borrower or any other party to any Loan Document to Banks shall be in default
and not cured within the grace period, if any, provided therein; or

 

(e)                                  Borrower any Subsidiary shall be in default
under any obligation in excess of $100,000 owed to any other Person, which
default entitles the Person to accelerate any such obligations or exercise
other remedies with respect thereto; or

 

(f)                                    Borrower or any Subsidiary or any other party
to any Loan Document shall voluntarily dissolve, liquidate or terminate
operations or apply for or consent to the 

 

26

 

appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of such Person or of all or of a substantial part of its
assets,  admit in writing its inability, or be generally unable, to pay
its debts as the debts become due,  make a general assignment for the
benefit of its creditors,  commence a voluntary case under the federal
Bankruptcy Code (as now or hereafter in effect),  file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts,  fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it
in an involuntary case under Bankruptcy Code, or take any corporate action for
the purpose of effecting any of the foregoing; or

 

(g)                                 An involuntary petition or complaint shall be
filed against Borrower or any Subsidiary or any other party to any Loan
Document seeking bankruptcy relief or reorganization or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of Borrower or any
Subsidiary or any other party to any Loan Document, of all or substantially all
of its assets, and such petition or complaint shall not have been dismissed
within sixty (60) days of the filing thereof; or an order, order for relief,
judgment or decree shall be entered by any court of competent jurisdiction or
other competent authority approving or ordering any of the foregoing actions;

 

(h)                                 A judgment in excess of $100,000 shall be
rendered against the Borrower or any Subsidiary or any other party to any Loan
Document and shall remain undischarged, undismissed and unstayed for more than
thirty days (except judgments validly covered by insurance with a deductible of
not more than $100,000) or there shall occur any levy upon, or attachment,
garnishment or other seizure of, any material portion of the assets of Borrower
or any Subsidiary or any other party to any Loan Document by reason of the
issuance of any tax levy, judicial attachment or garnishment or levy of
execution; or

 

(i)                                     Loss, theft, damage or destruction of any
material portion of the tangible assets of Borrower or any of its Subsidiaries
for which there is either no insurance coverage or for which, in the reasonable
opinion of Collateral Agent, there is insufficient insurance coverage; or

 

(j)                                     Any Change in Ownership or any Change in
Senior Management shall occur; or

 

(k)                                  There shall occur any event or condition that
could reasonably be expected to have a Material Adverse Effect.

 

8.2.                              Remedies. If any Default or Event of Default shall occur, each Bank may,
without notice to Borrower, at its sole option, withhold further Advances to
Borrower. If an Event of Default shall have occurred and be continuing, each
Bank (and the Collateral Agent at their direction) may at its sole option
take any or all of the following actions:

 

(a)                                  Declare any or all Obligations (other than in
respect of any Interest Rate Agreement) to be immediately due and payable (if
not earlier demanded), terminate its obligation to make Advances to Borrower,
bring suit against Borrower to collect the Obligations, exercise 

 

27

 

any
remedy available to it hereunder or at law and take any action or exercise any
remedy provided herein or in any other Loan Document or under applicable law;
provided, that no remedy shall be exclusive of other remedies or impair the
right of Banks or the Collateral Agent to exercise any other remedies.

 

(b)                                 Without waiving any of its other rights
hereunder or under any other Loan Document, exercise any or all rights and
remedies of a secured party under the Code (and the Uniform Commercial
Code of any other applicable jurisdiction) and such other rights and remedies
as may be available hereunder, under other applicable law or pursuant to
contract.

 

(c)                                  Demand, collect and sue for all amounts owed
pursuant to Accounts, General Intangibles, Chattel Paper, Instruments or for
Proceeds of any Collateral (either in Borrower’s name or Bank’s name at the
latter’s option), with the right to enforce, compromise, settle or discharge
any such amounts.

 

(d)                                 Terminate any Interest Rate Agreement in
accordance with the documentation therefore, and exercise any or all rights
under such documentation relating to any such Interest Rate Agreement,
including accelerating any such Interest Rate Agreement Obligations or
unwinding such transactions in accordance with the terms thereof.

 

8.3.                              Assembly of Collateral. If requested by Banks and/or the Collateral
Agent, Borrower will promptly assemble the Collateral and make it available to
Banks and/or the Collateral Agent at a place to be designated by Banks and/or
the Collateral Agent. Borrower agrees that any notice by Banks and/or the
Collateral Agent of the sale or disposition of the Collateral or any other
intended action hereunder, whether required by the Code or otherwise, shall
constitute reasonable notice to Borrower if the notice is mailed to Borrower by
regular or certified mail, postage prepaid, at least five days before the
action to be taken. Borrower shall be liable for any deficiencies in the event
the proceeds of the disposition of the Collateral do not satisfy the
Obligations in full.

 

8.4.                              Notice of Sales, etc. Any notice of sale, disposition or other
action by Banks and/or the Collateral Agent required by law and sent to
Borrower at Borrower’s address herein, or at such other address of Borrower as may from
time to time be shown on the records of Banks, at least 5 days prior to such
action, shall constitute reasonable notice to Borrower. Notice shall be deemed
given or sent when mailed postage prepaid to Borrower’s address as provided
herein. Collateral that is subject to rapid declines in value and is
customarily sold in recognized markets may be disposed of by Banks and/or
the Collateral Agent in a recognized market for such collateral without
providing notice of sale. Borrower waives any and all requirements that the
Banks and the Collateral Agent sell or dispose of all or any part of the
Collateral at any particular time, regardless of whether Borrower has requested
such sale or disposition.

 

8.5.                              Receiver. In addition to any other remedy available to it, Banks and the
Collateral Agent shall have the absolute right, upon the occurrence of an Event
of Default, to seek and obtain the appointment of a receiver to take possession
of and operate and/or dispose of the business and assets of Borrower and any
costs and expenses incurred by Banks and the 

 

28

 

Collateral
Agent in connection with such receivership shall bear interest at the Default
Rate, at each such Bank’s option.

 

8.6.                              Deposits. After the occurrence of an Event of Default, Borrower authorizes
Banks and the Collateral Agent to collect and apply against the Obligations
when due any cash or deposit accounts in its possession, and irrevocably
appoints each of Banks and the Collateral Agent as its attorney-in-fact to
endorse any check or draft or take other action necessary to obtain such funds.

 

8.7.                              Priorities. On and after an Event of Default and during the continuation of an
Event of Default, if Banks or Collateral Agent collect any money pursuant to
this Agreement, the Notes, the Collateral Agency Agreement or under any other
Loan Document, such money in the following order, subject to the terms of the
Collateral Agency Agreement:

 

FIRST:                                                            to the costs and expenses of collection and
enforcement, including reasonable attorneys’ fees and costs, whether or not
suit be brought and including such fees and costs on appeal and in insolvency
proceedings;

 

SECOND:                                             to the Collateral Agent to reimburse the
Collateral Agent for any reasonable expenses of collection so incurred;

 

THIRD:                                                        to Banks, pro rata in accordance with the
outstanding amount of First Priority Loans (including principal and accrued
interest), including Obligations relating to outstanding letters of credit
whether or not then drawn;

 

FOURTH:                                            to Banks, pro rata in accordance with the
outstanding amount of Second Priority Loans (including principal and accrued
interest), including Obligations relating to outstanding letters of credit
whether or not then drawn;

 

FIFTH:                                                           to Banks, pro rata in accordance with the
outstanding amount of Third Priority Obligations;

 

SIXTH:                                                         to Banks, pro rata in accordance with the
outstanding amount of any other Obligations not described above; and

 

SEVENTH:                                       to Borrower or as otherwise payable pursuant
to applicable law or order.

 

8.8.                              Sharing of Payments. Each of Banks and Collateral Agent agrees
that if it shall, during the continuance of an Event of Default, through the
exercise of a right of setoff or counterclaim against Borrower or pursuant to a
secured claim under Section 506 of Title 11 of the Bankruptcy Code or
other security or interest arising from, or in lieu of, such secured claim,
received by such Bank under any applicable bankruptcy, insolvency or other
similar law, or otherwise, expiration of letter of credit obligations or by any
other means, obtain payment or reduction (voluntary or involuntary) in respect
of any indebtedness as a result of which its unpaid indebtedness shall be
disproportionately reduced after the date of a Default Declaration, it shall 

 

29

 

be
deemed simultaneously to have purchased from the other Banks at face value, and
shall promptly pay to such other Banks the purchase price for, a participation
in the Notes of such other Banks, so that the aggregate unpaid principal amount
of the Obligations and participations applicable to each Bank shall be in the
same proportion to the aggregate unpaid amount of all Obligations then
outstanding prior to such exercise of setoff or counterclaim or other event;
provided, however, that any purchase or purchase adjustments shall be rescinded
if any Bank receiving payment as described in this section shall have
disgorged such payments. Borrower expressly consents to the foregoing
arrangements.

 

9.                                       Security Agreement.

 

9.1.                              Security Interest.

 

(a)                                  As security for the payment and performance
of any and all of the Obligations and the performance of all other obligations
and covenants of Borrower hereunder and under the other Loan Documents, certain
or contingent, now existing or hereafter arising, which are now, or may at
any time or times hereafter be owing by Borrower to each of Banks and/or the
Collateral Agent, Borrower hereby pledges and grants to Banks, and to the
Collateral Agent on behalf of each of Banks, and gives Banks, and the
Collateral Agent on behalf of each of Banks, a continuing security interest in
and general Lien upon and right of set-off against, all right, title and
interest of Borrower in and to the Collateral, whether now owned or hereafter
acquired by Borrower and wherever located.

 

(b)                                 Except as herein or by applicable law
otherwise expressly provided, neither the Collateral Agent nor the Banks shall
be obligated to exercise any degree of care in connection with any Collateral in
its possession, to take any steps necessary to preserve any rights in any of
the Collateral or to preserve any rights therein against prior parties, and
Borrower agrees to take such steps. In any case, each of the Collateral Agent
and Banks shall be deemed to have exercised reasonable care if it shall have
taken such steps for the care and preservation of the Collateral or rights
therein as Borrower may have reasonably requested it to take and its
omission to take any action not requested by Borrower shall not be deemed a
failure to exercise reasonable care. No segregation or specific allocation by
the Collateral Agent or the Banks of specified items of Collateral against any
liability of Borrower shall waive or affect any security interest in or Lien
against other items of Collateral or any of Collateral Agent’s or either Bank’s
options, powers or rights under this Agreement or the other Loan Documents or
otherwise arising.

 

(c)                                  While a Default or Event of Default exists,
the Collateral Agent and the Banks may, with or without notice to Borrower: (i) transfer
into the name of Collateral Agent and Banks or the name of Collateral Agent’s
(or Banks’) nominee any of the Collateral, (ii) notify any Account Debtor
or other obligor of any Collateral to make payment thereon direct to Collateral
Agent and Banks of any amounts due or to become due thereon and (iii) receive
and direct the disposition of any proceeds of any Collateral.

 

9.2.                              Power of Attorney. Each of the Collateral Agent and Banks is
authorized to file financing statements relating to Collateral without Borrower’s
signature where authorized 

 

30

 

by
law. Borrower authorizes each of
the Collateral Agent and Banks, at Borrower’s expense, to file any financing
statements relating to the Collateral (without Borrower’s signature thereon)
which it deems appropriate and Borrower irrevocably appoints each of the
Collateral Agent and Banks as its attorney-in-fact to execute any such
financing statements in Borrower’s name and to perform all other acts
which it deems appropriate to perfect and to continue perfection of its Liens. Borrower
hereby appoints each of the Collateral Agent and Banks as Borrower’s
attorney-in-fact to endorse, present and collect on behalf of Borrower and in
Borrower’s name any draft, checks or other documents necessary or desirable to
collect any amounts which Borrower may be owed. Borrower hereby also
constitutes and appoints each of the Collateral Agent and Banks the true and
lawful attorney of Borrower with full power of substitution to take any and all
appropriate action and to execute any and all documents or instruments that may be
necessary or desirable to
accomplish the purpose and carry out the terms of this Agreement. Each of the
Collateral Agent and Banks is hereby granted a license or other right to use,
without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and Borrower’s rights under all licenses
and all franchise agreements shall inure to Collateral Agent’s benefit. The
proceeds realized from the sale or other disposition of any Collateral shall be
applied, after allowing two (2) Business Days for collection, as provided
above in Section 8.7. If any
deficiency shall arise, Borrower shall remain liable to Collateral Agent
therefor.

 

9.3.                              Entry. Borrower hereby irrevocably consents to any act by each of the
Collateral Agent and Banks or its agents in entering upon any premises for the
purposes of either (i) inspecting the Collateral or (ii) taking
possession of the Collateral and Borrower hereby waives its right to assert against
Collateral Agent or its agents any claim based upon trespass or any similar
cause of action for entering upon any premises where the Collateral may be
located.

 

9.4.                              Other Rights. Borrower authorizes each of the Collateral
Agent and Banks without affecting Borrower’s obligations hereunder or under any
other Loan Document from time to time (i) to take from any party and hold
additional Collateral or guaranties for the payment of the Obligations or any part thereof,
and to exchange, enforce or release such collateral or guaranty of payment of
the Obligations or any part thereof and to release or substitute any
endorser or guarantor or any party who has given any security interest in any
collateral as security for the payment of the Obligations or any part thereof
or any party in any way obligated to pay the Obligations or any part thereof;
and (ii) upon the occurrence of any Event of Default to direct the manner
of the disposition of the Collateral as each of the Collateral Agent and Banks,
in its sole discretion may determine, and the enforcement of any
endorsements, guaranties, letters of credit or other security relating to the
Obligations or any part thereof as each of the Collateral Agent and Banks,
in its sole discretion, may determine.

 

9.5.                              Accounts. Before or after any Default or Event of Default, each of the
Collateral Agent and Banks may notify any Account Debtor of its Lien and may direct
such Account Debtor to make payment directly to it or at its direction for
application against the Obligations. Any such payments received by or on behalf
of Borrower at any time, whether before or after default, shall be the property
of each of the Collateral Agent and Banks, shall be held in trust for each of
the Collateral Agent and Banks and not commingled with any other 

 

31

 

assets
of any Person (except to the extent they may be commingled with other
assets of Borrower in an account with Collateral Agent or Banks) and shall be
immediately delivered to Collateral Agent in the form received. Collateral
Agent shall have the right to apply any proceeds of Collateral to such of the
Obligations as it may determine.

 

9.6.                              Control. Borrower will cooperate with each of the Collateral Agent and Banks
in obtaining control with respect to Collateral consisting of Deposit Accounts,
Investment Property, Collateral Letter of Credit Rights and “electronic chattel
paper” (as defined in the Code). Borrower will not create any tangible chattel
paper without placing a legend on the chattel paper acceptable to each of the
Collateral Agent and Banks indicating that it has a security interest in the
chattel paper. Borrower will not create any electronic chattel paper without
taking all steps deemed necessary by each of the Collateral Agent and Banks to
confer control of the electronic chattel paper upon it in accordance with the
Code.

 

9.7.                              Waiver of Marshaling. Borrower hereby waives any right it may have
to require marshaling of its assets.

 

9.8.                              Collateral Agent. Banks rights and remedies under the Loan
Agreement and the other Loan Documents, including particularly but without
limitation under Articles 8 and 9 hereof, are subject to the terms of the
Collateral Agency Agreement.

 

10.                                 Miscellaneous.

 

10.1.                        No Waiver, Remedies Cumulative. No failure on the part of Banks or the Collateral Agent to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and are in addition to any other remedies provided by law, any Loan
Document or otherwise.

 

10.2.                        Survival of Representations. All representations and warranties made herein shall survive the
making of the Loans hereunder and the delivery of the Notes, and shall continue
in full force and effect so long as any Obligation is outstanding, there exists
any commitment by Banks to Borrower, and until this Agreement is formally
terminated in writing.

 

10.3.                        Indemnity By Borrower; Expenses. In addition to all other Obligations, Borrower agrees to defend,
protect, indemnify and hold harmless each of the Collateral Agent and Banks and
its Affiliates and all of their respective officers, directors, employees,
attorneys, consultants and agents from and against any and all losses, damages,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, attorneys’ and paralegals’ fees, costs and expenses)
incurred by such indemnitees, whether prior to or from and after the date
hereof, as a result of or arising from or relating to (i) the due
diligence effort (including, without limitation, public record search,
recording fees, examinations and investigations of the properties of Borrower
and Borrower’s operations), negotiation, preparation, execution and/or
performance of any of the Loan Documents or of any document executed in
connection with the transactions contemplated thereby, maintenance of the Loans
by Banks, and any and all amendments, 

 

32

 

modifications,
and supplements of any of the Loan Documents or restructuring of the
Obligations, (ii) any suit, investigation, action or proceeding by any
Person (other than Borrower), whether threatened or initiated, asserting a
claim for any legal or equitable remedy against any Person under any statute,
regulation or common law principle, arising from or in connection with Banks’ furnishing
of funds to Borrower under this Agreement, (iii) each of the Collateral
Agent’s and Bank’s preservation, administration and enforcement of their rights
under the Loan Documents and applicable law, including 15% of the outstanding
Obligations as attorneys fees if collected by or through an attorney at law and
disbursements of counsel for the Collateral Agent and Banks in connection
therewith, whether suit be brought or not and whether incurred at trial or on
appeal, (iv) periodic field exams, audits and appraisals performed by each
of the Collateral Agent and Banks; and/or (v) any matter relating to the
financing transactions contemplated by the Loan Documents or by any document
execution in connection with the transactions contemplated thereby, other than
for such loss, damage, liability, obligation, penalty, fee, cost or expense
arising from such indemnitee’s gross negligence or willful misconduct. In
addition, Borrower agrees to pay and save each of the Collateral Agent and
Banks harmless against any liability for payment of any state documentary stamp
taxes, intangible taxes or similar taxes (including interest or penalties, if
any) which may now or hereafter be determined to be payable in respect to
the execution, delivery or recording of any Loan Document or the making of any
Advance, whether originally thought to be due or not, and regardless of any
mistake of fact or law on the part of Banks or Borrower with respect to
the applicability of such tax. Borrower’s obligation for indemnification for
all of the foregoing losses, damages, liabilities, obligations, penalties,
fees, costs and expenses of each of the Collateral Agent and Banks shall be part of
the Obligations, chargeable against Borrower’s loan account, and shall survive
termination of this Agreement.

 

10.4.                        Notices. Any notice
or other communication hereunder or under the Loan Documents to any party
hereto or thereto shall be by hand delivery, overnight delivery, telegram,
telex or registered or certified mail and unless otherwise provided herein
shall be deemed to have been given or made when delivered, telegraphed,
telexed, or three (3) Business Days after having been deposited in the
mails, postage prepaid, addressed to the party at its address specified below
(or at any other address that the party may hereafter specify to the other
parties in writing):

 

Banks:                                                      RBC CENTURA BANK

75 5th Street

Suite 900

Atlanta, Georgia 30308

Attn: Mr. W. Brendan
Chambers

 

REGIONS BANK

One Glenlake Parkway

Suite 400

Dunwoody, Georgia 30328

Attn: Mr. Michael S.
Harvey

 

Collateral

 

33

 

Agent:                                                     RBC CENTURA BANK

75 5th Street

Suite 900

Atlanta, Georgia 30308

Attn: Mr. W. Brendan
Chambers

 

Borrower:                                      VIDEO DISPLAY CORPORATION

1868 Tucker Industrial Road

Tucker, GA  30084

Attn: President

 

10.5.                        Governing Law. This
Agreement and the Loan Documents shall be deemed contracts made under the laws
of the State of Georgia and shall be governed by and construed in accordance
with the laws of said state (excluding its conflict of laws provisions if such
provisions would require application of the laws of another jurisdiction).

 

10.6.                        Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of Borrower
and the Collateral Agent and Banks, and their respective successors and
assigns; provided, that Borrower may not assign any of its rights
hereunder without the prior written consent of the Collateral Agent and Banks,
and any such assignment made without such consent will be void.

 

10.7.                        Counterparts. This
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which when taken together
shall constitute but one and the same instrument.

 

10.8.                        No Usury. Regardless
of any other provision of this Agreement, the Notes or in any other Loan
Document, if for any reason the effective interest should exceed the maximum
lawful interest, the effective interest shall be deemed reduced to, and shall
be, such maximum lawful interest, and (i) the amount which would be
excessive interest shall be deemed applied to the reduction of the principal
balance of the Notes and not to the payment of interest, and (ii) if the
Loans evidenced by the Notes have been or are thereby paid in full, the excess
shall be returned to the party paying same, such application to the principal
balance of the Notes or the refunding of excess to be a complete settlement and
acquittance thereof.

 

10.9.                        Powers. All powers
of attorney granted to each of the Collateral Agent and Banks are coupled with
an interest and are irrevocable.

 

10.10.                  Approvals. If this
Agreement calls for the approval or consent of the Collateral Agent and/or
Banks, the approval and consent of each such Person is required, and such
approval or consent may be given or withheld in its sole discretion of
unless otherwise specified herein.

 

10.11.                  Participations. Banks
shall have the right to enter into one or more participations with other
lenders with respect to the Obligations. Upon prior notice to Borrower 

 

34

 

of
such participation, Borrower shall thereafter furnish to such participant any
information furnished by Borrower to Banks pursuant to the terms of the Loan
Documents. Nothing in this Agreement or any other Loan Document shall prohibit
a Bank from pledging or assigning this Agreement and its rights under any of
the other Loan Documents, including collateral therefor, to any Federal Reserve
Bank in accordance with applicable law.

 

10.12.                  Waiver of Certain Defenses. To the fullest extent permitted by applicable law, upon the
occurrence of any Event of Default, neither Borrower nor anyone claiming by or
under Borrower will claim or seek to take advantage of any law requiring the
Collateral Agent or Banks to attempt to realize upon any collateral or
collateral of any surety or guarantor, or any appraisement, evaluation, stay,
extension, homestead, redemption or exemption laws now or hereafter in force in
order to prevent or hinder the enforcement of this Agreement. Borrower, for
itself and all who may at any time claim through or under Borrower, hereby
expressly waives to the fullest extent permitted by law the benefit of all such
laws. All rights of the Collateral Agent and Banks and all obligations of
Borrower hereunder shall be absolute and unconditional irrespective of (i) any
change in the time, manner or place of payment of, or any other term of, all or
any of the Obligations, or any other amendment or waiver of or any consent to
any departure from any provision of the Loan Documents, (ii) any exchange,
release or non-perfection of any other collateral given as security for the
Obligations, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Obligations, or (iii) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Borrower or any third party, other than payment and performance
in full of the Obligations.

 

10.13.                  Patriot Act. Each of
the Collateral Agent and Banks hereby notifies the Borrower that, pursuant to
the requirements of Uniting And Strengthening America By Providing Appropriate
Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001)
(the “Patriot Act”), it is required to obtain, verify and record information
that identifies the Borrower, which information includes names, addresses and
other information that will allow each of the Collateral Agent and Banks to identify
such Borrower in accordance with the Patriot Act.

 

10.14.                  Anti-Money Laundering and Anti-Terrorism. Borrower represents, warrants and covenants
to each of the Collateral Agent and Banks as follows: (1) Borrower (a) is
not and shall not become a person whose property or interest in property is
blocked or subject to blocking pursuant to Section 1 of Executive Order
13224 of September 23, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)), (b) does not engage in and shall not engage in any dealings
or transactions prohibited by Section 2 of such executive order, and is
not and shall not otherwise become associated with any such person in any
manner violative of Section 2, (c) is not and shall not become a
person on the list of Specially Designated Nationals and Blocked Persons, and (d) is
not and shall not become subject to the limitations or prohibitions under any
other U.S. Department of Treasury’s Office of Foreign Assets Control regulation
or executive order; (2) Borrower is and shall remain in compliance, in all
material respects, with (a) the Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any 

 

35

 

other
enabling legislation or executive order relating thereto, and (b) the
Patriot Act; and (3) Borrower has not and shall not use all or any part of
the proceeds, advances or other amounts or sums evidenced by this Note,
directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as
amended.

 

10.15.                  Indirect Means. Any
act which Borrower is prohibited from doing shall not be done indirectly
through a Subsidiary or by any other indirect means.

 

10.16.                  Dealings with Multiple Borrowers. If more than one Person is named as “Borrower” hereunder, all
Obligations, representations, warranties, covenants and indemnities set forth
in the Loan Documents to which such Person is a party shall be joint and
several. Each of the Collateral Agent and Banks shall have the right to deal
with any individual of any Borrower with regard to all matters concerning the
rights and obligations of each of the Collateral Agent and Banks hereunder and
pursuant to applicable law with regard to the transactions contemplated under
the Loan Documents. All actions or inactions of the officers, managers, members
and/or agents of any Borrower with regard to the transactions contemplated
under the Loan Documents shall be deemed with full authority and binding upon
all Borrowers hereunder. Each Borrower hereby appoints each other Borrower as
its true and lawful attorney-in-fact, with full right and power, for purposes
of exercising all rights of such Person hereunder and under applicable law with
regard to the transactions contemplated under the Loan Documents. The foregoing
is a material inducement to the agreement of each of the Collateral Agent and
Banks to enter into the terms hereof and to consummate the transactions
contemplated hereby.

 

10.17.                  Amendments, Waivers and Consents. Except as set forth below, any term, covenant, agreement or condition
of this Agreement or any of the other Loan Documents may be amended or
waived by the Banks, and any consent given by the Banks, if, but only if, such
amendment, waiver or consent is in writing signed by the Banks and delivered to
the Collateral Agent and, in the case of an amendment, signed by the Borrower.

 

36

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.

 

	
   

  	
  BANKS:

  
	
   

  	
   

  
	
   

  	
  RBC CENTURA BANK, as a lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REGIONS BANK, as a lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLLATERAL AGENT:

  
	
   

  	
   

  
	
   

  	
  RBC CENTURA BANK, as Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

37

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  VIDEO DISPLAY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  Z-AXIS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
							

 

38

 

	
   

  	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  AYDIN DISPLAYS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  MENGEL INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
  XKD CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  [SEAL]

  
							

 

39

 

SCHEDULE OF EXHIBITS

 

(If any exhibit is omitted, the
information called for therein

shall be considered “None” or “Not Applicable”)

 

	
  Exhibit

  	
   

  	
  Section Reference

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  1.1 (“Definitions”)

  	
   

  	
  Permitted Investments

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  4.1 (“Valid Existence”)

  	
   

  	
  Corporate Information

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.9

  	
   

  	
  4.9 (“Location”)

  	
   

  	
  Offices of Borrower

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.13

  	
   

  	
  4.13 (“Subsidiaries”)

  	
   

  	
  List of Subsidiaries

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.17

  	
   

  	
  4.17 (“Names; Mergers”)

  	
   

  	
  Names

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
   

  	
  5.6 (“Financial Reports”)

  	
   

  	
  Compliance Certificate

  

 

 

Exhibit 1.1

 

Permitted Investments

 

 

Exhibit 4.1

 

Corporate Information

 

	
  Name:

  	
   

  	
  Tax ID No.:

  	
   

  	
  State Corporate ID No.:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VIDEO DISPLAY CORPORATION

  	
   

  	
   

  	
   

  	
  J603206

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LEXEL IMAGING SYSTEMS, INC.

  	
   

  	
  95-2557445

  	
   

  	
  0689118

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FOX INTERNATIONAL, LTD., INC.

  	
   

  	
  34-0845191

  	
   

  	
  283730

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Z-AXIS, INC.

  	
   

  	
  16-1359534

  	
   

  	
  J918734

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TELTRON TECHNOLOGIES, INC.

  	
   

  	
  58-2314425

  	
   

  	
  K627542

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AYDIN DISPLAYS, INC.

  	
   

  	
  58-2424005

  	
   

  	
  K838123

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MENGEL INDUSTRIES, INC.

  	
   

  	
  23-2293698

  	
   

  	
  766306

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  XKD CORPORATION

  	
   

  	
  77-0403964

  	
   

  	
  C1940931

  

 

2

 

Exhibit 4.9

 

Offices of Borrower

 

276
Spearing St., Howard, PA 16841

 

1416
Alpine Blvd., Bossier City, LA 71111

 

8-18A
Riverside Dr., White Mills, PA 18473

 

1
Riga Ln, Birdsboro, PA 19508

 

1916
Route 96, Phelps, NY 14532

 

23600
Aurora Rd., Bedford Heights, OH 44146

 

1501
Newton Pike, Lexington, Kentucky

 

1868
Tucker Industrial Drive, Tucker, GA

 

Unit
5 Old Forge Trading Estate, Dudley Road, Stourbridge, West Midlands DY9 8EL,
England

 

15
Eagle Street, Phelps, NY

 

2
Riga Lane, Birdsboro, PA

 

3110
West Ridge Pike, Sanatoga, PA

 

18450 Technology Drive,
Morgan Hill, CA

 

3

 

Exhibit 4.14

 

List of Subsidiaries

 

VIDEO
DISPLAY CORPORATION has the following Subsidiaries

 

1.                                       LEXEL IMAGING SYSTEMS, INC.

 

2.                                       FOX INTERNATIONAL, LTD., INC.

 

3.                                       Z-AXIS, INC.

 

4.                                       TELTRON TECHNOLOGIES, INC.

 

5.                                       AYDIN DISPLAYS, INC.

 

6.                                       MENGEL INDUSTRIES, INC.

 

7.                                       XKD CORPORATION

 

8.                                       VIDEO
DISPLAY (EUROPE) LIMITED

 

 

Exhibit 4.17

 

Names; Mergers; Acquisitions

 

SOUTHWEST VACUUM DEVICES, INC. merged with and into VIDEO DISPLAY
CORPORATION.

 

 

Exhibit 5.6

COMPLIANCE
CERTIFICATE

 

	
  TO:

  	
  RBC CENTURA BANK

  
	
   

  	
  REGIONS BANK

  
	
   

  	
  (the “Banks”)

  

 

FROM:         VIDEO DISPLAY CORPORATION

 

The
undersigned authorized officer of VIDEO DISPLAY CORPORATION (“Parent”) hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Parent, certain of its Subsidiaries and Banks and
RBC Centura Bank, as collateral agent, dated June    , 2006
(the “Agreement”), (i) Borrowers are in complete compliance for the period
ending                                
with all covenants set forth in the Agreement, except as noted below and (ii) all
representations and warranties of Borrowers stated in the Agreement are true,
correct and accurate as of the date hereof. Attached herewith are the required
documents supporting the above certification. The undersigned authorized
officer further certifies that this Compliance Certificate and any supporting
financial documents have been prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to
the next except as explained in an accompanying letter or footnotes – or unless
otherwise permitted in the Agreement. Reference is made to the Agreement for
the relevant meanings of the reporting requirements and covenants which are
stated below in a “short-hand” manner.

 

Please indicate compliance status by circling Yes/No
under “Complies” column.

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 45 days

  	
   

  	
  Yes

  	
  No

  
	
  Aged Accounts and Inventory Report

  	
   

  	
  Monthly within 45 days

  	
   

  	
   

  	
   

  
	
  Annual financial statements (Audited)

  	
   

  	
  FYE within 150 days

  	
   

  	
  Yes

  	
  No

  
	
   

  	
   

  	
   

  	
   

  	
  Yes

  	
  No

  
	
  Budget/Forecast

  	
   

  	
  30 days after FYE

  	
   

  	
  Yes

  	
  No

  

 

 

Compliance
Certificate

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
   

  	
   

  	
  Actual

  	
   

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Total Liabilities to Adjusted Tangible Net Worth

  	
   

  	
  1.50

  	
   

  	
  1.00

  	
   

  	
   

  	
   

  	
  1.00

  	
  Yes

  	
  No

  
	
  Fixed Charge Coverage Ratio

  	
   

  	
   

  	
  *

  	
  1.00

  	
   

  	
   

  	
   

  	
  1.00

  	
  Yes

  	
  No

  
	
  Asset Coverage Ratio

  	
   

  	
  1.00

  	
   

  	
  1.00

  	
   

  	
   

  	
   

  	
  1.00

  	
  Yes

  	
  No

  
	
  EBITDA

  	
   

  	
  $

  	
   

  	
  **

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
  Yes

  	
  No

  
												

 

*1.15:1.00 at 8/31/06, 1.25:1.00 at 11/30/06, and
1.35:1.00 at each FQE thereafter

 

** $550,000 at FQE 5/31/06, $1,453,000 at FQE
8/31/06, $2,165,000 at FQE 11/30/06, $2,413,000 at FQE 2/28/07

 

2

 

Compliance Certificate

 

	
  Comments Regarding Exceptions:  See
  Attached.

  	
  BANK USE ONLY

  
	
   

  	
   

  
	
   

  	
  Received by: 

  	
   

  	
   

  
	
   

  	
  Authorized Signer

  
	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Authorized Signatory of Borrower

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signer

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  
	
   

  	
  Compliance Status

  	
  Yes

  	
  No

  
										

 

3

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
  1.1.

  	
  Definitions

  	
  1

  
	
   

  	
  1.2.

  	
  Other Defined Terms

  	
  10

  
	
   

  	
   

  	
   

  
	
  2.

  	
  The Loan Facility

  	
  10

  
	
   

  	
   

  	
   

  
	
  3.

  	
  The

  	
  10

  
	
   

  	
  3.1.

  	
  Promissory Note

  	
  11

  
	
   

  	
  3.2.

  	
  Repayment of Loans

  	
  12

  
	
   

  	
  3.3.

  	
  Extension of Termination Date

  	
  12

  
	
   

  	
  3.4.

  	
  Overdue Amounts

  	
  13

  
	
   

  	
  3.5.

  	
  Calculation of Interest

  	
  13

  
	
   

  	
  3.6.

  	
  Letters of Credit; Banker’s Acceptances

  	
  13

  
	
   

  	
  3.7.

  	
  Statement of Account

  	
  14

  
	
   

  	
  3.8.

  	
  Fees

  	
  14

  
	
   

  	
  3.9.

  	
  Termination

  	
  14

  
	
   

  	
  3.10.

  	
  Increased Costs; Reduced Returns

  	
  14

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Conditions Precedent to Borrowing

  	
  15

  
	
   

  	
  4.1.

  	
  Conditions Precedent to Initial Advance

  	
  15

  
	
   

  	
  4.2.

  	
  Conditions Precedent to Each Revolving Loan Advance

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Representations and Warranties

  	
  17

  
	
   

  	
  5.1.

  	
  Valid Existence and Power

  	
  17

  
	
   

  	
  5.2.

  	
  Authority

  	
  18

  
	
   

  	
  5.3.

  	
  Financial Condition

  	
  18

  
	
   

  	
  5.4.

  	
  Litigation

  	
  18

  
	
   

  	
  5.5.

  	
  Agreements, Etc.

  	
  18

  
	
   

  	
  5.6.

  	
  Authorizations

  	
  18

  
	
   

  	
  5.7.

  	
  Title

  	
  19

  
	
   

  	
  5.8.

  	
  Collateral

  	
  19

  
	
   

  	
  5.9.

  	
  Location

  	
  19

  
	
   

  	
  5.10.

  	
  Taxes

  	
  19

  
	
   

  	
  5.11.

  	
  Labor Law Matters

  	
  19

  
	
   

  	
  5.12.

  	
  Judgment Liens

  	
  19

  
	
   

  	
  5.13.

  	
  Subsidiaries

  	
  19

  
	
   

  	
  5.14.

  	
  Environmental

  	
  19

  
	
   

  	
  5.15.

  	
  ERISA

  	
  20

  
	
   

  	
  5.16.

  	
  Investment Company Act

  	
  20

  
	
   

  	
  5.17.

  	
  Names

  	
  20

  
	
   

  	
  5.18.

  	
  Accounts

  	
  20

  
	
   

  	
  5.19.

  	
  Intellectual Property

  	
  20

  
	
   

  	
  5.20.

  	
  Insider

  	
  20

  

 

i

 

	
   

  	
  5.21.

  	
  Compliance with Covenants; No Default

  	
  20

  
	
   

  	
  5.22.

  	
  Full Disclosure

  	
  21

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Affirmative Covenants

  	
  21

  
	
   

  	
  6.1.

  	
  Use of Loan Proceeds

  	
  21

  
	
   

  	
  6.2.

  	
  Maintenance of Business and Properties

  	
  21

  
	
   

  	
  6.3.

  	
  Insurance

  	
  21

  
	
   

  	
  6.4.

  	
  Notice of Default

  	
  21

  
	
   

  	
  6.5.

  	
  Inspections

  	
  22

  
	
   

  	
  6.6.

  	
  Financial Information

  	
  22

  
	
   

  	
  6.7.

  	
  Maintenance of Existence and Rights

  	
  23

  
	
   

  	
  6.8.

  	
  Payment of Taxes, Etc.

  	
  23

  
	
   

  	
  6.9.

  	
  Subordination

  	
  23

  
	
   

  	
  6.10.

  	
  Compliance; Hazardous Materials

  	
  23

  
	
   

  	
  6.11.

  	
  Further Assurances

  	
  23

  
	
   

  	
  6.12.

  	
  Covenants Regarding Collateral

  	
  23

  
	
   

  	
  6.13.

  	
  Deposit Account

  	
  24

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Negative Covenants

  	
  24

  
	
   

  	
  7.1.

  	
  Debt

  	
  24

  
	
   

  	
  7.2.

  	
  Liens

  	
  24

  
	
   

  	
  7.3.

  	
  Corporate Distributions

  	
  24

  
	
   

  	
  7.4.

  	
  Investments

  	
  24

  
	
   

  	
  7.5.

  	
  Change in Business

  	
  24

  
	
   

  	
  7.6.

  	
  Transactions with Affiliates

  	
  24

  
	
   

  	
  7.7.

  	
  No Change in Name, Offices; Removal of Collateral

  	
  24

  
	
   

  	
  7.8.

  	
  No Sale, Leaseback

  	
  24

  
	
   

  	
  7.9.

  	
  Margin Stock

  	
  25

  
	
   

  	
  7.10.

  	
  Tangible Collateral

  	
  25

  
	
   

  	
  7.11.

  	
  Subsidiaries

  	
  25

  
	
   

  	
  7.12.

  	
  Dispositions

  	
  25

  
	
   

  	
  7.13.

  	
  Liquidation, Mergers, Consolidations and Dispositions of Substantial
  Assets

  	
  25

  
	
   

  	
  7.14.

  	
  Change in Ownership

  	
  25

  
	
   

  	
  7.15.

  	
  Change of Fiscal Year or Accounting Methods

  	
  25

  
	
   

  	
  7.16.

  	
  Foreign Corrupt Practices

  	
  25

  
	
   

  	
  7.17.

  	
  Negative Pledge Agreements

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Financial Covenants

  	
  25

  
	
   

  	
  8.1.

  	
  Fixed Charge Coverage Ratio

  	
  26

  
	
   

  	
  8.2.

  	
  Total Liabilities to Tangible Net Worth Ratio

  	
  26

  
	
   

  	
  8.3.

  	
  Asset Coverage Ratio

  	
  26

  
	
   

  	
  8.4.

  	
  EBITDA

  	
  26

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Default

  	
  26

  
	
   

  	
  9.1.

  	
  Events of Default

  	
  26

  
	
   

  	
  9.2.

  	
  Remedies

  	
  27

  
	
   

  	
  9.3.

  	
  Assembly of Collateral

  	
  28

  

 

ii

 

	
   

  	
  9.4.

  	
  Notice of Sales, Etc.

  	
  28

  
	
   

  	
  9.5.

  	
  Receiver

  	
  28

  
	
   

  	
  9.6.

  	
  Deposits

  	
  29

  
	
   

  	
  9.7.

  	
  Priorities

  	
  29

  
	
   

  	
  9.8.

  	
  Sharing of Payments

  	
  29

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Security Agreement

  	
  30

  
	
   

  	
  10.1.

  	
  Security Interest

  	
  30

  
	
   

  	
  10.2.

  	
  Power of Attorney

  	
  30

  
	
   

  	
  10.3.

  	
  Entry

  	
  31

  
	
   

  	
  10.4.

  	
  Other Rights

  	
  31

  
	
   

  	
  10.5.

  	
  Accounts

  	
  31

  
	
   

  	
  10.6.

  	
  Control

  	
  32

  
	
   

  	
  10.7.

  	
  Waiver of Marshaling

  	
  32

  
	
   

  	
  10.8.

  	
  Collateral Agency Agreement

  	
  32

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Miscellaneous

  	
  32

  
	
   

  	
  11.1.

  	
  No Waiver, Remedies Cumulative

  	
  32

  
	
   

  	
  11.2.

  	
  Survival of Representations

  	
  32

  
	
   

  	
  11.3.

  	
  Indemnity By Borrower; Expenses

  	
  32

  
	
   

  	
  11.4.

  	
  Notices

  	
  33

  
	
   

  	
  11.5.

  	
  Governing Law

  	
  34

  
	
   

  	
  11.6.

  	
  Successors and Assigns

  	
  34

  
	
   

  	
  11.7.

  	
  Counterparts

  	
  34

  
	
   

  	
  11.8.

  	
  No Usury

  	
  34

  
	
   

  	
  11.9.

  	
  Powers

  	
  34

  
	
   

  	
  11.10.

  	
  Approvals

  	
  34

  
	
   

  	
  11.11.

  	
  Participations

  	
  34

  
	
   

  	
  11.12.

  	
  Waiver of Certain Defenses

  	
  35

  
	
   

  	
  11.13.

  	
  Patriot Act

  	
  35

  
	
   

  	
  11.14.

  	
  Anti-Money Laundering

  	
  35

  
	
   

  	
  11.15.

  	
  Indirect Means

  	
  36

  
	
   

  	
  11.16.

  	
  Amendments, Waivers and Consents

  	
  36

  

 

iii

 

	
  Customer No.

  
	
  Loan No.

  

 

	
  REGIONS BANK

  	
  Commercial Promissory Note: C & I

  

 

	
  $8,500,000

  	
  Atlanta, Georgia

  
	
   

  	
    June    ,
  2006

  
	
  Master Note

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to REGIONS BANK (“Bank”), or order, the sum of Eight Million Five Hundred
Thousand Dollars ($8,500,000), or so much thereof as shall have been
disbursed from time to time and remains unpaid, together with interest at the
rate and payable in the manner hereinafter stated.  Principal and interest shall be payable at
any banking office of Bank in the city or town indicated above, or such other
place as the holder of this Note may designate.

 

Interest Rate.

 

Pre-Default Rate. 
Subject to the provisions of Section 1.2.
below, interest payable on this Note per annum will accrue at the LIBOR Base
Rate plus the Applicable Margin.

 

The
“LIBOR Base Rate” means a fluctuating rate of interest (rounded upwards, if
necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding business day, as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. 
If for any reason such rate is not available, the term “LIBOR Rate”
shall mean the fluctuating rate of interest equal to the rate of interest
(rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding day, as adjusted from time to time in Lender’s sole discretion
for then-applicable reserve requirements, deposit insurance assessment rates
and other regulatory costs; provided, however, if more than one
rate is specified on Reuters Screen LIBO page, the applicable rate shall be the
arithmetic mean of all such rates. Any change in the rate will take effect on
the date of such change in the applicable index as indicated on Telerate
Page 3750.   Interest will accrue on
any non-banking day at the rate in effect on the immediately preceding banking day.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than 1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

i

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan
Agreement.  The ratio will be measured as
of August 31st, November 30th, February 28th
and May 31st of each year (each a “Measurement Date”);
adjustments in the Applicable Margin will occur as of the first day of the
month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of
the Loan Agreement (i.e., November 1st, February 1st,
May 1st  and
August 1st) for the immediately preceding Measurement Date
(each an “Adjustment Date”). The Applicable Margin will be in effect from the
then applicable Adjustment Date until the next Adjustment Date.  Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be
2.10%.  The First Adjustment Date will
occur on the first day of the month immediately following Bank’s receipt of the
Compliance Certificate due on October 15, 2006 and be based on the
August 31, 2006 Measurement Date financial statements, and shall apply
until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the
Applicable Margin from the date such certificate (and applicable financial
statement) was due until Bank receives it will be the highest level set forth
above, or at Bank’s option, the Default Rate.

 

Default Rate. 
Upon the nonpayment of any payment of interest described herein, Bank,
at its option and without accelerating this Note, may accrue interest on such
unpaid interest at a rate per annum (“Default Rate”) equal to the lesser of the
maximum contract rate of interest that may be charged to and collected from Borrower
on the loan evidenced by this Note under applicable law or five percent (5.0%)
plus the pre-default interest rate otherwise applicable hereunder, as set forth
in Section 1.1..  After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, charges and costs
and expenses owing hereunder at the Default Rate until this Note is paid in
full, whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. 
This is a variable rate note.  Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced by
this Note under applicable law. Bank shall have no obligation to notify
Borrower of adjustments in the rate of interest payable under this Note.  Adjustments to the rate of interest will be
effective as of the first day of each month.

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Interest shall be payable monthly, in
arrears, beginning August 1, 2006 and continuing on the first day of each
consecutive month thereafter until June 30, 2008 (“Maturity Date”), when
one final payment of the entire balance of principal, interest, fees, premiums,
charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

 

Prepayment. 
This Note may be prepaid in whole, or in part at anytime without any fee
or premium.

 

Application of Payments. 
All payments made on this Note shall be applied first to payment of all
late fees, charges, premiums and costs and expenses due but unpaid under this
Note, then to accrued but unpaid interest and finally to principal, unless Bank
determines in its sole discretion to apply payments in a different order or
applicable law requires a different application of payments.  Payments in federal funds, immediately
available in the place designated for payment, received by Bank prior to
2:00 p.m. local time at said place of payment, shall be credited as if
received prior to close of business on the day the funds are immediately
available; while other payments, at the option of Bank, may not be credited
until such payments are immediately available to Bank, in federal funds, in the
place designated for payment, prior to 2:00 p.m. local time at said place
of payment on a day on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  
The loan evidenced by this Note was made pursuant to a commitment letter
(“Commitment Letter”) from Bank to Borrower dated June 9, 2006.

 

ii

 

Loan and Security
Agreement.  Borrower, RBC Centura Bank, as collateral
agent, and Bank and RBC Centura Bank, as lenders, have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or
restated from time to time, the “Loan and Security Agreement”).  This Note is also secured by (1) the
security documents and other supporting obligations referenced in the
Commitment Letter and by those referenced in the Loan and Security Agreement
and (2) the security documents and other supporting obligations which
reference that they secure this Note (“security documents”).

 

Default

 

Late Charges and Expenses. 
Borrower agrees to pay, upon demand by Bank, for each payment past due
for fifteen (15) or more calendar days, a late charge in an amount equal to the
lesser of (1) four percent (4%) of the amount of the payment past due or
(2) the maximum percentage of the payment past due permitted by applicable
law, or the maximum amount if not expressed as a percentage.  If this Note is not paid in full whenever it
becomes due and payable, Borrower agrees to pay all costs and expenses of
collection, including reasonable attorneys’ fees.  The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note:
(1) the failure of Borrower to pay when due any payment described herein,
whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and
Security Agreement.

 

Acceleration. 
Upon the occurrence of an Event of Default, (1) the entire unpaid
principal balance of this Note, together with all other amounts owing and all
other amounts to be owing under this Note, shall, at the option of Bank, become
immediately due and payable, without notice or demand, and (2) the Bank
may, both before and after acceleration, exercise any of and all of its other
rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in
equity, to recover full payment of the balance (principal, interest, fees,
premiums, charges and costs and expenses) owing under this Note.  The failure by Bank to exercise any of its
options shall not constitute a waiver of the right to exercise same in the
event of any subsequent default.

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term
“Borrower” refers to all signatories of this Note collectively and severally,
as the context of this Note requires, and all signatories of this Note shall be
and the same are jointly and severally liable hereunder.

 

Waiver. 
Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any
other person or property, agrees that without notice to any person and without
affecting any person’s liability under this Note, Bank, at any time or times,
may grant extensions of the time for payment or other indulgences to any person
or permit the renewal, amendment or modification of this Note or any other
agreement executed and delivered by any person in connection with this Note, or
permit the substitution, exchange or release of any security for this Note and
may add or release any person primarily or secondarily liable, and agrees that
Bank may apply all moneys made available to it from any part of the proceeds
from the disposition of any security for this Note either to this Note or to
any other obligation of Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. 
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. 
Borrower, to the extent permitted by
law, waives any right to a trial by jury in any action arising from or related
to this Note.

 

Successors and Assigns. 
This Note shall apply to and bind Borrower’s and Bank’s heirs, personal
representatives, successors and assigns. 
All references in this Note to Bank shall include the holder hereof and
this Note shall inure to the benefit of any holder, its successors and assigns;
and, Borrower waives and will not assert against any transferee or assignee of
this Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive.  Borrower acknowledges that Customer Numbers
and Loan Numbers may be added to this Note after execution and delivery of this
Note by Borrower and if there is a section denoted “BANK USE ONLY”, the
information under such section may also be completed by Bank 

 

iii

 

after execution and
delivery of this Note. In addition, in the event the date of this Note is
omitted, Borrower consents to Bank inserting the date.

 

Master Note. 
If this Note is designated herein as a MASTER NOTE or is denoted on
Bank’s records as a MASTER NOTE, then this Note evidences a line of credit and
Borrower shall be liable for only so much of the principal amount as shall be
equal to the total of the amounts advanced to or for Borrower by Bank from time
to time, less all payments made by or for Borrower and applied by Bank to
principal, and for interest on each such advance, fees, premiums, charges and
costs and expenses incurred or due hereunder, all as shown on Bank’s books and
records which shall be conclusive evidence of the amount owed by Borrower under
this Note, absent a clear and convincing showing of bad faith or manifest
error.  If this is a MASTER NOTE, upon
the occurrence of an Event of Default or the occurrence of an event which, with
the giving of notice or a lapse of time, or both, would become an Event of
Default under this Note, in addition to its other rights and remedies, Bank may
terminate or suspend Borrower’s right to receive any future or additional
advances under this Note and the other loan documents.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows:
(1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not
engage in and shall not engage in any dealings or transactions prohibited by
Section 2 of such executive order, and is not and shall not otherwise
become associated with any such person in any manner violative of
Section 2, (c) is not and shall not become a person on the list of
Specially Designated Nationals and Blocked Persons, and (d) is not and
shall not become subject to the limitations or prohibitions under any other
U.S. Department of Treasury’s Office of Foreign Assets Control regulation or
executive order; (2) Borrower is and shall remain in compliance, in all material
respects, with (a) the Trading with the Enemy Act, as amended, and each of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation
or executive order relating thereto, and (b) the Uniting And Strengthening
America By Providing Appropriate Tools Required To Intercept And Obstruct
Terrorism (USA Patriot Act of 2001); and (3) Borrower has not and shall
not use all or any part of the proceeds, advances or other amounts or sums
evidenced by this Note, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.

 

(Signatures
Begin on the Next Page)

 

iv

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER:

 

	
  VIDEO DISPLAY CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  Z-AXIS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
						

 

i

 

	
  AYDIN DISPLAYS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  MENGEL INDUSTRIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  XKD CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
						

 

ii

 

 

	
  Customer No.

  
	
  Loan No.

  

 

	
  REGIONS BANK

  	
  Commercial Promissory Note: C & I

  

 

	
  $1,750,000

  	
  Atlanta, Georgia

  
	
   

  	
    June    , 2006

  
	
  Master Note

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to REGIONS BANK (“Bank”), or order, the sum of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000), or so much thereof as shall have been
disbursed from time to time and remains unpaid, together with interest at the
rate and payable in the manner hereinafter stated.  Principal and interest shall be payable at
any banking office of Bank in the city or town indicated above, or such other
place as the holder of this Note may designate.

 

Interest Rate.

 

Pre-Default Rate. 
Subject to the provisions of Section 1.2.
below, interest payable on this Note per annum will accrue at the LIBOR Base
Rate plus the Applicable Margin.

 

The
“LIBOR Base Rate” means a fluctuating rate of interest (rounded upwards, if
necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding business day, as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. 
If for any reason such rate is not available, the term “LIBOR Rate”
shall mean the fluctuating rate of interest equal to the rate of interest
(rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding day, as adjusted from time to time in Lender’s sole discretion
for then-applicable reserve requirements, deposit insurance assessment rates
and other regulatory costs; provided, however, if more than one
rate is specified on Reuters Screen LIBO page, the applicable rate shall be the
arithmetic mean of all such rates. Any change in the rate will take effect on
the date of such change in the applicable index as indicated on Telerate
Page 3750.   Interest will accrue on
any non-banking day at the rate in effect on the immediately preceding banking
day.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than 1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

i

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan
Agreement.  The ratio will be measured as
of August 31st, November 30th, February 28th
and May 31st of each year (each a “Measurement Date”);
adjustments in the Applicable Margin will occur as of the first day of the
month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of
the Loan Agreement (i.e., November 1st, February 1st,
May 1st  and
August 1st) for the immediately preceding Measurement Date
(each an “Adjustment Date”). The Applicable Margin will be in effect from the
then applicable Adjustment Date until the next Adjustment Date.  Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be
2.10%.  The First Adjustment Date will
occur on the first day of the month immediately following Bank’s receipt of the
Compliance Certificate due on October 15, 2006 and be based on the
August 31, 2006 Measurement Date financial statements, and shall apply
until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the
Applicable Margin from the date such certificate (and applicable financial
statement) was due until Bank receives it will be the highest level set forth
above, or at Bank’s option, the Default Rate.

 

Default Rate. 
Upon the nonpayment of any payment of interest described herein, Bank,
at its option and without accelerating this Note, may accrue interest on such
unpaid interest at a rate per annum (“Default Rate”) equal to the lesser of the
maximum contract rate of interest that may be charged to and collected from
Borrower on the loan evidenced by this Note under applicable law or five
percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1..  After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, charges and costs
and expenses owing hereunder at the Default Rate until this Note is paid in
full, whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. 
This is a variable rate note.  Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced by
this Note under applicable law. Bank shall have no obligation to notify Borrower
of adjustments in the rate of interest payable under this Note.  Adjustments to the rate of interest will be
effective as of the first day of each month.

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Interest shall be payable monthly, in
arrears, beginning August 1, 2006 and continuing on the first day of each
consecutive month thereafter until June 30, 2008 (“Maturity Date”), when
one final payment of the entire balance of principal, interest, fees, premiums,
charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

 

Prepayment. 
This Note may be prepaid in whole, or in part at anytime without any fee
or premium.

 

Application of Payments. 
All payments made on this Note shall be applied first to payment of all
late fees, charges, premiums and costs and expenses due but unpaid under this
Note, then to accrued but unpaid interest and finally to principal, unless Bank
determines in its sole discretion to apply payments in a different order or
applicable law requires a different application of payments.  Payments in federal funds, immediately
available in the place designated for payment, received by Bank prior to
2:00 p.m. local time at said place of payment, shall be credited as if
received prior to close of business on the day the funds are immediately
available; while other payments, at the option of Bank, may not be credited
until such payments are immediately available to Bank, in federal funds, in the
place designated for payment, prior to 2:00 p.m. local time at said place
of payment on a day on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  
The loan evidenced by this Note was made pursuant to a commitment letter
(“Commitment Letter”) from Bank to Borrower dated June 9, 2006.

 

ii

 

Loan and Security
Agreement.  Borrower, RBC Centura Bank, as collateral
agent, and Bank and RBC Centura Bank, as lenders, have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or
restated from time to time, the “Loan and Security Agreement”).  This Note is also secured by (1) the
security documents and other supporting obligations referenced in the
Commitment Letter and by those referenced in the Loan and Security Agreement
and (2) the security documents and other supporting obligations which
reference that they secure this Note (“security documents”).

 

Default

 

Late Charges and Expenses. 
Borrower agrees to pay, upon demand by Bank, for each payment past due
for fifteen (15) or more calendar days, a late charge in an amount equal to the
lesser of (1) four percent (4%) of the amount of the payment past due or
(2) the maximum percentage of the payment past due permitted by applicable
law, or the maximum amount if not expressed as a percentage.  If this Note is not paid in full whenever it
becomes due and payable, Borrower agrees to pay all costs and expenses of
collection, including reasonable attorneys’ fees.  The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note:
(1) the failure of Borrower to pay when due any payment described herein,
whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and
Security Agreement.

 

Acceleration. 
Upon the occurrence of an Event of Default, (1) the entire unpaid
principal balance of this Note, together with all other amounts owing and all
other amounts to be owing under this Note, shall, at the option of Bank, become
immediately due and payable, without notice or demand, and (2) the Bank
may, both before and after acceleration, exercise any of and all of its other
rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in
equity, to recover full payment of the balance (principal, interest, fees,
premiums, charges and costs and expenses) owing under this Note.  The failure by Bank to exercise any of its
options shall not constitute a waiver of the right to exercise same in the
event of any subsequent default.

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term
“Borrower” refers to all signatories of this Note collectively and severally,
as the context of this Note requires, and all signatories of this Note shall be
and the same are jointly and severally liable hereunder.

 

Waiver. 
Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any
other person or property, agrees that without notice to any person and without
affecting any person’s liability under this Note, Bank, at any time or times,
may grant extensions of the time for payment or other indulgences to any person
or permit the renewal, amendment or modification of this Note or any other
agreement executed and delivered by any person in connection with this Note, or
permit the substitution, exchange or release of any security for this Note and
may add or release any person primarily or secondarily liable, and agrees that
Bank may apply all moneys made available to it from any part of the proceeds
from the disposition of any security for this Note either to this Note or to
any other obligation of Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. 
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. 
Borrower, to the extent permitted by
law, waives any right to a trial by jury in any action arising from or related
to this Note.

 

Successors and Assigns. 
This Note shall apply to and bind Borrower’s and Bank’s heirs, personal
representatives, successors and assigns. 
All references in this Note to Bank shall include the holder hereof and
this Note shall inure to the benefit of any holder, its successors and assigns;
and, Borrower waives and will not assert against any transferee or assignee of
this Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive.  Borrower acknowledges that Customer Numbers
and Loan Numbers may be added to this Note after execution and delivery of this
Note by Borrower and if there is a section denoted “BANK USE ONLY”, the
information under such section may also be completed by Bank 

 

iii

 

after execution and
delivery of this Note. In addition, in the event the date of this Note is
omitted, Borrower consents to Bank inserting the date.

 

Master Note. 
If this Note is designated herein as a MASTER NOTE or is denoted on
Bank’s records as a MASTER NOTE, then this Note evidences a line of credit and
Borrower shall be liable for only so much of the principal amount as shall be
equal to the total of the amounts advanced to or for Borrower by Bank from time
to time, less all payments made by or for Borrower and applied by Bank to
principal, and for interest on each such advance, fees, premiums, charges and
costs and expenses incurred or due hereunder, all as shown on Bank’s books and
records which shall be conclusive evidence of the amount owed by Borrower under
this Note, absent a clear and convincing showing of bad faith or manifest
error.  If this is a MASTER NOTE, upon
the occurrence of an Event of Default or the occurrence of an event which, with
the giving of notice or a lapse of time, or both, would become an Event of
Default under this Note, in addition to its other rights and remedies, Bank may
terminate or suspend Borrower’s right to receive any future or additional
advances under this Note and the other loan documents.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows:
(1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not
engage in and shall not engage in any dealings or transactions prohibited by
Section 2 of such executive order, and is not and shall not otherwise
become associated with any such person in any manner violative of
Section 2, (c) is not and shall not become a person on the list of
Specially Designated Nationals and Blocked Persons, and (d) is not and
shall not become subject to the limitations or prohibitions under any other
U.S. Department of Treasury’s Office of Foreign Assets Control regulation or
executive order; (2) Borrower is and shall remain in compliance, in all
material respects, with (a) the Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other
enabling legislation or executive order relating thereto, and (b) the
Uniting And Strengthening America By Providing Appropriate Tools Required To
Intercept And Obstruct Terrorism (USA Patriot Act of 2001); and
(3) Borrower has not and shall not use all or any part of the proceeds,
advances or other amounts or sums evidenced by this Note, directly or
indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

 

(Signatures
Begin on the Next Page)

 

iv

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER:

 

	
  VIDEO DISPLAY CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  Z-AXIS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
						

 

i

 

	
  AYDIN DISPLAYS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  MENGEL INDUSTRIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  XKD CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
						

 

	
  Customer No.

  
	
  Loan No.

  

 

	
  REGIONS BANK

  	
  Commercial Promissory Note: C & I

  

 

	
  $1,500,000

  	
  Atlanta, Georgia

  
	
   

  	
    June    , 2006

  
	
  Term Note

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to REGIONS BANK (“Bank”), or order, the sum of One Million Five Hundred
Thousand Dollars ($1,500,000), or so much thereof as shall have been
disbursed from time to time and remains unpaid, together with interest at the rate
and payable in the manner hereinafter stated. 
Principal and interest shall be payable at any banking office of Bank in
the city or town indicated above, or such other place as the holder of this
Note may designate.

 

Interest Rate.

 

Pre-Default Rate. 
Subject to the provisions of Section 1.2.
below, interest payable on this Note per annum will accrue at the LIBOR Base
Rate plus the Applicable Margin.

 

ii

 

The
“LIBOR Base Rate” means a fluctuating rate of interest (rounded upwards, if
necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding business day, as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. 
If for any reason such rate is not available, the term “LIBOR Rate” shall
mean the fluctuating rate of interest equal to the rate of interest (rounded
upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the 1 month London interbank offered rate for deposits in
United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding day, as adjusted from time to time in Lender’s sole discretion
for then-applicable reserve requirements, deposit insurance assessment rates
and other regulatory costs; provided, however, if more than one
rate is specified on Reuters Screen LIBO page, the applicable rate shall be the
arithmetic mean of all such rates. Any change in the rate will take effect on
the date of such change in the applicable index as indicated on Telerate
Page 3750.   Interest will accrue on
any non-banking day at the rate in effect on the immediately preceding banking
day.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than 1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan
Agreement.  The ratio will be measured as
of August 31st, November 30th, February 28th,
and May 31st of each year (each a “Measurement Date”);
adjustments in the Applicable Margin will occur as of the first day of the
month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of
the Loan Agreement (i.e., November 1st, February 1st,
May 1st  and
August 1st) for the immediately preceding Measurement Date
(each an “Adjustment Date”). The Applicable Margin will be in effect from the
then applicable Adjustment Date until the next Adjustment Date.  Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be
2.10%.  The First Adjustment Date will
occur on the first day of the month immediately following Bank’s receipt of the
Compliance Certificate due on October 15, 2006 and be based on the
August 31, 2006 Measurement Date financial statements, and shall apply
until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the
Applicable Margin from the date such certificate (and applicable financial
statement) was due until Bank receives it will be the highest level set forth
above, or at Bank’s option, the Default Rate.

 

Default Rate. 
Upon the nonpayment of any payment of interest described herein, Bank,
at its option and without accelerating this Note, may accrue interest on such
unpaid interest at a rate per annum (“Default Rate”) equal to the lesser of the
maximum contract rate of interest that may be charged to and collected from
Borrower on the loan evidenced by this Note under applicable law or five
percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1..  After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, 

 

iii

 

charges and costs and
expenses owing hereunder at the Default Rate until this Note is paid in full,
whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. 
This is a variable rate note.  Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced by
this Note under applicable law. Bank shall have no obligation to notify
Borrower of adjustments in the rate of interest payable under this Note.  Adjustments to the rate of interest will be
effective as of the first day of each month.

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Principal and interest shall be due and
payable on the first day of each month, commencing August 1, 2006, in
consecutive monthly installments in an amount equal to the sum of (i) all
then accrued and unpaid interest, plus (ii) a principal payment in the
amount of $25,000.  The entire unpaid principal
amount hereof, together with accrued and unpaid interest thereon and all other
amounts payable hereunder shall be due and payable on July 1, 2011 (the “Maturity Date”).

 

Prepayment. 
This Note may be prepaid in whole, or in part at anytime without any fee
or premium.

 

Application of Payments. 
All payments made on this Note shall be applied first to payment of all
late fees, charges, premiums and costs and expenses due but unpaid under this
Note, then to accrued but unpaid interest and finally to principal, unless Bank
determines in its sole discretion to apply payments in a different order or
applicable law requires a different application of payments.  Payments in federal funds, immediately
available in the place designated for payment, received by Bank prior to 2:00 p.m.
local time at said place of payment, shall be credited as if received prior to
close of business on the day the funds are immediately available; while other
payments, at the option of Bank, may not be credited until such payments are
immediately available to Bank, in federal funds, in the place designated for
payment, prior to 2:00 p.m. local time at said place of payment on a day
on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  
The loan evidenced by this Note was made pursuant to a commitment letter
(“Commitment Letter”) from Bank to Borrower dated June 9, 2006.

 

Loan and Security
Agreement.  Borrower, RBC Centura Bank, as collateral
agent, and Bank and RBC Centura Bank, as lenders, have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or
restated from time to time, the “Loan and Security Agreement”).  This Note is also secured by (1) the
security documents and other supporting obligations referenced in the
Commitment Letter and by those referenced in the Loan and Security Agreement,
and (2) the security documents and other supporting obligations which
reference that they secure this Note (“security documents”).

 

Default

 

Late Charges and Expenses. 
Borrower agrees to pay, upon demand by Bank, for each payment past due
for fifteen (15) or more calendar days, a late charge in an amount equal to the
lesser of (1) four percent (4%) of the amount of the payment past due or
(2) the maximum percentage of the payment past due permitted by applicable
law, or the maximum amount if not expressed as a percentage.  If this Note is not paid in full whenever it
becomes due and payable, Borrower agrees to pay all costs and expenses of
collection, including reasonable attorneys’ fees.  The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note:
(1) the failure of Borrower to pay when due any payment described herein,
whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and
Security Agreement.

 

iv

 

Acceleration. 
Upon the occurrence of an Event of Default, (1) the entire unpaid
principal balance of this Note, together with all other amounts owing and all
other amounts to be owing under this Note, shall, at the option of Bank, become
immediately due and payable, without notice or demand, and (2) the Bank
may, both before and after acceleration, exercise any of and all of its other
rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in
equity, to recover full payment of the balance (principal, interest, fees,
premiums, charges and costs and expenses) owing under this Note.  The failure by Bank to exercise any of its
options shall not constitute a waiver of the right to exercise same in the
event of any subsequent default.

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term
“Borrower” refers to all signatories of this Note collectively and severally,
as the context of this Note requires, and all signatories of this Note shall be
and the same are jointly and severally liable hereunder.

 

Waiver. 
Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any
other person or property, agrees that without notice to any person and without
affecting any person’s liability under this Note, Bank, at any time or times,
may grant extensions of the time for payment or other indulgences to any person
or permit the renewal, amendment or modification of this Note or any other
agreement executed and delivered by any person in connection with this Note, or
permit the substitution, exchange or release of any security for this Note and
may add or release any person primarily or secondarily liable, and agrees that
Bank may apply all moneys made available to it from any part of the proceeds
from the disposition of any security for this Note either to this Note or to
any other obligation of Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. 
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. 
Borrower, to the extent permitted by
law, waives any right to a trial by jury in any action arising from or related
to this Note.

 

Successors and Assigns. 
This Note shall apply to and bind Borrower’s and Bank’s heirs, personal
representatives, successors and assigns. 
All references in this Note to Bank shall include the holder hereof and
this Note shall inure to the benefit of any holder, its successors and assigns;
and, Borrower waives and will not assert against any transferee or assignee of
this Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive.  Borrower acknowledges that Customer Numbers
and Loan Numbers may be added to this Note after execution and delivery of this
Note by Borrower and if there is a section denoted “BANK USE ONLY”, the
information under such section may also be completed by Bank after
execution and delivery of this Note. In addition, in the event the date of this
Note is omitted, Borrower consents to Bank inserting the date.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows:
(1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not
engage in and shall not engage in any dealings or transactions prohibited by
Section 2 of such executive order, and is not and shall not otherwise
become associated with any such person in any manner violative of
Section 2, (c) is not and shall not become a person on the list of
Specially Designated Nationals and Blocked Persons, and (d) is not and
shall not become subject to the limitations or prohibitions under any other
U.S. Department of Treasury’s Office of Foreign Assets Control regulation or
executive order; (2) Borrower is and shall remain in compliance, in all
material respects, with (a) the Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other
enabling legislation or executive order relating thereto, and (b) the
Uniting And Strengthening America By Providing Appropriate Tools Required To
Intercept And Obstruct Terrorism (USA Patriot Act of 2001); and (3) Borrower
has not and shall not use all or any part of the proceeds, advances or other
amounts or sums evidenced by this Note, directly or indirectly, for any
payments to any governmental official or employee, political party, official of
a political party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or obtain any
improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.

 

v

 

(Signatures
Begin on the Next Page)

 

vi

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER:

 

	
  VIDEO DISPLAY CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  Z-AXIS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
						

 

i

 

	
  AYDIN DISPLAYS, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  MENGEL INDUSTRIES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
	
  XKD CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  	
  [SEAL]

  
	
   

  
						

 

ii

 

	
  Customer No.

  
	
  Loan No.

  

 

	
  RBC Centura

  	
  Commercial Promissory Note: C & I

  

 

	
  $8,500,000

  	
  Atlanta, Georgia

  
	
   

  	
   June    ,
  2006

  
	
  Master Note

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to RBC CENTURA BANK (“Bank”), or order, the sum of Eight Million Five
Hundred Thousand Dollars ($8,500,000), or so much thereof as shall have
been disbursed from time to time and remains unpaid, together with interest at
the rate and payable in the manner hereinafter stated.  Principal and interest shall be payable at any
banking office of Bank in the city or town indicated above, or such other place
as the holder of this Note may designate.

 

Interest Rate.

 

Pre-Default Rate. 
Subject to the provisions of Section 1.2.
below, interest payable on this Note per annum will accrue at the LIBOR Base
Rate plus the Applicable Margin.

 

The
“LIBOR Base Rate” is the London Interbank Offer Rate for United States Dollars
for a term of one month which appears on Telerate Page 3750, Bloomberg
Professional Screen BBAM (or any generally recognized successor method or means
of publication) as of 11:00 a.m., London time, two (2) London
business days prior to the day on which the rate will become effective. The
rate for the first month or part thereof will initially become effective on the
date of the Note as shown on the face hereof. Thereafter, the rate will change
and a new rate will become effective on the first calendar day of each
succeeding month. If for any reason the London Interbank Offer Rate is not
available, then the “LIBOR Base Rate” shall mean the rate per annum which banks
charge each other in a market comparable to England’s Eurodollar market on
short-term money in U.S. Dollars for an amount substantially equivalent to the
principal amount due under this Note as determined at 11:00 A.M., London
time, two (2) London business days prior to the day on which the rate will
become effective, as determined in the Bank’s sole discretion. Bank’s
determination of such interest rate shall be conclusive, absent manifest error.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than 1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan
Agreement.  The ratio will be measured as
of August 31st, November 30th, February 28th
and May 31st of each year (each a “Measurement Date”);
adjustments in the Applicable Margin will occur as of the first day of the
month immediately following Bank’s receipt of Borrower’s quarterly Compliance Certificate
required under Section 5.6(c) of
the Loan Agreement (i.e., November 1st, February 1st,
May 1st  and
August 1st) for the immediately preceding Measurement Date
(each an “Adjustment Date”). The Applicable Margin will be in 

 

i

 

effect
from the then applicable Adjustment Date until the next Adjustment Date.  Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be
2.10%.  The First Adjustment Date will
occur on the first day of the month immediately following Bank’s receipt of the
Compliance Certificate due on October 15, 2006 and be based on the
August 31, 2006 Measurement Date financial statements, and shall apply
until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the
Applicable Margin from the date such certificate (and applicable financial
statement) was due until Bank receives it will be the highest level set forth
above, or at Bank’s option, the Default Rate.

 

Default Rate. 
Upon the nonpayment of any payment of interest described herein, Bank,
at its option and without accelerating this Note, may accrue interest on such
unpaid interest at a rate per annum (“Default Rate”) equal to the lesser of the
maximum contract rate of interest that may be charged to and collected from
Borrower on the loan evidenced by this Note under applicable law or five
percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1..  After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, charges and costs
and expenses owing hereunder at the Default Rate until this Note is paid in
full, whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. 
This is a variable rate note.  Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced by
this Note under applicable law. Bank shall have no obligation to notify
Borrower of adjustments in the rate of interest payable under this Note.  Adjustments to the rate of interest will be
effective as of the first day of each month.

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Interest shall be payable monthly, in
arrears, beginning August 1, 2006 and continuing on the first day of each
consecutive month thereafter until June 30, 2008 (“Maturity Date”), when
one final payment of the entire balance of principal, interest, fees, premiums,
charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

 

Prepayment. 
This Note may be prepaid in whole, or in part at anytime without any fee
or premium.

 

Application of Payments. 
All payments made on this Note shall be applied first to payment of all
late fees, charges, premiums and costs and expenses due but unpaid under this
Note, then to accrued but unpaid interest and finally to principal, unless Bank
determines in its sole discretion to apply payments in a different order or
applicable law requires a different application of payments.  Payments in federal funds, immediately
available in the place designated for payment, received by Bank prior to
2:00 p.m. local time at said place of payment, shall be credited as if
received prior to close of business on the day the funds are immediately
available; while other payments, at the option of Bank, may not be credited
until such payments are immediately available to Bank, in federal funds, in the
place designated for payment, prior to 2:00 p.m. local time at said place
of payment on a day on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  
The loan evidenced by this Note was made pursuant to a commitment letter
(“Commitment Letter”) from Bank to Borrower dated June 9, 2006.

 

Loan and Security
Agreement.  Borrower, RBC Centura Bank, as collateral
agent, and Bank and Regions Bank, as lenders, have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or
restated from time to time, the “Loan and Security Agreement”).  This Note is also secured by (1) the
security documents and other supporting obligations referenced in the
Commitment Letter and by those referenced in the Loan and Security Agreement
and (2) the security documents and other supporting obligations which
reference that they secure this Note (“security documents”).

 

ii

 

Default

 

Late Charges and Expenses. 
Borrower agrees to pay, upon demand by Bank, for each payment past due
for fifteen (15) or more calendar days, a late charge in an amount equal to the
lesser of (1) four percent (4%) of the amount of the payment past due or
(2) the maximum percentage of the payment past due permitted by applicable
law, or the maximum amount if not expressed as a percentage.  If this Note is not paid in full whenever it
becomes due and payable, Borrower agrees to pay all costs and expenses of
collection, including reasonable attorneys’ fees.  The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note:
(1) the failure of Borrower to pay when due any payment described herein,
whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and
Security Agreement.

 

Acceleration. 
Upon the occurrence of an Event of Default, (1) the entire unpaid
principal balance of this Note, together with all other amounts owing and all
other amounts to be owing under this Note, shall, at the option of Bank, become
immediately due and payable, without notice or demand, and (2) the Bank
may, both before and after acceleration, exercise any of and all of its other
rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in
equity, to recover full payment of the balance (principal, interest, fees,
premiums, charges and costs and expenses) owing under this Note.  The failure by Bank to exercise any of its options
shall not constitute a waiver of the right to exercise same in the event of any
subsequent default.

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term
“Borrower” refers to all signatories of this Note collectively and severally,
as the context of this Note requires, and all signatories of this Note shall be
and the same are jointly and severally liable hereunder.

 

Waiver. 
Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any
other person or property, agrees that without notice to any person and without
affecting any person’s liability under this Note, Bank, at any time or times,
may grant extensions of the time for payment or other indulgences to any person
or permit the renewal, amendment or modification of this Note or any other
agreement executed and delivered by any person in connection with this Note, or
permit the substitution, exchange or release of any security for this Note and
may add or release any person primarily or secondarily liable, and agrees that
Bank may apply all moneys made available to it from any part of the proceeds
from the disposition of any security for this Note either to this Note or to
any other obligation of Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. 
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof.  Borrower, to
the extent permitted by law, waives any right to a trial by jury in any action
arising from or related to this Note.

 

Successors and Assigns. 
This Note shall apply to and bind Borrower’s and Bank’s heirs, personal
representatives, successors and assigns. 
All references in this Note to Bank shall include the holder hereof and
this Note shall inure to the benefit of any holder, its successors and assigns;
and, Borrower waives and will not assert against any transferee or assignee of
this Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive.  Borrower acknowledges that Customer Numbers
and Loan Numbers may be added to this Note after execution and delivery of this
Note by Borrower and if there is a section denoted “BANK USE ONLY”, the
information under such section may also be completed by Bank after
execution and delivery of this Note. In addition, in the event the date of this
Note is omitted, Borrower consents to Bank inserting the date.

 

Master Note. 
If this Note is designated herein as a MASTER NOTE or is denoted on
Bank’s records as a MASTER NOTE, then this Note evidences a line of credit and
Borrower shall be liable for only so much of the principal amount as shall be
equal to the total of the amounts advanced to or for Borrower by Bank from time
to time, less all payments made by or for Borrower and applied by Bank to
principal, and for interest on each such advance, fees, 

 

iii

 

premiums, charges and
costs and expenses incurred or due hereunder, all as shown on Bank’s books and
records which shall be conclusive evidence of the amount owed by Borrower under
this Note, absent a clear and convincing showing of bad faith or manifest
error.  If this is a MASTER NOTE, upon
the occurrence of an Event of Default or the occurrence of an event which, with
the giving of notice or a lapse of time, or both, would become an Event of
Default under this Note, in addition to its other rights and remedies, Bank may
terminate or suspend Borrower’s right to receive any future or additional
advances under this Note and the other loan documents.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows:
(1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not
engage in and shall not engage in any dealings or transactions prohibited by
Section 2 of such executive order, and is not and shall not otherwise
become associated with any such person in any manner violative of
Section 2, (c) is not and shall not become a person on the list of
Specially Designated Nationals and Blocked Persons, and (d) is not and
shall not become subject to the limitations or prohibitions under any other
U.S. Department of Treasury’s Office of Foreign Assets Control regulation or
executive order; (2) Borrower is and shall remain in compliance, in all
material respects, with (a) the Trading with the Enemy Act, as amended, and
each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (b) the Uniting And
Strengthening America By Providing Appropriate Tools Required To Intercept And
Obstruct Terrorism (USA Patriot Act of 2001); and (3) Borrower has not and
shall not use all or any part of the proceeds, advances or other amounts or
sums evidenced by this Note, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.

 

(Signatures
Begin on the Next Page)

 

iv

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER:

 

	
  VIDEO DISPLAY CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  LEXEL IMAGING SYSTEMS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  FOX INTERNATIONAL, LTD., INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  Z-AXIS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  TELTRON TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

i

 

	
  AYDIN DISPLAYS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  MENGEL INDUSTRIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  XKD CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  Customer No.

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  
				

 

	
  RBC Centura

  	
   

  	
  Commercial Promissory Note: C & I

  

 

	
  $1,500,000

  	
   

  	
  Atlanta, Georgia

  	
   

  
	
   

  	
   

  	
  June    ,
  2006

  	
   

  
	
  Term Note

  	
   

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to REGIONS BANK (“Bank”), or order, the sum of One Million Five Hundred
Thousand Dollars ($1,500,000), or so much thereof as shall have been
disbursed from time to time and remains unpaid, together with interest at the
rate and payable in the manner hereinafter stated. Principal and interest shall
be payable at any banking office of Bank in the city or town indicated above,
or such other place as the holder of this Note may designate.

 

Interest Rate.

 

Pre-Default Rate. Subject to the provisions of Section 1.2. below, interest payable
on this Note per annum will accrue at the LIBOR Base Rate plus the Applicable
Margin.

 

ii

 

The
“LIBOR Base Rate” means a fluctuating rate of interest (rounded upwards, if
necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding business day, as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. If for any reason such rate is not
available, the term “LIBOR Rate” shall mean the fluctuating rate of interest
equal to the rate of interest (rounded upwards, if necessary to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the 1 month London
interbank offered rate for deposits in United States Dollars at approximately
11:00 a.m. (London time) on the second preceding day, as adjusted from
time to time in Lender’s sole discretion for then-applicable reserve
requirements, deposit insurance assessment rates and other regulatory costs; provided,
however, if more than one rate is specified on Reuters Screen LIBO page,
the applicable rate shall be the arithmetic mean of all such rates. Any change
in the rate will take effect on the date of such change in the applicable index
as indicated on Telerate Page 3750.  Interest will accrue on any non-banking day at
the rate in effect on the immediately preceding banking day.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than
  1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less
  than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan Agreement. The
ratio will be measured as of August 31st, November 30th,
February 28th, and May 31st of each year (each
a “Measurement Date”); adjustments in the Applicable Margin will occur as of
the first day of the month immediately following Bank’s receipt of Borrower’s
quarterly Compliance Certificate required under Section 5.6(c) of the Loan Agreement (i.e., November 1st,
February 1st, May 1st and August 1st)
for the immediately preceding Measurement Date (each an “Adjustment Date”). The
Applicable Margin will be in effect from the then applicable Adjustment Date
until the next Adjustment Date. Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be 2.10%.
The First Adjustment Date will occur on the first day of the month immediately
following Bank’s receipt of the Compliance Certificate due on October 15,
2006 and be based on the August 31, 2006 Measurement Date financial
statements, and shall apply until the next Adjustment Date. Thereafter if any
quarterly Compliance Certificate (and applicable financial statement) is not
delivered on time, the Applicable Margin from the date such certificate (and
applicable financial statement) was due until Bank receives it will be the
highest level set forth above, or at Bank’s option, the Default Rate.

 

Default Rate. Upon the nonpayment of any payment of
interest described herein, Bank, at its option and without accelerating this
Note, may accrue interest on such unpaid interest at a rate per annum (“Default
Rate”) equal to the lesser of the maximum contract rate of interest that may be
charged to and collected from Borrower on the loan evidenced by this Note under
applicable law or five percent (5.0%) plus the pre-default interest rate
otherwise applicable hereunder, as set forth in Section 1.1.. After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, charges and costs
and expenses owing hereunder at the Default Rate until this Note is paid in
full, whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. This is a variable rate note. Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced
by this Note under applicable law. Bank shall have no obligation to notify
Borrower of adjustments in the rate of interest payable under this Note. Adjustments
to the rate of interest will be effective as of the first day of each month.

 

iii

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Principal and interest shall be due and
payable on the first day of each month, commencing August 1, 2006, in
consecutive monthly installments in an amount equal to the sum of (i) all
then accrued and unpaid interest, plus (ii) a principal payment in the
amount of $25,000. The entire unpaid principal amount hereof, together with
accrued and unpaid interest thereon and all other amounts payable hereunder
shall be due and payable on July 1, 2011 (the “Maturity Date”).

 

Prepayment. This Note may be prepaid in whole,
or in part at anytime without any fee or premium.

 

Application of Payments. All payments made on this Note shall be
applied first to payment of all late fees, charges, premiums and costs and
expenses due but unpaid under this Note, then to accrued but unpaid interest
and finally to principal, unless Bank determines in its sole discretion to
apply payments in a different order or applicable law requires a different
application of payments. Payments in federal funds, immediately available in
the place designated for payment, received by Bank prior to 2:00 p.m.
local time at said place of payment, shall be credited as if received prior to
close of business on the day the funds are immediately available; while other
payments, at the option of Bank, may not be credited until such payments
are immediately available to Bank, in federal funds, in the place designated
for payment, prior to 2:00 p.m. local time at said place of payment on a
day on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  The loan evidenced by this Note was made
pursuant to a commitment letter (“Commitment Letter”) from Bank to Borrower
dated June 9, 2006.

 

Loan and Security
Agreement. Borrower,
RBC Centura Bank, as collateral agent, and Bank and RBC Centura Bank, as
lenders, have entered into a Loan and Security Agreement, dated as of even date
herewith (as amended or modified or restated from time to time, the “Loan and
Security Agreement”). This Note is also secured by (1) the security
documents and other supporting obligations referenced in the Commitment Letter
and by those referenced in the Loan and Security Agreement, and (2) the
security documents and other supporting obligations which reference that they
secure this Note (“security documents”).

 

Default

 

Late Charges and Expenses. Borrower agrees to pay, upon demand by
Bank, for each payment past due for fifteen (15) or more calendar days, a late
charge in an amount equal to the lesser of (1) four percent (4%) of the
amount of the payment past due or (2) the maximum percentage of the
payment past due permitted by applicable law, or the maximum amount if not
expressed as a percentage. If this Note is not paid in full whenever it becomes
due and payable, Borrower agrees to pay all costs and expenses of collection,
including reasonable attorneys’ fees. The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note: (1) the
failure of Borrower to pay when due any payment described herein, whether of
principal, interest, fees, premiums or otherwise; and (2) the occurrence
of any “Event of Default” under and as defined in the Loan and Security
Agreement.

 

Acceleration. Upon the occurrence of an Event of
Default, (1) the entire unpaid principal balance of this Note, together
with all other amounts owing and all other amounts to be owing under this Note,
shall, at the option of Bank, become immediately due and payable, without
notice or demand, and (2) the Bank may, both before and after
acceleration, exercise any of and all of its other rights and remedies under
this Note and the other loan documents, as well as any additional rights and
remedies it may have at law and it may have in equity, to recover
full payment of the balance (principal, interest, fees, premiums, charges and
costs and expenses) owing under this Note. The failure by Bank to exercise any
of its options shall not constitute a waiver of the right to exercise same in
the event of any subsequent default.

 

iv

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term “Borrower”
refers to all signatories of this Note collectively and severally, as the
context of this Note requires, and all signatories of this Note shall be and
the same are jointly and severally liable hereunder.

 

Waiver. Borrower waives presentment, demand,
protest and notice of dishonor, waives any rights which it may have to
require Bank to proceed against any other person or property, agrees that
without notice to any person and without affecting any person’s liability under
this Note, Bank, at any time or times, may grant extensions of the time
for payment or other indulgences to any person or permit the renewal, amendment
or modification of this Note or any other agreement executed and delivered by
any person in connection with this Note, or permit the substitution, exchange
or release of any security for this Note and may add or release any person
primarily or secondarily liable, and agrees that Bank may apply all moneys
made available to it from any part of the proceeds from the disposition of
any security for this Note either to this Note or to any other obligation of
Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. This Note shall be governed by and
construed in accordance with the substantive laws of the State of Georgia,
excluding, however, the conflict of law and choice of law provisions thereof. Borrower, to the extent permitted by law, waives any
right to a trial by jury in any action arising from or related to this Note.

 

Successors and Assigns. This Note shall apply to and bind
Borrower’s and Bank’s heirs, personal representatives, successors and assigns. All
references in this Note to Bank shall include the holder hereof and this Note
shall inure to the benefit of any holder, its successors and assigns; and,
Borrower waives and will not assert against any transferee or assignee of this
Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive. Borrower
acknowledges that Customer Numbers and Loan Numbers may be added to this
Note after execution and delivery of this Note by Borrower and if there is a section denoted
“BANK USE ONLY”, the information under such section may also be
completed by Bank after execution and delivery of this Note. In addition, in
the event the date of this Note is omitted, Borrower consents to Bank inserting
the date.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows: (1) Borrower
(a) is not and shall not become a person whose property or interest in
property is blocked or subject to blocking pursuant to Section 1 of
Executive Order 13224 of September 23, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not engage in and
shall not engage in any dealings or transactions prohibited by Section 2
of such executive order, and is not and shall not otherwise become associated
with any such person in any manner violative of Section 2, (c) is not
and shall not become a person on the list of Specially Designated Nationals and
Blocked Persons, and (d) is not and shall not become subject to the
limitations or prohibitions under any other U.S. Department of Treasury’s
Office of Foreign Assets Control regulation or executive order; (2) Borrower
is and shall remain in compliance, in all material respects, with (a) the
Trading with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) the Uniting And Strengthening America By
Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA
Patriot Act of 2001); and (3) Borrower has not and shall not use all or
any part of the proceeds, advances or other amounts or sums evidenced by
this Note, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order
to obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as
amended.

 

(Signatures
Begin on the Next Page)

 

v

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER:

 

	
  VIDEO DISPLAY CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  LEXEL IMAGING SYSTEMS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  FOX INTERNATIONAL, LTD., INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  Z-AXIS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  TELTRON TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

i

 

	
  AYDIN DISPLAYS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  MENGEL INDUSTRIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  XKD CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  Customer No.

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  
					

 

	
  RBC Centura

  	
   

  	
  Commercial Promissory Note: C & I

  

 

	
  $1,750,000

  	
   

  	
  Atlanta, Georgia

  	
   

  
	
   

  	
   

  	
  June    ,
  2006

  	
   

  
	
  Master Note

  	
   

  	
   

  	
   

  

 

FOR
VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to
pay to REGIONS BANK (“Bank”), or order, the sum of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000), or so much thereof as shall have been
disbursed from time to time and remains unpaid, together with interest at the
rate and payable in the manner hereinafter stated. Principal and interest shall
be payable at any banking office of Bank in the city or town indicated above,
or such other place as the holder of this Note may designate.

 

Interest Rate.

 

Pre-Default Rate. Subject to the provisions of Section 1.2. below, interest payable
on this Note per annum will accrue at the LIBOR Base Rate plus the Applicable
Margin.

 

ii

 

The
“LIBOR Base Rate” means a fluctuating rate of interest (rounded upwards, if
necessary to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the 1 month London interbank offered rate for deposits
in United States Dollars at approximately 11:00 a.m. (London time) on the
second preceding business day, as adjusted from time to time in Lender’s sole
discretion for then-applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. If for any reason such rate is not
available, the term “LIBOR Rate” shall mean the fluctuating rate of interest
equal to the rate of interest (rounded upwards, if necessary to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the 1 month London
interbank offered rate for deposits in United States Dollars at approximately
11:00 a.m. (London time) on the second preceding day, as adjusted from
time to time in Lender’s sole discretion for then-applicable reserve
requirements, deposit insurance assessment rates and other regulatory costs; provided,
however, if more than one rate is specified on Reuters Screen LIBO page,
the applicable rate shall be the arithmetic mean of all such rates. Any change
in the rate will take effect on the date of such change in the applicable index
as indicated on Telerate Page 3750.  Interest will accrue on any non-banking day at
the rate in effect on the immediately preceding banking day.

 

The
“Applicable Margin” is the percent per annum set forth below, based on the
ratio of Borrower’s Fixed Charge Coverage Ratio, as defined in the herein
defined Loan Agreement, as set forth in the most recent compliance certificate
received by Lender. Based upon the ratio, the “Applicable Margin” over Bank’s
LIBOR Base Rate will be determined as follows:

 

	
  Tier

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Greater than 1.35:1.0*, but less than 1.50:1.0

  	
   

  	
  2.10

  	
  %

  
	
  II

  	
   

  	
  Equal to/greater than 1.50:1.0 but less than 1.75:1.0

  	
   

  	
  1.85

  	
  %

  
	
  III

  	
   

  	
  Equal to/greater than 1.75:1.0

  	
   

  	
  1.60

  	
  %

  

 

(*1.15:1.0
for the period ending 8/31/06)

 

The
Applicable Margin will be determined from Borrower’s most recent quarterly
compliance certificate received by Bank, as required in the Loan Agreement. The
ratio will be measured as of August 31st, November 30th,
February 28th and May 31st of each year (each a
“Measurement Date”); adjustments in the Applicable Margin will occur as of the
first day of the month immediately following Bank’s receipt of Borrower’s
quarterly Compliance Certificate required under Section 5.6(c) of the Loan Agreement (i.e., November 1st,
February 1st, May 1st and August 1st)
for the immediately preceding Measurement Date (each an “Adjustment Date”). The
Applicable Margin will be in effect from the then applicable Adjustment Date
until the next Adjustment Date. Until Lender receives the first Compliance
Certificate and related financial statements due on October 15, 2006 for
the August 31, 2006 Measurement Date, the Applicable Margin will be 2.10%.
The First Adjustment Date will occur on the first day of the month immediately
following Bank’s receipt of the Compliance Certificate due on October 15,
2006 and be based on the August 31, 2006 Measurement Date financial
statements, and shall apply until the next Adjustment Date. Thereafter if any
quarterly Compliance Certificate (and applicable financial statement) is not
delivered on time, the Applicable Margin from the date such certificate (and
applicable financial statement) was due until Bank receives it will be the
highest level set forth above, or at Bank’s option, the Default Rate.

 

Default Rate. Upon the nonpayment of any payment of
interest described herein, Bank, at its option and without accelerating this
Note, may accrue interest on such unpaid interest at a rate per annum (“Default
Rate”) equal to the lesser of the maximum contract rate of interest that may be
charged to and collected from Borrower on the loan evidenced by this Note under
applicable law or five percent (5.0%) plus the pre-default interest rate
otherwise applicable hereunder, as set forth in Section 1.1.. After maturity of this Note, whether by
acceleration or otherwise, interest will accrue on the unpaid principal of this
Note, any accrued but unpaid interest and all fees, premiums, charges and costs
and expenses owing hereunder at the Default Rate until this Note is paid in
full, whether this Note is paid in full pre-judgement or post-judgement.

 

Variable Rate. This is a variable rate note. Any
change in the rate of interest payable under this Note will equal the change in
the variable rate index to which such rate is tied, but the rate at which
interest accrues under this Note shall never exceed the maximum contract rate
which may be charged to and collected from Borrower on the loan evidenced
by this Note under applicable law. Bank shall have no obligation to notify
Borrower of adjustments in the rate of interest payable under this Note. Adjustments
to the rate of interest will be effective as of the first day of each month.

 

iii

 

Calculation of Interest. All interest payable under this Note
will accrue daily on the basis of the actual number of days elapsed and a year
of three hundred sixty (360) days.

 

Payment Terms.

 

Payment Terms. Interest shall be payable monthly, in
arrears, beginning August 1, 2006 and continuing on the first day of each
consecutive month thereafter until June 30, 2008 (“Maturity Date”), when
one final payment of the entire balance of principal, interest, fees, premiums,
charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

 

Prepayment. This Note may be prepaid in whole,
or in part at anytime without any fee or premium.

 

Application of Payments. All payments made on this Note shall be
applied first to payment of all late fees, charges, premiums and costs and
expenses due but unpaid under this Note, then to accrued but unpaid interest
and finally to principal, unless Bank determines in its sole discretion to
apply payments in a different order or applicable law requires a different
application of payments. Payments in federal funds, immediately available in
the place designated for payment, received by Bank prior to 2:00 p.m.
local time at said place of payment, shall be credited as if received prior to
close of business on the day the funds are immediately available; while other
payments, at the option of Bank, may not be credited until such payments
are immediately available to Bank, in federal funds, in the place designated
for payment, prior to 2:00 p.m. local time at said place of payment on a
day on which Bank is open for business.

 

Loan Agreement and Security.

 

Commitment Letter.  The loan evidenced by this Note was made
pursuant to a commitment letter (“Commitment Letter”) from Bank to Borrower
dated June 9, 2006.

 

Loan and Security
Agreement. Borrower,
RBC Centura Bank, as collateral agent, and Bank and RBC Centura Bank, as
lenders, have entered into a Loan and Security Agreement, dated as of even date
herewith (as amended or modified or restated from time to time, the “Loan and
Security Agreement”). This Note is also secured by (1) the security
documents and other supporting obligations referenced in the Commitment Letter
and by those referenced in the Loan and Security Agreement and (2) the
security documents and other supporting obligations which reference that they
secure this Note (“security documents”).

 

Default

 

Late Charges and Expenses. Borrower agrees to pay, upon demand by
Bank, for each payment past due for fifteen (15) or more calendar days, a late
charge in an amount equal to the lesser of (1) four percent (4%) of the
amount of the payment past due or (2) the maximum percentage of the
payment past due permitted by applicable law, or the maximum amount if not
expressed as a percentage. If this Note is not paid in full whenever it becomes
due and payable, Borrower agrees to pay all costs and expenses of collection,
including reasonable attorneys’ fees. The Borrower hereby stipulates that
reasonable attorneys’ fees shall be fifteen percent (15%) of the outstanding
balance owing under this Note after default.

 

Default. Any one or more of the following shall
constitute an event of default (“Event of Default”) under this Note: (1) the
failure of Borrower to pay when due any payment described herein, whether of
principal, interest, fees, premiums or otherwise; and (2) the occurrence
of any “Event of Default” under and as defined in the Loan and Security
Agreement.

 

Acceleration. Upon the occurrence of an Event of
Default, (1) the entire unpaid principal balance of this Note, together
with all other amounts owing and all other amounts to be owing under this Note,
shall, at the option of Bank, become immediately due and payable, without
notice or demand, and (2) the Bank may, both before and after
acceleration, exercise any of and all of its other rights and remedies under
this Note and the other loan documents, as well as any additional rights and
remedies it may have at law and it may have in equity, to recover
full payment of the balance (principal, interest, fees, premiums, charges and
costs and expenses) owing under this Note. The failure by Bank to exercise any
of its options shall not constitute a waiver of the right to exercise same in
the event of any subsequent default.

 

iv

 

Miscellaneous.

 

Use of Terms. The term “Note” refers to this
Commercial Promissory Note: C & I; the term “loan document” refers to
this Note, the Commitment Letter, the Loan and Security Agreement and any
security documents and other documents and agreements executed and delivered to
Bank or others on Bank’s behalf in connection with this Note; and the term “Borrower”
refers to all signatories of this Note collectively and severally, as the
context of this Note requires, and all signatories of this Note shall be and
the same are jointly and severally liable hereunder.

 

Waiver. Borrower waives presentment, demand,
protest and notice of dishonor, waives any rights which it may have to require
Bank to proceed against any other person or property, agrees that without
notice to any person and without affecting any person’s liability under this
Note, Bank, at any time or times, may grant extensions of the time for
payment or other indulgences to any person or permit the renewal, amendment or
modification of this Note or any other agreement executed and delivered by any
person in connection with this Note, or permit the substitution, exchange or
release of any security for this Note and may add or release any person
primarily or secondarily liable, and agrees that Bank may apply all moneys
made available to it from any part of the proceeds from the disposition of
any security for this Note either to this Note or to any other obligation of
Borrower to Bank, as Bank may elect from time to time.

 

Jury and Jurisdiction. This Note shall be governed by and
construed in accordance with the substantive laws of the State of Georgia,
excluding, however, the conflict of law and choice of law provisions thereof. Borrower, to the extent permitted by law, waives any
right to a trial by jury in any action arising from or related to this Note.

 

Successors and Assigns. This Note shall apply to and bind
Borrower’s and Bank’s heirs, personal representatives, successors and assigns. All
references in this Note to Bank shall include the holder hereof and this Note
shall inure to the benefit of any holder, its successors and assigns; and,
Borrower waives and will not assert against any transferee or assignee of this
Note any claims, defenses, set-offs or rights of recoupment which Borrower
could assert against Bank, except defenses which Borrower cannot waive. Borrower
acknowledges that Customer Numbers and Loan Numbers may be added to this
Note after execution and delivery of this Note by Borrower and if there is a section denoted
“BANK USE ONLY”, the information under such section may also be
completed by Bank after execution and delivery of this Note. In addition, in
the event the date of this Note is omitted, Borrower consents to Bank inserting
the date.

 

Master Note. If this Note is designated herein as a
MASTER NOTE or is denoted on Bank’s records as a MASTER NOTE, then this Note
evidences a line of credit and Borrower shall be liable for only so much of the
principal amount as shall be equal to the total of the amounts advanced to or
for Borrower by Bank from time to time, less all payments made by or for
Borrower and applied by Bank to principal, and for interest on each such
advance, fees, premiums, charges and costs and expenses incurred or due
hereunder, all as shown on Bank’s books and records which shall be conclusive
evidence of the amount owed by Borrower under this Note, absent a clear and
convincing showing of bad faith or manifest error. If this is a MASTER NOTE,
upon the occurrence of an Event of Default or the occurrence of an event which,
with the giving of notice or a lapse of time, or both, would become an Event of
Default under this Note, in addition to its other rights and remedies, Bank may terminate
or suspend Borrower’s right to receive any future or additional advances under
this Note and the other loan documents.

 

Anti-Money Laundering and
Anti-Terrorism.
Borrower represents, warrants and covenants to Bank as follows: (1) Borrower
(a) is not and shall not become a person whose property or interest in
property is blocked or subject to blocking pursuant to Section 1 of
Executive Order 13224 of September 23, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not engage in and
shall not engage in any dealings or transactions prohibited by Section 2
of such executive order, and is not and shall not otherwise become associated
with any such person in any manner violative of Section 2, (c) is not
and shall not become a person on the list of Specially Designated Nationals and
Blocked Persons, and (d) is not and shall not become subject to the
limitations or prohibitions under any other U.S. Department of Treasury’s
Office of Foreign Assets Control regulation or executive order; (2) Borrower
is and shall remain in compliance, in all material respects, with (a) the
Trading with the Enemy Act, as amended, and each of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (b) the Uniting And Strengthening America By
Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA
Patriot Act of 2001); and (3) Borrower has not and shall not use all or
any part of the proceeds, advances or other amounts or sums evidenced by
this Note, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order

 

v

 

to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

 

(Signatures
Begin on the Next Page)

 

vi

 

The
undersigned has executed this Note as of the day and year first above stated.

 

BORROWER: 

	
  VIDEO DISPLAY CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  LEXEL IMAGING SYSTEMS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  FOX INTERNATIONAL, LTD., INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  Z-AXIS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  TELTRON TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

i

 

	
  AYDIN DISPLAYS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  MENGEL INDUSTRIES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

	
  XKD CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  
							

 

ii

 

	
  Customer No.

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  
						

 

	
  REGIONS BANK

  	
   

  	
  Subordination Agreement

  

 

SUBORDINATION
AGREEMENT

 

THIS SUBORDINATION AGREEMENT, dated as of June    ,
2006, among REGIONS BANK (“Bank”), RONALD D. ORDWAY (“Subordinating Party”),
VIDEO DISPLAY CORPORATION (the “Parent”) and LEXEL IMAGING SYSTEMS, INC. (“Lexel”),
FOX INTERNATIONAL, LTD., INC. (“Fox”), Z-AXIS, INC. (“Z-Axis”),
TELTRON TECHNOLOGIES, INC. (“Teltron”), AYDIN DISPLAYS, INC. (“Aydin”),
MENGEL INDUSTRIES, INC. (“Mengel”) and XKD CORPORATION (“XYD” and together
with Lexel, Fox, Z-Axis, Teltron, Aydin and Mengel, collectively, the “Subsidiaries”;
and the Subsidiaries, together with Parent, collectively, the “Borrower”);

 

WHEREAS, the Borrower and Regions Bank and Bank, as
lenders, and RBC Centura Bank, as collateral agent, have entered into that
certain Loan and Security Agreement, dated as of even date herewith, as
amended, modified, supplemented or restated from time to time (the “Loan
Agreement”; capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Loan Agreement);

 

WHEREAS, the Subordinating Party may own,
directly and indirectly, ownership interests in or be affiliated with, the
Borrower;

 

WHEREAS, the Borrower has executed and delivered to
the Subordinating Party that certain promissory note, dated as of June    ,
2006, in the principal amount of $6,000,000 (the “Subordinated Shareholder Note”);

 

WHEREAS, Subordinating Party has made, or may make,
other extensions of credit to the Borrower and/or its Subsidiaries from time to
time, and Bank has conditioned its agreement to enter into the Loan Agreement
on the agreement of the Subordinating Party to subordinate the Subordinated
Debt (as defined below), on the terms provided below;

 

NOW THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

Subordination.

 

Any and all obligations and indebtedness, now or
hereafter owing or due from the Borrower and its Subsidiaries to the
Subordinating Party, including, without limitation, the Subordinated
Shareholder Note, but excluding normal salaries and benefits and bonuses in the
ordinary course of business and consistent with historical practices (said
obligations and liabilities, as amended, modified supplemented, restated or
renewed from time to time, collectively, the “Subordinated Debt”), shall be
subordinate and inferior to any and all Obligations owing to Bank.

 

Except for regularly scheduled, non-accelerated
payments of principal and interest on the Subordinated Debt (so long as no
Default or Event of Default then exists or would be caused thereby and
otherwise subject to the provisions hereof and of the Loan Agreement), the
Subordinating Party will not ask, demand, sue for, take or receive from any
person or party, whether a direct or indirect obligor, by set-

 

i

 

off
or any manner, the whole or any part of the Subordinated Debt unless and
until all Obligations owing to Bank shall have been fully paid, without the
written consent of Bank.

 

So long as any of the Obligations remains unpaid, in
whole or in part the Subordinating Party shall not:  (i)  sell, assign, transfer, pledge, or
give a security interest in the Subordinated Debt (except where by the terms
thereof such transfer is made expressly subject to this Agreement as
hereinafter provided); (ii) set off any indebtedness, liability,
obligation, or any other amounts owing by the Subordinating Party to the
Borrower and its Subsidiaries, whether now existing or hereafter arising,
against any or all amounts outstanding under the Subordinated Debt; (iii) take
any security or collateral interest in any of the assets or property of the
Borrower and its Subsidiaries; and (iv) demand payment of any Subordinated
Debt or enforce any rights that the Subordinating Party has in the Borrower’s
or any of its Subsidiary’s assets or property.

 

Notwithstanding any other provision of this
Agreement, to the extent that any payments on the Subordinated Debt that are
not permitted hereunder are received by the Subordinating Party in any manner
from any of the assets or property of the Borrower and its Subsidiaries, all
the payments and amounts will be held in trust by the Subordinating Party for
the benefit of Bank and will be paid over to Bank to apply in the order and
manner that the Bank may choose. All payments and amounts are to be held
and paid over by the Subordinating Party to Bank until all of the Obligations
are paid in full, all before any such payment is to be applied toward the
payment of any Subordinated Debt. This priority of payment shall apply at all
times until all of the Obligations have been repaid in full.

 

In the event of: any assignment by the Borrower and
its Subsidiaries for the benefit of its creditors; any bankruptcy case or
proceedings, instituted by or against the Borrower or its Subsidiaries; the
appointment of any receiver for the Borrower and its Subsidiaries or its
business or assets; or any dissolution, liquidation or other winding up of the
affairs of the Borrower and its Subsidiaries; then in all such cases,
respectively, the officers of the Borrower and each Subsidiary, as applicable,
and any assignee, trustee in bankruptcy, receiver, and/or other person or
persons in charge of any of its assets or property, are hereby directed to pay
to Bank the full amount of the Obligations before making any payments under the
Subordinated Debt.

 

Should any payment, any dividend or other
distribution be received by the Subordinating Party in any bankruptcy,
receivership, liquidation or other proceeding on account of the Subordinated
Debt, such payment, dividend or other distribution will be held by such
Subordinating Party in trust for Bank and will be paid over to Bank to apply to
the Obligations in the order and the manner that Bank may choose.

 

If the Subordinating Party shall receive any
payments, security interests, or other rights in any property of the Borrower
and its Subsidiaries in violation of this Agreement, such payment or property
shall be received by such Subordinating Party in trust for the Bank and, upon
the Subordinating Party’s receipt of such payment or property, the same shall
be promptly delivered and transferred by the Subordinating Party to the Bank to
apply to the Obligations in the order and manner that the Bank may choose.

 

Modification of Obligations and Subordinated Debt. Without affecting the terms of this
Agreement or the subordination agreed to by the Subordinating Party, the Bank
in its sole discretion from time to time may alter the terms or extend the
maturity of the Obligations, or increase the amount of the Obligations, or make
any other amendment to the Obligations, all without notice to, or approval or
consent of, the Subordinating Parties. The Subordinating Party shall not amend
the terms of any of the Subordinated Debt without the consent of the Bank.

 

Legending. The Subordinating Party agrees that, at the request of the Bank, a
legend shall be placed on the face of any document or instrument evidencing or
securing the Subordinated Debt, which legend shall state that the payment of
the Subordinated Debt is subordinated pursuant to the terms of this Agreement.

 

ii

 

Bank’s Rights. The Subordinating Party agrees that the
Bank shall have absolute power and discretion, without notice to it, to deal in
any manner with the Obligations, including, without limitation, interest, costs
and expenses payable by the Borrower to the Bank, and any security and
guaranties therefore, including, but not by way of limitation, release,
surrender, extension, renewal, acceleration, collection, compromise or
substitution. The Subordinating Party hereby waives and agrees not to assert
against the Bank any rights which a guarantor or surety could exercise. The
Subordinating Party hereby waives the right, if any, to require that the Bank
marshal or otherwise require the Bank to proceed to dispose of or foreclose
upon any of its Collateral in any manner or order.

 

Each Subordinating Party’s Representation and
Warranty. The
Subordinating Party represents and warrants to Bank that it has not previously
subordinated all or any portion of the Subordinated Debt for the benefit of any
other party, other than a contemporaneous subordination agreement in favor of
RBC Centura Bank.

 

Miscellaneous.

 

Notices. Any and all notices, elections, demands, requests and responses
thereto permitted or required to be given under this Agreement shall be given
in accordance with the Loan Agreement and shall be addressed to the address
provided on the signature page of this Agreement.

 

Time of the Essence. Time is of the essence in the
interpretation and enforcement of this Agreement.

 

Entire Agreement, Etc. This Agreement expresses the entire
understandings of the parties with respect to the transactions contemplated
hereby and supersedes all prior and contemporaneous agreements of any nature
with respect to the transactions contemplated hereby. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated
orally or in writing, except as provided below.

 

Consents, Amendments, Waivers, Etc. Except as otherwise expressly set forth in
any particular provision of this Agreement, any consent or approval required or
permitted by this Agreement to be given by the Bank may be given, and any
term of this Agreement or of any other instrument related hereto or mentioned
herein, may be amended, and the performance or observance by any party of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written specific consent of the Bank. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Subordinating Party or any
other party shall entitle such party to other or further notice or demand in
similar or other circumstances.

 

Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall be
deemed to constitute one and the same agreement.

 

Headings. The headings of the various paragraphs of this Agreement are inserted
for convenience only and shall be wholly disregarded when interpreting the
meaning or effect of any of the terms hereof.

 

Choice of Law. This Agreement shall be construed and
enforced in accordance with and subject to the substantive laws of the State of
Georgia.

 

Successors and Assigns. All covenants and agreements in this
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties.

 

iii

 

IN WITNESS WHEREOF, the parties hereto have set their hands and
affixed their seals the day and year first above written.

 

	
   

  	
  “BORROWER”

  
	
   

  	
   

  
	
   

  	
  VIDEO DISPLAY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  Z-AXIS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
							

 

iv

 

	
   

  	
  AYDIN DISPLAYS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  MENGEL INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  XKD CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Video Display Corporation

  	
   

  
	
   

  	
  1868 Tucker Industrial Road

  	
   

  
	
   

  	
  Tucker, GA 30084

  	
   

  
							

 

v

 

	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
  REGIONS BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  One Glenlake Parkway

  
	
   

  	
  Suite 400

  
	
   

  	
  Dunwoody, Georgia 30328

  
					

 

vi

 

	
   

  	
  “SUBORDINATING PARTY”

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: RONALD D. ORDWAY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o Video Display Corporation

  
	
   

  	
  1868 Tucker Industrial Road

  
	
   

  	
  Tucker, GA  30084

  

 

	
  Customer No.

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  
	
  Loan No.

  	
   

  	
   

  	
   

  
							

 

	
  RBC Centura

  	
   

  	
  Subordination Agreement

  

 

SUBORDINATION
AGREEMENT

 

THIS SUBORDINATION AGREEMENT, dated as of June    ,
2006, among RBC CENTURA BANK (“Bank”), RONALD D. ORDWAY (“Subordinating Party”),
VIDEO DISPLAY CORPORATION (the “Parent”) and LEXEL IMAGING SYSTEMS, INC. (“Lexel”),
FOX INTERNATIONAL, LTD., INC. (“Fox”), Z-AXIS, INC. (“Z-Axis”),
TELTRON TECHNOLOGIES, INC. (“Teltron”), AYDIN DISPLAYS, INC. (“Aydin”),
MENGEL INDUSTRIES, INC. (“Mengel”) and XKD CORPORATION (“XYD” and together
with Lexel, Fox, Z-Axis, Teltron, Aydin and Mengel, collectively, the “Subsidiaries”;
and the Subsidiaries, together with Parent, collectively, the “Borrower”);

 

WHEREAS, the Borrower and Regions Bank and Bank, as
lenders, and RBC Centura Bank, as collateral agent, have entered into that
certain Loan and Security Agreement, dated as of even date herewith, as
amended, modified, supplemented or restated from time to time (the “Loan
Agreement”; capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Loan Agreement);

 

WHEREAS, the Subordinating Party may own,
directly and indirectly, ownership interests in or be affiliated with, the Borrower;

 

WHEREAS, the Borrower has executed and delivered to
the Subordinating Party that certain promissory note, dated as of June    , 2006, in the principal amount of $6,000,000
(the “Subordinated Shareholder Note”);

 

WHEREAS, Subordinating Party has made, or may make,
other extensions of credit to the Borrower and/or its Subsidiaries from time to
time, and Bank has conditioned its agreement to enter into the Loan Agreement
on the agreement of the Subordinating Party to subordinate the Subordinated
Debt (as defined below), on the terms provided below;

 

NOW THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

vii

 

Subordination.

 

Any and all obligations and indebtedness, now or
hereafter owing or due from the Borrower and its Subsidiaries to the
Subordinating Party, including, without limitation, the Subordinated
Shareholder Note but excluding normal salaries and benefits and bonuses in the
ordinary course of business and consistent with historical practices (said
obligations and liabilities, as amended, modified supplemented, restated or
renewed from time to time, collectively, the “Subordinated Debt”), shall be
subordinate and inferior to any and all Obligations owing to Bank.

 

Except for regularly scheduled, non-accelerated
payments of principal and interest on the Subordinated Debt (so long as no
Default or Event of Default then exists or would be caused thereby and
otherwise subject to the provisions hereof and of the Loan Agreement), the
Subordinating Party will not ask, demand, sue for, take or receive from any
person or party, whether a direct or indirect obligor, by set-off or any
manner, the whole or any part of the Subordinated Debt unless and until
all Obligations owing to Bank shall have been fully paid, without the written
consent of Bank.

 

So long as any of the Obligations remains unpaid, in
whole or in part the Subordinating Party shall not:  (i)  sell, assign, transfer, pledge, or
give a security interest in the Subordinated Debt (except where by the terms
thereof such transfer is made expressly subject to this Agreement as
hereinafter provided); (ii) set off any indebtedness, liability,
obligation, or any other amounts owing by the Subordinating Party to the
Borrower and its Subsidiaries, whether now existing or hereafter arising,
against any or all amounts outstanding under the Subordinated Debt; (iii) take
any security or collateral interest in any of the assets or property of the
Borrower and its Subsidiaries; and (iv) demand payment of any Subordinated
Debt or enforce any rights that the Subordinating Party has in the Borrower’s
or any of its Subsidiary’s assets or property.

 

Notwithstanding any other provision of this
Agreement, to the extent that any payments on the Subordinated Debt that are
not permitted hereunder are received by the Subordinating Party in any manner
from any of the assets or property of the Borrower and its Subsidiaries, all
the payments and amounts will be held in trust by the Subordinating Party for
the benefit of Bank and will be paid over to Bank to apply in the order and
manner that the Bank may choose. All payments and amounts are to be held and
paid over by the Subordinating Party to Bank until all of the Obligations are
paid in full, all before any such payment is to be applied toward the payment
of any Subordinated Debt. This priority of payment shall apply at all times
until all of the Obligations have been repaid in full.

 

In the event of: any assignment by the Borrower and
its Subsidiaries for the benefit of its creditors; any bankruptcy case or
proceedings, instituted by or against the Borrower or its Subsidiaries; the
appointment of any receiver for the Borrower and its Subsidiaries or its
business or assets; or any dissolution, liquidation or other winding up of the
affairs of the Borrower and its Subsidiaries; then in all such cases,
respectively, the officers of the Borrower and each Subsidiary, as applicable,
and any assignee, trustee in bankruptcy, receiver, and/or other person or
persons in charge of any of its assets or property, are hereby directed to pay
to Bank the full amount of the Obligations before making any payments under the
Subordinated Debt.

 

Should any payment, any dividend or other
distribution be received by the Subordinating Party in any bankruptcy,
receivership, liquidation or other proceeding on account of the Subordinated
Debt, such payment, dividend or other distribution will be held by such
Subordinating Party in trust for Bank and will be paid over to Bank to apply to
the Obligations in the order and the manner that Bank may choose.

 

If the Subordinating Party shall receive any
payments, security interests, or other rights in any property of the Borrower
and its Subsidiaries in violation of this Agreement, such payment or property
shall be received by such Subordinating Party in trust for the Bank and, upon
the Subordinating Party’s receipt of such payment or property, the same shall
be promptly delivered and transferred by the Subordinating Party to the Bank to
apply to the Obligations in the order and manner that the Bank may choose.

 

viii

 

Modification of Obligations and Subordinated Debt. Without affecting the terms of this
Agreement or the subordination agreed to by the Subordinating Party, the Bank
in its sole discretion from time to time may alter the terms or extend the
maturity of the Obligations, or increase the amount of the Obligations, or make
any other amendment to the Obligations, all without notice to, or approval or
consent of, the Subordinating Parties. The Subordinating Party shall not amend
the terms of any of the Subordinated Debt without the consent of the Bank.

 

Legending. The Subordinating Party agrees that, at the request of the Bank, a
legend shall be placed on the face of any document or instrument evidencing or
securing the Subordinated Debt, which legend shall state that the payment of
the Subordinated Debt is subordinated pursuant to the terms of this Agreement.

 

Bank’s Rights. The Subordinating Party agrees that the
Bank shall have absolute power and discretion, without notice to it, to deal in
any manner with the Obligations, including, without limitation, interest, costs
and expenses payable by the Borrower to the Bank, and any security and
guaranties therefore, including, but not by way of limitation, release,
surrender, extension, renewal, acceleration, collection, compromise or
substitution. The Subordinating Party hereby waives and agrees not to assert
against the Bank any rights which a guarantor or surety could exercise. The
Subordinating Party hereby waives the right, if any, to require that the Bank
marshal or otherwise require the Bank to proceed to dispose of or foreclose
upon any of its Collateral in any manner or order.

 

Each Subordinating Party’s Representation and
Warranty. The
Subordinating Party represents and warrants to Bank that it has not previously
subordinated all or any portion of the Subordinated Debt for the benefit of any
other party, other than a contemporaneous subordination agreement in favor of
Regions Bank.

 

Miscellaneous.

 

Notices. Any and all notices, elections, demands, requests and responses
thereto permitted or required to be given under this Agreement shall be given
in accordance with the Loan Agreement and shall be addressed to the address
provided on the signature page of this Agreement.

 

Time of the Essence. Time is of the essence in the
interpretation and enforcement of this Agreement.

 

Entire Agreement, Etc. This Agreement expresses the entire
understandings of the parties with respect to the transactions contemplated
hereby and supersedes all prior and contemporaneous agreements of any nature
with respect to the transactions contemplated hereby. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated
orally or in writing, except as provided below.

 

Consents, Amendments, Waivers, Etc. Except as otherwise expressly set forth in
any particular provision of this Agreement, any consent or approval required or
permitted by this Agreement to be given by the Bank may be given, and any
term of this Agreement or of any other instrument related hereto or mentioned
herein, may be amended, and the performance or observance by any party of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written specific consent of the Bank. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of Bank in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Subordinating Party or any
other party shall entitle such party to other or further notice or demand in
similar or other circumstances.

 

Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall be
deemed to constitute one and the same agreement.

 

Headings. The headings of the various paragraphs of this Agreement are inserted
for convenience only and shall be wholly disregarded when interpreting the
meaning or effect of any of the terms hereof.

 

ix

 

Choice of Law. This Agreement shall be construed and
enforced in accordance with and subject to the substantive laws of the State of
Georgia.

 

Successors and Assigns. All covenants and agreements in this
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties.

 

x

 

IN WITNESS WHEREOF, the parties hereto have set their hands and
affixed their seals the day and year first above written.

 

	
   

  	
  “BORROWER”

  
	
   

  	
   

  
	
   

  	
  VIDEO DISPLAY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEXEL IMAGING SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  FOX INTERNATIONAL, LTD., INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  Z-AXIS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  TELTRON TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
							

 

xi

 

	
   

  	
  AYDIN DISPLAYS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MENGEL INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  XKD CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Video Display Corporation

  	
   

  
	
   

  	
  1868 Tucker Industrial Road

  	
   

  
	
   

  	
  Tucker, GA  30084

  	
   

  
							

 

xii

 

	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
  RBC CENTURA BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  75 5th Street

  
	
   

  	
  Suite 900

  	
   

  
	
   

  	
  Atlanta, Georgia 30308

  	
   

  
						

 

xiii

 

	
   

  	
  “SUBORDINATING PARTY”

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: RONALD D. ORDWAY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o Video Display Corporation

  
	
   

  	
  1868 Tucker Industrial Road

  
	
   

  	
  Tucker, GA  30084

  

 

xiv

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]