Document:

ex10-30.htm

    
      
        

      

    

    Exhibit
10.30

     

    [Execution]

     

    FOURTH
AMENDED AND RESTATED

    LOAN
AND SECURITY AGREEMENT

     

    between

     

    INNOTRAC
CORPORATION

     

    “Borrower”

     

    and

     

    WACHOVIA
BANK, NATIONAL ASSOCIATION

     

    “Bank”

     

    Dated:
March 27, 2009

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          
            
              
                	
                        TABLE
      OF CONTENTS

                      
	 
      	 
      	 
      	 
      	 
      
	
                        Table
      of Contents

                      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                        Page

                      
	 
      	 
      	 
      	 
      
	
                        1.

                      	
                        Definitions

                      	 
      	
                        1

                      
	 
      	
                        1.1

                      	
                        Defined
      Terms:

                      	 
      	
                        1

                      
	 
      	
                        1.2

                      	
                        Financial Terms

                      	 
      	
                        14

                      
	 
      	 
      	 
      	 
      	 
      
	
                        2.

                      	
                        The
      Credit Facility; Letters of Credit; Interest and
      Fees

                      	 
      	
                        14

                      
	 
      	
                        2.1

                      	
                        The
      Credit Facility

                      	 
      	
                        14

                      
	 
      	
                        2.2

                      	
                        Collections
      Account

                      	 
      	
                        14

                      
	 
      	
                        2.3

                      	
                        Interest

                      	 
      	
                        15

                      
	 
      	
                        2.4

                      	
                        Interest
      Rate Adjustments

                      	 
      	
                        15

                      
	 
      	
                        2.5

                      	
                        Notice
      and Manner of Borrowing and Rate Conversion

                      	 
      	
                        15

                      
	 
      	
                        2.6

                      	
                        Repayment
      of Loans

                      	 
      	
                        16

                      
	 
      	
                        2.7

                      	
                        Additional
      Payment Provisions

                      	 
      	
                        16

                      
	 
      	
                        2.8

                      	
                        Default
      Rate

                      	 
      	
                        17

                      
	 
      	
                        2.9

                      	
                        Calculation
      of Interest

                      	 
      	
                        17

                      
	 
      	
                        2.10

                      	
                        Letters
      of Credit

                      	 
      	
                        18

                      
	 
      	
                        2.11

                      	
                        Fees

                      	 
      	
                        18

                      
	 
      	
                        2.12

                      	
                        Statement
      of Account

                      	 
      	
                        19

                      
	 
      	
                        2.13

                      	
                        Termination

                      	 
      	
                        19

                      
	 
      	
                        2.14

                      	
                        USA
      Patriot Act Notice

                      	 
      	
                        19

                      
	 
      	 
      	 
      	 
      	 
      
	
                        3.

                      	
                        Conditions
      Precedent to Extensions of Credit

                      	 
      	
                        19

                      
	 
      	
                        3.1

                      	
                        Conditions
      Precedent to Initial Loans

                      	 
      	
                        19

                      
	 
      	
                        3.2

                      	
                        Conditions
      Precedent to Each Loan

                      	 
      	
                        21

                      
	 
      	 
      	 
      	 
      	 
      
	
                        4.

                      	
                        Representations
      and Warranties

                      	 
      	
                        21

                      
	 
      	
                        4.1

                      	
                        Valid
      Existence and Power

                      	 
      	
                        21

                      
	 
      	
                        4.2

                      	
                        Authority

                      	 
      	
                        22

                      
	 
      	
                        4.3

                      	
                        Financial
      Condition

                      	 
      	
                        22

                      
	 
      	
                        4.4

                      	
                        Litigation

                      	 
      	
                        22

                      
	 
      	
                        4.5

                      	
                        Agreements,
      Etc

                      	 
      	
                        22

                      
	 
      	
                        4.6

                      	
                        Authorizations

                      	 
      	
                        23

                      
	 
      	
                        4.7

                      	
                        Title

                      	 
      	
                        23

                      
	 
      	
                        4.8

                      	
                        Collateral

                      	 
      	
                        23

                      
	 
      	
                        4.9

                      	
                        Jurisdiction
      of Organization; Location

                      	 
      	
                        23

                      
	 
      	
                        4.10

                      	
                        Taxes

                      	 
      	
                        23

                      
	 
      	
                        4.11

                      	
                        Labor
      Law Matters

                      	 
      	
                        23

                      
	 
      	
                        4.12

                      	
                        Accounts

                      	 
      	
                        23

                      
	 
      	
                        4.13

                      	
                        Judgment
      Liens

                      	 
      	
                        24

                      
	 
      	
                        4.14

                      	
                        Corporate
      Structure

                      	 
      	
                        24

                      
	 
      	
                        4.15

                      	
                        Deposit
      Accounts

                      	 
      	
                        24

                      
	 
      	
                        4.16

                      	
                        Environmental

                      	 
      	
                        24

                      
	 
      	
                        4.17

                      	
                        ERISA

                      	 
      	
                        24

                      
	 
      	
                        4.18

                      	
                        Investment
      Company Act

                      	 
      	
                        24

                      
	 
      	
                        4.19

                      	
                        Insider

                      	 
      	
                        25

                      

              

            

          

        

      

    

     

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    

    
      
        
          	 
      	
                  4.20

                	
                  Sanctioned
      Persons; Sanctioned Countries

                	 
      	
                  25

                
	 
      	
                  4.21

                	
                  Compliance
      with Covenants; No Default

                	 
      	
                  25

                
	 
      	
                  4.22

                	
                  Fiscal
      Year

                	 
      	
                  25

                
	 
      	
                  4.23

                	
                  Full
      Disclosure

                	 
      	
                  25

                
	 
      	
                  4.24

                	
                  Borrower
      Information Certificate

                	 
      	
                  25

                
	 
      	 
      	 
      	 
      	 
      
	
                  5.

                	
                  Affirmative
      Covenants of Borrower

                	 
      	
                  25

                
	 
      	
                  5.1

                	
                  Use of
      Loan Proceeds

                	 
      	
                  25

                
	 
      	
                  5.2

                	
                  Maintenance
      of Business and Properties

                	 
      	
                  25

                
	 
      	
                  5.3

                	
                  Insurance

                	 
      	
                  26

                
	 
      	
                  5.4

                	
                  Notice
      of Default

                	 
      	
                  26

                
	 
      	
                  5.5

                	
                  Inspections
      of Books and Records and Field Examinations

                	 
      	
                  26

                
	 
      	
                  5.6

                	
                  Financial
      Information

                	 
      	
                  26

                
	 
      	
                  5.7

                	
                  Maintenance
      of Existence and Rights

                	 
      	
                  28

                
	 
      	
                  5.8

                	
                  Payment
      of Taxes, Etc

                	 
      	
                  28

                
	 
      	
                  5.9

                	
                  Subordination

                	 
      	
                  28

                
	 
      	
                  5.10

                	
                  Compliance;
      Hazardous Materials

                	 
      	
                  28

                
	 
      	
                  5.11

                	
                  Further
      Assurances

                	 
      	
                  28

                
	 
      	
                  5.12

                	
                  Covenants
      Regarding Collateral

                	 
      	
                  28

                
	 
      	
                  5.13

                	
                  Post-Closing
      Covenants

                	 
      	
                  29

                
	 
      	 
      	 
      	 
      	 
      
	
                  6.

                	
                  Negative
      Covenants of Borrower

                	 
      	
                  29

                
	 
      	
                  6.1

                	
                  Debt

                	 
      	
                  29

                
	 
      	
                  6.2

                	
                  Liens

                	 
      	
                  30

                
	 
      	
                  6.3

                	
                  Restricted
      Payments

                	 
      	
                  31

                
	 
      	
                  6.4

                	
                  Loans
      and Other Investments

                	 
      	
                  31

                
	 
      	
                  6.5

                	
                  Change
      in Business

                	 
      	
                  31

                
	 
      	
                  6.6

                	
                  Accounts

                	 
      	
                  31

                
	 
      	
                  6.7

                	
                  Transactions
      with Affiliates

                	 
      	
                  31

                
	 
      	
                  6.8

                	
                  No
      Change in Name, Offices or Jurisdiction of Organization; Removal of
      Collateral

                	 
      	
                  31

                
	 
      	
                  6.9

                	
                  No
      Sale, Leaseback

                	 
      	
                  32

                
	 
      	
                  6.10

                	
                  Margin
      Stock

                	 
      	
                  32

                
	 
      	
                  6.11

                	
                  Tangible
      Collateral

                	 
      	
                  32

                
	 
      	
                  6.12

                	
                  Subsidiaries

                	 
      	
                  32

                
	 
      	
                  6.13

                	
                  Liquidation,
      Mergers, Consolidations and Dispositions of Substantial Assets, Name and
      Good Standing

                	 
      	
                  32

                
	 
      	
                  6.14

                	
                  Change
      of Fiscal Year or Accounting Methods

                	 
      	
                  32

                
	 
      	
                  6.15

                	
                  Deposit
      Accounts

                	 
      	
                  33

                
	 
      	 
      	 
      	 
      	 
      
	
                  7.

                	
                  Financial
      Covenants

                	 
      	
                  33

                
	 
      	
                  7.1

                	
                  Fixed
      Charge Coverage Ratio

                	 
      	
                  33

                
	 
      	
                  7.2

                	
                  Capital
      Expenditures

                	 
      	
                  33

                
	 
      	
                  7.3

                	
                  Minimum
      Excess Availability

                	 
      	
                  33

                
	 
      	 
      	 
      	 
      	 
      
	
                  8.

                	
                  Default

                	 
      	
                  33

                
	 
      	
                  8.1

                	
                  Events
      of Default

                	 
      	
                  33

                
	 
      	
                  8.2

                	
                  Remedies

                	 
      	
                  35

                
	 
      	
                  8.3

                	
                  Receiver

                	 
      	
                  36

                
	 
      	
                  8.4

                	
                  Deposits;
      Insurance

                	 
      	
                  36

                

        

      

    

     

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    

    
      
        
          	
                  9.

                	
                  Security
      Agreement

                	 
      	
                  36

                
	 
      	
                  9.1

                	
                  Security
      Interest

                	 
      	
                  36

                
	 
      	
                  9.2

                	
                  Financing
      Statements; Power of Attorney

                	 
      	
                  37

                
	 
      	
                  9.3

                	
                  Entry

                	 
      	
                  37

                
	 
      	
                  9.4

                	
                  Other
      Rights

                	 
      	
                  37

                
	 
      	
                  9.5

                	
                  Accounts

                	 
      	
                  37

                
	 
      	
                  9.6

                	
                  Waiver
      of Marshaling

                	 
      	
                  37

                
	 
      	
                  9.7

                	
                  Control

                	 
      	
                  38

                
	 
      	 
      	 
      	 
      	 
      
	
                  10.

                	
                  Miscellaneous

                	 
      	
                  38

                
	 
      	
                  10.1

                	
                  No
      Waiver, Remedies Cumulative

                	 
      	
                  38

                
	 
      	
                  10.2

                	
                  Survival
      of Representations

                	 
      	
                  38

                
	 
      	
                  10.3

                	
                  Indemnity
      By Borrower; Expenses

                	 
      	
                  38

                
	 
      	
                  10.4

                	
                  Notices

                	 
      	
                  39

                
	 
      	
                  10.5

                	
                  Governing
      Law

                	 
      	
                  39

                
	 
      	
                  10.6

                	
                  Successors
      and Assigns

                	 
      	
                  39

                
	 
      	
                  10.7

                	
                  Counterparts;
      Telecopied Signatures

                	 
      	
                  39

                
	 
      	
                  10.8

                	
                  No
      Usury

                	 
      	
                  39

                
	 
      	
                  10.9

                	
                  Powers

                	 
      	
                  40

                
	 
      	
                  10.10

                	
                  Approvals;
      Amendments

                	 
      	
                  40

                
	 
      	
                  10.11

                	
                  Participations
      and Assignments

                	 
      	
                  40

                
	 
      	
                  10.12

                	
                  Dealings
      with Multiple Borrowers

                	 
      	
                  40

                
	 
      	
                  10.13

                	
                  Waiver
      of Certain Defenses

                	 
      	
                  40

                
	 
      	
                  10.14

                	
                  Additional
      Provisions

                	 
      	
                  41

                
	 
      	
                  10.15

                	
                  Integration;
      Final Agreement

                	 
      	
                  41

                
	 
      	
                  10.16

                	
                  LIMITATION
      ON LIABILITY; WAIVER OF PUNITIVE DAMAGES

                	 
      	
                  41

                
	 
      	
                  10.17

                	
                  BINDING
      ARBITRATION; PRESERVATION OF REMEDIE

                	 
      	
                  41

                

        

      

    

     

    
      
         

      

      
        iii

        
          

        

      

      
         

      

    

     

    FOURTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT

     

              THIS
FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”),
dated March 27, 2009, between INNOTRAC CORPORATION, a Georgia corporation
(“Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association (together with its successors and assigns, “Bank”).

     

    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 Bank to extend credit to Borrower, the parties hereto agree that this
Agreement amends and restates in its entirety that certain Third Amended and
Restated Loan and Security Agreement, dated March 28, 2006, as previously
amended, as follows:

     

              1.     Definitions.
Capitalized terms that are not otherwise defined herein shall have the meanings
set forth in this Section 1.

     

                        1.1     Defined
Terms:

     

              “Accession” has the
meaning set forth in the Code.

     

              “Account” has the
meaning set forth in the Code, together with any guaranties, letters of credit,
Letter-of-Credit Rights, and other security therefor, including Supporting
Obligations.

     

              “Account Debtor” means
a Person who is obligated under any Account, Chattel Paper, General Intangible
or Instrument.

     

              “Affiliate” of a
Person means (a) any Person directly or indirectly owning five (5%) percent or
more of the voting stock or equity interests of such named Person or of which
the named Person owns five (5%) percent or more of such voting stock or equity
interests; (b) any Person controlling, controlled by or under common control
with such named Person; (c) any officer, director or employee of such named
Person or any Affiliate of the named Person; and (d) any family member of the
named Person or any Affiliate of such named Person.

     

              “Applicable Margin”
means, at any time of determination by Bank, as to any Base Rate Loan or LMIR
Loan, the relevant percentage below corresponding to Borrower’s Average Excess
Availability set forth below:

     

    
      
        
          
            
              
                
                  	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                          Tier

                        	 
      	
                          Average
      Excess Availability

                        	 
      	
                          Base
      Rate

                          Loans

                        	 
      	
                          LMIR
      Loans

                        
	
                          I

                        	 
      	
                          <
      $5,000,000

                        	 
      	
                          2.50%

                        	 
      	
                          3.50%

                        
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                          II

                        	 
      	
                          >
      $5,000,000 but < $10,000,000

                        	 
      	
                          2.25%

                        	 
      	
                          3.25%

                        
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                          III

                        	 
      	
                          >
      $10,000,000

                        	 
      	
                          2.00%

                        	 
      	
                          3.00%

                        
	 
      	 
      	 
      	 
      	 
      	 
      	 
      

                

              

            

          

        

      

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    provided, that, (i) the
Applicable Margin shall be calculated and established once each fiscal quarter
(commencing with the fiscal quarter commencing on or about July 1, 2009) and
shall remain in effect until adjusted for the next fiscal quarter, (ii) each
adjustment of the Applicable Margin shall be effective as of the first day of
each fiscal quarter based on the Average Excess Availability for the immediately
preceding fiscal quarter, and (iii) the Applicable Margin through the
fiscal quarter ending on or about June 30, 2009 shall be the amount set forth in
Tier II above. In the event that at any time after the end of a fiscal quarter
the Average Excess Availability for such fiscal quarter used for the
determination of the Applicable Margin is different than the actual amount of
the Average Excess Availability for such fiscal quarter as a result of the
inaccuracy of information provided by or on behalf of Borrower to Bank for the
calculation of Average Excess Availability, the Applicable Margin for such prior
fiscal quarter shall be adjusted to the applicable percentage based on such
actual Average Excess Availability and any difference in the amount of interest
for the applicable period as a result of such recalculation shall be, in the
case of additional interest to be paid, promptly paid to Bank, or in the case of
excess interest paid, reimbursed to Borrower. The foregoing shall not be
construed to limit the rights of Bank with respect to the amount of interest
payable after a Default or Event of Default whether based on such recalculated
percentage or otherwise. Nothing in this paragraph shall limit Bank’s rights to
impose the Default Rate under Section 2.8 of this Agreement, if
applicable.

     

              “Arbitration Rules”
has the meaning set forth in Section 10.17.

     

              “AT&T” shall mean
AT&T Services, Inc., successor in interest to BellSouth Corporation, and its
successor and assigns.

     

              “AT&T Agreement”
means (i) the Innotrac Corporation Master Services Agreement No. R13017M,
dated as of March 8, 2002, as heretofore amended, between Borrower and AT&T,
successor in interest to BellSouth Affiliate Services Corporation, (ii) all
letter purchase orders thereunder, and (iii) all other contracts between
Borrower and AT&T relating thereto, as all of the foregoing may be amended
or otherwise modified from time to time.

     

              “Availability” means,
on any date, the excess, if any, of (i) the lesser of the Borrowing Base on such
date or the Revolver Commitments on such date minus (ii) the aggregate principal
amount of outstanding Loans and the aggregate amount of outstanding Letter of
Credit Obligations on such date.

     

              “Average Excess
Availability” means, on any date, an amount equal to the total amount of
Availability for each day during the immediately preceding ninety (90) day
period, as determined by Bank pursuant to the terms hereof, divided by ninety
(90).

     

              “Base Rate” means, for
any day, the rate per annum (rounded upwards, if necessary, to the nearest whole
multiple of 1/100 of 1%) equal to the greater of (i) the Federal Funds Rate in
effect on such day plus 1⁄2 of 1% or (ii) the Prime Rate in effect on such day. If
for any reason Bank shall have determined (which determination shall be
conclusive absent manifest error) that it is unable after due inquiry to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of Bank to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall be determined without regard to clause (i) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Rate,
respectively.

     

              “Base Rate Loan” means
a Loan, or portion thereof, during any period in which it bears interest at a
rate based upon the Base Rate.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

              “Borrower Information
Certificate” means the certificate, dated as of the Closing Date, by
Borrower addressed to Bank and attached as Exhibit 3.1.2 hereto concerning
certain factual information about Borrower.

     

              “Borrowing Base”
means, on any date of determination thereof, an amount equal to:

     

                        (i)     
 up to eighty-five (85%) percent of the total amount of Eligible Accounts,
plus

     

                        (ii)   
  the lesser of (a) $2,000,000 or (b) up to fifty (50%) percent of the
total amount of Eligible Inventory; minus

     

                        (iii)     
any Reserves.

     

              “Borrowing Base
Certificate” has the meaning set forth in Section 5.6(a).

     

              “Business Day” means a
weekday on which Bank is open for business in Charlotte, North Carolina and
Atlanta, Georgia.

     

              “Capital Expenditures”
shall mean, with respect to any Person for any period, the aggregate of all
expenditures by such Person and its Subsidiaries during such period that in
accordance with GAAP are or should be included in “property, plant and
equipment” or in a similar fixed asset account on its balance sheet, whether
such expenditures are paid in cash or financed and including that portion of the
obligations under Capital Leases that is capitalized on the balance sheet of
such Person during such period.

     

              “Capital Lease” means,
with respect to any Person, any lease of any property (whether real, personal or
mixed) by such Person as lessee which would, in accordance with GAAP, be
required to be accounted for as a capital lease on the balance sheet of such
Person.

     

              “Capital Lease
Obligation” means, with respect to any Capital Lease of any Person, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital
Lease.

     

              “Cash Flow/Availability
Projections” means a report, in form satisfactory to Bank in all
respects, setting forth Borrower’s forecasted consolidated and consolidating
cash flows and borrowing availability prepared on a week by week
basis.

     

              “Chattel Paper” has
the meaning set forth in the Code, including Electronic Chattel Paper and
Tangible Chattel Paper, together with any guaranties, letters of credit,
Letter-of-Credit Rights, and other security therefore, including Supporting
Obligations.

     

              “Closing Date” means
the date on which all of the conditions precedent in Section 3 of this Agreement
are satisfied or otherwise waived or postponed by Bank in writing and the
initial Loans are made under this Agreement.

     

              “Code” means the
Uniform Commercial Code (or any successor statute), as adopted and in force in
the State of Georgia or, when the laws of any other state govern the method or
manner of the perfection or enforcement of any security interest in any of the
Collateral, the Uniform Commercial Code (or any successor statute) of such
state. Any term used in this Agreement and in any financing statement filed in
connection herewith which is defined in the Code and not otherwise defined in
this Agreement or in any other Loan Document has the meaning given to the term
in the Code.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

              “Collateral” means all
personal property of Borrower, wherever located and whether now owned by
Borrower or hereafter acquired, including but not limited to: (a) all Inventory;
(b) all General Intangibles; (c) all Accounts; (d) all Chattel Paper; (e) all
Instruments and Documents and any other instrument or intangible representing
payment for goods or services; (f) all Equipment; (g) all Investment Property;
(h) all Commercial Tort Claims; (i) all Letter-of-Credit Rights; (j) all Deposit
Accounts and funds on deposit therein, including but not limited to any
Disbursements Account, Collections Account or funds otherwise on deposit with or
under the control of Bank or its agents or correspondents; (k) all Fixtures; and
(l) all parts, replacements, substitutions, profits, products, Accessions and
cash and non-cash Proceeds and Supporting Obligations of any of the foregoing
(including, but not limited to, insurance proceeds) 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 Location”
means any location where Collateral is located, as identified and certified by
Borrower on the Borrower Information Certificate.

     

              “Collections Account”
means any Deposit Account maintained by Borrower at Bank to which collections,
deposits and other payments on or with respect to Collateral may be made
pursuant to the terms hereof, to which only Bank shall have access to withdraw
or otherwise direct the disposition of funds on deposit therein.

     

              “Commercial Tort
Claim” has the meaning set forth in the Code.

     

              “Consolidated Net
Income” shall mean, with respect to any Person for any period, the
aggregate of the net income (loss) of such Person, for such period (excluding to
the extent included therein any extraordinary and/or one time or unusual and
non-recurring gains or any non-cash losses) after deducting all charges which
should be deducted before arriving at the net income (loss) for such period and,
without duplication, after deducting the Provision for Taxes for such period,
all as determined in accordance with GAAP. For the purposes of this definition,
net income excludes any gain or non-cash loss, together with any related
Provision for Taxes for such gain or non-cash loss, realized upon the sale or
other disposition of any assets that are not sold in the ordinary course of
business (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or of any capital stock of such Person and any net
income realized or loss incurred as a result of changes in accounting principles
or the application thereof to such Person.

     

              “Debt” means all
liabilities of a Person as determined under GAAP and all obligations which such
Person has guaranteed or endorsed or is otherwise secondarily or jointly liable
for, and shall include, without limitation and without duplication (a) all
obligations for borrowed money or purchased assets, (b) obligations secured
by assets whether or not any personal liability exists, (c) the capitalized
amount of any capital or finance lease obligations, (d) the unfunded portion of
pension or benefit plans or other similar liabilities, (e) obligations as a
general partner, (f) contingent obligations pursuant to guaranties,
endorsements, letters of credit and other secondary liabilities, (g) obligations
for deposits, and (h) obligations under Swap Agreements.

     

              “Default” shall mean
an act, condition or event which with notice or passage of time or both would
constitute an Event of Default.

     

              “Default Rate”, on any
date, means a rate per annum that is equal to (i) in the case of each Loan
outstanding on such date, two (2%) percent in excess of the rate otherwise
applicable to such Loan on such date, and (ii) in the case of any other
Obligations outstanding on such date, two (2%) percent in excess of the Prime
Rate in effect on such date, provided that Obligations under Swap Agreements
shall bear interest at the Default Rate determined in accordance with the terms
of said Swap Agreements.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

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

     

              “Disbursements
Account” means any Deposit Account maintained by Borrower with Bank for
the purpose of depositing the proceeds of Loans made pursuant
hereto.

     

              “Document” has the
meaning set forth in the Code.

     

              “Early Termination
Fee” means the fee payable by Borrower to Bank pursuant to Section 2.13
hereof in an amount equal to (i) two (2%) percent of the Revolver
Commitment in the event of termination of the Revolver Commitment on or before
the first anniversary of the Closing Date, (ii) one (1%) percent of
the Revolver Commitment in the event of termination of the Revolver Commitment
after the first anniversary of the Closing Date but on or before the second
anniversary of the Closing Date, and (iii) one half of one (.50%) percent of the
Revolver Commitment in the event of termination of the Revolver Commitment after
the second anniversary of the Closing Date but before the third anniversary of
the Closing Date.

     

              “EBITDA” shall mean,
as to any Person, with respect to any period, an amount equal to: (a) the
Consolidated Net Income of such Person for such period, plus (b) depreciation,
amortization and other non-cash charges (including, but not limited to, imputed
interest, impairment to goodwill required under FASB 142 (as amended or
restated), and deferred compensation) for such period (to the extent deducted in
the computation of Consolidated Net Income of such Person), all in accordance
with GAAP, plus
(c) Interest Expense for such period (to the extent deducted in the computation
of Consolidated Net Income of such Person), plus (d) the
Provision for Taxes for such period (to the extent deducted in the computation
of Consolidated Net Income of such Person).

     

              “Electronic Chattel
Paper” has the meaning set forth in the Code.

     

              “Eligible Accounts”
means all Accounts in U.S. dollars evidenced by a paper invoice or electronic
equivalent (valued at the face amount of such invoice, less maximum discounts,
credits and allowances which may be taken by Account Debtors on such Accounts,
and net of any sales tax, finance charges or late payment charges included in
the invoiced amount) created or acquired by Borrower arising from the sale of
Inventory and/or (as approved by Bank) the provision of certain services in
Borrower’s ordinary course of business in which Bank has a first (and only)
priority, perfected security interest, but excluding any of the following,
without duplication,

     

                        (a)     Accounts
outstanding for longer than (i) one hundred twenty (120) days from the original
invoice date or (ii) ninety (90) days from the original due date, which ever is
shorter;

     

                        (b)     all
Accounts owed by an Account Debtor if more than fifty (50%) percent of the
Accounts owed by such Account Debtor to Borrower are deemed ineligible hereunder
pursuant to clause (a) of this definition;

     

                        (c)     
Accounts owing from any Affiliate of Borrower;

     

                        (d)     Accounts
owed by a creditor of Borrower to the extent of the amount of the Debt of
Borrower to such creditor;

     

                        (e)     Accounts
which are in dispute or subject to any counterclaim, contra-account, volume
rebate, cooperative advertising accrual, deposit or offset, to the extent
thereof;

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

                        (f)     Accounts
owed by an Account Debtor for whom Borrower maintains Inventory purchased from
Borrower’s suppliers on hand to the extent amounts Borrower owes such suppliers
exceeds such Accounts;

     

                        (g)     Accounts
owing by any Account Debtor which is not Solvent;

     

                        (h)     Accounts
arising from a sale on a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or similar basis or which is subject to
repurchase, return, rejection, repossession, loss or damage;

     

                        (i)     Accounts
owed by an Account Debtor that (1) is a Sanctioned Person or (2) is located
outside of the United States of America;

     

                        (j)     Accounts
owed by the United States of America or other governmental or quasi-governmental
unit, agency or subdivision, unless, with respect to the United States of
America, or any governmental or quasi-governmental unit, agency or subdivision
thereof, Borrower has complied with the Assignment of Claims Act of 1940, as
amended, to the extent necessary in order for Bank to be able to require payment
on such Accounts to be made directly to Bank during the existence of an Event of
Default;

     

                        (k)     Accounts
as to which the goods giving rise to the Account have not been delivered to and
accepted by the Account Debtor or the service giving rise to the Account has not
been completely performed or which do not represent a final sale;

     

                        (l)     Accounts
evidenced by a note or other Instrument or Chattel Paper or reduced to
judgment;

     

                        (m)     Accounts
for which the total of all Accounts from an Account Debtor (together with the
Affiliates of the Account Debtor) exceed ten (10%) percent of the total Accounts
of Borrower (to the extent of such excess) or Accounts for which the total of
all Accounts from Smith & Hawken, Ltd., exceed fifteen (15%) percent of the
total Accounts of Borrower (to the extent of such excess), or Accounts for which
the total of all Accounts from Target.com exceed twenty (20%) percent of the
total Accounts of Borrower (to the extent of such excess), or Accounts for which
the total of all Accounts from AT&T Corporation exceed twenty-five (25%)
percent of the total Accounts of Borrower (to the extent of such
excess);

     

                        (n)     Accounts
which, by contract, subrogation, mechanics’ lien laws or otherwise, are subject
to claims by Borrower’s creditors or other third parties or which are owed by
Account Debtors as to whom any creditor of Borrower (including any bonding
company) has lien or retainage rights;

     

                        (o)     Accounts
the validity, collectibility, or amount of which is determined in good faith by
Borrower or Bank to be doubtful;

     

                        (p)     Accounts
owed by an Account Debtor which is located in a jurisdiction where Borrower is
required to qualify to transact business or to file reports, unless Borrower has
so qualified or filed;

     

                        (q)     Accounts
owed by an Account Debtor who disputes the liability therefor;

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

                        (r)     Accounts
owed by an Account Debtor that shall be the subject of any proceeding of the
type described in Section 8.1(g) or (h);

     

                        (s)     Accounts
for which aged credit balances are outstanding for longer than the sooner of (i)
one hundred twenty (120) days from the original invoice date or (ii) ninety (90)
days from the original due date; or

     

                        (t)     Any
other Account which Bank otherwise in its sole and absolute discretion deems to
be ineligible.

     

    No
Account shall be an Eligible Account if any representation, warranty or covenant
herein relating thereto shall be untrue, misleading or in default. Any Accounts
that are not Eligible Accounts shall nevertheless be part of the
Collateral.

     

              “Eligible Inventory”
means all Inventory now owned or hereafter acquired by Borrower in the ordinary
course of its business as presently conducted consisting of raw materials and
finished goods which Bank has determined to be eligible for credit extensions
hereunder, valued at the lower of cost or market on a first-in, first-out basis,
but excluding, however, in any
event, without limitation of the foregoing, unless otherwise approved by Bank,
any such Inventory which

     

                        (a)     is
acquired from a customer acceptable to Bank is subject to a buy-back agreement
with such customer in form and substance reasonably satisfactory to
Bank;

     

                        (b)     is
not at all times subject to a duly perfected, first priority (and only) security
interest in favor of Bank;

     

                        (c)     is
not in good and saleable condition;

     

                        (d)     is
on consignment from, or subject to, any repurchase agreement with any
supplier;

     

                        (e)     constitutes
returned, repossessed, damaged, defective, obsolete, or slow-moving goods as
determined by Bank;

     

                        (f)     does
not conform in all respects to the warranties and representations set forth in
the Loan Documents in respect of Inventory Collateral or Collateral
generally;

     

                        (g)     is
subject to a negotiable document of title (unless issued or endorsed to
Bank);

     

                        (h)     is
subject to any license or other agreement that limits or restricts Borrower’s or
Bank’s right to sell or otherwise dispose of such inventory (unless the licensor
and Borrower enter into a licensor waiver in form and substance satisfactory to
Bank);

     

                        (i)     is
not located at a Collateral Location;

     

                        (j)     constitutes
inventory-in-transit;

     

                        (k)     is
located at a Collateral Location with respect to which, if not owned and
controlled by Borrower, Bank has not received from the Person owning such
property or in control thereof a Third Party Waiver (unless Reserves are imposed
with regard thereto as determined by Bank in its sole and absolute
discretion);

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

                        (l)      
consists of any packaging materials, supplies or promotional materials;
or

     

                        (m)     which
Bank otherwise in its sole and absolute discretion deems to not be Eligible
Inventory.

     

    Any
Inventory that is not Eligible Inventory shall nevertheless be part of the
Collateral.

     

              “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” has the
meaning set forth in the Code.

     

              “ERISA” has the
meaning set forth in Section 4.17.

     

              “Eurodollar Reserve
Percentage” means, for any day, the percentage (expressed as a decimal
and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in
effect for such day as prescribed by the Federal Reserve Board (or any
successor) for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) in respect of
eurocurrency liabilities or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.

     

              “Event of Default”
shall mean the occurrence or existence of any event or condition described in
Section 8.1 hereof.

     

              “Federal Funds Rate”
means, for any period, a fluctuating interest rate per annum equal, for each day
during such period, to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by
Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
Bank from three Federal Funds brokers of recognized standing selected by
it.

     

              “Financial Covenants”
means the covenants set forth in Section 7 hereof.

     

              “Fixed Charge Coverage
Ratio” shall mean, as to any Person, with respect to any period, the
ratio of: (a) the amount equal to EBITDA of such Person for such period to (b)
the Fixed Charges of such Person for such period.

     

              “Fixed Charges” shall
mean, as to any Person, with respect to any period, the sum of, without
duplication, (a) the cash portion of Interest Expense during such period, plus (b) all
unfinanced Capital Expenditures during such period, plus (c) all
regularly scheduled (as determined at the beginning of the respective period)
principal payments in respect of Debt for borrowed money (excluding payments in
respect of the Loans) and Debt with respect to Capital Leases (and without
duplicating items (a) and (c) of this definition, the interest component with
respect to Debt under Capital Leases) during such period, plus (d) all
dividends and other distributions, and repurchases and redemptions, in respect
of capital stock paid in cash or other immediately available funds during such
period, plus
(e) all income taxes paid during such period in cash.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

              “Fixtures” has the
meaning set forth in the Code.

     

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

     

              “General Intangibles”
has the meaning set forth in the Code, and includes, without limitation, general
intangibles of Borrower, whether now owned or hereafter created or acquired by
Borrower, including all choses in action, causes of action, company or other
business records, inventions, blueprints, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, service marks,
goodwill, brand names, copyrights, registrations, licenses, franchises, customer
lists, permits, tax refund claims, computer programs, operational manuals,
internet addresses and domain names, insurance refunds and premium rebates, all
claims under guaranties, security interests or other security held by or granted
to Borrower to secure payment of any of any of Borrower’s Accounts by an Account
Debtor, all rights to indemnification and all other intangible property of
Borrower of every kind and nature (other than Accounts).

     

              “Guarantor” means any
Person now or hereafter guaranteeing, endorsing or otherwise becoming liable for
any Obligations.

     

              “Guaranty Agreement”
means any guaranty of all or any Obligations now or hereafter executed and
delivered by any Guarantor to Bank, as amended or otherwise modified from time
to time.

     

              “Instrument” has the
meaning set forth in the Code.

     

              “Interest Expense”
shall mean, for any period, as to any Person, as determined in accordance with
GAAP, the total interest expense of such Person, whether paid or accrued during
such period (including the interest component of Capital Leases for such
period), including, without limitation, discounts in connection with the sale of
any Accounts and bank fees, commissions, discounts and other fees and charges
owed with respect to letters of credit, banker’s acceptances or similar
instruments.

     

              “Inventory” has the
meaning set forth in the Code.

     

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

     

              “Item” means any
“item” as defined in Section 4-104 of the Code, and shall also mean and include
checks, drafts, money orders or other media of payment.

     

              “Letter of Credit”
means a letter of credit issued by Bank for the account of Borrower as provided
in Section 2.1.1 and 2.10 hereof.

     

              “Letter of Credit
Obligations” means all obligations of Borrower to Bank, including but not
limited to reimbursement obligations, commissions and fees, incurred by Borrower
in connection with Bank’s issuance, amendment, renewal or extension of Letters
of Credit hereunder.

     

              “Letter-of-Credit
Right” has the meaning set forth in the Code.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

              “Lien” means any
mortgage, deed of trust, deed to secure debt, 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.

     

              “LIBOR Market Index
Rate”, for any day, means the LIBOR Rate where LIBOR is defined as the
rate for 1 month U.S. dollar deposits as reported on Telerate page 3750 as of
11:00 a.m., London time, on such day, or if such day is not a London business
day, then the immediately preceding London business day (or if not so reported,
then as determined by Bank from another recognized source or interbank
quotation).

     

              “LIBOR Rate” means a
rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%)
determined by Bank pursuant to the following formula:

    
      
        	 
      	 
      	 
      
	 
      	
                LIBOR
      Rate=

              	
                LIBOR

              
	 
      	 
      	
                1.00
      – Eurodollar Reserve
Percentage

              

      

    

     

              “LMIR Loan” means a
Loan, or portion thereof, during any period in which it bears interest at a rate
based upon the LIBOR Market Index Rate.

     

              “Loans” means the
loans now or hereafter made by Bank to Borrower on a revolving basis pursuant to
Section 2.1 hereof (involving advances, repayments and readvances).

     

              “Loan Documents” means
this Agreement, each other Security Agreement, each Guaranty Agreement, the
Notice of Borrowings, the Borrower Information Certificate, the Borrowing Base
Certificates, UCC financing statements and all other agreements, documents and
instruments now or hereafter evidencing, describing, guaranteeing or securing
the Obligations or delivered in connection herewith (excluding Swap Agreements),
as they may be modified, amended, extended, renewed or substituted from time to
time.

     

              “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 and/or any other Person obligated under any of the Loan Documents,
(iii) material adverse effect upon the ability of Borrower or any other Person
to fulfill any obligation under any of the Loan Documents, or (iv) material
adverse effect on the Collateral.

     

              “Material Agreement”
means (a) the agreements listed on Schedule 7 to the Borrower Information
Certificate and (b) each other agreement to which Borrower or any Guarantor is a
party (other than the Loan Documents) (i) which is deemed to be a material
contract as provided in Regulation S-K promulgated by the Securities and
Exchange Commission under the Securities Act of 1933 or (ii) for which breach,
termination, cancellation, nonperformance or failure to renew could reasonably
be expected to have a Material Adverse Effect.

     

              “Net Proceeds” means,
with respect to a disposition of any Collateral, the proceeds (including cash
receivable (when received) by way of deferred payment) received by Borrower in
cash from the sale, lease, transfer or other disposition of such Collateral,
including insurance proceeds and awards of compensation received with respect to
the destruction or condemnation of all or part of such Collateral, net of: (i)
the reasonable and customary costs and expenses of such sale, lease, transfer or
other disposition (including legal fees and sales commissions); (ii) amounts
applied to repayment of Debt for borrowed money (other than the Obligations)
secured by a Permitted Lien on such Collateral disposed of that is senior to
Bank’s Liens; and (iii) in connection with any sale of Collateral, a reasonable
reserve (not to exceed five (5%) percent of the total purchase price) for
post-closing adjustments to the purchase price, provided that upon the
expiration of not more than ninety (90) days after the sale, any remaining
reserve balance is remitted to Bank for application to the
Obligations.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

              “Notice of Borrowing”
with respect to Loans means the written request for a Loan as identified in
Section 2.5.2 hereof.

     

              “OFAC” means the
United States Department of the Treasury’s Office of Foreign Assets Control or
any successor thereto.

     

              “Obligations” means
all obligations now or hereafter owed to Bank or any Affiliate of Bank by
Borrower, whether related or unrelated to the Loans, this Agreement or the Loan
Documents, 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, any Debt arising out of or
relating to any Deposit Accounts of Borrower at Bank or any Affiliate of Bank or
any cash management services or other products or services, including merchant
card and ACH transfer services, Letter of Credit Obligations for outstanding
Letters of Credit, obligations for banker’s acceptances issued for the account
of Borrower or its Subsidiaries, amounts paid by Bank under Letters of Credit or
drafts accepted by Bank for the account of Borrower or its Subsidiaries,
together with all interest accruing thereon, including any interest on
pre-petition Debt accruing after bankruptcy, all existing and future obligations
under any Swap Agreements between Bank or any Affiliate of Bank and Borrower
whenever executed (including obligations under Swap Agreements entered into
prior to any transfer or sale of Bank’s interests hereunder if Bank ceases to be
a party hereto), all fees, all costs of collection, attorneys’ fees and expenses
of or advances by Bank which Bank pays or incurs in discharge of obligations of
Borrower or to inspect, repossess, protect, preserve, store or dispose of any
Collateral, 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” has
the meaning set forth in Section 6.1 hereof.

     

              “Permitted Liens” has
the meaning set forth in Section 6.2 hereof.

     

              “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.

     

              “Prime Rate” means
that rate announced by Bank from time to time as its prime rate and is one of
several interest rate bases used by Bank. Bank lends at rates both above and
below Bank’s Prime Rate, and Borrower acknowledges that Bank’s Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Bank.

     

              “Proceeds” has the
meaning set forth in the Code.

     

              “Projections” means
Borrower’s forecasted consolidated and consolidating balance sheets, income
statements, cash flow statements (including a detail of capital expenditures),
Borrowing Base projections and financial covenant compliance prepared on a month
by month basis, all of the foregoing to be on a consistent basis with Borrower’s
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

              “Properly Contested”
means, in the case of any Debt of Borrower or any Guarantor (including any
taxes) that is not paid as and when due or payable by reason of Borrower’s or
such Guarantor’s bona fide dispute concerning its liability to pay same or
concerning the amount thereof, (i) such Debt is being properly contested in good
faith by appropriate proceedings promptly instituted and diligently conducted;
(ii) Borrower or such Guarantor has established appropriate reserves as shall be
required in conformity with GAAP; (iii) the non-payment of such Debt will not
have a Material Adverse Effect and will not result in a forfeiture or sale of
any assets of Borrower or such Guarantor; (iv) no Lien is imposed upon any of
Borrower’s or such Guarantor’s assets with respect to such Debt unless such Lien
is at all times junior and subordinate in priority to the Liens in favor of Bank
(except only with respect to property taxes that have priority as a matter of
applicable state law) and enforcement of such Lien is stayed during the period
prior to the final resolution or disposition of such dispute; (v) if the Debt
results from, or is determined by the entry, rendition or issuance against
Borrower or such Guarantor or any of its assets of a judgment, writ, order or
decree, enforcement of such judgment, writ, order or decree is stayed pending a
timely appeal or other judicial review; and (vi) if such contest is abandoned,
settled or determined adversely (in whole or in part) to Borrower or such
Guarantor, Borrower or such Guarantor forthwith pays such Debt and all
penalties, interest and other amounts due in connection therewith.

     

              “Provision for Taxes”
shall mean an amount equal to all taxes imposed on or measured by net income,
whether Federal, State, county or local, and whether foreign or domestic, that
are paid or payable by any Person in respect of any period in accordance with
GAAP.

     

              “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.

     

              “Reserves” means
reserved amounts as may be required by Bank at any time and from time to time in
Bank’s good
faith discretion, including but not limited to (a) reserves for Swap Agreement
Obligations, (b) dilution with respect to Accounts (based on the ratio of the
aggregate amount of non-cash reductions in Accounts for any period to the
aggregate dollar amount of the sales of Borrower for such period) as calculated
by Bank for any period is or is reasonably anticipated to be greater than five
(5%) percent, (c) returns, discounts, claims, credits and allowances of any
nature that are not paid pursuant to the reduction of Accounts, and (d) amounts
due or to become due to the owners and lessors of the Specified Third Party
Locations and any other premises where Collateral having a net book value in
excess of $1,500,000 is located, other than for those locations with respect to
which Bank has received a Third Party Waiver acceptable to Bank; provided, that, (i) the
Reserves described in this clause (d) shall not be established prior to the date
that is one hundred twenty (120) days following the Closing Date, and
(ii) so long as no Default or Event of Default exists or has occurred and
is continuing, the Reserves described in this clause (d) shall not exceed
at any time the amount due or to become due for the next two (2) months to
the owner or lessor of the Specified Third Party Locations or any other premises
where Collateral having a net book value in excess of $1,500,000 is
located.

     

              “Revolver Commitment”
means the commitment of Bank, subject to the terms and conditions herein, to
make Loans and issue Letters of Credit in accordance with the provisions of
Section 2 hereof in an aggregate amount not to exceed $15,000,000 at any one
time.

     

              “Sanctioned Country”
means a country subject to the sanctions program identified on the list
maintained by OFAC and available at http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html
or as otherwise published from time to time.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

              “Sanctioned Person”
means (i) a Person named on the list of Specially Designated Nationals or
Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/ index.html or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or
(C) a Person resident in a Sanctioned Country, to the extent subject to a
sanctions program administered by OFAC.

     

              “Security Agreement”
means this Agreement as it relates to a security interest in the Collateral, and
any other mortgage instrument, security agreement or similar agreement, document
or instrument now or hereafter executed by Borrower or other Person granting
Bank a security interest in any Collateral to secure the Obligations, as each
may be amended or otherwise modified from time to time.

     

              “Senior Officer” means
the chairman of the board of directors, the president, chief financial officer
or the controller of, or in-house legal counsel to, Borrower.

     

              “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 value greater than its liabilities, at fair
valuation.

     

              “Specified Third Party
Locations” shall mean the following locations leased by Borrower in which
Collateral is or will be maintained on or after the Closing Date: (a) 6655
Sugarloaf Parkway, Duluth, Georgia; (b) 605 W. Crossroads Parkway, Bolingbrook,
Illinois; (c) 2305 Litton Lane, Hebron, Kentucky; and (d) 3357 Southpark
Place, Grove City, Ohio.

     

              “Subordinated Debt”
means Debt and all other obligations owed by Borrower to any Person other than
Bank which are subordinated to the Obligations.

     

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

     

              “Supporting
Obligation” has the meaning set forth in the Code.

     

              “Swap Agreement” has
the meaning for swap agreement as defined in 11 U.S.C. § 101, as in effect from
time to time, or any successor statute, and includes, without limitation, any
rate swap agreement, forward rate agreement, commodity swap, commodity option,
interest rate option, forward foreign exchange agreement, spot foreign exchange
agreement, rate cap agreement, rate floor agreement, rate collar agreement,
currency swap agreement, cross-currency rate swap agreement, currency option and
any other similar agreement.

     

              “Tangible Chattel
Paper” has the meaning set forth in the Code.

     

              “Term” means the
period from and including the Closing Date to but not including the Termination
Date.

     

              “Termination
Date” means the earliest of (i) June 30, 2012, (ii) the date on which
Borrower terminates this Agreement and the credit facilities provided hereunder
pursuant to Section 2.13 hereof, and (iii)
the date on which Bank terminates its obligation to make Loans and other
extensions of credit to Borrower pursuant to Section 8.2(a)
hereof.

    
      
         

      

      
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              “Third Party Waiver”
means a waiver or subordination of Liens satisfactory to Bank from any lessors,
mortgagees, warehouse operators, processors or other third parties that might
have lien holders’ enforcement rights against any Collateral, waiving or
subordinating those rights in favor of Bank and assuring Bank’s access to the
Collateral in exercise of Bank’s rights hereunder.

     

              “USA Patriot Act”
means the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, as
amended.

     

                        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 Credit
Facility; Letters of Credit; Interest and Fees.

     

                        2.1     The Credit
Facility Bank agrees, on the
terms and conditions set forth in this Agreement, to make Loans to Borrower and
to issue Letters of Credit on behalf of Borrower from time to time during the
Term in amounts such that the aggregate principal amount of Loans and the face
amount of any Letters of Credit at any one time outstanding will not exceed the
lesser of (i) the Revolver Commitment and (ii) the Borrowing Base. Loans may be
Base Rate Loans, or LMIR Loans. Within the foregoing limit, Borrower may borrow,
prepay and reborrow Loans at any time during the Term. All outstanding principal
amounts and accrued interest hereunder shall be due and payable in accordance
with the terms of this Agreement.

     

                        2.2     Collections
Account.

     

                                  2.2.1     Lockbox; Collections
Account. Borrower shall notify and direct all Account Debtors to forward
all payments on Accounts to the lockbox under Bank’s control on the Closing Date
from which all items of payment will be deposited in the Collections Account;
provided, however, that Bank shall have the right to directly contact Account
Debtors at any time to ensure that payments on the Accounts are directed to the
lockbox. Borrower shall continue to pay all of Bank’s standard fees and charges
in connection with such lockbox arrangement and Collections Account as such fees
and charges may change from time to time. All payment items received by Borrower
on Accounts and sale of Inventory and other Collateral shall be held by Borrower
in trust for Bank and not commingled with Borrower’s funds and shall be sent
promptly by Borrower to the lockbox. All such items shall be the exclusive
property of Bank upon the earlier of the receipt thereof by Bank or by Borrower.
Borrower hereby grants to Bank a security interest in and lien upon all items
and balances held in any lockbox, the Disbursements Account and the Collections
Account as Collateral for the Obligations, in addition to and cumulative with
the general security interest in all assets of Borrower (including all Deposit
Accounts) contained in Section 9.1 hereof.

     

                                  2.2.2     Power of Attorney.
Borrower hereby irrevocably appoints Bank (and any duly authorized Person
designated by Bank) as Borrower’s attorney-in-fact to endorse Borrower’s name on
any checks, drafts, money orders or other media of payment which come into
Bank’s possession or control; this power being coupled with an interest is
irrevocable so long as any of the Obligations remain outstanding. Such
endorsement by Bank under power of attorney shall, for all purposes, be deemed
to have been made by Borrower (prior to any subsequent endorsement by Bank) in
negotiation of the item.

     

                                  2.2.3     Application of
Payments. Payment items received into the Collections Account shall be
applied by Bank on account of the Loans on the Business Day after deposited by
Borrower, subject to chargebacks for uncollected payment items, and if no Event
of Default exists and no Loans are then outstanding or have been repaid, Bank
shall pay over such of the proceeds of such payments to a Deposit Account
maintained by Borrower at Bank and designated in writing by Borrower. No payment
item received by Bank shall constitute payment to Bank until such item is
actually collected by Bank and credited to the Collections Account; provided,
however, that Bank shall have the right to charge back to the Collections
Account (or any other account of Borrower maintained at Bank) an item which is
returned for inability to collect, plus accrued interest during the period of
Bank’s provisional credit for such item prior to receiving notice of
dishonor.

    
      
         

      

      
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                        2.3     Interest.
Borrower agrees to pay interest in respect of all unpaid principal amounts of
the Loans from the respective dates such principal amounts are advanced until
paid (whether at stated maturity, on acceleration or otherwise) at a rate per
annum equal to the applicable rate indicated below:

     

                                  2.3.1     LMIR Loans. Except as
set forth in Section 2.3.2, all Loans shall constitute LMIR Loans and shall bear
interest at the Applicable Margin in effect from time to time for such LMIR
Loans plus the LIBOR Market Index Rate in effect from time to time.

     

                                  2.3.2     Base Rate Loans.
Notwithstanding anything to the contrary in this Agreement, if (a) Borrower
should request or (b) Bank should at any time determine that (i) it is not
possible to determine the LIBOR Market Index Rate, (ii) the LIBOR Market Index
Rate is no longer available or (iii) a Default or Event of Default exists, then
all Loans shall constitute Base Rate Loans and shall bear interest at the
Applicable Margin in effect from time to time for such Base Rate Loans plus the
Base Rate in effect from time to time.

     

                        2.4     Interest
Rate Adjustments.

     

                                  2.4.1     Base Rate Loan. When
a Base Rate Loan is selected, the interest rate shall be adjusted from time to
time, effective as of the date of each change in the Base Rate, and the Base
Rate shall continue to apply until another interest rate option is selected by
Borrower for that Loan.

     

                                  2.4.2     LMIR Loan. When a
LMIR Loan is selected, the interest rate shall be adjusted daily as applicable
to reflect the LIBOR Market Index Rate then in effect and the LIBOR Market Index
Rate shall continue to apply until another interest rate option is selected by
Borrower for that Loan.

     

                        2.5     Notice and
Manner of Borrowing and Rate Conversion.

     

                                  2.5.1     Loans. Borrower shall
give Bank irrevocable telephonic notice of each proposed Loan or permitted rate
conversion not later than 11:00 a.m. (local time in Atlanta, Georgia) on the
same business day as each proposed Loan or rate conversion to a Base Rate Loan
or a LMIR Loan. Each such notice shall specify (i) the date of such Loan or rate
conversion, which shall be a Business Day, (ii) the amount of each Loan or the
amount to be converted, and (iii) the interest rate selected by Borrower from
the interest rate options set forth in this Agreement. Notices received after
11:00 a.m. (local time in Atlanta, Georgia) shall be deemed received on the next
Business Day. Bank’s acceptance of such a request shall be indicated by its
making the Loan requested. Such a Loan shall be made available to Borrower in
immediately available funds by deposit into the Disbursement
Account.

     

                                  2.5.2     Additional Provisions for
Requests for Loans. Bank, in its discretion, may require from Borrower a
signed written request for a Loan in form of a Notice of Borrowing satisfactory
to Bank, which request shall be irrevocable and shall be delivered to Bank no
later than 11:00 a.m. (local time in Atlanta, Georgia) on the date determined in
accordance with Section 2.5.1, and shall set forth the calculation of the
Borrowing Base and a reconciliation to the previous request or Borrowing Base
Certificate, specify the information required by Section 2.5.1 for the proposed
Loan and provide such other information as Bank may require.

    
      
         

      

      
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                                  (a)       
 Subject to subsection 2.5.2(c) below, unless payment is otherwise timely
made by Borrower, the becoming due of any amount required to be paid with
respect to any of the Obligations (whether as principal, accrued interest, fees
or other charges owed to Bank or any Affiliate of Bank) shall be deemed
irrevocably to be a request (without the requirement for the submission of a
Notice of Borrowing) for Loans on the due date of, and in an aggregate amount
required to pay, such Obligations, and Bank may disburse the proceeds of such
Loans by way of direct payment of the relevant Obligations, and such Loans shall
bear interest as Base Rate Loans.

     

                                  (b)      
 Subject to subsection 2.5.2(c) below, the presentation for payment of any
check or other item of payment drawn on the Disbursement Account at a time when
there are insufficient funds in such account to cover such item shall be deemed
irrevocably to be a request (without any requirement for the submission of a
Notice of Borrowing) for Loans on the date of such presentation in an amount
equal to the aggregate amount of the items presented for payment, and Bank may
disburse the proceeds of such Loans to the Disbursement Account and such Loans
shall bear interest as Base Rate Loans.

     

                                  (c)       
Bank shall have no obligation to Borrower to honor any deemed request for a Loan
under Section 2.5.2(a) or Section 2.5.2(b) above after the Termination Date or
when the principal amount of such Loan, when added to the aggregate outstanding
principal amount of all Loans and the Letter of Credit Obligations would exceed
the lesser of the Revolver Commitment and the Borrowing Base at such time or
when any condition precedent in Section 3.2 hereof is not satisfied, but may do
so in its sole and absolute discretion and without regard to the existence of,
and without being deemed to have waived, any Default or Event of
Default.

     

                                  2.5.3     Excess Outstandings.
Notwithstanding the foregoing, Bank may, in its sole and absolute discretion,
make or permit to remain outstanding Loans which, when added to the principal
amount of all other Loans and Letter of Credit Obligations, exceed the Revolver
Commitment or the Borrowing Base, and all such amounts shall (i) be part of the
Obligations, (ii) bear interest as provided herein, (iii) be payable upon demand
by Bank, and (iv) be secured by the Collateral and be entitled to all rights and
security as provided under the Loan Documents.

     

                        2.6     Repayment
of Loans.

     

                                2.6.1     Bank
may apply all proceeds of Accounts, Inventory or other Collateral received by
Bank and all other payments in respect of the Obligations to the Loans whether
or not then due or to any other Obligations then due, in whatever order or
manner Bank shall determine. In any event, the outstanding principal amount of
Loans shall be due and payable on the Termination Date. Unless otherwise
specified by Borrower, all principal repayment of Loans shall be applied by Bank
first to outstanding Base Rate Loans, and then to outstanding LMIR
Loans.

     

                                2.6.2     Interest
accrued on the Loans shall be due and payable on (i) the first day of each month
for the immediately preceding month), computed through the last calendar day of
the preceding month whether a Base Rate Loan or a LMIR Loan; and (ii) on the
Termination Date.

     

                        2.7     Additional
Payment Provisions.

     

                                  2.7.1      
Payment of Other
Obligations. The balance of the Obligations under the Loan Documents
requiring the payment of money shall be repaid by Borrower to Bank as and when
provided in the relevant Loan Documents, or, if no date of payment is otherwise
specified in the Loan Documents, on demand.

    
      
         

      

      
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                                  2.7.2     Authorization to
Debit. Bank may debit the Disbursement Account, the Collections Account
and any account subject to Bank’s control (as such term is used in Article 9 of
the Code) and/or make Loans to Borrower (whether or not in excess of the lesser
of the Revolver Commitment and the Borrowing Base) and apply such amounts to the
payment of interest, fees, expenses and other amounts to which Bank may be
entitled from time to time and Bank is hereby irrevocably authorized to do so
without the consent of Borrower.

     

                                  2.7.3     Time and Location of
Payment. Borrower shall make each payment of principal of and interest on
the Loans and fees hereunder not later than 2:00 p.m. (local time Atlanta,
Georgia) on the date when due, without set off, counterclaim or other deduction,
in immediately available funds to Bank at its address referred to in Section
10.4. 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.

     

                                  2.7.4     Excess Over Borrowing
Base. To the extent that the aggregate amount of all Loans and the Letter
of Credit Obligations exceeds the Borrowing Base at any time, the amount of such
excess will be paid immediately to Bank upon Borrower’s obtaining knowledge of
same.

     

                                  2.7.5     Swaps Are
Independent. Any prepayment of any Loans shall not affect Borrower’s
obligation to continue making payments under any Swap Agreement, which shall
remain in full force and effect notwithstanding such prepayment, subject to the
terms of such Swap Agreement.

     

                                  2.7.6     Capital Requirements.
If either (a) the introduction of, or any change in, or in the interpretation
of, any applicable law or (b) compliance with any guideline or request from any
central bank or comparable agency or other governmental authority (whether or
not having the force of law), has or would have the effect of reducing the rate
of return on the capital of, or has affected or would affect the amount of
capital required to be maintained by Bank or any corporation controlling Bank as
a consequence of, or with reference to, the Revolver Commitment and other
commitments of this type, below the rate which Bank or such other corporation
could have achieved by for such introduction, change or compliance, then within
five (5) Business Days after written demand by Bank, Borrower shall pay to Bank
from time to time as specified by Bank additional amounts sufficient to
compensate Bank or such other corporation for such reduction. A certificate as
to such amounts submitted to Borrower by Bank shall, in the absence of manifest
error, be presumed to be correct and binding for all purposes.

     

                        2.8     Default
Rate. In addition
to all other rights contained in the Loan Documents, if an Event of Default
occurs, the principal amount of all outstanding Obligations, other than
Obligations under any Swap Agreements between Borrower and Bank or its
affiliates, may, at Bank’s option, bear interest at the Default Rate. The
Default Rate shall apply from acceleration until such Obligations or any
judgment thereon is paid in full.

     

                        2.9     Calculation
of Interest. All fees and other charges provided for in this Agreement
that are calculated as a per annum percentage of any amount and all interest
shall be calculated daily and shall be computed on the actual number of days
elapsed over a year of 360 days. For purposes of computing interest and other
charges hereunder, all payment items and other forms of payment received by Bank
shall be deemed applied by Bank on account of the Obligations (subject to final
payment of such items) on the first Business Day after Bank receives such items
in immediately available funds in the Collections Account. Each determination by
Bank of interest and fees hereunder shall be presumptive evidence of the
correctness of such interest and fees.

    
      
         

      

      
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                        2.10    Letters of
Credit.

     

                                   
2.10.1    Issuance of Letters of
Credit. Bank shall from time to time issue, upon five (5) Business Days
prior written notice, extend or renew Letters of Credit for the account of
Borrower or its Subsidiaries; provided that (i) the aggregate face amount of
Letters of Credit issued by Bank which are outstanding at any one time shall not
exceed $2,000,000, (ii) Bank shall have no obligation to issue any Letter of
Credit if, after giving effect thereto, the principal amount of all Loans and
all Letter of Credit Obligations would exceed the lesser of the Borrowing Base
and the Revolver Commitment, and (iii) all other conditions precedent to the
issuance of each such Letter or Credit as set forth herein are satisfied or
waived in writing by Bank. All payments made by Bank 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 Bank in connection therewith,
shall be paid on demand, unless Borrower instructs Bank to make a Loan to pay
such amount, Bank agrees to do so, and the necessary amount remains available to
be drawn as a Loan hereunder. All Letter of Credit Obligations shall be secured
by the Collateral. Borrower shall complete and sign such applications and
supplemental agreements and provide such other documentation as Bank may require
in respect to the issuance and administration of the Letters of Credit. The form
and substance of all Letters of Credit, including expiration dates, shall be
subject to Bank’s approval, and Bank shall have no obligation to issue any
Letter of Credit or accept which has a maturity date later than the Termination
Date. Bank may charge certain fees or commissions for the issuance, handling,
renewal or extension of a Letter of Credit. Borrower unconditionally guarantees
all obligations of any Subsidiary with respect to Letters of Credit issued by
Bank for the account of such Subsidiary. Upon a Default or Event of Default,
Borrower shall, on demand, deliver to Bank good funds equal to one hundred five
(105%) percent of Bank’s maximum liability under all outstanding Letters of
Credit, to be held as cash Collateral for Borrower’s reimbursement obligations
and other Obligations.

     

                                   
2.10.2    Law Governing Letter of
Credit. Any Letter of Credit issued hereunder shall be governed, as
applicable, by the Uniform Customs and Practice for Documentary Credits
International Chamber of Commerce (“ICC”) Publication 500 or any subsequent
revision or restatement thereof adopted by the ICC and in use by Bank or the
International Standby Practices, ICC Publication No. 590 or any subsequent
revision or restatement thereof adopted by the ICC and in use by Bank, except to
the extent that the terms of such publication would limit or diminish rights
granted to Bank hereunder or in any other Loan Document.

     

                        2.11    Fees.

     

                                    2.11.1    Closing Fee. Borrower
shall pay to Bank the amount of $100,000 as a closing fee, which fee is fully
earned as of and shall be due and payable on the Closing Date.

     

                                   
2.11.2   Administration Fee.
Borrower shall pay to Bank a monthly non-refundable administration fee in the
amount of $275 payable on the first day of each month for the immediately
preceding month.

     

                                    2.11.3   Unused Line Fees.
Borrower shall pay to Bank an unused line fee with respect to the Revolver
Commitment for each day equal to the product of (i) fifty (50) basis points per
annum multiplied by (ii) the difference between (A) the Revolver Commitment and
(B) the aggregate outstanding amount of the Loans and Letter of Credit
Obligations on such day, payable quarterly on the first day of each calendar
quarter with respect to the immediately preceding quarter.

    
      
         

      

      
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                                    2.11.4    Letter of Credit
Fees. Borrower shall pay to Bank, at such times as Bank shall require,
Bank’s standard fees in connection with Letters of Credit, as in effect from
time to time. In addition, Borrower shall pay to Bank a letter of credit fee at
a rate equal to the Applicable Margin then in effect for LMIR Loans per annum on
the daily outstanding balance of the Letter of Credit Obligations for the
immediately preceding quarter (or part thereof), payable in advance as of the
first day of each succeeding quarter. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination of this Agreement.

     

                        2.12     Statement
of Account. If 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.

     

                        2.13     Termination.

     

                                   2.13.1   Upon
at least thirty (30) days prior written notice to Bank, Borrower may, at its
option, upon payment of the Early Termination Fee, terminate this Agreement and
the Revolver Commitment in its entirety but not partially; provided however, no such
termination by Borrower shall be effective until the full, final and
indefeasible payment of the Obligations and Early Termination Fee in cash or
immediately available funds and in the case of any Obligations consisting of
contingent obligations, Bank’s receipt of either cash collateral or a direct pay
letter of credit naming Bank as beneficiary and in form and substance and from
an issuing bank acceptable to Bank, in each case in an amount not less than one
hundred five (105%) percent of the aggregate amount of all such contingent
obligations. In addition, Bank shall be entitled to the Early Termination Fee
upon the occurrence of any Event of Default described in Sections 8.1(g) or (h)
hereof, even if Bank does not exercise the right to terminate this Agreement,
but elects, at its option, to provide financing to Borrower or permit the use of
cash collateral under the United States Bankruptcy Code. The Early Termination
Fee shall be presumed to be the amount of damages sustained by Bank as a result
of the early termination of this Agreement, and Borrower agrees that the amount
of the Early Termination Fee is reasonable under the circumstances currently
existing and that the Early Termination Fee constitutes part of the Obligations.
Notwithstanding the foregoing, in the event of the termination of this Agreement
by Borrower and the full and final payment of the Obligations in cash or
immediately available funds and (if applicable) the receipt by Bank of cash
collateral or a letter of credit in respect of all Letter of Credit Obligations
as described above, in each case from the proceeds of (a) an initial public
offering of the capital stock of Borrower, (b) the sale of all or substantially
all of the assets and properties of Borrower, (c) the sale by the current owners
and holders of more than twenty (20%) percent of the total outstanding shares of
capital stock of Borrower as of the date of the sale of such shares, or (d) the
merger by Borrower with and into a person which is not an Affiliate of Borrower,
in each case in a bona fide arm’s length transaction, Borrower shall not be
required to pay the Early Termination Fee provided for in this Section. Any
notice of termination of this Agreement given by Borrower shall be irrevocable
unless Bank otherwise agrees in writing.

     

                                    2.13.2  Bank
may terminate this Agreement and the Revolver Commitment at any time, without
notice, upon or after the occurrence of an Event of Default.

     

                        2.14  
   USA
Patriot Act Notice. To help fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify, and record information that identifies each Person who opens an
account. For purposes of this section, account shall be understood to include
loan accounts.

     

              3.     Conditions
Precedent to Extensions of Credit.

     

                        3.1     
Conditions
Precedent to Initial Loans. In addition to any other
requirement set forth in this Agreement, Bank shall not be required to fund any
Loan on the Closing Date or make any other extension of credit hereunder on the
Closing Date unless and until the following conditions shall have been
satisfied, in the sole opinion of Bank and its counsel:

    
      
         

      

      
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                                  3.1.1     Loan Documents.
Borrower and each other party to any Loan Document, as applicable, shall have
executed and delivered this Agreement and all other required Loan Documents, all
in form and substance satisfactory to Bank.

     

                                  3.1.2     Supporting Documents and
Other Conditions. Borrower shall cause to be delivered to Bank the
following documents and shall satisfy the following conditions:

     

                                  (a)        A
copy of the governing instruments of Borrower and each Subsidiary, and good
standing certificates of Borrower and each Subsidiary, certified by the
appropriate official of their respective states of incorporation and each state
in which Borrower or such Subsidiary is qualified to do business;

     

                                  (b)        Incumbency
certificate and certified resolutions of the board of directors (or other
appropriate governing body) 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;

     

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

     

                                  (d)       A
satisfactory Borrowing Base Certificate duly completed by Borrower, together
with all supporting statements, schedules and reconciliations as required by
Bank;

     

                                  (e)        UCC
and other Lien searches showing no existing security interests in or Liens on
the Collateral;

     

                                 
 (f)        the Borrower
Information Certificate, duly authorized, executed and delivered by
Borrower;

     

                                  (g)        Satisfactory
evidence of insurance meeting the requirements of Section 5.3.

     

                                  (h)        UCC
financing statements and, if applicable, certificates of title covering the
Collateral 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 Agreements and the UCC financing statements shall duly
have been paid;

     

                                  (i)         Subordinations
satisfactory to Bank from all Persons as required by Section 5.9.

     

                                  (j)         Satisfactory
evidence of payment of all fees due and reimbursement of all costs reasonably
incurred by Bank, and evidence of payment to other parties of all fees or costs
which Borrower is required under the Loan Documents to pay by the date of the
initial Loan;

     

                                  (k)        There
shall be no litigation in which Borrower or any Guarantor or Subsidiary is a
party defendant, which Bank determines may have a Material Adverse Effect;
and

    
      
         

      

      
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                                  (l)          Bank
shall have received Borrower’s financial statements for its most recently
concluded fiscal month and fiscal year and such other financial reports and
information concerning Borrower as Bank shall request, and Bank shall be
satisfied therewith.

     

                        3.2     Conditions
Precedent to Each Loan. In addition to any other
requirements set forth in this Agreement, Bank shall not be required to fund any
Loan or issue any Letter of Credit unless and until the following conditions
shall have been satisfied, in the sole opinion of Bank, and each Notice of
Borrowing (whether or not a written Notice of Borrowing is required) shall be
deemed to be a representation that all such conditions have been
satisfied:

     

                                  3.2.1     Notice of Borrowing.
Borrower shall have delivered to Bank a Notice of Borrowing and such other
information, as Bank may reasonably request.

     

                                  3.2.2     No Default. No
Default or Event of Default shall have occurred and be continuing or could occur
upon the making of the Loan or the issuance of any Letter of Credit in question
and, if Borrower is required to deliver a written Notice of Borrowing, Borrower
shall have delivered to Bank an officer’s certificate to such effect, which may
be incorporated in the Notice of Borrowing.

     

                                  3.2.3     Correctness of
Representations. All representations and warranties made by Borrower and
any Guarantor 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 date of the proposed
Loan or Letter of Credit (except to the extent such representations and
warranties relate expressly to a prior date), and, if Borrower is required to
deliver a written Notice of Borrowing, Borrower shall have delivered to Bank an
officer’s certificate to such effect, which may be incorporated in the Notice of
Borrowing.

     

                                  3.2.4     No Adverse Change.
There shall have been no change which could have a Material Adverse Effect on
Borrower, any Subsidiary or any Guarantor since the date of the most recent
financial statements of such Person delivered to Bank from time to
time.

     

                                  3.2.5     Limitations Not
Exceeded. Any proposed Loan or Letter of Credit shall not cause the
aggregate outstanding principal balance of the Loans and Letter of Credit
Obligations to exceed the lesser of the Revolver Commitment and the Borrowing
Base.

     

                                  3.2.6     No Termination. Bank
shall not have received notice from any Guarantor or any surety terminating or
repudiating such Person’s guaranty of the Obligations incurred by
Borrower.

     

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

     

              4.      Representations
and Warranties. In order to induce Bank to enter into this Agreement and
to make the Loans or extend credit as provided for herein, Borrower makes the
following representations and warranties, all of which shall survive the
execution and delivery of the Loan Documents. Unless otherwise specified, such
representations and warranties shall be deemed made as of the date hereof and as
of the date of each request for a Loan or extension of credit hereunder
:

     

                      
4.1     Valid
Existence and Power. Each Borrower and each Subsidiary is a corporation
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 would have a
Material Adverse Effect. Each of Borrower and each other Person which is a party
to any Loan Document (other than Bank) has the power to make and perform the
Loan Documents executed by it and all such instruments will constitute the
legal, valid and binding obligations of such Person, enforceable in accordance
with their respective terms, subject only to bankruptcy and similar laws
affecting creditors’ rights generally. Borrower is organized under the laws of
the State of Georgia and has not changed the jurisdiction of its organization
within the five years preceding the date hereof.

    
      
         

      

      
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  4.2     Authority.
The execution, delivery and performance thereof by Borrower and each other
Person (other than Bank) executing any Loan Document have been duly authorized
by all necessary actions of such Person, and do not and will not violate any
provision of law or regulation, or any writ, order or decree of any court or
governmental or regulatory authority or agency or any provision of the governing
instruments of such Person, 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 property or
assets of such Person pursuant to, any law, regulation, instrument or agreement
to which any such Person is a party or by which any such Person or its
respective 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 Bank or as incurred by Borrower or any Subsidiary
in the ordinary course of business since the date of the last financial
statements delivered to Bank, neither Borrower nor any Subsidiary nor (to the
knowledge of Borrower) any Guarantor has any material direct or contingent
obligations or liabilities (including any guarantees or leases) that are
required to be disclosed in financial statements or notes thereto in accordance
with GAAP or any material unrealized or anticipated losses from any commitments
of such Person except as described on Exhibit 4.3. All such financial statements
have been prepared in accordance with GAAP and, together with the notes thereto,
fairly present in all material respects the financial condition of Borrower,
Subsidiary or Guarantor, as the case may be, as of the date thereof in
accordance with GAAP. Borrower is not aware of any material adverse fact (other
than facts which are generally available to the public and not particular to
Borrower, such as general economic trends) concerning the condition (financial
or otherwise) or future prospects of Borrower or any Subsidiary or any Guarantor
which has not been fully disclosed to Bank, including any adverse change in the
operations or financial condition of such Person since the date of the most
recent financial statements delivered to Bank. Borrower is Solvent, and after
consummation of the transactions set forth in this Agreement and the other Loan
Documents, Borrower will be Solvent.

     

                      
4.4     Litigation.
Except as disclosed on Exhibit 4.4, there are no suits or proceedings pending,
or to the knowledge of Borrower threatened, before any court or by or before any
governmental or regulatory authority, commission, bureau or agency or public
regulatory body against or affecting Borrower, any Subsidiary or (to Borrower’s
knowledge) any Guarantor, or their assets, which if adversely determined would
have a Material Adverse Effect.

     

                     
 4.5     Agreements,
Etc. Neither Borrower nor any Subsidiary is 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 any such Person 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 that
could reasonably be expected to result in a Material Adverse
Effect.

    
      
         

      

      
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 4.6     Authorizations.
All authorizations, consents, approvals and licenses required under applicable
law or regulation for the ownership or operation of the property owned or
operated by Borrower or any Subsidiary 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
governmental commission, bureau or other administrative agency or public
regulatory body having jurisdiction over such Person, which default would have a
Material Adverse Effect on such Person. Except as noted herein, no approval,
consent or authorization of, or filing or registration with, any governmental
commission, bureau or other regulatory authority or agency is required with
respect to the execution, delivery or performance of any Loan
Document.

     

                      
4.7     Title.
Each of Borrower and each Subsidiary has good title to all of its assets and
properties, free and clear of all Liens, except Permitted Liens. Borrower alone
has full ownership rights in all Collateral.

     

                      
4.8     Collateral.
The security interests granted to Bank 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 Liens, rights of
all third persons, now existing or hereafter arising, except for Permitted
Liens. All of the Collateral is intended for use solely in Borrower’s
business.

     

                     
 4.9     Jurisdiction
of Organization; Location. The jurisdiction in which each of Borrower and
each Subsidiary is organized, existing and in good standing, the chief executive
office of Borrower and each Subsidiary, the office where Borrower’s and each
Subsidiary’s business records are located, all of Borrower’s and each
Subsidiary’s other places of business and any other places where any Collateral
is kept, are all correctly and completely indicated on the Borrower Information
Certificate. The Collateral is located and shall at all times be kept and
maintained only at Borrower’s location or locations as described on the Borrower
Information Certificate. No such Collateral is attached or affixed to any real
property so as to be classified as a fixture unless Bank has otherwise agreed in
writing. Borrower has not changed it legal status or the jurisdiction in which
it is organized or moved its chief executive office within the five (5) years
preceding the date hereof.

     

                    
  4.10   Taxes.
Borrower and each Subsidiary have 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. Neither Borrower nor any Subsidiary is subject to any federal, state
or local tax Liens nor has such Person received any notice of deficiency or
other official notice to pay any taxes. Borrower and each Subsidiary have paid
all sales and excise taxes due and payable by it.

     

                     
 4.11   Labor Law
Matters. No goods or services have been or will be produced by Borrower
or any Subsidiary 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   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 and disclosed to Bank in writing), defense,
set off, claim or counterclaim of a material nature against Borrower except as
to which Borrower has notified Bank 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 Borrower has notified Bank 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; and (f) is for a
liquidated amount maturing as stated in the invoice therefor. Each Account
included in any Notice of Borrowing, Borrowing Base Certificate, report or other
document as an Eligible Account meets all the requirements of an Eligible
Account set forth herein.

    
      
         

      

      
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4.13    Judgment
Liens. Neither Borrower nor any Subsidiary, nor any of their assets, are
subject to any unpaid judgments (whether or not stayed) or any judgment liens in
any jurisdiction.

     

                      
4.14    Corporate
Structure. Except as set forth on Exhibit 4.14 hereto, Borrower has no
Subsidiaries and no corporate or joint venture Affiliates. Since the date of the
last audited financial statements of Borrower and its Subsidiaries delivered to
Bank, Borrower has not made, or obligated itself to make, any dividends (other
than stock dividends) or other distribution on or with respect to, or any
purchase, redemption, retirement or other acquisition of, any equity interests
of Borrower, except as otherwise permitted hereunder. Except as set forth on
Exhibit 4.14 hereto, there are no outstanding options to purchase, or any rights
or warrants to subscribe for, or any commitments or agreements to issue or sell,
or any equity interests or obligations convertible into, or any powers of
attorney relating to, equity interests of Borrower or any of its Subsidiaries.
Except as set forth on Exhibit 4.14 hereto, there are no outstanding agreements
or instruments binding upon the holders of any Subsidiary’s equity interests
relating to the ownership of its equity interests.

     

                      
4.15     Deposit
Accounts. Borrower and its Subsidiaries have no Deposit Accounts other
than (a) on the Closing Date, those listed in the Borrower Information
Certificate and (b) after the Closing Date, those otherwise permitted by Section
6.15.

     

                      
4.16     Environmental. Except as disclosed on
Exhibit 4.16, and except for ordinary and customary amounts of solvents,
cleaners and similar materials used in the ordinary course of Borrower’s
business and in material compliance with all Environmental Laws, neither
Borrower, nor any Subsidiary, nor to Borrower’s knowledge any other previous
owner or operator of any real property currently owned or operated by Borrower,
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. Except as
disclosed on Exhibit 4.16, no Regulated Material has been generated, stored or
disposed of on any portion of the real property currently owned or operated by
Borrower or any Subsidiary by any other Person, or is now located on such
property. Except as disclosed on Exhibit 4.16, each of Borrower and each
Subsidiary is in material compliance with all applicable Environmental Laws and
neither Borrower nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which calls into question compliance by Borrower
with any 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.

     

                      
4.17    ERISA.
If requested by Bank, Borrower has furnished to Bank true and complete copies of
the latest annual report required to be filed pursuant to Section 104 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with
respect to each employee benefit plan or other plan maintained for employees of
Borrower or any Subsidiary and covered by Title IV of ERISA (a “Plan”), and no
Termination Event (as hereinafter defined) with respect to any Plan has occurred
and is continuing. For the purposes of this Agreement, a “Termination Event”
shall mean a “reportable event” as defined in Section 4043(b) of ERISA, or the
filing of a notice of intent to terminate under Section 4041 of ERISA. Neither
Borrower nor any Subsidiary has any unfunded liability with respect to any such
Plan.

     

                      
4.18    Investment
Company Act. Neither Borrower nor any Subsidiary is an “investment
company” as defined in the Investment Company Act of 1940, as
amended.

    
      
         

      

      
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                        4.19       Insider.
Borrower 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 Borrower
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 Bank, of a bank holding company of which Bank is a subsidiary, or of
any subsidiary of a bank holding company of which Bank is a
subsidiary.

     

                        4.20       Sanctioned
Persons; Sanctioned Countries. None of Borrower, its Subsidiaries or its
Affiliates or any Guarantor (i) is a Sanctioned Person or (ii) does business in
a Sanctioned Country or with a Sanctioned Person in violation of the economic
sanctions of the United States administered by OFAC. The proceeds of any Loan
will not be used to fund any operation in, finance any investments or activities
in or make any payments to, a Sanctioned Person or a Sanctioned
Country.

     

                        4.21       Compliance
with Covenants; No Default. Borrower is, and upon funding of the initial
Loans on the Closing Date will be, in compliance with all of the covenants
hereof. No Default or Event of Default has occurred, and the execution, delivery
and performance of the Loan Documents and the funding of the initial Loans on
the Closing Date will not cause a Default or Event of Default.

     

                        4.22       Fiscal
Year. Borrower’s
fiscal year end is December 31 as of the Closing Date.

     

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

     

                        4.24       Borrower
Information Certificate. All representations, warranties and statements
made by Borrower in the Borrower Information Certificate are true and correct,
except, to the extent any information contained therein has changed, (i) no
Default or Event of Default has occurred as a result thereof and (ii) Borrower
has complied with any notice or other reporting obligation to Bank with respect
to such change.

     

              5.       Affirmative
Covenants of Borrower. 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 Loans only to refinance Debt
existing on the Closing Date and for working capital and general corporate
purposes to be used in the operation of Borrower’s business and shall furnish
Bank all evidence that it may require with respect to such use.

     

                       5.2         Maintenance
of Business and Properties. Shall at all times maintain, preserve and
protect all Collateral and all the remainder of its 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.

    
      
         

      

      
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                       5.3         Insurance. Shall maintain such
liability insurance, workers’ compensation insurance, business interruption
insurance and casualty insurance in amounts as may be required by law, if
applicable, or in such amounts as in place on the Closing Date any other
insurance that may be reasonably required by Bank and shall insure and keep
insured all Collateral and other properties with insurance companies
satisfactory to Bank. All hazard insurance covering Collateral shall be in
amounts acceptable to Bank, shall name and directly insure Bank as secured party
and loss payee and shall not be terminable except upon 30 days’ written notice
to Bank. Borrower shall furnish to Bank copies of all such policies and shall
provide evidence of insurance on an annual basis or such more frequent basis as
may be requested by Bank from time to time.

     

                       5.4         Notice of
Default. Shall
provide to Bank immediate notice of (a) the occurrence of a Default or Event of
Default and what action (if any) Borrower is taking to cure the same, (b) any
litigation involving an amount at issue in excess of $100,000 or material
adverse changes in existing litigation or any judgment against it or its assets
in excess of $50,000, (c) any damage or loss to property in excess of $75,000,
(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 in an amount equal to $100,000 or otherwise having a Material
Adverse Effect on any Collateral, (g) the cancellation or termination of, or any
default under, any Material Agreement to which Borrower is a party or by which
any of its properties are bound, or any acceleration of the maturity of any Debt
of Borrower; and (h) any loss or threatened loss of material licenses or
permits.

     

                       5.5         Inspections
of Books and Records and Field Examinations. Shall permit inspections of
the Collateral and the records of such Person pertaining thereto and
verification of the Accounts, at such times and in such manner as may be
required by Bank and shall further permit such inspections, reviews and field
examinations of its other books and records and properties (with such frequency
and at such times as Bank may desire) by Bank as Bank may deem necessary or
desirable from time to time. The cost of all such field examinations, reviews,
verifications and inspections shall be borne by Borrower, provided that the cost
of field examinations shall not exceed $950 per examiner per day, plus Bank’s
reasonable out-of-pocket expenses. So long as no Default or Event of Default
shall exist or have occurred and be continuing, Bank shall not conduct more than
two (2) such inspections, reviews or field examinations in any twelve (12) month
period at the expense of Borrower.

     

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

     

                                   (a)          Periodic Borrowing Base
Information. Within fifteen (15) days of the end of each month (and more
frequently if required by Bank), a completed Borrowing Base Certificate in the
form attached hereto as Exhibit 5.6(a) for the immediately preceding month (a
“Borrowing Base Certificate”). Borrower shall attach the following to each
Borrowing Base Certificate, which shall be certified electronically or manually
by a Senior Officer of Borrower to be accurate and complete and in compliance
with the terms of the Loan Documents: (i) a report listing all Accounts of
Borrower as of the last Business Day of such month (an “Accounts Receivable
Report”) which shall include the amount and age of each Account on an original
invoice date aging basis, the name and mailing address of each Account Debtor, a
detailing of all Accounts which do not constitute Eligible Accounts, and such
other information as Bank may require in order to verify the Eligible Accounts,
all in reasonable detail and in form acceptable to Bank, (ii) a report listing
all Inventory and all Eligible Inventory of Borrower as of the last Business Day
of such month, the cost thereof, specifying raw materials, work-in-process,
finished goods and all Inventory which has not been timely sold by Borrower in
the ordinary course of business, and such other information as Bank may require
relating thereto, all in form acceptable to Bank (an “Inventory Report”), and
(iii) any other report as Bank may from time to time require in its sole
discretion, each prepared with respect to such periods and with respect to such
information and reporting as Bank may require. Notwithstanding any provision
herein to the contrary, Bank reserves the right, in the exercise of its sole
discretion, to calculate the Borrowing Base on a basis more frequently than
monthly from time to time.

    
      
         

      

      
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                                  (b)          Interim Statements.
Within thirty (30) days after the end of each fiscal month of Borrower and
within forty-five (45) days after the end of each fiscal quarter of Borrower,
(i) a consolidated and consolidating balance sheet of Borrower and its
Subsidiaries at the end of that period and a consolidated and consolidating
income statement and statement of cash flows for that period (and for the
portion of the fiscal year of Borrower 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 and (ii) a report reconciling (x) the
Accounts and Inventory of Borrower as set forth on the Accounts Receivable
Report and the Inventory Report attached to the Borrowing Base Certificate to
(y) the aggregate Accounts and Inventory set forth in the financial statements
delivered to Bank pursuant hereto (which shall be based upon Borrower’s general
ledger and verified by a physical Inventory count conducted on a frequency
acceptable to Bank). The foregoing statements and report shall be certified by
the controller of Borrower as true and correct and fairly representing the
financial condition of Borrower and its Subsidiaries and that such statements
are prepared in accordance with GAAP, except without footnotes and subject to
normal year end audit adjustments.

     

                                  (c)          Annual Statements.
Within ninety (90) days after the end of each fiscal year of Borrower, a
detailed audited financial report of Borrower and its Subsidiaries containing a
consolidated and unaudited consolidating balance sheet at the end of that period
and a consolidated and unaudited consolidating 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 acceptable to Bank that the financial statements were prepared in
accordance with GAAP. Borrower shall obtain such written acknowledgments from
Borrower’s independent certified public accountants as Bank may require
permitting Bank to rely on such annual financial statements.

     

                                  (d)          Compliance and No Default
Certificates. Together with each report required to be delivered by
subsection (b) above in connection with the end of each fiscal month and each
fiscal quarter and required to be delivered by subsection (c) above, a
compliance certificate in the form annexed hereto as Exhibit 5.6(d) and a
certificate of a Senior Officer of Borrower certifying that no Default or Event
of Default then exists or if a Default or Event of Default exists, the nature
and duration thereof and Borrower’s intention with respect thereto, and in
addition, a Senior Officer of Borrower shall deliver a copy of such compliance
certificate to Borrower’s independent auditors and to the members (if any) of
the audit committee of the Board of Directors of Borrower.

     

                                  (e)          Auditor’s Management
Letters. Promptly upon receipt thereof, copies of each report submitted
to Borrower by independent public accountants in connection with any annual,
interim or special audit made by them of the books of Borrower including,
without limitation, each report submitted to Borrower concerning its accounting
practices and systems and any final comment letter submitted by such accountants
to management in connection with the annual audit of Borrower.

     

                                  (f)          Payables Report.
Within thirty (30) days of the end of each fiscal month of Borrower (or more
frequently if required by Bank), a schedule of all accounts payable of Borrower
setting forth for each such account the number of days which have elapsed since
the original date of invoice and containing the name and address of each vendor
and such other detail requested by Bank.

    
      
         

      

      
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                                  (g)          SEC Reports. Within
ten (10) days after the issuance thereof, copies of such other financial
statements and reports as Borrower sends to its stockholders and copies of all
regular and periodic reports which Borrower may be required to file with the
Securities and Exchange Commission or any similar or corresponding governmental
commission, department or agency substituted therefor, or any similar or
corresponding governmental authority.

     

                                  (h)          Other Information.
Such other information reasonably requested by Bank from time to time concerning
the business, properties or financial condition of Borrower, Guarantor and their
respective Subsidiaries.

     

                                  (i)          Projections and Cash
Flow/Availability Projections. Within forty-five (45) days following the
commencement of each fiscal year of Borrower following the Closing Date,
Projections for Borrower for such fiscal year, and on or before the last
Business Day of each week, Cash Flow/Availability Projections for Borrower for
such week and for the immediately following twelve (12) week period
thereafter.

     

                        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 and to the extent
only that such taxes are being Properly Contested.

     

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

     

                        5.10     Compliance;
Hazardous Materials. Shall comply with all material laws, regulations,
ordinances and other legal requirements, specifically including, without
limitation, ERISA, all securities laws and all laws relating to hazardous
materials and the environment. Unless approved in writing by Bank, neither
Borrower nor any Subsidiary shall 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. Borrower shall promptly report to Bank any notices of any
violations of such laws or regulations received from any regulatory or
governmental body, along with Borrower’s proposed corrective action as to such
violation.

     

                        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. Borrower makes the following covenants with Bank
regarding the Collateral for itself and each Subsidiary. Borrower and each
Subsidiary:

     

                                  (a)          will
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)          will
defend the Collateral against all claims and demands of all Persons, except for
Permitted Liens;

    
      
         

      

      
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(c)         will promptly deliver
to Bank all promissory notes, drafts, trade acceptances, chattel paper,
Instruments or documents of title which are Collateral in tangible form,
appropriately
endorsed to Bank’s order, and Borrower will not create or permit any Subsidiary
to create any Electronic Chattel Paper without taking all steps deemed necessary
by Bank to confer control of the Electronic Chattel Paper upon Bank in
accordance with the Code;

     

                                   (d)          except
for (i) sales of Inventory in the ordinary course of business, (ii) the
voluntary termination of Swap Agreement to which Borrower or such Subsidiary is
a party, and (iii) Permitted Liens, will not sell, assign, lease, transfer,
pledge, hypothecate or otherwise dispose of or encumber any Collateral or any
interest therein;

     

                                   (e)          shall
promptly notify Bank of any future patents, trademarks or copyrights owned by
Borrower or any Subsidiary and any license agreements entered into by Borrower
or any Subsidiary authorizing said Person to use any patents, trademarks or
copyrights owned by third parties; and

     

                                   (f) 
         shall promptly notify Bank
in writing of any new trade or fictitious name. Borrower’s or any Subsidiary’s
use of any trade or fictitious name shall be in compliance with all laws
regarding the use of such names.

     

                        5.13      Post-Closing
Covenants. In
addition to all other terms, conditions and provisions set forth herein and in
the other Loan Documents, Borrower shall perform or cause to be performed the
following covenants:

     

                                   5.13.1
Borrower shall obtain and deliver to Bank, in form and substance satisfactory to
Bank, as soon as possible, but in no event later than April 30, 2009 (or such
later date as Bank shall agree in writing), evidence of the termination of the
UCC financing statement naming Chatham Credit Management III, LLC, as Agent, as
secured party, and Borrower, as debtor.

     

                                   5.13.2
Borrower shall obtain and deliver to Bank, in form and substance satisfactory to
Bank, as soon as possible, but in no event later than May 15, 2009 (or such
later date as Bank shall agree in writing), a certificate issued by the
Secretary of State or other applicable government authority of the State of Ohio
certifying that Borrower is qualified to do business as a foreign corporation
and is in good standing in the State of Ohio.

     

                                   5.13.3
Borrower shall use commercially reasonable efforts to obtain and deliver to
deliver to Bank, in form and substance satisfactory to Bank, as soon as
possible, but in no event later than July 31, 2009 (or such later date as Bank
shall agree in writing), Third Party Waivers with respect to all premises leased
by Borrower where Collateral is or will be maintained.

     

              6.          Negative
Covenants of Borrower. 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:

     

                          6.1     Debt.
Shall not create or permit to exist any Debt, including any guaranties or other
contingent obligations, except the following (“Permitted
Debt”):

     

                                
    (a)          
the Obligations;

     

                                  (b)          endorsement
of checks for collection in the ordinary course of business;

     

                                  (c)          accounts
payable to trade creditors which are not aged more than ninety (90) days from
billing date and current operating expenses (other than for borrowed money)
which are not more than thirty (30) days past due, in each case incurred in the
ordinary course of business and paid within such time period, unless the same
are actively being Properly Contested;

    
      
         

      

      
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                                  (d)          purchase
money Debt not exceeding $3,000,000 in aggregate principal amount at any time
outstanding for Borrower and all Subsidiaries incurred to purchase Equipment,
provided that the amount of such Debt shall not at any time exceed the purchase
price of the Equipment purchased;

     

                                  (e)          Debt
for taxes not at the time due and payable or deferred taxes or which are being
actively Properly Contested;

     

                                  (f)          
Subordinated Debt issued by Borrower subordinated in favor of Bank pursuant to
an executed subordination agreement on terms and conditions satisfactory to Bank
in all respects not exceeding $500,000 in aggregate principal amount at any time
outstanding;

     

                                  (g)          accrued
pension fund and other employee benefit plan obligations and liabilities
(provided, however, that such Debt does not result in the existence of any Event
of Default hereunder); and

     

                                  (h)          Debt
existing on the Closing Date and not otherwise permitted under this Section 6.1,
as set forth on Exhibit 6.1 hereto, and the renewal and refinancing (but not the
increase in the aggregate principal amount) thereof.

     

                        6.2       Liens.
Shall not create or permit any Liens on any of its property except the following
(“Permitted Liens”):

     

                                 
   (a)          Liens
securing the Obligations;

     

                                  (b)          Liens
for taxes, assessments and other governmental charges or levies (excluding any
Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws)
not yet due and payable or which are being Properly Contested;

     

                                  (c)          
The claims of materialmen, mechanics, carriers, warehousemen, processor or
landlords arising out of operation of law so long as the obligations secured
thereby are not past due or are being Properly Contested;

     

                                  (d)          Liens
consisting of deposits or pledges made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance, social security
and similar laws;

     

                                  (e)          Judgment
and other similar non-tax Liens arising in connection with court proceedings but
only if and for so long as (a) the execution or enforcement of such Liens is and
continues to be effectively stayed and bonded on appeal, (b) the validity and/or
amount of the claims secured thereby are being Properly Contested and (c) 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;

     

                                  (f)          Liens
securing Permitted Debt incurred solely for the purpose of purchase money
financing for the acquisition of Equipment, provided that such Lien does not
secure more than the purchase price of such Equipment and does not encumber
property other than the purchased property; and

    
      
         

      

      
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                                  (g)          Liens
not otherwise permitted by this Section 6.2, in existence on the Closing Date
and described on Exhibit 6.2.

     

                        6.3       Restricted
Payments. Shall
not pay or declare any dividends (other than stock dividends) or other
distribution or purchase, redeem or otherwise acquire any stock or other equity
interests or pay or acquire any Debt subordinate to the Obligations except that
(i) any Subsidiary may pay dividends to Borrower or another Subsidiary
wholly-owned by Borrower, (ii) so long as no Default or Event of Default is in
existence before or after giving effect thereto, Borrower may declare and pay
dividends to its stockholders not exceeding forty (40%) percent of Borrower’s
consolidated net income, determined in accordance with GAAP, in the aggregate in
any fiscal year, and (iii) so long as no Default or Event of Default is in
existence before or after giving effect thereto, Borrower may repurchase stock
in an amount not exceeding $750,000 in the aggregate in any fiscal
year.

     

                        6.4       Loans and
Other Investments. Shall not make or permit to exist any advances or
loans to, or guarantee or become contingently liable, directly or indirectly, in
connection with the obligations, leases, stock or dividends of, or own, purchase
or make any commitment to purchase any stock, bonds, notes, debentures or other
securities of, or any interest in, or make any capital contributions to any
Person, except for (a) purchases of direct obligations of the federal
government, (b) deposits in commercial banks, (c) commercial paper of any U.S.
corporation having the highest ratings then given by the Moody’s Investors
Services, Inc. or Standard & Poor’s Corporation, (d) loans and investments
in Subsidiaries created, acquired and existing in compliance with Section 6.12,
(e) endorsement of negotiable instruments for collection in the ordinary course
of business, and (f) advances to employees for business travel and other
expenses incurred in the ordinary course of business which do not at any time
exceed $50,000 in the aggregate.

     

                        6.5       Change in
Business. Shall not enter into any business which is substantially
different from the business in which it is engaged on the Closing
Date.

     

                        6.6       Accounts.
(a) Shall not sell, assign or discount any of its Accounts, Chattel Paper or any
promissory notes held by it other than the discount of such notes in the
ordinary course of business for collection; (b) shall not create or accept any
Account, Instrument, Chattel Paper or other obligation of any kind due from or
owed by a Sanctioned Person or enter into any lease that secures the Obligations
where the lessee is a Sanctioned Person; and (c) shall notify Bank promptly in
writing of any discount, offset or other deductions not shown on the face of an
Account invoice and any dispute over an Account, and any information relating to
an adverse change in any Account Debtor’s financial condition or ability to pay
its obligations or if it learns that any Account Debtor is a Sanctioned
Person.

     

                        6.7       Transactions
with Affiliates. Shall not 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 (i)
the acts or transactions described on Exhibit 6.7 hereto are not prohibited by
this Section 6.7 and (ii) any acts or transactions prohibited by this Section
may be performed or engaged in if upon terms not less favorable to Borrower or
such Subsidiary than if no such relationship existed.

     

                        6.8       No Change
in Name, Offices or Jurisdiction of Organization; Removal of Collateral.
Shall not change its name or the jurisdiction in which it is organized or,
unless it shall have given thirty (30) days’ advance written notice thereof to
Bank, change the location of its chief executive office or other office where
books or records are kept, or permit any Inventory or other tangible Collateral
to be located at any location other than as specified in the Borrower
Information Certificate.

    
      
         

      

      
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                        6.9       No Sale,
Leaseback. Shall not enter into any sale-and-leaseback or similar
transaction.

     

                        6.10      Margin
Stock. Shall not 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.

     

                        6.11      Tangible
Collateral. Shall not, 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.

     

                        6.12      Subsidiaries.
Shall not acquire, form or dispose of any Subsidiaries or permit any Subsidiary
to issue capital stock except to its parent.

     

                        6.13      Liquidation,
Mergers, Consolidations and Dispositions of Substantial Assets, Name and Good
Standing.

     

                               
    (a)        
Shall not merge, reorganize, consolidate or amalgamate with any
Person;

     

                                
   (b)         Shall not
liquidate, wind up its affairs or dissolve itself;

     

                                
  (c)         Shall not
acquire by purchase, lease or otherwise, all or substantially all of the assets
of any Person, the assets of any division or line of business of any Person, or
any other substantial amount of the assets of any Person outside of the ordinary
course of business, whether in a single
transaction or in a series of related transactions;

     

                                  
(d)         Shall not sell, transfer, lease
or otherwise dispose of any of its property or assets, or sell or dispose of any
equity ownership interests in any Subsidiary, in each case whether in a single
transaction or in a series of related transactions, except for:

     

                                           (i)  
the sale of Inventory in the ordinary course of business,

     

                                           (ii)
the sale of property or assets outside the ordinary course of business in the
aggregate amount not to exceed $100,000 during any twelve (12) consecutive month
period, and

     

                                           (iii)
the voluntary termination of Swap Agreements to which Borrower or such
Subsidiary is a party;

     

                              
    (e)          Shall
not change its name or jurisdiction of organization or conduct business under
any new fictitious name;

     

                                    (f)          Shall
not change its Federal Employer Identification Number; or

     

                                  (g)         Shall
not fail to remain in good standing and qualified to transact business as a
foreign corporation in any state or other jurisdiction in which it is required
to be qualified to transact business as a foreign corporation and in which the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect.

     

                        6.14      Change of
Fiscal Year or Accounting Methods. Shall not change its fiscal year or
its accounting methods without providing thirty (30) days prior written notice
to Bank.

    
      
         

      

      
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  6.15      Deposit
Accounts. Shall not open or maintain any Deposit Accounts except for (i)
Deposit Accounts opened or maintained at Bank, (ii) those listed on the Borrower
Information Certificate, (iii) Deposit Accounts which are not opened or
maintained at Bank but which are subject to Bank’s “control” (as such term is
used in Article 9 of the Code) on terms reasonably satisfactory to Bank, and
(iv) such other Deposit Accounts as shall be necessary for payroll, petty cash,
local trade payables, and other occasional needs of Borrower. The aggregate
balance of any Deposit Accounts (other than payroll accounts) which are not
subject to Bank’s “control” (as such term is used in Article 9 of the Code) on
terms reasonably acceptable to Bank shall never exceed $25,000 without Bank’s
prior written consent. Borrower shall maintain its primary Deposit Account and
cash management Deposit Accounts with Bank. All Deposit Accounts maintained at
Bank shall be deemed to be under Bank’s “control” as such term is used in
Article 9 of the Code.

     

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

     

                        
7.1       Fixed
Charge Coverage Ratio. During any period in which Average Excess
Availability is less than $6,500,000, Borrower and its Subsidiaries, on a
consolidated basis, shall maintain, as of the end of each fiscal month of
Borrower, a Fixed Charge Coverage Ratio of not less than 1.35 to 1.00 for the immediately
preceding period of twelve (12) consecutive fiscal months.

     

                       
 7.2       Capital
Expenditures. Borrower shall not permit the aggregate amount of all
Capital Expenditures of Borrower and its Subsidiaries during any fiscal year of
Borrower to exceed $3,500,000; provided, that, (a) in the event that the actual
amount of Capital Expenditures of Borrower and its Subsidiaries during any
fiscal year is less than the amount permitted hereunder, Capital Expenditures
may be made in the immediately succeeding fiscal year in the amount equal to the
amount permitted to be made during such fiscal year plus one hundred (100%)
percent of such excess amount from the immediately preceding fiscal year
(rounded to the nearest $100,000), and (b) any Capital Expenditures made in any
fiscal year shall be deemed to be made first from the excess amount from the
immediately preceding fiscal year and then to the applicable limitation for such
fiscal year.

     

                       
 7.3       Minimum
Excess Availability. Borrower shall maintain Excess Availability at all
times in an amount of not less than $1,500,000.

     

            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 in respect of the Loans or any fee due, any other amounts due
hereunder or any other Loan Document, or any other Obligations; or

     

                             
   (b)          There
shall occur any default by Borrower in the performance of any agreement,
covenant or obligation contained in Sections 5.1, 5.4, 5.5, 5.6 (other than
subsections (g) and (h)), 5.9, 5.12 (other than subsections (b) and (c)),
Section 6 or Section 7 of this Agreement; or

     

                             
   (c)          There
shall occur any default by Borrower or any other party to any Loan Document
(other than Bank) in the performance of any other agreement, covenant or
obligation contained in this Agreement or such Loan Document not provided for
elsewhere in this Section 8 and the breach of such other agreement, covenant or
obligation is not cured to Bank’s satisfaction within thirty (30) days after the
sooner to occur of any Senior Officer’s receipt of notice of such breach from
Bank or the date on which such failure or neglect first becomes known to any
Senior Officer; provided, however, that such notice and
opportunity to cure shall not apply in the case of any failure to perform, keep
or observe any covenant which is not capable of being cured at all or within
such thirty (30) day period or which is a willful and knowing breach by Borrower
or such other party; or

    
      
         

      

      
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                                (d)          Any
representation or warranty made by Borrower or any other party to any Loan
Document (other than Bank) 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

     

                             
  (e)          Any
other obligation now or hereafter owed by Borrower or any Subsidiary or any
Guarantor to Bank or any Affiliate of Bank shall be in default and not cured
within the grace period, if any, provided therein; or

     

                                (f)          Borrower
or any Subsidiary or Guarantor shall fail to make any payment in respect of
outstanding Debt (other than the Obligations) in an aggregate principal amount
of $50,000 or more when due after the expiration of any applicable grace period,
or any event or condition shall occur which results in the acceleration of the
maturity of such Debt (including, without limitation, any required mandatory
prepayment or “put” of such Debt to any such Person) or enables (or, with the
giving of notice or lapse of time or both, would enable) the holders of such
Debt or a commitment related to such Debt (or any Person acting on such holders’
behalf) to accelerate the maturity thereof or terminate any such commitment
prior to its normal expiration (including, without limitation, any required
mandatory prepayment or “put” of such Debt to such Person); or

     

                                (g)          Borrower
or any Subsidiary or any Guarantor shall (A) voluntarily dissolve, liquidate or
terminate operations or apply for or consent to the 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, (B) admit in writing
its inability, or be generally unable, to pay its debts as the debts become due,
(C) make a general assignment for the benefit of its creditors, (D) commence a
voluntary case under the federal Bankruptcy Code (as now or hereafter in
effect), (E) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding up, or composition or
adjustment of debts, (F) 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 (G) take any corporate action for the purpose of
effecting any of the foregoing; or

     

                                (h)          An
involuntary petition or complaint shall be filed against Borrower or any
Subsidiary or any Guarantor seeking bankruptcy relief or reorganization or the
appointment of a receiver, custodian, trustee, intervenor or liquidator of
Borrower or any Subsidiary or any Guarantor, 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;
or

     

                                (i)          A
judgment in excess of $100,000 shall be rendered against Borrower or any
Subsidiary or any Guarantor and shall remain undischarged, undismissed and
unstayed for more than 20 days or there shall occur any levy upon, or
attachment, garnishment or other seizure of, any portion of the Collateral or
other assets of Borrower, any Subsidiary or any Guarantor in excess of $50,000
by reason of the issuance of any tax levy, judicial attachment or garnishment or
levy of execution; or

     

                                 (j)          Any
Guarantor shall repudiate or revoke any Guaranty Agreement; or

    
      
         

      

      
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   (k)          Loss,
theft, damage or destruction of any portion of the tangible Collateral with an
aggregate book value in excess of $100,000 for which there is either no
insurance coverage or for which, in the reasonable opinion of Bank, there is
insufficient insurance coverage; or

     

                                 
 (l)          There shall
occur any default by Borrower under any Material Agreement in the performance of
Borrower’s duties and obligations thereunder resulting in the termination of
such Material Agreement; or

     

                                 
 (m)         There shall occur
any change in the condition (financial or otherwise) of Borrower, any Subsidiary
and/or any Guarantor which, in the reasonable opinion of Bank, would have a
Material Adverse Effect; or

     

                                  
(n)          Scott D. Dorfman
shall on a fully diluted basis, cease to control, with sole power to vote, at
least 40% of each class of voting stock or other equity or income interests of
Borrower; or

     

                                 
 (o)          the
individual holding the position of chief financial officer of Borrower on the
date hereof is no longer employed in such position and Borrower shall not have
replaced such individual within ninety (90) days thereafter with a new chief
financial officer acceptable to Bank.

     

                        8.2      
Remedies.
If any Default shall occur, Bank may, without notice to Borrower, at its option,
withhold further Loans or other extensions of credit to Borrower. If an Event of
Default shall have occurred and be continuing, Bank may at its option take any
or all of the following actions:

     

                                   (a)          Bank
may declare any or all Obligations (other than Obligations under any Swap
Agreements, between Borrower and Bank or any Affiliate of Bank, which shall be
due in accordance with and governed by the provisions of said Swap Agreements)
to be immediately due and payable (if not earlier demanded) (provided, that, upon the occurrence of
any Event of Default described in Sections 8.1(g) or 8.1(h), all Obligations
shall automatically become immediately due and payable), terminate its
obligation to make Loans and other extensions of credit to Borrower, bring suit
against Borrower to collect the Obligations, exercise any remedy available to
Bank hereunder or at law and take any action or exercise any remedy provided
herein or in any other Loan Document or under applicable law. No remedy shall be
exclusive of other remedies or impair the right of Bank to exercise any other
remedies.

     

                               
   (b)          Without
waiving any of its other rights hereunder or under any other Loan Document, Bank
shall have 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. If requested by Bank, Borrower will promptly assemble the
Collateral and make it available to Bank at a place to be designated by Bank.
Borrower agrees that any notice by Bank 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.

     

                               
   (c)          Bank
may demand, collect and sue for all amounts owed pursuant to Accounts, General
Intangibles, Chattel Paper, Instruments, Documents 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.

    
      
         

      

      
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                        8.3          Receiver.
In addition to any other remedy available to it, Bank 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 Bank
in connection with such receivership shall bear interest at the Default Rate, at
Bank’s option, and shall be secured by all Collateral.

     

                        8.4          Deposits;
Insurance. After the occurrence of an Event of Default, Borrower
authorizes Bank to collect and apply against the Obligations when due any cash
or Deposit Accounts in its possession, and any refund of insurance premiums or
any insurance proceeds payable on account of the loss or damage to any of the
Collateral and irrevocably appoints Bank as its attorney in fact to endorse any
check or draft or take other action necessary to obtain such
funds.

     

              9.      Security
Agreement.

     

                        9.1          Security
Interest.

     

                                    (a)          As
security for the payment and performance of any and all Obligations and the
performance of all obligations and covenants of Borrower to Bank and its
Affiliates, whether hereunder and under the other Loan Documents, Swap
Agreements between Bank or any Affiliate of Bank and Borrower or otherwise,
certain or contingent, now existing or hereafter arising, which are now, or may
at any time or times hereafter be owing by Borrower to Bank or any of Bank’s
Affiliates, Borrower hereby grants to Bank (for itself and its Affiliates) 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.

     

                                    (b)          Except
as herein or by applicable law otherwise expressly provided, Bank shall not 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 Bank 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
Bank to take and Bank’s 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 Bank 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 Bank’s options, powers or rights
under this Agreement or otherwise arising.

     

                                    (c)          Bank
may at any time and from time to time, with or without notice to Borrower during
the continuance of an Event of Default, (i) transfer into the name of Bank or
the name of Bank’s nominee any of the Collateral, (ii) notify any Account Debtor
or other obligor of any Collateral to make payment thereon direct to Bank of any
amounts due or to become due thereon and (iii) receive and direct the
disposition of any proceeds of any Collateral.

     

                                    (d)          Notwithstanding
the foregoing, (i) no Account, Instrument, Chattel Paper or other obligation or
property of any kind due from, owed by or belonging to, a Sanctioned Person or
(ii) any lease in which the lessee is a Sanctioned Person shall be Collateral or
shall be credited toward the payment of the Obligations.

    
      
         

      

      
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                        9.2          Financing
Statements; Power of Attorney. Borrower authorizes Bank at Borrower’s
expense to file any financing statements and/or amendments thereto relating to
the Collateral (without Borrower’s signature thereon) which Bank deems
appropriate that (a) indicate the Collateral (i) as “all assets” of Borrower or
words of similar effect, if appropriate, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the
Code, or (ii) by specific Collateral category, and (b) provide any other
information required by part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance of any financing statement or amendment. Borrower
irrevocably appoints Bank as its attorney in fact to execute any such financing
statements and/or control agreements in Borrower’s name and to perform all other
acts, at Borrower’s expense, which Bank deems necessary to perfect and to
continue perfection of the security interest of Bank. Borrower hereby appoints
Bank 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. During the
continuance of an Event of Default, Bank 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 Bank’s benefit. The
proceeds realized from the sale or other disposition of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
reasonable costs, expenses and attorneys’ fees and expenses incurred by Bank for
collection and for acquisition, completion, protection, removal, storage, sale
and delivering of the Collateral; second, to interest due upon any of the
Obligations; third, to the principal amount of the Obligations and to any other
Obligations then outstanding; and fourth to any other Person as required by
applicable law. If any deficiency shall arise, Borrower and each Guarantor shall
remain jointly and severally liable to Bank therefor.

     

                        9.3          Entry.
Borrower hereby irrevocably consents to any act by Bank or its agents in
entering upon any premises for the purposes of either (i) inspecting the
Collateral or (ii) during the continuance of an Event of Default, taking
possession of the Collateral and Borrower hereby waives its right to assert
against Bank or its agents any claim based upon trespass or any similar cause of
action, to the extent that Bank has acted in accordance with this Section 9.3,
for entering upon any premises where the Collateral may be
located.

     

                        9.4          Other
Rights. Borrower authorizes Bank 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 and the
enforcement of any endorsements, guaranties, letters of credit or other security
relating to the Obligations or any part thereof as Bank in its sole discretion
may determine.

     

                        9.5          Accounts.
During the continuance of an Event of Default, Bank may notify any Account
Debtor of Bank’s security interest and may direct such Account Debtor to make
payment directly to Bank for application against the Obligations. Any such
payments received by or on behalf of Borrower at any time, during the
continuance of an Event of Default, shall be the property of Bank, shall be held
in trust for Bank and not commingled with any other assets of any Person (except
to the extent they may be commingled with other assets of Borrower in an account
with Bank) and shall be immediately delivered to Bank in the form
received.

     

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

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

                        9.7          Control.
Borrower will cooperate with Bank in obtaining control of, or control agreements
with respect to, Collateral for which control or a control agreement is required
for perfection of Bank’s security interest under the Code.

     

              10.    Miscellaneous.

     

                        10.1       No
Waiver, Remedies Cumulative. No failure on the part of Bank 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 shall continue in full force and
effect so long as any Obligations is outstanding, there exists any commitment by
Bank 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 Bank 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, fines, fees, costs and expenses (including,
without limitation, attorneys’ and paralegals’ fees, costs and expenses, and
fees, costs and expenses for investigations and experts) 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 and the perfection of Bank’s Liens in the Collateral,
maintenance of the Loan by Bank, and any and all amendments, 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 Bank’s furnishing of funds to
Borrower under this Agreement, (iii) Bank’s preservation, administration and
enforcement of its rights under the Loan Documents and applicable law, including
the fees and disbursements of counsel for Bank in connection therewith, whether
suit be brought or not and whether incurred at trial or on appeal, and all costs
of repossession, storage, disposition, protection and collection of Collateral,
(iv) periodic field exams, audits and appraisals performed by Bank pursuant to
Section 5.5 hereof;(v) any civil penalty or fine assessed by OFAC against Bank
or any Affiliate of Bank and all reasonable costs and expense (including counsel
fees and disbursements) incurred in connection with defense thereof by Bank or
such Affiliate, as a result of the funding of Loans or the extension of credit,
the acceptance of payments due under the Loan Documents or any Swap Agreement or
acceptance of Collateral, and/or (vi) any matter relating to the financing
transactions contemplated by the Loan Documents or by any document executed in
connection with the transactions contemplated thereby; but in all instances,
other than for such loss, damage, liability, obligation, penalty, fee, cost or
expense arising from such indemnitee’s gross negligence or willful misconduct.
If Borrower should fail to pay any tax or other amount required by this
Agreement to be paid or which may be reasonably necessary to protect or preserve
any Collateral or Borrower’s or Bank’s interests therein, Bank may make such
payment and the amount thereof shall be payable on demand, may at Bank’s option
be debited against any Deposit Account of Borrower at Bank or converted to a
Loan hereunder, shall bear interest at the Default Rate from the date of demand
until paid and shall be deemed to be Obligations entitled to the benefit and
security of the Loan Documents. In addition, Borrower agrees to pay and save
Bank 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 Loan,
whether originally thought to be due or not, and regardless of any mistake of
fact or law on the part of Bank 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 Bank shall be part of the Obligations, secured by the Collateral, chargeable
against Borrower’s loan account, and shall survive termination of this
Agreement.

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

     

                        10.4      
    Notices.
Any notice or other communication hereunder to any party hereto or thereto shall
be by hand delivery, overnight delivery via nationally recognized overnight
delivery service, facsimile with receipt confirmed, telegram, telex or
registered or certified United States mail with return receipt and unless
otherwise provided herein shall be deemed to have been given or made when
delivered, telegraphed, telexed, faxed or, if sent via United States mail, when
receipt signed by the receiver, 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):

    
      
        
          	 	 
      	 
      
	 	
                  Bank:

                	
                  Wachovia
      Bank, National Association

                  171
      17th Street, N.W., 4th Floor

                  Atlanta,
      Georgia 30363

                  Attn:
      Portfolio Manager

                
	 	 
      	 
      
	 	
                  Borrower:

                	
                  Innotrac
      Corporation

                  6655
      Sugarloaf Pkwy.

                  Duluth,
      Georgia 30097

                  Attn:
      Scott D. Dorfman

                

        

      

    

     

                        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 the State of Georgia (excluding its conflict of laws
provisions if such provisions would require application of the laws of another
jurisdiction) except insofar as the laws of another jurisdiction may, by reason
of mandatory provisions of law, govern the perfection, priority and enforcement
of security interests in the Collateral.

     

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

     

                        10.7      
    Counterparts;
Telecopied Signatures. 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. Any
signature delivered by a party by facsimile transmission shall be deemed to be
an original signature hereto.

     

                        10.8        
  No
Usury. Regardless of any other provision of this Agreement 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 Loans and not to the payment of interest, and (ii) if the Loans
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 Loans or the
refunding of excess to be a complete settlement and acquittance
thereof.

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

     

                        10.9          Powers.
All powers of attorney granted to Bank are coupled with an interest and are
irrevocable.

     

                        10.10        Approvals;
Amendments. If this Agreement calls for the approval or consent of Bank,
such approval or consent may be given or withheld in the discretion of Bank
unless otherwise specified herein. This Agreement and the other Loan Documents
may not be modified, altered or amended, except by an agreement in writing
signed by Borrower and Bank and may not be modified in any manner adverse to a
provider under any secured or guarantied Swap Agreement without that provider’s
prior written consent.

     

                        10.11        Participations
and Assignments. Bank shall have the right to enter into one or more
participations with other lenders with respect to the Obligations and, upon
receipt of Borrower’s prior written consent (which consent shall not be
unreasonably withheld or delayed), to assign to one or more assignees all or a
portion of its interest, rights and obligations under the Loan Documents,
provided that any such consent from Borrower shall not be required during the
continuance of an Event of Default. Upon prior notice to Borrower of such
participation or assignment, Borrower shall thereafter furnish to such
participant or assignee any information furnished by Borrower to Bank pursuant
to the terms of the Loan Documents. Nothing in this Agreement or any other Loan
Document shall prohibit Bank from pledging or assigning this Agreement and
Bank’s rights under any of the other Loan Documents, including collateral
therefor, to any Federal Reserve Bank in accordance with applicable
law.

     

                        10.12        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. Bank shall have the right to deal with any
individual of any Borrower with regard to all matters concerning the rights and
obligations of Bank 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.

     

                        10.13        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 Bank
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 Bank
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.

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

     

                        10.14        Additional
Provisions. Time is of the essence of this Agreement and the other Loan
Documents. This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written. No provision of this
Agreement or any of the other Loan Documents shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of such party having or being
deemed to have structured, drafted or dictated such provision.

     

                        10.15        Integration; Final Agreement.
This Agreement and the other loan documents represent the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.

     

                        10.16        LIMITATION
ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO,
INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR
ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM (A
“DISPUTE”) THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT,
THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR
THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY
HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES
HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY
MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY DISPUTE,
WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR
OTHERWISE.

     

                        10.17        BINDING ARBITRATION;
PRESERVATION OF REMEDIES.

     

                                           (a)          Binding Arbitration.
Upon demand of any party hereto, whether made before or after institution of any
judicial proceeding, any claim or controversy between parties hereto arising out
of or relating to this Agreement or any other Loan Documents shall be resolved
by binding arbitration conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration
Association (the “AAA”) and the Federal Arbitration Act. Disputes may include,
without limitation, tort claims, counterclaims, a dispute as to whether a matter
is subject to arbitration, claims brought as class actions, or claims arising
from documents executed in the future. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to Swap
Agreements.

     

                                           (b)          Special Rules. All
arbitration hearings shall be conducted in the city named in the address of Bank
first stated above. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall conclude within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein.

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

     

                                          (c)         
 Preservation and
Limitation of Remedies. Notwithstanding the preceding binding arbitration
provisions, the parties agree to preserve, without diminution, certain remedies
that any party may exercise before or after an arbitration proceeding is
brought. The parties shall have the right to proceed in any court of proper
jurisdiction or by self-help to exercise or prosecute the following remedies, as
applicable: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale or under applicable law by judicial
foreclosure including a proceeding to confirm the sale; (ii) all rights of
self-help including peaceful occupation of real property and collection of
rents, set-off, and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and filing an involuntary
bankruptcy proceeding; and (iv) when applicable, a judgment by confession of
judgment. Any claim or controversy with regard to any party’s entitlement to
such remedies is a Dispute.

     

                                         
(d)          Waiver of Jury Trial.
THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.

     

    [Signatures
on following page]

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

     

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

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	 
      
	 
      	
                                    BORROWER:

                                  
	 
      	 
      
	 
      	
                                    INNOTRAC
      CORPORATION

                                  
	 
      	 
      
	 
      	
                                    By

                                  	
                                    /s/
      Scott D. Dorfman

                                  	
                                     

                                  
	 
      	
                                    Name:

                                  	
                                    Scott
      D. Dorfman

                                  
	 
      	
                                    Its:

                                  	
                                    President

                                  
	 
      	 
      
	 
      	
                                    BANK:

                                  
	 	 
	 
      	
                                    WACHOVIA
      BANK, NATIONAL ASSOCIATION

                                  
	 
      	 
      
	 
      	
                                    By    
      

                                  	
                                    /Jeanette
      K. Childress

                                  	
                                     

                                  
	 
      	
                                    Name:

                                  	
                                    Jeanette
      K. Childress

                                  	
                                     

                                  
	 
      	
                                    Its:

                                  	
                                    Director

                                  

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      43Supplemental Letter Agreement

 Exhibit 4.5 
 SUPPLEMENTAL LETTER 
  

			
	To:	  	DryShips Inc.
		  	Trust Company Complex
		  	Ajeltake Road
		  	Ajeltake Island
		  	Majuro
		  	The Marshall Islands MH 96960
		
	From:	  	HSH Nordbank AG
		  	Gerhart-Hauptmann-Platz 50
		  	D-20095 Hamburg
		  	Germany

 Dear Sirs 
 15 May 2006 
  

	1.	Background. 

  

	(A)	By a loan agreement (the “Senior Loan Agreement”) dated 31 March 2006 and made between (i) DryShips Inc. as borrower (the “Borrower”),
(ii) the banks and financial institutions listed therein as lenders (the “Senior Lenders”), (iii) the banks and financial institutions listed therein as swap banks, (iv) ourselves as agent, lead arranger, lead
bookrunner and security trustee, (v) ourselves and The Governor and Company of the Bank of Scotland (“BOS”) as joint underwriters and (vi) BOS as joint bookrunner, it was agreed that the Senior Lenders would make available to
the Borrower a term loan and short-term credit facilities of up to US$518,750,000 (the “Senior Loan”) in agreement. 

  

	(B)	By a loan agreement (the “Junior Loan Agreement”) dated 31 March 2006 and made between (i) the Borrower, (ii) the banks and financial institutions listed
therein as lenders (the “Junior Lenders” and together with the Senior Lenders, the “Lenders”), (iii) the banks and financial institutions listed therein as swap banks, (iv) ourselves as agent, lead arranger,
lead bookrunner and security trustee and (v) BOS as joint bookrunner it was agreed that the Junior Lenders would make available to the borrower a term loan and short-term credit facilities of up to US$110,000,000 (the “Junior
Loan”) in aggregate. 

  

	(c)	The Borrower has requested to drawdown an amount of US$26,512,500 representing 79.38 per cent. of the Market Value of the vessel “ATACAMA” (tbr “MAGANARI”)
(the “Ship”) to part-finance the acquisition of the Ship, which is one of the Additional Ships referred to in each of the Senior Loan Agreement and the Junior Loan Agreement (together, the “Loan Agreements” and each
a “Loan Agreement”). Under the terms of the Loan Agreements the amount of the Additional Advances which may be made available under the Loan Agreements to finance the acquisition of an Additional Ship may not exceed 75 per
cent. of the Market Value of that Additional Ship. 

 Words and expressions defined in the Loan Agreements shall have the same
meanings when used in this Letter unless otherwise defined or unless the context otherwise requires. 

	2.	Agreement and Amendments to the Senior Loan Agreement and the Junior Loan Agreement. Subject to the satisfaction of the conditions of this Letter and your agreement to repay
the Additional Advances which shall be used to finance the Additional Ship in the manner referred to in the Schedule to this Letter, we (in our capacity as Agent for the Lenders) agree to give our consent to your request. We also hereby confirm and
agree that the terms of Clauses 8.1(a)(ii) and 8.1(b) of each Loan Agreement (dealing with the Repayment Instalments and Balloon Instalments of the Additional Advances), shall not apply to each Additional Advance in respect of the Ship and each such
Additional Advance shall be repaid in accordance with the Schedule to this Letter. Clauses 8.l(a)(ii) and 8.l(b) of each Loan Agreement shall, as they relate to the Repayment Instalments and Balloon Instalments and the Balloon lnstalment for each
Additional Advance in respect of that Ship, be read and construed accordingly. 

  

	3.	Representations and Warranties. The Borrower hereby represents and warrants to the Lenders that: 

  

	(a)	the representations and warranties contained in each Loan Agreement are true and correct on the date of this Letter as if all references therein to “this Agreement” were
references to each of the Senior Loan Agreement and the Junior Loan Agreement as supplemented by this Letter; and 

  

	(b)	this Letter comprises the legal, valid and binding obligations of the Borrower enforceable in accordance with its terms. 

  

	4.	Conditions. Our agreement contained in paragraph 2 of this Letter shall be expressly subject to the condition that each Additional Advance in respect of the Ship will be
repaid in the form set out in the Schedule hereto and that we shall have received in form and substance as may be approved or required by us on or before the signature hereof: 

  

	(a)	copies of resolutions passed at a meeting of the board of directors of the Borrower evidencing approval of this Letter and authorising appropriate officers or attorneys to execute
the same; 

  

	(b)	the original of any power of attorney issued in favour of any person executing this Letter on behalf of the Borrower; and 

  

	(c)	copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by the Borrower of its obligations under this
Letter and the execution validity and enforceability of this Letter. 

  

	5.	Senior Loan Agreement, Junior Loan Agreement and Finance Documents. The Borrower hereby agrees with the Lenders that the provisions of each Loan Agreement and the Finance
Documents shall be and are hereby re-affirmed and remain in full force and effect. 

  

	6.	Notices. Clause 28 (Notices) of each Loan Agreement shall extend and apply to this Letter as if the same were (mutatis mutandis) herein expressly set forth.

  

	7.	Governing Law. This Letter shall be governed by and construed in accordance with English law and Clause 30 (Law and Jurisdiction) of each Loan Agreement shall extend and
apply to this Letter as if the same were (mutatis mutandis) herein expressly set Forth. 

  

 2 

 Please confirm your acceptance to the foregoing terms and conditions by signing the acceptance at the foot of this
letter. 
  

	
	Yours faithfully
	
	 

	
	George Paleokrassas
	for and on behalf of
	HSH NORDBANK AG
	
	Accepted and agreed
	
	 

	
	Eugenia Papapontikou
	for and on behalf of
	DRYSHIPS INC.

 Dated 15 May 2006 
  

 3

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