Document:

exv10w2

Exhibit 10.2

	 	 	 
	CIT Bank

2180 South 1300 East 

Suite 250

Salt Lake City, Utah 84106
	 	The CIT Group/Business Credit, Inc.

CIT Capital Securities LLC

505 Fifth Avenue

New York, New York 10017
	 	 	 
	 
	 	January 9, 2009

Senior Credit Facility

Commitment Letter

CONFIDENTIAL

Wellman, Inc.

3303 Port & Harbor Drive

Bay St. Louis, MS 39520

Attention: Messrs. Mark Ruday and

 Keith R. Phillips

Ladies and Gentlemen:

Wellman, Inc., debtor and debtor-in-possession in the Chapter 11 Cases referred to below
(“Parent”), Solus L.P. (“Solus”) and Blackrock Advisors (“Blackrock”, and
together with Solus, individually and collectively, “Sponsor”) have advised The CIT
Group/Business Credit, Inc. (“CITBC” or “Agent”), CIT Bank (“CIT Bank”) and
CIT Capital Securities LLC (“CITCS” or “Arranger” and, together with CITBC and CIT
Bank, the “Commitment Parties”; sometimes referred to herein as “we” or
“us”) that Parent intends to consummate the Plan of Reorganization (the “Plan”)
confirmed in the pending cases of Parent and its subsidiaries filed under Chapter 11 of the United
States Bankruptcy Code (collectively, the “Chapter 11 Cases”) (the “Transaction”).
All references to “Parent”, “Borrowers” or “Parent and its subsidiaries” for any period from and
after consummation of the Transaction shall mean and refer to each such entity after giving effect
to the consummation of the Plan.

1. Commitments.

The Sponsor and Parent have requested that the Commitment Parties commit to provide senior credit
facilities in the aggregate amount of up to $35,000,000 (to be comprised of a revolving credit
facility in an aggregate principal amount of up to $35,000,000) (the “Senior Credit
Facility”). The proceeds of loans

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made under the Senior Credit Facility will be used: (i) to refinance the existing
debtor-in-possession financing of the Borrowers (as defined below) in the Chapter 11 Cases, (ii) to
fund payments required in order to substantially consummate the Plan, (iii) to pay for fees and
expenses associated with the Transaction; and (v) for general corporate purposes.

Based upon and subject to the terms and conditions set forth in this commitment letter (the
“Commitment Letter”), the Summary Terms and Conditions attached hereto as Appendix A (the
“Term Sheet”) and the fee letter of even date herewith (the “Fee Letter”, and
together with the Commitment Letter and the Term Sheet, the “Commitment”), (i) CITBC and CIT Bank
are pleased to advise you of their commitment to provide up to $35,000,000 of the Senior Credit
Facility, (ii) CITBC is pleased to advise you of its commitment to act as the administrative agent
and collateral agent in respect thereof and (iii) CITCS is pleased to advise you of its agreement
to act as the arranger and sole bookrunner for the Senior Credit Facility. CITBC will act as the
sole administrative agent and sole collateral agent and CITCS will act as the sole lead arranger
and sole bookrunner for the Senior Credit Facility. You agree that no other agents or arrangers
will be appointed, and no other titles or compensation (other than as set forth in the Fee Letter)
will be awarded or paid in connection with the Senior Credit Facility unless approved by the
Commitment Parties.

In consideration of the commitments and agreements of the Commitment Parties hereunder, you agree
to pay the nonrefundable fees described in the Term Sheet and the Fee Letter.

2. Conditions.

The Commitment does not set forth all of the terms and conditions of the proposed financing;
rather, it only summarizes the major points of understanding which will be the basis of the final
financing agreements and related documentation (which are collectively referred to herein as the
“Loan Documentation”) which will be drafted by, and will be in form and substance
satisfactory to, the Commitment Parties, Parent and their respective counsel for senior debt
financing transactions of this kind. All terms used in this Commitment Letter and not otherwise
defined herein shall have the meanings ascribed to them in the Term Sheet.

The Commitment is issued by the Commitment Parties based upon the financial and other information
regarding Holdco (as defined below), Borrowers (as defined in the Term Sheet) and their
subsidiaries and the Transaction previously provided to the Commitment Parties. Accordingly, the
Commitment and the structure and terms of the Senior Credit Facility set forth in the Term Sheet
are subject to the fulfillment to the satisfaction of each of the Commitment Parties of the
following conditions (in addition to those set forth in the Term Sheet): (i) there shall not have
occurred after November 30, 2008 any event, development or circumstance that has had or would
reasonably be expected to have a material adverse effect on the business, assets, liabilities
(actual or contingent), operations, condition (financial or otherwise) or prospects of the
Borrowers and their subsidiaries, taken as a whole (a “MAE”), provided that, the filing
and pendency of the Chapter 11 Cases shall not be deemed to have resulted in such MAE for the
purposes hereof; (ii) the Commitment Parties shall not become aware of any information or other
matter (including new or updated financial information or projections) concerning the Borrowers and
their subsidiaries or the Transaction that differs from, or is inconsistent with, the information
previously provided to the Commitment Parties by or on behalf of the Borrowers and their
subsidiaries to the extent that such differences and inconsistencies, taken as a whole, would
result in a MAE; (iii) the Commitment Parties shall have completed and be satisfied with the
results of their legal due diligence investigation of the Borrowers and their subsidiaries, and
shall have completed their tax due diligence investigation of the Borrowers and their subsidiaries,
as a result of which tax due diligence investigation the Commitment Parties shall be reasonably
satisfied as to the Borrowers’ ability to achieve the financial results projected in any
Projections provided to the Commitment Parties by or on behalf of the Borrowers; (iv) the
Commitment Parties shall have determined that there are no competing issuances of debt, securities
or commercial bank facilities of the Parent and its subsidiaries or any affiliate thereof, being
offered, placed

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or arranged at any time prior to the consummation of the Senior Credit Facility, except with the
prior written consent of the Commitment Parties; and (v) there shall not be any pending or
threatened litigation or other proceedings (private or governmental) with respect to any of the
transactions contemplated hereby, other than the filing and the pendency of the Chapter 11 Cases.

3. Syndication.

We reserve the right, prior to or after the execution of the Loan Documentation, to syndicate all
or a portion of the Senior Credit Facility to a group of financial institutions (together with CIT
Bank, the “Lenders”) identified by us in consultation with you. If at any time we choose to
commence our syndication efforts, you agree to reasonably assist us in completing a satisfactory
syndication.

4. Information.

You hereby represent and covenant that (i) all information, other than Projections, which has been
or is hereafter made available to the Commitment Parties by or on behalf of either Sponsor, the
Borrowers, Guarantors, or their representatives in connection with the transactions contemplated
hereby (“Information”) is or, when furnished, will be complete and correct in all material
respects and does not and will not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made, and (ii) the Projections that have
been or will be made available to Commitment Parties have been and will be prepared in good faith
based upon assumptions that are reasonable at the time made and at the time made available to the
Commitment Parties. You hereby agree to supplement the Information and the Projections from time
to time and to promptly advise us of all developments materially affecting Sponsor, Borrowers,
Guarantors, any of their respective subsidiaries or affiliates or the transactions contemplated
hereby until the closing date of the Senior Credit Facility so that the representation and warranty
in the preceding sentence is correct on the closing date of the Senior Credit Facility. In
structuring and entering into the Senior Credit Facility, the Commitment Parties will be using and
relying on the Information and the Projections without independent verification thereof.

5. Indemnity and Expenses.

Borrowers and their subsidiaries, jointly and severally, agree (a) to indemnify and hold harmless
each Commitment Party and the Lenders and their respective affiliates and controlling persons and
the respective officers, directors, employees, agents, attorneys, members and successors and
assigns of each of the foregoing (each, an “Indemnified Person”) from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to which any such
Indemnified Person may become subject arising out of or in connection with this Commitment Letter
(including the Term Sheet), the Fee Letter, the Transaction, the Senior Credit Facility or the
syndication thereof or any related transaction or any claim, litigation, investigation or
proceeding relating to any of the foregoing, regardless of whether any such Indemnified Person is a
party thereto, and to reimburse each such Indemnified Person upon demand for any reasonable legal
or other expenses incurred in connection with investigating or defending any of the foregoing;
provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses,
claims, damages, liabilities or related expenses to the extent they are found in a final,
non-appealable judgment of a court of competent jurisdiction to have resulted from the willful
misconduct or gross negligence of such Indemnified Person or of any of its officers, directors,
employees, or agents, and (b) to reimburse each Indemnified Person from time to time, upon
presentation of a summary statement, for all reasonable out-of-pocket expenses (including but not
limited to expenses of the Commitment Parties’ due diligence investigation, syndication expenses,
travel expenses, appraisal, consulting and auditing fees, and reasonable fees, disbursements and
other charges of counsel to the Commitment Parties (any and all of the foregoing being referred to
herein collectively as “Expenses”)), in each case incurred in connection with the Senior
Credit Facility and the preparation of this Commitment Letter, the Fee Letter, the Loan
Documentation and any security arrangements in connection therewith and the

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administration, amendment, modification or waiver thereof (or any proposed amendment, modification
or waiver thereof), whether or not the closing date occurs for the Senior Credit Facility or any
Loan Documentation is executed and delivered or any extensions of credit are made under the Senior
Credit Facility. Notwithstanding any other provision of this Commitment Letter, (i) no Indemnified
Person shall be liable for (A) any damages arising from the use by others of information or other
materials obtained through electronic, telecommunications or other information transmission
systems, except to the extent such damages are found in a final, non-appealable judgment of a court
of competent jurisdiction to have resulted from the willful misconduct or gross negligence of such
Indemnified Person or (B) any indirect, special, punitive or consequential damages in connection
with its activities related to the Senior Credit Facility, and (ii) prior to the Close Date (as
defined below), without the prior consent of Parent, the Commitment Parties shall not at any time
incur Expenses that exceed, in the aggregate, the amount of the Good Faith Deposit (as defined in
the Fee Letter) then held by the Commitment Parties; provided, that, the foregoing shall in no
manner limit or waive Borrowers’ agreements with respect to the Good Faith Deposit which are set
forth in the Fee Letter.

6. Other Services.

You acknowledge that the Commitment Parties and their affiliates may be providing debt financing,
equity capital or other services (including financial advisory services) to other persons in
respect of which you may have conflicting interests regarding the transactions described herein and
otherwise. Neither the Commitment Parties nor any of their affiliates will use confidential
information obtained from you by virtue of the transactions contemplated by this Commitment Letter
or their other relationships with you in connection with the performance by them of services for
other persons, and neither the Commitment Parties nor any of their affiliates will furnish any such
information to other persons. You also acknowledge that neither the Commitment Parties nor any of
their affiliates have any obligation to use in connection with the transactions contemplated by
this Commitment Letter, or to furnish to you, confidential information obtained by them from other
persons.

You hereby agree that, on or after the closing of the Senior Credit Facility, the Commitment
Parties or any of their affiliates may place “tombstone” advertisements (which may include any of
Sponsors’ and/or Borrowers’ trade names or corporate logos and a brief description of the Senior
Credit Facility and the Transaction) in publications or other media of their choice (including
without limitation “e-tombstones” published or otherwise circulated in electronic form and related
hyperlinks to the Sponsors’ and/or Borrowers’ corporate website) at such Commitment Party’s own
expense. In addition, any Commitment Party may disclose the information about the Senior Credit
Facility and the Transaction to market data collectors and similar service providers to the
financing community.

7. Confidentiality.

This Commitment Letter is delivered to you on the understanding that none of this Commitment
Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed by
you, directly or indirectly, to any other person except (a) to your respective officers, employees,
attorneys, accountants, advisors and agents on a confidential and need-to-know basis, (b) as
required by applicable law or compulsory legal process or, in the case of the Commitment Letter and
the Term Sheet (but expressly excluding the Fee Letter), as may be necessary or advisable (in the
Borrowers’ opinion) to comply with applicable securities law (in which case you agree to inform us
promptly thereof), and (c) in a matter involving assertion by any party of a breach of this
Commitment Letter, the Term Sheet or the Fee Letter by any other party; provided
that, you may disclose this Commitment Letter, the Term Sheet and the contents hereof and
thereof (but not the Fee Letter or the contents thereof) to (i) the Official Committee of Unsecured
Creditors appointed in the Chapter 11 Cases, (ii) the existing lenders to Parent and its
subsidiaries in the Chapter 11 Cases (the “DIP Lenders”), and (iii) such Committee’s and
such DIP Lenders’ respective attorneys, accountants and advisors on a confidential and need-to-know
basis; provided, however, that such disclosure shall be made only on the condition
that such matters may not,

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except as required by law, be further disclosed and in no event shall any of such persons or
entities be entitled to rely upon this Commitment Letter. None of this Commitment Letter, the Term
Sheet or the Fee Letter nor any of their terms or substance shall be disclosed by the Sponsors,
Parent or any of their respective subsidiaries directly or indirectly to any other potential source
of financing without the prior written consent of the Commitment Parties. No person, other than the
parties hereto, is entitled to rely upon this Commitment Letter or any of its contents or have any
beneficial or legal right, remedy, or claim hereunder. No person shall, except as required by law,
use the name of, or refer to, any Commitment Party, or any of their affiliates, in any
correspondence, discussions, press release, advertisement or disclosure made in connection with the
Senior Credit Facility without the prior written consent of such Commitment Party. Notwithstanding
the foregoing, the Parent may file this Commitment Letter (including the Term Sheet, but expressly
excluding the Fee Letter) with the United States Bankruptcy Court for the Southern District of New
York (the “Bankruptcy Court”), in which court the Chapter 11 Cases are pending.

8. Survival.

The compensation, reimbursement, expense, indemnification, confidentiality, governing law, forum
and waiver of jury trial provisions contained herein and in the Fee Letter shall remain in full
force and effect regardless of whether definitive financing documentation shall be executed and
delivered and notwithstanding the termination of this Commitment Letter or the commitments of the
Commitment Parties.

9. Assignments; Amendments; Governing Law, Etc.

The Commitment shall not be assignable by you without the prior written consent of the Commitment
Parties. The Commitment is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or to create any rights in favor of, any person other than
the parties hereto (and Indemnified Persons) and you agree that it does not create a fiduciary
relationship among the parties hereto. The Commitment Parties may assign their commitments
hereunder to any of their affiliates or any Lender. Any such assignment to an affiliate will not
relieve the Commitment Parties from any of their obligations hereunder unless and until such
affiliate shall have funded the portion of the commitment so assigned. Any assignment to a Lender
shall release the Commitment Parties from the portion of their commitments hereunder so assigned.
Any and all obligations of, and services to be provided by, the Commitment Parties hereunder
(including, without limitation, the Commitment) may be performed and any and all rights of the
Commitment Parties hereunder may be exercised by or through any of their affiliates or branches.
THIS COMMITMENT LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS
COMMITMENT OR THE PERFORMANCE OF SERVICES HEREUNDER.

Each of the parties hereto hereby irrevocably and unconditionally (a) submits, for itself and its
property, to the non-exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Commitment Letter or the transactions
contemplated hereby, or for recognition or enforcement of any judgment, and agrees that all claims
in respect of any such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court, (b) waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Commitment Letter or the
transactions contemplated hereby in any New York State or
in any such Federal court and (c) waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court. 

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This Commitment Letter, together with the Term Sheet and the Fee Letter, embodies the entire
understanding among the parties hereto relating to the matters discussed herein and therein and
supersedes all prior discussions, negotiations, proposals, agreements and understandings, whether
oral or written, relating to the subject matter hereof and thereof. No course of prior conduct or
dealings between the parties hereto, no usage of trade, and no parole or extrinsic evidence of any
nature, shall be used or be relevant to supplement, explain or modify any term used herein. Any
modification or waiver of the Commitment or the terms hereof must be in writing, must be stated to
be such and must be signed by an authorized representative of each party hereto.

10. Patriot Act.

Each of the Commitment Parties hereby notifies you that, pursuant to the requirements of the USA
Patriot Act, Title III of Pub. L. 107-56 (signed into law on October 26, 2001) (the “Patriot
Act”), it is required to obtain, verify and record information that identifies each Sponsor,
each Borrower and each Guarantor, which information includes names and addresses and other
information that will allow such party to identify each Sponsor, the Borrowers and each Guarantor
in accordance with the Patriot Act.

11. Acceptance of Commitment; Termination.

If you wish to accept the Commitment, please return executed counterparts of this Commitment Letter
and the Fee Letter to CITBC, together with a wire transfer to CIT’s order in the amount required by
the Fee Letter, on or before 5:00 p.m., New York City time, on January 10, 2009; otherwise, the
offer set forth herein shall automatically terminate on such date and time and be of no further
force or effect. In the event that the initial borrowing in respect of the Senior Credit Facility
does not occur on or before March 15, 2009 or the closing of the Transaction without the use of the
Senior Credit Facility, then this Commitment Letter and the commitment and undertakings of each
Commitment Party hereunder shall automatically terminate (except for such provisions hereof which
survive such termination in accordance with the terms hereof), unless the Commitment Parties shall,
in their discretion, agree to an extension. Before such date, any Commitment Party may terminate
its obligations under this Commitment Letter if any event occurs or information becomes available
that, in its judgment, results or is likely to result in the failure to satisfy any condition
precedent set forth or referred to herein or in the Term Sheet or the other exhibits hereto.

[SIGNATURE PAGE FOLLOWS]

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This Commitment Letter may be executed in any number of counterparts, each of which, when so
executed, shall be deemed to be an original, but all such counterparts shall together constitute
but one and the same agreement. Delivery of an executed counterpart of a signature page of this
Commitment Letter by facsimile or electronic transmission shall be effective as a delivery of a
manually executed counterpart of this Commitment Letter.

	 	 	 	 	 
	Very truly yours,

THE CIT GROUP/BUSINESS CREDIT, INC.

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	CIT BANK

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	CIT CAPITAL SECURITIES LLC

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	The Foregoing Is Hereby Accepted And

Agreed To In All Respects By The Undersigned:

WELLMAN, INC.,

debtor and debtor-in-possession,

for itself and its subsidiaries

 	 
	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

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Wellman Commitment Ltr Signature Page

 

 

APPENDIX A

SUMMARY TERMS AND CONDITIONS

WELLMAN, INC.

January 9, 2009

$35,000,000 Senior Credit Facility

The Summary Terms and Conditions outlined below is the “Term Sheet” referred to in the Commitment
Letter, dated January 9, 2009, from the Commitment Parties to Wellman, Inc., debtor and
debtor-in-possession (the “Commitment Letter”). Terms used in this Term Sheet without
definition have the meanings assigned to such terms in the Commitment Letter.

	 	 	 
	Borrowers:

	 	Wellman, Inc., as reorganized pursuant to the Plan (“Reorganized
Wellman”), and certain of its domestic subsidiaries designated by
CITBC. For purposes of this Term Sheet, Reorganized Wellman and each
such domestic subsidiary are hereinafter referred to, individually as
the “Borrower” and collectively, jointly and severally, as the
“Borrowers”. Reorganized Wellman shall be a wholly-owned subsidiary
of Wellman Holdings, Inc. (“Holdco”), a newly formed holding company
to be controlled by the Sponsors. Sponsors shall own at least 51% of
the capital stock of Holdco as of the Close Date. Holdco has not and
will not engage in any business activities and has not had and will
not have any assets or other holdings, other than the equity ownership
interests of Reorganized Wellman. The ultimate structure, including,
without limitation, those persons to be “Borrowers” and “Guarantors”
under the Credit Facilities, will be determined upon CIT’s review of
the deal structure for the Transaction.
	 
	 	 
	Guarantors:

	 	Holdco and all present and future direct or indirect domestic
subsidiaries of Reorganized Wellman or Holdco that are not a Borrower
(other than GuardWell Insurance Company). The Senior Credit Facility
will be fully and unconditionally guaranteed on a joint and several
basis by all Guarantors, subject to exceptions to be agreed to the
extent such guarantees would be prohibited by applicable law or would
result in materially adverse tax consequences.
	 
	 	 
	Administrative,
Collateral Agent:

	 	The CIT Group/Business Credit, Inc. (“CITBC” or “Agent”; each of CITBC
and CIT Bank are collectively referred to in this Summary Terms and
Conditions as “CIT”).
	 
	 	 
	Lenders:

	 	A syndicate of financial institutions (including CIT Bank) to be
arranged by the Arranger.
	 
	 	 
	Sole Arranger,
Sole Bookrunner:

	 	CIT Capital Securities LLC (“CITCS” or “Arranger”).

Summary Terms and Conditions

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	Sponsor:

	 	Solus, LP and Blackrock Advisors
(each, a “Sponsor” and collectively,
the “Sponsors”).]
	 
	 	 
	Senior Credit
Facility:

	 	Senior secured credit facility (the “Senior Credit Facility”) in an
aggregate principal amount not to exceed $35,000,000, consisting of a
$35,000,000 three (3)-year revolving credit facility (the “Revolver”),
including a sub-limit of $10,000,000 for the issuance of L/C’s (as
defined below).
	 
	 	 
	Closing Date:

	 	The date on which the initial funding of the Senior Credit Facility
occurs (the “Close Date”).
	 
	 	 
	Interest Rate:

	 	See Schedule A hereto.
	 
	 	 
	Maturity:

	 	The third anniversary of the Close Date (the “Revolver Maturity Date”)
	 
	 	 
	Availability:

	 	Amounts under the Revolver may be borrowed, repaid and reborrowed from
the Close Date until five business days before the Revolver Maturity
Date. No more than $30,000,000 of advances and L/C’s shall be made
and issued under the Revolver on the Close Date. After giving effect
to all advances under the Revolver on the Close Date, including
issuances of L/C’s, if applicable, the Borrowers’ availability under
the Revolver shall not be less than $5,000,000 on the Close Date.
	 
	 	 
	Borrowing Base:

	 	All advances and L/C’s under the Revolver will be subject to a
Borrowing Base formula, which will be comprised of corporate, trade
accounts receivable and inventory subject to eligibility criteria.
Eligibility definitions and criteria will be defined in the Loan
Documentation (as defined below under the heading “Loan
Documentation”). The Revolver will be available at any time for loans
and L/Cs in an aggregate amount not to exceed the lesser of (i)
$35,000,000 and (ii) the Borrowing Base. The Borrowing Base will be
equal to: (A) 85% of eligible accounts receivable plus (B) the lesser
of (1) up to 75% of NOLV (as defined below) of eligible appraised
inventory and (2) up to 60% of the cost of eligible inventory minus
(C) applicable reserves. CIT shall have the ability to impose
additional eligibility criteria with respect to accounts receivable
and inventory and/or impose additional reserves against the Borrowing
Base in its commercially reasonable discretion. CIT will have its own
internal auditor or an independent accounting firm perform field
audit(s) of the Borrowers’ books and records, if necessary, and
accounts receivable and inventory during the term of the Senior Credit
Facility. Such field audits shall be performed on a quarterly basis
during the first year of the Senior Credit Facility and thereafter at
least annually and more frequently in CIT’s reasonable discretion.
	 
	 	 
	Letter of Credit
Issuing Bank:

	 	CIT and/or certain Lenders (each, an “L/C Issuer”) shall either issue
letters of credit directly or select another banking or financial
institution to issue letters of credit as to which L/C Issuer shall
issue letter of credit participation or support agreements (such
letters of credit and letter of credit participation or support
agreements are referred to herein as “L/Cs”).
	 
	 	 
	 

	 	To the extent that Borrowers do not reimburse the L/C Issuer for
drawings
under L/Cs, the Lenders under the Revolver shall be
unconditionally obligated to fund participations therein on a ratable
basis.

Summary Terms and Conditions

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	Revolver Fees:

	 	An unused line fee shall be payable on the average daily unutilized
portion of the Revolver for each quarter (or part thereof) after the
Close Date (the “Average Unutilized Amount”) at a rate per annum equal
to, for any such quarter, (a) 1.00% if the Average Unutilized Amount
for such quarter was equal to or greater than $10,000,000, and (b)
0.75% if the Average Unutilized Amount for such quarter was less than
$10,000,000 . Such fee will be payable quarterly in arrears on the
first day of each quarter and on the date of termination of the
Revolver commitment. The undrawn amount of outstanding L/Cs shall
count as utilization of the Revolver for purposes of calculating this
fee.
	 
	 	 
	 

	 	An L/C fee shall be payable to CIT on behalf of each Revolver Lender
with respect to such Revolver Lender’s participation in the L/Cs at
the applicable margin per annum used for determining interest payable
in respect of LIBOR loans made under the Revolver on the average daily
undrawn amount of L/Cs, payable monthly in arrears. The Borrowers
shall also be responsible for paying any fees, costs or expenses
(including fronting fees) due to any banking or financial institution
(other than CIT) for any L/Cs issued by such other banking or
financial institution in reliance on credit support furnished by CIT.
	 
	 	 
	 

	 	The other fees are set forth in the Fee Letter.
	 
	 	 
	Use of Proceeds:

	 	The Revolver will be used (subject to the terms and conditions of the
Loan Documentation): (i) to fund all payments required for the
substantial consummation of the Plan, (ii) to refinance existing
debtor-in-possession financing of the Borrowers in the Chapter 11
Cases, (iii) to fund the Borrowers’ ongoing working capital
requirements, (iv) to pay for fees and expenses associated with the
Senior Credit Facility and other bankruptcy related claims and
expenses, and (v) for general corporate purposes s.
	 
	 	 
	CERTAIN PAYMENT TERMS
	 
	 	 
	Optional
Prepayment:

	 	The Borrowers may prepay principal amounts outstanding under the
Revolver from time to time without premium or penalty, except that
LIBOR-based loans may only be prepaid at the end of the applicable
interest period, unless the Borrowers pay all breakage costs
associated with such prepayment.
	 
	 	 
	Mandatory
Prepayment:

	 	Borrowers will be required to make mandatory prepayments in respect of
the Revolver in an amount equal to (in each case, subject to such
exceptions to be mutually agreed upon):
	 
	 	 

	 	•	 	100% of the net cash proceeds (to be defined) from any sale or other
disposition of assets of the Borrowers or their subsidiaries (subject
to certain exceptions to be determined) other than net cash proceeds
of sales or other dispositions of inventory, and other assets in the
ordinary course of business 

Summary Terms and Conditions

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	 	 	 	and net cash proceeds up to an amount to
be determined that are reinvested in other assets useful in the
business of the Borrowers and their subsidiaries within 180 days of
their receipt upon terms and conditions to be mutually agreed upon;
	 
	 	•	 	100% of the net cash proceeds from the issuance of any equity
securities by Holdco, the Borrowers or any subsidiaries of the
Borrowers or Holdco;
	 
	 	•	 	100% of the net cash proceeds from the incurrence of indebtedness by
Holdco, the Borrowers or any of their subsidiaries (if and to the
extent such indebtedness is consented to by Lenders in accordance with
the Loan Documentation); and
	 
	 	•	 	100% of the net cash proceeds from insurance paid on account of any
loss of any property or assets of the Borrowers or their subsidiaries
in excess of an amount to be agreed (other than net cash proceeds that
are reinvested, or that the Borrowers have entered into a binding
contract to reinvest, in the business of the Borrowers and their
subsidiaries (or used to replace damaged or destroyed assets) within
180 days) of receipt thereof.
	 
	 	•	 	100% of Extraordinary Receipts (to be defined).

	 	 	 
	COLLATERAL
	 	 
	 
	 	 
	 

	 	The Senior Credit Facility (including any obligations under hedging
arrangements provided by the Lenders) will be secured by a perfected
first priority security interest in and lien or mortgage upon all
assets (real, mixed and personal property), in each case, whether now
owned or hereafter acquired, including, without limitation, all
receivables, accounts, inventory, general intangibles (including
payment intangibles), property, plant and equipment, fee owned and
leased real property (including a leasehold mortgage covering certain
land leased by Borrowers pursuant to a 99-year ground lease and all
building and other improvements thereon owned by Borrowers, located in
Hancock, Mississippi (the “Headquarters Property”)) and patents and
other intellectual properties of Borrowers and Guarantors and their
present and future domestic subsidiaries, in each case, whether now
owned or hereafter acquired, and all proceeds and products of any of
the foregoing (including insurance proceeds). The Senior Credit
Facility will also be collateralized by a perfected first priority
pledge of (i) 100% of the issued and outstanding capital stock or
other equity interests of the Borrowers and Guarantors (excluding the
equity interests of Holdco) and the Borrowers’ and Guarantors’ direct
or indirect domestic subsidiaries and (ii) 662/3% of the
issued and outstanding capital stock or other equity interests of the
Borrowers’ and Guarantors’ direct and indirect first-tier foreign
subsidiaries, in each case, whether now owned or hereafter acquired,
and a pledge of all intercompany indebtedness and, in all cases, all
proceeds and products thereof. Without limiting the foregoing,
Borrowers shall use its commercially reasonable efforts to deliver
landlord consents and waivers customary in a senior financing wherein
the landlord waives any security interest in the collateral, grants
CIT and its assignees reasonable access to the leased premises, and
consents to the future change of control of the tenant, in the event
CIT forecloses on the equity pledge, to the extent such consent is
required pursuant to the terms of the lease.

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

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	 	The foregoing security shall ratably secure the Senior Credit Facility
and any permitted interest rate swap or similar hedging arrangements
between the Borrowers or Guarantors and a Lender or its affiliates
under the Senior Credit Facility.
	 
	 	 
	Capitalization:

	 	The initial capitalization of Holdco and the Borrowers must be
satisfactory to CIT Bank and Agent, and Sponsors and other investors
acceptable to CIT Bank and Agent shall have contributed at least
$35,000,000 in new cash equity to Holdco. Sponsors shall collectively
own at least 51% of the capital stock of Holdco as of the Close Date.
	 
	 	 
	CERTAIN CONDITIONS
	 	 
	 
	 	 
	Conditions
Precedent:

	 	Closing and the initial funding under the Senior Credit Facility will
be subject to the satisfaction of all conditions precedent customarily
required by CIT Bank and Agent in similar financings and any
additional conditions precedent deemed necessary or appropriate by CIT
Bank and Agent in good faith in the context of this transaction,
including but not limited to:
	 
	 	 

	 	1.	 	(a) CIT Bank’s and Agent’s review of and reasonable satisfaction in
all respects with the final Plan and (b) the order of the Bankruptcy
Court confirming the Plan (the “Confirmation Order”), in form and
substance reasonably satisfactory to CIT Bank and Agent, shall have
been entered, following due notice to all creditors and other
parties-in-interest, confirming the Plan, (c) (i) the effective date
of the Plan (the “Effective Date”) shall have occurred, (ii) the
Confirmation Order shall be a valid, subsisting and continuing final
order, and (iii) the satisfaction (or valid waiver) of all conditions
precedent to the consummation of the Plan (other than any condition
relating to the funding under the Senior Credit Facility), and all
agreements and undertakings of the parties under the Plan to be
performed by the Effective Date shall have been satisfied and
performed; (c) the Agent’s confirmation that any retention of
jurisdiction by the Bankruptcy Court shall not govern the enforcement
of the Senior Credit Facility or any rights and remedies related
thereto, (d) no motion, action or proceeding shall be pending or filed
by any party-in-interest to Borrowers’ Chapter 11 Cases which could
adversely affect the Plan, the consummation of the Plan, the business
or operations of the Borrowers and Guarantors, or the Senior Credit
Facility, and (e) the Confirmation Order shall not have been reversed,
vacated, amended, supplemented, modified or appealed and shall not be
subject to any pending motion for reconsideration or any motion for
review.
	 
	 	 	 	No motion, action or proceeding shall be pending or, to the knowledge
of the Borrowers or CIT Bank or Agent, threatened against the
Borrowers or Guarantors by any creditor or other party-in-interest in
the Bankruptcy Court or any other court of competent jurisdiction
which may adversely affect the Plan, the Borrowers’ post-consummation
business or the proposed Senior Credit Facility.

Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-5

 

	 	 	 	The definitive Loan Documentation shall provide that, after the Close
Date, Borrowers and Guarantors shall be in compliance with all terms
and conditions of the Plan that are applicable to Borrowers and
Guarantors subsequent to the Effective Date.
	 
	 	2.	 	Execution and delivery of satisfactory Loan Documentation;
	 
	 	3.	 	CIT and Agent shall have received all financial and other due
diligence information and items required by CIT and Agent, the results
of which shall be satisfactory to CIT and Agent and their counsel,
including but not limited to the following: (a) field examination of
the books, records, assets, liabilities, cash management system, and
operations of the Borrowers; (b) an appraisal of Borrowers’ inventory,
in form, scope and methodology acceptable to CIT in good faith,
prepared by an appraiser acceptable to CIT and upon which CIT and
Lenders are expressly permitted to rely, setting forth the net orderly
liquidation value (“NOLV”) of such inventory; and (c) legal diligence,
including, without limitation, review of material contracts. The
findings related to these due diligence items could change the terms
and conditions of this Term Sheet.
	 
	 	4.	 	Sponsors and other investors acceptable to CIT Bank and Agent shall
have made a minimum cash equity contribution of $35,000,000 in Holdco
(which amount shall have been contributed to the Borrowers for
purposes of consummating the Transaction) and the capitalization,
structure and equity ownership of Holdco and the Borrowers after
consummation of the Transaction, including, but not limited to, the
constituent documents of Holdco, Borrowers and the other Guarantors
and related investment agreements, shall be satisfactory to CIT Bank
and Agent;
	 
	 	5.	 	The Borrowers, Guarantors and their subsidiaries shall have no
third party debt that will survive the closing of the Senior Credit
Facility other than (a) the Senior Credit Facility; (b) subordinated
debt consisting of subordinated second lien convertible notes issued
by Borrowers on the Close Date in an aggregate amount not to exceed
$40,000,000 on terms and conditions satisfactory to CIT (the “2nd Lien
Subordinated Notes”); (c) subordinated debt consisting of conversion
of pre-petition first and second lien term loan debt of Borrowers,
pursuant to the Plan, into subordinated third lien convertible notes
issued by Borrowers on the Close Date in an aggregate amount not to
exceed $60,000,000 on terms

and conditions satisfactory to CIT (the
“3rd Lien Subordinated Notes”); and (d) indebtedness owing by
Borrowers pursuant to the settlement contract to be entered into with
BP pursuant to the Plan and other debt scheduled in the Loan
Documentation, which may include certain capital leases and other
customary obligations, in each case existing on the Close Date and
reasonably approved by CIT.

The Loan Documentation shall provide that Borrowers shall have the
right to incur additional secured subordinated indebtedness
(“4th
Lien

Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-6

 

	 	 	 	Debt”), in a maximum aggregate amount to be
agreed upon in the Loan Documentation, provided that (a) the terms and
conditions of such indebtedness shall be reasonably satisfactory to
Agent and Lenders, and (b) such indebtedness shall be subject to an
intercreditor and subordination agreement containing substantially the
same terms and conditions as the Intercreditor Agreements (as defined
below) governing the Subordinated Notes (as defined below);
	 
	 	6.	 	The terms and conditions of the 2nd Lien Subordinated
Notes and the 3rd Lien Subordinated Notes (collectively,
the “Subordinated Notes”) shall be satisfactory to CIT Bank and the
Agent, and the Agent, on behalf of the Lenders, shall have entered
into a separate intercreditor and subordination agreement with the
holders of the 2nd Lien Subordinated Notes (the
“2nd
Lien Intercreditor”) and the holders of the
3rd Lien
Subordinated Notes (the “3rd Lien
Intercreditor”; and together with the 2nd Lien Intercreditor,
collectively, the “Intercreditor Agreements”), respectively,
containing terms and conditions satisfactory in all respects to CIT
Bank and the Agent.
	 
	 	 	 	The Intercreditor Agreements shall provide that the Subordinated Notes
are fully subordinated to the Senior Credit Facility and the security
interests and liens respectively securing same shall be “silent”,
fully subordinated to the first priority security interests and liens
securing the Senior Credit Facility. Without limiting the generality
of the foregoing, the Intercreditor Agreements shall provide that (a)
no payments whatsoever shall be permitted with respect to any
Subordinated Notes, other than (i) regularly scheduled cash interest
payments due under the 2nd Lien Subordinated Notes, on a
non-accelerated basis, at a rate not to exceed 10% per annum,
provided
that, on the date of any such interest payment and after giving effect
thereto, (A) no default or event of default shall have occurred and be
continuing under the Loan Documentation, and (B) Borrowers shall have
excess availability under the Revolver (as determined under the Loan
Documentation) of not less than $5,000,000, and (ii) regularly
scheduled cash and/or non-cash “PIK” interest payments due under the
3rd Lien Subordinated Notes, on a non-accelerated basis, at
a rate not to exceed 5% per annum, provided that, on the date of any
such cash interest payment and after giving effect thereto, (A) no
default or event of default shall have occurred and be continuing
under the Loan Documentation, and (B) Borrowers shall have excess
availability under the Revolver (as determined under the Loan
Documentation) of not less than $5,000,000; and (b) the holders of
Subordinated Notes shall have no rights to commence any action to
collect or otherwise enforce such Notes and shall be prohibited from
taking any action with respect to any collateral securing same until
the Senior Credit Facility has been terminated and all obligations and
indebtedness outstanding thereunder have been indefeasibly paid in
full to Agent and Lenders;
	 
	 	7.	 	The closing of the Subordinated Notes and the funding of the
2nd Lien Subordinated Notes shall have occurred on the
Close Date on terms and conditions reasonably satisfactory to CIT Bank
and the Agent;

Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-7

 

	 	8.	 	CIT shall have received and be satisfied with Borrowers’ internally
prepared monthly financial statements for December, 2008;
	 
	 	9.	 	CIT shall be satisfied that there has been no event, development or
circumstance that has had or could reasonably be expected to have a
material adverse effect on the business, assets, liabilities (actual
or contingent), operations, condition (financial or otherwise) or
prospects of Holdco, the Borrowers and/or their subsidiaries, taken as
a whole, since the financial statements submitted to CIT for the month
ended November 30, 2008 (provided that the filing and pendency of the
Chapter 11 Cases shall not be deemed to have resulted in such material
adverse effect for the purposes hereof);
	 
	 	10.	 	CIT and Lenders shall have received and be satisfied with the
Borrowers’ insurance policies, including endorsements in favor of CIT
with respect thereto;
	 
	 	11.	 	CIT’s receipt and satisfaction with the results of background
checks on the Borrowers’ key management;
	 
	 	12.	 	All governmental and third party approvals necessary in connection
with the Transaction shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without
any action being taken or threatened by any authority that would
restrain or otherwise impose adverse conditions on the Transaction;
	 
	 	13.	 	CIT shall have received such legal opinions, officer solvency
certificates and other documents and instruments as are customary for
transactions of this type or as it may reasonably request.
	 
	 	14.	 	Evidence of a valid and perfected first priority security
interest, liens and mortgages in and upon the Collateral in favor of
Agent and Lenders, including UCC and other applicable lien search
reports and lien release documents, in form and substance
satisfactory to Agent with respect to all security interests and
liens currently filed against Parent and its subsidiaries, except for
security interests and liens permitted herein and other permitted
encumbrances customary for in similar financings which shall be
identified in the Loan Documentation;
	 
	 	15.	 	Receipt by CIT of all documentation and other information required
by bank regulatory authorities under applicable “know your customer”
and anti-money laundering rules and regulations, including without
limitation the PATRIOT Act and OFAC.
	 
	 	16.	 	CIT and Lenders shall have received all fees, costs and expenses
payable on or prior to the Close Date;
	 
	 	17.	 	CIT and Lenders shall have received and approved a breakdown of
all uses of proceeds, including fees and expenses; and

Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-8

 

	 	18.	 	CIT’s receipt of, and satisfaction with, in the case of the
leasehold mortgage to be granted to Agent and Lenders covering the
Headquarters Property, (a) title insurance issued by a title insurance
company reasonably satisfactory to CIT, (b) a survey prepared by
independent licensed land surveyor reasonably satisfactory to CIT, and
(c) flood searches, and if applicable, flood insurance; and the costs
of all of the foregoing shall be paid by the Borrowers.

	 	 	 
	Conditions to
Extensions of
Credit:

	 	The making of each extension of credit (including amendments,
extensions and increases of L/Cs) shall be conditioned upon (i) the
accuracy in all material respects of all representations and
warranties contained in the Loan Documentation (including, without
limitations, the material adverse change and litigation
representations) (ii) there being no default or event of default in
existence at the time of, or after giving effect to the making of,
such extension of credit and (iii) availability under the Borrowing
Base.
	 
	 	 
	CERTAIN DOCUMENTATION MATTERS
	 
	 	 
	Loan
Documentation:

	 	The Senior Credit Facility will be subject to the terms and conditions
set forth in a definitive credit agreement, related security
agreement(s), guarantees, pledge agreements, mortgages, assignment
agreements and other instruments and documents, all of which will be
acceptable to CIT, the Lenders and their legal counsel (collectively,
the “Loan Documentation”).
	 
	 	 
	Representations
and Warranties:

	 	The Senior Credit Facility will contain such representations and
warranties by the Borrowers as are usual and customary for financings
of this kind, including, without limitation, corporate power and
authority, due organization and authorization, execution, delivery and
enforceability of the Loan Documentation, no default, financial
condition and solvency, no material adverse change, title to
properties, sufficiency of assets and rights, liens, litigation,
payment of taxes, insurance, subsidiaries, business locations, labor
matters, material contracts, investment company regulations, brokers’
fees, compliance with laws, environmental and ERISA matters, consents
and approvals, compliance with anti-terrorism laws, creation and
perfection of security interests, and full disclosure (subject to
qualifications to be agreed). The Loan Documentation shall contain
reasonable exceptions with respect to representations and warranties
regarding payment of property taxes on certain non-operating assets.

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-9

 

	 	 	 
	Reporting:

	 	The Borrowers will provide CIT and Lenders with periodic financial
reporting, including: audited annual financial statements; management
discussion and analysis; unaudited quarterly and monthly financial
statements; annual financial projections; compliance certificates;
notice of material events; collateral reporting; periodic borrowing
base certificates; receivables and payables against aging reports and
inventory reports and such other information reasonably requested by
CIT or any Lender.
	 
	 	 
	Covenants:

	 	The Senior Credit Facility will contain such affirmative covenants as
are usual and customary for financings of this kind (subject to
customary qualifications), and will likely include, but not be limited
to: receipt of timely and accurate financial information; notification
of litigation, investigations, environmental and ERISA matters and
other material adverse changes; payment and performance of obligations
(including, without limitation, under the Plan); maintenance of
existence; maintenance of property and insurance (including hazard and
business interruption coverage); maintenance of accurate records and
accounts; visits and inspection of property and books and records;
compliance with laws (including, without limitation, environmental
laws); compliance with material contractual obligations; maintenance
of licenses, permits and franchises issued or granted by any
governmental authority; use of proceeds (including anti-hoarding);
payment of taxes; ERISA; maintenance of security interests and further
assurances (including with respect to security interests in future
subsidiaries and after-acquired property); annual lenders meetings;
additional grantors and guarantors; separateness of loan parties;
post-closing syndication assistance (if applicable); and interest rate
protection requirements.
	 
	 	 
	 

	 	The Senior Credit Facility will contain such negative covenants as are
usual and customary for financings of this kind (subject to customary
qualifications), and will likely include, but not be limited to: restrictions and limitations against incurring additional indebtedness
(except for 4th Lien Debt described above) and guarantee
obligations; encumbrances, liens (other than liens securing
4th Lien Debt) and other obligations; restrictive payments
(including, but not limited to, distributions and dividends, and
management, acquisition, arrangement and other similar fees); loans
and investments; mergers, consolidations and acquisitions; sale and
leaseback transactions; asset transfers and dispositions; changes in
business; hedging arrangements; transactions with affiliates;
prepayments of and amendments to indebtedness (including, without
limitation, prepayment of, and amendments to, any subordinated debt);
restrictive agreements; ownership of subsidiaries; passive activities
of Holdco; bank accounts; amendments to organizational documents;
changes in fiscal year or accounting method; negative pledge clauses
and clauses restricting subsidiary distributions and changes in the
Plan and Confirmation Order post-closing that would adversely impact
the Lenders.
	 
	 	 
	Financial Covenants:

	 	Financial covenants will likely include: minimum fixed charge coverage
ratio; maximum leverage ratio; and maximum capital expenditures.
	 
	 	 
	Events of Default:

	 	Events of defaults will include those which are customarily found in
financing transactions of the type contemplated hereby, including, but
not limited to:

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-10

 

	 	 	 
	 

	 	nonpayment of principal or reimbursement obligations
when due; nonpayment of interest, fees or other amounts; inaccuracy of
representations and warranties; violation of covenants (subject, in
the case of certain affirmative covenants, to a grace period to be
agreed upon); cross-default to material indebtedness; bankruptcy
events; certain ERISA events; material judgments; actual or asserted
invalidity of any guarantee or security document, an Intercreditor
Agreement or other subordination provisions; change of control (which
shall be defined to include, without limitation, the Sponsors’
collective ownership of less than 51% of the outstanding capital stock
of Holdco or Holdco’s ownership of less than 100% of the outstanding
capital stock of Parent); changes in instructions regarding pledged
bank accounts; and changes in the passive holding company status of
Holdco.
	 
	 	 
	Cash Management:

	 	Within ninety (90) days following the Close Date, Borrowers shall
implement cash management procedures (“Post-confirmation Cash
Management”) in replacement of the cash management procedures which
exist in the Chapter 11 Cases (“Existing Cash
Management”), reasonably
satisfactory to CIT and Arranger, including lock box procedures and
blocked account agreements that will provide for full cash dominion
and automatic daily sweeps into a collection account controlled by
CIT. As of the Close Date, Borrowers shall arrange for the Existing
Cash Management to be utilized in connection with the Senior Credit
Facility until implementation of Post-confirmation Cash Management,
provided, that, if Borrowers propose establishing Post-confirmation
Cash Management at a bank other than the bank which currently provides
Existing Cash Management, then such replacement bank shall be
satisfactory to CIT.
	 
	 	 
	Costs and
Expenses:

	 	The Borrowers shall be responsible for the payment (whether or not the
transaction contemplated hereby closes or is consummated) of all of
CIT’s and the Arranger’s reasonable costs, fees and expenses of
underwriting, documenting and closing the transaction contemplated
hereby (including, without limitation, reasonable costs, fees and
expenses of outside legal counsel, travel, lodging and similar
expenses) or otherwise paid or incurred by CIT or the Arranger in
connection with the Loan Documentation or the transaction contemplated
hereby, including, but not limited to, those paid or incurred by CIT
or the Arranger in connection with the preparation, negotiation,
execution and closing of the Loan Documentation and the transaction
contemplated hereby, the arrangement, syndication and administration
of the Senior Credit Facility, the creation or perfection of liens and
security interests in connection therewith, and any amendment,
modification or waiver in respect of the Loan Documentation. The
Borrowers shall also be responsible for all fees and expenses of CIT
and Lenders incurred or in connection with enforcing rights, remedies
and actions taken under the Senior Credit Facility.
	 
	 	 
	Indemnification:

	 	The Borrowers shall indemnify and hold harmless CIT, the Arranger and
the Lenders, and their respective affiliates and, in each case, such
parties’ respective directors, officers, employees, agents,
representatives and controlling persons (each being an “Indemnified
Party”) from and against any and all claims, damages, liabilities and
expenses (including without limitation, fees and expenses of counsel)
that may be incurred by or asserted against such Indemnified Party in
connection with the investigation of, preparation for, or

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-11

 

	 	 	 
	 

	 	defense of
any pending or threatened claim or any action or proceeding (whether
or not such Indemnified Party is a party thereto) or otherwise arising
out of or relating to any of the transactions contemplated hereby, any
commitment or similar letter issued in connection therewith, any of
the Loan Documentation, any of the transactions contemplated thereby,
or any action or omission of any Indemnified Party or other matter or
thing under or in connection with any of the foregoing, except for
(with respect to any Indemnified Party) any such claims, damages,
liabilities or expenses resulting from such Indemnified Party’s own
gross negligence or willful misconduct as determined by a court of
competent jurisdiction in a final nonappealable order or judgment.
	 
	 	 
	Participation and
Assignment:

	 	The Lenders shall be permitted to assign all or a portion of their
loans and commitments with the consent, not to be unreasonably
withheld, of (a) the Parent, unless (x) the assignee is a Lender, an
affiliate of a Lender or an approved fund, or (y) an event of default
has occurred and is continuing, (b) the Agent, and (c) the Issuing
Bank. In the case of partial assignments (other than to another
Lender, an affiliate of a Lender or an approved fund), the minimum
assignment amount shall be $5,000,000 (unless otherwise agreed by the
Borrowers and CIT). The Agent shall receive a processing fee of
$3,500 in connection with all assignments. The Lenders shall also be
permitted to sell participations in their loans.
	 
	 	 
	Required Lenders:

	 	Lenders holding at least 51% of the loan exposure under the Revolving
Facility in the aggregate (the “Required Lenders”) (subject to certain
customary matters requiring unanimous Lender consent).
	 
	 	 
	Amendments
and Waivers:

	 	Subject to approval of Required Lenders party to the relevant Loan
Documentation, except that all affected Lenders must consent to
increases in commitment amounts, reductions in principal, interest and
fees, extensions of maturities and release of substantially all of the
guarantors and collateral.
	 
	 	 
	Yield Protection:

	 	The Loan Documentation shall contain customary provisions (i)
protecting the Lenders against increased costs or loss of yield
resulting from changes in reserve, tax, capital adequacy and other
requirements of law and from the imposition of or changes in
withholding and other taxes and (ii) indemnifying Lenders for
“breakage costs” incurred in connection with, among other things, any
prepayment or conversion of LIBOR loans on a day other than the last
day of the interest period applicable thereto.
	 
	 	 
	Governing
Law and
Jurisdiction:

	 	State of New York.
	 
	 	 
	Waiver of
Jury Trial:

	 	Such waivers as are customary for financing transactions of the type
contemplated hereby.
	 
	 	 
	Administrative
Agent’s Counsel:

	 	Otterbourg, Steindler, Houston & Rosen, P.C.

Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-12

 

	 	 	 
	Borrowers’ and
Guarantors’
Counsel:

	 	Kirkland & Ellis.

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

A-13

 

Schedule A

INTEREST RATES

	 	 	 
	Revolver:

	 	Borrowers will be required to pay interest on advances
outstanding under the Revolver at either: (i) the Prime
Rate plus 7% per annum or (ii) LIBOR Rate plus 8% per
annum.
	 
	 	 
	Prime Rate:

	 	The “Prime Rate” will mean, for any day, the greatest
of: (i) the rate of interest per annum quoted by
JPMorgan Chase Bank as its “prime rate” in effect from
time to time (or if such rate is at any time not
available, the prime rate so quoted by any banking
institution selected by CIT), which rate is not intended
to be the lowest rate charged by any such banking
institution to its borrowers, (ii) the Federal Funds
Effective Rate per annum plus 0.50% and (iii) the
1-Month LIBO Rate on such day plus 1%. Interest on
Prime Rate loans will be computed and payable monthly in
arrears on the basis of a 365 day year and based on the
actual number of days elapsed.
	 
	 	 
	 

	 	“1-Month LIBO Rate” will mean, for any day, the greater
of (i) the rate per annum equal to the rate determined
by CIT to be the offered rate that appears on the
Bloomberg BBAM Screen (or any successor thereto) that
displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on
such day) with a term equivalent to three months,
determined as of approximately 11:00 a.m. (London time)
on such day (or if such day is not a Business Day, the
immediately preceding Business Day) , and (ii) the LIBOR
Floor. In the event that such rate is not available at
such time for any reason, then the “1-Month LIBO Rate”
for such day shall be determined by CIT by reference to
such other comparable publicly available service for
displaying the offered rate for dollar deposits in the
London interbank market as may be selected by CIT and,
in the absence of availability, such other method as may
be selected by CIT in its sole discretion.
	 
	 	 
	LIBOR Rate:

	 	“LIBOR” will mean, for any interest period with respect
to any LIBOR loan, the rate per annum equal to the rate
determined by CIT to be the offered rate that appears on
the Bloomberg BBAM Screen (or any successor thereto)
that displays an average British Bankers Association
Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such interest period) with
a term equivalent to such interest period, determined as
of approximately 11:00 a.m. (London time) two (2)
business days prior to the first day of such interest
period. Interest periods shall not exceed one (1)
month. The Borrowers may elect to use LIBOR provided
(i) the Borrowers give CIT at least three business days
prior notice of such election and (ii) no default is
then outstanding under the Loan Documentation. Interest
on LIBOR-based loans will be computed and payable at the
end of the applicable LIBOR interest period in arrears
on the basis of a 360 day year and based on the actual
number

 Summary Terms and Conditions

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.

 

 

	 	 	 
	 

	 	of days elapsed.
	 
	 	 
	LIBOR Floor:

	 	LIBOR shall be subject to a floor equal to two percent
(2%) per annum.
	 
	 	 
	Default Interest:

	 	Upon the occurrence and during the continuance of an
Event of Default (upon written notice, except in the
case of any bankruptcy, insolvency, reorganization,
liquidation or other similar proceeding), amounts
outstanding under the Senior Credit Facility shall bear
interest at 2.00% per annum above the rate otherwise
applicable thereto and LIBOR-based loans and conversions
to LIBOR-based loans shall no longer be available.
Overdue interest, fees and other amounts shall accrue
interest at 2.00% above the rate applicable to Prime
Rate loans.

Securities and investment banking services provided through CIT Capital Securities LLC, an affiliate of CIT.EX-10.(H)

Exhibit 10(h)

	 	 	 
	RBC BANK (USA)

	 	Loan and Security Agreement

Loan And Security Agreement

     THIS AGREEMENT (the “Agreement”), dated as of September ___, 2008 among VIDEO DISPLAY
CORPORATION, a Georgia corporation (“Parent”), LEXEL IMAGING SYSTEMS, INC. (“Lexel”), FOX
INTERNATIONAL, LTD., INC. (“Fox”), Z-AXIS, INC. (“Z-Axis”), TELTRON TECHNOLOGIES, INC. (“Teltron”)
and AYDIN DISPLAYS, INC. (“Aydin” and together with Lexel, Fox, Z-Axis and Teltron, collectively,
the “Subsidiaries”; and the Subsidiaries, together with Parent, collectively, the “Borrower”), and
RBC BANK (USA) (“RBC” or the “Bank”) (formerly known as RBC Centura 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 agree as follows:

     1. Definitions.

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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debentures or similar instruments, (d) all capital lease obligations and (e) all Contingent Obligations.

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

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

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

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

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

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

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

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

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

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

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

4

 

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

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

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

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

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

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

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

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

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

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

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

     “Loans” has the meaning set forth in Section 2.1 and “Loan” means any of such loans identified
therein as the context may require.

5

 

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

     “Maximum Primary Revolving Loan Amount” means $17,000,000.

     “Maximum Secondary Revolving Loan Amount” means $3,500,000.

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

     “Notes” has the meaning set forth in Section 2.2 and “Note” means any of such notes identified
therein as the context may require.

     “Obligations” means all obligations now or hereafter owed to Bank by Borrower, whether
related or unrelated to the Loans, including, without limitation, amounts owed or to be owed under
the terms of the Loan Documents, or arising out of the transactions described therein, including,
without limitation, the Loans, sums advanced to pay overdrafts on any account maintained by
Borrower with Bank, reimbursement obligations for outstanding letters of credit or 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, all obligations, whether now existing or hereafter
arising, under any Interest Rate Agreement, including any swap agreements as defined in 11 U.S.C.
§101, as amended, between Bank and Borrower whenever executed, 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, whether such amounts are now due or hereafter become due, direct or
indirect and whether such amounts due are from time to time reduced or entirely extinguished and
thereafter re-incurred.

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

     “Permitted Investment” means: (i) Investments existing on the date disclosed on Exhibit 1.1
hereto; (ii) (A) Marketable direct obligations issued or unconditionally guaranteed by the United
States of America or any agency or any State thereof maturing within one year from the date of
acquisition thereof, (B) commercial paper maturing no more than one year from the date of creation
thereof and currently having a rating of at least A-2 or P-2 from either Standard &

6

 

Poor’s Corporation or Moody’s Investors Service, (C) certificates of deposit maturing no more
than one year from the date of investment therein issued by Bank, and (D) Bank’s money market
accounts; (iii) Investments accepted in connection with Permitted Transfers; (iv) Investments
consisting of travel advances and employee relocation loans and other employee loans and advances
in the ordinary course of business; (v) Investments (including Debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary
course of Borrower’s business; and (vi) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the
ordinary course of business, provided that this part shall not apply to Investments of Borrower in
any Subsidiary.

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

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

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

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

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

7

 

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

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

     “Revolving Loans” means collectively, the Primary Revolving Loan and the Secondary Revolving
Loan and “Revolving Loan” means either of such loans as the context may require.

     “Revolving Loan Termination Date” or “Termination Date” means (i) with respect to the Primary
Revolving Loan only, June 30, 2010 and (ii) with respect to the Secondary Revolving Loan only, June
30, 2009, in each case as such date may be renewed from time to time as provided herein.

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

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

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

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

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

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

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

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

8

 

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

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

     “Term Loan Amount” means $1,700,000.

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

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

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

     2. The Loan Facility.

          2.1. The Loans. Bank agrees to extend the following credit to Borrower, subject to
the terms set forth herein:

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

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

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

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          2.2. Promissory Notes.

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

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

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

          2.3. Repayment of Loans.

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

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

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

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

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

          2.5. Overdue Amounts.

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

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

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

          2.7. Letters of Credit.

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

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

          2.8. 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.

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          2.9. Fees. Borrower shall pay to Bank on or before the date hereof a commitment fee in
the amount of $17,000, which fee has been fully earned by Bank and is non-refundable in its
entirety.

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

          2.11. Increased Costs; Reduced Returns.

          (a) If after the date hereof, a Change of Law or compliance by Bank with any request or
directive (whether or not having the force of law) of any Authority either: (i) shall subject Bank
to any tax, duty or other charge with respect to its Loans, its Notes or its obligation to make
Advances, or shall change the basis of taxation of payments to it of the principal of or interest
on its Loans or any other amounts due under this Agreement or the other Loan Documents in respect
of its Loans or its obligation to make Advances (except for changes in the rate of tax on its
overall net income imposed by the jurisdiction in which its principal executive office is located);
or (ii) shall impose, modify or deem applicable any reserve, special deposit insurance or similar
requirement (including, without limitation, any such requirements imposed by the Board of Governors
of the Federal Reserve System) against assets of, deposits with or for the account of, or credit
extended by, it; or (iii) shall impose on it or the London Interbank Market any other similar
condition affecting its Loans, its Notes or its obligation to make Advances; and the result of any
of the foregoing is to increase the cost to it of making or maintaining any of its Loans, or to
reduce the amount received or receivable by it under this Agreement, under its Notes or under the
other Loan Documents with respect thereto, by an amount deemed by it to be material, then, within
fifteen (15) days after demand by Bank, Borrower shall pay to Bank such additional amount or
amounts as will compensate Bank for such increased cost or reduction.

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

          (c) Bank shall promptly notify Borrower of any event of which it has knowledge, occurring
after the date hereof, which will entitle it to compensation or reimbursement pursuant to this
Section. A certificate of Bank claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, Bank may use any
reasonable averaging and attribution methods. Notwithstanding anything to the contrary herein,
Bank may not claim compensation or reimbursement for any period more than twelve (12)

12

 

months prior to the date any such demand for payment is made under this Section 2.12, regardless of the cost to
Bank.

     3. Conditions Precedent to Borrowing.

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

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

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

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

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

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

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

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

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

          (d) Perfection of Liens. UCC-1 financing statements 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,

13

 

delivery and filing of the Security Agreement and the financing statements shall duly have been paid.

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

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

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

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

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

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

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

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

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

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

     4. Representations and Warranties. In order to induce Bank to enter into this
Agreement and to make the Loans provided for herein, Borrower hereby represents and warrants (all
of which shall survive the execution and delivery of the Loan Documents and all of which

14

 

shall be deemed made as of the date hereof and as of the Advance Date), on behalf of it and each of its
Subsidiaries, that:

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

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

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

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

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

15

 

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

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

          4.8. Collateral. The security interests granted to 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 rights of
all third persons, now existing or hereafter arising, subject only to Permitted Liens; and all of
the Collateral is intended for use solely in its business.

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

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

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

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

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

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

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

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

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

          4.18. Accounts. Each Account, instrument, Chattel Paper and other writing
constituting any portion of the Collateral (a) is genuine and enforceable in accordance with its
terms except for such limits thereon arising from bankruptcy and similar laws relating to
creditors’ rights; (b) is not subject to any deduction or discount (other than as stated in the invoice), defense, set off, claim or counterclaim of a material nature against
it except as to which it has notified 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 it 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 other than Permitted Liens; and (f)
is for a liquidated amount maturing as stated in the invoice therefor.

          4.19. Intellectual Property. It possesses all licenses, certificates, franchises,
permits and other authorizations from governmental and political subdivisions or regulatory
authorities, and all patents, trademarks, service marks, trade names, copyrights, franchises,
licenses and other rights that are necessary for ownership, maintenance and operation of any of

17

 

their respective material Properties and assets, and it is not in violation of any thereof, which,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

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

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

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

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

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

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

          5.3. Insurance. Shall maintain such liability insurance, workers’ compensation
insurance, business interruption insurance and casualty insurance as may be required by law,
customary and usual for prudent businesses in its industry or as may be reasonably required by

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Bank and shall insure and keep insured all of its material properties in good and responsible insurance
companies satisfactory to Bank.

          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) it is taking to correct the same, (b) any
material litigation or material changes in existing litigation or any judgment against it or its
assets, (c) any damage or loss to property that could reasonably be expected to have a Material
Adverse Effect, (d) any notice from taxing authorities as to claimed deficiencies or any tax lien
or any notice relating to alleged ERISA violations, (e) any Reportable Event, as defined in ERISA,
(f) any rejection, return, offset, dispute, loss or other circumstance that could reasonably be
expected to have a Material Adverse Effect, (g) the cancellation or termination of, or any default
under, any agreement to which it is a party or by which any of its properties are bound, which
cancellation or termination could reasonably be expected to have a Material Adverse Effect, or any
acceleration of the maturity of any of its Debt, and (h) any loss or threatened loss of licenses or
permits, which loss could reasonably be expected to have a Material Adverse Effect.

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

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

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

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

          (c) No Default Certificates. Within forty five (45) days after the end of each fiscal
quarter, a certificate of Borrower’s president or chief financial officer, in the form attached

19

 

hereto as Exhibit 5.6 (a “Compliance Certificate”), that no Default or Event of Default then exists
or if a Default or Event of Default exists, the nature and duration thereof and its intention with
respect thereto, and in addition, shall cause its independent auditors (if applicable) to submit to
Bank, together with its audit report, a statement that, in the course of such audit, it discovered
no circumstances which it believes would result in a Default or Event of Default or if it
discovered any such circumstances, the nature and duration thereof;

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

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

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

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

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

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

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

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

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

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

20

 

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

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

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

          5.13. Deposit Account. Shall maintain its primary depository accounts and cash
management accounts with Bank.

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

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

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

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

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

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

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

          6.7. No Change in Name, Offices; Removal of Collateral. Shall unless it shall have
given 60 days’ advance written notice thereof to Bank: (a) change its name or the location

21

 

of its chief executive office or other office where books or records are kept, (b) use any new trade or
fictitious name (provided its use of any trade or fictitious name shall be in compliance with all
laws regarding the use of such names), or (c) permit any Inventory or other tangible Collateral to
be located at any location other than as specified in Section 4.9.

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

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

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

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

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

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

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

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

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

22

 

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

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

          7.1. Fixed Charge Coverage Ratio. Borrower shall have a Fixed Charge Coverage Ratio
of at least 1.35 to 1.00 at each fiscal quarter end.

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

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

     8. Default.

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

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

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

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

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

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

23

 

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

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

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

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

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

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

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

24

 

          (a) Declare any or all Obligations (other than in respect of any Interest Rate Agreement) to
be immediately due and payable (if not earlier demanded), terminate its obligation to make Advances
to Borrower, bring suit against Borrower to collect the Obligations, exercise any remedy available
to it hereunder or at law and take any action or exercise any remedy provided herein or in any
other Loan Document or under applicable law; provided, that no remedy shall be exclusive of other
remedies or impair the right of Bank to exercise any other remedies.

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

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

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

          8.3. Assembly of Collateral. If requested by 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.

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

          8.5. Receiver. In addition to any other remedy available to it, Bank shall have the
absolute right, upon the occurrence of an Event of Default, to seek and obtain the

25

 

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.

          8.6. Deposits. 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 irrevocably appoints Bank as its attorney-in-fact to endorse any check or draft or
take other action necessary to obtain such funds.

          8.7. Priorities. On and after an Event of Default and during the continuation of an
Event of Default, Bank collects any money pursuant to this Agreement, the Notes, or under any other
Loan Document, such money shall be applied to the Obligations in such order and manner as Bank may
decide in its sole discretion.

     9. Security Agreement.

          9.1. Security Interest.

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

          (b) Except as herein or by applicable law otherwise expressly provided, 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 it to
take and its omission to take any action not requested by Borrower shall not be deemed a failure to
exercise reasonable care. No segregation or specific allocation by 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 Bank’s options, powers or rights under this Agreement or the
other Loan Documents or otherwise arising.

          (c) While a Default or Event of Default exists, Bank may, with or without notice to Borrower:
(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.

          9.2. Power of Attorney. Bank is authorized to file financing statements relating to
Collateral without Borrower’s signature where authorized by law. Borrower authorizes Bank,

26

 

at Borrower’s expense, to file any financing statements relating to the Collateral (without Borrower’s
signature thereon) which it deems appropriate and Borrower irrevocably appoints Bank as its
attorney-in-fact to execute any such financing statements in Borrower’s name and to perform all
other acts which it deems appropriate to perfect and to continue perfection of its Liens. Borrower
hereby appoints 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. Borrower hereby also constitutes and appoints Bank
the true and lawful attorney of Borrower with full power of substitution to take any and all
appropriate action and to execute any and all documents or instruments that may be necessary or
desirable to accomplish the purpose and carry out the terms of this Agreement. 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
shall be applied, after allowing two (2) Business Days for collection, as provided above in 

Section
8.7. If any deficiency shall arise, Borrower shall remain liable to 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) taking
possession of the Collateral and Borrower hereby waives its right to assert against Collateral
Agent or its agents any claim based upon trespass or any similar cause of action for entering upon
any premises where the Collateral may be located.

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

          9.5. Accounts. Before or after any Default or Event of Default, Bank may notify any
Account Debtor of its Lien and may direct such Account Debtor to make payment directly to it or at
its direction for application against the Obligations. Any such payments received by or on behalf
of Borrower at any time, whether before or after default, shall be the property of 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. Bank shall have the right to apply any
proceeds of Collateral to such of the Obligations as it may determine.

27

 

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

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

     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 the delivery of the Notes, and shall continue
in full force and effect so long as any Obligation is outstanding, there exists any commitment by
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, fees, costs and expenses (including,
without limitation, attorneys’ and paralegals’ fees, costs and expenses) incurred by such
indemnitees, whether prior to or from and after the date hereof, as a result of or arising from or
relating to (i) the due diligence effort (including, without limitation, public record search,
recording fees, examinations and investigations of the properties of Borrower and Borrower’s
operations), negotiation, preparation, execution and/or performance of any of the Loan Documents or
of any document executed in connection with the transactions contemplated thereby, maintenance of
the Loans by 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 their rights under the Loan Documents
and applicable law, including 15% of the outstanding Obligations as attorneys fees if collected by
or through an attorney at law and disbursements of counsel for Bank in connection therewith,
whether suit be brought or not and whether incurred at trial or on appeal, (iv) periodic field
exams, audits and appraisals performed by Bank; and/or (v) any matter relating to the financing
transactions contemplated by the Loan

28

 

Documents or by any document execution in connection with the
transactions contemplated thereby, other than for such loss, damage, liability, obligation,
penalty, fee, cost or expense arising from such indemnitee’s gross negligence or willful
misconduct. In addition, Borrower agrees to pay and save 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 Advance, 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, chargeable against Borrower’s
loan account, and shall survive termination of this Agreement.

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

	 	 	 
	          Bank:

	 	RBC BANK (USA)
	 

	 	75 5th Street
	 

	 	Suite 900
	 

	 	Atlanta, Georgia 30308
	 

	 	Attn: Ms. Dawnita McCain
	 
	 	 
	          Borrower:

	 	VIDEO DISPLAY CORPORATION
	 

	 	1868 Tucker Industrial Road
	 

	 	Tucker, GA 30084
	 

	 	Attn: President

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

          10.6. Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of Borrower and 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. 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.

29

 

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

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

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

          10.11. Participations. Bank shall have the right to enter into one or more
participations with other lenders with respect to the Obligations. Upon prior notice to Borrower
of such participation, Borrower shall thereafter furnish to such participant 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 its rights under any of the other Loan Documents, including collateral therefor, to any Federal
Reserve Bank in accordance with applicable law.

          10.12. Waiver of Certain Defenses. To the fullest extent permitted by applicable law,
upon the occurrence of any Event of Default, neither Borrower nor anyone claiming by or under
Borrower will claim or seek to take advantage of any law requiring 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 the 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.

          10.13. Patriot Act. Bank hereby notifies the Borrower that, pursuant to the
requirements of Uniting And Strengthening America By Providing Appropriate Tools Required To
Intercept And Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”), it is required to
obtain, verify and record information that identifies the Borrower, which information includes

30

 

names, addresses and other information that will allow Bank to identify such Borrower in accordance
with the Patriot Act.

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

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

          10.16. Dealings with Multiple Borrowers. If more than one Person is named as
“Borrower” hereunder, all Obligations, representations, warranties, covenants and indemnities set
forth in the Loan Documents to which such Person is a party shall be joint and several. 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.
Each Borrower hereby appoints each other Borrower as its true and lawful attorney-in-fact, with
full right and power, for purposes of exercising all rights of such Person hereunder and under
applicable law with regard to the transactions contemplated under the Loan Documents. The
foregoing is a material inducement to the agreement of Bank to enter into the terms hereof and to
consummate the transactions contemplated hereby.

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

31

 

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

	 	 	 	 	 	 	 
	 	 	BANK:	 	 
	 
	 	 	 	 	 	 
	 	 	RBC BANK (USA)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

32

 

	 	 	 	 	 	 	 
	 	 	BORROWER:	 	 
	 
	 	 	 	 	 	 
	 	 	VIDEO DISPLAY CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 
	 
	 	 	 	 	 	 
	 	 	LEXEL IMAGING SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 
	 
	 	 	 	 	 	 
	 	 	FOX INTERNATIONAL, LTD., INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 
	 
	 	 	 	 	 	 
	 	 	Z-AXIS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 
	 
	 	 	 	 	 	 
	 	 	TELTRON TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 

33

 

	 	 	 	 	 	 	 
	 	 	AYDIN DISPLAYS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[SEAL]
	 	 

34

 

SCHEDULE OF EXHIBITS

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

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

	 	 	 	 	 
	Exhibit	 	Section Reference	 	Title
	1.1

	 	1.1     (“Definitions”)
	 	Permitted Investments
	 
	 	 	 	 
	4.1

	 	4.1     (“Valid Existence”)
	 	Corporate Information
	 
	 	 	 	 
	4.9

	 	4.9     (“Location”)
	 	Offices of Borrower
	 
	 	 	 	 
	4.13

	 	4.13    (“Subsidiaries”)
	 	List of Subsidiaries
	 
	 	 	 	 
	4.17

	 	4.17 (“Names; Mergers”)
	 	Names
	 
	 	 	 	 
	5.6

	 	5.6   (“Financial Reports”)
	 	Compliance Certificate

 

 

Exhibit 1.1

Permitted Investments

 

 

Exhibit 4.1

Corporate Information

	 	 	 	 	 	 	 
	Name:	 	Tax ID No.:	 	State Corporate ID No.:
	VIDEO DISPLAY CORPORATION

	 	 	 	 	J603206	 
	 
	 	 	 	 	 	 
	LEXEL IMAGING SYSTEMS, INC.

	 	95-2557445
	 	 	0689118	 
	 
	 	 	 	 	 	 
	FOX INTERNATIONAL, LTD., INC.

	 	34-0845191
	 	 	283730	 
	 
	 	 	 	 	 	 
	Z-AXIS, INC.

	 	16-1359534
	 	 	J918734	 
	 
	 	 	 	 	 	 
	TELTRON TECHNOLOGIES, INC.

	 	58-2314425
	 	 	K627542	 
	 
	 	 	 	 	 	 
	AYDIN DISPLAYS, INC.

	 	58-2424005
	 	 	K838123	 

2

 

Exhibit 4.9

Offices of Borrower

276 Spearing St., Howard, PA 16841

1416 Alpine Blvd., Bossier City, LA 71111

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

1 Riga Ln, Birdsboro, PA 19508

1916 Route 96, Phelps, NY 14532

23600 Aurora Rd., Bedford Heights, OH 44146

1501 Newton Pike, Lexington, Kentucky

1868 Tucker Industrial Drive, Tucker, GA

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

15 Eagle Street, Phelps, NY

2 Riga Lane, Birdsboro, PA

3110 West Ridge Pike, Sanatoga, PA

18450 Technology Drive, Morgan Hill, CA

3

 

Exhibit 4.14

List of Subsidiaries

VIDEO DISPLAY CORPORATION has the following Subsidiaries

	1.	 	LEXEL IMAGING SYSTEMS, INC.
	 
	2.	 	FOX INTERNATIONAL, LTD., INC.
	 
	3.	 	Z-AXIS, INC.
	 
	4.	 	TELTRON TECHNOLOGIES, INC.
	 
	5.	 	AYDIN DISPLAYS, INC.
	 
	6.	 	VIDEO DISPLAY (EUROPE) LIMITED

 

 

Exhibit 4.17

Names; Mergers; Acquisitions

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

 

 

Exhibit 5.6

COMPLIANCE CERTIFICATE

			
	TO:	 	RBC BANK (USA)

(the “Bank”)

FROM: VIDEO DISPLAY CORPORATION

The undersigned authorized officer of VIDEO DISPLAY CORPORATION (“Parent”) hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement between Parent, certain
of its Subsidiaries and Bank, dated September                     , 2008 (the “Agreement”), (i) Borrowers are in
complete compliance for the period ending                                          with all covenants set forth in the
Agreement, except as noted below and (ii) all representations and warranties of Borrowers stated in
the Agreement are true, correct and accurate as of the date hereof. Attached herewith are the
required documents supporting the above certification. The undersigned authorized officer further
certifies that this Compliance Certificate and any supporting financial documents have been
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently
applied from one period to the next except as explained in an accompanying letter or footnotes – or
unless otherwise permitted in the Agreement. Reference is made to the Agreement for the relevant
meanings of the reporting requirements and covenants which are stated below in a “short-hand”
manner.

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

	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies	 	 
	Quarterly financial statements

	 	Quarterly within 45 days
	 	Yes
	 	No
	Annual financial statements (Audited)

	 	FYE within 150 days
	 	Yes
	 	No
	 

	 	 	 	Yes
	 	No
	Budget/Forecast

	 	30 days after FYE
	 	Yes
	 	No

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	 	 	 	 	 	Actual	 	 	 	 	 	 	Complies	 	 	 	 	 
	Adjusted Total Liabilities
to Adjusted Tangible Net Worth
	 	 	1.50	 	 	 	1.00	 	 	 	 	 	 	 	1.00	 	 	Yes	 	No
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fixed Charge Coverage Ratio
	 	 	1.35	 	 	 	1.00	 	 	 	 	 	 	 	1.00	 	 	Yes	 	No
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Asset Coverage Ratio
	 	 	1.00	 	 	 	1.00	 	 	 	 	 	 	 	1.00	 	 	Yes	 	No
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

(Continued on Next Page)

 

 

Compliance Certificate

(Continued from Previous Page)

	 	 	 
	Comments Regarding Exceptions: See Attached.
	 	 
	 
	 	 
	 
	 	 
	 

Authorized Signatory of Borrower

	 	 
	 
	 	 
	 

Title

	 	 
	 
	 	 
	 

Date

	 	 

	 	 	 	 	 	 	 	 	 
	BANK USE ONLY	 	 
	 
	 	 	 	 	 	 	 	 
	Received by:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	Authorized Signer	 	 
	 
	 	 	 	 	 	 	 	 
	Date: 
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Verified: 
	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Authorized Signer	 	 
	 
	 	 	 	 	 	 	 	 
	Date: 
	 	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Compliance Status	 	Yes          No

2 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	1. Definitions
	 	 	1	 
	1.1. Definitions
	 	 	1	 
	1.2. Other Defined Terms
	 	 	9	 
	 
	 	 	 	 
	2. The Loan Facility
	 	 	9	 
	 
	 	 	 	 
	3. The
	 	 	9	 
	3.1. Promissory Note
	 	 	10	 
	3.2. Repayment of Loans
	 	 	10	 
	3.3. Extension of Termination Date
	 	 	10	 
	3.4. Overdue Amounts
	 	 	10	 
	3.5. Calculation of Interest
	 	 	11	 
	3.6. Letters of Credit; Banker’s Acceptances
	 	 	11	 
	3.7. Statement of Account
	 	 	11	 
	3.8. Fees
	 	 	12	 
	3.9. Termination
	 	 	12	 
	3.10. Increased Costs; Reduced Returns
	 	 	12	 
	 
	 	 	 	 
	4. Conditions Precedent to Borrowing
	 	 	13	 
	4.1. Conditions Precedent to Initial Advance
	 	 	13	 
	4.2. Conditions Precedent to Each Revolving Loan Advance
	 	 	14	 
	 
	 	 	 	 
	5. Representations and Warranties
	 	 	14	 
	5.1. Valid Existence and Power
	 	 	15	 
	5.2. Authority
	 	 	15	 
	5.3. Financial Condition
	 	 	15	 
	5.4. Litigation
	 	 	15	 
	5.5. Agreements, Etc.
	 	 	15	 
	5.6. Authorizations
	 	 	16	 
	5.7. Title
	 	 	16	 
	5.8. Collateral
	 	 	16	 
	5.9. Location
	 	 	16	 
	5.10. Taxes
	 	 	16	 
	5.11. Labor Law Matters
	 	 	16	 
	5.12. Judgment Liens
	 	 	16	 
	5.13. Subsidiaries
	 	 	17	 
	5.14. Environmental
	 	 	17	 
	5.15. ERISA
	 	 	17	 
	5.16. Investment Company Act
	 	 	17	 
	5.17. Names
	 	 	17	 
	5.18. Accounts
	 	 	17	 
	5.19. Intellectual Property
	 	 	17	 
	5.20. Insider
	 	 	18	 

-i-

 

	 	 	 	 	 
	 	 	Page	 
	5.21. Compliance with Covenants; No Default
	 	 	18	 
	5.22. Full Disclosure
	 	 	18	 
	 
	 	 	 	 
	6. Affirmative Covenants
	 	 	18	 
	6.1. Use of Loan Proceeds
	 	 	18	 
	6.2. Maintenance of Business and Properties
	 	 	18	 
	6.3. Insurance
	 	 	18	 
	6.4. Notice of Default
	 	 	19	 
	6.5. Inspections
	 	 	19	 
	6.6. Financial Information
	 	 	19	 
	6.7. Maintenance of Existence and Rights
	 	 	20	 
	6.8. Payment of Taxes, Etc.
	 	 	20	 
	6.9. Subordination
	 	 	20	 
	6.10. Compliance; Hazardous Materials
	 	 	20	 
	6.11. Further Assurances
	 	 	20	 
	6.12. Covenants Regarding Collateral
	 	 	20	 
	6.13. Deposit Account
	 	 	21	 
	 
	 	 	 	 
	7. Negative Covenants
	 	 	21	 
	7.1. Debt
	 	 	21	 
	7.2. Liens
	 	 	21	 
	7.3. Corporate Distributions
	 	 	21	 
	7.4. Investments
	 	 	21	 
	7.5. Change in Business
	 	 	21	 
	7.6. Transactions with Affiliates
	 	 	21	 
	7.7. No Change in Name, Offices; Removal of Collateral
	 	 	21	 
	7.8. No Sale, Leaseback
	 	 	22	 
	7.9. Margin Stock
	 	 	22	 
	7.10. Tangible Collateral
	 	 	22	 
	7.11. Subsidiaries
	 	 	22	 
	7.12. Dispositions
	 	 	22	 
	7.13. Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets
	 	 	22	 
	7.14. Change in Ownership
	 	 	22	 
	7.15. Change of Fiscal Year or Accounting Methods
	 	 	22	 
	7.16. Foreign Corrupt Practices
	 	 	22	 
	7.17. Negative Pledge Agreements
	 	 	23	 
	 
	 	 	 	 
	8. Financial Covenants
	 	 	23	 
	8.1. Fixed Charge Coverage Ratio
	 	 	23	 
	8.2. Total Liabilities to Tangible Net Worth Ratio
	 	 	23	 
	8.3. Asset Coverage Ratio
	 	 	23	 
	 
	 	 	 	 
	9. Default
	 	 	23	 
	9.1. Events of Default
	 	 	23	 
	9.2. Remedies
	 	 	24	 
	9.3. Assembly of Collateral
	 	 	25	 
	9.4. Notice of Sales, Etc.
	 	 	25	 

-ii-

 

	 	 	 	 	 
	 	 	Page	 
	9.5. Receiver
	 	 	25	 
	9.6. Deposits
	 	 	26	 
	9.7. Priorities
	 	 	26	 
	 
	 	 	 	 
	10. Security Agreement
	 	 	26	 
	10.1. Security Interest
	 	 	26	 
	10.2. Power of Attorney
	 	 	26	 
	10.3. Entry
	 	 	27	 
	10.4. Other Rights
	 	 	27	 
	10.5. Accounts
	 	 	27	 
	10.6. Control
	 	 	28	 
	10.7. Waiver of Marshaling
	 	 	28	 
	 
	 	 	 	 
	11. Miscellaneous
	 	 	28	 
	11.1. No Waiver, Remedies Cumulative
	 	 	28	 
	11.2. Survival of Representations
	 	 	28	 
	11.3. Indemnity By Borrower; Expenses
	 	 	28	 
	11.4. Notices
	 	 	29	 
	11.5. Governing Law
	 	 	29	 
	11.6. Successors and Assigns
	 	 	29	 
	11.7. Counterparts
	 	 	29	 
	11.8. No Usury
	 	 	30	 
	11.9. Powers
	 	 	30	 
	11.10. Approvals
	 	 	30	 
	11.11. Participations
	 	 	30	 
	11.12. Waiver of Certain Defenses
	 	 	30	 
	11.13. Patriot Act
	 	 	30	 
	11.14. Anti-Money Laundering
	 	 	31	 
	11.15. Indirect Means
	 	 	31	 
	11.16. Dealings with Multiple Borrowers
	 	 	31	 
	11.17. Amendments, Waivers and Consents
	 	 	31	 

-iii-

 

	 	 	 
	RBC BANK (USA)

	 	Commercial Promissory Note: C & I
	 
	 	 
	$17,000,000

	 	Atlanta, Georgia
	 

	 	September
    , 2008
	Renewal Master Revolving Note
	 	 

FOR VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to pay to RBC BANK
(USA) (“Bank”) (formerly known as RBC Centura Bank), or order, the sum of Seventeen Million
Dollars ($17,000,000), or so much thereof as shall have been disbursed from time to time and
remains unpaid, together with interest at the rate and payable in the manner hereinafter stated.
Principal and interest shall be payable at any banking office of Bank in the city or town indicated
above, or such other place as the holder of this Note may designate. This Note is issued in
renewal of that certain Commercial Promissory Note (C&I), dated as of June ___, 2007, from Borrower
to the order of Bank in the original principal amount of $8,500,000.

Article I. Interest Rate.

Section 1.1. Pre-Default Rate. Subject to the provisions of Section 1.2 below, interest
payable on this Note per annum will accrue at the LIBOR Base Rate plus the Applicable Margin.

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

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

	 	 	 	 	 	 	 
	Tier	 	Fixed Charge Coverage Ratio	 	Applicable Margin
	I

	 	Greater than 1.35:1.0, but less than 1.50:1.0
	 	 	2.10	%
	II

	 	Equal to/greater than 1.50:1.0 but less than 1.75:1.0
	 	 	1.85	%
	III

	 	Equal to/greater than 1.75:1.0
	 	 	1.60	%

 

 

The Applicable Margin will be determined from Borrower’s most recent quarterly compliance
certificate received by Bank, as required in the Loan Agreement. The ratio will be measured as of
August 31st, November 30th, February 28th, and May 31st
of each year (each a “Measurement Date”); adjustments in the Applicable Margin will occur as of the
first day of the month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of the Loan Agreement (i.e., November 1st,
February 1st, May 1st and August 1st) for the immediately
preceding Measurement Date (each an “Adjustment Date”). The Applicable Margin will be in effect
from the then applicable Adjustment Date until the next Adjustment Date. Until Lender receives the
first Compliance Certificate and related financial statements due on October 15, 2008 for the
August 31, 2008 Measurement Date, the Applicable Margin will be 2.10%. The First Adjustment Date
will occur on the first day of the month immediately following Bank’s receipt of the Compliance
Certificate due on October 15, 2008 and be based on the August 31, 2008 Measurement Date financial
statements, and shall apply until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the Applicable Margin
from the date such certificate (and applicable financial statement) was due until Bank receives it
will be the highest level set forth above, or at Bank’s option, the Default Rate.

Section 1.2. Default Rate. Upon the nonpayment of any payment of interest described
herein, Bank, at its option and without accelerating this Note, may accrue interest on such unpaid
interest at a rate per annum (“Default Rate”) equal to the lesser of the maximum contract rate of
interest that may be charged to and collected from Borrower on the loan evidenced by this Note
under applicable law or five percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1. After maturity of this Note, whether by acceleration or
otherwise, interest will accrue on the unpaid principal of this Note, any accrued but unpaid
interest and all fees, premiums, charges and costs and expenses owing hereunder at the Default Rate
until this Note is paid in full, whether this Note is paid in full pre-judgment or post-judgment.

Section 1.3. Variable Rate. This is a variable rate note. Any change in the rate of
interest payable under this Note will equal the change in the variable rate index to which such
rate is tied, but the rate at which interest accrues under this Note shall never exceed the maximum
contract rate which may be charged to and collected from Borrower on the loan evidenced by this
Note under applicable law. Bank shall have no obligation to notify Borrower of adjustments in the
rate of interest payable under this Note. Adjustments to the rate of interest will be effective as
of the first day of each month.

Section 1.4. Calculation of Interest. All interest payable under this Note will accrue
daily on the basis of the actual number of days elapsed and a year of three hundred sixty (360)
days.

Article II. Payment Terms.

Section 2.1. Payment Terms. Interest shall be payable monthly, in arrears, beginning
November 1, 2008 and continuing on the first day of each consecutive month thereafter until June
30, 2010 (“Maturity Date”), when one final payment of the entire balance of principal, interest,
fees, premiums, charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

2

 

Section 2.2. Prepayment. This Note may be prepaid in whole, or in part at anytime without
any fee or premium.

Section 2.3. Application of Payments. All payments made on this Note shall be applied
first to payment of all late fees, charges, premiums and costs and expenses due but unpaid under
this Note, then to accrued but unpaid interest and finally to principal, unless Bank determines in
its sole discretion to apply payments in a different order or applicable law requires a different
application of payments. Payments in federal funds, immediately available in the place designated
for payment, received by Bank prior to 2:00 p.m. local time at said place of payment, shall be
credited as if received prior to close of business on the day the funds are immediately available;
while other payments, at the option of Bank, may not be credited until such payments are
immediately available to Bank, in federal funds, in the place designated for payment, prior to 2:00
p.m. local time at said place of payment on a day on which Bank is open for business.

Article III. Loan Agreement and Security.

Section 3.1. Loan and Security Agreement. Borrower and Bank have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or restated from time to
time, the “Loan and Security Agreement”). This Note is also secured by (1) the security documents
and other supporting obligations referenced in the Loan and Security Agreement and (2) the security
documents and other supporting obligations which reference that they secure this Note (“security
documents”).

Article IV. Default

Section 4.1. Late Charges and Expenses. Borrower agrees to pay, upon demand by Bank, for
each payment past due for fifteen (15) or more calendar days, a late charge in an amount equal to
the lesser of (1) four percent (4%) of the amount of the payment past due or (2) the maximum
percentage of the payment past due permitted by applicable law, or the maximum amount if not
expressed as a percentage. If this Note is not paid in full whenever it becomes due and payable,
Borrower agrees to pay all costs and expenses of collection, including reasonable attorneys’ fees.
The Borrower hereby stipulates that reasonable attorneys’ fees shall be fifteen percent (15%) of
the outstanding balance owing under this Note after default.

Section 4.2. Default. Any one or more of the following shall constitute an event of default
(“Event of Default”) under this Note: (1) the failure of Borrower to pay when due any payment
described herein, whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and Security Agreement.

Section 4.3. Acceleration. Upon the occurrence of an Event of Default, (1) the entire
unpaid principal balance of this Note, together with all other amounts owing and all other amounts
to be owing under this Note, shall, at the option of Bank, become immediately due and payable,
without notice or demand, and (2) the Bank may, both before and after acceleration, exercise any of
and all of its other rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in equity, to recover full
payment of the balance (principal, interest, fees, premiums, charges and costs and expenses) owing
under this Note. The failure by Bank to exercise any of its options shall not constitute a waiver
of the right to exercise same in the event of any subsequent default.

3

 

Article V. Miscellaneous.

Section 5.1. Use of Terms. The term “Note” refers to this Commercial Promissory Note: C &
I; the term “loan document” refers to this Note, the Loan and Security Agreement and any security
documents and other documents and agreements executed and delivered to Bank or others on Bank’s
behalf in connection with this Note; and the term “Borrower” refers to all signatories of this Note
collectively and severally, as the context of this Note requires, and all signatories of this Note
shall be and the same are jointly and severally liable hereunder.

Section 5.2. Waiver. Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any other person or
property, agrees that without notice to any person and without affecting any person’s liability
under this Note, Bank, at any time or times, may grant extensions of the time for payment or other
indulgences to any person or permit the renewal, amendment or modification of this Note or any
other agreement executed and delivered by any person in connection with this Note, or permit the
substitution, exchange or release of any security for this Note and may add or release any person
primarily or secondarily liable, and agrees that Bank may apply all moneys made available to it
from any part of the proceeds from the disposition of any security for this Note either to this
Note or to any other obligation of Borrower to Bank, as Bank may elect from time to time.

Section 5.3. Jury and Jurisdiction. This Note shall be governed by and construed in
accordance with the substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. Borrower, to the extent permitted by law, waives any
right to a trial by jury in any action arising from or related to this Note.

Section 5.4. Successors and Assigns. This Note shall apply to and bind Borrower’s and
Bank’s heirs, personal representatives, successors and assigns. All references in this Note to
Bank shall include the holder hereof and this Note shall inure to the benefit of any holder, its
successors and assigns; and, Borrower waives and will not assert against any transferee or assignee
of this Note any claims, defenses, set-offs or rights of recoupment which Borrower could assert
against Bank, except defenses which Borrower cannot waive. Borrower acknowledges that Customer
Numbers and Loan Numbers may be added to this Note after execution and delivery of this Note by
Borrower and if there is a section denoted “BANK USE ONLY”, the information under such section may
also be completed by Bank after execution and delivery of this Note. In addition, in the event the
date of this Note is omitted, Borrower consents to Bank inserting the date.

Section 5.5. Master Note. This Note evidences a line of credit and Borrower shall be
liable for only so much of the principal amount as shall be equal to the total of the amounts
advanced to or for Borrower by Bank from time to time, less all payments made by or for Borrower
and applied by Bank to principal, and for interest on each such advance, fees, premiums, charges
and costs and expenses incurred or due hereunder, all as shown on Bank’s books and records which
shall be conclusive evidence of the amount owed by Borrower under this Note, absent a clear and
convincing showing of bad faith or manifest error. Upon the occurrence of an Event of Default or
the occurrence of an event which, with the giving of notice or a lapse of time, or both, would
become an Event of Default under this Note, in addition to its other rights and remedies, Bank may
terminate or suspend Borrower’s right to receive any future or additional advances under this Note
and the other loan documents.

4

 

Section 5.6. Anti-Money Laundering and Anti-Terrorism. Borrower represents, warrants and
covenants to Bank as follows: (1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order
13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not engage in and
shall not engage in any dealings or transactions prohibited by Section 2 of such executive order,
and is not and shall not otherwise become associated with any such person in any manner violative
of Section 2, (c) is not and shall not become a person on the list of Specially Designated
Nationals and Blocked Persons, and (d) is not and shall not become subject to the limitations or
prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control
regulation or executive order; (2) Borrower is and shall remain in compliance, in all material
respects, with (a) the Trading with the Enemy Act, as amended, and each of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any other enabling legislation or executive order relating thereto, and (b) the
Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct
Terrorism (USA Patriot Act of 2001); and (3) Borrower has not and shall not use all or any part of
the proceeds, advances or other amounts or sums evidenced by this Note, directly or indirectly, for
any payments to any governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

(Signatures Begin on the Next Page)

5

 

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

BORROWER:

	 	 	 	 	 
	VIDEO DISPLAY CORPORATION	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 
	 
	 	 	 	 
	LEXEL IMAGING SYSTEMS, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 
	 
	 	 	 	 
	FOX INTERNATIONAL, LTD., INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 
	 
	 	 	 	 
	Z-AXIS, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 
	 
	 	 	 	 
	TELTRON TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 

(Signatures Continued on Next Page)

 

 

	 	 	 	 	 
	AYDIN DISPLAYS, INC.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	[SEAL]	 	 

 

 

	 	 	 	 	 
	Customer No.
	 	 	 
	Loan No.  

	 	 

	 	 
	 

	 

	 	 

	 	 	 
	RBC BANK (USA)

	 	Commercial Promissory Note: C & I
	 
	 	 
	$3,500,000

	 	Atlanta, Georgia
	 

	 	September      , 2008

Renewal Master Revolving Note

FOR VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to pay to RBC BANK
(USA) (“Bank”) (formerly known as RBC Centura Bank), or order, the sum of Three Million Five
Hundred Thousand Dollars ($3,500,000), or so much thereof as shall have been disbursed from time to
time and remains unpaid, together with interest at the rate and payable in the manner hereinafter
stated. Principal and interest shall be payable at any banking office of Bank in the city or town
indicated above, or such other place as the holder of this Note may designate. This Note is issued
in renewal of that certain Commercial Promissory Note (C&I), dated as of June 29, 2006, from
Borrower to the order of Bank in the principal amount of $1,750,000.

Article I. Interest Rate.

Section 1.1. Pre-Default Rate. Subject to the provisions of Section 1.2 below, interest
payable on this Note per annum will accrue at the LIBOR Base Rate plus the Applicable Margin.

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

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

 

 

	 	 	 	 	 	 	 
	Tier	 	Fixed Charge Coverage Ratio	 	Applicable Margin
	I

	 	Greater than 1.35:1.0, but less than 1.50:1.0
	 	 	2.10	%
	II

	 	Equal to/greater than 1.50:1.0 but less than 1.75:1.0
	 	 	1.85	%
	III

	 	Equal to/greater than 1.75:1.0
	 	 	1.60	%

The Applicable Margin will be determined from Borrower’s most recent quarterly compliance
certificate received by Bank, as required in the Loan Agreement. The ratio will be measured as of
August 31st, November 30th, February 28th, and May 31st
of each year (each a “Measurement Date”); adjustments in the Applicable Margin will occur as of the
first day of the month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of the Loan Agreement (i.e., November 1st,
February 1st, May 1st and August 1st) for the immediately
preceding Measurement Date (each an “Adjustment Date”). The Applicable Margin will be in effect
from the then applicable Adjustment Date until the next Adjustment Date. Until Lender receives the
first Compliance Certificate and related financial statements due on October 15, 2008 for the
August 31, 2008 Measurement Date, the Applicable Margin will be 2.10%. The First Adjustment Date
will occur on the first day of the month immediately following Bank’s receipt of the Compliance
Certificate due on October 15, 2008 and be based on the August 31, 2008 Measurement Date financial
statements, and shall apply until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the Applicable Margin
from the date such certificate (and applicable financial statement) was due until Bank receives it
will be the highest level set forth above, or at Bank’s option, the Default Rate.

Section 1.2. Default Rate. Upon the nonpayment of any payment of interest described
herein, Bank, at its option and without accelerating this Note, may accrue interest on such unpaid
interest at a rate per annum (“Default Rate”) equal to the lesser of the maximum contract rate of
interest that may be charged to and collected from Borrower on the loan evidenced by this Note
under applicable law or five percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1. After maturity of this Note, whether by acceleration or
otherwise, interest will accrue on the unpaid principal of this Note, any accrued but unpaid
interest and all fees, premiums, charges and costs and expenses owing hereunder at the Default Rate
until this Note is paid in full, whether this Note is paid in full pre-judgment or post-judgment.

Section 1.3. Variable Rate. This is a variable rate note. Any change in the rate of
interest payable under this Note will equal the change in the variable rate index to which such
rate is tied, but the rate at which interest accrues under this Note shall never exceed the maximum
contract rate which may be charged to and collected from Borrower on the loan evidenced by this
Note under applicable law. Bank shall have no obligation to notify Borrower of adjustments in the
rate of interest payable under this Note. Adjustments to the rate of interest will be effective as
of the first day of each month.

Section 1.4. Calculation of Interest. All interest payable under this Note will accrue
daily on the basis of the actual number of days elapsed and a year of three hundred sixty (360)
days.

2

 

Article II. Payment Terms.

Section 2.1. Payment Terms. Interest shall be payable monthly, in arrears, beginning
November 1, 2008 and continuing on the first day of each consecutive month thereafter until June
30, 2009 (“Maturity Date”), when one final payment of the entire balance of principal, interest,
fees, premiums, charges and costs and expenses then outstanding on this Note shall be due and
payable in full.

Section 2.2. Prepayment. This Note may be prepaid in whole, or in part at anytime without
any fee or premium.

Section 2.3. Application of Payments. All payments made on this Note shall be applied
first to payment of all late fees, charges, premiums and costs and expenses due but unpaid under
this Note, then to accrued but unpaid interest and finally to principal, unless Bank determines in
its sole discretion to apply payments in a different order or applicable law requires a different
application of payments. Payments in federal funds, immediately available in the place designated
for payment, received by Bank prior to 2:00 p.m. local time at said place of payment, shall be
credited as if received prior to close of business on the day the funds are immediately available;
while other payments, at the option of Bank, may not be credited until such payments are
immediately available to Bank, in federal funds, in the place designated for payment, prior to 2:00
p.m. local time at said place of payment on a day on which Bank is open for business.

Article III. Loan Agreement and Security.

Section 3.1. Loan and Security Agreement. Borrower and Bank have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or restated from time to
time, the “Loan and Security Agreement”). This Note is also secured by (1) the security documents
and other supporting obligations referenced in the Loan and Security Agreement and (2) the security
documents and other supporting obligations which reference that they secure this Note (“security
documents”).

Article IV. Default

Section 4.1. Late Charges and Expenses. Borrower agrees to pay, upon demand by Bank, for
each payment past due for fifteen (15) or more calendar days, a late charge in an amount equal to
the lesser of (1) four percent (4%) of the amount of the payment past due or (2) the maximum
percentage of the payment past due permitted by applicable law, or the maximum amount if not
expressed as a percentage. If this Note is not paid in full whenever it becomes due and payable,
Borrower agrees to pay all costs and expenses of collection, including reasonable attorneys’ fees.
The Borrower hereby stipulates that reasonable attorneys’ fees shall be fifteen percent (15%) of
the outstanding balance owing under this Note after default.

Section 4.2. Default. Any one or more of the following shall constitute an event of default
(“Event of Default”) under this Note: (1) the failure of Borrower to pay when due any payment
described herein, whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and Security Agreement.

Section 4.3. Acceleration. Upon the occurrence of an Event of Default, (1) the entire
unpaid principal balance of this Note, together with all other amounts owing and all other amounts
to be owing under this Note, shall, at the option of Bank, become immediately due and payable,
without notice or demand, and (2) the Bank may, both before and after acceleration, exercise any of
and all of its other rights and remedies under this Note and the other loan documents, as well

3

 

as any additional rights and remedies it may have at law and it may have in equity, to recover
full payment of the balance (principal, interest, fees, premiums, charges and costs and expenses)
owing under this Note. The failure by Bank to exercise any of its options shall not constitute a
waiver of the right to exercise same in the event of any subsequent default.

Article V. Miscellaneous.

Section 5.1. Use of Terms. The term “Note” refers to this Commercial Promissory Note: C &
I; the term “loan document” refers to this Note, the Loan and Security Agreement and any security
documents and other documents and agreements executed and delivered to Bank or others on Bank’s
behalf in connection with this Note; and the term “Borrower” refers to all signatories of this Note
collectively and severally, as the context of this Note requires, and all signatories of this Note
shall be and the same are jointly and severally liable hereunder.

Section 5.2. Waiver. Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any other person or
property, agrees that without notice to any person and without affecting any person’s liability
under this Note, Bank, at any time or times, may grant extensions of the time for payment or other
indulgences to any person or permit the renewal, amendment or modification of this Note or any
other agreement executed and delivered by any person in connection with this Note, or permit the
substitution, exchange or release of any security for this Note and may add or release any person
primarily or secondarily liable, and agrees that Bank may apply all moneys made available to it
from any part of the proceeds from the disposition of any security for this Note either to this
Note or to any other obligation of Borrower to Bank, as Bank may elect from time to time.

Section 5.3. Jury and Jurisdiction. This Note shall be governed by and construed in
accordance with the substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. Borrower, to the extent permitted by law, waives any
right to a trial by jury in any action arising from or related to this Note.

Section 5.4. Successors and Assigns. This Note shall apply to and bind Borrower’s and
Bank’s heirs, personal representatives, successors and assigns. All references in this Note to
Bank shall include the holder hereof and this Note shall inure to the benefit of any holder, its
successors and assigns; and, Borrower waives and will not assert against any transferee or assignee
of this Note any claims, defenses, set-offs or rights of recoupment which Borrower could assert
against Bank, except defenses which Borrower cannot waive. Borrower acknowledges that Customer
Numbers and Loan Numbers may be added to this Note after execution and delivery of this Note by
Borrower and if there is a section denoted “BANK USE ONLY”, the information under such section may
also be completed by Bank after execution and delivery of this Note. In addition, in the event the
date of this Note is omitted, Borrower consents to Bank inserting the date.

Section 5.5. Master Note. This Note evidences a line of credit and Borrower shall be
liable for only so much of the principal amount as shall be equal to the total of the amounts
advanced to or for Borrower by Bank from time to time, less all payments made by or for Borrower
and applied by Bank to principal, and for interest on each such advance, fees, premiums, charges
and costs and expenses incurred or due hereunder, all as shown on Bank’s books and records which
shall be conclusive evidence of the amount owed by Borrower under this Note, absent a clear and
convincing showing of bad faith or manifest error. Upon the occurrence of an Event of Default or
the occurrence of an event which, with the giving of notice or a lapse of time, or both, would

4

 

 become an Event of Default under this Note, in addition to its other rights and remedies, Bank
may terminate or suspend Borrower’s right to receive any future or additional advances under this
Note and the other loan documents.

Section 5.6. Anti-Money Laundering and Anti-Terrorism. Borrower represents, warrants and
covenants to Bank as follows: (1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order
13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not engage in and
shall not engage in any dealings or transactions prohibited by Section 2 of such executive order,
and is not and shall not otherwise become associated with any such person in any manner violative
of Section 2, (c) is not and shall not become a person on the list of Specially Designated
Nationals and Blocked Persons, and (d) is not and shall not become subject to the limitations or
prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control
regulation or executive order; (2) Borrower is and shall remain in compliance, in all material
respects, with (a) the Trading with the Enemy Act, as amended, and each of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any other enabling legislation or executive order relating thereto, and (b) the
Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct
Terrorism (USA Patriot Act of 2001); and (3) Borrower has not and shall not use all or any part of
the proceeds, advances or other amounts or sums evidenced by this Note, directly or indirectly, for
any payments to any governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

(Signatures Begin on the Next Page)

5

 

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

BORROWER:

VIDEO DISPLAY CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

LEXEL IMAGING SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	[SEAL]
	 	 

FOX INTERNATIONAL, LTD., INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

Z-AXIS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

TELTRON TECHNOLOGIES, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

(Signatures Continued on Next Page)

 

 

AYDIN DISPLAYS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

 

 

Customer No.                                        

Loan No.                                         

	 	 	 
	RBC BANK (USA)

	 	Commercial Promissory Note: C & I
	 
	 	 
	$1,700,000

	 	Atlanta, Georgia
	 

	 	September                     , 2008

Renewal Term Note

FOR VALUE RECEIVED, the undersigned (whether one or more, “Borrower”) promises to pay to RBC BANK
(USA) (“Bank”) (formerly known as RBC Centura Bank), or order, the sum of One Million Seven Hundred
Thousand Dollars ($1,700,000), or so much thereof as shall have been disbursed from time to time
and remains unpaid, together with interest at the rate and payable in the manner hereinafter
stated. Principal and interest shall be payable at any banking office of Bank in the city or town
indicated above, or such other place as the holder of this Note may designate. This Note is issued
in renewal of that certain Commercial Promissory Note (C&I), dated as of June 29, 2006, from
Borrower to the order of Bank in the principal amount of $1,500,000.

Article I. Interest Rate.

Section 1.1. Pre-Default Rate. Subject to the provisions of Section 1.2 below, interest
payable on this Note per annum will accrue at the LIBOR Base Rate plus the Applicable Margin.

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

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

 

 

	 	 	 	 	 
	Tier	 	Fixed Charge Coverage Ratio	 	Applicable Margin
	I
	 	Greater than 1.35:1.0, but less than 1.50:1.0	 	2.10%
	II
	 	Equal to/greater than 1.50:1.0 but less than 1.75:1.0	 	1.85%
	III
	 	Equal to/greater than 1.75:1.0	 	1.60%

The Applicable Margin will be determined from Borrower’s most recent quarterly compliance
certificate received by Bank, as required in the Loan Agreement. The ratio will be measured as of
August 31st, November 30th, February 28th, and May 31st
of each year (each a “Measurement Date”); adjustments in the Applicable Margin will occur as of the
first day of the month immediately following Bank’s receipt of Borrower’s quarterly Compliance
Certificate required under Section 5.6(c) of the Loan Agreement (i.e., November 1st,
February 1st, May 1st and August 1st) for the immediately
preceding Measurement Date (each an “Adjustment Date”). The Applicable Margin will be in effect
from the then applicable Adjustment Date until the next Adjustment Date. Until Lender receives the
first Compliance Certificate and related financial statements due on October 15, 2008 for the
August 31, 2008 Measurement Date, the Applicable Margin will be 2.10%. The First Adjustment Date
will occur on the first day of the month immediately following Bank’s receipt of the Compliance
Certificate due on October 15, 2008 and be based on the August 31, 2008 Measurement Date financial
statements, and shall apply until the next Adjustment Date. Thereafter if any quarterly Compliance
Certificate (and applicable financial statement) is not delivered on time, the Applicable Margin
from the date such certificate (and applicable financial statement) was due until Bank receives it
will be the highest level set forth above, or at Bank’s option, the Default Rate.

Section 1.2. Default Rate. Upon the nonpayment of any payment of interest described
herein, Bank, at its option and without accelerating this Note, may accrue interest on such unpaid
interest at a rate per annum (“Default Rate”) equal to the lesser of the maximum contract rate of
interest that may be charged to and collected from Borrower on the loan evidenced by this Note
under applicable law or five percent (5.0%) plus the pre-default interest rate otherwise applicable
hereunder, as set forth in Section 1.1. After maturity of this Note, whether by acceleration or
otherwise, interest will accrue on the unpaid principal of this Note, any accrued but unpaid
interest and all fees, premiums, charges and costs and expenses owing hereunder at the Default Rate
until this Note is paid in full, whether this Note is paid in full pre-judgment or post-judgment.

Section 1.3. Variable Rate. This is a variable rate note. Any change in the rate of
interest payable under this Note will equal the change in the variable rate index to which such
rate is tied, but the rate at which interest accrues under this Note shall never exceed the maximum
contract rate which may be charged to and collected from Borrower on the loan evidenced by this
Note under applicable law. Bank shall have no obligation to notify Borrower of adjustments in the
rate of interest payable under this Note. Adjustments to the rate of interest will be effective as
of the first day of each month.

Section 1.4. Calculation of Interest. All interest payable under this Note will accrue
daily on the basis of the actual number of days elapsed and a year of three hundred sixty (360)
days.

Article II. Payment Terms.

Section 2.1. Payment Terms. Principal and interest shall be due and payable on the first
day of each month, commencing November 1, 2008, in consecutive monthly installments in an amount
equal to the sum of (i) all then accrued and unpaid interest, plus (ii) a principal payment in the
amount of $25,000. The entire unpaid principal amount hereof, together with accrued and

2

 

unpaid interest thereon and all other amounts payable hereunder shall be due and payable on July 1,
2011 (the “Maturity Date”).

Section 2.2. Prepayment. This Note may be prepaid in whole, or in part at anytime without
any fee or premium.

Section 2.3. Application of Payments. All payments made on this Note shall be applied
first to payment of all late fees, charges, premiums and costs and expenses due but unpaid under
this Note, then to accrued but unpaid interest and finally to principal, unless Bank determines in
its sole discretion to apply payments in a different order or applicable law requires a different
application of payments. Payments in federal funds, immediately available in the place designated
for payment, received by Bank prior to 2:00 p.m. local time at said place of payment, shall be
credited as if received prior to close of business on the day the funds are immediately available;
while other payments, at the option of Bank, may not be credited until such payments are
immediately available to Bank, in federal funds, in the place designated for payment, prior to 2:00
p.m. local time at said place of payment on a day on which Bank is open for business.

Article III. Loan Agreement and Security.

Section 3.1. Loan and Security Agreement. Borrower and Bank have entered into a Loan and
Security Agreement, dated as of even date herewith (as amended or modified or restated from time to
time, the “Loan and Security Agreement”). This Note is also secured by (1) the security documents
and other supporting obligations referenced in the Loan and Security Agreement, and (2) the
security documents and other supporting obligations which reference that they secure this Note
(“security documents”).

Article IV. Default

Section 4.1. Late Charges and Expenses. Borrower agrees to pay, upon demand by Bank, for
each payment past due for fifteen (15) or more calendar days, a late charge in an amount equal to
the lesser of (1) four percent (4%) of the amount of the payment past due or (2) the maximum
percentage of the payment past due permitted by applicable law, or the maximum amount if not
expressed as a percentage. If this Note is not paid in full whenever it becomes due and payable,
Borrower agrees to pay all costs and expenses of collection, including reasonable attorneys’ fees.
The Borrower hereby stipulates that reasonable attorneys’ fees shall be fifteen percent (15%) of
the outstanding balance owing under this Note after default.

Section 4.2. Default. Any one or more of the following shall constitute an event of default
(“Event of Default”) under this Note: (1) the failure of Borrower to pay when due any payment
described herein, whether of principal, interest, fees, premiums or otherwise; and (2) the
occurrence of any “Event of Default” under and as defined in the Loan and Security Agreement.

Section 4.3. Acceleration. Upon the occurrence of an Event of Default, (1) the entire
unpaid principal balance of this Note, together with all other amounts owing and all other amounts
to be owing under this Note, shall, at the option of Bank, become immediately due and payable,
without notice or demand, and (2) the Bank may, both before and after acceleration, exercise any of
and all of its other rights and remedies under this Note and the other loan documents, as well as
any additional rights and remedies it may have at law and it may have in equity, to recover full
payment of the balance (principal, interest, fees, premiums, charges and costs and expenses) owing
under this Note. The failure by Bank to exercise any of its options shall not constitute a waiver
of the right to exercise same in the event of any subsequent default.

3

 

Article V. Miscellaneous.

Section 5.1. Use of Terms. The term “Note” refers to this Commercial Promissory Note: C &
I; the term “loan document” refers to this Note, the Loan and Security Agreement and any security
documents and other documents and agreements executed and delivered to Bank or others on Bank’s
behalf in connection with this Note; and the term “Borrower” refers to all signatories of this Note
collectively and severally, as the context of this Note requires, and all signatories of this Note
shall be and the same are jointly and severally liable hereunder.

Section 5.2. Waiver. Borrower waives presentment, demand, protest and notice of dishonor,
waives any rights which it may have to require Bank to proceed against any other person or
property, agrees that without notice to any person and without affecting any person’s liability
under this Note, Bank, at any time or times, may grant extensions of the time for payment or other
indulgences to any person or permit the renewal, amendment or modification of this Note or any
other agreement executed and delivered by any person in connection with this Note, or permit the
substitution, exchange or release of any security for this Note and may add or release any person
primarily or secondarily liable, and agrees that Bank may apply all moneys made available to it
from any part of the proceeds from the disposition of any security for this Note either to this
Note or to any other obligation of Borrower to Bank, as Bank may elect from time to time.

Section 5.3. Jury and Jurisdiction. This Note shall be governed by and construed in
accordance with the substantive laws of the State of Georgia, excluding, however, the conflict of
law and choice of law provisions thereof. Borrower, to the extent permitted by law, waives any
right to a trial by jury in any action arising from or related to this Note.

Section 5.4. Successors and Assigns. This Note shall apply to and bind Borrower’s and
Bank’s heirs, personal representatives, successors and assigns. All references in this Note to
Bank shall include the holder hereof and this Note shall inure to the benefit of any holder, its
successors and assigns; and, Borrower waives and will not assert against any transferee or assignee
of this Note any claims, defenses, set-offs or rights of recoupment which Borrower could assert
against Bank, except defenses which Borrower cannot waive. Borrower acknowledges that Customer
Numbers and Loan Numbers may be added to this Note after execution and delivery of this Note by
Borrower and if there is a section denoted “BANK USE ONLY”, the information under such section may
also be completed by Bank after execution and delivery of this Note. In addition, in the event the
date of this Note is omitted, Borrower consents to Bank inserting the date.

Section 5.5. Anti-Money Laundering and Anti-Terrorism. Borrower represents, warrants and
covenants to Bank as follows: (1) Borrower (a) is not and shall not become a person whose property
or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order
13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) does not engage in and
shall not engage in any dealings or transactions prohibited by Section 2 of such executive order,
and is not and shall not otherwise become associated with any such person in any manner violative
of Section 2, (c) is not and shall not become a person on the list of Specially Designated
Nationals and Blocked Persons, and (d) is not and shall not become subject to the limitations or
prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control
regulation or executive order; (2) Borrower is and shall remain in compliance, in all material
respects, with (a) the Trading with the Enemy Act, as amended, and

4

 

each of the foreign assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating
thereto, and (b) the Uniting And Strengthening America By Providing Appropriate Tools Required To
Intercept And Obstruct Terrorism (USA Patriot Act of 2001); and (3) Borrower has not and shall not
use all or any part of the proceeds, advances or other amounts or sums evidenced by this Note,
directly or indirectly, for any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper advantage, in
violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

(Signatures Begin on the Next Page)

5

 

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

BORROWER:

VIDEO DISPLAY CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

LEXEL IMAGING SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

FOX INTERNATIONAL, LTD., INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

Z-AXIS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

TELTRON TECHNOLOGIES, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]
	 	 

(Signatures Continued on Next Page)

 

 

AYDIN DISPLAYS, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	Name:

	 	 

	 	 
	Title:

	 	 

	 	 
	 

	 	 

	 	 
	[SEAL]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}]]