Exhibit 10.17

CREDIT AGREEMENT

Dated as of August 6, 2004

Between

BANK OF AMERICA, N.A.

as the Lender

and

AVIZA TECHNOLOGY, INC.

as the Borrower

TABLE OF CONTENTS

i

ii

iii

iv

ANNEXES, EXHIBITS AND SCHEDULES

v

CREDIT AGREEMENT

This Credit Agreement, dated as of August 6, 2004, (this “Agreement”) between BANK OF AMERICA, N.A. with an office at 55 South Lake Avenue, Pasadena, California 91101 (the “Lender”), and, AVIZA TECHNOLOGY, INC., a Delaware corporation, with offices at 440 Kings Village Road, Scotts Valley, California 95066 (the “Borrower”).

W I T N E S S E T H :

WHEREAS, the Borrower has requested that the Lender make available to the Borrower revolving lines of credit for loans and letters of credit in an aggregate amount not to exceed $40,000,000, and which extensions of credit the Borrower will use for the purposes permitted hereunder;

WHEREAS, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed thereto in Annex A which is attached hereto and incorporated herein; the rules of construction contained therein shall govern the interpretation of this Agreement, and all Annexes, Exhibits and Schedules attached hereto are incorporated herein by reference;

WHEREAS, the Lender has agreed to make available to the Borrower revolving credit facilities upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lender and the Borrower hereby agree as follows.

ARTICLE 1

LOANS AND LETTERS OF CREDIT

1.1                                  Total Facility .   Subject to all of the terms and conditions of this Agreement, the Lender agrees to make available a total credit facility of up to $40,000,000 (the “Total Facility”) to the Borrower from time to time during the term of this Agreement.  The Total Facility shall be composed of (i) a revolving line of credit of up to $20,000,000 for revolving loans (the “Revolver A”), (ii) a revolving line of credit of up to $20,000,000 for revolving loans (the “Revolver B”), and (iii) the Letters of Credit described herein.  Collectively, the revolving loans made under Revolver A and the revolving loans made under Revolver B shall be referred to herein as the “Revolving Loans”.

1.2                                  Revolving Loans .

(a)                                   Amounts .  Subject to the satisfaction of the conditions precedent set forth in Article 8 , the Lender agrees, upon the Borrower’s request from time to time on any Business Day during the period from the Closing Date to the Termination Date, to make Revolving Loans to the Borrower in amounts not to exceed Availability.  The Lender, however, in its discretion, may elect to make Revolving Loans or issue or arrange to have issued Letters of

1

Credit in excess of Availability on one or more occasions, but if it does so, the Lender shall not be deemed thereby to have changed the limits of the Availability or to be obligated to exceed such limits on any other occasion.  If any Borrowing would exceed Availability, the Lender may refuse to make or may otherwise restrict the making of Revolving Loans as the Lender determines until such excess has been eliminated.

(b)                                  Procedure for Borrowing .

(1)                                   Each Borrowing shall be made upon the Borrower’s irrevocable written notice delivered to the Lender in the form of a notice of borrowing (“Notice of Borrowing”), which must be received by the Lender prior to 11:00 a.m. (Los Angeles time) on the requested Funding Date, specifying:

(A) the amount of the Borrowing; and

(B) the requested Funding Date, which must be a Business Day.

(2)                                   In lieu of delivering a Notice of Borrowing, the Borrower may give the Lender telephonic notice of such request for advances to the Designated Account on or before the deadline set forth above.  The Lender at all times shall be entitled to rely on such telephonic notice in making such Revolving Loans, regardless of whether any written confirmation is received.

(c)                                   Reliance upon Authority .  Prior to the Closing Date, the Borrower shall deliver to the Lender, a notice setting forth the account of the Borrower (“Designated Account”) to which the Lender is authorized to transfer the proceeds of the Revolving Loans requested hereunder.  The Borrower may designate a replacement account from time to time by written notice.  All such Designated Accounts must be reasonably satisfactory to the Lender.  The Lender is entitled to rely conclusively on any person’s request for Revolving Loans on behalf of the Borrower, so long as the proceeds thereof are to be transferred to the Designated Account.  The Lender has no duty to verify the identity of any individual representing himself or herself as a person authorized by the Borrower to make such requests on its behalf.

(d)                                  No Liability .  The Lender shall not incur any liability to the Borrower as a result of acting upon any notice referred to in Sections 1.2(b)  and (c) , which the Lender believes in good faith to have been given by an officer or other person duly authorized by the Borrower to request Revolving Loans on its behalf.  The crediting of Revolving Loans to the Designated Account conclusively establishes the obligation of the Borrower to repay such Revolving Loans as provided herein.

(e)                                   Notice Irrevocable .  Any Notice of Borrowing (or telephonic notice in lieu thereof) made pursuant to Section 1.2(b)  shall be irrevocable.  The Borrower shall be bound to borrow the funds requested therein in accordance therewith.

(f)                                     Making of Revolving Loans .  Promptly after receipt of a Notice of Borrowing or telephonic notice in lieu thereof, the Lender shall make the proceeds of such

2

Revolving Loans available to the Borrower on the applicable Funding Date by transferring same day funds to the account designated by the Borrower; provided , however , that the amount of Revolving Loans so made on any date shall not exceed the Availability on such date.

1.3                                  Intentionally Deleted .

1.4                                  Letters of Credit .

(a)                                   Agreement to Issue or Cause To Issue .  Subject to the terms and conditions of this Agreement, the Lender agrees (i) to cause the Letter of Credit Issuer to issue for the account of the Borrower one or more commercial/documentary and standby letters of credit (“Letter of Credit”) and/or (ii) to provide credit support or other enhancement to a Letter of Credit Issuer acceptable to Lender, which issues a Letter of Credit for the account of the Borrower (any such credit support or enhancement being herein referred to as a “Credit Support”) from time to time during the term of this Agreement.

(b)                                  Amounts; Outside Expiration Date .  The Lender shall not have any obligation to issue or cause to be issued any Letter of Credit or to provide Credit Support for any Letter of Credit at any time if: (i) the maximum face amount of the requested Letter of Credit is greater than the Unused Letter of Credit Subfacility at such time; (ii) the maximum undrawn amount of the requested Letter of Credit and all commissions, fees, and charges due from the Borrower in connection with the opening thereof would exceed Availability at such time; or (iii) such Letter of Credit has an expiration date less than 30 days prior to the Stated Termination Date or more than 12 months from the date of issuance for standby letters of credit and 180 days for documentary letters of credit.

(c)                                   Other Conditions .  In addition to conditions precedent contained in Article 8 , the obligation of the Lender to issue or to cause to be issued any Letter of Credit or to provide Credit Support for any Letter of Credit is subject to the following conditions precedent having been satisfied in a manner reasonably satisfactory to the Lender:

(1)                                   The Borrower shall have delivered to the Letter of Credit Issuer, at such times and in such manner as such Letter of Credit Issuer may prescribe, an application in form and substance satisfactory to such Letter of Credit Issuer and reasonably satisfactory to the Lender for the issuance of the Letter of Credit and such other documents as may be required pursuant to the terms thereof, and the form, terms and purpose of the proposed Letter of Credit shall be reasonably satisfactory to the Lender and the Letter of Credit Issuer; and

(2)                                   As of the date of issuance, no order of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed Letter of Credit Issuer refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit.

3

(d)                                  Issuance of Letters of Credit .

(1)                                   Request for Issuance .  Borrower must notify the Lender of a requested Letter of Credit at least three (3) Business Days prior to the proposed issuance date.  Such notice shall be irrevocable and must specify the original face amount of the Letter of Credit requested, the Business Day of issuance of such requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial draws, the Business Day on which the requested Letter of Credit is to expire, the purpose for which such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit.  The Borrower shall attach to such notice the proposed form of the Letter of Credit.

(2)                                   Responsibilities of the Lender; Issuance .  As of the Business Day immediately preceding the requested issuance date of the Letter of Credit, the Lender shall determine the amount of the applicable Unused Letter of Credit Subfacility and Availability.  If (i) the face amount of the requested Letter of Credit is less than the Unused Letter of Credit Subfacility and (ii) the amount of such requested Letter of Credit and all commissions, fees, and charges due from the Borrower in connection with the opening thereof would not exceed Availability, the Lender shall cause the Letter of Credit Issuer to issue the requested Letter of Credit on the requested issuance date so long as the other conditions hereof are met.

(3)                                   No Extensions or Amendment .  The Lender shall not be obligated to cause the Letter of Credit Issuer to extend or amend any Letter of Credit issued pursuant hereto unless the requirements of this Section 1.4 are met as though a new Letter of Credit were being requested and issued.

(e)                                   Payments Pursuant to Letters of Credit .  The Borrower agrees to reimburse immediately the Letter of Credit Issuer for any draw under any Letter of Credit and the Lender upon any payment pursuant to any Credit Support, and to pay the Letter of Credit Issuer the amount of all other charges and fees payable to the Letter of Credit Issuer in connection with any Letter of Credit immediately when due, irrespective of any claim, setoff, defense or other right which the Borrower may have at any time against the Letter of Credit Issuer or any other Person.  Each drawing under any Letter of Credit shall constitute a request by the Borrower to the Lender for a Borrowing of a Revolving Loan in the amount of such drawing.  The Funding Date with respect to such borrowing shall be the date of such drawing.

(f)                                     Indemnification; Exoneration; Power of Attorney .

(1)                                   Indemnification .  In addition to amounts payable as elsewhere provided in this Section 1.4 , the Borrower agrees to protect, indemnify, pay and save the Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees) which the Lender (other than in its capacity as Letter of Credit Issuer) may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit or the provision of any Credit Support or enhancement in connection therewith.  The Borrower’s obligations under this Section shall survive payment of all other Obligations.

4

(2)                                   Assumption of Risk by the Borrower .  As between the Borrower and the Lender, the Borrower assumes all risks of the acts and omissions of, or misuse of any of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, the Lender shall not be responsible for:  (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any Person in connection with the application for and issuance of and presentation of drafts with respect to any of the Letters of Credit, even if it should prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (C) the failure of the beneficiary of any Letter of Credit to comply duly with conditions required in order to draw upon such Letter of Credit; (D) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; (G) the misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; (H) any consequences arising from causes beyond the control of the Lender, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority or (I) the Letter of Credit Issuer’s honor of a draw for which the draw or any certificate fails to comply in any respect with the terms of the Letter of Credit.  None of the foregoing shall affect, impair or prevent the vesting of any rights or powers of the Lender under this Section 1.4(f) .

(3)                                   Exoneration .  Without limiting the foregoing, no action or omission whatsoever by the Lender (excluding the Lender in its capacity as a Letter of Credit Issuer) shall result in any liability of the Lender to the Borrower, or relieve the Borrower of any of its obligations hereunder to any such Person.

(4)                                   Rights Against Letter of Credit Issuer .  Nothing contained in this Agreement is intended to limit the Borrower’s rights, if any, with respect to the Letter of Credit Issuer which shall be governed by the letter of credit application and related documents executed by and between the Borrower and the Letter of Credit Issuer.

(5)                                   Account Party .  The Borrower hereby authorizes and directs any Letter of Credit Issuer to name the Borrower as the “Account Party” therein and to deliver to the Lender all instruments, documents and other writings and property received by the Letter of Credit Issuer pursuant to the Letter of Credit, and to accept and rely upon the Lender’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the application therefor.

(g)                                  Supporting Letter of Credit; Cash Collateral .  If, notwithstanding the provisions of Section 1.4(b)  and Section 10.1 , any Letter of Credit or Credit Support is outstanding upon the termination of this Agreement, then upon such termination the Borrower shall deposit with the Lender, with respect to each Letter of Credit or Credit Support then outstanding, a standby letter of credit (a “Supporting Letter of Credit”) in form and substance

5

satisfactory to the Lender, issued by an issuer satisfactory to the Lender in an amount equal to the greatest amount for which such Letter of Credit or such Credit Support may be drawn plus any fees and expenses associated with such Letter of Credit or such Credit Support, under which Supporting Letter of Credit the Lender is entitled to draw amounts necessary to reimburse the Lender for payments to be made by the Lender under such Letter of Credit or Credit Support and any fees and expenses associated with such Letter of Credit or Credit Support.  Such Supporting Letter of Credit shall be held by the Lender as security for, and to provide for the payment of, the aggregate undrawn amount of such Letters of Credit or such Credit Support remaining outstanding.

1.5                                  Bank Products .   The Borrower may request and the Lender may, in its sole and absolute discretion, arrange for the Borrower to obtain from the Bank or the Bank’s Affiliates Bank Products although the Borrower is not required to do so.  If Bank Products are provided by an Affiliate of the Bank, the Borrower agrees to indemnify and hold the Lender and the Bank harmless from any and all costs and obligations now or hereafter incurred by the Bank or the Lender which arise from any indemnity given by the Lender to its Affiliates related to such Bank Products; provided , however , nothing contained herein is intended to limit the Borrower’s rights, with respect to the Bank or its Affiliates, if any, which arise as a result of the execution of documents by and between the Borrower and the Bank which relate to Bank Products.  The agreement contained in this Section shall survive termination of this Agreement.  The Borrower acknowledges and agrees that the obtaining of Bank Products from the Bank or the Bank’s Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank’s Affiliates, and (b) is subject to all rules and regulations of the Bank or the Bank’s Affiliates.

ARTICLE 2

INTEREST AND FEES

2.1                                  Interest .

(a)                                   Interest Rates .  All outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate equal to the Base Rate minus one-quarter of one percent (0.25%), but not to exceed the Maximum Rate.  Each change in the Base Rate shall be reflected in the interest rate applicable to Revolving Loans as of the effective date of such change.  All interest charges shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year).  The Borrower shall pay to the Lender interest accrued on all Revolving Loans in arrears on the first day of each month hereafter and on the Termination Date.

(b)                                  Default Rate .  If any Default or Event of Default occurs and is continuing and the Lender in its discretion so elects, then, while any such Default or Event of Default is continuing, all of the Obligations shall bear interest at the Default Rate applicable thereto.

6

2.2                                  Intentionally Deleted .

2.3                                  Maximum Interest Rate .   In no event shall any interest rate provided for hereunder exceed the maximum rate legally chargeable by the Lender under applicable law with respect to loans of the type provided for hereunder (the “Maximum Rate”).  If, in any month, any interest rate, absent such limitation, would have exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate.  In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section 2.3 , have been paid or accrued if the interest rate otherwise set forth in this Agreement had at all times been in effect, then the Borrower shall, to the extent permitted by applicable law, pay the Lender an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement.  If a court of competent jurisdiction determines that the Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations other than interest, in the inverse order of maturity, and if there are no Obligations outstanding, the Lender shall refund to the Borrower such excess.

2.4                                  Closing Fee .   The Borrower agrees to pay the Lender on the Closing Date a closing fee (the “Closing Fee”) in the amount of $650,000.

2.5                                  Unused Line Fee .   On the first day of each month and on the Termination Date the Borrower agrees to pay to the Lender an unused line fee (the “Unused Line Fee”) equal to 0.375% per annum times the amount by which the Maximum Revolver Amount exceeded the sum of the average daily outstanding amount of Revolving Loans and the average daily undrawn face amount of outstanding Letters of Credit, during the immediately preceding month or shorter period if calculated for the first month hereafter or on the Termination Date.  The Unused Line Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.  All principal payments received by the Lender shall be deemed to be credited to the Borrower’s Loan Account immediately upon receipt for purposes of calculating the Unused Line Fee pursuant to this Section 2.5 .

2.6                                  Letter of Credit Fee .   The Borrower agrees to pay to the Lender for each Letter of Credit, a fee (the “Letter of Credit Fee”) equal to 2.50% per annum and to the Lender for the benefit of the Letter of Credit Issuer a fronting fee of 0.125% of the undrawn face amount of each Letter of Credit, and to the Letter of Credit Issuer, all out-of-pocket costs, fees and expenses incurred by the Letter of Credit Issuer in connection with the application for, processing of, issuance of, or amendment to any Letter of Credit.  The Letter of Credit Fee shall be payable monthly in arrears on the first day of each month following any month in which a Letter of Credit is outstanding and on the Termination Date.  The Letter of Credit Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.

7

2.7                                  Administrative Fee .   On the Closing Date and on each anniversary of the Closing Date up to but not including the Termination Date, an administrative fee (the “Administrative Fee”) of $25,000.

ARTICLE 3

PAYMENTS AND PREPAYMENTS

3.1                                  Revolving Loans .   The Borrower shall repay the outstanding principal balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on the Termination Date.  The Borrower may prepay Revolving Loans at any time, and reborrow subject to the terms of this Agreement; provided , however , that all such prepayments shall be applied in accordance with Section 3.8 .  In addition, and without limiting the generality of the foregoing, upon demand the Borrower shall pay to the Lender the amount, without duplication, by which the Aggregate Revolver Outstandings exceeds the lesser of the Borrowing Base or the Maximum Revolver Amount.

3.2                                  Termination of Facility .   The Borrower may terminate this Agreement upon at least ten (10) Business Days’ notice to the Lender, upon (a) the payment in full of all outstanding Revolving Loans, together with accrued interest thereon, and the cancellation and return of all outstanding Letters of Credit, (b) the payment of the early termination fee set forth below, and (c) the payment in full in cash of all reimbursable expenses and other Obligations.  If this Agreement is terminated at any time prior to the Stated Termination Date, whether pursuant to this Section or pursuant to Section 9.2 , the Borrower shall pay to the Lender an early termination fee determined in accordance with the following table:

provided , however , that the early termination fee described in this Section 3.2 shall not be payable in the event that Borrower repays the Obligations (i) from the proceeds of a credit facility provided in whole by, or with respect to which the sole administrative agent is, another lending department of the Bank or any of its Affiliates, or (ii) from the proceeds of an initial public offering of Borrower.

3.3                                  Intentionally Deleted .

3.4                                  Intentionally Deleted .

3.5                                  Intentionally Deleted .

8

3.6                                  Payments by the Borrower .

(a)                                   All payments to be made by the Borrower shall be made without set-off, recoupment or counterclaim.  Except as otherwise expressly provided herein, all payments by the Borrower shall be made to the Lender, at the account designated by the Lender and shall be made in Dollars and in immediately available funds, no later than 12:00 noon (Los Angeles time) on the date specified herein.  Any payment received by the Lender after such time shall be deemed (for purposes of calculating interest only) to have been received on the following Business Day and any applicable interest shall continue to accrue.

(b)                                  Whenever any payment is due on a day other than a Business Day, such payment shall be due on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.

3.7                                  Payments as Revolving Loans .   At the election of the Lender, all payments of principal, interest, reimbursement obligations in connection with Letters of Credit and Credit Support for Letters of Credit, fees, premiums, reimbursable expenses and other sums payable hereunder, may be paid from the proceeds of Revolving Loans made hereunder.  The Borrower hereby irrevocably authorizes the Lender to charge the Loan Account for the purpose of paying all amounts from time to time due hereunder and agrees that all such amounts charged shall constitute Revolving Loans.

3.8                                  Apportionment, Application and Reversal of Payments .   Principal and interest payments and payments of the fees shall be payable solely to the Lender (except for fees payable to the Letter of Credit Issuer if different than the Lender).  All payments shall be remitted to the Lender and all such payments not relating to principal or interest of specific Loans, or not constituting payment of specific fees, and all proceeds of Accounts or other Collateral received by the Lender, shall be applied, ratably, subject to the provisions of this Agreement, (a) so long as no Event of Default then exists,  first , to pay any fees, indemnities, or expense reimbursements (including any amounts relating to Bank Products) then due to the Lender from the Borrower; second , to pay interest due in respect of all Loans; with such payments being applied first to the Loans advanced in respect of Revolver B and second with respect to the Loans advanced in respect of Revolver A; third , to pay or prepay unpaid reimbursement obligations in respect of Letters of Credit; fourth , to pay or prepay principal of the Loans, with such payments being applied first to the Loans advanced in respect of Revolver B and second with respect to the Loans advanced in respect of Revolver A; fifth , to pay an amount to Lender equal to all outstanding Letter of Credit Obligations to be held as cash collateral for such Obligations; and sixth , to the payment of any other Obligation due to the Lender by the Borrower; or (b) if any Event of Default then exists, first , to pay any fees, indemnities, or expense reimbursements (including any amounts relating to Bank Products) then due to the Lender from the Borrower; second , to pay interest due in respect of Loans advanced in respect of Revolver B; third , to pay or prepay unpaid reimbursement obligations in respect of Letters of Credit; fourth , to pay or prepay principal of the Loans advanced in respect of Revolver B; fifth , to pay an amount to Lender equal to all outstanding Letter of Credit Obligations then reserved against Revolver B, to be held as cash collateral for such Obligations; sixth , to pay interest due in respect of Loans advanced in respect of Revolver A; seventh , to pay or prepay

9

principal of the Loans advanced in respect of Revolver A;  eighth , to pay an amount to Lender equal to all outstanding Letter of Credit Obligations then reserved against Revolver A, to be held as cash collateral for such Obligations and ninth , to the payment of any other Obligation due to the Lender by the Borrower. The Lender shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Obligations.

3.9                                  Indemnity for Returned Payments .   If after receipt of any payment which is applied to the payment of all or any part of the Obligations, the Lender, the Bank or any Affiliate of the Bank is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Lender and the Borrower shall be liable to pay to the Lender, and hereby does indemnify the Lender and hold the Lender harmless for the amount of such payment or proceeds surrendered.  The provisions of this Section 3.9 shall be and remain effective notwithstanding any contrary action which may have been taken by the Lender in reliance upon such payment or application of proceeds, and any such contrary action so taken shall be without prejudice to the Lender’s rights under this Agreement and shall be deemed to have been conditioned upon such payment or application of proceeds having become final and irrevocable.  The provisions of this Section 3.9 shall survive the termination of this Agreement.

3.10                            Lender’s Books and Records; Monthly Statements .   The Lender shall record the principal amount of the Loans owing to the Lender, the undrawn face amount of all outstanding Letters of Credit and the aggregate amount of unpaid reimbursement obligations outstanding with respect to the Letters of Credit from time to time on its books.  In addition, the Lender may note the date and amount of each payment or prepayment of principal of the Loans in its books and records.  Failure by the Lender to make such notation shall not affect the obligations of the Borrower with respect to the Loans or the Letters of Credit.  The Borrower agrees that the Lender’s books and records showing the Obligations and the transactions pursuant to this Agreement and the other Loan Documents shall be admissible in any action or proceeding arising therefrom, and shall constitute rebuttably presumptive proof thereof, irrespective of whether any Obligation is also evidenced by a promissory note or other instrument.  The Lender will provide to the Borrower a monthly statement of Loans, payments, and other transactions pursuant to this Agreement.  Such statement shall be deemed correct, accurate, and binding on the Borrower and an account stated (except for reversals and reapplications of payments made as provided in Section 3.8 and corrections of errors discovered by the Lender), unless the Borrower notifies the Lender in writing to the contrary within thirty (30) days after such statement is rendered.  In the event a timely written notice of objections is given by the Borrower, only the items to which exception is expressly made will be considered to be disputed by the Borrower.

10

ARTICLE 4

TAXES AND YIELD PROTECTION

4.1                                  Taxes .

(a)                                   Any and all payments by the Borrower to the Lender under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes.  In addition, the Borrower shall pay all Other Taxes.

(b)                                  The Borrower agrees to indemnify and hold harmless the Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Lender and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.  Payment under this indemnification shall be made within 30 days after the date the Lender makes written demand therefor.

(c)                                   If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to the Lender, then:

(i)                                      the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) the Lender, receives an amount equal to the sum it would have received had no such deductions or withholdings been made;

(ii)                                   the Borrower shall make such deductions and withholdings;

(iii)                                the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv)                               the Borrower shall also pay to the Lender, at the time interest is paid, all additional amounts which the Lender specifies as necessary to preserve the after-tax yield the Lender would have received if such Taxes or Other Taxes had not been imposed.

(d)                                  At the Lender’s request, within 30 days after the date of any payment by the Borrower of Taxes or Other Taxes, the Borrower shall furnish the Lender the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Lender.

(e)                                   If the Borrower is required to pay additional amounts to the Lender pursuant to subsection (c)  of this Section, then the Lender shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its lending office so as to eliminate any such additional payment by the Borrower which may thereafter accrue, if such change in the judgment of the Lender is not otherwise disadvantageous to the Lender.

11

4.2                                  Intentionally Deleted .

4.3                                  Reduction of Return .   If the Lender shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Lender or any corporation or other entity controlling the Lender with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation or other entity controlling the Lender and (taking into consideration its policies with respect to capital adequacy and the Lender’s desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon demand of the Lender to the Borrower, the Borrower shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase.

4.4                                  Intentionally Deleted .

4.5                                  Intentionally Deleted .

4.6                                  Certificates of Lender .   If the Lender claims reimbursement or compensation under this Article 4, it shall determine the amount thereof and shall deliver to the Borrower a certificate setting forth in reasonable detail the amount payable to the Lender, and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error.

4.7                                  Survival .   The agreements and obligations of the Borrower in this Article 4 shall survive the payment of all other Obligations.

ARTICLE 5

BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

5.1                                  Books and Records .   The Borrower shall maintain, at all times, correct and complete books, records and accounts in which complete, correct and timely entries are made of its transactions in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a) .  The Borrower shall, by means of appropriate entries, reflect in such accounts and in all Financial Statements proper liabilities and reserves for all taxes and proper provision for depreciation and amortization of property and bad debts, all in accordance with GAAP.  The Borrower shall maintain at all times books and records pertaining to the Collateral in such detail, form and scope as the Lender shall reasonably require, including, but not limited to, records of (a) all payments received and all credits and extensions granted with respect to the Accounts; (b) the return, rejection, repossession, stoppage in transit, loss, damage, or destruction of any Inventory; and (c) all other dealings affecting the Collateral.

5.2                                  Financial Information .   The Borrower shall promptly furnish to the Lender all such financial information as the Lender shall reasonably request. Without limiting the foregoing, the Borrower will furnish to the Lender in such detail as the Lender shall request, the following:

12

(a)                                   As soon as available, but in any event not later than ninety (90) days after the close of each Fiscal Year (One Hundred Fifty (150) days for fiscal year 2004), consolidated audited and consolidating unaudited balance sheets, and income statements, cash flow statements and changes in stockholders’ equity for the Borrower and its Subsidiaries for such Fiscal Year, and the accompanying notes thereto (except in the case of the consolidating statement), setting forth in each case in comparative form figures for the previous Fiscal Year, all in reasonable detail, fairly presenting the financial position and the results of operations of the Borrower and its consolidated Subsidiaries as at the date thereof and for the Fiscal Year then ended, and prepared in accordance with GAAP.  Such statements shall be examined in accordance with generally accepted auditing standards by and, in the case of such statements performed on a consolidated basis, accompanied by a report thereon unqualified in any respect of independent certified public accountants selected by the Borrower and reasonably satisfactory to the Lender. The Borrower hereby authorizes the Lender to communicate directly with its certified public accountants and, by this provision, authorizes those accountants to disclose to the Lender any and all financial statements and other supporting financial documents and schedules relating to the Borrower and to discuss directly with the Lender the finances and affairs of the Borrower.

(b)                                  As soon as available, but in any event not later than (30) days after the end of each fiscal quarter of Borrower, unaudited balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarter, and consolidated unaudited income statements and cash flow statements for the Borrower and its consolidated Subsidiaries for such quarter and for the period from the beginning of the Fiscal Year to the end of such quarter, all in reasonable detail, fairly presenting the financial position and results of operations of the Borrower and its consolidated Subsidiaries as at the date thereof, and for such periods, and, in each case, in comparable form, figures in the Borrower’s budget, and (commencing with the quarterly statements delivered for the quarter ending in December 2004) for the corresponding period in the prior Fiscal Year, and prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a) .  The Borrower shall certify by a certificate signed by its chief financial officer that all such statements have been prepared in accordance with GAAP and present fairly the Borrower’s financial position as at the dates thereof and its results of operations for the periods then ended, subject to normal year-end adjustments.

(c)                                   As soon as available, but in any event not later than thirty (30) days after the end of each month, consolidated unaudited balance sheets of the Borrower (without the inclusion of its consolidated Subsidiaries) as at the end of such month, and unaudited income statements and cash flow statements for the Borrower (without the inclusion of its consolidated Subsidiaries) for such month and for the period from the beginning of the Fiscal Year to the end of such month, all in reasonable detail, fairly presenting the financial position and results of operations of the Borrower (without the inclusion of its consolidated Subsidiaries) as at the date thereof and for such periods, and, in each case, in comparable form, figures for the corresponding period in the prior Fiscal Year (commencing on November 2004), and prepared in accordance with GAAP applied consistently with the audited Financial Statements required to be delivered pursuant to Section 5.2(a) .  The Borrower shall certify by a certificate signed by its chief financial officer that all such statements have been prepared in accordance with GAAP and

13

present fairly the Borrower’s financial position as at the dates thereof and its results of operations for the periods then ended, subject to normal year-end adjustments.

(d)                                  Intentionally Omitted .

(e)                                   With each of the annual audited Financial Statements delivered pursuant to Section 5.2(a) , and within thirty (30) days after the end of each month , a certificate of the chief financial officer of the Borrower setting forth in reasonable detail the calculations required to establish that the Borrower was in compliance with the covenants set forth in Sections 7.23 through 7.24 during the period covered in such Financial Statements and as at the end thereof.  Within thirty (30) days after the end of each month, a certificate of the chief financial officer of the Borrower stating that, except as explained in reasonable detail in such certificate, (A) all of the representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that speak as of a particular date, (B) the Borrower is, at the date of such certificate, in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, (C) no Default or Event of Default then exists or existed during the period covered by the Financial Statements for such month, (D) describing and analyzing in reasonable detail all material trends, changes, and developments in each and all Financial Statements; and (E) on a quarterly basis and only with respect to fiscal quarters on and after the first calendar quarter of 2004, explaining the material variances of the figures in the corresponding budgets and prior Fiscal Year financial statements.  If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists, such certificate shall set forth what action the Borrower has taken or proposes to take with respect thereto.

(f)                                     No sooner than sixty (60) days and not less than thirty (30) days prior to the beginning of each Fiscal Year, annual forecasts (to include forecasted consolidated balance sheets, income statements and cash flow statements) for the Borrower and its Subsidiaries as at the end of and for each quarter of such Fiscal Year.

(g)                                  Promptly after filing with the PBGC and the IRS, a copy of each annual report or other filing filed with respect to each Plan of the Borrower.

(h)                                  Promptly upon the filing thereof, copies of all reports, if any, to or other documents filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission under the Exchange Act, and all reports, notices, or statements sent or received by the Borrower or any of its Subsidiaries to or from the holders of any equity interests of the Borrower (other than routine non-material correspondence sent by shareholders of the Borrower to the Borrower) or any such Subsidiary or of any Debt of the Borrower or any of its Subsidiaries registered under the Securities Act of 1933 or to or from the trustee under any indenture under which the same is issued.

14

(i)                                      As soon as available, but in any event not later than 15 days after the Borrower’s receipt thereof, a copy of all management reports and management letters prepared for the Borrower by any independent certified public accountants of the Borrower.

(j)                                      If the Borrower’s shares become available for trading on any public securities exchange, then promptly after their preparation, copies of any and all proxy statements, financial statements, and reports which the Borrower makes available to its public shareholders.

(k)                                   If requested by the Lender, promptly after filing with the IRS, a copy of each tax return filed by the Borrower or by any of its Subsidiaries.

(l)                                      As soon as available, but in any event no later than the third Business Day of each week, a weekly Borrowing Base Certificate as of the last Business Day of the preceding week, supporting information in accordance with Section 9 of the Security Agreement.  Borrower shall deliver a Borrowing Base Certificate to Lender more frequently than on a weekly basis upon Lender’s reasonable request.

(m)                                Such additional information as the Lender may from time to time reasonably request regarding the financial and business affairs of the Borrower or any Subsidiary.

5.3                                  Notices to the Lender .   The Borrower shall notify the Lender in writing of the following matters at the following times:

(a)                                   Immediately after becoming aware of any Default or Event of Default;

(b)                                  Immediately after becoming aware of the assertion by the holder of any capital stock of the Borrower or of any Subsidiary or the holder of any Debt of the Borrower or any Subsidiary in a face amount in excess of $100,000 that a default by Borrower or any Subsidiary exists with respect thereto or that the Borrower or such Subsidiary is not in compliance with the terms thereof, or the threat or commencement by such holder of any enforcement action because of such asserted default or non-compliance;

(c)                                   Immediately after senior management or the board of directors of Borrower become aware of any event or circumstance which they believe would be reasonably expected to have a Material Adverse Effect;

(d)                                  Immediately after becoming aware of any pending or threatened action, suit, or proceeding, by any Person, or any pending or threatened investigation by a Governmental Authority, which could reasonably be expected to have a Material Adverse Effect;

(e)                                   Immediately after becoming aware of any pending or threatened strike, work stoppage, unfair labor practice claim, or other labor dispute affecting the Borrower or any of its Subsidiaries in a manner which could reasonably be expected to have a Material Adverse Effect;

15

(f)                                     Immediately after becoming aware of any violation of any law, statute, regulation, or ordinance of a Governmental Authority affecting the Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect;

(g)                                  Immediately after receipt of any notice of any violation by the Borrower or any of its Subsidiaries of any Environmental Law which could reasonably be expected to have a Material Adverse Effect or that any Governmental Authority has asserted in writing that the Borrower or any Subsidiary is not in compliance with any Environmental Law or is investigating the Borrower’s or such Subsidiary’s compliance therewith;

(h)                                  Immediately after receipt of any written notice that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant or that the Borrower or any Subsidiary is subject to investigation by any Governmental Authority evaluating whether any remedial action is needed to respond to the Release or threatened Release of any Contaminant which, in either case, is reasonably likely to give rise to liability in excess of $500,000;

(i)                                      Immediately after receipt of any written notice of the imposition of any Environmental Lien against any property of the Borrower or any of its Subsidiaries;

(j)                                      Any change in the Borrower’s name as it appears in the state of its incorporation or other organization, state of incorporation or organization, type of entity, organizational identification number, locations of Collateral, or form of organization, trade names under which the Borrower will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, in each case at least thirty (30) days prior thereto;

(k)                                   Within ten (10) Business Days after the Borrower or any ERISA Affiliate knows or has reason to know, that an ERISA Event or a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred, and, when known, any action taken or threatened by the IRS, the DOL or the PBGC with respect thereto;

(l)                                      Upon request, or, in the event that such filing reflects a significant change with respect to the matters covered thereby, within three (3) Business Days after the filing thereof with the PBGC, the DOL or the IRS, as applicable, copies of the following:  (i) each annual report (form 5500 series), including Schedule B thereto, filed with the PBGC, the DOL or the IRS with respect to each Plan, (ii) a copy of each funding waiver request filed with the PBGC, the DOL or the IRS with respect to any Plan and all communications received by the Borrower or any ERISA Affiliate from the PBGC, the DOL or the IRS with respect to such request, and (iii) a copy of each other filing or notice filed with the PBGC, the DOL or the IRS, with respect to each Plan by either the Borrower or any ERISA Affiliate;

(m)                                Upon request, copies of each actuarial report for any Plan or Multi-employer Plan and annual report for any Multi-employer Plan; and within three (3) Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of the following:  (i) any notices of the PBGC’s intention to terminate a Plan or to have a trustee appointed to administer such Plan; (ii) any favorable or unfavorable determination letter from the IRS

16

regarding the qualification of a Plan under Section 401(a) of the Code; or (iii) any notice from a Multi-employer Plan regarding the imposition of withdrawal liability;

(n)                                  Within three (3) Business Days after the occurrence thereof: (i) any changes in the benefits of any existing Plan which increase the Borrower’s annual costs with respect thereto by an amount in excess of $500,000, or the establishment of any new Plan or the commencement of contributions to any Plan to which the Borrower or any ERISA Affiliate was not previously contributing; or (ii) any failure by the Borrower or any ERISA Affiliate to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; or

(o)                                  Within three (3) Business Days after the Borrower or any ERISA Affiliate knows or has reason to know that any of the following events has or will occur:  (i) a Multi-employer Plan has been or will be terminated; (ii) the administrator or plan sponsor of a Multi-employer Plan intends to terminate a Multi-employer Plan; or (iii) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.

Each notice given under this Section shall describe the subject matter thereof in reasonable detail, and shall set forth the action that the Borrower, its Subsidiary, or any ERISA Affiliate, as applicable, has taken or proposes to take with respect thereto.

ARTICLE 6

GENERAL WARRANTIES AND REPRESENTATIONS

The Borrower warrants and represents to the Lender that except as hereafter disclosed to and accepted by the Lender in writing:

6.1                                  Authorization, Validity, and Enforceability of this Agreement and the Loan Documents .   The Borrower has the power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, to incur the Obligations, and to grant to the Lender Liens upon and security interests in the Collateral.  The Borrower has taken all necessary action (including obtaining approval of its stockholders if necessary) to authorize its execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party.  This Agreement and the other Loan Documents to which it is a party have been duly executed and delivered by the Borrower, and constitute the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms.  The Borrower’s execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation or breach of, or result in the imposition of any Lien upon the property of the Borrower or any of its Subsidiaries, by reason of the terms of (a) any contract, mortgage, lease, agreement, indenture, or instrument to which the Borrower is a party or which is binding upon it, (b) any Requirement of Law applicable to the Borrower or any of its Subsidiaries, or (c) the certificate or articles of incorporation or by-laws or the limited liability company or limited partnership agreement of the Borrower or any of its Subsidiaries.

17

6.2                                  Validity and Priority of Security Interest .   The provisions of this Agreement, the Mortgage, and the other Loan Documents create legal and valid Liens on all the Collateral in favor of the Lender, and such Liens constitute perfected and continuing Liens on all the Collateral, having priority over all other Liens on the Collateral, except for those Liens identified in clauses (c) , (d)  and (e)  of the definition of Permitted Liens securing all the Obligations, and enforceable against the Borrower and all third parties.

6.3                                  Organization and Qualification .   The Borrower (a) is duly organized or incorporated and validly existing in good standing under the laws of the state of its organization or incorporation, (b) is qualified to do business and is in good standing in the jurisdictions set forth on Schedule 6.3 which are the only jurisdictions in which qualification is necessary in order for it to own or lease its property and conduct its business and (c) has all requisite power and authority to conduct its business and to own its property.

6.4                                  Corporate Name; Prior Transactions .   Except as set forth on Schedule 6.4, the Borrower has not, during the past five (5) years, been known by or used any other corporate or fictitious name, or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property outside of the ordinary course of business.

6.5                                  Subsidiaries and Affiliates .   Schedule 6.5 is a correct and complete list of the name and relationship to the Borrower of each and all of the Borrower’s Subsidiaries and other Affiliates.  Each Subsidiary is (a) duly incorporated or organized and validly existing in good standing under the laws of its state of incorporation or organization set forth on Schedule 6.5 , and (b) qualified to do business and in good standing in each jurisdiction in which the failure to so qualify or be in good standing could reasonably be expected to have a material adverse effect on any such Subsidiary’s business, operations, prospects, property, or condition (financial or otherwise) and (c) has all requisite power and authority to conduct its business and own its property.

6.6                                  Financial Statements and Projections .

(a)                                   The Borrower has delivered to the Lender the preliminary Fiscal Year end Financial Statements as of October 9, 2003.  The Borrower has also delivered to the Lender the unaudited balance sheet and related statements of income and cash flows for the Borrower and its consolidated Subsidiaries as of June 25, 2004.  Such financial statements are attached hereto as Exhibit C .  All such financial statements have been prepared in accordance with GAAP and present accurately and fairly in all material respects the financial position of the Borrower and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods then ended.

(b)                                  The Latest Projections when submitted to the Lender as required herein represent the Borrower’s best estimate of the future financial performance of the Borrower and its consolidated Subsidiaries for the periods set forth therein.  The Latest Projections have been prepared on the basis of the assumptions set forth therein, which the

18

Borrower believes are fair and reasonable in light of current and reasonably foreseeable business conditions at the time submitted to the Lender.

6.7                                  Capitalization .   The Borrower’s authorized capital stock consists of 17,000,000 shares of common stock, par value $0.001 per share, of which 247,600 shares are validly issued and outstanding, fully paid and non-assessable and are owned beneficially and of record by the stockholders set forth on Schedule 6.7 ; and 10,000,000 shares of Series A preferred stock, par value $0.001 per share, of which 5,804,446 shares are validly issued and outstanding, fully paid and non-assessable and are owned beneficially and of record by the stockholders set forth on Schedule 6.7 .

6.8                                  Solvency .   The Borrower is Solvent prior to and after giving effect to the Borrowings to be made on the Closing Date and the issuance of the Letters of Credit to be issued on the Closing Date, and shall remain Solvent during the term of this Agreement.

6.9                                  Debt .   After giving effect to the making of the Revolving Loans to be made on the Closing Date, the Borrower and its Subsidiaries have no Debt, except (a) the Obligations, and (b) Debt described on Schedule 6.9 .

6.10                            Distributions .   Since October 10, 2003, no Distribution has been declared, paid, or made upon or in respect of any capital stock or other securities of the Borrower or any of its Subsidiaries.

6.11                            Real Estate; Leases .   Schedule 6.11 sets forth, as of the Closing Date, a correct and complete list of all Real Estate owned by the Borrower and all Real Estate owned by any of its Subsidiaries, all leases and subleases of real or personal property held by the Borrower as lessee or sublessee (other than leases of personal property as to which the Borrower is lessee or sublessee for which the value of such personal property in the aggregate is less than $1,000,000), and all leases and subleases of real or personal property held by the Borrower as lessor, or sublessor.  Each of such leases and subleases is valid and enforceable in accordance with its terms and is in full force and effect, and no default by any party to any such lease or sublease exists.  The Borrower has good and marketable title in fee simple to the Real Estate identified on Schedule 6.11 as owned by the Borrower, or valid leasehold interests in all Real Estate designated therein as “leased” by the Borrower and the Borrower has good, indefeasible, and merchantable title to all of its other property reflected on the June 30, 2004 Financial Statements delivered to the Lender, except as disposed of in the ordinary course of business since the date thereof, free of all Liens except Permitted Liens.

6.12                            Proprietary Rights .   Schedule 6.12 sets forth a correct and complete list of all of the Borrower’s patents, trademarks and copyrights.  None of the patents, trademarks and copyrights is subject to any licensing agreement or similar arrangement except as set forth on Schedule 6.12 .  To the best of the Borrower’s knowledge, none of the patents, trademarks and copyrights infringes on or conflicts with any other Person’s property, and no other Person’s property infringes on or conflicts with the patents, trademarks and copyrights.  The patents, trademarks and copyrights described on Schedule 6.12 constitute all of the property of such type necessary to the current and anticipated future conduct of the Borrower’s business.

19

6.13                            Trade Names .   All trade names or styles under which the Borrower or any of its Subsidiaries will sell Inventory or create Accounts, or to which instruments in payment of Accounts may be made payable, are listed on Schedule 6.13 .

6.14                            Litigation .   Except as set forth on Schedule 6.14 , there is no pending, or to the best of the Borrower’s knowledge threatened, action, suit, proceeding, or counterclaim by any Person, or to the best of the Borrower’s knowledge, investigation by any Governmental Authority, or any basis for any of the foregoing, which could reasonably be expected to have a Material Adverse Effect.

6.15                            Labor Disputes .   Except as set forth on Schedule 6.15 , as of the Closing Date (a) there is no collective bargaining agreement or other labor contract covering employees of the Borrower or any of its Subsidiaries, (b) no such collective bargaining agreement or other labor contract is scheduled to expire during the term of this Agreement, (c) no union or other labor organization is seeking to organize, or to be recognized as, a collective bargaining unit of employees of the Borrower or any of its Subsidiaries or for any similar purpose, and (d) there is no pending or (to the best of the Borrower’s knowledge) threatened, strike, work stoppage, material unfair labor practice claim, or other material labor dispute against or affecting the Borrower or its Subsidiaries or their employees.

6.16                            Environmental Laws .   Except as otherwise disclosed on Schedule 6.16 :

(a)                                   The Borrower and its Subsidiaries have complied in all material respects with all Environmental Laws and neither the Borrower nor any Subsidiary nor any of its presently owned real property or presently conducted operations, nor its previously owned real property or prior operations, is subject to any enforcement order from or liability agreement with any Governmental Authority or private Person respecting (i) compliance with any Environmental Law or (ii) any potential liabilities and costs or remedial action arising from the Release or threatened Release of a Contaminant.

(b)                                  The Borrower and its Subsidiaries have obtained all permits necessary for their current operations under Environmental Laws, and all such permits are in good standing and the Borrower and its Subsidiaries are in compliance with all material terms and conditions of such permits.

(c)                                   Neither the Borrower nor any of its Subsidiaries, nor, to the best of the Borrower’s knowledge, any of its predecessors in interest, has in violation of applicable law stored, treated or disposed of any hazardous waste.

(d)                                  Neither the Borrower nor any of its Subsidiaries has received any summons, complaint, order or similar written notice indicating that it is not currently in compliance with, or that any Governmental Authority is investigating its compliance with, any Environmental Laws or that it is or may be liable to any other Person as a result of a Release or threatened Release of a Contaminant.

(e)                                   To the best of the Borrower’s knowledge, none of the present or past operations of the Borrower and its Subsidiaries is the subject of any investigation by any

20

Governmental Authority evaluating whether any remedial action is needed to respond to a Release or threatened Release of a Contaminant.

(f)                                     There is not now, nor to the best of the Borrower’s knowledge has there ever been on or in the Real Estate:

(1)                                   any underground storage tanks or surface impoundments,

(2)                                   any asbestos-containing material, or

(3)                                   any polychlorinated biphenyls (PCBs) used in hydraulic oils, electrical transformers or other equipment.

(g)                                  Neither the Borrower nor any of its Subsidiaries has filed any notice under any requirement of Environmental Law reporting a spill or accidental and unpermitted Release or discharge of a Contaminant into the environment.

(h)                                  Neither the Borrower nor any of its Subsidiaries has entered into any negotiations or settlement agreements with any Person (including the prior owner of its property) imposing material obligations or liabilities on the Borrower or any of its Subsidiaries with respect to any remedial action in response to the Release of a Contaminant or environmentally related claim.

(i)                                      None of the products manufactured, distributed or sold by the Borrower or any of its Subsidiaries contain asbestos containing material.

(j)                                      No Environmental Lien has attached to the Real Estate.

6.17                            No Violation of Law .   Neither the Borrower nor any of its Subsidiaries is in violation of any law, statute, regulation, ordinance, judgment, order, or decree applicable to it which violation could reasonably be expected to have a Material Adverse Effect.

6.18                            No Default .   Neither the Borrower nor any of its Subsidiaries is in default with respect to any note, indenture, loan agreement, mortgage, lease, deed, or other agreement to which the Borrower or such Subsidiary is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect.

6.19                            ERISA Compliance .

(a)                                   Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law.  Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Borrower, nothing has occurred which would cause the loss of such qualification.  The Borrower and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

21

(b)                                  There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)                                   (i)  No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

6.20                            Taxes .   The Borrower and its Subsidiaries have filed all federal and other tax returns and reports required to be filed, and have paid all federal and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable unless such unpaid taxes and assessments would constitute a Permitted Lien.

6.21                            Regulated Entities .   None of the Borrower, any Person controlling the Borrower, or any Subsidiary, is an “Investment Company” within the meaning of the Investment Company Act of 1940.  The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any other federal or state statute or regulation limiting its ability to incur indebtedness.

6.22                            Use of Proceeds; Margin Regulations .   The proceeds of the Loans are to be used solely for working capital purposes.  Neither the Borrower nor any Subsidiary is engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.

6.23                            Copyrights, Patents, Trademarks and Licenses, etc .   The Borrower owns or is licensed or otherwise has the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, licenses, rights of way, authorizations and other rights that are reasonably necessary for the operation of its businesses, without conflict with the rights of any other Person.  To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person.  No claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect.

22

6.24                            No Material Adverse Change .   No Material Adverse Effect has occurred since the latest date of the Financial Statements delivered to the Lender.

6.25                            Full Disclosure .   None of the representations or warranties made by the Borrower or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Borrower or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Borrower to the Lender prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.

6.26                            Material Agreements .   Schedule 6.26 hereto sets forth as of the Closing Date all material agreements and contracts to which the Borrower or any of its Subsidiaries is a party or is bound as of the date hereof.

6.27                            Bank Accounts .   Schedule 6.27 contains as of the Closing Date a complete and accurate list of all bank accounts maintained by the Borrower with any bank or other financial institution.

6.28                            Governmental Authorization .   No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower or any of its Subsidiaries of this Agreement or any other Loan Document.

ARTICLE 7

AFFIRMATIVE AND NEGATIVE COVENANTS

The Borrower covenants to the Lender that so long as any of the Obligations remain outstanding or this Agreement is in effect:

7.1                                  Taxes and Other Obligations .   The Borrower shall, and shall cause each of its Subsidiaries to, (a) file when due all tax returns and other reports which it is required to file; (b) pay, or provide for the payment, when due, of all taxes, fees, assessments and other governmental charges against it or upon its property, income and franchises, make all required withholding and other tax deposits, and establish adequate reserves for the payment of all such items, and provide to the Lender, upon request, satisfactory evidence of its timely compliance with the foregoing; and (c) pay when due all Debt owed by it and all claims of materialmen, mechanics, carriers, warehousemen, landlords, processors and other like Persons, and all other indebtedness owed by it and perform and discharge in a timely manner all other obligations undertaken by it; provided , however , so long as the Borrower has notified the Lender in writing, neither the Borrower nor any of its Subsidiaries need pay any tax, fee, assessment, or governmental charge (i) it is contesting in good faith by appropriate proceedings diligently pursued, (ii) as to which the Borrower or its Subsidiary, as the case may be, has established

23

proper reserves as required under GAAP, and (iii) the nonpayment of which does not result in the imposition of a Lien (other than a Permitted Lien).

7.2                                  Legal Existence and Good Standing .   The Borrower shall, and shall cause each of its Subsidiaries to, maintain its legal existence and its qualification and good standing in all jurisdictions in which the failure to maintain such existence and qualification or good standing could reasonably be expected to have a Material Adverse Effect.

7.3                                  Compliance with Law and Agreements; Maintenance of Licenses .   The Borrower shall comply, and shall cause each Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act and all Environmental Laws).  The Borrower shall, and shall cause each of its Subsidiaries to, obtain and maintain all licenses, permits, franchises, and governmental authorizations necessary to own its property and to conduct its business as conducted on the Closing Date.  The Borrower shall not modify, amend or alter its certificate or articles of incorporation, or its limited liability company operating agreement or limited partnership agreement, as applicable, other than in a manner which does not adversely affect the rights of the Lender.

7.4                                  Maintenance of Property; Inspection of Property .

(a)                                   The Borrower shall, and shall cause each of its Subsidiaries to, maintain all of its property necessary and useful in the conduct of its business, in good operating condition and repair, ordinary wear and tear excepted.

(b)                                  The Borrower shall permit representatives and independent contractors of the Lender (at the expense of the Borrower not to exceed four (4) times per year unless an Event of Default has occurred and is continuing) to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom and to discuss its affairs, finances and accounts with its directors and officers at such reasonable times during normal business hours and as soon as may be reasonably desired, upon reasonable advance notice to the Borrower; provided , however , when an Event of Default exists, the Lender may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

7.5                                  Insurance .

(a)                                   The Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, with financially sound and reputable insurers having a rating of at least A or better by Best Rating Guide, insurance with respect to its business and properties against loss or damage customarily insured against by Persons engaged in the same or similar business or as the Lender, in its reasonable discretion, shall specify, which insurance shall be in amounts and under policies as are reasonably acceptable to the Lender.  It is understood that the insurance policies maintained by the Borrower on the Closing Date are acceptable to the Lender in coverage, amount and carrier as of the Closing Date.  Without limiting the foregoing, in the event that any improved Real Estate covered by the Mortgage is determined to be located within

24

an area that has been identified by the Director of the Federal Emergency Management Agency as a Special Flood Hazard Area (“SFHA”), the Borrower shall purchase and maintain flood insurance on the improved Real Estate and any Equipment and Inventory located on such Real Estate.  The amount of said flood insurance will be reasonably determined by the Lender, and shall, at a minimum, comply with applicable federal regulations as required by the Flood Disaster Protection Act of 1973, as amended.  The Borrower shall also maintain flood insurance for its Inventory and Equipment which is, at any time, located in a SFHA.

(b)                                  The Borrower shall cause the Lender to be named as secured party or mortgagee and sole loss payee or additional insured, in a manner acceptable to the Lender.  Each policy of insurance shall contain a clause or endorsement requiring the insurer to give not less than thirty (30) days’ prior written notice to the Lender in the event of cancellation of the policy for any reason whatsoever and endorsement Form 438 BFU, or equivalent, stating that the interest of the Lender shall not be impaired or invalidated by any act or neglect of the Borrower or any of its Subsidiaries or the owner of any Real Estate for purposes more hazardous than are permitted by such policy.  All premiums for such insurance shall be paid by the Borrower when due, and certificates of insurance and, if requested by the Lender, photocopies of the policies (other than policies for any foreign Subsidiary of Borrower which are not material insurance policies), shall be delivered to the Lender.  If the Borrower fails to procure such insurance or to pay the premiums therefor when due, the Lender may do so from the proceeds of Revolving Loans.

7.6                                  Insurance and Condemnation Proceeds .   The Borrower shall promptly notify the Lender of any loss, damage, or destruction to the Collateral in excess of $250,000, whether or not such loss, damage or destruction is covered by insurance,.  The Lender is hereby authorized to collect all insurance and condemnation proceeds in respect of Collateral directly and to apply or remit them as follows:

(a)                                   With respect to insurance and condemnation proceeds relating to Collateral other than Fixed Assets, after deducting from such proceeds the reasonable expenses, if any, incurred by the Lender in the collection or handling thereof, the Lender shall apply such proceeds, ratably, to the reduction of the Obligations in the order provided for in Section 3.8 .

(b)                                  With respect to insurance and condemnation proceeds relating to Collateral consisting of Fixed Assets, the Lender shall permit or require the Borrower to use such proceeds, or any part thereof, to replace, repair, restore or rebuild the relevant Fixed Assets in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction so long as (1) no Default or Event of Default has occurred and is continuing, (2) the aggregate proceeds do not exceed $3,000,000 and (3) the Borrower first (i) provides the Lender with plans and specifications for any such repair or restoration which shall be reasonably satisfactory to the Lender and (ii) demonstrates to the reasonable satisfaction of the Lender that the funds available to it will be sufficient to complete such project in the manner provided therein.  In all other circumstances, the Lender shall apply such insurance and condemnation proceeds, ratably, to the reduction of the Obligations in the order provided for in Section 3.8 .

25

7.7                                  Environmental Laws .

(a)                                   The Borrower shall, and shall cause each of its Subsidiaries to, conduct its business in compliance with all Environmental Laws applicable to it, including those relating to the generation, handling, use, storage, and disposal of any Contaminant.  The Borrower shall, and shall cause each of its Subsidiaries to, take prompt and appropriate action to respond to any non-compliance with Environmental Laws and shall regularly report to the Lender on such response.

(b)                                  Without limiting the generality of the foregoing, the Borrower shall submit to the Lender annually, commencing on the first Anniversary Date, and on each Anniversary Date thereafter, an update of the status of each environmental compliance or liability issue.  The Lender may request copies of technical reports prepared by the Borrower and its communications with any Governmental Authority to determine whether the Borrower or any of its Subsidiaries is proceeding reasonably to correct, cure or contest in good faith any alleged non-compliance or environmental liability.  The Borrower shall, at the Lender’s request and at the Borrower’s expense, (i) retain an independent environmental engineer acceptable to the Lender to evaluate the site, including tests if appropriate, where the non-compliance or alleged non-compliance with Environmental Laws has occurred and prepare and deliver to the Lender a report setting forth the results of such evaluation, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof, and (ii) provide to the Lender a supplemental report of such engineer whenever the scope of the environmental problems, or the response thereto or the estimated costs thereof, shall increase in any material respect.

(c)                                   The Lender and its representatives will have the right at any reasonable time to enter and visit the Real Estate and any other place where any property of the Borrower is located for the purposes of observing the Real Estate, taking and removing soil or groundwater samples, and conducting tests on any part of the Real Estate.  The Lender is under no duty, however, to visit or observe the Real Estate or to conduct tests, and any such acts by the Lender will be solely for the purposes of protecting the Lender’s Liens and preserving the Lender’s rights under the Loan Documents.  No site visit, observation or testing by the Lender will result in a waiver of any default of the Borrower or impose any liability on the Lender.  In no event will any site visit, observation or testing by the Lender be a representation that hazardous substances are or are not present in, on or under the Real Estate, or that there has been or will be compliance with any Environmental Law.  Neither the Borrower nor any other party is entitled to rely on any site visit, observation or testing by the Lender.  The Lender owes no duty of care to protect the Borrower or any other party against, or to inform the Borrower or any other party of, any hazardous substances or any other adverse condition affecting the Real Estate.  The Lender may in its discretion disclose to the Borrower or to any other party if so required by law any report or findings made as a result of, or in connection with, any site visit, observation or testing by the Lender.  The Borrower understands and agrees that the Lender makes no warranty or representation to the Borrower or any other party regarding the truth, accuracy or completeness of any such report or findings that may be disclosed.  The Borrower also understands that depending on the results of any site visit, observation or testing by the Lender and disclosed to the Borrower, the Borrower may have a legal obligation to notify one or more

26

environmental agencies of the results, that such reporting requirements are site-specific, and are to be evaluated by the Borrower without advice or assistance from the Lender.  In each instance, the Lender will give the Borrower reasonable notice before entering the Real Estate or any other place the Lender is permitted to enter under this Section 7.7(c) .  The Lender will make reasonable efforts to avoid interfering with the Borrower’s use of the Real Estate or any other property in exercising any rights provided hereunder.

7.8                                  Compliance with ERISA .   The Borrower shall, and shall cause each of its ERISA Affiliates to:  (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) make all required contributions to any Plan subject to Section 412 of the Code; (d) not engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan; and (e) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

7.9                                  Mergers, Consolidations or Sales .   Neither the Borrower nor any of its Subsidiaries shall enter into any transaction of merger, reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or any part of its property, or wind up, liquidate or dissolve, or agree to do any of the foregoing, except for (i) sales of obsolete Inventory, to the extent already reserved-against, at the best sales price obtainable by Borrower, (ii) sales of Inventory in the ordinary course of its busines