1.

Definitions .

(a)

The definition of “Maximum Loan Limit” set forth in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“ “ Maximum Loan Limit ” shall mean Twelve Million Eight Hundred Sixteen Thousand Dollars ($12,816,000.00).”

(b)

The definition of “Maximum Revolving Loan Limit” set forth in Section 1 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“ “Maximum Revolving Loan Limit” shall mean Five Million Dollars ($5,000,000.00).”

(c)

Section 1 of the Loan Agreement is hereby amended by adding the following definitions alphabetically where they would otherwise appear:

“ “ Contingent Obligations ” as applied to any Person, shall mean the undrawn face amount of any letters of credit issued for the account of such Person and shall also mean any obligations of such Person guaranteeing or having the economic effect of guaranteeing any indebtedness, leases, dividends, letters of credit or any or other obligations ( “Primary Obligations” ) of any other Person (the “Primary Obligor” ) in any manner, whether directly or indirectly; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the Primary Obligation or, where such Contingent Obligation is specifically limited to a portion of any such Primary Obligation, that portion to which it is limited or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

“ “LIBOR Rate Overadvance Term Loan” shall mean any portion of the Overadvance Term Loan bearing interest with reference to the LIBOR Rate.”

“ “EBITDA” shall mean, with respect to any period, the net income of any Person after taxes for such period, (excluding any gains or losses on the sale of assets (other than the sale of Inventory in the ordinary course of business), excluding cash tax rebates, and excluding other extraordinary gains or losses), plus interest expense, income tax expense, depreciation and amortization for such period, plus or minus without duplication, any other non-cash charges or gains which have been subtracted or added in calculating net income after taxes for such period.”

“ “Stock Repurchase Date” shall mean the date on which all Preferred Stock is repurchased by Borrower.”

“ “Stock Repurchase Price” shall mean the total amount paid to Subordinated Lender to repurchase all of the Preferred Stock.”

“ “Total Funded Debt” shall mean, as to a particular Person at any particular time, the sum of the following, calculated in accordance with GAAP: (a) all obligations for borrowed money (whether as a direct obligor on a promissory note, bond, debenture, or other similar instrument, as a reimbursement obligor with respect to an issued letter of credit or similar instrument, as an obligor under a contingent obligation (including, without limitation, any Contingent Obligation) in respect of borrowed money, or as any other type of direct or contingent obligor); and (b) all capitalized lease obligations (other than the interest component of such obligations).”

2.

Overadvance Term Loan . The Loan Agreement is hereby amended by adding the following as Sections 2(d)(A) and 2(e)(vi)(A) thereto:

“ 2(d)(A)        Overadvance Term Loan . Subject to the terms and conditions of this Agreement and the Other Agreements, Lender shall make a term loan to the Borrowers in an amount equal to Six Million Four Hundred Thousand Dollars ($6,400,000.00) (the “Overadvance Term Loan” ). The entire principal amount of the Overadvance Term Loan shall be advanced on the Stock Repurchase Date.”

“ 2(e)(vi)(A)        Repayments . The principal of the Overadvance Term Loan shall be repaid in (i) equal and consecutive monthly installments of principal of One Hundred Seventy-Seven Thousand Seven Hundred Seventy-Seven and 78/100 Dollars ($177,777.78) each, payable on the first day of each month commencing the first day of the first month following the Stock Repurchase Date, and (ii) if not repaid in full previously in accordance with the terms of this Agreement, one final payment of the remaining principal balance thereof, together with all interest and fees accrued and unpaid thereon on the last day of the Term. If any such payment due date is not a Business Day, then such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the amount of interest and fees due hereunder.”

3.

Repayment of the Capital Expenditure Loan . Section 2(e) (iv) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“(iv)        The principal of the Capital Expenditure Loan shall be repaid (A) in consecutive monthly installments, payable on the first day of each month commencing the first day of the month next succeeding the month in which such Capital Expenditure Loan is made, each in an amount equal to (I) Fourteen Thousand Dollars ($14,000.00) for each payment made during the first twelve (12) months of such Capital Expenditure Loan, (II) Twenty-Eight Thousand Dollars ($28,000.00) for each payment made during the thirteenth (13th) through twenty-fourth (24th) months of such Capital Expenditure Loan, (III) Forty Thousand Dollars ($40,000.00) for each payment made after the twenty-fourth (24th) but prior to the last day of the Term and (B) if not repaid in full previously in accordance with the terms of this Agreement, one final payment of the remaining principal balance thereof, together with all interest and fees accrued and unpaid thereon, on the last day of the Term. If any such payment due date is not a Business Day, then such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the amount of interest and fees due hereunder.”

4.

Repayment of Term Loan C . Section 2(e) of the Loan Agreement is hereby amended by adding the following as Section 2(e)(vi) thereto:

“(vi)         Repayment of Term Loan C . The principal of Term Loan C shall be repaid in (i) twelve (12) equal and consecutive monthly installments of principal of Sixteen Thousand Dollars ($16,000.00), payable on the first day of each month during the period beginning on and including August 1, 2004 and ending on and including July 31, 2005, (ii) twelve (12) equal and consecutive monthly installments of principal of Thirty-Two Thousand Dollars ($32,000.00), payable on the first day of each month during the period beginning on and including August 1, 2005 and ending on and including July 31, 2006, (iii) equal and consecutive monthly installments of principal of Fifty-Two Thousand Dollars ($52,000.00), payable on the first day of each month commencing August 1, 2006 and ending on and including June 30, 2007 and (ii) one final payment of the remaining principal balance thereof, together with all interest and fees accrued and unpaid thereon, on July 1, 2007. If any such payment due date is not a Business Day, then such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the amount of interest and fees due hereunder.”

5.

Interest Rate . Section 4(a) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“(a)

Interest Rate . Subject to the terms and conditions set forth herein, each Loan shall bear interest as follows:

(i)

Each Revolving Loan (other than Revolving Loans supported by the Overadvance Amount) shall bear interest at the per annum rate of interest set forth in subsection (A) or (B) below:

(A)

the Prime Rate in effect from time to time.

(B)

one and three quarters of one percent (1.75%) in excess of the LIBOR Rate for the applicable Interest Period selected by Borrowers by irrevocable notice (in writing, by telecopy, telex, telegram, electronic mail or cable) given to Agent not less than three (3) Business Days prior to the first day of each respective Interest Period; provided that: (I) each such period occurring after such initial period shall commence on the day on which the immediately preceding period expires; (II) the final Interest Period shall be such that its expiration occurs on or before the end of the Term; and (III) if for any reason Borrowers shall fail to timely select a period, then such Revolving Loans shall continue as, or revert to, Prime Rate Loans, such rate to remain fixed for such Interest Period.

(ii)

Intentionally Deleted.

(iii)

Intentionally Deleted.

(iv)

Intentionally Deleted.

(v)

Term Loan C shall bear interest at the per annum rate of interest set forth in subsection (A) or (B) below:

(A)

one-quarter of one percent (.25%) per annum in excess of the Prime Rate

(B)

two and one-quarter of one percent (2.25%) in excess of the LIBOR Rate for the applicable Interest Period selected by Borrowers by irrevocable notice (in writing, by telecopy, telex, telegram, electronic mail or cable) given to Agent not less than three (3) Business Days prior to the first day of each respective Interest Period; provided that: (I) each such period occurring after such initial period shall commence on the day on which the immediately preceding period expires; (II) the final Interest Period shall be such that its expiration occurs on or before the end of the Term; and (III) if for any reason Borrowers shall fail to timely select a period, then such portion of Term Loan C shall continue as, or revert to, Prime Rate Loans, such rate to remain fixed for such Interest Period.

(vi)

Each Capital Expenditure Loan shall bear interest at the per annum rate of interest set forth in subsection (A) or (B) below:

(A)

one-quarter of one percent (.25%) per annum in excess of the Prime Rate in effect from time to time.

(B)

two and one-quarter of one percent (2.25%) in excess of the LIBOR Rate for the applicable Interest Period selected by Borrowers by irrevocable notice (in writing, by telecopy, telex, telegram, electronic mail or cable) given to Agent not less than three (3) Business Days prior to the first day of each respective Interest Period; provided that: (I) each such period occurring after such initial period shall commence on the day on which the immediately preceding period expires; (II) the final Interest Period shall be such that its expiration occurs on or before the end of the Term; and (III) if for any reason Borrowers shall fail to timely select a period, then such Capital Expenditure Loans shall continue as, or revert to, Prime Rate Loans, such rate to remain fixed for such Interest Period.

(vii)

The Overadvance Term Loan shal