Loan and Security Agreement

Exhibit 10(h)

Loan And Security Agreement      THIS AGREEMENT (the "Agreement"), dated as of September ___, 2008 among VIDEO DISPLAY CORPORATION, a Georgia corporation ("Parent"), LEXEL IMAGING SYSTEMS, INC. ("Lexel"), FOX INTERNATIONAL, LTD., INC. ("Fox"), Z-AXIS, INC. ("Z-Axis"), TELTRON TECHNOLOGIES, INC. ("Teltron") and AYDIN DISPLAYS, INC. ("Aydin" and together with Lexel, Fox, Z-Axis and Teltron, collectively, the "Subsidiaries"; and the Subsidiaries, together with Parent, collectively, the "Borrower"), and RBC BANK (USA) ("RBC" or the "Bank") (formerly known as RBC Centura Bank); W I T N E S S E T H:      In consideration of the premises and of the mutual covenants herein contained and to induce Bank to extend credit to Borrower, the parties agree as follows:      1.  Definitions .           1.1. Definitions . Capitalized terms that are not otherwise defined herein shall have the meanings set forth below.      "Account" means all "accounts" as defined in the Code from time to time, together with any guaranties, Letters of Credit and other security therefor.      "Account Debtor" means an "account debtor" as defined in the Code from time to time.      "Adjusted Total Liabilities to Adjusted Tangible Net Worth Ratio" means, as of any date of calculation, the ratio of Borrower’s Adjusted Total Liabilities as of such date to its Adjusted Tangible Net Worth as of such date.      "Adjusted Tangible Net Worth" means, as of any date of calculation, Borrower’s Shareholder Equity, less its intangible assets, less its leasehold improvements and loans receivable from related parties, plus its Subordinated Debt, calculated on consolidated basis and in accordance with GAAP.      "Adjusted Total Liabilities" means, as of any date of calculation, Borrower’s Total Liabilities, including Contingent Liabilities, less its Subordinated Debt, calculated on a consolidated basis and (except with respect to Contingent Liabilities) in accordance with GAAP.      "Advance" means an advance of proceeds of a Revolving Loan to, or the issuance of a letter of credit for the account of, Borrower pursuant to this Agreement.

     "Advance Date" means the date on which an Advance is made.      "Affiliate" means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors and partners.      "Asset Coverage Ratio" means, as of any date of calculation, the ratio of (a) the total amount of Borrower’s Obligations outstanding under the Primary Revolving Loan and the Secondary Revolving Loan divided by (b) the sum of (i) Borrower’s Accounts, net of allowance for doubtful Accounts, plus (ii) its Inventory, net of reserves (such net Inventory capped at $20,000,000), less (iii) its accounts payable.      "Authority" shall mean any governmental authority, central bank or comparable agency charged with the interpretation or administration of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof.      "Business Day" means any day that is not a Saturday, Sunday or other day on which banks in the State of Georgia are authorized or required to close.      "Capital Expenditures" means any amounts accrued or paid in respect of any purchase or other acquisition for value of capital assets and, for greater certainty, excludes amounts expended in respect of the normal repair and maintenance of capital assets utilized in the ordinary course of business.      "Capitalized Leases" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.      "Change in Ownership" shall mean a transaction or series of transactions in which any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such "person" or "group" to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.      "Change in Senior Management" shall mean (a) any one or more of Ronald D. Ordway, Gregory Osborne or Ervin Kuczogi shall cease to be actively involved with the day-to-day management of Borrower in an executive officer capacity, or (b) any two or more of David Mutcher, William Frohoff, Murray Fox or Carl Beacher shall cease to be actively involved with the day-to-day management of Borrower in an executive officer capacity.      "Change of Law" shall mean the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Authority.

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     "Chattel Paper" means "chattel paper" as defined in the Code from time to time, together with any guaranties, Letters of Credit and other security therefor.      "Code" means the Uniform Commercial Code, as in effect in Georgia from time to time.      "Collateral" means all assets and personal property of Borrower, wherever located and whether now owned by Borrower or hereafter acquired, including, without limitation, the following: (a) all Accounts; (b) all General Intangibles; (c) all Chattel Paper, Documents and Instruments and rights to payment evidenced thereby, (d) all Inventory; (e) all Equipment and Fixtures; (f) all Investment Property; (g) all Deposit Accounts; (h) all Letters of Credit and Letter of Credit Rights; (i) any other collateral in which Bank may be hereafter granted a security interest or Lien; and (j) all parts, replacements, substitutions, profits, products and cash and non-cash Proceeds of any of the foregoing (including insurance proceeds payable by reason of loss or damage thereto) in any form and wherever located. Collateral shall include all written or electronically recorded books and records relating to any such Collateral and other rights relating thereto.      "Contingent Liabilities" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any account, instrument, chattel paper, document, general intangible, indebtedness, lease, dividend, letter of credit, letter of credit right or other obligation of another Person, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any Interest Rate Agreement or other agreement or arrangement designated to protect a person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.      "Corporate Distributions" means all payments to (i) any shareholder (or other holder of an equity interest in Borrower), director, executive or officer of the Borrower, (ii) any Affiliate or holder of Subordinated Debt of the Borrower, or (iii) any shareholder (or other holder of an equity interest in Borrower), director, executive or officer of any Affiliate or holder of Subordinated Debt of the Borrower. For greater certainty, it includes bonuses, dividends, salaries (except salaries to officers or other employees in the ordinary course of business), and repayment of Indebtedness or making of loans to any such Person.      "Debt" means (a) all liabilities which would be reflected on a balance sheet prepared in accordance with GAAP, (b) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (c) all obligations evidenced by notes, bonds,

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debentures or similar instruments, (d) all capital lease obligations and (e) all Contingent Obligations.      "Default" or "default" means any of the events specified in Section 8.1, whether or not any requirement in such Section for the giving of notice or the lapse of time or the happening of any further condition, event or act shall have been satisfied.      "Default Rate" means the "default rate" of interest per annum specified in the applicable Note.      "Deposit Account" means "deposit account" as defined in the Code from time to time.      "Document" means "document" as defined in the Code from time to time.      "EBITDA" shall mean, as of any date of calculation, Borrower’s net income, plus its Interest Expense, plus its income tax expense, plus its depreciation and amortization, calculated on a consolidated basis and in accordance with GAAP.      "Environmental Laws" means, collectively the following acts and laws, as amended: the Comprehensive Environmental Response, Compensation and Liability Act of 1980; the Superfund Amendments and Reauthorization Act of 1986; the Resource Conservation and Recovery Act; the Toxic Substances Act; the Clean Water Act; the Clean Air Act; the Oil Pollution and Hazardous Substances Control Act of 1978; and any other "Superfund" or "Superlien" law or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect.      "Equipment" means "equipment" as defined in the Code from time to time.      "Event of Default" means any event specified as such in Section 8.1 hereof, provided that there shall have been satisfied any requirement in connection with such event for the giving of notice or the lapse of time, or both.      "Fixed Charge Coverage Ratio" means, as of any date of calculation: (a) the sum of Borrower’s EBITDA, plus its rent and lease expense, less its Unfunded Capital Expenditures, less its cash taxes, divided by (b) the sum of Borrower’s rent and lease expense, plus its current maturities of long term Funded Debt, plus its Interest Expense, plus its Corporate Distributions, each calculated on a consolidated basis for the trailing four quarter period and in accordance with GAAP.      "Fixtures" means "fixtures" as defined in the Code from time to time.      "Funded Debt" means, at any time, all obligations for borrowed money which bear interest or to which interest is imputed plus, without duplication, all obligations for the deferred payment of the purchase of property, all Capitalized Lease obligations and all Indebtedness secured by purchase money security interests.

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     "GAAP" means generally accepted accounting principles as in effect in the United States from time to time.      "General Intangibles" means "general intangibles" as defined in the Code from time to time, including "payment intangibles" and "software" (each as defined in the Code from time to time).      "Instrument" means "instrument" as defined in the Code from time to time.      "Interest Expense" means the total of the costs of advances outstanding under Indebtedness including (i) interest charges, (ii) capitalized interest, (iii) the interest component of Capitalized Leases, (iv) fees payable in respect of letters of credit and letters of guarantee, and (v) discounts incurred and fees payable in respect of bankers’ acceptances.      "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement designed to protect a Person against fluctuations in interest rates or to hedge such Person’s interest rate risk exposure, including any swap agreements as defined in 11 U.S.C. §101, as amended.      "Inventory" means "inventory" as defined in the Code from time to time.      "Investment" means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.      "Investment Property" means "investment property" as defined in the Code from time to time.      "Letters of Credit" and "Letter of Credit Rights" means "letters of credit" and "letter of credit rights", respectively, each as defined in the Code from time to time.      "Lien" means any mortgage, pledge, statutory lien or other lien arising by operation of law, security interest, trust arrangement, security deed, financing lease, collateral assignment or other encumbrance, conditional sale or title retention agreement, or any other interest in property designed to secure the repayment of Obligations, whether arising by agreement or under any statute or law or otherwise.      "Loan Documents" means this Agreement, the Notes, the Shareholder Subordination Agreement, the Negative Pledge Agreement, any Interest Rate Agreement, the Advance requests, and all other documents and instruments now or hereafter evidencing, describing, guaranteeing or securing the Obligations contemplated hereby or delivered in connection herewith, as they may be modified.      "Loans" has the meaning set forth in Section 2.1 and "Loan" means any of such loans identified therein as the context may require.

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     "Material Adverse Effect" means any (i) material adverse effect upon the validity, performance or enforceability of any of the Loan Documents or any of the transactions contemplated hereby or thereby, (ii) material adverse effect upon the properties, business, prospects or condition (financial or otherwise) of Borrower, any Subsidiary and/or any other Person obligated under any of the Loan Documents, or (iii) material adverse effect upon the ability of Borrower, any Subsidiary or any other Person to fulfill any obligation under any of the Loan Documents.      "Maximum Primary Revolving Loan Amount" means $17,000,000.      "Maximum Secondary Revolving Loan Amount" means $3,500,000.      "Negative Pledge Agreement" means that certain Negative Pledge Agreement of even date herewith from Borrower in favor of the Bank, as amended, modified, supplemented or restated from time to time.      "Notes" has the meaning set forth in Section 2.2 and "Note" means any of such notes identified therein as the context may require.      "Obligations" means all obligations now or hereafter owed to Bank by Borrower, whether related or unrelated to the Loans, including, without limitation, amounts owed or to be owed under the terms of the Loan Documents, or arising out of the transactions described therein, including, without limitation, the Loans, sums advanced to pay overdrafts on any account maintained by Borrower with Bank, reimbursement obligations for outstanding letters of credit or banker’s acceptances issued for the account of Borrower or its Subsidiaries, amounts paid by Bank under letters of credit or drafts accepted by Bank for the account of Borrower or its Subsidiaries, together with all interest accruing thereon, all obligations, whether now existing or hereafter arising, under any Interest Rate Agreement, including any swap agreements as defined in 11 U.S.C. §101, as amended, between Bank and Borrower whenever executed, all fees, all costs of collection, attorneys’ fees and expenses of or advances by Bank which Bank pays or incurs in discharge of obligations of Borrower, whether such amounts are now due or hereafter become due, direct or indirect and whether such amounts due are from time to time reduced or entirely extinguished and thereafter re-incurred.      "Permitted Debt" means (a) the Obligations; (b) Debt payable to suppliers and other trade creditors in the ordinary course of business on ordinary and customary trade terms and which is not past due; (c) Debt of any Subsidiary to Borrower or another Subsidiary; (d) Capitalized Leases in effect on the date hereof; and (e) endorsement of checks for collection in the ordinary course of business.      "Permitted Investment" means: (i) Investments existing on the date disclosed on Exhibit 1.1 hereto; (ii) (A) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (B) commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard &

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Poor’s Corporation or Moody’s Investors Service, (C) certificates of deposit maturing no more than one year from the date of investment therein issued by Bank, and (D) Bank’s money market accounts; (iii) Investments accepted in connection with Permitted Transfers; (iv) Investments consisting of travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business; (v) Investments (including Debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business; and (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this part shall not apply to Investments of Borrower in any Subsidiary.      "Permitted Liens" means (a) Liens securing the Obligations; (b) Liens for taxes and other statutory Liens, landlord’s Liens and similar Liens arising out of operation of law so long as the obligations secured thereby are not past due or are being contested and the proceedings contesting such obligations have the effect of preventing the forfeiture or sale of the property subject to such Lien; (c) Liens for deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance, social security and similar laws; (d) attachment, judgment and other similar non-tax Liens arising in connection with court proceedings but only if and for so long as (i) the execution or enforcement of such Liens is and continues to be effectively stayed and bonded on appeal, (ii) the validity and/or amount of the claims secured thereby are being actively contested in good faith by appropriate legal proceedings and (iii) such Liens do not, in the aggregate, materially detract from the value of the assets of the Person whose assets are subject to such Lien or materially impair the use thereof in the operation of such Person’s business; (e) Liens securing Permitted Debt described in clause (d) of the definition of Permitted Debt; and (f) Liens in the nature of easements or other similar encumbrances or restrictions (not securing Debt) on the use of Borrower’s properties, so long as such Liens do not materially impair Borrower’s use of such property.      "Permitted Transfer" means the conveyance, sale, lease, transfer or disposition by Borrower or any Subsidiary of: (i) Inventory in the ordinary course of business; (ii) non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) surplus, worn-out or obsolete Equipment in the ordinary and normal replacement program for Equipment under which Bank’s Lien priority continues in the replacement Equipment, or (iv) its Wintron Technology unit.      "Person" means any natural person, corporation, unincorporated organization, trust, joint-stock company, joint venture, association, company, limited or general partnership, limited liability company, any government or any agency or political subdivision of any government, or any other entity or organization.      "Primary Revolving Loan" shall have the meaning set forth in Section 2.1.      "Proceeds" means "proceeds" as defined in the Code from time to time.

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     "Regulated Materials" means any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.      "Revolving Loan Period" means the period from and including the date of this Agreement to and including the Revolving Loan Termination Date.      "Revolving Loans" means collectively, the Primary Revolving Loan and the Secondary Revolving Loan and "Revolving Loan" means either of such loans as the context may require.      "Revolving Loan Termination Date" or "Termination Date" means (i) with respect to the Primary Revolving Loan only, June 30, 2010 and (ii) with respect to the Secondary Revolving Loan only, June 30, 2009, in each case as such date may be renewed from time to time as provided herein.      "Sarbanes-Oxley" means the Sarbanes-Oxley Act of 2002, as amended from time to time.      "Secondary Revolving Loan" shall have the meaning set forth in Section 2.1.      "Security Agreement" means this Agreement as it relates to a security interest in the Collateral and any other mortgage, security agreement or similar instrument now or hereafter executed by Borrower or other Person granting Bank a security interest in any Collateral to secure the Obligations (including any arising under any Interest Rate Agreement).      "Shareholder Equity" means the total of (i) share capital (excluding redeemable preferred shares and treasury stock), (ii) contributed surplus, and (iii) retained earnings; and for non-corporate organizations such as partnerships or limited liability companies, equity accounts similar to those described herein for corporations.      "Shareholder Subordination Agreement" means that certain Subordination Agreement, dated as of even date herewith, among Bank, Ronald D. Ordway and Borrower, as amended, modified, supplemented or restated from time to time.      "Solvent" means, as to any Person, that such Person has capital sufficient to carry on its business and transactions in which it is currently engaged and all business and transactions in which it is about to engage, is able to pay its debts as they mature, and has assets having a fair valuation greater than its liabilities, at fair valuation.      "Subordinated Debt" means Debt of Borrower that is subordinated to the Obligations pursuant to a written agreement in form and substance satisfactory to Bank in its sole discretion.      "Subordinated Shareholder Note" means that certain unsecured promissory note from Borrower in favor of Ronald D. Ordway in the principal amount of $6,000,000.

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     "Subsidiary" means any corporation, partnership or other entity in which Borrower, directly or indirectly, owns more than fifty percent (50%) of the stock, capital or income interests, or other beneficial interests, or which is effectively controlled by such Person.      "Term Loan" shall have the meaning set forth in Section 2.1.      "Term Loan Amount" means $1,700,000.      "Total Liabilities" means all liabilities of a Person, including Contingent Liabilities, exclusive of deferred tax liabilities, calculated on a consolidated basis and in accordance with GAAP.      "Unfunded Capital Expenditures" means those Capital Expenditures which are not financed by Funded Debt.           1.2. Financial Terms . All financial terms used herein shall have the meanings assigned to them under GAAP unless another meaning shall be specified      2.  The Loan Facility .           2.1. The Loans . Bank agrees to extend the following credit to Borrower, subject to the terms set forth herein:           (a) Bank agrees, on the terms and conditions set forth in this Agreement, to make revolving loan Advances (including issuing letters of credit) to or for the account of Borrower from time to time during the Revolving Loan Period in amounts such that the aggregate principal amount of such revolving loan Advances (including the face amount of any letters of credit) under this loan at any one time outstanding will not exceed the Maximum Primary Revolving Loan Amount (the "Primary Revolving Loan"). Within the foregoing limit, Borrower may borrow, prepay and reborrow such Advances at any time during the Revolving Loan Period.           (b) Bank agrees, on the terms and conditions set forth in this Agreement, to make additional revolving loan Advances to or for the account of Borrower under a second revolving loan facility from time to time during the Revolving Loan Period in amounts such that the aggregate principal amount of such revolving loan Advances at any one time outstanding will not exceed the Maximum Secondary Revolving Loan Amount (the "Secondary Revolving Loan"). Within the foregoing limit, Borrower may borrow, prepay and reborrow such Advances at any time during the Revolving Loan Period.           (c) Bank agrees, on the terms and conditions set forth in this Agreement, to make a term loan to Borrower in an amount equal to the Term Loan Amount in a single advance on the date hereof (the "Term Loan" and together with the Primary Revolving Loan and the Secondary Revolving Loan, the "Loans"). Once repaid, principal of the Term Loan cannot be reborrowed.

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          2.2. Promissory Notes .           (a) The Primary Revolving Loan shall be evidenced by a promissory note in the face amount of the Maximum Primary Revolving Loan Amount, dated of even date herewith, from Borrower to the order of Bank (as amended, modified, supplemented, restated or renewed from time to time, the "Primary Revolving Note").           (b) The Secondary Revolving Loan shall be evidenced by a promissory note in the face amount of the Maximum Secondary Revolving Loan Amount, dated of even date herewith, from Borrower to the order of Bank (as amended, modified, supplemented, restated or renewed from time to time, the "Secondary Revolving Note").           (c) The Term Loan shall be evidenced by a promissory note in the face amount of the Term Loan Amount, dated of even date herewith, from Borrower to the order of Bank (as amended, modified, supplemented, restated or renewed from time to time, the "Term Note" and together with the Revolving Note and the Revolving Note, the "Notes").           2.3. Repayment of Loans .           (a) The Primary Revolving Loan shall be repayable in accordance with the terms of the Primary Revolving Note and this Agreement.           (b) The Secondary Revolving Loan shall be repayable in accordance with the terms of the Secondary Revolving Note and this Agreement.           (c) The Term Loan shall be repayable in accordance with the terms of the Term Note and this Agreement.           (d) Borrower shall make each required payment of principal of and interest on the Loans and fees hereunder not later than 12:00 noon (local time Atlanta, Georgia) on the date when due, without set off, counterclaim or other deduction, in immediately available funds to Bank at its address provided to Borrower from time to time. Whenever any payment of principal of, or interest on, the Loans or of fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time.           2.4. Extension of Termination Date . Bank may, in its sole and absolute discretion, extend the Termination Date for successive one-year terms which shall terminate on the anniversary of the then applicable Termination Date by giving written notice thereof to Borrower at least one year prior to the then applicable Termination Date (an "Extension Notice"); provided, unless Bank gives such Extension Notice in writing to Borrower at least one year prior to the then applicable Termination Date, the Termination Date shall not be extended.           2.5. Overdue Amounts .

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          (a) Any payments not made as and when due shall bear interest from the date due until paid at the Default Rate, in Bank’s discretion.           (b) If any payments are not timely made, Borrower shall also pay to Bank a late charge equal to 5% of each payment past due for 15 or more days to Bank. The Borrower acknowledges that the late charge imposed herein represents a reasonable estimate of the expenses of Bank incurred because of such lateness. Acceptance by Bank of any late payment without an accompanying late charge shall not be deemed a waiver of Bank’s right to collect such late charge or to collect a late charge for any subsequent late payment received.           2.6. Calculation of Interest . All interest under the Notes or hereunder shall be calculated on the basis of the Actual/360 Computation, as defined in the Notes.           2.7. Letters of Credit .           (a) At its discretion Bank may from time to time issue, extend or renew letters of credit for the account of Borrower or its Subsidiaries; provided, the stated expiration date thereof shall not be later than the Revolving Loan Termination Date. The availability of Advances under the Primary Revolving Loan shall be reduced by outstanding obligations of Bank under any letters of credit. All payments made by Bank under any such letters of credit (whether or not Borrower is the account party) and all fees, commissions, discounts and other amounts owed or to be owed to Bank in connection therewith, shall be deemed to be Advances under the Primary Revolving Note, and shall be repaid on demand. Borrower shall complete and sign such applications and supplemental agreements and provide such other documentation as Bank may require. The form and substance of all letters of credit, including expiration dates, shall be subject to Bank’s approval. Bank may charge a fee or commission for each issuance, renewal or extension of a letter of credit, such fee to be the "Applicable Margin" (as defined in the Primary Revolving Note) as then in effect under the Primary Revolving Note of the stated amount of such letter of credit. Borrower unconditionally guarantees all obligations of any Subsidiary with respect to letters of credit issued by Bank for the account of such Subsidiary. Upon a Default, Borrower shall, on demand, deliver to Bank good funds equal to 100% of Bank’s maximum liability under all outstanding letters of credit, to be held as cash collateral for Borrower’s reimbursement obligations and other Obligations.           (b) Any letter of credit issued hereunder shall be governed by the International Standby Practices (1998) of the Institute of International Banking Law & Practice, International Chamber of Commerce Publication No. 590 ("ISP98"), as revised from time to time, except to the extent that the terms of such publication would limit or diminish rights granted to Bank hereunder or in any other Loan Document.           2.8. Statement of Account . If Bank provides Borrower with a statement of account on a periodic basis, such statement will be presumed complete and accurate and will be definitive and binding on Borrower, unless objected to with specificity by Borrower in writing within forty-five (45) days after receipt.

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          2.9. Fees . Borrower shall pay to Bank on or before the date hereof a commitment fee in the amount of $17,000, which fee has been fully earned by Bank and is non-refundable in its entirety.           2.10. Termination . Upon at least thirty (30) days prior written notice to Bank, Borrower may, at its option, terminate this Agreement and repay the Loans in full.           2.11. Increased Costs; Reduced Returns .           (a) If after the date hereof, a Change of Law or compliance by Bank with any request or directive (whether or not having the force of law) of any Authority either: (i) shall subject Bank to any tax, duty or other charge with respect to its Loans, its Notes or its obligation to make Advances, or shall change the basis of taxation of payments to it of the principal of or interest on its Loans or any other amounts due under this Agreement or the other Loan Documents in respect of its Loans or its obligation to make Advances (except for changes in the rate of tax on its overall net income imposed by the jurisdiction in which its principal executive office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit insurance or similar requirement (including, without limitation, any such requirements imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, it; or (iii) shall impose on it or the London Interbank Market any other similar condition affecting its Loans, its Notes or its obligation to make Advances; and the result of any of the foregoing is to increase the cost to it of making or maintaining any of its Loans, or to reduce the amount received or receivable by it under this Agreement, under its Notes or under the other Loan Documents with respect thereto, by an amount deemed by it to be material, then, within fifteen (15) days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such increased cost or reduction.           (b) If Bank shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof, or compliance by it with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on its capital as a consequence of its obligations with respect to such adoption, change or compliance (taking into consideration its policies with respect to capital adequacy), by an amount deemed by it to be material, then from time to time, within fifteen (15) days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction.           (c) Bank shall promptly notify Borrower of any event of which it has knowledge, occurring after the date hereof, which will entitle it to compensation or reimbursement pursuant to this Section. A certificate of Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, Bank may use any reasonable averaging and attribution methods. Notwithstanding anything to the contrary herein, Bank may not claim compensation or reimbursement for any period more than twelve (12)

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months prior to the date any such demand for payment is made under this Section 2.12, regardless of the cost to Bank.      3.  Conditions Precedent to Borrowing .           3.1. Conditions Precedent to Initial Advance . In addition to any other requirement set forth in this Agreement, Bank will not make the initial Advance under its Revolving Loan unless and until the following conditions shall have been satisfied:           (a) Loan Documents . Borrower and each other party to any Loan Document, as applicable, shall have executed and delivered this Agreement, the Notes, Negative Pledge Agreement, and other required Loan Documents, all in form and substance satisfactory to Bank.           (b) Supporting Documents . Borrower shall cause to be delivered to Bank the following documents:      (i) A copy of the governing instruments of Borrower and its Subsidiaries, and a good standing certificate of Borrower and Subsidiaries, certified by the appropriate official of its state of incorporation, if different;      (ii) Incumbency certificate and certified resolutions of the board of directors (or other appropriate Persons) of Borrower and each other Person executing any Loan Documents, signed by the Secretary or another authorized officer of Borrower or such other Person, authorizing the execution, delivery and performance of the Loan Documents;      (iii) The legal opinion of Borrower’s legal counsel addressed to Bank regarding such matters as Bank and its counsel may request;      (iv) Satisfactory evidence of payment of all fees due and reimbursement of all costs incurred by Bank, and evidence of payment to other parties of all fees or costs which Borrower is required under this Agreement to pay by the date of the initial Advance; and      (v) UCC searches and other Lien searches showing no existing security interests in or Liens on the Borrower’s or its Subsidiaries’ assets, other than Permitted Liens.           (c) Insurance . Borrower shall have delivered to Bank satisfactory evidence of insurance meeting the requirements of Section 5.3.           (d) Perfection of Liens . UCC-1 financing statements covering the Collateral shall duly have been recorded or filed in the manner and places required by law to establish, preserve, protect and perfect the interests and rights created or intended to be created by the Security Agreement; and all taxes, fees and other charges in connection with the execution,

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delivery and filing of the Security Agreement and the financing statements shall duly have been paid.           (e) Shareholder Subordinated Note . The Shareholder Subordinated Note shall be on terms and in form and substance satisfactory to Bank in its sole discretion, and Ronald D. Ordway and Borrower shall have executed and delivered the Shareholder Subordination Agreement.           (f) Additional Documents . Borrower shall have delivered to Bank all additional opinions, documents, certificates and other assurances that Bank or its counsel may require.           (g) Payment of Fees . Borrower shall have paid all fees, costs and expenses as required by the Loan Documents in connection with the Closing.           3.2. Conditions Precedent to Each Revolving Loan Advance . The following conditions, in addition to any other requirements set forth in this Agreement, shall have been met or performed by the Advance Date with respect to any request for an Advance and each request for an Advance (whether or not a written Advance request is required) shall be deemed to be a representation that all such conditions have been satisfied:           (a) Advance Request . Borrower shall have delivered to Bank a request for an Advance and such other information as may be reasonably required by Bank.           (b) No Default . No Default or Event of Default shall have occurred and be continuing or could occur upon the making of the Advance in question.           (c) Correctness of Representations . All representations and warranties made by Borrower herein or otherwise in writing in connection herewith shall be true and correct in all material respects with the same effect as though the representations and warranties had been made on and as of the proposed Advance Date.           (d) No Adverse Change . There shall have been no event or condition which could have a Material Adverse Effect since the date of the most recent financial statements of Borrower delivered prior to date hereof.           (e) Limitation on Advances . Borrower shall not draw on the Primary Revolving Loan unless the Secondary Revolving Loan is fully funded.           (f) Further Assurances . Borrower shall have delivered such further documentation or assurances as Bank may reasonably require.      4. Representations and Warranties . In order to induce Bank to enter into this Agreement and to make the Loans provided for herein, Borrower hereby represents and warrants (all of which shall survive the execution and delivery of the Loan Documents and all of which

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shall be deemed made as of the date hereof and as of the Advance Date), on behalf of it and each of its Subsidiaries, that:           4.1. Valid Existence and Power . It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and is duly qualified or licensed to transact business in all places where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect on it; the state of its organization, its organization number in such state, if any, and its tax identification number or other identifying number are as set forth in Exhibit 4.1; and it has the power to make and perform the Loan Documents executed by it, and all such instruments will constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms, subject only to bankruptcy and similar laws affecting creditors’ rights generally.           4.2. Authority . Its execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action, and do not and will not violate any provision of law or regulation, or any writ, order or decree of any court or Authority or any provision of its governing instruments, and do not and will not, with the passage of time or the giving of notice, result in a breach of, or constitute a default or require any consent under, or result in the creation of any Lien upon any of its property or assets pursuant to, any law, regulation, instrument or agreement to which it is a party or by which it or its properties may be subject, bound or affected.           4.3. Financial Condition . Other than as disclosed in financial statements delivered on or prior to the date hereof to Bank, it has no direct or contingent obligations or liabilities (including any guarantees or leases) or any unrealized or anticipated losses from any of its commitments which could reasonably be expected to have a Material Adverse Effect; all such financial statements have been prepared in accordance with GAAP and fairly present its financial condition as of the date thereof; and it is not aware of any adverse fact (other than facts which are generally available to the public and not particular to it, such as general economic or industry trends) concerning its financial or business condition or future prospects which could reasonably be expected to have a Material Adverse Effect and which has not been fully disclosed to Bank, including any adverse change in its operations or financial condition since the date of the most recent financial statements delivered to Bank; and it is Solvent, and after consummation of the transactions set forth in this Agreement and the other Loan Documents, it will be Solvent.           4.4. Litigation . There are no suits or proceedings pending, or to its knowledge threatened, before any court or by or before any governmental or regulatory authority, commission, bureau or agency or public regulatory body against or affecting it or its assets which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.           4.5. Agreements, Etc. It is not a party to any agreement or instrument or subject to any court order, governmental decree or any charter or other corporate restriction, adversely affecting its business, assets, operations or condition (financial or otherwise), nor is it in default in the performance, observance or fulfillment of any of the material obligations, covenants or conditions contained in any agreement or instrument to which it is a party, or any law, regulation, decree, order or the like.

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          4.6. Authorizations . All authorizations, consents, approvals and licenses required under applicable law or regulation for its ownership or operation of the property owned or operated by it or for the conduct of any business in which it is engaged have been duly issued and are in full force and effect, and it is not in default, nor has any event occurred which with the passage of time or the giving of notice, or both, would constitute a default, under any of the terms or provisions of any part thereof, or under any order, decree, ruling, regulation, closing agreement or other decision or instrument of any Authority having jurisdiction over it, which default could reasonably be expected to have a Material Adverse Effect. Except as noted herein, no approval, consent or authorization of, or filing or registration with, any Authority or agency is required with respect to the execution, delivery or performance of any Loan Document.           4.7. Title . It has good title to all of the assets shown in its financial statements free and clear of all Liens, except Permitted Liens, and it alone has full ownership rights in all Collateral.           4.8. Collateral . The security interests granted to Bank herein and pursuant to any other Security Agreement (a) constitute and, as to subsequently acquired property included in the Collateral covered by the Security Agreement, will constitute, security interests under the Code entitled to all of the rights, benefits and priorities provided by the Code and (b) are, and as to such subsequently acquired Collateral will be, fully perfected, superior and prior to the rights of all third persons, now existing or hereafter arising, subject only to Permitted Liens; and all of the Collateral is intended for use solely in its business.           4.9. Location . Its chief executive office where its business records are located, all of its other places of business and any other places where any Collateral is kept, are all located at the addresses indicated on Exhibit 4.9; the Collateral is located and shall at all times be kept and maintained only at its location or locations as described on Exhibit 4.9 herein; and no such Collateral is attached or affixed to any real property so as to be classified as a fixture unless Collateral Agent has otherwise agreed in writing.           4.10. Taxes . It has filed all federal and state income and other tax returns which are required to be filed, and have paid all taxes as shown on said returns and all taxes, including withholding, FICA and ad valorem taxes, shown on all assessments received by it to the extent that such taxes have become due; and it is not subject to any federal, state or local tax Liens nor has it received any notice of deficiency or other official notice to pay any taxes; and it has paid all sales and excise taxes payable by it.           4.11. Labor Law Matters . No goods or services have been or will be produced by it in violation of any applicable labor laws or regulations or any collective bargaining agreement or other labor agreements or in violation of any minimum wage, wage-and-hour or other similar laws or regulations.           4.12. Judgment Liens . Neither it nor any of its assets are subject to any unpaid judgments (whether or not stayed) or any judgment liens in any jurisdiction.

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          4.13. Subsidiaries . If it has any Subsidiaries, they are listed on Exhibit 4.13.           4.14. Environmental . Except for ordinary and customary amounts of solvents, cleaners and similar materials used in the ordinary course of its business and in strict compliance with all Environmental Laws, neither it, nor to its best knowledge any other previous owner or operator of any real property currently owned or operated by it, has generated, stored or disposed of any Regulated Material on any portion of such property, or transferred any Regulated Material from such property to any other location in violation of any applicable Environmental Laws; no Regulated Material has been generated, stored or disposed of on any portion of the real property currently owned or operated by it by any other Person, or is now located on such property; and it is in full compliance with all applicable Environmental Laws and it has not been notified of any action, suit, proceeding or investigation which calls into question compliance by it with any Environmental Laws or which seeks to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Regulated Material.           4.15. ERISA . It has no unfunded liabilities with respect to any pension, profit-sharing or other benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").           4.16. Investment Company Act . It is not an "investment company" as defined in the Investment Company Act of 1940, as amended.           4.17. Names . It currently conducts all business only under its legal name as set forth above in the introductory section of this Agreement; and during the preceding five (5) years it has not (i) been known as or used any other corporate, fictitious or trade name, (ii) been the surviving entity of a merger or consolidation or (iii) acquired all or substantially all of the assets of any Person.           4.18. Accounts . Each Account, instrument, Chattel Paper and other writing constituting any portion of the Collateral (a) is genuine and enforceable in accordance with its terms except for such limits thereon arising from bankruptcy and similar laws relating to creditors’ rights; (b) is not subject to any deduction or discount (other than as stated in the invoice), defense, set off, claim or counterclaim of a material nature against it except as to which it has notified Bank in writing; (c) is not subject to any other circumstances that would impair the validity, enforceability or amount of such Collateral except as to which it has notified Bank in writing; (d) arises from a bona fide sale of goods or delivery of services in the ordinary course and in accordance with the terms and conditions of any applicable purchase order, contract or agreement; (e) is free of all Liens other than Permitted Liens; and (f) is for a liquidated amount maturing as stated in the invoice therefor.           4.19. Intellectual Property . It possesses all licenses, certificates, franchises, permits and other authorizations from governmental and political subdivisions or regulatory authorities, and all patents, trademarks, service marks, trade names, copyrights, franchises, licenses and other rights that are necessary for ownership, maintenance and operation of any of

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their respective material Properties and assets, and it is not in violation of any thereof, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.           4.20. Insider . It is not, and no Person having "control" (as that term is defined in 12 U.S.C. §  375(b)(5) or in regulations promulgated pursuant thereto) of it is, an "executive officer," "director," or "principal shareholder" (as those terms are defined in 12 U.S.C. § 375(b) or in regulations promulgated pursuant thereto) of Bank, of a bank holding company of which Bank is a subsidiary, or of any subsidiary of a bank holding company of which Bank is a subsidiary.           4.21. Compliance with Covenants; No Default . It is, and upon funding of the Loans will be, in compliance with all of the covenants hereof; and no Default or Event of Default has occurred, and the execution, delivery and performance of the Loan Documents and the funding of the Loans will not cause a Default or Event of Default.           4.22. Full Disclosure . There is no material fact which is known or which should be known by it that it has not disclosed to Bank which could have a Material Adverse Effect; and no Loan Document, nor any agreement, document, certificate or statement delivered by it to Bank, contains any untrue statement of a material fact or omits to state any material fact which is known or which should be known by it necessary to keep the other statements from being misleading.      5.  Affirmative Covenants . Borrower covenants and agrees that from the date hereof and until payment in full of the Obligations and the formal termination of this Agreement, Borrower and each Subsidiary:           5.1. Use of Loan Proceeds . Shall use the proceeds of the Loans to refinance existing indebtedness of the Borrower, other than the Subordinated Shareholder Note. The proceeds from the Primary Revolving Loan and the Secondary Revolving Loan may also be use to finance working capital needs and general corporate purposes of the Borrower. In each case, Borrower shall furnish Bank all evidence that the Bank may reasonably require with respect to such use.           5.2. Maintenance of Business and Properties . Shall at all times maintain, preserve and protect its material property used or useful in the conduct of its business, and keep the same in good repair, working order and condition, and from time to time make, or cause to be made, all material needful and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be conducted properly and in accordance with standards generally accepted in businesses of a similar type and size at all times, and maintain and keep in full force and effect all licenses and permits necessary to the proper conduct of its business.           5.3. Insurance . Shall maintain such liability insurance, workers’ compensation insurance, business interruption insurance and casualty insurance as may be required by law, customary and usual for prudent businesses in its industry or as may be reasonably required by

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Bank and shall insure and keep insured all of its material properties in good and responsible insurance companies satisfactory to Bank.           5.4. Notice of Default . Shall provide to Bank immediate notice of (a) the occurrence of a Default or Event of Default and what action (if any) it is taking to correct the same, (b) any material litigation or material changes in existing litigation or any judgment against it or its assets, (c) any damage or loss to property that could reasonably be expected to have a Material Adverse Effect, (d) any notice from taxing authorities as to claimed deficiencies or any tax lien or any notice relating to alleged ERISA violations, (e) any Reportable Event, as defined in ERISA, (f) any rejection, return, offset, dispute, loss or other circumstance that could reasonably be expected to have a Material Adverse Effect, (g) the cancellation or termination of, or any default under, any agreement to which it is a party or by which any of its properties are bound, which cancellation or termination could reasonably be expected to have a Material Adverse Effect, or any acceleration of the maturity of any of its Debt, and (h) any loss or threatened loss of licenses or permits, which loss could reasonably be expected to have a Material Adverse Effect.           5.5. Inspections . Shall permit inspections of its records, at such times and in such manner as may be reasonably required by Bank and shall further permit such inspections, reviews and examinations of its other records and its properties (with such reasonable frequency and at such reasonable times as Bank may desire) by Bank as Bank may deem necessary or desirable from time to time. The cost of any such examinations, reviews, verifications and inspections shall be borne by Borrower.           5.6. Financial Information . Shall maintain books and records in accordance with GAAP and shall furnish to Bank the following periodic financial information:           (a) Quarterly Interim Statements . Within forty five (45) days after the end of each fiscal quarter, Borrower’s consolidated unaudited balance sheet at the end of that period and its consolidated income statement and statement of cash flows for the portion of the fiscal year ending with such period, together with all supporting schedules, setting forth in comparative form the figures for the same period of the preceding fiscal year, and certified by its chief financial officer as true and correct and fairly representing its and its Subsidiaries financial condition and that such statements are prepared in accordance with GAAP, except without footnotes and subject to normal year-end audit adjustments;           (b) Annual Statement . Within one hundred fifty (150) days after the end of each fiscal year, Borrower’s audited financial statements containing a consolidated balance sheet at the end of that period and a consolidated income statement and statement of cash flows for that period, setting forth in comparative form the figures for the preceding fiscal year, together with all supporting schedules and footnotes, and containing an unqualified audit opinion of independent certified public accountants reasonably acceptable to Bank that the financial statements were prepared in accordance with GAAP;           (c) No Default Certificates . Within forty five (45) days after the end of each fiscal quarter, a certificate of Borrower’s president or chief financial officer, in the form attached

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hereto as Exhibit 5.6 (a "Compliance Certificate"), that no Default or Event of Default then exists or if a Default or Event of Default exists, the nature and duration thereof and its intention with respect thereto, and in addition, shall cause its independent auditors (if applicable) to submit to Bank, together with its audit report, a statement that, in the course of such audit, it discovered no circumstances which it believes would result in a Default or Event of Default or if it discovered any such circumstances, the nature and duration thereof;           (d) Budget . Annually, within thirty (30) days following the close of each fiscal year, Borrower’s internally prepared budget for the following year, in form and substance satisfactory to Bank;           (e) Other Information . Such other information reasonably requested by Bank from time to time concerning its business, properties or financial condition.           5.7. Maintenance of Existence and Rights . Shall preserve and maintain its corporate existence, authorities to transact business, rights and franchises, trade names, patents, trademarks and permits necessary to the conduct of its business.           5.8. Payment of Taxes, Etc. Shall pay before delinquent all of its Debts and taxes, except that Bank shall not unreasonably withhold its consent to nonpayment of taxes being actively contested in accordance with law (provided that Bank may require bonding or other assurances).           5.9. Subordination . Shall cause all Debt and other obligations now or hereafter owed to any shareholder or Affiliate to be subordinated in right of payment and security to the Obligations in accordance with subordination agreements satisfactory to Bank.           5.10. Compliance; Hazardous Materials . Shall strictly comply with all laws, regulations, ordinances and other legal requirements, specifically including, without limitation, ERISA, all securities laws, Sarbanes-Oxley (if applicable) and all laws relating to hazardous materials and the environment; and unless approved in writing by Bank, it shall not engage in the storage, manufacture, disposition, processing, handling, use or transportation of any hazardous or toxic materials, whether or not in compliance with applicable laws and regulations.           5.11. Further Assurances . Shall take such further action and provide to Bank such further assurances as may be reasonably requested to ensure compliance with the intent of this Agreement and the other Loan Documents.           5.12. Covenants Regarding Collateral . Shall, regarding the Collateral:           (a) use the Collateral only in the ordinary course of its business and will not permit the Collateral to be used in violation of any applicable law or policy of insurance;           (b) as agent for Bank, will defend the Collateral against all claims and demands of all Persons, except for Permitted Liens;

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