First Amendment to Loan and Security Agreement between the Company and FCC, LLC d/b/a/ First Capital, dated July 31, 2008

1.  

All capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings given to such terms in the Agreement.

2.  

The Agreement is amended by deleting Item 1(a)(ii)(B) of the Schedule and substituting the following in lieu thereof:

 

(2)

50% of the dollar value (determined at the lower of cost or market value) of Eligible Inventory.

 

provided, however, that the aggregate principal amount available to be borrowed against Eligible Inventory under this clause (B) (i) shall not exceed 85% of the Obligations from July 1, 2008 through and including September 15, 2008; (ii) shall not exceed 60% of the Obligations from September 16, 2008 through and including September 30, 2008; and (iii) shall not exceed 40% of the Obligations beginning October 1, 2008 and at all times thereafter, except that during the months of July, August and September of each calendar year (beginning with 2009 calendar year) the aggregate principal amount available to be borrowed against Eligible Inventory under this clause (B) (i) shall not exceed 60% of the Obligations;

3.  

The Agreement is amended by deleting Item 8 of the Schedule and substituting the following in lieu thereof:

09/30/08

(measured quarterly)

5.75x

12/31/08

(measured quarterly)

3.00x

03/31/09 and

thereafter

(measured quarterly on 3/31/09 and monthly thereafter)

 

2.25x

4.  

The Agreement is amended by deleting Item 21(b) of the Schedule and substituting the following in lieu thereof:

Borrower shall maintain a Tangible Net Worth, plus the outstanding principal balance of Subordinated Debt, as follows:

06/30/08

(measured quarterly)

$1,750,000

09/30/08

(measured quarterly)

$2,500,000

12/31/08

(measured quarterly)

$5,000,000

3/31/09 and

thereafter

(measured quarterly on 3/31/09 and monthly therafter)

 

$5,500,000

5.  

The Agreement is amended by deleting Item 21(c) of the Schedule and substituting the following in lieu thereof:

06/30/08

(measured quarterly)

3.75x

09/30/08

(measured quarterly)

7.00x

12/31/08

(measured quarterly)

4.00x

03/31/09 and

thereafter

(measured quarterly on 3/31/09 and monthly thereafter)

 

3.25x

6.  

To induce Lender to enter into this Amendment, Borrower hereby represents and warrants that, as of the date hereof, and after giving effect to the terms hereof, there exists no Default under the Agreement or any of the other Loan Documents.

7.  

In consideration of the modification of the Agreement, and to compensate Lender for underwriting the credit accommodations described in this Amendment, Borrower agrees to pay Lender a fee in the amount of $25,000 on the date hereof.  In the event that the amount borrowed against Eligible Inventory under Item 1(a)(ii)(B) of the Schedule exceeds 80% of the Obligations at any time during the period of July 1, 2008 through and including September 15, 2008, then Borrower agrees to pay Lender a one-time fee in the amount of $10,000 within five Business Days of Lender’s demand.  Borrower hereby authorizes Lender to charge such foregoing amounts to the Borrower as revolving loans under the Agreement.  Such fees are fully earned on the date hereof and are not subject to refund or rebate.  Such fees are fees for services and are not interest or a charge for the use of money.

8.  

Borrower hereby restates, ratifies and reaffirms each and every term, condition representation and warranty heretofore made by it under or in connection with the execution and delivery of the Agreement, as amended hereby, and the other Loan Documents, as fully as though such representations and warranties had been made on the date hereof and with specific reference to this Amendment and the Loan Documents.

9.  

Except as set forth herein, the Agreement shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligation of Borrower to Lender.

10.  

To induce Lender to enter into this Amendment, Borrower hereby releases, acquits and forever discharges Lender, and Lender’s officers, directors, agents, employees, successors and assigns, from all liabilities, claims, demands, actions or causes of action of any kind (if any there be), whether absolute or contingent, due or to become due, disputed or undisputed, liquidated or unliquidated, at law or in equity, known or unknown, that Borrower now has or ever has had against Lender, whether arising under or in connection with the Agreement or otherwise

11.  

This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.

12.  

This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto.

13.  

This Amendment shall be governed by, and construed in accordance with, the laws of the State of Oklahoma, other than its laws respecting choice of law.