NU HORIZONS ELECTRONICS CORP.
(the “Borrower”)
AND
CITIBANK, N.A.
(“Administrative Agent” and as a “Lender”)

BANK OF AMERICA, N.A.
(“Documentation Agent” and as a “Lender”)

JPMORGAN CHASE BANK, N.A.
(“Syndication Agent” and as a “Lender”)

ISRAEL DISCOUNT BANK OF NEW YORK
(“Syndication Agent” and as a “Lender”)

AND
THE LENDERS PARTY HERETO
(each a “Lender”)

AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF JANUARY 31, 2007

 
 
 

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TABLE OF CONTENTS

 
 
Page
     
SECTION 1. DEFINITIONS
2
1.1
Defined Terms
2
1.2
Accounting Terms
14
 
   
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
14
2.1
Revolving Credit Commitments
14
2.2
Revolving Credit Loans
14
2.3
Revolving Credit Notes
15
2.4
Interest
15
2.5
Procedure for Revolving Credit Borrowing
15
2.6
Conversion and Renewals
16
2.7
Suspension of Eurodollar Loans
16
2.8
Commitment Fees; Other Fees
17
2.9
Additional Compensation in Certain Circumstances
18
2.10
Termination or Reduction of Commitment
20
2.11
Prepayment
20
2.12
Payments
20
2.13
Pro Rata Treatment
21
2.14
Sharing of Setoffs
22
2.15
Use of Proceeds
23
2.16
Issuance of Letters of Credit
23
2.17
Actions of Issuing Lender
24
2.18
Indemnity as to Letters of Credit
24
2.19
Payment in Respect of Letters of Credit; Reimbursement
24
 
 
 
SECTION 3. REPRESENTATIVES AND WARRANTIES
27
3.1
Financial Condition
27
3.2
No Change
27
3.3
Corporate Existence; Compliance with Law; Subsidiaries
27
3.4
Corporate Power; Authorization; Enforceable Obligations
27
3.5
Legal Bar
28
3.6
No Material Litigation
28
3.7
No Default
28
3.8
No Burdensome Restrictions
28
3.9
Federal Regulations
28
3.10
Environmental Regulation
28
3.11
Title to Properties
29
3.12
Taxes
29
3.13
ERISA
29
3.14
Operation of Business
30
3.15
Security Agreements and Pledge Agreements
30

 
 
 

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SECTION 4. CONDITIONS PRECEDENT
30
4.1
Conditions to Initial Revolving Credit Loan
30
4.2
Conditions to All Revolving Credit Loans, Etc.
32
 
   
SECTION 5. AFFIRMATIVE COVENANTS
33
5.1
Information
33
5.2
Corporate Existence; Continuance of Business
35
5.3
Payment of Obligations
36
5.4
Insurance
36
5.5
Payment of Indebtedness and Performance of Obligations
36
5.6
Condition of Property
36
5.7
Observance of Legal Requirements
36
5.8
Books and Records
36
5.9
Inspection
36
5.10
Compliance with Environmental Laws; Indemnity
37
5.11
New Subsidiaries
37
5.12
Collection of Accounts
38
5.13
Cash Concentration Accounts
39
   
 
SECTION 6. FINANCIAL COVENANTS
39
6.1
Capital Base
39
6.2
Domestic Capital Base
39
6.3
Minimum Excess Availability
39
6.4
Maximum Net Loss
39
6.5
Capital Expenditures
40
 
 
 
SECTION 7. NEGATIVE COVENANTS
40
7.1
Indebtedness for Borrowed Money
40
7.2
Liens
40
7.3
Loans and Investments
41
7.4
Fundamental Changes
41
7.5
Contingent Liabilities
41
7.6
Sales of Receivables; Sale-Leasebacks
42
7.7
Lease Payments
42
7.8
Dividends
42
7.9
Supply and Purchase Contracts
42
7.10
Nature of Business
42
7.11
Stock of Subsidiaries
42
7.12
Transactions with Affiliates
43
7.13
ERISA
43
7.14
Change of Management
43
     
SECTION 8. EVENTS OF DEFAULT
43

 
 
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SECTION 9. ADMINISTRATAIVE AGENT
46
   
 
SECTION 10. MISCELLANEOUS
49
10.1
Notices
49
10.2
Survival of Agreement
49
10.3
Successors and Assigns; Participations
50
10.4
Expenses; Indemnity
52
10.5
Applicable Law
53
10.6
Right of Setoff
53
10.7
Payments on Business Days
53
10.8
Waivers; Amendments
54
10.9
Severability
54
10.10
Entire Agreement; Waiver of Jury Trial, Etc.
55
10.11
Confidentiality
55
10.12
Submission to Jurisdiction
56
10.13
Interest Rate Limitation
56
10.14
Further Assurances
56
10.15
Counterparts
57
10.16
Provisions Regarding Syndication and Documentation Agents
57
10.17
USA PATRIOT ACT
57
10.18
Headings
57

   
SCHEDULE I
Schedule I/Page 1
   
EXHIBIT A - Revolving Credit Note
Exhibit A/Page 1
   
EXHIBIT B - Borrowing Base Certificate
Exhibit B/Page 1
   
EXHIBIT C - Form of Assignment and Acceptance
Exhibit C/Page 1
   
EXHIBIT D - Control Agreement (Bank Accounts)
Exhibit D/Page 1

 
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AMENDED AND RESTATED CREDIT AGREEMENT (the “Agreement”) dated as of January 31,
2007, by and among NU HORIZONS ELECTRONICS CORP., a Delaware corporation, having
its principal executive office at 70 Maxess Road, Melville, New York (the
“Borrower”), the lenders which from time to time are parties to this Agreement
(including, without duplication, the Issuing Lender (as defined herein), if the
context so requires, individually, a “Lender” and, collectively, the “Lenders”),
BANK OF AMERICA, N.A., a national banking association, as Documentation Agent
for the Lenders, JPMORGAN CHASE BANK, N.A., a national banking association, as
Syndication Agent for the Lenders, ISRAEL DISCOUNT BANK OF NEW YORK, a New York
bank, as Syndication Agent for the Lenders and CITIBANK, N.A., a national
banking association, as administrative agent for the Lenders (the
“Administrative Agent”).
 
W I T N E S S E T H:

WHEREAS, the Borrower and certain lenders entered into a credit agreement dated
as of September 30, 2004, as amended by a first amendment dated as of February
28, 2005, a second amendment dated as of November 21, 2005 and a third amendment
dated as of August 29, 2006 (collectively, the “Prior Agreement”);

WHEREAS, the Borrower has requested that the Prior Lenders under the Prior
Agreement amend and restate the Prior Agreement to provide for, among other
things, an increase in the amount of the credit facilities provided under the
Prior Agreement, an extension of the maturity thereof and other revisions to the
credits and loans available and that the Lenders party hereto join in such
amendment and restatement;

WHEREAS, the following principal amounts are currently outstanding under the
notes executed pursuant to the Prior Agreement and owing to, respectively,
Citibank, N.A., JPMorgan Chase Bank, N.A., Israel Discount Bank of New York,
Bank of America, N.A., Sovereign Bank, HSBC Bank USA, National Association,
North Fork Bank and Bank Leumi USA (collectively, the “Lenders”): $9,639,000.00,
$6,885,000.00, $6,426,000.00, $6,885,000.00, $3,442,500.00, $4,590,000.00,
$4,590,000.00 and $3,442,500.00 (collectively, the “Prior Loans”);

WHEREAS, the Borrower represents and warrants that it has complied or has caused
the compliance with the provisions of Sections 5.11 and 5.13 hereof;

WHEREAS, the Prior Loans shall continue as Revolving Credit Loans under this
Agreement;

WHEREAS, the Security Agreements and the Guarantees shall remain in full force
and shall be reaffirmed by documentation of even date herewith acceptable to the
Agent;

WHEREAS, the Administrative Agent and the Lenders hereto are willing to extend
such credits and make such loans by amending and restating the Prior Agreement
upon the terms and conditions hereinafter set forth;

 
 

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NOW, THEREFORE, in consideration of the premises and the agreements hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree to amend and restate the Prior Agreement and covenant and agree as
follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms. As used herein, the following terms shall have the following
meanings:

“Accounts” shall mean those accounts arising out of the sale or lease of goods
or the rendition of services by the Borrower and its Domestic Subsidiaries.

“Account Debtor” shall mean the person who is obligated on or under an Account.

“Aggregate Outstandings” shall mean, on the date of determination, the sum of
(a) the Letter of Credit Exposure, and (b) the aggregate outstanding principal
amount of all Revolving Credit Loans at such time.

“Blocked Account” shall have the meaning ascribed thereto in the Blocked Account
Agreement.

“Blocked Account Agreement” shall mean, collectively, the blocked account
agreement by and between the Borrower, NIC Components Corp., Nu Horizons
International Corp., Titan Supply Chain Services Corp. and Razor Electronics,
Inc., as applicable, and the Administrative Agent in the form of Exhibit E
hereto.

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States of America.

“Borrowing Base” shall mean the lesser of (i) the amount of the Total Revolving
Credit Commitment or (ii) 80% of the Eligible Accounts plus the lesser of (a)
40% of the Eligible Inventory as reported on the most recent Borrowing Base
Certificate delivered pursuant to Section 5.1 (12) hereof or (b) $60,000,000;
provided, however, if such certificate has not been provided the Borrowing Base
shall be deemed to be zero.

“Borrowing Base Certificate” shall mean a certificate of the Borrower in the
form of Exhibit B hereto setting forth the Borrower’s calculation of the
Borrowing Base.

“Business Day” shall mean (a) a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close and (b) relative to the date of (i) continuing a Eurodollar Loan
as, or converting a Prime Rate Loan to, a Eurodollar Loan, (ii) making any
payment or prepayment of principal of or payment of interest on a Eurodollar
Loan, or (iii) the Borrower giving any notice (or the number of Business Days to
elapse prior to the effectiveness thereof) in connection with any matter
referred to in (b)(i) or (b)(ii), any day on which dealings in U.S. dollars are
carried on in the London interbank eurodollar market.

 
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“Capital Assets” shall mean assets that in accordance with GAAP are required or
permitted to be depreciated or amortized on a balance sheet.

“Capital Leases” shall mean capital leases, conditional sales contracts and
other title retention agreements, relating to the purchase or acquisition of
Capital Assets.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (or any successor statute) and the rules and regulations
thereunder, all as from time to time in effect.

“CERCLIS” shall mean the Comprehensive Environmental Response Compensation
Liability Information System List.

“Commitment Period” shall mean the period from and including the date hereof to,
but not including, the Termination Date or such earlier date as the Revolving
Credit Commitments shall terminate as provided herein.

“Consolidated Net Income” shall mean, for the applicable period, the net income
or loss of the Borrower and its Subsidiaries from continuing operations
determined on a consolidated basis for such period.

“Contractual Obligations” shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.

“Control Agreement” shall mean, collectively, the agreement(s) regarding the
concentration deposit accounts of the Borrower, NIC Components Corp., Nu
Horizons International Corp., Titan Supply Chain Services Corp. and Razor
Electronics, Inc. (and each Domestic Subsidiary of the Borrower which, from time
to time hereafter, is required to execute a Control Agreement in accordance with
Section 5.13 hereof, collectively, the “Control Agreement Guarantors”) by and
among the Borrower, or the Control Agreement Guarantors, as applicable, Mellon
Bank, N.A., or any other depository acceptable to the Administrative Agent, and
the Administrative Agent in the form of Exhibit D hereto.

“Default” shall mean any of the events specified in Section 8 hereof, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied or given, as the case may be.

“Dollars” and “$” shall mean lawful currency of the United States of America.

“Domestic Subsidiary” shall mean, as to any Person, any Subsidiary of such
Person organized under the laws of the United States of America or any state
thereof.

 
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“EBIT” shall mean, for the Borrower and its Subsidiaries on a consolidated basis
for the applicable period, Consolidated Net Income (Net Loss) less all interest
income plus Interest Expense and all income taxes to any government or
governmental instrumentality expensed on such Person’s books (whether paid or
accrued) determined in accordance with GAAP.

“EBITDA” shall mean, for the Borrower and its Subsidiaries for the applicable
period, EBIT plus the sum of depreciation expense and amortization expense, all
as determined in accordance with GAAP.

“Eligible Accounts” shall mean those Accounts of the Borrower and its Domestic
Subsidiaries with respect to which, when scheduled on a Borrowing Base
Certificate and at all times thereafter, the Administrative Agent on behalf of
the Lenders has a valid and perfected first priority security interest, there is
no violation of the negative, affirmative or collateral covenants or other
provisions of this Agreement or any other Loan Document and which the
Administrative Agent in its reasonable credit judgment, deems to be Eligible
Accounts based on such credit and collateral considerations as the
Administrative Agent may deem appropriate. In general, an Account of the
Borrower or a Domestic Subsidiary shall be an Eligible Account if:

(a) such Accounts (i) arise from the actual and bona fide sale and delivery of
goods or rendition of services in the ordinary course of business which
transactions are completed in accordance with the terms and provisions contained
in any documents related thereto, (ii) are not evidenced by or payable pursuant
to invoices or similar documentation issued by, or calling for payment to, any
other Person and (iii) do not arise from or in connection with any sales of
goods or rendition of services to an Affiliate or any Subsidiary;

(b) such Accounts are not unpaid more than ninety (90) days after date of
original invoice;

(c) such Accounts do not have or include any deductions, contras, unapplied
cash, unapplied credits or credit balances existing or asserted with respect
thereto;

(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale
and return, sale on approval, or other terms under which payment by the Account
Debtor may be conditional or contingent;

(e) the chief executive office of the Account Debtor with respect to such
Accounts is located in the United States of America, or, subject to the prior
written consent of the Required Lenders and any conditions so imposed by the
Required Lenders, Canada, or, at the Administrative Agent’s option, if either:
(i) the Account Debtor has delivered an irrevocable letter of credit issued or
confirmed by a bank satisfactory to the Administrative Agent, sufficient to
cover such Account, in form and substance satisfactory to the Administrative
Agent and, if required by the Administrative Agent, the original of such letter
of credit has been delivered to the Administrative Agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to the
Administrative Agent, or (ii) such Account is subject to credit insurance
payable to the Administrative Agent issued by an insurer and on terms and in an
amount acceptable to the Administrative Agent, or (iii) such Account is
otherwise acceptable in all respects to the Required Lenders (subject to such
lending formula with respect thereto as the Required Lenders may determine);

 
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(f) such Accounts do not consist of progress billings, bill and hold invoices or
retainage invoices, except as to bill and hold invoices, if the Administrative
Agent shall have received an agreement in writing from the Account Debtor, in
form and substance satisfactory to the Administrative Agent, confirming the
unconditional obligation of the Account Debtor to take the goods related thereto
and pay such invoice;

(g) the Account Debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;

(h) there are no facts, events or occurrences which would impair the validity,
enforceability or collectability of such Accounts or reduce the amount payable
or delay payment thereunder;

(i) such Accounts are subject to the first priority, valid and perfected
security interest of the Administrative Agent and any goods giving rise thereto
are not, and were not at the time of the sale thereof, subject to any liens
except those permitted in this Agreement;

(j) neither the Account Debtor nor any officer or other person who, in each
case, performs any management functions for or with respect to the Account
Debtor with respect to such Accounts is an officer or other person who, in each
case, performs any management functions for or with respect to, is an agent of,
or is affiliated with, the Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;

(k) the Account Debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, if the Account Debtor is
the United States of America, any State, political subdivision, department,
agency or instrumentality thereof, upon the Administrative Agent’s request, the
Federal Assignment of Claims Act of 1940, as amended or any similar State or
local law, if applicable, has been complied with in a manner satisfactory to the
Administrative Agent;

(l) there are no proceedings or actions which are threatened or pending against
the Account Debtors with respect to such Accounts which might result in any
material adverse change, in the credit judgment of the Administrative Agent, in
any such Account Debtor’s financial condition;

(m) the Accounts do not arise out of or in connection with any contract for
services or involving projects entered into by the Borrower or a Domestic
Subsidiary that require a bond, guaranty or other similar surety as credit
support;

 
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(n) such Accounts are not owed by an Account Debtor who has Accounts unpaid more
than ninety (90) days after the date of the original invoice and which
constitute more than fifty (50%) percent of the total Accounts of such Account
Debtor;

(o) such Accounts are not owed by an Account Debtor that is a Subsidiary of,
Affiliate of, or has common officers or directors with the Borrower or its
Subsidiaries;

(p) that portion of any Accounts not representing late fees, service charges or
interest but only to the extent of such portion;

(q) Accounts owed by any Account Debtor which is not insolvent or is not the
subject of an insolvency proceeding; and

(r) such Accounts are owed by Account Debtors deemed creditworthy at all times
by the Administrative Agent, as determined by the Administrative Agent.

General criteria for Eligible Accounts may be established and revised from time
to time by Required Lenders in good faith on the basis of Field Audits and
Required Lenders reserve the right, in their reasonable discretion, to create,
from time to time, additional categories of ineligible Accounts. Any Accounts
which are not Eligible Accounts shall nevertheless be part of the Collateral.

“Eligible Inventory” shall mean all unencumbered inventory of raw material, work
in process and finished goods of the Borrower and its Domestic Subsidiaries
exclusive of End of Life Inventory, as herein defined, from time to time on
hand, valued at the lowest of (a) cost, (b) market value, or (c) the valuation
consistent with that employed in the preparation of the financial statements of
the Borrower referred to in Section 5.1 hereof. ‘End of Life Inventory’ shall
mean inventory that the vendor of which has discontinued or declared obsolete
and whose sale is final and without return privileges.

“Environmental Laws” shall mean all applicable federal, state or local statutes,
laws, ordinances, codes, rules, regulations and guidelines (including consent
decrees and administrative orders) relating to public health and safety and
protection of the environment.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and all
rules and regulations promulgated pursuant thereto, as the same may from time to
time be supplemented or amended.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
which together with the Borrower or its Subsidiaries would be treated as a
single employer under Section 4001 of ERISA.

“Eurocurrency Reserve Requirement” shall mean for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto), as from time
to time hereafter in effect, dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of such Board) maintained by a member bank of such system.

 
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“Eurodollar Loan” shall mean any Revolving Credit Loan when and to the extent
that the interest rate therefor is determined by reference to the Reserve
Adjusted LIBOR.

“Event of Default” shall mean any of the events specified in Section 8 hereof,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.

“Field Audit” shall have the meaning assigned thereto in Section 5.1 (11)
hereof.

“First-Tier Subsidiary” shall mean any Subsidiary of any Person which Subsidiary
is directly owned by such Person.

“Foreign Acquisition” shall mean the acquisition by the Borrower or any
Subsidiary of the Borrower of more than 50% of the capital stock, membership
interests, partnership interests or other similar ownership interests of a
Person not organized under the laws of the United States or any state thereof or
the purchase of all or substantially all of the assets owned by such Person.

“Foreign Subsidiary” shall mean, as to any Person, any Subsidiary of such Person
which is not organized under the laws of the United States of America or any
state thereof.

“Funded Debt” shall mean, on a consolidated basis with respect to the Borrower
and its Subsidiaries, without duplication, (i) indebtedness for borrowed money,
(ii) obligations to pay the deferred purchase price of property or services
(other than trade payables arising in the ordinary course of business which are
not overdue), (iii) obligations as lessee under Capital Leases, (iv) obligations
evidenced by bonds, debentures, notes or equivalent instruments and (v)
reimbursement obligations (contingent or otherwise) in respect of drawings made
under letters of credit and acceptance drafts.

“GAAP” shall mean generally accepted accounting principles applied in a manner
consistent with that employed in the preparation of the Borrower’s certified
annual consolidated financial statements for the fiscal year ended February 28,
2006.

“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.

“Guarantee” or “Guarantees” shall mean, collectively, the Guarantee and
Reaffirmation and Acknowledgment of Guaranty in the forms prepared by counsel to
the Administrative Agent to be executed and delivered by each Guarantor on the
date of this Agreement and thereafter by any Domestic Subsidiaries of the
Borrower required to deliver a Guarantee pursuant to Section 5.11 hereof, as the
same may hereafter be amended, restated, supplemented or otherwise modified from
time to time.

 
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“Guarantors” shall mean, collectively, NIC Components Corp. a New York
corporation, Nu Horizons International Corp. a New York corporation, NUV Inc.
(formerly known as Nu Visions Manufacturing, Inc.), a Massachusetts corporation,
Titan Supply Chain Services Corp. (formerly known as Titan Logistics Corp.), a
New York corporation, Razor Electronics, Inc. (formerly known as Hunter
Electronics, Inc.), a New York corporation, NuXChange B2B Services, Inc., a
Delaware corporation and each other Domestic Subsidiary of the Borrower which,
from time to time hereafter, is required to execute a Guarantee in accordance
with Section 5.11 hereof.

“Hazardous Materials” shall mean: (a) any “hazardous substance” as defined by
CERCLA; (b) any “hazardous waste” as defined by the Resource Conservation and
Recovery Act; (c) any petroleum product; or (d) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material or substance within the meaning
of any other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders) relating to or
imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, all as heretofore amended or hereafter
amended.

“Indebtedness” shall mean all obligations that in accordance with GAAP should be
classified as liabilities upon a balance sheet or for which references should be
made by footnotes thereto.

“Interest Expense” shall mean, for the applicable period, all interest expense
exclusive of all interest income determined in accordance with GAAP.

“Interest Period” with respect to any Eurodollar Loan shall mean:

(a) initially, the period commencing on the date such Eurodollar Loan is made
and ending one, two, three or six months thereafter; and

(b) thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two, three or
six months thereafter, as selected by the Borrower by irrevocable written notice
to the Administrative Agent not less than three (3) Business Days prior to the
last day of the then current Interest Period with respect to such Eurodollar
Loan; provided, however, that all of the foregoing provisions relating to
Interest Periods are subject to the following:

(i) if any Interest Period pertaining to a Eurodollar Loan would otherwise end
on a day which is not a Business Day, the Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Business Day;

 
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(ii) if the Borrower shall fail to give notice as provided in clause (b) above,
the Borrower shall be deemed to have requested conversion of the affected
Eurodollar Loan to a Prime Rate Loan on the last day of the then current
Interest Period with respect thereto;

(iii) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and

(iv) no Interest Period may be selected which ends later than the Termination
Date.

“Involuntary Rate” shall mean at any time a rate per annum equal to two (2%)
percent in excess of the otherwise applicable rate or, if there is no rate in
effect, two (2%) percent in excess of the Prime Rate in effect from time to
time.

“Issuing Lender” shall mean the Lender which is the Administrative Agent in its
capacity as the issuer of Letters of Credit hereunder.

“Letter of Credit” or “Letters of Credit” shall mean letters of credit issued by
the Issuing Lender pursuant to Section 2.16 hereof for the account of the
Borrower.

“Letter of Credit Exposure” shall mean at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit and (b) the aggregate amount
of all drawings under Letters of Credit for which the Administrative Agent or
the Lenders shall not have been reimbursed as provided in Section 2.19 hereof.

“Lien” shall mean any mortgage, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction pursuant to any of the types of security interests referred
to herein).

“Loan Documents” shall mean, collectively, this Agreement, the Revolving Credit
Notes, documents executed in connection with a Letter of Credit, the Security
Agreements, the Guarantee, the Pledge Agreement, the Control Agreement, the
Blocked Account Agreement, reaffirmations of any of the foregoing agreements and
any other documents executed by the Borrower or the Guarantors in connection
herewith including any and all amendments to such documents.

“Minority Interest Purchase” shall have the meaning set forth in Section 7.3
hereof.

“Multiemployer Plan” shall mean any Plan described in Section 4001(a)(3) of
ERISA.

 
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“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.

“Permitted Acquisition” shall mean an acquisition by the Borrower or any
Subsidiary of the Borrower by merger, by consolidation or by purchase of a
voting majority of the stock of another Person or the purchase of all or
substantially all of the assets of another Person (or of a division or other
operating component of another Person) (an “Acquisition”) if all of the
following conditions are met:

(i) The total consideration, including the cash purchase price for such
Acquisition and any Funded Debt incurred or assumed in connection therewith,
does not exceed $15,000,000 and the aggregate total consideration for all
Acquisitions consummated during the Commitment Period does not exceed
$25,000,000;

(ii) The Acquisition is identified as a “Permitted Acquisition” by the Borrower
in writing to the Administrative Agent;

(iii) The Borrower and its Subsidiaries have not closed more than two (2)
Acquisitions in any twelve (12) month period and four (4) Acquisitions during
the Commitment Period of which no more than one of which shall be a Foreign
Acquisition which has a total consideration that does not exceed $12,000,000. In
the case of such Foreign Acquisition, the business to be acquired shall be
acquired by (x) the Borrower or a Domestic Subsidiary, (y) a First-Tier
Subsidiary of the Borrower or a Domestic Subsidiary, or (z) a direct or indirect
wholly-owned Subsidiary of a First-Tier Subsidiary of a Domestic Subsidiary,
provided that if such First-Tier Subsidiary is a Foreign Subsidiary, then 65% of
the capital stock of such First-Tier Subsidiary shall have been pledged to the
Administrative Agent for the benefit of the Lenders.

(iv) No Acquisition shall be a Permitted Acquisition if the business which is
the subject of such acquisition has a negative EBITDA for the most recently
concluded four quarters;

(v) Substantially all of the revenue of the Person or assets being acquired is
derived from products and services substantially similar to those currently
provided by the Borrower and/or its Subsidiaries;

(vi) The Administrative Agent and the Lenders shall have received at least three
(3) years of historical financial statements of such Person (or, if such Person
has been in business for less than three (3) years, financial statements for
such lesser number of years) and a set of projections setting forth in
reasonable detail (with those stated assumptions set forth below) the pro forma
effect of such Acquisition and showing compliance by the Borrower with all
covenants set forth in this Agreement for the next succeeding four (4) fiscal
quarters. The projections to be delivered hereunder shall include and specify
the assumptions used to prepare such projections regarding growth of sales,
margins on sales and cost savings resulting from such Acquisition;

 
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(vii) The Administrative Agent and the Lenders shall have received a certificate
signed by the chief financial officer of the Borrower to the effect that (and
including calculations indicating that) on a pro forma basis after giving effect
to such Acquisition: (a) all representations and warranties contained in the
Loan Documents will remain true and correct except those, if any, made as of a
specific time which shall have been true and correct when made, (b) the Borrower
will remain in compliance with all covenants contained in the Loan Documents,
and (c) no Default or Event of Default has occurred and is continuing or will
occur as a result of the consummation of such Acquisition;

(viii) With respect to such Person which is the subject of an Acquisition, such
Acquisition has been (x) approved by the board of directors or other appropriate
governing body of such Person or (y) recommended for approval by such board of
directors or governing body to the shareholders, members, partners, or other
owners of such Person, as required under applicable law or the certificate of
incorporation and by-laws or other organizational documents of such Person and
subsequently approved by the shareholders, members, partners or other owners if
such approval is required under applicable law or by the certificate of
incorporation and by-laws or other organizational documents of such Person or
(z) otherwise agreed to by all shareholders, members, partners or owners of such
Person;

(ix) The Borrower has timely delivered the financial statements required
pursuant to Section 5.1(1) and 5.1(2) hereof;

(x) The Borrower and such other Person, if any, has complied with the provisions
of Section 5.11 hereof; and

(xi) The Acquisition constitutes a Domestic Acquisition, as hereinafter defined,
unless same is the Foreign Acquisition permitted by subparagraph (iii) above.
Domestic Acquisition shall mean the acquisition by the Borrower or any
Subsidiary of the Borrower of more than 50% of the capital stock, membership
interests, partnership interests or other similar ownership interests of a
Person organized under the laws of the United States or any state thereof or the
purchase of all or substantially all of the assets owned by such Person
substantially all of which assets are located in the United States.

“Person” shall mean any individual, corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization or any other
juridical entity, or a government or state or any agency or political
subdivision thereof.

“Plan” shall mean any plan of a type described in Section 4021(a) of ERISA in
respect of which the Borrower or any of its Subsidiaries or any ERISA Affiliate
is an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” shall mean (a) with respect to the Borrower, any Pledge
Agreement entered into in accordance with Section 5.11 hereof relating to the
capital stock or other equity interests of a Foreign Subsidiary of the Borrower
which is a First-Tier Subsidiary of the Borrower substantially in the form
prepared by counsel to the Administrative Agent, (b) with respect to each
Domestic Subsidiary, as applicable, any Pledge Agreement entered into in
accordance with Section 5.11 hereof relating to the capital stock or other
equity interests of a Foreign Subsidiary which is a First-Tier Subsidiary of a
Domestic Subsidiary of the Borrower substantially in the form prepared by
counsel to the Administrative Agent and as each of the same may hereafter be
amended, restated, supplemented or otherwise modified from time to time.

 
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“Prime Rate” the rate per annum announced by the Administrative Agent from time
to time as its prime rate in effect at its principal office. Each change in the
Prime Rate shall be effective on the date such change is announced to become
effective.

“Prime Rate Loan” shall mean any Revolving Credit Loan when and to the extent
that the interest rate therefor is determined by reference to the Prime Rate.

“Prior Agreement” shall mean that certain credit agreement among the Borrower
and certain lenders dated as of September 30, 2004, as amended by a First
Amendment dated as of February 28, 2005, a Second Amendment dated as of November
21, 2005 and a Third Amendment dated as of August 29, 2006.

“Prohibited Transaction” means any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time.

“Reportable Event” shall mean any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.

“Required Lenders” shall mean at any time Lenders having at least fifty-one
(51%) percent of the aggregate amount of the Revolving Credit Commitments or, if
the Revolving Credit Commitments are no longer in effect, Lenders holding at
least fifty-one (51%) percent of the aggregate outstanding principal amount of
the sum of the Revolving Credit Notes and the Letter of Credit Exposure (or
participation in any of the foregoing); provided, however, that such calculation
shall be made without including the Revolving Credit Commitment and pro rata
portion of Letter of Credit Exposure of any Lender or principal amount of
Revolving Credit Notes held by such Lender, if such Lender is in default with
respect to any of its obligations to the Administrative Agent, the Borrower or
any Lender.

“Requirements of Law” shall mean, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any material law, treaty, rule or regulation, or any determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

“Reserve Adjusted LIBOR” shall mean with respect to the Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to the quotient
(rounded upwards to the next higher 1/16 of one percent) of (a) the annual rate
of interest at which dollar deposits of an amount comparable to the amount of
such Revolving Credit Loan and for a period equal to the Interest Period
applicable thereto are offered to the Administrative Agent in the London
interbank market at approximately 11:00 a.m. (London time) on the second
Business Day prior to the beginning of such Interest Period, divided by (b) a
number equal to 1.00 minus the Eurocurrency Reserve Requirement.

 
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“Revolving Credit Commitment” shall mean, with respect to each Lender, the
obligation of such Lender to make Revolving Credit Loans to the Borrower during
the Commitment Period pursuant to the terms hereof as such Commitment is
described in Section 2.1 hereof.

“Revolving Credit Loan” shall mean a loan made pursuant to the terms of Section
2.2 hereof.

“Revolving Credit Note” or “Revolving Credit Notes” shall mean the Revolving
Credit Notes referred to in Section 2.3 hereof in the form of Exhibit “A”
hereto.

“Security Agreement” or “Security Agreements” shall mean a Security Agreement
executed by the Borrower and each of its Domestic Subsidiaries in the form
prepared by counsel to the Administrative Agent.

“Subordinated Debt” shall mean indebtedness of the Borrower subordinated in
right of payment to the obligations to the Lenders under this Agreement pursuant
to documentation containing maturities, amortization schedules, covenants,
defaults, remedies, subordination provisions and other material terms in form
and substance reasonably satisfactory to the Administrative Agent and the
Required Lenders.

“Subsidiary” shall mean with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the partnership interests are, as of such date,
owned, controlled or held, directly or indirectly, by the parent.

“Tangible Net Worth” shall mean, for the Borrower and its Subsidiaries on a
consolidated basis, at any date, the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with GAAP consistently applied, excluding, however, from the
determination of total assets all assets which would be classified as intangible
assets under GAAP, including, without limitation, goodwill, patents, trademarks,
trade names, copyrights and franchises.

“Termination Date” shall mean September 30, 2011 or, if such date is not a
Business Day, the Business Day next succeeding such date.

“Total Revolving Credit Commitment” shall mean the sum of the Lenders’ Revolving
Credit Commitments, as the same may be reduced from time to time in accordance
with Section 2.10 hereof.

 
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1.2 Accounting Terms. As used herein and in any certificate or other documents
made or delivered pursuant hereto, accounting terms not specifically defined
herein shall have the respective meanings given to them under GAAP.

SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS

2.1 Revolving Credit Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender,
severally and not jointly, agrees to make Revolving Credit Loans to the
Borrower, at any time and from time to time from the date hereof to the
Termination Date, or until the earlier termina-tion of its Revolving Credit
Commitment in accordance with the terms hereof, in an aggregate principal amount
at any time out-standing not to exceed the amount of such Lender’s Revolving
Credit Commitment set forth opposite its name in Schedule I hereto, as such
Revolving Credit Commitment may be changed from time to time in accordance with
the provisions of this Agreement. Notwithstanding the foregoing, the sum of (i)
the aggregate principal amount of Revolving Credit Loans outstanding at any time
to the Borrower and (ii) the Letter of Credit Exposure shall not exceed the
lesser of (y) the Total Revolving Credit Commitment or (z) the Borrowing Base.
The Revolving Credit Commitment of each Lender shall automatically and
permanently terminate on the Termination Date.

Within the foregoing limits, the Borrower may borrow, repay (or, subject to the
provisions of Section 2.9 hereof, prepay) and reborrow, during the Commitment
Period, subject to the terms, provisions and limitations set forth herein.

2.2  Revolving Credit Loans. (a) The Revolving Credit Loans made by a Lender on
any date shall be in a minimum amount of $500,000 and in integral multiples of
$100,000 in excess thereof in the case of a Eurodollar Loan or in a minimum
amount of $250,000 and in integral multiples of $100,000 in excess thereof in
the case of a Prime Rate Loan.

(b) Revolving Credit Loans shall be made ratably by the Lenders in accordance
with their respective Revolving Credit Commitments; provided, however, that the
failure of any Lender to make any Revolving Credit Loan shall not in itself
relieve any other Lender of its obligation to lend hereunder.

(c) Each Revolving Credit Loan shall be either a Prime Rate Loan or a Eurodollar
Loan as the Borrower may request pursuant to Section 2.5 hereof. Revolving
Credit Loans of more than one type and Interest Period may be outstanding at the
same time.

(d) Each Lender shall make its Revolving Credit Loans on the proposed dates
thereof by paying the amount required to the Administrative Agent in Hauppauge,
New York, in immediately available funds not later than 1:00 p.m., New York
time, and the Administrative Agent shall as soon as practicable, but in no event
later than 3:00 p.m., New York time, credit the amounts so received to the
general deposit account of the Borrower with the Administrative Agent in
immediately available funds or, if Revolving Credit Loans are not to be made on
such date because any condition precedent to a borrowing herein specified is not
met, return the amounts so received to the respective Lenders.

 
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2.3 Revolving Credit Notes (a) The Revolving Credit Loans made by the Lenders
pursuant to Section 2.2 hereof shall be evidenced by promissory notes of the
Borrower substantially in the form of Exhibit “A” hereto with appropriate
insertions (individually, a “Revolving Credit Note” and, collectively, the
“Revolving Credit Notes”), payable to the order of each Lender and evidencing
the obligations of the Borrower to pay to each Lender on the Termination Date
the lesser of (y) the amount of each Lender’s Revolving Credit Commitment or (z)
the aggregate unpaid principal amount of all Revolving Credit Loans made by such
Lender, with interest thereon as hereinafter prescribed in Section 2.4 hereof.
The revolving credit notes payable to the order of the Prior Lenders shall be
amended and restated as the Revolving Credit Notes payable to the order of the
Lenders under this Agreement.

(b) The date and amount of each Revolving Credit Loan, the basis for calculating
interest, the Interest Period (if any) applicable thereto and each payment of
principal with respect thereto may be endorsed by the Lenders on the schedule
annexed to and constituting a part of the Revolving Credit Notes. The aggregate
unpaid amount of Revolving Credit Loans set forth on such schedule shall be
presumed to be the principal amount owing and unpaid thereon. The failure of a
Lender to make such endorsement on such schedule shall not prejudice such Lender
in any way, nor affect its rights hereunder with respect to any Revolving Credit
Loan. The Revolving Credit Notes shall be dated the date of this Agreement and
be stated to mature on the Termination Date.

2.4 Interest. Interest on each Revolving Credit Loan shall be at a per annum
rate to be elected by the Borrower, in accordance with Section 2.5 hereof, and
shall be either a fluctuating rate equal to the Prime Rate or, subject to
availability, the Reserve Adjusted LIBOR for Interest Periods selected by the
Borrower plus 1.50%. Interest on each Prime Rate Loan shall be payable monthly
in arrears to the Administrative Agent for the pro rata benefit of the Lenders,
on the first Business Day of each month, commencing on the first such day to
occur after the pertinent Revolving Credit Loan is made and upon payment in full
thereof. Interest on each Eurodollar Loan shall be payable to the Administrative
Agent for the pro rata benefit of the Lenders in arrears (i) in the case of
Eurodollar Loans with Interest Periods of three months or less, at the end of
each applicable Interest Period and (ii) in the case of Eurodollar Loans with
Interest Periods of more than three months, on the numerically corresponding day
that falls three months after the beginning of such Interest Period and at the
end of the applicable Interest Period. Whenever the unpaid principal balance of
any Revolving Credit Loan shall become due and payable (whether at the stated
maturity thereof, by acceleration or otherwise) interest shall thereafter be
payable, on demand, to the Administrative Agent for the pro rata benefit of the
Lenders at the Involuntary Rate. Interest on each Revolving Credit Loan shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.

2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the
Revolving Credit Commitments during the Commitment Period on any Business Day by
giving the Administrative Agent irrevocable notice of a request for a Revolving
Credit Loan hereunder setting forth the amount of the Revolving Credit Loan
requested, the date thereof, whether it is to be a Eurodollar Loan or a Prime
Rate Loan and, if it is to be a Eurodollar Loan, the duration of the Interest
Period applicable thereto. Requests for Eurodollar Loans shall be received by
the Administrative Agent not later than 11:00 a.m. (New York time) three (3)
Business Days prior to the first day of the Interest Period for each such
Revolving Credit Loan. Requests for Prime Rate Loans may be made up to 11:00
a.m. (New York time) on the day such Revolving Credit Loan is to be made. Any
request for a Revolving Credit Loan may be written or oral, but if oral, it
shall be confirmed in writing sent by the Borrower to the Administrative Agent
by the close of business of such Business Day. The Administrative Agent shall
promptly advise (but in any event, by 2:00 p.m. New York time, three (3)
Business Days prior to a Eurodollar Loan or by 12:00 p.m. on the same Business
Day in the case of a Prime Rate Loan) the Lenders of any notice given pursuant
to this Section 2.5 and of each Lender’s portion of the requested borrowing.

 
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2.6 Conversion and Renewals. The Borrower may elect from time to time to convert
all or a part of one type of Revolving Credit Loan into another type of
Revolving Credit Loan or to renew all or part of a Revolving Credit Loan by
giving the Administrative Agent notice by 11 a.m. (New York time) on the day of
the conversion into a Prime Rate Loan and at least three (3) Business Days
before the conversion into or renewal of a Eurodollar Loan, specifying: (1) the
renewal or conversion date; (2) the amount of the Revolving Credit Loan to be
converted or renewed; (3) in the case of conversions, the type of Revolving
Credit Loan to be converted into; and (4) in the case of renewals of or a
conversion into Eurodollar Loans, the duration of the Interest Period applicable
thereto; provided that (a) the minimum principal amount of each Revolving Credit
Loan of a Lender outstanding after a renewal or conversion to a Eurodollar Loan
shall be $500,000 or to a Prime Rate Loan shall be $250,000; and (b) Eurodollar
Loans can be converted only on the last day of the Interest Period of such
Revolving Credit Loan. All notices given under this Section 2.6 shall be
irrevocable and shall be given not later than 11:00 a.m. (New York time) on the
day which is the day or not less than the number of Business Days, as the case
may be, specified above for such notice. Any request for a conversion or a
renewal under this Section 2.6 may be written or oral, but if oral, it shall be
confirmed in writing sent by the Borrower to the Administrative Agent by the
close of business of such Business Day. If the Borrower shall fail to give the
Administrative Agent the notice as specified above for the renewal or conversion
of a Eurodollar Loan prior to the end of the Interest Period with respect
thereto, such Eurodollar Loan shall automatically be converted into a Prime Rate
Loan on the last day of the Interest Period for such Revolving Credit Loan. The
Administrative Agent shall promptly advise (but in any event, by 2:00 p.m. New
York time, three (3) Business Days prior to a Eurodollar Loan or by 3:00 p.m. on
the same Business Day in the case of a Prime Rate Loan) the Lenders of any
notice given pursuant to this Section 2.6 and of each Lender’s portion of the
requested conversion or renewal.

2.7 Suspension of Eurodollar Loans.

(a) Disaster. Notwithstanding anything contained in this Agreement to the
contrary, if the Administrative Agent determines that:

(i) it is unable for any reason to quote or determine rates based upon a Reserve
Adjusted LIBOR, or

 
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(ii) the Reserve Adjusted LIBOR does not accurately reflect the cost to a Lender
of making or maintaining a Eurodollar Loan,

then the Administrative Agent shall give the Borrower and the Lenders prompt
notice thereof, and so long as such condition shall remain in effect the right
of the Borrower to select a Eurodollar Loan or to convert a Prime Rate Loan
into, or to borrow or renew, a Eurodollar Loan shall be suspended. The Borrower,
in such event, shall, on the last day of a then current Interest Period either
prepay such loan together with accrued interest thereon or convert such loan
into a Prime Rate Loan.

(b) Illegality. Notwithstanding any other provisions herein, if any Requirements
of Law, regulation, order or decree or any change therein or in the
interpretation or application thereof shall make it unlawful for a Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement, the
commitment hereunder to make Eurodollar Loans shall forthwith be canceled with
respect to such Lender upon notice to the Administrative Agent and the Borrower
and Revolving Credit Loans of such Lender then outstanding as Eurodollar Loans,
if any, shall, at the option of the Borrower, be prepaid in full together with
all interest accrued and unpaid to the date of any such prepayment together with
any amounts required by Section 2.9 hereof, or converted into a Prime Rate Loan.

2.8 Commitment Fees; Other Fees.

(a) Commitment Fees. As additional compensation for the Revolving Credit
Commitments, the Borrower agrees to pay to the Administrative Agent for the pro
rata benefit of the Lenders a commitment fee for the Commitment Period based on
the average daily unused portion of the Total Revolving Credit Commitment
(without reference to the Borrowing Base) of .20% which fee shall accrue from
the date of this Agreement.

Any fee payable under this Section 2.8 which is not paid when due shall bear
interest at the Involuntary Rate until paid, payable on demand. Such fee shall
be computed on the basis of a 360 day year for the actual days elapsed and shall
be payable monthly on the first day of each month during the Commitment Period
and on the Termination Date or any earlier date of termination in accordance
with the terms of this Agreement. The “unused portion of the Total Revolving
Credit Commitment” means, at any time, the Total Revolving Credit Commitment
less the sum of (a) the unpaid principal balance of all Revolving Credit Loans
and (b) the Letter of Credit Exposure. Upon termination or reduction of the
Revolving Credit Commitments or adjustment of the Lenders’ percentage of Total
Revolving Credit Commitments, the Borrower will pay to the Administrative Agent,
for the pro rata account of the Lenders, accrued unused fees on the portion of
the Revolving Credit Commitment terminated or reduced to the date of termination
or reduction.

(b) Letter of Credit Fees.

(i) In connection with Standby Letters of Credit, the Borrower will pay the
Administrative Agent a non-refundable Standby Letter of Credit Fee equal to
1.25% per annum on the amount available to be drawn under such Standby Letter of
Credit. Such fee shall be payable to the Administrative Agent upon issuance.

 
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(ii) In connection with Commercial Letters of Credit, the Borrower will pay the
Administrative Agent a non-refundable (y) fronting fee equal to 1/8 of 1% of the
amount of such Commercial Letter of Credit and (z) a presentation fee equal to
1/8 of 1% of the amount of such Commercial Letter of Credit.

(iii) The Administrative Agent will distribute all fees provided for in
subsections (i) and (ii) of less than $500.00 to the Issuing Lender for its own
account and with respect to all fees of $500.00 or more, it will pay $500.00 to
the Issuing Lender, for its own account and any excess to the Lenders on a pro
rata basis in accordance with the provisions of Section 2.13 hereof.

(iv) The Borrower agrees to pay to the Issuing Lender for its own account the
customary administration, amendment, and transfer fees charged by the Issuing
Lender in connection with its issuance and administration of Letters of Credit.

(c) Administrative Agent’s Fee. The Borrower agrees to pay to the Administrative
Agent, for its own account, an annual fee payable in the amount and at the time
separately agreed upon between the Borrower and the Administrative Agent.

(d) Payment of All Fees. All fees payable hereunder shall be paid on the dates
due, in immediately available funds, to the Administrative Agent. Fees paid
shall not be refundable under any circumstances.

2.9 Additional Compensation in Certain Circumstances.

(a) Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc. If any law or guideline or interpretation
or application thereof by any Governmental Authority charged with the
interpretation or administration thereof, or any change therein, or compliance
with any request or directive of any Governmental Authority (whether or not
having the force of law) now existing or hereafter adopted:

(i) subjects the Administrative Agent or a Lender to any tax or changes the
basis of taxation with respect to this Agreement, the Revolving Credit Notes,
the Revolving Credit Loans, any other extensions of credit under this Agreement
or payments by the Borrower of principal, interest, commitment fee or other
amounts due from the Borrower hereunder or under the Revolving Credit Notes
(except for taxes on the overall net income of the Administrative Agent or a
Lender imposed by the jurisdiction in which the Administrative Agent or such
Lender’s principal office is located),

(ii) imposes, modifies or deems applicable any reserve, special deposit or
similar requirement against credits or commitments to extend credit extended by,
assets (funded or contingent) of, deposits with or for the account of, or other
acquisition of funds by, the Administrative Agent or a Lender (or participations
in any of the foregoing) (other than requirements expressly included herein in
the determination of the Reserve Adjusted LIBOR hereunder),

 
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(iii) imposes, modifies or deems applicable any capital adequacy or similar
requirement (A) against assets (funded or contingent) of, or credits or
commitments to extend credit extended by, the Administrative Agent or a Lender
(or participations therein) or (B) otherwise applicable to the obligations of
the Administrative Agent or a Lender under this Agreement, or

(iv) imposes upon the Administrative Agent or a Lender any other condition or
expense with respect to this Agreement, the Revolving Credit Notes or its
making, maintenance or funding any part of the Revolving Credit Loans or any
other extensions of credit under this Agreement (or participations therein), and
the result of any of the foregoing is to increase the cost to, reduce the income
receivable by, or impose any expense (including loss of margin) upon the
Administrative Agent or a Lender with respect to this Agreement, the Revolving
Credit Notes or the making, maintenance or funding of any part of the Revolving
Credit Loans or any other extensions of credit under this Agreement (or, in the
case of any capital adequacy or similar requirement, to have the effect of
reducing the rate of return on the Administrative Agent’s or a Lender’s capital,
taking into consideration the Administrative Agent’s and such Lender’s policies
with respect to capital adequacy) by an amount which the Administrative Agent or
a Lender deems to be material, the Administrative Agent or such Lender shall
from time to time notify the Borrower of the amount determined in good faith
(using any averaging and attribution methods) by the Administrative Agent or
such Lender (which determination shall be conclusive) to be necessary to
compensate the Administrative Agent or such Lender for such increase, reduction
or imposition. Such amount shall be due and payable by the Borrower to the
Administrative Agent or the applicable Lender ten (10) Business Days after such
notice is given. A certificate by the Administrative Agent or a Lender as to the
amount due and payable under this Section 2.9(a) from time to time and the
method of calculating such amount shall be conclusive absent manifest error. All
references to “Lender” shall be deemed to include any participant in such
Lender’s Revolving Credit Commitment.

(b) Indemnity. In addition to the compensation required by subsection (a) of
this Section 2.9, the Borrower shall indemnify the Administrative Agent and each
Lender against any loss or expense (including loss of margin) which the
Administrative Agent or such Lender has sustained or incurred as a consequence
of any

(i) payment, prepayment or conversion of any part of any Eurodollar Loan on a
day other than the last day of the applicable Interest Period (whether or not
such payment, prepayment or conversion is mandatory or automatic and whether or
not such payment or prepayment is then due),

(ii) attempt by the Borrower to revoke (expressly, by later inconsistent notices
or otherwise) in whole or part any notice stated herein to be irrevocable (the
Administrative Agent having in its sole discretion the options (A) to give
effect to such attempted revocation and obtain indemnity under this Section
2.9(b) or (B) to treat such attempted revocation as having no force or effect,
as if never made), or

 
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(iii) default by the Borrower in the performance or observance of any covenant
or condition contained in this Agreement or the Revolving Credit Notes,
including without limitation any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, commitment fee or other
amount due hereunder or under a Revolving Credit Note.

If the Administrative Agent or a Lender sustains or incurs any such loss or
expense it shall from time to time notify the Borrower of the amount determined
in good faith by the Administrative Agent or such Lender (which determination
shall be conclusive) to be necessary to indemnify the Administrative Agent or
such Lender for such loss or expense. Such amount shall be due and payable by
the Borrower to the Administrative Agent or Lender ten (10) Business Days after
such notice is given. All references to “Lender” shall be deemed to include any
participant in such Lender’s Revolving Credit Commitment.

The indemnities set forth herein shall survive payment in full of all Eurodollar
Loans and all other Revolving Credit Loans made pursuant to this Agreement.

2.10 Termination or Reduction of Commitment. Subject to the indemnity agreement
with respect to Eurodollar Loans set forth in Section 2.9(b) hereof, the
Borrower shall have the right, upon not less than three (3) Business Days’
irrevocable notice to the Administrative Agent (which shall promptly notify each
of the Lenders), to terminate the Total Revolving Credit Commitment or, from
time to time, to reduce the amount of the Total Revolving Credit Commitment,
provided that (a) any such reduction (i) shall be in the minimum amount of
$1,000,000 or a multiple thereof, (ii) shall reduce permanently the amount of
the Total Revolving Credit Commitment then in effect, and (iii) shall be
accompanied by prepayment of the Revolving Credit Loans outstanding, together
with accrued interest on the amount so prepaid to the dates of each such
prepayment, to the extent, if any, that the Aggregate Outstandings exceed the
amount of the Total Revolving Credit Commitment as then reduced, and (b) any
such termination of the Total Revolving Credit Commitment shall be accompanied
by prepayment in full of the Revolving Credit Loans outstanding, together with
accrued interest thereon to the date of prepayment, and the payment of any
unpaid commitment fee then accrued hereunder, and (c) no such reduction shall
reduce the Total Revolving Credit Commitment to an amount which is less than the
Letter of Credit Exposure, and (d) no such termination shall be effective if
there is then any Letter of Credit Exposure.

2.11 Prepayment. Subject to the indemnity agreement with respect to Eurodollar
Loans set forth in Section 2.9(b) hereof, the Borrower (a) may prepay any
Revolving Credit Loan in whole or in part without premium or penalty and (b)
shall prepay Revolving Credit Loans to the extent that the Aggregate
Outstandings exceed the Borrowing Base no later than five (5) Business Days
after the occurrence of such excess. Each prepayment shall be made together with
interest accrued on the amount prepaid to the date of prepayment. Prepayments of
Revolving Credit Loans may be reborrowed on a revolving basis as aforesaid.

2.12 Payments.

(a) All payments (including prepayments) to be made by the Borrower on account
of principal, interest and fees shall be made without setoff or counterclaim and
shall be made to the Lenders on the date of payment at the office of the
Administrative Agent set forth in Section 10.1 hereof or at such other place as
the Administrative Agent may from time to time designate in writing on or before
11:00 a.m. (New York time). All such payments shall be made in lawful money of
the United States of America and in immediately available funds. If any payment
hereunder (other than payments on Eurodollar Loans) becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment
into another calendar month in which event such payment shall be made on the
immediately preceding Business Day and, in the event of any extension, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

 
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(b) The Borrower hereby authorizes the Administrative Agent to charge any of its
accounts maintained at the Administrative Agent on the date any payment is due
hereunder or under a Revolving Credit Note.

2.13  Pro Rata Treatment.

(a) Except for any payment, reimbursement or other indemnity to any Lender or
other indemnified person under Section 2.7(b), 2.8(b), 2.8(c), 2.9, 2.18 or 10.4
hereof, each borrowing by the Borrower of Revolving Credit Loans from the
Lenders hereunder, each conversion or renewal of a Revolving Credit Loan, each
payment by the Borrower of any commitment fees, letter of credit fees or
participation fees hereunder (subject to the provisions of Section 2.8(b) (iii)
hereof) and each reduction of the Total Revolving Credit Commitment shall be
made pro rata among the Lenders in the proportions that their Revolving Credit
Commitments bear to the Total Revolving Credit Commitment. Each payment or
prepayment of principal of the Revolving Credit Notes and each payment of
interest on the Revolving Credit Notes shall be made pro rata among the Lenders
in the proportions that the amount outstanding under a Revolving Credit Note
payable to a particular Lender bears to the aggregate amount outstanding under
the Revolving Credit Notes.

(b) Unless the Administrative Agent shall have been notified in writing by any
Lender prior to the time such Lender is required to fund any proposed borrowing
that such Lender will not make the amount that would constitute its pro rata
share of such borrowing on such date available to the Administrative Agent, the
Administrative Agent may (assuming that the Administrative Agent has furnished
such Lender with notice of the proposed borrowing as required under Section 2.5
hereof) assume that such Lender has made such amount available to the
Administrative Agent on such date, and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrower a corresponding amount. If
such amount is made available by such Lender to the Administrative Agent on a
date after such borrowing date, such Lender shall pay to the Administrative
Agent on demand an amount equal to the product of (i) the daily average Federal
funds rate during such period as quoted by the Administrative Agent, times (ii)
the amount of such Lender’s pro rata share of such borrowing, times (iii) a
fraction the numerator of which is the number of days that elapse from and
including such borrowing date to the date on which such Lender’s pro rata share
of such borrowing shall have become immediately available to the Administrative
Agent and the denominator of which is 360. A certificate of the Administrative
Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender’s pro rata share of such borrowing is not in fact made available to the
Administrative Agent by such Lender within three (3) Business Days of such
borrowing date, the Administrative Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to the relevant
Revolving Credit Loans hereunder, on demand, from the Borrower.

 
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(c) Notwithstanding the foregoing provisions of this Section 2.13, in the event
that a Lender fails to make any amount that would constitute its pro rata share
of a borrowing available to the Administrative Agent, the Administrative Agent
shall so notify the other Lender(s) whereupon such Lender(s) shall be required
to make such amount available to the Administrative Agent on a pro rata basis
between (or among) the Lenders in the proportions that their Revolving Credit
Commitments bear to the Total Revolving Credit Commitment, in an aggregate
amount not to exceed the amount of such Lender’s unused Revolving Credit
Commitment as set forth on Schedule I attached hereto.

2.14 Sharing of Setoffs. Each Lender agrees that if it shall, through the
exercise of a right of banker’s lien, setoff or counterclaim against the
Borrower or a Guarantor, including, but not limited to, a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of a Revolving Credit Note held by
it as a result of which the unpaid principal portion of the Revolving Credit
Note held by it shall be proportionately less than the unpaid principal portion
of the Revolving Credit Notes held by any other Lender, it shall be deemed to
have simultaneously purchased from such other Lender a participation in the
Revolving Credit Note or participation held by such other Lender with the
purchase price payable in cash upon demand by such other Lender, so that the
aggregate unpaid principal amount of the Revolving Credit Notes and
participations in Revolving Credit Notes held by it shall be in the same
proportion to the aggregate unpaid principal amount of all Revolving Credit
Notes then outstanding as the principal amount of the Revolving Credit Notes
held by it prior to such exercise of banker’s lien, setoff or counterclaim was
to the principal amount of all Revolving Credit Notes outstanding prior to such
exercise of banker’s lien, setoff or counterclaim; provided, however, that if
any such purchase or purchases or adjustments shall be made pursuant to this
Section 2.14 and such other Lender shall thereafter receive or recover from or
respecting the Borrower or any Guarantor any amount in respect of a Revolving
Credit Note proportionally greater than that received by the first Lender, such
purchase or purchases or adjustments shall be repurchased and rescinded to the
extent of such receipt or recovery and the purchase price or prices paid or
adjustments made shall be repaid or restored, as applicable, without interest;
provided, that, if such disproportionate amount received or recovered by such
other Lender exceeds the amount necessary to restore the Lenders respective pro
rata shares, then this section shall apply to such excess. If all or part of any
proportionately greater payment received by any purchasing Lender is thereafter
recovered from such purchasing Lender upon the bankruptcy or reorganization of
the Borrower or any Guarantor, or otherwise, the purchases by such purchasing
Lender shall be rescinded and the purchase price paid for the participations
purchased by such purchasing Lender shall be returned to such purchasing Lender
ratably to the extent of such recovery, but without interest. The Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Revolving Credit Note deemed to have been so
purchased may exercise any and all rights of banker’s lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to such
Lender as fully as if such Lender held a Revolving Credit Note in the amount of
such participation.

 
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2.15 Use of Proceeds. The Borrower has utilized the proceeds of the initial
Revolving Credit Loans to refinance any amounts owing to the Administrative
Agent or the Prior Lenders under the Prior Agreement. The proceeds of any
subsequent Revolving Credit Loans may be used by the Borrower for working
capital purposes, capital expenditures, to fund the purchase price of Permitted
Acquisitions and to repurchase stock of the Borrower in an aggregate cumulative
amount during the Commitment Period not to exceed $4,000,000 valued at the
market price at the time of purchase. Each Standby Letter of Credit, as defined
in section 2.16 hereof, shall be used by the Borrower solely to provide support
for an obligation of a Person and which may be drawn on upon the failure of such
Person to perform such obligation or other contingency for the purposes of the
Borrower and its Subsidiaries in the ordinary course of business. Each
Commercial Letter of Credit, as defined in Section 2.16 hereof, shall be used by
the Borrower and its Subsidiaries solely to provide the primary means of payment
in connection with the purchase of goods or services by the Borrower and its
Subsidiaries in the ordinary course of business. No portion of the proceeds of
any Revolving Credit Loan and no Letter of Credit shall be used by the Borrower
in any manner which might cause the borrowing of such Revolving Credit Loan, or
such Letter of Credit or the application of such proceeds to violate Regulation
U, Regulation T or Regulation X of the Board.

2.16 Issuance of Letters of Credit. Upon the request of the Borrower, and
subject to the conditions set forth herein and such other conditions to the
opening of Letters of Credit as the Issuing Lender requires of its customers
generally, the Issuing Lender shall from time to time during the Commitment
Period issue letters of credit for the account of the Borrower as follows:

(i) standby letters of credit (collectively, the “Standby Letters of Credit”) in
a form reasonably satisfactory to the Issuing Lender and in favor of such
beneficiaries as the Borrower shall specify form time to time (which shall be
reasonably satisfactory to the Issuing Lender); and

(ii) commercial letters of credit in the form of the Issuing Lender’s standard
commercial letters of credit (“Commercial Letters of Credit”) in favor of
sellers of goods or services to the Borrower or its Subsidiaries (the Standby
Letters of Credit and the Commercial Letters of Credit, collectively, the
“Letters of Credit”).

The issuance of each Letter of Credit shall be made on at least two (2) Business
Days prior written notice from the Borrower to the Issuing Lender which written
notice shall be an application for a Letter of Credit on the Issuing Lender’s
customary form. The expiration date of any Letter of Credit shall not be later
than one (1) year from the date of issuance thereof nor, in any event, later
than the Termination Date. The Letters of Credit shall be denominated in Dollars
and shall be issued in respect of any transactions occurring in the Borrower’s
ordinary course of business.

 
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2.17 Actions of Issuing Lender. Any Letter of Credit may, in the discretion of
the Issuing Lender or its correspondents, be interpreted by them (to the extent
not inconsistent with such Letter of Credit) in accordance with the Uniform
Customs and Practice for Documentary Credits of the International Chamber of
Commerce, as adopted or amended from time to time, or any other rules,
regulations and customs prevailing at the place where any Letter of Credit is
available or the drafts thereunder are drawn or nego-tiated. The Issuing Lender
and its correspondents may in good faith accept and act upon the name,
signature, or act of any party purporting to be the executor, administrator,
receiver, trustee in bankruptcy, or other legal representative of any party
designated in any Letter of Credit in the place of the name, signature, or act
of such party.

2.18 Indemnity as to Letters of Credit. The Borrower hereby agrees to indemnify
and hold harmless the Issuing Lender, the Administrative Agent and the Lenders
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which the Issuing Lender, the Administrative Agent or the
Lenders may incur or suffer by reason of or in connection with the execution and
delivery or assignment of, or payment under, any Letter of Credit, except only
if and to the extent that any such claim, damage, loss, liability, cost or
expense shall be caused by the willful misconduct or gross negligence of the
Issuing Lender, the Administrative Agent or any Lender performing its
obligations respecting such Letter of Credit under this Agreement. Without
limiting the foregoing, the Borrower further agrees to indemnify and hold
harmless the Issuing Lender, the Administrative Agent, the Lenders and their
respective officers and directors, each Person who controls any of the foregoing
within the meaning of Section 15 of the Securities Act of 1933 or any applicable
state securities law and their respective successors and assigns from and
against any and all claims, damages, losses, liabilities, costs or expenses,
joint or several, to which they or any of them may become subject under any
federal or state securities law, rule or regulation, at common law or otherwise,
insofar as such claims, damages, losses, liabilities, costs or expenses arise
out of or are based upon the execution and delivery by the Issuing Lender of any
Letters of Credit or the execution and delivery of any other document in
connection therewith (but not including any claims, damages, losses,
liabilities, costs or expenses arising from the gross negligence or willful
misconduct of the Issuing Lender, the Administrative Agent or a Lender). The
Borrower upon demand by the Administrative Agent at any time, shall reimburse
the Administrative Agent for any reasonable legal or other expenses incurred in
connection with investigating or defending against any of the foregoing. The
indemnities contained herein shall survive the expiration or termination of the
Letters of Credit and this Agreement.

2.19 Payment in Respect of Letters of Credit; Reimbursement. Upon the issuance
of any Letter of Credit, the Issuing Lender shall notify the Administrative
Agent which shall notify each Lender of the principal amount, the number, and
the expiration date thereof and the amount of such Lender’s participation
therein. By the issuance of a Letter of Credit hereunder and without further
action on the part of the Issuing Lender, the Administrative Agent or the
Lenders, each Lender hereby accepts from the Issuing Lender a participation
(which participation shall be nonrecourse to the Issuing Lender) in such Letter
of Credit equal to such Lender’s pro rata (based on its Revolving Credit
Commitment) share of such Letter of Credit, effective upon the issuance of such
Letter of Credit. Each Lender hereby absolutely and unconditionally agrees to
pay and discharge, and to indemnify and hold harmless the Issuing Lender from
liability in respect of, such Lender’s pro rata share of the amount of any
drawing under a Letter of Credit. Each Lender acknowledges and agrees that its
obligation to acquire participations in each Letter of Credit issued by the
Issuing Lender and its obligation to make the payments specified herein, and the
right of the Issuing Lender to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default hereunder, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. The
Issuing Lender shall review, on behalf of the Lenders, each draft presented
under a Letter of Credit and shall notify each Lender of any such presentment.
Promptly after it shall have ascertained that any draft presented under any
Letter of Credit appears on its face to be in substantial conformity with the
terms and conditions of such Letter of Credit, the Issuing Lender shall give
notice to the Administrative Agent which shall give telephonic or facsimile
notice to the Lenders and the Borrower of the receipt and amount of such draft
and the date on which payment thereon will be made provided, however, the
Issuing Lender shall have the right, in its sole discretion, to decline to
accept any documents and to decline to make payment under any Letter of Credit
if the documents presented are not in strict compliance with the terms of such
Letter of Credit. The Borrower shall pay to the Issuing Lender the amount
specified in such notice by no later than 11:00 a.m. (New York time) on the date
such payment is scheduled to be made. If the Borrower has not so discharged such
payment obligations and the Issuing Lender is unable to recover the required
amount by debiting the Borrower’s account, the Issuing Lender shall give the
Administrative Agent notice which shall give each Lender notice of any amount
that remains unpaid, and each Lender shall promptly pay the amounts required to
the Issuing Lender in immediately available funds, and, with respect to Letters
of Credit, the Issuing Lender, not later than 3:00 p.m. (New York time) on such
day, shall make the appropriate payment to the applicable beneficiary. If the
Lenders shall pay to the Issuing Lender the amount of any draft presented under
a Letter of Credit, then the Issuing Lender, on behalf of the Lenders, shall
charge the general deposit account of the Borrower with the Issuing Lender for
the amount thereof, together with the Issuing Lender’s customary overdraft or
similar fee in the event the funds available in such account shall not be
sufficient to reimburse the Lenders for such payment. If the Lenders have not
been paid with respect to any drawing as provided above, the Borrower shall pay
to the Issuing Lender, for the account of the Lenders, the amount of such
drawing together with interest on such amount at a rate per annum (computed on
the basis of the actual number of days elapsed over a year of 360 days) equal to
the Involuntary Rate, payable on demand. The obligations of the Borrower under
this Section 2.19 to pay the Issuing Lender, the Lenders and the Administrative
Agent for all drawings under Letters of Credit shall be absolute, unconditional
and irrevocable and shall be satisfied strictly in accordance with their terms,
irrespective of:

 
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(a) any lack of validity or enforceability of any Letter of Credit;

(b) the existence of any claim, setoff, defense or other right which the
Borrower or any other Person may at any time have against the beneficiary under
any Letter of Credit, the Issuing Lender, the Administrative Agent or any Lender
(other than the defense of payment in accordance with the terms of this
Agreement or a defense not otherwise waived hereunder based on the gross
negligence or willful misconduct of the Issuing Lender, the Administrative Agent
or any Lender) or any other Person in connection with this Agreement or any
other transaction;

(c) any draft or other document presented under or in connection with any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

(d) payment by the Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not comply with the terms
of such Letter of Credit;

 
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(e) the existence, character, quantity, quality, condition, packing, value or
delivery of any goods or other property relating to any Letter of Credit;

(f) the time, place, manner or order in which shipment is made;

(g) the provisions of any insurance policy or any act or omission of any
insurer, shipper, warehouseman, carrier, correspondent or other Person; or

(h) any other circumstance or event whatsoever, whether or not similar to any of
the foregoing.

Neither the Issuing Lender, the Administrative Agent nor a Lender shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make payment
thereunder (irrespective of any of the circumstances referred to above), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Lender, the Administrative Agent or a Lender,
provided that the foregoing shall not be construed to excuse the Issuing Lender,
the Administrative Agent or a Lender from liability to the Borrower to the
extent of damages suffered by the Borrower that are caused by the Issuing
Lender’s, the Administrative Agent’s or such Lender’s gross negligence or
willful misconduct. It is understood that in making any payment under any Letter
of Credit (x) the Issuing Lender’s exclusive reliance on the documents presented
to it under such Letter of Credit as to any and all matters set forth therein,
including, without limitation, good faith reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, not be deemed willful misconduct or gross
negligence of the Issuing Lender.

 
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SECTION 3. REPRESENTATIONS AND WARRANTIES

In order to induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Revolving Credit Loans and to issue Letters of Credit
herein provided for, the Borrower hereby covenants, represents and warrants to
the Administrative Agent and the Lenders that:

3.1 Financial Condition. The consolidated balance sheet and consolidated
statements of income, retained earnings and cash flows of the Borrower and its
Subsidiaries as at February 28, 2006 audited by Lazar Levine & Company, LLC,
CPAs and the interim consolidated balance sheet and related consolidated
statements of income, retained earnings and cash flows as of November 30, 2006
have heretofore been furnished to the Lenders, and fairly present the financial
condition of the Borrower and its Subsidiaries as at such dates, and the results
of their operations for the fiscal year and fiscal quarter, respectively, then
ended. Such annual financial statements have been prepared in accordance with
GAAP and such interim financial statements have been prepared on a basis
consistent with the annual financial statements, subject to year end
adjustments. Neither the Borrower nor any of its Subsidiaries has any material
contingent obligations, contingent liabilities or liability for taxes, long-term
lease or unusual forward or long-term commitment, which are not reflected in the
foregoing statements or in the notes thereto.

3.2 No Change. Since November 30, 2006, there has been no material adverse
change in the business, operations, assets or financial or other condition of
the Borrower or its Subsidiaries.

3.3 Corporate Existence; Compliance with Law; Subsidiaries. Each of the Borrower
and each of its Subsidiaries (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority and the legal right to own and operate its
properties, and to conduct the business in which it is currently engaged, (iii)
does not own or operate properties or conduct business which requires
qualification as a foreign corporation in any jurisdiction in which it is not so
qualified, and (iv) is in compliance with all Requirements of Law; except to the
extent that the failure to so qualify as a foreign corporation as required by
clause (iii) of this Section 3.3 or to comply with all Requirements of Law as
required by clause (iv) of this Section 3.3 would not, in the aggregate, have a
material adverse effect on the business, operations, property or financial or
other condition of the Borrower and its Subsidiaries taken as a whole, and would
not materially adversely affect the ability of the Borrower or a Subsidiary to
perform its obligations under the Loan Documents.

3.4 Corporate Power; Authorization; Enforceable Obligations. The Borrower and
each of its Subsidiaries has the corporate power and authority and the legal
right to execute, deliver and perform its obligations under the Loan Documents
and, in the case of the Borrower, to borrow and obtain other extensions of
credit hereunder. The Borrower has taken all necessary corporate action to
authorize the borrowings and other extensions of credit hereunder on the terms
and conditions of this Agreement and the Borrower and each of its Subsidiaries
has taken all necessary corporate action to authorize the execution, delivery
and performance of the Loan Documents. No consent or authorization of, filing
with, or other act by or in respect of any other Person (including stockholders
and creditors of the Borrower or its Subsidiaries) or any Governmental
Authority, is required in connection with the borrowings and other extensions of
credit hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents. Each of the Loan Documents has been duly
executed and delivered on behalf of the Borrower or its Subsidiaries, as
applicable, and each of the Loan Documents constitutes a legal, valid and
binding obligation of the Borrower or its Subsidiaries, as applicable,
enforceable against the Borrower or its Subsidiaries, as applicable, in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally.

 
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3.5 Legal Bar. The execution, delivery and performance of each of the Loan
Documents and the borrowings and other extensions of credit hereunder and the
use of the proceeds thereof, will not violate any of the Requirements of Law or
Contractual Obligations of the Borrower or its Subsidiaries, and will not result
in, or require the creation or imposition of, any Lien on any of its respective
properties or revenues pursuant to any Requirements of Law or Contractual
Obligations.

3.6 No Material Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending by or against the
Borrower or any Subsidiary or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries or any of their
respective properties or revenues (a) with respect to any of the Loan Documents
or any of the transactions contemplated hereby or thereby, or (b) which if
adversely determined, would have a material adverse effect on the business,
operations, property or financial or other condition of the Borrower and its
Subsidiaries taken as a whole.

3.7 No Default. Neither the Borrower nor any of its Subsidiaries is in default
under or with respect to any Contractual Obligations in any respect which would
be materially adverse to the business, operations, property or financial or
other condition of the Borrower and its Subsidiaries taken as whole or which
would materially and adversely affect the ability of the Borrower or its
Subsidiaries to perform its respective obligations under any of the Loan
Documents. No Default or Event of Default has occurred and is continuing.

3.8 No Burdensome Restrictions. No Contractual Obligations of the Borrower or
its Subsidiaries and no Requirements of Law materially adversely affect, or
insofar as the Borrower or its Subsidiaries may reasonably foresee may so
affect, the business, operations, property or financial or other condition of
the Borrower and its Subsidiaries taken as a whole.

3.9 Federal Regulations. Neither the Borrower nor its Subsidiaries is engaged
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying” any
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U of the Board as now and from time to time hereafter in effect. No
part of the proceeds of any Revolving Credit Loans hereunder, and no Letter of
Credit, will be used for “purchasing” or “carrying” “margin stock” as so defined
or for any purpose which violates, or which would be inconsistent with, the
provisions of the regulations of the Board.

3.10 Environmental Regulation.

(a) The Borrower has no knowledge of receipt of any past, pending or threatened:

 
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(i) claims, complaints, notices or requests for information with respect to any
alleged violation of any Environmental Law that, singly or in the aggregate,
have resulted in, or may reasonably be expected to result in, any material
adverse change in the financial or business conditions of the Borrower and its
Subsidiaries taken as a whole; or

(ii) complaints, notices or inquiries to the Borrower or any Subsidiary of the
Borrower regarding potential liability under any Environmental Law that, singly
or in the aggregate, have resulted in, or may reasonably be expected to result
in, any material adverse change in the financial or business conditions of the
Borrower and its Subsidiaries taken as a whole;

(b) No property now or previously owned or leased by the Borrower or any
Subsidiary of the Borrower is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on CERCLIS or on any similar state list of
sites requiring investigation or clean-up; and

(c) Neither the Borrower nor any Subsidiary of the Borrower has directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on CERCLIS or on any similar state list or
which is the subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against the Borrower for any
remedial work, damage to natural resources or personal injury, including claims
under CERCLA.

3.11 Title to Properties. Each of the Borrower and its Subsidiaries has valid
leases of or good and marketable title to its respective properties and assets,
including the properties and assets reflected in the balance sheets described in
Section 3.1 hereof. Such properties and assets are not subject to any Lien,
except as reflected in such balance sheets and except to the extent otherwise
permitted by Section 7.2 hereof.

3.12 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and
other tax returns which to the knowledge of the Borrower and its Subsidiaries
are required to be filed and have paid all taxes shown as due and payable on
said returns or on any assessments made against them or any of their respective
properties except such taxes, if any, as are being contested in good faith and
by proper proceedings and as to which adequate reserves have been maintained in
conformity with GAAP.

3.13 ERISA. Based upon ERISA and the regulations and published interpretations
thereunder, each of the Borrower, its Subsidiaries and each ERISA Affiliate is
in compliance in all material respects with all applicable provisions, if any,
of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred
and is continuing with respect to any Plan; no notice of intent to terminate a
Plan has been filed nor has any Plan been terminated; no circumstances exist
which constitute grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a Plan,
nor has the PBGC instituted such proceedings; each of the Borrower, its
Subsidiaries and each ERISA Affiliate has met its minimum funding requirements
under ERISA with respect to all of its Plans and the present fair market value
of all Plan assets exceeds the present value of all vested benefits under each
Plan, as determined on the most recent valuation date of such Plan in accordance
with the provisions of ERISA and the regulations thereunder for calculating the
potential liability of the Borrower, its Subsidiaries and each ERISA Affiliate
to the PBGC or such Plan under Title IV of ERISA, and neither the Borrower, its
Subsidiaries nor an ERISA Affiliate has incurred any liability to the PBGC under
ERISA.

 
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3.14 Operation of Business. The Borrower and its Subsidiaries possess all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, necessary to conduct their respective businesses
substantially as now conducted and as presently proposed to be conducted, and
neither the Borrower nor any Subsidiary is in material violation of any valid
rights of others with respect to any of the foregoing except where the failure
to obtain licenses or permits does not individually or in the aggregate
materially and adversely impair the ability of the Borrower or any of its
Subsidiaries to operate its business or perform its obligations under a Loan
Document.

3.15 Security Agreements and Pledge Agreements. Each Security Agreement and
Pledge Agreement executed by the Borrower and each Domestic Subsidiary, as
applicable, shall, pursuant to its terms and applicable law, constitute a valid
and continuing lien on and security interest in the collateral referred to in
such Security Agreement and such Pledge Agreement in favor of the Administrative
Agent, for the ratable benefit of the Lenders, which shall be prior to all other
Liens, claims and rights of all other Persons in such collateral which may be
perfected under the laws of any state of the United States of America except
Liens permitted by the terms hereof.

SECTION 4. CONDITIONS PRECEDENT

4.1 Conditions to Initial Revolving Credit Loan. The obligation of the Lenders
to make the initial extension of credit to the Borrower hereunder is subject to
the satisfaction of the following conditions precedent:

(a) Revolving Credit Notes. Each Lender shall have received a Revolving Credit
Note conforming to the requirements hereof and duly executed by the Borrower.

(b) Legal Opinion. The Administrative Agent and each Lender shall have received
a favorable opinion of counsel to the Borrower and the Guarantors satisfactory
in form and substance to the Administrative Agent and the Lenders and covering
such matters incident to the transactions contemplated by this Agreement as the
Administrative Agent shall reasonably require.

(c) Guarantee. The Administrative Agent shall have received the Reaffirmation
and Acknowledgement of Guarantee duly executed by each Guarantor in favor of the
Administrative Agent for the benefit of the Lenders.

(d) Security Agreements. The Administrative Agent shall have received the
Reaffirmation and Acknowledgement of Security Agreements duly executed by the
Borrower and its Domestic Subsidiaries, together with UCC-1 financing statements
in favor of the Administrative Agent for the benefit of the Lenders, Form UCC-3
termination statements or amendments (if required), Uniform Commercial searches
and security agreement questionnaires.

 
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(e) Control Agreement. The Administrative Agent shall have received the
Reaffirmation and Acknowledgement of Control Agreement duly executed by the
Borrower, NIC Components Corp., Nu Horizons International Corp., Titan Supply
Chain Services Corp. and Razor Electronics Inc. in favor of the Administrative
Agent for the benefit of the Lenders.

(f) Blocked Account Agreement. The Administrative Agent shall have received the
Reaffirmation and Acknowledgement of Blocked Account Agreement duly executed by
the Borrower, NIC Components Corp., Nu Horizons International Corp., Titan
Supply Chain Services Corp. and Razor Electronics Inc. in favor of the
Administrative Agent for the benefit of the Lenders.

(g) Pledge Agreement. The Administrative Agent shall have received the
Reaffirmation and Acknowledgement of Pledge Agreement duly executed by the
Borrower in favor of the Administrative Agent for the benefit of the Lenders.

(h) Certificate of Insurance. The Administrative Agent shall have received a
certificate of insurance naming the Administrative Agent, for the benefit of
itself and for the ratable benefit of the Lenders as loss payee.

(i) Certified Copies and Other Documents. The Lenders shall have received such
certificates and other documents relating to the Borrower and the Guarantors
with respect to the matters herein contemplated as the Administrative Agent may
request, including but not limited to:

(i) certificates of good standing from the Secretary of State of New York if
incorporated under the laws of the State of New York or doing business in New
York and, if incorporated in a jurisdiction other than New York, from the
Secretary of State or applicable Governmental Authority of such jurisdiction of
incorporation and from the Secretary of State or applicable Governmental
Authority of each jurisdiction in which an office is maintained;

(ii) certificates of incorporation and all amendments thereto certified by the
applicable Secretary of State or applicable Governmental Authority;

(iii) certificates of an officer of the Borrower dated the date of this
Agreement certifying (x) true and correct copies of the by-laws of the Borrower
as in effect on the date of adoption of the resolutions referred to in (y) of
this subsection (iii), (y) true and correct copies of resolutions adopted by the
board of directors of the Borrower (1) authorizing the borrowings and the other
extensions of credit from the Lenders hereunder, the execution, delivery and
performance by the Borrower of each of the Loan Documents to which it is a party
and the performance by the Borrower of its obligations under each of the Loan
Documents to which it is a party, (2) approving forms in substantially execution
form of each of the Loan Documents to which it is a party, and (3) authorizing
officers of the Borrower to execute and deliver each of the Loan Documents to
which it is a party, and (z) the incumbency and specimen signatures of the
officers of the Borrower executing any documents delivered to the Administrative
Agent or a Lender by the Borrower in connection herewith; and

 
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(iv) certificates of an officer of each Guarantor dated the date of this
Agreement certifying (w) true and correct copies of the by-laws of such
Guarantor as in effect on the date of adoption of the resolutions referred to in
(x) of this subsection (iv), (x) true and correct copies of resolutions adopted
by the board of directors of such Guarantor authorizing (1) the execution,
delivery and performance by such Guarantor of each of the Loan Documents to
which it is a party and the performance by such Guarantor of its obligations
under each of the Loan Documents to which it is a party, (2) approving forms in
substantially execution form of each of the Loan Documents to which it is a
party, and (3) authorizing officers of such Guarantor to execute and deliver
each of the Loan Documents to which it is a party, (y) true and correct copies
of resolutions adopted by the shareholders of such Guarantor authorizing the
execution and delivery of the Loan Documents to which it is a party and (z) the
incumbency and specimen signatures of the officers of such Guarantor executing
any documents delivered to the Administrative Agent or a Lender by such
Guarantor in connection herewith.

(j) Fees. The Administrative Agent shall have received evidence of payment of an
origination fee in the amount of $35,000 for the pro rata benefit of those
Lenders that have increased their Revolving Credit Commitments above those
contained in the Prior Agreement, an extension fee in the amount of $150,000
based on the Commitments under this Agreement for the pro rata benefit of the
Lenders, the Administrative Agent’s per annum fee pursuant to a side letter
between the Administrative Agent and the Borrower and the Administrative Agent’s
attorneys’ fees and disbursements.

(k) Amounts Due under the Prior Agreement. The administrative agent under the
Prior Agreement shall have received evidence of payment of all interest and fees
accrued under the Prior Agreement and any administrative agent fee letter
referred to therein or related thereto.

(l) Field Audit. The Lenders shall have received an updated field examination
satisfactory in all respects to the Lenders.

(m) Additional Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall be satisfactory in form
and substance to the Administrative Agent and its counsel.

4.2 Conditions to All Revolving Credit Loans, Etc. The obligation of the Lenders
to make any Revolving Credit Loan (including the initial Revolving Credit Loan)
to be made hereunder, or to issue any Letter of Credit to be issued hereunder is
subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. The representations and warranties made by
the Borrower herein or which are contained in any other Loan Document or any
certificate, document or financial or other statement furnished at any time
under or in connection herewith, shall be correct on and as of the date of such
extension of credit as if made on and as of such date except to the extent that
such representation is stated to be made as of a date certain.

 
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(b) No Default or Event of Default. No Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit or after
giving effect to the extension of credit to be made on such date.

Each extension of credit to the Borrower hereunder shall constitute a
representation and warranty by the Borrower hereunder as of the date of each
such extension of credit that the conditions in clauses (a) and (b) of this
Section 4.2 have been satisfied.

SECTION 5. AFFIRMATIVE COVENANTS

The Borrower hereby agrees that so long as the Revolving Credit Commitments
remain in effect, a Revolving Credit Note or any Letter of Credit remains
outstanding and unpaid, or any other amount is owing to the Administrative Agent
or a Lender hereunder, the Borrower will and will cause each of its Subsidiaries
to:

5.1 Information. Furnish to each of the Lenders or cause to be furnished to each
of the Lenders:

(1) As soon as available, but not more than the earlier of one hundred (100)
days or ten (10) days after the date specified in SEC regulations for delivery
of annual financial statements applicable to the Borrower (the “Annual Delivery
Date”) after the close of each fiscal year, the Borrower’s Form 10-K and the
financial statements of the Borrower and its Subsidiaries including the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries with related consolidated and consolidating statements of income,
retained earnings and cash flows for such fiscal year, setting forth in each
case in comparative form the figures as of the end of and for the previous
fiscal year, all prepared in accordance with GAAP consistently applied and
audited by a firm of independent certified public accountants acceptable to the
Required Lenders. Such financial statements shall be accompanied by (i) copy of
the management letter, if any, prepared by such firm and (ii) a certificate of
the chief financial officer of the Borrower with computations demonstrating
compliance with the financial covenants contained in Section 6 of this Agreement
and to the effect that, having read this Agreement and the other Loan Documents
and based upon an examination which in the opinion of such officer was
sufficient to enable such officer to make an informed statement, nothing came to
such officer’s attention which would cause such officer to believe that an Event
of Default or Default had occurred, and, if so, stating the facts with respect
thereto and whether the same has been cured prior to the date of such
certificate, and, if not, what action is proposed to be taken with respect
thereto.

(2) As soon as possible, but not more than the earlier of fifty (50) days or
five (5) days after the date specified in SEC regulations for delivery of
quarterly financial statements applicable to the Borrower (the “Quarterly
Delivery Date”) after the close of the first three (3) fiscal quarters of each
year, the Borrower’s Form 10-Q and the financial statements of the Borrower and
its Subsidiaries including consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries with related consolidated and consolidating
statements of income, retained earnings and cash flows as of the last day of and
for such quarter and for the period of the fiscal year ended as of the close of
the particular quarter, all such quarterly statements to be in reasonable
detail, all prepared on a basis consistent with the annual financial statements,
subject to year end adjustments and certified as to fairness of presentation by
the chief financial officer of the Borrower. Such financial statements shall be
accompanied by a certificate signed by the chief financial officer of such
Borrower as specified in paragraph (1) above.

 
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(3) Prompt written notice if: (i) any obligation (other than an obligation under
this Agreement) of the Borrower or any of its Subsidiaries for borrowed money or
for the deferred purchase price of any property is declared or shall become due
and payable prior to its stated maturity, (ii) the holder of any note (other
than a Revolving Credit Note), or other evidence of indebtedness, certificate or
security evidencing any such obligation, has the right to declare such
obligation due and payable prior to its stated maturity, or (iii) to the
knowledge of any officer of the Borrower or any of its Subsidiaries there shall
occur an Event of Default or a Default.

(4) Prompt written notice of: (i) any citation, summons, subpoena, order to show
cause or other order naming the Borrower or any of its Subsidiaries a party to
any proceeding before any governmental body which relates to any of the Loan
Documents or which if adversely determined would have a material adverse effect
on the business, financial condition or operations of the Borrower and its
Subsidiaries taken as a whole, and include with such notice a copy of such
citation, summons, subpoena, order to show cause or other order, (ii) any lapse
or other termination of a license, permit or other authorization issued to the
Borrower or any of its Subsidiaries by any Governmental Authority or Person,
which lapse or other termination would have a material adverse effect on the
property, business, profits or conditions (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (iii) any refusal by any
Governmental Authority or any other Person to renew or extend such license,
permit or other authorization, and (iv) any suit between the Borrower or any of
its Subsidiaries and any Governmental Authority or any other Person or formal
demand made upon the Borrower or any of its Subsidiaries by any Governmental
Authority or any other Person which if adversely determined would have a
material adverse effect on the property, business, profits or conditions
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.

(5) Prompt written notice in the event that: (i) the Borrower or an ERISA
Affiliate shall fail to make any payment when due and payable under any Plan or
(ii) the Borrower or an ERISA Affiliate shall receive notice from the Internal
Revenue Service or the Department of Labor that it shall have failed to meet the
minimum funding requirements of any Plan, and include therewith a copy of such
notice.

(6) Copies of any request for a waiver of the funding standards or any extension
of the amortization periods required by Sections 303 and 304 of ERISA, or
Section 402 of the Internal Revenue Code of 1986, as amended from time to time,
promptly after any such request is submitted to the Department of Labor or the
Internal Revenue Service, as the case may be.

(7) Promptly after a Reportable Event occurs which may result in a termination
of a Plan, or the Borrower or an ERISA Affiliate receives notice that the PBGC
has instituted or intends to institute proceedings under Section 4042 of ERISA
to terminate or appoint a trustee to administer a Plan, a copy of any notice of
such Reportable Event which is filed with the PBGC, or any notice delivered by
the PBGC evidencing its institution of such proceedings or its intent to
institute such proceedings, or any notice to the PBGC that a Plan is to be
terminated, as the case may be.

 
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(8) Promptly upon becoming aware of the occurrence of any Prohibited Transaction
in connection with any Plan, a written notice specifying the nature thereof,
what action the Borrower or an ERISA Affiliate is taking or proposes to take
with respect thereto, and, when known, any action taken by the Internal Revenue
Service or the PBGC with respect thereto.

(9) Promptly after the filing thereof, copies of each annual report required to
be filed pursuant to Section 103 of ERISA and copies of any other reports
required to be filed with respect to any Plan.

(10) Within ten (10) days after the filing thereof, copies of all other periodic
reports which the Borrower or any of its Subsidiaries may now or hereafter be
required to file with or deliver to any securities exchange or to the Securities
and Exchange Commission, or any other Governmental Authority succeeding to the
functions thereof.

(11) At all times relevant hereto the Borrower shall grant reasonable access to
the Administrative Agent and/or its duly authorized representatives or agents,
and cooperate fully with the Administrative Agent in any inspection of the
Borrower’s and its Subsidiaries books and records and all collateral wherever
located (“Field Audit”), provided that, prior to an Event of Default, such Field
Audits will be limited to one in each 12 month period and to a review of
Accounts, Inventory, accounts payable, taxes and insurance of the Borrower and
its Domestic Subsidiaries.

(12) Within twenty (20) days after the close of each month, an accounts
receivable aging report and an accounts receivable concentration report of the
ten (10) largest Account Debtors of the Borrower and its Domestic Subsidiaries
on a combined basis accompanied by a Borrowing Base Certificate.

(13) Promptly upon request therefor, such other information and reports relating
to the financial condition and operations of the Borrower or any of its
Subsidiaries as the Administrative Agent or a Lender at any time or from time to
time may reasonably request.

5.2 Corporate Existence; Continuance of Business. Preserve and maintain its
corporate existence and its rights, privileges and franchises, continue to
engage in substantially the same line of business in which it was engaged on the
date hereof and its right to conduct business in all states in which the nature
of its business requires qualification to do business; provided, however, that
nothing herein shall prevent the dissolution or termination of the existence,
rights, privileges or franchises of a Subsidiary of the Borrower if the Board of
Directors of the Borrower shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower and its
Subsidiaries taken as a whole. In the event of dispute between the Borrower or
any of its Subsidiaries and the Administrative Agent as to when qualification is
necessary, the decision of the Administrative Agent in its reasonable judgment
shall control.

 
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5.3 Payment of Obligations. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income and profits,
or upon any property belonging to it, prior to the date upon which penalties
attach thereto except where contested in good faith and by proper proceedings if
appropriate reserves are maintained with respect thereto in conformity with
GAAP.

5.4 Insurance. Maintain insurance, at all times throughout the term of this
Agreement, on its property with responsible insurance carriers licensed or
authorized to do business in the State of New York and each state in which the
Borrower or any of its Subsidiaries conducts business against such risks, loss,
damage and liability (including liability to third parties) and in such amounts
as is customarily maintained by similar businesses, including, without
limitation, public liability and workers’ compensation insurance, and file with
the Administrative Agent within ten (10) Business Days after request therefor a
certificate of such insurance then in effect on Acord form or other similar form
acceptable to the Administrative Agent.

5.5 Payment of Indebtedness and Performance of Obligations. Pay and discharge
promptly all lawful claims for labor, materials and supplies or otherwise which,
if unpaid, would have a material adverse effect on the operations, business or
financial or other condition of the Borrower and its Subsidiaries taken as a
whole except where contested in good faith and by proper proceedings if
appropriate reserves are maintained with respect thereto in conformity with
GAAP.

5.6 Condition of Property. At all times, maintain, protect and keep in good
repair, working order and condition, normal wear and tear excepted, all property
of the Borrower and its Subsidiaries necessary and useful in the judgment of the
Borrower and its Subsidiaries in connection with the proper conduct of the
business of the Borrower and its Subsidiaries.

5.7 Observance of Legal Requirements. Observe and comply in all respects with
all material laws (including but not limited to ERISA), ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all governmental bodies which now or at any time
hereafter may be applicable to the Borrower or any of its Subsidiaries.

5.8 Books and Records. Keep proper books of record and account.

5.9 Inspection. At any reasonable times and from time to time, upon reasonable
notice permit the Administrative Agent and the Lenders, through officers or
employees or authorized representatives to visit and inspect any of the
properties of the Borrower or any of its Subsidiaries, and to examine the minute
books, books of account, reports and other records of the Borrower and its
Subsidiaries including records relating to the Accounts and Inventory and make
copies thereof or extracts therefrom, and discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries with its principal officers or
with such Borrower’s independent accountants. Such right of inspection shall
encompass the conduct of a Field Audit by the Administrative Agent or its duly
authorized representatives.

 
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5.10 Compliance with Environmental Laws; Indemnity.

(a) Use and operate all of its facilities and properties in material compliance
with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect and remain in material compliance therewith, and handle all
Hazardous Materials in material compliance with all applicable Environmental
Laws;

(b) Immediately notify the Administrative Agent and the Lenders, and provide
copies upon receipt, of all written claims, complaints, notices or inquires
relating to the condition of its facilities and properties relating to, or
compliance with, Environmental Laws, and promptly cure and have dismissed with
prejudice to the satisfaction of the Administrative Agent and the Lenders any
actions and proceedings relating to compliance with Environmental Laws;

(c) Provide such information and certifications which the Administrative Agent
or a Lender may reasonably request from time to time to evidence compliance with
this Section 5.10; and

(d) Indemnify the Administrative Agent and the Lenders for, and hold the
Administrative Agent and the Lenders harmless from, all liability, costs and
expenses (including reasonable attorney’s fees) incurred by, or imposed upon, or
sought to be imposed upon, any Lender arising out of the breach by the Borrower
of any of the covenants set forth in this Section 5.10. Notwithstanding anything
herein contained to the contrary, the provisions of this paragraph shall survive
payment in full of the Revolving Credit Loans.

5.11 New Subsidiaries. Give the Administrative Agent prompt written notice of
the creation, establishment or acquisition, in any manner, of any Subsidiary not
existing on the date of this Agreement. The Borrower (a) shall cause any
Domestic Subsidiary formed after the date of this Agreement to become a
Guarantor of all debts and obligations of the Borrower under this Agreement and
cause such Domestic Subsidiary to execute a Guarantee and a Security Agreement
together with related security agreement questionnaires and UCC-1 financing
statements which shall be acceptable to the Administrative Agent in all respects
and (b) the Borrower or a Domestic Subsidiary of the Borrower, as appropriate,
shall execute a Pledge Agreement in the form provided by counsel to the
Administrative Agent, with respect to not more than 65% of each class of the
capital stock or other equity interest of any First-Tier Subsidiary of such
Person which is or becomes a Foreign Subsidiary formed after the date of this
Agreement to be pledged to the Agent for the pro rata benefit of the Lenders
pursuant to the Pledge Agreement or an amendment thereto and deliver to the
Agent the stock certificates, if any, evidencing the shares or other interests
pledged under such Pledge Agreement together with stock powers executed in
blank. In no event shall the Borrower or a Domestic Subsidiary be required to
pledge any of the assets of a Subsidiary that is a controlled foreign
corporation, as defined in Section 957(a) of the Internal Revenue Code,
including, but not limited to the stock of any Subsidiary held directly or
indirectly by any such Subsidiary. In the case of both (a) and (b) above, within
ten (10) days after the creation, establishment, or acquisition of such
Subsidiary, the Borrower and or a Domestic Subsidiary shall deliver or cause to
be delivered such proof of corporate action, incumbency of officers, opinions of
counsel and other documents as are consistent with those delivered as to each
Subsidiary pursuant to Section 4.1 hereof or as the Administrative Agent shall
request, each in form and substance satisfactory to the Administrative Agent.

 
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5.12 Collection of Accounts.

(a) In the event that the Borrower is in default of (1) the Minimum Excess
Availability covenant contained in Section 6.3 of this Agreement and, provided
there is at least $1.00 of Excess Availability, such default continues for a
period of fifteen (15) days or (2) the provisions of Section 8(a) hereof, after
giving effect to any period of grace, then in each instance and in addition to
any other rights of the Administrative Agent or the Lenders and/or remedies
available to the Administrative Agent under the Loan Documents (y) the
Administrative Agent shall give the Notice of Exclusive Control under the
Control Agreement, for the Borrower’s and the Control Agreement Guarantors’ cash
concentration account(s) at Mellon Bank, N.A. and, in addition, (z) the
Administrative Agent shall (A) require the Borrower to deposit, promptly upon
receipt, all payments on Accounts and all proceeds of other collateral securing
the Revolving Credit Loans in the identical form in which such payments are
made, whether by cash, check or other manner, into the Blocked Account, (B)
cause the Borrower to give notice to all account debtors to deposit all payments
on Accounts, whether by cash, check or other manner, into the Blocked Account,
and (c) give the Notice of Full Dominion under the Blocked Account Agreement.
The Borrower and each Domestic Subsidiary hereby agree that all payments made to
the Blocked Account or other funds received and collected by the Administrative
Agent, whether on the Accounts or as proceeds of other collateral or otherwise,
shall be the property of the Administrative Agent for the pro rata benefit of
the Lenders. Neither the Borrower nor any Domestic Subsidiary shall be entitled
to make withdrawals from the Blocked Account except in accordance with the terms
of the Blocked Account Agreement.

(b) Such payments or other funds received pursuant to Section 5.12(a) hereof
will be applied (conditional upon final collection) in the manner specified in
the Blocked Account Agreement.

(c) In the event that subsection (a) is applicable, the Borrower and all of its
Affiliates, Subsidiaries, shareholders, directors, employees or agents shall,
acting as trustee for the Administrative Agent, receive, as the property of the
Administrative Agent for the pro rata benefit of the Lenders, any monies,
checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts or other collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Account, or otherwise remit the same or cause the
same to be remitted, in kind, to the Administrative Agent. In no event shall the
same be commingled with any of the Borrower’s own funds.

(d)  If there has occurred a Full Dominion Effective Date as defined in and
provided for in the Blocked Account Agreement due to a violation of Section 6.3
hereof, the Administrative Agent’s control over the Blocked Account will remain
in effect until such time as the Borrower has maintained Minimum Excess
Availability, as defined in Section 6.3 hereof, for a consecutive two (2) month
period as reflected in the Borrowing Base Certificates delivered pursuant to
Section 5.1 (12) hereof. Upon satisfaction of such condition the Administrative
Agent shall give the Notice of Termination of Exclusive Control under the
Control Agreement and give the Notice of Termination of Full Dominion under the
Blocked Account Agreement.

 
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5.13 Cash Concentration Accounts. Maintain and cause its Domestic Subsidiaries
to maintain any cash concentration accounts subject to the Lien of the
Administrative Agent and in furtherance thereof enter into and maintain the
Control Agreement.

SECTION 6. FINANCIAL COVENANTS

The Borrower hereby agrees that, so long as the Revolving Credit Commitments
remain in effect, a Revolving Credit Note or any Letter of Credit remains
outstanding and unpaid, or any other amount is owing to the Administrative Agent
or a Lender hereunder, the Borrower and its Subsidiaries, on a consolidated
basis, will comply with the following financial covenants:

6.1 Capital Base. Maintain a minimum Capital Base, as defined herein, as at
11/30/06 and at the end of each fiscal quarter thereafter of at least the sum of
$133,997,000 plus 75% of cumulative consolidated quarterly net income of the
Borrower and its Subsidiaries after 11/30/06. In addition, 75% of the net
proceeds received by the Borrower or its Subsidiaries from any equity offering
will be added to the applicable Capital Base amount required as set forth above
for the next succeeding fiscal quarter and in each fiscal quarter thereafter.
Net losses, if any, will not be deducted from the applicable calculation of
Capital Base. Capital Base shall mean for the Borrower and its Subsidiaries on a
consolidated basis the sum of Tangible Net Worth plus Subordinated Debt.

6.2 Domestic Capital Base. Maintain a minimum Domestic Capital Base, as defined
herein, as at 11/30/06 and at the end of each fiscal quarter thereafter of at
least the sum of $112,783,000 plus 75% of cumulative consolidated quarterly net
income of the Borrower and its Domestic Subsidiaries after 11/30/06. In
addition, 75% of the net proceeds received by the Borrower or its Domestic
Subsidiaries from any equity offering will be added to the applicable Domestic
Capital Base amount required as set forth above for the next succeeding fiscal
quarter and in each fiscal quarter thereafter. Net losses, if any, will not be
deducted from the applicable calculation of Domestic Capital Base. Domestic
Capital Base shall mean for the Borrower and its Domestic Subsidiaries on a
consolidated basis the sum of Tangible Net Worth plus Subordinated Debt, in each
case, of the Borrower and its Domestic Subsidiaries.

6.3 Minimum Excess Availability. Maintain at all times an Excess Availability,
as herein defined, of $7,500,000. Excess Availability means the amount of
Revolving Credit Loans which would be available if the Borrowing Base was
calculated without giving effect to the limitations on the maximum amount of
same imposed by reference to the definition of Total Revolving Credit
Commitments, less the sum of the amounts of Revolving Credit Loans outstanding
and the Letter of Credit Exposure.

6.4 Maximum Net Loss. Not incur a net loss as of the end of each fiscal quarter
for the rolling four fiscal quarters then ended.

 
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6.5 Capital Expenditures. As at the end of each fiscal quarter, not make Capital
Expenditures of more than $3,000,000 for the rolling four quarters then ended.
Capital Expenditures means the aggregate amount of expenditures (including
purchase money indebtedness and purchase money Liens) for assets (including
fixed assets acquired under Capital Leases) which it is contemplated will be
used or usable in fiscal years subsequent to the fiscal year of acquisition.
Notwithstanding the foregoing, up to an aggregate amount of $5,000,000 of
Capital Expenditures used for machinery, equipment or leasehold improvements
associated with the Borrower’s or any of its Subsidiaries’ proposed new leased
warehouse (“New Warehouse CapEx”) shall be excluded for purposes of calculating
compliance with this covenant.

Except as specifically otherwise provided, all financial covenants shall be
calculated in accordance with GAAP consistently applied.

SECTION 7. NEGATIVE COVENANTS

The Borrower hereby agrees that, so long as the Revolving Credit Commitments
remain in effect, a Revolving Credit Note or any Letter of Credit remains
outstanding and unpaid, or any other amount is owing to a Lender hereunder, the
Borrower will not, nor will it permit any Subsidiary to:

7.1 Indebtedness for Borrowed Money. Incur, or permit to exist, any indebtedness
for borrowed money except (i) indebtedness incurred pursuant to borrowings or
other extensions of credit hereunder, (ii) purchase money indebtedness (y)
secured by Liens described in Section 7.2(iv) hereof which has an annual debt
service requirement of not more than $8,000,000 in the aggregate inclusive of
the annual amounts expended by the Borrower for operating leases pursuant to
Section 7.7 hereof and (z) incurred in connection with New Warehouse CapEx, as
defined in Section 6.5 hereof, (iii) indebtedness existing on the date of this
Agreement and reflected in the financial statements referred to in Section 3.1
hereof and extensions, renewals and refinancings thereof (without increase in
principal amount), (iv) indebtedness incurred in the ordinary course of business
inclusive of trade payables but exclusive of that incurred in the borrowing of
money and provided such trade payables shall be paid or discharged when due
unless same are included as loans by the Borrower under Section 7.3(vii) hereof,
(v) Subordinated Indebtedness, (vi) indebtedness incurred by the Foreign
Subsidiaries to institutional lenders not to exceed (x) $30,000,000 in the
aggregate outstanding prior to the effective date of the DT Electronics Limited
Acquisition referred to in the Third Amendment of the Prior Agreement, (y)
$35,000,000 in the aggregate prior to the date of this Agreement and (z)
$40,000,000 in the aggregate after the date of this Agreement, and (vii) other
indebtedness which shall not exceed in the aggregate for the Borrower and all
Domestic Subsidiaries, at any time outstanding, the sum of $1,000,000.

7.2 Liens. Create, assume or permit to exist any Lien on any of its property or
assets now owned or hereafter acquired except (i) Liens in favor of the
Administrative Agent for the benefit of the Lenders; (ii) other Liens incidental
to the conduct of its business or the ownership of its property and assets which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not materially impair the use thereof in the
operation of its business; (iii) Liens for taxes or other governmental charges
which are not delinquent or which are being contested in good faith and for
which a reserve shall have been established in accordance with GAAP; (iv)
purchase money Liens on fixed assets granted to secure either the unpaid balance
of the purchase price thereof or a loan made to finance the purchase of such
assets, all to the extent permitted under Section 7.1(ii)(y) and (z) hereof; (v)
Liens existing on the date hereof and disclosed in writing to the Lenders as
indicated on Schedule II hereto and (vi) Liens attaching to the property of the
Foreign Subsidiaries securing indebtedness of the Foreign Subsidiaries permitted
by Section 7.1 (vi) hereof.

 
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7.3 Loans and Investments. Lend or advance money, credit or property to or
invest in (by capital contribution, loan, purchase or otherwise) any firm,
corporation, or other Person except (i) investments in United States Government
obligations, certificates of deposit of any banking institution with combined
capital and surplus of at least $200,000,000 and commercial paper of the highest
credit rating given by Moody’s Investors Service, Inc. or Standard and Poor’s
Ratings Services, (ii) the Borrower may make loans provided that the aggregate
thereof at any time outstanding and owing by any one Person shall not exceed
$200,000, (iii) investments in stocks, securities or assets of other Persons
which qualify as a Permitted Acquisition, (iv) the purchase of up to $1,000,000
of the stock of the Borrower on behalf of the ESOP valued at the market price at
the time of such purchase, (v) investments in stocks, securities or assets of
other corporations not meeting the requirements of subsection (iii) above, so
long as such corporation is in the electronics or high tech business; provided,
however, that (1) the aggregate of such investments shall not exceed $1,000,000
and (2) such corporation is organized under the laws of any state of the United
States of America, (vi) the purchase of not more than an aggregate of $4,000,000
of minority interests in the Borrower’s Foreign Subsidiaries pursuant to and in
accordance with the terms of the shareholder agreements of such Foreign
Subsidiaries (a “Minority Interest Purchase”) and (vii) investments by the
Borrower and its Domestic Subsidiaries in stocks, securities or assets of
Foreign Subsidiaries or loans to Foreign Subsidiaries provided that such
investments and loans together with the guarantees permitted by Section 7.5
(iii) hereof do not exceed $70,000,000 in the aggregate reduced by any amount
utilized for any Minority Interest Purchase under subsection (vi) above.

7.4 Fundamental Changes. Wind up, liquidate, or dissolve itself, reorganize,
merge or consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of (whether in one transaction or a series of transactions)
all or substantially all of its assets, (whether now owned or hereafter acquired
other than sales of inventory and obsolete equipment in the ordinary course of
business) to any Person, or, except with respect to a Permitted Acquisition,
acquire all or substantially all of the assets or the business of any Person
except: a wholly owned Subsidiary of the Borrower may merge into or consolidate
with (1) a wholly owned Subsidiary of the Borrower or (2) the Borrower, provided
that no Foreign Subsidiary shall merge with and into another Foreign Subsidiary
if 65% of the shares or other ownership interests of the surviving Subsidiary
cannot be pledged to the Administrative Agent for the benefit of the Lenders,
provided further that in each case that immediately after giving effect thereto,
the surviving entity is obligated under this Agreement and no event shall occur
and be continuing which constitutes a Default or an Event of Default.

7.5 Contingent Liabilities. Assume, endorse, be or become liable for or
guarantee the obligations of any Person if, as a result thereof, the aggregate
of such contingent liabilities with respect to any one Person would exceed
$100,000 excluding, however, (i) the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business, (ii) guarantees given
by the Borrower for obligations of its Domestic Subsidiaries and guarantees
given by Domestic Subsidiaries for the obligations of the Borrower and (iii)
guarantees by the Borrower and its Foreign Subsidiaries for obligations of
Foreign Subsidiaries permitted by Section 7.1 (vi) hereof provided that such
obligations together with investments and loans permitted by Section 7.3 (vii)
and Minority Interest Purchases permitted by Section 7.3 (vi) do not exceed
$70,000,000 in the aggregate and such guarantees are not secured by any property
of the Borrower or its Domestic Subsidiaries. Solely for purposes of calculating
compliance with the provisions of (iii) above, the guaranteed amount pursuant to
guarantees by the Borrower and/or one or more guarantors of the same
indebtedness obligations shall only be counted once.

 
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7.6 Sales of Receivables; Sale - Leasebacks. Sell, discount or otherwise dispose
of notes, accounts receivable or other obligations owing to the Borrower or its
Domestic Subsidiaries, with or without recourse, except for the purpose of
collection in the ordinary course of business; or sell any asset pursuant to an
arrangement to thereafter lease such asset from the purchaser thereof.

7.7 Lease Payments. Expend in the aggregate for the Borrower and all
Subsidiaries in excess of $8,000,000 in any fiscal year for the lease, rental or
hire of real or personal property provided the limitation shall exclude leases
that have been or should be capitalized in accordance with GAAP.

7.8 Dividends. Declare or pay any dividends on its capital stock (other than
dividends payable solely in shares of its own common stock), or purchase,
redeem, retire or otherwise acquire any of its capital stock at any time
outstanding, except that (i) the Borrower may purchase shares of its own common
stock in an aggregate cumulative amount during the Commitment Period not to
exceed $4,000,000 valued at the market price at the time of such purchase,
excluding from such amount any purchase price of shares acquired by an employee
stock ownership plan formed by the Borrower, (ii) any Subsidiary wholly-owned by
the Borrower may declare and pay dividends to, and purchase, redeem, retire and
otherwise acquire its capital stock from, the Borrower so long as such
Subsidiary remains a wholly-owned Subsidiary of the Borrower, (iii) the Borrower
may make Minority Interest Purchases within the limitations of Section 7.3(vi)
hereof and (iv) the Borrower may declare and pay cash dividends for each fiscal
year solely out of 25% of consolidated net income based upon the most recent
financial statements delivered pursuant to Section 5.1(1) hereof for the
immediately preceding fiscal year.

7.9 Supply and Purchase Contracts. Enter into or be a party to any contract for
the purchase of materials, supplies or other property if such contract requires
that payment for such materials, supplies or other property be made whether or
not delivery of such materials, supplies or other property is ever made or
tendered.

7.10 Nature of Business. Materially alter the nature of the Borrower’s or a
Subsidiary of the Borrower’s business.

7.11 Stock of Subsidiaries. Sell or otherwise dispose of any Subsidiary of the
Borrower (except in connection with a merger or consolidation of a Subsidiary of
the Borrower into the Borrower or another such Subsidiary or with the
dissolution of a Subsidiary of the Borrower) or permit a Subsidiary of the
Borrower to issue any additional shares of its capital stock except pro rata to
its stockholders and except for the sale of an additional 10% of the shares of
NIC Eurotech Limited to Nippon Industries Co. Ltd.

 
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7.12 Transactions with Affiliates. Except for existing employment agreements and
any stock options or warrants and Minority Interest Purchases within the
limitations of Section 7.3(vi) hereof or except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower’s or any of its
Subsidiaries’ business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary than would obtain in a comparable arms’ length
transaction with a Person not an Affiliate, enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate. “Affiliate” shall mean a
Person (1) which directly or indirectly controls, or is controlled by, or is
under common control with the Borrower or any of its Subsidiaries, (2) which
directly or indirectly beneficially owns or holds five (5%) percent or more of
any class of voting stock of the Borrower or any of its Subsidiaries, or (3)
five (5%) percent or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or any of its Subsidiaries. The term
“control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise.

7.13 ERISA. (a) Terminate and Plan so as to result in any material liability of
the Borrower or any Subsidiary to the PBGC, (b) engage in or permit any Person
to engage in any prohibited Transaction involving any Plan which would subject
the Borrower or any of its Subsidiaries to any material tax, penalty or other
liability, (c) incur or suffer to exist any material “accumulated funding
deficiency” (as defined in Section 202 of ERISA), whether or not waived,
involving any Plan, or (d) allow or suffer to exist any event or condition,
which presents a material risk of incurring a material liability of the borrower
or any Subsidiary to the PBGC by reason of termination of any Plan.

7.14 Change of Management. Permit Arthur Nadata and Richard Schuster at any time
not to be active on a substantially full time basis in the affairs of the
Borrower by maintaining the positions of Chairman and Chief Executive Officer
and President/Chief Operating Officer and Secretary, respectively, or their
equivalents, provided that the failure of one of such individuals to comply with
this Section 7.14 shall not be deemed a violation.

SECTION 8. EVENTS OF DEFAULT

Upon the occurrence of any of the following events (each an “Event of Default”):

(a) The Borrower shall fail to pay within five (5) days of the due date thereof
any interest under or principal of any Revolving Credit Note; any other amount
payable hereunder including, without limitation, amounts necessary to pay to the
Issuing Lender the amount of a draw under a Letter of Credit or the Borrower
shall default under any other agreement, instrument or obligation made with or
in favor of or owing to the Administrative Agent or a Lender (including any
applicable grace period or notice requirement); provided, however, that the
five-day grace period provided in this paragraph for payment of interest and
principal under the Revolving Credit Notes and for obligations with respect to
Letters of Credit shall not affect the obligation of the Borrower to pay
interest for such period at the rate in effect prior to maturity with respect to
payments due under the Revolving Credit Notes and at the rates provided in
Section 2.19 hereof with respect to Letters of Credit; or

 
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(b) Any representation or warranty made or deemed made by the Borrower herein or
which is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall prove to
have been false in any material respect on or as of the date made or deemed made
or furnished; or

(c)  The Borrower shall default in the observance or performance of any of its
agreement set forth in Sections 5.11, 6 (other than Section 6.3 unless there is
less than $1.00 of Excess Availability) or 7 hereof; or

(d) The Borrower shall default in the observance or performance of any other
agreement contained in this Agreement and such default shall continue unremedied
for a period of ten (10) days after written notice thereof is given to the
Borrower by the Administrative Agent; or

(e) With respect to any indebtedness for borrowed money, which indebtedness is
in an outstanding principal amount in excess of Five Hundred Thousand and 00/100
($500,000) Dollars (other than the Revolving Credit Notes), the Borrower or any
Subsidiary of the Borrower shall (i) default in any payment of any such
indebtedness beyond the grace period, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition exist,
in each case the effect of which default or other event or condition is to
entitle the holder or holders of such indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause such indebtedness to become due prior
to its stated maturity; or

(f) (i) The Borrower or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall have not been vacated,
discharged, or stayed or bonded pending appeal within twenty (20) days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) of this
Section 8(f); or (v) the Borrower or any of its Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or

 
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(g) Any of the following events occur or exist with respect to the Borrower or
an ERISA Affiliate: (1) any Prohibited Transaction involving any Plan, (2) any
Reportable Event shall occur with respect to any Plan, (3) a notice of intent to
terminate any Plan shall be filed or the termination of any Plan, (4) any event
or circumstance exists which might constitute grounds entitling the PBGC to
institute proceedings for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings, or (5) the complete or partial withdrawal from any Multiemployer
Plan, and in each case above, such event or condition, together with all other
events or conditions listed above, if any, would reasonably be expected to
subject the Borrower or any Subsidiary of the Borrower to any tax, penalty, or
other liability to a Plan, the PBGC or otherwise (or a combination thereof)
which in the aggregate exceeds or may exceed One Hundred Thousand and 00/100
($100,000) Dollars; or

(h) The rendition by any court of a final judgment or judgments against the
Borrower or any of its Subsidiaries which shall not be satisfactorily stayed,
discharged, vacated or set aside within sixty (60) days of the making thereof;
or the attachment of any property of the Borrower or any of its Subsidiaries
which has not been released or provided for to the reasonable satisfaction of
the Administrative Agent within sixty (60) days after the making thereof, which
judgment or attachment is for an amount of One Hundred Thousand and 00/100
($100,000) or more; or

(i) A Loan Document shall cease, for any reason, to be in full force and effect
or shall be declared null and void, a default shall occur thereunder or any
party thereto shall assert that it has no further obligation to a Lender or the
Administrative Agent thereunder (unless such party has been discharged from such
obligation under such Loan Document by such Lender or the Administrative Agent
in writing) or any Security Agreement or any Pledge Agreement shall for any
reason, except to the extent permitted by this Agreement or any other Loan
Document, cease to create, or the Administrative Agent (for any reason other
than termination or release as permitted by this Agreement) shall cease to have,
for the benefit of itself and the ratable benefit of the Lenders, a valid,
enforceable and perfected first priority security interest in the Collateral (as
defined therein) or any portion thereof, then, in any such event, any or all of
the following actions shall be taken: (i) the Administrative Agent with the
written consent of the Required Lenders may, and upon the written request of the
Required Lenders shall, by notice of default to the Borrower, declare the
Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving
Credit Commitments and all obligations of the Lenders to make Revolving Credit
Loans or issue Letters of Credit, shall immediately terminate; (ii) the
Administrative Agent with the written consent of the Required Lenders may, and
upon the written request of the Required Lenders shall, by notice of default to
the Borrower, declare the entire amounts due under the Revolving Credit Notes
(with accrued interest thereon) and all other amounts owing under this Agreement
to be immediately due and payable; provided, however, that upon the happening of
an event specified in subsection (f) of this Section 8, the obligation of the
Lenders to make further Revolving Credit Loans and the Issuing Lender to issue
Letters of Credit shall terminate and the Revolving Credit Notes and all other
amounts owing under this Agreement shall be immediately due and payable without
declaration or other notice to the Borrower. Except as expressly provided above
in this Section, presentment, demand, protest and all other notices of any kind
are hereby expressly waived.

 
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SECTION 9. ADMINISTRATIVE AGENT

In order to expedite the transactions contemplated by this Agreement, Citibank,
N.A. is hereby appointed to act as Administrative Agent on behalf of the
Lenders. Each of the Lenders and each subse-quent holder of any Revolving Credit
Note or issuer of any Letter of Credit, irrevocably authorizes the
Administrative Agent to take such action on its behalf and to exercise such
powers hereunder and under the other Loan Documents as are specifically
delegated to or required of the Administrative Agent by the terms hereof and the
terms thereof together with such powers as are reasonably incidental thereto.
Neither the Administrative Agent nor any of its directors, officers, employees
or Administrative Agents shall be liable as such for any action taken or omitted
to be taken by it or them hereunder or under any of the other Loan Documents or
in connection herewith or therewith (a) at the request or with the approval of
the Required Lenders (or, if otherwise specifically required hereunder or
thereunder, the consent of the Lenders) or (b) in the absence of its or their
own gross negligence or willful misconduct.

The Administrative Agent is hereby expressly authorized on behalf of the
Lenders, without hereby limiting any implied authority, and the Administrative
Agent hereby agrees, (a) to receive on behalf of each of the Lenders any payment
of principal of or interest on the Revolving Credit Notes outstanding hereunder
and all other amounts accrued hereunder paid to the Administrative Agent, and
promptly to distribute to each Lender its proper share of all payments so
received, (b) to distribute to each Lender copies of all notices, agreements and
other material as provided for in this Agreement or in the other Loan Documents
as received by the Administrative Agent and (c) to take all actions with respect
to this Agreement and the other Loan Documents as are specifically delegated to
the Administrative Agent.

In the event that (a) the Borrower fails to pay when due the principal of or
interest on any Revolving Credit Note, any amount payable under any Letter of
Credit, or any fee payable hereunder or (b) the Administrative Agent receives
written notice of the occurrence of a Default or an Event of Default, the
Administrative Agent within a reasonable time shall give written notice thereof
to the Lenders; and shall take such action with respect to such Event of Default
or other condition or event as it shall be directed to take by the Required
Lenders or all Lenders, as applicable hereunder; provided, however, that, unless
and until the Administrative Agent shall have received such directions, the
Administrative Agent may take such action or refrain from taking such action
hereunder or under any other Loan Documents with respect to a Default or Event
of Default as it shall deem advisable in the best interests of the Lenders.

The Administrative Agent shall not be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, perfection, value, genuineness,
validity or due execution of this Agreement, the Revolving Credit Notes or any
of the other Loan Documents or any other agreements or certificates, requests,
financial statements, notices or opinions of counsel or for any recitals,
statements, warranties or representations contained herein or in any such
instrument or be under any obligation to ascertain or inquire as to the
performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any of the other Loan
Documents or any other agreements on a part of the Borrower and, without
limiting the generality of the foregoing, the Administrative Agent shall, in the
absence of knowledge to the contrary, be entitled to accept in good faith any
certificate furnished pursuant to this Agreement or any of the other Loan
Documents as conclusive evidence of the facts stated therein and shall be
entitled to rely in good faith on any note, notice, consent, certificate,
affidavit, letter, telegram, teletype message, statement, order or other
document which it believes in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. It is understood and agreed
that the Lender which is the Administrative Agent may exercise its rights and
powers under other agreements and instruments to which it is or may be a party,
and engage in other transactions with the Borrower, as though it were not
Administrative Agent of the Lenders hereunder.

 
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The Administrative Agent shall promptly give notice to the Lenders of the
receipt or sending of any notice, schedule, report, projec-tion, financial
statement or other document or information pursuant to this Agreement or any of
the other Loan Documents and shall promptly forward a copy thereof to each
Lender.

Neither the Administrative Agent nor any of its directors, officers, employees
or agents shall have any responsibility to the Borrower on account of the
failure or delay in performance or breach by any Lender of any of its
obligations hereunder or to any Lender on account of the failure of or delay in
performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or in connection herewith.

The Administrative Agent may consult with legal counsel selected by it with
reasonable care in connection with matters arising under this Agreement or any
of the other Loan Documents and any action taken or suffered in good faith by it
in accordance with the opinion of such counsel shall be full justification and
protection to it. The Administrative Agent may exercise any of its powers and
rights and perform any duty under this Agreement or any of the other Loan
Documents through agents or attorneys.

The Administrative Agent and the Borrower may deem and treat the payee or most
recent assignee pursuant to Section 10.3 hereof, as applicable, of any Revolving
Credit Note as the holder thereof until written notice of transfer shall have
been delivered as provided in Section 10.3 hereof by such payee to the
Administrative Agent and the Borrower.

With respect to the Revolving Credit Loans made hereunder, the Revolving Credit
Notes issued to it and any other extension of credit applicable to it, the
Lender which is the Administrative Agent in its individual capacity as the
Issuing Lender or Lender and not as an Administrative Agent shall have the same
rights, powers and duties hereunder and under any other agreement executed in
connection herewith as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the Lender which is the Administrative
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or other affiliate thereof as
if it were not the Administrative Agent.

 
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Each Lender agrees (i) to reimburse the Administrative Agent in the amount of
such Lender’s pro rata share (based on its Revolving Credit Commitment
hereunder) of any reasonable out-of-pocket expenses incurred for the benefit of
the Lenders by the Administrative Agent, including reasonable fees and
disbursements of counsel to the Administrative Agent and compensation of agents
and employees paid for services rendered on behalf of the Lenders, not
reimbursed by the Borrower pursuant to Section 10.4 hereof and (ii) to indemnify
and hold harmless the Administrative Agent and any of its directors, officers,
employees or agents, on demand, in the amount of its pro rata share (based on
its Revolving Credit Commitment hereunder), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or any of them in any way relating to or arising out of
this Agreement or any of the other Loan Documents or any action taken or omitted
by it or any of them under this Agreement or any of the other Loan Documents, to
the extent not reimbursed by the Borrower pursuant to Section 10.4 hereof;
provided, however, that no Lender shall be liable to the Administrative Agent
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of the Administrative Agent or any of its
directors, officers, employees or agents.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is a party. Each Lender also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document, any related agreement or any
document furnished hereunder.

No Lender identified in this Agreement as the Documentation Agent or as a
Syndication Agent shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of such Lenders shall have
or be deemed to have a fiduciary relationship with any other Lender. Each Lender
hereby makes the same acknowledgments with respect to such Lenders as it makes
with respect to the Administrative Agent in the preceding paragraph.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by notifying the
Lenders and the Borrower. Upon any such resignation, the Lenders shall have the
right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by such Lenders and shall have
accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a Lender with an office (or an affiliate
with an office) in the New York metropolitan area having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor, such successor shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder and under each of the
other Loan Documents. After any Administrative Agent’s resignation hereunder,
the provisions of this Article shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.

 
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The Lenders hereby acknowledge that the Administrative Agent shall be under no
duty to take any discretionary action permitted to be taken by the
Administrative Agent pursuant to the provisions of this Agreement or any of the
other Loan Documents unless it shall be requested in writing to do so by the
Required Lenders.

SECTION 10. MISCELLANEOUS

10.1 Notices. Notices, consents and other communications provided for herein
shall be in writing and shall be delivered or mailed (or in the case of telex or
facsimile communication, delivered by telex, telecopier or other
telecommunications equipment, with receipt confirmed) addressed:

(a) if to the Borrower, any Guarantor or any of their respective subsidiaries at
Nu Horizons Electronics Corp., 70 Maxess Road, Melville, New York 11747, Attn.:
Mr. Kurt Freudenberg, Vice President, Treasurer and Chief Financial Officer with
a copy to Farrell Fritz, P.C. 1320 Reckson Plaza, Uniondale, New York
11556-1320, Attn: Nancy D. Lieberman, Esq.

(b) if to the Administrative Agent, at Citibank, N.A., 730 Veterans Memorial
Highway, Hauppauge, New York, 11788, Attn: Mr. Stuart N. Berman, Vice President.
 
(c) if to any Lender at the address set forth on the signature pages to this
Agreement.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or three (3) Business Days after being sent by
registered or certified mail, postage prepaid, return receipt requested, if by
mail, or upon receipt during normal business hours on any Business Day (or
otherwise the next Business Day) if by any telex, facsimile or other
telecommunications equipment, in each case addressed to such party as provided
in this Section 10.1 or in accordance with the latest unrevoked direction from
such party.

10.2 Survival of Agreement. All covenants, agreements, representations and
warranties made by the Borrower or any of its Subsidiaries herein and in the
other Loan Documents and the certificates or other instruments prepared or
delivered in connection with this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders and shall survive the making
by the Lenders of the Revolving Credit Loans and the execution and delivery to
the Lenders of the Revolving Credit Notes and the occurrence of any other
extension of credit and shall continue in full force and effect as long as the
principal of or any accrued interest on the Revolving Credit Notes or any other
fee or amount payable under the Revolving Credit Notes or this Agreement or any
other Loan Document is outstanding and unpaid and so long as any Lender’s
Revolving Credit Commitment has not been terminated.

 
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10.3 Successors and Assigns: Participations.

(a) Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf the Borrower, any
Guarantor, any ERISA Affiliate, any Subsidiary of any thereof, the
Administrative Agent or the Lenders, that are contained in this Agreement shall
bind and inure to the benefit of such Persons and their respective successors
and assigns. Without limiting the generality of the foregoing, the Borrower
specifically confirms that the Administrative Agent and each Lender may at any
time and from time to time assign or pledge or otherwise grant a security
interest in any Revolving Credit Loan or any Revolving Credit Note (or any part
thereof) to any Federal Reserve Bank. The Borrower may not assign or transfer
any of its rights or obligations hereunder without the written consent of all
the Lenders and any such assignment or transfer without such consent shall be
null and void.

(b) Each Lender, without the consent of the Borrower, may sell participations to
one or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Credit Commitment and the Revolving Credit Loans owing
to it and undrawn Letters of Credit and the Revolving Credit Notes held by it);
provided, however, that (i) such Lender’s obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the banks or other
entities buying participations shall be entitled to the cost protection
provisions contained in Sections 2.7 and 2.9 hereof (except to the extent that
application of such Section 2.9 to such banks and other entities would cause the
Borrower to make duplicate payments thereunder), and (iv) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.

(c) Each Lender may assign by novation as of the date of assignment, to any one
or more Lenders or other entities with the consent of the Borrower (which
consent shall be given in its sole discretion unless the Administrative Agent
waives its additional fee for the assignment to such Lender or Lenders in which
case consent will not be unreasonably withheld) and the Administrative Agent
(which consent will not be unreasonably withheld) (except that in the case of an
assignment by a Lender to one of its Affiliates or to another Lender no such
consent of the Administrative Agent or the Borrower shall be required), all or a
portion of its interests, rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, all or a portion of its
Revolving Credit Commitment and the same portion of the Revolving Credit Loans
and undrawn Letters of Credit at the time owing to it and the Revolving Credit
Notes held by it), provided, however, that (i) each such assignment shall be of
a constant, and not a varying, percentage of all of the assigning Lender’s
rights and obligations under this Agreement, which shall include the same
percentage interest in the Revolving Credit Loans, Letters of Credit and
Revolving Credit Notes, (ii) the amount of the Revolving Credit Commitment of
the assigning Lender being assigned pursuant to each such assignment (determined
as of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall be in a minimum principal amount of
$5,000,000 and (iii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register (as defined below), an assignment and acceptance in form and substance
acceptable to the Administrative Agent (an “Assignment and Acceptance”),
together with any Revolving Credit Note subject to such assignment and a
processing and recordation fee of $2,500 payable by the assigning Lender. Upon
such execution, delivery, acceptance and recording and after receipt of the
written consent of the Administrative Agent, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and under the other Loan Documents and (y) the Lender which is assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement,
such Lender shall cease to be a party hereto and thereto except in respect of
Sections 2.9 and 10.4 hereof for the period prior to the effective date
thereof).

 
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(d) By executing and delivering an Assignment and Acceptance, the Lender which
is assignor thereunder and the assignee thereunder confirm to, and agree with,
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim created
by it, such assignor Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto or the
execution, legality, validity, enforceability, perfection, genuineness,
sufficiency or value of this Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (ii) such Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower, any Guarantor or any Subsidiary of
any thereof or the performance or observance by the Borrower, any Guarantor or
any Subsidiary of any thereof of any of their respective obligations under this
Agreement or any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee confirms that it has
received a copy of this Agreement and the other Loan Documents, together with
copies of financial statements and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such Lender or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as the Administrative Agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.

 
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(e) The Administrative Agent shall maintain at its address referred to in
Section 10.1 hereof a copy of each Assignment and Acceptance delivered to it and
a register for the recordation of the names and addresses of the Lenders and the
Revolving Credit Commitment of, and principal amount of the Revolving Credit
Loans and other extensions of credit owing to, each Lender from time to time
(the “Register”). The entries in the Register shall be conclusive, in the
absence of manifest error or written notice to the contrary delivered in
accordance with this Agreement, and the Borrower, the Administrative Agent and
the Lenders may treat each Person whose name is so recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.

(f) Upon its receipt of an Assignment and Acceptance executed by an assigning
Lender and an assignee together with any Revolving Credit Note subject to such
assignment and the written consent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Lenders and the Borrower. Within five (5) Business Days after receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for each surrendered Revolving Credit Note or
Revolving Credit Notes a new Revolving Credit Note to the order of such assignee
in an amount equal to the Revolving Credit Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained any
Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order
of the assigning Lender in an amount equal to the Revolving Credit Commitment
retained by it hereunder. Such new Revolving Credit Note shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Revolving Credit Note, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit C hereto.

(g) Notwithstanding any other provision herein, any Lender may, in connection
with any assignment or participation or proposed assignment or participation
pursuant to this Sec-tion 10.3, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the Borrower, any
Guarantor or any Subsidiary of any thereof furnished to such Lender by or on
behalf of the Borrower, such Guarantor or such Subsidiary in connection with
this Agreement; provided, however, that prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information relating to the
Borrower, any Guarantor or any Subsidiary of any thereof received from such
Lender.

10.4 Expenses; Indemnity.

(a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by
the Administrative Agent in connection with the preparation of this Agreement,
the Revolving Credit Notes and the other Loan Documents or with any amendments,
modifications or waivers of the provisions hereof or thereof or incurred by the
Administrative Agent or any of the Lenders in connection with the enforcement,
adjudication or protection of its rights in connection with this Agreement or
any of the other Loan Documents or with the Revolving Credit Loans made or the
Revolving Credit Notes or Letters of Credit issued hereunder or the use of
proceeds therefrom, or in connection with any pending or threatened action,
proceeding, or investigation relating to the foregoing, including but not
limited to the reasonable fees and disbursements of counsel for the
Administrative Agent and, in connection with such enforcement or protection, the
reasonable fees and disbursements of counsel for the Lenders. The Borrower also
agrees to pay the Administrative Agent an annual fee for acting as same in
accordance with the terms of a side letter between the Borrower and the
Administrative Agent. In connection with Field Audits, the Borrower agrees to
pay the out of pocket expenses and costs incurred by the Administrative Agent in
conducting periodic Field Audits, provided however, that so long as no Event of
Default has occurred and is continuing the costs and expenses of any Field Audit
required by Section 5.1, shall not exceed $10,000 per annum. The Borrower
further indemnifies the Lenders from and agrees to hold them harmless against
any documentary taxes, assessments or charges made by any governmental authority
by reason of the execution and delivery of this Agreement or the Revolving
Credit Notes.

 
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(b) The provisions of this Section 10.4 shall remain operative and in full force
and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Revolving Credit Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Revolving Credit Notes, or any investigation
made by or on behalf of the Administrative Agent or any Lender. All amounts due
under this Section 10.4 shall be payable on written demand therefor.

10.5 Applicable Law. THIS AGREEMENT AND THE REVOLVING CREDIT NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

10.6 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender shall and is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower or any Guarantor against any and all of
the obligations of the Borrower now or hereafter existing under this Agreement
and the Revolving Credit Notes held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement or the Revolving
Credit Notes and although such obligations may be unmatured. Each Lender agrees
to notify promptly the Administrative Agent and the Borrower and any applicable
Guarantor after any such setoff and application made by such Lender, but the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which may be available to such Lender.

10.7 Payments on Business Days. Should the principal of or interest on the
Revolving Credit Notes or any fee or other amount payable hereunder become due
and payable on other than a Business Day, payment in respect thereof may be made
on the next succeeding Business Day (except as otherwise specified in the
definition of “Interest Period”), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment and
fees payable hereunder.

 
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10.8 Waivers; Amendments.

(a) No failure or delay of any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such right or power, pre-clude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the Lenders
hereunder are cumulative and not exclusive of any rights or remedies which they
may otherwise have. No waiver of any provision of this Agreement or the
Revolving Credit Notes nor consent to any departure by the Borrower therefrom
shall in any event be effective unless the same shall be authorized as provided
in paragraph (b) below, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice to or
demand on the Borrower in any case shall entitle it to any other or further
notice or demand in similar or other circumstances. Each holder of any of the
Revolving Credit Notes shall be bound by any amendment, modification, waiver or
consent authorized as provided herein, whether or not such Revolving Credit Note
shall have been marked to indicate such amendment, modification, waiver or
consent.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Revolving Credit Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Revolving Credit Loan or reduce the rate of interest thereon, or reduce any
fees payable hereunder, or reduce any payment by the Borrower hereunder in
respect of any Letter of Credit without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment of the principal
amount of any Revolving Credit Loan or any interest thereon, or any fees payable
hereunder, or any payment by the Borrower hereunder in respect of any Letter of
Credit or reduce the amount of, waive or excuse any such payment, or postpone
the scheduled date of expiration of any Revolving Credit Commitment, without the
written consent of each Lender affected thereby, (iv) change Section 2.12 or
2.13 hereof in a manner that would alter the pro rata sharing of payments
required thereby, without the written consent of each Lender, (v) change any of
the provisions of this Section or the definition of “Required Lenders” or any
other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or
grant any consent hereunder without the written consent of each Lender, or (vi)
release any Guarantor or any Collateral (as defined in any Security Agreement)
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent as the case may be.

10.9 Severability. In the event any one or more of the provisions contained in
this Agreement or in the Revolving Credit Notes should be held invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

 
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10.10 Entire Agreement; Waiver of Jury Trial, Etc. (a) This Agreement, the
Revolving Credit Notes and the other Loan Documents constitute the entire
contract between the parties hereto relative to the subject matter hereof and
thereof. Any previous agreement among the parties hereto with respect to the
transactions contemplated hereby and thereby is superseded by this Agreement,
the Revolving Credit Notes and the other Loan Documents. Except as expressly
provided in this Agreement, the Revolving Credit Notes or the other Loan
Documents, nothing in this Agreement, the Revolving Credit Notes or the other
Loan Documents is intended to confer upon any party, other than the parties
hereto, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, the Revolving Credit Notes or the other Loan Documents.

(b) THE BORROWER HEREBY EXPRESSLY WAIVES ANY AND EVERY RIGHT TO A TRIAL BY JURY
IN ANY ACTION ON OR RELATED TO ANY OF THE LOAN DOCUMENTS OR THE ENFORCEMENT OF
ANY OR ALL OF THE SAME. THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
INTERPOSE A COUNTERCLAIM IN ANY ACTION OR PROCEEDING ON OR RELATED TO THIS
AGREEMENT EXCEPT FOR MANDATORY COUNTERCLAIMS.

(c) Except as prohibited by law, each party hereto hereby waives any right it
may have to claim or recover in any litigation referred to in paragraph (b) of
this Section 10.10 any special, exemplary or punitive damages.

(d) Each party hereto (i) certifies that no representative, agent or attorney of
any Lender has represented, expressly or otherwise, that such Lender would not,
in the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that it has been induced to enter into this Agreement, the
Revolving Credit Notes or the other Loan Documents, as applicable, by, among
other things, the mutual waivers and certifications herein.

10.11 Confidentiality. The Administrative Agent and the Lenders agree to keep
confidential (and to cause their respective officers, directors, employees,
agents and representatives to keep confidential) all information, materials and
documents furnished to the Administrative Agent or any Lender (the
“Information”). Notwithstanding the foregoing, the Administrative Agent and each
Lender shall be permitted to disclose Information (i) to such of its officers,
directors, employees, agents, attorneys and representatives as need to know such
Information in connection with its participation in any of the contemplated
transactions or the administration of this Agreement or the other Loan
Documents; (ii) to the extent required by applicable laws and regulations or by
any subpoena or similar legal process, or requested by any governmental agency
or authority; (iii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this Agreement, (B) becomes
available to the Administrative Agent or such Lender on a non-confidential basis
from a source other than the Borrower, any Guarantor or any of their respective
Subsidiaries or (C) was available to the Administrative Agent or such Lender on
a non-confidential basis prior to its disclosure to the Administrative Agent or
such Lender by the Borrower, any Guarantor or any of their respective
Subsidiaries; (iv) to the extent the Borrower, any Guarantor or any of their
respective Subsidiaries shall have consented to such disclosure in writing; (v)
in connection with the sale of any collateral pursuant to the provisions of any
of the other Loan Documents; (vi) pursuant to Section 10.3(g) hereof; or (vii)
in connection with any litigation to which the Administrative Agent or any
Lender is a party.

 
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10.12 Submission to Jurisdiction.

(a) Any legal action or proceeding with respect to this Agreement or the
Revolving Credit Notes or any other Loan Document may be brought in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Borrower and each of the Guarantors hereby accept for themselves and in respect
of their property, generally and unconditionally, the jurisdiction of the
aforesaid courts.

(b) The Borrower and each of the Guarantors hereby irrevocably waive, in
connection with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which they may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.

(c) The Borrower and each of the Guarantors hereby irrevocably consent to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each such person, as the case may be, at its address set
forth in Section 10.1 hereof.

(d) Nothing herein shall affect the right of the Administrative Agent or any
Lender to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower or any Guarantor in
any other jurisdiction.

10.13 Interest Rate Limitation. Notwithstanding anything herein to the contrary,
if at any time the interest rate applicable to any Revolving Credit Loan,
together with all fees, charges and other amounts which are treated as interest
on such loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender holding such loan in accordance with
applicable law, the rate of interest payable in respect of such loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon to the date of repayment, shall have been received by such
Lender.

10.14 Further Assurances. The Borrower agrees at any time and from time to time
at its expense, upon request of any Lender, to promptly execute, deliver, or
obtain or cause to be executed, delivered or obtained any and all further
instruments and documents and to take or cause to be taken all such other action
as any Lender may reasonably deem desirable in obtaining the full benefits of
the Loan Documents.

 
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10.15. Counterparts. This Agreement each of the other Loan Documents may be
executed in counterparts of the entire document, or of signature pages to the
document, each of which shall constitute an original but all of which when taken
together shall constitute but one contract, and shall become effective when
copies which, when taken together, bear the signatures of each of the parties
hereto or thereto shall be delivered to the Administrative Agent and the
Borrower.

10.16. Provisions Regarding Syndication and Documentation Agents. No Syndication
or Documentation Agent shall have any duties or responsibilities under this
Agreement or the Loan Documents, other than their responsibilities as a Lender,
or any fiduciary relationship with the Administrative Agent or any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against a Syndication or Documentation Agent.

10.17. USA PATRIOT ACT. Each Lender that is subject to the requirements of the
USA PATRIOT ACT (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”) hereby notifies the Borrower that pursuant to the requirements of
the Act, it is or may be required to obtain, verify and record information that
identifies the Borrower and its Subsidiaries which information includes the name
and address of the Borrower and its Subsidiaries and other information that will
allow such Lender to identify the Borrower and its Subsidiaries in accordance
with the Act.

10.18. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

 
Borrower:

NU HORIZONS ELECTRONICS CORP.

By: s/Kurt Freudenberg                     
Kurt Freudenberg
Vice President, Treasurer and Chief Financial Officer

Administrative Agent:

CITIBANK, N.A., as Administrative Agent

By: s/Stuart N. Berman                     
Stuart N. Berman
Vice President

Documentation Agent:

BANK OF AMERICA, N.A.,
as Documentation Agent

By: s/Steven J. Melicharek                  
Steven J. Melicharek
Senior Vice President

Syndication Agent:

JPMORGAN CHASE BANK, N.A.,
as Syndication Agent

By: s/Allison Masciangelo                   
Allison Masciangelo
Assistant Vice President

 
 
 
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Syndication Agent:

ISRAEL DISCOUNT BANK OF NEW YORK, as Syndication Agent

By: s/Scott Fishbein                             
Scott Fishbein
First Vice President

By: s/Michael Paul                                 
Michael Paul
Assistant Vice President

 
Notice Addresses:
 
CITIBANK, N.A.
730 Veterans Memorial Highway
Hauppauge, NY 11788
Lenders:
 
CITIBANK, N.A.
By: s/Stuart N. Berman                          
Stuart N. Berman
Vice President

 
JPMORGAN CHASE BANK, N.A.
395 North Service Road, Floor 3
Melville, NY 11747
JPMORGAN CHASE BANK, N.A.
 
By:  s/Allison Masciangelo                   
Allison Masciangelo
Assistant Vice President

 
ISRAEL DISCOUNT BANK OF NEW YORK
511 Fifth Avenue
New York, NY 10017
ISRAEL DISCOUNT BANK OF NEW YORK
 
By: s/Scott Fishbein                             
Scott Fishbein
First Vice President

By: s/Michael Paul                                
Michael Paul
Assistant Vice President

 

 
BANK OF AMERICA, N.A.
1185 Avenue of the Americas
New York, NY 10036
BANK OF AMERICA, N.A.
 
By: s/Steven J. Melicharek                    
Steven J. Melicharek
Senior Vice President

 
 
 
-59-

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SOVEREIGN BANK
3 Huntington Quadrangle
Suite 103 South
Melville, NY 11747
SOVEREIGN BANK
 
By: s/Christine Gerula                           
Christine Gerula
Senior Vice President
   
HSBC BANK USA, NATIONAL 
ASSOCIATION
534 Broad Hollow Road
Melville, NY 11747
HSBC BANK USA, NATIONAL
ASSOCIATION
 
By: s/Christopher J. Mendelsohn        
Christopher J. Mendelsohn
First Vice President
   
NORTH FORK BANK
275 Broadhollow Road
Melville, NY 11747
NORTH FORK BANK
 
By: s/Robert J. Milas                             
Robert J. Milas
Vice President
   
BANK LEUMI USA     
48 South Service Road
Suite 200 
Melville, NY 11747
BANK LEUMI USA
 
By: s/Paul Tine                                    
Paul Tine
First Vice President

 
-60-

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SCHEDULE I

Revolving Credit Commitments (Section 2.1)

Facility Amount: $150,000,000

Bank
 
Citibank, N.A
 
JPMorgan Chase Bank, N.A.
 
Israel Discount Bank of New York
 
Bank of America, N.A.
 
Sovereign Bank
 
HSBC Bank USA, National Association
 
North Fork Bank
 
Bank Leumi USA
Revolving Credit Commitment
 
$30,000,000
 
$21,000,000
 
$21,000,000
 
$19,500,000
 
$18,000,000
 
$15,000,000
 
$13,500,000
 
$12,000,000
Percentage of Total
 
20%
 
14%
 
14%
 
13%
 
12%
 
10%
 
9%
 
8%

 
 
Schedule A/Page 1

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EXHIBIT A
REVOLVING CREDIT NOTE
 

$30,000,000 
730 Veterans Memorial Highway
As of ____________, 2007

Hauppauge, NY 11788

FOR VALUE RECEIVED, NU HORIZONS ELECTRONICS CORP., (the “Borrower”) promises to
pay to the order of CITIBANK, N.A. (the “Lender”) on the Termination Date, at
the office of Citibank, N.A., as administrative agent (“the Administrative
“Agent”) specified in Section 10.1 of the Amended and Restated Credit Agreement,
dated as of __________, 2007 among the Borrower, the Lender, certain other
lenders named therein and the Administrative Agent (as amended from time to
time, the “Agreement”; terms defined in the Agreement shall have their defined
meanings when used in this Note), in lawful money of the United States of
America and in immediately available funds the principal amount of THIRTY
MILLION AND 00/100 ($30,000,000) DOLLARS or, if less than such principal amount,
the aggregate unpaid principal amount of all Revolving Credit Loans made by the
Lender to the Borrower pursuant to Section 2 of the Agreement. The Borrower
further promises to pay interest in like money on the unpaid principal balance
of this Note from time to time outstanding at such rates, and payable at such
times, as are specified in the Agreement. All Revolving Credit Loans made by the
Lender pursuant to Section 2 of the Agreement and all payments of principal
thereon may be endorsed by the holder of this Note on the schedule annexed
hereto, which holder may add additional pages to such schedule. The aggregate
net unpaid amount of Revolving Credit Loans set forth in such schedule shall be
presumed to be the principal balance hereof. After the stated or any accelerated
maturity hereof, this Note shall bear interest at such rates as are specified in
the Agreement, payable on demand, but in no event in excess of the maximum rate
of interest permitted under applicable law.

This Note is one of the Revolving Credit Notes referred to in the Agreement, and
is entitled to the benefits thereof and may be prepaid in whole or in part as
provided therein. This note replaces and supersedes the original Note dated
September 30, 2004, as previously replaced and superseded by the note of
November 21, 2005, but shall not constitute a repayment thereof, and the
execution and delivery of this Note shall not be deemed to terminate or
discharge the security interests securing the original Note or any replacements
thereof.

Upon the occurrence of any one or more of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note may be declared to be
or may become immediately due and payable as provided in the Agreement.

This Note shall be construed in accordance with and governed by the laws of the
State of New York.

NU HORIZONS ELECTRONICS CORP.
 
 
Exhibit A/Page 1

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SCHEDULE OF
REVOLVING CREDIT LOANS
AND
PAYMENTS OF PRINCIPAL
TO REVOLVING CREDIT NOTE
DATED ______________, 2007
NU HORIZONS ELECTRONICS CORP.
TO
CITIBANK, N.A.

Amount
   
Balance
 
 
and Type
Interest Principal
Remaining
Notation
Date
Borrower
of Loan
Period
Paid
Unpaid
Made By

 

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Exhibit A/Page 2

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EXHIBIT B
BORROWING BASE CERTIFICATE

____________ __, 20__

To:
Citibank, N.A., as administrative agent (the “Administrative Agent”) under a
certain Amended and Restated Credit Agreement dated as of __________ __, 2007
(as the same may be amended from time to time, the “Agreement”), by and among
the Administrative Agent, each of the Lenders that is a signatory thereof and Nu
Horizons Electronics Corp. (the “Borrower”).

Terms used in this certificate shall have the same meaning as ascribed thereto
in the Agreement.

For the Month of _________________

I.
Total Accounts Receivable
_______________
 
Less Ineligibles:
 

(a)
(applicable subsections of the
 
definition of Eligible Accounts)
_______________
(b)
 
_______________
(c)
 
_______________
(d)
 
_______________
(e)
 
_______________
(f)
 
_______________
(g)
 
_______________
(h)
 
_______________
(i)
 
_______________
(j)
 
_______________
(k)
 
_______________
(l)
 
_______________
(m)
 
_______________
(n)
 
_______________
(o)
 
_______________
(p)
 
_______________
(q)
 
_______________
(r)
 
_______________
Total Ineligibles
_______________

Total Eligible Accounts Receivable
_________________

 
Exhibit B/Page 1

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II.
Total Inventory
__________________
 
Less Ineligibles (including inventory at leased premises,
   
without a landlord waiver):
__________________
 
End of Life Inventory
__________________
 
Total Ineligible Inventory
__________________
       
Total Eligible Inventory
__________________
             
Borrowing Base
   
80% of Total Eligible A/R’s
__________________
       
40% of Total Eligible Inventory
   
(not more than 60MM)
__________________
       
Total of Available Collateral
__________________
       
Commitment Amount
__________________
       
Aggregate Outstanding as of the date of this Certificate
__________________
       
Collateral Excess/ (Deficiency)
__________________

 
The undersigned, certifies that this Borrowing Base Certificate is true,
accurate and complete in all material respects as of __________________________.

 
By: ________________________________
Name:
Title:

 
 
Exhibit B/Page 2

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EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE

Dated: _____________, 200__

Reference is made to the Amended and Restated Credit Agreement, dated as of
___________ __, 2007 (as amended, modified or supplemented from time to time in
accordance with its terms, the “Agreement”), among NU HORIZONS ELECTRONICS CORP.
(the “Borrower”), the LENDERS party thereto (collectively, the “Lenders”) and
CITIBANK, N.A., as Administrative Agent for the Lenders (in such capacity, the
“Administrative Agent”). Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Agreement.

_______________________________ (the “Assignor”) and
_______________________________ (the “Assignee”) agree as follows:

1. The Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, ____% interest in and to all the
Assignor’s rights and obligations under the Agreement as of the Effective Date
(as defined below) (including, without limitation, such percentage interest in
the Revolving Credit Commitment of the Assignor on the Effective Date and/or
such percentage interest in the Revolving Credit Loans owing to the Assignor
outstanding on the Effective Date and/or such percentage interest in the Letters
of Credit and Acceptance Drafts outstanding on the Effective Date, together with
such percentage interest in all unpaid interest and commitment fees accrued to
the Effective Date and such percentage interest in the Revolving Credit Note
held by the Assignor).

2. The Assignor (i) represents that as of the date hereof, its Revolving Credit
Commitment (without giving effect to assignments thereof which have not yet
become effective) is $___________, the outstanding balance of its Revolving
Credit Loans (unreduced by any assignments thereof which have not yet become
effective) is $ , and the amount of its participation in Letters of Credit and
Acceptance Drafts (unreduced by any assignments thereof which have not yet
become effective) that have been issued and remain undrawn is $___________, (ii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Agreement or the execution, legality, validity, enforceability, perfection,
genuineness, sufficiency or value of the Agreement or any other Loan Documents
or any other instrument or document furnished pursuant to any thereof, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim;
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any Guarantor, or the
performance or observance by the Borrower or any Guarantor, of its obligations
under the Agreement or any other Loan Documents or any other instrument or
document furnished pursuant to any thereof; and (iv) attaches the Revolving
Credit Note referred to in paragraph 1 above and requests that the
Administrative Agent exchange such Revolving Credit Note for a new Revolving
Credit Note [payable to Assignee] [payable to Assignor] in principal amounts
equal to _______ and _______, respectively.

 
Exhibit C/Page 1

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3. The Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance and the other documents executed and
delivered in connection therewith; (ii) confirms that it has received a copy of
the Agreement and the other Loan Documents, together with copies of such
financial statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (iii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Agreement; (iv) appoints and authorizes the Administrative Agent to
take such action as Administrative Agent on its behalf and to exercise such
powers under the Agreement as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Agreement are required to be performed by
it as a Lender; and (vi) agrees that it will keep confidential all information
with respect to the Borrower furnished to it by the Borrower or the Assignor
(other than information generally available to the public or otherwise available
to the Assignor on a nonconfidential basis). [; and (vii) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee’s exemption from United States withholding taxes with respect to
all payments to be made to the Assignee under the Agreement or such other
documents as are necessary to indicate that all such payments are subject to
such tax at a rate reduced by an applicable tax treaty.] 1 

4. The effective date for this Assignment and Acceptance shall be   (the
“Effective Date”). 1  Following the execution of this Assignment and Acceptance,
it will be delivered to the Administrative Agent for acceptance and recording by
the Administrative Agent.

5. Upon such acceptance and recording, from and after the Effective Date, (i)
the Assignee shall be a party to the Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Agreement.

6. Upon such acceptance and recording, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date by the Administrative Agent
or with respect to the making of this assignment directly between themselves.
 

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1 If the Assignee is organized under the laws of a jurisdiction outside the
United States.
 
2 See Section 10.3 of the Agreement. Such date shall be at least five Business
Days after the execution of this Assignment and Acceptance and delivery thereof
to the Administrative Agent.
 
 
Exhibit C/Page 2

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7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE.

 
[NAME OF ASSIGNOR]

By:_______________________
Name:
Title:

[NAME OF ASSIGNEE]

By:_______________________
Name:
Title:

 
Accepted this                day
of          , 200   

CITIBANK, N.A., as Administrative Agent

By:_______________________
Name:
Title:
 
 
Exhibit C/Page 3

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EXHIBIT D

CONTROL AGREEMENT (BANK ACCOUNTS)

This CONTROL AGREEMENT (BANK ACCOUNTS) dated as of [____________], 20___ (this
“Agreement”) is made among [_______________] (“Pledgor”), Citibank, N.A., as
Administrative Agent (“Administrative Agent”), Mellon Bank, N.A. (“Mellon Bank”)
and Mellon Financial Services Corporation #1 (“MFSC#1”). Mellon Bank and MFSC#1
are collectively referred to herein as “Mellon”.

The parties hereto refer to Account No. [__________] in the name of the Pledgor
maintained at Mellon Bank (the “Account”) and lockbox [_________] maintained at
Mellon Bank in accordance with the Mellon Global Cash Management Terms and
Conditions dated October 1, 1994 (“Mellon T&C”). In addition, the parties hereto
refer to lockbox 21102 maintained at Mellon Financial Services Corporation #1 in
accordance with the Mellon Financial Services Corporation #1 Global Cash
Management Terms and Conditions dated April 1, 1994 (“MFSC #1 T&C”). Lockboxes
[________] and [________] are collectively referred to as the “Lockbox”. The
Mellon T&C and the MFSC#1 T&C are collectively referred to herein as the “Terms
and Conditions”. The parties hereby agree as follows:

1. Pledgor and Administrative Agent notify Mellon that by separate agreement
Pledgor has granted Administrative Agent a security interest in the Account and
all funds therein and rights thereto. Mellon acknowledges being so notified and
confirms that it has no actual knowledge or notice of any restraint, security
interest, lien or other adverse claim in or to the Account or any funds therein.

2. Mellon shall comply with orders received from Pledgor (without further
consent from Administrative Agent) concerning the Account until Mellon has
received a notice purporting to be signed and sent by the Administrative Agent
in substantially the form attached as Exhibit A hereto (a “Notice of Exclusive
Control”). After such receipt, Mellon shall not honor any orders from Pledgor
and shall comply with all withdrawal, transfer, payment and other instructions
(collectively, “orders”) received from Administrative Agent (without further
consent from Pledgor) concerning the Account until such time as an Exclusive
Control Termination Date, as hereinafter defined, has occurred. Any Notice of
Exclusive Control received by Mellon after 1:00 p.m. on any business day shall
not be deemed effective until the opening of business on the next succeeding
business day. Orders directing disposition of funds will apply only to available
funds Notwithstanding the foregoing: (i) all transactions relating to the
Account and any items therein duly consummated or processed by Mellon prior to
its receipt of a Notice of Exclusive Control (or duly commenced by Mellon prior
to any such receipt and so consummated or processed thereafter) shall be deemed
not to constitute a violation of this Agreement; (ii) Mellon may (at its
discretion and without any obligation to do so) commence honoring solely
Administrative Agent’s orders concerning the Account at any time or from time to
time after it becomes aware that Administrative Agent has sent to it a Notice of
Exclusive Control (including without limitation reversing or redirecting any
transaction referred to in clause (i) above) with no liability whatsoever to
Pledgor or Administrative Agent or any other party for doing so; and (iii)
Mellon shall not change the name or account number of any Account without having
received the Administrative Agent’s prior express written consent thereto. In
case of any conflict between instructions received by Mellon from Administrative
Agent and Pledgor, the instructions from Administrative Agent shall prevail.
“Exclusive Control Effective Date” means the date of receipt by Mellon of the
Notice of Exclusive Control in the form of Exhibit A hereto. Such notice shall
be in effect until Mellon has received from the Administrative Agent a written
notice of Pledgor’s satisfaction of the release provisions in the separate
documentation between Pledgor and the Administrative Agent in the form attached
as Exhibit B hereto, and the date of receipt by Mellon of such notice shall be
referred to as the “Exclusive Control Termination Date.” Any period between an
Exclusive Control Effective Date and an Exclusive Control Termination Date shall
be referred to as an Administrative Agent Control Period.

 
Exhibit D/Page 1

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3. Mellon is authorized to debit the Account in accordance with Mellon’s
customary practices with respect to (i) payment of customary fees and charges
with respect to the routine maintenance and operation of the Account and Lockbox
(“Fees”) and (ii) any items (including, but not limited to, checks, drafts,
Automatic Clearinghouse (ACH) credits or wire transfers or other electronic
transfers or credits) deposited to the Account and returned or otherwise not
collected, whether for insufficient funds or any other reason (“Returned
Items”), in each case as provided for under any agreements between Pledgor and
Mellon relating to the Account. In the event Mellon is unable to obtain
sufficient funds from such charges to cover Fees or Returned Items, Pledgor and,
with respect to any Administrative Agent Control Period, Pledgor and
Administrative Agent, jointly and severally, shall indemnify Mellon for all
amounts related to the Fees or Returned Items incurred by Mellon. Mellon shall
neither advance margin or other credit against the Account, nor hypothecate any
funds deposited in the Account, without the prior written consent of
Administrative Agent. Except as required by law, Mellon shall not agree with any
other person or entity that it will comply with any withdrawal, transfer,
payment instructions, or any other orders, from such person or entity concerning
the Account or any funds therein, without the prior written consent of
Administrative Agent and any such agreement entered into without such consent
shall be null and void, provided, however, that the foregoing shall not apply to
any withdrawals, transfers, payment instructions, debits or other orders that
are the result of any wire drawdowns or ACH debits to the Account that have been
initiated prior to Mellon’s receipt of a Notice of Exclusive Control.

4. Mellon represents and warrants to Administrative Agent that: (i) Mellon Bank
constitutes a “bank” (as defined in Section 9-102 of the Pennsylvania Uniform
Commercial Code (“UCC”)), and (ii) that the jurisdiction (determined in
accordance with Section 9-304 of the UCC) of Mellon Bank for purposes of each
Account maintained by Pledgor with Mellon Bank shall be the Commonwealth of
Pennsylvania. Mellon will not, without Administrative Agent’s prior written
consent, amend the Terms and Conditions so that Mellon Bank’s jurisdiction for
purposes of Section 9-304 of the UCC is other than a jurisdiction permitted
pursuant to preceding clause (ii). Upon request, Mellon will promptly furnish to
Administrative Agent a copy of the Terms and Conditions. Upon request, Mellon
shall furnish to Administrative Agent, at its address indicated below, copies of
all monthly account statements and other information relating to each Account
that Mellon sends to Pledgor and to disclose to Administrative Agent all
information requested by Administrative Agent regarding the Account.

 
Exhibit D/Page 2

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5. Anything to the contrary in this Agreement notwithstanding: (i) Mellon shall
have only the duties and responsibilities expressly set forth in writing herein
(and in its Terms and Conditions as in effect from time to time, all of which
shall apply to the Account to the extent not inconsistent with this Agreement)
and shall not be deemed to be a fiduciary for any party hereto; (ii) Mellon
shall be fully protected in acting or refraining from acting in good faith on
any written notice, instruction or request purportedly furnished to it by
Administrative Agent in accordance with the terms hereof, in which case the
parties hereto agree that Mellon has no duty to make any further inquiry
whatsoever; (iii) unless Mellon is grossly negligent or engages in willful
misconduct in performance or non-performance in connection with this Agreement
and the Account, Pledgor and Administrative Agent expressly agree that Mellon’s
liability shall be limited to damages directly caused by such breach and in no
event shall Mellon be liable for any incidental, indirect, punitive or
consequential damages or attorneys’ fees; and (iv) the Pledgor and, with respect
to any Administrative Agent Control Period, the Pledgor and the Administrative
Agent, jointly and severally, hereby indemnify Mellon for, and hold Mellon
harmless against, any claim, loss, cost, liability or expense (including
reasonable inside or outside counsel fees and disbursements) incurred or
suffered by any party in connection herewith arising out of or in connection
with this Agreement or the Account, except as may result from its willful
misconduct or gross negligence.

6. Notwithstanding any other provision of this Agreement, Mellon shall not be
liable for any failure, inability to perform, or delay in performance hereunder,
if such failure, inability, or delay is due to acts of God, war, civil
commotion, governmental action, fire, explosion, strikes, other industrial
disturbances, equipment malfunction, action, non-action or delayed action on the
part of the Pledgor or Administrative Agent or any other entity or any other
events or circumstances that are beyond Mellon’s reasonable control.

7. Any amendment, modification or supplementation of this Agreement shall be
effected solely by an instrument in writing executed by all the parties hereto.
This Agreement may not be terminated by the Pledgor unless the prior written
consent of Mellon and the Administrative Agent are obtained. Mellon may
terminate this Agreement: (i) upon ten (10) days prior written notice for cause,
or (ii) upon thirty (30) days’ prior written notice without cause, in each case,
to the Pledgor and the Administrative Agent. Administrative Agent may terminate
this Agreement (i) upon ten (10) days prior written notice for cause, or (ii)
upon thirty (30) days’ prior written notice without cause, in each case, to
Mellon. Pledgor’s and Administrative Agent’s obligations, if any, to Mellon
under this Agreement to indemnify, hold harmless and pay amounts owed shall
survive termination of this Agreement. Administrative Agent shall provide a
written notice to Mellon when all obligations of the Pledgor to Administrative
Agent are paid and satisfied in full or when the security agreement is
terminated.

8. All notices shall be in writing and sent (including via facsimile with
receipt confirmed by telephone) to the parties hereto at their respective
addresses or facsimile or telephone numbers (or to such other address or
facsimile and telephone numbers as any such party shall designate in writing to
the other parties from time to time). Notices shall be deemed to have been
properly given when delivered in person, or when sent by facsimile or other
electronic means and electronic confirmation of error-free receipt is
received, or three (3) business days after being sent by certified or registered
mail, return receipt requested, postage prepaid, addressed to the party at the
address set forth below:

 
Exhibit D/Page 3

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Pledgor:
[_____________________]   70 Maxess Road    Melville, New York 11747  
Attention: Mr. Kurt Freudenberg     Vice President, Treasurer and Chief
Financial Officer   Phone: 631-396-5000   Fax: 631-396-5060

 
Bank:
Mellon Bank, N.A.   Mellon Financial Services Corporation #1   Mellon Client
Service Center   500 Ross Street, Room 1380   Pittsburgh, PA 15262-0001  
Attention: Document Control Group Manager   Phone: 412-234-4172   Fax:
412-236-7419

 
Administrative Agent: 
Citibank, N.A.  
730 Veterans Memorial Highway
 
Hauppauge, New York 11788
  Attention: Stuart N. Berman    
Vice President
  Phone: 631-265-3430   Fax: 631-265-4888

 
9. This Agreement: (i) may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument; (ii) shall become effective when
counterparts hereof have been signed by the parties hereto; and (iii) shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.

10. To the extent a conflict exists between the terms of this Agreement and the
Terms and Conditions, the terms of this Agreement shall control.

11. The provisions of this Agreement shall be binding upon and inure to the
benefit of Mellon, Administrative Agent and Pledgor and their respective
successors and assigns provided that Pledgor and Mellon may not assign any of
their respective rights or obligations hereunder without the prior written
consent of the Administrative Agent, provided however, with respect to Mellon an
assignment by operation of law in connection with a merger or similar
transaction will not be deemed to be an assignment requiring the consent of the
Administrative Agent. Administrative Agent agrees to provide written notice to
Mellon if Administrative Agent assigns its rights under this Agreement. 

 
Exhibit D/Page 4

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.

 
 

 
[______________________________]

By:____________________________
Kurt Freudenberg
Vice President, Treasurer and Chief Financial Officer

Mellon Bank, N.A.
Mellon Financial Services Corporation #1

By: ___________________________
Name:
Title:

Citibank, N.A., as Administrative Agent

By: ___________________________
Stuart N. Berman
Vice President

 
 
 
Exhibit D/Page 5

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EXHIBIT A

Citibank, N.A.

NOTICE OF EXCLUSIVE CONTROL

_______________, ____

Mellon Bank, N.A.
__________________________
__________________________
__________________________
Attention: __________________

 
Re:
CONTROL AGREEMENT (BANK ACCOUNTS) dated as of November ___, 20___ (the
“Agreement”) among [___________________], Citibank, N.A., as Administrative
Agent and Mellon Bank, N.A. relating to Account(s) No. [_____________________]

Ladies and Gentlemen:

This constitutes the Notice of Exclusive Control referred to in paragraph 2 of
the Agreement. In accordance with paragraph 2 of the Agreement we hereby inform
you that the Exclusive Control Effective Date has occurred upon your receipt
hereof.

 
Citibank, N.A.

By: ___________________________
Stuart N. Berman
Vice President

 
 
 
Exhibit D/Page 6

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EXHIBIT B

Citibank, N.A.

NOTICE OF TERMINATION OF EXCLUSIVE CONTROL

_______________, ____

Mellon Bank, N.A.
__________________________
__________________________
__________________________
Attention: __________________

 
Re:
CONTROL AGREEMENT (BANK ACCOUNTS) dated as of November ___, 20___ (the
“Agreement”) among [____________________], Citibank, N.A., as Administrative
Agent and Mellon Bank, N.A. relating to Account(s) No. [____________________]

Ladies and Gentlemen:

This constitutes the Notice of Termination of Exclusive Control referred to in
paragraph 2 of the Agreement. In accordance with paragraph 2 of the Agreement we
hereby inform you that the Exclusive Control Termination Date has occurred upon
your receipt hereof.

 
Citibank, N.A.

By: ___________________________
Stuart N. Berman
Vice President

 
 
 
Exhibit D/Page 6

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