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                                   $4,000,000


                                CREDIT AGREEMENT

                            dated as of May 28, 1997


                                     between


                               V BAND CORPORATION

                                       and


                    NATIONAL BANK OF CANADA, NEW YORK BRANCH






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<PAGE>
                                TABLE OF CONTENTS 

This table of contents has been provided for the  convenience of the parties and
does not constitute part of the Agreement to which it is attached.




ARTICLE 1                 DEFINITIONS...........................................

                  1.1     Defined Terms.........................................
                  1.2     Other Definitional Provisions.........................

ARTICLE 2                 THE CREDIT FACILITY...................................

                  2.1     The Loans.............................................
                  2.2     Maintenance of Account; Procedure for Borrowing
                  2.3     Procedure for Conversion and Continuation.............
                  2.4     Minimum  Amount of  Eurodollar  Loans and  Maximum 
                          Number of Interest Periods............................
                  2.5     Termination or Reduction of Commitments...............
                  2.6     Repayment of Loans....................................
                  2.7     Evidence of Indebtedness..............................
                  2.8     Optional and Mandatory Prepayments....................
                  2.9     Interest Rates and Payment Dates......................
                  2.10    The Letters of Credit.................................
                  2.11    Fees..................................................
                  2.12    Computation of Interest and Fees......................
                  2.13    Place and Manner of Payment...........................
                  2.14    Use of Letters of Credit and Loan Proceeds............

ARTICLE 3                 YIELD PROTECTION AND ILLEGALITY; TAXES 

                  3.1     Inability to Determine Interest Rate..................
                  3.2     Illegality............................................
                  3.3     Additional Costs; Capital Adequacy....................
                  3.4     Taxes.................................................
                  3.5     Indemnity.............................................

ARTICLE 4                 REPRESENTATIONS AND WARRANTIES........................

                  4.1     Organization, Powers, Compliance......................
                  4.2     Capital Stock, Subsidiaries, Fiscal Year..............
                  4.3     Authorization, Absence of Conflicts...................
                  4.4     Binding Obligations...................................
                  4.5     Financial Condition and Statements....................
                  4.6     Taxes.................................................
                  4.7     Title to Properties...................................
                  4.8     Proceedings...........................................
                  4.9     Labor Disputes; Collective Bargaining Agreements......
                  4.10    Material Agreements and Licenses......................
                  4.11    Intangible Assets.....................................
                  4.12    Condition of Assets...................................
                  4.13    No Defaults, Compliance With Laws.....................
                  4.14    Indebtedness..........................................
                  4.15    Not an Investment Company or Regulated Company........
                  4.16    Use of Proceeds.......................................
                  4.17    Ranking of Loans......................................
                  4.18    Burdensome Provisions.................................
                  4.19    ERISA.................................................
                  4.20    Environmental Matters.................................
                  4.21    Correct Information...................................

ARTICLE 5                 CONDITIONS PRECEDENT..................................

                  5.1     Conditions Precedent to Initial Credit Event..........
                  5.2     Conditions Precedent to Each Credit Event.............

ARTICLE 6                 COVENANTS.............................................

                  6.1     Corporate Existence, Properties.......................
                  6.2     Payment of Indebtedness, Taxes........................
                  6.3     Financial Statements, Reports, etc....................
                  6.4     Notice of Adverse Events and Significant Changes......
                  6.5     Books and Records; Inspection.........................
                  6.6     Insurance.............................................
                  6.7     Compliance with Laws..................................
                  6.8     Environmental Laws....................................
                  6.9     Use of Proceeds.......................................
                  6.10    Indebtedness..........................................
                  6.11    Liens.................................................
                  6.12    Contingent Liabilities................................
                  6.13    Merger and  Consolidation;  Acquisition  and..........
                          Disposition Of Assets.................................
                  6.14    Investments...........................................
                  6.15    Change in Nature of Business..........................
                  6.16    Transactions with Affiliates..........................
                  6.17    Restricted Payments...................................
                  6.18    Management Fees.......................................
                  6.19    Leases................................................
                  6.20    Capital Expenditures..................................
                  6.21    Cash Dominion ........................................
                  6.22    Formation or Acquisition of Subsidiaries..............
                  6.23    Location of Inventory.................................
                  6.24    Change in Fiscal Date or Accounting Practices.........

ARTICLE 7                 FINANCIAL COVENANTS...................................

                  7.1     Financial Covenants...................................
                  7.2     Definitions Relating to Financial Covenants...........

ARTICLE 8                 EVENTS OF DEFAULT.....................................

                  8.1     Events of Default.....................................
                  8.2     Waivers...............................................

ARTICLE 9                 MISCELLANEOUS.........................................

                  9.1     Notice................................................
                  9.2     Expenses, Indemnity...................................
                  9.3     Amendments and Waivers................................
                  9.4     Waivers...............................................
                  9.5     Cumulative Remedies...................................
                  9.6     Survival..............................................
                  9.7     Successors and Assigns................................
                  9.8     Set-off...............................................
                  9.9     Governing Law.........................................
                  9.10    Judicial Proceedings..................................
                  9.11    Waiver of Jury Trial..................................
                  9.12    Further Assurances....................................
                  9.13    Integration Clause....................................
                  9.14    Severability..........................................
                  9.15    Counterparts..........................................
                  9.16    Acknowledgments.......................................


                                    SCHEDULES 

                  Schedule I     -  Disclosure Schedule


                                     EXHIBITS

                  Exhibit A      -  Form of Note
                  Exhibit B-1    -  Form of Notice of Borrowing
                  Exhibit B-2    -  Form of Notice of Conversion or Continuation
                  Exhibit C      -  Form of Compliance Certificate
<PAGE>
            CREDIT  AGREEMENT,  dated as of May 28, 1997,  by and between V BAND
CORPORATION,  a New York  corporation  (the  "Borrower")  and  NATIONAL  BANK OF
CANADA, NEW YORK BRANCH (the "Bank").


                              W I T N E S S E T H : 

            WHEREAS,  the Borrower has requested  that the Bank extend credit to
it in the form of revolving loans and letters of credit as provided  below,  and
the Bank is  willing  to extend  such  credit on the  terms and  subject  to the
conditions specified below.

            NOW, THEREFORE, the parties hereto agree as follows:


                                    ARTICLE 1
                                   DEFINITIONS


            1.1 Defined Terms.  As used in this  Agreement,  the following terms
shall have the following meanings:

            "Account":  any right,  now  existing or hereafter  arising,  of the
Borrower to payment for goods sold or for services rendered which constitutes an
account  receivable  of  the  Borrower  under  generally   accepted   accounting
principles.

            "Affiliate":  as to any Person, any other Person which,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person.  For purposes of this  definition,  "control" of a Person means the
power,  directly or indirectly,  either to (a) vote 5% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the  direction  of the  management  and policies of such Person,
whether by contract or otherwise.

            "Applicable Percentage": as defined in Section 2.11(f).

            "Audit Fee": as defined in Section 2.11(e).

            "Available Commitment": at any time, the amount, if any, by which at
such  time (a) the  lesser  of (x) the  Commitment  or (y) the  Borrowing  Base,
exceeds (b) the Exposure.

            "Bank":  as defined in the preamble hereto.

            "Base  Rate":  for any day, a rate per annum  (rounded  upwards,  if
necessary,  to the next 1/16%)  equal to the greater of (a) the NBC Base Rate in
effect on such day and (b) the Federal  Funds  Effective  Rate in effect on such
day plus 1/2%.  For  purposes  hereof:  "NBC Base  Rate"  shall mean the rate of
interest per annum established by the Bank from time to time as a reference rate
for short-term commercial loans in Dollars to U.S. corporate borrowers,  as such
rate  is in  effect  on  such  day  (which  the  Borrower  acknowledges  is  not
necessarily  the Bank's lowest rate);  and "Federal Funds  Effective Rate" shall
mean the overnight cost of funds of the Bank, as determined  solely by the Bank.
Any change in the Base Rate due to a change in the NBC Base Rate or the  Federal
Funds  Effective  Rate shall be  effective  as of the opening of business on the
effective day of such change in the NBC Base Rate or the Federal Funds Effective
Rate.

            "Base Rate Loan": at any time, any Loan which bears interest at such
time at a rate that is based upon the Base Rate.

            "Borrower": as defined in the preamble hereto.

            "Borrowing Base": an amount equal to the sum of:

                         (i) up to 85% of the  aggregate  amount of the Eligible
                         Accounts at such time; plus

                         (ii) up to the lesser of (x) 40% of the aggregate value
                         (at the  lower  cost or market  value at such  time) of
                         Eligible Inventory or (y) $750,000.

            "Borrowing Base Certificate": as defined in Section 6.3(f).

            "Borrowing Date": any Business Day on which the Bank makes a Loan to
the Borrower or issues a Letter of Credit for account of the Borrower.

            "Business": as defined in Section 4.20(a).

            "Business  Day":  a day (i) other  than a  Saturday,  Sunday,  legal
holiday or any other day on which  commercial  banks in New York,  New York, are
authorized or required by law or by government  decree to close and (ii) if such
day  relates to a  Eurodollar  Loan,  which is also a day on which  dealings  in
eurodollar  deposits  are carried out between  banks in the  relevant  interbank
eurodollar market.

            "Capital  Expenditures":  for any period,  without duplication,  the
aggregate  amount of all  expenditures,  whether paid in cash or other assets or
accrued as a liability  (including the aggregate amount of all obligations under
Capital Leases  incurred  during such period) made or to be made by the Borrower
during such period to acquire or construct  fixed or capital  assets,  plant and
equipment (including any renewals, improvements and replacements thereof and all
tooling costs, but excluding repairs), computed in accordance with GAAP.

            "Capital  Lease":  any  lease of  property,  real or  personal,  the
obligations  of the lessee in respect of which are required in  accordance  with
GAAP to be capitalized on a balance sheet of the lessee.

            "Capital Stock":  any and all shares,  interests,  participations or
other equivalents  (however  designated) of capital stock of a corporation,  any
and all equivalent  ownership  interests in a Person (other than a corporation),
and any and all warrants or options to purchase any of the foregoing.

            "Cash  Collateralize":  with  respect to any  outstanding  Letter of
Credit,  to deposit cash with the Bank in an amount equal to the undrawn  amount
of such Letter of Credit, as collateral  security for the Borrower's  obligation
to  reimburse  the Bank for any payment  made or to be made by the Bank under or
pursuant to such Letter of Credit.

            "Closing  Date":  the date on which this  Agreement  shall have been
executed by all the parties hereto.

            "Closing Fee": as defined in Section 2.11(a).

            "Code":  the Internal  Revenue Code of 1986, as amended from time to
time.

            "Collateral":  (i) all  assets  of the  Borrower  and  its  Domestic
Subsidiaries and (ii) all of the issued and outstanding  shares of Capital Stock
of the Borrower's Subsidiaries pledged to the Bank, which secure the Obligations
from time to time, including all assets which constitute  "Collateral",  as such
term is defined in any Security Document.

            "Commercial  Letter of Credit":  any Letter of Credit issued for the
purpose of  providing  the primary  payment  mechanism  in  connection  with the
purchase  of any  materials,  goods or  services  by the  Borrower or any of its
Subsidiaries  in the  ordinary  course  of  business  of the  Borrower  or  such
Subsidiary.

            "Commitment":  the  commitment of the Bank to make Loans pursuant to
Section 2.1, and to issue  Letters of Credit  pursuant to Section  2.10,  in the
maximum aggregate principal amount of Four Million Dollars ($4,000,000),  as the
Commitment may be terminated or reduced from time to time in accordance with the
provisions of this Agreement.

            "Commitment Fee":  as defined in Section 2.11(b).

            "Commitment  Period":  the period from and including the date hereof
to but excluding the Commitment Termination Date.

            "Commitment Termination Date": May 28, 2000, or such earlier date on
which the Commitment shall terminate as provided herein.

            "Commonly   Controlled   Entity":   an   entity,   whether   or  not
incorporated, which is under common control with the Borrower within the meaning
of Section  4001 of ERISA or is part of a group which  includes the Borrower and
which is  treated as a single  employer  under  Section  414(b) or 414(c) of the
Code.

            "Consolidated EBITDA":  as defined in Section 7.2.

            "Consolidated Interest Expense":  as defined in Section 7.2.

            "Consolidated Tangible Net Worth": as defined in Section 7.2.

            "Contractual  Obligation":  as to any Person,  any  provision of any
security  issued  by  such  Person  or of any  agreement,  instrument  or  other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

            "Contribution  Agreement":  a  Contribution  Agreement  in form  and
substance  satisfactory  to the Bank,  pursuant  to which the  Borrower  and its
Domestic  Subsidiaries  shall set forth  their  respective  indemnification  and
contribution  obligations  relating to payments  made by any of them to the Bank
under any Loan Document.

            "Current Ratio":  as defined in Section 7.2.

            "Customary Charges":  as defined in Section 2.11(d).

            "Default": an Event of Default or an event which, with the giving of
notice  or  lapse  of  time  or  both,  or  upon  the  occurrence  of any  other
contingency, would be an Event of Default.

            "Disclosure  Schedule":  the  Disclosure  Schedule  attached to this
Agreement as Schedule I.

            "Dollars:  and "$":  dollars in lawful currency of the United States
of America.

            "Domestic  Subsidiary":  any  Subsidiary  of the  Borrower  that  is
organized under the laws of the United States or any state thereof.

            "Effective Date": the date on which all the conditions precedent set
forth in Section 5.1 shall have been satisfied or waived.

            "Eligible  Account":  means an Account of the  Borrower in which the
Bank has a first and  perfected  security  interest  and which meets each of the
following requirements:

                    (a) such  Account  arose from a bona fide  outright  sale of
                    goods   (and  not   consignments   or   "sale   or   return"
                    transactions)  or  rendering of services by the Borrower and
                    such goods have been  shipped or such  services  rendered to
                    the respective account debtors or their designees;

                    (b)  such  Account  is  based  on an  enforceable  order  or
                    contract  for goods or  services  and such  goods  have been
                    delivered or such services  rendered in accordance with such
                    order or contract;

                    (c) the amount shown as an Account on the  Borrower's  books
                    and any invoice or statement  delivered to the Bank is owing
                    to the Borrower and no partial payment has been made thereon
                    by anyone;

                    (d) such Account,  or any portion  thereof which is included
                    in the  Borrowing  Base,  is not  subject  to any  discount,
                    credit,  rebate,  allowance,  set-off,  reservation,  contra
                    account, claim of reduction,  counterclaim,  recoupment,  or
                    any claim for credit, allowance or adjustment by the account
                    debtor on such  Account  known to the  Borrower  because  of
                    returned,  inferior  and  damaged  goods  or  unsatisfactory
                    services,  or for any other  reason,  except  for  customary
                    discounts allowed for prompt payment;

                    (e) such Account is not one as to which Bank has determined,
                    with notice to  Borrower,  to be  ineligible  in whole or in
                    part for the following or similar reasons:

                           (1)    payment terms not customary,
                           (2)    credit weakness of the account debtor,
                           (3)    history of slow payments or disputes, or
                           (4)    any  questions  as to the bona fide  nature of
                                  the account debtor thereon or its  undertaking
                                  to pay;

                    (f) the Borrower has good,  marketable and undisputed  title
                    to such  Account,  free and clear of any  Liens,  other than
                    Liens in favor of the Bank and Permitted Liens;

                    (g) such Account is  unconditionally  payable in Dollars and
                    the obligations of the account debtor under such Account (i)
                    are not evidenced by a promissory  note or other  negotiable
                    instrument  (except for any such note or instrument on which
                    the Bank  holds a  perfected  first  lien),  (ii) are not in
                    dispute and are not subject to any set-off or counter-claim,
                    and (iii) have not been extended or modified in any respect;

                    (h)  the  account  debtor  on  such  Account  (i)  is not an
                    Affiliate  of the  Borrower  and  (ii)  is not  bankrupt  or
                    insolvent or the subject of  receivership  proceedings,  and
                    has not made an  assignment  for benefit of  creditors  or a
                    composition with creditors;

                    (i) to the extent such Account is reflected in any Borrowing
                    Base  Certificate,  the account debtor thereon has not as of
                    the date of such Borrowing  Base  Certificate  returned,  or
                    refused to retain,  or asserted a right to return or refuse,
                    any of the  goods  from the sale of which  such  Account  or
                    portion thereof arose;

                    (j) such Account is  evidenced by an invoice  dated the date
                    that shipment,  delivery or performance was made or rendered
                    to the account  debtor and (i) such Account is not more than
                    sixty (60) days past due from the  original due date thereof
                    and (ii) not more than  ninety (90) days have  elapsed  from
                    the invoice date of such invoice;

                    (k) the amount of such Account,  together with the amount of
                    the other  Accounts  owed by the same  account  debtor  with
                    respect  to which not more than 90 days  have  elapsed  from
                    invoice  date,  constitutes  at least fifty percent (50%) of
                    the aggregate amount owing on all Accounts from such account
                    debtor

                    (l) the amount of such Account  reported on a Borrowing Base
                    Certificate  or a  Period-End  Recapitulation  Report  as an
                    Eligible   Account   excludes   as  of  the   date  of  such
                    Recapitulation  (i) all partial or total  payments  received
                    therefor,  (ii) all chargeback  billings,  all freight items
                    and claims, (iv) all finance charges,  late charges or other
                    service  charges,  (v)  any  retainages  agreed  to  by  the
                    Borrower or asserted by the account debtor thereon,  or (vi)
                    reversals of credits  previously given to the account debtor
                    thereon;

                    (m) if (i) such  Account  represents  progress  or  contract
                    billings,  then the services or goods to which such billings
                    relate have been  rendered  or shipped,  as the case may be,
                    and  (ii)  if  such  Account  represents  billings  under  a
                    maintenance  contract,  then the time  period to which  such
                    billings relate has ended;

                    (n) such  Account  does not arise out of a contract  with or
                    order from an account  debtor which by its terms  forbids or
                    makes void or  unenforceable  the  assignment of the Account
                    arising with respect thereto;

                    (o) such Account, and the account debtor thereon, are deemed
                    acceptable  to the  Bank  in  good  faith  and  in its  sole
                    discretion;

                    (p) if the United  States of America,  any state,  county or
                    municipality,  or any agency,  department or instrumentality
                    thereof, is the account debtor with respect to such Account,
                    the Borrower  shall have duly assigned its rights to payment
                    thereon to the Bank pursuant to the Assignment of Claims Act
                    of 1940,  as amended,  or any similar state or local statute
                    or regulation; and

                    (q)  either  (x) the  account  debtor on such  account  is a
                    resident  of the United  States of  America  or  Canada,  an
                    entity  organized  under  the law of the  United  States  of
                    America or Canada or any political  subdivision  thereof, or
                    any office or branch located in the United States of America
                    or Canada of any entity  organized under the laws of another
                    country or (y) such  Account is backed by a letter of credit
                    in form and issued by a bank  satisfactory to the Bank or is
                    credit-insured pursuant to a policy in form and issued by an
                    insurer satisfactory to the Bank.

            "Eligible Inventory": as of any date of determination, all Inventory
of the Borrower:

                    (a)    that is then located at the Elmsford Facilities;


                    (b)    which consists of raw materials or finished goods;

                    (c)    which is of merchantable quality and fit for sale;

                    (d)  to  which  the  Borrower  has  good,   marketable   and
                    undisputed  title,  free and clear of any Liens,  other than
                    Liens in favor of the Bank and Permitted Liens;

                    (e) in which the Bank holds a  perfected  security  interest
                    or, in the case of items in transit,  which are evidenced by
                    a bill of lading  in form  satisfactory  to the Bank,  which
                    bill of lading is in the possession of the Bank; and

                    (f)  which  the  Bank in good  faith  deems  to be  Eligible
                    Inventory for purposes of this Agreement;

provided,  however,  that there  shall in any event be  excluded  from  Eligible
Inventory:

                    (1) any goods which are  consigned or leased to the Borrower
                    or are, for any reason, not owned by the Borrower;

                    (2) any items  which are not then  located  at the  Elmsford
                    Facilities;

                    (3) any items which constitute work in progress;

                    (4) packaging supplies;

                    (5) items which are  determined  by the Bank, in good faith,
                    to be  obsolete  or not  to be  marketable  in the  ordinary
                    course of business of the Borrower; and

                    (6) items which are  determined  by the Bank, in good faith,
                    to be so highly  customized for a specific  Person as not to
                    be readily saleable to anyone else;

                    (7) items  which  are  determined  by the Bank,  in its sole
                    discretion, to be ineligible for any other reason.

            "Elmsford Facilities": the facilities of the Borrower located at 565
Taxter Road, Elmsford,  New York 10523, and 3 Westchester Plaza,  Elmsford,  New
York 10523, respectively.

            "Environmental  Costs":  any and all costs or  expenses  (including,
without  limitation,   attorneys'  and  consultants'  fees,   investigation  and
laboratory  fees,  response  costs,  court  costs and  litigation  expenses)  of
whatever kind or nature, known or unknown, contingent or otherwise,  arising out
of, or in any way relating to any violation of,  noncompliance with or liability
under  any  Environmental  Laws  or  any  orders,   requirements,   demands,  or
investigations  of any Person related to any Environmental  Laws.  Environmental
Costs include any and all of the foregoing, without regard to whether they arise
out of or are related to any past, pending or threatened proceeding of any kind.

            "Environmental  Laws":  any and  all  applicable  foreign,  Federal,
state,  local  or  municipal  laws,  rules,   orders,   regulations,   statutes,
ordinances,  codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including  common law) regulating,  relating to or imposing
liability or standards of conduct  concerning  protection of human health or the
environment, as now or at any time hereafter in effect.

            "ERISA":  the Employee  Retirement  Income  Security Act of 1974, as
amended from time to time,  together with all rules and regulations  promulgated
from time to time thereunder.

            "Eurocurrency  Reserve  Requirements":  for any day as  applied to a
Eurodollar Loan, the aggregate (without  duplication) of the rates (expressed as
a decimal) 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 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.

            "Eurodollar  Base  Rate":  with  respect  to each  day  during  each
Interest Period  pertaining to a Eurodollar  Loan, a rate per annum equal to the
rate quoted by the Bank to banks in the New York interbank eurodollar market two
Business  Days prior to the  beginning of such  Interest  Period for deposits in
eurodollars in immediately  available  funds to be delivered on the first day of
such  Interest  Period in amounts and for  durations  comparable to the relevant
Eurodollar Loan and Interest Period.

            "Eurodollar  Loan":  at any time, any Loan,  which bears interest at
such time at a rate which is based upon the Eurodollar Rate.

            "Eurodollar  Rate":  with  respect to each day during each  Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward,  if necessary,  to the
nearest 1/16%):

                              Eurodollar Base Rate
                    1.00 - Eurocurrency Reserve Requirements

            "Event of Default":  any of the events specified in Section  8.1.

            "Exposure":  at any  time,  the sum of (a) the  aggregate  principal
amount of all Loans  outstanding at such time,  plus (b) the LC Exposure at such
time.

            "Federal Funds  Effective  Rate":  as set forth in the definition of
the term "Base Rate".

            "Fee":  each of the Closing Fee, the  Commitment  Fee, the Letter of
Credit Fees, the Customary  Charges,  the Audit Fee, and the Prepayment Fee; and
"Fees" means all of the foregoing fees, collectively.

            "Former  Plan":  any  employee  benefit plan in respect of which the
Borrower  or a Commonly  Controlled  Entity  could  incur  liability  because of
Section 4069 or Section 4212(c) of ERISA.

            "GAAP":  generally  accepted  accounting  principles  in the  United
States of America in effect from time to time, consistently applied.

            "Governmental  Authority":  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.

            "Guarantee  Obligation":   of  or  by  any  Person  shall  mean  any
obligation,  contingent or otherwise,  of such Person,  guaranteeing  or entered
into with the purpose of guaranteeing  any Indebtedness of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly,  and including
any  obligation of such Person,  direct or indirect,  (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such  Indebtedness or to
purchase  (or to advance or supply  funds for the  purchase of) any security for
the  payment of such  Indebtedness,  (b) to  purchase  property,  securities  or
services  for the purpose of  assuring  the holder of such  Indebtedness  of the
payment of such  Indebtedness,  or (c) to maintain  working  capital,  equity or
other financial statement condition or liquidity of the primary obligor so as to
enable the  primary  obligor to pay such  Indebtedness,  and any other  contract
which, in economic effect, is substantially equivalent to a guarantee; provided,
however, that the term "Guarantee Obligation" shall not include endorsements for
collection or deposit of instruments in the ordinary course of business.

            "Hazardous   Substances":   any  and  all  wastes,   materials   and
substances,  whether  solid,  liquid  or  gaseous,  (i)  defined  as  "hazardous
substances"  or "toxic  substances"  in any  Environmental  Law, (ii)  otherwise
protected  against by any Environmental  Law, or (iii) the discharge,  spillage,
uncontrolled loss, seepage or filtration of which constitutes a violation of any
Environmental Law, including,  without limitation,  radioactive waste, asbestos,
asbestos-containing  materials,  radon gas, urea  formaldehyde  foam insulation,
polychlorinated biphenyls, petroleum products and by-products and oil.

            "Indebtedness":  of any  Person  at any date  (a) all  indebtedness,
liabilities and obligations of such Person for borrowed money (including, in the
case of the Borrower, indebtedness hereunder), (b) all indebtedness evidenced by
notes,  bonds,  debentures or similar  instruments,  (c) all obligations of such
Person under Capital  Leases,  (d) all  obligations of such Person in respect of
acceptances  (as defined in Section  3-410 of the UCC) issued or created for the
account of such Person,  (e) the undrawn  amount of all letters of credit issued
for the  account of such Person  (including,  in the case of the  Borrower,  the
Letters of Credit) and (without  duplication) all drafts drawn  thereunder,  (f)
all  indebtedness of such Person for the deferred  purchase price of property or
services  (other  than trade  liabilities  incurred  in the  ordinary  course of
business  and  payable  in  accordance  with  customary   practices),   (g)  all
obligations of such Person, contingent or otherwise,  under or in respect of any
interest rate swap,  cap or collar  agreement,  any currency  exchange rate swap
agreement,  or  similar  arrangement  between  such  Person  and a bank or other
financial  institution  providing  for the transfer or mitigation of interest or
exchange  risks  either  generally  or  under  specific  contingencies,  (h) all
indebtedness  or obligations  of the types referred to in the preceding  clauses
(a) through (g) above  secured by any Lien on any property  owned by such Person
even  though  such Person has not  assumed or  otherwise  become  liable for the
payment thereof and (i) all Guarantee  Obligations of such Person,  in each case
determined as at such date, without duplication and in accordance with GAAP. The
Indebtedness of any Person shall include the  Indebtedness of any Partnership in
which such Person is a general partner, unless such partnership  Indebtedness is
without recourse to such general  partner.  The term  "Indebtedness",  when used
with respect to any Person,  shall include all  liabilities  and  obligations of
such  Person in respect of any of the items  specified  above,  irrespective  of
whether GAAP  requires  that such  liabilities  and  obligations  be reported as
indebtedness  on such  Person's  financial  statements  or whether  such  Person
actually  reports  such  liabilities  and  obligations  as  indebtedness  on its
financial statements.

            "Indemnitee": as defined in Section 9.2(b).

            "Ineligible  Financial  Institutions":  any banks or other financial
institutions,  other  than  (a)  the  Bank  and (b)  banks  or  other  financial
institutions  which have executed and delivered to the Bank letter agreements in
form and  substance  reasonably  satisfactory  to the  Bank,  acknowledging  the
security interest of the Bank in any funds or credit balances maintained by them
for the account of the  Borrower or any of its  Subsidiaries,  agreeing to block
such  accounts  and wire all cash  balances  to the Bank upon demand by the Bank
following the  occurrence of an Event of Default  hereunder,  and limiting their
set-off rights in a manner satisfactory to the Bank.

            "Intellectual    Property    Security    Agreement":    a   Security
Agreement-Patents, Trademarks and Copyrights, in form and substance satisfactory
to the Bank, pursuant to which the Borrower and its Domestic  Subsidiaries shall
grant to the Bank, as security for the  Obligations,  a lien on their respective
patents, trademarks and copyrights and the related applications and licenses.

            "Interest Coverage Ratio": as defined in Section 7.2.

            "Interest  Period":  with respect to any Eurodollar Loan, the period
commencing on the borrowing or conversion  date of such  Eurodollar  Loan, or on
the last day of the immediately  preceding  Interest  Period  applicable to such
Eurodollar  Loan,  as the case  may be,  and  ending  one,  two or three  months
thereafter,  as selected by the Borrower in its notice of borrowing,  conversion
or  continuation,  as the case may be,  given with  respect  thereto;  provided,
however, that:

                    (a) if any Interest Period would otherwise end on a day that
            is not a Business Day, such 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;

                    (b) no  Interest  Period  may extend  beyond the  Commitment
            Termination Date; and

                    (c) 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 relevant  subsequent  calendar month) shall
            end on the last  Business  Day of the relevant  subsequent  calendar
            month.

            "Inventory":  with  respect  to any  Person,  all  goods  and  other
personal  property  owned by such Person which are held for sale or lease or are
furnished or are to be furnished under a contract of service or which constitute
raw  materials,  work in process or materials  used or consumed or to be used or
consumed in such Person's business, or in the processing,  packaging or shipping
of the same,  and all  finished  goods,  including  all  inventory as defined in
Section 9-109(4) of the UCC.

            "Investments":  in any Person means:

                    (i) the purchase or acquisition (whether for cash, property,
            services or securities or  otherwise,  and whether  structured as an
            acquisition  or as a merger or  consolidation  or  otherwise) of any
            share of Capital Stock, any bond, note,  debenture or other evidence
            of indebtedness, or any other security, issued by such Person, or of
            any partnership or other ownership  interest in such Person,  or any
            binding obligation or option to make such purchase or acquisition,

                    (ii) any loan,  advance,  or  extension  of credit  to,  any
            deposit with, and any  contribution  to the capital of, such Person,
            and any commitment to make such loan, advance,  extension of credit,
            deposit or contribution to capital,

                    (iii)  any  Guarantee   Obligation,   or  other   contingent
            obligation,  with respect to Indebtedness or other liability of such
            Person, and

                    (iv)  any  purchase  of  all  or any  integral  part  of the
            business of such Person or assets  comprising  such business or part
            thereof, and any binding obligation or option to make such purchase;

provided,  however,  that the term  "Investment"  shall not  include (a) current
trade and customer  accounts  receivable  for services  rendered in the ordinary
course of business  and payable in  accordance  with  customary  trade terms and
other  investments  in accounts,  contract  rights and chattel  paper arising or
acquired in the  ordinary  course of  business or (b) stock or other  securities
acquired in connection  with the  satisfaction or enforcement of debts or claims
due or owing or as  security  for any such debts or claims,  provided  that such
debts or claims were not created for the purpose of or with a view to  acquiring
such stock or other securities.

            "LC Application": as defined in Section 2.10(c).

            "LC  Disbursement":  any  payment or  disbursement  made by the Bank
under or pursuant to a Letter of Credit.

            "LC  Exposure":  at any time,  the sum of (a) the aggregate  undrawn
amount of all Letters of Credit then outstanding,  plus (b) the aggregate amount
drawn under Letters of Credit for which the Bank has not been  reimbursed by the
Borrower.

            "Letter of Credit" and  "Letters  of Credit":  as defined in Section
2.10(a).

            "Letter of Credit Fee": as defined in Section  2.11(c);  and "Letter
of Credit  Fees" means the Letter of Credit Fees payable with respect to all the
Letters of Credit issued hereunder from time to time, collectively.

            "Leverage Ratio":  as defined in Section 7.2.

            "Lien": any mortgage, pledge,  hypothecation,  assignment,  security
deposit  arrangement,   encumbrance,  lien  (whether  statutory,  consensual  or
otherwise),  charge or other security interest  (including,  without limitation,
any conditional  sale or other title  retention  agreement and any Capital Lease
having substantially the same economic effect as any of the foregoing).

            "Loan" and "Loans": as defined in Section 2.1(a).

            "Loan   Documents":   this  Agreement,   the  Note,  the  Subsidiary
Guarantee,   the  Security  Documents,   the  Contribution  Agreement,   the  LC
Applications and any other instruments or documents relating hereto or thereto.

            "Lockbox":  each lockbox  established  by the Borrower or one of its
Subsidiaries with the Bank pursuant to a Lockbox Agreement.

            "Lockbox Agreement":  each Lockbox Agreement,  in form and substance
satisfactory to the Bank,  between the Borrower or any of its  Subsidiaries  and
the Bank.

            "Losses": as defined in Section 9.2(b).

            "Material  Adverse  Effect":  a material  adverse  effect on (a) the
business,  operations,  property,  condition  (financial  or  otherwise)  of the
Borrower and its Subsidiaries  taken as a whole, or the Borrower's or any of its
Subsidiaries'  ability to perform its  obligations  under this  Agreement or any
other Loan Document or (b) the validity or  enforceability  against the Borrower
or any of its Subsidiaries of this Agreement or any other Loan Document,  or any
of the rights or remedies of the Bank hereunder or thereunder.

            "Material  Environmental Amount": any amount payable by the Borrower
and/or any of its Subsidiaries in respect of or under any  Environmental Law for
remedial costs, compliance costs, compensatory damages, punitive damages, fines,
penalties or any combination thereof, that has a Material Adverse Effect.

            "Multiemployer  Plan":  a Plan  which  is a  multiemployer  plan  as
defined in Section 4001(a)(3) of ERISA.

            "NBC Base Rate":  as set forth in the  definition  of the term "Base
Rate".

            "Note": as defined in Section 2.7(b).

            "Notice of Borrowing": as defined in Section 2.2(b).

            "Notice  of  Conversion  or  Continuation":  as  defined  in Section
2.3(a).

            "Obligations":   all   indebtedness   and  other   liabilities   and
obligations  of  the  Borrower  hereunder  or  under  any  other  Loan  Document
including,  without  limitation,  (i) the  obligation to repay the Loans in full
when due,  (ii) the  obligation to pay interest on the Loans at the rates and on
the dates  specified  herein,  (iii) the obligation to pay the Fees in full when
due at the rates and on the  dates  specified  herein,  (iv) the  obligation  to
reimburse  the Bank in full for any payment  made by it under a Letter of Credit
as provided herein or in the relevant LC Application, (v) the obligation to Cash
Collateralize  the Letters of Credit as provided herein,  (vi) the obligation to
indemnify the Bank as provided  herein or in any other Loan Document,  (vii) the
obligation  to pay costs and  expenses as  provided  herein or in any other Loan
Document, and (viii) the obligation to pay all other amounts specified herein or
in any other Loan Document.

            "Operating Account": as defined in Section 2.2(a).

            "Optional Reduction Amount": as defined in Section 2.11(f).

            "Other Taxes": as defined in Section 9.2(a).

            "PBGC":  the  Pension  Benefit  Guaranty   Corporation   established
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.

            "Period End Accounts Receivable and Loan Reconciliation  Report" and
"Period End Recapitulation Report": the reports on the Bank's standard form that
are so designated, as they may be modified from time to time, and any substitute
reports, however named.

            "Permitted Liens": the Liens described in clauses (a) through (i) of
Section 6.11.

            "Person": an individual,  partnership,  corporation, business trust,
joint  stock  company,  trust,   unincorporated   association,   joint  venture,
Governmental Authority or other entity of whatever nature.

            "Plan":  any employee  benefit plan which is covered by ERISA and in
respect of which the Borrower or a Commonly  Controlled  Entity is an "employer"
as defined in Section 3(5) of ERISA.

            "Pledge  Agreement":  a  Pledge  Agreement  in  form  and  substance
satisfactory  to the Bank,  pursuant to which the  Borrower  shall pledge to the
Bank all of the shares of capital stock of its Domestic  Subsidiaries  now or at
any time hereafter owned by it.

            "Prepayment Fee": as defined in Section 2.11(f).

            "Properly Contested":  as defined in Section 6.2.

            "Properties" as defined in Section 4.20.

            "Regulation  U":  Regulation  U of the  Board  of  Governors  of the
Federal Reserve System as in effect from time to time.

            "Reportable  Event":  any of the events set forth in Section 4043(c)
of ERISA,  other than those events as to which the  thirty-day  notice period is
waived under  Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg.  Section 4043
or any successor regulation thereto.

            "Requirement of Law": as to any Person,  the articles or certificate
of  incorporation,  declaration of trust,  partnership  agreement and by-laws or
other organizational or governing documents of such Person, and any law, treaty,
rule or  regulation  or  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  material  property or to which such Person or any of its material
property is subject.

            "Responsible  Officer":  the  president  of the  Borrower  or,  with
respect to financial matters (including the delivery of Compliance  Certificates
pursuant  to  Section   6.3(d)  and  Borrowing  Base   Certificates   and  other
substantiating or supporting documentation regarding the Borrowing Base pursuant
to paragraphs (e) through (j) of Section 6.3), the chief financial officer,  the
treasurer  or  the   controller   of  the  Borrower  or,  with  respect  to  any
certification  of incumbency of any officer or any  resolutions or other matters
of corporate authorization or governance, the secretary of the Borrower.

            "Restricted   Payment":   with  respect  to  any  Person,   (i)  the
declaration  or  payment by such  Person of any  dividend  (excluding  dividends
payable solely in Capital Stock of such Person) or any other distribution on any
share of the Capital  Stock of such Person,  (ii) the  purchase,  redemption  or
retirement  by such Person of any share of any of such Person's  Capital  Stock,
(iii) any payment by such Person  resulting  in the  reduction of the capital of
such Person,  (iv) the purchase or  acquisition by any Subsidiary of such Person
of any  share of the  Capital  Stock of such  Person  from any  other  person or
entity,  and (v) the  payment by such Person or any of its  Subsidiaries  of any
amount, including principal and interest, of Subordinated Debt.

            "SEC": the United States  Securities and Exchange  Commission or any
successor thereto.

            "Security  Agreement":  a Security  Agreement in form and  substance
satisfactory  to the Bank,  pursuant  to which  the  Borrower  and its  Domestic
Subsidiaries shall grant to the Bank, as security for the Obligations, a blanket
lien on all of their respective assets.

            "Security  Documents":  collectively,  the Security  Agreement,  the
Intellectual  Property  Security  Agreement,  the  Pledge  Agreement,  and  each
financing statement or other document executed,  filed or recorded in connection
therewith; and "Security Document" means each of the foregoing, individually.

            "Single  Employer  Plan":  any Plan  which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.

            "Solvent" and "Solvency": with respect to any Person on a particular
date, the condition that on such date (a) the fair value of the property of such
Person is  greater  than the total  amount of  liabilities,  including,  without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the  assets of such  Person is not less  than the  amount  that will be
required  to pay the  probable  liability  of such  Person  on its debts as they
become  absolute and  matured,  (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities  mature, and (d) such Person is not engaged in
business  or a  transaction,  and  is not  about  to  engage  in  business  or a
transaction,  for which such Person's  property would constitute an unreasonably
small amount of capital.

            "Solvency   Certificate":   a  certificate  in  form  and  substance
satisfactory to the Bank, executed by a Responsible Officer of the Borrower.

            "Standby  Letter of  Credit":  any  Letter of  Credit  other  than a
Commercial Letter of Credit.

            "Subordinated  Debt" means all Indebtedness of the Borrower which is
subordinated to the Obligations by an instrument in writing satisfactory in form
and substance to the Bank.

            "Subsidiary": as to any Person, a corporation,  partnership or other
entity of which shares of stock or other  ownership  interests  having  ordinary
voting power to elect a majority of the board of directors or other  managers of
such  corporation,  partnership  or other  entity are at the time owned,  or the
management of which is otherwise controlled,  directly or indirectly through one
or more intermediaries,  or both, by such Person; and "wholly-owned  Subsidiary"
means, as to any Person, a corporation, partnership or other entity all of whose
shares of stock or other ownership  interests are owned by such Person and/or by
one  or  more  wholly  owned  Subsidiaries  of  such  Person.  Unless  otherwise
indicated,  all  references  to  "Subsidiaries"  shall  be  deemed  to  refer to
Subsidiaries of the Borrower.

            "Subsidiary Guarantee": a Subsidiary Guarantee in form and substance
satisfactory  to the Bank,  pursuant  to which each of the  Borrower's  Domestic
Subsidiaries  shall  irrevocably and  unconditionally  guarantee to the Bank the
payment in full of the Obligations when due.

            "Taxes":  as defined in Section 3.4(a).

            "Type": as to any Loan or portion thereof, its nature as a Base Rate
Loan or a Eurodollar Loan.

            "UCC":  the Uniform  Commercial Code as adopted in New York and from
time to time in effect.

            "Underfunding":  an excess of the present  value of all  accumulated
benefits under a Plan (based on those  assumptions used to fund such Plan), over
the  aggregate  market  value  of the  assets  of such  Plan  allocable  to such
accumulated  benefits,  determined  in each  case as of the most  recent  annual
valuation date.

            1.2     Other Definitional  Provisions.

            (a) Unless otherwise  specified  therein,  all terms defined in this
Agreement  shall have the defined  meanings when used in any other Loan Document
or any certificate or other document made or delivered pursuant hereto.

            (b)  As  used  herein,  in  the  other  Loan  Documents,  and in any
certificate  or other  documents made or delivered  pursuant  hereto or thereto,
accounting terms which are not defined in Section 1.1 and accounting terms which
are partly  defined in Section  1.1, to the extent not  defined,  shall have the
respective meanings given to them under GAAP.

            (c) The  words  "hereof",  "herein"  and  "hereunder"  and  words of
similar  import when used in this  Agreement  shall refer to this Agreement as a
whole and not to any  particular  provision  of this  Agreement;  references  to
Articles,  Sections,  Schedules  and  Exhibits  are  references  to Articles and
Sections of, and  Schedules  and Exhibits to, this  Agreement  unless  otherwise
specified;  and the  words  "this  Agreement"  refer to this  Credit  Agreement,
together with all schedules and exhibits hereto, as amended, restated,  modified
or supplemented from time to time.

            (d) The  meanings  given to terms  defined  herein  shall be equally
applicable  to both the singular  and plural  forms of such terms.  Words of the
neuter gender mean and include  correlative  words of the masculine and feminine
gender.

            (e) The Table of Contents and Article, Section, Schedule and Exhibit
headings used in this  Agreement are for  convenience  only and shall not affect
the construction or meaning of any provisions of this Agreement.

            (f) Except as otherwise  specified herein, all references herein (i)
to any Person shall be deemed to include such Person's  successors  and assigns,
(ii) to any  Requirement  of Law defined or  referred to herein  shall be deemed
references to such Requirement of Law or any successor Requirement of Law as the
same may have been or may be  amended  or  supplemented  from time to time,  and
(iii) to any Loan Document or other document or agreement defined or referred to
herein  shall be deemed  to refer to such Loan  Document  or other  document  or
agreement (and, in the case of any Note or any other instrument,  any instrument
issued in  substitution  therefor) as the terms  thereof may have been or may be
amended, supplemented, waived or otherwise modified from time to time.

            (g) Unless otherwise specified, all references to times of day shall
be to New York, New York times.

            (h) Unless otherwise specified, the term "including",  whenever used
in this Agreement or any other Loan Document, shall be deemed to mean "including
without limitation".

            (i) Each  authorization  in favor of the Bank granted by or pursuant
to this  Agreement  shall  be  deemed  to be  irrevocable  and  coupled  with an
interest.


                                    ARTICLE 2
                               THE CREDIT FACILITY


            2.1     The Loans. Loans

            (a) Subject to the terms and conditions of this Agreement,  the Bank
agrees to make  revolving  credit loans (each, a "Loan" and,  collectively,  the
"Loans") to the Borrower  from time to time during the  Commitment  Period in an
aggregate principal amount at any one time outstanding which,  together with the
LC Exposure,  will not exceed in the aggregate the lesser of (i) the  Commitment
or (ii) the Borrowing Base then in effect.

            (b) Subject to the terms and  conditions of this  Agreement,  during
the  Commitment  Period the Borrower  may borrow from the Bank  pursuant to this
Article 2, convert  pursuant to Section 2.3, repay or prepay pursuant to Section
2.8 (subject to the  provisions  of Section  3.5) and reborrow  pursuant to this
Article 2 up to the amount  specified  in  Section  2.1(a) by means of Base Rate
Loans or Eurodollar  Loans;  provided that no Loan shall be made  hereunder as a
Eurodollar  Loan  after  the  day  that is one  month  prior  to the  Commitment
Termination Date.

            2.2     Maintenance of Account; Procedure for Borrowing.

            (a) To facilitate the administration of this Agreement, the Borrower
shall establish a non-interest bearing deposit account (the "Operating Account")
with the Bank on or before  the  Closing  Date and shall use and  maintain  such
account  so long as the  Commitment  is in  effect  or any  Letter  of Credit is
outstanding and until the payment in full of the Obligations.

            (b)  The  Borrower  may  borrow  under  the  Commitment  during  the
Commitment Period on any Business Day, provided that the Borrower shall give the
Bank irrevocable  notice (which notice must be received by the Bank (i) prior to
11:00 a.m. on the requested  Borrowing Date with respect to Base Rate Loans, and
(ii) prior to 11.00 a.m.  three  Business Days prior to the requested  Borrowing
Date with respect to Eurodollar  Loans),  which notice shall be substantially in
the form of Exhibit B-1 and shall be duly  completed  by the Borrower  (each,  a
"Notice of  Borrowing").  Each  Eurodollar  Loan shall be in an amount  equal to
$500,000 or any greater  amount  that is a whole  multiple of $100,000  and each
Base Rate Loan  shall be in an amount  equal to  $25,000  or any whole  multiple
thereof (or, if the  Commitment  on the  requested  Borrowing  Date is less than
$25,000,  such  lesser  amount).  If the  Type  of the  requested  Loans  is not
specified in a Notice of  Borrowing,  then such Loans shall be made as Base Rate
Loans.  If no  Interest  Period  is  specified  with  respect  to any  requested
Eurodollar Loans in a Notice of Borrowing,  then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Bank will make the
amount of each Loan  available to the  Borrower by crediting  such amount to the
Borrower's Operating Account.

            (c)  Notwithstanding  the  provisions  of  paragraph  (b)  above but
subject to all other terms and conditions of this Agreement,  the Bank will make
Loans from time to time,  to the  extent of the then  Available  Commitment,  to
cover checks written on the Borrower's Operating Account. Loans made by the Bank
pursuant to this  paragraph (c) shall be made only as Base Rate Loans and may be
made in amounts that are less than $25,000 or a whole multiple thereof,  but the
obligation  of the Bank to make such Loans  shall be subject to all other  terms
and  conditions of this  Agreement,  including  satisfaction  of the  conditions
precedent  set forth in  Sections  5.1 and 5.3 (other than the  requirement  for
delivery  of a Notice of  Borrowing).  Each  presentment  to the Bank of a check
written on the Borrower's  Operating Account when  insufficient  collected funds
exist therein to cover such check shall constitute a request by the Borrower for
a Loan hereunder.

            2.3     Procedure for Conversion and Continuation.

            (a) The Borrower may elect from time to time to convert  outstanding
Loans from one Type to another by giving the Bank irrevocable  written notice of
such  election (i) at least one  Business  Day prior to the proposed  conversion
date, in the case of  conversion  of  Eurodollar  Loans into Base Rate Loans and
(ii) at least three Business Days prior to the proposed  conversion date, in the
case of conversion of Base Rate Loans into Eurodollar Loans,  which notice shall
be  substantially  in the form of Exhibit B-2 and shall be duly completed by the
Borrower (each, a "Notice of Conversion or  Continuation");  provided,  however,
that any conversion of Eurodollar Loans into Base Rate Loans may only be made on
the last day of an Interest  Period  with  respect  thereto.  Any such notice of
conversion to a Eurodollar Loan shall specify the length of the initial Interest
Period  therefor.  If such  notice  fails to specify  the length of the  initial
Interest Period therefor,  then the Borrower shall be deemed to have selected an
Interest  Period of one  month's  duration.  All or any part of any  outstanding
Loans may be  converted  as provided  herein,  provided  that (i) no Loan may be
converted  into a Eurodollar  Loan when any Event of Default has occurred and is
continuing and the Bank has notified the Borrower that such conversion option is
no longer  available  and (ii) no Loan may be converted  into a Eurodollar  Loan
after the date that is one month prior to the Commitment Termination Date.

            (b) Any  Eurodollar  Loan may be  continued  by the Borrower as such
upon the expiration of the then current  Interest Period with respect thereto by
giving a Notice of Conversion or Continuation to the Bank, specifying the length
of the next  Interest  Period to be  applicable  to such  Loans,  determined  in
accordance  with  the  applicable  provisions  of the  definition  of  the  term
"Interest  Period"  set  forth  in  Section  1.1;  provided,  however,  that  no
Eurodollar  Loan may be  continued  as such (i) when any  Event of  Default  has
occurred and is  continuing  and the Bank has  notified  the Borrower  that such
continuation  option is no longer  available  or (ii) after the date that is one
month prior to the Commitment  Termination Date; and provided  further,  that if
the Borrower shall fail to give any required  notice as described  above in this
paragraph or if such  continuation  is not  permitted  pursuant to the preceding
proviso,  such Eurodollar Loan shall be  automatically  converted to a Base Rate
Loan on the last day of the then expiring Interest Period.

            2.4     Minimum Amount of Eurodollar Loans and
                    Maximum Number of Interest Periods.

            All borrowings, conversions and continuations of Loans hereunder and
all selections of Interest Periods  hereunder shall be in such amounts and shall
be made pursuant to such  elections so that,  after giving effect  thereto,  the
aggregate  principal amount of each Eurodollar Loan shall be equal to or greater
than  $500,000 and shall be a whole  multiple of $100,000 and there shall not be
more than four (4) Interest Periods in effect at any one time.

             2.5    Termination or Reduction of Commitments. 

            (a) The Borrower  shall have the right,  upon not less than five (5)
Business  Days' notice to the Bank, to either  terminate the Commitment or, from
time to time,  to reduce the amount of the unused  Commitment.  Any such partial
reduction  shall be in an  aggregate  amount  equal to  $500,000  or any greater
amount that is a whole  multiple of $100,000  and shall reduce  permanently  the
relevant Commitment then in effect. Any such termination of the Commitment shall
be accompanied by prepayment in full of any Loans then outstanding and an amount
sufficient to Cash  Collateralize  any Letters of Credit then  outstanding.  Any
termination or reduction of the Commitment  shall also be accompanied by payment
in full of any Prepayment Fee applicable thereto.

            (b) Interest  accrued on the amount of any prepayment  relating to a
termination of the Commitment  pursuant  hereto and any unpaid  Commitment  Fees
accrued  hereunder with respect to the Commitment or the portion thereof that is
being reduced shall be paid by the Borrower on the date of such  termination  or
reduction. Prepayments made pursuant to this Section 2.5 shall be accompanied by
amounts payable  pursuant to Section 3.5, if any, that are  attributable to such
prepayments.

            2.6     Repayment of Loans.  

            The Borrower hereby unconditionally promises to repay to the Bank in
full on the Commitment Termination Date (or such earlier date on which the Loans
become due and payable  pursuant to Section 8.1) the aggregate  principal amount
of all Loans that are then outstanding.

            2.7     Evidence of Indebtedness.

            (a) The Bank shall maintain in accordance  with its normal  practice
an account or  accounts  evidencing  Indebtedness  of the  Borrower  to the Bank
hereunder.  The entries  made by the Bank in such  account or accounts  shall be
prima facie  evidence of the  existence  and amounts of the  obligations  of the
Borrower therein recorded,  provided,  however,  that the failure of the Bank to
maintain any such account, or any error therein,  shall not in any manner affect
the  obligation  of the  Borrower  to repay the Loans,  and to pay all  interest
accrued thereon, in accordance with the terms of this Agreement.

            (b) The Borrower  shall execute and deliver to the Bank a promissory
note substantially in the form of Exhibit A (the "Note") to evidence the Loans.

            2.8     Optional and Mandatory Prepayments.  

            (a) The  Borrower  may prepay the Loans at any time,  in whole or in
part, without premium or penalty, upon at least three Business Days' irrevocable
notice to the Bank,  specifying the date and amount of  prepayment.  If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with accrued interest on the amount prepaid
and any amounts payable pursuant to Section 3.5.  Optional  partial  prepayments
shall be in an  aggregate  principal  amount  equal  to  $100,000  or any  whole
multiple thereof.

            (b) All collected funds credited from time to time to any account of
the Borrower with the Bank shall be applied, upon collection,  to the payment or
prepayment  of the  principal  amount of and any interest  then due on any Loans
then  outstanding,  and the Borrower hereby authorizes and instructs the Bank to
debit any of its  accounts  with the Bank for the amount of any such  payment or
prepayment.  The Bank shall give credit for all  collections (x) for purposes of
calculating interest due hereunder,  two (2) Business Days after the receipt and
deposit thereof and (y) for all other purposes,  in accordance with its internal
policies and procedures.

            (c) If the Exposure exceeds the lesser of (i) the Commitment or (ii)
the  Borrowing  Base at any time,  the  Borrower  shall  immediately  prepay any
outstanding Loans and, after prepayment in full thereof,  Cash Collateralize any
outstanding Letters of Credit, to the extent necessary to eliminate such excess.
Any prepayment  hereunder shall be accompanied by accrued interest on the amount
prepaid and any amounts payable pursuant to Section 3.5.

            (d) Any prepayment  under this Section 2.8 shall be applied,  first,
to outstanding Base Rate Loans and Eurodollar Loans with Interest Periods ending
on the day of such  prepayment,  if any, and thereafter to any other  Eurodollar
Loans then outstanding;  provided,  however, that so long as no Event of Default
shall have occurred and be continuing,  the Bank shall not apply collected funds
to the prepayment of outstanding  Eurodollar Loans pursuant to Section 2.8(b) if
such  prepayment  would cause the Borrower to incur  liability to the Bank under
Section 3.5. Any such prepayment shall be applied first to interest then due and
then to principal.

            2.9     Interest Rates and Payment Dates.  

            (a) Each Base  Rate  Loan  shall  bear  interest  for each day it is
outstanding  at a rate per  annum  equal to the Base Rate in effect on such day,
plus 1/4%.

            (b) Each  Eurodollar  Loan shall bear  interest  for each day during
each  Interest  Period  with  respect  thereto at a rate per annum  equal to the
Eurodollar Rate applicable to such Interest Period, plus 2-1/4%.

            (c) After the  occurrence of an Event of Default and the  expiration
of any  applicable  grace periods  specified in Article 8, interest shall accrue
(after as well as before  judgment)  (i) with  respect to the  principal of each
Loan,  at a rate per annum  equal to two percent  (2%) above the rate  otherwise
applicable  thereto  pursuant to Section 2.9(a) or (b), (ii) with respect to any
other Obligations which prior to default bear interest  hereunder at a specified
rate, at a rate per annum equal to two percent (2%) above such  specified  rate,
and (iii) with  respect to any other  amounts  (including  overdue  payments  of
interest and fees) at a rate per annum equal to the Base Rate plus 2 1/4%.

            (d)  Interest on each Loan  (irrespective  of Type) shall be payable
monthly in arrears on the first Business Day of each calendar month,  commencing
with  July 1,  1997,  on the date on  which  such  Loan is  repaid,  prepaid  or
converted  and,  if such  Loan is a  Eurodollar  Loan  and the  Interest  Period
applicable  thereto  ends  on a day  that  is not the  first  Business  Day of a
calendar  month,  also on the last day of such  Interest  Period;  provided that
interest accruing pursuant to paragraph (c) of this Section 2.9 shall be payable
from time to time on demand.

            (e) It is the  intention  of the parties  hereto to comply  strictly
with applicable  usury laws;  accordingly,  it is stipulated and agreed that the
aggregate of all amounts which constitute  interest under applicable usury laws,
whether contracted for, charged,  taken,  reserved,  or received,  in connection
with the  Indebtedness  evidenced by this  Agreement or any other Loan  Document
shall never  exceed  under any  circumstance  whatsoever  the maximum  amount of
interest allowed by applicable usury laws.

            2.10    The Letters of Credit.

            (a) Subject to the terms and conditions  hereof and relying upon the
representations  and warranties  herein set forth, the Bank agrees,  at any time
and from time to time on or after the  Effective  Date until the  earlier of (i)
the tenth  Business Day preceding the Commitment  Termination  Date and (ii) the
termination  of the  Commitment  in accordance  with the terms hereof,  to issue
letters of credit (each, a "Letter of Credit" and collectively,  the "Letters of
Credit")  for  account of the  Borrower;  provided,  however,  that no Letter of
Credit shall be issued if, after giving effect thereto:

            (x) the LC  Exposure  would  exceed  Seven  Hundred  Fifty  Thousand
            Dollars ($750,000); or

            (y) the Exposure  would exceed the lesser of (1) the  Commitment  or
            (2) the Borrowing Base then in effect.

            (b) Each Letter of Credit (i) shall be in form  satisfactory  to the
Bank,  (ii) shall permit  drawings upon the  presentation  of such  documents as
shall be specified by the Borrower in the LC Application  delivered  pursuant to
paragraph (c) of this Section 2.10, and (iii) shall by its terms expire no later
than the earlier to occur of (x) 360 days after the issuance  thereof or (y) the
last Business Day prior to the Commitment Termination Date. Any Letter of Credit
may  provide for the renewal  thereof for  additional  periods of up to 360 days
(which shall in no event extend beyond the Commitment  Termination  Date).  Each
Letter of Credit  shall by its terms  provide for payment of drawings in Dollars
at sight.

            (c) The Borrower shall request the issuance of a Letter of Credit by
submitting to the Bank a properly completed and duly executed counterpart of the
Bank's standard letter of credit application (an "LC Application") no later than
11:00 a.m.,  one Business Day (or such shorter  period as shall be acceptable to
the Bank) prior to the proposed issuance of the requested Letter of Credit. Each
LC  Application  shall refer to this  Agreement,  shall  specify (i) the date on
which such Letter of Credit is to be issued  (which shall be a Business Day) and
the face  amount of such  Letter of  Credit,  (ii) the name and  address  of the
beneficiary of such Letter of Credit,  (iii) whether such Letter of Credit shall
permit a single  drawing or multiple  drawings,  (iv) the form of the  documents
required to be  presented  at the time of any drawing  (together  with the exact
wording of such  documents or copies  thereof),  and (v) the expiry date of such
Letter of Credit (which shall conform to the provisions of paragraph (b) of this
Section 2.10),  and shall be accompanied by such  certificates,  documents,  and
other papers and  information as the Bank may reasonably  request.  The Borrower
hereby  agrees  to  observe  and  perform  all  of  its  covenants,  duties  and
obligations under each LC Application. In the event of any inconsistency between
the terms of this Agreement and the terms of an LC  Application,  this Agreement
shall prevail.

            (d) The Borrower  hereby agrees to reimburse the Bank for any amount
paid by the Bank under any Letter of Credit no later than 1:00 p.m.  on the date
on which the Bank makes such payment.  So long as no Event of Default shall have
occurred  and be  continuing  and the Borrower  has the  necessary  availability
hereunder,  it may  reimburse the Bank for any payments made by it under Letters
of Credit with the  proceeds  of Loans.  Failure to  reimburse  the Bank for any
payment  made by it under a Letter of  Credit by 1:00 p.m.  on the date on which
the Bank makes such payment shall  constitute a borrowing notice by the Borrower
under Section 2.3 for a Loan in the principal amount equal to the amount of such
payment by the Bank,  to be made on the date on which the  Borrower is obligated
to reimburse the Bank for such payment pursuant to this Section 2.10(d). Subject
to this  Section  2.10,  the  Borrower's  obligation  to  reimburse  the Bank in
accordance  with the terms hereof for all  payments  made by the Bank under each
Letter  of  Credit  and to pay  interest  on the  unpaid  amount  of  each  such
reimbursement obligation shall be absolute,  irrevocable and unconditional under
any and all circumstances  whatsoever and shall not be terminated for any reason
whatsoever.

            (e) In the event that the Borrower  does not  reimburse  the Bank as
provided in paragraph  (d) of this Section 2.10 for any payment made by the Bank
under  a  Letter  of  Credit,  the  outstanding  amount  of  such  reimbursement
obligation shall bear interest from the date when due pursuant to said paragraph
(d) until paid in full at a rate per annum equal to the Base Rate in effect from
time to time plus two and one-quarter percent (2-1/4%).

            (f) The Bank shall examine documents  delivered under each Letter of
Credit so as to  ascertain  that said  documents  on their face appear to comply
with the terms of such Letter of Credit, but the Bank shall have no liability or
responsibility  (i) for the  genuineness or  authenticity  of any document which
appears on such examination to be regular on its face; (ii) for honoring a draft
or demand for payment after notification from the Borrower of fraud,  forgery or
other defect not apparent on the face of the  documents;  (iii) for the ultimate
correctness of the Bank's decision  regarding  documentary  compliance where its
decision is based on its  examination  of the  documents  pursuant to its normal
examination  procedures  or in a manner  not  unreasonable  or where the  Bank's
decision  is  based  on its  exercise  of  judgment  and  that  judgment  is not
unreasonable.  The  Borrower  hereby  waives  any right it may have to bring any
action against the Bank based on fraud,  forgery or other defects (which are not
the result of the  Bank's  gross  negligence  or wilful  misconduct,  as finally
determined by a court of competent jurisdiction) not apparent on the face of the
documents presented under any Letter of Credit; provided,  however, that nothing
herein  contained  shall prohibit the Borrower from bringing an action to enjoin
the Bank from  making a payment  under a Letter of  Credit.  For the  purpose of
determining  whether the Bank has met its obligations to the Borrower to examine
documents  delivered under each Letter of Credit,  documents which substantially
or otherwise  reasonably  comply with the terms of the relevant Letter of Credit
may be  accepted,  and the tests of  literal or strict  construction  as regards
acceptability of documents shall not be applied in any dispute which may develop
between the Bank and the Borrower.

            (g) The Borrower hereby agrees that: (i) the Bank may accept or pay,
as complying with the terms of a Letter of Credit, any drafts or other documents
otherwise  in order  which may be signed or issued by a trustee  in  bankruptcy,
debtor in possession, assignee for benefit of creditors,  liquidator,  receiver,
successor or other legal  representative  of the party who is  authorized  under
such Letter of Credit to draw or issue any drafts or other  documents;  and (ii)
to the extent not inconsistent  with the express terms of the relevant Letter of
Credit, the Bank and any of its  correspondents  may, without limiting any other
provisions of this  Agreement,  accept  documents of any character  which comply
with the provisions, definitions, interpretations and practices contained in The
Uniform   Customs  and  Practice  for  Documentary   Credits  (1993   Revision),
International Chamber of Commerce Publication No. 500 (the "UCP"), and accept or
pay any draft dated on or before the  expiration of any time limit  expressed in
such Letter of Credit,  regardless of when drawn and when or whether negotiated,
provided the other required  documents are dated prior to the expiration date of
such Letter of Credit.

            (h) The Borrower's obligation to reimburse the Bank in full for each
payment made by the Bank under a Letter of Credit in  compliance  with the terms
of such Letter of Credit,  this  Agreement  and the relevant LC  Application  is
absolute and unconditional, under all circumstances whatsoever, and shall not be
affected by:

                    (1) any  invalidity  or  unenforceability  of any  Letter of
            Credit, LC Application,  this Agreement,  any Note or any other Loan
            Document; or

                    (2) any  amendment or waiver of, or any consent to departure
            from, this Agreement, any LC Application, any Note or any other Loan
            Document; or

                    (3) the failure by the Bank to make any Loan hereunder; or

                    (4) any  exchange  or  release of any  collateral  or of any
            security  interest  therein,  any  failure  to  perfect  a  security
            interest in any collateral, or any release of any guarantor; or

                    (5) the  existence of any claim,  set-off,  defense or other
            right  which  the   Borrower  may  have  at  any  time  against  any
            beneficiary of any Letter of Credit, or any other Person, whether in
            connection with this Agreement, the transactions contemplated herein
            or any unrelated transaction; or

                    (6)  any   statement  or  any  other   document   (including
            insurance),  or endorsement  thereof,  presented under any Letter of
            Credit proving to be forged, fraudulent, invalid or uncollectible in
            any respect or any  statement  therein being untrue or inaccurate in
            any respect whatsoever; or

                    (7) any  irregularity  in the  transactions  with respect to
            which any Letter of Credit is issued, including, without limitation,
            any fraud by any beneficiary thereunder; or

                    (8) any breach of contract  between the Bank or the Borrower
            and any beneficiary under a Letter of Credit or any other Person; or

                    (9)   consequences   of   compliance   with  laws,   orders,
            regulations or customs in effect in places of negotiation or payment
            of drafts drawn under any Letter of Credit; or

                    (10)  failure  of  drafts  to  bear  reference  or  adequate
            reference  to any Letter of  Credit,  or  failure  of  documents  to
            accompany  drafts  at  negotiation,  or  failure  of any  Person  to
            surrender or take up any Letter of Credit,  or failure of any Person
            to note the amount of any draft presented under any Letter of Credit
            or forward  documents  apart from  drafts as may be  required by the
            terms of any  Letter  of  Credit  (each of  which  requirements  the
            Borrower hereby waives,  to the extent permitted under the UCP, even
            if included in any Letter of Credit); or

                    (11)   errors,   omissions,   interruptions   or  delays  in
            transmission  or delivery of any messages,  however sent and whether
            plain  or  in  code  or  cipher,  or  errors  in  translation  or in
            interpretation of technical or other terms; or

                    (12) without limiting the foregoing, any act or omission not
            done or  omitted  in bad  faith or as a result of the  Bank's  gross
            negligence  (in  each  case,  as  finally  determined  by a court of
            competent jurisdiction).

            (i) In case of any variation between the documents called for by any
Letter of Credit or any Borrower's  instructions  and documents  accepted by the
Bank,  the  Borrower  shall be  conclusively  deemed to have waived any right to
object to such variation with respect to any action of the Bank relating to such
documents, and to have ratified and approved such action as having been taken at
the Borrower's direction, unless promptly following receipt of such documents or
acquisition  of knowledge of such variation the Borrower files an objection with
the Bank in writing.

            (j) The Borrower  hereby  agrees to indemnify  and hold harmless the
Bank from and against any and all claims, damages, losses, liabilities, costs or
expenses  whatsoever  which the Bank may incur (or which may be claimed  against
the Bank by any  Person  whatsoever)  by  reason  of or in  connection  with the
issuance  of, or  payment  or  failure  to pay  under,  any  Letter of Credit in
compliance  with the terms of such  Letter of  Credit,  this  Agreement  and the
relevant LC  Application;  provided,  however,  that the  Borrower  shall not be
required to indemnify  the Bank for any claims,  damages,  losses,  liabilities,
costs or expenses to the extent,  but only to the extent,  caused by the willful
misconduct or gross negligence of the Bank (as finally  determined by a court of
competent jurisdiction).  Nothing in this paragraph (j) is intended to limit the
Borrower's reimbursement obligations under Section 2.10(d).

            2.11    Fees.  

            (a) The  Borrower  shall  pay to the Bank on the  Closing  Date,  as
consideration for the Bank's execution and delivery of this Agreement, a closing
fee in the amount of $20,000 (the "Closing  Fee"),  which shall be deemed earned
when paid and shall be non-refundable.  The Bank hereby acknowledges that it has
previously received a portion of the Closing Fee in the amount of $10,000.

            (b)  The  Borrower  shall  pay to the  Bank a  commitment  fee  (the
"Commitment  Fee")  calculated at the rate of one-half of one percent (1/2%) per
annum on the average daily unused amount of the Commitment from the Closing Date
through the date on which the Commitment is terminated.  The accrued  Commitment
Fee shall be paid on the first Business Day of each month, starting with July 1,
1997, and on the date on which the Commitment is terminated.

            (c) The  Borrower  shall pay to the Bank in respect of each  Standby
Letter of Credit a letter of credit  fee (the  "Letter  of Credit  Fee") for the
period from the issuance of such Standby Letter of Credit through its expiration
date,  calculated at the rate of two and one quarter of one percent (2-1/4%) per
annum on the face amount of such Standby  Letter of Credit (taking into account,
in  calculating  such fee, any scheduled  reductions  in said face amount).  The
Letter of Credit Fees  payable  with  respect to each month shall be paid on the
first Business Day of the immediately succeeding month.

            (d) The Borrower  shall pay to the Bank,  in respect of each Standby
Letter of Credit and Commercial Letter of Credit, the customary  administration,
issuance,  amendment,  transfer,  drawing and negotiation  fees and charges (the
"Customary  Charges")  charged by the Bank from time to time in connection  with
letters of credit.  The Customary Charges shall be paid by the Borrower promptly
upon request therefor by the Bank.

            (e) The Borrower  shall pay to the Bank  promptly  upon demand,  for
each  field   examination  or  audit  conducted  by  the  Bank  or  any  of  its
representatives or agents with respect to the Borrower, its books and records or
the Collateral,  (i) an audit fee (the "Audit Fee"),  exclusive of expenses,  in
the amount of $500 per day per auditor for each such field  examination or audit
and (ii) all expenses  relating to such field examination or audit for which the
Borrower is responsible pursuant to Section 9.2.

            (f) In the  event  that  the  Borrower  reduces  or  terminates  the
Commitment pursuant to Section 2.5(a), refinances the credit facilities provided
hereunder,  or voluntarily  terminates this Agreement,  at any time prior to the
Commitment  Termination  Date (the amount of any such  reduction or  termination
(which in the case of a refinancing of the credit facilities  provided hereunder
or voluntary  termination of this Agreement shall be equal to the full amount of
the Commitment  then in effect) herein called an "Optional  Reduction  Amount"),
the  Borrower  shall  pay to the  Bank on the  date  on  which  such  reduction,
refinancing or termination  becomes effective a fee (the "Prepayment Fee") equal
to the Applicable  Percentage of the Optional  Reduction Amount. For purposes of
this Section, the term "Applicable  Percentage" means (i) 3% with respect to any
optional reduction,  refinancing or termination which becomes effective prior to
May 28, 1998,  (ii) 2% with respect to any optional  reduction,  refinancing  or
termination  which becomes effective after May 28, 1998 but before May 28, 1999,
and (iii) 1% with respect to any optional reduction,  refinancing or termination
which becomes effective after May 28, 1999.

            2.12    Computation of Interest and Fees.   

            (a) Interest and Fees shall be  calculated on the basis of a 360-day
year for the actual number of days elapsed. Any change in the interest rate on a
Loan  resulting  from a change in the NBC Base Rate or the  Federal  Funds  Rate
shall  become  effective  as of the opening of business on the day on which such
change  becomes  effective.  The  Bank  shall  notify  the  Borrower  as soon as
practicable of the effective date and the amount of each such change in interest
rate.

            (b) Each  determination  of an interest rate by the Bank pursuant to
any provision of this Agreement  shall be conclusive and binding on the Borrower
in the absence of manifest error.

            2.13    Place and Manner of Payment

            (a) All  payments of  principal,  interest,  fees and other  amounts
hereunder  and under the other Loan  Documents  shall be made in Dollars  and in
immediately available funds at the office of the Bank at 125 W. 55th Street, New
York,  New York 10019 (or at such other  office as the Bank may  designate  from
time to time by a prior  notice in writing to the  Borrower)  no later than 1:00
p.m. on the date when due. The Bank is hereby  authorized  (but not required) to
debit the Borrower's  deposit accounts with the Bank for any amount owing to the
Bank  hereunder or under any other Loan Document  (including any amount owing to
the Bank in  respect of  principal,  interest  or fees).  The rights of the Bank
under  this  Section  2.13 are in  addition  to and not in lieu of the rights of
set-off under Section 9.8 and under applicable law.

            (b) If any amount payable hereunder or under any other Loan Document
shall be due on a day which is not a Business Day, the maturity thereof shall be
extended to the immediately  succeeding  Business Day and interest thereon shall
accrue during the period of such extension (i) in the case of amounts payable in
respect of principal,  at the rate  provided in this  Agreement for the relevant
Loan and (ii) in the case of all other amounts, at a rate per annum equal to the
Base Rate then in effect plus one quarter of one percent (1/4%).

            2.14    Use of Letters of Credit and Loan Proceeds.

            The  Borrower  shall use (a) the  proceeds  of the  Loans  solely to
finance its working  capital needs and the working capital needs of its Domestic
Subsidiaries and to repay its outstanding Indebtedness to Mr. Thomas E. Feil not
exceeding  $210,000 in the  aggregate  (including  unpaid  principal and accrued
interest  and fees,  if any),  (b) the  Commercial  Letters of Credit  solely to
provide for  payments in  connection  with the purchase of  materials,  goods or
services by it or its Domestic  Subsidiaries in the ordinary course of business,
and (c) the  Standby  Letters of Credit  solely to support  its or its  Domestic
Subsidiaries'  workers'  compensation  liabilities,   obligations  to  insurers,
obligations  under  leases  and other  payment,  performance,  deposit or surety
obligations incurred in the ordinary course of business; provided, however, that
(i) the Borrower  shall in no event use any Letters of Credit or the proceeds of
any Loans to finance or support any offices,  plants or other  facilities of the
Borrower or any of its  Subsidiaries  located outside the United States and (ii)
the  Borrower  may use the  Letters of Credit and the  proceeds  of the Loans to
finance the acquisition, manufacturing and assembly of Inventory of the Borrower
or any of its Domestic  Subsidiaries intended for sale outside the United States
having a fair market value which does not exceed  $1,000,000 in the aggregate at
any one time.


                                    ARTICLE 3
                     YIELD PROTECTION AND ILLEGALITY; TAXES.

            3.1     Inability to Determine Interest Rate.  

            If prior to the first day of any Interest Period:

                    (a) the Bank  shall  have  determined  (which  determination
            shall be conclusive  and binding upon the Borrower)  that, by reason
            of  circumstances   affecting  the  relevant  market,  adequate  and
            reasonable  means do not exist for  ascertaining the Eurodollar Rate
            for such Interest Period, or

                    (b) the Bank shall have  determined that the Eurodollar Rate
            determined  or to be determined  for such  Interest  Period will not
            adequately  and  fairly  reflect  the cost to the Bank of  making or
            maintaining  its Loans  during such  Interest  Period as  Eurodollar
            Loans,

the Bank shall give  telecopy or  telephonic  notice  thereof to the Borrower as
soon as practicable  thereafter.  If such notice is given,  any Eurodollar Loans
requested to be made on the first day of such  Interest  Period shall be made as
Base Rate Loans.  Until such notice has been  withdrawn by the Bank,  no further
Eurodollar Loans shall be made, nor shall the Borrower have the right to request
any Eurodollar Loans.

            3.2     Illegality.  

            Notwithstanding  any other provision  herein,  if the adoption of or
any change in any  Requirement  of Law or in the  interpretation  or application
thereof  occurring  after the date hereof shall make it unlawful for the Bank to
make or maintain  Eurodollar  Loans as contemplated  by this Agreement,  (a) the
Bank shall  promptly give written notice of such  circumstances  to the Borrower
(which notice shall be withdrawn  whenever such  circumstances no longer exist),
(b) the  obligation  of the Bank  hereunder to make any  Eurodollar  Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
the  Bank  to make  and  maintain  Eurodollar  Loans,  the  Bank  shall  have no
obligation to make or maintain  Eurodollar  Loans,  and (c) any Eurodollar Loans
then  outstanding  shall be  converted  automatically  to Base Rate Loans on the
respective last days of the then current  Interest  Periods with respect to such
Loans or within such earlier  period as required by law. If any such  conversion
of a  Eurodollar  Loan  occurs  on a day  which  is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to the Bank
such amounts, if any, as may be required pursuant to Section 3.5.

            3.3     Additional Costs; Capital Adequacy.  

            (a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application  thereof applicable to the Bank, or compliance
by the Bank with any  request or  directive  (whether or not having the force of
law) from any central bank or other  Governmental  Authority,  in each case made
subsequent to the date hereof:

            (i) shall  subject the Bank to any tax of any kind  whatsoever  with
            respect  to any  Letter  of  Credit,  any  Eurodollar  Loan,  or its
            obligation to issue Letters of Credit or make  Eurodollar  Loans, or
            change  the basis of  taxation  of  payments  to the Bank in respect
            thereof  (except  for Taxes  covered by Section  3.4 and  changes in
            taxes  measured  by or  imposed  upon the  overall  net  income,  or
            franchise  taxes  (imposed in lieu of such net income  tax),  of the
            Bank or its  applicable  lending  office,  branch,  or any affiliate
            thereof);

            (ii) shall impose,  modify or hold  applicable any reserve,  special
            deposit,  compulsory loan or similar requirement against assets held
            by,  deposits  or  other  liabilities  in or  for  the  account  of,
            advances, loans, letters of credit or other extensions of credit by,
            or any other  acquisition of funds by, any office of the Bank, which
            requirement is not otherwise  included in the  determination  of the
            Eurodollar Rate hereunder; or

            (iii)  shall impose on the Bank any other condition;

and the result of any of the  foregoing  is to increase  the cost to the Bank of
issuing or maintaining Letters of Credit or of making or maintaining  Eurodollar
Loans or to reduce any amount receivable  hereunder in respect thereof or of its
Commitment  hereunder,  then from time to time,  within 2  Business  Days  after
submission  by the Bank to the  Borrower  of a  written  request  therefor,  the
Borrower  shall  pay to  the  Bank  (i)  any  additional  amounts  necessary  to
compensate  the  Bank for  such  increased  cost or  reduced  amount  receivable
attributable  to its  issuance  or  maintenance  of any Letters of Credit or its
making or  maintaining  any  Eurodollar  Loans,  and such  additional  amount or
amounts as will  compensate the Bank for such increased cost or reduced  amounts
receivable  attributable  to this Agreement,  the Bank's  obligation to issue or
maintain  Letters of Credit,  the Bank's  Commitment  and the credit  facilities
provided  hereunder;  provided  that,  in any  such  case,  if the  compensation
required  to be  provided  by it  hereunder  relates to  Eurodollar  Loans,  the
Borrower may elect to convert the Eurodollar  Loans to Base Rate Loans by giving
the Bank at least one Business Day's notice of such election,  in which case the
Borrower shall promptly pay to the Bank upon demand,  without duplication,  such
amounts, if any, as may be required pursuant to Section 3.5. If the Bank becomes
entitled to claim any additional  amounts pursuant to this Section 3.3, it shall
provide prompt notice thereof to the Borrower.  Such notice as to any additional
amounts  payable  pursuant  to this  Section  3.3  submitted  by the Bank to the
Borrower  shall be  conclusive in the absence of manifest  error.  This covenant
shall survive the termination of this Agreement and the other Loan Documents and
the payment in full of the Notes and all other amounts payable hereunder.

            (b) If the Bank shall have  determined  that the  adoption of or any
change  in  any  Requirement  of  Law  regarding  capital  adequacy  or  in  the
interpretation  or  application  thereof  or  compliance  by  the  Bank  or  any
corporation controlling the Bank with any request or directive regarding capital
adequacy  (whether  or not  having  the  force  of law)  from  any  Governmental
Authority,  in each case made subsequent to the date hereof,  does or shall have
the effect of  reducing  the rate of return on the Bank's or such  corporation's
capital as a  consequence  of its  obligations  hereunder  to a level below that
which the Bank or such  corporation  could have  achieved but for such change or
compliance (taking into consideration the Bank's or such corporation's  policies
with  respect to capital  adequacy),  then from time to time,  within 2 Business
Days after submission by the Bank to the Borrower of a written request therefor,
(i) the Borrower shall pay to the Bank such additional amount or amounts as will
compensate  the  Bank  for  such  reduction  attributable  to  its  issuance  or
maintenance of the Letters of Credit hereunder,  or its making or maintaining of
Eurodollar  Loans  hereunder,  and (ii) the Borrower  shall pay to the Bank such
additional amount or amounts as will compensate the Bank or such corporation for
such reduction  attributable to this Agreement,  its obligation to issue Letters
of Credit hereunder, its Commitment hereunder and the credit facilities provided
hereunder to the Borrower.

            (c) If the Bank requests  compensation from the Borrower pursuant to
paragraph  (a) or (b) of this Section 3.3, the Bank will deliver to the Borrower
a certificate  setting  forth in reasonable  detail the basis and amount of such
request  and such  certificate  shall be  conclusive  as to the amount set forth
therein,  absent manifest error. In determining  such amount,  the Bank may make
such uniformly applied estimates, assumptions,  allocations among its assets and
liabilities and the like as it determines in good faith to be  appropriate,  and
the determinations made by the Bank on the basis thereof shall be final, binding
and conclusive upon the Borrower,  except,  in the case of such  determinations,
for manifest errors.  The covenants and obligations of the Borrower set forth in
this Section 3.3 shall survive the termination of this Agreement, the expiration
of the  Letters  of Credit and the  payment  of the Loans and all other  amounts
payable hereunder.

            3.4     Taxes.  

            (a) All payments made by the Borrower  under this  Agreement and the
other Loan Documents  shall be made free and clear of, and without  deduction or
withholding  for or on account of, any present or future income,  stamp or other
taxes, levies, imposts,  duties, charges, fees, deductions or withholdings,  now
or  hereafter  imposed,   levied,   collected,   withheld  or  assessed  by  any
Governmental Authority,  excluding net income taxes and franchise taxes (imposed
in lieu of net  income  taxes)  imposed  on the Bank as a result of a present or
former connection between the jurisdiction of the government or taxing authority
imposing such tax and the Bank  (excluding a connection  arising solely from the
Bank having  executed,  delivered or  performed  its  obligations  or received a
payment  under,  or enforced,  this Agreement or any other Loan Document) or any
political   subdivision  or  taxing  authority  thereof  or  therein  (all  such
non-excluded taxes,  levies,  imposts,  duties,  charges,  fees,  deductions and
withholdings being hereinafter  called "Taxes").  If any such Taxes are required
to be  withheld  from any  amounts  payable  to the Bank or under any other Loan
Document,  the amounts so payable shall be increased to the extent  necessary to
yield to the Bank  (after  payment  of all  Taxes)  interest,  fees or any other
amounts  payable  hereunder or under any other Loan  Document at the rates or in
the amounts  specified in this Agreement or such other Loan Document;  provided,
however,  that the Borrower  shall be entitled to deduct and withhold Taxes from
amounts  payable  to the Bank (and shall not be  required  to  increase  amounts
payable  hereunder  to gross up for Taxes) if the Bank fails to comply  with the
requirements  of  paragraph  (b) of this  Section  3.4.  Whenever  any Taxes are
payable by the Borrower, as promptly as possible thereafter,  the Borrower shall
send to the Bank a certified copy of an original  official  receipt  received by
the Borrower  showing  payment  thereof.  If the Borrower fails to pay any Taxes
when due to the appropriate  taxing  authority or fails to remit to the Bank the
required  receipts or other required  documentary  evidence,  the Borrower shall
indemnify the Bank for any  incremental  taxes,  interest or penalties  that may
become  payable by the Bank as a result of any such failure.  The  agreements in
this Section shall survive the  termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.

            (b)  The Bank shall:

                    (i) on or before  the date of any  payment  by the  Borrower
            under this Agreement or any other Loan Document to the Bank, deliver
            to the Borrower a duly completed copy of the United States  Internal
            Revenue Service Form 1001 or 4224, or any successor applicable form,
            as the  case  may be,  certifying  that it is  entitled  to  receive
            payments  under this  Agreement and its Notes  without  deduction or
            withholding of any United States federal income taxes; and

                    (ii) deliver to the Borrower further copies of any such form
            or  certification  on or  before  the date  that  any  such  form or
            certification  expires or becomes  obsolete and after the occurrence
            of any event  requiring a change in the most recent form  previously
            delivered by it to the Borrower;

unless in any such case any change in any  Requirement of Law has occurred after
the  Closing  Date which  renders  all such forms  inapplicable  or which  would
prevent the Bank from duly  completing and delivering any such form with respect
to itself.

            3.5     Indemnity.

            The Borrower  agrees to  indemnify  the Bank against and to hold the
Bank  harmless from any loss or expense which the Bank may sustain or incur as a
consequence  of (a)  any  failure  on the  part  of the  Borrower  to  borrow  a
Eurodollar  Loan,  convert a Base Rate Loan into a Eurodollar Loan or continue a
Eurodollar  Loan as such,  after the Borrower has given a notice  requesting the
same in accordance with the provisions of this Agreement, (b) any failure on the
part of the Borrower to make any payment in respect of principal of a Eurodollar
Loan  after the  Borrower  has given a notice  thereof  in  accordance  with the
provisions  of this  Agreement or (c) the making by the Borrower of a payment or
prepayment  in respect of principal  of a Eurodollar  Loan on a day which is not
the last day of the Interest Period with respect  thereto.  Without limiting the
foregoing,  such  indemnification  shall  include (x) an amount equal to (i) the
amount of interest which would have accrued on the amount so prepaid,  or not so
borrowed, converted or continued for the period from the date of such prepayment
or of such  failure  to  borrow,  convert  or  continue  to the  last day of the
applicable  Interest Period (or, in the case of a failure to borrow,  convert or
continue,  the  Interest  Period that would have  commenced  on the date of such
failure) in each case at the interest rate applicable to such Eurodollar  Loans,
minus (ii) the amount of interest (as  reasonably  determined by the Bank) which
would have  accrued to the Bank on such amount by placing such amount on deposit
for a comparable period with leading banks in the relevant interbank  eurodollar
market,  (y)  any  other  breakage  costs  incurred  by the  Bank  and  (z)  any
administrative   costs   or   expenses   incurred   by   the   Bank   (including
interdepartmental  or other internal  charges).  This covenant shall survive the
termination  of this Agreement and the other Loan  Documents,  the expiration of
the Letters of Credit and the payment of the Notes and all other amounts payable
hereunder.


                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

            To  induce  the Bank to make the Loans  and  issue  the  Letters  of
Credit, the Borrower hereby represents and warrants to the Bank that:

            4.1     Organization, Powers, Compliance.

            Each of the  Borrower  and  its  Domestic  Subsidiaries  (a) is duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its incorporation and is duly qualified to do business and is in
good  standing in each  jurisdiction  in which the  character of its  respective
properties  or  the   transaction   of  its   respective   business  makes  such
qualification  necessary  and where the failure to be so qualified  would have a
Material  Adverse Effect;  (b) has full corporate power and authority to own the
properties  and assets it  currently  owns and to carry on its business as it is
now being  conducted;  (c) has full  corporate  power and  authority to execute,
deliver and perform this Agreement and the other Loan Documents to which each is
a  party;  and  (d) is not  in  violation  of any  Requirement  of Law  that  is
applicable to it or any of its properties, which violation could have a Material
Adverse Effect.

            4.2     Capital Stock, Subsidiaries, Fiscal Year.

            (a) The authorized,  issued and outstanding  shares of Capital Stock
of the Borrower and each of its  Subsidiaries are as set forth in the Disclosure
Schedule.  All such outstanding  shares have been duly  authorized,  are validly
issued and outstanding and are fully paid and non-assessable. To the best of the
Borrower's  knowledge,   there  are  no  outstanding  options  or  other  rights
pertaining  to the Capital  Stock of the  Borrower  or any of its  Subsidiaries,
other than as set forth in the Disclosure Schedule. Neither the Borrower nor any
of its Subsidiaries has any obligation to repurchase or redeem any shares of its
Capital Stock.

            (b) The Disclosure  Schedule sets forth the names and  jurisdictions
of incorporation  of, and the ownership  interest of the Borrower in, all of the
Borrower's Subsidiaries.

            (c) The fiscal  year of the  Borrower  and each of its  Subsidiaries
ends on October 31 and its fiscal  quarters end on January 31, April 30, July 31
and October 31, respectively.

            4.3     Authorization, Absence of Conflicts.

            The execution,  delivery and performance by the Borrower and each of
its Domestic  Subsidiaries  of this  Agreement  and the other Loan  Documents to
which each is a party,  the  borrowings and the requests for issuance of letters
of credit hereunder, and the creation of security interests in favor of the Bank
pursuant  to the  Security  Documents  (a)  have  been  duly  authorized  by all
requisite corporate action of the Borrower and its Domestic Subsidiaries, (b) do
not require the consent or approval of any stockholders of the Borrower, and (c)
will not (i) violate any Requirement of Law applicable to the Borrower or any of
its Domestic Subsidiaries,  (ii) violate or constitute (with due notice or lapse
of time or both) a breach of or a default  under any  Contractual  Obligation of
the Borrower or any of its Domestic  Subsidiaries,  (iii) result in the creation
or imposition of any Lien of any nature whatsoever upon any properties or assets
of the Borrower or any of its Domestic  Subsidiaries  (other than Liens in favor
of the Bank), or (iv) require any  authorization,  consent,  approval,  license,
ruling,  permit,   tariff,  rate,   certification,   exemption,   or  filing  or
registration by or with any Governmental Authority or any consent or approval of
any other Person,  except such filings as may be required in connection with the
Security Documents.

            4.4     Binding Obligations.  

            This Agreement is, and, upon the delivery  thereof to the Bank, each
other  Loan  Document  executed  and  delivered  by the  Borrower  or any of its
Subsidiaries  will be, legal,  valid and binding  obligations of the Borrower or
such Subsidiary,  as the case may be,  enforceable  against the Borrower or such
Subsidiary  in  accordance  with  their   respective   terms,   except  as  such
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting   enforceability   of
creditors'  rights  generally  at the time in  effect  and  except  as  specific
performance and rights of acceleration may be subject to equitable principles of
general applicability.

            4.5     Financial Condition and Statements.

            The  consolidated  audited  balance  sheet of the  Borrower  and its
Subsidiaries as at October 31, 1996, and the related consolidated  statements of
income,  retained  earnings and cash flows of the Borrower and its  Subsidiaries
for the fiscal year ended on said date,  and the unaudited  balance sheet of the
Borrower  and  its   Subsidiaries  as  at  January  31,  1997  and  the  related
consolidated  statements of income and cash flows of the Borrower for the three-
month  period then ended,  heretofore  furnished  to the Bank,  are complete and
correct and fairly  present the  financial  condition  of the  Borrower  and its
Subsidiaries  as at said dates and the results of its  operations for the fiscal
year and the  three-month  period ended on said dates  (subject,  in the case of
such  financial  statements  as at January 31, 1997,  to normal  year-end  audit
adjustments),  all in accordance with GAAP and practices applied on a consistent
basis. On said dates neither the Borrower nor its  Subsidiaries had any material
obligations or liabilities, direct or contingent (including, without limitation,
any liabilities under  Environmental  Laws),  liabilities for taxes,  forward or
long-term  commitments or unrealized or anticipated losses from any commitments,
except as referred to or reflected or provided for in said balance  sheets as at
said dates,  and except for  liabilities  set forth on the Disclosure  Schedule.
Since  October 31, 1996,  (a) there has been no material  adverse  change in the
financial condition, operations or business taken as a whole of the Borrower and
its consolidated  Subsidiaries from that set forth in said financial  statements
as at said date and (b) there has been no  development or event which has had or
could  reasonably  be  expected  to have a Material  Adverse  Effect.  As of the
Effective Date, after giving effect to the transactions contemplated hereby, the
Borrower and each of its Subsidiaries is Solvent.

            4.6     Taxes.

            The  Borrower and its  Domestic  Subsidiaries  have filed all United
States  Federal  income tax returns and all other material tax returns which are
required to be filed by them and have paid all  material  taxes due  pursuant to
such returns or pursuant to any  assessment  made against the Borrower or any of
its Domestic Subsidiaries or any of their respective assets and all other taxes,
fees  and  other  charges  imposed  on the  Borrower  or  any  of  its  Domestic
Subsidiaries by any Governmental Authority, except such taxes, if any, which are
not yet delinquent or which are being Properly Contested. The charges,  accruals
and  reserves on the books of the  Borrower  and its  Domestic  Subsidiaries  in
respect  of taxes and other  governmental  charges  are,  in the  opinion of the
Borrower,  adequate. No tax Liens other than Permitted Liens have been filed and
no claims  are being  asserted  with  respect to any such  taxes,  fees or other
charges. Neither the Borrower nor any of its Domestic Subsidiaries is undergoing
any tax audits, other than as specified in the Disclosure Schedule.

            4.7     Title to Properties.

            Except as set forth in the Disclosure Schedule, each of the Borrower
and its Subsidiaries  owns and has good and marketable title or leasehold rights
to all of its assets,  free and clear of any Liens other than  Permitted  Liens,
and enjoys peaceful and undisturbed possession under all leases necessary in any
material  respects for the  operation of its assets.  Except as set forth in the
Disclosure  Schedule,  no mortgage or financing  statement or other  evidence or
notice of a  security  interest  covering  all or any part of the  assets of the
Borrower or any of its Subsidiaries is on file in any public office, except such
as have been filed in connection with Permitted Liens.

            4.8     Proceedings.

            Except as set forth in the Disclosure Schedule,  there is no action,
suit,  proceeding or claim,  at law or in equity,  by or before any  arbitrator,
Governmental  Authority  or  other  body  (including,  without  limitation,  any
Environmental  Proceeding),  now pending or, to the  knowledge of the  Borrower,
threatened  against or affecting the Borrower or any of its  Subsidiaries or any
of  their  respective  properties,  rights  or  assets,  which  relates  to  the
transactions  contemplated  hereby or by the other Loan  Documents or which,  if
adversely determined, could have a Material Adverse Effect.

            4.9     Labor Disputes; Collective Bargaining Agreements.

            Except  as set  forth  in the  Disclosure  Schedule,  as of the date
hereof  (a)  there  are no  collective  bargaining  agreements  or  other  labor
contracts  covering  the  Borrower  or  any  of its  Subsidiaries;  (b) no  such
collective  bargaining  agreement or other labor contract will expire during the
term of this Agreement;  (c) no union or other labor  organization is seeking to
organize,  or to be recognized as  bargaining  representative  for, a bargaining
unit of employees of the  Borrower or any of its  Subsidiaries;  (d) there is no
pending or threatened  strike,  work  stoppage,  material  unfair labor practice
claim or  charge,  arbitration  or  other  material  labor  dispute  against  or
affecting the Borrower or any of its Subsidiaries or their respective employees;
and (e) there are no actions, suits, charges, demands, claims,  counterclaims or
proceedings pending or, to the knowledge of the Borrower, threatened against the
Borrower  or any of its  Subsidiaries  or,  by or on  behalf  of,  or with,  its
employees,  other than  employee  grievances  arising in the ordinary  course of
business which are not, in the aggregate, material.

            4.10    Material Authorizations and Licenses.

            To the best of the  Borrower's  knowledge,  each of the Borrower and
its Subsidiaries has all necessary licenses,  permits and approvals  (including,
without limitation,  all necessary licenses, permits and authorizations relating
to Environmental Laws) to own and operate its properties and assets and to carry
on their business as currently conducted,  except where the failure to have such
license, permit or authorization would not have a Material Adverse Effect.

            4.11    Intangible Assets.

            Each of the Borrower and its  Subsidiaries  possesses  all necessary
patents, know-how,  trademarks,  service marks, trade names, and copyrights, and
rights with respect to each of the foregoing, necessary to carry on its business
as currently  conducted and the  possession and use thereof in its business does
not,  to the  best of the  Borrower's  knowledge,  conflict  with  the  patents,
know-how,  trademarks,  service marks,  trade names, and copyrights,  and rights
with respect to the foregoing,  of any other Person,  except where such conflict
could not have a Material Adverse Effect.

            4.12    Condition of Assets.

            All  of  the  assets  and   properties   of  the  Borrower  and  its
Subsidiaries  which  are  reasonably   necessary  for  the  operation  of  their
respective  businesses  are in good working  condition,  ordinary  wear and tear
excepted,  and are able to serve the function for which they are currently being
used or for which they are intended.

            4.13    No Defaults, Compliance With Laws.  With Laws

            To the best of the  Borrower's  knowledge,  neither the Borrower nor
its Subsidiaries is in default under any Contractual  Obligation,  which default
could have a Material Adverse Effect.  Each of the Borrower and its Subsidiaries
has complied and is in compliance in all respects with all  Requirements  of Law
including, without limitation, all applicable Environmental Laws, non-compliance
with which would have a Material Adverse Effect.  No Default or Event of Default
has occurred and is continuing.

            4.14    Indebtedness.

            Neither the  Borrower  nor its  Subsidiaries  has any  Indebtedness,
except  (i)  Indebtedness  set  forth  in  the  Disclosure   Schedule  and  (ii)
Indebtedness set forth in the financial statements referred to in Section 4.5.

            4.15    Not an Investment Company or Regulated Company.

            (a) Neither the  Borrower  nor any of its  Affiliates  is subject to
regulation under the Investment  Company Act of 1940, as amended,  or is subject
to any statute or regulation  which  regulates the incurrence by the Borrower or
such corporation of indebtedness for or with respect to borrowed money.

            (b) Neither the  Borrower  nor any of its  Affiliates  is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended.

            (c) Neither the  Borrower  nor any of its  Affiliates  is subject to
regulation  as a  "public  utility"  or  "public  service  corporation"  or  the
equivalent  under the applicable  law of any state relating to public  utilities
and/or public service corporations.

            4.16    Use of Proceeds.

            (a) The Borrower shall use the Letters of Credit and the proceeds of
the Loans solely in accordance with Section 2.14.

            (b) No part of the  proceeds  of the Loans or the  Letters of Credit
will be used for the purpose,  whether  immediate,  incidental  or ultimate,  of
purchasing or carrying any "margin stock" (as such term is defined in Regulation
U of the Board of Governors of the Federal  Reserve  System as now and from time
to time  hereafter  in effect),  or for the payment in full or in part of, or to
provide credit support for, Indebtedness which was or is to be incurred for such
purpose,  or to extend  credit or  support  credit  extended  to others for such
purpose.  The Borrower is not engaged  principally,  or as one of its  important
activities,  in the  business  of  extending  credit  for the  purpose,  whether
immediate, incidental or ultimate, of buying or carrying "margin stock".

            4.17    Ranking of Loans.

            The Obligations  rank and will at all times rank at least pari passu
in priority of payment to all other  Indebtedness  of the Borrower.  Neither the
Borrower nor any of its Domestic Subsidiaries has any secured Indebtedness other
than the  Obligations,  the Indebtedness  reflected in the financial  statements
described  in Section  4.5, and the  Indebtedness  specified  in the  Disclosure
Schedule.

            4.18    Burdensome Provisions.

            Neither the Borrower nor any of its  Subsidiaries  is party to or is
it bound by any  Requirement of Law or Contractual  Obligation,  compliance with
which could have a Material Adverse Effect.

            4.19    ERISA.

            During the five year period ending on the  Effective  Date (or, with
respect to (vi) or (viii) below, as of the date such  representation  is made or
deemed made),  except as set forth in the Disclosure Schedule or as reflected in
the  financial  statements  referred to in Section  4.5,  none of the  following
events  or  conditions  has  occurred  which,  either  individually  or  in  the
aggregate, has resulted or could reasonably be expected to result in a liability
to the Borrower  which could have a Material  Adverse  Effect:  (i) a Reportable
Event; (ii) an "accumulated  funding  deficiency" (within the meaning of Section
412 of the Code or Section 302 of ERISA); (iii) any material  noncompliance with
the applicable  provisions of ERISA or the Code;  (iv) a termination of a Single
Employer Plan (other than a standard  termination pursuant to Section 4041(b) of
ERISA);  (v) a Lien in  favor  of the  PBGC or a Plan;  (vi)  Underfunding  with
respect to any Single Employer Plan; (vii) a complete or partial withdrawal from
any  Multiemployer  Plan  by the  Borrower  or any  of its  Subsidiaries  or any
Commonly  Controlled Entity;  (viii) any liability of the Borrower or any of its
Subsidiaries  or any Commonly  Controlled  Entity under ERISA if the Borrower or
any  such  Commonly  Controlled  Entity  were to  withdraw  completely  from all
Multiemployer  Plans as of the annual valuation date most closely  preceding the
date  on  which  this   representation   is  made  or  deemed  made;   (ix)  the
reorganization  or  insolvency  (within the meaning of Section 4245 of ERISA) of
any  Multiemployer  Plan; (x) the excess of the present value  (determined using
actuarial and other  assumptions which are reasonable in respect of the benefits
provided and the  employees  participating)  of the  aggregate  liability of the
Borrower or any of its Subsidiaries for post-retirement  benefits to be provided
to their  current and former  employees  under  Plans which are welfare  benefit
plans (as  defined in  Section  3(1) of ERISA)  over the  assets  under all such
Plans;  and (xi) an event or condition with respect to which the Borrower or any
of its Subsidiaries or any Commonly  Controlled Entity could incur any liability
in respect of a Former Plan.

            4.20    Environmental Matters.

            Except as set forth in the Disclosure Schedule:

            (a) To the  best  of the  Borrower's  knowledge,  (i)  the  Elmsford
Facilities and all other facilities and properties owned,  leased or operated by
the Borrower or any of its Subsidiaries (the "Properties") and all operations at
the Properties are in compliance  with all applicable  Environmental  Laws, (ii)
there is no violation of any Environmental Law with respect to the Properties or
the  business  operated  by  the  Borrower  or any  of  its  Subsidiaries,  (the
"Business"),  and (iii)  there are no  conditions  relating  to the  Business or
Properties that could reasonably be expected to give rise to liability under any
applicable  Environmental  Law, except for any failure so to comply or violation
or condition,  or any aggregation thereof, that could not reasonably be expected
to result in the payment of a Material Environmental Amount.

            (b) To the best of the Borrower's  knowledge after diligent inquiry,
the Properties do not contain, and have not previously contained,  any Hazardous
Substances  at, on or under the  Properties  in amounts or  concentrations  that
constitute  or  constituted  a violation  of, or could  reasonably  give rise to
liability  under,  Environmental  Laws  except  insofar as the  presence  of any
Hazardous  Substances  is not  reasonably  likely to result in the  payment of a
Material Environmental Amount.

            (c) Neither the  Borrower nor any of its  Subsidiaries  has received
any written or verbal notice of, or inquiry from any Governmental  Authority, of
any  violation,  alleged  violation,  non-compliance,   liability  or  potential
liability regarding  environmental matters or compliance with Environmental Laws
with  regard  to any of the  Properties  or  the  Business  (including,  without
limitation,  any  notice  that  any of the  Properties  has been  listed  on the
national  priorities list or any similar state list), nor does the Borrower have
knowledge or reason to believe that any such notice will be received or is being
threatened,  except  insofar  as  such  notice  or  threatened  notice,  or  any
aggregation  thereof,  does not  involve  a  matter  or  matters  that is or are
reasonably likely to result in the payment of a Material Environmental Amount.

            (d) To the best of the Borrower's  knowledge,  Hazardous  Substances
have not been  transported  or disposed of from the  Properties,  or  generated,
treated,  stored or  disposed  of by or on behalf of the  Borrower or any of its
Subsidiaries  at, on or under any of the  Properties  or any other  location  in
violation  of, or in a manner  that would be  reasonably  likely to give rise to
liability  under, any applicable  Environmental  Law, except insofar as any such
violation  or  liability  referred  to in  this  paragraph,  or any  aggregation
thereof,  is not  reasonably  likely  to  result in the  payment  of a  Material
Environmental Amount.

            (e) No judicial proceeding or governmental or administrative  action
is  pending  or,  to  the  knowledge  of the  Borrower,  threatened,  under  any
Environmental Law to which the Borrower or any of its Subsidiaries is or will be
named as a party,  nor are there any consent  decrees or other decrees,  consent
orders,  administrative  orders  or other  orders,  or other  administrative  or
judicial  requirements  outstanding  under any Environmental Law with respect to
the Borrower,  any of its  Subsidiaries,  any of its Properties or its Business,
except insofar as such proceeding,  action,  decree, order or other requirement,
or any aggregation thereof, is not reasonably likely to result in the payment of
a Material Environmental Amount.

            (f)  There has been no  release  or,  to the best  knowledge  of the
Borrower,  after diligent inquiry,  threat of release of Hazardous Substances at
or from the Properties, or arising from or related to the operations (including,
without  limitation,  disposal)  of the Borrower or any of its  Subsidiaries  in
connection with the Properties or otherwise in connection with the Business,  in
violation  of or in amounts or in a manner  that would be  reasonably  likely to
give rise to liability  under  Environmental  Laws,  except  insofar as any such
violation  or  liability  referred  to in  this  paragraph,  or any  aggregation
thereof,  is not  reasonably  likely  to  result in the  payment  of a  Material
Environmental Amount.

            (g) Neither the Borrower nor any of its  Subsidiaries  has knowingly
assumed any liability of any Person under any Environmental Law.

            (h)  The  Borrower  and  its  Domestic  Subsidiaries  conduct  their
respective  operations in compliance with applicable  Environmental Laws, except
where the  failure to do so could not  reasonably  be  expected to result in the
payment of a Material Environmental Amount.

            4.21    Correct Information.

            The information,  schedules,  exhibits and reports  furnished by the
Borrower  and  each of its  Subsidiaries  to the  Bank in  connection  with  the
negotiation  and  preparation of this Agreement and the other Loan Documents did
not  contain  any  omissions  or  misstatements  of fact  which  would  make the
statements  contained  therein  misleading or incomplete in any material respect
when  furnished  to the Bank.  The  Borrower  knows of no fact that has not been
disclosed in writing to the Bank and which materially and adversely affects,  or
which could  reasonably  be expected in the future to  materially  and adversely
affect, the Borrower, any of its Subsidiaries, or the ability of the Borrower to
perform its obligations hereunder and under the other Loan Documents.

                                    ARTICLE 5

                              CONDITIONS PRECEDENT

            5.1     Conditions Precedent to Initial Credit Event.  

            The obligation of the Bank to make the initial Loan and to issue the
initial  Letter of Credit  hereunder  is  subject  to the  following  conditions
precedent:

            (a)  Documents.  The Bank shall have  received each of the following
documents (dated or certified as of the Closing Date unless  otherwise  provided
herein, and in form and substance satisfactory to the Bank):

                    (i) Credit Agreement. A counterpart of this Agreement,  duly
            executed by the Borrower;

                    (ii)  Note.  The  Note,  appropriately  completed  and  duly
            executed by the Borrower;

                    (iii)  Security  Agreement.  The  Security  Agreement,  duly
            executed by the Borrower and each of its Domestic Subsidiaries;

                    (iv)   Intellectual   Property   Security   Agreement.   The
            Intellectual  Property  Security  Agreement,  duly  executed  by the
            Borrower and each of its Domestic Subsidiaries;

                    (v) Subsidiary  Guarantee.  The Subsidiary  Guarantee,  duly
            executed by each of the Borrower's Domestic Subsidiaries;

                    (vi)  Contribution  Agreement.  The Contribution  Agreement,
            duly executed by the Borrower and its Domestic Subsidiaries;

                    (vii) Pledge Agreement. The Pledge Agreement,  duly executed
            by the Borrower.

                    (viii) Perfection and Priority of Liens. (1) UCC-1 financing
            statements  duly  executed by the  Borrower and each of its Domestic
            Subsidiaries and properly completed for filing in all public offices
            specified   by  the  Bank,   (2)  letters  in  form  and   substance
            satisfactory to the Bank, duly executed by each public  warehouse in
            which the  Borrower or any of its  Domestic  Subsidiaries  maintains
            Inventory,  (3) evidence that no financing  statements are currently
            on record in any  public  office  specified  by the Bank  naming the
            Borrower or any of its Domestic  Subsidiaries as debtor,  other than
            financing  statements  filed in connection  with Permitted Liens and
            financing  statements  with  respect  to which the Bank  shall  have
            received UCC-3  termination  statements duly executed by the secured
            party named therein, (4) evidence  satisfactory to the Bank that the
            Collateral  covered by the Intellectual  Property Security Agreement
            is owned by the Borrower  and is not subject to any liens,  licenses
            or  interests  in  favor  of  any  other  party,  and  (5)  evidence
            satisfactory to the Bank that its liens on the Collateral covered by
            the  Intellectual  Property  Security  Agreement have been perfected
            (including  an  escrow  agreement  satisfactory  to the Bank with an
            escrow agent  acceptable to the Bank covering the source code of all
            relevant software);

                    (ix)   Pledged   Stock   and  Stock   Powers.   Certificates
            representing  the  Pledged  Stock under and as defined in the Pledge
            Agreement,  together  with an  undated  stock  power  for each  such
            certificate  executed in blank by a duly  authorized  officer or the
            Borrower;  (x)  Lockbox  Agreements.  The Lockbox  Agreements,  duly
            executed by the Borrower and each of its Domestic Subsidiaries;

                    (x)  Lockbox  Agreements.   The  Lockbox  Agreements,   duly
            executed by the Borrower and each of its Domestic Subsidiaries;

                    (xi) Insurance.  Certificates  of insurance  satisfactory in
            form  and  substance  to the  Bank  with  respect  to the  insurance
            required by the  provisions of Section 6.6,  together with copies of
            the policies  referred to therein,  which shall include loss payable
            clauses  naming the Bank as  loss-payee or  additional  insured,  as
            appropriate,  and shall  provide  for not less  than 30 days'  prior
            written notice to the Bank in the event of cancellation;

                    (xii) Field Examination and Audit. A written report prepared
            by the  Bank's  auditors,  based  upon a  recent  field  examination
            conducted by them with respect to the Borrower and  satisfaction  on
            the part of the Bank with the findings of such report;

                    (xiii)   Corporate   Authority,   Actions  and   Incumbency.
            Originals  or copies of such  documents as the Bank may require (all
            of  which  shall  be  certified  by  such   corporate   officers  or
            governmental  officials  as the Bank may  require)  relating  to the
            existence  and  corporate  authority of the Borrower and each of its
            Domestic Subsidiaries,  the taking of all necessary corporate action
            to authorize the execution, delivery and performance by the Borrower
            and its  Subsidiaries of the Loan Documents to which they are party,
            and the incumbency and authenticity of the signature of each officer
            who executes a Loan Document on behalf of the Borrower or any of its
            Subsidiaries;

                    (xiv) Compliance Certificate. A Compliance Certificate dated
            the Effective  Date,  duly executed by a Responsible  Officer of the
            Borrower;

                    (xv)  Opinion of Counsel.  The  favorable  legal  opinion of
            counsel to the Borrower and its  Domestic  Subsidiaries,  as to such
            matters as the Bank may reasonably require;

                    (xvi) Financial Statements.  Copies, certified to the Bank's
            satisfaction,  of the Borrower's  financial  statements specified in
            Section 4.5; and

                    (xvii) Solvency Certificate. The Solvency Certificate,  duly
            executed by a Responsible Officer of the Borrower;

                    (xviii)Perfection  Certificate.  A perfection certificate in
            form and substance  satisfactory  to the Bank,  duly executed by the
            Borrower and each of its Domestic Subsidiaries;

                    (xix)   Additional   Documents.   Such   other   statements,
            certificates,  documents or  information  as the Bank may reasonably
            specify.

            (b)     Payments. The Bank shall have received:

                    (i)    payment in full of the Closing Fee; and

                    (ii)  payment in full of all  disbursements  and  reasonable
            fees of its  counsel  relating  to this  transaction,  for  which an
            invoice shall have been presented on or before the Closing Date.

            (c)  Lockboxes  and  Operating  Account.  The  Borrower  shall  have
established the Operating  Account and the Borrower and each of its Subsidiaries
shall have  established one or more Lockboxes  satisfactory to the Bank pursuant
to the Lockbox Agreements.

            5.2     Conditions Precedent to Each Credit Event.  

            The  obligation  of the  Bank to make  any  Loan  hereunder  and its
obligation  to issue or renew  any  Letter of Credit  hereunder  (including  the
initial Letter of Credit),  are subject to all of the  conditions  precedent set
forth in Section 5.1 and the  following  conditions  precedent  (it being agreed
that any  certificates or other documents  required  hereunder shall be dated or
certified  as of the  Borrowing  Date for such Loan or  Letter of Credit  unless
otherwise  provided herein,  and shall be in form and substance  satisfactory to
the Bank):

            (a) Compliance,  Representations  and  Warranties.  The Borrower and
each of its Subsidiaries shall be in compliance with all of the terms, covenants
and conditions of this Agreement on such date. Each of the  representations  and
warranties  set forth in Article 4 shall be true and correct as to the  Borrower
and as to any  Subsidiary  of the  Borrower  to which such  representations  and
warranties  relate in all material respects on and as of such date as if made on
and as of  such  date  (except  to the  extent  that  such  representations  and
warranties  expressly  relate to an earlier  date) and, if the Bank so requests,
the Bank shall have  received  a  certificate  duly  executed  by a  Responsible
Officer of the Borrower to such effect.

            (b) No Default.  No Default or Event of Default  shall have occurred
and be continuing on such date or after giving effect to the Loans  requested to
be made and the  Letters of Credit  requested  to be issued on such date and, if
the Bank so requests,  the Bank shall have received a certificate  duly executed
by a Responsible Officer of the Borrower to such effect.

            (c) No Material Adverse Change.  The Bank shall have determined that
no material adverse change has occurred in the financial condition or results of
operations of the Borrower and its Domestic  Subsidiaries  taken as a whole from
the condition and results reflected in the financial  statements  referred to in
Section 4.5.

            (d) Request of Borrowing or Issuance.  The Bank shall have  received
an appropriate  Notice of Borrowing or LC Application,  as the case may be, with
respect  to the  Loans to be made or  Letters  of  Credit  to be d)  Request  of
Borrowing or Issuance.  The Bank shall have  received an  appropriate  Notice of
Borrowing or LC Application, as the case may be, with respect to the Loans to be
made or Letters of Credit to be issued on such date.

            (e)  Borrowing  Base  Certificate.  The Bank shall have received the
most recent Borrowing Base Certificate  required to be delivered by the Borrower
to the Bank pursuant to Section 6.3(f),  which  certificate  shall indicate that
the requested Loan or Letter of Credit does not exceed the Available  Commitment
on such date.

            (f) Additional Matters. The Bank shall have received such additional
instruments,  certificates or other documents,  and such additional information,
as the Bank may reasonably require.


                                    ARTICLE 6
                                    COVENANTS

            The  Borrower  hereby  covenants  and  agrees  that  so  long as the
Commitment  remains in effect or any Letter of Credit  remains  outstanding  and
until the payment in full of the Obligations and the complete performance of all
of  the  Borrower's  other  obligations  hereunder  and  under  the  other  Loan
Documents, unless the Bank shall otherwise consent in writing:

            6.1     Corporate Existence, Properties.

            The   Borrower   shall,   and  shall  cause  each  of  its  Domestic
Subsidiaries to, do or cause to be done all things necessary to:

            (a) preserve and keep in full force and effect its legal existence;

            (b) remain or become a  corporation  qualified to engage in business
            in good standing in all  jurisdictions in which the character of its
            properties   or  the   transaction   of  its   business   make  such
            qualification necessary;

            (c)  maintain,   preserve  and  protect  all  permits,   rights  and
            privileges  necessary for the proper conduct of its business and all
            franchises,   licenses,   patents,   trade  names,   trademarks  and
            copyrights  owned  by  or  licensed  to it  that  are  necessary  or
            desirable in the normal conduct of its business;

            (d) ensure  that all  property  used or useful in the conduct of its
            business is  maintained  and kept in good repair,  working order and
            condition, and from time to time take all reasonable action to make,
            or cause to be made,  all  needful  and  proper  repairs,  renewals,
            replacements,  betterments and improvements  thereto so that, in the
            reasonable  judgment  of the  Borrower  or  such  Subsidiaries,  the
            business  carried on in  connection  therewith  may be properly  and
            advantageously conducted at all times.

            6.2     Payment of Indebtedness, Taxes

            The Borrower shall, and shall cause each of its Subsidiaries to, pay
all of its Indebtedness  and obligations  promptly and in accordance with normal
terms and trade  practices  and shall  promptly pay and discharge or cause to be
paid or  discharged  all taxes,  assessments  or other  governmental  charges or
levies  imposed  upon it or upon its  income and  profits or upon its  property,
real,  personal  or mixed,  or upon any part  thereof,  before the date on which
penalties attach thereto, as well as all lawful claims for labor,  materials and
supplies or otherwise which, if unpaid,  might become a lien or charge upon such
properties or any part thereof;  provided,  however, that the Borrower shall not
be  required to pay and  discharge  or cause any of its  Subsidiaries  to pay or
discharge any such debt, obligation,  tax, assessment,  charge, levy or claim so
long as it is Properly  Contested.  For purposes of this Agreement,  any debt or
obligation  of, any tax,  assessment,  charge,  levy or claim  against,  and any
litigation or other legal proceeding involving, any Person shall be deemed to be
"Properly  Contested"  only if (a) it shall be contested  diligently and in good
faith by  appropriate  proceedings,  (b) such Person shall have  assigned on its
books  adequate  reserves  with  respect  to any  such  debt,  obligation,  tax,
assessment,  charge, levy or claim so contested,  and (c) no material portion of
such  Person's  assets shall be subject to  encumbrance,  loss or  forfeiture by
reason of such contest.

            6.3     Financial Statements, Reports, etc. 

            The  Borrower  shall  furnish  to the  Bank  (in  reasonable  detail
satisfactory to the Bank):

            (a) as soon as  available  but in any  event no  later  than 45 days
after the close of each month, the consolidated and consolidating  balance sheet
of the  Borrower  and its  Subsidiaries  as of the  close of such  month and the
related  consolidated  and  consolidating  profit  and  loss  statement  and the
consolidated  and  consolidating  statement of cash flows for such month and for
the period from the beginning of the then current fiscal year to the end of such
month,  such  financial  statements  to be  accompanied  by a  certificate  of a
Responsible  Officer of the  Borrower,  stating that said  financial  statements
fairly present the consolidated  financial  condition and results of operations,
as the case may be, of the  Borrower and its  Subsidiaries  in  accordance  with
generally accepted accounting principles consistently applied, as at the end of,
and for,  such month  (except for the absence of footnotes and subject to normal
year-end audit adjustments);

            (b) as soon as  available  but in any  event no  later  than 90 days
after  the close of each  fiscal  year of the  Borrower,  the  consolidated  and
consolidating balance sheet of the Borrower and its Subsidiaries as of the close
of such fiscal year and the related  consolidated and  consolidating  profit and
loss statement and  consolidated and  consolidating  statement of cash flows for
such fiscal year, such financial statements to be audited by, and accompanied by
a report of, any firm of  independent  certified  public  accountants  generally
recognized  as one of the  "big  six"  accounting  firms  or any  other  firm of
independent   certified  public  accountants  of  recognized  national  standing
acceptable  to the Bank (the  "Accountants")  to the effect that such  financial
statements have been prepared in conformity with generally  accepted  accounting
principles  consistently applied,  which audit and accompanying report shall not
contain any  qualification  or exception,  together  with a certificate  of such
accountants (1) stating that, in connection with their audit of the Borrower and
its Subsidiaries they have reviewed the provisions of this Agreement and that in
the course of their audit of the Borrower nothing has come to their attention to
lead them to believe that any Event of Default  hereunder  exists or, if such is
not the case,  specifying such Event of Default and the nature thereof (it being
understood  that the  examination of such  accountants  cannot be relied upon to
give them  knowledge of any Event of Default  except as it relates to accounting
or auditing matters) and (2) setting forth in detail reasonably  satisfactory to
the  Bank the  calculations  made to  determine  compliance  with the  financial
covenants  contained  in  Article 7 and the  information  required  to make such
calculations;

            (c) as soon as  available,  but in any event not later  than 90 days
after the beginning of each fiscal year of the Borrower,  financial  projections
prepared by a Responsible  Officer of the Borrower covering such fiscal year and
the remaining fiscal years (or portions  thereof) during the Commitment  Period,
which  projections  shall be prepared in detail  reasonably  satisfactory to the
Bank,  shall  contain  forecasts  prepared  on a quarterly  basis,  and shall be
certified  by such  officer to have been  prepared  in good faith and based upon
reasonable assumptions;

            (d)  together  with each  delivery of  financial  statements  of the
Borrower  pursuant to clause (a) or (b) above,  a  certificate  of a Responsible
Officer of the Borrower  substantially  in the form of Exhibit C (a  "Compliance
Certificate");

            (e) as soon as  available,  but in any event no later  than  fifteen
Business  Days  after the  close of each  calendar  month or with  such  greater
frequency as the Bank may require,  accounts receivable aging reports,  accounts
payable aging reports,  and inventory  reports for such month,  prepared in form
and detail  satisfactory  to the Bank and certified by a Responsible  Officer of
the Borrower;

            (f) as soon as available,  but in any event no later than 11:00 a.m.
on the second  Business Day of each week (or with such greater  frequency as the
Bank may  require) and on each  Borrowing  Date,  a Borrowing  Base  Certificate
prepared on the Bank's standard form,  setting forth the  information  requested
therein for the  immediately  preceding  week (or, if such  Certificate is being
delivered on a Borrowing Date that is not the second Business Day of a week, for
the portion of the current  week ending on the day  immediately  preceding  such
Borrowing Date),  certified by a Responsible  Officer of the Borrower (each such
certificate herein called a "Borrowing Base Certificate");

            (g) as soon  as  available,  but in any  event  no  later  than  ten
Business Days after the end of each calendar month, a Period End  Recapitulation
Report and a Period End Accounts Receivable and Loan  Reconciliation  Report for
such  month,  in each  case in form  and  detail  satisfactory  to the  Bank and
certified by a Responsible Officer of the Borrower;

            (h) as soon as available,  but in any event no later than 11:00 a.m.
on each Business Day,  daily  reports of sales,  remittances  and credits of the
Borrower and its Subsidiaries for the immediately preceding Business Day;

            (i)  promptly  upon  their  becoming  available,  copies  of (x) all
financial  statements,  reports,  notices  and  proxy  statements  sent  or made
available generally by the Borrower to its security holders, (y) all regular and
periodic reports and all registration statements and prospectuses, if any, filed
by the Borrower with any securities exchange or with the Securities and Exchange
Commission,  and (z) all press  releases  and other  statements  made  available
generally by the Borrower to the public concerning material  developments in the
business of the Borrower; and

            (j) with reasonable promptness, such other information regarding the
Borrower as the Bank may reasonably request.

            6.4     Notice of Adverse Events and Significant Changes.

            The Borrower shall furnish to the Bank prompt written notice of:

            (a) the occurrence of any event which constitutes a Default or Event
of Default hereunder,  promptly after any senior officer of the Borrower becomes
aware or  could  reasonably  be  expected  to  become  aware,  that  such  event
constitutes a Default or Event of Default,

            (b) the  commencement  of any  action  or  proceeding  involving  or
affecting the Borrower or any Subsidiary  thereof or any properties or assets of
the  Borrower  or such  Subsidiary  an  adverse  determination  of  which  could
reasonably be expected to have a Material Adverse Effect,

            (c) any default or event of default  under any material  Contractual
Obligation of the Borrower or any of its Subsidiaries  which could reasonably be
expected to have a Material Adverse Effect,

            (d) any litigation,  investigation  or proceeding which may exist at
any time between the Borrower and any  Governmental  Authority,  which in either
case,  if not  cured or if  adversely  determined,  as the  case  may be,  could
reasonably be expected to have a Material Adverse Effect,

            (e)  the  occurrence  of  any  of  the  following  events:  (i)  the
occurrence or expected  occurrence of any  Reportable  Event with respect to any
Single  Employer  Plan which  could  reasonably  be  expected to have a Material
Adverse  Effect,  (ii) a  failure  on the  part  of the  Borrower  or any of its
Subsidiaries  to  make  any  required  contribution  to  a  Single  Employer  or
Multiemployer  Plan  (other  than a  failure  to make a  contribution  which (1)
together  with all other  contributions  that are then past due does not  exceed
$100,000 in the  aggregate,  (2) does not constitute or result in a violation of
any provision of ERISA or the Code or any  regulation  adopted  thereunder,  (3)
does not  cause an  Underfunding  of such  Plan and (4) does not  result  in the
imposition  of  any  fees  or  penalties  against  the  Borrower  or  any of its
Subsidiaries,  other  than  the  requirement  to pay  interest  accrued  on such
contribution to the relevant  Plan),  (iii) the creation of any Lien in favor of
the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
insolvency  (within the meaning of Section 4245 of ERISA) of, any  Multiemployer
Plan;  (iv)  Underfunding  with respect to any Single  Employer Plan which could
result  in a  material  liability  to  the  Borrower;  (v)  the  institution  of
proceedings or the taking of any other action by the PBGC or the Borrower or any
Commonly  Controlled  Entity  or any  Multiemployer  Plan  with  respect  to the
withdrawal from, or the termination,  Reorganization  or insolvency  (within the
meaning of Section 4245 of ERISA) of, any Single Employer or Multiemployer Plan;
or (vi) the  occurrence or expected  occurrence of any event or condition  under
which the Borrower or any Commonly Controlled Entity has incurred or could incur
any liability in respect of a Former Plan which could  reasonably be expected to
have a Material Adverse Effect,

            (f)  any  material  adverse  change  in  the  business,  operations,
property  or  condition  (financial  or  otherwise)  of  the  Borrower  and  its
Subsidiaries taken as a whole,

            (g) (i) any release or discharge  by the Borrower or any  Subsidiary
of any Hazardous  Substances required to be reported under Environmental Laws to
any  Governmental  Authority;  (ii) any condition,  circumstance,  occurrence or
event that could result in material  Environmental  Costs or could result in the
imposition  of any  lien  or  other  restriction  on  the  title,  ownership  or
transferability  of any Property;  and (iii) any proposed  action to be taken by
the  Borrower or any  Subsidiary  that could  subject the Borrower or any of its
Subsidiaries to any material additional or different requirements or liabilities
under Environmental Laws, and

            (h)  the   execution   by  the  Borrower  or  any  of  its  Domestic
Subsidiaries  of  any  new  collective  bargaining  agreements  or  other  labor
contract, the recognition of any union or other labor organization as bargaining
representative  for a bargaining unit of employees of the Borrower or any of its
Domestic Subsidiaries any pending or threatened strike, work stoppage,  material
unfair labor  practice  claim or charge,  arbitration  or other  material  labor
dispute  against or affecting  the Borrower or any of its Domestic  Subsidiaries
and any actions, suits, charges,  demands, claims,  counterclaims or proceedings
pending or, to the knowledge of the Borrower, threatened against the Borrower or
any of its Domestic  Subsidiaries  by or on behalf of, or with,  its  employees,
other than employee  grievances arising in the ordinary course of business which
are not, in the aggregate, material.

            6.5     Books and Records; Inspection; Audits.

            The Borrower  shall  maintain,  and shall cause each of its Domestic
Subsidiaries to maintain, proper books and records with respect to the operation
of its business in accordance with GAAP consistently applied; the Borrower shall
permit, and shall cause each of its Domestic Subsidiaries to permit,  authorized
representatives  of the  Bank to  visit  and  inspect  from  time  to time  upon
reasonable notice during business hours (or at any time after the occurrence and
during the  continuance  of an Event of Default  hereunder)  any of the offices,
inventory locations and other facilities of the Borrower or such Subsidiary,  to
examine the books and records of the Borrower or such Subsidiary and make copies
or  extracts  therefrom,  to  examine  the  Inventory  of the  Borrower  or such
Subsidiary,  to conduct  field  examinations  with  respect to the assets of the
Borrower  and its  Domestic  Subsidiaries,  to  verify  the  eligibility  of the
Inventory  and  Accounts  of the  Borrower  and its  Domestic  Subsidiaries  for
inclusion  in the  Borrowing  Base,  and to discuss the affairs,  inventory  and
accounts of the  Borrower and its  Domestic  Subsidiaries  with its officers and
accountants.  The Borrower  shall  permit,  and shall cause each of its Domestic
Subsidiaries to permit, the Bank to conduct field examinations  thereof every 90
days,   or  with  such   greater   frequency   as  the  Bank  may   require. 

            6.6     Insurance. 

            The Borrower shall, and shall cause each of its Subsidiaries to, (i)
keep its assets that are of an insurable  character insured by financially sound
and  reputable  insurers  against  loss or damage by fire,  explosion  and other
hazards insured against by extended coverage in amounts sufficient to prevent it
from becoming a co-insurer (other than maintaining  reasonable  deductibles) and
in any event not less than 80% of the full insurable value (replacement value if
available) of the property  insured,  (ii) maintain with  financially  sound and
reputable  insurers,  insurance against hazards,  risks and liability to persons
and property to the extent and in the manner  customary for companies in similar
business  similarly  situated,  (iii)  provide to the Bank no later than 10 days
prior  to the  scheduled  expiration  date  of any  insurance  policy,  evidence
satisfactory  to the Bank that such  expiration  date has been  extended  for at
least one year (including  evidence of payment of the relevant  premiums),  (iv)
file with the Bank  annually,  within 30 days prior to each  anniversary  of the
Closing  Date  (or at such  other  time as may be  mutually  agreed  upon by the
Borrower and the Bank), a detailed list of the insurance then in effect, stating
the  names of the  insurance  companies,  the  amounts  of  insurance,  dates of
expiration  thereof  and the  properties  and  risks  covered  thereby,  and (v)
promptly  upon  request  by the  Bank,  such  other  information  regarding  the
insurance  maintained by the Borrower or any of its Subsidiaries as the Bank may
require.

            6.7     Compliance with Laws.

            The Borrower  shall,  and shall cause each of its  Subsidiaries  to,
observe and comply in all material  respects with all  Requirements of Law which
now or at any time  hereafter  may be  applicable  to the Borrower or any of its
Subsidiaries  (including  all  applicable  provisions  of ERISA  and the  Code),
noncompliance with which could reasonably be expected to have a Material Adverse
Effect.

            6.8     Environmental Laws.

            The Borrower, and shall cause each of its Subsidiaries to, shall (a)
comply with, and use all reasonable  efforts to ensure compliance by all tenants
and subtenants of the  Properties,  if any,  with, all applicable  Environmental
Laws and obtain and comply with and maintain and use all  reasonable  efforts to
ensure that all tenants and subtenants obtain and comply with and maintain,  any
and all licenses, approvals, notifications, registrations or permits required by
applicable  Environmental  Laws,  except  in each  case to the  extent  that the
failure to do so could not  reasonably be expected to result in the payment of a
Material  Environmental  Amount,  (b) conduct and complete  all  investigations,
studies,  sampling  and testing,  and all  remedial,  removal and other  similar
actions  required of the Borrower under  Environmental  Laws and promptly comply
with  all  orders  and  directives  of all  Governmental  Authorities  regarding
Environmental  Laws,  except to the extent that the same are being  contested in
good  faith by  appropriate  proceedings,  and except in each case to the extent
that the  failure to do so could not  reasonably  be  expected  to result in the
payment of a Material Environmental Amount.

            6.9     Use of Proceeds.

            The Borrower shall use the Letters of Credit and the proceeds of the
Loans solely in accordance  with its  representations  and warranties in Section
4.16.

            6.10    Indebtedness.

            The  Borrower  shall not,  and shall not permit any of its  Domestic
Subsidiaries  to, create,  incur,  assume or suffer to exist any Indebtedness at
any time, except:

            (a)  Indebtedness  owing to the Bank  hereunder  and under the other
            Loan Documents;

            (b) taxes, assessments and governmental charges that are not yet due
            and payable;

            (c)  Indebtedness  secured by purchase money liens  permitted  under
            Section 6.11(f) and obligations under Capital Leases, so long as the
            total amount of such  Indebtedness  and obligations  does not exceed
            $500,000 in the aggregate;

            (d) Indebtedness  specified in the financial  statements referred to
            in Section 4.5 or in the Disclosure  Schedule,  and any  extensions,
            renewals  and  refinancings  thereof,  so long  as such  extensions,
            renewals or  refinancings do not increase the amount of the original
            Indebtedness; and

            (e) Unsecured Subordinated Debt.

            6.11    Liens.

            The  Borrower  shall not,  and shall not permit any of its  Domestic
Subsidiaries to, create,  incur,  assume or suffer to exist any Lien of any kind
upon,  or any security  interest in, any of its property or assets,  whether now
owned or hereafter acquired, except:

            (a) Liens in favor of the Bank securing the Obligations;

            (b) liens for taxes not delinquent or being  contested in good faith
            and by appropriate proceedings;

            (c)  deposits  or  pledges  to  secure  obligations  under  workers'
            compensation, social security or similar laws, or under unemployment
            insurance;

            (d) deposits or pledges to secure bids,  tenders,  contracts  (other
            than contracts for borrowed money),  leases,  statutory obligations,
            surety and appeal bonds and other obligations of like nature arising
            in the ordinary course of business;

            (e) mechanics', workers', carriers', warehousemen's,  materialmen's,
            suppliers'  or other like liens  arising in the  ordinary  course of
            business with respect to  obligations  which are not due,  which are
            bonded or  discharged  within 30 days of the date of filing or which
            are being contested in good faith;

            (f)  purchase  money liens on fixed  assets of the  Borrower or such
            Subsidiary  securing  Indebtedness  permitted under Section 6.10(c),
            which liens secure the purchase price of such fixed assets and apply
            only to the fixed assets so  purchased,  provided that the principal
            amount of the indebtedness secured by any such lien shall at no time
            exceed an amount  equal to the lesser of the cost to the Borrower or
            such Subsidiary of the fixed assets so purchased and the fair market
            value of such fixed assets (as determined in good faith by the board
            of directors of the Borrower or such Subsidiary) at the time of such
            acquisition,  and that any such  Lien  shall be  created  within  12
            months after, in the case of property,  its acquisition,  and in the
            case of improvements, their completion;

            (g) liens  arising out of Capital  Leases  permitted  under  Section
            6.10(c),  so long as such  liens  attach  only to the  fixed  assets
            subject to such Capital Leases;

            (h)  easements,   rights-of-way,   restrictions  and  other  similar
            encumbrances  incurred in the ordinary  course of business which, in
            the  aggregate,  are not  substantial  and do not interfere with the
            ordinary conduct of the business of the Borrower; and

            (i) the Liens set forth in the Disclosure Schedule, provided that no
            such Lien is extended  to cover any  additional  property  after the
            Closing Date and that the amount of Indebtedness  secured thereby is
            not increased.

             6.12   Contingent Liabilities.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to,  assume,  guarantee,  endorse,  contingently  agree to purchase or otherwise
become liable upon any obligation of any Person,  except (a) by the  endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business,  (b) guarantees in favor of the Bank hereunder and under the
other Loan Documents,  (c) the guarantees  disclosed in the financial statements
referred  to in  Section  4.5,  (d)  the  guarantees  listed  in the  Disclosure
Schedule,  and (e) guarantees which replace any of the guarantees referred to in
clause (c) or (d) of this Section 6.12, so long as such  replacement  guarantees
cover the same Indebtedness as the original guarantees (or extensions,  renewals
or refinancings of such  Indebtedness) and the maximum liability of the Borrower
thereunder does not exceed its maximum liability under the original guarantees.

            6.13    Merger and Consolidation; Acquisition and Disposition of 
                    Assets.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any merger,  consolidation or voluntary dissolution,  or lease or
acquire all or substantially  all of the assets of any Person or of any division
or business unit of any Person, or sell, lease,  license or otherwise dispose of
any  of  its  assets,  except  (a)  acquisitions,  sales,  leases,  licenses  or
dispositions in the ordinary course of business,  (b) mergers and consolidations
with,  and  acquisitions  of all or  substantially  all of the assets or capital
stock of, any Person or any  division or business  unit of any Person,  provided
that the Borrower or such  Subsidiary is the surviving  entity of such merger or
consolidation,  that no Default or Event of Default has  occurred or would occur
after giving effect to such merger,  consolidation or acquisition,  and that (in
the case of an acquisition of capital stock) such acquisition is permitted under
Section 6.14 and the Borrower  complies with Section 6.22,  if  applicable,  (c)
mergers by the Borrower with one of its Subsidiaries (provided that the Borrower
is the  surviving  entity of such  merger)  or mergers  of  Subsidiaries  of the
Borrower with each other.

            6.14    Investments.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to, make any  Investment,  except (a)  obligations  issued or  guaranteed by the
United  States  of  America  or any  agency  thereof  or short  term  repurchase
agreements  with respect  thereto,  in each case maturing within 12 months after
the date of acquisition thereof,  (b) short-term  certificates of deposit issued
by, and deposits in, the Bank or, subject to Section 6.21, any other  commercial
bank having a combined capital and surplus of not less than  $500,000,000 or the
equivalent  thereof in another currency,  in each case maturing within 12 months
after the date of acquisition thereof, (c) short-term  commercial paper maturing
within 12 months after the date of acquisition thereof, which has been given the
highest  rating by Standard & Poor's  Corporation,  Moody's  Investors  Service,
Inc., or another nationally recognized credit rating agency of similar standing,
(d)  shares of money  market  mutual  funds  having  net assets of not less than
$1,000,000,000,  which invest solely in  securities  referred to in clauses (a),
(b) or (c) above,  (e) loans and  advances  to  employees  of the  Borrower  for
travel, entertainment and relocation expenses in the ordinary course of business
in an aggregate amount not to exceed $250,000 at any one time  outstanding,  (f)
Investments in the Borrower, and (g) Investments in Subsidiaries, so long as the
Borrower shall be in compliance with, or shall  concurrently  with the making of
such Investments comply with, Section 6.22 with respect to such Subsidiaries.

            6.15    Change in Nature of Business.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to,  engage at any time in any  business  or  business  activity  other than the
business currently conducted by it and business activities reasonably incidental
thereto.

            6.16    Transactions with Affiliates. 

            The Borrower shall not, and shall not permit any of its Subsidiaries
to,  directly or  indirectly,  (a) make any  Investment  in any Affiliate of the
Borrower or such  Subsidiary  (other than  Investments  which are  permitted  by
Section 6.14), (b) transfer,  sell,  lease,  assign or otherwise  dispose of any
assets  to any  Affiliate  of the  Borrower  or such  Subsidiary  (other  than a
Domestic  Subsidiary),  (c) purchase or acquire assets from any Affiliate of the
Borrower or such Subsidiary; or (d) enter into any other transaction directly or
indirectly  with or for the  benefit of any  Affiliate  of the  Borrower or such
Subsidiary   (including,   without  limitation,   any  Guarantee  Obligation  or
assumption of obligations thereof);  provided,  however, that: (x) any Affiliate
of the  Borrower  or of a  Subsidiary  who is a natural  person  may serve as an
employee or director of the Borrower or such  Subsidiary and receive  reasonable
compensation  for his or her  services in such  capacity and (y) the Borrower or
any of its  Subsidiaries  may  enter  into  any  transaction  with  any of their
respective  Affiliates  providing for the leasing of property,  the rendering or
receipt of services  or the  purchase  or sale of  product,  inventory  or other
assets in the ordinary course of business on terms that are no less favorable to
the Borrower or such  Subsidiary  than those which might be obtained at the time
from Persons who are not Affiliates of the Borrower or such Subsidiary.

            6.17    Restricted Payments.

            The Borrower shall not, and shall not permit any of its Subsidiaries
that is not a wholly owned  Subsidiary to, make any Restricted  Payment,  or set
apart  any sum for the  purpose  of making  any  Restricted  Payment;  provided,
however,  that so  long as no  Event  of  Default  shall  have  occurred  and be
continuing, the Borrower may (a) pay dividends on its Capital Stock and (b) make
payments in respect of its  Subordinated  Debt to the extent permitted under the
agreement or instrument setting forth the terms of subordination thereof.

            6.18    Management Fees.

            The  Borrower  shall not pay any fees or other  compensation  to any
Person in respect of services  rendered by such  Person in  connection  with the
management or supervision of the  management of the Borrower,  except  salaries,
bonuses and other  compensation  to employees of the Borrower in respect of such
employment.

            6.19    Leases.

            The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any operating lease as lessee or guarantee the obligations of any
lessee under an operating  lease,  other than operating  leases in effect on the
date of this Agreement and extensions,  renewals and replacements thereof (each,
an "Existing Operating Lease"); provided, however, that so long as no Default or
Event of Default has occurred and is  continuing  and entering  into such leases
would not cause a Default or Event of Default to occur,  the  Borrower may enter
into  operating  leases (in addition to the  Existing  Operating  Leases)  which
provide for total scheduled payments (including base rent, supplemental rent and
other amounts,  however  characterized)  not exceeding $250,000 in the aggregate
for all such leases in any fiscal year of the Borrower.

            6.20  Capital Expenditures.

            The  Borrower  shall not make any  Capital  Expenditures;  provided,
however,  that if immediately  prior and after giving effect thereto no Event of
Default shall exist,  the Borrower may make Capital  Expenditures  not exceeding
$1,000,000 in the aggregate in any fiscal year of the Borrower.

            6.21  Cash Dominion.

            (a) The  Borrower  shall  maintain,  and shall  cause each  Domestic
Subsidiary  which  bills  its  customers  directly  for goods  sold or  services
rendered by it to maintain,  one or more Lockboxes with the Bank at all times in
accordance  with the Lockbox  Agreement and shall  specify,  and cause each such
Domestic  Subsidiary  to  specify,  on all of its  invoices  for  goods  sold or
services  rendered that payment is to be made (x) if by check,  to a Lockbox and
(y) if by wire transfer or other electronic means, to a reconcilement account at
the Bank in accordance with the Bank's instructions.

            (b) The Borrower shall not, and shall not permit any of its Domestic
Subsidiaries  to, maintain  balances in excess of $100,000 in the aggregate with
Ineligible Financial Institutions.

            6.22    Formation or Acquisition of Subsidiaries.

            (a) The  Borrower  shall not form or acquire  any direct or indirect
Subsidiary other than those which are in existence on the date hereof unless (1)
it has given the Bank, prior to the formation or acquisition of such Subsidiary,
written notice of its intention to form or acquire such  Subsidiary,  (2) it has
provided the Bank, prior to such formation or acquisition, with such information
about such Subsidiary,  its assets and its  contemplated  operations as the Bank
may reasonably require, (3) if such Subsidiary is a Domestic Subsidiary,  it has
caused such Subsidiary,  immediately after its formation, to execute and deliver
to the Bank such guarantees, security agreements and other documents as the Bank
may  reasonably  require,  (4) it has  pledged  to Bank,  immediately  after the
formation  of such  Subsidiary,  pursuant  to the Pledge  Agreement,  all of the
voting stock of such Subsidiary owned by the Borrower (or, if such Subsidiary is
not a Domestic  Subsidiary,  voting  stock  representing  up to 65% of the total
outstanding  voting stock of such Subsidiary) and (5) the Bank is satisfied that
the formation or acquisition of such  Subsidiary  will have no adverse effect on
its ability to collect the  Obligations  and to enforce its rights and  remedies
hereunder  and  under  the other  Loan  Documents  against  the  Borrower,  such
Subsidiary and their respective assets.

            (b) In the  event  that  the  Borrower  forms  or  acquires  any new
Subsidiary,  the  Borrower  shall  cause  such  Subsidiary  to  comply  with the
covenants set forth in this Article 6 to the same extent as the Borrower.

            6.23    Location of Inventory. 

            The   Borrower   shall,   and  shall  cause  each  of  its  Domestic
Subsidiaries  to,  maintain all of its Inventory at locations  controlled by the
Borrower or its Domestic Subsidiaries;  provided, however, that the Borrower may
permit  Inventory  of the  Borrower or any of its  Domestic  Subsidiaries  to be
located at the premises of their  respective  suppliers so long as the aggregate
book value of such  Inventory does not exceed at any one time (a) on or prior to
October 31, 1997, an amount equal to the sum of the aggregate  book value of the
Inventory that is located at the premises of suppliers on the Closing Date, plus
$500,000 and (b) after October 31, 1997, $500,000.

            6.24    Change in Fiscal Dates or Accounting Practices.

            The  Borrower  shall not change its fiscal year or any of its fiscal
quarters from those in effect on the date hereof,  change any of its  accounting
or auditing  policies,  practices or procedures in effect on the date hereof, or
permit any of its Domestic  Subsidiaries to do so, unless the Borrower has given
the Bank not less than thirty days' prior written  notice of its intention to do
so and has amended the financial  covenants set forth in Article 7 to the extent
necessary, in the opinion of the Bank, to preserve the usefulness to the Bank of
such financial  covenants as a means of ascertaining the financial  condition of
the Borrower.
<PAGE>

                                    ARTICLE 7
                               FINANCIAL COVENANTS

            7.1     Financial  Covenants.  

            The  Borrower  hereby  covenants  and  agrees  that  so  long as the
Commitment  remains in effect or any Letter of Credit  remains  outstanding  and
until the payment in full of the Obligations and the complete performance of all
of  the  Borrower's  other  obligations  hereunder  and  under  the  other  Loan
Documents,  unless the Bank shall  otherwise  consent in writing,  the  Borrower
shall not:

            (a) Permit its Consolidated  EBITDA for any fiscal quarter specified
below to be less than the amount set forth below for such fiscal quarter:
<TABLE>
<CAPTION>
  Fiscal Year 
    Ending                First Quarter     Second Quarter      Third Quarter     Fourth Quarter
    ------                -------------     --------------      -------------     --------------
<S>                      <C>                  <C>                 <C>               <C>
October 31, 1997         Not Applicable       $228,000            $225,000          $456,000
October 31, 1998         $60,000              $300,000            $300,000          $550,000
October 31, 1999         $185,000             $438,000            $438,000          $690,000
</TABLE>

            (b)  Permit its  Leverage  Ratio to exceed  during  any fiscal  year
specified below the ratio set forth below opposite such fiscal year:
<TABLE>
<CAPTION>

  Fiscal Year
   Ending                                                     Ratio
   ------                                                     -----
<S>                                                         <C>
October 31, 1997                                            0.60:1.00
October 31, 1998                                            0.55:1.00
October 31, 1999                                            0.45:1.00
</TABLE>

            (c) Permit its Consolidated  Tangible Net Worth as at the end of any
fiscal  quarter  specified  below to be less than the amount set forth below for
such fiscal quarter:
<TABLE>
<CAPTION>
  Fiscal Year 
    Ending                First Quarter     Second Quarter      Third Quarter     Fourth Quarter
    ------                -------------     --------------      -------------     --------------
<S>                      <C>                 <C>                <C>                <C>
October 31, 1997         $11,655,000         $11,868,000        $12,053,000        $12,469,000
October 31, 1998         $12,491,000         $12,760,000        $13,029,000        $13,544,000
October 31, 1999         $13,693,000         $14,096,000        $14,449,000        $15,157,000
</TABLE>
<PAGE>

            (d) Permit its Interest  Coverage Ratio to be less than 4.50 to 1.00
for any Calculation Period ending on or before April 30, 1998, or less than 5.00
to 1.00 for any Calculation Period ending thereafter.

            (e) Permit its Current  Ratio to be less than 2.50 to 1.00 as at the
end of any fiscal  quarter ending on or before April 30, 1998, or less than 3.00
to 1.00 as at the end of any fiscal quarter ending thereafter.

            7.2  Definitions  Relating to Financial  Covenants.  As used in this
Agreement, the following terms have the following meanings:

            "Calculation   Period"  means,   each  period   consisting  of  four
consecutive  fiscal quarters of the Borrower  (irrespective  of whether they are
part of the same fiscal year), taken as a single fiscal period.

            "Consolidated EBITDA": with respect to any period, the net income of
the Borrower and its consolidated  Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, plus Consolidated  Interest Expense,
income  tax  payments,  provisions  for  deferred  income  taxes,  depreciation,
amortization  and other  non-cash  charges  (to the extent  that such items were
included in the calculation of consolidated net income for such period).

            "Consolidated  Interest  Expense"  shall mean,  with  respect to any
period,  the  aggregate  amount of  interest  payable  by the  Borrower  and its
consolidated Subsidiaries, determined on a consolidated basis in accordance with
GAAP, during such period in respect of their respective  Indebtedness (including
interest payable  hereunder and imputed interest under Capital Leases),  whether
or not actually paid.

            "Consolidated  Tangible Net Worth"  shall mean,  with respect to any
period,  (a) the sum of (i) the total of the amounts  that would be shown on the
consolidated balance sheet of the Borrower and its consolidated  Subsidiaries as
at  such  date  in  accordance  with  GAAP as the  par or  stated  value  of all
outstanding  shares of Capital Stock,  paid-in capital or capital  surplus,  and
retained earnings  (excluding,  however, the value of any treasury stock and any
redeemable  preferred stock or similar capital stock) and (ii) the  Subordinated
Debt of the  Borrower as at such date,  less (b) the sum of (x) any  accumulated
deficit that would be shown on such balance  sheet as at such date in accordance
with GAAP and (y) the total amount that would be shown on such balance  sheet as
at such date in  accordance  with GAAP as  goodwill,  trademarks,  trade  names,
patents, copyrights or other intangible assets.

            "Current Ratio" shall mean, with respect to any period, the ratio of
(i) the current assets of the Borrower and its  consolidated  Subsidiaries as at
the last day of such period, to (ii) the current liabilities  (including current
maturities of long-term debt) of the Borrower and its consolidated  Subsidiaries
as at the last day of such  period,  determined  in each case on a  consolidated
basis in accordance with GAAP.

            "Interest  Coverage  Ratio" shall mean,  with respect to any period,
the ratio of (i) the  Consolidated  EBITDA for such period,  minus the aggregate
amount of Capital  Expenditures  incurred by the Borrower  and its  consolidated
Subsidiaries during such period, to (ii) Consolidated  Interest Expense for such
period.

            "Leverage  Ratio" shall mean, with respect to any period,  the ratio
of (a) total  Indebtedness  of the  Borrower and its  consolidated  Subsidiaries
(other than Subordinated Debt) to (b) Consolidated  Tangible Net Worth as at the
end of such period.


                                    ARTICLE 8
                                EVENTS OF DEFAULT

            8.1     Events of Default.  

            If one or more of the following events (each, an "Event of Default")
shall occur:

            (a) The Borrower shall default in (i) the punctual  payment when due
(whether at stated  maturity or  otherwise)  of any principal of any Loan or the
punctual  reimbursement  when due (whether at the due date thereof or otherwise)
of any LC Disbursement or (ii) the punctual  payment when due of any interest on
any  Loan or LC  Disbursement,  any  Fees or any  other  amounts  payable  by it
hereunder, under any Note or under any other Loan Document and, in the case of a
default in the payment of any amount specified in this clause (ii), such default
shall  continue  unremedied for more than three (3) days after written notice is
given by the Bank to the Borrower; or

            (b) The Borrower  shall default in the due observance or performance
of any term,  covenant or agreement contained in Section 6.4(a) or Sections 6.10
through 6.22 (inclusive) or Article 7; provided, however, that failure to comply
with the financial  covenants set forth in subsection (b), (c) or (e) of Section
7.1 as at the end of any fiscal quarter shall not constitute an Event of Default
hereunder if the Borrower is in compliance with such financial  covenants by the
earlier to occur of (i) the tenth day  following the delivery to the Bank of the
financial  statements required to be delivered with respect to the last month of
such fiscal  quarter  pursuant to Section 6.3(a) and (ii) the 55th day following
the end of such fiscal quarter (such date herein called the "Outside  Date") and
furnishes to the Bank by the Outside Date a  Compliance  Certificate  showing in
detail  satisfactory  to the Bank the  calculations  necessary to determine such
compliance, or

            (c) The Borrower  shall default in the due observance or performance
of any other term,  covenant or  agreement  contained  in this  Agreement or any
other Loan  Document on its part to be observed or  performed  and such  default
shall  continue  unremedied for a period of 30 days after the earlier of (i) the
first date on which the  Borrower  obtains  knowledge  thereof  or (ii)  written
notice thereof is given to the Borrower by the Bank; or

            (d) Any representation or warranty made by the Borrower herein or in
any  other  Loan  Document,  or any  statement  or  representation  made  in any
certificate,  report or opinion delivered by the Borrower, or any officer of the
Borrower  pursuant to this  Agreement or any other Loan Document  shall prove to
have been incorrect or misleading in any material respect when made; or

            (e) The Borrower or any of its  Subsidiaries  shall fail to make any
payment when due (after giving effect to any  applicable  grace  periods) on any
Indebtedness aggregating at least $100,000 with respect to which the Borrower or
any of its Domestic Subsidiaries is a primary obligor or a guarantor or which is
secured  by any  assets  of the  Borrower  or any of its  Domestic  Subsidiaries
("Material Indebtedness");  or any Material Indebtedness shall be accelerated or
shall be  required to be paid prior to the stated  maturity  thereof or prior to
any regularly  scheduled dates of payment,  or shall be required to be purchased
by the  Borrower  or any of its  Subsidiaries  prior to its stated  maturity  or
regularly  scheduled date of payment, or the Borrower or any of its Subsidiaries
shall  default  in the  performance  of any term  contained  in, or any event or
condition  shall exist under,  any agreement or instrument  pursuant to which it
has outstanding any Material  Indebtedness if the effect of such default,  event
or condition is to cause, or permit holder(s) of such  Indebtedness to cause (i)
any Material Indebtedness to become due and payable prior to its stated maturity
or  regularly  scheduled  dates of  payment or (ii) the  Borrower  or any of its
Subsidiaries  to be  required  to purchase  or  otherwise  acquire any  Material
Indebtedness; or

            (f) The  Borrower or any of its  Subsidiaries  shall be insolvent or
shall generally cease paying,  or be unable to pay, its debts as they become due
or shall make any admission in writing to the foregoing effect; or a substantial
part of the  operations  or business of the Borrower or any of its  Subsidiaries
shall be suspended and such suspension shall, in the opinion of the Bank, have a
material adverse effect on the condition  (financial or otherwise) or operations
of the Borrower or on the ability of the Borrower to repay the  Obligations;  or
the Borrower or any of its Subsidiaries shall make an assignment for the benefit
of creditors,  or shall commence (as debtor) a case under the Federal Bankruptcy
Code, or shall commence any proceeding with respect to itself,  or a substantial
portion of its  properties or assets,  under any other  insolvency,  bankruptcy,
arrangement,  reorganization,  liquidation,  dissolution  or similar  law of the
United States or Canada or any other jurisdiction, or shall apply for a trustee,
receiver or custodian  (however  named) for all or a substantial  portion of its
properties  or  assets  for  the  purpose  of  general  administration  of  such
properties  or assets for the benefit of creditors  or for any other  purpose or
shall take any action to authorize any of the foregoing  actions;  or a court or
competent  jurisdiction  in the premises shall enter an order for relief against
the Borrower as a debtor in a case or  proceeding  under the Federal  Bankruptcy
Code or any similar law of the United States, or any other jurisdiction;  or any
case or proceeding  under the Federal  Bankruptcy Code or any other  insolvency,
bankruptcy, reorganization, arrangement, liquidation, dissolution or similar law
of the United States, or any other  jurisdiction  shall be commenced against the
Borrower or any of its  Subsidiaries  and such case or  proceeding  shall remain
undismissed,  undischarged  or unbonded for 60 days or an order for relief shall
be  issued  in  any  such  case  or  proceeding  or the  Borrower  or any of its
Subsidiaries  shall  consent to or admit in  writing  the  material  allegations
against it in any such case or proceeding;  or any trustee,  receiver or similar
officer,  however named, shall be appointed for all or a substantial part of the
property of the Borrower or any of its  Subsidiaries  and the Borrower or any of
its  Subsidiaries,  shall consent  thereto or such  trusteeship or  receivership
shall continue for a period of 60 days; or

            (g) One or more  judgment or judgments  for the payment of money the
uninsured  portion of which exceeds in the aggregate  $100,000 shall be rendered
against  the  Borrower  or any of its  Subsidiaries  and  shall  not be  stayed,
released,  discharged or fully bonded within 60 days after the issuance thereof;
or

            (h) (i) Any Person shall engage in any "prohibited  transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed,  to administer or to terminate,  any Single Employer
Plan,  which Reportable Event or commencement of proceedings or appointment of a
trustee  is  reasonably  likely to result  in the  termination  of such Plan for
purposes  of Title IV of ERISA  (other than a standard  termination  pursuant to
Section  4041(b) of ERISA),  (iv) any Single  Employer Plan shall  terminate for
purposes  of Title IV of ERISA,  (v) the  Borrower  or any  Commonly  Controlled
Entity shall, or is reasonably likely to, incur any liability in connection with
a  withdrawal  from,  or the  insolvency  (within the meaning of Section 4245 of
ERISA) or  Reorganization  of, a  Multiemployer  Plan,  (vi) the  occurrence  or
expected  occurrence  of any event or condition  which  results or is reasonably
likely to result in the Borrower's or any Commonly  Controlled Entity's becoming
responsible  for any  liability in respect of a Former Plan,  or (vii) any other
event or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vii) above,  such event or condition,  together with all
other such events or conditions,  if any, could result in liability  which could
have a Material Adverse Effect; or

            (i)  The  Borrower  or any  of its  Subsidiaries  shall  assert,  or
institute any proceedings  seeking to establish,  that any provision of any Loan
Document is invalid, not binding or unenforceable; or

            (j) Any Security Document shall cease to be in full force and effect
or shall  cease to be  effective  to  grant  to the  Bank a  perfected  security
interest in the collateral described therein,  with the priority purported to be
created thereby;

            then,  upon the happening of any of the foregoing  Events of Default
or at any  time  thereafter  so long as any  such  Event  of  Default  shall  be
continuing,  the Bank, by a notice to the Borrower,  may take any one or more of
the following  actions:  (1) terminate the Commitment,  whereupon the Commitment
shall immediately  terminate and/or (2) declare the outstanding principal amount
of the Loans and all  interest  accrued  thereon,  the  reimbursement  of the LC
Disbursements  and all interest accrued thereon,  and all fees and other amounts
payable hereunder or under any of the other Loan Documents to be immediately due
and payable,  whereupon said principal,  interest,  fees and other amounts shall
become  immediately  due and payable  and/or (3) require that the Borrower  Cash
Collateralize  all Letters of Credit then  outstanding,  whereupon the amount of
such  cash  collateral  shall  become  immediately  due and  payable;  provided,
however,  that upon the happening of any event specified in clause (f) above the
Commitment shall immediately terminate and the Loans, the LC Disbursements,  all
accrued  interest  thereon and all fees and other amounts  payable  hereunder or
under any other Loan  Document,  shall be immediately  due and payable,  and the
Borrower  shall  immediately  Cash  Collateralize  all  Letters  of Credit  then
outstanding, all without declaration or other notice to the Borrower.

            8.2     Waivers.

            The Borrower  hereby waives,  to the extent  permitted by applicable
law, (a) all  presentments,  demands for performance,  notices of nonperformance
(except to the extent  required by the  provisions  of this  Agreement or of any
other  Loan  Document),  protests,  notices  of  protest,  notices  of intent to
accelerate  and notices of dishonor in  connection  with the Notes and the Loans
and (b) any  requirement  of diligence or  promptness on the part of the Bank in
the enforcement of its rights under the provisions of this Agreement,  the Notes
or any other Loan Document.

                                    ARTICLE 9
                                  MISCELLANEOUS

            9.1     Notices.

            All notices, requests, demands,  instructions,  directions and other
communications  provided  for  hereunder  shall be in writing  (which term shall
include telecopied  communications) and shall be telecopied or delivered by hand
or overnight courier to the applicable party at the address or telecopier number
specified for such party on the signature  pages hereto or, as to any party,  to
such other address or telecopier  number as such party shall specify by a notice
in  writing  to the  other  parties  hereto  delivered  in  accordance  with the
provisions  of this Section  9.1.  Each notice,  request,  demand,  instruction,
direction  or  other  communication  provided  for  hereunder  shall  be  deemed
delivered (a) if by hand or overnight courier,  when delivered to the applicable
party at such address, and (b) if by telecopy, when sent to the applicable party
at such telecopier number.

            9.2     Expenses, Indemnity.  

            (a) The Borrower  agrees to pay,  promptly  upon demand of the Bank,
whether  or not  the  transactions  contemplated  hereby  are  consummated,  the
following  fees,  disbursements,  costs,  expenses,  taxes and charges:  (i) the
reasonable fees and disbursements of counsel for the Bank (including  reasonable
fees and  disbursement  of outside  counsel and  reasonable  allocated  costs of
in-house  counsel) in connection  with the preparation of this Agreement and the
other Loan Documents and the transactions  contemplated hereby and thereby, (ii)
the  reasonable  fees and  disbursements  of  counsel  for the  Bank  (including
reasonable fees and  disbursement  of outside  counsel and reasonable  allocated
costs of in-house  counsel) in  connection  with any  amendment,  supplement  or
modification of this Agreement or of any other Loan Document, and any consent or
waiver hereunder or thereunder (or any such instrument which is proposed but not
executed and delivered); (iii) all reasonable costs and expenses incurred by the
Bank in  connection  with  due  diligence  conducted  by it in  preparation  for
entering into this  Agreement or any amendment or waiver  relating  hereto or to
any other Loan Document and (iv) all reasonable expenses incurred by the Bank in
connection with the performance of any inspections, field examinations or audits
performed  by the Bank or any of its agents or  representatives  with respect to
the  Borrower,  its books  and  records,  or any of its  assets  (including  the
inspections,   examinations  and  audits  referred  to  in  Article  6  and  the
preparation of reports with respect thereto),  and (v) all recording and release
taxes, all transfer taxes, all documentary,  stamp, intangible and similar taxes
(other than income or franchise taxes), all search filing and recording fees and
taxes, and any other excise or property taxes,  charges, or similar taxes at any
time  payable in  respect of this  Agreement  or any other  Loan  Document,  the
incurrence of obligations  hereunder and under the other Loan Documents,  or any
payment  made  hereunder  or under any other Loan  Document  (collectively,  the
"Other Taxes").  The Borrower further agrees to pay, promptly upon demand by the
Bank, all expenses  incurred by the Bank in connection  with the  enforcement or
preservation  of any rights and remedies  with respect to the Borrower or any of
its assets  hereunder or under any other Loan  Document,  including all costs of
collection,  all  reasonable  fees and  disbursements  of outside  counsel,  all
reasonable allocated costs of in-house counsel,  and all out-of-pocket  expenses
of the Bank. The Bank hereby  acknowledges  that it has  previously  received on
account  the sum of  $10,000,  which  sum  shall be  applied  by the Bank to the
partial payment of fees and expenses  (including legal expenses)  incurred by it
in  connection  with  the  performance  of  pre-closing  field  audits  and  the
preparation of this Agreement and the other Loan Documents.

            (b) The Borrower  agrees to indemnify  the Bank and each Person,  if
any,  controlling the Bank, and each of their  respective  directors,  officers,
employees,  attorneys  and  agents  (each  of the  foregoing  herein  called  an
"Indemnitee") against, and to hold each Indemnitee harmless from (i) any losses,
liabilities,  damages,  claims,  costs  and  expenses  (collectively,  "Losses")
suffered or incurred by such Indemnitee arising out of, resulting from or in any
manner connected with, the execution, delivery and performance of this Agreement
or any other Loan Document,  the making or maintenance of any Loans, the issuing
or  maintenance  of any  Letter of  Credit,  or any  transaction  related  to or
consummated  in  connection  with this  Agreement,  the Loans or the  Letters of
Credit, including any Losses suffered or incurred by such Indemnitee arising out
of or related to the violation of,  noncompliance  with or liability  under, any
Environmental  Laws or any  orders,  requirements  or  demands  of  Governmental
Authorities  related  thereto,  or in  investigating,  preparing for,  defending
against, or providing  evidence,  producing documents or taking any other action
in respect of any commenced or threatened litigation,  administrative proceeding
or  investigation,  under any  Environmental  Laws or any other  statute  of any
jurisdiction,  or any  regulation,  or at common  law or  otherwise,  other than
Losses arising out of or relating to the gross negligence or willful  misconduct
of such Indemnitee; (ii) any and all Losses (including,  without limitation, all
reasonable  fees and  disbursements  of  counsel  with whom any  Indemnitee  may
consult in connection  therewith  and all expenses of litigation or  preparation
therefor)  that any  Indemnitee  may incur or which may be asserted  against any
Indemnitee  in connection  with any  litigation  or  investigation  involving or
relating to the Borrower, any of its Subsidiaries,  any of its Affiliates or any
of its officers,  directors,  employees or agents,  or any of its assets,  other
than  Losses  arising  out of or  relating  to the gross  negligence  or willful
misconduct of such Indemnitee; and (iii) the full amount of any Other Taxes paid
by the Bank and any  liability  (including  penalties,  interest  and  expenses)
arising therefrom or with respect thereto,  whether or not such Other Taxes were
correctly or legally asserted,  which relate to this Agreement or any other Loan
Document or the credit facilities provided hereunder.

            (c) The  covenants  contained in clauses (a) and (b) of this Section
9.2 shall be in addition to any other obligations or liabilities of the Borrower
to the Bank  hereunder,  under  any other  Loan  Document,  or at common  law or
otherwise and shall survive the termination of the Commitment, the expiration of
the Letters of Credit and the repayment of the Obligations.

            9.3     Amendments and Waivers.and Waivers

            This  Agreement  may  not  be  amended  or  modified  except  by  an
instrument in writing signed by the Borrower and the Bank.

            9.4     Waivers.

            No  failure  on the  part of the Bank to  exercise,  and no delay in
exercising,  any  right,  power or remedy  hereunder  shall  operate as a waiver
thereof or of any Event of Default,  nor shall any single or partial exercise by
the Bank of any right,  power or remedy hereunder  preclude any other or further
exercise thereof or the exercise of any other right,  power or remedy. No waiver
of any provision of this  Agreement nor consent to any departure  herefrom shall
in any event be effective  unless the same shall be in writing and signed by the
Bank,  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,  of itself,  entitle  the  Borrower to any other or
further notice or demand in similar or other circumstances. No course of dealing
between the Borrower and the Bank shall operate as a waiver of the Bank's rights
under this  Agreement  or any other Loan  Document or with respect to any of the
Borrower's  obligations  hereunder or thereunder.  If notice,  whether before or
after an Event of Default  has  occurred,  is required by law to be given by the
Bank to the  Borrower,  the  parties  hereto  agree  that,  except as  otherwise
provided in any Loan Document or required by law, five (5) days' notice given in
the manner provided in Section 9.1 shall be reasonable notice.

            9.5     Cumulative Remedies.   

            This Agreement and the obligations of the Borrower  hereunder are in
addition  to and not in  substitution  for any  other  obligations  or  security
interests  now or  hereafter  held by the Bank and shall not affect the  rights,
remedies or powers of the Bank in respect of any  obligation  or other  security
interest held by the Bank. The remedies  herein  provided are cumulative and are
not exclusive of any remedy provided by law.

            9.6         Survival. 

            All  covenants,  agreements,  representations  and  warranties  made
hereunder and in the other Loan Documents (or in any amendment,  modification or
supplement hereto or thereto) and in any certificate  delivered  pursuant hereto
or such other Loan  Documents  shall  survive the execution and delivery of this
Agreement and the other Loan  Documents and the making of the Loans and issuance
of the  Letters of Credit  hereunder,  and  unless  specified  otherwise,  shall
continue  in full  force  and  effect  until  all of the  Loans  and  all  other
Obligations  shall have been  indefeasibly  paid in full,  the Letters of Credit
shall  have  expired  or been  terminated  and the  Commitments  shall have been
terminated.

            9.7     Successors and Assigns. 

            This  Agreement and the other Loan  Documents  shall be binding upon
and inure to the  benefit  of the  Borrower  and the Bank and  their  respective
successors  and  permitted  assigns,  except that the Borrower may not assign or
transfer  any of its rights or  obligations  under this  Agreement  or under any
other Loan Document  without the prior written consent of the Bank. The Bank may
freely  assign its rights and  remedies  hereunder,  under any Note or under any
other Loan Document,  in whole or in part, to any other Person (an  "Assignee"),
without  the need for consent by the  Borrower.  Upon any such  assignment,  the
relevant Assignee shall become a party hereto and, to the extent of the interest
assigned to it, shall have all the rights and obligations of the Bank hereunder;
provided,  however,  that no  Assignee  which  as of the  effective  date of the
assignment to it would be entitled to receive any greater payment under Sections
3.3 or 3.4 than the Bank  would  have been  entitled  to receive as of such date
under said Section with respect to the interest  assigned,  shall be entitled to
receive such greater payment unless the Borrower has consented in writing to the
assignment.

            9.8     Set-off.

            In addition to any rights and remedies of the Bank  provided by law,
the Bank shall have the right,  without prior notice to the  Borrower,  any such
notice  being  expressly  waived by the  Borrower,  to the extent  permitted  by
applicable  law,  upon the  occurrence  of an Event  of  Default  to set off and
appropriate and apply against any amount then due and payable by the Borrower to
the Bank  hereunder  or under  any other  Loan  Document,  any and all  deposits
(general  or  special,  time or demand,  provisional  or  final),  and any other
credits,  indebtedness  or  claims,  in each case  whether  direct or  indirect,
absolute or contingent,  matured or unmatured,  at any time held or owing by the
Bank or any branch or agency  thereof to or for the credit or the account of the
Borrower.

            9.9     GOVERNING LAW.  

            THIS  AGREEMENT  AND THE NOTES SHALL BE GOVERNED BY, AND  CONSTRUED,
INTERPRETED  AND ENFORCED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.

             9.10   JUDICIAL PROCEEDINGS. 

            (A) THE  BORROWER  HEREBY  EXPRESSLY  SUBMITS  TO THE  NON-EXCLUSIVE
JURISDICTION  OF ALL FEDERAL AND STATE  COURTS  SITTING IN THE CITY OF NEW YORK,
STATE OF NEW YORK IN CONNECTION WITH ANY ACTION,  SUIT OR PROCEEDING RELATING TO
THIS  AGREEMENT,  ANY NOTE ANY OTHER LOAN DOCUMENT OR ANY INSTRUMENT OR DOCUMENT
RELATING  HERETO OR THERETO,  AND, IN CONNECTION  WITH ANY SUCH ACTION,  SUIT OR
PROCEEDING,  AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO
ANY OF SAID COURTS OR A JUDGE THEREOF MAY BE SERVED UPON THE BORROWER  WITHIN OR
WITHOUT SUCH COURT'S  JURISDICTION  BY  REGISTERED  OR  CERTIFIED  MAIL,  AT THE
ADDRESS OF THE  BORROWER  SPECIFIED  ON THE  SIGNATURE  PAGES HERETO (OR AT SUCH
OTHER  ADDRESS  AS THE  BORROWER  SHALL  SPECIFY  BY A PRIOR  NOTICE IN  WRITING
DELIVERED TO THE BANK IN  ACCORDANCE  WITH SECTION  8.1),  PROVIDED A REASONABLE
TIME FOR APPEARANCE IS ALLOWED.

            (B) THE BORROWER  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION WHICH IT
MAY NOW OR  HEREAFTER  HAVE TO THE  LAYING  OF  VENUE  OF ANY  SUIT,  ACTION  OR
PROCEEDING  ARISING OUT OF OR RELATING TO THIS AGREEMENT,  ANY NOTE OR ANY OTHER
LOAN  DOCUMENT  BROUGHT IN ANY FEDERAL OR STATE COURT SITTING IN THE CITY OF NEW
YORK, STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

            (C) NOTWITHSTANDING THE FOREGOING,  THE BANK MAY SUE THE BORROWER IN
ANY  JURISDICTION  WHERE THE  BORROWER OR ANY OF ITS ASSETS MAY BE FOUND AND MAY
SERVE LEGAL PROCESS UPON THE BORROWER IN ANY OTHER MANNER PERMITTED BY LAW.

            9.11 WAIVER OF JURY TRIAL. 

            EACH PARTY  HEREBY  IRREVOCABLY  WAIVES ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE  ARISING UNDER OR RELATING TO THIS  AGREEMENT,  ANY
NOTE OR ANY OTHER LOAN  DOCUMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY.

            9.12  Further Assurances.  

            At any time and from time to time, upon the request of the Bank, the
Borrower  shall  execute,  deliver  and  acknowledge,  or cause to be  executed,
delivered and acknowledged,  such further  documents and instruments,  and shall
take or refrain  from  taking  such  other  action,  as the Bank may  reasonably
request in order to fully effect the purposes of this Agreement,  the other Loan
Documents and any other agreements, instruments and documents delivered pursuant
hereto or in connection with the Loans or the Letters of Credit.

            9.13    Integration Clause.  

            This  Agreement  and the other  Loan  Documents  embody  the  entire
agreement  and  understanding  among the Borrower and the Bank and supersede all
prior  agreements  and  understandings,  whether  written or oral,  between  the
parties hereto relating to the subject matter of this Agreement.

            9.14    Severability.  

            If any part of this  Agreement  is contrary  to,  prohibited  by, or
deemed invalid under,  any  applicable law of any  jurisdiction,  such provision
shall, as to such jurisdiction, be inapplicable and deemed omitted to the extent
so contrary, prohibited or invalid, without invalidating the remainder hereof or
affecting  the  validity  or  enforceability  of  such  provision  in any  other
jurisdiction.

            9.15    Counterparts.  

            This   Agreement   may  be   simultaneously   executed   in  several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute one and the same agreement. Delivery of an executed signature page to
this Agreement by facsimile  transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.

            9.16    Acknowledgements. 

            The Borrower hereby acknowledges that:

            (a)  it  has  been   represented  and  advised  by  counsel  in  the
negotiation,  execution  and  delivery  of this  Agreement  and the  other  Loan
Documents;

            (b)  the  Bank  has no  fiduciary  relationship  with or duty to the
Borrower arising out of or in connection with this Agreement or any of the other
Loan  Documents,  and the  relationship  between the Bank, on one hand,  and the
Borrower,  on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and

            (c)  no  joint  venture  is  created  hereby  or by the  other  Loan
Documents or otherwise exists by virtue of the transactions  contemplated hereby
the Borrower and Bank.

            (d) This  agreement  contains a waiver of trial by jury.  In waiving
trial by jury, the Borrower hereby knowingly,  intentionally,  voluntarily,  and
unconditionally  waives  any and all  rights it has or may have to trial by jury
under the constitutions and laws of the United States and the State of New York.

      [Remainder of page intentionally left blank; signature page follows] 


<PAGE>


            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, as of the day and year first
above written.

Address for Notices:                          V BAND CORPORATION
565 Taxter Road
Elmsford, New York  10523-2330
Attention:  Mr. Mark R. Hahn           By:    /s/Thomas E. Feil
Telephone: (914) 789-5017                     ----------------------
Telecopier: (914) 789-5068           Name:    Thomas E. Feil 
                                    Title:    Chairman & Chief Executive Officer

Address for Notices:                          NATIONAL BANK OF CANADA,
125 West 55th Street                          NEW YORK BRANCH
New York, New York 10019
Attention:  Mr. Joseph A. Klapkowski
Telephone:  (212) 632-8551             By:   /s/Gaetan R. Frosina
Telecopier: (212) 632-8545                   --------------------
                                     Name:   Gaetan R. Frosina
                                    Title:   Vice President



                                       By:   /s/Joseph A. Klapkowski
                                             -----------------------
                                     Name:   Joseph A. Klapkowski
                                    Title:   Assistant Vice President


<PAGE>
                                                                      SCHEDULE I


                               DISCLOSURE SCHEDULE 


         1. The authorized,  issued and  outstanding  shares of capital stock of
the Borrower and each of its Subsidiaries,  and the direct or indirect ownership
of such shares, are as follows:

                                       BORROWER
                               (a New York corporation)

Beneficial                Number of                       Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Various Persons           5,328,303          Common          100%


                                  LICOM INCORPORATED
                               (a Delaware corporation)

Beneficial                Number of                       Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Borrower                       100           Common          100%


                                   V BAND NE, INC.
                               (a New York corporation)

Beneficial                Number of                       Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Borrower                       100           Common          100%


                                V BAND SERVICES, INC.
                               (a New York corporation)

Beneficial                Number of                        Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Borrower                      ---            Common          100%


                                      V BAND PLC
                         (registered in England No. 1855636)

Beneficial                Number of                        Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Borrower                     50,049          Ordinary         App.
Licom                             1          Ordinary

<PAGE>

                                   VBI CORPORATION
                          (a U.S. Virgin Island corporation)

Beneficial                Number of                       Percentage
Owner                     Shares Owned       Class          of Class
----------                ------------       -----         ---------
Borrower                      1,000          Common          100%

         Options to purchase  shares of the  Borrower's  common  stock have been
issued to employees, officers, directors, and consultants of the Borrower.

         2. Liabilities of the Borrower or any of its Subsidiaries which are not
shown on the balance sheet delivered to the Bank pursuant to Section 4.5:

            The Borrower and its  Subsidiaries  have  material  obligations  and
         liabilities to customers,  suppliers,  landlords,  employees, and other
         incurred in the ordinary  course of business  which are not required to
         be reflected in the Borrowers balance sheet.

         3. The Borrower and the following Subsidiaries are currently undergoing
the following tax audits:

            The Borrower is undergoing a New York State  Franchise Tax audit for
         the period  November 1, 1990 through October 31, 1993. The Borrower has
         recently  received  from the New York State  Department of Taxation and
         Finance a "Summary of  Additional  Taxes and Interest" in the amount of
         $84,576, with interest computed through March 1, 1997. This document is
         currently  being  reviewed by the Borrower's  outside tax  accountants,
         Deloitte & Touch LLP.

            The  Borrower  recently  received  correspondence  from the State of
         California Tax Board,  with a statement  reflecting an apparent balance
         due to the State of California of  $23,454.74.  Deloitte & Touch LLP is
         also reviewing the document.

         4. The  exceptions  to title and  financing  statement  referred  to in
Section 4.7:

            Under the terms of the System Sales Agreement (the NYMEX Agreement")
         by and between the New York Mercantile Exchange ("NYMEX") the Borrower,
         title to certain materials and equipment  pre-purchased by the Borrower
         to be incorporated in the equipment being sold to NYMEX under the NYMEX
         Agreement is held by the Battery Park City Authority.

            The Borrower has  indebtedness  outstanding to Thomas E. Feil in the
         principal  amount of $200,000 which is secured by an assignment of, and
         a security  interest  in, all of the  Borrower's  accounts  receivable.
         Financing statements are on file in the Department of State of New York
         and Westchester County, New York relating to that security interest.
<PAGE>
         5. Proceedings referred to in Section 4.8:

            In October 1994, the Borrower  commenced an action against Technical
         Telephone  Systems,  Inc. ("TTSI") in New York State Supreme Court, New
         York County,  for minimum payments due to the Borrower in the amount of
         $650,00 under a distribution  agreement  between the Borrower and TTSI.
         In  November  1994,  TTSI filed a  counterclaim  against  the  Borrower
         denying all allegation stated in the Borrower's  complaint and alleging
         a breach  of good  faith and fair  dealing  by the  Borrower,  claiming
         damages of $1 million.  The Borrower believes its claim against TTSI is
         meritorious  and believes  TTSI's  counterclaim  against the  Borrower.
         Which the Borrower will  vigorously  defend,  is without merit and will
         not have a material impact on the consolidated  financial  condition of
         the Borrower.

            By  letter  dated  September  5,  1996,   Telefonia  Vazquez  S.R.L.
         ("Telefonia  Vazquez")  has  asserted  a claim  that the  Borrower  had
         violated certain exclusive sales rights it claims were granted to it in
         Argentina.  In its  letter,  Telefonia  Vazquez  asserts a claim for an
         aggregate of  $92,785.00  for the  recovery of certain  expenses and an
         aggregate of  $2,000,000.00  in lost future profits and "business image
         loss."  The  Borrower  received  the  letter  after  Telefonia  Vazquez
         ordered, received, and failed to pay for, approximately $152,000 of the
         Borrower's  equipment.  While the September 5, 1996 letter threatens to
         initiate  "pertinent  legal  action"  the  Borrower is not aware of any
         action taken to initiate litigation by Telefonia Vazquez.  The Borrower
         believes its claim against Telefonia Vazquez is meritorious and intends
         to initiate a collection  proceeding.  The Borrower  believes  that the
         Claims made by Telefonia Vazquez against the Borrower are without merit
         and will not  have a  material  impact  on the  consolidated  financial
         condition of the Borrower.

         6. Collective  bargaining agreements and other labor contracts referred
to in Section 4.9:

            Agreement between V Band NE, Inc. and Local 2222 of the IBEW.

         7. The following  events or  conditions  specified in Section 4.19 have
occurred:

                                      NONE

         8. Environmental disclosures required by Section 4.20:

                                      NONE 

         9. Indebtedness referred to in Sections 4.14:

            The Borrower has  indebtedness  outstanding to Thomas E. Feil in the
         principal  amount of $200,000 which is secured by an assignment of, and
         a security interest in, all of the Borrower's accounts receivable.
<PAGE>
            Obligations  to the  following  entities  relating to the  following
         equipment, to the extent such obligations may constitute Indebtedness:

         Entity                                Equipment
         ------                                ---------

         GECC                 Refurbished   Universal   Dual  In  Line   Package
                              Insertion System with Expandable DIP IC Sequencer,
                              Rotary  Table  Option,   Board  Error   Correction
                              Option,  Auto Stick  Option,  and Three Model 6770
                              Forty Eight Station Add On Modules with Storage

                              Genrad  Test System Serial No. 125, Module 2283

         Copelco Credit       Ricoh 8880 Copier
         Corporation

         Interactive, Inc.    HP 9000 Model G40, US Robotics Sportster 14.4 Baud
                              Modem, HP-UX Operating System,  Unidata RDBMS-AE &
                              USAM   Print/Batch,   SB+  Runtime  &   Developer,
                              Manufacturer's   INFOFLO   Version  7.0,   INFOFLO
                              Manuals, and SB Termite Network Version

         AT&T Capital         Millennia Transport  Notebook, Millennia Series C,
         Leasing              Millennia  Series  B  Minitower,  17" Monitor, 15"
                              Monitor 

                                                        
         10. Liens referred to in Section 6.11:

            Any Liens arising under the obligations  described in Paragraph 9 of
         the Disclosure Schedule.
<PAGE>
                                                                       EXHIBIT A

                             FORM OF PROMISSORY NOTE 



$4,000,000.00                                                       May 28, 1997

                    FOR  VALUE  RECEIVED,   V  BAND  CORPORATION,   a  New  York
corporation  (the  "Borrower"),  hereby promises to pay to the order of NATIONAL
BANK OF CANADA, NEW YORK BRANCH (the "Bank"),  at its office located at 125 West
55th  Street,  New York,  New York 10019 (or at such  other  place as the holder
hereof shall  designate by a notice in writing to the Borrower) on May 28, 2000,
the principal sum of Four Million Dollars  ($4,000,000.00) or such lesser amount
as shall equal the aggregate  unpaid  principal  amount of the Loans made by the
Bank to the Borrower under the Credit  Agreement,  in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid  principal  amount of each such Loan,  at such office,  in like money and
funds, for the period  commencing on the date of such Loan until such Loan shall
be paid in full, at the rates per annum and on the dates specified in the Credit
Agreement.

                    This Note is the Note  referred  to in the Credit  Agreement
dated as of May 28, 1997 (said Credit  Agreement,  as from time to time amended,
herein called the "Credit  Agreement")  between the Borrower and the Bank.  This
Note is secured  by the  Collateral  referred  to in the  Credit  Agreement  and
evidences Loans made by the Bank to the Borrower  thereunder.  Capitalized terms
used in this Note and not otherwise defined herein have the respective  meanings
assigned to them in the Credit Agreement.

                    Upon the  occurrence of an Event of Default under the Credit
Agreement, the principal amount hereof and accrued interest hereon shall become,
or may be declared  to be,  forthwith  due and  payable in the manner,  upon the
conditions and with the effect  provided in the Credit  Agreement.  The Borrower
may at its option  prepay all or any part of the  principal  of this Note before
maturity  upon the  terms  provided  in the  Credit  Agreement  and  shall  make
mandatory prepayments of this Note as required by the Credit Agreement.

                    THIS NOTE SHALL BE GOVERNED  BY, AND SHALL BE  CONSTRUED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK  WITHOUT  REFERENCE  TO ITS
PRINCIPLES OF CONFLICTS OF LAW.

                                                          V BAND CORPORATION



                                                   By: _________________________
                                                 Name:
                                                Title:


<PAGE>
                                                                     EXHIBIT B-1

                           FORM OF NOTICE OF BORROWING 

                                                           _______________, 19__


National Bank of Canada,
New York Branch
125 West the Street
New York, New York  10019
Attention:  Mr. Joseph A. Klapkowski

Gentlemen:

                  The undersigned,  V Band Corporation,  a New York corporation,
refers to the Credit  Agreement dated as of May 28, 1997 (as amended,  restated,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
between the undersigned and the Bank.  Capitalized terms that are defined in the
Credit Agreement and are not otherwise  defined herein shall have the respective
meanings given to them in the Credit Agreement.

                  We hereby  request a Loan  under the Credit  Agreement  and in
that  connection  set forth  below the  information  relating  to such Loan (the
"Proposed Loan") as required by Section 2.2(b) of the Credit Agreement:

         (i)      The date of the Proposed Loan is ______________, 199__(1)

         (ii)     The amount of the Proposed Loan is $______________(2)

         (iii)    The Proposed Loan is comprised of _________________________(3)

         (iv)     The initial Interest Period shall be ______________________(4)

         (v)      The proceeds of the Proposed  Loan are to  be disbursed to the
                  following  account of the Borrower: _______________________(5)


----------- 
                 
     (1)    Must be a Business Day.

     (2)    Must be an integral multiple of $25,000 (for Borrowings comprised of
            Base Rate Loans) or an integral multiple of $100,000,  not less than
            $500,000 (for Borrowings comprised of Eurodollar Loans).

     (3)    Specify Base Rate Loans or Eurodollar Loans.

     (4)    Insert Interest Period of one, two or three months,  ending no later
            than the Commitment Termination Date (applicable to Eurodollar Loans
            only).

     (5)    Insert number of Borrower's Operating Account.
<PAGE>
         The undersigned hereby certifies that the following statements are true
on the date  hereof,  and will be true on the date of the  Proposed  Loan  after
giving effect to the Proposed Loan:

         (a)      the Exposure does not and, after giving effect to the Proposed
                  Loan,  will not exceed the lesser of (x) the Commitment or (y)
                  the Borrowing Base;

         (b)      no event has occurred and is continuing,  or would result from
                  such  Proposed  Loan or from the  application  of the proceeds
                  thereof, which constitutes a Default or an Event of Default;

         (c)      the   representations   and  warranties  made  in  the  Credit
                  Agreement are true and correct in all material respects,  both
                  before and after giving  effect to the  Proposed  Loan and the
                  application of the proceeds thereof,  as though made on and as
                  of the date of such Proposed  Loan,  except to the extent that
                  such  representations  and warranties  expressly  relate to an
                  earlier   date  (in  which  case  such   representations   and
                  warranties shall have been true and accurate on and as of such
                  earlier date); and

         (d)      all  conditions  precedent to the Proposed  Loan  specified in
                  Article 5 of the Credit Agreement have been satisfied.

                                                        Very truly yours,

                                                        V BAND CORPORATION


                                                  By:___________________________
                                                Name:
                                               Title:


<PAGE>
                                                                     EXHIBIT B-2

                  FORM OF NOTICE OF CONVERSION OR CONTINUATION 

                                                           _______________, 19__

National Bank of Canada,
New York Branch
125 West the Street
New York, New York  10019
Attention:  Mr. Joseph A. Klapkowski

Gentlemen:

                  The undersigned,  V Band Corporation,  a New York corporation,
refers to the Credit  Agreement dated as of May 28, 1997 (as amended,  restated,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
between the undersigned and the Bank.  Capitalized terms that are defined in the
Credit Agreement and are not otherwise  defined herein shall have the respective
meanings given to them in the Credit Agreement.

                  We hereby  request  pursuant  to Section  2.3(a) of the Credit
Agreement  that the  Designated  Loans  specified  below [be converted  into the
Resulting  Loans  specified  below on the Conversion  Date specified  below] [be
continued as Loans of the same Type for the additional Interest Period specified
below]:

A.       Designated Loans(6):

         Type:                          _________________

         Last day of Current
         Interest Period:               _________________ (7)

         Principal Amount:             $_________________



B.       Resulting Loans(8):

         Type:                          _________________


---------

         (6)      If the Designated Loans are of more than one Type, provide the
                  requested information for each Type of Designated Loan.

         (7)      Insert only if Designated Loans are Eurodollar Loans.

         (8)      If the Resulting Loans are of more than one Type,  provide the
                  requested information for each Type of Resulting Loan.

<PAGE>

         Initial Interest Period:       _________________ (9)

         Principal Amount:             $_________________ (10)

C.       Date of Requested
         Conversion/Continuation:       _________________ (11)

D.       Additional Interest Period: (5)_________________


                                                        Very truly yours,

                                                       V BAND CORPORATION


                                                  By:___________________________
                                                Name:
                                               Title:

----------


         (9)      Insert Interest Period of one, two or three months,  ending no
                  later than the  Commitment  Termination  Date  (applicable  to
                  Eurodollar Loans only).

         (10)     Complete only if applicable.

         (11)     Must be a  Business  Day  and,  if the  Designated  Loans  are
                  Eurodollar  Loans, must be the last day of the Interest Period
                  applicable thereto.
<PAGE>
                                                                       EXHIBIT C


                         FORM OF COMPLIANCE CERTIFICATE 



         I,  ___________________ , the [Chief Executive  Officer/Chief Financial
Officer] of V Band Corporation, a New York corporation (the "Borrower"),  hereby
certify to National Bank of Canada, New York Branch (the "Bank") that:

         This  Compliance  Certificate  is being  delivered  pursuant to Section
6.3(d) of the Credit Agreement,  dated as of May 28, 1997,  between the Borrower
and the Bank (the "Credit  Agreement") and accompanies the financial  statements
delivered  by the  Borrower  to the Bank  pursuant  to Section 6.3 of the Credit
Agreement as at the Determination Date (as hereafter  defined).  All capitalized
terms which are defined in the Credit  Agreement and are not  otherwise  defined
herein  have the  respective  meanings  given to them in the  Credit  Agreement.
Unless otherwise specified,  all section numbers refer to sections of the Credit
Agreement.

         1. [No condition or event exists on the date hereof which constitutes a
Default and no such  condition or event has occurred  since the date of the last
Compliance  Certificate  delivered  to the Bank] or [The  following  Default has
occurred  and the Borrower  has taken or proposes to take the  following  action
with respect to it:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________


         2. The Borrower is in compliance with the financial covenants set forth
in Section 7.1 of the Credit Agreement.

         3.  The   calculations   below  accurately  set  forth  the  Borrower's
Consolidated EBITDA,  Leverage Ratio,  Consolidated Tangible Net Worth, Interest
Coverage Ratio,  and Current Ratio as at  ________________  (the  "Determination
Date") and for the  fiscal  quarter  and  Calculation  Period  then  ended,  all
determined  on a  consolidated  basis in  accordance  with GAAP,  based upon the
financial   statements  delivered  by  the  Borrower  to  the  Bank  as  at  the
Determination Date pursuant to Section 6.3 of the Credit Agreement:

Consolidated EBITDA:

1.       Actual:

         a. Consolidated net income for the fiscal quarter            $________

         b. Consolidated Interest Expense reflected in item a          ________

         c. Income tax payments and deferred income taxes
            reflected in item a                                        ________

         d. Depreciation, amortization and other non-cash charges
                  reflected in item a

         e. Sum of items a, b, c and d                                 ________
 
         f. Actual Consolidated EBITDA:                               $________

2.       Required: Minimum Consolidated EBITDA
                  required under Section 7.1(a)                       $________
 
Leverage Ratio:

1.       Actual:

         a. Principal amount of Loans outstanding on
                  the Determination Date                              $________

         b. Other Indebtedness outstanding on the Determination Date   ________

         c. Subordinated Debt outstanding on the Determination Date    ________

         d. Total amount of senior Indebtedness outstanding on
                  the Determination Date (sum of a and b, minus c)     ________

         e. Borrower's Consolidated Tangible Net Worth as at
                  the Determination Date                               ________

         f. Actual leverage ratio (d divided by e)          ______       to 1.00
                                                                    

2.       Required:  Maximum Leverage Ratio permitted under  ______
         Section 7.1(b)                                                  to 1.00

Consolidated Tangible Net Worth:

1.       Actual (as at the Determination Date or, if the Determination
                  Date is not the end of a fiscal quarter,  as at the end of the
                  most recent fiscal quarter):

         a.  Par or stated value of Capital Stock, paid-in capital
                  or capital surplus and retained earnings (excluding
                  treasury stock and redeemable preferred or similar
                  Capital Stock) as at the Determination Date         $________

         b. Subordinated Debt as at the Determination Date             ________

         c. Actual net worth as at the Determination Date 
           (sum of a and b)                                            ________

         d. Accumulated deficit as at the Determination Date

         e. Goodwill, trademarks, trade names, patents, copyrights,
                  and other intangible assets as at the Determination Date

         f. Adjustments to net worth (sum of d and e)

         g. Actual Consolidated Tangible Net Worth as at
                  the Determination Date (c minus f)                  $________

2.       Required: Minimum Consolidated Tangible Net Worth
                  required under Section 7.1(c)                       $________
 

Interest Coverage Ratio:

1.       Actual:

         a. Consolidated EBITDA for Calculation Period                $________

         b. Aggregate amount of Capital Expenditures incurred
                  during Calculation Period                            ________

         c. Adjusted Consolidated EBITDA (a minus b)                   ________

         d. Consolidated Interest Expense for Calculation Period       ________ 

         e. Actual Interest Coverage Ratio (c divided by d)    _______   to 1.00

2.       Required: Minimum Interest Coverage Ratio required
                  under Section 7.1(d)                         _______   to 1.00

Current Ratio:

1.       Actual:

         a. Current assets as at the Determination Date
            (if fiscal quarter-end)                                   $ _______

         b. Current liabilities as at the Determination Date            _______

         c. Actual Current Ratio as at the Determination Date 
            (a divided by b)                                   _______   to 1.00

2.       Required: Minimum Current Ratio required under 
         Section 7.1(e)                                        _______   to 1.00




Date: _______________                       _______________________________
                                            Name:
                                            Title:
<PAGE>

                              SUBSIDIARY GUARANTEE 

                  GUARANTEE  dated as of May 28, 1997 among V Band NE,  Inc.,  a
New York corporation,  V Band Services, Inc., a New York corporation,  and Licom
Incorporated,  a Delaware  corporation  (each a "Guarantor" and collectively the
"Guarantors") and National Bank of Canada, New York Branch (the "Bank").

                                    RECITALS:

                  A. V Band  Corporation,  a New York  corporation,  that is the
parent company of the  Guarantors  (the  "Borrower"),  and the Bank are entering
into a Credit Agreement,  dated as of the date hereof (said Credit Agreement, as
it may be amended,  restated,  supplemented  or otherwise  modified from time to
time,  the  "Credit  Agreement")  providing  for the  making of loans to and the
issuance  of letters of credit for the account of the  Borrower in the  amounts,
and subject to the terms and conditions, specified in the Credit Agreement.

                  B. The execution and delivery of this Guarantee  constitutes a
condition  precedent to the obligation of the Bank to continue to make Loans and
issue Letters of Credit pursuant to the terms of the Credit Agreement.

                  C. The Borrower  finances the operations of the Guarantors and
provides various services and other benefits to the Guarantors,  and accordingly
the  Guarantors  will  benefit  from the  execution  and  delivery of the Credit
Agreement by securing  access to sources of financing on favorable  terms and at
favorable rates, and by obtaining other material benefits.

                  ACCORDINGLY, in consideration of the premises, and in order to
induce the Bank to execute  and  deliver  the Credit  Agreement  and to make and
maintain  Loans and issue and  maintain  Letters of Credit  thereunder,  and for
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby agrees with the Bank as follows:

                  1.       Defined Terms.

                  (a) Capitalized terms that are defined in the Credit Agreement
and are not otherwise defined herein have the respective  meanings given to them
in the Credit Agreement and, in addition, the following terms have the following
meanings:

                  "Credit Agreement" has the meaning specified in Recital A.

                  "Obligations" means all indebtedness and other liabilities and
obligations  of the  Borrower  under the  Credit  Agreement  and the other  Loan
Documents including,  without limitation,  (i) the obligation to repay the Loans
in full when due,  (ii) the  obligation  to pay interest on the Loans and the LC
Disbursements (including, without limitation,  interest accrued on the Loans and
the LC Disbursements  after the  commencement of a bankruptcy  proceeding or any
similar  proceeding  with respect to the Borrower) at the rates and on the dates
specified in the Credit Agreement,  (iii) the obligation to pay the Fees in full
when due at the rates and on the dates specified in the Credit  Agreement,  (iv)
the obligation to reimburse the Bank in full for any LC Disbursement as provided
in the Credit Agreement, (v) the obligation to Cash Collateralize the Letters of
Credit as provided in the Credit Agreement, (vi) the obligation to indemnify the
Bank as provided in the Credit  Agreement or any other Loan Document,  (vii) the
obligation to pay costs and expenses as provided in the Credit  Agreement or any
other  Loan  Document,  and  (viii)  the  obligation  to pay all  other  amounts
specified in the Credit Agreement or any other Loan Document.

                  (b) Unless otherwise expressly specified herein, defined terms
denoting the singular number shall,  when in the plural form,  denote the plural
number of the matter or item to which such defined terms refer, and vice-versa.

                  (c) Words of the neuter  gender mean and  include  correlative
words of the masculine and feminine gender.

                  (d) Section and Schedule  headings used in this  Guarantee are
for  convenience  only and shall not affect the  construction  or meaning of any
provisions of this Guarantee.

                  (e) Unless otherwise specified, the words "hereof",  "herein",
"hereunder"  and other similar words refer to this  Guarantee as a whole and not
just to the Section,  subsection or clause in which they are used; and the words
"this Guarantee" refer to this Guarantee, as amended, restated,  supplemented or
otherwise modified from time to time.

                  (f)  Unless  otherwise  specified,   references  to  Sections,
Recitals and Schedules are references to Sections of, and Recitals and Schedules
to, this Guarantee.

                  2.       Guarantee.

                  (a) Each  Guarantor  hereby  irrevocably  and  unconditionally
guarantees,  jointly  with the  other  Guarantors  and  severally,  as a primary
obligor and not merely as a surety, the due and punctual payment and performance
in full of the Obligations.  Each Guarantor  further agrees that the Obligations
may be extended or renewed,  in whole or in part,  without  notice to or further
assent  from it,  and that it will  remain  bound upon its  guarantee  hereunder
notwithstanding any extension or renewal of any Obligation.

                  (b)  Anything  contained  in this  Guarantee  to the  contrary
notwithstanding, the obligations of each Guarantor hereunder shall be limited to
a maximum  aggregate  amount equal to the greatest  amount that would not render
such  Guarantor's  obligations  hereunder  subject to  avoidance as a fraudulent
transfer or  conveyance  under Section 548 of Title 11 of the United States Code
or any  provisions  of  applicable  state  law  (collectively,  the  "Fraudulent
Transfer  Laws"),  in each case after giving effect to all other  liabilities of
such Guarantor,  contingent or otherwise, that are relevant under the Fraudulent
Transfer  Laws  (specifically  excluding,   however,  any  liabilities  of  such
Guarantor  in  respect  of (a)  intercompany  indebtedness  to the  Borrower  or
Affiliates  of the  Borrower  to the  extent  that  such  indebtedness  would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b)  liabilities of such Guarantor that are  subordinated in right of payment to
the  Obligations)  and after giving effect as assets to the value (as determined
under the applicable  provisions of the Fraudulent  Transfer Laws) of any rights
to subrogation, contribution, reimbursement, indemnity or similar rights of such
Guarantor  pursuant to (i) applicable law, (ii) Section 2(c), (iii) the Security
Agreement and the  Intellectual  Property  Security  Agreement or (iv) any other
agreement  providing for an equitable  allocation  among such  Guarantor and the
Borrower,  the other  Guarantors  or any other  Affiliates  of the  Borrower  of
obligations arising under this Guarantee,  any other guarantees extended by such
parties or any other Loan Documents.

                  (c) Each Guarantor (a "Contributing  Guarantor")  agrees that,
in the event a payment shall be made by any other Guarantor under this Guarantee
or assets of any other Guarantor shall be sold pursuant to any Security Document
to  satisfy  a claim  of the  Bank  and  such  other  Guarantor  (the  "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
the  Contribution  Agreement or  otherwise,  the  Contributing  Guarantor  shall
indemnify  the  Claiming  Guarantor  in an  amount  equal to the  amount of such
payment  or the  greater  of the book  value or the  fair  market  value of such
assets,  as the case may be, in each case  multiplied by a fraction of which the
numerator  shall be the net  worth  of the  Contributing  Guarantor  on the date
hereof  and  the  denominator  shall  be the  aggregate  net  worth  of all  the
Guarantors on the date hereof (or, in the case of any Guarantor becoming a party
hereto  pursuant to Section 22, the date of the Supplement  hereto  executed and
delivered by such Guarantor). Any Contributing Guarantor making any payment to a
Claiming  Guarantor  pursuant to this  Section 2(c) shall be  subrogated  to the
rights of such Claiming Guarantor to the extent of such payment,  subject to the
subordination set forth in Section 3.

                  3.       Agreement to Pay; Subordination.

                  In  furtherance  of the foregoing and not in limitation of any
other  right  that the Bank has at law or in equity  against  any  Guarantor  by
virtue hereof,  upon the failure of the Borrower to pay any Obligation  when and
as the same shall become due, whether at maturity, by acceleration, after notice
of prepayment or otherwise, each Guarantor hereby promises to and will forthwith
pay to the Bank in cash the amount of such unpaid  Obligations.  Upon payment by
any  Guarantor  of any sums to the Bank as  provided  above,  all rights of such
Guarantor  against the Borrower  arising as a result  thereof by way of right of
subrogation,  contribution,  reimbursement,  indemnity or otherwise shall in all
respects be subordinate and junior in right of payment to the prior indefeasible
payment in full in cash of all the Obligations. In addition, with respect to any
indebtedness  of the Borrower now or hereafter held by any Guarantor,  after the
occurrence  and  during  the  continuance  of an Event of  Default,  no  payment
(whether of principal or interest,  and whether  before,  after or in connection
with any dissolution,  winding up, liquidation or reorganization or receivership
proceeding  or upon an  assignment  for the  benefit of  creditors  or any other
marshalling of the assets and liabilities of the Borrower) may be made, directly
or  indirectly,  on such  indebtedness  until  all  the  Obligations  have  been
indefeasibly  paid in full in cash. If any amount shall  erroneously  be paid to
any Guarantor on account of (i) such subrogation,  contribution,  reimbursement,
indemnity or similar right or (ii) any such  indebtedness of the Borrower,  such
amount shall be held in trust for the benefit of the Bank and shall forthwith be
paid to the Bank to be credited against the payment of the Obligations,  whether
matured or unmatured, in accordance with the terms of the Credit Agreement.

                  4.       Guarantee of Payment.

                  Each Guarantor hereby agrees that its guarantee  constitutes a
guarantee  of payment  when due and not of  collection,  and waives any right to
require  that  any  resort  be had by the Bank to any of the  security  held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the Bank in favor of the Borrower or any other person.

                  5.       Guarantee Not Affected.

                  To the  fullest  extent  permitted  by  applicable  law,  each
Guarantor  waives  presentment  to,  demand of payment  from and  protest to the
Borrower of any of the Obligations,  and also waives notice of acceptance of its
guarantee and notice of protest for nonpayment.  To the fullest extent permitted
by applicable  law, the  obligations  of each Guarantor  hereunder  shall not be
affected  by (a) the  failure  of the Bank to  assert  any claim or demand or to
enforce  or  exercise  any right or remedy  against  the  Borrower  or any other
Guarantor under the provisions of the Credit Agreement,  any other Loan Document
or otherwise,  (b) any rescission,  waiver, amendment or modification of, or any
release  from any of the terms or  provisions  of any Loan  Document,  any other
guarantee or any other agreement,  including with respect to any other Guarantor
under this Guarantee or (c) the failure to perfect any security  interest in, or
the release of, any of the security held by or on behalf of the Bank.

                  6.       Security.

                  Each of the  Guarantors  authorizes  the  Bank to (a) take and
hold  security  for the  payment  of this  Guarantee  and  the  Obligations  and
exchange,  enforce, waive and release any such security, (b) apply such security
and direct the order or manner of sale thereof as they in their sole  discretion
may  determine and (c) release or substitute  any one or more  endorsees,  other
guarantors or other obligors.

                  7.       No Discharge or Diminishment of Guarantee.

                  The  obligations  of each  Guarantor  hereunder  shall  not be
subject to any reduction,  limitation,  impairment or termination for any reason
(other  than  the  indefeasible  payment  in full  in cash of the  Obligations),
including any claim of waiver, release,  surrender,  alteration or compromise of
any of the Obligations, and to the fullest extent permitted by law, shall not be
subject to any  defense  or  setoff,  counterclaim,  recoupment  or  termination
whatsoever by reason of the invalidity,  illegality or  unenforceability  of the
Obligations or otherwise.  Without limiting the generality of the foregoing, the
obligations of each Guarantor  hereunder  shall not be discharged or impaired or
otherwise  affected  by the failure of the Bank to assert any claim or demand or
to enforce any remedy under the Credit Agreement, any other Loan Document or any
other agreement,  by any waiver or modification of any provision of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations,  or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Guarantor or that would otherwise  operate as
a discharge of any  Guarantor as a matter of law or equity (other than the full,
final and indefeasible payment in full in cash of all the Obligations).

                  8.       Defenses of Borrower Waived.

                  To the fullest extent permitted by applicable law, each of the
Guarantors  waives any  defense  based on or arising  out of any  defense of the
Borrower or the unenforceability of the Obligations or any part thereof from any
cause,  or the cessation from any cause of the liability of the Borrower,  other
than the final and indefeasible payment in full in cash of the Obligations.  The
Bank may, at its  election,  foreclose on any security held by it by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation  with the  Borrower or any other  guarantor  or exercise any other
right or remedy  available  to it against the  Borrower or any other  guarantor,
without  affecting  or  impairing  in any way  the  liability  of any  Guarantor
hereunder  except to the extent the  Obligations  have been  fully,  finally and
indefeasibly  paid in cash.  Pursuant to applicable  law, each of the Guarantors
waives any defense  arising out of any such  election  even though such election
operates,  pursuant to applicable  law, to impair or to extinguish  any right of
reimbursement or subrogation or other right or remedy of such Guarantor  against
the  Borrower or any other  Guarantor or  guarantor,  as the case may be, or any
security.

                  9.       Information.

                  Each of the Guarantors  assumes all  responsibility  for being
and keeping itself  informed of the Borrower's  financial  condition and assets,
and of all  other  circumstances  bearing  upon  the risk of  nonpayment  of the
Obligations  and the nature,  scope and extent of the risks that such  Guarantor
assumes and incurs hereunder, and agrees that the Bank will not have any duty to
advise any of the Guarantors of information known to it or any of them regarding
such circumstances or risks.

                  10.      Representations and Warranties.

                  Each Guarantor hereby makes the following  representations and
warranties, which shall be deemed to be repeated and confirmed upon the creation
of any Obligation:

                  (a)  All   representations   and  warranties  relating  to  it
contained in the Credit Agreement are true and correct.

                  (b) Its execution,  delivery and performance of this Guarantee
and its  guarantee  of the  Obligations  pursuant  hereto (i) have all been duly
authorized by all requisite  action of such  Guarantor,  (ii) do not require the
approval of its  stockholders  and (iii) will not (1) violate any  provision  of
law, or its certificate of incorporation or by-laws, (2) violate, be in conflict
with,  result in a breach of or constitute  (with due notice or lapse of time or
both) a default under any indenture,  agreement or other  instrument to which it
is a party or by which it or any of its  properties  is bound,  (3)  violate any
governmental or agency rule or regulation or any order of any court, tribunal or
governmental  agency or (4) result in the  creation or  imposition  of any lien,
charge or  encumbrance  of any nature  whatsoever  upon any of its properties or
assets.  No  authorizations,  approvals  and  consents  of, and no  filings  and
registrations  with,  any  governmental  or  regulatory  authority or agency are
necessary for the  execution,  delivery or performance by such Guarantor of this
Guarantee or for the validity or enforceability hereof. No consent of any Person
is  required  in  connection  with  the  Guarantor's  execution,   delivery  and
performance of this Guarantee.

                  (c) This Guarantee  constitutes  the legal,  valid and binding
obligation of such  Guarantor,  enforceable  against it in  accordance  with its
terms.

                  11.      Exercise of Rights; Remedies Cumulative.

                  The Bank  shall  have the  right  in its  sole  discretion  to
determine  which rights,  security,  liens,  guaranties,  security  interests or
remedies it shall retain, pursue, release, subordinate, modify or take any other
action with respect to,  without in any way  modifying  or affecting  any of the
other  of  them or any of the  Bank's  rights  hereunder.  The  remedies  herein
provided are cumulative and not exclusive of any remedy provided by law.

                  12.      Notices.

                  All notices, requests, demands,  instructions,  directions and
other  communications  provided for  hereunder  shall be in writing  (which term
shall include telecopied communications) and shall be sent by overnight courier,
telecopied or hand  delivered to the  applicable  party at the address set forth
opposite such party's  signature  line below or, as to any party,  to such other
address as such party  shall  specify by a notice in writing to the other  party
hereto.  Each  notice,  request,   demand,   instruction,   direction  or  other
communication provided for hereunder shall be deemed delivered (i) if by hand or
overnight courier,  when delivered to the applicable party at such address,  and
(ii) if by telecopy, when sent to the applicable party at such address.

                  13.      Costs and Expenses.

                  The Guarantors  jointly and severally agree to pay, on demand,
whether  or not any Event of Default  shall  have  occurred  and  regardless  of
whether or not any proceeding to enforce this Guarantee or the Obligations shall
have  been  commenced,  all  of  the  costs  and  expenses  (including,  without
limitation,  all fees and  disbursements  of legal  counsel) (x) incurred by the
Bank in connection  with (i) the  preparation  of this Guarantee and any related
instruments and documents or (ii) the preparation of any requested amendments to
this Guarantee or waivers or consents in connection  herewith or (y) incurred by
the Bank in connection with the  enforcement of this  Guarantee.  Any such costs
and expenses so incurred by the Bank shall be a part of the Obligations.

                  14.      Successors and Assigns.

                  This  Guarantee  shall be binding upon each  Guarantor and its
successors  and  assigns  and  shall  inure to the  benefit  of the Bank and its
successors,  transferees  and  assigns.  No  Guarantor  may assign its rights or
obligations  hereunder or any portion  thereof without the prior written consent
of the Bank. The Bank may assign its rights and powers under this Guarantee with
all or any of the Obligations  owing to it and, in the event of such assignment,
the assignee of such rights and powers, to the extent of such assignment,  shall
have the same rights and remedies hereunder as if originally named herein as the
Bank.

                  15.      Severability.

                  If any part of this Guarantee is contrary to, prohibited by or
deemed  invalid under the applicable  laws or  regulations of any  jurisdiction,
such  provision  shall,  as to such  jurisdiction,  be  inapplicable  and deemed
omitted to the extent so  contrary,  prohibited  or invalid,  but the  remainder
hereof shall not be invalidated thereby and shall be given full force and effect
so far as possible,  and any such  prohibition or invalidity in any jurisdiction
shall  not  invalidate  or  render  unenforceable  such  provision  in any other
jurisdiction.

                  16.      Indemnification.

                  The Guarantors jointly and severally agree to pay, and to save
the Bank harmless  from, any and all  liabilities,  costs,  expenses,  losses or
damages (including,  without  limitation,  legal fees and expenses) which may be
imposed on,  incurred by or asserted  against the Bank in connection with any of
the transactions contemplated by this Guarantee or the enforcement of any of the
terms hereof;  provided,  however,  that no Guarantor shall be liable for any of
the foregoing to the extent that they arise from the gross negligence or willful
misconduct of the Bank.

                  17.      Survival; Termination.

                  (a) All covenants, agreements,  representations and warranties
made herein by any  Guarantor  shall  survive the execution and delivery of this
Guarantee and shall continue in full force and effect so long as the Bank has an
obligation  to make  Loans or issue  Letters  of  Credit  under the terms of the
Credit  Agreement,  any  Letters  of  Credit  remain  outstanding  or any of the
Obligations remain unpaid.

                  (b) This Guarantee shall terminate when the Bank's obligations
to make  Loans and issue  Letters  of Credit  under the  Credit  Agreement  have
terminated, all of the Letters of Credit have expired or been terminated and all
of the  Obligations  have  been  paid in  full;  provided,  however,  that  this
Guarantee  shall be reinstated if any payment in respect of the  Obligations  is
rescinded,  invalidated,  declared to be fraudulent or preferential or otherwise
required to be restored or returned by any  Creditor  for any reason,  including
without limitation by reason of the insolvency,  bankruptcy or reorganization of
the Borrower, any Guarantor or any other Person.

                  18.      GOVERNING LAW.

                  THIS  GUARANTEE  SHALL BE GOVERNED  BY, AND SHALL BE CONSTRUED
AND INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK,  WITHOUT
REFERENCE TO ITS PRINCIPLES OF CONFLICT OF LAWS.

                  19.      SUBMISSION TO JURISDICTION.

                  (A)  EACH   GUARANTOR   HEREBY   EXPRESSLY   SUBMITS   TO  THE
NON-EXCLUSIVE  JURISDICTION  OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW  YORK,  STATE  OF NEW  YORK,  IN  CONNECTION  WITH  ANY  ACTION,  SUIT OR
PROCEEDING  RELATING TO THIS GUARANTEE,  ANY INSTRUMENT OR DOCUMENT  REFERRED TO
HEREIN OR RELATED HERETO, AND IN CONNECTION THEREWITH AGREES THAT ANY PROCESS OR
NOTICE OF MOTION OR OTHER  APPLICATION  TO ANY OF SAID COURTS OR A JUDGE THEREOF
MAY BE SERVED UPON ANY GUARANTOR WITHIN OR WITHOUT SUCH COURT'S  JURISDICTION BY
REGISTERED  OR CERTIFIED  MAIL,  AT THE ADDRESS OF SUCH  GUARANTOR  SPECIFIED IN
SECTION 12 (OR AT SUCH OTHER ADDRESS AS SUCH GUARANTOR  SHALL SPECIFY BY A PRIOR
NOTICE IN WRITING TO THE AGENT),  PROVIDED A REASONABLE  TIME FOR  APPEARANCE IS
ALLOWED.

                  (B) EACH  GUARANTOR  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING  ARISING OUT OF OR RELATING TO THIS  GUARANTEE OR ANY  INSTRUMENT  OR
DOCUMENT  REFERRED TO HEREIN OR RELATED  HERETO  BROUGHT IN ANY FEDERAL OR STATE
COURT  SITTING  IN THE CITY OF NEW YORK,  STATE OF NEW YORK AND  HEREBY  FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                  (C)  NOTWITHSTANDING  THE  FOREGOING,  THE  BANK  MAY  SUE ANY
GUARANTOR IN ANY  JURISDICTION  WHERE SUCH GUARANTOR OR ANY OF ITS ASSETS MAY BE
FOUND  AND MAY SERVE  LEGAL  PROCESS  UPON ANY  GUARANTOR  IN ANY  OTHER  MANNER
PERMITTED BY LAW.

                  20.      WAIVER OF JURY TRIAL.

                  EACH  PARTY  HERETO  HEREBY  WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE  ARISING UNDER OR RELATING TO THIS  GUARANTEE,  ANY
INSTRUMENT OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

                  21.      Execution in Counterparts.

                  This  Guarantee may be executed in any number of  counterparts
and by  different  parties  on  separate  counterparts,  all of which when taken
together shall constitute but one and the same agreement.

                  22.      Additional Guarantors.

                  Pursuant  to  Section  6.22  of  the  Credit  Agreement,  each
Domestic Subsidiary of the Borrower that was not in existence on the date of the
Credit  Agreement is required to enter into this  Guarantee as a Guarantor  upon
becoming a Subsidiary.  Upon execution and delivery after the date hereof by the
Bank and  such a  Subsidiary  of a  Supplement  in the  form of  Annex  1,  such
Subsidiary shall become a Guarantor  hereunder with the same force and effect as
if  originally  named as a Guarantor  herein.  The execution and delivery of any
instrument adding an additional Guarantor as a party to this Guarantee shall not
require the consent of any other Guarantor hereunder. The rights and obligations
of  each   Guarantor   hereunder   shall   remain  in  full   force  and  effect
notwithstanding the addition of any new Guarantor as a party to this Guarantee.

                  23.      Right of Setoff.

                  The Bank 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 the Bank to or for the credit
or the  account of any  Guarantor  against  any or all the  obligations  of such
Guarantor  now or hereafter  existing  under this  Guarantee  and the other Loan
Documents held by the Bank,  irrespective  of whether or not the Bank shall have
made any demand  under this  Guarantee  or any other Loan  Document and although
such obligations may be unmatured.  The rights of the Bank under this Section 23
are in addition to other rights and remedies  (including other rights of setoff)
which the Bank may have.


      [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS] 
<PAGE>


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Guarantee to be duly executed and delivered by their  respective duly authorized
officers as of the date first above written.

                                                       Guarantors:

Address:                                               V BAND NE, INC.

565 Taxter Road
Elmsford, New York 10523                         By:   /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                            ----------------
Telephone: (914) 789-5000                      Name:   Thomas E. Feil  
Telecopier: (914) 789-5068                    Title:   President

Address:                                               V BAND SERVICES, INC.

565 Taxter Road
Elmsford, New York 10523                        By:    /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                            ----------------
Telephone: (914) 789-5000                     Name:    Thomas E. Feil 
Telecopier: (914) 789-5068                   Title:    President



Address:                                               LICOM INCORPORATED

565 Taxter Road
Elmsford, New York 10523                        By:    /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                            ----------------
Telephone: (914) 789-5000                     Name:    Thomas E. Feil
Telecopier: (914) 789-5068                   Title:    President


                                                       Bank:

Address:                                               NATIONAL BANK OF CANADA, 
125 West 55th Street                                   NEW YORK BRANCH
New York, New York 10019
Attention: Mr. Joseph A. Klapkowski
Telephone:  (212) 632-8551                      By:    /s/Gaetan R. Frosina
                                                       --------------------
Telecopier: (212) 632-8545                    Name:    Gaetan R. Frosina
                                             Title:    Vice President


                                                By:    /s/Joseph A. Klapkowski
                                                       -----------------------
                                              Name:    Joseph A. Klapkowski
                                             Title:    Assistant Vice President

<PAGE>
                                                                      Annex 1 to
                                                          [Subsidiary Guarantee]
                                                            [Security Agreement]
                                      [Intellectual Property Security Agreement]
                                                        [Contribution Agreement]

                  SUPPLEMENT NO.     dated as of              , to

                  (a) the Subsidiary  Guarantee dated as of May 28, 1997 (as the
                  same  may be  amended,  restated,  supplemented  or  otherwise
                  modified from time to time, the "Subsidiary  Guarantee") among
                  V BAND NE,  Inc.,  a New York  corporation,  V BAND  SERVICES,
                  INC.,  a New  York  corporation,  and  LICOM  INCORPORATED,  a
                  Delaware corporation (each a "Subsidiary" and collectively the
                  "Subsidiaries")  and NATIONAL BANK OF CANADA,  NEW YORK BRANCH
                  (the "Bank"), and

                  (b) the  Security  Agreement  dated as of May 28, 1997 (as the
                  same may be amended,  supplemented or otherwise  modified from
                  time to time,  the  "General  Security  Agreement")  by V BAND
                  CORPORATION,  a New York  corporation (the "Borrower") and the
                  Subsidiaries in favor of the Bank, and

                  (c) the Security Agreement-Patents,  Trademarks and Copyrights
                  dated  as of May  28,  1997  (as  the  same  may  be  amended,
                  supplemented  or  otherwise  modified  from time to time,  the
                  "Intellectual  Property  Security  Agreement") by the Borrower
                  and the Subsidiaries in favor of the Bank, and

                  (d) the  Contribution  Agreement  dated as of May 28, 1997 (as
                  the same may be amended,  supplemented  or otherwise  modified
                  from time to time,  the  "Contribution  Agreement")  among the
                  Borrower,  the  Subsidiaries  and  the  Bank  (the  Subsidiary
                  Guarantee,  the General Security  Agreement,  the Intellectual
                  Property  Security  Agreement and the  Contribution  Agreement
                  herein collectively called the "Relevant  Agreements" and each
                  a "Relevant Agreement").

                                       RECITALS:

                  A.  The  Borrower  and the  Bank  are  entering  into a Credit
Agreement dated as of May 28, 1997 (said Credit Agreement, as it may be amended,
restated,  supplemented  or otherwise  modified  from time to time,  the "Credit
Agreement")  providing for the making of loans to and the issuance of letters of
credit for the account of the Borrower in the amounts,  and subject to the terms
and conditions, specified in the Credit Agreement.

                  B. The  Borrower  and the  Subsidiaries  have entered into the
Relevant  Agreements  in order to induce  the Bank to make  loans to,  and issue
letters of credit for account of, the Borrower.  Pursuant to Section 6.22 of the
Credit Agreement,  each Domestic Subsidiary of the Borrower that is subsequently
acquired or  organized is required to enter into the  Subsidiary  Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement  as a Debtor,  and the  Contribution  Agreement  as a  Guarantor  upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security  Agreement,  Section 10 of the Intellectual  Property  Security
Agreement,  and Section 16 of the Contribution Agreement provide that additional
Subsidiaries  of  the  Borrower  may  become  Guarantors  under  the  Subsidiary
Guarantee,  Debtors under the General  Security  Agreement and the  Intellectual
Property Security Agreement,  and Guarantors under the Contribution Agreement by
execution  and delivery of an  instrument  in the form of this  Supplement.  The
undersigned  Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee,  a Debtor under the General Security
Agreement and the  Intellectual  Property  Security  Agreement,  and a Guarantor
under the Contribution  Agreement in order to induce the Bank to make additional
Loans and issue  additional  Letters  of Credit and as  consideration  for Loans
previously made and Letters of Credit previously issued.

                  Now  therefor,  the New  Subsidiary  agrees as follows for the
benefit of the Bank:

                  1.       Definitions.

                  Capitalized terms used herein and not otherwise defined herein
shall have the meanings  assigned to such terms in the Relevant  Agreements  and
the Credit Agreement.

                  2.       Agreement to be Bound by Relevant Agreements.

                  In  accordance  with Section 22 of the  Subsidiary  Guarantee,
Section 27 of the General  Security  Agreement,  Section 10 of the  Intellectual
Property Security Agreement,  and Section 16 of the Contribution Agreement,  the
New Subsidiary by its signature  below becomes a Guarantor  under the Subsidiary
Guarantee,  a Debtor under the General  Security  Agreement and the Intellectual
Property Security  Agreement,  and a Guarantor under the Contribution  Agreement
with the same force and effect as if  originally  named  therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and  provisions  of  Subsidiary  Guarantee,  the General  Security
Agreement,  the Intellectual  Property  Security  Agreement and the Contribution
Agreement applicable to it as a Guarantor,  Debtor or Guarantor, as the case may
be, thereunder.  Each reference to a "Guarantor" in the Subsidiary Guarantee,  a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement,  or a "Guarantor" in the  Contribution  Agreement  shall be deemed to
include the New  Subsidiary.  Each  Relevant  Agreement  is hereby  incorporated
herein by reference.

                  3.       Representations and Warranties.

                  The New  Subsidiary  represents  and warrants to the Bank that
this  Supplement  has been duly  authorized,  executed  and  delivered by it and
constitutes its legal, valid and binding  obligation,  enforceable against it in
accordance with its terms.

                  4.       Miscellaneous.

                  (a) This  Supplement may be executed in  counterparts  (and by
different  parties  hereto  on  different  counterparts),  each of  which  shall
constitute an original,  but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.

                  (b) Except as expressly  supplemented  hereby,  each  Relevant
Agreement shall remain in full force and effect.

                  (c) THIS  SUPPLEMENT  SHALL BE GOVERNED  BY, AND  CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OF CONFLICT OF LAWS.

                  (d) In case  any one or more of the  provisions  contained  in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such  provision  is held to be  invalid,  illegal or  unenforceable,  but the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein  and in the  Relevant  Agreements  shall  not in any way be  affected  or
impaired.

                  (e) All  communications  and  notices  hereunder  shall  be in
writing and given as provided in the Relevant Agreements. All communications and
notices  hereunder to the New Subsidiary shall be given to it at the address set
forth next to its signature.

                  (f) The New  Subsidiary  agrees to reimburse  the Bank for its
reasonable out-of-pocket expenses in connection with this Supplement,  including
the reasonable fees, other charges and disbursements of counsel for the Bank.

                  IN WITNESS WHEREOF,  the New Subsidiary has duly executed this
Supplement to the Subsidiary  Guarantee,  the General  Security  Agreement,  the
Intellectual Property Security Agreement,  and the Contribution  Agreement as of
the day and year first above written.

Address:                                             [Name of New Subsidiary]

----------------------
______________________              By: __________________________
______________________                  Name:
Attention: _____________                Title:
Telecopier: ____________
<PAGE>

                           GENERAL SECURITY AGREEMENT 


                  SECURITY  AGREEMENT  dated  as  of  May  28,  1997  by V  BAND
CORPORATION,  a New York  corporation (the  "Borrower"),  V BAND NE, INC., a New
York corporation  ("Northeast"),  V BAND SERVICES,  INC., a New York corporation
("Service")  and LICOM  INCORPORATED,  a  Delaware  corporation  ("Licom")  (the
Borrower, Northeast, Service and Licom herein collectively called the "Debtors",
and each a "Debtor") in favor of NATIONAL  BANK OF CANADA,  NEW YORK BRANCH (the
"Secured Party").

                                    RECITALS:

                  A. The  Borrower  and the Secured  Party are  entering  into a
Credit Agreement dated as of the date hereof (as it may be amended,  modified or
supplemented from time to time, the "Credit Agreement") providing for extensions
of  credit  to the  Borrower  in the  amounts,  and  subject  to the  terms  and
conditions, specified in the Credit Agreement.

                  B. The execution  and delivery of this Security  Agreement and
the grant by the Debtors to the Secured Party of the security interests in their
respective  Collateral  specified herein constitute  conditions precedent to the
obligation of the Secured Party to extend credit to the Borrower pursuant to the
terms of the Credit Agreement.

                  ACCORDINGLY, in consideration of the premises, and in order to
induce the Secured  Party to execute and  deliver  the Credit  Agreement  and to
extend credit to the Debtor  pursuant  thereto,  and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Debtors hereby agree with the Secured Party as follows:

                  1. Defined Terms.  (a)  Capitalized  terms that are defined in
the Credit  Agreement and are not otherwise  defined  herein have the respective
meanings given to them in the Credit  Agreement and, in addition,  the following
terms have the following meanings:

                  "Debtors" has the meaning specified in the Preamble.

                  "Chattel  Paper"  means any "chattel  paper",  as such term is
defined in Section  9-105(b) of the UCC, now owned or hereafter  acquired by the
Debtors.

                  "Collateral" has the meaning specified in Section 2.

                  "Contract  Rights"  means any right of any  Debtor to  payment
under  a  Contract  not yet  earned  by  performance  and  not  evidenced  by an
Instrument or Chattel Paper, now in existence or hereafter  arising  (including,
without  limitation,  (i) all rights of any Debtor to receive  moneys due and to
become due to it thereunder or in  connection  therewith,  (b) all rights of any
Debtor to damages  arising out of, or for,  breach or default in respect thereof
and (c) all  rights of any  Debtor  to  perform  and to  exercise  all  remedies
thereunder).

                  "Contracts" means all contracts to which any Debtor is, or may
at any time hereafter become, a party and all agreements and undertakings of any
third parties in favor or for the benefit of any Debtor.

                  "Copyright  Licenses"  means any  agreement,  written or oral,
naming  any  Debtor  as  licensor  or  licensee,  granting  any right to use any
Copyright, now in existence or hereafter arising.

                  "Copyrights" means all of the following to the extent that any
Debtor now has or hereafter acquires any right,  title or interest therein:  (i)
all copyrights in all works,  whether published or unpublished,  now existing or
hereafter created or acquired, all registrations and recordings thereof, and all
applications   in   connection   therewith,   including,   without   limitation,
registrations,  recordings  and  applications  in the  United  States  Copyright
Office, and (ii) all renewals thereof.

                  "Credit Agreement" has the meaning specified in Recital A.

                  "Debtor" and "Debtors" have the respective  meanings specified
in the preamble hereto.

                  "Documents" means any "documents",  as such term is defined in
Section 9-105(1) of the Uniform Commercial Code, now owned or hereafter acquired
by any Debtor.

                  "Equipment"  means all machinery,  equipment and furniture now
owned or  hereafter  acquired  by any  Debtor or in which any  Debtor now has or
hereafter may acquire any right,  title or interest,  and any and all additions,
substitutions  and replacements  thereof,  wherever  located,  together with all
attachments,  components,  parts, equipment and accessories installed therein or
affixed  thereto,  including,  but not limited to, all  equipment  as defined in
Section 9-109(2) of the Uniform Commercial Code.

                  "Fixtures"  means any  "fixture",  as such term is  defined in
Section 9-313(1) of the Uniform Commercial Code, now owned or hereafter acquired
by any Debtor.

                  "General Intangibles" means any "general intangibles", as such
term is defined in Section 9-106 of the Uniform  Commercial  Code,  now owned or
hereafter acquired by any Debtor.

                  "Goods" means any "goods",  as such term is defined in Section
9-105(1) of the Uniform  Commercial Code, now owned or hereafter acquired by any
Debtor .

                  "Instrument"  means any "instrument",  as such term is defined
in Section  9-105(l)(i) of the Uniform  Commercial  Code, now owned or hereafter
acquired by any Debtor.

                  "Intellectual Property" means,  collectively,  Patents, Patent
Licenses, Trademarks, Trademark Licenses, Copyrights and Copyright Licenses.

                  "Inventory" means all inventory,  wherever located,  now owned
or hereafter  acquired by any Debtor or in which any Debtor now has or hereafter
may acquire any right, title or interest,  including,  without  limitation,  all
goods and other personal property now or hereafter owned by any Debtor which are
held for sale or lease or are furnished or are to be furnished  under a contract
of service or which constitute raw materials,  work in process or materials used
or  consumed  or to be used or  consumed  in any  Debtor's  business,  or in the
processing,  packaging  or  shipping  of  the  same,  and  all  finished  goods,
including,  but not limited to, all inventory as defined in Section  9-109(4) of
the Uniform Commercial Code.

                  "Leases" means all leasehold interests held by any Debtor.

                  "Licenses"  and  "Licensing  Agreements"  means the  Copyright
Licenses and the Trademark Licenses.

                  "Patent  License"  means  any  agreement,   written  or  oral,
providing for the grant by or to any Debtor of any right to use any Patent,  now
in existence or hereafter arising.

                  "Patents"  means (i) all patents and patent  applications  and
the  inventions  and  improvements   described  and  claimed  therein,  and  all
patentable  inventions,  now owned or  hereafter  acquired  or  obtained  by any
Debtor,  (ii) all  registrations and recordings  thereof,  whether in the United
States  Patent and  Trademark  Office or in any similar  office or agency of the
United  States,  any  State  thereof  or any  other  country  or  any  political
subdivision thereof, or otherwise, (iii) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any of the foregoing, (iv) all
income,  royalties,  damages or payments now and  hereafter  due and/or  payable
under or with respect to any of the foregoing,  including,  without  limitation,
damages or payments for past or future  infringements  of any of the  foregoing,
(v) the right to sue for past,  present and future  infringements  of any of the
foregoing  throughout the world, and (vi) all rights and obligations pursuant to
any Patent  License  with respect  thereto,  whether any Debtor is a licensor or
licensee  under  any such  Patent  License,  and,  subject  to the terms of such
licenses,  the right to  prepare  for sale,  sell and  advertise  for sale,  all
inventory now or hereafter  owned by any Debtor and now or hereafter  covered by
such licenses.

                  "Proceeds"  means (i) all "proceeds",  as such term is defined
in Section  9-306(1) of the Uniform  Commercial Code, and (ii) to the extent not
included  in  such  definition,  (1)  any and  all  proceeds  of any  insurance,
indemnity,  warranty,  guaranty  or letter of credit  payable to any Debtor from
time to time with  respect to any of the  Collateral,  (2) all  payments (in any
form  whatsoever)  paid or payable to any Debtor from time to time in connection
with  any  taking  of all or any  part  of the  Collateral  by any  governmental
authority (or any Person acting under color of governmental authority),  (3) all
judgments in favor of any Debtor in respect of the Collateral,  (4) any claim of
any Debtor  against third parties for past,  present or future  infringement  or
dilution of any Trademark or Trademark  License,  Copyright or Copyright License
and (5) all other  amounts  from time to time paid or  payable  or  received  or
receivable under or in connection with any of the Collateral.

                  "Receivables"  means  all  accounts  receivable,  book  debts,
notes,  drafts,   instruments,   documents,   acceptances  and  other  forms  of
obligations now owned or hereafter received or acquired by or belonging or owing
to any Debtor (including,  without limitation,  under any trade names, styles or
divisions thereof),  whether arising out of goods sold by any Debtor or services
rendered by it or from any other  transaction,  whether or not the same involves
the sale of goods or performance of services by any Debtor  (including,  without
limitation,  any such  obligation  which would be  characterized  as an account,
general  intangible or chattel paper under the Uniform  Commercial Code) and all
of each  Debtor's  rights  in,  to and under all  purchase  orders  now owned or
hereafter  received  or acquired  by it for goods or  services,  and all of each
Debtor's  rights to any goods  represented  by any of the  foregoing  (including
returned or repossessed  goods and unpaid seller's rights) and all moneys due or
to become due to any Debtor under all contracts for the sale of goods and/or the
performance of services by it (whether or not yet earned by  performance)  or in
connection with any other  transaction,  now in existence or hereafter  arising,
including without  limitation the right to receive the proceeds of said purchase
orders and  contracts,  and all  collateral  security and guarantees of any kind
given by any person or entity with respect to any of the foregoing.

                  "Trademark  License"  means any  agreement,  written  or oral,
providing  for the grant by or to any Debtor of any right to use any  Trademark,
now in existence or hereafter arising.

                  "Trademarks" means (i) all trademarks,  trade names, corporate
names, company names,  business names,  fictitious business names, trade styles,
service marks, logos and other source or business identifiers,  and the goodwill
associated  therewith,  now  existing  or  hereafter  adopted or acquired by any
Debtor,  all  registrations  and recordings  thereof,  and all  applications  in
connection  therewith,  whether in the United States Patent and Trademark Office
or in any similar  office or agency of the United  States,  any State thereof or
any other country or any political  subdivision thereof, or otherwise,  and (ii)
all renewals thereof.

                  "Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of New York.

                  "Vehicles" means all cars, trucks, trailers,  construction and
earth moving  equipment and other vehicles covered by a certificate of title law
of any state, in which any Debtor has or hereafter  acquires any right, title or
interest, and all tires and other appurtenances to any of the foregoing.

                       (c) Unless otherwise expressly specified herein,  defined
terms denoting the singular  number shall,  when in the plural form,  denote the
plural  number of the  matter or item to which such  defined  terms  refer,  and
vice-versa.

                       (d)  Words  of  the  neuter   gender   mean  and  include
correlative words of the masculine and feminine gender.

                       (e) The  Table  of  Contents  and  Section  and  Schedule
headings used in this  Agreement are for  convenience  only and shall not affect
the construction or meaning of any provisions of this Agreement.

                       (f)  Unless  otherwise  specified,  the  words  "hereof",
"herein", "hereunder" and other similar words refer to this Agreement as a whole
and not just to the Section,  subsection  or clause in which they are used;  and
the  words  "this  Agreement"  refer to this  Security  Agreement,  as  amended,
modified or supplemented from time to time.

                       (g) Unless otherwise  specified,  references to Sections,
Recitals and Schedules are references to Sections of, and Recitals and Schedules
to, this Agreement.

                  2.  Security  Interest.  As security  for the due and punctual
payment and  performance  of the  Obligations,  each Debtor  hereby  pledges and
assigns to the Secured  Party,  and hereby  grants to the Secured  Party a first
priority lien upon and a continuing  first  priority  security  interest in, all
rights, title and interest of such Debtor in, to and under all personal property
and  fixtures of such Debtor,  whether now owned or  hereafter  acquired by such
Debtor and wherever  located and whether now  existing or  hereafter  arising or
created  (all such  property  and  assets  are  herein  collectively  called the
"Collateral"), including, without limitation, the following:

                       (a)    all Receivables of such Debtor;

                       (b)    all Inventory of such Debtor;

                       (c)    all Equipment of such Debtor,  including,  without
                              limitation, all Vehicles of such Debtor (excluding
                              any Equipment  subject to purchase  money liens if
                              the  terms  of the  Indebtedness  secured  by such
                              liens expressly prohibit such Debtor from granting
                              any lien thereon or security  interest therein and
                              any  Equipment  subject to a capital  lease  which
                              expressly  prohibits such Debtor from granting any
                              lien thereon or security interest therein);

                       (d)    all Contracts  and Contract  Rights of such Debtor
                              (excluding any Contract that  expressly  prohibits
                              such  Debtor  from  granting  any lien  thereon or
                              security interest therein);

                       (e)    all Instruments and Chattel Paper of such Debtor;

                       (f)    all General Intangibles of such Debtor, including,
                              without limitation,  all Intellectual  Property of
                              such Debtor;

                       (g)    all Leases of such Debtor;

                       (h)    all Fixtures of such Debtor;

                       (i)    all computers;

                       (j)    all  books   and   records   (including,   without
                              limitation,  computer programs,  tapes and related
                              electronic data processing  software)  relating to
                              such Debtor's Receivables,  Inventory,  Equipment,
                              Contracts, Intellectual Property and other assets;
                              and

                       (k)    to the extent not otherwise included, all cash and
                              non-cash  Proceeds  and  products  of  any  of the
                              foregoing.

                  3.  Obligations  Absolute.  (a) Each Debtor hereby agrees that
this Agreement  shall be binding upon such Debtor,  and the grant to the Secured
Party of a security  interest in such  Debtor's  Collateral  hereunder  shall be
irrevocable  and  unconditional,  irrespective  of  the  validity,  legality  or
enforceability of the Credit Agreement, the Note, any other Loan Document or any
of the Obligations, the absence of any action to enforce the same, the waiver or
consent by the Secured Party with respect to any provision thereof, the recovery
of any judgment  against any other Person,  or any action to enforce the same or
any  other  similar   circumstances.   Each  Debtor  hereby  waives   diligence,
presentment,  demand of  payment,  filing of claims with a court in the event of
merger or bankruptcy of the Borrower or any other Debtor,  any notice to require
a proceeding  first against any other Person,  protest or notice with respect to
the Note or any other  promissory  notes or  evidences of  indebtedness  secured
hereby or the indebtedness  evidenced  thereby and all demands  whatsoever,  and
covenants  that this  Agreement  will remain in full force and effect so long as
the  Borrower  may borrow or request the issuance of letters of credit under the
Credit Agreement or any Obligations remain unpaid.

                       (b) Each Debtor agrees that, without notice to or further
assent by such Debtor,  the liability of any other Person for or upon any of the
Obligations  may, from time to time, in whole or in part, be renewed,  extended,
modified,  accelerated,  compromised  or released by the Secured  Party,  as the
Secured  Party  may  deem  advisable,  and that any  other  collateral  or liens
securing  any of the  Obligations  may,  from time to time,  in whole or in part
(subject,  in the case of such Debtor's  Collateral,  to the  provisions of this
Agreement),  be exchanged,  sold or  surrendered  by the Secured  Party,  as the
Secured Party may deem advisable, all without impairing, abridging, affecting or
diminishing  this Agreement or the rights of the Secured Party hereunder or with
respect to the Collateral.

                  4.  Representations  and Warranties.  Each Debtor hereby makes
the  following  representations  and  warranties,  which  shall be  deemed to be
repeated and confirmed  upon the creation or  acquisition by such Debtor of each
item of Collateral and upon the creation of any Obligation:

                       (a) Such Debtor is a corporation duly organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation,  has full power and authority to own its  properties and to carry
on its business as now being conducted,  is duly qualified to do business and is
in good standing in each  jurisdiction  in which the character of its properties
and the transaction of its business make such qualification  necessary and where
the failure to be so qualified  would have a Material  Adverse  Effect,  and has
full power and authority to execute, deliver and perform this Agreement.

                       (b)  Its  execution,  delivery  and  performance  of this
Security  Agreement and the granting of the security  interest in the Collateral
hereunder  (i) have all been duly  authorized  by all  requisite  action of such
Debtor,  (ii) do not require the approval of its stockholders and (iii) will not
(1) violate  any  provision  of law,  or its  certificate  of  incorporation  or
by-laws,  (2) violate,  be in conflict with, result in a breach of or constitute
(with  due  notice  or lapse of time or both) a  default  under  any  indenture,
agreement  or other  instrument  to which it is a party or by which it or any of
its  properties  is bound,  (3)  violate  any  governmental  or  agency  rule or
regulation  or any order of any court,  tribunal or  governmental  agency or (4)
result in the creation or imposition of any lien,  charge or  encumbrance of any
nature  whatsoever upon any of the Collateral,  except for the security interest
created by this Agreement. No authorizations,  approvals and consents of, and no
filings and  registrations  with, any  governmental  or regulatory  authority or
agency are necessary for the  execution,  delivery or performance by such Debtor
of this  Security  Agreement or for the validity or  enforceability  hereof.  No
consent of any party to any  Contract  or any  account  debtor in respect of any
Receivable  is  required  in  connection   with  the  execution,   delivery  and
performance  of this  Agreement or the  creation of a security  interest in such
Contract or Receivable pursuant hereto.

                       (c) This Security Agreement  constitutes the legal, valid
and binding obligation of such Debtor, enforceable against it in accordance with
its terms,  except as  enforceability  may be limited by applicable  bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting enforceability
of creditors rights generally and except as specific  performance may be subject
to equitable  principles of general  applicability.  Except for Permitted Liens,
this  Security  Agreement  creates in favor of the  Secured  Party a valid first
priority  lien  and  first  priority   security   interest  in  the  Collateral,
enforceable  against such Debtor and all third  parties and superior in right to
all other  security  interests,  liens,  encumbrances,  or charges,  existing or
future.

                       (d) Except for the security interest of the Secured Party
therein,  such Debtor is, and as to Collateral  acquired from time to time after
the date hereof such  Debtor  will be, the owner of all the  Collateral,  having
good and  marketable  title  thereto,  free  from any lien,  security  interest,
encumbrance  or other  right,  title  or  interest  of any  Person,  other  than
Permitted Liens.

                       (e) Appropriate  financing statements with respect to the
security  interest  created  hereunder  have  been or will be duly  filed in all
appropriate  offices;  no  filing  of any other  financing  statements  or other
instruments and no recording,  filing or indexing of this Agreement is necessary
or appropriate in order to preserve and protect the liens and security interests
created or intended to be created by this Security Agreement as legal, valid and
enforceable  perfected liens on and security  interests in the Collateral (other
than  filings  or  appropriate  assignments  with the United  States  Patent and
Trademark  Office  or  the  United  States  Copyright  Office  with  respect  to
Intellectual Property of such Debtor, if any).

                       (f) Except as set forth in the Disclosure Schedule, there
is no financing  statement (or similar  statement or instrument of  registration
under  the law of any  jurisdiction)  now on file or  registered  in any  public
office (other than in respect of Permitted  Liens) covering any interest of such
Debtor  in the  Collateral,  or  intended  so to be,  and so long as the  Credit
Agreement is in effect or any of the Obligations  remain unpaid such Debtor will
not execute,  and will not permit the filing or the continued  existence on file
of any financing  statement (or similar  statement or instrument of registration
under the law of any  jurisdiction)  relating  to the  Collateral  in any public
office,  except  financing  statements  filed or to be filed with respect to the
security  interest  granted  hereunder  to the Secured  Party or with respect to
Permitted Liens.

                       (g) The chief  executive  office and  principal  place of
business  of such  Debtor is located at the address set forth for it in Schedule
I. Schedule I lists the correct Federal Employer  Identification  Number of such
Debtor and such Debtor has never used any other Federal Employer  Identification
Number other than that shown in Schedule I. The  originals of all  documents (as
well as all  duplicates  thereof)  evidencing  or relating  to the  Receivables,
Contracts,  Leases and  Intellectual  Property  and the only  original  books of
account and records of such  Debtor  relating  thereto are kept at the office or
offices  specified in Schedule I. All  Inventory  and  Equipment are held on the
date hereof at the locations  specified in Schedule II. While owned by a Debtor,
the  Inventory  and  Equipment has either been in transit to, or located at, the
locations specified in Schedule II.

                       (h) The name of such  Debtor  set  forth in the  preamble
hereto is correct.  Such Debtor is not currently  doing, and has not at any time
during the five years immediately preceding the date hereof done, business under
any  trade  name or  other  assumed  name.  During  the five  years  immediately
preceding  the date  hereof  such  Debtor  has not had any name  other  than its
present name. Such Debtor has not merged or  consolidated  with any other entity
during the five years immediately preceding the date hereof.

                       (i) None of the Collateral  constitutes farm products (as
such term is defined in Section 9-109(3) of the Uniform  Commercial Code) or the
Proceeds thereof.

                       (j) None of the account debtors on any  Receivables,  and
none of the parties to any Contracts, is a governmental entity.

                       (k)  To  such  Debtor's   knowledge,   the   information,
schedules,  exhibits and reports furnished by any Debtor to the Secured Party in
connection  with the  negotiation  and  preparation  of this  Agreement  did not
contain any omissions or  misstatements  of fact which would make the statements
contained therein misleading or incomplete in any material respect.

                  5.  Covenants.  (a) At all reasonable  times the Secured Party
shall  have full  access  to, and the right to audit,  check,  inspect  and make
abstracts and copies of, each Debtor's books,  records,  audits,  correspondence
and all other papers and computer tapes and programs relating to the Collateral.
The Secured Party shall have the right to confirm and verify the Receivables and
other  Collateral  and to do whatever  the Secured  Party may deem  necessary to
protect  the  Secured  Party's  interests  and each Debtor  shall  furnish  such
assistance  and  information  as the  Secured  Party may  require in  connection
therewith.  The  Secured  Party or its  agent  may  enter  from time to time the
premises of each Debtor at any  reasonable  time during  business  hours for the
purpose of inspecting the Collateral and any and all records pertaining thereto.

                       (b) Each  Debtor  will  keep the  Collateral,  at its own
expense, in good repair and condition,  and will not misuse,  abuse or waste the
Collateral  or  allow  the  Collateral  to  deteriorate  (or  permit  any of the
foregoing),  except  for  normal  wear and tear,  and will  make the  Collateral
available for  inspection by the Secured  Party at all  reasonable  times during
business hours.

                       (c) Each Debtor  shall  comply in all  material  respects
with all  acts,  rules,  regulations,  orders,  decrees  and  directions  of any
governmental  authority  applicable to the  Collateral or any part thereof or to
the operation of its business;  provided,  however,  that any Debtor may contest
any act,  regulation,  order, decree or direction in any reasonable manner which
shall not in the reasonable  opinion of the Secured Party  adversely  affect the
Secured  Party's  rights or the first priority of the Secured  Party's  security
interest in the Collateral.

                       (d) Each  Debtor  will pay  promptly  when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or  profits  therefrom,  as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the  validity  thereof is being  contested  by any Debtor in
good faith by appropriate proceedings,  (ii) such proceedings do not involve, in
the reasonable opinion of the Secured Party, any danger of the sale,  forfeiture
or loss of any of the  Collateral or any interest  therein and (iii) such charge
is adequately  reserved against in accordance with generally accepted accounting
principles.

                       (e) No Debtor will create, permit or suffer to exist, and
each Debtor will defend the Collateral against, and take such other action as is
necessary  to  remove,  any  lien,  security  interest  or  encumbrance  on  the
Collateral,  other than Permitted  Liens, and each Debtor will defend the right,
title and interest of the Secured Party in and to any of such Debtor's rights to
the Collateral against the claims and demands of all Persons whomsoever claiming
an  interest  therein  adverse  to the  Secured  Party,  other  than  holders of
Permitted Liens.

                       (f) Each Debtor will advise the Secured  Party  promptly,
in reasonable detail, of (i) any security  interest,  lien or encumbrance placed
on or asserted  against any of the  Collateral,  (ii) any material change in the
composition  of the Collateral and (iii) the occurrence of any other event which
could have a material  effect on the aggregate value of the Collateral or on the
security interest created by any Debtor hereunder.

                       (g) No Debtor will (x) change the  location  specified in
Section 4(g) of its chief executive  office,  principal place of business or the
office  where  records   concerning  its  Receivables,   Contracts,   Leases  or
Intellectual  Property are kept, (y) keep Inventory or Equipment at any location
other  than the  location  specified  in  Schedule  II, or (z)  change its name,
identity or corporate structure, until, in each case, (i) it shall have given to
the Secured Party not less than 30 days' prior  written  notice of its intention
so to do,  clearly  describing  such new location,  name,  identity or corporate
structure and providing such other  information  in connection  therewith as the
Secured Party may  reasonably  request,  and (ii) it shall have taken such other
actions  satisfactory to the Secured Party (including,  without limitation,  the
delivery of additional  financing  statements duly signed by any Debtor), as are
necessary  to  maintain  the  security  interest  of the  Secured  Party  in the
Collateral at all times senior and fully perfected and in full force and effect.

                       (h) Each Debtor will  maintain its  Vehicles,  if any, in
good operating condition,  ordinary wear and tear excepted, and will provide all
maintenance, service and repairs necessary for such purpose. No Vehicle shall be
removed  from the state which has issued the  certificate  of title or ownership
therefor  for a period in excess of four  months.  Within 15 days of any request
therefor  by the Secured  Party,  each  Debtor  will file all  applications  for
certificates of title or ownership indicating the Secured Party's first priority
security  interest on the  Vehicle  covered by such  certificate,  and any other
necessary  documentation,  in each office in each jurisdiction which the Secured
Party shall deem advisable to perfect its security interests in the Vehicles.

                       (i) Each Debtor will furnish to the Secured  Party within
ten (10) days  after any  request  therefor  by the  Secured  Party,  statements
(prepared  by any Debtor or, if the Secured  Party so requires,  by  independent
public  accountants  satisfactory  to the Secured  Party in form,  substance and
detail  satisfactory  to the Secured  Party) of all  Receivables  of such Debtor
(showing  reconciliations,  aging  and  test  verifications  thereof  and  trial
balances  therefor),  itemized  by  account  debtor,  and of the  location  (and
aggregate  book value at each such  location)  of all  Inventory of such Debtor,
each such  statement  to be  certified  by its  chief  financial  officer,  and,
promptly  from time to time,  such other  information  as the Secured  Party may
reasonably  request  regarding  the  Collateral  and its  operations,  business,
affairs and financial condition.

                       (j) No Debtor  will sell,  transfer,  lease or  otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so, except
as permitted by Section 6.13 of the Credit Agreement.

                       (k) Each Debtor will, at its own expense,  make, execute,
endorse, acknowledge, file and/or deliver to the Secured Party from time to time
such lists,  descriptions,  schedules,  invoices,  warehouse receipts,  bills of
confirmatory   assignments,    conveyances,   financing   statements,   transfer
endorsements,  powers of attorney, certificates,  reports and other assurance or
instruments  and take such further steps  relating to the  Collateral  and other
property or rights covered by the security interest hereby granted by it, as the
Secured  Party in its  reasonable  judgment  deems  appropriate  or advisable to
perfect, preserve or protect its security interest in the Collateral.

                  6.  Special Provisions Concerning  Receivables.  (a) As of the
time when any Receivable  arises,  each Debtor shall be deemed to have warranted
as to such Receivable that such Receivable and all papers and documents relating
thereto are genuine and in all  respects  what they purport to be, and that each
such  Receivable  (i) will  represent  the  genuine,  legal,  valid and  binding
obligation  of the account  debtor  thereon  for the unpaid  amount owed by such
account  debtor for the sale and  delivery by such  Debtor of the goods,  or the
performance  by such Debtor of the services,  listed  therein,  (ii) will be the
only original  writings  evidencing and embodying such obligation of the account
debtor named  therein,  (iii) will  evidence  true and  undisputed  obligations,
enforceable  in accordance  with their  respective  terms and not subject to any
defenses,  set-offs or  counterclaims  known to such  Debtor,  or stamp or other
taxes,  except as shall be disclosed to the Secured Party,  and (iv) will be, to
the best  knowledge  of such  Debtor,  in  compliance  and will conform with all
applicable  federal,  state and local laws and  applicable  laws of any relevant
foreign  jurisdiction.  Each Debtor shall use its best efforts to take all steps
necessary to preserve the liability of each account debtor, guarantor, endorser,
obligor or secondary party on or with respect to the Receivables.

                       (b)  Each  Debtor  will  keep  and  maintain,  at its own
expense,  satisfactory and complete records of the Receivables,  including,  but
not limited to, records of all payments  received,  all credits granted thereon,
all merchandise returned and all other dealings therewith,  and each Debtor will
make the same available to the Secured Party, at such Debtor's  expense,  at any
and all reasonable times upon demand of the Secured Party. At the request of the
Secured Party, each Debtor shall legend, in form and manner  satisfactory to the
Secured Party, its Receivables and its books,  records and documents  evidencing
or pertaining to its Receivables with an appropriate  reference to the fact that
such  Receivables  have been  assigned to the Secured Party and that the Secured
Party has a security interest therein.

                       (c) No Debtor  will  rescind or cancel  any  indebtedness
evidenced  by any of the  Receivables  or modify  any term  thereof  or make any
adjustment with respect  thereto,  or extend or renew the same, or compromise or
settle any dispute,  claim, suit or legal proceeding  relating thereto,  or sell
any of such Receivables or interest  therein,  without the prior written consent
of the Secured Party, except as permitted by Section 6(e).

                       (d) Each Debtor will duly fulfill all  obligations on its
part to be fulfilled  under or in connection  with the  Receivables  and will do
nothing to impair the rights of the Secured Party in the Receivables.

                       (e) Each Debtor  will  endeavor to collect or cause to be
collected from the account debtor on each of its Receivables (including, without
limitation,  Receivables which are delinquent,  such Receivables to be collected
in accordance with generally accepted lawful collection procedures), as and when
due, any and all amounts owing under or on account of such  Receivables,  except
that prior to the occurrence of an Event of Default such Debtor may allow in the
ordinary   course  of  business  as  adjustments  to  amounts  owing  under  its
Receivables  (i) an  extension  or renewal of the time or times of  payment,  or
settlement  for less than the total  unpaid  balance,  which such  Debtor  finds
necessary  in  accordance  with sound  business  and credit  judgment and (ii) a
refund or credit due as a result of returned or damaged inventory or improper or
faulty  performance of services.  The costs and expenses  (including  attorney's
fees) of collection, whether incurred by such Debtor or the Secured Party, shall
be borne by the Debtors jointly and severally.

                       (f) Each Debtor shall,  promptly  upon learning  thereof,
report to the  Secured  Party all delays in  performance,  notices  of  default,
claims made or disputes  asserted by any account  debtor or other obligor on any
Receivable and any other matters materially affecting the value,  enforceability
or collectibility of any Receivable.

                       (g) The Secured Party is authorized  and empowered in its
sole  discretion  to accept  the  return of goods,  if any,  represented  by any
Receivable or contract rights,  without notice to or consent by any Debtor,  all
without  discharging or in any way affecting any Debtor's liability hereunder or
on the Obligations.

                       (h) After the occurrence and during the continuance of an
Event of Default,  the Secured  Party  shall have the right,  without  notice to
(unless specifically provided for herein), or assent by, any Debtor, and without
affecting  the  Obligations,  in the  name of any  Debtor  or in the name of the
Secured Party or otherwise:  (i) to notify any or all account  debtors under any
or all of the Receivables to make payment thereof  directly to the Secured Party
for the account of any Debtor or the Secured  Party and to require any Debtor to
forthwith give similar notice to the account debtors;  (ii) to demand,  collect,
sue for,  receive,  compound and give  acquittance for any of the Receivables or
any part thereof;  (iii) to extend the time of payment of,  compromise or settle
for cash,  credit or otherwise,  and upon any terms and  conditions,  any of the
Receivables;  (iv) to endorse  the name of any Debtor on any  checks,  drafts or
other  orders or  instruments  for the  payment of moneys  payable to any Debtor
which shall be issued in respect of any  Receivable;  (v) to file any claims and
commence, maintain or discontinue any actions, suits or other proceedings deemed
by the Secured  Party to be necessary or advisable for the purpose of collecting
or enforcing  payment of any  Receivable;  (vi) to execute any instrument and do
any and all other  things  necessary  and proper to  protect  and  preserve  and
realize upon the Receivables and the other rights contemplated  hereby; (vii) to
require any Debtor to forthwith account for and transmit to the Secured Party in
the same form as  received  all  proceeds  (other  than  physical  property)  of
collection of Receivables received by such Debtor and, until so transmitted,  to
hold the same in trust for the Secured  Party and not  commingle  such  proceeds
with any other funds of such Debtor; (viii) to require any Debtor to deliver, at
the  expense  of such  Debtor or the  Borrower,  any or all  papers,  documents,
correspondence,  records and computer  programs  and tapes and other  electronic
data processing software evidencing or relating to such Debtor's  Receivables to
the Secured Party at a place designated by the Secured Party (and after delivery
thereof  such  Debtor  shall  have  no  further  claim  to or  interest  in such
Receivables);  (ix) to notify the Post Office  authorities to change the address
for  delivery  of mail  addressed  to any Debtor to such  address as the Secured
Party may designate;  and (x) to do all other acts and things necessary to carry
out this  Agreement.  The Secured  Party shall not be obligated to do any of the
acts hereinabove  authorized,  but in the event that the Secured Party elects to
do any such act, the Secured Party shall not be responsible to any Debtor except
for its gross negligence or willful misconduct.

                       (i) If any Receivable of a Debtor becomes  evidenced by a
promissory  note or similar  instrument  in the sum of more than  $25,000,  such
Debtor will promptly  notify the Secured Party thereof,  and upon request by the
Secured  Party will  promptly  deliver  such  instrument  to the  Secured  Party
appropriately endorsed to the order of the Secured Party as further security for
the payment in full of the Obligations.

                   7. Special Provisions Concerning Inventory and Equipment. (a)
Each Debtor will at all times keep all of the Inventory and Equipment insured at
its expense, to the Secured Party's  satisfaction,  against fire, theft, and all
other risks to which the Inventory and Equipment may be subject; all policies or
certificates  with  respect to such  insurance  shall be endorsed to the Secured
Party's  satisfaction for the benefit of the Secured Party,  including,  without
limitation,  by naming the  Secured  Party as loss payee,  and  evidence of such
insurance  satisfactory to the Secured Party shall be deposited with the Secured
Party.  If any Debtor shall fail to insure the  Inventory  and  Equipment to the
Secured  Party's  satisfaction,  or if any Debtor  shall fail so to endorse  and
deposit  all  policies  or  certificates  with  respect  thereto  in  accordance
herewith,  the  Secured  Party  shall  have  the  right  (but  shall be under no
obligation)  to procure such  insurance  and each Debtor agrees to reimburse the
Secured  Party for all costs and expenses of procuring  such  insurance  that it
failed to procure.  The Secured Party may, after  consultation with the relevant
Debtor,  apply any proceeds of such  insurance with respect to the Inventory and
Equipment,  when received by it,  toward the payment of any of the  Obligations,
whether or not the same  shall then be due.  Each  Debtor  shall give  immediate
written notice to the insurers and to the Secured Party of any loss or damage to
the  Collateral  or any part thereof and shall  promptly  file all  necessary or
appropriate  proofs of loss with the insurers.  Each Debtor hereby  appoints the
Secured Party the attorney-in-fact  for such Debtor in obtaining,  adjusting and
cancelling any such insurance and endorsing settlement drafts.

                       (b) The  Secured  Party  shall have the  right,  upon the
occurrence and during the continuance of an Event of Default,  without notice to
(unless specifically  provided for herein), or assent by, any Debtor but without
affecting  the  Obligations,  in the  name of any  Debtor  or in the name of the
Secured  Party or  otherwise:  (i) upon  notice to such  effect,  to require any
Debtor to deliver, at the expense of such Debtor or the Borrower,  any or all of
the  Inventory  and  Equipment  of such Debtor to the  Secured  Party at a place
designated  by the Secured Party (and after  delivery  thereof such Debtor shall
have no further claim to or interest in such Inventory and  Equipment);  (ii) to
take  possession  of any or all of the  Inventory  and  Equipment  and, for that
purpose, to enter, with the aid and assistance of any Person, any premises where
such  Inventory and  Equipment,  or any part  thereof,  is, or may be, placed or
assembled, to remove any such Inventory or Equipment, and to dispose of or store
such Inventory or Equipment in such premises at the expense of the Debtors;  and
(iii) to execute or endorse any instrument (including,  without limitation,  any
invoice, bill of lading, and storage or warehouse receipt) and do all the things
necessary  and proper to protect and preserve and realize upon the Inventory and
Equipment and the other rights contemplated  hereby. The Secured Party shall not
be obligated to do any of the acts hereinabove authorized, but in the event that
the Secured  Party  elects to do any such act,  the  Secured  Party shall not be
responsible to any Debtor except for the Secured Party's own gross negligence or
willful misconduct.

                       (c) Upon taking  possession of any Inventory or Equipment
pursuant  hereto  following the  occurrence of an Event of Default,  the Secured
Party shall have the right to hold, store and/or use,  manage,  control and sell
such Inventory or Equipment. Upon any such taking of possession of any Inventory
or  Equipment,  the Secured  Party may,  from time to time at the expense of the
Debtors,  make  all  such  repairs,  replacements,  alterations,  additions  and
improvements to and of such Inventory or Equipment as the Secured Party may deem
proper.  In any such case,  the Secured Party shall have the right to manage and
control such  Inventory  or Equipment  and to carry on the business and exercise
all rights and powers of any Debtor respecting its Inventory and Equipment,  all
as the Secured Party shall deem best; and the Secured Party shall be entitled to
collect and receive all issues,  profits, fees, revenues and other income of the
same and every part  thereof.  Such issues,  profits,  fees,  revenues and other
income shall be applied to pay the expenses incurred by the Secured Party or its
agents in (i) holding such Inventory or Equipment;  (ii) performing all repairs,
replacements,  alterations,  additions and improvements  which the Secured Party
may be  required  or may elect to make,  if any;  and (iii)  paying  all  taxes,
assessments,  insurance, warehouse fees and other charges upon such Inventory or
Equipment or any part thereof,  and all other payments,  which the Secured Party
may be  required  or  authorized  or elect to make  (including  legal  costs and
attorneys' fees). Any remaining rents, issues, profits, fees, revenues and other
income shall be applied to the payment of the  Obligations  in  accordance  with
Section 11.

                   8. Financing  Statements;  Documentary  Stamp Taxes. (a) Each
Debtor  agrees  to  sign  and  deliver  to  the  Secured  Party  such  financing
statements,  in form  acceptable to the Secured Party,  as the Secured Party may
from time to time  reasonably  request or as are necessary in the opinion of the
Secured  Party to establish  and  maintain a valid,  enforceable  and  perfected
security   interest  in  the  Collateral  and  the  other  rights  and  security
contemplated  hereby  which is  superior  and  prior to the  rights of all third
Persons.  The Debtors hereby  jointly and severally  agree to pay any applicable
filing fees and related  expenses.  Each Debtor  authorizes the Secured Party to
file any such financing statements without the signature of such Debtor.

                       (b) Each Debtor agrees to procure,  pay for, affix to any
and all  documents  and cancel  any  documentary  tax  stamps or  similar  taxes
required by, and in  accordance  with,  applicable  law, and the Debtors  hereby
jointly and  severally  agree to  indemnify  the Secured  Party for and hold the
Secured Party harmless against any liability  (including interest and penalties)
in respect of such taxes.

                   9.  Additional  Provisions  Concerning  Remedies  and Sale of
Collateral.  (a) In addition to any rights and remedies  contained herein or now
or hereafter  granted under  applicable  law and not by way of limitation of any
such rights and remedies,  upon the occurrence and during the  continuance of an
Event of Default, the Secured Party shall have all of the rights and remedies of
a secured party under the Uniform  Commercial  Code as enacted in any applicable
jurisdiction in addition to the rights and remedies provided herein. The Secured
Party may take legal  proceedings for the appointment of a receiver or receivers
(to which the  Secured  Party  shall be  entitled  as a matter of right) to take
possession of the  Collateral  pending the sale thereof  pursuant  either to the
powers of sale granted by this Agreement or to a judgment,  order or decree made
in any judicial  proceeding for the  foreclosure or involving the enforcement of
this Agreement.

                       (b) Upon the occurrence and during the continuance of any
Event of  Default  the  Secured  Party  shall  have the  right to seize and take
possession of any Collateral (or any paper, documents, correspondence,  computer
tapes and programs and other electronic data processing software relating to the
Collateral),  and may enter the premises  where such  Collateral (or such paper,
documents,  correspondence,  tapes,  programs or  software)  are located for the
purpose of effecting such seizure.  The Secured Party shall not be liable to any
Debtor for any damage  suffered by such Debtor by reason thereof and the Debtors
hereby  jointly and  severally  agree to  indemnify  the  Secured  Party for any
liability which may accrue to any Person by reason of such entry or seizure.  At
any time or from time to time after the occurrence and during the continuance of
an Event of  Default  the  Secured  Party  may hire and  maintain  on any of the
premises of any Debtor a custodian  or  independent  contractor  selected by the
Secured Party who shall have full  authority to do all lawful acts  necessary to
protect  the  Secured  Party's  interests  and to  report to the  Secured  Party
thereon.  Each Debtor hereby agrees to cooperate  with any such Person and to do
whatever the Secured Party may  reasonably  request to preserve the  Collateral.
All expenses  incurred by the Secured  Party by reason of the  employment of any
such Person shall be payable by the Debtors, jointly and severally, and shall be
secured hereby and shall be a part of the Obligations.

                       (c) Upon the occurrence and during the  continuance of an
Event of Default the Secured  Party may,  without  obligation to resort to other
security,  at any time and from time to time, sell, re-sell,  assign and deliver
all or any of the  Collateral,  in one or more  parcels at the same or different
times, and all right, title and interest,  claim and demand therein and right of
redemption  thereof,  at public or private  sale,  for cash,  upon credit or for
future  delivery,  and at such price or prices and on such terms as the  Secured
Party may determine,  with the amounts realized from any such sale to be applied
in the manner  provided in Section 11. Each Debtor hereby agrees that all of the
foregoing may be effected  without  demand,  advertisement  or notice (except as
required by law or as expressly  provided  herein),  all of which (to the extent
permitted  by law)  are  hereby  expressly  waived.  Upon any sale of any of the
Collateral, whether made under the power of sale hereby given or under judgment,
order or decree in any judicial  proceeding  for the  foreclosure  involving the
enforcement  of this  Agreement,  (i) the Secured Party may bid for the property
being  sold,  and upon  compliance  with the terms of sale may hold,  retain and
possess and dispose of such property in its own absolute  right without  further
accountability,  and may, in paying the  purchase  money  therefor,  discharge a
portion of the Obligations owing to the Secured Party in an amount equal to such
purchase price;  (ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of assignment
and  transfer  of the  property  sold;  (iii)  the  Secured  Party  may make all
necessary deeds, bills of sale and instruments of assignment and transfer of the
property thus sold; but if so requested by the Secured Party or such  purchaser,
the  appropriate  Debtors  shall ratify and confirm any such sale or transfer by
executing and  delivering  to the Secured Party or such  purchaser all property,
deeds, bills of sale, instruments of assignment and transfer and releases as may
be designated in any such request;  (iv) all right, title,  interest,  claim and
demand whatsoever, either in law or in equity or otherwise, of any Debtor of, in
and to the property so sold shall be divested and such sale shall be a perpetual
bar both at law and in equity  against each Debtor,  its successors and assigns,
and against any and all Persons  claiming or who may claim the property  sold or
any part thereof from,  through or under any Debtor,  its successors or assigns;
and (v) the receipt of the Secured Party or of the officer  thereof  making such
sale shall be a sufficient discharge to the purchaser or purchasers at such sale
for his or their purchase money, and such purchaser or purchasers,  and his, its
or their  assigns or  personal  representatives,  shall not,  after  paying such
purchase  money and  receiving  such  receipt  of the  Secured  Party or of such
officers thereof,  be obligated to see to the application of such purchase money
or be in any way  answerable  or  responsible  for any loss,  misapplication  or
non-application thereof.

                       (d) To the extent that it may lawfully do so, each Debtor
agrees  that it will not at any time  insist  upon,  or plead,  or in any manner
whatsoever  claim  or take  the  benefit  or  advantage  of,  any  appraisement,
valuation,  stay,  extension or  redemption  laws,  or any law  permitting it to
direct the order in which the  Collateral or any part thereof shall be sold, now
or at any time hereafter in force, which may delay,  prevent or otherwise affect
the  performance or enforcement of this Agreement or the  Obligations,  and each
Debtor  hereby  expressly  waives all benefit or  advantage of any such laws and
covenants  that it will not hinder,  delay or impede the  execution of any power
granted or delegated to the Secured Party in this Agreement, but will suffer and
permit the  execution  of every such power as though no such laws were in force.
In the event of any sale of Collateral  pursuant to this  Security  Agreement by
the Secured Party,  the Secured Party shall,  at least 10 days before such sale,
give such Debtor written notice (which notice may be given by telecopier) of its
intention to sell, except that, if the Secured Party shall determine in its sole
discretion  that any of the  Collateral  is  perishable  or threatens to decline
speedily  in value,  any such sale may be made  upon one  day's  written  notice
(which notice may be given by telecopier) to the Borrower.

                       (e) Each Debtor  agrees that upon the  occurrence  of any
Event of Default  and at any time  during the  continuance  thereof,  any of the
monies,  deposit  balances and other  property of such Debtor held by, or coming
into the  possession  of, the Secured Party may be applied  (including,  without
limitation,  by way of  set-off)  by the  Secured  Party to a  reduction  of the
Obligations.

                  10.  Secured  Party  Appointed  Attorney-in-Fact.  Each Debtor
hereby appoints the Secured Party as such Debtor's  attorney-in-fact,  with full
power of  substitution,  for the purpose of carrying out the  provisions of this
Agreement and taking any action and executing  any  instrument  that the Secured
Party may deem necessary or advisable to accomplish the purposes  hereof,  which
appointment is irrevocable  and coupled with an interest.  Without  limiting the
generality of the  foregoing,  the Secured Party shall have the right and power,
in its own name or as  attorney-in-fact  for such Debtor, (i) to take any of the
actions  specified  in Section  6(h) or 7(b) under the  circumstances  described
therein  and (ii)  generally,  to do, at the Secured  Party's  option and at the
expense of the Debtors,  at any time, or from time to time,  all acts and things
that the Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Secured Party's security  interest  therein;  and each Debtor
hereby ratifies all that the Secured Party, acting as  attorney-in-fact  for any
Debtor, shall lawfully do or cause to be done by virtue hereof.

                  11. Application of Moneys; Reassignment of Collateral.  Except
as otherwise  provided herein,  all moneys which the Secured Party shall receive
pursuant to this Agreement or with respect to the Collateral shall be applied in
the following  manner:  First, to the payment of all costs and expenses incurred
in connection with the administration and enforcement of, or the preservation of
any  rights  under,  this  Agreement  and the  realization  on  such  Collateral
(including,  without  limitation,  the fees  and  disbursements  of the  Secured
Party's counsel and agents); and Second, to the payment of all other Obligations
in such order and manner as the Secured Party shall determine.  The balance,  if
any, of such moneys shall be paid over to the Borrower  (for  allocation  to the
Debtors,  it being  understood  and agreed that the Secured  Party shall have no
obligation  to determine  how to allocate  such balance among the Debtors) or as
otherwise  required by law or as directed by a court of competent  jurisdiction.
Upon  the  payment  in  full of the  Obligations  and  the  termination  of this
Agreement,  all  Collateral  not sold or otherwise  disposed of pursuant  hereto
shall, at the request of the Borrower and at the sole expense of the Debtors, be
reassigned by the Secured  Party to any Debtor  specified by the Borrower (or as
otherwise directed by a court of competent  jurisdiction),  without recourse and
without any  representations,  warranties or agreements of any kind. Each Debtor
shall remain  liable to the Secured Party (in  accordance  with the terms of the
Credit Agreement,  in the case of the Borrower, and in accordance with the terms
of the  Subsidiary  Guarantee,  in  the  case  of the  other  Debtors)  for  any
deficiency remaining on the Obligations after the aforesaid  application of such
monies to the Obligations.

                  12. Exercise of Rights. The Secured Party shall have the right
in its sole discretion to determine which rights,  security,  liens, guaranties,
security interests or remedies it shall retain,  pursue,  release,  subordinate,
modify or take any other action with respect to, without in any way modifying or
affecting  any of the  other  of  them  or any  of the  Secured  Party's  rights
hereunder.

                  13. Waivers, Amendments,  Required Notices. Each Debtor hereby
waives  notice of  acceptance  of this  Agreement,  notice of  nonpayment of any
Obligations or of any Receivables or of any instrument relating thereto, demand,
presentment, protest and notice thereof with respect to any and all instruments,
notice  of  Collateral  received  or  delivered,  or any other  action  taken in
reliance  hereon and all other  demands and notices of any  description,  except
such as are expressly  provided for herein or which by applicable law may not be
waived on the date hereof.  No course of dealing  between the Secured  Party and
any Debtor or any other Person,  and no failure on the part of the Secured Party
to exercise,  and no delay in exercising,  any right, power or remedy hereunder,
shall  operate as a waiver  thereof or as a waiver of any Event of Default,  nor
shall any single or partial exercise by the Secured Party of any right, power or
remedy  hereunder  or with  respect  to the  Obligations  preclude  any other or
further exercise thereof or the exercise of any other right, power or remedy. No
amendment or  modification  of this Agreement nor any waiver of any provision of
this Agreement or consent to any departure by any Debtor  therefrom shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party,  and then any 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
any  Debtor in any case  shall,  of itself,  entitle  any Debtor to any other or
further notice or demand in similar or other circumstances.  If notice,  whether
before or after any Event of Default  has  occurred,  is  required  by law to be
given by the  Secured  Party to any  Debtor,  the  Debtors  agree  that,  unless
otherwise  specifically  provided  herein,  five (5) days'  notice  given in the
manner provided below shall be reasonable notice.

                  14.  Cumulative  Rights and Remedies.  This  Agreement and the
liens and security  interests  granted  hereunder  are in addition to and not in
substitution for any other security interest or collateral now or hereafter held
by or on behalf of the  Secured  Party to secure the  Obligations  and shall not
operate as a merger of any contract debt or suspend the fulfillment of or affect
the  rights,  remedies  or  powers  of  the  Secured  Party  in  respect  of the
Obligations  or any other  security  interests held by the Secured Party for the
fulfillment  thereof.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedy provided by law.

                  15. Notices.  All notices,  requests,  demands,  instructions,
directions and other  communications  provided for hereunder shall be in writing
(which term shall include telecopied  communications) and shall be telecopied or
delivered by hand or overnight  courier to the  applicable  party at the address
specified below for such party:

                       If to any Debtor, at:

                              c/o V Band Corporation
                              565 Taxter Road
                              Elmsford, New York 10523-2330
                              Attention: Mr. Mark R. Hahn
                              Telephone No.: (914) 789-5000
                              Telecopier No.:  (914) 789-5068

                       If to the Secured Party, at:

                              National Bank of Canada, New York Branch
                              125 W. 55th Street
                              New York, New York 10019
                              Attention: Mr. Joseph A. Klapkowski
                              Telephone No.: (212) 632-8551
                              Telecopier No.: (212) 632-8545

or, as to any party,  to such other  address  as such party  shall  specify by a
notice in writing to the other  party  hereto.  Each  notice,  request,  demand,
instruction,  direction or other  communication  provided for hereunder shall be
deemed  delivered  (i) if by hand or overnight  courier,  when  delivered to the
applicable  party at such  address,  and (ii) if by  telecopy,  when sent to the
applicable party at such telecopier number.

                  16.  Costs and  Expenses.  (a) Each  Debtor  agrees to pay, on
demand,  whether or not any Event of Default shall have occurred and  regardless
of whether or not any  proceeding to enforce this  Agreement or the  Obligations
shall have been  commenced,  all of the costs and expenses  (including,  without
limitation,  all reasonable fees and disbursements of legal counsel) incurred by
the Secured Party in connection  with (i) the  preparation of this Agreement and
any related financing  statements and other instruments and documents,  (ii) the
enforcement  of this  Agreement and the security  interests  granted  hereunder,
(iii) any filings or recordings with respect to the security  interests  granted
hereunder (including all filing and recording fees, stamp taxes, recording taxes
and intangible  property taxes), (iv) the receipt of proceeds of the Receivables
hereunder,  (v) the care and  preservation of the  Collateral,  (vi) the sale or
other disposition of, or other  realization  upon, the Collateral,  or (vii) the
preparation of any requested amendments to this Agreement or waivers or consents
in  connection  herewith.  Any such costs and  expenses  so incurred by the Bank
shall be secured hereby and be a part of the Obligations.

                       (b) If any lien or tax shall be claimed  with  respect to
the Collateral which, in the opinion of the Secured Party, may possibly create a
valid  obligation  having  priority  over the  security  interest  granted to it
herein,  the Secured Party may in its sole  discretion and without notice to any
Debtor pay such taxes  and/or the amount  secured by such lien and the amount of
such  payment  shall be charged  to the  Borrower  and added to the  Obligations
secured hereby:  provided,  however,  that the Secured Party shall not make such
payment  with  respect to any lien or tax being  contested  in good faith by any
Debtor by  appropriate  proceedings  if (i) such  proceedings  shall suspend the
enforcement  of  such  lien or  collection  of  such  tax,  (ii) no part of such
Debtor's rights in and under the Collateral shall be subject to sale, forfeiture
or diminution,  and (iii) such Debtor shall have furnished such security that is
not part of the Collateral as may be required in such  proceedings or reasonably
requested by the Secured Party.

                       (c) Upon any  failure by any Debtor to perform any of its
duties and  obligations  hereunder,  the  Secured  Party  may,  but shall not be
obligated  to,  perform any or all of such duties,  and the Debtors shall pay to
the Secured Party,  forthwith upon written demand  therefor,  an amount equal to
the cash or out-of-pocket expense incurred by the Secured Party in so doing plus
interest  thereon,  from the date such  expense is incurred  until it is paid in
full at a rate per annum  equal to the highest  rate of interest  payable by the
Borrower from time to time on the Obligations.

                  17.  Successors and Assigns.  This Agreement  shall be binding
upon each Debtor and its  successors  and assigns and shall inure to the benefit
of the Secured Party and its successors,  transferees and assigns. No Debtor may
assign its rights or obligations  hereunder or any portion  thereof  without the
prior  written  consent of the Secured  Party.  The Secured Party may assign its
rights and powers under this Agreement with all or any of the  Obligations  and,
in the event of such assignment,  the assignee of such rights and powers, to the
extent of such  assignment,  shall have the same rights and remedies  hereunder,
and shall be secured hereby to the same extent, as if originally named herein in
the place of the Secured Party.

                  18.  Severability.  If any part of this  Agreement is contrary
to,  prohibited by or deemed invalid under the applicable laws or regulations of
any jurisdiction, such provision shall, as to such jurisdiction, be inapplicable
and deemed  omitted to the extent so contrary,  prohibited  or invalid,  but the
remainder hereof shall not be invalidated  thereby and shall be given full force
and effect so far as possible,  and any such  prohibition  or  invalidity in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

                  19.  No  Assumption  of  Duties;  Limitation  on  Liabilities;
Preservation of Collateral.  (a) Nothing herein  contained shall be construed to
constitute  the Secured Party as any Debtor's  agent for any purpose  whatsoever
except for the limited  purposes of  receiving  proceeds  of the  Collateral  as
provided above.  The Secured Party does not, by anything  contained herein or in
any  assignment  or  otherwise,   assume  any  Debtor's  obligations  under  any
Receivable or other  Collateral or any contract or agreement  relating  thereto,
and the  Secured  Party  shall not be  responsible  in any way for any  Debtor's
performance of any of the terms and conditions thereof.

                       (b) Neither the Secured  Party nor any of its  directors,
officers, employees or agents shall be liable to any Person for any action taken
or omitted by the Secured Party or its officers, directors,  employees or agents
hereunder or with respect to any  transaction  contemplated  by this  Agreement,
except for the Secured  Party's or such  officers',  directors',  employees'  or
agents' gross negligence or willful misconduct.  Without limiting the generality
of the  foregoing,  the Secured Party shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and  regardless of the cause thereof unless due
to the Secured Party's gross negligence or willful misconduct. The Secured Party
shall  not,  under  any  circumstances  or in any  event  whatsoever,  have  any
liability  for any  error or  omission  or delay  of any kind  occurring  in the
settlement,  collection or payment of any of the  Receivables  or any instrument
received in payment thereof or for any damage resulting therefrom.

                       (c) The  Secured  Party's  sole duty with  respect to the
custody,  safekeeping  and  physical  preservation  of  the  Collateral  in  its
possession,  under  Section 9-207 of the Uniform  Commercial  Code or otherwise,
shall be to deal with it in the same  manner as the  Secured  Party  deals  with
similar  property for its own account.  Neither the Secured Party nor any of its
directors,  officers, employees or agents shall be liable for failure to demand,
collect or realize  upon all or any part of the  Collateral  or for any delay in
doing so or shall be under any  obligation  to sell or otherwise  dispose of any
Collateral upon the request of any Debtor or otherwise.

                  20. Indemnification.  The Debtors hereby jointly and severally
agree  to  pay,  and to  save  the  Secured  Party  harmless  from,  any and all
liabilities,  costs, expenses, losses or damages (including, without limitation,
legal  fees and  expenses)  which may be imposed  on,  incurred  by or  asserted
against the Secured Party (i) with respect to, or resulting  from,  any delay by
any  Debtor in paying  any and all  excise,  sales or other  taxes  which may be
payable or determined to be payable with respect to any of the Collateral,  (ii)
with respect to, or resulting  from,  any delay by any Debtor in complying  with
any  requirement  of  law  applicable  to  any of the  Collateral  or  (iii)  in
connection  with any of the  transactions  contemplated by this Agreement or the
enforcement  of any of the terms hereof in  accordance  with such terms.  In any
suit, proceeding or action brought by the Secured Party under or with respect to
any Receivable,  License or Contract for any sum owing thereunder, or to enforce
any provisions of any Receivable,  License or Contract, the Debtors will jointly
and  severally  save,  indemnify  and keep the Secured  Party  harmless from and
against all liabilities,  costs,  expense,  loss or damage suffered by reason of
any  defense,  setoff,  counterclaim,   recoupment  or  reduction  or  liability
whatsoever of the account debtor or obligor thereunder,  arising out of a breach
by  any  Debtor  of any  obligation  thereunder  or  arising  out  of any  other
agreement,  indebtedness  or  liability at any time owing to or in favor of such
account debtor or obligor or its successors from any Debtor. Notwithstanding the
foregoing, no Debtor shall be liable for any of the foregoing to the extent that
they arise from the gross negligence or willful misconduct of the Secured Party.

                  21.  Survival;  Termination.  (a) All  covenants,  agreements,
representations  and  warranties  made  herein by any Debtor  shall  survive the
execution and delivery of this  Agreement  and shall  continue in full force and
effect so long as the Secured  Party has any  obligation to make Loans under the
terms of the Credit Agreement or any of the Obligations remain outstanding.

                       (b) This  Agreement  shall  terminate  when  the  Secured
Party's  obligation  to make Loans under the terms of the Credit  Agreement  has
terminated and all of the Obligations have been paid in full; provided, however,
that this  Agreement  shall be  reinstated  if any  payment  in  respect  of the
Obligations is rescinded, invalidated, declared to be fraudulent or preferential
or  otherwise  required to be restored or returned by the Secured  Party for any
reason, including without limitation by reason of the insolvency,  bankruptcy or
reorganization of any Debtor or any other Person.

                  22.  GOVERNING LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.

                  23. SUBMISSION TO JURISDICTION.

                       (A)  EACH  DEBTOR   HEREBY   EXPRESSLY   SUBMITS  TO  THE
NON-EXCLUSIVE  JURISDICTION  OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW  YORK,  STATE  OF NEW  YORK,  IN  CONNECTION  WITH  ANY  ACTION,  SUIT OR
PROCEEDING  RELATING TO THIS AGREEMENT,  ANY INSTRUMENT OR DOCUMENT  REFERRED TO
HEREIN OR RELATED HERETO, OR ANY ITEM OF COLLATERAL, AND IN CONNECTION THEREWITH
AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER  APPLICATION TO ANY OF SAID
COURTS OR A JUDGE  THEREOF MAY BE SERVED UPON ANY DEBTOR  WITHIN OR WITHOUT SUCH
COURT'S  JURISDICTION  BY REGISTERED  OR CERTIFIED  MAIL, AT THE ADDRESS OF SUCH
DEBTOR  SPECIFIED IN SECTION 17 HEREOF (OR AT SUCH OTHER  ADDRESS AS SUCH DEBTOR
SHALL  SPECIFY BY A PRIOR  NOTICE IN WRITING TO THE SECURED  PARTY),  PROVIDED A
REASONABLE TIME FOR APPEARANCE IS ALLOWED.

                       (B) EACH DEBTOR HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY  INSTRUMENT  OR
DOCUMENT  REFERRED TO HEREIN OR RELATED  HERETO  BROUGHT IN ANY FEDERAL OR STATE
COURT  SITTING  IN THE CITY OF NEW YORK,  STATE OF NEW YORK AND  HEREBY  FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.


                       (C) NOTWITHSTANDING THE FOREGOING,  THE SECURED PARTY MAY
SUE ANY DEBTOR IN ANY JURISDICTION WHERE SUCH DEBTOR OR ANY OF ITS ASSETS MAY BE
FOUND AND MAY SERVE LEGAL PROCESS UPON ANY DEBTOR IN ANY OTHER MANNER  PERMITTED
BY LAW.

                  24. WAIVER OF JURY TRIAL.

                  EACH DEBTOR  HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT,  ANY INSTRUMENT
OR DOCUMENT REFERRED TO HEREIN OR RELATED HERETO, OR ANY ITEM OF COLLATERAL, AND
AGREES THAT ANY SUCH  DISPUTE  SHALL BE TRIED BEFORE A JUDGE  SITTING  WITHOUT A
JURY.

                  25. Execution in Counterparts.  This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
all of  which  when  taken  together  shall  constitute  but one  and  the  same
agreement.

                  26.   Joint  and   Several   Obligations   All   payment   and
indemnification  obligations of the Debtors hereunder shall be joint and several
and each Debtor shall be responsible to the Secured Party hereunder for the full
amount of such obligations.

                  27. Additional Debtors. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that was not in existence on
the date of the Credit  Agreement is required to enter into this  Agreement as a
Debtor upon becoming a Subsidiary.  Upon  execution and delivery  after the date
hereof by such  Subsidiary of a Supplement  in the form of Annex 1 hereto,  such
Subsidiary  shall become a Debtor hereunder with the same force and effect as if
originally  named  as a  Debtor  herein.  The  execution  and  delivery  of  any
instrument  adding an additional  Debtor as a party to this Agreement  shall not
require the consent of any other Debtor hereunder. The rights and obligations of
each Debtor hereunder shall remain in full force and effect  notwithstanding the
addition of any new Debtor as a party to this Agreement.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
                            [SIGNATURE PAGE FOLLOWS]


<PAGE>



                  IN  WITNESS  WHEREOF,   each  party  hereto  has  caused  this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.

                                            V BAND CORPORATION


                                        By: /s/Thomas E. Feil
                                            ----------------- 
                                      Name: Thomas E. Feil
                                     Title: Chairman and Chief Executive Officer

                                            V BAND NE, INC.


                                        By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
                                     Title: President

                                            V BAND SERVICES, INC.


                                        By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
                                     Title: President


                                            LICOM INCORPORATED


                                       By:  /s/Thomas E. Feil
                                            ----------------- 
                                     Name:  Thomas E. Feil
                                    Title:  President


Acknowledged and accepted:

NATIONAL BANK OF CANADA, NEW YORK BRANCH

   By: /s/Gaetan R. Frosina
       --------------------
 Name: Gaetan R. Frosina
Title: Vice President


   By: /s/Joseph A. Klapkowski
       -----------------------
 Name: Joseph A. Klapkowski
Title: Assistant Vice President
<PAGE>
                                   SCHEDULE I

                               SCHEDULE OF OFFICES



1.        Addresses of Debtors' chief executive  offices and principal places of
          business:
<TABLE>
<CAPTION>
   Name of Entry                            Mailing Address                             County         State
   -------------                            ---------------                             ------         -----
<S>                               <C>                                                  <C>              <C>
V Band Corporation                565 Taxter Road, Elmsford, NY 10523                  Westchester      NY

V Band Services, Inc.             58 West 40th Street, New York, NY 10018              New York         NY

V Band NE, Inc.                   112 Water Street, Boston, MA 02109                   Suffolk          MA

Licom Incorporated                565 Taxter Road, Elmsford, NY 10523                  Westchester      NY
</TABLE>

2.        Addresses  of all  offices  where the  original  books of account  and
          records of any Debtor relating to the Receivables,  Contracts,  Leases
          and Intellectual Property are kept:
<TABLE>
<CAPTION>
   Name of Entry                            Mailing Address                             County         State
   -------------                            ---------------                             ------         -----
<S>                               <C>                                                  <C>              <C>
V Band Corporation                565 Taxter Road, Elmsford, NY 10523                  Westchester        NY
                                  3 Westchester Plaza, Elmsford, NY 10523              Westchester        NY
                                  58 West 40th Street, New York, NY 10018              New York           NY
                                  One Exchange Plaza, 55 Broadway New York, NY
                                  10006-0008                                           New York           NY
                                  208 S. LaSalle Street, Chicago, IL 60604             Cook               IL
                                  88 Kearny Street, San Francisco, CA 94108            San Francisco      CA

V Band Services, Inc.             58 West 40th Street, New York, NY 10018              New York           NY
                                  One Exchange Plaza, 55 Broadway New York, NY
                                  10006-0008                                           New York           NY

V Band NE, Inc.                   112 Water Street, Boston, MA 02109                   Suffolk            MA

Licom Incorporated                565 Taxter Road, Elmsford, NY 10523                  Westchester        NY
</TABLE>

3.        Federal Tax Identification Numbers of the Debtors:

V Band Corporation     13-2990015

Licom Incorporated     54-1256093

V Band Services, Inc.  13-2990015

V Band NE, Inc.        13-3752313
<PAGE>
<TABLE>
<CAPTION>

                                               SCHEDULE II


                                     SCHEDULE OF INVENTORY LOCATIONS

   Name of Entry                        Mailing Address                             County         State
   -------------                        ---------------                             ------         -----
<S>                            <C>                                                <C>               <C>
V Band Corporation             565 Taxer Road, Elmsford, NY 10523                 Westchester        NY
                               3 Westchester Plaza, Elmsford, NY 10523            Westchester        NY
                               58 West 40th Street, New York, NY 10018
                               One Exchange Plaza, 55 Broadway, New York, NY      New York           NY
                               10006-0008
                               208 S. LaSalle Street, Chicago, IL 60604           New York           NY
                               88 Kearny Street, San Francisco, CA 94108          Cook               IL

                                                                                  San Francisco      CA
V Band Services, Inc.          58 West 40th Street, New York, NY 10018
                               One Exchange Place                                 New York           NY
                                                                                  New York           NY
V Band NE, Inc.                112 Water Street, Boston, MA 02109                 Suffolk            MA
Licom Incorporated             565 Taxter Road, Elmsford, NY 10523                Westchester        NY
Ogden Atlantic Design          150 Corporate Drive, Binghamton, NY 13904
                                                                                  Broome             NY
Kimchuk Incorporated           Commerce Industrial Park, Corporate Drive,
                               Danbury, CT 06810-4130                             Fairfield          CT
IEC Electronics Corporation    105 Norton Street, Newark, NY 14513-0271
                                                                                  Wayne              NY
AI Aecutek, Inc.               350 11th Street, S.W., Arab, Alabama 35016         Marshall           AL
</TABLE>
<PAGE>
                                                                      Annex 1 to
                                                          [Subsidiary Guarantee]
                                                            [Security Agreement]
                                      [Intellectual Property Security Agreement]
                                                        [Contribution Agreement]

                  SUPPLEMENT NO.     dated as of              , to

                  (g) the Subsidiary  Guarantee dated as of May 28, 1997 (as the
                  same  may be  amended,  restated,  supplemented  or  otherwise
                  modified from time to time, the "Subsidiary  Guarantee") among
                  V BAND NE,  Inc.,  a New York  corporation,  V BAND  SERVICES,
                  INC.,  a New  York  corporation,  and  LICOM  INCORPORATED,  a
                  Delaware corporation (each a "Subsidiary" and collectively the
                  "Subsidiaries")  and NATIONAL BANK OF CANADA,  NEW YORK BRANCH
                  (the "Bank"), and

                  (h) the  Security  Agreement  dated as of May 28, 1997 (as the
                  same may be amended,  supplemented or otherwise  modified from
                  time to time,  the  "General  Security  Agreement")  by V BAND
                  CORPORATION,  a New York  corporation (the "Borrower") and the
                  Subsidiaries in favor of the Bank, and

                  (i) the Security Agreement-Patents,  Trademarks and Copyrights
                  dated  as of May  28,  1997  (as  the  same  may  be  amended,
                  supplemented  or  otherwise  modified  from time to time,  the
                  "Intellectual  Property  Security  Agreement") by the Borrower
                  and the Subsidiaries in favor of the Bank, and

                  (j) the  Contribution  Agreement  dated as of May 28, 1997 (as
                  the same may be amended,  supplemented  or otherwise  modified
                  from time to time,  the  "Contribution  Agreement")  among the
                  Borrower,  the  Subsidiaries  and  the  Bank  (the  Subsidiary
                  Guarantee,  the General Security  Agreement,  the Intellectual
                  Property  Security  Agreement and the  Contribution  Agreement
                  herein collectively called the "Relevant  Agreements" and each
                  a "Relevant Agreement").

                                           RECITALS:

                  A.  The  Borrower  and the  Bank  are  entering  into a Credit
Agreement dated as of May 28, 1997 (said Credit Agreement, as it may be amended,
restated,  supplemented  or otherwise  modified  from time to time,  the "Credit
Agreement")  providing for the making of loans to and the issuance of letters of
credit for the account of the Borrower in the amounts,  and subject to the terms
and conditions, specified in the Credit Agreement.

                  B. The  Borrower  and the  Subsidiaries  have entered into the
Relevant  Agreements  in order to induce  the Bank to make  loans to,  and issue
letters of credit for account of, the Borrower.  Pursuant to Section 6.22 of the
Credit Agreement,  each Domestic Subsidiary of the Borrower that is subsequently
acquired or  organized is required to enter into the  Subsidiary  Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement  as a Debtor,  and the  Contribution  Agreement  as a  Guarantor  upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security  Agreement,  Section 10 of the Intellectual  Property  Security
Agreement,  and Section 16 of the Contribution Agreement provide that additional
Subsidiaries  of  the  Borrower  may  become  Guarantors  under  the  Subsidiary
Guarantee,  Debtors under the General  Security  Agreement and the  Intellectual
Property Security Agreement,  and Guarantors under the Contribution Agreement by
execution  and delivery of an  instrument  in the form of this  Supplement.  The
undersigned  Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee,  a Debtor under the General Security
Agreement and the  Intellectual  Property  Security  Agreement,  and a Guarantor
under the Contribution  Agreement in order to induce the Bank to make additional
Loans and issue  additional  Letters  of Credit and as  consideration  for Loans
previously made and Letters of Credit previously issued.

                  Now  therefor,  the New  Subsidiary  agrees as follows for the
benefit of the Bank:

                  1.   Definitions.

                  Capitalized terms used herein and not otherwise defined herein
shall have the meanings  assigned to such terms in the Relevant  Agreements  and
the Credit Agreement.

                  2.   Agreement to be Bound by Relevant Agreements.

                  In  accordance  with Section 22 of the  Subsidiary  Guarantee,
Section 27 of the General  Security  Agreement,  Section 10 of the  Intellectual
Property Security Agreement,  and Section 16 of the Contribution Agreement,  the
New Subsidiary by its signature  below becomes a Guarantor  under the Subsidiary
Guarantee,  a Debtor under the General  Security  Agreement and the Intellectual
Property Security  Agreement,  and a Guarantor under the Contribution  Agreement
with the same force and effect as if  originally  named  therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and  provisions  of  Subsidiary  Guarantee,  the General  Security
Agreement,  the Intellectual  Property  Security  Agreement and the Contribution
Agreement applicable to it as a Guarantor,  Debtor or Guarantor, as the case may
be, thereunder.  Each reference to a "Guarantor" in the Subsidiary Guarantee,  a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement,  or a "Guarantor" in the  Contribution  Agreement  shall be deemed to
include the New  Subsidiary.  Each  Relevant  Agreement  is hereby  incorporated
herein by reference.

                  3.   Representations and Warranties.

                  The New  Subsidiary  represents  and warrants to the Bank that
this  Supplement  has been duly  authorized,  executed  and  delivered by it and
constitutes its legal, valid and binding  obligation,  enforceable against it in
accordance with its terms.

                  4.   Miscellaneous.

                  (a) This  Supplement may be executed in  counterparts  (and by
different  parties  hereto  on  different  counterparts),  each of  which  shall
constitute an original,  but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Bank shall have
received a counterpart of this Supplement signed by the New Subsidiary.

                  (b) Except as expressly  supplemented  hereby,  each  Relevant
Agreement shall remain in full force and effect.

                  (c) THIS  SUPPLEMENT  SHALL BE GOVERNED  BY, AND  CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OF CONFLICT OF LAWS.

                  (d) In case  any one or more of the  provisions  contained  in
this Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such  provision  is held to be  invalid,  illegal or  unenforceable,  but the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein  and in the  Relevant  Agreements  shall  not in any way be  affected  or
impaired.

                  (e) All  communications  and  notices  hereunder  shall  be in
writing and given as provided in the Relevant Agreements. All communications and
notices  hereunder to the New Subsidiary shall be given to it at the address set
forth next to its signature.

                  (f) The New  Subsidiary  agrees to reimburse  the Bank for its
reasonable out-of-pocket expenses in connection with this Supplement,  including
the reasonable fees, other charges and disbursements of counsel for the Bank.

                  IN WITNESS WHEREOF,  the New Subsidiary has duly executed this
Supplement to the Subsidiary  Guarantee,  the General  Security  Agreement,  the
Intellectual Property Security Agreement,  and the Contribution  Agreement as of
the day and year first above written.

      Address:                                 [Name of New Subsidiary]

 
______________________                   By: __________________________
______________________                 Name:
Attention: _____________              Title:
Telecopier: ____________

<PAGE>
             SECURITY AGREEMENT - PATENTS, TRADEMARKS AND COPYRIGHTS


                  Security Agreement - Patents, Trademarks and Copyrights, dated
as of May 28,  1997,  among V Band  Corporation,  a New  York  corporation  (the
"Borrower"),  V Band NE,  Inc.,  a New York  corporation  ("Northeast"),  V Band
Services,  Inc., a New York corporation  ("Service") and Licom  Incorporated,  a
Delaware  corporation  ("Licom")  (the  Borrower,  Northeast,  Service and Licom
herein  collectively  called the "Debtors",  and each a "Debtor"),  and National
Bank of Canada, New York Branch (the "Secured Party").

                                    RECITALS

         A. The  Borrower  and the  Secured  Party  are  entering  into a Credit
Agreement  dated  as of  the  date  hereof  (as it  may  be  amended,  restated,
supplemented or otherwise  modified from time to time, the "Credit  Agreement"),
providing for  extensions of credit to the Borrower in the amounts,  and subject
to the terms and conditions, specified in the Credit Agreement.

         B. The  execution  and  delivery  of this  Security  Agreement-Patents,
Trademarks and Copyrights and the grant by each Debtor to the Secured Party of a
security  interest in the  Collateral  specified  herein  constitute  conditions
precedent  to the  obligation  of the  Secured  Party to  extend  credit  to the
Borrower pursuant to the terms of the Credit Agreement.

         ACCORDINGLY,  in consideration of the premises,  and in order to induce
the Secured Party to execute and deliver the Credit  Agreement and to extend and
maintain  credit to the  Borrower  thereunder,  and for other good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
as collateral  security for the full and prompt  payment and  performance of all
Obligations,  as hereinafter defined, each Debtor hereby mortgages,  pledges and
assigns to the Secured Party,  and hereby grants to the Secured Party a security
interest in, all of such Debtor's  right,  title and interest in and to (i) each
of the Trademarks  (as  hereinafter  defined),  and the goodwill of the business
symbolized  by  each  of  the  Trademarks;  (ii)  each  of  the  Copyrights  (as
hereinafter  defined) and all  registrations and recordings  thereof;  (iii) all
customer lists and other records of such Debtor relating to the  distribution of
products  bearing or  including  any  Trademark or  Copyright;  (iv) each of the
Patents (as  hereinafter  defined);  and (iv) any and all  receivables and other
proceeds of the foregoing,  including,  without  limitation,  any claims by such
Debtor against third parties for  infringement  of any  Trademark,  Copyright or
Patent (collectively, the "Collateral").

                  1. Defined Terms.  (a)  Capitalized  terms that are defined in
the Credit  Agreement and are not otherwise  defined  herein have the respective
meanings given to them in the Credit  Agreement and, in addition,  the following
terms have the following meanings:

                  "Collateral"  has  the  meaning  specified  in  the  paragraph
immediately preceding Section 1 hereof.

                  "Copyrights"  means (i) all copyrights of any Debtor,  whether
now in existence or at any time hereafter created or acquired, including without
limitation  all  copyrights  listed on Schedule C annexed hereto and made a part
hereof,  (ii)  all  registrations  and  recordings  thereof,  including  without
limitation registrations and recordings in the United States Copyright Office or
any similar  office or agency of the United States,  any State  thereof,  or any
other country or any political  subdivision  thereof,  (iii) all applications in
connection therewith,  including without limitation applications submitted to or
filed in the United States  Copyright  Office or any similar office or agency of
the United  States,  any State  thereof,  or any other  country or any political
subdivision thereof, (iv) all reissues,  extensions or renewals thereof, (v) all
income,  royalties,  damages and payments now and hereafter  due and/or  payable
with respect thereto,  including,  without limitation,  damages and payments for
past, present or future infringements  thereof,  (vi) the right to sue for past,
present and future  infringements  thereof and (vii) all rights and  obligations
pursuant to any license agreements with respect thereto,  whether such Debtor is
a licensor or licensee  under any such license  agreements,  including,  without
limitation,  the  licenses  listed on Schedule A annexed  hereto and made a part
hereof, if any, and, subject to the terms of such licenses, the right to prepare
for sale,  sell and advertise for sale, all inventory now or hereafter  owned by
any Debtor and now or hereafter covered by such licenses.

                  "Event of Default" means any event which  constitutes an Event
of Default under, and as such term is defined in, the Credit  Agreement,  taking
into account any applicable notice or grace period.

                  "Obligations"   means  all   indebtedness,   liabilities   and
obligations  of any Debtor to the Secured  Party under or pursuant to the Credit
Agreement,  the Note, the Subsidiary  Guarantee,  this Security Agreement or any
other Loan Document,  including  without  limitation the  "Obligations" (as such
term is defined in the Credit  Agreement)  and the  obligations  of the  Debtors
under the Subsidiary Guarantee.

                  "Patents"  means (i) all patents and patent  applications  and
the  inventions  and  improvements   described  and  claimed  therein,  and  all
patentable  inventions,  now owned or  hereafter  acquired  or  obtained  by any
Debtor,  including  without  limitation the patents listed on Schedule A annexed
hereto and made a part hereof,  (ii) all registrations  and recordings  thereof,
whether  in the United  States  Patent and  Trademark  Office or in any  similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof, or otherwise, (iii) all reissues,  divisions,
continuations,  renewals,  extensions  and  continuations-in-part  of any of the
foregoing, (iv) all income, royalties, damages or payments now and hereafter due
and/or payable under or with respect to any of the foregoing, including, without
limitation,  damages or payments for past or future  infringements of any of the
foregoing,  (v) the right to sue for past,  present and future  infringements of
any of the foregoing  throughout the world,  and (vi) all rights and obligations
pursuant to any license  agreements with respect  thereto,  whether the relevant
Debtor is a licensor or licensee under any such license  agreements,  including,
without  limitation,  the licenses listed on said Schedule A and, subject to the
terms of such  licenses,  the right to prepare for sale,  sell and advertise for
sale,  all inventory  now or hereafter  owned by any Debtor and now or hereafter
covered by such licenses.

                  "Trademarks"  means (i) all  trademarks,  trade  names,  trade
styles, and service marks of any Debtor, whether now owned or hereafter acquired
or created,  including without limitation all trademarks described on Schedule B
annexed  hereto  and made a part  hereof,  all  prints  and labels on which said
trademarks, trade names, trade styles and service marks have appeared or appear,
all designs and general  intangibles  of like nature,  now existing or hereafter
adopted or acquired,  all right, title and interest therein and thereto, and all
applications,   registrations  and  recordings   thereof,   including,   without
limitation,  applications,  registrations  and  recordings  in the United States
Patent  and  Trademark  Office or any  similar  office  or agency of the  United
States,  any State  thereof,  or any other country or any political  subdivision
thereof,  (ii) all reissues,  extensions or renewals thereof,  (iii) all income,
royalties,  damages and  payments  now and  hereafter  due and/or  payable  with
respect thereto, including,  without limitation,  damages and payments for past,
present or future infringements thereof, (iv) the right to sue for past, present
and future infringements  thereof and (v) all rights and obligations pursuant to
any license  agreements with respect  thereto,  whether the relevant Debtor is a
licensor or  licensee  under any such  license  agreements,  including,  without
limitation,  the licenses listed on said Schedule B and, subject to the terms of
such licenses,  the right to prepare for sale,  sell and advertise for sale, all
inventory now or hereafter  owned by any Debtor and now or hereafter  covered by
such licenses.

                  2.  Representations,  Warranties  and  Covenants.  Each Debtor
hereby represents, warrants, covenants and agrees as follows:

                  (a) Except as may be disclosed in the Credit  Agreement,  each
Debtor has the sole,  full and clear  title to the  Trademarks,  Copyrights  and
Patents  listed as owned by it in the Schedules  hereto in the United States for
the  goods  and  services  covered  by  the   registrations   thereof  and  such
registrations are valid and subsisting and in full force and effect.

                  (b) Each Debtor  shall (and the  Borrower  shall cause each of
the other  Debtors to) perform  all acts and execute all  documents,  including,
without limitation, assignments for security in forms suitable for a filing with
the United  States  Trademark  Office and the United  States  Copyright  Office,
reasonably  requested  by the Secured  Party at any time to  evidence,  perfect,
maintain,  record and enforce the Secured Party's interests in the Collateral or
otherwise in furtherance of the  provisions of this  Agreement,  and each Debtor
hereby  authorizes  the Secured Party to execute and file one or more  financing
statements  (and  similar  documents)  or  copies  thereof  or of this  Security
Agreement with respect to the Collateral signed only by the Secured Party.

                  (c) Except to the extent  that the Secured  Party,  upon prior
written  notice from any Debtor,  shall consent in writing,  each Debtor (either
itself or through  licensees)  will,  consistent  with sound business  judgment,
continue  to use its  Trademarks  on each  and  every  trademark  class of goods
applicable to its current line as reflected in its current  catalogs,  brochures
and price lists in order to maintain its  Trademarks in full force free from any
claim of  abandonment  for nonuse and the Debtors  will not (and will not permit
any licensee  thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated.

                  (d)  The  Debtors  hereby  jointly  and  severally   agree  to
reimburse the Secured Party promptly for any and all reasonable sums, costs, and
expenses  which the Secured Party may pay or incur pursuant to the provisions of
this  Agreement or in enforcing the  Obligations or protecting the Collateral or
the security  interests granted  hereunder,  including,  but not limited to, all
filing or recording fees,  governmental fees, court costs,  collection  charges,
travel,  and  reasonable  attorneys'  fees,  all of  which  shall be part of the
Obligations and be payable on demand.

                  (e) Except as may be disclosed in the Credit  Agreement,  each
Debtor has the right and power to make the assignments and to grant the security
interests  herein  granted;  and the  Collateral  is not now,  and at all  times
hereafter will not be, subject to any liens,  mortgages,  assignments,  security
interests or encumbrances of any nature whatsoever,  except Permitted Liens, and
none of the Collateral is subject to any claim.

                  (f) Except to the extent that the Credit Agreement  permits or
the Secured Party, upon prior written request from any Debtor,  shall consent in
writing  (which  consent,  in the case of a request  for  permission  to grant a
non-exclusive  license,  shall not be  unreasonably  withheld),  no Debtor shall
assign, sell, mortgage, lease, transfer, pledge,  hypothecate,  grant a security
interest in or lien upon, encumber,  grant an exclusive or non-exclusive license
or otherwise  dispose of any of the  Collateral,  and nothing in this  Agreement
shall be deemed a consent  by the  Secured  Party to any such  action  except as
expressly permitted herein.

                  (g) Each Debtor  shall (and the  Borrower  shall cause each of
the other Debtors to) take all necessary  steps,  consistent with sound business
judgment,  in any  proceeding  before the  United  States  Patent and  Trademark
Office,  the United States  Copyright  Office or any similar office or agency in
any other  country  or any  political  subdivision  thereof,  to  maintain  each
application  and  registration  of  the  Trademarks,   Copyrights  and  Patents,
including, without limitation, filing of renewals, affidavits of use, affidavits
of incontestability  and opposition,  interference and cancellation  proceedings
(except to the extent that dedication,  abandonment or invalidation is permitted
under paragraph 2(c) hereof).

                  (h)  The  Debtors  assume  all  responsibility  and  liability
arising from the use of the Trademarks,  Copyrights or Patents, and hereby agree
to indemnify  and hold the Secured  Party  harmless  from and against any claim,
suit, loss, damage or expense (including reasonable attorneys' fees) arising out
of any alleged  defect in any product  manufactured,  promoted or sold by any of
the Debtors (or any  affiliate or  subsidiary  thereof) in  connection  with, or
which  bears or  includes,  any  Trademark,  Copyright  or  Patent or out of the
manufacture,  promotion, labelling, sale or advertisement of any such product by
any of the Debtors (or any affiliate or subsidiary thereof).  Each Debtor agrees
that the Secured Party does not assume,  and shall have no  responsibility  for,
the  payment of any sums due or to become due under any  agreement  or  contract
included in the Collateral or the performance of any obligations to be performed
under or with respect to any such agreement or contract by any Debtor,  and each
Debtor  hereby  agrees to indemnify  and hold the Secured  Party  harmless  with
respect to any and all claims by any person relating thereto.

                  (i) The Secured Party may, in its sole  discretion,  but shall
have no obligation to, pay any  reasonable  amount or do any act required of any
Debtor  hereunder or deemed  necessary or  appropriate  by the Secured  Party to
preserve,  defend, protect, maintain, record or enforce any Debtor's obligations
contained  herein,  the Obligations,  the Collateral,  or the rights,  title and
interests granted to the Secured Party herein,  and which any Debtor fails to do
or pay (after notice,  if required,  and the expiration of any applicable  grace
period), and any such payment shall be deemed an advance by the Secured Party to
the Borrower, shall constitute part of the Obligations,  and shall be payable on
demand  together  with  interest  at  the  highest  rate  then  payable  on  the
Obligations.

                  (j)  Each  Debtor  agrees  that  if it,  or any  affiliate  or
subsidiary thereof, learns of any use by any person of any term or design likely
to cause  confusion  with any Trademark,  it shall  promptly  notify the Secured
Party of such use and, if  requested by the Secured  Party,  shall join with the
Secured Party, at such Debtor's expense, in such action as the Secured Party, in
its reasonable discretion,  may deem advisable for the protection of the Secured
Party's interests in and to the Trademarks.

                  (k) All  licenses  of its  Trademarks,  Copyrights  or Patents
which any Debtor has  granted to third  parties  are set forth in the  Schedules
hereto.

                  (l) The  Trademarks,  Copyrights  and Patents are  subsisting,
have not been adjudged invalid or unenforceable in whole or in part, and are not
currently being challenged in any way.

                  (m) None of the Trademarks,  Copyrights or Patents have lapsed
or expired or have been  abandoned or  cancelled,  whether due to any failure to
pay any maintenance or other fees or make any filing or otherwise.

                  (n) Each of the  Trademarks,  Copyrights  and Patents is valid
and  enforceable  and  the  Debtors  are not  aware  of any  impairments  to the
Trademarks,  Copyrights  or Patents  which  would have a material  effect on the
validity and/or enforceability thereof.

                  (o)  No  claim  has  been  made  that  the  use  of any of the
Trademarks, Copyrights or Patents constitutes an infringement.

                  (p) Each Debtor will  continue  to use,  consistent  with past
practice, proper statutory notice in connection with its use of the Trademarks.

                  (q)  Each  Debtor  will  use   standards  of  quality  in  its
manufacture  of  products  sold  under  the  Trademarks  consistent  with  those
currently employed by it.

                  (r) No Debtor shall adopt or use any mark which is confusingly
similar or a colorable  imitation of any Trademark  unless it shall have granted
to the Secured Party a perfected security interest in such mark pursuant to this
Security Agreement.

                  (s) No Debtor will (either itself or through licensees) do any
act, or omit to do any act,  whereby any Copyright may become  injected into the
public  domain.  Each Debtor shall notify the Secured  Party  immediately  if it
knows,  or has reason to know,  that any Copyright may become  injected into the
public domain or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
court or  tribunal  in the United  States or any other  country)  regarding  any
Debtor's ownership of any such Copyright or its validity.

                  (t) Each Debtor shall promptly notify the Secured Party of any
infringement of any Trademark, Copyright or Patent of which it becomes aware and
shall take, consistent with sound business judgment, such actions as the Secured
Party may  reasonably  require to protect  such  Trademark,  Copyright or Patent
including,  where  appropriate,  the bringing of suit for infringement,  seeking
injunctive  relief  and  seeking  to  recover  any  and  all  damages  for  such
infringement.

                  3.  Continuing  Liability  under the  Collateral.  Each Debtor
hereby expressly agrees that,  anything herein to the contrary  notwithstanding,
it shall remain liable under each license, interest and obligation pledged by it
to the Secured  Party  hereunder to observe and perform all the  conditions  and
obligations  to be observed and  performed by it  thereunder,  all in accordance
with and pursuant to the terms and provisions  thereof.  The Secured Party shall
have no obligation or liability  under any such license,  interest or obligation
by reason of or arising  out of this  Security  Agreement  or the receipt by the
Secured  Party  of  any  payment  relating  to any  such  license,  interest  or
obligation  pursuant hereto nor shall the Secured Party be required or obligated
in any  manner to  perform  or  fulfill  any of the  obligations  of any  Debtor
thereunder or pursuant thereto,  to make any payment,  to make any inquiry as to
the nature or the  sufficiency  of any  performance  by any party under any such
license,  interest  or  obligation,  to present or file any claim or to take any
action to collect or enforce any  performance or the payment of any amounts that
may have been granted to the Secured  Party or to which the Secured Party may be
entitled at any time or times.

                  4. Remedies.  Upon the occurrence and during the  continuation
of an Event of Default  after taking into account any  applicable  grace or cure
period,  in addition  to all other  rights and  remedies  of the Secured  Party,
whether  contractual,  at law,  in  equity or  otherwise,  all such  rights  and
remedies  being  cumulative,   not  exclusive,  and  enforceable  alternatively,
successively or concurrently,  without (except as provided herein) notice to, or
consent by, any Debtor,  the Secured Party shall have the  following  rights and
remedies:  (a) the Secured  Party may at any time,  upon  written  notice to any
Debtor  (with  a copy to the  Borrower,  if such  Debtor  is not the  Borrower),
prohibit  such Debtor from making any further use of the  Trademarks or any mark
similar thereto,  the Copyrights or the Patents for any purpose; (b) the Secured
Party may, at any time and from time to time,  upon 10 days' prior notice to any
Debtor  (with  a copy to the  Borrower,  if such  Debtor  is not the  Borrower),
license,  whether general,  special or otherwise, and whether on an exclusive or
nonexclusive basis, any of the Trademarks, Copyrights or Patents, throughout the
world for such term or terms,  on such  conditions,  and in such manner,  as the
Secured Party shall in its sole discretion determine; (c) the Secured Party may,
at any time and from time to time,  upon 10 days'  prior  notice  to any  Debtor
(with a copy to the Borrower, if such Debtor is not the Borrower), assign, sell,
or otherwise  dispose of, the  Collateral  or any of it,  either with or without
special or other conditions or stipulations, with power to buy the Collateral or
any part of it, and with power also to execute assurances, and do all other acts
and things for completing the assignment,  sale or disposition which the Secured
Party shall,  in its sole  discretion,  deem  appropriate or proper;  and (d) in
addition to the foregoing,  in order to implement the assignment,  sale or other
disposition of any of the Collateral  pursuant to subparagraph 0(c) hereof,  the
Secured Party may, at any time, pursuant to the authority granted in the Special
Power of Attorney  described  in  paragraph 0 hereof  (such  authority  becoming
effective on the occurrence and remaining  effective  during the continuation as
hereinabove  provided of an Event of Default),  execute and deliver on behalf of
any  Debtor  one  or  more  instruments  of  assignment  of  some  or all of the
Collateral,  in form  suitable  for filing,  recording  or  registration  in any
country. Each Debtor hereby agrees to pay when due all reasonable costs incurred
in any such  transfer of the  Collateral or any portion  thereof,  including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license,  assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation,  reasonable attorneys' fees
and all legal,  travel and other  expenses  which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest as
the Secured Party may desire;  and each Debtor will remain liable, to the extent
provided in the Credit Agreement (in the case of the Borrower) or the Subsidiary
Guarantee  (in the case of the other  Debtors) and will pay the Secured Party on
demand any deficiency remaining,  together with interest thereon at a rate equal
to the  highest  rate then  payable on the  Obligations,  and the balance of any
expenses unpaid.  In the event that there should be any excess proceeds over the
Obligations,  the Secured  Party shall pay such excess to the Debtors or to such
other  person  as may be  required  by law or by  court  order.  Nothing  herein
contained  shall be construed as  requiring  the Secured  Party to take any such
action at any time. In the event of any such license,  assignment, sale or other
disposition  of  the  Collateral,   or  any  of  it,  after  the  occurrence  or
continuation as hereinabove  provided of an Event of Default,  each Debtor shall
supply  its  customer  lists  and  other  records  relating  to its  Trademarks,
Copyrights and Patents or to the  distribution of products  bearing or including
any of the  Trademarks,  Copyrights  or  Patents  to the  Secured  Party  or its
designee.

                  5. Power of  Attorney.  Concurrently  with the  execution  and
delivery  hereof,  each Debtor will  execute and deliver to the Secured  Party a
Special Power of Attorney  substantially in the form of Exhibit I hereto for the
implementation of the assignment, sale or other disposition of the Collateral or
any portion thereof  pursuant to paragraphs  0(c), 4(d) and 7 hereof and for the
other  purposes  specified  in such Power of  Attorney,  and each Debtor  hereby
releases the Secured Party from any claims,  causes of action and demands at any
time arising out of or with respect to any actions  taken or omitted to be taken
by the  Secured  Party under the power of  attorney  granted  herein or therein,
other than actions taken or omitted to be taken through the gross  negligence or
willful misconduct of the Secured Party.

                  6. Access to Media.  For the  purpose of enabling  the Secured
Party to exercise  rights and remedies  hereunder,  each Debtor hereby grants to
the Secured Party access upon the  occurrence  and during the  continuance of an
Event of Default (after taking into account any applicable grace or cure period)
to all media in which  any  Collateral  may be  recorded  or  stored  and to all
computer  equipment and software  programs used for the  compilation or printout
thereof to the extent that such Debtor may lawfully do so, and hereby authorizes
any and all custodians  thereof to release such media to the Secured Party or in
accordance  with the  Secured  Party's  instructions  upon  receipt  of a letter
executed by the Secured  Party stating that an Event of Default has occurred and
is continuing.

                  7. Grant of License to Use Trademarks, Copyrights and Patents.
For the  purpose  of  enabling  the  Secured  Party to  exercise  its rights and
remedies under this Agreement at such time as the Secured Party,  without regard
to this  Section 0, shall be  lawfully  entitled  to  exercise  such  rights and
remedies  and for no other  purpose,  each Debtor  hereby  grants to the Secured
Party,  effective  upon the  occurrence of an Event of Default and notice by the
Secured  Party  that it  desires  to  exercise  such  rights  and  remedies,  an
irrevocable,  exclusive license, exercisable without payment of royalty or other
compensation to any of the Debtors, to use, assign, license or sublicense any of
the  Collateral,  including  in such license  reasonable  access to all media in
which any of the  licensed  items may be recorded or stored and to all  computer
programs used for the compilation or printout  thereof.  The rights and remedies
of the Secured  Party under this  paragraph 7 shall be in addition to and not in
substitution  for the rights and remedies of the Secured Party under paragraph 4
hereof or any other  rights or  remedies of the Secured  Party  hereunder  or as
provided  by law.  All rights  and  remedies  of the  Secured  Party  under this
Agreement  are  cumulative  and not  exclusive  of each other or of any right or
remedy provided by law.

                  8. Miscellaneous. No provision hereof may be modified, altered
or limited except by a written instrument  expressly referring to this Agreement
and executed by all the parties hereto. No course of dealing between the Debtors
or any of them and the Secured Party, nor any failure to exercise, nor any delay
in exercising,  on the part of the Secured Party, any right,  power or privilege
hereunder  or under any other  agreement or document  shall  operate as a waiver
thereof;  nor shall any  single  or  partial  exercise  of any  right,  power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the  exercise of any other  right,  power or  privilege.  The  execution  and
delivery of this Security  Agreement has been duly  authorized by the respective
Boards of  Directors  of the  Debtors  and by any  necessary  vote or consent of
stockholders  thereof.  This  Security  Agreement  shall  be  binding  upon  the
respective  successors  and assigns of the Debtors and shall,  together with the
rights and remedies of the Secured Party hereunder,  inure to the benefit of the
Secured Party and its successors and assigns.  THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS  OF THE  PARTIES  HEREUNDER  AND IN AND TO THE  COLLATERAL  SHALL BE
GOVERNED  IN ALL  RESPECTS  BY THE LAWS OF THE UNITED  STATES OF AMERICA AND THE
LAWS OF THE STATE OF NEW YORK.  EACH DEBTOR HEREBY  SUBMITS TO THE  NONEXCLUSIVE
JURISDICTION  OF THE  SUPREME  COURT OF THE  STATE  OF NEW YORK AND THE  FEDERAL
COURTS OF THE UNITED  STATES OF  AMERICA  LOCATED IN SUCH STATE IN ANY ACTION OR
PROCEEDING  ARISING  UNDER  THIS  AGREEMENT  AND HEREBY  IRREVOCABLY  WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,  ACTION
OR  PROCEEDING  BROUGHT  IN ANY SUCH COURT HAS BEEN  BROUGHT IN AN  INCONVENIENT
FORUM.  EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN CONNECTION
WITH ANY DISPUTE  HEREUNDER.  If any term of this Agreement  shall be held to be
invalid, illegal or unenforceable,  the validity of all other terms hereof shall
in no way be affected thereby.

                  9.   Joint  and   Several   Obligations.   All   payment   and
indemnification  obligations of the Debtors hereunder shall be joint and several
and each Debtor shall be responsible to the Secured Party hereunder for the full
amount of such obligations.

                  10. Additional Debtors. Pursuant to Section 6.22 of the Credit
Agreement, each Domestic Subsidiary of the Borrower that was not in existence on
the date of the Credit  Agreement is required to enter into this  Agreement as a
Debtor upon becoming a Subsidiary.  Upon  execution and delivery  after the date
hereof by such  Subsidiary of a Supplement  in the form of Annex 1 hereto,  such
Subsidiary  shall become a Debtor hereunder with the same force and effect as if
originally  named  as a  Debtor  herein.  The  execution  and  delivery  of  any
instrument  adding an additional  Debtor as a party to this Agreement  shall not
require the consent of any other Debtor hereunder. The rights and obligations of
each Debtor hereunder shall remain in full force and effect  notwithstanding the
addition of any new Debtor as a party to this Agreement.
<PAGE>


         IN WITNESS WHEREOF,  the Debtors and the Secured Party have caused this
Agreement to be executed by their duly authorized  officers as of the date first
above written.

                                            Debtors:


                                            V BAND CORPORATION


                                        By: /s/Thomas E. Feil
                                            ----------------- 
                                      Name: Thomas E. Feil
                                     Title: Chairman and Chief Executive Officer

                                            V BAND NE, INC.


                                        By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
                                     Title: President

                                            V BAND SERVICES, INC.


                                        By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
                                     Title: President


                                            LICOM INCORPORATED


                                       By:  /s/Thomas E. Feil
                                            ----------------- 
                                     Name:  Thomas E. Feil
                                    Title:  President


                                            Secured Party:

                                            NATIONAL BANK OF CANADA,
                                            NEW YORK BRANCH

                                       By: /s/Gaetan R. Frosina
                                           --------------------
                                     Name: Gaetan R. Frosina
                                    Title: Vice President


                                       By: /s/Joseph A. Klapkowski
                                           -----------------------
                                     Name: Joseph A. Klapkowski
                                    Title: Assistant Vice President
<PAGE>

      Schedule A to Security Agreement - Patents, Trademarks and Copyrights

                               SCHEDULE OF PATENTS


I.       ISSUED PATENTS
<TABLE>
<CAPTION>

COUNTRY               PATENT NO.            ISSUE DATE           INVENTOR(S)                   TITLE
-------               ----------            ----------           -----------                   -----
<S>                   <C>                   <C>                  <C>                   <C>
U.S.A.                Des. 349,709          08/16/94             Borrower              1994 Design of Power Deck

U.S.A.                Des. 333,822          03/09/93             Borrower              1993 Design of Viax DN

U.S.A.                5,151,896             09/29/92             Borrower              1992 System Digital Switch

U.S.A.                1,681,595             03/03/92             Borrower              1992 ProMX (Licom)

U.S.A.                5,089,937             02/18/92             Borrower              1992 Power Interface
                                                                                       Apparatus for a DC Power
                                                                                       Distribution System
</TABLE>
II.      PENDING PATENT APPLICATIONS

COUNTRY       DOCKET NO.      EXPECTED FILING DATE       INVENTOR(S)     TITLE




III.     PATENT APPLICATIONS IN PREPARATION


IV.      PATENT LICENSES

<PAGE>















      Schedule B to Security Agreement - Patents, Trademarks and Copyrights

                             SCHEDULE OF TRADEMARKS

                                     V Band
                                      Licom




<PAGE>











      Schedule C to Security Agreement - Patents, Trademarks and Copyrights

                             SCHEDULE OF COPYRIGHTS




<PAGE>
                                                                    Exhibit I to
                           Security Agreement-Patents, Trademarks and Copyrights

                            SPECIAL POWER OF ATTORNEY 

STATE OF NEW YORK )
                                    ) ss.:
COUNTY OF NEW YORK         )

         KNOW ALL MEN BY THESE PRESENTS,  THAT , a corporation  (the "Assignor")
hereby  irrevocably  appoints and constitutes  National Bank of Canada, New York
Branch  (the  "Assignee"),  its true and  lawful  attorney,  with full  power of
substitution, and with full power and authority to perform the following acts on
behalf of such Assignor:

                  1.  For  the  purpose  of  assigning,  selling,  licensing  or
         otherwise  disposing of all right,  title and interest of such Assignor
         in and to any and all trademarks, trade names, trade styles and service
         marks  listed in  Schedule  1 hereto  (the  "Trademarks"),  any and all
         patents  listed  on  Schedule  2 hereto  (the  "Patents"),  any and all
         copyrights  listed in  Schedule 3 hereto  (the  "Copyrights"),  and all
         registrations,  recordings, reissues, extensions and renewals of any of
         the foregoing,  and all pending applications  therefor, for the purpose
         of continuing, protecting and preserving the Trademarks, the Copyrights
         or the Patents,  and for the purpose of the recording,  registering and
         filing of, or  accomplishing  any other  formality with respect to, the
         foregoing,  (a) to execute  on its own behalf  and/or on the behalf and
         stead of the  Assignor and deliver any and all  agreements,  documents,
         instruments  of  assignment  or other papers  necessary or advisable to
         effect such purpose and (b) to take such other  actions with respect to
         the Trademarks,  the Copyrights or the Patents as the Assignee deems in
         its best interest; and

                  2. To execute on its own behalf and/or on the behalf and stead
         of the  Assignor any and all  documents,  statements,  certificates  or
         other papers  necessary or advisable in order to effectuate  any of the
         purposes  described  above  as  Assignee  may  in its  sole  discretion
         determine.

         The Assignor  hereby  ratifies all that Assignee  shall  lawfully do or
cause to be done under or by virtue of the powers of attorney granted herein and
hereby releases  Assignee from any and all claims,  causes of action and demands
at any time arising out of or with respect to any actions taken or omitted to be
taken by Assignee under the powers of attorney granted herein.

         This power of  attorney  is made  pursuant  to a Security  Agreement  -
Patents,  Trademarks and Copyrights dated as of the date hereof, among Assignor,
Assignee and certain other  assignors  party thereto (the "Security  Agreement")
and takes effect, upon the occurrence of an Event of Default thereunder, for the
purposes of paragraphs 4(c), 4(d) and 7 thereof and is subject to the conditions
thereof and may not be revoked until the payment in full of all "Obligations" as
defined in such Security  Agreement and the  termination  of the  Commitment (as
defined in the Credit Agreement referred to in such Security Agreement).

Dated:   May       , 1997

                                             By:_____________________________
                                           Name:
                                          Title:
<PAGE>

STATE OF NEW YORK )
                                    ) ss.:
COUNTY OF NEW YORK         )

         On this day of May, 1997, before me personally  appeared , to me known,
who,  being  by me  duly  sworn,  did  depose  and  say  that he is the of , the
corporation  described in and which executed the foregoing  instrument;  that he
knows the seal of said corporation;  that the seal affixed to said instrument is
such corporate seal;  that it was affixed  pursuant to authority of the Board of
Directors of said  corporation,  and that he signed his name thereto pursuant to
such authority.



                                                    -----------------------
                                                         Notary Public

<PAGE>




                     Schedule A to Special Power of Attorney

                               SCHEDULE OF PATENTS


I.       ISSUED PATENTS
<TABLE>
<CAPTION>

COUNTRY               PATENT NO.            ISSUE DATE           INVENTOR(S)                 TITLE
-------               ----------            ----------           -----------                 -----
<S>                   <C>                   <C>                  <C>                   <C>
U.S.A.                Des. 349,709          08/16/94             Borrower              1994 Design of Power Deck

U.S.A.                Des. 333,822          03/09/93             Borrower              1993 Design of Viax DN

U.S.A.                5,151,896             09/29/92             Borrower              1992 System Digital Switch

U.S.A.                1,681,595             03/03/92             Borrower              1992 ProMX (Licom)
     
U.S.A.                5,089,937             02/18/92             Borrower              1992 Power Interface
                                                                                       Apparatus for a DC Power
                                                                                       Distribution System
</TABLE>



II.      PENDING PATENT APPLICATIONS

COUNTRY       DOCKET NO.       EXPECTED FILING DATE   INVENTOR(S)       TITLE


III.     PATENT APPLICATIONS IN PREPARATION




IV.      PATENT LICENSES

<PAGE>









                     Schedule B to Special Power of Attorney

                             SCHEDULE OF TRADEMARKS

                                     V Band
                                      Licom



<PAGE>










                     Schedule C to Special Power of Attorney

                             SCHEDULE OF COPYRIGHTS




<PAGE>
                                                                      Annex 1 to
                                                          [Subsidiary Guarantee]
                                                            [Security Agreement]
                                      [Intellectual Property Security Agreement]
                                                        [Contribution Agreement]

         SUPPLEMENT NO.     dated as of              , to

         (i) the Subsidiary  Guarantee dated as of May 28, 1997 (as the same may
         be amended,  restated,  supplemented or otherwise modified from time to
         time,  the  "Subsidiary  Guarantee")  among V BAND NE, Inc., a New York
         corporation,  V BAND SERVICES, INC., a New York corporation,  and LICOM
         INCORPORATED,   a  Delaware   corporation   (each  a  "Subsidiary"  and
         collectively the  "Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK
         BRANCH (the "Bank"), and

         (ii) the Security  Agreement  dated as of May 28, 1997 (as the same may
         be amended,  supplemented or otherwise  modified from time to time, the
         "General  Security  Agreement")  by V  BAND  CORPORATION,  a  New  York
         corporation (the "Borrower") and the Subsidiaries in favor of the Bank,
         and

         (iii) the Security  Agreement-Patents,  Trademarks and Copyrights dated
         as of May 28,  1997  (as  the  same  may be  amended,  supplemented  or
         otherwise  modified  from  time to  time,  the  "Intellectual  Property
         Security  Agreement") by the Borrower and the  Subsidiaries in favor of
         the Bank, and

         (iv) the  Contribution  Agreement dated as of May 28, 1997 (as the same
         may be amended,  supplemented or otherwise  modified from time to time,
         the "Contribution  Agreement") among the Borrower, the Subsidiaries and
         the Bank (the Subsidiary Guarantee, the General Security Agreement, the
         Intellectual Property Security Agreement and the Contribution Agreement
         herein  collectively  called  the  "Relevant  Agreements"  and  each  a
         "Relevant Agreement").

                                    RECITALS:

         a. The Borrower and the Bank are entering into a Credit Agreement dated
as of May 28,  1997 (said  Credit  Agreement,  as it may be  amended,  restated,
supplemented  or otherwise  modified from time to time, the "Credit  Agreement")
providing  for the making of loans to and the  issuance of letters of credit for
the  account  of the  Borrower  in the  amounts,  and  subject  to the terms and
conditions, specified in the Credit Agreement.

         B. The  Borrower  and the  Subsidiaries  have entered into the Relevant
Agreements  in order to induce the Bank to make  loans to, and issue  letters of
credit for account  of, the  Borrower.  Pursuant  to Section  6.22 of the Credit
Agreement,  each  Domestic  Subsidiary  of the  Borrower  that  is  subsequently
acquired or  organized is required to enter into the  Subsidiary  Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement  as a Debtor,  and the  Contribution  Agreement  as a  Guarantor  upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security  Agreement,  Section 10 of the Intellectual  Property  Security
Agreement,  and Section 16 of the Contribution Agreement provide that additional
Subsidiaries  of  the  Borrower  may  become  Guarantors  under  the  Subsidiary
Guarantee,  Debtors under the General  Security  Agreement and the  Intellectual
Property Security Agreement,  and Guarantors under the Contribution Agreement by
execution  and delivery of an  instrument  in the form of this  Supplement.  The
undersigned  Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee,  a Debtor under the General Security
Agreement and the  Intellectual  Property  Security  Agreement,  and a Guarantor
under the Contribution  Agreement in order to induce the Bank to make additional
Loans and issue  additional  Letters  of Credit and as  consideration  for Loans
previously made and Letters of Credit previously issued.

         Now therefor,  the New Subsidiary  agrees as follows for the benefit of
the Bank:

         1.       Definitions.

         Capitalized  terms used herein and not otherwise  defined  herein shall
have the  meanings  assigned to such terms in the  Relevant  Agreements  and the
Credit Agreement.

         2.       Agreement to be Bound by Relevant Agreements.

         In accordance with Section 22 of the Subsidiary  Guarantee,  Section 27
of the  General  Security  Agreement,  Section 10 of the  Intellectual  Property
Security  Agreement,  and  Section  16 of the  Contribution  Agreement,  the New
Subsidiary  by its  signature  below  becomes a Guarantor  under the  Subsidiary
Guarantee,  a Debtor under the General  Security  Agreement and the Intellectual
Property Security  Agreement,  and a Guarantor under the Contribution  Agreement
with the same force and effect as if  originally  named  therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and  provisions  of  Subsidiary  Guarantee,  the General  Security
Agreement,  the Intellectual  Property  Security  Agreement and the Contribution
Agreement applicable to it as a Guarantor,  Debtor or Guarantor, as the case may
be, thereunder.  Each reference to a "Guarantor" in the Subsidiary Guarantee,  a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement,  or a "Guarantor" in the  Contribution  Agreement  shall be deemed to
include the New  Subsidiary.  Each  Relevant  Agreement  is hereby  incorporated
herein by reference.

         3.       Representations and Warranties.

         The New  Subsidiary  represents  and  warrants  to the Bank  that  this
Supplement  has  been  duly  authorized,   executed  and  delivered  by  it  and
constitutes its legal, valid and binding  obligation,  enforceable against it in
accordance with its terms.

         4.       Miscellaneous.

         (a) This Supplement may be executed in  counterparts  (and by different
parties  hereto on different  counterparts),  each of which shall  constitute an
original,  but all of  which  when  taken  together  shall  constitute  a single
contract.  This  Supplement  shall  become  effective  when the Bank  shall have
received a counterpart of this Supplement signed by the New Subsidiary.

         (b) Except as expressly  supplemented  hereby,  each Relevant Agreement
shall remain in full force and effect.

         (c) THIS  SUPPLEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES
OF CONFLICT OF LAWS.

         (d) In  case  any  one or  more  of the  provisions  contained  in this
Supplement  should be held  invalid,  illegal or  unenforceable  in any respect,
neither party hereto shall be required to comply with such provision for so long
as such  provision  is held to be  invalid,  illegal or  unenforceable,  but the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein  and in the  Relevant  Agreements  shall  not in any way be  affected  or
impaired.

         (e) All  communications  and notices  hereunder shall be in writing and
given as provided in the Relevant  Agreements.  All  communications  and notices
hereunder  to the New  Subsidiary  shall be given to it at the address set forth
next to its signature.

         (f) The New Subsidiary  agrees to reimburse the Bank for its reasonable
out-of-pocket  expenses  in  connection  with  this  Supplement,  including  the
reasonable fees, other charges and disbursements of counsel for the Bank.
<PAGE>

         IN  WITNESS  WHEREOF,   the  New  Subsidiary  has  duly  executed  this
Supplement to the Subsidiary  Guarantee,  the General  Security  Agreement,  the
Intellectual Property Security Agreement,  and the Contribution  Agreement as of
the day and year first above written.

Address:                                      [Name of New Subsidiary]

 
______________________                    By: __________________________
______________________                  Name:
Attention: _____________               Title:
Telecopier: ____________


<PAGE>

                             CONTRIBUTION AGREEMENT 

         AGREEMENT dated as of May 28, 1997 among V BAND CORPORATION, a New York
corporation  (the  "Borrower"),   V  BAND  NE,  INC.,  a  New  York  corporation
("Northeast"),  V BAND SERVICES,  INC., a New York  corporation  ("Service") and
LICOM INCORPORATED,  a Delaware corporation  ("Licom")  (Northeast,  Service and
Licom herein collectively called the "Guarantors", and each a "Guarantor").

                                    RECITALS:

         A. The  Borrower  and  National  Bank of Canada,  New York  Branch (the
"Bank") are entering into a Credit  Agreement dated as of the date hereof (as it
may be  amended,  modified  or  supplemented  from  time to  time,  the  "Credit
Agreement")  providing for  extensions of credit to the Borrower in the amounts,
and subject to the terms and conditions, specified in the Credit Agreement.

         B. (1) The Guarantors are entering into a Subsidiary Guarantee dated as
of the date hereof (said guarantee, as it may be amended, restated, supplemented
or otherwise modified from time to time, the "Subsidiary  Guarantee"),  pursuant
to which  they are  guaranteeing  the  payment  and  performance  in full of all
obligations  of  the  Borrower  under  the  Credit  Agreement  and  all  related
instruments  and documents and (2) the Borrower and the  Guarantors are entering
into (i) a General Security Agreement dated as of the date hereof (said security
agreement,  as it may be amended,  restated,  supplemented or otherwise modified
from  time to time,  the  "General  Security  Agreement")  and  (ii) a  Security
Agreement-Patents,  Trademarks and Copyrights  dated as of the date hereof (said
Security Agreement,  as it may be amended,  restated,  supplemented or otherwise
modified from time to time,  the  "Intellectual  Property  Security  Agreement")
pursuant  to which  they are  granting  to the Bank a first  priority  perfected
security  interest in all the Collateral  specified  therein as security for the
obligations  of  the  Borrower  under  the  Credit  Agreement  and  all  related
instruments and documents.

         C.  The   execution  and  delivery  of  this   Contribution   Agreement
constitutes a condition precedent to the obligation of the Bank to extend credit
to the Borrower pursuant to the terms of the Credit Agreement.

         ACCORDINGLY,  in consideration of the premises,  and in order to induce
the Bank to execute and deliver the Credit Agreement and to extend credit to the
Borrower pursuant thereto,  and for other good and valuable  consideration,  the
receipt and sufficiency of which are hereby acknowledged,  the Guarantors hereby
agree with the Bank as follows:

         1.       Defined Terms.

         (g) Capitalized  terms that are defined in the Credit Agreement and are
not otherwise  defined herein have the respective  meanings given to them in the
Credit Agreement.

         (b) Unless otherwise expressly specified herein, defined terms denoting
the singular number shall,  when in the plural form, denote the plural number of
the matter or item to which such defined terms refer, and vice-versa.

         (c) Words of the neuter  gender mean and include  correlative  words of
the masculine and feminine gender.

         (d)  Section  and  Annex  headings  used  in  this  Agreement  are  for
convenience  only and  shall not  affect  the  construction  or  meaning  of any
provisions of this Agreement.

         (e)  Unless  otherwise   specified,   the  words  "hereof",   "herein",
"hereunder"  and other similar words refer to this  Agreement as a whole and not
just to the Section,  subsection or clause in which they are used; and the words
"this Agreement" refer to this Contribution Agreement,  as amended,  modified or
supplemented from time to time.

         (f) Unless otherwise  specified,  references to Sections,  Recitals and
Annexes  are  references  to  Sections  of, and  Recitals  and  Annexes to, this
Agreement.

         2.       Indemnity and Subrogation.

         In addition  to all such rights of  indemnity  and  subrogation  as the
Guarantors  may have  under  applicable  law (but  subject  to  Section  4), the
Borrower  agrees that (a) in the event a payment  shall be made by any Guarantor
under the Subsidiary Guarantee,  the Borrower shall indemnify such Guarantor for
the full amount of such payment and such  Guarantor  shall be  subrogated to the
rights of the person to whom such payment  shall have been made to the extent of
such  payment  and (b) in the event any  assets of any  Guarantor  shall be sold
pursuant to the General Security Agreement or the Intellectual Property Security
Agreement to satisfy a claim of the Bank,  the  Borrower  shall  indemnify  such
Guarantor in an amount equal to the greater of the book value or the fair market
value of the assets so sold.

         3.       Contribution and Subrogation.

         Each Guarantor (a "Contributing  Guarantor") agrees (subject to Section
4) that, in the event a payment shall be made by any other  Guarantor  under the
Subsidiary  Guarantee or assets of any other Guarantor shall be sold pursuant to
the General Security  Agreement or the Intellectual  Property Security Agreement
to  satisfy  a claim  of the  Bank  and  such  other  Guarantor  (the  "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
Section 2, the Contributing  Guarantor shall indemnify the Claiming Guarantor in
an amount  equal to the amount of such  payment or the greater of the book value
or the fair  market  value of such  assets,  as the  case may be,  in each  case
multiplied  by a fraction of which the  numerator  shall be the net worth of the
Contributing  Guarantor  on the date  hereof  and the  denominator  shall be the
aggregate net worth of all the Guarantors on the date hereof (or, in the case of
any  Guarantor  becoming a party hereto  pursuant to Section 16, the date of the
Supplement  hereto executed and delivered by such  Guarantor).  Any Contributing
Guarantor making any payment to a Claiming  Guarantor pursuant to this Section 3
shall be subrogated to the rights of such Claiming  Guarantor under Section 2 to
the extent of such payment.

         4.       Subordination.

         Notwithstanding  any provision of this  Agreement to the contrary,  all
rights  of the  Guarantors  under  Sections  2 and 3 and  all  other  rights  of
indemnity,  contribution or subrogation  under applicable law or otherwise shall
be  fully  subordinated  to the  indefeasible  payment  in  full  in cash of the
Obligations. No failure on the part of the Borrower or any Guarantor to make the
payments  required by  Sections 2 and 3 (or any other  payments  required  under
applicable  law or  otherwise)  shall in any respect limit the  obligations  and
liabilities of any other  Guarantor with respect to its  obligations  hereunder,
and each Guarantor shall remain liable for the full amount of the obligations of
such Guarantor hereunder.

         5. No Effect on Obligations to the Bank. Nothing herein contained shall
be deemed to affect or limit in any way the  obligations  or  liabilities of any
Guarantor  to the Bank under the Loan  Documents  to which such  Guarantor  is a
party,  which obligations and liabilities are and shall continue to be joint and
several.  No failure on the part of the  Borrower or any  Guarantor  to make the
payments required hereunder (or any other payments required under applicable law
or otherwise)  shall in any respect limit the obligations and liabilities of any
Guarantor  to the Bank under the Loan  Documents  to which such  Guarantor  is a
party.

          6.      GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE  STATE OF NEW  YORK,  WITHOUT  REFERENCE  TO ITS  PRINCIPLES  OF
CONFLICT OF LAWS.

          7.      SUBMISSION TO JURISDICTION.

         (A) EACH PARTY HERETO  HEREBY  EXPRESSLY  SUBMITS TO THE  NON-EXCLUSIVE
JURISDICTION  OF ALL FEDERAL AND STATE COURTS SITTING IN NEW YORK COUNTY,  STATE
OF NEW YORK,  IN ANY ACTION OR  PROCEEDING  ARISING  OUT OF OR  RELATING TO THIS
AGREEMENT OR THEIR RESPECTIVE OBLIGATIONS HEREUNDER AND EACH OF THEM AGREES THAT
ANY PROCESS OR NOTICE OF MOTION OR OTHER  APPLICATION TO ANY OF SAID COURTS OR A
JUDGE THEREOF MAY BE SERVED UPON IT WITHIN OR WITHOUT SUCH COURT'S  JURISDICTION
BY  REGISTERED  OR CERTIFIED  MAIL  (RETURN  RECEIPT  REQUESTED)  OR BY PERSONAL
SERVICE,  AT THE ADDRESS OF SUCH PARTY  SPECIFIED  NEXT TO ITS SIGNATURE  HERETO
(OR, IN THE CASE OF ANY  GUARANTOR  THAT  BECOMES A PARTY  HERETO BY EXECUTING A
SUPPLEMENT,  NEXT TO ITS  SIGNATURE  THERETO)  OR AT SUCH OTHER  ADDRESS AS SUCH
PARTY SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE OTHER PARTIES HERETO.

         (B) EACH PARTY HERETO HEREBY  IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR  HEREAFTER  HAVE TO THE  LAYING  OF  VENUE  OF ANY  SUIT,  ACTION  OR
PROCEEDING  ARISING OUT OF OR RELATING TO THIS AGREEMENT  BROUGHT IN ANY FEDERAL
OR STATE COURT SITTING IN NEW YORK COUNTY, STATE OF NEW YORK, AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

         (C) NOTWITHSTANDING  THE FOREGOING,  ANY PARTY HERETO MAY SUE ANY OTHER
PARTY HERETO IN ANY JURISDICTION WHERE SUCH OTHER PARTY OR ANY OF ITS ASSETS MAY
BE FOUND AND MAY SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

          8.      WAIVER OF JURY TRIAL.

         EACH  PARTY  HERETO  HEREBY  WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE  ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

          9.      Termination; Payment in Full; Reinstatement.

         (a) This  Agreement is a continuing  agreement and shall remain in full
force and effect so long as the  Borrower  may borrow or request the issuance of
letters  of  credit  under  the  Credit  Agreement  or any  letter  of credit is
outstanding  under the Credit Agreement,  and until the indefeasible  payment in
full of the Obligations.

         (b) The Obligations  shall not be deemed to have been indefeasibly paid
in  full  for  purposes  of this  Agreement  until  all  amounts  owing  thereon
(including,  without  limitation,  any interest accrued on the Obligations after
the  commencement  of a case or  proceeding  with respect to the Borrower  under
applicable  bankruptcy,  insolvency or similar laws) shall have been paid to the
Bank,  whether  or not a claim  for such  amounts  (including  a claim  for such
post-petition  interest) is enforceable,  and any applicable  preference periods
shall have expired.

         (c) This Agreement shall continue to be effective or be reinstated,  as
the case may be, if at any time payment,  or any part thereof, of any Obligation
is rescinded or must otherwise be restored by the Bank or any Guarantor upon the
bankruptcy or reorganization of the Borrower or any Guarantor or otherwise.

         10.      Assignments.

         This  Agreement  shall be binding  upon and inure to the benefit of the
parties hereto and their respective successors and assigns;  provided,  however,
that neither the Borrower nor any Guarantor  shall  transfer,  sell or otherwise
dispose of any of its rights or obligations  hereunder without the prior written
consent of the Bank.

         11.      Notices.

         All notices,  requests,  demands,  instructions,  directions  and other
communications  provided  for  hereunder  shall be in writing  (which term shall
include  telecopied  communications)  and  shall be sent by  overnight  courier,
telecopied  or delivered to the  applicable  party at the address or  telecopier
number  specified for such party  opposite its signature  line below (or, in the
case of any  Guarantor  that becomes a party  hereto by executing a  Supplement,
opposite its  signature  line on the  Supplement)  or, as to any party,  to such
other  address or  telecopier  number as such party shall specify by a notice in
writing to the other parties hereto. Each notice, request, demand,  instruction,
direction  or  other  communication  provided  for  hereunder  shall  be  deemed
delivered (i) if by overnight  courier,  one Business Day after being  deposited
with the overnight courier, addressed to the applicable party at its address set
forth above,  (ii) if by hand,  when delivered to the  applicable  party at such
address,  and (iii) if by telecopy,  when sent to the  applicable  party at such
telecopier number.

         12.      Severability.

         Any provision of this Agreement that is prohibited or  unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render such provision  unenforceable in any
other jurisdiction.

         13.      Execution in Counterparts.

         This  Agreement  may be executed in any number of  counterparts  and by
different  parties on separate  counterparts,  all of which when taken  together
shall constitute but one and the same agreement.

         14.      No Waiver; Amendment.

         (a) No failure on the part of any  Guarantor to exercise,  and no delay
in exercising,  any right,  power or remedy  hereunder shall operate as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy by any Guarantor  preclude any other or further  exercise  thereof or the
exercise  of any other  right,  power or  remedy.  All  remedies  hereunder  are
cumulative and are not exclusive of any other remedies  provided by law. Neither
the Bank nor any of the  Guarantors  shall be deemed to have  waived  any rights
hereunder unless such waiver shall be in writing and signed by such parties.

         (b) Neither  this  Agreement  nor any  provision  hereof may be waived,
amended,  modified or terminated  except pursuant to a written agreement entered
into among the Borrower, the Guarantors and the Bank.

         15.      Survival of Agreement; Reliance by Bank.

         All covenants and  agreements  made by the Borrower and each  Guarantor
herein and in the  certificates  or other  instruments  prepared or delivered in
connection  with this Agreement or the other Loan Documents  shall be considered
to have been relied  upon by the Bank and shall  survive the making of the Loans
and the issuance of the Letters of Credit,  and shall continue in full force and
effect as long as any Obligations  remain  outstanding and unpaid or any Letters
of Credit  remain  outstanding  and until the  Commitment  has  expired  or been
terminated.

         16.      Additional Guarantors.

         Pursuant  to  Section  6.22  of the  Credit  Agreement,  each  Domestic
Subsidiary  of the  Borrower  is  required  to enter  into this  Agreement  as a
Guarantor upon becoming a Subsidiary. Upon execution and delivery after the date
hereof  by such  Subsidiary  of a  Supplement  in the form of Annex 1 hereto  (a
"Supplement"),  such  Subsidiary  shall become a "Guarantor"  hereunder with the
same  force  and  effect  as if  originally  named as a  Guarantor  herein.  The
execution and delivery of any  instrument  adding an  additional  Guarantor as a
party to this  Agreement  shall not require  the consent of the  Borrower or any
other Guarantor  hereunder.  The rights and obligations of the Borrower and each
Guarantor  hereunder shall remain in full force and effect  notwithstanding  the
addition of any new Guarantor as a party to this Agreement.

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their  respective duly authorized  officers as of
the date first above written.



Address:                                             V BAND CORPORATION

565 Taxter Road
Elmsford, New York 10523                             By: /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                              ----------------
Telephone: (914) 789-5000                          Name: Thomas E. Feil 
Telecopier: (914) 789-5068                        Title: Chairman and Chief 
                                                         Executive Officer

Address:                                                 V BAND NE, INC.

565 Taxter Road
Elmsford, New York 10523                             By: /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                              ----------------     
Telephone: (914) 789-5000                          Name: Thomas E. Feil 
Telecopier: (914) 789-5068                        Title: President

Address:                                                 V BAND SERVICES, INC.

565 Taxter Road
Elmsford, New York 10523                             By: /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                              ----------------
Telephone: (914) 789-5000                          Name: Thomas E. Feil  
Telecopier: (914) 789-5068                        Title: President


Address:                                                 LICOM INCORPORATED

565 Taxter Road
Elmsford, New York 10523                             By: /s/Tomas E. Feil 
Attention: Mr. Mark R. Hahn                              ---------------- 
Telephone: (914) 789-5000                          Name: Thomas E. Feil     
Telecopier: (914) 789-5068                        Title: President



<PAGE>
                                                                      Annex 1 to
                                                          [Subsidiary Guarantee]
                                                            [Security Agreement]
                                      [Intellectual Property Security Agreement]
                                                        [Contribution Agreement]

         SUPPLEMENT NO.     dated as of              , to

         (a) the Subsidiary  Guarantee dated as of May 28, 1997 (as the same may
         be amended,  restated,  supplemented or otherwise modified from time to
         time,  the  "Subsidiary  Guarantee")  among V BAND NE, Inc., a New York
         corporation,  V BAND SERVICES, INC., a New York corporation,  and LICOM
         INCORPORATED,   a  Delaware   corporation   (each  a  "Subsidiary"  and
         collectively the  "Subsidiaries") and NATIONAL BANK OF CANADA, NEW YORK
         BRANCH (the "Bank"), and

         (b) the Security Agreement dated as of May 28, 1997 (as the same may be
         amended,  supplemented  or otherwise  modified  from time to time,  the
         "General  Security  Agreement")  by V  BAND  CORPORATION,  a  New  York
         corporation (the "Borrower") and the Subsidiaries in favor of the Bank,
         and

         (c) the Security Agreement-Patents,  Trademarks and Copyrights dated as
         of May 28, 1997 (as the same may be amended,  supplemented or otherwise
         modified  from  time  to  time,  the  "Intellectual  Property  Security
         Agreement") by the Borrower and the  Subsidiaries in favor of the Bank,
         and

         (d) the  Contribution  Agreement  dated as of May 28, 1997 (as the same
         may be amended,  supplemented or otherwise  modified from time to time,
         the "Contribution  Agreement") among the Borrower, the Subsidiaries and
         the Bank (the Subsidiary Guarantee, the General Security Agreement, the
         Intellectual Property Security Agreement and the Contribution Agreement
         herein  collectively  called  the  "Relevant  Agreements"  and  each  a
         "Relevant Agreement").

                                    RECITALS:

         A. The Borrower and the Bank are entering into a Credit Agreement dated
as of May 28,  1997 (said  Credit  Agreement,  as it may be  amended,  restated,
supplemented  or otherwise  modified from time to time, the "Credit  Agreement")
providing  for the making of loans to and the  issuance of letters of credit for
the  account  of the  Borrower  in the  amounts,  and  subject  to the terms and
conditions, specified in the Credit Agreement.

         B. The  Borrower  and the  Subsidiaries  have entered into the Relevant
Agreements  in order to induce the Bank to make  loans to, and issue  letters of
credit for account  of, the  Borrower.  Pursuant  to Section  6.22 of the Credit
Agreement,  each  Domestic  Subsidiary  of the  Borrower  that  is  subsequently
acquired or  organized is required to enter into the  Subsidiary  Guarantee as a
Guarantor, the General Security Agreement and the Intellectual Property Security
Agreement  as a Debtor,  and the  Contribution  Agreement  as a  Guarantor  upon
becoming a Subsidiary. Section 22 of the Subsidiary Guarantee, Section 27 of the
General Security  Agreement,  Section 10 of the Intellectual  Property  Security
Agreement,  and Section 16 of the Contribution Agreement provide that additional
Subsidiaries  of  the  Borrower  may  become  Guarantors  under  the  Subsidiary
Guarantee,  Debtors under the General  Security  Agreement and the  Intellectual
Property Security Agreement,  and Guarantors under the Contribution Agreement by
execution  and delivery of an  instrument  in the form of this  Supplement.  The
undersigned  Subsidiary of the Borrower (the "New Subsidiary") is executing this
Supplement in accordance with the requirements of the Credit Agreement to become
a Guarantor under the Subsidiary Guarantee,  a Debtor under the General Security
Agreement and the  Intellectual  Property  Security  Agreement,  and a Guarantor
under the Contribution  Agreement in order to induce the Bank to make additional
Loans and issue  additional  Letters  of Credit and as  consideration  for Loans
previously made and Letters of Credit previously issued.

         Now therefor,  the New Subsidiary  agrees as follows for the benefit of
the Bank:

         1.       Definitions.

         Capitalized  terms used herein and not otherwise  defined  herein shall
have the  meanings  assigned to such terms in the  Relevant  Agreements  and the
Credit Agreement.

         2.       Agreement to be Bound by Relevant Agreements.

         In accordance with Section 22 of the Subsidiary  Guarantee,  Section 27
of the  General  Security  Agreement,  Section 10 of the  Intellectual  Property
Security  Agreement,  and  Section  16 of the  Contribution  Agreement,  the New
Subsidiary  by its  signature  below  becomes a Guarantor  under the  Subsidiary
Guarantee,  a Debtor under the General  Security  Agreement and the Intellectual
Property Security  Agreement,  and a Guarantor under the Contribution  Agreement
with the same force and effect as if  originally  named  therein as a Guarantor,
Debtor or Guarantor, as the case may be, and the New Subsidiary hereby agrees to
all the terms and  provisions  of  Subsidiary  Guarantee,  the General  Security
Agreement,  the Intellectual  Property  Security  Agreement and the Contribution
Agreement applicable to it as a Guarantor,  Debtor or Guarantor, as the case may
be, thereunder.  Each reference to a "Guarantor" in the Subsidiary Guarantee,  a
"Debtor" in the General Security Agreement or the Intellectual Property Security
Agreement,  or a "Guarantor" in the  Contribution  Agreement  shall be deemed to
include the New  Subsidiary.  Each  Relevant  Agreement  is hereby  incorporated
herein by reference.

         3.       Representations and Warranties.

         The New  Subsidiary  represents  and  warrants  to the Bank  that  this
Supplement  has  been  duly  authorized,   executed  and  delivered  by  it  and
constitutes its legal, valid and binding  obligation,  enforceable against it in
accordance with its terms.

         4.       Miscellaneous.

         (a) This Supplement may be executed in  counterparts  (and by different
parties  hereto on different  counterparts),  each of which shall  constitute an
original,  but all of  which  when  taken  together  shall  constitute  a single
contract.  This  Supplement  shall  become  effective  when the Bank  shall have
received a counterpart of this Supplement signed by the New Subsidiary.

         (b) Except as expressly  supplemented  hereby,  each Relevant Agreement
shall remain in full force and effect.

         (c) THIS  SUPPLEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES
OF CONFLICT OF LAWS.

         (d) In  case  any  one or  more  of the  provisions  contained  in this
Supplement  should be held  invalid,  illegal or  unenforceable  in any respect,
neither party hereto shall be required to comply with such provision for so long
as such  provision  is held to be  invalid,  illegal or  unenforceable,  but the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein  and in the  Relevant  Agreements  shall  not in any way be  affected  or
impaired.

         (e) All  communications  and notices  hereunder shall be in writing and
given as provided in the Relevant  Agreements.  All  communications  and notices
hereunder  to the New  Subsidiary  shall be given to it at the address set forth
next to its signature.

         (f) The New Subsidiary  agrees to reimburse the Bank for its reasonable
out-of-pocket  expenses  in  connection  with  this  Supplement,  including  the
reasonable fees, other charges and disbursements of counsel for the Bank.
<PAGE>

         IN  WITNESS  WHEREOF,   the  New  Subsidiary  has  duly  executed  this
Supplement to the Subsidiary  Guarantee,  the General  Security  Agreement,  the
Intellectual Property Security Agreement,  and the Contribution  Agreement as of
the day and year first above written.

Address:                                       [Name of New Subsidiary]

 
______________________                    By: __________________________
______________________                  Name:
Attention: _____________               Title:
Telecopier: ____________


<PAGE>

                                PLEDGE AGREEMENT


                       PLEDGE  AGREEMENT,  dated as of May 28,  1997,  by V BAND
CORPORATION,  a New York corporation (the "Pledgor") to NATIONAL BANK OF CANADA,
NEW YORK BRANCH (the "Secured Party").

                                    RECITALS:

                       A. The Pledgor and the Secured  Party are entering into a
Credit Agreement dated as of the date hereof (as it may be amended,  modified or
supplemented from time to time, the "Credit Agreement") providing for extensions
of  credit  to the  Pledgor  in the  amounts,  and  subject  to  the  terms  and
conditions, specified in the Credit Agreement.

                       B. The  execution  and delivery of this Pledge  Agreement
and the pledge by the Pledgor to the Secured  Party of its rights in the Pledged
Collateral  (as  hereinafter  defined)  constitute  conditions  precedent to the
obligation of the Secured Party to extend credit to the Pledgor  pursuant to the
terms of the Credit Agreement.

                       ACCORDINGLY,  in  consideration  of the premises,  and in
order to induce the Secured  Party to execute  and deliver the Credit  Agreement
and to  extend  credit  to it  thereunder,  and  for  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby agrees with the Secured Party as follows:

             Section 1. Definitions.  (a) Capitalized terms that are not defined
herein have the  respective  meanings  ascribed to them in the Credit  Agreement
and, in addition, the following terms have the following meanings:

             "Amount Realized" has the meaning specified in Section 10.

             "Credit Agreement" has the meaning specified in Recital A.

             "Issuer" means each issuer of Pledged Shares.

             "Obligations"  means all  indebtedness  and other  liabilities  and
obligations  of the  Pledgor  to the  Secured  Party of every  kind,  nature and
description,  present or future, direct or indirect, secured or unsecured, joint
or several,  absolute or contingent,  matured or not, in any currency, due or to
become due, now existing or hereafter  arising,  regardless of how they arise or
by what  agreement  or  instrument  or whether  evidenced  by any  agreement  or
instrument and whether as principal or surety,  including,  without  limitation,
(i) the "Obligations" (as such term is defined in the Credit Agreement) and (ii)
the observance and  performance by the Pledgor of the obligations to be observed
and performed by it under this Pledge Agreement and any other agreement executed
by the  Pledgor  from time to time which  inures to the  benefit of the  Secured
Party.

             "Permissible  Amount" means the maximum amount of voting stock of a
Subsidiary  of the  Borrower  that is not a  Domestic  Subsidiary  which  may be
pledged  by  the  Borrower  without  causing  such  Subsidiary  to be  deemed  a
"controlled foreign  corporation" under Section 956 of the Internal Revenue Code
of 1986, as amended.

             "Pledge" has the meaning specified in Section 2.

             "Pledged Collateral" has the meaning specified in Section 2.

             "Pledged  Shares"  means all shares of capital  stock  described in
paragraphs (a), (b), and (c) of Section 2.

             "Uniform  Commercial  Code"  means the Uniform  Commercial  Code as
adopted and in effect from time to time in the State of New York.

             (b) Unless  otherwise  expressly  specified  herein,  defined terms
denoting the singular number shall,  when in the plural form,  denote the plural
number of the matter or item to which such defined terms refer, and vice-versa.

             (c) Words of the neuter gender mean and include  correlative  words
of the masculine and feminine gender.

             (d)  The  Section,  Schedule  and  Exhibit  headings  used  in this
Agreement  are for  convenience  only and shall not affect the  construction  or
meaning of any provisions of this Agreement.

             (e)  Unless  otherwise  specified,  the words  "hereof",  "herein",
"hereunder"  and other similar words refer to this  Agreement as a whole and not
just to the Section,  subsection or clause in which they are used; and the words
"this  Agreement"  refer to this  Pledge  Agreement,  as  amended,  modified  or
supplemented from time to time.

             (f) Unless otherwise specified,  references to Sections,  Recitals,
Schedules and Exhibits are  references  to Sections of, and Recitals,  Schedules
and Exhibits to, this Agreement.

             Section 2. Pledge. As collateral  security for the due and punctual
payment  and  performance  of  the  Obligations,  the  Pledgor  hereby  pledges,
hypothecates  and assigns to the Secured Party, and hereby grants to the Secured
Party a security interest in (all the foregoing herein called the "Pledge"), the
following  described  property,  whether now owned by the  Pledgor or  hereafter
acquired and whether now existing or hereafter created (hereinafter collectively
called the "Pledged Collateral"):

                       (a) all of the  shares  of  capital  stock of each of the
             Pledgor's  Subsidiaries  described in Schedule I, together with the
             certificates evidencing such shares;

                       (b) all other  shares of capital  stock of the  Pledgor's
             Domestic  Subsidiaries  now or at any time  hereafter  owned by the
             Pledgor;

                       (c) all other shares of capital stock of the Subsidiaries
             of the Pledgor  that are not  Domestic  Subsidiaries  now or at any
             time hereafter owned by the Pledgor, up to the Permissible Amount;

                       (d) all cash,  instruments,  securities or other property
             representing a dividend or other distribution on any of the Pledged
             Shares, or representing a distribution or return of capital upon or
             in respect of the Pledged  Shares,  or  resulting  from a split-up,
             revision,  reclassification  or other  like  change of the  Pledged
             Shares  or  otherwise  received  in  exchange  therefor,   and  any
             warrants,  rights or options issued to the holders of, or otherwise
             in respect of, the Pledged Shares;

                       (e) in the  event of any  consolidation  or merger of any
             Issuer in which such Issuer is not the surviving  corporation,  all
             shares  of  each  class  of the  capital  stock  of  the  successor
             corporation  (unless  such  successor  corporation  is the  Pledgor
             itself)  formed by or resulting from such  consolidation  or merger
             (provided  that  nothing  herein   contained  shall  be  deemed  to
             constitute  consent  under,  or waiver  of, any  provision  of this
             Agreement,  the Credit  Agreement or any other Loan Document  which
             prohibits such consolidation or merger by any Issuer);

                       (f) all  proceeds  of any of the  property of the Pledgor
             described  in  subsections  (a) through (c) above of this Section 2
             and,  to the  extent  related  to any  property  described  in said
             clauses or such proceeds, all books, correspondence,  credit files,
             records, invoices and other documents.

             Section 3. Pledge Absolute.

                       (a) The Pledgor hereby agrees that this  Agreement  shall
be  binding  upon the  Pledgor  and that the  Pledge of the  Pledged  Collateral
hereunder shall be irrevocable and unconditional,  irrespective of the validity,
legality or  enforceability  of the Credit  Agreement,  the Note, any other Loan
Document  or any of the  Obligations,  the  absence of any action to enforce the
same,  the waiver or consent by the Secured  Party with respect to any provision
thereof,  the  recovery of any judgment  against the  Pledgor,  or any action to
enforce the same or any other similar  circumstances.  The Pledgor hereby waives
diligence,  presentment, demand of payment, filing of claims with a court in the
event of merger or bankruptcy of the Pledgor, any notice to require a proceeding
first against the Pledgor or any other Person, protest or notice with respect to
the Note or any other  promissory  notes or  evidences of  indebtedness  secured
hereby or the indebtedness  evidenced  thereby and all demands  whatsoever,  and
covenants  that this  Agreement  will remain in full force and effect so long as
the Pledgor may borrow or request  the  issuance of letters of credit  under the
Credit Agreement or any Obligations remain unpaid.

                       (b) The Pledgor agrees that, without notice to or further
assent by the Pledgor,  the  liability of the Pledgor or of any other Person for
or upon any of the  Obligations  may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised or released by the Secured
Party, as the Secured Party may deem advisable,  and that the Pledged Collateral
or other  collateral or liens securing any of the Obligations  may, from time to
time, in whole or in part (subject,  in the case of the Pledged  Collateral,  to
the  provisions of this  Agreement),  be exchanged,  sold or  surrendered by the
Secured Party, as the Secured Party may deem advisable,  all without  impairing,
abridging,  affecting or diminishing this Agreement or the rights of the Secured
Party hereunder or with respect to the Pledged Collateral.

             Section 4.  Representations  and  Warranties.  The  Pledgor  hereby
represents and warrants as follows:

                       (a) The Pledgor is a corporation duly organized,  validly
             existing  and in good  standing  under  the laws of New  York.  The
             Pledgor has full power and  authority  to execute and deliver  this
             Agreement, to Pledge the Pledged Collateral pursuant hereto, and to
             incur and perform the obligations provided for herein.

                       (b)  The  execution,  delivery  and  performance  of this
             Agreement  by the  Pledgor,  the Pledge of the  Pledged  Collateral
             pursuant   hereto  and  the  incurrence  and   performance  of  the
             obligations  provided for herein (i) have been duly  authorized  by
             all  requisite  action  of the  Pledgor,  (ii) do not  require  the
             approval of the stockholders of the Pledgor, and (iii) will not (1)
             violate any law or regulation or the  certificate of  incorporation
             or by-laws of the  Pledgor,  (2)  violate or  constitute  (with due
             notice or lapse of time or both) a default  under any  provision of
             any indenture,  agreement, license or other instrument to which the
             Pledgor is a party or by which it or any of its  properties  may be
             bound or affected,  (3) violate any order of any court, tribunal or
             governmental  agency  binding  upon  the  Pledgor  or  any  of  its
             properties  or (4) result in the creation or imposition of any lien
             or encumbrance of any nature whatsoever upon any assets or revenues
             of  the  Pledgor  (except  liens  in  favor  of the  Secured  Party
             hereunder).

                       (c) No authorizations,  approvals and consents of, and no
             filings and  registrations  with,  any  governmental  or regulatory
             authority  or agency  or any other  Person  are  necessary  for the
             execution, delivery or performance by the Pledgor of this Agreement
             or for the validity or enforceability hereof.

                       (d) This  Agreement  constitutes  the  legal,  valid  and
             binding obligation of the Pledgor,  enforceable against the Pledgor
             in accordance with its terms.

                       (e) The Pledgor is the sole record and  beneficial  owner
             of the Pledged  Shares.  The Pledged  Shares are not subject to any
             liens,  security interests,  charges or encumbrances of any kind or
             nature, other than the liens created hereunder.  The Pledged Shares
             have been duly authorized and validly issued and are fully paid and
             non-assessable.  The Pledgor has legal title to the Pledged  Shares
             and the Pledgor has good and lawful  authority to Pledge all of the
             Pledged  Shares in the  manner  hereby  done or  contemplated.  The
             Pledged Shares are not subject to any contractual  restriction,  or
             any restriction  under the certificate of  incorporation or by-laws
             of any Issuer, upon the transfer thereof,  and no right, warrant or
             option to acquire any of the Pledged  Shares exists in favor of any
             other Person.  The Pledged Shares  constitute all of the issued and
             outstanding  shares of capital  stock of each  Issuer  beneficially
             owned by the Pledgor  (whether or not registered in the name of the
             Pledgor).  The Pledgor has taken all necessary action to create and
             perfect a security  interest in the Pledged  Shares in favor of the
             Secured Party, and the Secured Party has acquired a first and prior
             perfected security interest therein.

                       (f) When any item of  Pledged  Collateral  other than the
             Pledged  Shares is pledged  hereunder,  (i) the Pledgor will be the
             owner of such  item of  Pledged  Collateral  free and  clear of any
             liens,  security interests,  charges or encumbrances of any kind or
             nature  (other than those  created  hereunder),  (ii) each share of
             stock  comprising  such  Pledged  Collateral  will  have  been duly
             authorized,  validly  issued and be fully paid and  non-assessable,
             and (iii) the Pledgor will have legal title to such item of Pledged
             Collateral  and the Pledgor will have good and lawful  authority to
             Pledge and deliver  such item of Pledged  Collateral  in the manner
             hereby contemplated.

                       (g) The Pledgor's  chief  executive  office and principal
             place of business is located at the address specified  opposite its
             signature  hereto,  and the Pledgor  maintains all of its books and
             records at such address.

                       (h)  To  the  Pledgor's   knowledge,   the   information,
             schedules,  exhibits  and reports  furnished  by the Pledgor to the
             Secured Party in connection with the negotiation and preparation of
             this  Agreement did not contain any omissions or  misstatements  of
             fact which would make the statements  contained therein  misleading
             or incomplete in any material  respect. 

             Section  5. Covenants. The Pledgor  hereby agrees that,  unless the
Secured  Party  shall  otherwise  agree in  writing,  so long as the Pledgor may
borrow under the terms of the Credit  Agreement and until the payment in full of
the Obligations:

                       (a) The Pledgor (i) shall defend its title to the Pledged
             Collateral  against  all claims  and  demands  whatsoever  that are
             adverse to the Secured Party, (ii) shall not create,  incur, assume
             or  suffer to exist  any  liens,  security  interests,  charges  or
             encumbrances  of any  kind or  nature  (other  than  those  created
             hereunder)  in any  Pledged  Collateral  and (iii)  shall not sell,
             assign,  transfer,  exchange or otherwise  dispose of, or grant any
             option or other right with respect to, any Pledged Shares.

                       (b) The Pledgor shall,  upon demand of the Secured Party,
             do the following:  furnish further assurances of title, execute any
             written  agreement or do any other act(s)  necessary to  effectuate
             the purposes and provisions of this Pledge  Agreement,  execute any
             instrument,  document or statement  required by law or otherwise in
             order to perfect,  continue or preserve the  security  interests of
             the Secured Party in the Pledged  Collateral  and pay all filing or
             other costs incurred in connection therewith.

                       (c) The  Pledgor  shall not  change the  location  of its
             chief executive office or principal place of business or the office
             where it keeps its books and records from the respective  locations
             thereof  specified in Section 4(g) hereof,  until (i) it shall have
             given to the  Secured  Party not less than 30 days'  prior  written
             notice  of its  intention  so to do,  clearly  describing  such new
             location  and  providing  such  other   information  in  connection
             therewith as the Secured Party may reasonably request and (ii) with
             respect to such new  location,  it shall  have  taken such  action,
             satisfactory to the Secured Party (including,  without  limitation,
             the delivery of additional  financing statements duly signed by the
             Pledgor), to maintain the security interest of the Secured Party in
             the Pledged  Collateral  at all times fully  perfected  and in full
             force and effect.

                       (d) The Pledgor shall permit, and shall cause each Issuer
             and each  registrar and transfer  agent with respect to the Pledged
             Collateral to permit,  representatives  of the Secured Party,  upon
             reasonable  notice,  at any time during normal  business  hours, to
             inspect  and make  abstracts  from its or their  books and  records
             pertaining to the Pledged Collateral.

                       (e) Before the making of any Loan,  and upon the  Secured
             Party's  request  from time to time  thereafter,  the Pledgor  will
             make, execute,  acknowledge and deliver, and file and record in the
             proper  filing  and   recording   places,   all  such   instruments
             (including,  without limitation,  appropriate  financing statements
             and duly  executed  blank  stock  powers and other  instruments  of
             transfer or  assignment  satisfactory  in form and substance to the
             Secured Party),  and take all such action, as the Secured Party may
             reasonably  deem necessary or advisable to carry out the intent and
             purpose of this Pledge  Agreement  and to establish and maintain in
             favor of the  Secured  Party a  valid,  enforceable  and  perfected
             security  interest in the Pledged  Collateral  and the other rights
             contemplated  hereby that are  superior and prior to the rights and
             security  interests  of all  other  persons  or  entities.  Without
             limiting the generality of the foregoing sentence,  (i) the Pledgor
             will, from time to time upon the Secured Party's request, cause its
             accounting  books and  records  to be marked  with such  legends or
             segregated  in such manner as the Secured  Party may  specify,  and
             take or  cause  to be  taken  such  other  action  and  adopt  such
             procedures as the Secured Party may specify, to give notice of, and
             to perfect,  the security  interests  created hereby in the Pledged
             Collateral.

                       (f) The Pledgor shall procure,  pay for, affix to any and
             all documents and cancel any  documentary  tax stamps  required by,
             and in  accordance  with,  applicable  law and will  indemnify  the
             Secured  Party,  and hold the Secured Party harmless  against,  any
             liability  (including  interest and  penalties)  in respect of such
             documentary stamp taxes.

             Section 6. Appointment of Agents; Registration in Nominee Name. The
Secured Party shall have the right to appoint one or more agents for the purpose
of retaining physical possession of the certificates  representing or evidencing
the  Pledged  Collateral,  which may be held (in the  discretion  of the Secured
Party) in the name of the Pledgor,  endorsed or assigned in blank or in favor of
the  Secured  Party,  or in the  name of the  Secured  Party or any  nominee  or
nominees of the Secured Party or any agent  appointed by the Secured  Party.  In
addition to all other rights  possessed by the Secured Party,  the Secured Party
may, from time to time after the  occurrence and during the  continuation  of an
Event of Default,  at the Secured  Party's sole discretion and without notice to
the Pledgor,  take any or all of the following actions:  (a) transfer all or any
part of the  Pledged  Collateral  into  the  name of the  Secured  Party  or its
nominee,  with or without  disclosing that such Pledged Collateral is subject to
the lien and security interest created hereby;  (b) take control of any proceeds
of any of the Pledged Collateral;  and (c) exchange  certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations for any purpose consistent with its rights under
this Pledge Agreement;  provided that all powers of the Secured Party under this
Section 6 shall be subject to the rights of the Pledgor  under  Section 9 hereof
to the extent that the  exercise of such powers  represents a sale of an item of
Pledged Collateral.

             Section 7. Voting Rights; Dividends, Etc.

                       (g) So long as no Event of Default  has  occurred  and is
continuing,  the Pledgor shall be entitled to exercise any and all voting rights
and powers relating or pertaining to the Pledged  Collateral or any part thereof
for any purpose not inconsistent with the terms of this Pledge Agreement.

                       (b) So long as no Event of Default  has  occurred  and is
continuing, the Pledgor shall be entitled to receive and retain any and all cash
dividends  paid  on  the  Pledged  Collateral.  Any  and  all  stock  dividends,
liquidating   dividends,   distributions  of  property,   redemptions  or  other
distributions made on or in respect of the Pledged Collateral, whether resulting
from a subdivision,  combination or  reclassification of the outstanding capital
stock of any Issuer or received in exchange for Pledged  Collateral  or any part
thereof  or as a  result  of any  merger,  consolidation,  acquisition  or other
exchange of assets to which any Issuer may be a party or otherwise,  and any and
all cash and other  property  received  in  payment  of the  principal  of or in
redemption  of or in exchange  for any Pledged  Collateral  (either at maturity,
upon  call for  redemption  or  otherwise),  shall  become  part of the  Pledged
Collateral  and,  if  received  by the  Pledgor,  shall be held in trust for the
benefit of the Secured  Party and shall  forthwith  be  delivered to the Secured
Party or its designated agent  (accompanied by proper  instruments of assignment
and/or  stock  powers  executed  by the Pledgor in  accordance  with the Secured
Party's instructions) to be held subject to the terms of this Pledge Agreement.

                       (c) Upon the  occurrence  of an Event of  Default  and so
long as such Event of Default shall continue, at the option of the Secured Party
(subject to  applicable  law),  (i) all rights of the  Pledgor to  exercise  the
voting  rights and powers which the Pledgor is entitled to exercise  pursuant to
Section 7(a) shall cease,  and all such rights shall thereupon  become vested in
the Secured Party, and the Secured Party shall have the sole and exclusive right
and authority to exercise such voting  and/or  consensual  rights and powers and
(ii) the Secured  Party shall be entitled to receive and retain any and all cash
dividends,  if any, paid on the Pledged  Collateral.  Any and all cash and other
property  paid  over  to or  received  by  the  Secured  Party  pursuant  to the
provisions of this subsection (c) shall be retained by the Secured Party as part
of the  Pledged  Collateral,  and  shall  be  applied  in  accordance  with  the
provisions hereof.

                       (d)  Concurrently  with its execution of this  Agreement,
the Pledgor shall execute and deliver to the Secured Party an irrevocable  proxy
to vote the Pledged  Shares,  substantially  in the form of Exhibit A. After the
occurrence and during the continuance of an Event of Default,  the Pledgor shall
deliver to the Secured Party such further evidence of such irrevocable  proxy or
such further  irrevocable  proxies to vote any shares of stock constituting part
of the Pledged Collateral as the Secured Party may request.

                       (e) The Secured Party at any time may extend or renew for
one or more  periods  (whether  or not  longer  than the  original  period)  the
Obligations, and grant releases,  compromises or indulgences with respect to the
Obligations or any extension or renewal  thereof or any security  therefor or to
any obligor  hereunder  or  thereunder  without  impairing  the Secured  Party's
rights, or releasing the Pledgor from its obligations, hereunder.

             Section 8. Remedies upon Default.  Upon the  occurrence of an Event
of Default,  the Secured Party may, without being required to give any notice to
the Pledgor,  apply the cash (if any) then held by it pursuant to Section 6 or 7
to the ratable  payment in full of the  Obligations  and all other  indebtedness
referred  to in Section 10 in the order and manner  specified  in Section 10. If
there  is no such  cash,  or the  cash so  applied  is  insufficient  to pay all
Obligations then due and payable in full, the Secured Party may sell the Pledged
Collateral,  or any part thereof,  in accordance  with Section 9 and shall apply
the proceeds of such sale to the ratable  payment in full of the Obligations and
all other  indebtedness  referred  to in  Section  10 in the  order  and  manner
specified in Section 10.

             Section 9. Sale of Pledged  Collateral. (a) The sale of the Pledged
Collateral  or any portion  thereof may be made at any public or private sale or
at any broker's board or on any securities  exchange,  for cash,  upon credit or
for future delivery,  as the Secured Party shall deem  appropriate.  The Secured
Party shall be  authorized at any such sale (to the extent it deems it advisable
to do so) to restrict the prospective  bidders or purchasers to persons who will
represent and agree that they are purchasing the Pledged  Collateral  then being
sold  for  their  own  account  for  investment  and  not  with  a  view  to the
distribution  or  resale  thereof,  and upon  consummation  of any such sale the
Secured Party shall have the right to assign,  endorse,  transfer and deliver to
the purchaser or purchasers  thereof the Pledged  Collateral so sold.  Each such
purchaser at any such sale shall hold the property  sold  absolutely,  free from
any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to
the extent permitted by law) all right of redemption, stay and/or appraisal that
it now has or may at any  time  in the  future  have  under  any  rule of law or
statute  now  existing  or  hereafter  enacted.  Except  in the case of  Pledged
Collateral  which  threatens  to  decline  speedily  in  value  or is of a  type
customarily sold on a recognized  exchange,  the Secured Party shall give to the
Pledgor at least ten (10) days' written notice of the Secured Party's  intention
to make any such  public or private  sale or sale at a broker's  board or on any
such securities  exchange.  Such notice, in case of public sale, shall state the
time and place fixed for such sale, and, in the case of sale at a broker's board
or on a  securities  exchange,  shall  state the board or exchange at which such
sale is to be made and the day on which the Pledged  Collateral,  or any portion
thereof,  will first be offered  for sale at such  board or  exchange.  Any such
public sale shall be held at such time or times within ordinary  business hours,
and at such place or places,  as the Secured Party may fix in the notice of such
sale. At any such sale, the Pledged  Collateral,  or any portion thereof,  to be
sold  may be sold in one  lot as an  entirety  or in  separate  parcels,  as the
Secured  Party may determine and the Secured Party may bid (which bid may be, in
whole  or in  part,  in the  form of  cancellation  of any  Obligation)  for and
purchase the whole or any part of the Pledged Collateral. The Secured Party may,
without notice or  publication,  adjourn any public or private sale or cause the
same to be  adjourned  from time to time by  announcement  at the time and place
fixed for sale, and such sale may,  without further notice,  be made at the time
and  place to which  the same was so  adjourned.  In case the sale of all or any
part of the Pledged  Collateral  is made on credit or for future  delivery,  the
Pledged  Collateral  so sold may be retained by the Secured Party until the sale
price is paid by the  purchaser or  purchasers  thereof,  but the Secured  Party
shall not incur any  liability in case any such  purchaser or  purchasers  shall
fail to take up and pay for the Pledged  Collateral  so sold and, in the case of
any such failure, such Pledged Collateral may be sold again upon like notice. As
an  alternative  to exercising  the power of sale herein  conferred upon it, the
Secured  Party may  proceed by a suit or suits at law or in equity to  foreclose
this  Pledge  Agreement  and to sell  the  Pledged  Collateral,  or any  portion
thereof,  pursuant  to a  judgment  or decree of a court or courts of  competent
jurisdiction.

                       (b) In  connection  with any  disposition  of the Pledged
Collateral, if the Secured Party elects to obtain the advice of any one of three
independent,  nationally known investment banking firms that are member firms of
the New York Stock  Exchange,  proposed by the Secured  Party to the Pledgor and
chosen by the Pledgor within seven days of receiving  notice thereof (or, if the
Pledgor fails to agree on such choice within such seven-day  period,  the advice
of any one of such firms chosen by the Secured Party) with respect to the method
or manner of sale or  disposition  of any of the  Pledged  Collateral,  the best
price reasonably  obtainable therefor and any other details concerning such sale
or  disposition,  then,  to the  extent  permitted  by law,  any  sale or  other
disposition of any Pledged Collateral in reliance on such advice shall be deemed
to be commercially  reasonable  under the Uniform  Commercial Code and otherwise
proper.

                       (c) The Pledgor  understands that compliance with Federal
or state  securities  laws may very strictly  limit the course of conduct of the
Secured Party if the Secured Party were to attempt to dispose of all or any part
of the Pledged  Collateral  and may also limit the extent to which or the manner
in which any subsequent  transferee of the Pledged Collateral may dispose of the
same. The Pledgor  agrees that in any sale of any of the Pledged  Collateral the
Secured  Party is  hereby  authorized  to  comply  with any such  limitation  or
restriction  in  connection  with such sale as it may be  advised  by counsel is
necessary in order to (i) avoid any  violation  of  applicable  law  (including,
without  limitation,  compliance with such procedures as may restrict the number
of prospective  bidders and purchasers  and/or further restrict such prospective
bidders or  purchasers  to persons  who will  represent  and agree that they are
purchasing  for  their own  account  for  investment  and not with a view to the
distribution  or resale of such Pledged  Collateral) or (ii) obtain any required
approval  of  the  sale  or of the  purchaser  by  any  governmental  regulatory
authority or official. The Pledgor further agrees that such compliance shall not
result  in such  sale  being  considered  or  deemed  not to have been made in a
commercially  reasonable  manner, and that the Secured Party shall not be liable
or  accountable  to the Pledgor for any  discount  allowed by reason of the fact
that the Pledged  Collateral is sold in compliance  with any such  limitation or
restriction.

                       (d) The  Secured  Party shall be under no  obligation  to
sell or  otherwise  dispose of any Pledged  Collateral,  or to cause any Pledged
Collateral to be sold or otherwise  disposed of, by reason of any  diminution in
the fair market  value  thereof,  and the failure of the Secured  Party to do so
shall under no circumstances be deemed a failure to exercise  reasonable care in
the custody or preservation of the Pledged Collateral.

                       (e) The  Secured  Party shall be under no  obligation  to
delay a sale or disposition of any of the Pledged Shares to permit the issuer of
such Pledged Shares to register them for public sale under the Securities Act of
1933 or under any applicable state securities or blue-sky laws.

                       (f) In addition to the rights and remedies granted to the
Secured Party in this Pledge  Agreement and in any other instrument or agreement
securing,  evidencing or relating to any of the  Obligations,  the Secured Party
shall have all the rights and  remedies  of a secured  party  under the  Uniform
Commercial  Code. The Secured Party shall have the right in its sole  discretion
to determine  which  rights,  security,  liens,  guaranties or remedies it shall
retain,  pursue,  release,  subordinate,  modify or enforce,  without in any way
modifying  or affecting  any of the other of them or any of the Secured  Party's
rights hereunder.

             Section 10. Application of Proceeds of Collateral Sale.

                       (a)  If  the  Pledgor  shall  fail  to  pay  any  of  the
Obligations  when due (whether at  maturity,  upon demand,  by  acceleration  or
otherwise),  the  Secured  Party  shall  apply all cash held by it  pursuant  to
Section 6 or 7 with  respect to the Pledged  Collateral  and the proceeds of the
sale of any  Pledged  Collateral  (such  cash and  proceeds  being  referred  to
collectively as the "Amount Realized") as follows:

                       First:  to the payment of the costs and  expenses of such
             sale or the  collection of such cash,  including the  out-of-pocket
             expenses  of  the  Secured  Party  and  the  reasonable   fees  and
             disbursements of counsel employed in connection  therewith,  and to
             the  payment  of all  advances  made by the  Secured  Party for the
             account of the Pledgor  hereunder  and the payment of all costs and
             expenses  incurred  by the  Secured  Party in  connection  with the
             administration  and  enforcement  of this Agreement and the Pledged
             Collateral;

                       Second: to the payment in full of the Obligations in such
             order and manner as the Secured Party shall determine;

                       Third:  the  balance (if any) of such  proceeds  shall be
             paid to the  Pledgor or as a court of  competent  jurisdiction  may
             direct.

                       (b) The Pledgor shall remain liable for any deficiency in
its Obligations remaining after the application thereto of said payments.

             Section 11. Compliance With Securities Laws.

                       (a) The  Pledgor  shall  cause each Issuer to execute and
deliver to the Secured Party  concurrently with the Pledgor's  execution of this
Agreement  an  undertaking  substantially  in the form of  Exhibit B hereto  and
agrees  that if any Event of  Default  shall  occur  the  Pledgor  shall,  if so
requested by the Secured  Party and at the Pledgor's  sole  expense,  cause each
Issuer to perform its obligations under such undertaking.

                       (b) If the Secured Party determines to exercise its right
to sell any or all of the Pledged Shares,  upon written request from the Secured
Party the Pledgor  shall,  furnish to the Secured Party all such  information as
the Secured Party may request in order to determine the number of Pledged Shares
which  may be sold  by the  Secured  Party  in  exempt  transactions  under  the
Securities Act of 1933 and the rules of the  Securities and Exchange  Commission
thereunder, as the same are from time to time in effect.

                       (c) The Pledgor  further agrees to do or cause to be done
all  such  other  acts  and  things  as may be  necessary  to make  any  sale or
disposition  of any  portion or all of the Pledged  Shares by the Secured  Party
hereunder valid and binding and in compliance with any and all applicable  laws,
regulations,  orders,  writs,  injunctions,  decrees  or  awards  of any and all
courts,  arbitrators  or  governmental  instrumentalities,  domestic or foreign,
having  jurisdiction  over any such  sale or sales or  dispositions,  all at the
Pledgor's sole expense.  The Pledgor  further agrees that a breach of any of the
covenants  contained  in this  Section 11 will cause  irreparable  injury to the
Secured Party,  that the Secured Party has no adequate  remedy at law in respect
of such breach and agrees that each and every covenant contained in this Section
11 shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives  and agrees not to assert  any  defenses  against an action for  specific
performance of such covenants, except for a defense that no Event of Default has
occurred,  that such Event of Default has been cured or waived,  that all of the
Obligations  have been paid in full or that the Secured  Party has  released the
Pledged Shares or that the performance sought would violate applicable law.

             Section 12. Indemnification. The Pledgor hereby agrees to indemnify
the Secured Party for any and all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind and nature  whatsoever  which may be imposed  on,  incurred  by or asserted
against  the  Secured  Party  in any  way  relating  to or  arising  out of this
Agreement or any other  documents  contemplated  by or referred to herein or the
transactions  contemplated hereby or the enforcement of any of the terms hereof;
provided, however, that the Pledgor shall not be liable for any of the foregoing
to the extent they arise from the gross negligence or willful  misconduct of the
Secured Party or failure by the Secured Party to exercise reasonable care in the
custody and preservation of the Pledged Collateral as provided in Section 15.

             Section 13. Secured Party Appointed  Attorney-in-Fact.  The Pledgor
hereby appoints the Secured Party as the Pledgor's  attorney-in-fact,  with full
power of  substitution,  for the purpose of carrying out the  provisions of this
Agreement and taking any action and executing  any  instrument  that the Secured
Party may deem necessary or advisable to accomplish the purposes  hereof,  which
appointment is irrevocable  and coupled with an interest.  Without  limiting the
generality of the foregoing, the Secured Party shall have the right and power to
sign  the  name  of  the  Pledgor  to  any  financing  statements,  continuation
statements or other documents under the Uniform  Commercial Code relating to the
Pledged Collateral, and, to the extent permitted under Section 7, shall have the
right and power to receive,  endorse and collect all checks and other orders for
the payment of money made  payable to the  Pledgor  representing  any  dividend,
interest  payment or other  distribution  payable or distributable in respect of
the Pledged Collateral or any part thereof and to give full discharge therefor.

             Section 14. No Subrogation. Notwithstanding any payment or payments
made by the Pledgor  hereunder,  the receipt of any amounts by the Secured Party
with respect to the Pledged  Collateral or any setoff or application of funds of
the  Pledgor by the  Secured  Party,  the  Pledgor  shall not be  entitled to be
subrogated to any of the rights of the Secured Party against the Pledgor, or any
collateral  security,  guaranty or right of offset held by the Secured Party for
the payment of the Obligations, and the Pledgor shall not seek any reimbursement
from the Pledgor in respect of payments made by the Pledgor hereunder.

             Section  15.  Limitations  on  Secured  Party's  Duty in Respect of
Collateral.  Beyond the safe custody  thereof,  the Secured Party shall not have
any duty as to any Pledged  Collateral  in its  possession  or control or in the
possession or control of any agent or nominee of the Secured Party or any income
thereon or as to the  preservation  of rights against prior parties or any other
rights pertaining thereto.

             Section 16. No Waiver;  Cumulative  Remedies.  No course of dealing
between the Pledgor and the Secured Party, no failure on the part of the Secured
Party to  exercise,  and no delay in  exercising,  any  right,  power or  remedy
hereunder  shall  operate as a waiver  thereof;  nor shall any single or partial
exercise of any such right,  power or remedy by the Secured  Party  preclude any
other or further exercise  thereof or the exercise of any other right,  power or
remedy.  All remedies  hereunder are  cumulative  and not exclusive of any other
remedies provided by law,  including without  limitation the rights and remedies
of a secured party under the Uniform Commercial Code.

             Section 17.  Termination.  This Agreement  shall terminate when the
Secured Party's obligation to make Loans under the terms of the Credit Agreement
has terminated and all of the Obligations  have been paid in full, at which time
the Secured Party shall reassign and redeliver to the Pledgor,  without recourse
or warranty and at the sole expense of the Pledgor, against receipt, such of the
Pledged  Collateral (if any) as shall not have been sold,  assigned,  collected,
received,  appropriated  or  realized  pursuant  to Section 8 or 9 or  otherwise
applied by the Secured Party to the payment of the  Obligations  pursuant to the
terms hereof and is then still held by it hereunder,  together with  appropriate
instruments of reassignment and release; provided,  however, that this Agreement
shall be reinstated if any payment in respect of the  Obligations  is rescinded,
invalidated,  declared to be fraudulent or preferential or otherwise required to
be restored or returned by the Secured Party for any reason,  including  without
limitation  by reason of the  insolvency,  bankruptcy or  reorganization  of the
Pledgor or any other Person.

             Section 18.  Addresses  for Notices,  Etc.  All notices,  requests,
demands,   instructions,   directions  and  other  communications  provided  for
hereunder   shall  be  in  writing   (which   term  shall   include   telecopied
communications)  and  shall be  telecopied  or  delivered  by hand or  overnight
courier to the applicable  party at the address or telecopier  number  specified
below for such party:

                       If to the Pledgor, at:

                             V Band Corporation
                             565 Taxter Road
                             Elmsford, New York 10523-2330
                             Attention: Mr. Mark R. Hahn
                             Vice President and Chief Financial Officer
                             Telephone No.: (914) 789-5000
                             Telecopier No.: (914) 789-5068

                       If to the Secured Party, at:

                             National Bank of Canada
                             125 West 55th Street
                             New York, New York 10019
                             Attention: Mr. Joseph A. Klapkowski
                             Telephone No.:  (212) 632-8551
                             Telecopier No.: (212) 632-8545

or, as to any party,  to such other address or  telecopier  number as such party
shall  specify by a notice in writing to the other party  hereto.  Each  notice,
request,  demand,  instruction,  direction or other  communication  provided for
hereunder shall be deemed  delivered (i) if by hand or overnight  courier,  when
delivered to the applicable party at such address, and (ii) if by telecopy, when
sent to the applicable party at such telecopier number.

             Section 19.  Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability  in any  jurisdiction  shall  not  invalidate  or  render  such
provision unenforceable in any other jurisdiction.

             Section  20.  Further  Assurances.  The  Pledgor  agrees to do such
further  reasonable acts and things,  and to execute and deliver such additional
conveyances,  assignments,  agreements and instruments, as the Secured Party may
at any time request in connection with the administration or enforcement of this
Pledge Agreement (including, without limitation, to aid the Secured Party in the
sale of all or any part of the  Pledged  Collateral)  or related to the  Pledged
Collateral or any part thereof or in order better to assure and confirm unto the
Secured Party rights, powers and remedies hereunder. The Pledgor hereby consents
and  agrees  that  any  registrar  or  transfer  agent  for  any of the  Pledged
Collateral  shall be  entitled  to accept the  provisions  hereof as  conclusive
evidence of the right of the Secured  Party to effect any  transfer  pursuant to
Section  6,  notwithstanding  any other  notice  or  direction  to the  contrary
heretofore  or  hereafter  given by the Pledgor or any other  person to any such
registrar to transfer agent.

             Section 21. Binding Agreement;  Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns,  except that the Pledgor shall not assign this Agreement
or any interest  herein or in the Pledged  Collateral  or any part  thereof,  or
otherwise  pledge,  encumber  or grant any option  with  respect to the  Pledged
Collateral or any part thereof, without the prior written consent of the Secured
Party.  The Secured Party may assign this  Agreement and its rights and remedies
hereunder in whole or in part to any assignee of the  Obligations or any portion
thereof.

             Section 22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE  CONSTRUED  IN  ACCORDANCE  WITH,  THE LAWS OF THE  STATE OF NEW  YORK,
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.

             Section 23. SUBMISSION TO JURISDICTION.

                       (A)  THE  PLEDGOR   HEREBY   EXPRESSLY   SUBMITS  TO  THE
NON-EXCLUSIVE  JURISDICTION  OF ALL FEDERAL AND STATE COURTS SITTING IN THE CITY
OF NEW  YORK,  STATE  OF NEW  YORK,  IN  CONNECTION  WITH  ANY  ACTION,  SUIT OR
PROCEEDING  RELATING TO THIS AGREEMENT,  ANY INSTRUMENT OR DOCUMENT  REFERRED TO
HEREIN OR RELATED HERETO, OR ANY ITEM OF PLEDGED  COLLATERAL,  AND IN CONNECTION
THEREWITH  AGREES THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER  APPLICATION  TO
ANY OF SAID COURTS OR A JUDGE  THEREOF MAY BE SERVED UPON THE PLEDGOR  WITHIN OR
WITHOUT SUCH COURT'S  JURISDICTION  BY  REGISTERED  OR  CERTIFIED  MAIL,  AT THE
ADDRESS OF THE PLEDGOR  SPECIFIED IN SECTION 18 HEREOF (OR AT SUCH OTHER ADDRESS
AS THE PLEDGOR SHALL SPECIFY BY A PRIOR NOTICE IN WRITING TO THE SECURED PARTY),
PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED.

                       (B) THE PLEDGOR HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY  INSTRUMENT  OR
DOCUMENT  REFERRED TO HEREIN OR RELATED  HERETO  BROUGHT IN ANY FEDERAL OR STATE
COURT  SITTING  IN THE CITY OF NEW YORK,  STATE OF NEW YORK AND  HEREBY  FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                       (C) NOTWITHSTANDING THE FOREGOING,  THE SECURED PARTY MAY
SUE THE PLEDGOR IN ANY  JURISDICTION  WHERE THE PLEDGOR OR ANY OF ITS ASSETS MAY
BE FOUND  AND MAY SERVE  LEGAL  PROCESS  UPON THE  PLEDGOR  IN ANY OTHER  MANNER
PERMITTED BY LAW.

             Section 24. WAIVER OF JURY TRIAL.  THE PARTIES  HERETO HEREBY WAIVE
ANY  RIGHT  THEY  MAY HAVE TO A TRIAL BY JURY OF ANY  DISPUTE  ARISING  UNDER OR
RELATING TO THIS  AGREEMENT,  ANY  INSTRUMENT OR DOCUMENT  REFERRED TO HEREIN OR
RELATED  HERETO,  OR ANY ITEM OF  PLEDGED  COLLATERAL,  AND AGREE  THAT ANY SUCH
DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

             Section 25.  Amendments.  No  provision  of this  Agreement  may be
amended,  waived or modified,  and (unless otherwise provided herein) no item of
Pledged  Collateral  may be released,  except in a writing signed by the Pledgor
and the Secured Party.

             Section 26.  Expenses.  The Pledgor  hereby agrees to reimburse the
Secured  Party for all costs  and  expenses  of the  Secured  Party  (including,
without  limitation,  all reasonable fees and disbursements of counsel) incurred
by the Secured Party in connection with the preparation of this Agreement or any
amendments  hereto,  the filing or recording of this Agreement or any instrument
with respect  hereto,  the  enforcement of the Secured Party's rights under this
Agreement,  the  sale of the  Pledged  Collateral  or any part  thereof  and the
collection of payments due under or in respect of the Pledged Collateral and all
amounts due under this Agreement.

             Section 27.  Waiver of Notice of  Acceptance.  The  Pledgor  hereby
waives  notice of the making of any Loan or the  issuance of the Note and notice
from the Secured Party of its acceptance of and reliance upon this Agreement.

             Section  28.  Execution  in  Counterparts.  This  Agreement  may be
executed  in any number of  counterparts  and by  different  parties on separate
counterparts,  all of which when taken together shall constitute but one and the
same agreement.
<PAGE>

IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly executed by
its duly authorized officer as of the date first above written.


Address of Pledgor's                        V BAND CORPORATION
Chief Executive Office
and Principal Place of
Business:                               By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
565 Taxter Road                      Title: Chairman and Chief Executive Officer
Elmsford, New York 10523-2330
<PAGE>
                                  Schedule I to
                                Pledge Agreement

<TABLE>
<CAPTION>

                                      SCHEDULE OF PLEDGED SHARES


                                                                                               Stock
Name of           Beneficial     Number of      Class of     Percentage of      Par       Certificate
Issuer              Owner          Shares         Stock           Class          Value          No.
------              -----          ------         -----           -----          -----          ---
<S>                 <C>            <C>            <C>          <C>            <C>               <C>
Borrower (a New     Various        5,328,303      Common          100%
York corporation)   Persons

Licom               Borrower       100            Common          100%               $.01        1
Incorporated (a
Delaware
corporation)

V Band NE, Inc.     Borrower       100            Common          100%               $.01        1
(a New York
corporation)

V Band Services,    Borrower       100            Common          100%               $.01        1
Inc. (a New York
corporation)

V Band PLC          Borrower       31,383         Ordinary     App. 100%      (pound)1.00       20
(Registered in      Licom          1              Ordinary
England No.
1855636)

VBI Corporation     Borrower       1,000          Common          100%              $1.00        2
(a U.S. Virgin
Island
corporation)
</TABLE>
<PAGE>
                                                                    Exhibit A to
                                                                Pledge Agreement

                            FORM OF IRREVOCABLE PROXY 


             KNOW ALL MEN BY THESE  PRESENTS  that the  undersigned  does hereby
make,  constitute and appoint  NATIONAL BANK OF CANADA (the "Secured Party") and
each of the  Secured  Party's  officers  and  employees,  its  true  and  lawful
attorneys,  for it and in its  name,  place  and  stead,  to act as its proxy in
respect of all of the shares of capital stock of (i) V Band NE, Inc., a New York
corporation, (ii) V Band Services, Inc., a New York corporation, and (iii) Licom
Incorporated,   a  Delaware   corporation   (hereinafter   referred  to  as  the
"Subsidiaries"),  which it now or hereafter may own or hold, including,  without
limitation,  the right, on its behalf,  to demand the call by any proper officer
of  each  of the  Subsidiaries  pursuant  to the  provisions  of the  respective
certificates  of  incorporation  or by-laws of each of the  Subsidiaries  and as
permitted  by  law  of  a  meeting  of  each  of  the  Subsidiaries   respective
shareholders and at any meeting of shareholders,  annual, general or special, to
vote for the  transaction  of any and all  business  that may come  before  such
meeting, or at any adjournment thereof, including, without limitation, the right
to vote for the sale of all or any part of the respective  assets of each of the
Subsidiaries and/or the liquidation and dissolution of each of the Subsidiaries;
giving and  granting to its said  attorneys  full power and  authority to do and
perform each and every act and thing,  whether necessary or desirable to be done
in and  about  the  premises,  as fully  as it  might or could do if  personally
present,  with full power of  substitution,  appointment and revocation,  hereby
ratifying and confirming all that their  respective  attorneys shall do or cause
to be done by virtue hereof.

             This  Irrevocable  Proxy is given to the  Secured  Party and to its
officers and employees in consideration of its execution and delivery the Credit
Agreement  dated as of the date hereof between the  undersigned  and the Secured
Party (as it may be amended,  modified or  supplemented  from time to time,  the
"Credit Agreement"),  and the transactions contemplated thereby, and in order to
carry  out  the  covenant  of the  undersigned  contained  in a  certain  Pledge
Agreement of even date herewith by the undersigned in favor of the Secured Party
(as it may be amended,  modified or supplemented  from time to time, the "Pledge
Agreement"),  and this Proxy shall be irrevocable  and coupled with an interest,
and shall be effective and binding upon the  undersigned  and its successors and
assigns until the  termination of the Secured  Party's  obligation to make loans
under the Credit Agreement and the payment in full of all of the Obligations (as
such term is defined in the Pledge  Agreement)  and may be exercised  only after
the occurrence  and during the  continuance of an Event of Default (as such term
is defined in the Credit Agreement).
<PAGE>

             IN WITNESS  WHEREOF,  the undersigned  has caused this  Irrevocable
Proxy to be  executed by its duly  authorized  officer as of this 28 day of May,
1997.


                                                 V BAND CORPORATION


                                             By: _______________________
                                           Name:
                                          Title:


<PAGE>
                                                                    Exhibit B to
                                                                Pledge Agreement

                          FORM OF ISSUER'S UNDERTAKING 


                  The undersigned agrees that if an Event of Default shall occur
under the Credit  Agreement  (as such term is  defined in the Pledge  Agreement)
dated as of May 28, 1997 (said Pledge Agreement, as it may be amended,  modified
or  supplemented  from  time  to  time,  the  "Pledge  Agreement"),  by  V  Band
Corporation, a New York corporation (the "Pledgor") in favor of National Bank of
Canada,  New York Branch (the "Secured  Party"),  the undersigned  shall, at the
request of the Secured Party and at the sole expense of the undersigned, furnish
to the  Secured  Party such  statements,  prospectuses,  opinions of counsel and
other  documents as the Secured  Party shall require to enable  compliance  with
applicable state and federal  securities or blue sky laws in connection with the
public sale or other  disposition of the Pledged  Shares and to facilitate  such
public sale or disposition.  The undersigned  agrees that a breach of any of its
obligations set forth in this undertaking will cause  irreparable  injury to the
Secured Party,  that the Secured Party has no adequate  remedy at law in respect
of such breach and agrees that each and every covenant contained herein shall be
specifically  enforceable  against the undersigned,  and the undersigned  hereby
waives  and agrees not to assert  any  defenses  against an action for  specific
performance of such covenants.  The undertaking of the undersigned  herein shall
remain in full force and effect notwithstanding any amendment or modification of
the Pledge Agreement, which amendment or modification may be made without notice
to or the consent of the undersigned.

                                           [INSERT NAME OF ISSUER]


                                                By: _______________________
                                              Name:
                                             Title:


<PAGE>
                               V BAND CORPORATION
                                 565 Taxter Road
                            Elmsford, New York 10523

                                  May 28, 1997
National Bank of Canada
125 West 55th Street
New York, New York 10019

                  Re:  Post-Closing Satisfaction of Certain Conditions
Gentlemen:
                  Reference is made to the Credit Agreement dated as of the date
hereof  between V Band  Corporation  and  National  Bank of Canada (the  "Credit
Agreement"). All capitalized terms which are defined in the Credit Agreement and
are not otherwise  defined  herein shall have the  respective  meanings given to
them in the Credit Agreement.

                  We hereby  request that you make Loans to us and issue Letters
of Credit for our account under the Credit  Agreement  notwithstanding  the fact
that we have  not  delivered  to you (i) the  evidence  required  under  Section
5.1(a)(viii)  (4) and (5) that our  patents,  trademarks,  copyrights  and other
intellectual  property  (including  the source code for all of our software) are
owned by us and are not  subject to any rights or  interests  of third  parties,
that your liens  thereon have been duly  perfected  and that the source code has
been delivered to an escrow agent acceptable to you under an escrow  arrangement
satisfactory   to  you  (the   "Intellectual   Property   Condition")  and  (ii)
certificates representing the Pledged Stock as provided in Section 5.1(a)(ix) of
the Credit  Agreement,  together with an opinion of counsel covering such pledge
and the Pledged Stock (the "Stock Pledge Condition").  In order to induce you to
make Loans to us and issue  Letters of Credit for our  account  under the Credit
Agreement,  we  hereby  (a)  undertake  to  satisfy  the  Intellectual  Property
Condition as soon as  practicable  but in any event no later than June 30, 1997,
and the Stock Pledge  Condition as soon as practicable but in any event no later
than June 17, 1997,  and (b) agree that failure to satisfy  either  Condition by
the date specified for it above will  constitute an additional  Event of Default
under the Credit Agreement.
<PAGE>

                  We hereby  acknowledge that,  notwithstanding  anything to the
contrary  contained in the Credit  Agreement,  until we satisfy the Intellectual
Property  Condition  we will not have the right to request  and you will have no
obligation  to make or issue Loans or Letters of Credit if, after giving  effect
thereto,  the Exposure would exceed 85% of the aggregate  amount of the Eligible
Accounts at such time. We hereby  acknowledge that Eligible Inventory will in no
event be included in the Borrowing Base until we have satisfied the Intellectual
Property Condition.

                                             Very truly yours,

                                             V BAND CORPORATION


                                        By: /s/Thomas E. Feil
                                            -----------------
                                      Name: Thomas E. Feil
                                     Title: Chairman and Chief Executive Officer
Accepted and Agreed:

NATIONAL BANK OF CANADA


   By: /s/Gaetan R. Frosina
       --------------------
 Name: Gaetan R. Frosina
Title: Vice President


   By: /s/Joseph A. Klapkowski
       -----------------------
 Name: Joseph A. Klapkowski
Title: Assistant Vice President