REVOLVING CREDIT AND TERM LOAN AGREEMENT

                            dated as of June 28, 2002


                                      among


                              EMERSON RADIO CORP.,
                             MAJEXCO IMPORTS, INC.,
                       EMERSON RADIO (HONG KONG) LIMITED,
                      And EMERSON RADIO INTERNATIONAL LTD.,
                                 as the Borrower


                         PNC BANK, NATIONAL ASSOCIATION
                       AND THE OTHER LENDERS PARTY HERETO,
                                   as Lenders


                                       and


                    PNC BANK, NATIONAL ASSOCIATION, as Agent


<PAGE>
<TABLE>

                                TABLE OF CONTENTS

                                                                                                             Page

<S>           <C>                                                                                                <C>
ARTICLE 1.  DEFINITIONS...........................................................................................1
      Section 1.1        Defined Terms............................................................................1
      Section 1.2        Other Definitional Provisions...........................................................20

ARTICLE 2.  AMOUNT AND TERMS OF COMMITMENTS......................................................................20
      Section 2.1        Revolving Credit Commitments............................................................20
      Section 2.2        Revolving Credit Note...................................................................21
      Section 2.3        Procedure for Revolving Credit Borrowings...............................................21
      Section 2.4        Commitment and Other Fees...............................................................22
      Section 2.5        Termination/Reduction of Commitments....................................................23
      Section 2.6        Term Loans..............................................................................23
      Section 2.7        Term Notes..............................................................................23
      Section 2.8        Procedure for Term Loan Borrowing.......................................................24
      Section 2.9        Prepayments.............................................................................24
      Section 2.10       Conversion and Continuation Options.....................................................25
      Section 2.11       Minimum Amounts of Tranches/Number of Tranches..........................................26
      Section 2.12       Interest Rates and Payment Dates........................................................26
      Section 2.13       Inability to Determine Interest Rate....................................................27
      Section 2.14       Payments/Funding........................................................................28
      Section 2.15       Change in Legality......................................................................29
      Section 2.16       Increased Costs.........................................................................30
      Section 2.17       Indemnity...............................................................................32
      Section 2.18       Intentionally omitted...................................................................33
      Section 2.19       Purpose of Loans........................................................................33

ARTICLE 3.  REPRESENTATIONS AND WARRANTIES.......................................................................37
      Section 3.1        Financial Condition.....................................................................37
      Section 3.2        No Material Adverse Change..............................................................38
      Section 3.3        Corporate Existence; Compliance with Law................................................38
      Section 3.4        Corporate Power; Authorization; Enforceable Obligations.................................38
      Section 3.5        No Legal Bar............................................................................39
      Section 3.6        No Material Litigation..................................................................39
      Section 3.7        No Default..............................................................................39
      Section 3.8        Ownership of Property; Liens............................................................39
      Section 3.9        Intellectual Property...................................................................39
      Section 3.10       No Burdensome Restrictions..............................................................40
      Section 3.11       Taxes...................................................................................40
      Section 3.12       Federal Regulations.....................................................................40
      Section 3.13       Investment Company Act; Public Utility Holding Company
                         Act; Other Regulations..................................................................40

<PAGE>

      Section 3.14       Subsidiaries............................................................................40
      Section 3.15       Employee Grievances.....................................................................40
      Section 3.16       ERISA...................................................................................41
      Section 3.17       ER Intercompany Payable.................................................................42

ARTICLE 4.  CONDITIONS PRECEDENT.................................................................................43
      Section 4.1        Conditions to Effective Date............................................................43
      Section 4.2        Conditions to Each Loan.................................................................45

ARTICLE 5.  AFFIRMATIVE COVENANTS................................................................................46
      Section 5.1        Financial Statements....................................................................47
      Section 5.2        Certificates; Other Information.........................................................49
      Section 5.3        Payment of Obligations..................................................................49
      Section 5.4        Conduct of Business and Maintenance of Existence........................................49
      Section 5.5        Maintenance of Property; Insurance......................................................50
      Section 5.6        Inspection of Property; Books and Records; Discussions..................................50
      Section 5.7        Notices.................................................................................51
      Section 5.8        ERISA Compliance........................................................................51
      Section 5.9        Taxes and Claims........................................................................52
      Section 5.10       Environmental Matters...................................................................52
      Section 5.11       Shipping Documents......................................................................52
      Section 5.12       Significant Subsidiary..................................................................53
      Section 5.13       Waivers and Consents....................................................................53
      Section 5.14       Hedging Agreement.......................................................................53
      Section 5.15       Lockbox Account.........................................................................53

ARTICLE 6.  NEGATIVE COVENANTS...................................................................................54
      Section 6.1        Limitation on Indebtedness..............................................................55
      Section 6.2        Limitation on Liens.....................................................................56
      Section 6.3        Limitation on Contingent Obligations....................................................57
      Section 6.4        Limitations on Fundamental Changes......................................................57
      Section 6.5        Limitation on Sale of Assets............................................................57
      Section 6.6        Limitation on Investments, Loans and Advances...........................................58
      Section 6.7        Limitation on Optional Payments and Modifications of
                         Debt Instruments........................................................................59
      Section 6.8        Transactions with Affiliates............................................................59
      Section 6.9        Fiscal Year.............................................................................59
      Section 6.10       Limitation on Conduct of Business.......................................................59
      Section 6.11       Net Worth...............................................................................59
      Section 6.12       Fixed Charge Coverage Ratio.............................................................60
      Section 6.13       Senior Funded Debt to EBITDA............................................................60
      Section 6.14       Intentionally omitted...................................................................60
      Section 6.15       ERISA Obligations.......................................................................60
      Section 6.16       Restricted Payments.....................................................................60

ARTICLE 7.  EVENTS OF DEFAULT....................................................................................60
      Section 7.1        Events of Default.......................................................................60
<PAGE>

ARTICLE 8.  THE AGENT............................................................................................64
      Section 8.1        Actions.................................................................................64
      Section 8.2        Exculpation.............................................................................65
      Section 8.3        Successor...............................................................................65
      Section 8.4        Credit Decisions........................................................................66
      Section 8.5        Notices, etc............................................................................66
      Section 8.6        Security Documents......................................................................66

ARTICLE 9.  PURCHASING LENDER....................................................................................66
      Section 9.1        Purchasing Lender.......................................................................66
      Section 9.2        Disclosure of Information...............................................................68
      Section 9.3        Pledges to Federal Reserve Bank.........................................................68

ARTICLE 10.  MISCELLANEOUS.......................................................................................68
      Section 10.1       Amendments and Waivers..................................................................68
      Section 10.2       Notices.................................................................................70
      Section 10.3       No Waiver; Cumulative Remedies..........................................................71
      Section 10.4       Survival of Representations and Warranties..............................................71
      Section 10.5       Payment of Expenses and Taxes...........................................................71
      Section 10.6       Successors and Assigns..................................................................72
      Section 10.7       Set-off/Sharing.........................................................................73
      Section 10.8       Foreign Subsidiaries....................................................................74
      Section 10.9       Judgment Currency/Withholding Tax.......................................................74
      Section 10.10      Counterparts............................................................................75
      Section 10.11      Severability............................................................................75
      Section 10.12      Integration.............................................................................75
      Section 10.13      Governing Law...........................................................................75
      Section 10.14      Submission To Jurisdiction; Waivers.....................................................75
      Section 10.15      Acknowledgments.........................................................................76
      Section 10.16      Waivers of Jury Trial...................................................................76
      Section 10.17      SSG.....................................................................................76

</TABLE>

Exhibits

Exhibit A                  Revolving Credit Note
Exhibit B                  Term Note
Exhibit C                  Borrowing Base Certificate
Exhibit D                  Omitted
Exhibit E                  Assumption Agreement
Exhibit F                  Omitted
Exhibit G                  Security Agreement
Exhibit H                  Stock Pledge Agreement
Exhibit I                  Intellectual Property Security Agreement
Exhibit J                  Opinion of Counsel
Exhibit K                  HK Subordination Agreement
Exhibit L                  Landlord/Warehouse Waiver
Exhibit M                  Convertible Debenture Trustee Instructions
Exhibit N                  Borrowing Request

<PAGE>

Schedules

Pricing Schedule
Schedule I                 Commitments
Schedule II                Consents (ss.3.4(b))
Schedule III               Litigation (ss.3.6)
Schedule IV                Subsidiaries (ss.3.14)
Schedule V                 Employee Grievances (ss.3.15)
Schedule VI                ERISA Plans (ss.3.16)
Schedule VII               Liens (ss.6.2(g))
Schedule VIII              Existing Permitted Investments
Schedule IX                Convertible Debentures
Schedule X                 Affiliated Agreements (ss.6.8)
Schedule XI                Notice Addresses




<PAGE>

                                                              WMLM 108066.029


                    REVOLVING CREDIT AND TERM LOAN AGREEMENT


     REVOLVING  CREDIT AND TERM LOAN AGREEMENT,  dated as of June 28, 2002 among
EMERSON RADIO CORP. ("ERC US"), a Delaware  corporation,  MAJEXCO IMPORTS,  INC.
("MI"),  a California  corporation,  EMERSON RADIO (HONG KONG) LIMITED ("ER HONG
KONG") a Hong Kong corporation, and EMERSON RADIO INTERNATIONAL LTD. ("ER BVI"),
a British  Virgin Islands  company,  jointly and severally as  co-borrowers  and
co-obligors,  except as  expressly  set forth  herein in  Section  10.8  hereof,
(collectively,  the "Borrower"),  PNC BANK, NATIONAL  ASSOCIATION and each other
lender  signatory hereto or which becomes a Lender pursuant to Section 9.1 (each
a "Lender" and, collectively,  the "Lenders") and PNC BANK, NATIONAL ASSOCIATION
as agent for the Lenders (in such capacity, the "Agent").

                              W I T N E S S E T H:

     WHEREAS, the Borrower has requested the Lenders to extend credit facilities
to Borrower; and

     WHEREAS,  the Lenders have agreed,  upon the terms and conditions set forth
herein, to extend such credit facilities to the Borrower.

     NOW,  THEREFORE,  in consideration of the premises,  and for other good and
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged, the Lenders, the Agent and the Borrower hereby agree as follows:

                                    ARTICLE 1
                                  DEFINITIONS

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

     "A Stock" when used in reference to inventory, new product (manufactured of
new material and parts and not repaired,  remanufactured or rebuilt),  which has
not been subjected to use after original manufacture (but excluding in any event
seconds, opened returns and inventory held for resale).


                                      -1-

<PAGE>

     "Adjusted EBITDA" Consolidated EBITDA for ERC US and its Subsidiaries other
than SSG and the Foreign Subsidiaries.

     "Adjusted  Funded  Debt" Funded Debt of ERC US and its  Subsidiaries  other
than SSG and the Foreign  Subsidiaries less the then aggregate  liability of the
Foreign Subsidiaries hereunder.

     "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 10% 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.

     "Agent"  (a) PNC Bank,  National  Association;  or (b) such  other  bank or
financial  institution  as shall have been  subsequently  appointed as successor
Agent pursuant to Section 8.3 of this Agreement.

     "Agreement"  this  Revolving  Credit and Term Loan  Agreement,  as amended,
supplemented or otherwise modified from time to time.

     "Applicable Fee Rate" means a rate per annum  determined in accordance with
the Pricing Schedule. The Agent shall set the Applicable Fee Rate based on Level
III Pricing on the Pricing  Schedule until receipt by the Agent of the financial
statements  of Borrower for the fiscal  quarter  ending  September  30, 2002 and
thereafter  the Agent shall set the  Applicable Fee Rate for each fiscal quarter
based upon the financial  statements of Borrower for the  immediately  preceding
fiscal quarter delivered  pursuant to Section 5.1. The Applicable Fee Rate as so
determined  shall  apply  effective  as  of  the  date  the  relevant  financial
statements  are  received by the Agent.  If the  Borrower  shall fail to deliver
financial  statements as required by Section 5.1, the  Applicable Fee Rate shall
be set as determined by Level IV Pricing on the Pricing Schedule for each fiscal
quarter for which such  financials are not delivered to the Agent for the period
from the beginning of such fiscal quarter to the date such financial  statements
are  delivered  and  from  such  date  to the  end of such  fiscal  quarter  the
Applicable Fee Rate shall be set by Agent based upon such financial statements.

     "Applicable  Margin" means a rate per annum  determined in accordance  with
the Pricing  Schedule.  The Agent shall set the Applicable Margin based on Level
III Pricing on the Pricing  Schedule until receipt by the Agent of the financial
statements  of Borrower for the fiscal  quarter  ending  September  30, 2002 and
thereafter  the Agent shall set the  Applicable  Margin for each fiscal  quarter
based upon the financial  statements of Borrower for the  immediately  preceding
fiscal quarter  delivered  pursuant to Section 5.1. The Applicable  Margin as so
determined  shall  apply  effective  as  of  the  date  the  relevant  financial
statements  are  received by the Agent.  If the  Borrower  shall fail to deliver
financial  statements as required by Section 5.1, the Applicable Margin shall be
set as  determined  by Level IV Pricing on the Pricing  Schedule for each fiscal
quarter for which such  financials are not delivered to the Agent for the period
from the beginning of such fiscal quarter to the date such financial  statements
are  delivered  and  from  such  date  to the  end of such  fiscal  quarter  the
Applicable Margin shall be set by Agent based upon such financial statements.

                                      -2-
<PAGE>


     "Assignment and Acceptance" as defined in Section 9.1.

     "Assumption Agreement" an agreement  substantially in the form of Exhibit E
hereto (with such changes therein as are reasonably  acceptable to the Agent) to
be delivered to the Agent pursuant to Section 5.12.

     "Available  Commitment" at any time with respect to Revolving  Credit Loans
for each Lender,  an amount equal to (i) the amount of such Lender's  Commitment
at such time to make Revolving  Credit Loans minus (ii) the sum of the aggregate
principal  amount of all then  outstanding  Revolving  Credit Loans made by such
Lender.

     "Base Rate" on any date the higher of (i) the Prime Rate then in effect and
(ii) the Federal Funds Rate then in effect plus1/2%.

     "Base Rate Loans" Loans whose interest rate is based on the Base Rate.

     "Board" the Board of Governors of the Federal  Reserve System of the United
States.

     "Borrowing  Base"  means an  amount  equal to (A) the sum of (x) 80% of the
value of Eligible  Receivables of ERC US for the most recently ended Calculation
Period  plus  (y) the  lesser  of (i) 55% (or  such  greater  percentage  as the
Required  Lenders may approve  with  respect to any  Calculation  Period) of the
aggregate  value  of  unsold  Eligible  Inventory  of ERC US and MI for the most
recently ended Calculation  Period,  (ii) 85% (or such greater percentage as the
Required Lenders may approve with respect to any Calculation  Period) of the Net
Recovery  Value and (iii)  $15,000,000,  during  the period  from and  including
January  1 to and  including  March 31 in each  calendar  year and  $18,000,000,
during the period from and  including  April 1 to and  including  December 31 in
each calendar  year,  less (B) (x) the Rental Reserve until the Agent shall have
received  landlord/warehousemen  waivers as required by Section 5.13 in form and
substance  satisfactory  to the Agent from all Persons  providing  warehouse and
leasehold  premises  to ERC US, (y) the  amount of the  California  unitary  tax
assessed  against ERC US (and all penalties,  interest and other amounts payable
with  respect  thereto) in the event a Lien is filed with respect to such tax by
any  Governmental  Authority so long as such tax is not paid (provided if ERC US
enters into an agreement with the relevant Governmental Authority assessing such
tax in form and substance satisfactory to the Required Lenders with respect to a
schedule for payment of such assessed tax (and any penalties,  interest or other
amounts payable with respect thereto),  the amount reserved with respect to such
assessed tax shall be limited to all payments  under such agreement due prior to
the second  anniversary of any date of determination so long as ERC US is not in
breach of such  agreement and no  proceedings  have been initiated to enforce or
foreclose upon the Lien with respect thereto), (z) at any time during the period

                                      -3-
<PAGE>

from and  including  January 1st to and  including  March 31st in each year,  an
amount  equal to 10% of the net accounts  receivable  reflected on the then most
recent  Borrowing Base  Certificate  delivered with respect to such period,  and
(aa) such additional  reserves as Agent shall deem appropriate in its reasonable
business  judgment in the event the  inventory  of any Person  constituting  the
Borrower  is  underinsured  (in Agent's  reasonable  business  judgment)  by the
insurance in force  pursuant to Section 5.5. If the Required  Lenders shall have
approved a change in any percentage  used in determining  the Borrowing Base for
any Calculation Period, they shall have no further or future obligation to do so
with respect to any other Calculation Period.

     "Borrowing Base  Certificate" a certificate in the form of Exhibit C hereto
to be delivered by the ERC US for each Calculation Period.

     "Borrowing Date" any Business Day specified in a notice pursuant to Section
2.3 as a date on which a Borrower requests the Lenders to make Loans.  "Borrower
Deposit" has the meaning ascribed thereto in Section 4.2(g).

     "Business  Day" a day  other  than  Saturday,  Sunday or other day on which
commercial  banks in New Jersey are  authorized  or required by law to be closed
and, in the case of Eurodollar Loans, a day which is also a Working Day.

     "CAPEX"  for any  period,  the cost  attributed  in  accordance  with  GAAP
consistent  with  those  applied  in  preparation  of the  financial  statements
referred to in Section 5.1 hereof to  acquisitions  during such period by ERC US
and/or its consolidated  Subsidiaries (other than SSG) of any asset, tangible or
intangible,  or replacements or substitutes  therefor or additions thereto which
are  treated as a non current  asset on such  financial  statements,  including,
without  limitation,  the  acquisition or construction of assets having a useful
life of more than one year.

     "Calculation  Period"  In the case of the  initial  Loan,  the  Calculation
Period  shall be as of June 26,  2002 and then as of the end of each  successive
calendar month until the first date, if any,  Undrawn  Availability  falls below
$2,500,000,  on which  date the  Calculation  Period  shall,  until the  Undrawn
Availability equals or exceeds $2,500,000 for a thirty- (30) day period, be each
successive  seven day period beginning on a Saturday and ending on the following
Friday.

     "Capital Lease  Obligations" of any Person for any period,  the obligations
of such  Person  to pay rent and  other  amounts  under  any  lease of (or other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  for such  period,  which  obligations  are required to be
classified and accounted for as capital leases on a balance sheet of such Person
under GAAP.

     "Capital  Stock" any and all  shares,  interests,  participations  or other
equivalents  (however  designated)  of shares of capital  or 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.

                                      -4-
<PAGE>

     "Change in Control"  means the  acquisition  by any Person,  or two or more
Persons  acting in concert  (other than any  individuals  who are members of ERC
US's senior  management on the Effective Date or any entity,  if and so long as,
the majority of equity and voting  interests in which is owned by one or more of
such individuals),  of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities  and Exchange  Commission  under the  Securities  Exchange Act of
1934) of greater than 30% (or such greater  percentage  as the Required  Lenders
may agree to in writing) of the outstanding shares of voting stock of ERC US.

     "Closing Date" the date on which the Lenders make the initial Loans.

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

     "Commitment"  for each Lender at any time from and  including the Effective
Date to but  excluding  the Maturity Date the lesser of (i) the amount set forth
opposite such Lender's name in Schedule I under the heading "Commitment" as such
amount may be adjusted  pursuant to Sections  2.5 or 9.1 and (ii) the product of
such  Lender's  Percentage  and the  Borrowing  Base  for the  then  immediately
preceding Calculation Period.

     "Congress  Financial Credit Facility" the Loan and Security Agreement dated
March  31,  1994  among  Congress  Financial  Corporation  and ERC US and MI, as
amended.

     "Consolidated  EBITDA" means,  for any fiscal period,  (a) Consolidated Net
Income  (Loss) for such period less upward  adjustments  to deferred  tax assets
which increase  earnings as reflected on the profit and loss statement of ERC US
plus,  (b) the sum of (i)  downward  adjustments  to deferred  tax assets  which
decrease earnings as reflected on ERC US' profit and loss statement,  (ii) other
non-cash  charges  related  to  changes  in GAAP,  (iii)  Consolidated  Interest
Expense,  (iv)  depreciation,  (v)  amortization  of intangible  assets and (vi)
federal,  state,  local and foreign income taxes; all computed and calculated in
accordance with GAAP.

     "Consolidated  Intangibles" at a particular  date, all assets of ERC US and
its  consolidated  Subsidiaries  (excluding  SSG),  that would be  classified as
intangible  assets in accordance with GAAP, but in any event including,  without
limitation, unamortized organization and reorganization expense and goodwill.

     "Consolidated  Interest Expense" for any period, the total interest expense
paid for such  period  (including,  without  limitation,  that  attributable  to
Capital  Lease   Obligations  in  accordance  with  GAAP)  of  ERC  US  and  its
consolidated  Subsidiaries  (excluding  SSG)  with  respect  to all  outstanding
Indebtedness of ERC US and its consolidated Subsidiaries(excluding SSG).

                                      -5-
<PAGE>

     "Consolidated  Net Income" for any period,  the consolidated net income (or
net loss) of ERC US and its consolidated  Subsidiaries  (excluding SSG) for such
period, determined in accordance with GAAP.

     "Consolidated Net Worth" at a particular date, the sum of all amounts which
would be included under shareholders'  equity on a consolidated balance sheet of
ERC  US  and  its  consolidated   Subsidiaries  (excluding  SSG)  determined  in
accordance with GAAP as at such date.

     "Consolidated Tangible Net Worth" as used in Section 7.1(h) at a particular
date,  (a) the sum of all amounts  which would be included  under  shareholders'
equity  on  a  consolidated  balance  sheet  of  ERC  US  and  its  consolidated
Subsidiaries  (excluding SSG) determined in accordance with GAAP as at such date
minus (b) Consolidated Intangibles as at such date.

     "Contingent  Obligation"  as  to  any  Person  any  guarantee  of  payment,
collection or performance by such Person of any Indebtedness or other obligation
of any other  Person,  or any  agreement  to provide  financial  assurance  with
respect to the financial  condition,  or the payment of the obligations of, such
other Person (including, without limitation,  purchase or repurchase agreements,
reimbursement  agreements  with  respect to  letters  of credit or  acceptances,
indemnity arrangements,  grants of security interests to support the obligations
of  another   Person,   keepwell   agreements  and  take-or-pay  or  through-put
arrangements)  which has the effect of  assuring or holding  harmless  any third
Person  against  loss with  respect  to one or more  obligations  of such  other
Person; provided, however, that the term Contingent Obligation shall not include
endorsements  of instruments for deposit or collection in the ordinary course of
business  or  indemnities  entered  into in the  ordinary  course of business in
connection with the sale of inventory or licensing of  intellectual  property or
other proprietary  information.  The amount of any Contingent  Obligation of any
Person  shall be deemed to be the lower of (a) an amount  equal to the stated or
determinable  amount  of  the  primary  obligation  in  respect  of  which  such
Contingent  Obligation  is made  and (b)  the  maximum  amount  for  which  such
contingently liable Person may be liable pursuant to the terms of the instrument
embodying such  Contingent  Obligation,  unless such primary  obligation and the
maximum amount for which such  contingently  liable Person may be liable are not
stated or determinable,  in which case the amount of such Contingent  Obligation
shall  be such  contingently  liable  Person's  maximum  reasonably  anticipated
liability in respect thereof as determined by the contingently  liable Person in
good faith.

     "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.

     "Controlled Group" as set forth in Section 1563(a) of the Code.

                                      -6-
<PAGE>

     "Convertible  Debentures"  has the  meaning  ascribed  thereto  in  Section
2.19(a).

     "Default"  any of the events  specified in Section 7.1,  whether or not any
requirement  for the giving of notice,  the lapse of time, or both, or any other
condition, has been satisfied.

     "Director  Share" one ordinary  share of the Capital  Stock of ER Hong Kong
held by Paul Gullett, an individual.

     "Dollar" and "$" lawful currency of the United States of America.

     "Effective Date" as set forth in Section 4.1.

     "Eligible  Inventory"  all A Stock goods of ERC US and MI excluding work in
progress, any inventory purchased from a Person not constituting the Borrower in
which ERC US or MI does not have  title,  which is subject to a Lien (other than
in favor of the Agent and the Lender),  which has not been shipped to, or at the
direction  of, ERC US or MI, in which the Agent  does not have a first  priority
perfected  security  interest,  with  respect  to which any  representations  or
warranties  contained in the Loan Documents are untrue or as to which any Person
constituting the Borrower has breached its covenants in the Loan Documents,  and
excluding any inventory in any warehouse or other  facility for which Agent does
not have a Waiver and Consent in form and substance  satisfactory to it, and any
other  inventory  which  the Agent  deems to be  otherwise  unacceptable  in its
reasonable  judgment  (including,  without  limitation,  by  reason of its being
unacceptable due to age, type, category or quantity).

     "Eligible  Receivables"  all  accounts  receivable  of  ERC US  other  than
accounts  receivable (i) which have remained  unpaid for more than 90 days after
the date of their creation;  (ii) which are owed by any Person where 50% or more
of the receivables owed by such Person would be excluded by reason of clause (i)
of this  definition  (the  "50%  Rule");  (iii)  which  are  owed by any  Person
constituting  the  Borrower  or any  Affiliate  of any Person  constituting  the
Borrower;   (iv)  which  are  payable  by  any  Person  not  incorporated  in  a
jurisdiction which is part of the United States of America,  Canada or any state
or province thereof; (v) as to which the goods which gave rise to the receivable
have been or are being  returned  or as to which a credit has been  claimed  but
only  to the  extent  of  such  return  or  claimed  credit;  (vi)  as to  which
(collectively,  "Contras")  the account  party has (or claimed the right to) set
off against or has netted out (or claimed the right to net out) charge  backs or
other amounts due such account party by any Person constituting the Borrower but
only to the  extent of such  Contra;  (vii) as to which  there are  accrued  and
unpaid late  charges,  to the extent of such late charges  (provided,  that this
clause (vii) shall not derogate from the provisions of clause (i) above); (viii)
which are  payable  by any  Person  which is the  subject  of any  voluntary  or
involuntary  bankruptcy or insolvency  proceeding (state or federal),  which has
made a general  assignment  for the  benefit  of  creditors  or had a  receiver,
trustee or other similar official appointed with respect to all or a substantial

                                      -7-
<PAGE>

portion of its  properties or which has ceased doing  business other than K Mart
but only to the extent of  receivables  which are payable  within 20 days of the
invoice date not exceeding $4,000,000 at any time; or (ix) which the Agent deems
to be otherwise unacceptable in its reasonable judgment.

     "Environmental  Liabilities"  shall  mean  any  and  all  claims,  demands,
penalties, fines, liabilities,  settlements, damages, losses, costs and expenses
(including,   without   limitation,   reasonable   attorneys'   and   reasonable
consultants'  fees and  disbursements,  remedial  investigation  and feasibility
study costs, clean-up costs and other response costs under the Environmental and
Safety  Laws,  currently  in  existence  or which may be enacted in the  future,
laboratory  fees,  court costs and  litigation  expenses)  of  whatever  kind or
nature, known or unknown, contingent or otherwise,  arising out of or in any way
related to (i) the  presence,  disposal  or release of any  Hazardous  Materials
which are on,  from or which  affect  any real  property  owned or leased by any
Person  constituting  the  Borrower  or any  part  thereof,  including,  without
limitation, soil, water, vegetation, buildings, equipment, personal property, or
which affect Persons, animals or otherwise;  (ii) any personal injury (including
wrongful death) or property damage (real or personal)  arising out of or related
to such  Hazardous  Materials  or damage to wetlands  whether or not relating to
Hazardous  Materials;  (iii)  any  lawsuit  brought  or  threatened,  settlement
reached, or government order or directive relating to such Hazardous  Materials;
and/or (iv) any violation of any  Requirement of Law or  requirements or demands
of any  Governmental  Authority,  which are based upon or in any way  related to
such  Hazardous  Materials  and which are paid or  incurred  by the Agent or any
Lender.

     "Environmental and Safety Laws" shall mean all Requirements of Law relating
to the environment and workplace safety including, without limitation, the Clean
Air Act ("CAA"),  the Clean Water Act ("CWA"),  the Toxic Substances Control Act
("TSCA"),  the Hazardous  Materials  Transportation  Act ("HMTA"),  the Resource
Conservation  and  Recovery  Act,  as  amended   ("RCRA"),   the   Comprehensive
Environmental Response,  Compensation and Liability Act ("CERCLA"),  as modified
by the  Superfund  Amendments  and  Reauthorization  Act of 1986  ("SARA"),  the
Emergency Planning and Community Right to Know Act ("EPCRA"),  the Noise Control
Act ("NCA"), the Occupational Safety and Health Act ("OSHA"),  the Safe Drinking
Water Act and the Federal  Insecticide,  Fungicide and  Rodenticide  Act, as any
such  Requirements of Laws may be amended,  supplemented  or otherwise  modified
from time to time.

     "ER Hong Kong Bought and Sold Notes"  shall mean the  executed  and undated
instrument of transfer, and contract notes, necessary to effect the transfer and
registration  of the Pledged Stock (as defined and set forth in the Stock Pledge
Agreement executed and delivered by ERC US to the Agent) in ER Hong Kong.

     "ER Hong Kong Director  Resignations"  collectively each undated,  executed
resignation from the Board of Directors of ER Hong Kong from each member of such
Board of Directors.

                                      -8-
<PAGE>

     "ERC  Intercompany  Payable" the net Indebtedness owed by ERC US to ER Hong
Kong and ER BVI pursuant to a Letter Agreement dated March 15, 1984, between ERC
US and ER Hong Kong and otherwise.

     "ERISA" means the Employee  Retirement Income Security Act of 1974 (and any
sections  of the  Code  amended  by it),  as the same  from  time to time may be
amended, supplemented or modified, and all regulations promulgated thereunder.

     "ERISA   Affiliate"   means  each  trade  or   business   (whether  or  not
incorporated)  which together with any Person constituting the Borrower would be
deemed to be a single employer under Section 414 of the Code.

     "Escrow Account" has the meaning ascribed thereto in Section 2.19.

     "Eurodollar  Loans"  Loans  whose  rate  of  interest  is  based  upon  the
Eurodollar Rate.

     "Eurodollar  Rate" shall mean, with respect to any Tranche for any Interest
Period,  the interest  rate per annum  determined  by the Agent by dividing (the
resulting quotient rounded upwards,  if necessary,  to the nearest 1/100th of 1%
per annum) (i) the rate of interest  determined by the Agent in accordance  with
its usual procedures  (which  determination  shall be conclusive absent manifest
error) to be the average of the London interbank  offered rates for U.S. Dollars
quoted by the British  Bankers'  Association  as set forth on Dow Jones  Markets
Service (formerly known as Telerate) display page 3750 (or appropriate successor
or, if the British Bankers'  Association or its successor ceases to provide such
quotes, a comparable  replacement determined by the Agent) two (2) Business Days
prior to the first day of such Interest Period for an amount  comparable to such
Tranche and having a borrowing  date and a maturity  comparable to such Interest
Period by (ii) a number equal to 1.00 minus the  Euro-Rate  Reserve  Percentage.
The Eurodollar Rate may also be expressed by the following formula:

         Eurodollar Rate = Average of London interbank
                           offered rates on Dow Jones Markets
                           Service display page 3750 as quoted
                           by British Bankers' Association or
                           appropriate successor
                           -------------------------------------
                           1.00 - Euro-Rate Reserve Percentage

     The  Eurodollar  Rate  shall  be  adjusted  with  respect  to  any  Tranche
outstanding  on the  effective  date  of any  change  in the  Euro-Rate  Reserve
Percentage as of such effective  date. The Agent shall give prompt notice to the
Borrower  of the  Eurodollar  Rate  as  determined  or  adjusted  in  accordance
herewith, which determination shall be conclusive absent manifest error.

     "Euro-Rate Reserve Percentage" shall mean the maximum percentage (expressed
as a decimal  rounded  upward to the nearest  1/100 of 1%) as  determined by the
Agent which is in effect during any relevant period,  as prescribed by the Board

                                      -9-
<PAGE>

of Governors of the Federal  Reserve System (or any  successor) for  determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements)  with respect to eurocurrency  funding  (currently  referred to as
"Eurocurrency Liabilities") of a member bank in such System.

     "Event of Default" as defined in Section 7.1.

     "Excess  Cash Flow" for any  period,  Consolidated  EBITDA  less,  for such
period,  the sum of (i) cash taxes paid,  (ii) up to $1,000,000 of CAPEX,  (iii)
Consolidated   Interest  Expense  and  (iv)  scheduled  principal  payments  and
scheduled prepayments made on the Term Loan pursuant to Section 2.9(e).

     "Federal Funds Rate" for any period, a fluctuating  interest rate per annum
(based on a 360 day year)  equal for each day during  such period to the average
of the rates of interest charged on overnight federal funds  transactions,  with
member banks of the Federal  Reserve System only, as published for any day which
is a Business Day by the Federal Reserve Bank of New York (or, in the absence of
such publication, as reasonably determined by the Agent).

     "Fixed  Charge  Coverage  Ratio"  means,  as of the last day of any  fiscal
quarter of ERC US, the ratio of (i) Consolidated EBITDA less the sum of (x) cash
federal,  state,  local and foreign  income tax expense  (excluding the deferred
portion  of any  thereof),  (y) CAPEX  (excluding  the cost of  acquisitions  of
interests  in other  Persons)  and (z)  distributions  (whether  denominated  as
redemptions,  dividends or otherwise and whether paid in cash or in kind) by ERC
US to any holder of any of its  Capital  Stock for the four  consecutive  fiscal
quarters of ERC US and its consolidated Subsidiaries ending on such date to (ii)
the sum of (x)  Consolidated  Interest  Expense,  plus (y)  scheduled  principal
payments on any Indebtedness of ERC US and its Consolidated  Subsidiaries (other
than SSG) for such period.

     "Foreign Subsidiaries" shall mean each of ER Hong Kong and ER BVI.

     "Funded Debt" at any date of determination, for ERC US and its Subsidiaries
other than SSG  (determined  on a  consolidated  basis  without  duplication  in
accordance  with GAAP);  obligations  created,  issued or incurred  for borrowed
money  (whether  by  loan  or the  issuance  and  sale  of  debt  securities  or
otherwise),  all Contingent Obligations relating to obligations created,  issued
or  incurred  for  borrowed  money,  all  Capital  Lease   Obligations  and  all
reimbursement and other obligations of each such Person in respect of letters of
credit, acceptances and similar obligations issued or created for the account of
such  Person  (but  excluding,  in  the  case  of  ER  Hong  Kong  and  ER  BVI,
reimbursement obligations under back to back letter of credit facilities so long
as no issuer of any letter of credit under any such  facilities  to ER Hong Kong
or ER BVI as  beneficiary,  or for  their  account,  has  failed to honor a draw
thereunder for any reason and excluding,  in the case of ERC US, any proceeds of
the Term Loan  while  such  proceeds  are held in the  Escrow  Account;  and the
reimbursement  obligations  of ER Hong Kong  under the HS Trade LC  Facility  or

                                      -10-
<PAGE>

other trade letter of credit  facility opened by another  financial  institution
shall be  reduced,  for  purposes  of this  definition,  by any cash  collateral
required  and held by Hang Seng Bank or such other  financial  institution  with
respect thereto).

     "GAAP"  generally  accepted  accounting  principles in the United States of
America  consistent  with those  utilized in  preparing  the  audited  financial
statements referred to in Section 5.1(a). Unless otherwise specifically provided
herein,  any  accounting  term  used in the  Agreement  shall  have the  meaning
customarily  given  such  term  in  accordance  with  GAAP,  and  all  financial
computations  hereunder shall be computed in accordance  with GAAP  consistently
applied.  That certain  items or  computations  are  explicitly  modified by the
phrase "in  accordance  with  GAAP"  shall in no way be  construed  to limit the
foregoing. If any "Accounting Changes" (as defined below) occur and such changes
result in a change in the calculation of the financial  covenants,  standards or
terms used in the Agreement or any other Loan Document, then Borrower, Agent and
Lenders agree to enter into  negotiations  in order to amend such  provisions of
the  Agreement  so as to  equitably  reflect  such  Accounting  Changes with the
desired result that the criteria for evaluating Borrower's and its Subsidiaries'
financial  condition shall be the same after such Accounting  Changes as if such
Accounting Changes had not been made; provided,  however,  that the agreement of
Required  Lenders  to any  required  amendments  of  such  provisions  shall  be
sufficient  to bind all  Lenders.  "Accounting  Changes"  means (i)  changes  in
accounting  principles  required by the  promulgation  of any rule,  regulation,
pronouncement  or opinion by the  Financial  Accounting  Standards  Board of the
American  Institute  of  Certified  Public  Accountants  or the  Securities  and
Exchange Commission (or successor thereto or any agency with similar functions),
(ii)  changes in  accounting  principles  concurred in by  Borrower's  certified
public accountants;  (iii) purchase accounting adjustments under A.P.B. 16 or 17
and EITF 88-16,  and the  application of the accounting  principles set forth in
FASB 109,  including  the  establishment  of reserves  pursuant  thereto and any
subsequent reversal (in whole or in part) of such reserves and (iv) the reversal
of any reserves established as a result of purchase accounting  adjustments.  If
the Required Lenders and Borrower agree upon the required amendments, then after
appropriate  amendments have been executed and the underlying  Accounting Change
with respect  thereto has been  implemented,  any reference to GAAP contained in
the  Agreement or in any other Loan Document  shall,  only to the extent of such
Accounting Change,  refer to GAAP,  consistently  applied after giving effect to
the  implementation  of such  Accounting  Change.  If the  Required  Lenders and
Borrower  cannot  agree by the  date  which  is 15 days  prior  to the  required
reporting  date under  Section 5.1 upon the required  amendments  to reflect any
Accounting  Change which has become  effective,  then all  financial  statements
delivered and all  calculations  of financial  covenants and other standards and
terms in accordance  with the Agreement  and the other Loan  Documents  shall be
prepared, delivered and made without regard to the underlying Accounting Change.

     "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.

                                      -11-

<PAGE>

     "Hazardous  Materials"  shall  mean,  without  limitation,   any  flammable
material,  explosives,  radioactive  materials,  gasoline,  petroleum  products,
asbestos,  urea formaldehyde,  polychlorinated  biphenyls,  hazardous materials,
hazardous wastes, hazardous or toxic substances, or related materials as defined
in the Environmental and Safety Laws.

     "Hedging  Agreements"  shall mean,  collectively,  each interest rate swap,
cap, collar or other hedging  agreement  entered into by any one or more Persons
constituting the Borrower pursuant to Section 4.1(h).


     "HK  Subordination  Agreement"  the  Subordination  Agreement  in the  form
annexed hereto in Exhibit K to be executed and delivered by ER Hong Kong, ER BVI
and ERC US in  favor  of the  Agent as the  same  may be  amended,  modified  or
supplemented from time to time.

     "HS Facility" has the meaning set forth in Section 6.1(b).

     "HS Trade LC Facility" has the meaning set forth in Section 6.1(b).

     "Inactive Subsidiary" any Subsidiary which is not a Significant Subsidiary.

     "Indebtedness" of any Person at any date (without duplication):

     (a) all  indebtedness of such Person for borrowed money or for the deferred
purchase  price of property or services  (other than current  trade  liabilities
incurred in the  ordinary  course of business  and  payable in  accordance  with
customary practices),

     (b) any other  indebtedness  of such Person  which is  evidenced by a note,
bond, debenture or similar instrument,

     (c) all Capital Lease Obligations of such Person,

     (d) all  reimbursement  and other  obligations of such Person in respect of
letters of credit, acceptances and similar obligations issued or created for the
account of such Person,

     (e) all  liabilities  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,

                                      -12-
<PAGE>

     (f) net  liabilities  of such Person under  interest rate cap and or collar
agreements,  interest rate swap agreements, foreign currency exchange agreements
and other hedging agreements or arrangements,

     (g) all Contingent Obligations of such Person, and

     (h) withdrawal liabilities of such Person under a Plan.

The Indebtedness of any Person shall include any Indebtedness of any partnership
in which  such  Person is a general  partner  and  Indebtedness  of any  limited
liability  company of which such Person is a member to the extent,  if any,  the
organizational  documents of such entity provide that members are liable for its
obligations.

     "Indemnified Liabilities" has the meaning ascribed thereto in Section 10.5.

     "Intellectual Property" has the meaning ascribed thereto in Section 3.9.

     "Intellectual  Property  Security  Agreements"  the  Intellectual  Property
Security  Agreements  in the  form of  Exhibit  I  hereto,  to be  executed  and
delivered  by  ERC US and  Scott  to the  Agent,  as the  same  may be  amended,
supplemented or modified from time to time.

     "Interest Payment Date" (a) as to any Base Rate Loan, the first day of each
calendar month to occur while such Loan is  outstanding,  beginning on the first
day of the first full calendar month  occurring after the date of such Loan, (b)
in addition,  as to any Eurodollar  Loan,  the last day of each Interest  Period
with respect  thereto,  and (c) in addition,  as to any Eurodollar  Loan with an
Interest  Period of six months  duration,  on the last day of the third calendar
month  thereof.  Interest  shall accrue from and  including  the first day of an
Interest Period to but excluding the last day of such Interest Period.

     "Interest Period" with respect to any Eurodollar Loan:

     (a) initially,  the period  commencing on the borrowing or conversion date,
as the case may be, with respect to such  Eurodollar  Loan and ending one,  two,
three or six months  thereafter,  as selected  by the  Borrower in its notice of
borrowing  or notice of  conversion,  given  with  respect  thereto,  subject to
availability; and

     (b)  thereafter,  each  period  commencing  on the  last  day  of the  next
preceding  Interest  Period  applicable to such  Eurodollar Loan and ending one,
two, three, or six months thereafter, as selected by the Borrower by irrevocable
notice to the Agent  given not less than three  Business  Days prior to the last
day of the then  current  Interest  Period  with  respect  thereto,  subject  to
availability;

provided that, the foregoing provisions relating to Interest Periods are subject
to the following:

                                      -13-
<PAGE>

          (1) if any  Interest  Period  would end on a day other than a Business
Day such Interest  Period shall be extended to the next Business Day unless,  in
the case of a Eurodollar  Loan, such next succeeding  Business Day would fall in
the next calendar  month,  in which case such  Interest  Period shall end on the
next preceding Business Day;

          (2) in the case of a Eurodollar  Loan, if an Interest Period commences
on the last day in a calendar month that is a Business Day, such Interest Period
shall  end on the last  day  that is a  Business  Day in the  month  that is the
specified  number  of  months  after the  month in which  such  Interest  Period
commenced;

          (3) an Interest Period that otherwise would extend beyond the Maturity
Date shall end on the  Maturity  Date;  and (4)  Borrower  shall elect  Interest
Periods for Eurodollar Loans so as to create,  if necessary,  a principal amount
of Base Rate  Loans on each Term Loan  Payment  Date  sufficient  to permit  any
prepayments  required  pursuant  to Section  2.6(b),  2.9(e) and 2.9(f)  without
requiring the prepayment of outstanding Eurodollar Loans.

     "Lender Hedge Agreements" shall mean, collectively,  each Hedging Agreement
entered  into  pursuant  to  Section  4.1(h)  hereof  by  one  or  more  Persons
constituting the Borrower and any Lender.

     "Lien"   any   mortgage,   pledge,   hypothecation,   assignment,   deposit
arrangement,  encumbrance,  lien (statutory or other),  other charge or security
interest;  or any  preference,  priority  or  other  agreement  or  preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional  sale  or  other  title  retention  agreement,   any  Capital  Lease
Obligations  having  substantially  the  same  economic  effect  as  any  of the
foregoing).  A  precautionary  filing of a  financing  statement  by a lessor of
property (other than with respect to a Capital Lease  Obligation)  covering only
such property shall not constitute a Lien.

     "Loan" any loan made by the  Lenders  pursuant to this  Agreement  (whether
denominated as a Base Rate Loan,  Eurodollar  Loan,  Revolving Credit Loan, Term
Loan or otherwise).

     "Loan Documents" this Agreement,  the Notes, the Security Documents, the HK
Subordination  Agreement  and each other  agreement or  instrument  executed and
delivered pursuant hereto or thereto (other than any Lender Hedge Agreements).

     "Material  Adverse  Effect" a material  adverse effect on (a) the business,
operations,  property or condition  (financial  or  otherwise)  of the Borrower,
taken as a whole, or (b) the validity or  enforceability  of (i) this Agreement,
any of the Notes or the other Loan  Documents  or (ii) the rights or remedies of
the Lender hereunder or thereunder.

                                      -14-
<PAGE>

     "Maturity Date" June 30, 2005.

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

     "Net Recovery Value" at any time the net orderly  liquidation  value of the
Eligible  Inventory  as set  forth  in the then  most  recent  valuation  report
prepared  for the  Agent  and the  Lenders  by Ozer  Group or other  independent
appraiser selected by the Agent.

     "Notes" the  collective  reference to the  Revolving  Credit Notes and Term
Notes.

     "Obligations"  all  obligations  (monetary  or  otherwise)  of each  Person
constituting  the Borrower to the Lenders  and/or the Agent  arising under or in
connection with this Agreement  (including,  without limitation,  the net amount
owed to any Lender  pursuant to any Lender Hedge  Agreement),  the Notes and the
other Loan Documents.  The nominal amount with respect to which any Lender Hedge
Agreements are entered into shall not constitute Obligations for any purpose.

     "Payment Office" as specified in Section 2.14(a).

     "PBGC" the Pension Benefit  Guaranty  Corporation  established  pursuant to
Subtitle A of Title IV of ERISA, and any entity  succeeding to any or all of its
functions under ERISA.

     "Percentage"  of any Lender means,  at any time,  with respect to Revolving
Credit Loans, the percentage set forth opposite such Lender's name on Schedule I
hereto under the heading "Revolving Credit Loans."

     "Permitted Investments"

          (a) marketable direct obligations issued or unconditionally guaranteed
by the United  States of America or issued by any agency  thereof  and backed by
the full faith and credit of the United States of America, in each case maturing
within six months from the date of acquisition thereof;

          (b) marketable  general  obligations issued by any state of the United
States of America or any political  subdivision  of any such state or any public
instrumentality  thereof maturing within six months from the date of acquisition
thereof and, at the time of  acquisition,  having one of the two highest ratings
generally  obtainable  from  either  Standard  & Poor's  Corporation  or Moody's
Investors Service, Inc.;

          (c)  without  limiting  the  provisions  of  subsection  (d)  of  this
definition,  commercial  paper maturing no more than six months from the date of
acquisition thereof and, at the time of acquisition,  having a rating of A-1 (or
the  equivalent)  or higher from Standard & Poor's  Corporation  and P-1 (or the
equivalent) or higher from Moody's Investors Service, Inc.;

                                      -15-
<PAGE>


          (d) commercial paper maturing no more than six months from the date of
acquisition  thereof and issued by (i) the holding company of any Lender or (ii)
the holding company of any other bank that has (A) combined capital, surplus and
undivided profits (less any undivided losses) of not less than $250 million, (B)
a Keefe  Bank  Watch  Rating of C or better and (C)  commercial  paper  having a
rating of A-2 (or the equivalent) from Standard & Poor's  Corporation or P-2 (or
the equivalent) or higher from Moody's Investors Service, Inc.;

          (e) domestic and Eurodollar  certificates  of deposit,  time or demand
deposits or  bankers'  acceptances  maturing  within six months from the date of
acquisition  issued or  guaranteed by or placed with,  and money market  deposit
accounts issued or offered by:

     (1) any Lender,

     (2) any other commercial bank organized under the laws of the United States
of America,  any state  thereof or the  District of  Columbia,  Hong Kong or the
British Virgin Islands having combined  capital,  surplus and undivided  profits
(less any undivided  losses) of not less than $500 million (or its equivalent in
other currencies),

     (3) any branch located in the United States of America of a commercial bank
organized  under  the laws of the  United  Kingdom  or  Canada  having  combined
capital,  surplus and undivided  profits (less any undivided losses) of not less
than $500 million or

     (4) any domestic  commercial  bank the deposits of which are  guaranteed by
the Federal Deposit Insurance Corporation,  provided that (A) the full amount of
the deposits of the Person making such  Permitted  Investment  are so guaranteed
and (B) the aggregate amount of all Permitted Investments under this clause (iv)
does not exceed $500,000;

     (5) fully collateralized repurchase agreements with a term of not more than
30 days for underlying  securities of the type described in subsections  (a) and
(b)  of  this  definition,   entered  into  with  any  institution  meeting  the
qualifications specified in clause (d) or subclauses (i) through (iii) of clause
(e) of this  definition;  provided,  in each  case,  that such  obligations  are
payable in Dollars; and

     (6) those investments listed on Schedule VIII to the extent in existence on
the date hereof.

                                      -16-
<PAGE>

     "Person"  an  individual,   partnership,   corporation,  limited  liability
company, 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 subject to ERISA and which covers
the employees or former employees of any Person  constituting the Borrower or an
ERISA  Affiliate,  under which any Person  constituting the Borrower or an ERISA
Affiliate has any obligation or liability or under which such Person or an ERISA
Affiliate has made  contributions  within the preceding  five years.  References
herein to a Plan shall include any Multiemployer Plan.

     "PNC" PNC Bank, National Association.

     "Pricing Schedule" means the Schedule  identified as such,  attached hereto
and made a part hereof.

     "Prime Rate" means the rate of interest per annum  publicly  announced from
time to time by PNC as its prime rate.  The Prime Rate is not intended to be the
lowest rate of interest  charged by PNC in connection  with extensions of credit
to debtors.

     "Purchasing Lender" as defined in Section 9.1.

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

     "Rental Reserve" the aggregate charges to ERC US from each warehouseman and
space  lessor of ERC US in the United  States of America  from whom a Waiver and
Consent  satisfactory  to the Agent  shall not have been  obtained  for the next
three (3) month period at any date of determination.

     "Reportable  Event" any event set forth in Section  4043(b) of ERISA or the
regulations thereunder.

     "Required  Lenders"  means,  if there are no more than three  Lenders,  the
Lenders holding 100% of the aggregate Commitments,  if no Loans are outstanding,
and, otherwise, Lenders holding 100% of outstanding Loans and, if there are four
or more Lenders, the Lenders holding 66 2/3% of the aggregate Commitments, if no
Loans are outstanding,  and,  otherwise,  Lenders holding 66 2/3% of outstanding
Loans.

     "Requirement of Law" as to any Person, the Certificate of Incorporation 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  property or to which such Person or any of its property is
subject.

                                      -17-
<PAGE>

     "Responsible  Officer"  in  such  Person's  capacity  as  such,  the  chief
executive  officer of any Person  constituting  the Borrower or the president of
such Person (if not the chief executive  officer) and, with respect to financial
matters,  the chief  financial  officer or corporate  controller  of such Person
constituting  the  Borrower;  provided,  in the case of ER Hong Kong and ER BVI,
"Responsible  Officer"  shall mean a director  of ER Hong Kong or ER BVI, as the
case may be.

     "Revolving Credit Loans" as defined in Section 2.1(a).

     "Revolving Credit Note" as defined in Section 2.2.

     "Revolving Loan Commitment" as to any Lender, the obligation of such Lender
to make Revolving Credit Loans to the Borrower hereunder.

     "Scott"  H.H.  Scott,  Inc.,  a New Jersey  corporation  and  wholly  owned
subsidiary of ERC US.

     "Security  Agreements"  the  Security  Agreements  in the form of Exhibit G
hereto,  to be executed and delivered by ERC US and MI to the Agent, as the same
may be amended, supplemented or modified from time to time.

     "Security  Documents" the collective  reference to the Security Agreements,
Intellectual Property Security Agreements and the Stock Pledge Agreements.

     "Senior Funded Debt" all Funded Debt less  Subordinated  Debt of ERC US and
its consolidated Subsidiaries other than SSG.

     "Significant  Subsidiary"  at any time a  Subsidiary  of ERC US (other than
SSG) which meets the  definition of a "significant  subsidiary"  contained as of
the date hereof in Regulation S-X of the Securities and Exchange Commission.

     "SSG" collectively, Sport Supply Group, Inc. a Delaware corporation and its
wholly owned Subsidiaries.

     "Stock Pledge Agreements" collectively,  each Stock Pledge Agreement in the
form of Exhibit H hereto,  to be executed  and  delivered  by ERC US and ER Hong
Kong to the Agent,  as the same may be amended,  supplemented  or modified  from
time to time.

     "Subordinated  Debt"  means  any  unsecured   Indebtedness  of  any  Person
constituting  the Borrower (a) no part of the principal of which is stated to be
payable or is required to be paid  (whether by way of  mandatory  sinking  fund,
mandatory  redemption,  mandatory  prepayment or otherwise)  prior to October 1,
2005,  and the  payment  of the  principal  of and  interest  on which and other
obligations  of the Borrower in respect  thereof are  subordinated  to the prior
payment  in full  of the  principal  of and  interest  (including  post-petition
interest)  on the  Notes  and all  other  Obligations  hereunder  on  terms  and

                                      -18-
<PAGE>

conditions  approved  in  writing  by the  Required  Lenders  and (b)  otherwise
containing terms, covenants and conditions satisfactory in form and substance to
the Required Lenders, as evidenced by their prior written approval thereof.

     "Subsidiary"  as to any Person (a  "Parent")  (a) any other Person in which
the  Parent  owns or  controls,  directly  or  indirectly,  more than 50% of the
Capital Stock of such Person,  (b) any other Person of which such  percentage of
Capital  Stock shall at the time be owned or  controlled by the Parent or one or
more of its  Subsidiaries  as  defined  in  clause  (a) or by one or  more  such
Subsidiaries,  or (c) any other Person of which  Capital  Stock having  ordinary
voting power  (other than stock or such other  ownership  interests  having such
power only by reason of the happening of a  contingency)  to elect a majority of
the board of directors  or other  managers of such Person 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 Parent.

     "Subsidiary Borrower" means Majexco Imports,  Inc., ER Hong Kong or ER BVI,
and each Subsidiary which executes and delivers an Assumption Agreement pursuant
to  Section  5.12,  as the  case  may be,  and,  collectively,  the  "Subsidiary
Borrowers."

     "Term Loan Commitment" the commitment of each Lender to make a Term Loan as
set forth on Schedule I hereto.

     "Term Loans" as defined in Section 2.6.

     "Term Loan  Payment  Date" shall mean the last  Business Day of each March,
June,  September and December  occurring  prior to the Maturity  Date  beginning
September 30, 2002.

     "Term Notes" as defined in Section 2.7.

     "Tranche"  the  collective  reference to  Eurodollar  Loans whose  Interest
Periods  begin on the same date and end on the same later date  (whether  or not
such Loans originally were made on the same day).

     "Transfer" any direct or indirect sale, conveyance, lease, transfer, option
to  purchase   or  other   disposition.   (including   without   limitation,   a
sale-leaseback transaction), or a series of related sales, conveyances,  leases,
transfers, options to purchase or other dispositions.

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

     "Undrawn  Availability"  at a particular date shall mean an amount equal to
(a) the lesser of (i) the Borrowing Base, or (ii) the maximum Commitments of the

                                      -19-
<PAGE>

Lenders set forth on Schedule I for  Revolving  Credit  Loans minus (b) the then
outstanding principal amount of all Revolving Credit Loans.

     "Waiver and Consent" means a landlord/warehouse waiver substantially in the
form of Exhibit L.

     "Working Day" any Business Day on which dealings in foreign  currencies and
exchange between banks may be carried on in London,  England.


     Section 1.2 Other Definitional Provisions.

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

          (b) As used  herein and in the  Notes,  and any  certificate  or other
document made or delivered pursuant hereto,  accounting terms relating to ERC US
and its  Subsidiaries  not defined in Section 1.1 and  accounting  terms  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,  and Section,  subsection,
Schedule  and  Exhibit   references  are  to  this  Agreement  unless  otherwise
specified.

          (d) The  meanings  given  to terms  defined  herein  shall be  equally
applicable to both the singular and plural forms of such terms.


                                   ARTICLE 2.
                        AMOUNT AND TERMS OF COMMITMENTS

     Section 2.1 Revolving Credit Commitments.

          (a) Subject to the terms and conditions of this Agreement, each Lender
severally  agrees to make revolving credit loans  ("Revolving  Credit Loans") to
the  Borrower  from  time to time  from the date  hereof  to but  excluding  the
Maturity Date in an aggregate  principal  amount at any one time outstanding for
the Borrower not to exceed the then  Available  Commitment  of such Lender.  The
Borrower may borrow and prepay the  Revolving  Credit Loans in whole or in part,
and  reborrow  Revolving  Credit  Loans,  all in  accordance  with the terms and
conditions hereof. All then outstanding  Revolving Credit Loans shall be paid in
full on the Maturity Date.

          (b) The  Revolving  Credit  Loans may from time to time be  Eurodollar
Loans, Base Rate Loans or a combination  thereof,  as determined by the Borrower

                                      -20-
<PAGE>

and  notified to the Agent in  accordance  with  Section  2.3 and Section  2.10,
provided that no Revolving  Credit Loan shall be made as a Eurodollar Loan after
the day that is one month prior to the  Maturity  Date.

     Section 2.2 Revolving  Credit Note. The Revolving Credit Loans made by each
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of  Exhibit A, with  appropriate  insertions  as to date and  principal
amount (each a "Revolving Credit Note"), payable to the order of such Lender and
in a principal  amount equal to such Lender's  Revolving Loan  Commitment.  Each
Lender  is  hereby  authorized  to  record  the  date,  Type and  amount of each
Revolving Credit Loan, each  continuation  thereof,  each conversion of all or a
portion  thereof  to  another  Type,  the date and  amount  of each  payment  or
prepayment of principal thereof and, in the case of Eurodollar Loans, the length
of each Interest  Period with respect  thereto,  on the schedule  annexed to and
constituting  a part of each  Revolving  Credit Note,  and any such  recordation
shall  constitute  rebuttable  presumptive  evidence  of  the  accuracy  of  the
information  so  recorded.  Each  Revolving  Credit  Note shall (x) be dated the
Closing  Date,  (y) be stated to mature on the Maturity Date and (z) provide for
the payment of interest in accordance with Section 2.12.

     Section 2.3 Procedure for Revolving Credit Borrowings.

          (a) The Borrower may borrow under the Commitment for Revolving  Credit
Loans prior to the Maturity  Date on any Business  Day. The Borrower  shall give
the Agent  irrevocable  notice (which notice must be received by the Agent prior
to 11:00 a.m.,  New Jersey  time,  three  Business  Days prior to the  requested
Borrowing Date, if all or any part of the requested  Revolving  Credit Loans are
to be initially  Eurodollar Loans (provided that the Borrower shall not maintain
any Loans as Eurodollar Loans prior to the earlier of July 30, 2002 and the date
a Purchasing Lender shall have entered into an Assignment and Acceptance with
PNC with respect to not less than  $20,000,000 in principal  amount of the Loans
and  commitments of PNC  hereunder)  and on the requested  Borrowing Date in the
case of Base Rate  Loans),  specifying  (1) the amount to be  borrowed,  (2) the
requested Borrowing Date, (3) whether the borrowing is to be of Eurodollar Loans
or Base Rate Loans or a  combination  thereof and (4) if the  borrowing is to be
entirely or partly of Eurodollar  Loans, the amount of such Loans and the length
of the initial Interest Period therefor.  Each Revolving Credit Loan shall be in
an  amount  equal to (x) in the case of Base  Rate  Loans,  $250,000  or a whole
multiple  of  $50,000  in  excess  thereof  (or,  if less,  the  then  Available
Commitment) and (y) in the case of Eurodollar Loans $500,000 or a whole multiple
of $100,000 in excess  thereof.  The Agent shall promptly  notify the Lenders of
its receipt of any such irrevocable notice of borrowing from the Borrower.

          (b) On or before  2:00 p.m.,  New Jersey  time,  on the  Business  Day
specified in the Borrower's  notice of borrowing,  each Lender shall provide the
Agent  with  funds at the  Payment  Office in an amount  equal to such  Lender's
Percentage of the requested  borrowing.  The proceeds of each borrowing shall be
made  available by the Agent to the  Borrower  pursuant to Section  2.14(d).  No
Lender's  obligation  to make any Loan shall be affected  by any other  Lender's
failure  to make any  Loan.  Neither  the Agent nor any  Lender  shall  have any
liability for the failure of any Lender (other than itself) to fund a Loan.

                                      -21-
<PAGE>

          (c) With  respect  to any  Loan,  unless  the  Agent  shall  have been
notified  in writing by any  Lender  prior to the date of making  such Loan that
such Lender does not intend to make available to the Agent such Lender's portion
of the Loan to be made on such date,  the Agent may (but shall not be  obligated
to) assume that such Lender has made such amount  available to the Agent on that
date and, in reliance on such  assumption,  the Agent may make  available to the
Borrower a  corresponding  amount.  If such amount is not made available by such
Lender  to the Agent on the date of  making  such  Loan,  such  Lender  shall be
obligated  to pay such  amount to the Agent and shall pay to the Agent on demand
interest on such  amount at the  Federal  Funds Rate for the number of days from
and  including  the date of making such Loan to the date on which such  Lender's
portion of the Loan becomes immediately  available to the Agent. The Agent shall
also be entitled to recover such amount,  with interest  thereon at the rate per
annum then applicable to the Loans comprising such borrowing,  upon demand, from
the Borrower.  A statement of the Agent  submitted to any Lender with respect to
any amounts owing under this Section  2.3(c) shall be conclusive  and binding in
the absence of  demonstrable  error.  Nothing in this  Section  2.3(c)  shall be
deemed to relieve any Lender  from its  obligation  to fulfill  its  Commitments
hereunder.

     Section 2.4 Commitment and Other Fees.

          (a) The  Borrower  agrees to pay to the Agent for the  benefit  of and
disbursement  to the Lenders a  nonrefundable  commitment  fee in respect of the
Commitments  to make Revolving  Credit Loans,  for the period from and including
the date hereof to the Maturity Date,  computed at a rate per annum equal to the
Applicable  Fee Rate for each  calendar  quarter,  calculated  on the basis of a
360-day  year for the actual days  elapsed,  on the average  daily amount of the
aggregate  Available  Commitments  during the period for which  payment is made,
payable quarterly in arrears on the last day of each March, June,  September and
December and on the Maturity Date or such earlier date as the Commitments  shall
terminate  as provided  herein,  commencing  on the first of such dates to occur
after the date  hereof.  As soon as  practicable  the  Agent  shall  notify  the
Borrower and the Lenders of each determination of the Applicable Fee Rate.

          (b) On the Effective Date, the Borrower shall pay to the Agent for the
benefit of and disbursement to the Lenders a nonrefundable facility fee equal to
$400,000  which shall be  distributed by the Agent to the Lenders pro rata based
on their commitments.

          (c) The Borrower agrees to pay to the Agent, for its own account,  the
amounts  set forth in the letter  agreement  dated  June 28,  2002  between  the
Borrower  and PNC in  consideration  of PNC's  acting  as Agent  hereunder.  The
Agent's compensation shall be paid on the dates set forth in said letter.

                                      -22-
<PAGE>

     Section 2.5 Termination/Reduction of Commitments.

          (a) ERC US shall  have the  right,  upon not less than  five  Business
Days' written notice to the Agent,  to terminate the Revolving Loan  Commitments
or, from time to time, to reduce the amount of such  Commitments,  provided that
at no time may the Revolving  Loan  Commitments be reduced by the Borrower to an
amount less than the sum of the outstanding principal amount of Revolving Credit
Loans.  Any such reduction  shall be in an amount equal to $1,000,000 or a whole
multiple  of  $250,000  in excess  thereof  and  shall  reduce  permanently  the
Revolving Loan Commitments  then in effect.  Any such reduction in the Revolving
Loan Commitment shall be binding on the Subsidiary Borrowers whether or not they
have notice thereof.

          (b)  Each  reduction  in  the  Revolving  Loan  Commitments  shall  be
permanent and  irrevocable.  All  reductions in the Revolving  Loan  Commitments
shall be made pro rata to the Revolving  Loan  Commitments  of the Lenders.  The
Agent shall  promptly  notify each Lender of the amount of any  reduction of its
Revolving Loan Commitment. Section

     2.6 Term Loans.

          (a) Subject to the terms and conditions hereof,  each Lender severally
agrees to make a term loan (each a "Term  Loan") to the  Borrower on the Closing
Date in an amount not to exceed the amount of the Term Loan  Commitment  of such
Lender.  The Term Loans may, from time to time,  be Base Rate Loans,  Eurodollar
Loans or a  combination  thereof,  as determined by the Borrower and notified to
the Agent in accordance  with Section 2.8 and 2.10. Any portion of the Term Loan
Commitment  which is unused on the Closing Date shall  irrevocably  terminate on
such date.

          (b) The Borrower shall repay the outstanding  principal  amount of the
Term Loans on each Term Loan Payment Date in an amount equal to  $1,000,000  for
each Term Loan Payment Date occurring on or before June 30, 2004; and $1,750,000
on each Term Loan Payment Date thereafter. The then outstanding principal amount
of the Term Loans shall be repaid in full on the Maturity Date.


     Section  2.7  Term  Notes.  The  Term  Loan  made by each  Lender  shall be
evidenced by a  promissory  note of the  Borrower  substantially  in the form of
Exhibit B (each a "Term Note"),  with appropriate  insertions therein as to date
and  principal  amount,  payable to the order of such  Lender and in a principal
amount equal to such  Lender's  Term Loan.  Each Lender is hereby  authorized to
record the date and amount of each  payment or  prepayment  of  principal of its
Term  Loan,  each  continuation  thereof,  each  conversion  of all or a portion
thereof to another Type and, in the case of Eurodollar Loans, the length of each
Interest Period with respect thereto, on the schedule annexed to an constituting
a part of the Term Note, and any such recordation  shall  constitute  rebuttable
presumptive evidence of the accuracy of the information so recorded.

                                      -23-
<PAGE>

     Section 2.8 Procedure for Term Loan Borrowing.  The Borrower shall give the
Agent  irrevocable  notice  (which notice must be received by the Agent prior to
12:00  noon,  New Jersey  time,  one  Business  Day prior to the  Closing  Date)
requesting  that the Lenders make Term Loans on the Closing Date and  specifying
(1) the amount to be borrowed,  (2) whether the Term Loans are to be initially a
Eurodollar  Loan  (provided  that the  Borrower  shall not maintain any Loans as
Eurodollar Loans prior to the earlier of July 30, 2002 and the date a Purchasing
Lender  shall have  entered  into an  Assignment  and  Acceptance  with PNC with
respect  to not less  than  $20,000,000  in  principal  amount  of the Loans and
commitments  of PNC hereunder) or Base Rate Loan or a combination  thereof,  and
(3) if the Term Loans are to be entirely or partly a Eurodollar Loan, the amount
of such Loan and the  length of the  initial  Interest  Period  therefore.  Each
portion of the Term Loan which is maintained as a Eurodollar  Loan shall be in a
principal  amount of $500,000 or a multiple of $100,000 in excess  thereof.  The
Agent  shall  promptly  notify the Lenders of its receipt of any notice from the
Borrower pursuant to this Section.

     Section 2.9 Prepayments.

          (a) From time to time the Borrower may  voluntarily  prepay the Loans,
in whole or in part,  subject to the  provisions  of Section 2.17 but  otherwise
without premium or penalty,  upon at least three (3) Business Days'  irrevocable
notice to the Agent, in the case of Eurodollar Loans and otherwise by 12:00 noon
on the date of payment,  specifying the date and amount of  prepayment.  Partial
prepayments  of  Revolving  Loans shall be in an aggregate  principal  amount of
$100,000 or a whole multiple in excess thereof or, if less, the then outstanding
principal amount of the Revolving Loans. Partial prepayments of Term Loans shall
be in an aggregate  principal  amount of $500,000 or a whole multiple of $50,000
in excess  thereof or, if less,  the  outstanding  principal  amount of the Loan
being prepaid.  All prepayments shall be allocated to the Lenders based on their
respective  Total  Percentages  (as  such  term  is used  in the  definition  of
"Percentage").  The Borrower shall further instruct the Lenders whether to apply
such  prepayment  to  Revolving  Loans  or Term  Loans or  both;  provided  such
instructions shall require the same pro rata allocation by each Lender among the
Revolving Loans and Term Loans held by them.

          (b) If any notice of prepayment is given, the amount specified in such
notice shall be due and payable on the date  specified  therein.  Prepayments of
the Loans  shall be  accompanied  by payment or accrued  interest to the payment
date on the principal amount prepaid.

          (c)  Partial  prepayments  of the Term  Loans  shall be applied to the
installments  of  principal  under the Term Loans in the inverse  order of their
respective scheduled maturities.

          (d)  Amounts  prepaid  on  account  of  the  Term  Loans  may  not  be
reborrowed.

                                      -24-
<PAGE>

          (e) On or before the fifth (5th)  Business Day  following the date the
consolidated  and  consolidating  balance  sheet of ERC US and its  consolidated
subsidiaries  are  required to be delivered  pursuant to Section  5.1(a) in each
year  beginning in 2003,  the Borrower  shall prepay the  outstanding  principal
amount of the Term Loans by an amount  equal to 50% of Excess  Cash Flow for the
immediately  preceding fiscal year. Principal  prepayments made pursuant to this
Section  2.9(e)  shall be applied to required  payments of the  principal of the
Term Loan pursuant to Section  2.6(b) in the inverse order of maturity until the
Term Loan is paid in full.  Principal  amounts  repaid  pursuant to this Section
2.9(e) may not be reborrowed.

          (f) In the event that (i) any Person  constituting the Borrower or any
Subsidiary of any Person constituting the Borrower (other than SSG) shall effect
a Transfer  of any  Capital  Stock  issued by ERC US or SSG owned by such Person
constituting  the Borrower or any such Subsidiary or (ii) ERC US shall issue any
additional  Capital  Stock or effect a Transfer of any of its Capital Stock held
as treasury shares or otherwise  (other than (1) in satisfaction of the exercise
of stock  options held by any employee or director of ERC US pursuant to ERC US'
stock  option  plan,  (2)  the  issuance  of  warrants  (and  Capital  Stock  in
satisfaction  thereof) to brokerage  houses in connection  with the marketing of
the  Capital  Stock  of ERC US,  (3) the  issuance  of  Capital  Stock of ERC US
pursuant to exchange  offers in  connection  with  investments  in other Persons
permitted by the terms hereof and (4) the issuance of Capital Stock of ERC US in
connection with the conversion of any  Convertible  Debentures into such Capital
Stock),  or (iii) any Person  constituting the Borrower or any Subsidiary of any
Person constituting the Borrower (other than SSG) shall effect a Transfer of any
assets (other than Transfers of inventory in the ordinary course of business and
Transfers of equipment  which is or to be replaced in the ordinary course within
three (3)  months  from the date of  Transfer);  in each case  described  in the
preceding  clauses (i),  (ii) and (iii) for a price in excess of $500,000 in the
aggregate in any fiscal year  (whether  such  Transfers  are made in one or more
transactions);  the Borrower shall,  simultaneously with the consummation of any
such Transfers,  prepay the Term Loans in an amount equal to the net proceeds of
such  Transfer(s)  (including  the first  $500,000  thereof but after  deducting
reasonable  attorneys' fees and other  customary  costs of Transfer).  Each such
prepayment  shall be applied to required  payments of the  principal of the Term
Loan pursuant to Section  2.6(b) in the inverse order of maturity until the Term
Loan is paid in full.  Principal  amounts repaid pursuant to this Section 2.9(f)
may not  reborrowed.  No Transfer  referred to in this  Section  2.9(f) shall be
effected except on arms length business terms.

          (g) The  Agent  shall  disburse  all  prepayments  of the Loans to the
Lenders on a pro rata basis.


     Section 2.10 Conversion and Continuation  Options.  The Borrower shall have
the right at any time upon prior  irrevocable  notice to the Agent (i) not later
than 12:00 noon, New Jersey time, on any Business Day, to convert any Eurodollar
Loan to a Base Rate Loan, (ii) not later than 12:00 noon, New Jersey time, three
Business Days prior to conversion or continuation, to convert any Base Rate Loan
into a Eurodollar  Loan or to continue any Eurodollar  Loan as a Eurodollar Loan

                                      -25-
<PAGE>

for any  additional  Interest  Period,  and (iii) not later than 12:00 noon, New
Jersey time,  three Business Days prior to  conversion,  to convert the Interest
Period  with  respect to any  Eurodollar  Loan to another  permissible  Interest
Period, subject in each case to the following:

          (a) a  Eurodollar  Loan may not be  converted at a time other than the
last day of the Interest Period  applicable  thereto;

          (b) any  portion of a Loan  maturing  or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar  Loan;

          (c) no Eurodollar  Loan may be continued as such and no Base Rate Loan
may be converted to a Eurodollar Loan when any Event of Default has occurred and
is  continuing;

          (d) any portion of a Eurodollar  Loan that cannot be converted into or
continued  as a  Eurodollar  Loan by reason of  Section  2.10(b)  or  2.10(c) or
otherwise  automatically shall be converted at the end of the Interest Period in
effect  for such Loan to a Base Rate Loan;

          (e) on the last day of any Interest  Period for Eurodollar  Loans,  if
the  Borrower  has  failed  to give  notice of  conversion  or  continuation  as
described  in this  subsection  or if such  conversion  or  continuation  is not
permitted  pursuant  to  Section  2.10(d)  or  otherwise,  such  Loans  shall be
converted  to Base  Rate  Loans on the last day of such then  expiring  Interest
Period;

          (f) accrued  interest on a Loan (or portion  thereof) being  converted
shall be paid by the Borrower at the time of conversion.

     Section  2.11    Minimum   Amounts  of  Tranches/Number  of  Tranches.  All
borrowings,  conversions and continuations of Loans hereunder and all selections
of Interest  Periods  hereunder shall be in such amounts and be made pursuant to
such elections that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar  Tranche shall be equal to $500,000 or a
whole  multiple  of  $100,000  in excess  thereof.  No more than six  Eurodollar
Tranches may be outstanding at any time.

     Section 2.12 Interest Rates and Payment Dates.

          (a) Subject to the provisions of Section 2.12(c),  each Base Rate Loan
shall bear  interest  at a rate per annum  (computed  on the basis of the actual
number of days elapsed over a year of 360 days and twelve  30-day  months) equal
to the Base Rate plus the Applicable  Margin for Base Rate Loans.

          (b) Subject to the provisions of Section 2.12(c), each Eurodollar Loan
shall bear interest  (computed on the basis of the actual number of days elapsed
over a year of 360 days) at a rate per annum  equal to the  Eurodollar  Rate for

                                      -26-
<PAGE>

the  Interest  Period in effect  for such  Eurodollar  Loan plus the  Applicable
Margin for Eurodollar Loans in effect for such Interest Period.

          (c) If all or a portion of (A) the principal  amount of any Loan,  (B)
any interest  payable  thereon or (C) any commitment fee or other amount payable
hereunder  shall  not be paid  when due  (whether  at the  stated  maturity,  by
acceleration  or  otherwise),  such  overdue  amount  shall,  upon notice to the
Borrower  from the Agent,  bear interest at a rate per annum which is

               (1) in the case of  overdue  principal,  the rate that  otherwise
     would be applicable  thereto  pursuant to the foregoing  provisions of this
     subsection  plus 2% per  annum  or such  other  lower  rate as a court  may
     impose, or

               (2) in the case of overdue interest or fees or other amounts, the
     Base Rate plus 2% per annum or such other lower rate as a court may impose,

in each case from the date of such nonpayment  until such amount is paid in full
(as well as after, to the extent  permitted by law, as before  judgment).  In no
event  shall any  interest  to be paid  pursuant  to this  Agreement  exceed the
maximum rate permitted by law.

          (d)  Interest  shall be payable in  arrears on each  Interest  Payment
Date,  provided that interest  accruing on overdue  amounts  pursuant to Section
2.12(c) shall be payable on demand.

          (e) As soon as practicable the Agent shall notify the Borrower and the
Lenders of (A) each determination of a Eurodollar Rate and Applicable Margin and
(B) the  effective  date and the amount of each change in the interest rate on a
Loan.  Each  determination  of an  interest  rate by the Agent  pursuant  to any
provision of this Agreement  shall be conclusive and binding on the Borrower and
the Lenders in the absence of clearly  demonstrable error. At the request of the
Borrower,  the Agent  shall  deliver to the  Borrower a  statement  showing  the
quotations  used by the Agent in  determining  any  interest  rate  pursuant  to
Sections 2.12(a), (b) or (c).

     Section 2.13  Inability to Determine  Interest Rate.  If prior to the first
day of any Interest Period:

          (a) the Agent  shall have  determined  (which  determination  shall be
conclusive and binding upon the Borrower) that adequate and reasonable  means do
not exist for ascertaining the Eurodollar Rate for such Interest Period,  or

          (b) a Lender  notifies the Agent and Borrower that the Eurodollar Rate
determined or to be determined for such Interest  Period will not adequately and
fairly reflect the cost to such Lender of making or  maintaining  the Eurodollar
Loans during such Interest Period, or

                                      -27-
<PAGE>

          (c) The Agent  shall have  determined  (which  determination  shall be
conclusive and binding upon the Borrower) that Dollar  deposits in the principal
amounts  of the  Eurodollars  Loans  to  which  such  Interest  Period  is to be
applicable are not generally available in the London Interbank Market,


the Agent shall give notice  thereof to the Borrower by fax or telephone as soon
as  practicable  thereafter.  If such notice is given (A) any  Eurodollar  Loans
requested to be made on the first day of such  Interest  Period shall be made as
Base Rate  Loans,  and (B) any Loans  that  were to have  been  converted  to or
continued as Eurodollar  Loans on the first day of such Interest Period shall be
converted  to or  continued  as Base Rate  Loans.  Until  such  notice  has been
withdrawn  by the Agent,  no Loans shall be made as or converted to or continued
as Eurodollar Loans.

     Section 2.14 Payments/Funding.

          (a)  All  payments  (including   prepayments)  made  by  the  Borrower
hereunder and under the Notes, whether on account of principal,  interest, fees,
or otherwise,  shall be made without set off or  counterclaim  and shall be made
prior to 12:00 noon, New Jersey time, on the due date thereof to the Agent,  for
the account of the Lenders in Dollars and in immediately  available funds to the
Agent's  account at such  address as the Agent shall give notice to the Borrower
and the Lenders (the  "Payment  Office").  Except for  payments  received by the
Agent for the account of the Agent in its  capacity as such,  or for the account
of a specific Lender in accordance  with the provisions of this  Agreement,  the
Agent shall, within one Business Day of funds collection,  distribute like funds
relating to the payment of  principal,  interest or fees pro rata to the Lenders
(based on their  Percentages) to which such payment is due and payable for their
accounts and at the addresses as each such Lender shall specify in its notice to
the Agent made in accordance with Section 10.2 of this  Agreement.  If the Agent
fails  to so  distribute  funds  within  the time  set  forth  in the  preceding
sentence, the Agent shall pay interest on the amount to be distributed at a rate
equal to the Federal Funds Rate from the date such funds were to be  distributed
to the date of distribution.

          Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders  hereunder that the Borrower
will not make such  payment in full,  the Agent may (but shall not be  obligated
to) assume that the  Borrower has made such payment in full to the Agent on such
date,  and the  Agent  may,  in  reliance  upon  such  assumption,  cause  to be
distributed  to each Lender on such due date an amount  equal to the amount then
due such Lender.  If and to the extent the Borrower  shall not have so made such
payment in full to the Agent,  each Lender shall repay to the Agent forthwith on
demand the amount distributed to such Lender together with interest thereon,  at
the rate equal to the Federal Funds Rate, for each day from the date such amount
is  distributed  to such Lender until the date such Lender repays such amount to
the Agent.

          (b) If  any  principal  payment  hereunder  (other  than  payments  on
Eurodollar  Loans)  becomes due and payable on a day other than a Business  Day,
such payment  date shall be extended to the next  succeeding  Business  Day, and
interest  thereon  shall be  payable at the then  applicable  rate  during  such

                                      -28-
<PAGE>

extension.  If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business  Day, the maturity  thereof  shall be extended to the next
succeeding  Business Day (and  interest  shall accrue  during such  extension of
time) unless the result of such  extension  would be to extend such payment into
another  calendar  month,  in  which  event  such  payment  shall be made on the
immediately preceding Business Day.

          (c) If on any date a payment is due hereunder,  the Borrower shall pay
less than the amount stated to be due or on any date the Agent shall receive any
payment under any Security Document or pursuant to any proceeding to enforce the
Obligations  of any Person  constituting  the Borrower,  such proceeds  shall be
distributed to the Lenders pro rata based on their  respective  Percentages  and
shall be applied first to costs of collection incurred by each Lender, second to
accrued and unpaid  interest,  third to principal and then to the payment of any
other amounts due hereunder or the other Loan Documents.

          (d) The  Agent  shall  fund  each  Loan by  depositing  $5,000,000  in
aggregate  of the  initial  Loans to ER Hong  Kong's  and ER BVI's  account  no.
8019335333  with PNC  (provided  such  funds may only be used to fund the Escrow
Account) and by  depositing  the proceeds of all other Loans in the account (the
"Account")  of ERC US  (account  no.  8019335317)  at PNC's  office at Two Tower
Center Boulevard, East Brunswick, New Jersey 08817 or as otherwise directed in a
writing from the Borrower to the Agent directing payment for purposes  permitted
by the terms  hereof;  provided  that the  proceeds  of each Loan shall first be
applied  to  principal  prepayments  or  payments  due on the date of such  Loan
(without derogating from the Borrower's obligation to repay) and proceeds of any
conversion or continuation of a Loan to or as a particular Type shall be applied
by the Agent solely to effect such  conversion or  continuation.  Each Lender is
hereby authorized to debit the accounts of each Person constituting the Borrower
for all payments due hereunder;  provided the foregoing  shall not derogate from
the  Borrower's  obligation  to pay or  restrict  any  Lender's  recourse to any
particular fund or source of monies. The Borrower agrees to maintain its primary
depository  accounts  with  PNC's  office at Two Tower  Center  Boulevard,  East
Brunswick, New Jersey 08817.

     Section 2.15  Change  in  Legality.  Notwithstanding   any  other provision
herein,  if any change in any  Requirement  of Law or in the  interpretation  or
application  thereof by a  Governmental  Authority  shall make it unlawful for a
Lender to make or maintain  Eurodollar  Loans as contemplated by this Agreement,
(a) the Commitment of such Lender hereunder to make Eurodollar  Loans,  continue
Eurodollar  Loans as such and convert Loans to Eurodollar  Loans forthwith shall
be canceled and (b) such Loans then  outstanding  as Eurodollar  Loans,  if any,
automatically  shall be converted 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 such Lender such amounts,  if
any, as may be required pursuant to Section 2.17.

                                      -29-
<PAGE>

     Section 2.16 Increased Costs.

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

               (1) shall  subject  any Lender to any tax of any kind  whatsoever
     with respect to this Agreement, any Note or any Eurodollar Loan made by it,
     or change  the basis of  taxation  of  payments  to such  Lender in respect
     thereof (except for the imposition of and changes in the rate of tax on the
     overall net income of the Lender);

               (2) 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 or
     other  extensions of credit by, or any other  acquisition  of funds by, any
     office of a Lender which is not otherwise  included in the determination of
     the  Eurodollar  Rate  hereunder,   including,   without  limitation,   the
     imposition of any reserves with respect to Eurocurrency  Liabilities  under
     Regulation D of the Board; or

               (3) shall impose on a Lender any other condition;

               (4) and the result of any of the  foregoing  is to  increase  the
     cost to such  Lender,  by an amount which such Lender deems to be material,
     of making,  converting  into,  continuing or maintaining  Eurodollar  Loans
     hereunder or to reduce any amount  receivable  hereunder in respect thereof
     then, in any such case, the Borrower  shall promptly pay such Lender,  upon
     its demand,  any additional amounts necessary to compensate such Lender for
     such  increased  cost or reduced  amount  receivable.  If a Lender  becomes
     entitled to claim any additional  amounts pursuant to this  subsection,  it
     shall promptly  notify the Agent and the Borrower of the event by reason of
     which it has become so entitled. A certificate as to any additional amounts
     payable  pursuant to this subsection  submitted by a Lender to the Borrower
     and Agent shall  include a  computation  thereof and be  conclusive  in the
     absence of clearly  demonstrable  error.  This  covenant  shall survive the
     termination  of this  Agreement  and the payment of the Notes and all other
     amounts payable hereunder.

               (5) Each  Lender  agrees,  as promptly  as  practicable  after it
     becomes aware of any  circumstances  referred to above that would result in
     such  increased  cost,  the  affected  Lender  shall,  to  the  extent  not
     inconsistent with such Lender's  internal policies of general  application,
     use reasonable  commercial  efforts to minimize costs and expenses incurred
     by it and payable to it by the Borrower.

          (b) In the event that a Lender shall have  determined  that any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation  controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental  Authority made subsequent to
the date hereof does or shall have the effect of reducing  the rate of return on
such Lender's or such corporation's  capital as a consequence of its obligations

                                      -30-
<PAGE>

hereunder to a level below that which such Lender or such corporation could have
achieved but for such change or compliance (taking into  consideration  Lender's
or such  corporation's  policies with respect to capital  adequacy) by an amount
deemed by such Lender to be material,  then from time to time,  after submission
by such Lender to the Borrower  (with a copy to the Agent) of a written  request
therefore  (which shall contain a computation of the  compensating  amount to be
paid, such computation to be conclusive in the absences of demonstrable  error),
the Borrower shall pay to such Lender such additional  amount or amounts as will
compensate such Lender for such reduction.

          (c) In the event  that by reason of any change in any  Requirement  of
Law (including,  without limitation,  the lapse or termination of any treaty) or
in the  interpretation  thereof,  or the adoption of any new law,  regulation or
requirement by any Governmental  Authority, or the imposition of any requirement
of any central bank whether or not having the force of law, (i) the Agent or any
Lender  shall,  with  respect to this  Agreement,  the  Loans,  the Notes or its
obligation to make Loans under this  Agreement,  be subjected to any withholding
or  other  tax,  levy,  impost,  charge,  fee,  duty or  deduction  of any  kind
whatsoever  (other than franchise taxes imposed by the jurisdiction in which the
Agent or such Lender is domiciled  and other than any tax  generally  imposed or
based  upon the net  income  or  branch  profits  of the  Agent or such  Lender)
(collectively,  "Taxes") or (ii) any change  shall occur in the  taxation of the
Agent or such Lender with respect to any Loan, the interest  payable  thereon or
any fees payable  hereunder or referred to herein  (other than  franchise  taxes
imposed by the  jurisdiction  in which the Agent or such Lender is domiciled and
other than any change  which  affects,  and to the extent that it  affects,  the
taxation of the net income or branch  profits of the Agent or such Lender),  and
if any such measures or any other similar measure shall result in an increase in
the cost to the Agent or such  Lender of  making  or  maintaining  any Loan or a
reduction in the amount of principal,  interest or fees  receivable by the Agent
or such  Lender in respect  thereof,  the Agent or such  Lender  promptly  after
learning of the  imposition of such cost or reduction in any amount shall notify
the Borrower and the Agent (if  applicable)  stating the reasons  therefor.  The
Borrower shall thereafter pay to the Agent or such Lender, upon demand from time
to time, as additional consideration hereunder,  such additional amounts as will
fully  compensate the Agent or such Lender for such  increased  costs or reduced
amounts and shall promptly provide the Agent or such Lender, as the case may be,
with official tax receipts or other evidence of the payment of any taxes paid by
the Borrower. A certificate as to the increased costs or reduced amounts setting
forth the  calculations  therefor,  shall be submitted  promptly by the Agent or
such Lender to the Borrower and the Agent (if applicable) and, in the absence of
demonstrable error, shall be conclusive and binding as to the amount thereof. If
the Agent or Lender receives any additional  amounts from the Borrower  pursuant
to this subsection (c) if requested by Borrower,  the Agent or such Lender shall

                                      -31-
<PAGE>

(at the Borrower's expense) attempt to obtain a refund, reduction,  deduction or
credit for any Taxes  with  respect to the  additional  amounts  paid under this
subsection  (c).  If the Agent or such  Lender  actually  receives or enjoys the
benefit of any such refund,  reduction,  deduction or credit for any such Taxes,
the Agent or such Lender shall reimburse the Borrower if and to the extent,  but
only the extent,  that the Agent or such Lender  determines that it has actually
received  (i) a refund of taxes or other  amounts  (together  with any  interest
actually  received  thereon from the respective  Governmental  Authority)  which
refund is  attributable  to the Taxes  with  respect  to which  such  additional
amounts were paid;  or (ii) an  effective  net  reduction  (through a reduction,
deduction,  credit or otherwise) in any taxes or other amounts otherwise payable
by the Agent or such Lender  (including  any taxes imposed on or measured by the
net income of the Agent or such Lender),  which reduction is attributable to the
Taxes with respect to which such  additional  amounts were paid. If, at any time
after the Agent or such Lender makes a payment to the  Borrower  pursuant to the
preceding sentence, the Agent or such Lender determines that it was not entitled
to the full amount of any refund (together with the interest thereon) reimbursed
to the  Borrower as  aforesaid  or that its taxes are not reduced by a credit or
deduction for the full amount of Taxes  reimbursed to the Borrower as aforesaid,
the  Borrower  upon the demand of the Agent or such Lender will  promptly pay to
the Agent or such  Lender  the  amounts so  refunded  to which the Agent or such
Lender  was not so  entitled,  or the  amount by which the taxes of the Agent or
such Lender were not so reduced, as the case may be.

          (d) If  Borrower  is required  to pay  additional  amounts  under this
Section 2.16 to any Lender,  the Borrower may, at its own expense,  require such
Lender to transfer and assign in whole or in part,  without recourse all or part
of its  interests,  rights and  obligations  under this Agreement to an assignee
(which may be another Lender,  if a Lender accepts such assignment)  which shall
assume such assigned  obligations in a writing in form and substance  reasonably
acceptable to the Agent;  provided that (i) such  assignment  shall not conflict
with any law,  rule or  regulation  or order of any court or other  Governmental
Authority,  (ii) the Borrower shall have received a written consent of the Agent
in the case of any  entity  that is not a  Lender,  which  consent  shall not be
unreasonably  withheld,  and (iii) the Borrower or such assignee shall have paid
to the assigning  Lender in  immediately  available  funds the principal of, and
interest  accrued to the date of such payment on, the Loans made by it hereunder
and all other amounts owed to it hereunder as of such date.

     Section 2.17 Indemnity.

          (a) The  Borrower  agrees to  indemnify  each  Lender and to hold each
Lender  harmless from any loss or expense which such Lender may sustain or incur
as a  consequence  of

               (7) default by the Borrower in payment when due of any portion of
     the principal  amount of or interest on any Eurodollar Loan,

               (8) default by Borrower in making a borrowing of, conversion into
     or  continuation  of  Eurodollar  Loans after  Borrower  has given a notice
     requesting the same in accordance with the provisions of this Agreement,

               (9) default by Borrower in making any  prepayment  after Borrower
     has  given a notice  thereof  in  accordance  with the  provisions  of this
     Agreement, or

               (10) the making of a payment or a prepayment of Eurodollar  Loans
     on a day  which is not the  last day of an  Interest  Period  with  respect
     thereto,

                                      -32-
<PAGE>

including,  without  limitation,  in each case, any such loss or expense arising
from the  reemployment  of funds obtained by such Lender or from fees payable to
terminate the deposits from which such funds were obtained.


          (b) For the purpose of calculation of all amounts  payable to a Lender
under this  subsection  such Lender shall be deemed to have actually  funded its
relevant  Eurodollar Loan through the purchase of a deposit bearing  interest at
the Eurodollar Rate in an amount equal to the amount of that Eurodollar Loan and
having a maturity comparable to the relevant Interest Period; provided, however,
that each  Lender  may fund each of its  Eurodollar  Loans in any manner it sees
fit, and the foregoing  assumption shall be utilized only for the calculation of
amounts  payable  under  this  subsection.   This  covenant  shall  survive  the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.

     Section 2.18 Intentionally omitted.

     Section 2.19 Purpose of Loans.

          (a) The proceeds of the Revolving  Credit Loans shall be used first to
repay the outstanding Indebtedness under the Congress Financial Credit Facility,
second to  increase  the funds on deposit  in the  Escrow  Account to a total of
$20,750,000  and third for working capital needs of the Borrower and for general
corporate purposes. The proceeds of the Term Loan and the Borrower Deposit shall
be used  solely  to  repay  ERC  US's  outstanding  8-1/2%  Senior  Subordinated
Convertible Debentures Due 2002 (the "Convertible Debentures").  The Convertible
Debentures were issued on August 30, 1995 in the aggregate  principal  amount of
$20,750,000.   ERC  US  represents  that  (x)  there  is  currently  outstanding
$20,750,000 in aggregate principal amount of the Convertible  Debentures and (y)
it has  received  no  notice  that  any of the  Convertible  Debentures  will be
converted  into  Capital  Stocks  of ERC US.  The Term  Loan  shall be funded by
payment by the Agent on behalf of the Lenders from the  accounts  referred to in
Section 2.14(d)  directly to account no.  8019335296 at PNC which is an interest
bearing  account and is titled "ERC US  Convertible  Debenture  Escrow  Account"
(hereinafter,  the "Escrow Account"). The amount of the Term Loan disbursed into
the Escrow Account, when added to the Borrower Deposit, shall not exceed the sum
of (x) the outstanding principal amount of Convertible Debentures on the Closing

                                      -33-
<PAGE>

Date  (excluding  Convertible  Debentures to be converted)  plus (y) accrued and
unpaid  interest  thereon  from the interest  payment  date for the  Convertible
Debentures immediately preceding the Closing Date, all as certified to the Agent
and the Lenders by the Trustee  for the holders of the  Convertible  Debentures.
Any portion of the Term Loan  Commitment  not used to fund the Escrow Account on
the Closing Date shall irrevocably terminate. Borrower shall pay interest on the
principal  amount of the Term Loan funded on the Closing Date while the proceeds
thereof are in the Escrow  Account and shall  continue to pay  interest  thereon
after disbursement  thereof.  Interest,  if any, accruing on funds in the Escrow
Account shall remain in the Escrow Account and be applied in accordance with the
terms of this  Section  2.19.  The Agent  shall  disburse  funds from the Escrow
Account  directly to holders of  Convertible  Debentures  (or their agents) on 5
days'  notice (i) to pay the  purchase  price of  Convertible  Debentures  to be
purchased  by ERC  US on or  prior  to  the  maturity  date  of the  Convertible
Debentures  provided  (a)  no  Event  of  Default  shall  have  occurred  and be
continuing as a result of the failure of any Person constituting the Borrower to
pay any amount due by it  hereunder  or under any other  Loan  Document  or as a
result of a breach of Section 6.11, 6.12 or 6.13 hereof,  (b) the purchase price
funded  for  any  such  Convertible  Debenture  shall  not  exceed  101%  of the
outstanding  principal  amount thereof plus accrued and unpaid interest from the
most recent interest  payment date for the Convertible  Debentures and (c) funds
shall be  disbursed  by the  Agent  only  against  presentation  to Agent of the
original  Convertible  Debenture to be purchased  together with any  endorsement
deemed  necessary by the Agent together with proof  satisfactory to the Agent of
the  identity of the holder of such  Convertible  Debenture  as reflected on the
Register  maintained by the Trustee (or any Person,  such as DTC, acting for the
Trustee) for the holders of the Convertible Debentures pursuant to the Documents
pursuant  to which the  Convertible  Debentures  were  issued  and the power and
authority of such holder to Transfer  such  Convertible  Debenture  and (d) each
Convertible  Debenture  so  delivered to the Agent shall be destroyed by it upon
disbursement  of  funds  for the  purchase  thereof  or  delivered  (at  Agent's
discretion)  to the Trustee for the holders of the  Convertible  Debentures  for
cancellation  (in accordance with the Trustee's  instructions  which are annexed
hereto  as  Exhibit  M),  and  (ii)  on the  maturity  date  of the  Convertible
Debentures  to the  Trustee  for the holders  thereof  (in  accordance  with the
Trustee's instructions which are annexed hereto as Exhibit M) an amount equal to
the lesser of (x) the funds then  remaining in the Escrow  Account (in excess of
the  amount,  if any, to be paid on such date for the  purchase  of  Convertible
Debentures  pursuant  to clause (i) of this  sentence)  and (y) the  outstanding
principal  amount  of  Convertible  Debentures  on  the  maturity  date  of  the
Convertible  Debentures (excluding  Convertible Debentures to be converted) plus
accrued and unpaid  interest  thereon  from the  interest  payment  date for the
Convertible Debentures immediately preceding such maturity date. Notwithstanding
anything to the contrary in this Section 2.19(a), Borrower authorizes payment of
the   Convertible   Debentures  to  be  made  in  accordance  with  the  written
instructions  of the Trustee for the holders of the  Convertible  Debentures Any
portion of the funds in the Escrow Account remaining after the close of business
on the maturity date of the  Convertible  Debentures for which notice of payment
has not been given pursuant to this Section  2.19(a),  exclusive of any interest

                                      -34-
<PAGE>

thereon, if any, remaining in the Escrow Account,  shall be applied by the Agent
to  required  payments  of the  principal  of the Term Loan  pursuant to Section
2.6(b) in the inverse order of maturity  until the Term Loan is paid in full and
any interest  remaining in the Escrow  Account at such time shall be returned to
the  Borrower  provided  no Event of Default  has  occurred  and is  continuing.
Principal  amounts  repaid  pursuant to this  Section  2.19 may not  reborrowed.
Pending disbursements from the Escrow Account, monies therein shall be held, and
the Borrower hereby  pledges,  to the Agent for the benefit of the Agent and the
Lenders,  such monies, as cash collateral for the Obligations which monies, upon
the  occurrence  and  continuance of an Event of Default and the maturity of the
Loans (by  acceleration or otherwise) shall be applied by the Agent to repayment
of the  Obligations  in such order as the Agent  shall  elect.  Borrower  has no
independent right to withdraw funds from the Escrow Account.

          (b) The  duties  and  responsibilities  of the  Agent  hereunder  with
respect  to the  Escrow  Account  shall  be  determined  solely  by the  express
provisions   of  this  Section  2.19,   and  no  other  or  further   duties  or
responsibilities  shall be  implied.  The  Agent  shall  not have any  liability
hereunder, nor duty to inquire into the terms and provisions of any agreement or
instructions,  other than  outlined  in this  Agreement.  Without  limiting  the
generality  of the  foregoing,  it is  expressly  agreed that the Agent shall be
entitled  to rely  solely  upon  any  instrument,  written  statement  or  other
instructions  purportedly  made or given  pursuant  hereto,  and  shall  have no
liability  to the  parties  hereto for any  action it may take or  refrain  from
taking in connection  with such reliance.  The Agent shall have no liability for
anything it may do or refrain from doing in connection with its duties hereunder
except as a result of its own willful misconduct on gross negligence.  The Agent
may rely upon any  instrument  not only as to its due  execution,  validity  and
effectiveness,  but  also  as to the  truth  and  accuracy  of  any  information
contained therein.  Anything in this Agreement to the contrary  notwithstanding,
in no event shall the Agent be liable for  special,  indirect  or  consequential
loss or damage of any kind  whatsoever  (including,  but not  limited  to,  lost
profits),  even if the Agent has been advised of the  likelihood of such loss or
damage and regardless of the form of action.

          (c) In the event of a dispute over the application or release of funds
from the Escrow  Account,  the Agent shall have the  authority to deposit all or
any portion of the funds in the Escrow  Account as Agent deems  appropriate  and
related  documents  with a court of competent  jurisdiction  and to abide by the
judgment thereof.  In making any such deposit,  the Agent shall notify the court
that the funds in the Escrow  Account are  encumbered by a security  interest in
favor of the Agent and the  Lenders  and shall  seek entry of an order from such
court  that the funds in the  Escrow  Account  to be  deposited  shall,  for the
purpose of enabling Agent to establish,  maintain and continue the perfection of
its security interest in the funds in the Escrow Account, be deemed to be in the
possession and control of the Agent.

          (d) In the event that Agent  should  resign or be replaced as provided
in Article 8, the successor Agent shall take control of the Escrow Account.  Any
successor  Agent  shall  execute and  deliver to the  predecessor  Agent and the
parties hereto, an instrument accepting such appointment and the transfer of the
funds in the Escrow  Account and  agreeing to the terms of this  Agreement,  and
thereupon such successor  Agent shall,  without  further act, become vested with

                                      -35-
<PAGE>

all the estates, properties,  rights, powers and duties of the predecessor Agent
as if originally named herein.

          (e) Neither the Agent or any Lender  shall have any  liability  in the
event the monies in the Escrow Account are  insufficient  to purchase or pay for
all  Convertible  Debentures or are unavailable for application to such purchase
or payment  pursuant to the terms of Section  2.19(a).  The Borrower assumes all
risks of the acts,  omissions  or misuse of any  disbursements  from the  Escrow
Account to any purported  holder of any Convertible  Debenture or to the Trustee
for the holders of the Convertible  Debentures.  Except to the extent of its own
gross negligence or willful misconduct,  the Agent shall not be responsible for:


               (6) the form, validity,  sufficiency,  accuracy,  genuineness, or
     legal effect of any document submitted by any Person in connection with the
     purchase by ERC US of any Convertible Debenture,  even if it should in fact
     prove  to be in any  or all  respects  invalid,  insufficient,  inaccurate,
     fraudulent or forged;

               (7) the form,  validity,  sufficiency,  accuracy,  genuineness or
     legal effect of any instrument  transferring  or assigning or purporting to
     transfer  or assign a  Convertible  Debenture  or the  rights  or  benefits
     thereunder or proceeds thereof in whole or in part;

               (8) failure of holder of any Convertible Debenture or the Trustee
     to comply fully with  conditions  required in order to demand payment under
     or with respect to any Convertible Debenture;

               (9) errors, omissions, interruptions or delays in transmission or
     delivery of any information or messages, by mail, cable,  telegraph,  telex
     or otherwise;

               (10) any loss or delay in the  transmission  or  otherwise of any
     document or draft required in order to make a disbursement  from the Escrow
     Account or of the proceeds thereof;

               (11) errors in interpretation of technical terms;

               (12) any misapplication by a holder of any Convertible  Debenture
     or the Trustee for the holders  thereof (or any Person,  such as DTC acting
     for the  Trustee  for the  holders of the  Convertible  Debentures  or such
     holders) of the proceeds of any disbursement from the Escrow Account; and

               (13) any  consequences  arising from causes beyond the control of
     the  Agent  including,   without  limitation,   acts  of  any  Governmental
     Authority.

None of the foregoing shall affect,  impair or prevent the vesting of any of the
rights or powers granted to the Agent and each Lender hereunder.

                                      -36-
<PAGE>

          The Borrower  hereby  agrees to protect,  indemnify,  pay and save the
Agent  harmless  from and  against  any and all  claims,  demands,  liabilities,
damages,  losses,  costs, charges and expenses  (including,  without limitation,
reasonable  attorneys'  fees)  which the Agent may incur or be  subject  to as a
consequence,  direct or indirect,  of (i) the  application  of any monies in the
Escrow  Account,  other  than as a result of the  gross  negligence  or  willful
misconduct of the Agent as determined by a court of proper jurisdiction, or (ii)
the failure of the Agent to honor a request for  disbursement  of funds from the
Escrow Account as a result of any act or omission, whether rightful or wrongful,
of any  present  or  future  de jure or de  facto  Governmental  Authority.  The
agreements in this paragraph shall survive payment of the Obligations.

                                   ARTICLE 3.
                         REPRESENTATIONS AND WARRANTIES

          To induce the Agent and the Lenders to enter into this  Agreement  and
to make the Loans, the Borrower hereby  represents and warrants to the Agent and
the Lenders that as of the Effective Date:

     Section 3.1 Financial  Condition.

          (a) The  consolidated  balance  sheets of ERC US and its  consolidated
Subsidiaries  as at March 31, 2002 and the related  consolidated  statements  of
income and of cash flows for the fiscal  period ended on each such date,  copies
of which have  heretofore  been furnished to each Lender,  present fairly in all
material  respects  the  consolidated  financial  condition  of ERC  US and  its
consolidated  Subsidiaries  as at such dates,  and the  consolidated  results of
their  operations  and their  consolidated  cash flows for the fiscal years then
ended.

          (b) All such financial  statements,  including the related  schedules,
have been prepared in accordance with GAAP applied  consistently  throughout the
periods  involved  (except as  approved  by such  accountants  and as  disclosed
therein).

          (c) Neither  ERC US nor any of its  consolidated  Subsidiaries  (other
than SSG) had, at the date of the most recent  balance  sheet  delivered  to the
Agent  pursuant  to  Section  3.1(a)  or 5.1  hereof,  any  material  Contingent
Obligation,  material  contingent  liability or material liability for taxes, or
any  material   long-term  lease  or  material   unusual  forward  or  long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction or other financial derivative,  except as reflected
in the foregoing  statements or in the notes thereto or would not  reasonably be
expected to have a Material Adverse Effect.

          (d) During  the  period  from  April 1,  2002,  to and  including  the
Effective Date hereof there has been no sale,  transfer or other  disposition by
ERC US or any of its consolidated  Subsidiaries (other than SSG) of any material
part of its business or property (other than in the ordinary course of business)

                                      -37-
<PAGE>

and no purchase or other acquisition of any business or property  (including any
Capital Stock of any other Person, other than Capital Stock of ERC US by ERC US,
in any case, other than in the ordinary course of business) material in relation
to the  consolidated  financial  condition of the Borrower and its  consolidated
Subsidiaries  at March 31, 2002.

          (e) As of the date hereof,  the holders of the Convertible  Debentures
are set forth on Schedule  IX.

     Section 3.2 No Material  Adverse Change.  Since March 31, 2002,  there  has
been no development  or event  which has had or could  reasonably be expected to
have  a  Material Adverse  Effect.

     Section 3.3 Corporate Existence;  Compliance with Law.  Each of  ERC US and
its  Subsidiaries  (other than  Inactive  Subsidiaries)  (a) is duly  organized,
validly  existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged,  (c) is duly qualified as
a foreign  corporation and in good standing under the laws of each  jurisdiction
where its  ownership,  lease or  operation  of  property  or the  conduct of its
business requires such  qualification  except where the failure to so qualify or
be in good standing  therewith would not have a Material  Adverse Effect and (d)
is in compliance with all Requirements of Law except where the failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect.

     Section 3.4 Corporate Power;  Authorization;  Enforceable Obligations.

          (a) Each Person  constituting the Borrower has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement, the
Notes  and  each  other  Loan  Document  to which  it is a party  and to  borrow
hereunder  and has  taken  all  necessary  corporate  action  to  authorize  the
borrowings  on the terms and  conditions of this  Agreement,  the Notes and each
other  Loan  Document  to which it is a party and to  authorize  the  execution,
delivery  and  performance  of this  Agreement,  the Notes and each  other  Loan
Document  to which it is a  party.

          (b)  Except  for  consents,  authorizations,  approvals,  notices  and
filings  described  on  Schedule  II, all of which have been  obtained,  made or
waived,  no consent or authorization  of, approval by, notice to, filing with or
other act by or in respect of, any Governmental Authority or any other Person is
required in  connection  with the  borrowings  hereunder or with the  execution,
delivery, performance, validity or enforceability of this Agreement or the Notes
or any other Loan Document.

          (c) This  Agreement  has  been,  and each  Note  and each  other  Loan
Document to which it is a party will be, duly  executed and  delivered on behalf
of each Person constituting the Borrower.

          (d) This  Agreement  constitutes,  and each Note and each  other  Loan
Document when executed and delivered will constitute, a legal, valid and binding
obligation of each Person  constituting  the Borrower  enforceable  against each
such  Person in  accordance  with its  terms,  except as  enforceability  may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or

                                      -38-
<PAGE>

similar laws  affecting the  enforcement of creditors'  rights  generally and by
general equitable  principles  (whether  enforcement is sought by proceedings in
equity or at law).

     Section 3.5 No Legal Bar. The execution,  delivery and  performance of this
Agreement and the Notes,  the  borrowings  hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual Obligation of any
Person  constituting  the  Borrower  and will not  result  in, or  require,  the
creation  or  imposition  of any  Lien on any of its  respective  properties  or
revenues pursuant to any such Requirement of Law or Contractual Obligation.

     Section 3.6 No Material Litigation.  Except as set forth on Schedule III or
disclosed in writing to the Lenders, no litigation,  investigation or proceeding
of or before any  arbitrator  or  Governmental  Authority  is pending or, to the
knowledge of the any Person constituting the Borrower,  threatened by or against
any Person constituting the Borrower or against any of its respective properties
or  revenues  (a)  with  respect  to this  Agreement,  the  Notes  or any of the
transactions  contemplated  hereby,  or (b) which if adversely  determined would
have a Material Adverse Effect.

     Section 3.7 No Default.  No Person  constituting the Borrower is in default
under or with respect to any of their respective Contractual  Obligations in any
respect which would reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

     Section 3.8  Ownership of Property;  Liens.  Each Person  constituting  the
Borrower  has good  record  and  marketable  title in fee  simple to, or a valid
leasehold  interest  in,  all its real  property,  and good title to, or a valid
leasehold  interest  in, all its other  property,  and none of such  property is
subject to any Lien except as permitted by Section 6.2.

     Section 3.9 Intellectual  Property.  Each Person  constituting the Borrower
owns, or is licensed to use, all trademarks,  tradenames,  copyrights,  patents,
technology,  know-how and processes necessary for the conduct of its business as
currently conducted (collectively, the "Intellectual Property") except where the
failure  to own or  license  any such  Intellectual  Property  would  not have a
Material  Adverse Effect.  The  Intellectual  Property owned or licensed by each
Person  constituting the Borrower is set forth on Exhibit I. Except as set forth
on Exhibit I, no claim has been asserted in writing and is pending by any Person
challenging  or  questioning  the use of any such  Intellectual  Property or the
validity or effectiveness of any such  Intellectual  Property which would have a
Material Adverse Effect,  nor does any Person  constituting the Borrower know of
any valid basis for any such claim  which,  if  asserted,  would have a Material
Adverse  Effect.  To the best of the knowledge of the Borrower,  the use of such
Intellectual Property by each Person constituting the Borrower does not infringe
the rights of any Person.

                                      -39-
<PAGE>

     Section  3.10  No  Burdensome  Restrictions.   No  Requirement  of  Law  or
Contractual  Obligation  of any Person  constituting  the Borrower has, or could
reasonably be expected to have, a Material Adverse Effect.

     Section  3.11 Taxes.  Each Person  constituting  the  Borrower has filed or
caused to be filed all tax returns which,  to the knowledge of such Person,  are
required  to be filed and has paid all taxes shown to be due and payable on said
returns or on any  assessments  made  against it or any of its  property and all
other taxes,  fees or other charges  imposed on it or any of its property by any
Governmental  Authority  (other  than any the  amount or  validity  of which are
currently  being  contested in good faith by  appropriate  proceedings  and with
respect to which  reserves  in  conformity  with GAAP have been  provided on the
books of such Person  constituting the Borrower or its respective  Subsidiaries,
as the case may be); no tax Lien has been filed,  and, to the  knowledge of such
Person,  no claim is being asserted,  with respect to any such tax, fee or other
charge in any case which would have a Material Adverse Effect,  except, there is
currently  a  California  unitary  tax  assessed  against ERC US in an amount of
approximately $1,100,000 and no Lien has been filed with respect thereto.

     Section 3.12 Federal Regulations. No part of the proceeds of any Loans will
be used for  "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under  Regulation U of the Board as now and
from time to time  hereafter  in effect or for any purpose  which  violates  the
provisions of any  Regulations  of the Board.  If requested by any Lender at any
time,  each  Person  constituting  the  Borrower  will  furnish to such Lender a
statement  in  conformity  with the  requirements  of FR Form U-1 referred to in
Regulation U.

     Section 3.13  Investment  Company Act;  Public Utility Holding Company Act;
Other  Regulations.  No Person  constituting  the Borrower is (a) an "investment
company,"  or a company  "controlled"  by an  "investment  company,"  within the
meaning of the  Investment  Company Act of 1940,  as amended,  or (b) a "holding
company" as defined in, or otherwise  subject to  regulation  under,  the Public
Utility  Holding  Company Act of 1935.  No Person  constituting  the Borrower is
subject to regulation  under any federal or state  statute or  regulation  which
limits its ability to incur Indebtedness.

     Section  3.14  Subsidiaries.  All  the  Subsidiaries  of  ERC  US as of the
Effective Date and the ownership of the Capital Stock of such  Subsidiaries  are
listed on Schedule IV to this  Agreement.  None of the Capital Stock of any such
Subsidiary is subject to a Lien in favor of any Person (except Liens in favor of
the Agent and Lenders).

     Section 3.15 Employee Grievances. Except as set forth on Schedule V hereof,
as of the Effective Date no Person  constituting  the Borrower is a party to any
collective  bargaining  agreement  or,  to the best  knowledge  of such  Person,
subject  to any  current  effort  to  organize,  and  there  are no  actions  or
proceedings pending or, to the best of the knowledge of such Person,  threatened
against  it, 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.

                                      -40-
<PAGE>

     Section  3.16 ERISA.

          (a) Except as set forth in  Schedule  VI hereof,  as of the  Effective
Date no  Person  constituting  the  Borrower  has any  Plan  (including  without
limitation any Multiemployer Plan) or any similar arrangement (a "Foreign Plan")
under the law of their  domicile,  in the case of the Foreign  Subsidiaries,  or
have made or make any  payments  to any Plan or Foreign  Plan.

          (b) Each Person constituting the Borrower is and has at all times been
in substantial  compliance with all applicable provisions of ERISA, except where
a failure to be in such  compliance  would not have a Material  Adverse  Effect.
Each Foreign Subsidiary is in compliance with all Requirements of Law related to
any Foreign  Plan.

          (c) No Person  constituting  the Borrower has engaged in a transaction
in connection  with which such Person or any ERISA Affiliate could be subject to
a material  liability  for either a civil penalty  assessed  pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Code.

          (d) There has been no termination of a Plan or trust created under any
Plan that would give rise to a material liability to the PBGC on the part of any
Person  constituting the Borrower or any ERISA Affiliate.  No material liability
to the PBGC has been or is expected to be incurred  with  respect to any Plan by
any Person  constituting the Borrower or any ERISA  Affiliate.  The PBGC has not
instituted  proceedings to terminate any Plan.  There exists no condition or set
of  circumstances  which  presents a  material  risk of  termination  or partial
termination of any Plan by the PBGC. Each Person  constituting  the Borrower and
each ERISA  Affiliate  have paid all  premiums  to the PBGC when due. No Foreign
Subsidiary has incurred any material liability to any Governmental  Authority or
other Person with respect to any Foreign Plan.

          (e) Full payment has been made of all amounts which are required under
the terms of each Plan to have been paid as contributions to such Plan as of the
last day of the most recent fiscal year of such Plan ended on or before the date
of this Agreement,  and no accumulated funding deficiency (as defined in Section
302 of ERISA and  Section 412 of the Code),  whether or not waived,  exists with
respect to any Plan. No Person constituting the Borrower nor any ERISA Affiliate
has failed to make a required  installment  under Section  412(m) of the Code or
any other  payment  required  under Section 412 of the Code on or before the due
date.

          (f) The  value of the  benefit  liabilities  (as  defined  in  Section
4001(a)(16) of ERISA) of each Plan (based on the actuarial assumptions contained
in Title IV of ERISA)  does not  exceed the fair  market  value of the assets of
such Plan.  No Person  constituting  the  Borrower  nor any ERISA  Affiliate  is
required to provide security to a Plan under Section 401(a)(29) of the Code.

          (g) No Person  constituting  the Borrower nor any ERISA  Affiliate has
made a complete or partial  withdrawal  from a  Multiemployer  Plan. To the best

                                      -41-
<PAGE>

knowledge of each Person  constituting  the Borrower the liability to which such
Person or any ERISA  Affiliate  would become  subject under ERISA if such Person
and all ERISA  Affiliates  were to withdraw  completely  from all  Multiemployer
Plans  as of the  most  recent  valuation  date,  together  with  any  secondary
liability for withdrawal  liability such Person and any ERISA Affiliate may have
as of the date hereof,  would not have a Material  Adverse  Effect.  To the best
knowledge of each Person constituting the Borrower no such Multiemployer Plan is
in  reorganization  (as such term is  defined  in  Section  4241 of ERISA) or is
insolvent  (as such term is  defined in  Section  4245 of ERISA).

          (h) No Person  constituting the Borrower (i) has any liability for any
Plan or  Multiemployer  Plan to which any  Subsidiary  of ERC US (other than the
Subsidiary  Borrowers)  contributes  or as to  which  such  Subsidiary  has  any
liability;  or (ii)  makes any  contribution  to any such Plan or  Multiemployer
Plan;  or (iii) has any  employees  enrolled  in or  covered by any such Plan or
Multiemployer Plan.

     Section 3.17 ER Intercompany  Payable.  The ER Intercompany  Payable is not
evidenced by any note or other  instrument or writing  except only by entries on
the books and  records of ER Hong Kong and ER BVI.  ER Hong Kong and ER BVI will
make a notation on such books and records to reflect the subordination of the ER
Intercompany  Payable pursuant to the HK Subordination  Agreement.  In the event
the ER  Intercompany  Payable becomes  evidenced by a note,  instrument or other
writing,  ER Hong Kong and ER BVI will (prior to its  execution)  cause the form
thereof  to  contain  a  reference  to the  provisions  of the HK  Subordination
Agreement satisfactory in form and substance to Agent and shall promptly deliver
a copy of such note, instrument or other writing to the Agent as executed.

                                      -42-
<PAGE>

ARTICLE 4. CONDITIONS PRECEDENT

     Section 4.1  Conditions  to Effective  Date.  This  Agreement  shall become
effective on the date (the "Effective  Date") on which each condition  listed in
Section 4.2 is satisfied and each of the following shall have occurred:

          (a) The Agent shall have received  counterparts of (i) this Agreement,
executed and delivered by a duly authorized officer of each Person  constituting
the  Borrower and each Lender,  and (ii) each  Security  Document and other Loan
Document executed by each Person party thereto.  Each Lender shall have received
a Revolving Credit Note and Term Note conforming to the requirements  hereof and
executed by a duly authorized officer of each Person constituting the Borrower.

          (b) The Agent shall have received a certificate of the Secretary or an
Assistant  Secretary of each Person constituting the Borrower and Scott dated as
of the  Effective  Date and  certifying  (1) that  attached  thereto  is a true,
complete and correct copy of resolutions  duly adopted by the Board of Directors
of such Person  authorizing (x) the execution,  delivery and performance of this

                                      -43-
<PAGE>

Agreement  and the Notes and the other  Loan  Documents  and (y) the  borrowings
contemplated  hereunder  and  that  such  resolutions  have  not  been  amended,
modified,  revoked or rescinded, (2) as to the incumbency and specimen signature
of  each  officer  executing  any  Loan  Documents  on  behalf  of  such  Person
constituting  the Borrower and (3) that  attached  thereto are true and complete
copies of the  organizational  documents of such Person (which in the case of ER
Hong Kong and ER BVI shall have been  amended  to  incorporate  changes  therein
requested  by the Agent);  and such  certificate  and the  resolutions  attached
thereto shall be in form and substance satisfactory to the Agent.

          (c) The Agent  shall  have  received  the  executed  legal  opinion of
Lowenstein,  Sandler P.C., US, counsel to the Persons constituting the Borrower,
together with the opinions of Baker & McKenzie,  Hong Kong  counsel,  to ER Hong
Kong, and Conyers,  Dill & Pearman,  British Virgin Island's  counsel to ER BVI,
substantially  in the form of Exhibit J. Such legal  opinions  shall  cover such
matters incident to the transactions contemplated by this Agreement as the Agent
and the Lenders reasonably may require.

          (d) The Borrower shall have paid to the Agent, for distribution to the
Lenders, a non-refundable facility fee of $400,000.

          (e) The Agent shall have  received (i) a payoff  letter from  Congress
Financial with respect to the Congress  Financial  Credit  Facility which letter
shall state that the Congress  Financial  Credit  Facility and the commitment of
Congress  Financial to Lender under will  terminate  upon payment of the amounts
set forth  therein  and (ii) UCC-3  Termination  Statements  or other  documents
necessary  to  terminate  all  Liens  securing  the  repayment  of the  Congress
Financial Credit Facility.

          (f) The  Borrower  shall  have paid all fees of  counsel  to the Agent
submitted on the date hereof as previously  agreed to. This condition  precedent
does not derogate from the Borrower's continuing obligations under Section 10.5.

          (g) The Trustee for the holders of the  Convertible  Debentures  shall
have confirmed to the Agent the outstanding  principal amount of the Convertible
Debentures.

          (h) The Agent shall have  received a Waiver and Consent  from  Gilbert
West, Inc. with respect to the California  warehouse used by ERC US and a letter
from SSG with respect to the warehousing  arrangements between it and ERC US, in
each case in form and substance satisfactory to the Agent.

          (i) The Lender shall have received such other materials, documents and
papers regarding the Borrower or the Loans as the Lender may reasonably require.

          (j) The Agent shall have received (i) all UCC Financing  Statements or
other public  filing  documents  required to perfect any security  interests and
other evidence of the Liens granted pursuant to the Security  Documents and (ii)
original stock certificates evidencing all Capital Stock pledged pursuant to the

                                      -44-
<PAGE>

Stock Pledge Agreement together with original stock powers (or equivalent forms)
executed in blank in form and substance satisfactory to the Agent.

          (k) The Agent shall have received the executed ER Hong Kong Bought and
Sold Notes and ER Hong Kong Director Resignations.

          (l) ERC US shall have  delivered to the Agent the most recent draft of
ERC US' financial  statements  for the fiscal year ended March 31, 2002 and such
statements shall be acceptable to the Agent.

          (m)  All  corporate  and  other   proceedings,   and  all   documents,
instruments  and  other  legal  matters  in  connection  with  the  transactions
contemplated  by this Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Lenders, and the Agent and the Lenders
shall have  received such other  documents and legal  opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as they
may reasonably request.

     Section 4.2  Conditions to Each Loan. The obligation of the Lenders to make
any Loan  requested to be made on any date (including,  without  limitation, the
initial  Loan)  is  subject to  the  satisfaction  of the  following  conditions
precedent:

          (a) Each of the  representations  and  warranties  made by each Person
constituting the Borrower in or pursuant to the Loan Documents shall be true and
correct in all material  respects on and as of such date as if made on and as of
such date except for  representations  and warranties  which speak as of another
date, in which case such  representations and warranties shall have been true in
all material respects as of such date (it being agreed that for purposes of this
Section  4.2 (a) the date  referred to in Section 3.2 shall refer to the date of
the then most recent audited financial statements of ERC US and its consolidated
Subsidiaries delivered to the Agent.

          (b) 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
on such date.

          (c) The Agent shall have received a Borrowing Base Certificate for the
then most recently ended Calculation Period in accordance with Section 5.2(c).

          (d) The Agent and the  Lenders  shall have  received  all fees due and
owing pursuant to Sections 2.4.

          (e) No notice of, or any other  document or instrument  creating,  any
federal tax Lien or Lien under  Section 412 of the Code or Section 4068 of ERISA
shall have been  issued,  recorded  or filed in an amount in excess of  $100,000
with respect to the assets of any Person constituting the Borrower and no Lender
shall have informed the Agent or the Borrower that such Lender has processed any
such Lien or has notice thereof.

                                      -45-
<PAGE>

          (f) No restrictions  shall have been imposed on the  convertibility or
transferability of any currency by any Governmental Authority where ER Hong Kong
or ER BVI is domiciled which the Agent deems in its business  judgment will have
an adverse impact on the ability of any Person  constituting the Borrower to pay
or perform the  Obligations  hereunder  or under the other Loan  Documents or to
continue to operate its business.

          (g) In the case of any  Revolving  Credit  Loan  requested  to be made
during the period  beginning on the Effective  Date and ending on the earlier of
July 30,  2002 and the date a  Purchasing  Lender  shall  have  entered  into an
Assignment and Acceptance with PNC with respect to not less than  $20,000,000 in
principal  amount of the Loans and  commitments of PNC  hereunder,  funding such
Revolving Credit Loan will not reduce the then Undrawn Availability to less than
$5,000,000.

          (h) To the  extent the Loan  proceeds  to be  deposited  in the Escrow
Account on the  Closing  Date are less than  $20,750,000,  Borrower  shall have,
simultaneously  with the funding of the initial Loans deposited other funds (the
"Borrower Deposit") in the Escrow Account so that the aggregate funds on deposit
therein are not less than $20,750,000.

          (i) On the date of the initial  Loan,  the ratio of Senior Funded Debt
to Consolidated EBITDA shall not exceed 2.0 to 1.0. For purposes of this Section
4.2(i),  Senior  Funded  Debt shall be  reduced  by the  amount of the  Borrower
Deposit.

          (j) On the date of the initial  Loan,  the Congress  Financial  Credit
Facility shall be paid in full.

          (k) In the case of the initial  Loans,  the Agent,  ERC US and Bank of
America  shall  have  entered  into an  account  control  agreement  in form and
substance  satisfactory to the Agent with respect to such of the accounts of ERC
US and MI with the Bank of America as is required by the Agent.

          Each  borrowing   hereunder  shall  constitute  a  representation  and
warranty  by the  Borrower  as of the  date of such  Loan  that  the  conditions
contained in this Section 4.2 have been satisfied.

                                   ARTICLE 5.
                             AFFIRMATIVE COVENANTS

          Each Person  constituting  the Borrower hereby agrees that, so long as
the Commitments remain in effect, any Note remains outstanding and unpaid or any
other  amount  is  owing to the  Agent  or any  Lender  hereunder,  each  Person
constituting the Borrower shall and shall cause their  respective  Subsidiaries,
other than SSG and Inactive Subsidiaries,  to:

                                      -46-
<PAGE>

     Section 5.1 Financial Statements.  Furnish  to  the  Agent (with sufficient
copies for each Lender):

          (a) (i) as soon as  available,  but in any event within 105 days after
the end of the  fiscal  year  of ERC US  ended  March  31,  2002,  a copy of the
consolidated balance sheet of ERC US and its consolidated Subsidiaries as at the
end of such fiscal year and the related  consolidated  statements  of income and
retained earnings and of cash flows for such fiscal year,  setting forth in each
case in comparative form the figures for the previous fiscal year,  certified by
and reported on without a "going concern" or like qualification or exception, or
qualification  arising out of the scope of the audit,  by Ernst & Young,  LLP or
other independent certified public accountants of nationally recognized standing
reasonably  acceptable  to the  Agent,  setting  forth in  comparative  form the
figures for the  previous  year,  together  with a compliance  certificate  by a
Responsible  Officer as to their being fairly  stated in all  material  respects
when considered in relation to the consolidated  financial  statements of ERC US
and its  consolidated  Subsidiaries  together  with an  unaudited  consolidating
balance sheet of ERC US and its consolidated  Subsidiaries as at the end of such
fiscal  year and the related  unaudited  consolidated  statements  of income and
retained  earnings and of cash flows for such fiscal year setting  forth in each
case, in  comparative  form,  the figures for the previous  fiscal year together
with a compliance  certificate by a Responsible Officer as to their being fairly
stated in all material respects;  and (ii) as soon as available but in any event
within 90 days of the end of each other fiscal year of ERC US ending after March
31, 2002, a copy of the consolidated and  consolidating  balance sheet of ERC US
and its  consolidated  Subsidiaries  as at the end of such  fiscal  year and the
related  consolidated  and  consolidating  statements  of  income  and  retained
earnings and of cash flows for such fiscal year,  setting  forth in each case in
comparative  form the figures for the  previous  fiscal  year,  certified by and
reported on without a "going  concern" or like  qualification  or exception,  or
qualification  arising out of the scope of the audit,  by Ernst & Young,  LLP or
other independent certified public accountants of nationally recognized standing
reasonably  acceptable  to the  Agent,  setting  forth in  comparative  form the
figures for the  previous  year,  together  with a compliance  certificate  by a
Responsible  Officer as to their being fairly  stated in all  material  respects
when considered in relation to the consolidated  financial  statements of ERC US
and its consolidated Subsidiaries; and

                                      -47-
<PAGE>

          (b) as soon as  available,  but in any event  not  later  than 45 days
after the end of each of the first three  quarterly  periods of each fiscal year
of ERC US, the unaudited  consolidated and consolidating balance sheet of ERC US
and its  consolidated  Subsidiaries as at the end of such fiscal quarter and the
related  unaudited  consolidated  and  consolidating  statements  of income  and
retained earnings and of cash flows of ERC US and its consolidated  Subsidiaries
for such fiscal  quarter  and the portion of the fiscal year  through the end of
such fiscal quarter,  setting forth in each case in comparative form the figures
for the previous year,  together with a compliance  certificate by a Responsible
Officer as to their being fairly stated in all material respects when considered
in  relation  to the  consolidated  financial  statements  of  ERC  US  and  its
consolidated  Subsidiaries  (subject to normal year-end audit adjustments);

all such  financial  statements  to be  complete  and  correct  in all  material
respects and to be prepared in  reasonable  detail and in  accordance  with GAAP
applied  consistently  throughout the periods  reflected  therein and with prior
periods (except as approved by such accountants or officer,  as the case may be,
and disclosed therein).


                                      -48-
<PAGE>

     Section 5.2  Certificates;  Other  Information.  Furnish to the Agent (with
sufficient copies for each Lender):

          (a)  concurrently  with  the  delivery  of  the  financial  statements
referred to in Sections 5.1(a) and 5.1(b), the following: (i) a certificate of a
Responsible  Officer  of ERC US  stating  that,  to the  best of such  Officer's
knowledge such  Responsible  Officer has obtained no knowledge of any Default or
Event of Default,  except as specified in such  certificate  and (ii) an updated
listing of all  license  agreements  for  intellectual  property to which ERC US
and/or any of its  Subsidiaries  is a party as licensor or licensee.

          (b) within five Business  Days after the same are sent,  copies of all
financial  statements  and  reports  which  ERC US  sends  to  its  stockholders
generally,  and  within  five  days  after  the same are  filed,  copies  of all
financial  statements  and reports  which ERC US may make to, or file with,  the
Securities  and Exchange  Commission or any successor or analogous  Governmental
Authority;

          (c)  within  seven  Business  Days  after the end of each  Calculation
Period  and,  in the event the  Calculation  Period  becomes a seven day  period
pursuant to the definition of such term, by the Wednesday next following the end
of each Calculation  Period, (i) a Borrowing Base Certificate as of the last day
of such  Calculation  Period which  certificate  shall  include,  inter alia, an
accounts receivable aging report for each Person constituting the Borrower as of
the end of the Calculation Period covered by such certificate, and (ii) a report
with  respect  to each back to back  letter of credit  facility  and each  other
credit  facility of ER Hong Kong and ER BVI, giving notice of any failure of any
issuer  of any  letter  of  credit  under  any  such  facility  to  honor a draw
thereunder  for any  reason  and  notice of  disputes  with  respect to any such
letters  of  credit;  and

          (d) promptly,  such additional  financial and other information as the
Agent  from  time to  time  reasonably  may  request.

     Section 5.3 Payment of Obligations.  Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever  nature,  except where the amount or validity thereof is
currently being contested in good faith by appropriate  proceedings and reserves
in conformity  with GAAP with respect thereto have been provided on the books of
the relevant Person  constituting the Borrower or its Subsidiaries,  as the case
may be or except for amounts not exceeding $500,000, in the aggregate,  incurred
in the  ordinary  course of  business  but subject to Section  6.2.

     Section 5.4 Conduct of Business and  Maintenance of Existence.  Continue to
engage in businesses related to the businesses now conducted by it and preserve,
renew and keep in full  force and effect its  corporate  existence  and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal  conduct of its business  except as otherwise  permitted
pursuant  to  Section  6.4;   comply  with  all   Contractual   Obligations  and
Requirements of Law (excluding, for purposes of this subsection, Requirements of
Law specifically  addressed in other  subsections of this Article 5) except,  in

                                      -49-
<PAGE>

the case of any  Inactive  Subsidiary,  to the  extent  that  failure  to comply
therewith would not, in the aggregate,  have a Material Adverse Effect.

     Section 5.5  Maintenance of Property;  Insurance.  Keep all property useful
and necessary in its business in good working order and condition, ordinary wear
and tear  excepted;  maintain with  financially  sound and  reputable  insurance
companies (rated A or better by A.M. Best & Co.) insurance on substantially  all
its property (including, without limitation, inventory) in at least such amounts
and against at least such risks (but  including in any event general  liability,
product  liability  and  business  interruption)  as is required by Agent in its
reasonable business judgment and available in the marketplace; cause Agent to be
a loss payee on all such  insurance  policies  and  furnish  to the Agent  proof
reasonably  satisfactory  to the Agent of the annual renewal  thereof (within 30
days of such renewal) and, upon written  request,  such other  information as to
the insurance carried as Agent may reasonably  request.  Such insurance policies
that cover goods shall  provide that the  insurance  company shall give Agent at
least thirty (30) days'  written  notice  before any such policy of insurance is
altered or canceled and that no act, whether willful or negligent, or default of
Borrower  shall  affect  the  right of Agent to  recover  under  such  policy of
insurance in case of loss or damage. Borrower irrevocably makes, constitutes and
appoints  Agent (and all officers,  employees or agents  designated by Agent) as
Borrower's  true  and  lawful  attorney  (and  agent-in-fact)  for the  purpose,
following an Event of Default,  of making,  settling and adjusting  claims under
such  policies  of  insurance,  endorsing  the  name  of  the  relevant  Persons
constituting  the  Borrower  on any check,  draft,  instrument  or other item of
payment  for  the  proceeds  of  such  policies  of  insurance  and  making  all
determinations and decisions with respect to such policies of insurance.

     Section 5.6 Inspection of Property;  Books and Records;  Discussions.  Keep
proper  books of record and account in which full,  true and correct  entries in
conformity with prudent business  practices and all Requirements of Law shall be
made  of  all  dealings  and  transactions  in  relation  to  its  business  and
activities;  and  permit  representatives  of the Agent and each  Lender  during
normal business hours and upon reasonable notice (unless an Event of Default has
occurred and is  continuing,  in which case no such notice from the Agent or any
Lender shall be required)  to visit and inspect any of its  properties,  examine
and make  abstracts  from any of its books and records and conduct  asset/system
reviews and/or appraisals,  including, without limitation, up to three (3) field
exams every  fiscal year of ERC US during the term hereof to be  performed  by a
third party acceptable to the Required Lenders and an annual inventory appraisal
to be performed by a third party  acceptable  to the Required  Lenders (all such
asset/system reviews and appraisals,  field exams and inventory appraisals to be
at the  Borrower's  sole cost and  expense,  the cost of which  shall be paid by
Borrower  on demand from the Agent) at any  reasonable  time and as often as may
reasonably be desired and to discuss the business,  operations,  properties  and
financial and other  condition of any Person  constituting  the Borrower and its
Subsidiaries with officers and employees of such Person and its Subsidiaries and
with its independent certified public accountants.

                                      -50-
<PAGE>

     Section  5.7  Notices.  Promptly  give  notice  to the  Agent  of:

          (a) the  occurrence  of any  Default  or Event of Default of which the
Borrower  has  knowledge;

          (b)  any (i)  default  or  event  of  default  under  any  Contractual
Obligation of any Person  constituting the Borrower or any of its  Subsidiaries,
other than SSG and Inactive Subsidiaries,  or (ii) litigation,  investigation or
proceeding  which may exist at any time  between  any  Person  constituting  the
Borrower or any of its Subsidiaries,  other than SSG and Inactive  Subsidiaries,
and any  Governmental  Authority,  which  in  either  case,  if not  cured or if
adversely determined,  as the case may be, would have a Material Adverse Effect;

          (c) any litigation or proceeding affecting any Person constituting the
Borrower or any of its  Subsidiaries in which the amount involved is $500,000 or
more and not covered by insurance or in which  injunctive  or similar  relief is
sought;

          (d) the occurrence of any event having a Material Adverse Effect;  and

          (e) The failure of any Person  which has issued one or more letters of
credit in a face amount equal to or greater than $100,000 (or its  equivalent in
any currency), in the case of trade letters of credit, and $500,000, in the case
of back to back letters of credit (or its equivalent in any currency), singly or
in the aggregate to ER Hong Kong or ER BVI, as  beneficiary,  or for the account
of ER Hong Kong or ER BVI,  to honor a draw under such  letter of credit for any
reason.

          Each notice  pursuant to this  subsection  shall be  accompanied  by a
statement of a  Responsible  Officer of the  relevant  Person  constituting  the
Borrower setting forth details of the occurrence referred to therein and stating
what action such Person proposes to take with respect thereto.

     Section 5.8 ERISA Compliance.  Comply with all the applicable provisions of
ERISA now or  hereafter in effect with respect to each of its Plans except where
the  failure to comply  would not have a  Material  Adverse  Effect.  Notify the
Lender of the  following  events,  as soon as possible  and in any event  within
thirty  days after the  Borrower  knows or has reason to know  thereof:  (i) the
occurrence of any Reportable Event with respect to any Plan; (ii) the occurrence
of a prohibited  transaction (as defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any Plan,  (iii) the  institution of proceedings or
the  taking or  expected  taking of any other  action by the PBGC or any  Person
constituting  the  Borrower or any ERISA  Affiliate  to terminate or withdraw or
partially withdraw from any Plan and, with respect to a Multiemployer  Plan, the
Reorganization  or Insolvency of such Plan (as such terms are defined in ERISA),
(iv) the failure of any Person  constituting the Borrower or any ERISA Affiliate
to make a required  installment  under  Section 412 (m) of the Code or any other
payment  required under Section 412 of the Code on or before the due date or (v)
the  adoption  of an  amendment  with  respect  to a Plan  so  that  any  Person
constituting the Borrower or any ERISA Affiliate is required to provide security
to the Plan under Section 401(a)(29) of the Code, and in

                                      -51-
<PAGE>

addition to such notice,  promptly deliver to the Lender a certificate signed by
a Responsible Officer setting forth the details relating thereto, and the action
that such Person and the ERISA  Affiliate  propose to take with respect  thereto
and when known,  any action taken or threatened by the Internal  Revenue Service
or the PBGC,  together  with a copy of any  notice  to the PBGC or the  Internal
Revenue  Service or any notice  delivered  by the PBGC or the  Internal  Revenue
Service.

     Section 5.9 Taxes and Claims. Pay and discharge all taxes,  assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any property belonging to it and which upon non-payment could become a Lien
on any  portion of its  property,  prior to the date on which  penalties  attach
thereto;  provided that, subject to any more restrictive provisions contained in
the Loan  Documents,  Borrower  shall not be required to pay or cause to be paid
any such tax, assessment, charge or levy the payment of which is being contested
in good faith and by proper  proceedings  and for which  adequate  reserves  are
being  maintained in accordance  with GAAP;  provided,  however,  Borrower shall
immediately  pay and  discharge  or  cause to be paid  and  discharged  any such
contested  taxes,  assessments and  governmental  charges or levies in excess of
$100,000 upon the commencement of any proceeding to foreclose, sell or otherwise
execute on the Lien thereof.

     Section 5.10 Environmental Matters.

          (a) Borrower  shall defend,  indemnify and hold harmless the Agent and
all Lenders from and against any and all Environmental Liabilities.

          (b)  Borrower  shall not cause or permit  (or allow any  subtenant  to
cause or  permit)  (i) any real  property  owned or  leased  by it,  or any part
thereof, to be used to generate,  manufacture,  refine, transport, treat, store,
handle, dispose,  transfer,  produce or process Hazardous Materials in violation
of the Environmental and Safety Laws.

          (c) The  provisions  of this  Section 5.10 shall be in addition to any
other  obligation  and  liability  the  Borrower  may have to the  Agent and the
Lenders, and shall survive the transactions contemplated herein, the termination
of this Credit Agreement and the repayment of all Obligations.

     Section 5.11  Shipping  Documents. Upon  reasonable  request  by Agent, (i)
each of the  Subsidiary  Borrowers  or any one or  more of them as  Agent  shall
direct from time to time,  shall  deliver the copies of all ocean or other bills
of lading and other shipping documents (collectively,  "Shipping Documents") for
each shipment of goods made by or for any  Subsidiary  Borrower to ERC US, MI or
any other Subsidiary or Person receiving goods (and acting on ERC US' behalf) to
be sold by ERC US to be delivered  to the Agent or any Person  selected by Agent
to act on its behalf (including  without limitation any Lender) and/or (ii) upon
the  occurrence  and during the  continuance  of an Event of Default,  cause the
Agent or any Person  selected by Agent to act on its behalf  (including  without
limitation  any  Lender)  to be named  on such  Shipping  Documents  as a Person

                                      -52-
<PAGE>

necessary to negotiate  or effect a Transfer of such  Shipping  Documents or the
goods covered  thereby,  and (iii) ERC US shall cause any other Person  shipping
goods to ERC US to take the  actions  described  in clause  (i) and (ii) of this
Section 5.11.

          Section  5.12  Significant  Subsidiary.  Cause each  Subsidiary  which
becomes a  Significant  Subsidiary  after  the  Closing  Date (if not  already a
Subsidiary Borrower) to become a party hereto by executing and delivering an
Assumption  Agreement  to  this  Agreement.  If any  two  (2) or  more  Inactive
Subsidiaries  (a  "Significant   Group")  taken  together  would   constitute  a
Significant   Subsidiary,   Borrower  shall  cause  so  many  of  such  Inactive
Subsidiaries to become a party hereto (by executing and delivering an Assumption
Agreement to this Agreement) as is necessary to cause the remaining Person(s) in
such  group  to  cease to be a  Significant  Group.

          Section  5.13  Waivers and  Consents.  Borrower  shall use  reasonable
efforts to obtain  Waivers and Consents  substantially  in the form of Exhibit L
hereto from each  warehousemen/lessor  of each  location in the United States of
America at which any Person  constituting the Borrower  maintains any Collateral
(as defined in the Security Agreements) and which has not been obtained prior to
the  Effective  Date.  Section

          Section  5.14  Hedging Agreement.  Not later than the thirty-fifth day
following the Closing Date,  Borrower  shall enter into an interest rate hedging
arrangement  in form and  substance  and with  counterparties  acceptable to the
Agent (whose  acceptance shall not be unreasonably  withheld) with respect to at
least $10,000,000 of the Loans for a period of at least one year.

          Section 5.15 Lockbox  Account.  On or before December 31, 2002, ERC US
and MI shall have terminated  their lockbox and other deposit accounts with Bank
of America,  N.A., on or before September 3, ERC US shall have established those
lockbox  and  other  deposit  accounts  and full  cash  dominion  with PNC Bank,
National  Association  (in that  capacity,  the  "Depository")  to  which  their
customers  will be directed to make payment on accounts and into which  proceeds
of collateral shall be promptly  deposited,  and shall have entered into control
agreements  with the  Depository  and the Agent  with  respect  to such  deposit
accounts  providing for a first  security  therein in favor of the Agent for the
benefit of the Lenders,  all in form and substance  satisfactory to the Required
Lenders.

                                      -53-
<PAGE>

                                   ARTICLE 6.
                               NEGATIVE COVENANTS

          Each Person  constituting  the Borrower hereby agrees that, so long as
the Commitments remain in effect, any Note remains outstanding and unpaid or any
other  amount is owing to the Agent or any Lender  hereunder,  it shall not, and
shall not  permit any of their  respective  Subsidiaries,  other  than SSG,  to,
directly or indirectly:

                                      -54-
<PAGE>

     Section 6.1  Limitation  on  Indebtedness.  Create, incur, assume or suffer
to exist any Indebtedness, except:

          (a)  Indebtedness  (i) in respect  of the  Loans,  the Notes and other
obligations  of such Person  constituting  the Borrower under this Agreement and
(ii) arising with respect to Hedging Agreements;

          (b)  Indebtedness  of ER Hong  Kong and ER BVI to the Bank of  America
and/or Hang Seng Bank pursuant to the Letter  Agreement  dated July 11, 2001, as
amended,  between  Bank of  America  and ER Hong  Kong  and ER BVI  (the "B of A
Facility"),  the Letter  Agreement dated July 7, 2000, as amended,  between Hang
Seng Bank and ER Hong Kong which  establishes  a  back-to-back  letter of credit
facility  (the "HS  Facility"),  and a trade letter of credit  facility (the "HS
Trade LC  Facility"),  and other  letter of  credit  facilities  to ER Hong Kong
and/or ER BVI, provided the Person providing such letter of credit facility does
not require cash  collateral in an amount in excess of 35% of the available face
amount of letters of credit issued under such other facility.

          (c) ERC US may guarantee up to $5,000,000  (or its equivalent in other
currencies)  of the aggregate  liability of ER Hong Kong and ER BVI under the HS
Trade LC  Facility  or other  trade  letter of credit  facilities  permitted  by
6.1(b).

          (d) ERC  Intercompany  Payable in the  aggregate  principal  amount of
$35,000,000  on the Closing Date plus an additional  $3,000,000  for each fiscal
year  ending  after  March 31,  2002.  ERC US shall  cause the amount of the ERC
Intercompany  Payable to increase by $3,000,000  during each fiscal year. ERC US
shall  not at any  time  reduce  the  outstanding  principal  amount  of the ERC
Intercompany  Payable below $35,000,000  during the fiscal year ending March 31,
2003,  $38,000,000  during the fiscal year ending  March 31,  2004,  $41,000,000
during the fiscal year ending March 31, 2005, and $44,000,000  during the fiscal
year ending  March 31, 2006,  and shall make no payment with respect  thereto at
any time  during  which an Event of  Default  has  occurred  and is  continuing.
Neither ER Hong Kong nor ER BVI shall effect a Transfer of the ERC  Intercompany
Payable.

          (e) Unsecured  Indebtedness  not  exceeding  $500,000 and which has no
negative pledge  covenant of a Person which becomes a Subsidiary  after the date
hereof, provided that such Indebtedness existed at the time such Person became a
Subsidiary  and was not  created in  anticipation  thereof;

          (f)  Capital  Lease  Obligations  plus  purchase  money   indebtedness
existing on the Effective Date plus  additional  Capital Lease  Obligations  and
purchase money  indebtedness  provided the aggregate  amount of such  additional
Capital Lease  Obligations and purchase money  indebtedness does not increase in
any fiscal year during the term of this Agreement by more than $500,000 over the
amount  thereof in the prior  fiscal year;  and

          (g)  Contingent  Obligations  in  accordance  with Section 6.3 of this
Agreement.

                                      -55-
<PAGE>

          (h)  Convertible  Debentures  in an  aggregate  outstanding  principal
amount not exceeding  $20,750,000 provided the same are paid or retired prior to
their current  stated  maturity date.

     Section  6.2  Limitation  on  Liens.  Create,  incur,  assume  or suffer to
exist any Lien upon any of its property, assets (including,  without limitation,
any Capital Stock of ER Hong Kong,  ER BVI, MI or SSG) or revenues,  whether now
owned or hereafter acquired, except for:

          (a) Liens securing the  Obligations.

          (b) Liens securing Indebtedness permitted by Section 6.1(f); provided,
that, in the case of Liens  securing  Indebtedness  permitted by Section  6.1(f)
such Liens shall not encumber  any  property not financed by such  Indebtedness,
and in the case of any Liens permitted by Section  6.1(e),  such Liens shall not
encumber any property  owned by any Person other than the new  Subsidiary or any
property  not  encumbered  by such Lien at the time it was  created,  such Liens
existed at the time such  Person  became a  Subsidiary  and were not  created in
anticipation of the acquisition,  and any such Lien does not by its terms secure
any Indebtedness other than Indebtedness  existing immediately prior to the time
such Person  becomes a Subsidiary;

          (c) Subject to Section  5.9,  Liens for taxes not yet due or which are
being contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the relevant Person
constituting the Borrower or its Subsidiaries, as the case may be, in conformity
with GAAP;

          (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlords'  or other  like  Liens on  inventory  and  equipment  arising  in the
ordinary  course of business  which  secure  amounts not overdue for a period of
more than 60 days or which  are being  contested  in good  faith by  appropriate
proceedings  provided,  the Borrower shall give immediate  written notice to the
Agent of any action taken by the holder of any such Lien to foreclose or enforce
such Lien and shall  immediately pay and discharge the same upon notice from the
Agent that in the Agent's business  judgment such Lien impairs or may impair the
Agent's security interest in, or the value of, any Collateral (as defined in any
of the Loan Documents);

          (e) pledges or  deposits in  connection  with  workers'  compensation,
unemployment  insurance  and other  social  security  legislation  and  deposits
securing  liability  to insurance  carriers  under  insurance or  self-insurance
arrangements;

          (f) deposits to secure the performance of bids, trade contracts (other
than for  borrowed  money),  leases,  statutory  obligations,  surety and appeal
bonds,  performance bonds and other obligations of a like nature incurred in the
ordinary course of business; and

                                      -56-
<PAGE>

          (g)  Liens  listed  on  Schedule  VII,  provided  that no such Lien is
amended after the date of this Agreement to cover any additional  property or to
secure additional Indebtedness.

          Notwithstanding   the  termination   pursuant  to  the  terms  of  any
Intellectual  Property  Security  Agreement  of any  Lien  on  any  Intellectual
Property of any Person constituting the Borrower, except upon payment in full of
the Obligations and termination of the Commitments,  no Person  constituting the
Borrower  shall  create,  incur,  assume  or  suffer  to  exist  any Lien on any
Intellectual  Property owned by it except in favor of the Agent and the Lenders.


     Section 6.3  Limitation on Contingent Obligations.  Create,  incur,  assume
or  suffer  to  exist any  Contingent  Obligation,  except  as permitted by this
Agreement, including without limitation, Section 6.1(b) and 6.1(c), provided, in
any case those obligations are not otherwise prohibited under this Agreement.

     Section  6.4  Limitations  on  Fundamental  Changes. Enter into any merger,
consolidation or amalgamation,  or (except in the case of Inactive Subsidiaries)
liquidate,   wind  up  or  dissolve   itself  (or  suffer  any   liquidation  or
dissolution),  reincorporate itself in any other jurisdiction,  or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property,  business or assets, make, in the case of any Subsidiary Borrower, any
amendments to its organizational  documents,  or make any material change in its
present method of conducting business, except:

          (a) any  Subsidiary  of ERC US, other than ER Hong Kong or ER BVI, may
be merged or consolidated with or into ERC US (provided that ERC US shall be the
continuing  or  surviving  corporation)  or with or into any one or more  wholly
owned Subsidiaries of ERC US other than SSG or any Inactive Subsidiary (provided
that the wholly owned Subsidiary or Subsidiaries or the Subsidiary Borrower,  if
it is a party  to such  merger  or  consolidation,  shall be the  continuing  or
surviving  corporation) and after giving effect to any of such transactions,  no
Default or Event of Default shall exist; and

          (b) any wholly owned  Subsidiary  of ERC US other than ER Hong Kong or
ER BVI may sell,  lease,  transfer  or  otherwise  dispose  of any or all of its
assets (upon voluntary  liquidation or otherwise) to ERC US or any  wholly-owned
Subsidiary of ERC US other than SSG or any Inactive Subsidiary; and

          (c) sales of assets in accordance with Section 6.5 of this Agreement.

     Section 6.5  Limitation on Sale of Assets.  Convey,  sell,  lease,  assign,
transfer  or  otherwise  dispose  of any of its  property,  business  or assets,
tangible or intangible,  (including,  without  limitation,  Capital Stock of any
Person  constituting  the Borrower  (other than Capital  Stock of ERC US or SSG,
provided the provisions of Section 2.9(f) are complied  with),  receivables  and
leasehold interests), whether now owned or hereafter acquired, except:

                                      -57-
<PAGE>

          (a)  obsolete  or worn out  property  and  property  no longer used or
useful in such Persons' business disposed of in the ordinary course of business;

          (b) the sale of inventory in the ordinary course of business;

          (c) the sale or discount without recourse of accounts  receivable only
in connection with the compromise thereof or the assignment of past-due accounts
receivable for collection; and

          (d) as otherwise contemplated by Section 6.4 of this Agreement.

     Section 6.6 Limitation on Investments,  Loans and Advances.  Purchase, hold
or acquire  beneficially  any Capital  Stock,  other  securities or evidences of
indebtedness  of, make or permit to exist any loans or  advances  to, or make or
permit to exist any investment or acquire any interest  whatsoever in, any other
Person,  except:

          (a) extensions of trade credit to customers in the ordinary  course of
business provided payment of such trade credit is made on normal business terms.

          (b) So  long  as no  Event  of  Default  shall  have  occurred  and be
continued,  ERC US may (i) acquire  Capital Stock in SSG (provided  such Capital
Stock of SSG is acquired only with Capital  Stock of ERC US and provided  giving
effect to any such  acquisition  shall not cause any  Person who holds less than
10% (or such greater percentage as the Required Lenders may agree to in writing)
of any class of Capital Stock of ERC US on the date hereof to hold more than 10%
(or such greater  percentage as the Required Lenders may agree to in writing) of
any such  class of  Capital  Stock of ERC US,  and (ii)  beginning  on the first
anniversary of the Closing Date, in accordance with the strategic  objectives of
its business plan,  acquire  Capital Stock in other Persons (other than Inactive
Subsidiaries) in businesses related to that of ERC US; in all cases described in
clauses  (i) and (ii) taken  together in an  aggregate  amount for each 12 month
period  beginning on an  anniversary  of the Closing Date and ending on the next
succeeding  anniversary of the Closing Date (each such period,  an  "Acquisition
Period") not exceeding  the lesser of (x) $500,000 and (y) the principal  amount
of the Term Loan  repaid  pursuant  to Section  2.9(e)  during the twelve  month
period immediately  preceding the then current Acquisition Period;

          (c) Permitted Investments, provided if the Person making the Permitted
Investment  is  organized  under the laws of any state of the  United  States of
America,  the  District of  Columbia,  Puerto  Rico,  or any other  territory or
possession  of the United  States of America the Agent shall have been granted a
first priority perfected security interest therein;

          (d) capital  contributions,  loans and advances by ER Hong Kong and/or
ER BVI to ERC US;

                                      -58-
<PAGE>

          (e) loans and advances in the form of cash by any Person  constituting
the Borrower in an aggregate amount for all Persons constituting Borrower not to
exceed $1,000,000 in outstanding principal amount at any time; and

          (f) loans and advances between ER Hong Kong and ER BVI in the ordinary
course of business.

          (g) prior to the  occurrence  of an Event of Default,  advances by any
Person constituting the Borrower to Inactive Subsidiaries to pay charges imposed
by  Governmental  Authorities  related  to  the  maintenance  of  such  Inactive
Subsidiary's  corporate existence,  such as annual filing and franchise fees and
other minimal  expenses  necessary to maintain such Inactive  Subsidiary in good
standing.

     Section 6.7  Limitation  on Optional  Payments  and  Modifications  of Debt
Instruments.   Make  any  optional  payment  or  prepayment  on  or  redemption,
defeasance or purchase of any Subordinated Debt, or amend,  modify or change, or
consent or agree to any  amendment,  modification  or change to any of the terms
relating to the payment or  prepayment  or principal of or interest on, any such
Indebtedness,  other than any  amendment,  modification  or change  which  would
extend the maturity or reduce the amount of any payment of principal  thereof or
which would reduce the rate or extend the date for payment of interest thereon.

     Section  6.8  Transactions  with  Affiliates.  Enter into any  transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service,  with any Affiliate  unless such transaction is
(a) not  otherwise  prohibited  under  this  Agreement,  and (b)  upon  fair and
reasonable  terms no less  favorable to the  relevant  Person  constituting  the
Borrower,  than it would obtain in a comparable arm's length  transaction with a
Person which is not an  Affiliate.  Transactions  entered  into  pursuant to the
agreements  listed on  Schedule  X are  permitted,  provided  in the case of the
management agreements or other transactions with SSG, the net amount owed by SSG
at any time shall not exceed $100,000.

     Section 6.9 Fiscal Year. Permit the fiscal year of the Borrower to end on a
day other than March 31st of each year.

     Section 6.10  Limitation  on Conduct of  Business.  Enter into any business
either directly or through any Subsidiary  except for businesses in which ERC US
and its  Subsidiaries  are engaged on the date of this  Agreement  and  business
related to such existing businesses.

     Section  6.11 Net Worth.  Permit  Consolidated  Net Worth at the end of any
fiscal  quarter of ERC US to be less than the sum of (a) an amount  equal to (i)
85% times  (ii) an amount  equal to the  Consolidated  Net Worth as shown in the
audited financial  statements of ERC US for the fiscal year ended March 31, 2002
and  delivered to the Agent and the Lenders  pursuant to Section 5.1,  minus the

                                      -59-
<PAGE>

share repurchase amount of $5,500,000 plus (b) 50% of the aggregate,  cumulative
Consolidated  Net  Income  (but  excluding  net  losses  for  purposes  of  this
calculation), if any, for each quarter occurring after the Closing Date.

     Section 6.12 Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage
Ratio for the period of four consecutive  fiscal quarters  preceding any date of
determination to be less than 1.25 to 1.

     Section 6.13 Senior  Funded Debt to EBITDA.


          (a)  Permit  the  ratio  of  Senior  Funded  Debt  of ERC  US and  its
consolidated  Subsidiaries  to  Consolidated  EBITDA  for  the  period  of  four
consecutive  fiscal quarters  preceding any date of  determination to be greater
than:  2.50 to 1.0.

          (b)  Permit  the  ratio  of  Adjusted  Funded  Debt  of ERC US and its
consolidated  Subsidiaries to Adjusted EBITDA for the period of four consecutive
fiscal quarters  preceding any date of determination to be greater than: 2.50 to
1.0.

     Section 6.14 Intentionally omitted.

     Section 6.15 ERISA Obligations.  Be or become obligated to the PBGC, in any
material respect, other than in respect of annual premium payments.

     Section 6.16 Restricted  Payments.  Make any purchase,  redemption or other
acquisition of any Capital Stock of ERC US other than payment of the Convertible
Debentures.  Make any other  distribution to holders of the Capital Stock of ERC
US, in their  capacity as such,  except for the issuance of Capital Stock of ERC
US  in  transactions  described  in  the  parenthetical   contained  in  Section
2.9(f)(ii) and pursuant to transactions contemplated by Section 6.6(b)(i).

                                   ARTICLE 7.
                               EVENTS OF DEFAULT

     Section 7.1 Events of Default.  If any of the following  events (each,
an "Event of Default") shall occur and be continuing:

          (a) (i) The  Borrower  shall fail to pay any  principal of any Note or
the Loans when due in accordance  with the terms thereof or hereof;  or (ii) the
Borrower  shall fail to pay any interest on any Note or the Loans,  or any other
amount payable hereunder,  or any Person constituting the Borrower shall fail to
pay any net  amount  due by it under any Lender  Hedge  Agreement,  in each case
within two (2) Business  Days' after any such  interest or other amount  becomes
due in  accordance  with the terms  thereof or hereof  (and,  in the case of any
Lender  Hedge  Agreement,  notice of such  failure  shall have been given to the
Agent in writing);  or

                                      -60-
<PAGE>

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

          (c)  Any  Person  constituting  the  Borrower  shall  default  in  the
observance or performance of any agreement  contained in Article 6, Section 5.1,
5.2, 5.6, 5.7 or 5.11 or in any covenant or agreement in any Security  Document,
or in any  covenant or agreement  in any other Loan  Document  which has a grace
period  expressed  with  respect  thereto;  or

          (d) Any Person  constituting the Borrower or any other Party to a Loan
Document shall default in the  observance or performance of any other  agreement
contained in this Agreement (other than as provided in Sections  7.1(a),  (b) or
(c)) or any other Loan Document,  and such default shall continue unremedied for
a period of 30 days, provided,  if such Event of Default is not a monetary Event
of  Default  and is  capable  of cure  and the  relevant  Person  is  diligently
proceeding  to cure such Event of Default,  such Person shall have an additional
thirty (30) days to effect such cure; or

          (e) ERC US or any of its Subsidiaries, other than SSG, shall:


               (1)  default in any  payment of  principal  of or interest on any
     Indebtedness  (other  than the  Notes or in  respect  of any  Lender  Hedge
     Agreement) or in the payment of any Contingent Obligation in either case in
     excess of  $500,000,  beyond the period of grace,  if any,  provided in the
     instrument  or  agreement  under  which  such  Indebtedness  or  Contingent
     Obligation was created; or

               (2)  default  in the  observance  or  performance  of  any  other
     agreement  or condition  relating to any such  Indebtedness  or  Contingent
     Obligation or contained in any instrument or agreement evidencing, securing
     or relating thereto, or any other event shall occur or condition exist, the
     effect of which  default or other event or condition is to cause the holder
     or holders of such  Indebtedness  or beneficiary or  beneficiaries  of such
     Contingent  Obligation  (or a trustee or agent on behalf of such  holder or
     holders  or  beneficiary  or  beneficiaries)  to cause,  with the giving of
     notice if  required,  such  Indebtedness  to become due prior to its stated
     maturity or such Contingent Obligation to become payable; or

          (f) (1)  ERC US or any of its  Subsidiaries,  other  than  SSG,  shall
commence any case,  proceeding  or other action (A) under any existing or future
law  of  any  jurisdiction,   domestic  or  foreign,   relating  to  bankruptcy,
insolvency,  reorganization,  conservatorship  or relief of debtors,  seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent,  or seeking  reorganization,  arrangement,  adjustment,
winding-up, liquidation,  dissolution,  composition or other relief with respect
to it  or  its  debts,  or  (B)  seeking  appointment  of a  receiver,  trustee,
custodian,  conservator  or  other  similar  official  for it or for  all or any

                                      -61-
<PAGE>

substantial part of its assets, or ERC US or any of its Subsidiaries, other than
SSG, shall make a general  assignment  for the benefit of its creditors;  or (2)
there shall be commenced against ERC US or any of its  Subsidiaries,  other than
SSG, any case,  proceeding or other action of a nature referred to in clause (1)
above  which  (A)  results  in the  entry of an  order  for  relief  or any such
adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days;  or (3) there shall be commenced  against ERC US or any
of its  Subsidiaries,  other  than SSG,  any case,  proceeding  or other  action
seeking  issuance of a warrant of  attachment,  execution,  distraint or similar
process against all or any  substantial  part of its assets which results in the
entry of an  order  for any such  relief  which  shall  not have  been  vacated,
discharged,  or stayed or bonded  pending  appeal  within 60 days from the entry
thereof;  or (4) ERC US or any of its  Subsidiaries,  other than SSG, shall take
any action in  furtherance  of, or  indicating  its consent to,  approval of, or
acquiescence  in, any of the acts set forth in clause (1), (2) or (3) above;  or
(5) ERC US or any of its  Subsidiaries,  other than SSG, shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they  become  due;  or

          (g) One or more  judgments or decrees shall be entered  against ERC US
or any of its  Subsidiaries,  other  than  SSG,  involving  in the  aggregate  a
liability  (not paid or fully  covered by insurance) of $900,000 or more and all
such  judgments or decrees  shall not have been vacated,  discharged,  stayed or
bonded  pending  appeal  within 60 days from the entry  thereof;  or

          (h) (i) Any Reportable Event,  which the Required Lenders determine in
good  faith  (which  determination  shall be final and  conclusive)  constitutes
grounds for the  termination of any Plan or Plans by PBGC or for the appointment
by the  appropriate  United States  District Court of a trustee to administer or
liquidate any Plan or Plans,  shall have occurred and be continuing  thirty (30)
days after written or telegraphic or telephonic notice to such effect shall have
been given to the Borrower by the Agent; or (ii) a decision shall have been made
by the Board of Directors (or any committee thereof),  any authorized officer or
other  employee  of any Person  constituting  the  Borrower,  or any  trustee or
trustees  of any  Plan or  Plans  to  terminate  any  Plan or Plans or to file a
termination  notice with respect to any Plan or Plans;  or (iii) a trustee shall
be appointed by the  appropriate  United States District Court to administer any
Plan or Plans,  or any Plan or Plans  shall be  terminated;  or (iv) PBGC  shall
institute  proceedings to terminate any Plan or Plans or to appoint a trustee to
administer any Plan or Plans; or (v) any Person constituting the Borrower or any
ERISA Affiliate shall fail with respect to any Plan or Plans to meet the minimum
funding  standards  established  in the Code,  or shall  obtain a waiver of such
minimum funding standards;  or (vi) any Person  constituting the Borrower or any
ERISA Affiliate shall completely or partially withdraw from a Plan; or (vii) any
Person constituting the Borrower or any ERISA Affiliate shall make a decision to
cease  operations at a facility or facilities  where such cessation would result
in a  separation  from  employment  of more  than  20% of the  total  number  of
employees  who are  participants  under a Plan;  where in the case of any one or
more of the events  described  in the  preceding  clauses (i) through  (vii) the
aggregate outstanding amount of unfunded vested liabilities under such Plan if a
single employer plan (including unfunded vested liabilities which arise or might
arise as a result of the  termination  of or  withdrawal  from such Plan) or the

                                      -62-
<PAGE>

allocable  portion  of such  outstanding  unfunded  vested  liabilities  under a
Multiemployer  Plan shall exceed  (either singly or in the aggregate in the case
of any such liability  arising out of one or more of the events described in the
preceding  clauses  (i)  through  (vii) under more than one such Plan) 2% of the
Consolidated  Tangible Net Worth of ERC US and shall in good faith be determined
by the Required Lenders (which  determination  shall be final and conclusive) to
have a Material  Adverse Effect;  or

          (i) A Change in Control  shall  occur;  or

          (j) Any Subsidiary of any Person  constituting the Borrower shall take
any action  set forth in  Article 6 which the  Borrower  has  undertaken  not to
permit; or

          (k) Any Subsidiary of any Person  constituting the Borrower shall fail
to take any action set forth in Article 5 which the Borrower has  undertaken  to
cause and such failure  shall not be remedied for a period of 30 days; or

          (l) An Event of  Default  under  (and as  defined  in) any other  Loan
Document  shall  occur;  or

          (m) ERC US  shall  cease  to own  all of the  issued  and  outstanding
Capital  Stock of ER Hong Kong  (other than the  Director  Share) or MI, or Paul
Gullett, an individual with an office at Suite 3105, Hampton Court, The Gateway,
25-27 Canton Road,  Kowloon,  Hong Kong 1, or other nominee of ERC US reasonably
acceptable  to Agent,  shall cease to own the Director  Share as nominee for ERC
US;  or

          (n) ER Hong Kong shall  cease to own all the  issued  and  outstanding
Capital Stock of ER BVI; or

          (o) any Person  shall  become a member of the Board of Directors of ER
Hong  Kong  unless  simultaneously  with  becoming  a  member  of said  Board of
Directors such Person has delivered an ER Hong Kong Director  Resignation to the
Agent;

          (p) Geoffrey P. Jurick shall cease to be the Chairman of the Board and
Chief  Executive  Officer of ERC US or shall own less than 20% of its issued and
outstanding common Capital Stock of ERC US; or

then, and in any such event, (A) if such event is an Event of Default  specified
in  clause  (1) or (2) of  Section  7.1(f)  above  with  respect  to any  Person
constituting  the Borrower,  automatically  the  Commitments  shall  immediately
terminate and the Loans hereunder (with accrued interest  thereon) and all other
amounts owing under this  Agreement and the Notes shall  immediately  become due
and  payable,  and (B) if such event is any other Event of  Default,  any one or
more of the following  actions may be taken: (i) the Agent may (with the consent
of the Required  Lenders) and shall (upon the request of the Required  Lenders),
by written  notice to the  Borrower,  declare the  Commitments  to be terminated
forthwith, whereupon the Commitments shall immediately terminate; (ii) the Agent
may (with the consent of the  Required  Lenders)  and shall (upon the request of

                                      -63-
<PAGE>

the Required  Lenders),  by written  notice to the  Borrower,  declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement  and the Notes to be due and  payable  forthwith,  whereupon  the same
shall  immediately  become  due and  payable  and  (iii) the Agent may (with the
consent of the  Required  Lenders)  and shall (upon the request of the  Required
Lenders but  subject to the  provisions  of Article  8),  proceed to enforce the
rights and remedies of the Secured Party under the Security Documents. Except as
expressly provided above in this Section,  presentment,  demand, protest and all
other notices of any kind are hereby expressly waived.

                                   ARTICLE 8.
                                    THE AGENT

     Section 8.1 Actions. Each Lender authorizes the Agent t o act on  behalf of
such  Lender  under  this  Agreement,  the  other Loan  Documents  and any other
related  instruments and, in the absence of other written  instructions from the
Lenders received from time to time by the Agent (with respect to which the Agent
agrees that it will,  subject to the last two  sentences  of this  Section  8.1,
comply in good faith except as otherwise  advised by counsel),  to exercise such
powers hereunder and thereunder as are specifically  delegated to or required of
the Agent by the terms hereof and thereof,  together  with such powers as may be
reasonably incidental thereto. Each Lender agrees (which agreement shall survive
any termination of this Agreement) to indemnify the Agent, pro rata according to
such Lender's Percentage, from and against any and all liabilities, obligations,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or nature  whatsoever  which may at any time be imposed on, incurred
by, or asserted  against the Agent in any way relating to or arising out of this
Agreement,  the Notes,  any of the other Loan  Documents  and any other  related
instruments,  including,  without limitation, the reimbursement of the Agent for
all  reasonable   out-of-pocket   expenses   (including,   without   limitation,
syndication  costs and attorneys'  fees)  incurred by the Agent  hereunder or in
connection  herewith or in  enforcing  the  obligations  of the  Borrower or any
Lender under this Agreement,  under any of the other Loan Documents or any other
related instruments, in all cases as to which the Agent is not reimbursed by the
Borrower; provided that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements determined by a court of proper jurisdiction in
a final proceeding to have resulted from the Agent's gross negligence or willful
misconduct.  The Agent  shall not be required  to take any action  hereunder  or
under any other  related  instruments,  or to  prosecute  or defend  any suit in
respect of this  Agreement or any such  instrument,  unless  indemnified  to its
satisfaction  by the Lenders  against  costs,  liability,  and  expense.  If any
indemnity  in  favor  of the  Agent  shall  become  impaired,  it may  call  for
additional  indemnity  and cease to do the acts  indemnified  against until such
additional  indemnity is given.  The Agent may delegate its duties  hereunder to
affiliates,  agents or  attorneys-in-fact  selected  in good faith by the Agent.
Each  Lender's  obligation  to  indemnify  the Agent as set forth above shall be

                                      -64-
<PAGE>

unconditional  under any and all  circumstances  and irrespective of any setoff,
counterclaim  or  defense  to  payment  which  such  Lender may have or have had
against the Agent, any other Lender,  the Borrower,  any Subsidiary or any other
Person.

          Section   8.2   Exculpation.   The  Agent  shall  have  no  duties  or
responsibilities except those expressly set forth in this Agreement. Neither the
Agent nor any of its directors,  officers,  employees,  or agents (collectively,
the  "Related  Parties")  shall be liable to any Lender for any action  taken or
omitted to be taken by it under this Agreement,  the other Loan Documents or any
other related instrument, or in connection herewith or therewith, except for its
own willful  misconduct or gross negligence,  nor shall the Agent or any Related
Parties be responsible for any recitals or  representations or warranties herein
or therein, or for the effectiveness,  enforceability, validity or due execution
of this  Agreement,  the other Loan Documents or any other related  instruments,
nor shall the Agent or any  Related  Parties be  obligated  to make any  inquiry
respecting  the  performance  by the  Borrower of its  obligations  hereunder or
thereunder.  The  Agent  shall  be  entitled  to rely  upon  advice  of  counsel
concerning legal matters and upon any notice, consent, certificate, statement or
writing  which it believes to be genuine and to have been  presented by a proper
Person.  The Agent may at any time  request  instructions  from the Lenders with
respect to any actions or approvals  which, by the terms of this Agreement,  the
Agent  is  permitted  or  required  to take or  grant,  and the  Agent  shall be
absolutely  entitled  to  refrain  from  taking any  action or to  withhold  any
approval  and shall not be under any  liability  whatsoever  to any  Person  for
refraining  from  taking  any  action or  withholding  any  approval  under this
Agreement or any of the other Loan Documents until it has received  instructions
from the Required  Lenders.  No Lender shall have any right of action whatsoever
against  the Agent as a result of the Agent  acting or  refraining  from  acting
hereunder  or  under  any  of  the  other  Loan  Documents  in  accordance  with
instructions  from the (i) Required  Lenders,  or (ii) all of the Lenders to the
extent required hereunder.

          Section 8.3  Successor.  The Agent may resign as such at any time upon
at least ten (10)  Business  Days' prior notice to the Borrower and all Lenders,
and the Agent may be  removed at any time by written  notice  from the  Required
Lenders.  If the Agent at any time  shall  resign or be  removed,  the  Required
Lenders may appoint another Lender as a successor Agent. If the Required Lenders
do not make such appointment  within thirty days, the resigning or removed Agent
shall  appoint a new Agent from among the Lenders or, if no Lender  accepts such
appointment,  from among commercial  banking  institutions or trust institutions
generally;  provided such successor  agent shall be a domestic  commercial  bank
having a combined  capital and surplus in excess of  $500,000,000  and, if not a
Lender,  shall be  reasonably  acceptable  to ERC US (ERC US' approval not to be
unreasonably  withheld or delayed).  Upon the  acceptance of any  appointment as
Agent by a successor  Agent,  such successor  Agent shall  thereupon  become the
Agent  hereunder  and shall be  entitled  to receive  from the prior  Agent such
documents of transfer and  assignment  as such  successor  Agent may  reasonably
request,  and the resigning or removed  Agent shall (i) be  discharged  from its
duties and  obligations  under this Agreement and the other related  instruments
and (ii) entitled to the continued benefit of this Article 8 with respect to all
actions  taken by it prior to its  removal or  resignation.

                                      -65-
<PAGE>

          Section 8.4 Credit Decisions.  Each Lender represents and acknowledges
to the Agent that it has,  independently of the Agent and each other Lender, and
based on the financial  information  referred to in this Agreement and the other
Loan Documents and such other documents,  information and  investigations  as it
has  deemed  appropriate,  made  its own  credit  decision  to enter  into  this
Agreement.  Each Lender also  acknowledges  that it will,  independently  of the
Agent  and  each  Lender,   and  based  on  such   documents,   information  and
investigations  as it shall deem  appropriate at any time,  continue to make its
own credit  decisions as to exercising or not  exercising  from time to time any
rights and privileges  available to it under this Agreement,  the Loan Documents
or any other related  instruments.

          Section 8.5  Notices,  etc.  from  Agent.  The Agent shall give prompt
notice  to each  Lender  of each  notice  or  request  given to the Agent by the
Borrower  or by the  Agent  to  the  Borrower  pursuant  to the  terms  of  this
Agreement.  The Agent will promptly  distribute  to each Lender each  instrument
received for its account and copies of all other communications  received by the
Agent  from  the  Borrower  for  distribution  to the  Lenders  by the  Agent in
accordance  with the terms of this  Agreement.

          Section 8.6 Security  Documents.  Each Lender  hereby  authorizes  the
Agent to enter into the Security  Documents and to take all action  contemplated
thereby.  Each Lender hereby confirms its agreement to be bound by the terms and
conditions  of the Security  Documents.  Each Lender agrees that no Lender shall
have any right  individually to seek to realize upon the collateral  granted for
the benefit of the Lenders pursuant to any of the Security  Documents,  it being
understood  and agreed that such rights and  remedies  may be  exercised  by the
Agent  for the  benefit  of the  Agent  and the  Lenders  upon the  terms of the
Security Documents.


                                   ARTICLE 9.
                                PURCHASING LENDER

     Section 9.1 Purchasing Lender.

          (a) Each Lender,  in the  ordinary  course of its  commercial  banking
business and in accordance with applicable law, at any time may sell, assign and
delegate to any Affiliate of such Lender  and/or,  with the consent of the Agent
and ERC US (which in each case shall not be unreasonably withheld or delayed and
shall not be required of ERC US after the occurrence  during the  continuance of
an Event of Default), to one or more additional banks or financial  institutions
(each, a "Purchasing  Lender") all or any part (but not less than  $5,000,000 in
aggregate of such Lender's  rights and  obligations  under this  Agreement,  the
Notes and the other Loan Documents (provided, that any such sale, assignment and
delegation  shall be made with respect to each Loan and the  Commitment and Term
Loan Commitment of such Lender hereunder) pursuant to an agreement  ("Assignment
and  Acceptance")  executed  by the  Purchasing  Lender  and such  Lender.  Such
Assignment and Acceptance shall specify an effective date which is not less than
five Business  Days after the date of execution  thereof.  Upon such  execution,
delivery, and acceptance,  from and after the effective date determined pursuant
to such  Assignment  and  Acceptance  and payment by the  assigning  Lender of a

                                      -66-
<PAGE>

$3,500  administrative fee to the Agent for its own account with respect to each
Purchasing  Lender party to such Assignment and  Acceptance,  (A) the Purchasing
Lender  thereunder shall be a party hereto and, to the extent of the Commitments
assigned and Loans sold pursuant to such  Assignment  and  Acceptance,  have the
rights and  obligations  of a Lender  hereunder  with a Commitment  as set forth
therein,  and (B) the assigning  Lender  thereunder  shall, to the extent of the
Commitments  assigned  pursuant to such Assignment and  Acceptance,  be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement,  such assigning Lender shall cease to be a
party hereto).  Such  Assignment  and  Acceptance  shall be deemed to amend this
Agreement  to the  extent,  and only to the  extent,  necessary  to reflect  the
addition of such Purchasing  Lender as a Lender and the resulting  adjustment of
Commitments  arising  from the  purchase by such  Purchasing  Lender of all or a
portion  of the rights  and  obligations  of such  assigning  Lender  under this
Agreement and the Notes. On or prior to the effective date  determined  pursuant
to such  Assignment  and  Acceptance,  the Borrower,  at its own expense,  shall
execute and deliver to the assigning  Lender and  Purchasing  Lender in exchange
for the surrendered  Notes, new Notes to the order of such Purchasing  Lender in
an amount equal to the Commitment  assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, new
Notes to the order of the assigning  Lender in an amount equal to the Commitment
retained by it  hereunder.  Such new Notes  shall be dated the Closing  Date and
otherwise  shall  be in the  form  of the  Notes  replaced  thereby.  The  Notes
surrendered  by the  assigning  Lender shall be returned to the Borrower  marked
"replaced."  The  assigning  Lender shall  provide the Agent with a copy of each
Assignment and Acceptance.

          (b) If, pursuant to this Agreement,  any interest in this Agreement or
any other Loan Documents is assigned to any transferee,  or a  participation  in
any interest in this Agreement is given to a transferee, in either case which is
organized under the laws of any jurisdiction other than the United States or any
State thereof,  the transferor Lender shall cause such transferee,  concurrently
with the  effectiveness  of such  transfer,  (i) to represent to the  transferor
Lender (for the benefit of the  transferor  Lender,  the Agent and the Borrower)
that under  applicable law and treaties no taxes will be required to be withheld
by the Agent, the Borrower or the transferor Lender with respect to any payments
to be made to such  transferee  in respect of the Loans,  (ii) to furnish to the
transferor  Lender,  the Agent and the Borrower Form W-8ECI or W-8BEN (Ownership
Exemption  or  Reduced  Rate   Certificate)   (wherein  such  transferee  claims
entitlement  to complete  exemption  from U.S.  federal  withholding  tax on all
interest  payments  hereunder)  and  (iii) to  agree  (for  the  benefit  of the
transferor Lender, the Agent and the Borrower) to provide the transferor Lender,
the Agent and the  Borrower a new Form W-8ECI or W-8BEN upon the  expiration  or
obsolescence  of any  previously  delivered  form and  comparable  statements in
accordance  with  applicable  U.S.  laws and  regulations  and  amendments  duly
executed and completed by such transferee,  and to comply from time to time with
all applicable  U.S. laws and  regulations  with regard to such  withholding tax
exemption.

                                      -67-
<PAGE>

     Section  9.2  Disclosure  of  Information.  Each  Person  constituting  the
Borrower  authorizes  the Lenders to disclose to any  Purchasing  Lender and any
prospective  Purchasing  Lender any and all information  relating to each Person
constituting  the Borrower and its  Affiliates  which has been  furnished to the
Agent and the Lenders by or on behalf of each Person  constituting the Borrower;
provided that any such Purchasing Lender agrees to keep any information relating
to any Person  constituting the Borrower received hereunder  confidential except
as may be required  by any  Requirement  of Law.

          Section 9.3 Pledges to Federal  Reserve  Bank.  Nothing  herein  shall
prohibit any Lender from pledging or assigning  any Note to any Federal  Reserve
Bank in accordance with applicable law.

                                  ARTICLE 10.
                                  MISCELLANEOUS

     Section 10.1 Amendments and Waivers.


          (a) No amendment or waiver of any provision of this Agreement,  or any
of the other Loan  Documents,  nor  consent  to any  departure  by the  Borrower
therefrom,  shall in any event be effective  unless the same shall be in writing
and signed by the  Required  Lenders,  and then such waiver or consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given;  provided,  however,  that no  amendment,  waiver or  consent,  unless in
writing and signed by all the Lenders, shall do any of the following:  (A) waive
any of the conditions specified in Section 4.1 (though the Agent alone may defer
the fulfillment of such conditions until the date of the applicable  borrowing),
(B) increase the amount or extend the term of the  Commitments of the Lenders or
subject the Lenders to any additional obligations,  (C) reduce the principal of,
or interest on, the Loans, the Reimbursement Obligations or any of the Notes, or
reduce any fees payable  hereunder,  (D) postpone any date fixed for any payment
in respect of  principal  of, or  interest  on,  the  Loans,  the  Reimbursement
Obligations or any of the Notes, as the case may be, or fees payable  hereunder,
(E) change any of the components  which shall be required for the Lenders or any
Lender to take any action  hereunder,  (i.e., the Percentage of the Commitments,
or the  aggregate  unpaid  principal  amount  of the  Loans,  or the  number  of
Lenders),  (F) release all or any substantial  portion of the collateral subject
to any Security  Document except as contemplated  by the  Intellectual  Property
Security  Agreements  and, with respect to intellectual  property,  the Security
Agreements  executed and delivered by ERC US and Scott or (G) amend this Section
10.1; and provided,  further, that no amendment, waiver or consent shall, unless
in  writing  and  signed by the Agent in  addition  to the  Lenders  hereinabove
required  to take such  action,  affect the rights or duties of the Agent  under
this  Agreement.  Without  derogating  from the foregoing,  no amendment to this
Agreement  shall be  effective  unless  signed by each Person  constituting  the
Borrower.

          (b) The liability of each Person  constituting the Borrower  hereunder
shall be  absolute  and  unconditional  irrespective  of:

                                      -68-
<PAGE>

               (14) any  change in the time,  manner,  or place of payment or in
     any other term of, or any other  amendment  or waiver of, or any consent to
     departure from any of the Loan Agreement,  any of the Loan Documents or any
     Obligations;

               (15) any  change  in the  name,  Capital  Stock,  Certificate  of
     Incorporation  or by-laws,  as the case may be, of any Person  constituting
     the Borrower;

               (16)  the   insolvency   of,  or  the  voluntary  or  involuntary
     bankruptcy,  assignment  for the benefit of  creditors,  reorganization  or
     other similar proceedings affecting any Person constituting the Borrower or
     any of their  respective  assets;  or

               (17) any  other  circumstance  or  claim  which  might  otherwise
     constitute  a  defense   available  to,  or  a  discharge  of,  any  Person
     constituting  the  Borrower in respect of the  Obligations.


          (c) No  payment  made by any  Person  constituting  the  Borrower,  or
received  or  collected  by the  Agent or any of the  Lenders,  from any  Person
constituting  the Borrower by virtue of any action or  proceeding  or set-off or
application at any time in reduction of or in payment of the  Obligations  shall
be deemed to modify,  release or  otherwise  affect the  liability of any Person
constituting  the Borrower under the Loan  Documents.  Notwithstanding  any such
payments  received or collected by the Agent or any of the Lenders in connection
with the Obligations,  each Person constituting the Borrower shall remain liable
for the  Obligations  until  all  Obligations  are paid in full.  The  joint and
several obligation of each Person constituting the Borrower shall continue to be
effective  or be  reinstated,  as the case may be, if at any time any payment of
any of the  Obligations  is rescinded or must otherwise be returned by the Agent
or the Lenders upon the insolvency,  bankruptcy or  reorganization of any Person
constituting the Borrower or otherwise,  all as though such payment had not been
made.

          (d) The obligations and  liabilities of each Person  constituting  the
Borrower  hereunder  shall not be  released,  discharged,  limited or in any way
affected by anything  done,  suffered  or  permitted  by the Agent or Lenders in
connection  with any  monies or credit  advanced  by the Agent or Lenders to any
Person  constituting the Borrower or any security therefor,  including,  without
limitation, any loss of, or in respect of, any security received by the Agent or
any of the Lenders from any Person constituting the Borrower.  It is agreed that
the  Lenders  and/or the Agent,  without  releasing,  discharging,  limiting  or
otherwise  affecting in whole or in part the  obligations and liabilities of any
Person constituting the Borrower hereunder, may, without limiting the generality
of the foregoing:

                                      -69-
<PAGE>

               (1) grant time, renewals, extensions,  indulgences,  releases and
          discharges  to any  Person  constituting  the  Borrower;

               (2) take or abstain from taking  security or  collateral  for the
          Obligations  or  from  perfecting   security  or  collateral  for  the
          Obligations;

               (3) release,  discharge,  compromise or otherwise deal with (with
          or  without   consideration)   any  and  all  collateral,   mortgages,
          indemnities,   guaranties  or  other  security  given  by  any  Person
          constituting the Borrower with respect to the Obligations;

               (4) accept compromises from any Person constituting the Borrower;

               (5)  after an Event of  Default,  apply  all  monies  at any time
          received  from  any  Person  constituting  the  Borrower  or from  any
          guaranties,  indemnities  or any  collateral  upon  such  part  of the
          Obligations as the Lenders and/or Agent may see fit or change any such
          application in whole or in part from time to time as the Agent or such
          Lenders  may  see  fit;  or

               (6) otherwise deal with each Person constituting the Borrower and
          all other Persons and  collateral as the Lenders  and/or Agent may see
          fit;


          (e)  neither  the  Agent  nor any of the  Lenders  shall  be  bound or
obligated to exhaust  recourse  against any Person  constituting the Borrower or
other Persons or any security,  guarantee,  indemnity, mortgage or collateral it
may hold or take any other  action  before  being  entitled to payment from each
Person  constituting  the Borrower  hereunder and each Person  constituting  the
Borrower hereby waives any requirement  that would otherwise compel the Agent or
the Lenders to do any of the foregoing.

     Section 10.2  Notices.  Any  notice,  request,  demand, direction  or other
communication  (for  purposes of this Section 10.2 only, a "Notice") to be given
to or made upon any party hereto under any provision of this Agreement  shall be
given or made by telephone or in writing (which  includes by means of electronic
transmission (i.e., "e-mail") or facsimile  transmission).  Any such Notice must
be delivered to the  applicable  parties hereto at the addresses and numbers set
forth under their  respective  names on Schedule XI hereof or in accordance with
any subsequent  unrevoked Notice from any such party that is given in accordance
with this  Section  10.2.  Any  notice  shall be  effective:

          (a) In the case of hand-delivery, when delivered;

          (b) If given by mail,  four days after such Notice is  deposited  with
the United States Postal  Service,  with  first-class  postage  prepaid,  return
receipt requested;

          (c) In the case of a telephonic  Notice,  when a party is contacted by
telephone,  if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic  transmission,  or
an overnight  courier  delivery of a confirmatory  Notice (received at or before
noon on such next Business Day);

                                      -70-
<PAGE>

          (d)  In  the  case  of a  facsimile  transmission,  when  sent  to the
applicable  party's facsimile  machine's  telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;

          (e) In the case of electronic transmission, when actually received.

Any  Lender  giving  a  Notice  to a  Person  constituting  the  Borrower  shall
concurrently  send a copy  thereof to the Agent,  and the Agent  shall  promptly
notify  the other  Lenders  of its  receipt of such  Notice,  provided  that any
notice,  request or demand to or upon the Agent pursuant to Section 2.3, Section
2.5,  Section 2.8,  Section 2.9(a) or Section 2.10 shall not be effective  until
received.  Any party may change its  address  for notices by notice to the other
parties  hereto in the manner  provided  in this  subsection.  Any notice to the
Borrower or given by the Borrower shall be binding upon, and deemed  received or
given  by,  all  Persons  constituting  the  Borrower  if  given  by any  Person
constituting  the  Borrower  (in the  case of  notices  from  the  Borrower)  or
delivered  to any Person  constituting  the Borrower at the address set forth on
Schedule XI (or such other address noticed to the Lender as provided herein) and
no separate notice to or by any other Person  constituting the Borrower shall be
necessary  for the  binding  effect or deemed  receipt  of a notice to or by the
Borrower.

     Section 10.3 No Waiver;  Cumulative  Remedies.

          (a) No failure to exercise and no delay in exercising,  on the part of
the Agent or any Lender, any right,  remedy,  power or privilege hereunder shall
operate as a waiver  thereof.

          (b) No single or  partial  exercise  of any  right,  remedy,  power or
privilege  hereunder shall preclude any other or further exercise thereof or the
exercise  of any  other  right,  remedy,  power or  privilege.

          (c) The rights,  remedies,  powers and privileges  herein provided are
cumulative  and not  exclusive of any rights,  remedies,  powers and  privileges
provided by law.

     Section   10.4   Survival   of   Representations   and   Warranties.    All
representations  and warranties made hereunder and in any document,  certificate
or statement  delivered pursuant hereto or in connection  herewith shall survive
the execution and delivery of this Agreement and the Notes.

     Section 10.5 Payment of Expenses and Taxes.  The Borrower shall:

          (a) pay or reimburse  the Agent for all its  reasonable  out-of-pocket
costs and expenses incurred in connection with the negotiation,  preparation and
execution   of,  and  any  proposed  or  effective   amendment,   supplement  or
modification  to, this  Agreement and the Notes and the other Loan Documents and
any other  documents  prepared  in  connection  herewith or  therewith,  and the

                                      -71-
<PAGE>

consummation of the  transactions  contemplated  hereby and thereby,  including,
without  limitation,  the reasonable  fees and  disbursements  of counsel to the
Agent;

          (b) pay or  reimburse  the Agent and each  Lender  for all  reasonable
out-of-pocket costs and expenses incurred by each of them in connection with the
enforcement or preservation of any rights under this Agreement,  the Notes,  the
other  Loan  Documents  and  any  such  other  documents,   including,   without
limitation,  reasonable fees and  disbursements of counsel to the Agent and each
Lender;


          (c) pay, indemnify,  and hold the Agent and each Lender harmless from,
any and all recording and filing fees and any and all  liabilities  with respect
to, or  resulting  from any delay in paying,  stamp,  excise  and other  similar
taxes,  if any,  which may be payable or  determined to be payable in connection
with the execution and delivery of, or consummation  of any of the  transactions
contemplated by, or any amendment,  supplement or modification of, or any waiver
or consent  under or in respect of, this  Agreement,  the Notes,  the other Loan
Documents and any such other  documents;  and

          (d) pay,  indemnify,  and hold the Agent and each Lender harmless from
and  against  any and  all  other  liabilities,  obligations,  losses,  damages,
penalties,  actions  (whether  sounding  in  contract,  in tort or on any  other
ground),   judgments,   suits,  reasonable   out-of-pocket  costs,  expenses  or
disbursements  of any kind or nature  whatsoever  with respect to the execution,
delivery,  enforcement,  performance and  administration of, or in any other way
arising out of or relating  to, (i) this  Agreement,  the Notes,  the other Loan
Documents  or any  other  documents  contemplated  by or  referred  to herein or
therein,  (ii) any  transaction  financed or to be financed in whole or in part,
directly  or  indirectly,  with  the  proceeds  of any Loan  (including  without
limitation,  any disbursement  from the Escrow Fund with respect to the purchase
or payment of any Convertible Debentures),  (iii) any investigation,  litigation
or proceeding  relating to any acquisition or proposed  acquisition by ERC US or
any of its  Subsidiaries  of all or a  portion  of the  Capital  Stock or all or
substantially all of the assets of any Person,  regardless of whether any Lender
is a party  thereto or (iv)any  action taken or omitted to be taken by the Agent
or any Lender with respect to any of the foregoing;

(all the foregoing, collectively, the "Indemnified Liabilities"), and if and to
the extent that the foregoing undertaking may be unenforceable for any reason,
the Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law; provided, that the Borrower shall have no obligation hereunder
to the Agent or any Lender with respect to Indemnified Liabilities arising from
the gross negligence or willful misconduct of the Agent or such Lender. The
agreements in this subsection shall survive repayment of the Notes and all other
amounts payable hereunder.

     Section 10.6  Successors and Assigns.  This Agreement shall be binding upon
and inure to the  benefit of the  Borrower,  the Agent,  the Lenders, all future
future holders of the Notes and their respective successors and assigns,  except

                                      -72-
<PAGE>

that no Person constituting the Borrower may assign, transfer or delegate any of
their  rights or  obligations  under this  Agreement  without the prior  written
consent of the Lenders  other than pursuant to the operation of law by reason of
a transaction  permitted by Section 6.4.

     Section  10.7  Set-off/Sharing.

          (a) In  addition  to any rights and  remedies of the Agent and Lenders
provided by law,  each Lender shall have the right,  without prior notice to any
Person constituting the Borrower, any such notice being expressly waived by each
Person constituting the Borrower to the extent permitted by applicable law, upon
any amount  becoming  due and payable by any Person  constituting  the  Borrower
hereunder or under the Notes or the other Loan Documents  (whether at the stated
maturity,  by  acceleration  or otherwise) to set-off and  appropriate and apply
against  such amount any and all deposits  (general or special,  time or demand,
provisional or final), in any currency,  and any other credits,  indebtedness or
claims,  in any currency,  in each case whether direct or indirect,  absolute or
contingent,  matured or  unmatured,  at any time held or owing by such Lender or
any branch or agency of such  Lender to or for the credit or the  account of any
Person  constituting  the Borrower.  Each Lender  agrees  promptly to notify the
Borrower and Agent after any such set-off and  application  made by such Lender,
provided  that the failure to give such notice  shall not affect the validity of
such set-off and  application.

          (b) Each of the Lenders  agree among  themselves  that with respect to
all amounts received by them which are applicable to the payment or satisfaction
of all or part of the Loans or Reimbursement Obligations,  interest thereon, any
fees or any other amount  payable  hereunder or under the other Loan  Documents,
equitable  adjustment will be made so that, in effect,  all such amounts will be
shared among the Lenders in proportion to their respective Percentages,  whether
received  by  voluntary  payment,  by the  exercise  of the  right of  setoff or
banker's lien, by counterclaim  or by the enforcement of their rights  hereunder
or under the other Loan Documents.

          (c) If any  Lender  shall,  through  the  exercise  of  any  right  of
counterclaim,  setoff, banker's lien or otherwise,  receive payment or reduction
of a proportion of the aggregate  amount of the Loans or interest thereon due to
such Lender, or any other amount payable hereunder, as the case may be, which is
greater than the  proportion  received by any other Lender or Lenders in respect
to the aggregate  amount of any Loan or  Reimbursement  Obligation  and interest
thereon due such Lender, or with respect to any other amount payable  hereunder,
that Lender  receiving  such  proportionately  greater  payment shall notify the
other Lenders and the Agent of such receipt and purchase  participations  (which
it shall be deemed to have done  simultaneously  upon the receipt of such excess
payment) in the Loans and Reimbursement  Obligations held by the other Lender or
Lenders so that all such  recoveries  of principal  and interest with respect to
the  Loans  shall  be  proportionate  to each  Lender's  respective  Percentage;
provided that if all or part of such proportionately greater payment received by
such purchasing Lender is thereafter recovered from such Lender, those purchases
shall be rescinded and the purchase prices paid for such participations shall be
returned to the purchasing Lender to the extent of such recovery,  together with

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a pro rata portion (based on the amount of each  participation)  of the interest
thereon (or other amounts),  if any,  recovered from the purchasing  Lender.

          (d) The Borrower  expressly  consents to the arrangement  described in
this Section 10.7.

     Section 10.8 Foreign Subsidiaries. Notwithstanding anything to the contrary
contained herein,  the joint and several  liability of the Foreign  Subsidiaries
and the Significant  Subsidiaries which are formed in a jurisdiction outside the
United  States  hereunder  shall be limited  to  $5,000,000  of the  Obligations
outstanding on the Maturity Date or such earlier date (an "Accelerated  Maturity
Date") to which the  maturity  of the  Obligations  is  accelerated  pursuant to
Section 7.1 (and whether  denominated as principal,  interest,  Revolving Credit
Loans,  Term Loans, or otherwise).  It is agreed that no payment of interest on,
or principal of, the Revolving Credit Loans or Term Loans by any Person (whether
or not a  Foreign  Subsidiary)  prior to the  Maturity  Date or any  Accelerated
Maturity Date shall be counted  towards,  satisfy or discharge  such  $5,000,000
limit on liability  provided,  that, on the date the Term Loans, and all accrued
and unpaid interest thereon,  are paid in full, the Foreign  Subsidiaries  shall
have no further  liability  for the  Obligations.  Nothing in this  Section 10.8
shall (i)  release or impair the  validity of the  Obligations,  (ii) in any way
affect or impair any Lien granted pursuant to any Security Document or any other
Loan Document,  (iii) in any way affect or impair the right of the Agent and the
Lenders to foreclose the Security  Documents or enforce any other Loan Documents
pursuant to the terms  thereof or (iv) impair or reduce the  liability of ERC US
or MI for the  whole  of the  Obligations  which  liability  is  unlimited.  The
establishment  of multiple  accounts by Persons  constituting the Borrower shall
not  derogate  from their joint and several  liability  for the  Obligations  as
limited by this Section 10.8.

     Section 10.9 Judgment  Currency/Withholding Tax.

          (a) If for the  purposes  of  obtaining  a judgment  in any court with
respect to any  obligation of any Person  constituting  the Borrower  under this
Agreement, the Notes or any other instrument or agreement executed and delivered
by any Person  constituting  the  Borrower in  connection  therewith  it becomes
necessary  to  convert  into any  other  currency  any  amount  in  Dollars  due
thereunder,  then  such  conversion  shall be made at the  buying  spot  rate of
exchange  for freely  transferable  Dollars at the close of  business on the day
before the day on which the  judgment  is given at the place where such court is
located.  If there is a change in such rate of exchange  prevailing  between the
day before the day on which the  judgment  is given and the date of the  payment
thereof,  the Borrower agrees to pay such additional  amounts (if any) as may be
necessary  to insure  that the  amount  paid on such date is the  amount in such
other currency  which,  when converted at such rate of exchange in effect on the
date of payment,  is the amount  then due in Dollars.  Any amount due under this
Section 10.9 will be due in Dollars. Any amount due under this Section 10.9 will
be due as a  separate  debt and shall  not be  affected  by or  merged  into any
judgment  being  obtained  for any other  sums due under or in  respect  of this

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<PAGE>

Agreement, the Notes or any other instrument or agreement executed and delivered
by any Person  constituting the Borrower in connection  therewith.  In no event,
however,  shall the  Borrower be  required  to pay more  Dollars at such rate of
exchange  when payment is made than the amount of Dollars  stated to be due.

          (b) If any payment of the Obligations by any Subsidiary Borrower which
is organized or located in a  jurisdiction  outside the United States of America
is subject in such  jurisdiction to any withholding or other tax, levy,  impost,
charge,  fee, duty or deduction of any kind whatsoever  (each, a "Foreign Tax"),
the  Borrower  shall  pay to the  Agent or  Lender,  as the  case  may be,  such
additional  amounts as will  result in a net payment to the Agent or such Lender
equal to the amount such payee would have  received had no such Foreign Tax been
imposed.

     Section 10.10  Counterparts.  This Agreement may be executed by one or more
of the parties to this  Agreement  on any number of  separate  counterparts, and
all of said  counterparts  taken  together shall be deemed to constitute one and
the same  instrument.

     Section  10.11  Severability.  Any  provision  of this  Agreement  which 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
unenforceable such provision in any other jurisdiction.

     Section 10.12 Integration.  This Agreement  represents the agreement of the
Borrower,  the Agent and the Lenders with respect to the subject  matter hereof,
and there are no promises,  undertakings,  representations  or warranties by the
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.

     Section 10.13  Governing  Law. This  Agreement and the Notes and the rights
and  obligations  of the  parties  under this  Agreement  and the Notes shall be
governed by, and construed and  interpreted  in accordance  with, the law of the
State of New Jersey.

     Section 10.14 Submission To Jurisdiction; Waivers. Each Person constituting
the Borrower hereby irrevocably and unconditionally:

          (a)  submits  for  itself  and its  property  in any  legal  action or
proceeding  relating  to or  arising  out of this  Agreement  and the other Loan
Documents  to which it is a party,  or the  conduct  of any party  with  respect
thereto,  or for recognition and enforcement of any judgment in respect thereof,
to the  nonexclusive  general  jurisdiction  of the  Courts  of the State of New
Jersey,  the courts of the  United  States of America  for the  District  of New
Jersey, and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
courts and waives to the fullest  extent  permitted by law any objection that it
may now or hereafter  have to the venue of any such action or  proceeding in any
such court or that such  action or  proceeding  was  brought in an  inconvenient
court and agrees  not to plead or claim the same;

                                      -75-
<PAGE>

          (c) agrees that  service of process in any such  action or  proceeding
may be effected by mailing a copy thereof by  registered  or certified  mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at the
address set forth in Section  10.1 or at such other  address of which the Lender
shall have been notified pursuant thereto;

          (d)  agrees  that  nothing  herein  shall  affect  the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in  any  other  jurisdiction;  and

          (e) waives,  to the maximum extent  permitted by law, any right it may
have to claim or recover in any legal action or  proceeding  referred to in this
subsection any special, exemplary, punitive or consequential damages.

     Section 10.15 Acknowledgments. Each Person constituting the Borrower hereby
acknowledges  that:

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

          (b) it has not  been  advised  by the  Agent  or any  Lender  or their
respective counsel as to any tax or other financial implications or consequences
of  the  transactions  contemplated  by  the  Loan  Documents  and  each  Person
constituting the Borrower has made an independent analysis of, and decision with
respect  to,  such  matters,   relying  on  its  own  legal  counsel  and  other
professionals.  It is further acknowledged that the Agent, the Lenders and their
respective counsel had and have no obligation to advise any Person  constituting
the  Borrower  with respect to any such  matters.

          (c) neither the Agent nor any Lender has any fiduciary relationship to
any Person constituting the Borrower, and the relationship between the Agent and
the Lenders,  on one hand,  and each Person  constituting  the Borrower,  on the
other hand,  is solely  that of debtor and  creditor;  and

          (d)  no  joint  venture  exists  among  any  Person  constituting  the
Borrower,  the Agent or any Lender.

     Section 10.16 Waivers of Jury Trial. EACH PERSON CONSTITUTING THE BORROWER,
THE AGENT AND EACH LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY  WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING  RELATING TO THIS  AGREEMENT OR THE NOTES
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

     Section  10.17 SSG.  Notwithstanding  anything  to the  contrary  contained
herein, SSG is not a party hereto and is not obligated in anyway hereunder.

                      [Balance of page Intentionally Blank
                            Signature page to follow]

                                      -76-
<PAGE>

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

                                           Borrowers:

                                           EMERSON RADIO CORP

                                           By:/s/ Kenneth A. Corby
                                           Name: Kenneth A. Corby
                                           Title: CFO - EVP

                                           MAJEXCO IMPORTS, INC.

                                           By:/s/ Kenneth A. Corby
                                           Name: Kenneth A. Corby
                                           Title: CFO - EVP

                                           EMERSON RADIO (HONG KONG) LIMITED

                                           By: /s/ John J. Raab
                                           Name: John J. Raab
                                           Title: Director

                                           EMERSON RADIO INTERNATIONAL LTD.

                                           By: Kenneth A. Corby
                                           Name: Kenneth A. Corby
                                           Title: Director

                                           Lenders:
                                           PNC BANK, NATIONAL ASSOCIATION

                                           By: /s/ Virginia Alling
                                           Name: Virginia Alling
                                           Title: VP

                                           Agent:
                                           PNC BANK, NATIONAL ASSOCIATION

                                           By: /s/ Virginia Alling
                                           Name: Virginia Alling
                                           Title: VP

                                      -77-