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                                CREDIT AGREEMENT

                                  by and among

                            THREE-FIVE SYSTEMS, INC.
                              and its Subsidiaries


                             The Banks Named Herein


                                       and


                                  IMPERIAL BANK

                                    as Agent


                                   Dated as of

                                January 21, 2000










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<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
RECITALS.......................................................................1

ARTICLE 1  DEFINITION OF TERMS.................................................2
     1.1       Definitions.....................................................2
     1.2       Terms Generally................................................12

ARTICLE 2  THE RLC............................................................13
     2.1       RLC Commitment.................................................13
     2.2       Revolving Line.................................................13
     2.3       RLC Notes......................................................13
     2.4       RLC............................................................14
     2.5       Excess Balance Repayment.......................................17
     2.6       Reduction of RLC Commitment....................................17
     2.7       Conditions.....................................................17
     2.8       Other RLC Advances.............................................17
     2.9       Assignment.....................................................17
     2.10      Issuance of Letters of Credit..................................18
     2.11      Issuance Procedure for Letter of Credit........................18
     2.12      Letter of Credit Fees..........................................19
     2.13      Disbursements..................................................19
     2.14      Reimbursement Obligations of Borrower..........................19
     2.15      Nature of Reimbursement Obligations............................19
     2.16      Banks Obligation...............................................20
     2.17      Certain Requirements...........................................20
     2.18      Risk Participations, Drawings, and Reimbursements..............21
     2.19      Repayment of Participations....................................22
     2.20      Role of the Issuing Bank.......................................23

ARTICLE 3  PAYMENTS, FEES AND EURODOLLAR PROVISIONS...........................24
     3.1       Payments.......................................................24
     3.2       Loan Fees......................................................25
     3.3       Computations...................................................25
     3.4       Maintenance of Accounts........................................25
     3.5       Certain Contingencies..........................................25
     3.6       Increased Capital Requirements; Tax............................26
     3.7       Special Provisions for LIBOR Rate Advances.....................27
     3.8       Prepayments....................................................29
     3.9       Non U.S. Subsidiaries - Currency Indemnity.....................30

ARTICLE 4  [INTENTIONALLY LEFT BLANK].........................................31

                                       -i-
<PAGE>
ARTICLE 5  CONDITIONS PRECEDENT...............................................32
     5.1       Initial Advance................................................32
     5.2       No Event of Default............................................33
     5.3       No Material Adverse Effect.....................................33
     5.4       Representations and Warranties.................................33

ARTICLE 6  REPRESENTATIONS AND WARRANTIES.....................................34
     6.1       Recitals.......................................................34
     6.2       Organization and Good Standing.................................34
     6.3       Authorization and Power........................................34
     6.4       Enforceable Obligations........................................34
     6.5       No Conflicts or Consents.......................................34
     6.6       No Litigation..................................................35
     6.7       Financial Condition............................................35
     6.8       Taxes..........................................................35
     6.9       No Stock Purchase..............................................35
     6.10      Advances.......................................................35
     6.11      Solvent........................................................35
     6.12      ERISA..........................................................36
     6.13      Full Disclosure................................................36
     6.14      No Default.....................................................36
     6.15      Significant Debt Agreements....................................36
     6.16      Compliance with Law............................................36
     6.17      Subsidiaries...................................................36

ARTICLE 7  AFFIRMATIVE COVENANTS..............................................37
     7.1       Financial Statements, Reports and Documents....................37
     7.2       Maintenance of Existence.......................................38
     7.3       Maintain Business..............................................38
     7.4       Insurance......................................................38
     7.5       Compliance with Credit Documents...............................39
     7.6       Books and Records; Access......................................39
     7.7       Payment of Taxes and Other Indebtedness........................39
     7.8       Notice of Default..............................................39
     7.9       Other Notices..................................................39
     7.10      ERISA Compliance...............................................39
     7.11      Further Assurances.............................................40
     7.12      Compliance with Significant Debt Agreements....................40
     7.13      Compliance with Law............................................40
     7.14      Authorizations and Approvals...................................40
     7.15      News Releases..................................................40
     7.16      New Subsidiaries...............................................40
     7.17      Change in Control..............................................41

                                      -ii-
<PAGE>
ARTICLE 8  NEGATIVE COVENANTS.................................................42
     8.1       No Debt........................................................42
     8.2       Liens..........................................................42
     8.3       Loans..........................................................42
     8.4       Dividends......................................................42
     8.5       Existence; Sale or Transfer of Assets..........................42
     8.6       Fiscal Year....................................................43
     8.7       Margin Stock...................................................43
     8.8       Amendments to Organizational Documents.........................43
     8.9       [Intentionally left blank.]....................................43
     8.10      Permitted Acquisitions.........................................43
     8.11      Financial Covenants............................................43

ARTICLE 9  EVENTS OF DEFAULT..................................................45
     9.1       Events of Default..............................................45
     9.2       Remedies Upon Event of Default.................................47
     9.3       Performance by the Banks.......................................48

ARTICLE 9A  AGENT.............................................................50
     9A.1      Appointment and Authorization..................................50
     9A.2      Exculpation....................................................50
     9A.3      Agent and Affiliates...........................................50
     9A.4      Banks' Credit Decisions........................................50
     9A.5      Indemnification................................................51
     9A.6      Administration.................................................51
     9A.7      Default by a Bank..............................................53
     9A.8      Collections; Sharing of Payments...............................53
     9A.9      Successor Agent................................................53
     9A.10     Issuing Bank...................................................54

ARTICLE 10  MISCELLANEOUS.....................................................55
     10.1      Modification...................................................55
     10.2      Waiver.........................................................55
     10.3      Payment of Expenses............................................55
     10.4      Notices........................................................55
     10.5      Governing Law; Jurisdiction, Venue; Arbitration................57
     10.6      Invalid Provisions.............................................57
     10.7      Binding Effect.................................................57
     10.8      Entirety.......................................................58
     10.9      Relationship of the Banks and Borrower.........................58
     10.10     Time of the Essence............................................58
     10.11     Good Faith Standard............................................58
     10.12     Assignments and Participations; Transferees....................58

                                      -iii-
<PAGE>
     10.13     Headings.......................................................61
     10.14     Survival.......................................................61
     10.15     No Third Party Beneficiary.....................................61
     10.16     Joint Liability................................................61
     10.17     Schedules and Exhibits Incorporated............................62
     10.18     Waiver of Jury Trial...........................................62
     10.19     Counterparts...................................................62

Schedule 1.1 - Pro Rata Share and Notice Address of each Bank

Schedule 6.17 - Subsidiaries

Schedule 8.2 - Existing Liens

Exhibit "A" - Form of Compliance Certificate

Exhibit "B" - Form of Advance Notice

Exhibit "C" - Form of Notes

Exhibit "D" - Form of Assumption Agreement

Exhibit "E" - Administrative Details Reply Form

Exhibit "F" - Form of Assignment and Acceptance

                                      -iv-
<PAGE>
                                CREDIT AGREEMENT

     BY THIS CREDIT  AGREEMENT  (together with any amendments or  modifications,
the "Credit  Agreement"),  entered into as of the 21st day of January,  2000, by
and between THREE- FIVE SYSTEMS,  INC., a Delaware  corporation (the "Company"),
all  present and future  Subsidiaries  (as  hereinafter  defined) of the Company
(with  the  Company,  the  "Borrower"),  the banks  listed  from time to time in
Schedule 1.1 (the "Banks"), and IMPERIAL BANK, a California banking corporation,
as  administrative  agent  for the Banks (in such  capacity,  together  with any
successor  agent  appointed  hereunder,  the  "Agent")  and as Issuing  Bank (as
hereinafter  defined) in  consideration  of the mutual promises herein contained
and for other  valuable  consideration,  the parties  hereto do hereby  agree as
follows:

                                    RECITALS

     A.  Borrower has  requested  that the Banks  establish a revolving  line of
credit (the "RLC") in the principal amount of  $25,000,000.00 to provide working
capital financing and for the issuance from time to time of letters of credit.

     B. The Banks have agreed to do so upon the terms, conditions and provisions
set forth herein.

     C.  Effective  as of the  delivery of this Credit  Agreement,  the Borrower
acknowledges  and agrees that the Credit  Agreement dated as of November 5, 1998
between the Borrower,  Imperial Bank Arizona, an Arizona banking corporation, as
the Administrative Agent, and the Banks listed therein (the "Prior Banks") shall
be  terminated  and the Prior  Banks  shall have no further  obligations  to the
Borrower  under said Credit  Agreement  and the  Borrower  shall have no further
obligation to the Prior Banks under said Credit Agreement.

     Accordingly, the parties hereto agree as follows:
<PAGE>
                                    ARTICLE 1

                               DEFINITION OF TERMS

     1.1  DEFINITIONS.  For the  purposes of this Credit  Agreement,  unless the
context  otherwise  requires,  the  following  terms  shall have the  respective
meanings assigned to them in this Article 1 or in the section hereof referred to
below:

          "ADMINISTRATIVE QUESTIONNAIRE" means that Administrative Details Reply
Form  substantially  in the form of Exhibit "E" attached hereto delivered to the
Agent pursuant to Section 10.12.

          "ADVANCE" means an RLC Advance.

          "AFFILIATE"  of  any  Person  means  any  Person  which,  directly  or
indirectly,  controls,  is controlled by, or is under common control with,  such
Person.  For  the  purposes  of  this  definition,  "control"  (including,  with
correlative  meanings,  the terms  "controlled  by" and  "under  common  control
with"), as used with respect to any Person, shall mean the possession,  directly
or  indirectly,  of the power to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.

          "AGENT": See the Preamble hereto.

          "ASSIGNMENT  AND  ACCEPTANCE"  means that  Assignment  and  Acceptance
substantially  in the form of Exhibit "F" attached hereto delivered to the Agent
pursuant to Section 10.12.

          "AUTHORIZED   OFFICER"  means  the  chief  executive  officer,   chief
financial  officer or the chief  accounting  officer of Borrower,  or such other
individual  who is from time to time  designated to the Banks in writing by said
officer as authorized to act for Borrower with respect to the Loans.

          "BANKING  DAY" means a day of the year on which  commercial  banks are
not required or authorized to close in Inglewood,  California,  and/or  Phoenix,
Arizona,  and, with respect to a LIBOR Rate Advance, a day on which dealings are
carried on in the London interbank market.

          "BANKS": See the Preamble hereto.

          "BORROWER": See the Preamble hereto.

          "CASH FLOW" means the sum for the relevant  period of  Borrower's  Net
Income,  tax expense (less taxes actually paid in cash),  depreciation  expense,
amortization  of  intangibles  expense and interest  expense,  all to the extent
deducted in the calculation of Net Income.

                                       -2-
<PAGE>
          "CHANGE IN CONTROL" means the occurrence or existence of either of the
following  events or conditions  without the prior written consent of the Banks,
if different than the state of affairs as of the Closing Date:

               (a) the  acquisition  by any Person or two or more Persons acting
          in concert of "beneficial ownership" (within the meaning of Rule 13d-3
          promulgated  by  the  SEC  under  the  Exchange  Act  or as  otherwise
          specified under the provisions of this Credit Agreement) of securities
          of Borrower  having more than 50% of the ordinary voting power for the
          election of directors; or

               (b) the  acquisition  of Control of Borrower by any Person or two
          or more Persons acting in concert of Control of Borrower.

          "CLOSING DATE" means the date of delivery of this Credit Agreement.

          "CO-BORROWERS," each a "CO-BORROWER" means the Subsidiaries that are a
party to this Credit Agreement from time to time.

          "CODE" means the Internal Revenue Code of 1986, as amended.

          "COMMITMENT" means the RLC Commitment.

          "COMPANY": See the Preamble hereto.

          "COMPLIANCE CERTIFICATE": See Section 7.1(c).

          "CONTROL"  when used  with  respect  to any  Person  means the  power,
directly  or  indirectly,  to direct the  management  policies  of such  Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

          "CONTROLLED GROUP" means,  severally and collectively,  the members of
the group  controlling,  controlled  by and/or in common  control  of  Borrower,
within the meaning of Section 4001(b) of ERISA.

          "CONTROLLED SUBSIDIARY" means any Subsidiary in which the Company owns
in excess of fifty  percent  (50.0%)  of both all  voting  rights and all equity
interests.

          "CREDIT AGREEMENT": See the Preamble hereto.

          "CREDIT  DOCUMENTS" means this Credit Agreement,  the Notes (including
any renewals,  extensions,  restatements and refundings thereof) and any written
agreements,   certificates  or  documents  (and  with  respect  to  this  Credit
Agreement,  the  Note and such  other  written  agreements  and  documents,  any
amendments  or  supplements  thereto  or  modifications   thereof)  executed  or
delivered pursuant to the terms of this Credit Agreement.

                                       -3-
<PAGE>
          "CREDIT FACILITIES" means the RLC.

          "DEBT COVERAGE  RATIO" means for any date the ratio of Borrower's Cash
Flow to its Debt  Service  Requirement,  calculated  on a  rolling  four-quarter
basis.

          "DEBT SERVICE REQUIREMENT" means the sum of the following that are due
within the relevant period:  all current maturities of long-term debt (excluding
the RLC), capital lease obligations and interest expense.

          "DEFAULT  RATE" means an interest rate per annum equal to five percent
(5.0%) over the Variable  Rate,  which Default Rate shall change when and as the
Variable Rate changes.

          "DISBURSEMENT": See Section 2.13.

          "DISBURSEMENT DATE": See Section 2.13.

          "DOLLARS"  and the sign "$" mean lawful  currency of the United States
of America.

          "EQUITY"  means  Borrower's  stockholders'  equity,  determined  on  a
consolidated basis in accordance with GAAP.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended,  together  with all final and  permanent  regulations  issued  pursuant
thereto.  References  herein to sections and  subsections of ERISA are deemed to
refer to any successor or substitute provisions therefor.

          "EUROCURRENCY  LIABILITIES"  has the meaning  assigned to that term in
Regulation  D of the Board of  Governors to the Federal  Reserve  System,  as in
effect from time to time.

          "EURODOLLAR RATE RESERVE PERCENTAGE" for the LIBOR Interest Period for
each LIBOR Rate Advance means the reserve percentage  applicable two (2) Banking
Days before the first day of such LIBOR Interest Period under regulations issued
from time to time by the Board of  Governors of the Federal  Reserve  System (or
any successor) for determining the maximum reserve requirement  (including,  but
not  limited  to,  any  emergency,   supplemental,  or  other  marginal  reserve
requirement)  for a member bank of the Federal  Reserve  System in San Francisco
with respect to  liabilities or assets  consisting of or including  Eurocurrency
Liabilities (or with respect to any other category of liabilities which includes
deposits by reference to which the interest rate on LIBOR Rate Advances)  having
a term equal to such Interest Period.

          "EVENT OF DEFAULT": See Section 9.1.

                                       -4-
<PAGE>
          "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

          "FEDERAL FUNDS RATE" means, as of any date of determination,  the rate
set forth in the weekly  statistical  release  designated as  H.15(519),  or any
successor  publication,  published by the Federal  Reserve Board  (including any
such successor,  "H.15(519)")  for such date opposite the caption "Federal Funds
(Effective)."  If for any  relevant  date  such  rate is not  yet  published  in
H.15(519),  the rate  for such  date  will be the  rate set  forth in the  daily
statistical  release  designated as the Composite 3:30 p.m.  Quotations for U.S.
Government Securities,  or any successor  publication,  published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such date under the caption  "Federal Funds Effective  Rate." If
on any relevant date the appropriate  rate for such date is not yet published in
either H.15(519) or the Composite 3:30 p.m.  Quotations,  the rate for such date
will be the arithmetic  mean of the rates for the last  transaction in overnight
Federal funds  arranged  prior to 9:00 a.m. (New York City time) on that date by
each of three  leading  brokers of Federal funds  transactions  in New York City
selected by the Agent.

          "FINANCIAL COVENANTS": See Section 8.11 hereof.

          "FUNDED DEBT" means as of the end of any fiscal quarter,  with respect
to any Person, its  interest-bearing  Indebtedness  including without limitation
any capital lease debt.

          "GAAP"  means  those  generally  accepted  accounting  principles  and
practices  which are  recognized as such by the American  Institute of Certified
Public  Accountants  acting  through its Accounting  Principles  Board or by the
Financial  Accounting  Standards  Board or through other  appropriate  boards or
committees thereof and which are consistently  applied for all periods after the
date hereof so as to properly reflect the financial  condition,  and the results
of operations  and changes in the  financial  position,  of Borrower,  including
without limitation  accounting rules promulgated  pursuant to Regulations SX and
SK, except that any accounting  principle or practice  required to be changed by
the said Accounting Principles Board or Financial Accounting Standards Board (or
other appropriate board or committee of the said Boards) in order to continue as
a generally accepted accounting principle or practice may be so changed.

          "GOVERNMENTAL  AUTHORITY"  means  any  government  (or  any  political
subdivision  or  jurisdiction   thereof),   court,   bureau,   agency  or  other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.

          "HONOR DATE" has the meaning specified in Section 2.18(b).

          "IMPERIAL" means Imperial Bank, a California banking corporation.

          "INDEBTEDNESS"  means, with respect to any Person, all of its monetary
and contingent obligations and liabilities, including without limitation each of
the following (without duplication): (a) obligations of that Person to any other
Person for payment of borrowed money, (b) capital lease  obligations,  (c) notes
and drafts drawn or accepted by that Person payable to any other Person, whether

                                       -5-
<PAGE>
or not representing  obligations for borrowed money (but without  duplication of
indebtedness for borrowed  money),  (d) any obligation for the purchase price of
property the payment of which is deferred for more than one year or evidenced by
a note or  equivalent  instrument,  (e)  guarantees  of  Indebtedness  of  third
parties,  and (f) a recourse  or  nonrecourse  payment  obligation  of any other
Person that is secured by a Lien on any property of the first Person, whether or
not assumed by the first Person, up to the fair market value (from time to time)
of such property  (absent  manifest  evidence to the  contrary,  the fair market
value of such property shall be the amount  determined  under GAAP for financial
reporting  purposes),  but  excluding  any  trades  accounts  payables  and  any
accruals.

          "INSOLVENCY  PROCEEDING"  means any  proceeding  undertaken  under the
Debtor Relief Laws.

          "ISSUANCE  DATE"  means  the  date on  which a  Letter  of  Credit  is
delivered to the beneficiary thereof.

          "ISSUANCE  REQUEST"  means a  request  for a  Letter  of  Credit  duly
executed by Borrower in a form satisfactory to the Issuing Bank.

          "ISSUE" means,  with respect to any Letter of Credit,  to issue or, by
amendment  or  otherwise,  to extend the expiry of, or to renew or  increase  or
decrease the amount of, such Letter of Credit; and the terms "ISSUED," "ISSUING"
and "ISSUANCE" have corresponding meanings.

          "ISSUING  BANK" means  Imperial  and/or any  Affiliate  thereof in its
capacity as issuer of one or more Letters of Credit hereunder, together with any
replacement Letter of Credit issuer arising under this Credit Agreement.

          "LC BORROWING"  means an extension of credit  resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date when
made nor converted into a Variable Rate Advance.

          "LC  OBLIGATIONS"  means at any time the sum of (a) the Outstanding LC
Balance under the RLC, plus (b) the amount of all  unreimbursed  drawings  under
all Letters of Credit, including all outstanding LC Borrowings.

          "LETTER OF CREDIT" means a letter of credit issued by the Issuing Bank
for the account of Borrower pursuant to Article 2.

          "LEVERAGE  RATIO"  means as of any date the  ratio of  Funded  Debt to
Equity.

          "LIBOR"  means  the  London  Interbank  Offered  Rate,  determined  as
provided herein, for the applicable LIBOR Interest Period to be specified by the
Borrower as provided herein.  For each Advance under the LIBOR option, the LIBOR
rate will remain in effect  through  the end of the LIBOR  Interest  Period.  If
prior to the due date for a LIBOR Rate Advance Borrower  requests a continuation

                                       -6-
<PAGE>
of said LIBOR Rate  Advance,  Borrower's  request  shall comply with the request
procedure specified below and the LIBOR rate for the LIBOR Rate Advance shall be
re-determined for the next LIBOR Interest Period as provided below.  LIBOR shall
mean with respect to any LIBOR Interest  Period the rate equal to the arithmetic
mean (rounded upwards, if necessary,  to the nearest  one-sixteenth  (1/16th) of
one percent (1%)) of:

               (a) the offered rates per annum for deposits in U.S.  Dollars for
          a period equal to such LIBOR  Interest  Period which  appears at 11:00
          a.m., London time, on the Reuters Screen LIBOR Page on the Banking Day
          that is two (2)  Banking  Days  before  the  first  day of such  LIBOR
          Interest Period,  in each case if at least four (4) such offered rates
          appear on such page, or

               (b) if clause  (a) is not  available,  (x) the  offered  rate per
          annum for  deposits in U.S.  Dollars for a period  equal to such LIBOR
          Interest Period for a LIBOR Rate Advance hereunder which appears as of
          11:00 a.m.,  London time on the  Telerate  Monitor on Telerate  Screen
          3750 on the Banking Day which is two (2) Banking Days before the first
          day of such LIBOR Interest  Period;  or (y) if clause (x) above is not
          available,  the arithmetic mean (rounded upwards, if necessary, to the
          nearest  one-sixteenth  (1/16th) of one percent  (1%)) of the interest
          rates per annum offered by at least three (3) prime banks  selected by
          the Banks at approximately 11:00 a.m., London time, on the Banking Day
          which is two (2) Banking  Days  before such date for  deposits in U.S.
          Dollars to prime banks in the London  interbank  market,  in each case
          for a period  equal to such  LIBOR  Interest  Period  for a LIBOR Rate
          Advance  hereunder in an amount equal to the amount to which the LIBOR
          applies.  "Reuters Screen LIBOR Page" as used herein means the display
          designated as page LIBOR on the Reuters Monitor Money Rates Service or
          such other page as may replace the LIBOR page on that  service for the
          purpose of displaying London interbank offered rates of major banks.

          "LIBOR  BASED  RATE"  means the rate per annum equal (A) to the sum of
LIBOR and one hundred  fifty basis points (150 bp),  divided by (B) a percentage
equal to one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage
for the period equal to the applicable LIBOR Interest Period.

          "LIBOR INTEREST PERIOD" means, for each LIBOR Rate Advance, the period
commencing  on the date of such LIBOR Rate Advance and ending on the last day of
the  period  selected  by  Borrower  pursuant  to  the  provisions  herein  and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding  LIBOR  Interest  Period  and  ending  on the last  day of the  period
selected by Borrower  pursuant to the  provisions  herein.  The duration of each

                                       -7-
<PAGE>
LIBOR  Interest  Period shall be one, two,  three or six months,  as selected by
Borrower (A), for a new Advance, in the request for a LIBOR Rate Advance or (B),
for an outstanding  Advance, in the request for a LIBOR Rate Advance to continue
bearing  interest at the LIBOR Based Rate or (C),  for an  outstanding  Variable
Rate  Advance,  in the  request to convert  to a LIBOR Rate  Advance;  provided,
however, that:

               (i) LIBOR Interest  Periods  commencing on the same date shall be
          of the same duration;

               (ii)  Whenever  the last day of any LIBOR  Interest  Period would
          otherwise  occur on a day other  than a Banking  Day,  the last day of
          such LIBOR  Interest  Period  shall be  extended  to occur on the next
          succeeding  Banking Day,  provided that if such extension  would cause
          the  last  day of such  LIBOR  Interest  Period  to  occur in the next
          following  calendar month,  the last day of such LIBOR Interest Period
          shall occur on the next preceding Banking Day; and

               (iii) No LIBOR  Interest  Period with  respect to any RLC Advance
          shall extend beyond the RLC Maturity Date.

          "LIBOR  RATE  ADVANCE"  means  an  Advance  or a  portion  of  a  Loan
designated by Borrower, that bears, or is requested to bear, interest at a LIBOR
Based Rate.  Each LIBOR Rate Advance shall be in a minimum amount of $500,000.00
with integral multiples of $1,000.00 in excess thereof.

          "LIEN" means any lien, mortgage,  security interest, tax lien, pledge,
encumbrance,  conditional  sale or title  retention  arrangement,  or any  other
interest in property  designed to secure the repayment of  Indebtedness  whether
arising by agreement or under any statute or law, or otherwise.

          "LOANS" or "LOAN" means the RLC.

          "LOAN FEES": See Section 3.2 hereof.

          "MATERIAL  ADVERSE  EFFECT" means any  circumstance or event which (i)
has any  material  adverse  effect upon the  validity or  enforceability  of any
Credit Document,  (ii) materially impairs the ability of Borrower to fulfill its
obligations under the Credit  Documents,  or (iii) causes an Event of Default or
any event which,  with notice or lapse of time or both, would become an Event of
Default.

          "MATURITY DATE" means the RLC Maturity Date.

          "MAXIMUM LC COMMITMENT"  means SEVEN MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($7,500,000.00).

                                       -8-
<PAGE>
          "NET INCOME"  means for any period the net income of Borrower for such
period in accordance with GAAP, determined on a consolidated basis.

          "NEW SUBSIDIARY": See Section 7.16 hereof.

          "NOTE" means the RLC Note.

          "OBLIGATION"  means all present and future  indebtedness,  obligations
and  liabilities  of  Borrower to the Banks,  and all  renewals  and  extensions
thereof,  or any part  thereof,  arising  pursuant to this Credit  Agreement  or
represented  by the  Notes,  including  without  limitation  the  Loans  and all
interest  accruing  thereon,  and attorneys' fees incurred in the enforcement or
collection  thereof,  regardless of whether such  indebtedness,  obligations and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several; together with all indebtedness, obligations and liabilities of Borrower
evidenced  or arising  pursuant to any of the other  Credit  Documents,  and all
renewals and extensions thereof, or part thereof.

          "OUTSTANDING  LC  BALANCE"  in  effect at any time  means the  maximum
aggregate  amount  available  to be drawn at such  time  under  all  outstanding
Letters of Credit, the determination of such maximum amount to assume compliance
with all conditions for a Disbursement.

          "PAYMENT DATE" means:

               (i) as to a Variable Rate  Advance,  the first day of each month,
          provided  that if any such day is not a Banking Day, then such Payment
          Date shall be the next successive Banking Day; and

               (ii) as to a LIBOR Rate Advance,  the earlier of (A) the last day
          of its LIBOR Interest Period,  or (B) the last day of each three month
          period during such LIBOR Interest Period.

          "PBGC"  means  the  Pension  Benefit  Guaranty  Corporation,  and  any
successor  to  all  or  substantially   all  of  the  Pension  Benefit  Guaranty
Corporation's functions under ERISA.

          "PERMITTED LIENS" means Liens which consist of the following:

               (a) Liens for taxes,  assessments or governmental charges not yet
          delinquent;

               (b) Liens to which the Banks shall  consent in writing,  in their
          sole and absolute discretion; and

               (c) Existing Liens listed on Schedule 8.2.

                                       -9-
<PAGE>
          "PERSON"  includes an individual,  a corporation,  a joint venture,  a
partnership,   a  trust,  a  limited   liability   company,   an  unincorporated
organization or a government or any agency or political subdivision thereof.

          "PLAN" means an employee defined benefit plan or other plan maintained
by  Borrower  for  employees  of Borrower  and covered by Title IV of ERISA,  or
subject to the minimum funding standards under Section 412 of the Code.

          "PRIME RATE" means the interest rate per annum  publicly  announced by
Imperial  Bank, a California  banking  corporation,  or its  successors,  as its
"prime  rate" as in effect  from time to time.  Borrower  acknowledges  that the
Prime Rate is not  necessarily  the best or lowest rate offered by Imperial Bank
and Imperial Bank may lend to its customers at rates that are at, above or below
its Prime Rate.

          "PRO RATA SHARE" means, as to each Bank, that amount shown at any time
on Schedule 1.1 attached  hereto as that Bank's  share of the  Commitment,  each
Advance and each Letter of Credit.

          "QUARTERLY END DATE" means the last day of each March, June, September
and December.

          "REGULATION  U"  means  Regulation  U  promulgated  by  the  Board  of
Governors  of the  Federal  Reserve  System,  12 C.F.R.  Part 221,  or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.

          "REGULATORY  CHANGE" means any change effective after the date of this
Credit Agreement in United States federal,  state, or foreign law,  regulations,
or rules or the  adoption  or  making  after  such  date of any  interpretation,
directive,  or request  applying to a class of banks  including the Banks, of or
under any United  States  federal,  state,  or foreign law,  regulation  or rule
(whether  or not  having  the  force  of law) by any  court or  governmental  or
monetary authority charged with the interpretation or administration thereof.

          "REPORTABLE  EVENT"  means  any  "reportable  event" as  described  in
Section  4043(b)  of ERISA  with  respect  to which the  thirty  (30) day notice
requirement has not been waived by the PBGC.

          "REQUIRED  BANKS"  means,  at any time,  Banks  having Pro Rata Shares
representing at least sixty-five percent (65.0%) of the aggregate Commitment.

          "RLC": See Recital A hereto.

          "RLC ADVANCE" means a disbursement of the proceeds of the RLC.

                                      -10-
<PAGE>
          "RLC  BALANCE"  means (i) with  respect  to the RLC on any  date,  the
aggregate  outstanding  principal  amount  thereof  after  giving  effect to any
borrowings and prepayments or repayments of RLC Advances occurring on such date;
plus (ii) with respect to any outstanding LC Obligations on any date, the amount
of such LC  Obligations  on such date after  giving  effect to any  Issuances of
Letters of Credit  occurring on such date and any other changes in the aggregate
amount of the LC Obligations as of such date,  including  changes occurring as a
result of any reimbursements of outstanding unpaid drawings under any Letters of
Credit or any  reductions  in the maximum  amount  available  for drawing  under
Letters of Credit taking effect on such date.

          "RLC  COMMITMENT"  means   TWENTY-FIVE   MILLION  AND  NO/100  DOLLARS
($25,000,000.00).

          "RLC FEE": See Section 3.2(b).

          "RLC MATURITY DATE" means January 19, 2001.

          "RLC NON-USE FEE": See Section 3.2(a).

          "RLC NOTE" means a  Revolving  Promissory  Note of even date  herewith
substantially  in the form  attached  hereto as  Exhibit  C, in the  amount of a
Bank's Pro Rata Share of the RLC Commitment,  executed by Borrower and delivered
to a Bank  pursuant to the terms of this  Credit  Agreement,  together  with any
renewals, extensions, modifications, restatements or replacements thereof.

          "SEC" means the Securities and Exchange Commission.

          "SIGNIFICANT  DEBT  AGREEMENT"  means all documents,  instruments  and
agreements  executed by Borrower,  evidencing (i) any unsecured  Indebtedness of
Borrower in excess of  $1,000,000.00  in  outstanding  principal  (or  principal
equivalent)  amount,  or (ii) any secured  Indebtedness of Borrower in excess of
$100,000.00 in outstanding  principal (or principal  equivalent)  amount, or any
guaranty in excess of  $1,000,000.00  in  outstanding  principal  (or  principal
equivalent) amount.

          "STATED  AMOUNT" of a Letter of Credit  means the amount of the Letter
of Credit as stated in the Letter of Credit.

          "STATED  EXPIRY  DATE" of a Letter of Credit  means the stated  expiry
date or expiration date as stated in the Letter of Credit.

          "SUBSIDIARY"  means any business  association  directly or  indirectly
controlled by the Borrower.

          "TANGIBLE NET WORTH" means, at any given date, the total shareholder's
equity  (including  capital  stock,  additional  paid in  capital  and  retained
earnings after  deducting  treasury stock) which would appear on a balance sheet

                                      -11-
<PAGE>
of  Borrower  prepared as of such date in  accordance  with  generally  accepted
accounting  principles  consistently  applied,  LESS the aggregate book value of
"Intangible Assets" (as defined below) shown on such balance sheet.  "Intangible
Assets"  means those  assets that are (i)  deferred  assets,  other than prepaid
taxes; (ii) patents, copyrights,  trademarks,  tradenames, franchises, goodwill,
experimental  expenses and other  similar  assets which would be  classified  as
intangible  assets on a balance  sheet  prepared in  accordance  with  generally
accepted accounting principles  consistently applied; and (iii) unamortized debt
discount and expense.

          "TANGIBLE NET WORTH  MINIMUM"  means the sum of  $88,000,000.00  as of
September 30, 1999,  plus fifty percent  (50.0%) of its positive Net Income plus
any  additional  equity raised by Borrower for each fiscal  quarter,  commencing
December 31, 1999.

          "U.S." means the United States of America.

          "VARIABLE  RATE"  means the rate per annum equal to the Prime Rate per
annum as in effect from time to time.  The Variable Rate will change on each day
that the "Prime Rate" changes.

          "VARIABLE  RATE  ADVANCE"  means an  Advance  or a  portion  of a Loan
designated  by Borrower,  that bears,  or is requested to bear,  interest at the
Variable Rate.

     1.2 TERMS GENERALLY.

          (a) The  definitions  in Section 1.1 shall  apply  equally to both the
     singular and plural forms of the terms defined.

          (b) Whenever the context may require,  any pronoun  shall  include the
     corresponding masculine, feminine and neuter forms.

          (c)  All  references  herein  to  Articles,   Sections,  Exhibits  and
     Schedules  shall be deemed  references  to Articles  and  Sections  of, and
     Exhibits  and  Schedules  to,  this  Agreement  unless  the  context  shall
     otherwise require.

          (d) Except as otherwise  expressly  provided  herein,  all terms of an
     accounting or financial  nature shall be construed in accordance with GAAP,
     as in effect from time to time.

                                      -12-
<PAGE>
                                    ARTICLE 2

                                     THE RLC

     2.1 RLC COMMITMENT. Each Bank agrees, severally but not jointly, to loan to
or for the benefit of Borrower,  and Borrower shall be entitled to draw upon and
borrow, in the manner and upon the terms and conditions contained in this Credit
Agreement, an amount that shall not exceed that Bank's Pro Rata Share of the RLC
Commitment.

     2.2 REVOLVING LINE.

          (a)  Subject  to the terms  and  conditions  set forth in this  Credit
     Agreement,  each Bank shall provide to Borrower a revolving  line of credit
     (each, a "RLC"), against which a Bank shall fund its Pro Rata Share of each
     RLC Advance to be made to Borrower,  repaid by Borrower,  and readvanced to
     Borrower,  as Borrower may  request,  and the Issuing Bank shall issue such
     Letters of Credit as Borrower  shall  request,  which may be  terminated or
     repaid by  Borrower  and  reissued  provided  that (i) there is no Event of
     Default under any provision of this Credit  Agreement,  (ii) no RLC Advance
     shall be made or Letter of Credit  issued  that would cause the RLC Balance
     to exceed the RLC  Commitment,  (iii) no Bank shall be obligated  under any
     circumstances  to fund an RLC  Advance  in excess of that  Bank's  Pro Rata
     Share of the requested RLC Advance,  (iv) the aggregate  amount of a Bank's
     funding of the RLC Balance at any one time outstanding shall not exceed its
     Pro Rata Share of the RLC Commitment,  and (v) no Letter of Credit shall be
     issued with a Stated  Expiry  Date later than the RLC  Maturity  Date.  The
     Banks  shall  not be  obligated  to fund  their  Pro Rata  Share of any RLC
     Advance if, after giving effect thereto,  any of the foregoing  limitations
     would be exceeded.

          (b) The  failure  of any  Bank to fund  its Pro  Rata  Share of an RLC
     Advance in accordance  with its Pro Rata Share of the RLC Commitment  shall
     not  relieve any other Bank of its several  obligations  hereunder,  but no
     Bank  shall be liable  with  respect  to the  obligation  of any other Bank
     hereunder.

          (c) RLC  Advances may be made for the purpose of providing to Borrower
     working  capital  financing or in connection  with a  Disbursement  under a
     Letter of Credit.

     2.3 RLC NOTES.  The RLC of each Bank shall be  evidenced by an RLC Note and
shall bear  interest and be payable to the order of such Bank upon the terms and
conditions  contained  therein.  The aggregate amount funded by a Bank under its
RLC Note less all repayments of principal  thereof shall be the principal amount
owing and unpaid on its RLC Note and its RLC. The  principal  amount funded by a
Bank and all  principal  payments and  prepayments  thereof may be noted by such
Bank on a schedule  attached to its RLC Note and shall be entered by the Bank on

                                      -13-
<PAGE>
its ledgers and computer records;  provided that the failure of the Bank to make
such notations or entries shall not affect the principal amount owing and unpaid
on its RLC Note.  The entries made in the ordinary  course of business by a Bank
on its  ledgers and  computer  records and any  notations  made in the  ordinary
course of business by a Bank on any such schedule  annexed to its RLC Note shall
be presumed to be accurate  until the  contrary is  established.  If  requested,
Borrower shall confirm in writing to the Agent each RLC Advance.

     2.4 RLC.  The RLC shall bear  interest and be payable to the Banks upon the
terms and conditions contained therein, which include the following provisions:

          (a) Interest shall accrue:

               (i) On the unpaid  principal  of an RLC  Advance at the  Variable
          Rate except to the extent that an RLC  Advance  bears  interest at the
          LIBOR Based Rate.

               (ii) On the unpaid principal of an RLC Advance at the LIBOR Based
          Rate  to the  extent  Borrower  shall  elect  and to  the  extent  not
          otherwise provided herein.

          (b) All interest  shall be computed on the basis of a 360-day year and
     accrue on a daily basis for the actual number of days elapsed.  All accrued
     interest shall be due and payable on each Payment Date.

          (c) The  entire  unpaid  principal  balance,  all  accrued  and unpaid
     interest, and all other amounts payable under the RLC Note shall be due and
     payable in full on the RLC Maturity Date.

          (d) Each request for an RLC Advance shall be substantially in the form
     attached  hereto as Exhibit "B" from an  Authorized  Officer and shall,  in
     addition to complying with the other requirements in this Credit Agreement,
     (i) specify the date and amount of the requested RLC Advance,  (ii) specify
     whether the RLC Advance shall be an RLC Advance that bears  interest at the
     Variable  Rate or shall be an RLC Advance that bears  interest at the LIBOR
     Based  Rate,  (iii) be in a minimum  amount of  $500,000.00  with  integral
     multiples of $1,000.00 in excess thereof, and (iv) if the RLC Advance is to
     bear  interest  at the LIBOR Based  Rate,  (A)  specify the LIBOR  Interest
     Period,  and  (B) be  delivered  to  Agent  before  9:00  a.m.  (Inglewood,
     California local time) at least three (3) Banking Days prior to the date of
     the  requested  RLC Advance.  Any request for an RLC Advance not  complying
     with the foregoing  requirements for an RLC Advance bearing interest at the
     LIBOR Based Rate shall bear interest at the Variable Rate; provided that in
     the event such  non-compliance is due to Borrower's  failure to specify the
     required  information,  the Banks agree to notify  Borrower of such failure
     and to provide Borrower the opportunity to provide such  information  prior
     to directing that the RLC Advance bear interest at the Variable Rate.

                                      -14-
<PAGE>
          (e)  After  receiving  a  request  for an RLC  Advance  in the  manner
     provided herein,  the Agent shall promptly,  before 11:30 a.m.  (Inglewood,
     California local time) on the date an RLC Advance is requested, notify each
     Bank by telephone  (confirmed promptly in writing),  telefacsimile or cable
     of the  terms  of such  request  and  such  Bank's  Pro  Rata  Share of the
     requested  Rate  Advance.  Each Bank shall,  before  1:00 p.m.  (Inglewood,
     California  local  time)  on the  date  an RLC  Advance  is to be  made  as
     specified  in a request  for an RLC  Advance,  deposit  with the Agent such
     Bank's Pro Rata Share of the requested RLC Advance in immediately available
     funds.  Upon fulfillment of all applicable  conditions set forth herein and
     after  receipt by the Agent of such  funds,  the Agent shall pay or deliver
     all funds so received to the order of Borrower at the  principal  office of
     the  Agent.  The  failure of any Bank to fund its Pro Rata Share of any RLC
     Advance  required of it  hereunder  shall not relieve any other Bank of its
     obligation to fund its Pro Rata Share of any RLC Advance hereunder.  If any
     Bank fails to fund its Pro Rata Share of the  requested  RLC Advance and if
     all  conditions to such RLC Advance have  apparently  been  satisfied,  the
     Agent will make  available  to Borrower  the funds  received by it from the
     other  Bank.  Neither the Agent nor any Bank shall be  responsible  for the
     performance by any other Bank of its obligations hereunder.

          Unless the Agent shall have  received  notice from a Bank prior to the
     date of any RLC Advance that such Bank will not make available to the Agent
     such  Bank's Pro Rata Share of the  requested  RLC  Advance,  the Agent may
     assume  that such Bank has made such amount  available  to the Agent on the
     date of such RLC Advance in accordance with this Section and the Agent may,
     in reliance upon such assumption,  make available a corresponding amount to
     or on behalf of Borrower on such date.  If and to the extent any Bank shall
     not have so made its Pro Rata Share of the requested RLC Advance  available
     to the Agent (the "Principal  Shortfall Amount"),  Borrower agrees to repay
     the Principal  Shortfall Amount to the Agent forthwith on demand,  together
     with  interest  thereon  for each day from  (and  including)  the date such
     amount is made available to or on behalf of Borrower to (but excluding) the
     date such amount is repaid to the Agent, at the rate per annum equal to the
     rate otherwise applicable to the RLC Advance in question.

          (f) If Borrower  desires  that a LIBOR Rate  Advance  continue to bear
     interest  at the  LIBOR  Based  Rate  after  the end of an  existing  LIBOR
     Interest  Period,  Borrower  shall  deliver to the Agent at least three (3)
     Banking  Days prior to the end of the existing  LIBOR  Interest  Period;  a
     notice making such election and specifying  the new LIBOR Interest  Period.
     If Borrower does not deliver such notice  within such time,  then after the
     existing  LIBOR  Interest  Period the LIBOR  Rate  Advance  shall  become a
     Variable Rate Advance and shall bear interest at the Variable Rate.

                                      -15-
<PAGE>
          (g) Borrower may upon written  notice to and received by the Agent not
     later than 9:00 a.m.  (Inglewood,  California  local time) (i) on the third
     Banking Day, in the case of any  conversion of a Variable Rate Advance into
     a LIBOR Rate  Advance and (ii) on the first  Banking Day in the case of any
     conversion of a LIBOR Rate Advance into a Variable  Rate Advance,  prior to
     the date of the  proposed  conversion,  convert any RLC Advance of one type
     into  an RLC  Advance  of the  other  type;  provided,  however,  that  any
     conversion  of a LIBOR Rate  Advance (A) shall only be made on the last day
     of the  applicable  LIBOR  Interest  Period  except as  otherwise  provided
     herein, and (B) shall be made only as to an RLC Advance in a minimum amount
     of $500,000.00 with integral multiples of $1,000.00 in excess thereof. Each
     such notice of a conversion  shall specify the date of such  conversion and
     the RLC Advance(s) to be converted.  After  receiving any such notice,  the
     Agent shall promptly notify each Bank by telephone,  telefacsimile or cable
     and deliver a copy thereof to each Bank.

          (h) Each  request for an RLC  Advance as well as each  election by the
     Borrower  that an RLC Advance  continue to bear interest at the LIBOR Based
     Rate after the end of an existing LIBOR Interest Period and each conversion
     request  shall be  irrevocable  and binding on Borrower once the request is
     received  by the  Agent and the Agent  notifies  the Banks of the  request.
     Prior to the  Agent's  notice of the  request  to the Banks,  Borrower  may
     revoke the request.  Borrower  shall  indemnify each Bank against any cost,
     loss or expense  incurred by any Bank as a result of Borrower's  failure to
     fulfill,  on or before the date specified for an RLC Advance in any request
     for an RLC Advance,  the  conditions  to such RLC Advance set forth herein,
     including any cost,  loss or expense  incurred by reason of the liquidation
     or  reemployment of deposits or other funds acquired by a Bank to fund such
     RLC Advance when such RLC Advance, as a result of such failure, is not made
     on the date so specified.

          (i) No RLC  Advance  shall be  requested  by  Borrower to bear a LIBOR
     Based  Rate,  whether  pursuant  to a  request  for  an  RLC  Advance  or a
     conversion  hereunder,  so long as there  shall have  occurred  an Event of
     Default and such Event of Default is continuing.

          (j)  Nothing  herein  shall be  deemed  to  relieve  any Bank from its
     obligation to fulfill its Pro Rata Share of the RLC Commitment hereunder or
     to prejudice any right which the Agent or the Borrower may have against any
     Bank as a result of any default by such Bank hereunder.

          (k) If any payment of interest and/or principal is not received by the
     Agent when such payment is due, then in addition to the remedies  conferred
     upon the Banks under the Credit  Documents,  a late charge of five  percent
     (5%) of the amount of the  installment  due and unpaid will be added to the
     delinquent  amount to compensate  the Banks for the expense of handling the
     delinquency for any payment past due in excess of ten (10) days, regardless
     of any notice and cure period.

                                      -16-
<PAGE>
          (l) Upon the  occurrence  of an Event of Default  and after  maturity,
     including  maturity upon acceleration,  the unpaid principal  balance,  all
     accrued and unpaid interest and all other amounts  payable  hereunder shall
     bear interest at the Default Rate.

     2.5 EXCESS BALANCE REPAYMENT.  There shall be due and payable from Borrower
to the Banks, and Borrower shall  immediately  repay to the Banks three (3) days
after notice to Borrower, from time to time, any amount by which the RLC Balance
exceeds the RLC Commitment.

     2.6 REDUCTION OF RLC COMMITMENT.  Borrower shall have the right at any time
upon at least  seven  days'  prior  written  notice to the  Agent to reduce  the
aggregate amount of the RLC Commitment;  PROVIDED,  that the amount of each such
reduction shall be in a minimum aggregate amount of $1,000,000.00 or an integral
aggregate  multiple of  $100,000.00 in excess thereof and that no such reduction
shall reduce (i) the amount of the RLC  Commitment to less than the RLC Balance,
or (ii) the amount of a Bank's Pro Rata Share of the RLC Commitment to less than
the  amount  of the RLC  Balance  funded  by such  Bank.  Any  reduction  in the
aggregate amount of the RLC Commitment shall reduce each Bank's share of the RLC
Commitment by its Pro Rata Share of the aggregate amount of such reduction.  The
Agent shall promptly  notify each Bank of any such notice of reduction  received
from the  Borrower.  Any reduction in the RLC  Commitment  may not be reinstated
without the mutual prior consent of the Borrower and the Banks.

     2.7  CONDITIONS.  The Banks shall have no obligation to fund their Pro Rata
Shares  of  any  RLC  Advance  unless  and  until  all  of  the  conditions  and
requirements of this Credit Agreement are fully satisfied. However, the Banks in
their sole and  absolute  discretion  may elect to make one or more RLC Advances
prior to full satisfaction of one or more such conditions  and/or  requirements.
Notwithstanding  that  such  an RLC  Advance  or RLC  Advances  are  made,  such
unsatisfied  conditions  and/or  requirements  shall not be  waived or  released
thereby.  Borrower  shall be and continue to be obligated to fully  satisfy such
conditions  and  requirements,  and the  Banks,  at any time,  in their sole and
absolute  discretion,  may stop making RLC  Advances  until all  conditions  and
requirements are fully satisfied.

     2.8 OTHER RLC ADVANCES.  The Agent,  at the  direction of the Banks,  after
giving written  notice to Borrower,  from time to time, may make RLC Advances in
any amount in payment of (i) interest accrued and payable upon the RLC, (ii) any
indebtedness,  charges and expenses that are the  obligation  of Borrower  under
this Credit  Agreement,  and (iii) any charges or matters  necessary to cure any
Event of Default.

     2.9 ASSIGNMENT.  Borrower shall have no right to any RLC Advance other than
to have the same  disbursed  by the Agent in  accordance  with the  disbursement
provisions  contained  in this Credit  Agreement.  Any  assignment  or transfer,
voluntary or involuntary,  of this Credit Agreement or any right hereunder shall
not be  binding  upon or in any way  affect  the  Banks  without  their  written

                                      -17-
<PAGE>
consent;  the Agent,  at the direction of the Banks may make RLC Advances  under
the  disbursement  provisions  herein,  notwithstanding  any such  assignment or
transfer.

     2.10 ISSUANCE OF LETTERS OF CREDIT.

          (a) Subject to the terms and conditions of this Credit Agreement,  (i)
     the Issuing Bank agrees from time to time before the RLC  Maturity  Date to
     issue Letters of Credit for the account of the Borrower; and (ii) the Banks
     severally  agree to participate in Letters of Credit issued for the account
     of the  Borrower,  subject  to the  prior  approval  by  each  Bank  of the
     provisions  of each  Letter  of  Credit.  Each  reference  in  this  Credit
     Agreement  to the  "issue" or  "issuance"  or other  forms of such words in
     relation to Letters of Credit  shall be deemed to include any  extension or
     renewal of a Letter of Credit.

          (b) Each Letter of Credit shall (i) by its terms be issued in a Stated
     Amount; (ii) have a Stated Expiry Date no later than the RLC Maturity Date;
     (iii) expire or be  terminated by the  beneficiary  thereunder on or before
     its Stated  Expiry Date;  (iv) not cause the RLC Balance after the issuance
     of said  Letter of Credit to exceed the RLC  Commitment;  and (v) not cause
     the  Outstanding  LC Balance after the issuance of said Letter of Credit to
     exceed the Maximum LC Commitment.

          (c) In addition to the conditions otherwise specified in this Section,
     the  obligation  of the Issuing  Bank to issue a Letter of Credit  shall be
     subject to the further  condition  precedent that the following  statements
     shall be correct, and each of the application for such Letter of Credit and
     the issuance of such Letter of Credit shall constitute a representation and
     warranty  by  Borrower  that on the date of the  issuance of such Letter of
     Credit such statements are correct:

               (i) The  representations  and warranties in Article 6 are correct
          on and as of the date of the issuance of such Letter of Credit, before
          and after giving effect to such issuance,  as though made on and as of
          such date;

               (ii) No Event of Default has occurred and is continuing; and

               (iii) The  conditions  in Section  2.2(a) are satisfied as of the
          date of  issuance  of the  Letter of Credit,  before and after  giving
          effect to such issuance.

     2.11 ISSUANCE  PROCEDURE  FOR LETTER OF CREDIT.  By delivery to the Issuing
Bank of an Issuance Request on or before 9:00 a.m. (Inglewood,  California time)
three (3) Banking Days prior to the requested  Issuance  Date, and the execution
of such applications and agreements as the Issuing Bank may reasonably  request,
Borrower may request the issuance of a Letter of Credit in such form as Borrower

                                      -18-
<PAGE>
may  reasonably  request.  Each  Issuance  Request shall include the form of the
Letter of Credit,  the amount and other terms thereof.  Subject to the terms and
conditions of this Credit Agreement,  the Issuing Bank will issue such Letter of
Credit on the  Issuance  Date  specified in the  Issuance  Request  submitted in
connection  therewith.  The Issuing Bank and Borrower  agree that all Letters of
Credit  issued  pursuant  to the terms of this  Article  shall be subject to the
terms and conditions, and entitled to the benefits, of this Credit Agreement and
the other Credit Documents.

     2.12 LETTER OF CREDIT  FEES.  Borrower  agrees to pay to the Issuing Bank a
non-refundable  Letter of Credit fee agreed to by Borrower  in writing  upon the
application of a Letter of Credit. Borrower further agrees to pay to the Issuing
Bank a charge for all reasonable expenses of the Issuing Bank in connection with
the issuance, amendment, modification or negotiation of the Letter of Credit.

     2.13   DISBURSEMENTS.   The  Issuing  Bank  will  notify  Borrower  of  the
presentment  for  payment  of a Letter  of Credit  by any  beneficiary  thereto,
together with notice of the date (the "Disbursement Date") such payment shall be
made.  Subject to the terms and provisions of the Letter of Credit,  the Issuing
Bank shall make such payment (a "Disbursement") to the beneficiary of the Letter
of  Credit.  Each  such  Disbursement  shall  be  deemed  to be an  RLC  Advance
hereunder.

     2.14  REIMBURSEMENT  OBLIGATIONS OF BORROWER.  Borrower's  obligation under
Section 2.13 to reimburse the Banks with respect to each Disbursement (including
interest  thereon)  in  respect of any Letter of Credit  shall be  absolute  and
unconditional  under any and all  circumstances  and irrespective of any setoff,
counterclaim,  or defense to payment which Borrower may have or have had against
the Banks, the Issuing Bank, the Agent or the beneficiary thereof, including any
defense based upon the occurrence of any Event of Default,  any draft, demand or
certificate or other document presented under the Letter of Credit proving to be
forged, fraudulent,  invalid or insufficient, the failure of any Disbursement to
conform to the terms of the Letter of Credit (if,  in Issuing  Bank's good faith
opinion,   such   Disbursement   is  determined  to  be   appropriate)   or  any
non-application  or  misapplication  by the  beneficiary of the proceeds of such
Disbursement,  or the legality,  validity, form, regularity or enforceability of
the Letter of Credit;  PROVIDED,  HOWEVER,  that nothing herein shall  adversely
affect the right of Borrower to commence any proceeding against Issuing Bank for
any wrongful  Disbursement  made by Issuing Bank under the Letter of Credit as a
result of acts or omissions  constituting gross negligence or willful misconduct
on the part of Issuing Bank.

     2.15 NATURE OF REIMBURSEMENT  OBLIGATIONS.  Borrower shall assume all risks
of the acts,  omissions  or misuse  of any  Letter of Credit by the  beneficiary
thereof. Neither the Banks nor the Issuing Bank (except to the extent of its own
gross negligence or willful misconduct) shall be responsible for:

          (a) the form, validity,  sufficiency,  accuracy,  genuineness or legal
     effect of any Letter of Credit or any  document  submitted  by any party in
     connection with the issuance of any Letter of Credit, even if such document
     should in fact prove to be in any or all  respects  invalid,  insufficient,
     inaccurate, fraudulent or forged;

                                      -19-
<PAGE>
          (b) the form, validity,  sufficiency,  accuracy,  genuineness or legal
     effect  of any  instrument  transferring  or  assigning  or  purporting  to
     transfer or assign any Letter of Credit;

          (c) failure of any beneficiary of any Letter of Credit to comply fully
     with  conditions  required  in order to  demand  payment  under a Letter of
     Credit;

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

          (e) any loss or delay in the transmission or otherwise of any document
     or draft  required by or from a beneficiary  of a Letter of Credit in order
     to make a Disbursement under a Letter of Credit or of the proceeds thereof.

None of the foregoing shall affect,  impair or prevent the vesting of any of the
rights or powers granted the Banks or the Issuing Bank hereunder. In furtherance
and extension,  and not in limitation or derogation of any of the foregoing, any
action  taken or  omitted to be taken by the Banks or the  Issuing  Bank in good
faith  shall be  binding  upon the  Borrower  and shall not put the Banks or the
Issuing Bank under any resulting liability to Borrower.

     2.16 BANKS  OBLIGATION.  Nothing herein shall be deemed to relieve any Bank
from  its  obligations  to  fulfill  its Pro Rata  Share  of the RLC  Commitment
hereunder  or to  prejudice  any right which the Agent or the  Borrower may have
against any Bank as a result of any default by such Bank hereunder.

     2.17 CERTAIN REQUIREMENTS. The Issuing Bank is under no obligation to Issue
any Letter of Credit if:

          (i) any order,  judgment or decree of any  Governmental  Authority  or
     arbitrator  shall by its terms  purport to enjoin or  restrain  the Issuing
     Bank  from  Issuing  such  Letter  of  Credit,  or any  requirement  of law
     applicable  to the Issuing Bank or any request or directive  (with which it
     is customary for banks in the relevant  jurisdiction  to comply  whether or
     not  having  the  force  of  law)  from  any  Governmental  Authority  with
     jurisdiction  over the Issuing  Bank shall  prohibit,  or request  that the
     Issuing Bank refrain from,  the Issuance of letters of credit  generally or
     such Letter of Credit in  particular  or shall impose upon the Issuing Bank
     with respect to such Letter of Credit any restriction,  reserve, or capital
     requirement  (for  which  the  Issuing  Bank is not  otherwise  compensated
     hereunder)  not in effect on the  Closing  Date,  or shall  impose upon the
     Issuing  Bank  any  unreimbursed  loss,  cost,  or  expense  which  was not
     applicable  on the Closing  Date and which the  Issuing  Bank in good faith
     deems material to it;

                                      -20-
<PAGE>
          (ii) the Issuing Bank has received  written  notice from any Bank, the
     Agent or  Borrower,  on or prior to the Banking Day prior to the  requested
     date  of  Issuance  of  such  Letter  of  Credit,  that  one or more of the
     applicable conditions contained in Article 5 is not then satisfied;

          (iii) the Stated Expiry Date of any requested  Letter of Credit is not
     in accord with the requirements of Section 2.10(b), unless all of the Banks
     have approved such Stated Expiry Date;

          (iv) any requested Letter of Credit does not provide for drafts, or is
     not otherwise in form and substance  acceptable to the Issuing Bank, or the
     Issuance of a Letter of Credit shall violate any applicable policies of the
     Issuing Bank; or

          (v) such  Letter of Credit is to be  denominated  in a currency  other
     than Dollars.

     2.18 RISK PARTICIPATIONS, DRAWINGS, AND REIMBURSEMENTS.

          (a) Immediately upon the Issuance of each Letter of Credit,  each Bank
     shall be deemed to, and hereby irrevocably and  unconditionally  agrees to,
     purchase from the Issuing Bank a participation in such Letter of Credit and
     each  drawing  thereunder  in an amount equal to the product of (i) the Pro
     Rata Share of such Bank,  times (ii) the  maximum  amount  available  to be
     drawn  under  such  Letter  of  Credit  and  the  amount  of  any  Drawing,
     respectively. For purposes of the applicable Commitment, each Issuance of a
     Letter of Credit  shall be deemed to utilize  each Bank's Pro Rata Share of
     said Commitment by an amount equal to the amount of such participation.

          (b) In the event of any request for a drawing under a Letter of Credit
     by the  beneficiary or transferee  thereof,  the Issuing Bank will promptly
     notify the Borrower.  The Issuing Bank shall honor any Disbursement request
     under any Letter of Credit  only if (i) such  request is  delivered  to the
     Issuing  Bank by the  beneficiary  of such Letter of Credit,  and (ii) such
     request is accompanied by the original  documents required by the Letter of
     Credit for any  Disbursement.  Except as  otherwise  provided  herein,  the
     Borrower shall  reimburse the Issuing Bank prior to 11:00 a.m.  (Inglewood,
     California  local time) on each date that any amount is paid by the Issuing
     Bank under any Letter of Credit (each such date,  an "Honor  Date"),  in an
     amount  equal to the amount so paid by the Issuing  Bank.  In the event the
     Borrower is required but fails to  reimburse  the Issuing Bank for the full
     amount of any drawing under any Letter of Credit by 11:00 a.m.  (Inglewood,
     California  local time) on the Honor Date,  the Issuing Bank will  promptly
     notify the Agent and the Agent will promptly notify each Bank thereof.  Any
     notice given by the Issuing Bank or the Agent  pursuant to this Section may
     be oral if  immediately  confirmed  in writing  (including  by  facsimile);
     provided that the lack of such an immediate  confirmation  shall not affect
     the conclusiveness or binding effect of such notice.

                                      -21-
<PAGE>
          (c) Each Bank shall  upon any notice  pursuant  to this  Section  make
     available  to the Agent for the  account of the  Issuing  Bank an amount in
     Dollars and in immediately  available  funds equal to its Pro Rata Share of
     the amount of the drawing,  whereupon the Banks shall (subject to paragraph
     (d)) each be deemed to have made a Variable Rate Advance to the Borrower in
     that amount.  If any Bank so notified  fails to make available to the Agent
     for the  account of the  Issuing  Bank the  amount of such  Bank's Pro Rata
     Share of the amount of the  drawing by no later than 3:00 p.m.  (Inglewood,
     California  local time) on the Honor Date,  then  interest  shall accrue on
     such Bank's  obligation  to make such  payment,  from the Honor Date to the
     date such Bank makes such payment, at a rate per annum equal to the Federal
     Funds Rate in effect  from time to time  during such period and such amount
     and  interest  shall be  immediately  due and  payable  to the  Agent;  the
     obligation  of such Bank to make  such  payment  to the Agent  shall not be
     waived by the Agent without the prior written consent of the Borrower.  The
     Agent will  promptly give notice of the  occurrence of the Honor Date,  but
     failure  of the  Agent to give  any such  notice  on the  Honor  Date or in
     sufficient  time to enable  any Bank to effect  such  payment  on such date
     shall not relieve such Bank from its obligations under this Section.

          (d) With respect to any  unreimbursed  drawing,  the Borrower shall be
     deemed to have  incurred  from the Issuing Bank a Variable Rate RLC Advance
     in the amount of such drawing.

          (e) Each Bank's obligation in accordance with this Credit Agreement to
     make the Variable  Rate Advance,  as  contemplated  by this  Section,  as a
     result  of a  drawing  under a Letter  of  Credit,  shall be  absolute  and
     unconditional  and without  recourse  to the Issuing  Bank and shall not be
     affected by any  circumstance,  including  (i) any  set-off,  counterclaim,
     recoupment,  defense,  or other right which such Bank may have  against the
     Issuing Bank, the Borrower,  or any other Person for any reason whatsoever,
     (ii) the occurrence or continuance of a default,  an Event of Default, or a
     Material Adverse Effect,  or (iii) any other  circumstance,  happening,  or
     event whatsoever, whether or not similar to any of the foregoing.

     2.19 REPAYMENT OF PARTICIPATIONS.

          (a) Upon (and only upon)  receipt by the Agent for the  account of the
     Issuing  Bank of  immediately  available  funds  from the  Borrower  (i) in
     reimbursement  of any payment  made by the  Issuing  Bank under a Letter of
     Credit with respect to which any Bank has paid the Agent for the account of
     the  Issuing  Bank for such Bank's  participation  in such Letter of Credit
     pursuant to Section 2.18, or (ii) in payment of interest thereon, the Agent
     will pay to each Bank, in the same funds as those received by the Agent for
     the account of the Issuing  Bank,  the amount of such Bank's Pro Rata Share

                                      -22-
<PAGE>
     of such  funds,  and the Issuing  Bank shall  receive the amount of the Pro
     Rata  Share of such funds of any Bank that did not so pay the Agent for the
     account of the Issuing Bank.

          (b) If the Agent or the Issuing Bank is required at any time to return
     to the Borrower, or to a trustee, receiver,  liquidator,  custodian, or any
     official in any Insolvency Proceeding,  any portion of the payments made by
     the Borrower to the Agent for the account of the Issuing  Bank  pursuant to
     paragraph (a) in  reimbursement  of a payment made under a Letter of Credit
     or  interest  or fee  thereon,  each Bank  shall,  on demand of the  Agent,
     forthwith  return to the Agent or the  Issuing  Bank the  amount of its Pro
     Rata Share of any amounts so returned by the Agent or the Issuing Bank plus
     interest thereon from the date such demand is made to the date such amounts
     are returned by such Bank to the Agent or the Issuing  Bank,  at a rate per
     annum equal to the Federal Funds Rate in effect from time to time.

     2.20 ROLE OF THE ISSUING BANK.

          (a) Each Bank and Borrower  agree that,  in paying any drawing under a
     Letter of Credit,  the Issuing  Bank shall not have any  responsibility  to
     obtain any document (other than any sight draft and certificates  expressly
     required  by the  Letter of Credit)  or to  ascertain  or inquire as to the
     validity or accuracy of any such  document or the  authority  of the Person
     executing or delivering any such document.

          (b) No Agent-related Person nor any of the respective  correspondents,
     participants  or  assignees of the Issuing Bank shall be liable to any Bank
     for: (i) any action taken or omitted in connection  herewith at the request
     or with the  approval  of the Banks or (ii) any action  taken or omitted in
     the absence of gross negligence or willful misconduct.

                                      -23-
<PAGE>
                                    ARTICLE 3

                    PAYMENTS, FEES AND EURODOLLAR PROVISIONS

     3.1 PAYMENTS.

          (a) All payments and  prepayments  by the Borrower of principal of and
     interest  on the  Notes  and all fees,  expenses  and any other  Obligation
     payable  to the Agent or the Banks in  connection  with the Loans  shall be
     nonrefundable  and made in Dollars or  immediately  available  funds to the
     Banks not later than 11:00 a.m.  (Inglewood,  California local time) on the
     dates  called for under this  Credit  Agreement,  at the main office of the
     Agent in Inglewood,  California.  Funds  received  after such hour shall be
     deemed to have been received by the Agent on the next Banking Day.  Payment
     to the Agent as  aforesaid  shall be deemed  payment  to the Banks as well,
     regardless  of whether the Agent makes the  distributions  contemplated  by
     Section 9A.8(a) hereof.

          (b) Unless  otherwise  required by  applicable  law,  payments will be
     applied  first to accrued,  unpaid  interest,  then to  principal,  and any
     remaining  amount to any unpaid  collection  costs,  late charges and other
     charges;  provided,  however,  upon delinquency or other default, the Banks
     reserve  the  right to  apply  payments  among  principal,  interest,  late
     charges, collection costs and other charges at its discretion.

          (c) Interest shall be due and payable on the Loan on each Payment Date
     through the end of the preceding month and on the Maturity Date.

          (d)  Whenever any payment to be made  hereunder  shall be stated to be
     due on a day which is not a Banking Day,  such payment shall be made on the
     next succeeding  Banking Day, and such extension of time shall in such case
     be included in the computation of interest,  commission or fee, as the case
     may be.

          (e) Borrower authorizes the Agent to collect all interest, fees, costs
     and/or  expenses  due under this Credit  Agreement  by charging  Borrower's
     demand deposit  account number 97002657 with the Agent, or any other demand
     deposit account  maintained by Borrower with the Agent, for the full amount
     thereof.  Should  there be  insufficient  funds in any such demand  deposit
     account to pay all such sums when due,  the full amount of such  deficiency
     shall be  immediately  due and  payable by  Borrower.  Provided no Event of
     Default  and no event,  that with the  giving of notice or the  passage  of
     time,  or both,  would be an Event of Default,  shall have  occurred and be
     continuing,  Agent shall provide Borrower with written notice at least five
     (5) days prior to charging Borrower's account pursuant to this paragraph.

                                      -24-
<PAGE>
     3.2 LOAN FEES.

          (a) RLC Non-Use Fee. Borrower agrees to pay the Agent for distribution
     to the Banks  pursuant to Section  9A.8  hereof a  quarterly  fee (the "RLC
     Non-Use Fee") in an annualized amount equal to one-quarter  percent (0.25%)
     of the average daily undrawn balance of the RLC Commitment during the prior
     calendar quarterly period. For purposes of calculating the RLC Non-Use Fee,
     the  Outstanding LC Balance on any date shall be deemed to have been drawn.
     The RLC Non-Use Fee shall accrue from the Closing Date and shall be due and
     payable in arrears  within three (3) Banking Days after  written  notice of
     such amount due by the Agent to Borrower and shall be  non-refundable.  The
     first such payment shall be prorated from the Closing Date and shall be due
     on March 31, 2000 and thereafter on each Quarterly End Date.

          (b) RLC Fee.  Borrower  agrees  to pay Agent on the  Closing  Date for
     distribution  to the Banks  pursuant to Section 9A.8 hereof a fee (the "RLC
     Fee")  in an  amount  equal  to one  eighth  percent  (0.125%)  of the  RLC
     Commitment.

     3.3  COMPUTATIONS.  All fees and interest on each Note shall be computed on
the basis of a year of 360-days/year  and accrue on a daily basis for the actual
number of days elapsed.

     3.4 MAINTENANCE OF ACCOUNTS.  The Banks shall maintain,  in accordance with
their usual practice,  an account or accounts evidencing the indebtedness of the
Borrower and the amounts  payable and paid from time to time  hereunder.  In any
legal action or proceeding in respect of this Credit Agreement, the entries made
in the ordinary course of business in such account or accounts shall be evidence
of the existence and amounts of the obligations of the Borrower therein recorded
and shall be presumed  to be accurate  until the  contrary is  established.  The
failure to record any such amount shall not, however,  limit or otherwise affect
the  obligations of the Borrower  hereunder to repay all amounts owed hereunder,
together with all interest accrued thereon as provided in the Notes.

     3.5 CERTAIN CONTINGENCIES.

          (a) If the  contingency  contemplated by Section 3.6, 3.7(b) or 3.7(c)
     should  occur,  the Borrower may at any time after  receipt of such notice,
     and as  long  as the  circumstances  giving  rise  to  the  relevant  claim
     continue,  require the Banks to  terminate  upon not less than thirty days'
     notice the  participation  agreement  with such  participant,  unless  such
     participant has waived any claim to payment under those provisions.

          (b) If  circumstances  arise  which would (or would upon the giving of
     notice) entitle a Bank to receive  additional  payments pursuant to Section
     3.6, 3.7(b) or 3.7(c), then the Bank shall promptly, upon becoming aware of
     such  circumstances,  notify the  Borrower  and,  to the extent that it can
     legally do so without  material  prejudice  to its own  position,  the Bank
     shall take such reasonable  steps as may be available to it to mitigate the
     effects of such circumstances.

                                      -25-
<PAGE>
     3.6 INCREASED CAPITAL REQUIREMENTS; TAX.

          (a)  In  the  event  that,  as a  result  of  any  Regulatory  Change,
     compliance  by any  Bank  with any  applicable  law or  governmental  rule,
     requirement, regulation, guideline or order (with which it is customary for
     banks in the  relevant  jurisdiction  to comply  whether  or not having the
     force of law) has or would have the effect of  reducing  the rate of return
     on the  capital of the Bank or any  institution  controlling  the Bank as a
     consequence  of or with  reference  to any  Commitment,  the  issuance of a
     Letter of Credit or amounts  outstanding  under the Notes to a level  below
     that which the Bank or such other  corporation  could have achieved but for
     such change or compliance  (taking into  consideration  the policies of the
     Bank or such other corporation with respect to capital),  then from time to
     time the Borrower shall pay to such Bank such additional  amount or amounts
     as will  compensate the Bank for such  reduction.  The Bank will notify the
     Borrower  of  any   Regulatory   Change  that  will  entitle  the  Bank  to
     compensation  pursuant to this Section as promptly as  practicable,  but in
     any event within ninety (90) days after the Bank obtains knowledge thereof;
     provided, however, that if the Bank fails to give such notice within ninety
     (90) days after it obtains knowledge of such a Regulatory  Change, the Bank
     shall,  with  respect  to  compensation  payable  in  respect  of any costs
     resulting  from such  Regulatory  Change,  only be  entitled to payment for
     costs incurred from and after the date that the Bank does give such notice.
     Such Bank shall deliver to the Borrower a written  certificate which states
     the additional amount(s) due and payable,  showing in reasonable detail the
     calculation of such amount and provide  evidence to substantiate the Bank's
     claim for such amount(s).

          (b) Each Bank that is  organized  outside the United  States (i) on or
     before the date it becomes a party to this Credit  Agreement  and (ii) with
     respect to each lending  office  located  outside the United States of such
     Bank,  shall  deliver  to the  Borrower  and the Agent  such  certificates,
     documents  or  other  evidence,   as  required  by  the  Code  or  Treasury
     Regulations  issued pursuant  thereto,  including  Internal Revenue Service
     Form 1001 or Form 4224,  properly  completed and duly executed by such Bank
     establishing  that  payments  received  hereunder  are (i) not  subject  to
     withholding  under the Code because such payment is  effectively  connected
     with the conduct by such Bank of a trade or  business in the United  States
     or (ii) totally exempt from United States Federal  withholding  tax under a
     provision of an applicable tax treaty.  In addition,  each such Bank shall,
     if legally able to do so, thereafter deliver such  certificates,  documents
     or other  evidence from time to time  establishing  that payments  received
     hereunder  are not subject to such  withholding  upon  receipt of a written
     request  therefor  from the Borrower or the Agent.  Unless the Borrower and
     the Agent  have  received  forms or other  documents  satisfactory  to them
     indicating  that  payments  hereunder or under the Notes are not subject to
     United  States  Federal  withholding  tax,  the Borrower or the Agent shall
     withhold such taxes from such payments at the applicable statutory rate.

                                      -26-
<PAGE>
          (c) The Borrower shall not be required to pay any  additional  amounts
     to any Bank or the Agent in respect to United  States  Federal  withholding
     tax if the obligation to pay such additional  amounts would not have arisen
     but for a failure  by such Bank or the Agent to deliver  the  certificates,
     documents or other evidence specified in the preceding paragraph (b) unless
     such failure is attributable to (i) a change in applicable law,  regulation
     or official  interpretation thereof or (ii) an amendment or modification to
     or a  revocation  of any  applicable  tax  treaty or a change  in  official
     position regarding the application or interpretation  thereof, in each case
     on or after the date such Bank or the Agent  becomes a party to this Credit
     Agreement.

          (d) Nothing  contained in this Section  shall  require any Bank or the
     Agent to make  available  any of its tax returns (or any other  information
     relating to its taxes) which it deems to be confidential.

     3.7 SPECIAL PROVISIONS FOR LIBOR RATE ADVANCES.

          (a) Funding:  Notwithstanding any provision of the Credit Documents to
     the  contrary,  the Banks  shall be  entitled  to fund and  maintain  their
     funding  of all or any  part of any  Advance  in any  manner  they see fit;
     provided,  however,  that for the purposes of the Notes, all determinations
     thereunder shall be made as if the Banks had actually funded and maintained
     each  Advance  bearing  interest  at the LIBOR  Based Rate during the LIBOR
     Interest Period therefor through the purchase of deposits having a maturity
     corresponding  to the last day of the LIBOR Interest  Period and bearing an
     interest rate equal to the LIBOR Based Rate for such LIBOR Interest Period.

          (b)  Inadequacy  of  Eurodollar  Pricing:  If,  due to any  Regulatory
     Change,  there  shall be any  increase in the cost to a Bank of agreeing to
     make or making,  funding,  or maintaining  Advances bearing interest at the
     LIBOR  Based Rate  (including,  without  limitation,  any  increase  in any
     applicable reserve requirement), then the Borrower shall from time to time,
     upon  demand by the  Bank,  pay to the Bank  such  amounts  as the Bank may
     reasonably  determine  to be  necessary  to  compensate  the  Bank  for any
     additional  costs that the Bank reasonably  determines are  attributable to
     such Regulatory Change. The Bank will notify the Borrower of any Regulatory
     Change  that  will  entitle  the  Bank  to  compensation  pursuant  to this
     paragraph as promptly as  practicable,  but in any event within ninety (90)
     days after the Bank obtains knowledge thereof;  provided,  however, that if
     the Bank fails to give such notice within ninety (90) days after it obtains
     knowledge  of such a  Regulatory  Change,  the Bank shall,  with respect to
     compensation payable in respect of any costs resulting from such Regulatory

                                      -27-
<PAGE>
     Change,  only be entitled to payment for costs  incurred from and after the
     date  that the Bank does give such  notice.  The Bank will  furnish  to the
     Borrower a certificate setting forth in reasonable detail the basis for the
     amount of each request by the Bank for  compensation  under this paragraph.
     Determinations  by the Bank of the amounts  required to compensate the Bank
     shall be conclusive,  absent manifest error.  The Bank shall be entitled to
     compensation  in  connection  with any  Regulatory  Change  only for  costs
     actually incurred by the Bank.

          (c) Illegality: Notwithstanding any provision of the Credit Documents,
     if a Bank shall notify the Borrower that as a result of a Regulatory Change
     it is unlawful for the Bank to make Advances at the LIBOR Based Rate, or to
     fund or maintain  Advances  bearing  interest at the LIBOR Based Rate , (i)
     the obligations of the Bank to make Advances at the LIBOR Based Rate and to
     convert  Advances to the LIBOR Based Rate shall be suspended until the Bank
     shall notify the Borrower that the circumstances causing such suspension no
     longer  exist,  and (ii) in the  event  such  Regulatory  Change  makes the
     maintenance  of  Advances at the LIBOR Based Rate  unlawful,  the  Borrower
     shall forthwith  prepay in full all Advances  bearing interest at the LIBOR
     Based Rate then outstanding, together with interest accrued thereon and all
     amounts in connection with such  prepayment  specified  herein,  unless the
     Borrower,  within five (5) Banking  Days of notice from the Bank,  converts
     all Advances bearing interest at the LIBOR Based Rate then outstanding into
     Advances  bearing  interest at the Variable Rate pursuant to the conversion
     procedures  herein and pays all amounts in connection with such prepayments
     or conversions specified herein.

          (d) Market  Disruption:  Notwithstanding  any other  provision  of the
     Credit  Documents,  if  prior to the  commencement  of any  LIBOR  Interest
     Period, the Banks shall determine (i) that United States dollar deposits in
     the amount of any  Advance  bearing  interest at the LIBOR Based Rate to be
     outstanding  during such LIBOR Interest Period are not readily available to
     the  Banks  in  the  London  interbank   market,   or  (ii)  by  reason  of
     circumstances   affecting  the  London  interbank   market,   adequate  and
     reasonable  means do not exist for  ascertaining  the LIBOR  Based Rate for
     such LIBOR  Interest  Period in the manner  prescribed in the definition of
     "LIBOR Based Rate," then the Agent shall  promptly  give notice  thereof to
     the Borrower and the obligation of the Banks to create, continue, or effect
     by conversion any Advance bearing  interest at the LIBOR Based Rate in such
     amount and for such LIBOR  Interest  Period  shall  terminate  until United
     States  dollar  deposits in such amount and for the LIBOR  Interest  Period
     shall  again be  readily  available  in the  London  interbank  market  and
     adequate and reasonable means exist for ascertaining the LIBOR Based Rate.

          (e)  Prepayment:  Borrower  may,  upon at least two (2) Banking  Days'
     notice in the case of LIBOR Based Rate  Advances and one (1) Banking  Day's

                                      -28-
<PAGE>
     notice in the case of  Variable  Rate  Advances  to the Agent  stating  the
     proposed date and aggregate principal amount of the prepayment, and if such
     notice is given Borrower shall, prepay the outstanding principal balance of
     the Loan in whole or in part at any time prior to the  applicable  Maturity
     Date as stated in such notice by Borrower.  With any  prepayment of a LIBOR
     Based Rate Advance or with any  conversion of a LIBOR Based Rate Advance to
     a Variable Rate Advance,  in either case other than on the last Banking Day
     of the LIBOR Interest  Period for such LIBOR Based Rate Advance  (including
     any such prepayment made  voluntarily or  involuntarily  as a result of the
     acceleration  of maturity upon a default or otherwise),  Borrower shall pay
     all accrued  interest on the principal  amount prepaid with such prepayment
     and, on demand,  shall reimburse the Banks and hold the Banks harmless from
     all  losses  and  expenses  incurred  by the  Banks  as a  result  of  such
     prepayment,  including, without limitation, any losses and expenses arising
     from the  liquidation  or  reemployment  of  deposits  acquired  to fund or
     maintain  the  principal  amount  prepaid.   Such  reimbursement  shall  be
     calculated as though the Banks funded the principal  amount prepaid through
     the  purchase of U.S.  Dollar  deposits in the  London,  England  interbank
     market having a maturity  corresponding  to such LIBOR Interest  Period and
     bearing  an  interest  rate  equal to the LIBOR  Based  Rate for such LIBOR
     Interest  Period,  whether  in fact  that is the  case or not.  The  Banks'
     determination  of the amount of such  reimbursement  shall be conclusive in
     the absence of manifest error.

     3.8 PREPAYMENTS.

          (a) Borrower shall have the option to prepay the Loans,  in full or in
     part, at any time, subject to payment of all amounts specified  hereinbelow
     with respect to any LIBOR Rate Advance.

          (b) If for  any  reason  (including  voluntary  prepayment,  voluntary
     conversion  of a LIBOR  Rate  Advance  into a  Variable  Rate  Advance,  or
     acceleration,   but  excluding   any  mandatory   prepayment  or  mandatory
     conversion  such as pursuant to Section  3.7(b)),  the Banks receive all or
     part of the principal  amount of a LIBOR Rate Advance prior to the last day
     of  the  LIBOR  Interest  Period  for  such  Advance,  the  Borrower  shall
     immediately  notify the  Borrower's  account  officer at the Agent and,  on
     demand by the Banks,  pay the "LIBOR  Breakage Fees," defined as the amount
     (if any) by which (i) the additional interest which would have been payable
     on the amount so received  had it not been  received  until the last day of
     such LIBOR Interest  Period exceeds (ii) the interest which would have been
     recoverable by the Banks  (without  regard to whether the Banks actually so
     invest  said  funds) by placing  the amount so  received  on deposit in the
     certificate of deposit markets or the offshore  currency  interbank markets
     or United States  Treasury  investment  products,  as the case may be for a
     period  starting on the date on which it was so received  and ending on the
     last day of such LIBOR Interest  Period at the interest rate  determined by
     the Banks in their reasonable  discretion.  The Banks'  determination as to
     such amount shall be conclusive and final, absent manifest error.

                                      -29-
<PAGE>
          (c) The  Borrower  shall  pay to the  Banks,  upon the  demand  of the
     Required  Banks,  such other  amount or amounts as shall be  sufficient  to
     compensate them for any loss, costs or expense ("LIBOR Prepayment Charges")
     incurred by them as a result of any  prepayment by the Borrower  (including
     voluntary  prepayment,  voluntary conversion of a LIBOR Rate Advance into a
     Variable Rate Advance, or prepayment due to acceleration, but excluding any
     mandatory  prepayment or mandatory  conversion  such as pursuant to Section
     3.7(b))  of all or part of the  principal  amount of a LIBOR  Rate  Advance
     prior  to the last  day of the  LIBOR  Interest  Period  for  such  Advance
     (including  without  limitation,  any  failure by the  Borrower to borrow a
     LIBOR Rate  Advance on the loan date for such  borrowing  specified  in the
     relevant  notice of borrowing  hereunder).  Such LIBOR  Prepayment  Charges
     shall  include,  without  limitation,  any  interest or fees payable by the
     Banks to lenders  of funds  obtained  by them in order to make or  maintain
     their loans based on the London  interbank  eurodollar  market.  The Banks'
     determination as to such LIBOR  Prepayment  Charges shall be conclusive and
     final, absent manifest error.

          (d) The Banks agree that they shall make a best effort to minimize any
     such LIBOR Breakage Fees or any such LIBOR Prepayment Charges.

     3.9 NON U.S.  SUBSIDIARIES - CURRENCY INDEMNITY.  Borrower shall pay to the
Banks,  upon the demand of the Required  Banks,  such other amount or amounts as
shall be sufficient to compensate them for any loss, cost or expense  ("Currency
Loss")  incurred by them as a result of any  repayment  being made in a currency
other than Dollars.  The Banks'  determination as to such Currency Loss shall be
conclusive and final, absent manifest error.

                                      -30-
<PAGE>
                                    ARTICLE 4

                           [INTENTIONALLY LEFT BLANK]




                                      -31-

<PAGE>
                                    ARTICLE 5

                              CONDITIONS PRECEDENT

     The  obligations  of the Banks to make the  Loans  and to make the  initial
Advance  hereunder or the Issuing Bank's  obligation to issue the initial Letter
of Credit is  subject to the full prior  satisfaction  of each of the  following
conditions  precedent  and,  as to  each  future  Advance,  to  the  full  prior
satisfaction  at each such time of each of the conditions  precedent in Sections
5.2, 5.3 and 5.4 hereof:

     5.1 INITIAL  ADVANCE.  Prior to its making the initial  Advance,  the Agent
shall have received the following,  each in form and substance  satisfactory  to
the Required Banks:

          (a) THIS CREDIT  AGREEMENT.  This Credit  Agreement,  duly executed by
     Borrower.

          (b) THE NOTES. The Notes, each duly executed, as provided in Article 2
     hereof.

          (c)  OFFICER'S  CERTIFICATE.  A  certificate  signed by an  Authorized
     Officer of the Company and an  Authorized  Agent's  Certificate  as to each
     Subsidiary,  stating that (to the best knowledge and belief thereof,  after
     reasonable inquiry and review of matters pertinent to the subject matter of
     such certificate):  (i) all of the representations and warranties contained
     in Article 6 of this Credit  Agreement  and in the other  Credit  Documents
     are,  in all  material  respects,  true and  correct as of the date  hereof
     (other  than those of such  representations  which by their  express  terms
     speak to a date  prior to such  date,  which  representations  are,  in all
     material respects,  true and correct as of such respective dates);  (ii) no
     event has occurred and is  continuing,  or would result from the advance of
     the proceeds of the Loans, which would constitute an Event of Default;  and
     (iii) no change or changes  having a Material  Adverse Effect have occurred
     in the  business or financial  condition of Borrower  since the date of the
     last financial statements of Borrower heretofore delivered to the Banks.

          (d)  ORGANIZATIONAL  DOCUMENTS.  A copy of the current  organizational
     documents of Borrower,  including all  amendments  thereto,  except for non
     U.S.  Subsidiaries  certified  as current and  complete by the  appropriate
     authority of the state of said corporation's  incorporation,  together with
     evidence of said corporation's good standing in said corporation's state of
     incorporation and in every other state in which it is doing business or the
     conduct of said  corporation's  business  requires  such  standing  for the
     enforcement of material contracts.

          (e) CERTIFICATE.  A certificate of the corporate secretary of Company,
     signed by the duly appointed secretary thereof and issued as of the Closing
     Date,  certifying that (i) attached  thereto is a true and complete copy of

                                      -32-
<PAGE>
     the corporate  by-laws of said corporation in effect on the date of passage
     of  the  corporate  resolutions  described  immediately  below  and  at all
     subsequent  times to and  including  the date of the  certificate,  (ii) no
     change has been made to said corporation's  charter documents other than as
     reflected in the certified copies submitted in connection with the delivery
     of this Credit  Agreement or as approved in writing by the Agent, and (iii)
     attached thereto are proper  resolutions,  authorizations  and certificates
     relating to the  authority of any person  executing  documents on behalf of
     such entity. As to each Subsidiary,  a unanimous Written Consent in Lieu of
     Special Meeting of the Sole Shareholder together with an Authorized Agent's
     Certificate  as  to  the   organizational   documents  of  the  Subsidiary,
     certifying that no change has been made to said documents.

          (f) COSTS. Payment of costs of the Agent and the Banks.

          (g)  OPINION OF  COUNSEL.  An opinion of counsel to the  Company as to
     those matters reasonably required by the Banks.

          (h) COMPLIANCE  CERTIFICATE.  A Compliance  Certificate in the form of
     Exhibit "A"  attached  hereto  executed  by the  Company,  indicating  that
     Borrower is in compliance with all Financial  Covenants as of September 30,
     1999.

          (i) ADDITIONAL  INFORMATION.  Such other  information and documents as
     may reasonably be required by the Banks or their counsel.

     5.2 NO EVENT OF DEFAULT.  No Event of Default known to Borrower  shall have
occurred and be continuing, or result from the making of the Loans.

     5.3 NO MATERIAL ADVERSE EFFECT. Since the date of the most recent financial
statements  provided to the Banks by Borrower,  no change shall have occurred in
the  business or  financial  condition  of  Borrower  that could have a Material
Adverse Effect.

     5.4  REPRESENTATIONS  AND WARRANTIES.  The  representations  and warranties
contained  in  Article  6  hereof  shall  be true and  correct  in all  material
respects, with the same force and effect as though made on and as of the Closing
Date  (other than those of such  representations  which by their  express  terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).

                                      -33-
<PAGE>
                                    ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

     To induce  the Banks to make the  Loans,  the  Company  and,  to the extent
applicable, each Co-Borrower represents and warrants to the Banks that:

     6.1  RECITALS.  The recitals  and  statements  of intent  appearing in this
Credit Agreement are true and correct.

     6.2 ORGANIZATION AND GOOD STANDING.  It is duly organized under the laws of
the  jurisdiction  of its  organization,  is  validly  existing  and is in  good
standing,  to the extent  required by law, in each  jurisdiction  in which it is
doing  business.  It has the legal power and authority to own its properties and
assets and to  transact  the  business  in which it is engaged and is or will be
qualified in those jurisdictions wherein the nature of its proposed business and
property will make such qualifications necessary or appropriate in the future.

     6.3  AUTHORIZATION  AND POWER.  It has the  corporate  power and  requisite
authority to execute,  deliver and perform this Credit Agreement,  the Notes and
the other Credit  Documents to be executed by it; it is duly  authorized to, and
has taken all action,  corporate  or  otherwise,  necessary  to authorize it to,
execute,  deliver and perform  this Credit  Agreement,  the Notes and such other
Credit  Documents and is and will continue to be duly authorized to perform this
Credit Agreement, the Notes and such other Credit Documents.

     6.4 ENFORCEABLE OBLIGATIONS. This Credit Agreement, the Notes and the other
Credit  Documents  are the legal,  valid and binding  obligations  of  Borrower,
enforceable  against Borrower in accordance with their respective terms,  except
as limited by  bankruptcy,  insolvency or other laws or equitable  principles of
general application relating to the enforcement of creditors' rights.

     6.5 NO CONFLICTS OR CONSENTS.  Neither the  execution  and delivery of this
Credit  Agreement,  the Notes or the  other  Credit  Documents  to which it is a
party,  nor  the  consummation  of any of the  transactions  herein  or  therein
contemplated,  nor compliance  with the terms and provisions  hereof or with the
terms and  provisions  thereof,  (a) will  contravene or conflict  with: (i) any
provision  of law,  statute  or  regulation  to  which it is  subject,  (ii) any
judgment,  license, order or permit applicable to it, (iii) any indenture,  loan
agreement, mortgage, deed of trust, or other agreement or instrument to which it
is a party or by which it may be bound,  or to which it may be  subject,  or (b)
will  violate  any  provision  of  its  organizational  documents.  No  consent,
approval, authorization or order of any court or Governmental Authority or other
Person is required in  connection  with the  execution and delivery by it of the
Credit  Documents  or to  consummate  the  transactions  contemplated  hereby or
thereby, or if required,  such consent,  approval,  authorization or order shall
have been obtained.

                                      -34-
<PAGE>
     6.6 NO  LITIGATION.  There  are no  actions,  suits  or  legal,  equitable,
arbitration or administrative  proceedings  pending,  or to its actual knowledge
overtly threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.

     6.7  FINANCIAL  CONDITION.  It has delivered to the Banks copies of the its
audited  consolidated  financial statements as most recently filed with the SEC.
Such  financial  statements,  in  all  material  respects,  fairly  present  the
financial  position  of  Borrower  as of such  date and have  been  prepared  in
accordance  with  GAAP.  Since  the  date  thereof,  it has not  discovered  any
obligations,  liabilities  or  indebtedness  (including  contingent and indirect
liabilities and obligations or unusual forward or long-term  commitments)  which
in the aggregate are material and adverse to the financial  position or business
of  Borrower  that  should have been but were not  reflected  in such  financial
statements.  No changes  having a Material  Adverse  Effect have occurred in the
financial  condition or business of Borrower  since its most recent filings with
the SEC.

     6.8 TAXES. It has filed or caused to be filed all returns and reports which
are required to be filed by any jurisdiction, and has paid or made provision for
the  payment  of all  taxes,  assessments,  fees or other  governmental  charges
imposed upon its  properties,  income or franchises,  as to which the failure to
file or pay would have a Material  Adverse  Effect,  except such  assessments or
taxes,  if  any,  which  are  being  contested  in  good  faith  by  appropriate
proceedings.

     6.9  NO  STOCK  PURCHASE.   No  part  of  the  proceeds  of  any  financial
accommodation made by the Banks in connection with this Credit Agreement will be
used to purchase or carry "margin  stock," as that term is defined in Regulation
U, or to extend  credit to others for the purpose of purchasing or carrying such
margin stock.

     6.10  ADVANCES.  Each  request for an Advance or for the  extension  of any
financial  accommodation by the Banks whatsoever shall constitute an affirmation
that the representations and warranties of Section 6.7 are true and correct with
respect to any financial  statements  submitted by Borrower to the Banks between
the date of this Credit  Agreement  and the date of such  request,  and that the
representations  and  warranties  of Sections  6.1,  6.4,  6.5, 6.6, 6.7 and 6.8
hereof are true and correct as of the time of such request.  All representations
and warranties made herein shall survive the execution of this Credit Agreement,
all  advances  of proceeds of the Loans and the  execution  and  delivery of all
other  documents and instruments in connection with the Loans and/or this Credit
Agreement,  so long as any Bank has any  commitment to lend  hereunder and until
the Loans have been paid in full and all of  Borrower's  obligations  under this
Credit Agreement and the Notes been fully discharged.

     6.11  SOLVENT.  Company  (both before and after giving  effect to the Loans
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount  required to pay its probable  liabilities  on its existing debts as they
become  absolute  and  matured,  and has,  and is  expected  to have,  access to
adequate  capital  for the  conduct of its  business  and the ability to pay its
debts from time to time incurred in connection therewith as such debts mature.

                                      -35-
<PAGE>
     6.12 ERISA.  (a) No Reportable  Event has occurred and is  continuing  with
respect to any Plan;  (b) PBGC has not  instituted  proceedings to terminate any
Plan;  (c) neither the Borrower,  any member of the  Controlled  Group,  nor any
duly-appointed  administrator  of a Plan (i) has incurred any  liability to PBGC
with  respect to any Plan other than for premiums not yet due or payable or (ii)
has  instituted or intends to institute  proceedings to terminate any Plan under
Section  4041 or  4041A  of  ERISA;  and (d)  each  Plan of  Borrower  has  been
maintained and funded in all material  respects in accordance with its terms and
in all material  respects in accordance with all provisions of ERISA  applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required  to make  contributions  to, any  Multi-employer  Plan (as that term is
defined in Section 3(37) of ERISA).

     6.13 FULL  DISCLOSURE.  No certificate or statement  delivered  herewith or
heretofore by it to the Banks in  connection  with  negotiations  of this Credit
Agreement,  when read together with the S-3 dated  September 27, 1999,  contains
any untrue  statement  of a material  fact or omits to state any  material  fact
necessary  to keep  the  statements  contained  herein  or  therein  from  being
misleading.

     6.14 NO DEFAULT.  No event or condition has occurred and is continuing that
constitutes an Event of Default.

     6.15  SIGNIFICANT  DEBT  AGREEMENTS.  It is not in default in any  material
respect under any Significant Debt Agreement.

     6.16  COMPLIANCE  WITH LAW. It is in substantial  compliance with all laws,
rules,  regulations,  orders  and  decrees  that are  applicable  to it,  or its
properties, noncompliance with which would have a Material Adverse Effect.

     6.17 SUBSIDIARIES. Except for Subsidiaries listed on Schedule 6.17, Company
has no existing Subsidiary that conducts any business or operations.

                                      -36-
<PAGE>
                                    ARTICLE 7

                              AFFIRMATIVE COVENANTS

     Until  payment  in full of the Notes and the  complete  performance  of the
Obligation,  and so  long as any  Bank  has any  Commitment  outstanding  to any
Borrower,  the Company and, to the extent  applicable,  each Co-Borrower  agrees
that:

     7.1 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS. Borrower shall deliver, or
cause to be delivered, to the Banks each of the following:

          (a)  CONSOLIDATED  QUARTERLY  STATEMENTS  OF THE  COMPANY.  As soon as
     available,  and in any event within  forty-five  (45) days after the end of
     the first  three (3) fiscal  quarterly  periods of each  fiscal year of the
     Company,  copies of the consolidated balance sheet of the Company as of the
     end of such fiscal quarter,  and  consolidated  statements of income of the
     Company  for that  fiscal  quarter  and for the  portion of the fiscal year
     ending with such fiscal quarter,  in each case setting forth in comparative
     form the figures for the corresponding period of the preceding fiscal year,
     all in reasonable  detail and fairly stated and prepared in accordance with
     GAAP.

          (b)  CONSOLIDATED  ANNUAL  STATEMENTS  OF  THE  COMPANY.  As  soon  as
     available  and in any event within ninety (90) days after the close of each
     fiscal year of the Company,  audited  consolidated  financial statements of
     the Company,  including its  consolidated  balance sheet as of the close of
     such fiscal year and  consolidated  statements of income of the Company for
     such  fiscal  year,  in each case  setting  forth in  comparative  form the
     figures  for the  preceding  fiscal  year,  all in  reasonable  detail  and
     accompanied  by  an  unqualified  opinion  thereon  of  independent  public
     accountants  of recognized  national  standing  selected by the Company and
     acceptable to the Banks, to the effect that such financial  statements have
     been  prepared in  accordance  with GAAP  (except for changes in which such
     accountants concur) and that the examination of such accounts in connection
     with such financial  statements has been made in accordance  with generally
     accepted auditing  standards and,  accordingly,  includes such tests of the
     accounting  records and such other auditing  procedures as were  considered
     necessary in the circumstances.

          (c) COMPLIANCE CERTIFICATE OF THE COMPANY. Within forty-five (45) days
     after the end of each fiscal  quarter of the Company,  a  certificate  (the
     "Compliance Certificate") substantially in the form of Exhibit "A" attached
     hereto  signed by an Authorized  Officer,  (i) stating that a review of the
     activities  of the Company  during such quarter or year has been made under
     his/her  supervision,  that,  as of such date,  the Company  has  observed,
     performed and fulfilled each and every  obligation  and covenant  contained
     herein  and no Event of  Default  exists  under  any of the same or, if any

                                      -37-
<PAGE>
     Event of Default  shall  have  occurred,  specifying  the nature and status
     thereof,  and stating that all financial  statements delivered to the Banks
     during the respective  period pursuant to Section 7.1(a) and 7.1(b) hereof,
     to such  officer's  knowledge  after due  inquiry,  fairly  present  in all
     material respects the financial  position of the Company and the results of
     its  operations at the dates and for the periods  indicated,  and have been
     prepared  in  accordance   with  GAAP,   subject  to  year  end  audit  and
     adjustments,  and (ii)  setting  forth in such level of detail as the Banks
     shall reasonably require a calculation of the Financial Covenants as of the
     end of that fiscal quarter.

          (d) MANAGEMENT  LETTERS.  With the audited fiscal year-end  statements
     submitted under Section 7.1(b) above, the management letter, if any, of the
     Company's  certified  public  accountants  issued in  connection  with such
     audit.

          (e) SEC FILINGS.  When filed,  copies of each filing with the SEC made
     by the Company,  including without limitation its annual 10-K and quarterly
     10-Q reports.

          (f) PROJECTIONS.  No later than thirty-one (31) days before the end of
     each fiscal year,  financial  statements  of the Company for the  following
     fiscal year and each fiscal quarter thereof, based on its current financial
     projections for such fiscal year.

          (g) OTHER INFORMATION. Such other information concerning the business,
     properties or financial condition of Borrower as the Banks shall reasonably
     request.

     7.2 MAINTENANCE OF EXISTENCE. Borrower shall maintain its existence with no
material amendments or changes in its organizational documents without the prior
written  approval  of  the  Required  Banks,  not to be  unreasonably  withheld,
conditioned or delayed.

     7.3 MAINTAIN BUSINESS. Borrower shall maintain in full force and effect all
agreements,  rights, trademarks, patents and licenses necessary to carry out its
business in its reasonable  business judgment,  shall keep all of its assets and
properties in good condition and repair,  ordinary wear and tear  excepted,  and
shall make all needed and proper repairs and  improvements  to its properties in
order to properly conduct its business in its reasonable business judgment.

     7.4 INSURANCE.  To the extent Borrower is not self-insured,  Borrower shall
maintain  in full  force and  effect at all times  policies  of fire,  flood and
extended  coverage  insurance and policies of public liability  property damage,
workman's compensation insurance in scope and amount not less than, and not less
extensive  than,  the scope and  amount of  insurance  coverages  customary  for
companies of comparable size and financial  strength in the trades or businesses
in which  Borrower  is from time to time  engaged.  Upon  request  by the Banks,
Borrower shall deliver to the Banks certificates of, and copies of the originals
of, all such  policies of insurance in effect from time to time,  to be retained
by the Banks so long as the Banks shall have any  commitment to lend to Borrower
and/or any portion of the Loans shall be outstanding or unsatisfied.

                                      -38-
<PAGE>
     7.5 COMPLIANCE WITH CREDIT DOCUMENTS. Borrower will comply with any and all
covenants  and  provisions  of this  Credit  Agreement,  the Notes and all other
Credit Documents.

     7.6 BOOKS AND RECORDS;  ACCESS.  Borrower shall maintain,  in a safe place,
proper and accurate books, ledgers, correspondence and other records relating to
its operations and business affairs. The Banks shall have the right from time to
time,  upon  reasonable  notice to  Borrower,  to  examine  and audit  (within a
reasonable  scope of audit) at  Borrower's  expense  (such expense not to exceed
$5,000.00 per annum) and to make  abstracts  from and  photocopies of Borrower's
books, ledgers, correspondence and other records.

     7.7 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.  Borrower shall pay all of its
current obligations before they become delinquent under applicable agreements or
normal trade practices,  including all accounts  payable and all federal,  state
and local  taxes,  assessments,  levies and  governmental  charges and all other
payments  required under any federal state or local law.  Borrower may, however,
contest in good faith the  validity or amount of any such  current  obligations,
including accounts payable and any such taxes, assessments, levies or other such
governmental  charges  provided  that the Banks may require  Borrower to provide
security  with  respect  thereto  in the  form  of a bond,  insurance,  security
deposit,  cash reserve or other evidence satisfactory to the Banks of Borrower's
ability  to  pay  and  discharge  such  matter  in the  event  such  contest  is
unsuccessful  where the failure to provide  such  security  would  result in the
occurrence of a Material Adverse Event.

     7.8 NOTICE OF DEFAULT.  Borrower will furnish to the Banks immediately upon
becoming  actually  aware  of the  existence  of any  event  or  condition  that
constitutes  an Event of Default,  a written  notice  specifying  the nature and
period of  existence  thereof  and the action  which it is taking or proposes to
take with respect thereto.

     7.9 OTHER  NOTICES.  Borrower  will  promptly  notify  the Banks of (a) any
Material  Adverse  Effect,  (b)  any  waiver,   release  or  default  under  any
Significant  Debt Agreement,  (c) except as to any claim not covered as a result
of an insurance deductible provision, any claim not covered by insurance against
Borrower or any of Borrower's properties that has a Material Adverse Effect, and
(d) the commencement of, and any material  determination in, any litigation with
any third party or any proceeding  before any Governmental  Authority  affecting
it, except litigation or proceedings which, if adversely  determined,  would not
have a Material Adverse Effect.

     7.10 ERISA COMPLIANCE. With respect to its Plans, Borrower shall (a) at all
times  comply with the  minimum  funding  standards  set forth in Section 302 of
ERISA and Section 412 of the Code or shall have duly obtained a formal waiver of
such compliance  from the proper  authority;  (b) at the Banks' request,  within
thirty (30) days after the filing  thereof,  furnish to the Banks copies of each
annual   report/return  (Form  5500  Series),  as  well  as  all  schedules  and

                                      -39-
<PAGE>
attachments  required  to be filed  with the  Department  of  Labor  and/or  the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the plan; (c) notify the Banks within a reasonable  time of any
fact, including,  but not limited to, any Reportable Event arising in connection
with any of its Plans, which constitutes  grounds for termination thereof by the
PBGC or for the appointment by the appropriate United States District Court of a
trustee to administer such Plan, together with a statement,  if requested by the
Banks,  as to the reason therefor and the action,  if any,  proposed to be taken
with respect  thereto;  and (d) furnish to the Banks  within a reasonable  time,
upon the Banks' request, such additional information concerning any of its Plans
as may be reasonably requested.

     7.11  FURTHER  ASSURANCES.  Borrower  will make,  execute or  endorse,  and
acknowledge  and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements,  undertakings or other assurances, and
take any and all such other action,  as the Banks may,  from time to time,  deem
reasonably necessary or proper to fully evidence the Loan.

     7.12 COMPLIANCE WITH SIGNIFICANT  DEBT AGREEMENTS.  Borrower will comply in
all material respects with all Significant Debt Agreements.

     7.13  COMPLIANCE WITH LAW.  Borrower will comply with all applicable  laws,
rules,  regulations,  and all final,  nonappealable  orders of any  Governmental
Authority  applicable  to it or any  of its  property,  business  operations  or
transactions, a breach of which could result in a Material Adverse Effect.

     7.14 AUTHORIZATIONS AND APPROVALS. Borrower will promptly obtain, from time
to time at its own  expense,  all such  governmental  licenses,  authorizations,
consents,  permits and  approvals as may be required to enable it to comply with
its  obligations  hereunder and under the other Credit  Documents and to operate
its businesses as presently or hereafter duly conducted.

     7.15 NEWS RELEASES.  Borrower shall forward to the Banks copies of all news
releases  made by it to the news media as to anything  of material  significance
with  respect to its  financial  status or its business  operations  or, in each
case, that of its Subsidiaries.

     7.16 NEW  SUBSIDIARIES.  Company  shall  promptly and  diligently  take all
actions  necessary to cause any existing  Subsidiary  which is not a Co-Borrower
and that  subsequently  undertakes  to conduct any  business or  operations  and
qualifies as a Controlled Subsidiary,  and any new Controlled Subsidiary (each a
"New  Subsidiary")  to become a  Co-Borrower.  Within  thirty (30) days of being
acquired,  or in the case of an existing  Subsidiary  within thirty (30) days of
the later of  undertaking to conduct any business or operations or qualifying as
a  Controlled  Subsidiary,  such New  Subsidiary  shall  deliver to the Banks an
executed  Assumption  Agreement in the form attached  hereto as Exhibit "D", and
such other documents as the Banks may reasonably request. The term "Co-Borrower"
shall mean that such Subsidiary shall be jointly liable,  and each severally and
unconditionally  liable,  for the full payment and satisfaction of the Loans and
all other obligations of Borrower under this Credit Agreement.

     7.17 CHANGE IN  CONTROL.  Should  there be a Change in  Control,  the Loans
shall be immediately due and payable.

                                      -40-
<PAGE>
                                    ARTICLE 8

                               NEGATIVE COVENANTS

     Until payment in full of the Notes and the  performance of the  Obligation,
and so long as any Bank has any  Commitment  outstanding  to any  Borrower,  the
Company and, to the extent applicable, each Co-Borrower agrees that:

     8.1 NO DEBT. The Company shall not become without the prior written consent
of Banks or remain obligated either directly or as a guarantor or surety for any
Indebtedness for borrowed money, or for any Indebtedness  incurred in connection
with the acquisition (which shall not include bona fide leases) of any property,
real or personal,  tangible or intangible  including,  but not limited to, lease
purchase agreements, except:

          (a) Indebtedness to the Banks hereunder.

          (b)  Unsecured  trade,  utility  or  accounts  payable  arising in the
     ordinary course of its business.

          (c) Lease purchase  agreements  and purchase money security  interests
     not exceeding the sum of $3,000,000.00 in payments during any fiscal year.

          (d)  Borrower's  line of credit up to $350,000  with Barclays Bank PLC
     (U.K.) secured by U.K. receivables and inventory.

          (e) Indebtedness secured by liens permitted under Section 8.2 hereof.

          (f)   Borrower's   credit   facility   in  an  amount  not  to  exceed
     $4,000,000.00  with the Bank of China secured by a standby letter of credit
     issued by Imperial.

     8.2 LIENS.  On and after the date  hereof,  the Company  will not create or
suffer to exist Liens upon its  property,  real or personal,  including  without
limitation  its patents,  copyrights and  trademarks,  except  Permitted  Liens,
including without limitation those listed on Schedule 8.2 attached hereto.

     8.3  LOANS.  It will not make any loan,  advance,  or direct  extension  of
credit in excess of  $1,000,000.00,  or, except as permitted under Section 8.10,
any investment  (consisting of equity or debt convertible into equity) in excess
of  $3,000,000.00,  in aggregate on an annual basis to any person(s) or entities
other than in the ordinary course of business.

     8.4 DIVIDENDS. It will not declare or pay any cash dividend.

     8.5  EXISTENCE;  SALE OR  TRANSFER OF ASSETS.  It will not (i)  dissolve or
liquidate,  or merge or consolidate  with or into any corporation or entity,  or
(ii) turn over the management or operation of its property, assets or businesses

                                      -41-
<PAGE>
to any other person,  firm or  corporation,  or (iii) sell,  lease,  transfer or
dispose of more than  $2,000,000.00 of its assets  (excluding  inventory) in any
calendar  year.  The  Company  will not  transfer  more  than  $2,000,000.00  in
aggregate  value per  calendar  year of its  assets  that  consist  of  accounts
receivable or existing fixed assets located in the U.S. to locations outside the
U.S.  Notwithstanding  anything herein to the contrary, the Company may transfer
to  locations  outside the U.S.  equipment  purchased by the Company in the U.S.
with the sole intent to transfer it to its non-U.S. Subsidiaries.

     8.6  FISCAL  YEAR.  It  will  not  change  the  times  of  commencement  or
termination  of its  fiscal  year or other  accounting  periods;  or change  its
methods of  accounting  other than to  conform to GAAP  applied on a  consistent
basis. After any such changes, its method of accounting shall conform to GAAP.

     8.7 MARGIN STOCK.  Borrower shall not use any proceeds of the Loans, or any
proceeds of any other or future financial  accommodation  from the Banks for the
purpose,  whether immediate,  incidental or ultimate,  of purchasing or carrying
any  "margin  stock" as that term is  defined  in  Regulation  U or to reduce or
retire any indebtedness  undertaken for such purposes within the meaning of said
Regulation  U, and will not use such  proceeds  in a manner  that would  involve
Borrower in a violation of Regulation U or of any other  Regulation of the Board
of  Governors  of its Federal  Reserve  System,  nor use such  proceeds  for any
purpose not  permitted by Section 7 of the Exchange  Act, as amended,  or any of
the  rules or  regulations  respecting  the  extensions  of  credit  promulgated
thereunder.

     8.8  AMENDMENTS TO  ORGANIZATIONAL  DOCUMENTS.  Borrower will not amend its
organizational  documents if the result  thereof could result in the  occurrence
directly or indirectly of a Material Adverse Effect.

     8.9 [Intentionally left blank.]

     8.10  PERMITTED  ACQUISITIONS.  Without the prior written  consent of Banks
(such consent not to be unreasonably withheld,  conditioned or delayed), it will
not make  investments  for the purpose of acquiring  businesses,  whether by the
purchase  of their  assets or their  equity  interests,  other  than  businesses
reasonably  related to the  business  of  Borrower  in an  aggregate  amount not
exceeding $10,000,000 in any fiscal year.

     8.11 FINANCIAL COVENANTS. It will not permit on a consolidated basis:

          (a) Its  Tangible  Net  Worth to be less than the  Tangible  Net Worth
     Minimum at the end of any fiscal quarter.

          (b) Its  Leverage  Ratio to be more  than 0.5 to 1.0 at the end of any
     fiscal quarter.

          (c) Its Debt  Coverage  Ratio to be less than 3.0 to 1.0 at the end of
     any fiscal quarter.

          (d) Its Net Income for any two consecutive  fiscal quarters  beginning
     with the quarter ending December 31, 1999 or for any fiscal year to be less
     than zero (i.e. net loss).

                                      -42-
<PAGE>
                                    ARTICLE 9

                                EVENTS OF DEFAULT

     9.1 EVENTS OF DEFAULT. An "Event of Default" shall exist if any one or more
of the following events (herein  collectively  called "Events of Default") shall
occur and be continuing:

          (a) Failure to pay any  installment of principal or interest under the
     Loans within five (5) Banking Days of when the same become due and payable,
     or the  failure  to pay any other  sum due  under the Loans or this  Credit
     Agreement  when the same shall  become  due and  payable  and such  failure
     continues for five (5) Banking Days after notice thereof to Borrower;

          (b) Any failure or neglect to perform or observe  any of the  material
     terms,  provisions,  or  covenants of this Credit  Agreement  (other than a
     failure or neglect described in one or more of the other provisions of this
     Section  9.1) and such  failure or neglect  either (i) cannot be  remedied,
     (ii) can be  remedied  within  fifteen  (15)  days by prompt  and  diligent
     action, but it continues unremedied for a period of fifteen (15) days after
     notice thereof to Borrower,  or (iii) can be remedied,  although not within
     fifteen  (15) days even by prompt and diligent  action,  but such remedy is
     not commenced  within fifteen (15) days after notice thereof to Borrower or
     is not  diligently  prosecuted to  completion  within a total of forty-five
     (45) days from the date of such notice;

          (c)  Any  warranty,  representation  or  statement  contained  in this
     Agreement,  or  made or  furnished  to the  Banks  by or on  behalf  of the
     Borrower,  that shall be or shall prove to have been false in any  material
     respect when made or furnished;

          (d) The  occurrence of any "event of default" or "default" by Borrower
     under any Credit  Document or any agreement,  now or hereafter  existing to
     which any Bank and Borrower are a party, after the expiration of any notice
     and cure period;

          (e) Borrower shall (i) fail to pay any Indebtedness of Borrower (other
     than the Notes) due under any Significant  Debt Agreement,  or any interest
     or premium  thereon,  when due  (whether by  scheduled  maturity,  required
     prepayment,  acceleration,  demand,  or otherwise) or within any applicable
     grace  period,  (ii) fail to  perform  or observe  any term,  covenant,  or
     condition on its part to be performed  or observed  under any  agreement or
     instrument  relating  to such  Indebtedness,  within any  applicable  grace
     period when  required to be performed  or  observed,  if the effect of such
     failure  to  perform  or observe  is to  accelerate  the  maturity  of such
     Indebtedness,  or any such  Indebtedness  shall be  declared  to be due and
     payable,  or  required to be prepaid  (other than by a regularly  scheduled
     prepayment),  prior to the  stated  maturity  thereof,  or (iii)  allow the
     occurrence  of  any  material   event  of  default  with  respect  to  such
     Indebtedness;

                                      -43-
<PAGE>
          (f) Any one or more of the Credit Documents shall have been determined
     to be invalid  or  unenforceable  against  Borrower  executing  the same in
     accordance  with  the  respective  terms  thereof,  or  shall in any way be
     terminated or become or be declared  ineffective or  inoperative,  so as to
     deny  the  Banks  the  substantial  benefits  contemplated  by such  Credit
     Document or Credit Documents;

          (g) Borrower  shall (i) apply for or consent to the  appointment  of a
     receiver, trustee, custodian,  intervenor or liquidator of itself or of all
     or a  substantial  part of its assets,  (ii) file a  voluntary  petition in
     bankruptcy  or admit in writing  that it is unable to pay its debts as they
     become due,  (iii) make a general  assignment for the benefit of creditors,
     (iv) file a petition or answer  seeking  reorganization  of an  arrangement
     with creditors or to take  advantage of any bankruptcy or insolvency  laws,
     (v) file an answer admitting the material allegations of, or consent to, or
     default in  answering,  a  petition  filed  against  it in any  bankruptcy,
     reorganization or insolvency proceeding,  or (vi) take corporate action for
     the purpose of effecting any of the foregoing;

          (h) An  involuntary  petition  or  complaint  shall be  filed  against
     Borrower,   seeking  bankruptcy  or  reorganization  of  Borrower,  or  the
     appointment of a receiver,  custodian, trustee, intervenor or liquidator of
     Borrower,  or all or substantially all of its assets,  and such petition or
     complaint  shall  not have been  dismissed  within  sixty  (60) days of the
     filing thereof; or an order, order for relief,  judgment or decree shall be
     entered by any court of competent jurisdiction or other competent authority
     approving a petition  or  complaint  seeking  reorganization  of  Borrower,
     appointing a receiver,  custodian,  trustee,  intervenor  or  liquidator of
     Borrower,  or all or  substantially  all of its  assets,  and  such  order,
     judgment or decree  shall  continue  unstayed and in effect for a period of
     sixty (60) days;

          (i) Any final judgment(s) (excluding those the enforcement of which is
     suspended  pending appeal) for the payment of money in excess of the sum of
     $250,000.00 in the aggregate  (other than any judgment covered by insurance
     where  coverage has been  acknowledged  by the  insurer)  shall be rendered
     against  Borrower,  and such judgment or judgments  shall not be satisfied,
     settled,  bonded or  discharged at least ten (10) days prior to the date on
     which any of its assets could be lawfully sold to satisfy such judgment;

          (j) Either (i) proceedings shall have been instituted to terminate, or
     a notice of  termination  shall have been filed with  respect to, any Plans
     (other  than a  Multi-Employer  Pension  Plan as that  term is  defined  in
     Section  4001(a)(3)  of ERISA) by  Borrower,  any member of the  Controlled
     Group, PBGC or any representative of any thereof, or any such Plan shall be
     terminated,  in each case  under  Section  4041 or 4042 of ERISA,  and such

                                      -44-
<PAGE>
     termination  shall  give  rise  to a  liability  of  the  Borrower  or  the
     Controlled  Group to the PBGC or the Plan under  ERISA  having an effect in
     excess of $500,000.00 or (ii) a Reportable  Event,  the occurrence of which
     would cause the imposition of a lien in excess of $500,000.00 under Section
     4062 of ERISA,  shall have  occurred with respect to any Plan (other than a
     Multi-Employer  Pension Plan as that term is defined in Section  4001(a)(3)
     of ERISA) and be continuing for a period of sixty (60) days;

          (k) Any of the following events shall occur with respect to any Multi-
     Employer  Pension  Plan (as that term is defined in Section  4001(a)(3)  of
     ERISA)  to which  Borrower  contributes  or  contributed  on  behalf of its
     employees and the Required Banks determine in good faith that the aggregate
     liability  likely to be  incurred  by  Borrower,  as a result of any of the
     events  specified in  Subsections  (i), (ii) and (iii) below,  will have an
     effect in excess of $500,000.00; (i) Borrower incurs a withdrawal liability
     under Section 4201 of ERISA; (ii) any such plan is "in  reorganization"  as
     that term is defined in  Section  4241 of ERISA;  or (iii) any such Plan is
     terminated under Section 4041A of ERISA;

          (l) The occurrence of a Change in Control  without the written consent
     of the Banks;

          (m) The  dissolution,  liquidation,  sale,  transfer,  lease  or other
     disposal of all or substantially all of the assets or business of Borrower;

          (n) Any attachment,  garnishment,  levy or execution upon, or judicial
     seizure of, any property of Borrower that has a fair market value in excess
     of $500,000.00, that is not bonded or released within thirty (30) days;

          (o) The  institution  of any legal action or  proceedings to enforce a
     lien or  security  interest in any  property  of  Borrower  that has a fair
     market value in excess of $500,000.00;

          (p) The failure of Borrower to comply with any  Financial  Covenant at
     the end of any fiscal quarter; or

          (q) The  occurrence  of a Material  Adverse Event if the Banks in good
     faith shall  believe  that the  prospect of payment or  performance  of the
     Loans is impaired.

     9.2  REMEDIES  UPON EVENT OF  DEFAULT.  If an Event of  Default  shall have
occurred and be continuing, then the Agent, at the request of the Required Banks
may, at their sole option,  exercise any one or more of the following rights and
remedies, and any other remedies provided in any of the Credit Documents, as the
Required Banks in their sole discretion may deem necessary or  appropriate,  all
of which remedies shall be deemed cumulative, and not alternative:

                                      -45-
<PAGE>
               (i)  Cease   making   Advances   or   extensions   of   financial
          accommodations  in any  form to or for the  benefit  of  Borrower  and
          declare the  principal of, and all interest then accrued on, the Notes
          and any other  liabilities  hereunder to be forthwith due and payable,
          whereupon the same shall become  immediately  due and payable  without
          presentment,   demand,   protest,   notice  of   default,   notice  of
          acceleration or of intention to accelerate or other notice of any kind
          all of which Borrower  hereby  expressly  waives,  anything  contained
          herein or in the Notes to the contrary notwithstanding;

               (ii) Reduce any claim to judgment;

               (iii) Without notice of default or demand, pursue and enforce any
          of the Banks' and the  Agent's  rights and  remedies  under the Credit
          Documents,  or otherwise  provided under or pursuant to any applicable
          law or agreement;

               (iv)  Require the  Borrower to deposit  with the Agent cash in an
          amount equal to the Outstanding LC Balance;

provided, however, that if any Event of Default specified in Sections 9.1(g) and
9.1(h) shall occur,  the  principal of, and all interest on, the Notes and other
liabilities  hereunder  shall  thereupon  become  due and  payable  concurrently
therewith,  without  any further  action by the Banks and  without  presentment,
demand,  protest,  notice of default,  notice of acceleration or of intention to
accelerate or other notice of any kind, all of which Borrower  hereby  expressly
waives.

     Upon the occurrence and during the continuance of any Event of Default, the
Agent on behalf of the Banks,  at the  request of the  Required  Banks is hereby
authorized  at any time and from time to time,  without  notice to Borrower (any
such notice being  expressly  waived by Borrower),  to set off and apply any and
all moneys, securities or other property of Borrower and the proceeds therefrom,
now or hereafter held or received by or in transit to the Banks or their agents,
from or for the account of Borrower,  whether for safe keeping, custody, pledge,
trans  mission,  collection  or  otherwise,  and also upon any and all  deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against  the  Banks at any time  existing.  The Banks  agree to notify  Borrower
promptly  after any such setoff and  application,  provided  that the failure to
give such notice shall not affect the  validity of such setoff and  application.
The rights of the Banks under this  Section are in addition to other  rights and
remedies (including, without limitation, other rights of setoff) which the Banks
may have.

     9.3 PERFORMANCE BY THE BANKS. Should Borrower fail to perform any covenant,
duty or agreement  with respect to the payment of taxes,  obtaining  licenses or
permits,  or any other  requirement  contained  herein  or in any of the  Credit
Documents  within the period  provided  herein,  if any, for  correction of such
failure,  the Banks may,  at their  option,  perform or attempt to perform  such
covenant,  duty or  agreement  on behalf of  Borrower.  In such event,  Borrower
shall, at the request of the Required Banks, promptly pay any amount expended by
the Banks and/or the Agent in such  performance or attempted  performance to the
Agent at its office in Inglewood,  California, together with interest thereon at
the Default Rate, from the date of such expenditure until paid.  Notwithstanding
the foregoing,  it is expressly  understood that neither the Banks nor the Agent
assume any  liability or  responsibility  for the  performance  of any duties of
Borrower  hereunder or under any of the Credit  Documents or other  control over
the management and affairs of Borrower.

                                      -46-
<PAGE>
                                   ARTICLE 9A

                                      AGENT

     9A.1 APPOINTMENT AND AUTHORIZATION.  Each Bank hereby irrevocably  appoints
and  authorizes  the Agent to act on behalf of such Bank to the extent  provided
herein or in any of the Credit  Documents  or any other  document or  instrument
delivered hereunder or in connection herewith,  and to take such other action as
may be reasonably  incidental  thereto as  determined by Agent.  The Banks agree
that Borrower shall be entitled to rely upon any  communications  to them by the
Agent with  respect to any request or notice  from,  decision or consent of, the
Banks.

     9A.2  EXCULPATION.  Agent  shall be entitled to rely upon advice of counsel
concerning legal matters,  and upon this Credit Agreement,  any Credit Documents
and any schedule, certificate,  statement, report, notice or other writing which
it believes to be genuine or to have been presented by a proper person.  Neither
Agent nor any of its  directors,  officers,  employees,  or agents  shall (a) be
responsible for any recitals, representations or warranties contained in, or for
the execution, validity,  genuineness,  effectiveness or enforceability of, this
Credit  Agreement,  any Credit  Documents  or any other  instrument  or document
delivered hereunder or in connection herewith,  (b) be under any duty to inquire
into  or  pass  upon  any of the  foregoing  matters,  or to  make  any  inquiry
concerning  the  performance  by  the  Borrower  or  any  other  obligor  of its
obligations,  or (c) in any  event,  be liable as such for any  action  taken or
omitted by it or them,  except for its or their own gross  negligence or willful
misconduct.  The agency  hereby  created shall in no way impair or affect any of
the rights and powers of, or impose any duties or obligations upon, Agent in its
individual capacity.

     9A.3 AGENT AND AFFILIATES.  Agent has the same rights and powers  hereunder
and under the Credit  Documents  as any other Bank and may  exercise the same as
though it were not the Agent. Agent and its Affiliates may accept deposits from,
lend  money to,  and  generally  engage in any kind of  banking,  trust or other
business  with  Borrower and any  Affiliate  of Borrower,  as if it were not the
Agent and  without  any duty to account  therefor  to the Banks.  Agent need not
account to any other Bank for any monies received by it for reimbursement of its
costs and expenses as Agent  hereunder,  or for any monies received by it in its
capacity as a Bank hereunder, except as otherwise provided herein.

     9A.4 BANKS' CREDIT  DECISIONS.  Each Bank has made,  and shall  continue to
make,  its  own  independent  investigation  or  evaluation  of the  operations,
business,  property and condition,  financial and otherwise, of the Borrower, in
connection with the making of its respective  Commitment,  and each has made its
own  appraisal of the  creditworthiness  of the  Borrower.  Except as explicitly
provided herein, the Agent has no duty or responsibility, either initially or on
a  continuing  basis,  to provide any Bank with any credit or other  information
with   respect   to  such   operations,   business,   property,   condition   or
creditworthiness,  whether  such  information  comes into its  possession  on or
before an Event of  Default  or at any time  thereafter.  Each Bank  agrees  and
acknowledges  that  Agent  makes no  representations  or  warranties  about  the
creditworthiness  of the  Borrower or with  respect to the  legality,  validity,
sufficiency  or  enforceability  of this Credit  Agreement  or any of the Credit
Documents.

                                      -47-
<PAGE>
     9A.5  INDEMNIFICATION.  Each Bank agrees to  indemnify,  hold  harmless and
defend  the  Agent (to the  extent  not  reimbursed  by the  Borrower),  ratably
according  to its Pro Rata  Share,  from and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind or nature  whatsoever which may be imposed
on, incurred by or asserted  against the Agent in any way relating to or arising
out of this Credit  Agreement  or the Credit  Documents  or any action  taken or
omitted by the Agent under the Credit Agreement or Credit  Documents;  provided,
that no Bank shall be liable for any portion of such  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements resulting from the Agent's gross negligence or willful misconduct.
Without  limitation  of the  foregoing,  each Bank agrees to reimburse the Agent
promptly  upon  demand  for its Pro  Rata  Share of any  out-of-pocket  expenses
(including,  without  limitation,  attorney's fees and expenses) incurred by the
Agent in connection with the preparation,  execution, delivery,  administration,
modification,  amendment or enforcement  (whether  through  negotiations,  legal
proceedings  or  otherwise)  of,  or  legal  advice  in  respective   rights  or
responsibilities  under,  this Credit  Agreement and the Credit Documents to the
extent  that the Agent is not  reimbursed  for such  expenses  by the  Borrower;
provided,  that no Bank  shall be liable for any  portion  of any such  expenses
resulting from the Agent's gross negligence or willful misconduct.

     9A.6 ADMINISTRATION.

          (a) Agent shall administer and manage the Loans in the ordinary course
     of its business and in accordance  with its usual practices and that degree
     of care it would use in administering,  managing,  and servicing facilities
     of similar size and type for its own account.  Each Bank  expressly  agrees
     that,  except as expressly  otherwise  provided  herein,  Agent  shall,  in
     accordance  with  such  practices  and  degree  of  care,  make any and all
     decisions  and is hereby  authorized  to do or cause to be done any and all
     acts regarding the  administration of the facilities in accordance with its
     sole and absolute discretion.

          (b) Unless in each case consented to in writing by all the Banks,  the
     Agent shall not (i) agree to the modification or waiver of any of the terms
     of any of the Credit  Documents,  or (ii) consent to any act or omission by
     the  Borrower,  or (iii)  exercise any rights which the Agent may have with
     respect to the Loans, the Notes, or any of the other Credit  Documents,  if
     any such agreement, consent or exercise would:

               (i) change or modify the interest rate and  repayment  provisions
          set forth in the Credit Documents;

               (ii) increase any Commitment;

                                      -48-
<PAGE>
               (iii) extend the Maturity Date of any Loan;

               (iv)  postpone  any date for  payment or forgive  the  payment of
          principal  of, or  interest  on, the Loans or the payment of any other
          sum due under the Credit Documents;

               (v) change or modify or waive any Financial Covenant;

               (vi) waive any Event of Default; or

               (vii) allow any  assignment  by Borrower of any right or interest
          in the Credit Documents.

          (c) Other than upon the  occurrence of an Event of Default  hereunder,
     any  decision or consent  required  hereunder  shall be made jointly by the
     Banks and the Agent instructed accordingly. Upon the occurrence of an Event
     of Default hereunder, the Banks shall consult with each other and determine
     whether,  and in what  manner  and to  what  extent,  any  and  all  rights
     hereunder and under the Credit Documents shall be exercised.  The course of
     action so agreed upon shall set forth what matters,  if any,  shall require
     the  further  consent of the Banks and shall be carried out by Agent in its
     name on behalf of the Banks.

          (d) [Intentionally left blank]

          (e) As to any  matters  which are subject to the consent of all of the
     Banks,  the Agent  shall not be  permitted  or  required  to  exercise  any
     discretion or take any action except with such consent.  The Agent shall be
     fully  protected  by the  Banks  severally  and in  accordance  with  their
     respective Pro Rata Share in so acting or in so refraining from action, but
     in no event shall the Agent be required  to take any action  which  exposes
     the Agent to personal  liability which is contrary to this Credit Agreement
     or the Credit Documents or applicable law.

          (f) All  communications  from the  Agent to the Banks  requesting  the
     Banks'  determination,  consent,  approval or disapproval shall be given in
     the form of a  written  notice  to each Bank  containing  (i) a  reasonably
     detailed description of the matter or thing as to which such determination,
     approval,  consent  or  disapproval  is  requested,   accompanied  by  such
     information in Agent's possession which, in Agent's opinion,  is reasonably
     relevant to such determination,  approval, consent or disapproval, and (ii)
     the course of action and determination  recommended by the Agent in respect
     thereof.  Each Bank shall  reply  within ten (10)  Banking  Days after such
     written  notice is given by Agent,  and, if such reply is not so given by a
     Bank,  such course of action shall be deemed to have been  approved by such
     Bank.

                                      -49-
<PAGE>
     9A.7 DEFAULT BY A BANK. In the event that any Bank (the "Defaulting  Bank")
fails  to  make  timely  payment  to  Agent  of any sum due  under  this  Credit
Agreement,  including  without  limitation,  such  Bank's  Pro Rata Share of any
Advance, Disbursement or liabilities,  obligations,  losses, damages, penalties,
actions,  judgments,  suits, costs and expenses or any other expenses or amounts
due Agent,  the  non-defaulting  Bank may, but shall not be required to, advance
such amount and recover such amount on demand from the Defaulting Bank, together
with  interest  thereon at the Federal  Funds Rate  commencing  on the date such
amount was made  available to Agent and ending on the date Agent  recovers  such
amount.  Until  the full  repayment  is made to Agent of such  amount  funded on
behalf of the  Defaulting  Bank  together  with  interest  thereon from the date
advanced to the date repaid by the  Defaulting  Bank at the Federal  Funds Rate,
the  right of the  Defaulting  Bank to  participate  in  decisions  or  consents
hereunder  shall  be  suspended  and the  entire  interest  in the  Loans of the
Defaulting Bank shall be subordinated to the interest of the non-defaulting Bank
and all payments or  recoveries  on the Loans  received by Agent from any source
whatsoever  that would  otherwise  be credited by Agent to the  Defaulting  Bank
shall  instead be credited to the  non-defaulting  Bank until full  repayment is
made to the  non-defaulting  Bank.  In  addition,  Agent  shall be  entitled  to
exercise  any and all remedies  available to it at law or in equity  against the
Defaulting Bank.

     9A.8 COLLECTIONS; SHARING OF PAYMENTS.

          (a) Agent,  upon receipt,  shall promptly  distribute in like funds as
     received  to each Bank its Pro Rata  Share of all  payments  of  principal,
     interest  and  fees  received  by Agent on or with  respect  to the  Loans,
     whether  collected  from  Borrower,  or any  security  for  the  Loans,  or
     otherwise, after first deducting any costs, fees or other charges due Agent
     hereunder or under the Credit  Documents,  with the exception of any charge
     for the administrative  expenses of the Issuing Bank in connection with the
     Letters of Credit paid by Borrower  pursuant to Section 2.12, which amounts
     shall be paid to the Issuing Bank.

          (b) If any Bank shall  receive and retain any payment,  whether by set
     off, application of deposit balance or security,  or otherwise,  in respect
     of the obligations of Borrower  hereunder in excess of such Bank's Pro Rata
     Share,  then such Bank shall  purchase from the other Bank (for cash and at
     face value and without recourse) such participation in the Loans held by it
     as shall be necessary to cause such excess  payment to be shared ratably as
     aforesaid  with the other Banks;  provided,  that if such excess payment or
     part thereof is thereafter recovered from such purchasing Bank, the related
     purchases  from the other Bank shall be rescinded  ratably and the purchase
     price restored as to the portion of such excess payments so recovered,  but
     without interest.

     9A.9  SUCCESSOR  AGENT.  The Agent may resign at any time by giving written
notice  thereof to the Banks and the  Borrower.  Borrower and the Banks agree to
execute and deliver to such  successor  Agent such  documents and  agreements as
such  successor  Agent  may  require  to carry out the  succession  contemplated
herein.

                                      -50-
<PAGE>
     9A.10 ISSUING BANK.  The Issuing Bank shall act on behalf of the Banks with
respect  to any  Letters  of Credit  Issued by it and the  documents  associated
therewith  until  such time and except for so long as the Agent may agree at the
request  of all the Banks to act for such  Issuing  Bank with  respect  thereto;
provided,  however,  that the Issuing  Bank shall have all of the  benefits  and
immunities (i) provided to the Agent in this Article 9A with respect to any acts
taken or omissions  suffered by the Issuing Bank in  connection  with Letters of
Credit  Issued by it or  proposed  to be Issued  by it and the  application  and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent," as used in this Article 9A,  included the Issuing Bank with
respect to such acts or  omissions,  and (ii) as  additionally  provided in this
Credit Agreement with respect to the Issuing Bank.

                                      -51-
<PAGE>
                                   ARTICLE 10

                                  MISCELLANEOUS

     10.1  MODIFICATION.  Except as otherwise  required in Section 9A.6(b),  all
modifications,  consents,  amendments  or waivers of any provision of any Credit
Document, or consent to any departure by Borrower therefrom,  shall be effective
only if the same shall be in writing and accepted by the Required Banks.

     10.2 WAIVER.  No failure to exercise,  and no delay in  exercising,  on the
part of the Banks,  any right hereunder  shall operate as a waiver thereof,  nor
shall any single or partial exercise thereof preclude any other further exercise
thereof or the  exercise of any other  right.  The rights of the Banks and Agent
hereunder  and under the  Credit  Documents  shall be in  addition  to all other
rights  provided  by law. No  modification  or waiver of any  provision  of this
Credit Agreement,  the Notes or any Credit  Documents,  nor consent to departure
therefrom,  shall be  effective  unless in writing and no such consent or waiver
shall  extend  beyond the  particular  case and purpose  involved.  No notice or
demand  given in any case shall  constitute  a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.

     10.3 PAYMENT OF EXPENSES.  Borrower shall pay all costs and expenses of the
Banks and the Agent (including,  without limitation,  reasonable attorneys' fees
and  costs)  incurred  by the  Banks  and  the  Agent  in  connection  with  the
documentation  of the Loans,  and the  preservation and enforcement of rights of
the Banks and the Agent under this Credit Agreement, the Notes, and/or the other
Credit Documents;  provided,  however, that notwithstanding the aforesaid,  with
respect  to any legal  action  between  the  parties  hereto  that is pursued to
judgment the  prevailing  party only shall be  reimbursed by the other party for
all costs and expenses  (including,  without limitation,  reasonable  attorneys'
fees and costs) incurred in connection with the  preservation and enforcement of
its rights under this Credit Agreement, the Notes and/or other Credit Documents.
In  addition,  Borrower  shall pay all costs and  expenses  of the Banks and the
Agent in connection with the negotiation, preparation, execution and delivery of
any and all  amendments,  modifications  and  supplements  of or to this  Credit
Agreement,  the Notes or any other Credit Document.  In addition Borrower agrees
to and shall  indemnify,  hold harmless and defend the Banks from any liability,
claims or losses  resulting from the  disbursement  of the proceeds of the Loans
except for their own gross  negligence  or willful  misconduct.  This  provision
shall survive repayment of the Loans and shall continue in full force and effect
so long as the possibility of such liability, claims or losses exists.

     10.4 NOTICES.  Except for telephonic  notices permitted herein, any notices
or other  communications  required  or  permitted  to be  given  by this  Credit
Agreement or any other documents and instruments  referred to herein must be (i)
given in writing and  personally  delivered  or mailed by prepaid  certified  or
registered mail, or (ii) made by telefacsimile delivered or transmitted,  to the
party to whom such notice or communication  is directed,  to the address of such
party as follows:

                                      -52-
<PAGE>
     Company:            Three-Five Systems, Inc.
                         1600 North Desert Drive
                         Tempe, Arizona  85281-1212
                         Attention: Vice President - Administration
                         Telecopier: (602) 389-8836

     Agent:              Imperial Bank
                         One Arizona Center
                         400 East Van Buren
                         Suite 900
                         Phoenix, Arizona  85004
                         Attention: Kevin Halloran
                         Telecopier: (602) 261-7881

     with a copy to:     Imperial Bank
                         9920 South La Cienega Boulevard
                         Suite 636
                         Inglewood, California  90301
                         Attention: Lending Services
                         Telecopier: (310) 417-5695

     with a copy to:     Imperial Bank
                         9920 South La Cienega Boulevard
                         Suite 1100
                         Inglewood, California 90301
                         Attention: Charles D. Wilmot, Syndicated Finance Group
                         Telecopier: (310) 417-5997

     Banks:              See Schedule 1.1.

Any notice to be personally  delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed.  Any such notice or other  communication  shall be deemed to have been
given (whether actually  received or not) on the day it is personally  delivered
as aforesaid;  or, if mailed,  on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile,  on the day that such notice is transmitted
as aforesaid if sent before the end of the normal  business  hours of recipient.
Any party may change its address for purposes of this Credit Agreement by giving
notice of such change to the other parties pursuant to this Section.  Any notice
required to be delivered by the Borrower to the Banks under the Credit Documents
shall be deemed to be so delivered if  delivered to the Agent.  Borrower  agrees
that any notice required to be delivered by the Agent and/or the Banks under the
Credit Documents to the Borrower shall be deemed to be so delivered if delivered
to the Company.

                                      -53-
<PAGE>
     10.5 GOVERNING LAW; JURISDICTION, VENUE; ARBITRATION.

          (a) The  Credit  Documents  shall  be  governed  by and  construed  in
     accordance  with the  substantive  laws (other than  conflict  laws) of the
     State of  Arizona,  except to the  extent the Banks has  greater  rights or
     remedies  under Federal law,  whether as a national  bank or otherwise,  in
     which case such  choice of Arizona  law shall not be deemed to deprive  the
     Banks of any such rights and  remedies as may be  available  under  Federal
     law.  Each party  consents to the  personal  jurisdiction  and venue of the
     state courts  located in Maricopa  County,  State of Arizona in  connection
     with any controversy related to this Credit Agreement,  waives any argument
     that  venue  in any  such  forum  is not  convenient  and  agrees  that any
     litigation  initiated  by  any of  them  in  connection  with  this  Credit
     Agreement  shall  be  venued  in the  Superior  Court of  Maricopa  County,
     Arizona.

          (b) Each Non-U.S.  Subsidiary hereby appoints the Company as its agent
     for the service of all process in the United States of America.

          (c)  All  claims  or  controversies  of  any  type  regarding  matters
     occurring  at any time arising  under or relating to this Credit  Agreement
     (including,  but not limited to,  claims under  contract,  law or statute),
     except the parties rights to seek  injunctive  relief between  Borrower and
     the Banks (including claims against any shareholders or affiliated entities
     of the Banks in claims against any directors, officers, employees or agents
     of the Banks or their  affiliated  entities),  shall be settled and finally
     determined by one  arbitrator in Maricopa  County,  Arizona,  in accordance
     with the arbitration rules of JAMS/Endispute and judgment by the arbitrator
     may be entered into any court having jurisdiction  thereof.  This agreement
     to arbitrate includes all claims of breach of contract and all other claims
     of any type to the maximum extent permissible.  The prevailing party in any
     such arbitration  shall be awarded its reasonable costs and attorneys' fees
     as determined by the arbitrator.

     10.6 INVALID PROVISIONS. If any provision of any Credit Document is held to
be illegal,  invalid or  unenforceable  under  present or future laws during the
term of this Credit  Agreement,  such provision shall be fully  severable;  such
Credit  Document shall be construed and enforced as if such illegal,  invalid or
unenforceable  provision had never comprised a part of such Credit Document; and
the remaining  provisions of such Credit Document shall remain in full force and
effect  and shall not be  affected  by the  illegal,  invalid  or  unenforceable
provision or by its severance from such Credit Document. Furthermore, in lieu of
each such illegal,  invalid or  unenforceable  provision there shall be added as
part of such Credit Document a provision  mutually agreeable to Borrower and the
Banks as similar in terms to such illegal, invalid or unenforceable provision as
may be possible and be legal, valid and enforceable.

     10.7 BINDING EFFECT.  The Credit  Documents shall be binding upon and inure
to the  benefit  of  Borrower,  the Banks  and the  Agent  and their  respective
successors, assigns and legal representatives;  provided, however, that Borrower
may not,  without  the prior  written  consent of the Banks,  assign any rights,
powers, duties or obligations thereunder.

                                      -54-
<PAGE>
     10.8 ENTIRETY. The Credit Documents embody the entire agreement between the
parties and supersede all prior agreements and understandings,  if any, relating
to the subject matter hereof and thereof.

     10.9  RELATIONSHIP  OF THE BANKS AND BORROWER.  The Banks and Borrower each
have  separate  and  independent   rights  and  obligations  under  this  Credit
Agreement.  Nothing contained herein shall be construed as creating,  forming or
constituting any partnership, joint venture, merger or consolidation of Borrower
and the Banks for any purpose or in any respect.

     10.10 TIME OF THE ESSENCE.  Time is  expressly  made of the essence of this
Credit Agreement.

     10.11 GOOD FAITH STANDARD. Except where governed by a specific provision of
this Credit Agreement for a specific  purpose,  whenever the approval or consent
of the Banks is required  hereunder,  the Banks shall  consider  the request for
approval or consent on a timely basis, but the Banks shall have such time as may
be reasonably  necessary to review and consider  such request,  as determined in
their  sole  judgment,  and the Banks  shall  have the  right to not give  their
approval or consent or to impose such conditions or additional requirements with
respect to their  approval or consent as the Banks in their sole judgment  shall
determine. Approvals or consents by the Banks shall be effective only when given
in writing,  except when otherwise specifically provided herein. The standard by
which the Banks shall be  governed  with  respect to a request  for  approval or
consent  shall be "good  faith" as that term is defined in the  Arizona  Uniform
Commercial Code.

     10.12 ASSIGNMENTS AND PARTICIPATIONS; TRANSFEREES.

          (a) This  Credit  Agreement  shall be  binding  upon and  inure to the
     benefit of the parties hereto and their respective  successors and assigns,
     except  that  the  Borrower  may  not  assign  its  rights  or  obligations
     hereunder,  under any Note or under any other Credit  Document  without the
     prior written consent of all of the Banks.

          (b) Each Bank may at any time grant  participations  in any portion of
     the Loans and Credit  Documents  owned by it to an  Affiliate  of such Bank
     without  the  consent  of the other  Banks.  Otherwise  each Bank may sell,
     assign,  transfer  or  otherwise  dispose of any  portion  of its  interest
     therein (each such grant of a participation or interest so sold,  assigned,
     transferred or disposed of being herein called a "Transferred Interest") to
     other financial  institutions  ("Transferees") only with the consent of the
     other Banks. In addition, each Bank may pledge any portion of its Notes for
     security purposes to any Federal Reserve Bank.  Without in any way limiting
     the  rights  of  Transferees  hereunder,  the  Borrower  agrees  that  each
     Transferee shall be entitled to the benefits of the Credit Documents to the

                                      -55-
<PAGE>
     extent of its Transferred Interest as if it were the "Bank" in an aggregate
     amount equal to such  Transferred  Interest,  and that each  Transferee may
     exercise  any and all rights of  banker's  lien,  setoff  and  counterclaim
     available pursuant to law with respect to its Transferred Interest as fully
     as if such Transferee were a direct lender to the Borrower.  Borrower shall
     not be obligated to deal with or communicate with any such participant.

          (c)  As  to  any  such  assignment  to a  Transferee,  (i)  each  such
     assignment shall be of a constant, and not a varying, percentage of all the
     assigning Bank's rights and obligations under this Credit  Agreement,  (ii)
     the amount of the  Commitment  of the  assigning  Bank subject to each such
     assignment  (determined as of the date the  Assignment and Acceptance  with
     respect to such  assignment  is  delivered  to the Agent) shall not be less
     than  $1,000,000.00,  (iii) the amount of the  Commitment  retained  by the
     assigning  Bank,  unless the Assignment  and  Acceptance  covers all or the
     remaining portion of the assigning Bank's interest,  rights and obligations
     under this Credit  Agreement,  after each such assignment shall not be less
     than $1,000,000.00,  (iv) the parties to each such assignment shall execute
     and deliver to the Agent an Assignment  and  Acceptance,  together with the
     Note or Notes subject to such  assignment,  and (v) the  Transferee,  if it
     shall  not  be a  Bank,  shall  deliver  to  the  Agent  an  Administrative
     Questionnaire.  Upon acceptance and recording  pursuant to paragraph (f) of
     this  Section,  from  and  after  the  effective  date  specified  in  each
     Assignment and Acceptance,  (A) the Transferee  thereunder shall be a party
     hereto  and shall  become a "Bank"  hereunder,  and,  to the  extent of the
     interest  assigned by such Assignment and  Acceptance,  have all the rights
     and obligations of a Bank under this Credit Agreement and (B) the assigning
     Bank  thereunder  shall,  to the extent of the  interest  assigned  by such
     Assignment  and  Acceptance,  be released from its  obligations  under this
     Credit Agreement (and, in the case of an Assignment and Acceptance covering
     all or the remaining  portion of an assigning Bank's rights and obligations
     under this Credit  Agreement,  such Bank shall  cease to be a party  hereto
     (but shall continue to be entitled to the benefits of Sections 3.6,  3.7(b)
     and 10.3).

          (d) By executing  and  delivering an Assignment  and  Acceptance,  the
     assigning Bank thereunder and the Transferee  thereunder shall be deemed to
     confirm  to and agree  with each  other  and the  other  parties  hereto as
     follows:  (i)  such  assigning  Bank  warrants  that  it is the  legal  and
     beneficial  owner of the interest being assigned  thereby free and clear of
     any adverse claim and that its Commitment and the  outstanding  balances of
     its Loans,  without  giving  effect to  assignments  thereof which have not
     become effective, are as set forth in such Assignment and Acceptance,  (ii)
     except  as  set  forth  in  (i)  above,   such   assigning  Bank  makes  no
     representation  or warranty and assumes no  responsibility  with respect to
     any statements, warranties or representations made in or in connection with
     this   Credit   Agreement,   or   the   execution,    legality,   validity,
     enforceability, genuineness, sufficiency or value of this Credit Agreement,
     any other Credit  Document or any other  instrument  or document  furnished

                                      -56-
<PAGE>
     pursuant  hereto  or  the  financial  condition  of  the  Borrower  or  the
     performance or observance by the Borrower of any of its  obligations  under
     this Credit Agreement, any other Credit Document or any other instrument or
     document  furnished pursuant hereto;  (iii) such Transferee  represents and
     warrants that it is legally  authorized to enter into such  Assignment  and
     Acceptance;  (iv) such  Transferee  confirms that it has received a copy of
     this Credit  Agreement,  together with copies of the most recent  financial
     statements  delivered  pursuant to Section 7.1 and such other documents and
     information as it has deemed  appropriate  to make its own credit  analysis
     and  decision  to enter  into  such  Assignment  and  Acceptance;  (v) such
     Transferee will  independently  and without  reliance upon the Agent,  such
     assigning  Bank  or  any  other  Bank  and  based  on  such  documents  and
     information as it shall deem appropriate at the time,  continue to make its
     own credit  decisions  in taking or not  taking  action  under this  Credit
     Agreement;  (vi) such Transferee  appoints and authorizes the Agent to take
     such action as agent on its behalf and to exercise  such powers  under this
     Credit  Agreement  as are  delegated  to the  Agent  by the  terms  hereof,
     together with such powers as are reasonably  incidental thereto;  and (vii)
     such Transferee  agrees that it will perform in accordance with their terms
     all the  obligations  which  by the  terms  of this  Credit  Agreement  are
     required to be performed by it as a Bank.

          (e)  The  Agent  shall  maintain  at one of its  offices  in  Phoenix,
     Arizona,  a copy of each  Assignment and  Acceptance  delivered to it and a
     register for the  recordation of the names and addresses of the Banks,  and
     the  Commitment  of, and principal  amount of the Loans owing to, each Bank
     pursuant  to the  terms  hereof  from time to time  (the  "Register").  The
     entries in the  Register  shall be  conclusive  in the  absence of manifest
     error and the Borrower, the Agent and the Banks may treat each Person whose
     name is recorded  in the  Register  pursuant to the terms  hereof as a Bank
     hereunder for all purposes of this Credit Agreement.  The Register shall be
     available for  inspection  by the Borrower and any Bank, at any  reasonable
     time and from time to time upon reasonable prior notice.

          (f) Upon its receipt of a duly  completed  Assignment  and  Acceptance
     executed by an assigning  Bank and an Transferee  together with the Note or
     Notes subject to such assignment, an Administrative Questionnaire completed
     in respect of the Transferee (unless the Transferee shall already be a Bank
     hereunder), the Agent shall (i) accept such Assignment and Acceptance, (ii)
     record the information  contained  therein in the Register,  and (iii) give
     prompt notice thereof to the Banks.  Within five Banking Days after receipt
     of notice,  the Borrower,  as applicable,  shall execute and deliver to the
     Agent, in exchange for the  surrendered  Note or Notes, a new Note or Notes
     to the order of such  assigning  Bank in a  principal  amount  equal to the
     applicable Commitment retained by it. Such new Note or Notes shall be in an
     aggregate  principal amount equal to the aggregate principal amount of such
     surrendered  Note or Notes;  such new Notes  shall be dated the date of the
     surrendered   Notes  which  they   replace  and  shall   otherwise   be  in
     substantially the applicable form of Exhibit "C" hereto.

                                      -57-
<PAGE>
     10.13 HEADINGS.  Section headings are for convenience of reference only and
shall in no way affect the interpretation of this Credit Agreement.

     10.14 SURVIVAL.  All representations and warranties made by Borrower herein
shall survive delivery of the Notes and the making of the Loans.

     10.15 NO THIRD PARTY BENEFICIARY. The parties do not intend the benefits of
this  Credit  Agreement  to inure to any  third  party,  nor shall  this  Credit
Agreement  be  construed to make or render the Banks and the Agent liable to any
materialman,  supplier,  contractor,  subcontractor,  purchaser or lessee of any
property owned by Borrower,  or for debts or claims accruing to any such persons
against Borrower.  Notwithstanding anything contained herein or in the Notes, or
in any other Credit Document,  or any conduct or course of conduct by any or all
of the parties hereto,  before or after signing this Credit  Agreement or any of
the other Credit  Documents,  neither this Credit Agreement nor any other Credit
Document  shall be  construed  as creating  any right,  claim or cause of action
against the Banks and the Agent, or any of their officers,  directors, agents or
employees,  in favor of any materialman,  supplier,  contractor,  subcontractor,
purchaser or lessee of any property  owned by Borrower,  nor to any other person
or entity other than Borrower.

     10.16 JOINT LIABILITY.

          (a) The  Company  and the  Co-Borrowers  each:  (a)  agrees  that  the
     liability  hereunder of all parties  hereto is joint and  several;  and (b)
     consents that the Banks may extend the time of payment or otherwise  modify
     the terms of payment of any part or the whole of the debt evidenced hereby,
     at the request of any other person  liable  hereon,  and such consent shall
     not alter nor diminish the liability of any person hereon.

          (b) In  addition,  the  Company and the  Co-Borrowers  each waives and
     agrees not to assert: (a) any right to require the Banks to proceed against
     the  obligations,  to  proceed  against  or exhaust  any  security  for the
     obligations,  to pursue any other  remedy  available  to the  Banks,  or to
     pursue any remedy in any particular order or manner; (b) the benefit of any
     statute of limitations affecting its liability hereunder or the enforcement
     hereof; (c) the benefits of any legal or equitable doctrine or principle of
     marshalling;  (d) notice of the existence,  creation or incurring of new or
     additional  indebtedness of Borrower to the Banks;  (e) the benefits of any
     statutory  provision limiting the liability of a surety,  including without
     limitation  the  provisions  of Sections  12-1641,  ET SEQ., of the Arizona
     Revised  Statutes;  (f) any defense  arising by reason of any disability or
     other  defense of  Borrower  or by reason of the  cessation  from any cause
     whatsoever  (other than  payment in full) of the  liability of Borrower for
     payment of any other party  hereto;  and (g) the benefits of any  statutory

                                      -58-
<PAGE>
     provision limiting the right of the Banks to recover a deficiency judgment,
     or to otherwise  proceed against any person or entity obligated for payment
     of the obligations, after any foreclosure or trustee's sale of any security
     for the obligations,  including without limitation the benefits, if any, to
     a surety of Arizona Revised Statutes Section 33-814.  Until payment in full
     of the  obligations  and the Banks have no  obligation  to make any further
     advances  of the  proceeds  hereof,  no  party  shall  have  any  right  of
     subrogation  and each hereby  waives any right to enforce any remedy  which
     the Banks now have, or may hereafter  have,  against  Borrower or any other
     party,  and waives any  benefit  of, and any right to  participate  in, any
     security now or hereafter held by the Banks.

     10.17  SCHEDULES  AND EXHIBITS  INCORPORATED.  All  schedules  and exhibits
attached  hereto are hereby  incorporated  into this  Credit  Agreement  by each
reference thereto as if fully set forth at each such reference.

     10.18  WAIVER  OF  JURY  TRIAL.   EACH  PARTY  HERETO   HEREBY   KNOWINGLY,
VOLUNTARILY,  AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO REQUIRE A TRIAL
BY JURY IN ANY COURT  ACTION  PERTAINING  TO  OBLIGATIONS  SECURED OR THE CREDIT
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.

     10.19  COUNTERPARTS.  This  Credit  Agreement  may be  executed in multiple
counterparts,  each of which, when so executed,  shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.

     IN WITNESS WHEREOF,  the undersigned have executed this Credit Agreement as
of the day and year first above written.

                                        THREE-FIVE SYSTEMS, INC., a Delaware
                                        corporation


                                        By: /s/ Jeffrey D. Buchanan
                                            ------------------------------------
                                        Name: Jeffrey D. Buchanan
                                             -----------------------------------
                                        Title: Executive V.P. / CFO
                                              ----------------------------------
                                                                         COMPANY

                                      -59-
<PAGE>
                                        THREE-FIVE SYSTEMS (BEIJING), LTD., a
                                        wholly foreign owned enterprise
                                        organized under the laws of the People's
                                        Republic of China.


                                        By: /s/ Jeffrey D. Buchanan
                                            ------------------------------------
                                        Name: Jeffrey D. Buchanan
                                             -----------------------------------
                                        Title: Legal Representative
                                              ----------------------------------


                                        THREE-FIVE SYSTEMS PACIFIC, INC., a
                                        Philippine corporation


                                        By: /s/ Jeffrey D. Buchanan
                                            ------------------------------------
                                        Name: Jeffrey D. Buchanan
                                             -----------------------------------
                                        Title: Executive V.P. / CFO
                                              ----------------------------------


                                        THREE-FIVE SYSTEMS LIMITED, a
                                        corporation organized under the laws of
                                        the United Kingdom


                                        By: /s/ Jeffrey D. Buchanan
                                            ------------------------------------
                                        Name: Jeffrey D. Buchanan
                                             -----------------------------------
                                        Title: Executive V.P. / CFO
                                              ----------------------------------
                                                                    CO-BORROWERS


                                        IMPERIAL BANK, a California banking
                                        corporation


                                        By: /s/ Kevin C. Halloran
                                            ------------------------------------
                                        Name: Kevin C. Halloran
                                             -----------------------------------
                                        Title: S.V.P.
                                              ----------------------------------
                                                                  AGENT AND BANK

                                      -60-
<PAGE>
                                  SCHEDULE 1.1

                 PRO RATA SHARE AND NOTICE ADDRESS OF EACH BANK



                     PRO RATA SHARE:                IMPERIAL
                     --------------                 --------
                     RLC Commitment               $25,000,000


NOTICE ADDRESS:
--------------

     Imperial:      Imperial Bank
                    400 East Van Buren
                    Suite 900
                    Phoenix, Arizona  85004
                    Attention: Kevin Halloran
                    Telecopier: (602) 261-7881
<PAGE>
                                  SCHEDULE 6.17

                                  SUBSIDIARIES


     1. Three-Five  Systems  (Beijing),  Ltd., a wholly foreign owned enterprise
organized under the laws of the People's Republic of China.

     2. Three-Five Systems Pacific, Inc., a Philippine corporation.

     3. Three-Five  Systems Limited,  a corporation  organized under the laws of
the United Kingdom.
<PAGE>
                                  SCHEDULE 8.2

                                 EXISTING LIENS


1.   Any liens  related to  Borrower's  line of credit  with  Barclays  Bank PLC
     (U.K.) Secured by U.K. receivables and inventory.

2.   Lien to Pitney Bowes Credit per Arizona  UCC-1  Financing  Statement  dated
     February  15, 1995 filed  February  21, 1995 with the Arizona  Secretary of
     State No. 820568.

3.   Lien to  Pitney  Bowes  Credit  Corporation  for  Arizona  UCC-1  Financing
     Statement  filed  April 27, 1998 with the  Arizona  Secretary  of State No.
     01014229.
<PAGE>
                                   EXHIBIT "A"

                           COMPLIANCE CERTIFICATE FOR
                              FISCAL QUARTER ENDING
                              _____________, 20___
                              ("REPORTING QUARTER")


Imperial Bank
One Arizona Center
400 East Van Buren
Suite 900
Phoenix, Arizona  85004
Attention:  Kevin Halloran
Telecopier:  (602) 261-7881

                                                          Date: _____________(1)

Dear Ladies and Gentlemen:

     This  Compliance  Certificate  refers to the Credit  Agreement  dated as of
January 21, 2000 (as it may hereafter be amended, modified, extended or restated
from time to time, the "Credit Agreement"), between Three-Five Systems, Inc., an
Arizona  corporation  ("Company"),  all present and future  Subsidiaries  of the
Company,  the Banks named  therein  and  Imperial  Bank,  a  California  banking
corporation as Agent.  Capitalized  terms used and not otherwise  defined herein
shall have the meanings assigned to such terms in the Credit Agreement.

     Pursuant  to  Section  7.1 of the Credit  Agreement,  the  undersigned,  an
Authorized Officer of Borrower, hereby certifies that:

     1. Enclosed are the required financial statements for the [quarter] [fiscal
year]  ending for the  Borrower  as  required  under  Section  7.1 of the Credit
Agreement,  which, to the  undersigned's  knowledge,  after due inquiry,  fairly
present in all material respects the financial  position of the Borrower and the
results of its operations at the dates and for the periods  indicated,  and have
been prepared in accordance with GAAP.

     2. To the best of the  undersigned's  knowledge,  no "Event of Default" has
occurred [or if so,  specifying the nature and extent thereof and any corrective
actions taken or to be taken].

----------
(1)  To be submitted  within 45 days after the end of each fiscal quarter and 90
     days of each fiscal year of Borrower.
<PAGE>
     3. As of the last day of the Reporting Quarter, the computations below were
true and correct:

I.   Section 8.11(a) - TANGIBLE NET WORTH

          Shareholder's equity (capital stock,
          paid-in capital, retained earnings)
                                                                   -------------

          less treasury stock
                                                                   -------------

          less Intangible Assets
                                                                   -------------

          equals Tangible Net Worth                                            A
                                                                   -------------

          covenant requirement:

               Initial Tangible Net Worth as of
               September 30, 1999                                  $88,000,000 C
                                                                   -------------
               plus fifty percent (50.0%) of the
               aggregate quarterly positive Net Income,
               commencing 12/31/99
                                                                   -------------

               plus additional equity raised
                                                                   -------------

               equals covenant requirement                                     B
                                                                   -------------

          A is required to be greater than or equal to B                    A>=B
                                                                   =============

II.  Section 8.11(b) - LEVERAGE RATIO                             (in thousands)

          Numerator:    Funded Debt                                $           A
                                                                   -------------
                                                        divided by
          Denominator:  Equity                                                 B
                                                                   -------------

                        Ratio                               equals           A/B
                                                                   -------------

                                                           Maximum
                                                                   -------------

III. Section 8.11(c) - DEBT COVERAGE RATIO (ROLLING 4 QUARTERS)

          Numerator:    Net Income
                                                                   -------------

                                       -2-

<PAGE>
                        plus tax expense
                                                                   -------------

                        plus depreciation
                                                                   -------------

                        plus amortization
                                                                   -------------

                        plus interest expense
                                                                   -------------

                        less taxes actually paid in cash
                                                                   -------------

                        equals Cash Flow                                       A
                                                                   -------------

                                                        divided by

          Denominator:  CPLTD
                                                                   -------------

                        plus CP Capital Leases
                                                                   -------------

                        plus interest expense
                                                                   -------------

                        equals Debt Service Requirement                        B
                                                                   -------------

                        Ratio                               equals           A/B
                                                                   =============

                                                           Minimum          3.0x
                                                                   =============

IV.  Section 8.11(d) - NET INCOME

          Two consecutive fiscal quarters (beginning
          with 12/31/99)
                                                                   -------------

          Fiscal Year
                                                                   -------------

                                                           Minimum $           0
                                                                   -------------

                                        THREE-FIVE SYSTEMS, INC., a Delaware
                                        corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Its:
                                             -----------------------------------

                                       -3-
<PAGE>
                                   EXHIBIT "B"

                             FORM OF ADVANCE NOTICE

Imperial Bank
One Arizona Center
400 East Van Buren
Suite 900
Phoenix, Arizona  85004
Attention: Kevin Halloran
Telecopier: (602) 261-7881

                                                             Date:______________
                                                             Time:______________

Dear Ladies and Gentlemen:

     The  undersigned,   Three-Five  Systems,   Inc.,  a  Delaware   corporation
("Company"),  refers to the Credit Agreement dated as of January 21, 2000 (as it
may hereafter be amended, modified,  extended or restated from time to time, the
"Credit Agreement"), between Company, all present and future Subsidiaries of the
Company,  the Banks named  therein  and  Imperial  Bank,  a  California  banking
corporation as Agent.  Capitalized  terms used herein and not otherwise  defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

     The Borrower  hereby  gives notice that it requests an Advance  pursuant to
the Credit Agreement and sets forth below the terms of such requested Advance:

     A.   Date of Advance
                                                                   -------------
     B.   Principal Amount of Advance(1)
                                                                   -------------
     C.   Type of Advance(2)
                                                                   -------------

----------
(1)  Each Advance shall be a principal amount which is not less than $500,000.00
     with integral multiples of $1,000.00.
(2)  Variable Rate or LIBOR Rate Advance.
<PAGE>
                                                       FROM:          THROUGH:
                                                   ------------     ------------

     D.   LIBOR Interest Period(1)
                                                   ------------     ------------
          Maturity Date
                                                                    ------------

     E.   Conversion (Identity of Advance
          to be Converted)
               Date
                                                                    ------------
               Type
                                                                    ------------
               Amount
                                                                    ------------
               Maturity Date
                                                                    ------------


                                        Sincerely,

                                        THREE-FIVE SYSTEMS, INC., a Delaware
                                        corporation



                                        By
                                           -------------------------------------
                                           Its
                                               ---------------------------------

----------
(1)  One, two, three or six months and end not later than the Maturity Date.

                                       -2-
<PAGE>
                                   EXHIBIT "C"

                                  FORM OF NOTES


<PAGE>
                                   EXHIBIT "C"

                            REVOLVING PROMISSORY NOTE
                                      (RLC)

$_______________                                                Phoenix, Arizona
                                                            ______________, 2000


     FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),  promises
to pay to the  order of  _________________________________________________  (the
"Payee"; Payee and each subsequent transferee and/or owner of this Note, whether
taking by endorsement or otherwise, are herein successively called "Holder"), at
Imperial Bank, 9920 South La Cienega  Boulevard,  Lending  Services,  Inglewood,
California  90301,  or at such  other  place as  Holder  may  from  time to time
designate   in   writing,    the   principal    sum   of    ____________________
___________________________  AND  NO/100  DOLLARS  ($_____________)  or so  much
thereof as Holder  may  advance  to or for the  benefit  of Maker plus  interest
calculated  on a daily basis  (based on a 360-day  year) from the date hereof on
the principal  balance from time to time  outstanding as  hereinafter  provided,
principal,  interest and all other sums  payable  hereunder to be paid in lawful
money of the United States of America as follows:

          1    Interest shall accrue:

               1.1 On the unpaid  principal  of an RLC  Advance at the  Variable
          Rate,  except to the extent that an RLC Advance bears  interest at the
          LIBOR Based Rate.

               1.2 On the unpaid  principal of an RLC Advance at the LIBOR Based
          Rate,  to the  extent  Borrower  shall  elect  and to the  extent  not
          otherwise provided in the Credit Agreement.

          2    All accrued interest through the end of the preceding month shall
     be due and payable on each Payment Date.

          3    The entire  unpaid  principal  balance,  all  accrued  and unpaid
     interest,  and all other amounts payable hereunder shall be due and payable
     in full on the RLC Maturity Date.

     The  "Variable  Rate"  means the rate per annum equal to the Prime Rate per
annum as in effect from time to time; the Variable Rate shall change on each day
that the "Prime  Rate"  changes.  The LIBOR  Based Rate means the rate per annum
equal (A) to the sum of LIBOR  and one  hundred  fifty  basis  points  (150 bp),
divided  by (B) a  percentage  equal to one  hundred  percent  (100%)  minus the
Eurodollar Rate Reserve Percentage with respect to the applicable LIBOR Interest
Period. The "RLC Maturity Date" means January 19, 2001.
<PAGE>
     The principal balance of this Note represents a revolving credit all or any
part of which may be  advanced to Maker,  repaid by Maker,  and  re-advanced  to
Maker from time to time,  subject to the other terms hereof and the  conditions,
if any, contained in the hereinafter defined Credit Agreement, and provided that
the  principal  balance  outstanding  at any one time  shall not exceed the face
amount hereof.

     Maker agrees to an effective rate of interest that is the rate stated above
plus any  additional  rate of interest  resulting  from any other charges in the
nature of interest  paid or to be paid by or on behalf of Maker,  or any benefit
received or to be received by Holder, in connection with this Note.

     This Note is issued  pursuant to that Credit  Agreement dated as of January
21, 2000 (the "Credit  Agreement")  between  Maker,  the Banks named therein and
Imperial Bank, a California banking corporation as Agent. Capitalized terms used
and not otherwise  defined herein shall have the meanings assigned to such terms
in the Credit Agreement.

     Time is of the essence of this Note.

     Maker shall pay all costs and  expenses,  including  reasonable  attorneys'
fees and court costs,  incurred in the  collection or  enforcement of all or any
part of this Note.

     Failure of Holder to exercise any option  hereunder  shall not constitute a
waiver of the right to exercise the same in the event of any subsequent  default
or in the event of continuance  of any existing  default after demand for strict
performance hereof.

     Maker and all  sureties,  guarantors  and/or  endorsers  hereof  (or of any
obligation   hereunder)  and   accommodation   parties  hereon  (severally  each
hereinafter  called a "Surety")  each:  (a) agree that the liability  under this
Note of all parties hereto is joint and several; (b) severally waive any and all
formalities  in connection  with this Note to the maximum extent allowed by law,
including  (but not limited  to) demand,  diligence,  presentment  for  payment,
protest and  demand,  and notice of  extension,  dishonor,  protest,  demand and
nonpayment  of this Note;  and (c)  consent  that  Holder may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt  evidenced by this Note, at the request of any other person liable  hereon,
and such  consent  shall not alter nor  diminish  the  liability  of any  person
hereon.

     This Note shall be binding  upon Maker and its  successors  and assigns and
shall inure to the benefit of Payee,  and any  subsequent  holders of this Note,
and their successors and assigns.

     All notices  required or  permitted in  connection  with this Note shall be
given at the place and in the manner  provided in the Credit  Agreement  for the
giving of notices.

     If any payment of interest  and/or  principal is not received by the Holder
hereof when such payment is due, then in addition to the remedies conferred upon
the Holder  hereof and the other loan  documents,  a late charge of five percent
(5%) of the  amount  of the  installment  due and  unpaid  will be  added to the

                                       -2-
<PAGE>
delinquent  amount to  compensate  the Holder hereof for the expense of handling
the delinquency for any payment past due in excess of ten (10) days,  regardless
of any notice and cure period.

     This  Note  shall be  governed  by and  construed  in  accordance  with the
substantive  laws (other than conflict laws) of the State of Arizona,  except to
the extent Holder has greater rights or remedies under Federal law, whether as a
national bank or  otherwise,  in which case such choice of Arizona law shall not
be deemed to deprive  Holder of any such rights and remedies as may be available
under Federal law. Each party consents to the personal jurisdiction and venue of
the state courts located in Maricopa County, State of Arizona in connection with
any controversy related to this Note, waives any argument that venue in any such
forum is not convenient and agrees that any litigation  initiated by any of them
in connection  with this Note shall be venued in the Superior  Court of Maricopa
County, Arizona.

     This Note may be executed in multiple counterparts,  each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same instrument.

     IN  WITNESS  WHEREOF,  these  presents  are  executed  as of the date first
written above.

                                        THREE-FIVE SYSTEMS, INC., a Delaware
                                        corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Its:
                                             -----------------------------------


                                        THREE-FIVE SYSTEMS (BEIJING), LTD., a
                                        wholly foreign owned enterprise
                                        organized under the laws of the People's
                                        Republic of China


                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Its:
                                             -----------------------------------

                                       -3-
<PAGE>
                                        THREE-FIVE SYSTEMS PACIFIC, INC., a
                                        Philippine corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Its:
                                             -----------------------------------


                                        THREE-FIVE SYSTEMS LIMITED, a
                                        corporation organized under the laws of
                                        the United Kingdom


                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Its:
                                             -----------------------------------
                                                                           MAKER

                                       -4-
<PAGE>
                                   EXHIBIT "D"

                              ASSUMPTION AGREEMENT


     BY THIS ASSUMPTION  AGREEMENT (the "Agreement") made and entered into as of
the _____ day of _________________, 2000, ______________________________________
_______________________________________________________________,  whose  address
is _____________________________________________________________________________
(hereinafter  called "Added Borrower"),  in favor of IMPERIAL BANK, a California
banking  corporation as Agent, whose address is 9920 South La Cienega Boulevard,
Lending Services,  Inglewood,  California 90301 (hereinafter  called Agent"), in
consideration  of the  recitals  herein  contained  and other good and  valuable
consideration,  the receipt  and  sufficiency  of which is hereby  acknowledged,
confirms and agrees as follows:

SECTION 1. RECITALS.

     1.1 Added  Borrower is a Subsidiary  and an  Affiliate  (as those terms are
defined in the Credit  Agreement  hereinafter  defined) of  Three-Five  Systems,
Inc., a Delaware corporation (the "Company"), and its then existing Subsidiaries
(with the Company, the "Borrower").

     1.2 As such,  Added Borrower is benefitted by the financial  accommodations
(the  "Loans")  advanced  by the Banks to the  Borrower  pursuant to that Credit
Agreement  dated January 21, 2000 among the Banks named  therein,  the Agent and
Borrower (the "Credit Agreement").

     1.3 A condition for the  continuation  of the Loans specified in the Credit
Agreement is that any subsequently acquired or created Subsidiary of the Company
assume as a  "Co-Borrower"  within the  meaning  of  Section  7.17 of the Credit
Agreement the obligations of the Borrower under the Credit Agreement,  and agree
to be bound by all of the terms, conditions and provisions thereof, and agree to
be jointly liable with the Borrower for the full payment and satisfaction of the
Loans and all other obligations of the Borrower under the Credit Agreement.

     1.4  Because  of the  benefits  derived  by the  Added  Borrower  from said
financial accommodations,  which consideration is acknowledged by Added Borrower
as sufficient for its agreements herein, Added Borrower desires to so agree.

SECTION 2. ASSUMPTION.

     2.1 Added Borrower hereby assumes as a "Co-Borrower"  and agrees to perform
as a  "Co-Borrower"  all of the duties,  obligations and promises of Borrower as
set forth in or arising under the Credit Agreement, to be bound as a Co-Borrower
by all of the terms, conditions and provisions of the Credit Agreement and to do
as a Co-Borrower any and all acts and things required under the Credit Agreement
to be done by Borrower.
<PAGE>
SECTION 3. MISCELLANEOUS.

     3.1 Added  Borrower  shall  execute such  additional  documents and do such
other acts as may be reasonably  necessary to fully implement the intent of this
Agreement.

     3.2 This Agreement shall be governed by and construed according to the laws
of the State of Arizona.

     3.3 This  Agreement  shall be binding upon,  and shall inure to the benefit
of, the parties hereto and their heirs, personal representatives, successors and
assigns.

     IN WITNESS  WHEREOF,  these  presents are executed as of the date indicated
above.

                                        ----------------------------------------


                                        By
                                           -------------------------------------
                                           Its
                                               ---------------------------------
                                                                  ADDED BORROWER

                                       -2-
<PAGE>
                                   EXHIBIT "E"

                        ADMINISTRATIVE DETAILS REPLY FORM


Re:  Revolving  Line  of  Credit  for  Three-Five  Systems,   Inc.,  a  Delaware
     corporation, and its Subsidiaries


1.    NAME OF ENTITY FOR SIGNATURE PAGE:
                                         ---------------------------------------
2.    NAME OF ENTITY AS IT SHOULD
      APPEAR IN ANY PUBLICITY:
      (if different than above)
                                         ---------------------------------------
3.    NAME OF PERSON TO RECEIVE DRAFT
      CREDIT AGREEMENT AT BANK:
                                         ---------------------------------------
4.    NAME OF PERSON TO SIGN
      CREDIT AGREEMENT:
                                         ---------------------------------------

5.    CONTACTS:       CREDIT CONTACT     OPERATIONS CONTACT     LEGAL COUNSEL
                     ----------------    ------------------    -----------------
      Name:
                     ----------------    ------------------    -----------------
      Title:
                     ----------------    ------------------    -----------------
      Address:
                     ----------------    ------------------    -----------------

                     ----------------    ------------------    -----------------

                     ----------------    ------------------    -----------------
      Telephone:
                     ----------------    ------------------    -----------------
      Facsimile #:
                     ----------------    ------------------    -----------------
      Telex #:
                     ----------------    ------------------    -----------------
      Answerback:
                     ----------------    ------------------    -----------------
<PAGE>
6.    PAYMENT INSTRUCTIONS:

      Method of Payment:    Fedwire                      Chips
                                    -------------------        -----------------
      Pay to:
                            ----------------------------------------------------
      Name of Bank:
                            ----------------------------------------------------
      City, State, Zip:
                            ----------------------------------------------------
      ABA Number:                              Reference:
                            ----------------              ----------------------
      Account Number:                          Account Name:
                            ----------------                --------------------
      Attention:
                            ----------------------------------------------------

                                       -2-
<PAGE>
                                   EXHIBIT "F"

                            ASSIGNMENT AND ACCEPTANCE

                              ______________, 2000


     Reference is made to the Credit Agreement dated as of January 21, 2000 (the
"Credit Agreement"), among THREE-FIVE SYSTEMS, INC., a Delaware corporation, and
its Subsidiaries  (collectively,  the "Borrower"),  the banks named therein (the
"Banks") and IMPERIAL BANK, a California banking corporation,  as Agent (in such
capacity, the "Agent").  Terms defined in the Credit Agreement and not otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.

     1.  The  Assignor  hereby  sells  and  assigns,  without  recourse,  to the
Assignee, and the Assignee hereby purchases and assumes,  without recourse, from
the  Assignor,  effective  as of the  Effective  Date set  forth on the  reverse
hereof, the interests set forth on the reverse hereof (the "Assigned  Interest")
in the Assignor's rights and obligations under the Credit Agreement,  including,
without  limitation,  the  interests  set  forth on the  reverse  hereof  in the
Commitment  of the  Assignor  on the  Effective  Date and the Loans owing to the
Assignor  which are  outstanding  on the  Effective  Date,  together with unpaid
interest accrued on the assigned Loans to the Effective Date and the amount,  if
any, set forth on the reverse  hereof of the Fees accrued to the Effective  Date
for the account of the  Assignor.  Each of the Assignor and the Assignee  hereby
makes  and  agrees  to be  bound  by all  the  representations,  warranties  and
agreements set forth in Section 10.12 of the Credit  Agreement,  a copy of which
has been received by each such party.  From and after the Effective Date (i) the
Assignee  shall  be a party  to and be bound  by the  provisions  of the  Credit
Agreement  and, to the extent of the interests  assigned by this  Assignment and
Acceptance,  have the rights and  obligations of a Bank thereunder and under the
Loan  Documents  and (ii) the  Assignor  shall,  to the extent of the  interests
assigned  by this  Assignment  and  Acceptance,  relinquish  its  rights  and be
released from its obligations under the Credit Agreement.

     2. This  Assignment and Acceptance is being delivered to the Agent together
with (i) the Notes evidencing the Loans included in the Assigned Interest,  (ii)
if  the  Assignee  is  not  already  a  Bank  under  the  Credit  Agreement,  an
Administrative  Details  Reply  Form in the form of  Exhibit  "E" to the  Credit
Agreement and (iii) a processing fee of $2,500.00.

     3. This  Assignment  and  Acceptance  shall be governed by and construed in
accordance with the laws of the State of Arizona.
<PAGE>
Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee's Address for Notice:

Effective Date of Assignment:


                                               Percentage Assigned of Commitment
                                               (set forth as a percentage of the
                                               Commitment and the aggregate
                                               Commitments of all Banks
                                               thereunder)
                  Principal Amount Assigned

Commitment        $________________            ______________%
Assigned:
Loans:            $________________
Fees Assigned
(if any):         $________________

The terms set forth above and
on the reverse side hereof are
hereby agreed to:                             Accepted


                    , as Assignor
--------------------              ----------------------------------------------


By                                      By
   ---------------------------------       -------------------------------------
   Its                                     Its
      ------------------------------           ---------------------------------


                    , as Assignor
--------------------              ----------------------------------------------


By                                      By
   ---------------------------------       -------------------------------------
   Its                                     Its
      ------------------------------           ---------------------------------

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