________________________________________________________________________________




                                   exh.10.23

                              AMENDED AND RESTATED

                                CREDIT AGREEMENT

                                      AMONG

                              KOMAG, INCORPORATED,

                                BANKBOSTON, N.A.

                                    AS AGENT,

                           AND THE BANKS PARTY HERETO




________________________________________________________________________________

<PAGE>

                               TABLE OF CONTENTS

                                                                            PAGE

ARTICLE I

    DEFINITIONS.............................................................. 1
    SECTION 1.1  DEFINED TERMS............................................... 1
    SECTION 1.2  OTHER DEFINITIONAL PROVISIONS............................... 9

ARTICLE II

    THE REVOLVING LOANS.....................................................  9
    SECTION 2.1  THE REVOLVING LOANS........................................  9
    SECTION 2.2  REPAYMENT.................................................. 13
    SECTION 2.3  INTEREST RATE AND PAYMENT DATES............................ 15
    SECTION 2.4  CONTINUATION AND CONVERSION OPTIONS........................ 16

ARTICLE III

    GENERAL PROVISIONS CONCERNING THE REVOLVING LOANS....................... 17
    SECTION 3.1  USE OF PROCEEDS............................................ 17
    SECTION 3.2  POST MATURITY INTEREST..................................... 17
    SECTION 3.3  COMPUTATION OF INTEREST.................................... 17
    SECTION 3.4  PAYMENTS................................................... 17
    SECTION 3.5  PAYMENT ON NON-BUSINESS DAYS............................... 17
    SECTION 3.6  REDUCED RETURN............................................. 18
    SECTION 3.7  INDEMNITIES................................................ 18
    SECTION 3.8  FUNDING SOURCES............................................ 19
    SECTION 3.9  INABILITY TO DETERMINE INTEREST RATE....................... 19
    SECTION 3.10  REQUIREMENTS OF LAW....................................... 20
    SECTION 3.11  ILLEGALITY................................................ 21
    SECTION 3.12  SUBSTITUTION OF BANKS..................................... 21

ARTICLE IV

    CONDITIONS OF LENDING................................................... 22
    SECTION 4.1  CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT.... 22
    SECTION 4.2  CONDITIONS PRECEDENT TO EACH BORROWING..................... 23

ARTICLE V

    REPRESENTATIONS AND WARRANTIES.......................................... 24
    SECTION 5.1  REPRESENTATIONS AND WARRANTIES............................. 24

                                        i

<PAGE>



ARTICLE VI

       COVENANTS............................................................ 27
       SECTION 6.1  AFFIRMATIVE COVENANTS................................... 27
       SECTION 6.2  NEGATIVE COVENANTS...................................... 30

ARTICLE VII

       EVENTS OF DEFAULT.................................................... 34
       SECTION 7.1  EVENTS OF DEFAULT....................................... 34

ARTICLE VIII

       THE AGENT............................................................ 37
       SECTION 8.1  THE AGENT............................................... 37
       SECTION 8.2  DELEGATION OF DUTIES, ETC............................... 37
       SECTION 8.3  INDEMNIFICATION......................................... 38
       SECTION 8.4  EXCULPATORY PROVISIONS.................................. 38
       SECTION 8.5  KNOWLEDGE OF DEFAULT.................................... 39
       SECTION 8.6  THE AGENT IN ITS INDIVIDUAL CAPACITY.................... 39
       SECTION 8.7  PAYEE OF REVOLVING NOTE TREATED AS OWNER................ 40
       SECTION 8.8  RESIGNATION OR REMOVAL OF THE AGENT..................... 40

ARTICLE IX

       MISCELLANEOUS........................................................ 41
       SECTION 9.1  AMENDMENTS, ETC......................................... 41
       SECTION 9.2  NOTICES, ETC............................................ 42
       SECTION 9.3  RIGHT OF SETOFF......................................... 43
       SECTION 9.4  NO WAIVER; REMEDIES..................................... 43
       SECTION 9.5  COSTS AND EXPENSES...................................... 43
       SECTION 9.6  ASSIGNMENTS; PARTICIPATIONS............................. 44
       SECTION 9.7  EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW............ 45
       SECTION 9.8  CONSENT TO JURISDICTION; VENUE; THE AGENT FOR........... 45
                    SERVICE OF PROCESS
       SECTION 9.9   ENTIRE AGREEMENT....................................... 46
       SECTION 9.10  SEPARABILITY OF PROVISIONS............................. 46
       SECTION 9.11  EXECUTION IN COUNTERPARTS.............................. 46
       SECTION 9.12  SURVIVAL OF CERTAIN AGREEMENTS......................... 46
       SECTION 9.13  EFFECT OF AMENDMENT AND RESTATEMENT.................... 46
       SECTION 9.14  CERTAIN CLOSING DATE TRANSITIONAL MATTERS.............. 47

                                       ii


<PAGE>


Exhibit A:        AMENDED AND RESTATED PROMISSORY NOTE
Exhibit B:        FORM OF BORROWING REQUEST
Schedule 1:       SCHEDULE OF COMMITMENTS
Schedule 2:       EXISTING LIENS AND SECURITY INTERESTS
Schedule 3:       SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES
Schedule 4:       BANK ORIGINAL AND CLOSING DATE PERCENTAGES

                                       iii

<PAGE>

                              AMENDED AND RESTATED
                                CREDIT AGREEMENT




         This Amended and Restated Credit Agreement (as amended, supplemented or
modified from time to time after the date hereof,  the "Agreement")  dated as of
June 20, 1997 is entered into among KOMAG, INCORPORATED,  a Delaware corporation
("Borrower"),  the banks from time to time  party  hereto,  together  with their
respective  successors and assigns (each a "Bank" and collectively the "Banks"),
and BANKBOSTON,  N.A., a national banking association  ("BankBoston"),  as agent
for the Banks  (in such  capacity,  the  "Agent").  This  Agreement  amends  and
restates in its entirety that certain Credit Agreement (as amended, supplemented
or  modified  prior to the  date  hereof,  the  "Prior  Agreement")  dated as of
December 15, 1994 among Borrower,  Wells Fargo Bank,  National  Association (the
"Prior Agent"),  and the banks party thereto. The parties hereto hereby agree as
follows:

                                    ARTICLE I

                                   DEFINITIONS


         SECTION 1.1 DEFINED  TERMS.  As used in this  Agreement,  the following
terms have the following meanings:

                 "Agent":  As set forth in the  introductory  paragraph  of this
Agreement.

                 "Aggregate Commitment": The sum of the Commitments as set forth
on Schedule 1, as such amount may be reduced  pursuant to Section  2.1(d) and as
such Schedule may be revised from time to time according to the terms hereof.

                 "Agreement": As set forth in the introductory paragraph of this
Agreement.

                 "Assignment Agreement": As set forth in Section 9.6(a).

                 "Bank" or "Banks": Those Banks set forth on Schedule 1, as such
Schedule may be revised from time to time according to the terms hereof.

                 "Bank  Affiliate":  means,  as to any Person,  any other Person
which,  directly or indirectly,  is in control of, is controlled by, or is under
common control with,  such Person.  A Person shall be deemed to control  another
Person if the controlling Person possesses, directly or indirectly, the power to
vote 50% or more of the securities  having ordinary voting power of the election
of directors of such Person.

                                       1

<PAGE>



                 "BankBoston":  As set forth in the  introductory  paragraph  of
this Agreement.

                 "Base  Rate":  The  higher of (a) the annual  rate of  interest
announced  from time to time by the Agent at the Agent's  Head Office in Boston,
Massachusetts,  as its "base rate" and (b) one-half of one percent  (1/2%) above
the Federal Funds Effective Rate. For the purposes of this definition,  "Federal
Funds  Effective  Rate"  shall mean for any day the rate per annum  equal to the
weighted  average of the rates on  overnight  federal  funds  transactions  with
members of the Federal  Reserve  System  arranged by federal funds  brokers,  as
published  for such day (or,  if such day is not a  Business  Day,  for the next
preceding  Business  Day) by the Federal  Reserve Bank of New York,  or, if such
rate is not so published  for any day that is a Business Day, the average of the
quotations  for such day on such  transactions  received by the Agent from three
(3) funds brokers of recognized standing selected by the Agent.

                 "Base Rate Loan": A Revolving Loan that bears interest based on
the Base Rate.

                 "Borrower":  As set forth in the introductory paragraph of this
Agreement.

                 "Borrowing": As defined in Section 2.1(a).

                 "Business Day": A day other than a Saturday, Sunday or a day on
which commercial banks in California are authorized or required by law to close.

                 "Capital  Lease":  As applied to any  Person,  any lease of any
property (whether real, personal or mixed) by that Person as lessee which would,
in  accordance  with GAAP, be required to be accounted for as a capital lease on
the balance sheet of that Person.

                 "Closing Date": The date when this Agreement  becomes effective
pursuant to Section 4.1.

                 "Closing Date Percentage": As defined in Section 9.14.

                 "Commitment": With respect to each Bank, the Commitment of such
Bank to make Revolving  Loans to Borrower  pursuant to Article II up to, but not
exceeding, at any time outstanding the amount or amounts referred to in Schedule
1, as such  Schedule  may be revised  from time to time  according  to the terms
hereof.

                 "Commitment  Percentage":   With  respect  to  each  Bank,  the
percentage  equivalent  of the ratio which such Bank's  Commitment  bears to the
Aggregate  Commitment,  as  specified  in  Schedule 1, as such  Schedule  may be
revised from time to time according to the terms hereof.

                                       2

<PAGE>



                 "Consolidated   Capital":   At  any   date  of   determination,
Consolidated Funded Debt plus Consolidated Tangible Net Worth.

                 "Consolidated  Funded  Debt":  At any  date  of  determination,
without duplication, all Debt (excluding minority interests) of the Borrower and
its Consolidated  Subsidiaries,  determined in accordance with GAAP which is for
borrowed money including (a) contingent obligations with respect to "off balance
sheet" or "synthetic" leases (i.e.,  leases where for tax purposes the lessee is
treated as the owner of the leased  property but for GAAP  purposes the lease is
treated  as an  operating  lease and the  lessor is  treated as the owner of the
leased  property)  and (b)  securitizations,  but in each  such case only to the
extent there is recourse to the Borrower in connection  therewith and the amount
of all such contingent  obligations is in excess of $3,000,000.  For the purpose
of calculating the amount of  Consolidated  Funded Debt, Debt of the Borrower to
its Consolidated Subsidiaries,  Debt of the Borrower's Consolidated Subsidiaries
to the  Borrower and Debt of  Consolidated  Subsidiaries  to other  Consolidated
Subsidiaries shall not be included in the calculation.

                 "Consolidated Subsidiary" or "Consolidated  Subsidiaries":  Any
corporation  or other Person more than fifty  percent  (50%) of the  outstanding
voting  stock of  which  shall at the  time be  owned  by  Borrower  or  another
Consolidated Subsidiary, excluding from this definition Asahi Komag Co., Ltd., a
Japanese corporation.

                 "Consolidated   Tangible   Net   Worth":   At   any   date   of
determination,   the  excess  of  total  assets  over  consolidated  liabilities
(excluding  minority  interests) of Borrower and its  Consolidated  Subsidiaries
determined on a consolidated basis, excluding, however from the determination of
total assets (a) all intangible assets, including, without limitation,  goodwill
(whether  representing  the excess  cost over book value of assets  acquired  or
otherwise),  patents,  trademarks,  trade  names,  copyrights,   franchises  and
deferred charges (including,  without limitation,  unamortized debt discount and
expense,  organization and research and product  development costs but excluding
deferred  income taxes),  (b) treasury  stock,  (c) cash set apart and held in a
sinking or other  analogous  fund  established  for the purpose of redemption or
other  retirement of capital stock,  and (d) to the extent not already  deducted
from total assets,  reserves for depreciation,  depletion,  obsolescence  and/or
amortization of properties and all other reserves or  appropriation  of retained
earnings  which,  in accordance  with GAAP,  should be established in connection
with the business conducted by the relevant corporation.

                 "Cut-Off Date": As set forth in Section 2.1(f).

                 "Dastek (M)": Dastek (M) SDN BHD, a Malaysian corporation.

                                       3

<PAGE>



                 "Debt":  As applied to any  Person,  (a) all  indebtedness  for
borrowed money,  (b) that portion of obligations  with respect to Capital Leases
which is properly  classified  as a liability on a balance  sheet in  conformity
with GAAP,  (c) notes  payable and drafts  accepted  representing  extensions of
credit  whether or not  representing  obligations  for borrowed  money,  (d) any
obligation  owed for all or any part of the deferred  purchase price of property
or services  which  purchase  price is (i) due more than six (6) months from the
date of incurrence of the obligation in respect thereof,  or (ii) evidenced by a
note or similar written instrument, and (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person  regardless of whether the
indebtedness  secured  thereby  shall  have been  assumed  by that  Person or is
non-recourse to the credit of that Person.

                 "DHC": Dastek Holding Company, a California corporation.

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

                 "Employee Benefit Plan": Any Pension Plan, any employee welfare
benefit plan, or any other  employee  benefit plan which is described in Section
3(3) of ERISA and which is  maintained  for  employees  of Borrower or any ERISA
Affiliate of Borrower.

                 "ERISA":  The Employee  Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.

                 "ERISA  Affiliate":  As  applied  to any  Person,  any trade or
business  (whether  or not  incorporated)  which is a member of a group of which
that Person is a member and which is under common  control within the meaning of
Section 414(b) or (c) of the Internal Revenue Code, but excluding any Subsidiary
or other Person that is not a Consolidated Subsidiary.

                 "Event of Default": As defined in Article VII.

                 "GAAP":  Generally accepted accounting  principles set forth in
the  opinions  and  pronouncements  of the  Accounting  Principles  Board of the
American   Institute  of  Certified   Public   Accountants  and  statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statements by such other entity as may be approved by a  significant  segment of
the accounting profession, as may be in effect from time to time.

                 "Interest Payment Date": As to any Base Rate Loan until payment
in full,  the Maturity Date and the last day of each December,  March,  June and
September  commencing  on the first of such days to occur after a Base Rate Loan
is made.  As to any LIBOR Rate Loan with an Interest  Period of thirty (30) days
or less,  the last day of such Interest  Period and the Maturity Date, and as to
any LIBOR Rate

                                       4

<PAGE>



Loan with an Interest  Period in excess of thirty (30) days, (a) the last day of
each  December,  March,  June and  September  following  the  beginning  of such
Interest  Period,  (b) the last day of such Interest Period and (c) the Maturity
Date.



                 "Interest Period":

                 With respect to any LIBOR Rate Loan:

                 (a)  initially,  the period  commencing on, as the case may be,
the Borrowing or conversion date with respect to such LIBOR Rate Loan and ending
at least one (1) month, two (2) months,  three (3) months, six (6) months,  nine
(9)  months,  or twelve (12)  months  thereafter  as selected by Borrower in the
notice of Borrowing as provided in Section 2.1(b) or the notice of conversion as
provided  in Section  2.4 so long as the LIBOR Rate is quoted for such period in
the London interbank market; and

                 (b) thereafter,  each period  commencing on the last day of the
next preceding  Interest Period applicable to such LIBOR Rate Loan and ending at
least one (1) month, two (2) months,  three (3) months, six (6) months, nine (9)
months,  or twelve (12) months  thereafter as selected by Borrower in the notice
of  continuation  as provided in Section 2.4 so long as the LIBOR Rate is quoted
for such period in the London interbank market;

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

                     (i) if any  Interest  Period  for a LIBOR  Rate Loan  would
otherwise end on a day which is not a LIBOR  Business Day, that Interest  Period
shall be extended to the next  succeeding  LIBOR  Business  Day unless such next
succeeding  LIBOR Business Day falls in another  calendar  month,  in which case
that Interest Period shall end on the preceding LIBOR Business Day; and

                     (ii) there shall be no more than six (6)  Interest  Periods
outstanding at any time.

                 "Internal  Revenue Code": The Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.

                 "LIBOR  Business  Day":  A day which is a  Business  Day and on
which  dealings in Dollar  deposits  may be carried out in the London  interbank
market.

                 "LIBOR Rate": For each Interest Period (a) the rate of interest
determined by the Agent at which deposits for the relevant Interest Period would
be offered to the Agent or good quality U.S. Banks in the approximate  amount of
the relevant  LIBOR Rate Loan for the Interest  Period  requested by Borrower in
the

                                       5

<PAGE>

London  interbank  market  selected by the Agent,  upon  request to the Agent by
11:00 A.M.  (San  Francisco  time) on the day which is three (3) LIBOR  Business
Days  prior to the first day of such  Interest  Period,  divided by (b) a number
equal to 1.00 minus the aggregate  (but without  duplication)  of the rates,  if
any, (expressed as a decimal fraction) of reserve  requirements in effect on the
day  which is three (3)  LIBOR  Business  Days  prior to the  beginning  of such
Interest Period (including,  without limitation,  basic, supplemental,  marginal
and emergency  reserves  under any  regulations of the Board of Governors of the
Federal Reserve System or other governmental  authority having jurisdiction with
respect thereto, as in effect at the time the Agent quotes the rate to Borrower)
for  Eurocurrency   funding  of  domestic  assets  (currently   referred  to  as
"Eurocurrency  liabilities" in Regulation D of such Board) which are required to
be  maintained  by a member bank of such System (such rate to be adjusted to the
next higher 1/16 of 1%).

                 "LIBOR Rate Loans":  Revolving  Loans hereunder at such time as
they accrue interest at a rate based upon the LIBOR Rate.

                 "Lien": Any lien,  mortgage,  deed of trust,  pledge,  security
interest,  charge or encumbrance of any kind (including any conditional  sale or
other  title  retention  agreement,  any lease in the  nature  thereof,  and any
agreement to give any security interest).

                 "Loan Documents": This Agreement, the Revolving Notes and other
documents  executed in connection with this Agreement and/or the Revolving Loans
extended hereunder,  including, without limitation, all amendments,  waivers and
consents relating thereto.

                 "Majority  Banks":  At any  time  when any  Commitments  remain
outstanding, the Banks having Commitments equal to at least 51% of the Aggregate
Commitment, and at any time after the termination of all Commitments,  the Banks
with outstanding  Revolving Loans having an unpaid principal balance equal to at
least 51% of all Revolving Loans outstanding.

                 "Material Adverse Effect": As defined in Section 5.1(f).

                 "Maturity Date": June 20, 2002, unless an extension shall occur
under Section 2.1, in which case "Maturity Date" shall mean the amended Maturity
Date resulting from such extension.

                 "Multiemployer  Plan":  A  "multiemployer  plan" as  defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower or any
ERISA Affiliate of Borrower.

                 "Nondisclosure  Agreement":  Borrower's standard  Nondisclosure
Agreement in the form delivered to the Agent and the Banks.

                                       6

<PAGE>

                 "Original Percentage": As defined in Section 9.14.

                 "Pension  Plan":  Any employee plan which is subject to Section
412 of the  Internal  Revenue  Code and which is  maintained  for  employees  of
Borrower or any ERISA Affiliate of Borrower, other than a Multiemployer Plan.

                 "Permitted Liens": A lien,  security  interest,  encumbrance or
charge (a) for taxes, assessments,  charges or claims of Borrower either not yet
due or being contested in good faith by appropriate proceedings, (b) arising out
of judgments or awards against Borrower with respect to which an appeal or other
proceeding  is being  prosecuted  in good faith and with  respect to which there
shall have been secured a stay of execution  pending such appeal or  proceedings
or which is vacated or discharged  within thirty (30) days after the termination
of such stay, (c) materialmen's,  mechanics', workers', repairmen's,  employee's
or other like liens  arising in the  ordinary  course of  business  for  amounts
either not yet due or being contested in good faith by appropriate  proceedings,
(d) granted by Borrower to the Agent or Banks  pursuant to this  Agreement,  (e)
liens,  deposits  or  pledges  made to secure  statutory  obligations,  workers'
compensation  claims,  surety  or appeal  bonds,  or bonds  for the  release  of
attachments  or for stay of  execution,  or to secure the  performance  of bids,
tenders, contracts (other than for the payment of borrowed money), leases or for
purposes of like general nature in the ordinary  course of Borrower's  business,
(f) purchase money security  interests for property  acquired,  conditional sale
agreements  or  other  title  retention  agreements  with  respect  to  property
acquired,  provided,  however, that no such security interest or agreement shall
extend to any property other than such after-acquired property and proceeds, (g)
refunding, refinancing or extension of the liens or security interests permitted
in the foregoing  clause not exceeding the principal  amount of  indebtedness so
refunded,  refinanced or extended at the time of the  refunding,  refinancing or
extension thereof, and applying only to the same property theretofore subject to
such lien or  security  interest,  (h) liens  existing  on the date  hereof  and
identified  in  Schedule  2  attached  hereto or  incurred  with any  refunding,
refinancing  or  extension  of any  such  indebtedness  secured  by such  liens,
provided that such  refinancing,  refunding or extension  shall not increase the
amount, as of the date of such refinancing,  refunding or extension,  secured by
any such lien or security interest,  (i) other liens securing Debt the principal
amount of which  shall not exceed  $2,000,000,  (j) liens in  property  of Asahi
Komag Co.,  Ltd.,  a Japanese  corporation,  (k) liens  taken by Borrower on its
Subsidiaries,  and (l) liens against DHC arising in  conjunction  with (i) loans
from  Asahi  Glass  Co.,  Ltd.,  or any of its  affiliates,  (ii)  that  certain
Recapitalization  Agreement  dated as of March 1, 1993  among  Asahi  Glass Co.,
Ltd., Asahi Glass America, Inc., AGA Capital,  Inc., Borrower,  Dastek, Inc. and
DHC and the other  documents  executed in  connection  therewith,  and (iii) the
purchase of claims of third parties by Borrower and Asahi Glass Co., Ltd. and/or
its affiliates against DHC and Dastek (M).

                                       7

<PAGE>

                 "Person":  An individual,  partnership,  corporation,  business
trust, joint stock company, trust,  unincorporated  association,  joint venture,
governmental authority or other entity of whatever nature.

                 "Potential Event of Default": A condition or event which, after
notice or lapse of time or both,  would  constitute  an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.

                 "Prior Agent":  As set forth in the  introductory  paragraph of
this Agreement.

                 "Prior Agreement":  As set forth in the introductory  paragraph
of this Agreement.

                 "Regulation  G,  T,  U and  X":  Regulations  G,  T,  U and  X,
respectively,  promulgated  by the Board of  Governors  of the  Federal  Reserve
System, as amended from time to time, and any successors thereto.

                 "Revolving Loans": As defined in Section 2.1(a).

                 "Requirement": As defined in Section 3.6.

                 "Revolving Notes": As defined in Section 2.1(e).

                 "S.E.C.":  The United States Securities and Exchange Commission
and  any  successor   institution  or  body  which  performs  the  functions  or
substantially all of the functions thereof.

                 "Subsidiary":  A corporation  or other Person of which at least
fifty percent (50%) of the outstanding voting stock or profit interests shall at
the time be owned by Borrower or another Subsidiary.

                 "Termination  Event":  (a) a  "Reportable  Event"  described in
Section  4043 of ERISA  and the  regulations  issued  thereunder  (other  than a
"Reportable Event" not subject to the provision for 30-day notice to the Pension
Benefit Guaranty  Corporation under such regulations),  or (b) the withdrawal of
Borrower or any of its ERISA  Affiliates  from a Pension Plan during a plan year
in which it was a  "substantial  employer" as defined in Section  4001(1)(2)  or
4068(f) of ERISA, or (c) the filing of a notice of intent to terminate a Pension
Plan or the treatment of a Pension Plan amendment as a termination under Section
4041 of ERISA, or (d) the institution of proceedings to terminate a Pension Plan
by the Pension Benefit  Guaranty  Corporation,  (e) any other event or condition
which  might  constitute  grounds  under  ERISA for the  termination  of, or the
appointment  by  the  Pension  Benefit  Guaranty  Corporation  of a  trustee  to
administer,  any  Pension  Plan,  or (f) the  imposition  of a lien  pursuant to
Section 412(n) of the Internal Revenue Code.

                                       8

<PAGE>

                 "Transfer": As defined in Section 6.2(h).

         SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.

                 (a) All terms defined in this Agreement  shall have the defined
meanings when used in the Revolving  Notes or any  certificate or other document
made or delivered pursuant hereto.

                 (b) As  used  herein  and  in  the  Revolving  Notes,  and  any
certificate  or other  document made or delivered  pursuant  hereto,  accounting
terms not defined in Section 1.1, and accounting terms partly defined in Section
1.1 to the extent not defined,  shall have the respective meanings given to them
under GAAP, and all financial data required to be delivered  hereunder  shall be
prepared in  accordance  with GAAP,  except that  foreign  currency  translation
adjustments need not be included for purposes of determining  Borrower's  equity
or net worth.  If any changes in GAAP from those used in the  preparation of the
financial  statements  referred to in Section 5.1(e) ("GAAP Changes")  hereafter
occasioned  by  the  promulgation  of  rules,  regulations,  pronouncements  and
opinions by or  required  by the  Financial  Accounting  Standards  Board of the
American  Institute of Certified  Public  Accountants (or successors  thereto or
agencies with similar functions) result in a change in the method of calculation
of any of the financial covenants,  standards or other terms or conditions found
in this Agreement,  the parties hereto agree to enter into negotiations to amend
such  provisions so as to reflect  equitably  such GAAP Changes with the desired
result that the criteria for evaluating the financial  condition and performance
of Borrower and its Consolidated  Subsidiaries shall be the same after such GAAP
Changes as if such GAAP Changes had not been made.

                 (c) The words  "hereof",  "herein" and "hereunder" and words of
similar  import when used in this  Agreement  shall refer to this Agreement as a
whole  and not to any  particular  provision  of this  Agreement,  and  section,
subsection  and  exhibit  references  are to  this  Agreement  unless  otherwise
specified.

                                   ARTICLE II

                               THE REVOLVING LOANS

 .        SECTION 2.1  THE REVOLVING LOANS.

                 (a)  The  Aggregate  Commitment.  Each of the  Banks  severally
agrees,  on the  terms and  conditions  hereinafter  set  forth,  to make  loans
("Revolving  Loans") to  Borrower  from time to time  during the period from the
date hereof to and including the Maturity Date, pro rata in accordance  with its
Commitment  Percentage,  in the aggregate  principal amount not to exceed at any
one time  outstanding its Commitment,  as such amount may be reduced pursuant to
Section 2.1(d).  Each borrowing under this Section (a "Borrowing") shall be in a
minimum amount of

                                       9

<PAGE>

$1,000,000 and in an integral  multiple of $100,000 above such amount for a Base
Rate Loan and in a minimum amount of $1,000,000  and in an integral  multiple of
$500,000  above such  amount  for a LIBOR  Rate Loan.  Within the limits of each
Commitment,  Borrower may borrow,  repay pursuant to Section 2.2(b) and reborrow
under  this  Section,  provided  that at no time shall the  aggregate  principal
amount of outstanding  Revolving  Loans exceed the Aggregate  Commitment then in
effect.

                 (b) Making the Revolving  Loans.  Borrower may borrow under the
Aggregate  Commitment  on any Business  Day if the  Borrowing is to consist of a
Base Rate Loan and on any LIBOR Business Day if the Borrowing is to consist of a
LIBOR Rate Loan,  provided that Borrower shall give the Agent irrevocable notice
in the form of Exhibit B (which  notice  must be  received by the Agent prior to
9:00 A.M., San Francisco  time and which when received,  will obligate Agent and
Banks  to fund at the  interest  rates  quoted  to  Borrower  by  Agent  for the
applicable  Borrowing)  (i) three (3) LIBOR Business Days prior to the requested
Borrowing  date in the case of a LIBOR  Rate  Loan,  and (ii) on or  before  the
requested  Borrowing  date in the case of a Base Rate Loan,  specifying  (A) the
amount of the proposed Borrowing,  (B) the requested date of the Borrowing,  (C)
whether  the  Borrowing  is to consist of a Base Rate Loan or a LIBOR Rate Loan,
and (D) if the  Revolving  Loan is to be a LIBOR  Rate  Loan,  the length of the
Interest Period  therefor.  The Agent shall notify each Bank by telecopy of each
Borrowing request  promptly.  Subject to the terms and conditions  hereof,  each
Bank shall make  immediately  available  funds  available to the Agent not later
than 12:00 P.M.,  San Francisco  time, on such Borrowing date in an amount equal
to the product of (A) its respective Commitment Percentage and (B) the aggregate
principal  amount of the Revolving  Loan  requested.  The failure of any Bank to
advance its Commitment Percentage of a requested Borrowing shall not relieve any
other Bank of its  obligation  hereunder  to advance its  Commitment  Percentage
thereof, and neither the Agent nor any Bank shall be responsible for the failure
of any other Bank to make such  advance.  Unless the Agent  shall have  received
prior notice from a Bank (which notice shall be given promptly by telecopy) that
such  Bank  will  not make  available  to the  Agent  such  Bank's  share of the
Borrowing  requested by Borrower,  and provided  that the Agent shall have given
such Bank timely notice of the applicable  Borrowing  request in accordance with
this Section,  the Agent may assume that such Bank has made its share  available
to the Agent on the  applicable  Borrowing  date and the Agent in reliance  upon
such assumption, may make available to Borrower on such Borrowing date an amount
corresponding to such Bank's Commitment Percentage of the Borrowing made on such
date. If and to the extent such Bank shall not have so made such share available
to the Agent,  such Bank and Borrower  agree to repay to the Agent  forthwith on
demand such corresponding  amount together with interest thereon at the interest
rate applicable at the time to the subject  Revolving  Loans,  for each day from
the date such amount is made available to Borrower until the date such amount is
repaid  to the  Agent,  and such Bank and  Borrower  agree to repay to the Agent
forthwith on demand such out-of-pocket administrative and investigative expenses
incurred  by the Agent in  connection  with the  Agent's  reasonable  efforts to
obtain

                                       10
<PAGE>

such payments.  If such Bank shall repay to the Agent such corresponding amount,
together  with accrued  interest,  such amount so repaid shall  constitute  such
Bank's Revolving Loan for purposes of this Agreement.  Upon  satisfaction of the
applicable  conditions set forth in this Section and in Article IV, the proceeds
of all such Revolving Loans will then be made available to Borrower by the Agent
by crediting the account of Borrower on the books of the Agent,  or as otherwise
directed by Borrower.

                     The  notice of  Borrowing  may be given  orally  (including
telephonically)  or in writing  (including telex or facsimile  transmission) and
any conflict  regarding a notice or between an oral notice and a written  notice
applicable to the same Borrowing shall be conclusively determined by the Agent's
books and  records.  The  Agent's  failure to receive  any  written  notice of a
particular  Borrowing shall not relieve  Borrower of its obligation to repay the
Borrowing  made and to pay  interest  thereon.  The  Agent  shall  not incur any
liability  to Borrower in acting  upon any notice of  Borrowing  which the Agent
believes  in good faith to have been given by a Person duly  authorized  to give
such notice on behalf of Borrower.

                 (c) Facility Fee.  Borrower agrees to pay to the Agent, for the
pro rata benefit of the Banks in  accordance  with their  respective  Commitment
Percentages,  a facility fee based on the Aggregate  Commitment at the following
rates,  each of which shall be calculated on the basis of a 360-day year for the
actual days elapsed beginning on the Closing Date, payable in arrears at the end
of each calendar  quarter  following the Closing Date.  With respect to any fees
payable by Borrower under this Section 2.1(c), Borrower shall be given credit by
the Agent and the Banks for the amount of any fees paid in  advance by  Borrower
under  Section  2.01(c) of the Prior  Agreement for any period of time after the
Closing  Date;  provided,  that the Agent  shall not be  required to extend such
credit to the  Borrower to the extent that the Banks do not  promptly  give such
credit to the  Borrower.  Said  rates  shall be  calculated  quarterly  based on
Borrower's  performance for the immediately preceding quarter for which Borrower
has provided  information to the Agent regarding the calculation of the rate and
shall be effective five (5) Business Days following the Agent's  receipt of such
financial  statements and the officer's  certificate required to be delivered in
connection therewith pursuant to Section 6.1(a); provided that if Borrower shall
not have timely  delivered its financial  statements in accordance  with Section
6.1(a) (after  giving  effect to any grace period set forth in Section  7.1(c)),
then  commencing on the date upon which such  financial  statements  should have
been  delivered and  continuing  until such  financial  statements  are actually
delivered,  it shall be assumed  for  purposes  of  determining  said rates that
Borrower's  Consolidated  Funded  Debt to  Consolidated  Capital  is equal to or
greater than .25 to 1.0.

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is less than .15 to 1.0: 15 basis points per annum;

                                       11
<PAGE>

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is equal  to or  greater  than .15 to 1.0 but less  than .25 to
                 1.0: 20 basis points per annum; and

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is equal to or  greater  than .25 to 1.0:  25 basis  points per
                 annum.

                 (d) Reduction of the Aggregate Commitment.  Borrower shall have
the right,  upon at least  three (3)  Business  Days'  notice to the  Agent,  to
terminate  in whole  or  reduce  in part the  unused  portion  of the  Aggregate
Commitment,  without  premium or penalty,  provided that each partial  reduction
shall be in the  aggregate  amount of  $5,000,000  or an  integral  multiple  of
$5,000,000  thereof  and that such  reduction  shall not  reduce  the  Aggregate
Commitment  to an  amount  less than the  amount  outstanding  hereunder  on the
effective  date of the  reduction.  Such notice  shall be  irrevocable  and such
reduction shall not be reinstated.  The Agent shall promptly inform the Banks by
telecopy of receipt of said notice or notices.

                 (e)  Revolving  Notes.  The  Revolving  Loans made by the Banks
pursuant   hereto  shall  be  evidenced   by   promissory   notes  of  Borrower,
substantially  in the  form of  Exhibit  A,  with  appropriate  insertions  (the
"Revolving  Notes"),  payable  to the  order of each Bank and  representing  the
obligation  of Borrower to pay the  aggregate  unpaid  principal  amounts of the
Revolving  Loans  made by such  Bank  to  Borrower,  with  interest  thereon  as
prescribed  in  Section  2.3.  Each Bank is hereby  authorized  to record in its
respective  books and records and on any exhibit annexed to its Revolving Notes,
the date and amount of each  Revolving  Loan made by said Bank, and the date and
amount of each  payment  of  principal  thereof,  and in the case of LIBOR  Rate
Loans, the Interest Period and interest rate with respect thereto,  and any such
recordation  shall  constitute  prima  facie  evidence  of the  accuracy  of the
information  so  recorded;  provided  that  failure by said Bank to effect  such
recordation  shall not affect  Borrower's  obligations  hereunder.  Prior to the
transfer of a Revolving  Note,  each Bank shall record such  information  on any
exhibit  annexed to and forming a part of such Revolving Note. Upon surrender of
any  Revolving  Note at the  office  of  Borrower  by  reason  of any  permitted
assignment,  transfer or other disposition of any Commitment or portion thereof,
Borrower shall execute and deliver one or more new Revolving Notes of like tenor
and of a like aggregate principal amount in the name of the designated holder or
holders of such  Commitment or portions  thereof.  Any such new  Revolving  Note
shall  thereafter be considered a Revolving Note under this Agreement.  Any such
new Revolving  Note shall carry the rights to accrued and unpaid  interest which
were carried by the Revolving Note so exchanged so that neither gain nor loss of
interest shall result from such event.

                  (f) Extension of Maturity  Date.  Notwithstanding  anything to
the contrary  contained in this Agreement,  the Maturity Date of the Commitments
of the  Banks  may be  extended  for an  additional  one  (1)  year  and  for an
additional one (1)

                                       12
<PAGE>

year on each  anniversary  date of the original  Closing  Date if Borrower,  the
Agent and the Banks agree in writing to said  extension(s) on or before ten (10)
days prior to each such anniversary date. Said  extension(s)  shall be evidenced
by an executed  amendment.  Borrower  shall  submit an  extension  request  (the
"Request")  by  delivering  written  notice  thereof to the Agent,  on or before
forty-five (45) days prior to the earlier of (i) the date the Borrower files its
Form 10-K  Annual  Report with the S.E.C.  or (ii) one hundred and twenty  (120)
days after the end of the immediately preceding fiscal year of the Borrower, and
the Agent  shall  notify  each Bank of the  Request  promptly  after the Agent's
receipt  thereof from  Borrower.  Not later than fifteen (15) days prior to each
anniversary date (the "Cut-Off Date"), each Bank may in its sole discretion,  by
written notice to the Agent, agree to the extension of the then current Maturity
Date with  respect to its  Commitment.  In order for any  extension  of the then
current Maturity Date to be effective,  at least one (1) of the Banks must elect
to extend,  in which event the then current Maturity Date shall be extended with
respect to the  Commitments of the  consenting  Bank or Banks for the period set
forth in the Request.  The failure by any Bank to deliver an extension notice to
the Agent on or prior to the Cut-Off Date shall be deemed  notice that such Bank
has declined to extend the then  current  Maturity  Date,  and a decision by any
Bank whether or not to so extend shall be in its sole  discretion.  In the event
that any of the Banks elects not to extend the  Maturity  Date (or are deemed to
have  declined to so extend),  the Agent  shall use  reasonable  efforts to find
replacement  banks (which can be one of the other Banks, if any). In such event,
if a  replacement  bank is found the parties  agree to execute and deliver  such
documentation as the Agent shall request to effectuate such replacement. If none
of the Banks agree to extend and if such a  replacement  bank is not found,  the
Maturity Date shall not be extended with respect to the  Commitment of any Bank.
If  BankBoston  shall  elect not to extend but at least one (1) other Bank shall
extend,  the agency duties of BankBoston  shall be  transferred  to a continuing
Bank upon expiration of BankBoston's  Commitment.  In connection with the making
of any  Request,  Borrower  shall  provide  to the  Agent  or  any  Bank  or any
prospective replacement bank any documents, instruments, records, information or
access to management  personnel that the Agent or such Bank or replacement  bank
may reasonably request.

                 (g) Agency and Upfront/Arrangement  Fees. Borrower shall pay to
the Agent, for its own account, an agency fee and an upfront/arrangement  fee as
agreed to separately  between  Borrower and Agent under Option C of that certain
fee letter dated January 8, 1997 between  Agent and  Borrower,  with said agency
fee to be payable  annually in advance on each  anniversary  of the Closing Date
and said  upfront/arrangement  fee to be  payable  one time only on the  Closing
Date.

 .        SECTION 2.2  REPAYMENT.

                 (a) Mandatory Repayments. The aggregate principal amount of the
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon,  shall be due and payable in full on the Maturity  Date. If at any time
the

                                       13
<PAGE>

aggregate principal amount of outstanding  Revolving Loans exceeds the Aggregate
Commitment then in effect,  Borrower shall immediately repay the Revolving Loans
in an amount equal to the excess.

                 (b)  Optional  Payment.  Borrower  may at its option  repay the
Revolving Loans, without penalty except as set forth in Section 3.7(b), in whole
or in part, on any Business Day, prior to the Maturity Date,  from time to time,
provided the Agent shall have received from Borrower  notice of any such payment
at least one (1) Business Day prior to the date of the proposed  payment if such
date is not the last day of the then current  Interest Period for each Revolving
Loan being paid, in each case specifying the date and the amount of payment. For
Base Rate  Loans,  each day shall be  defined  as and  constitute  an  "Interest
Period." Partial payments hereunder shall be in an aggregate principal amount of
not less than the  lesser  of (i)  $1,000,000  and in an  integral  multiple  of
$100,000 for a Revolving Loan  consisting of a Base Rate Loan;  (ii)  $1,000,000
and in an integral  multiple of $500,000 for a Revolving  Loan  consisting  of a
LIBOR Rate Loan; and (iii) the  outstanding  balance of the Revolving Loan being
paid. The Agent shall  promptly  inform the Banks by telecopy of receipt of each
such payment.

                 (c) Allocation of Payments. Prior to the occurrence of an Event
of Default and  acceleration of the Revolving Loans, all amounts received by the
Agent on account of the Revolving Loans,  except as set forth to the contrary in
other Sections of this  Agreement,  shall be disbursed by the Agent to the Banks
pro rata in accordance  with their  respective  Commitment  Percentages  by wire
transfer on the date of receipt if received by the Agent  before  12:00 Noon or,
if received later, by 12:00 Noon on the next  succeeding  Business Day,  without
further interest  payable by the Agent.  Following the occurrence of an Event of
Default and  acceleration of the Revolving  Loans,  all amounts  received by the
Agent on account  of the  Revolving  Loans  shall be  disbursed  by the Agent as
follows:

                     (i) first, to the payment of expenses incurred by the Agent
in the  performance  of its duties and  enforcement of the rights under the Loan
Documents,  including, without limitation, all costs and expenses of collection,
attorneys' fees and court costs;

                     (ii) then, to the Banks,  pro rata in accordance with their
respective  Commitment  Percentages  until all  outstanding  Revolving Loans and
interest accrued thereon have been paid in full; and

                     (iii)  then,  to such  Persons as may be  legally  entitled
thereto.

                 (d)  Sharing of  Payments.  Except  where a  provision  of this
Agreement  provides for non-pro rata  treatment,  if any Bank shall  receive and
retain any payment,  whether by setoff,  application  of the deposit  balance or
security,  or  otherwise,  in respect of the  Revolving  Loans in excess of such
Bank's  Commitment

                                       14
<PAGE>

Percentage thereof,  then such Bank shall purchase from the other Banks for cash
and at face value and without  recourse,  such  participation  in the  Revolving
Loans  held by them as shall be  necessary  to cause such  excess  payment to be
shared ratably as aforesaid with each of them; provided,  however,  that if such
excess  payment or part thereof is  thereafter  recovered  from such  purchasing
Bank, the related  purchases from the other Banks shall be rescinded ratably and
the  purchase  price  restored  as to the  portion  of such  excess  payment  so
recovered, but without interest. Each Bank agrees to exercise any and all rights
of setoff, counterclaim or banker's lien first fully against the Revolving Loans
held by such Bank,  and only then to any other  obligations  of Borrower to such
Bank.

         SECTION 2.3  INTEREST RATE AND PAYMENT DATES.

                 (a)  Payment  of  Interest.   Interest  with  respect  to  each
Revolving  Loan shall be payable in arrears on each  Interest  Payment  Date for
such  Revolving  Loan. In no event shall interest on a Revolving Loan exceed the
maximum rate permitted by applicable law.

                 (b) Base Rate Loans.  Revolving Loans which are Base Rate Loans
shall bear interest on the unpaid  principal  amount thereof at a rate per annum
equal to the Base Rate from the date hereof through the Maturity Date. The Agent
shall  promptly  notify  Borrower and each Bank of the amount and the  effective
date of each  adjustment in the Base Rate,  provided that no failure or delay in
giving any such notice shall affect or delay the making of any such  adjustments
or the obligation of Borrower to pay in a timely manner the interest due on such
Revolving Loans.

                 (c) LIBOR  Rate  Loans.  Revolving  Loans  which are LIBOR Rate
Loans shall bear interest for each Interest  Period with respect  thereto on the
unpaid  principal  amount  thereof  at a rate per annum  equal to the LIBOR Rate
determined for such Interest Period plus an amount determined in accordance with
following schedule:

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is less than .15 to 1.0: 35 basis points;

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is equal  to or  greater  than .15 to 1.0 but less  than .25 to
                 1.0: 42.5 basis points; and

                 If Borrower's  Consolidated Funded Debt to Consolidated Capital
                 is equal to or greater than .25 to 1.0: 50 basis points.

Said rates shall be calculated quarterly based on Borrower's performance for the
immediately preceding quarter for which Borrower has provided information to the
Agent  regarding  the  calculation  of the rate and shall be effective  five (5)
Business

                                       15
<PAGE>

Days  following  the  Agent's  receipt  of  such  financial  statements  and the
officer's  certificate required to be delivered in connection therewith pursuant
to Section 6.1(a); provided that if Borrower shall not have timely delivered its
financial  statements in accordance  with Section 6.1(a) (after giving effect to
any grace period set forth in Section 7.1(c)),  then commencing on the date upon
which such financial  statements should have been delivered and continuing until
such  financial  statements  are  actually  delivered,  it shall be assumed  for
purposes of determining said rates that Borrower's  Consolidated  Funded Debt to
Consolidated  Capital is equal to or greater than .25 to 1.0 (said  calculations
shall apply to existing as well as new LIBOR Rate Loans).

         SECTION 2.4  CONTINUATION  AND CONVERSION  OPTIONS.  Borrower may elect
from time to time to convert  outstanding  Revolving  Loans from Revolving Loans
bearing  interest at a rate  determined  by  reference to one basis to Revolving
Loans bearing interest at a rate determined by reference to an alternative basis
if Borrower gives the Agent (a) at any time irrevocable notice of an election to
convert  LIBOR Rate  Loans to Base Rate  Loans and (b) at least  three (3) LIBOR
Business Days prior irrevocable notice of an election to convert Base Rate Loans
to LIBOR Rate Loans,  provided  that any  conversion of LIBOR Rate Loans to Base
Rate Loans shall only be made on the last day of an Interest Period with respect
thereto, and provided further that no Base Rate Loan may be converted to a LIBOR
Rate Loan so long as an Event of  Default  or  Potential  Event of  Default  has
occurred and is continuing. Borrower may elect from time to time to continue its
outstanding  LIBOR Rate  Loans upon the  expiration  of the  Interest  Period(s)
applicable  thereto  if  Borrower  gives  to the  Agent  irrevocable  notice  of
continuation  of such a LIBOR Rate at least three (3) LIBOR  Business Days prior
to the expiration  thereof and so long as an Event of Default or Potential Event
of Default has not  occurred  and is not  continuing.  Each  notice  electing to
convert  or  continue  a  Revolving  Loan  shall   specify:   (i)  the  proposed
conversion/continuation  date;  (ii)  the  amount  of the  Revolving  Loan to be
converted/continued;  (iii) the nature of the proposed  continuation/conversion;
and (iv) in the case of a conversion to, or  continuation  of a LIBOR Rate Loan,
the  requested  Interest  Period,  and shall certify that no Event of Default or
Potential Event of Default has occurred and is continuing.  On the date on which
such  conversion or  continuation is being made the Agent shall take such action
as is necessary to effect such conversion or continuation.  In the event that no
notice of  continuation  or  conversion is received by the Agent with respect to
outstanding  LIBOR  Rate  Loans,  upon  expiration  of  the  Interest  Period(s)
applicable  thereto,  such LIBOR Rate Loans  shall  convert to Base Rate  Loans.
Subject to the  limitations  set forth in this Section and in the  definition of
Interest Period, all or any part of outstanding Revolving Loans may be converted
or  continued  as  provided  herein,   provided  that  partial   conversions  or
continuations  shall be in an  aggregate  principal  amount of not less than (A)
$1,000,000  and  in an  integral  multiple  of  $100,000  for a  Revolving  Loan
consisting of a Base Rate Loan; (B)  $1,000,000  and in an integral  multiple of
$500,000  above  such  amount for a LIBOR  Rate  Loan;  and (C) the  outstanding
balance of the Revolving Loan being converted or continued.

                                       16
<PAGE>

                                   ARTICLE III

                GENERAL PROVISIONS CONCERNING THE REVOLVING LOANS

         SECTION  3.1 USE OF  PROCEEDS.  The  proceeds  of the  Revolving  Loans
hereunder shall be used by Borrower for general corporate purposes.

         SECTION 3.2 POST  MATURITY  INTEREST.  Notwithstanding  anything to the
contrary  contained in Section 2.3, if all or a portion of the principal  amount
of any of the Revolving  Loans made  hereunder or any interest  accrued  thereon
shall not be paid when due (whether at the stated  maturity,  by acceleration or
otherwise),  any such  overdue  amount  shall bear  interest at a rate per annum
which is equal to the greater of (a) two percent (2%) above the rate which would
otherwise be  applicable  pursuant to Section 2.3 and (b) two percent (2%) above
the Base Rate,  from the date of such  nonpayment  until paid in full  (after as
well as before judgment),  payable on demand. In addition,  such Revolving Loan,
if a LIBOR Rate Loan,  shall be  converted to a Base Rate Loan at the end of the
then current Interest Period therefor.

         SECTION 3.3 COMPUTATION OF INTEREST.

                 (a)  Calculations.  Interest  in respect of the Base Rate Loans
shall be  calculated on the basis of a 365-day year for the actual days elapsed.
Any change in the interest rate on a Base Rate Loan  resulting  from a change in
the Base Rate shall become effective as of the opening of business on the day on
which such change in the Base Rate shall become effective. Interest with respect
of the LIBOR Rate Loans shall be  calculated  on the basis of a 360-day year for
the actual days elapsed.

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

         SECTION 3.4  PAYMENTS.  Borrower  shall make each payment of principal,
interest and fees referred to in Section 2.2 due from it hereunder and under the
Revolving Notes, without setoff or counterclaim,  not later than 12:00 P.M. (San
Francisco  time) on the day when due in  lawful  money of the  United  States of
America  to the  Agent,  on  behalf  of the  Banks,  at the  office of the Agent
designated from time to time in immediately available funds.

         SECTION 3.5  PAYMENT ON NON-BUSINESS  DAYS.  Whenever any payment to be
made  hereunder or under the Revolving  Notes shall be stated to be due on a day
which is not a Business  Day,  such  payment may be made on the next  succeeding
Business Day, and with respect to payments of principal,  interest thereon shall
be payable at the then applicable rate during such extension.

                                       17
<PAGE>

         SECTION 3.6 REDUCED RETURN.  If any Bank shall have determined that any
new or additional  applicable law,  regulation,  rule or regulatory  requirement
(collectively in this Section 3.6, "Requirement") regarding capital adequacy, or
any  change  therein,  or any  change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the  interpretation or administration  thereof,  or compliance by said Bank
with any new or  additional  request or  directive  regarding  capital  adequacy
(whether or not having the force of law) of any such authority,  central bank or
comparable  agency,  has or would have the effect of reducing the rate of return
on said  Bank's  capital as a  consequence  of its  Commitment  and  obligations
hereunder  to a level  below that which  would have been  achieved  but for such
Requirement,  change  or  compliance  (taking  into  consideration  said  Bank's
policies  with respect to capital  adequacy) by an amount deemed by said Bank to
be  material  (which  amount  shall  be  determined  by said  Bank's  reasonable
allocation of the aggregate of such reductions resulting from such events), then
from time to time, within thirty (30) Business Days after written demand by said
Bank,  Borrower  shall pay to the  Agent on behalf of said Bank such  additional
amount  or  amounts   as  will   compensate   said  Bank  for  such   reduction.
Notwithstanding the foregoing,  no additional compensation will be required from
Borrower under this Section 3.6 if the reason for said  additional  compensation
was based solely on said Bank's  failure to comply with any existing or new law,
treaty, rule or regulation or requirement. In addition, said Bank shall promptly
notify Borrower of any proposed request for compensation  under this Section 3.6
and shall provide Borrower with reasonable support therefor. Any request by said
Bank for additional compensation shall be structured to allocate such additional
costs over the term of the credit affected thereby.

         SECTION 3.7  INDEMNITIES.

                 (a)  General.  Whether  or not  the  transactions  contemplated
hereby shall be  consummated,  Borrower  agrees to  indemnify,  pay and hold the
Agent and the Banks, and the shareholders,  officers,  directors,  employees and
agents of same,  harmless  from and  against  any and all  claims,  liabilities,
losses, damages, costs and expenses (whether or not any of the foregoing Persons
is a  party  to  any  litigation),  including,  without  limitation,  reasonable
attorneys'  fees  and  costs  (including.  without  limitation,  the  reasonable
estimate of the allocated cost of in-house legal counsel and staff) and costs of
investigation,  document  production,  attendance  at  a  deposition,  or  other
discovery,  with  respect to or arising out of (i) any proposed  acquisition  by
Borrower or any of its Consolidated Subsidiaries of any Person or any securities
(including a self-tender), (ii) this Agreement or any use of proceeds hereunder,
or (iii) any claim,  demand,  action or cause of action being  asserted  against
Borrower or any of its Consolidated Subsidiaries (collectively, the "Indemnified
Liabilities"),  provided that Borrower  shall have no obligation  hereunder with
respect to Indemnified  Liabilities arising from the gross negligence or willful
misconduct  of any such Persons.  If any claim is made,  or any action,  suit or
proceeding is brought against any Person  indemnified  pursuant to this Section,
the  indemnified   Person  shall

                                       18
<PAGE>

notify  Borrower of such claim or of the  commencement  of such action,  suit or
proceeding,  and  Borrower  will  assume  the  defense of such  action,  suit or
proceeding,  employing counsel selected by Borrower and reasonably  satisfactory
to the indemnified  Person, and pay the fees and expenses of such counsel.  This
covenant  shall  survive  termination  of  this  Agreement  and  payment  of the
outstanding Revolving Notes.

                 (b) Funding Losses.  Borrower agrees to indemnify the Agent and
the Banks and to hold the Agent and the Banks  harmless from any loss or expense
including, but not limited to, any such loss or expense arising from interest or
fees  payable  by the Banks to  lenders  of funds  obtained  by them in order to
maintain their LIBOR Rate Loans hereunder,  which the Banks may sustain or incur
as a consequence  of (i) default by Borrower in payment of the principal  amount
of or interest on the LIBOR Rate Loans of the Banks, (ii) default by Borrower in
making a conversion or  continuation  after Borrower has given a notice thereof,
(iii)  default by  Borrower  in making any payment  after  Borrower  has given a
notice of payment or (iv) Borrower  making any payment of a LIBOR Rate Loan on a
day other than the last day of the Interest  Period for such Revolving Loan. For
purposes of this  Section and Section  3.10,  it shall be assumed that the Banks
had funded or would have  funded one hundred  percent  (100%) of each LIBOR Rate
Loan in the London  interbank  market for a  corresponding  amount and term. The
determination  of such amount by the affected Bank shall be presumed  correct in
the absence of manifest  error.  Any Person  making a claim for  indemnification
hereunder must provide reasonably detailed information  describing such claim to
the Borrower  prior to requiring  Borrower to pay any such claim.  This covenant
shall  survive  termination  of the  Agreement  and  payment of the  outstanding
Revolving Notes.

         SECTION 3.8 FUNDING SOURCES.  Nothing in this Agreement shall be deemed
to  obligate  any  Bank  to  obtain  the  funds  for any  Revolving  Loan in any
particular place or manner or to constitute a representation by any Bank that it
has obtained or will obtain the funds for any Revolving  Loan in any  particular
place or manner.

         SECTION 3.9 INABILITY TO DETERMINE INTEREST RATE. In the event that the
Agent shall have determined (which determination shall be conclusive and binding
upon  Borrower  and the Banks)  that by reason of  circumstances  affecting  the
interbank  LIBOR  market,  adequate  and  reasonable  means  do  not  exist  for
ascertaining the LIBOR Rate applicable  pursuant to Section 2.3 for any Interest
Period with respect to a LIBOR Rate Loan that will result from a requested LIBOR
Rate Loan or that such rate of interest  does not  adequately  cover the cost of
funding  such  Revolving  Loan,  the Agent shall  forthwith  give notice of such
determination  to Borrower not later than 1:00 P.M. San  Francisco  time, on the
requested  Borrowing  date, the requested  conversion date or the last day of an
Interest  Period of a Revolving Loan which was to have been continued as a LIBOR
Rate Loan. If such notice is given and has not been  withdrawn (a) any requested
LIBOR  Rate Loan shall

                                       19
<PAGE>

be made as a Base Rate Loan, or, at Borrower's option, such Revolving Loan shall
not be made,  (b) any Revolving  Loan that was to have been converted to a LIBOR
Rate Loan,  shall be continued  as, or converted  into, a Base Rate Loan and (c)
any outstanding LIBOR Rate Loan shall be converted,  on the last day of the then
current  Interest Period with respect  thereto,  to a Base Rate Loan. Until such
notice has been  withdrawn  by the Agent,  no further  LIBOR Rate Loans shall be
made and  Borrower  shall not have the right to  convert a  Revolving  Loan to a
LIBOR Rate Loan.  The Agent will review the  circumstances  affecting the London
interbank  market from time to time and the Agent will  withdraw  such notice at
such  time as it shall  determine  that the  circumstances  giving  rise to said
notice no longer exist.

         SECTION 3.10 REQUIREMENTS OF LAW. In the event that any law, regulation
or  directive  or any change  therein or in the  interpretation  or  application
thereof or compliance by any Bank with any request or directive  (whether or not
having the force of law) from any central bank or other governmental  authority,
agency or instrumentality:

                 (a) does or shall  subject  said Bank to any new or  additional
tax of any kind whatsoever with respect to this Agreement, any Revolving Note or
any Revolving Loan made  hereunder,  or change the basis of taxation of payments
to said Bank of principal,  commitment fee, non-utilization fee, interest or any
other  amount  payable  hereunder  (except for changes in the rate of tax on the
overall net income of said Bank);

                 (b)  does  or  shall  impose,  modify  or hold  applicable  any
reserve,  assessment rate, special deposit, compulsory loan or other requirement
(collectively in this Section 3.10,  "Requirements")  against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit  extended by, or any other  acquisition  of funds by, any office of
said Bank which  Requirements are not otherwise included in the determination of
any LIBOR  Rate at the last  Borrowing,  conversion  or  continuation  date of a
Revolving Loan;

                 (c) does or shall impose,  modify or hold applicable any of the
Requirements against the Commitments; or

                 (d)  does  or  shall  impose  on said  Bank  any  other  new or
additional condition;

and the result of any of the  foregoing  is to increase the cost to said Bank of
making,  renewing or  maintaining  its  Commitment or the LIBOR Rate Loans or to
reduce any amount receivable thereunder by an amount determined by said Bank, in
its sole  discretion,  to be  material  (which  increase or  reduction  shall be
determined  by the Bank's  reasonable  allocation  of the aggregate of such cost
increases or reduced amounts  receivable  resulting from such events),  then, in
any such case,  Borrower  shall pay to the Agent on behalf of said Bank,  within
thirty (30) Business Days of its

                                       20
<PAGE>

demand,  any  additional  amounts  necessary  to  compensate  said Bank for such
additional  cost or reduced  amount  receivable  as determined by said Bank with
respect to this Agreement. If said Bank becomes entitled to claim any additional
amounts  pursuant to this  subsection,  it shall notify Borrower of the event by
reason  of which it has  become  so  entitled.  A  statement  incorporating  the
calculation  as to any  additional  amounts  payable  pursuant to the  foregoing
sentence  submitted by said Bank to Borrower  shall be conclusive in the absence
of manifest error.  Notwithstanding  the foregoing,  no additional  compensation
will be required  from  Borrower  under this Section 3.10 if the reason for said
additional  compensation  was based solely on said Bank's failure to comply with
any existing or new law, treaty, rule or regulation or requirement. In addition,
said  Bank  shall  promptly  notify   Borrower  of  any  proposed   request  for
compensation  under this Section 3.10 and shall provide Borrower with reasonable
support therefor. Any request by said Bank for additional  compensation shall be
structured  to  allocate  such  additional  costs  over the  term of the  credit
affected thereby.

         SECTION 3.11 ILLEGALITY.  Notwithstanding  any other provisions herein,
if any law,  regulation,  treaty or  directive  or any change  therein or in the
interpretation  or application  thereof,  shall make it unlawful,  impossible or
impracticable  for any Bank to make or maintain LIBOR Rate Loans as contemplated
by this Agreement,  (a) the commitment of said Bank hereunder to make LIBOR Rate
Loans or  convert  Base  Rate  Loans to LIBOR  Rate  Loans  shall  forthwith  be
suspended and (b) said Bank's  Revolving  Loans then  outstanding  as LIBOR Rate
Loans, if any, shall be converted  automatically  to Base Rate Loans on the next
succeeding  Interest  Payment Date or within such  earlier  period as allowed by
law.  Borrower hereby agrees to pay said Bank,  within thirty (30) Business Days
of its demand,  any additional amounts necessary to compensate said Bank for any
costs  incurred by said Bank in making any  conversion in  accordance  with this
Section,  including,  but not limited to, any  interest or fees  payable by said
Bank to lenders of funds  obtained by it in order to make or maintain  its LIBOR
Rate Loans hereunder (said Bank's notice of such costs, as certified to Borrower
to be conclusive  absent  manifest  error).  Notwithstanding  the foregoing,  no
additional  compensation  will be required from Borrower under this Section 3.11
if the reason for said additional  compensation  was based solely on said Bank's
failure to comply with any existing or new law,  treaty,  rule or  regulation or
requirement.  In  addition  said Bank  shall  promptly  notify  Borrower  of any
proposed  request for  compensation  under this Section  3.11 and shall  provide
Borrower  with  reasonable  support  therefor.  Any  request  by said  Bank  for
additional  compensation  shall be structured to allocate such additional  costs
over the term of the credit affected thereby.

         SECTION 3.12  SUBSTITUTION OF BANKS.  Upon the receipt by Borrower from
any Bank (an "Affected  Bank") of a claim for  compensation  pursuant to Section
3.6 or 3.10 or a notice  pursuant to Section 3.11  Borrower may: (a) request the
Agent and/or Affected Bank to use its best efforts to obtain a replacement  bank
or financial  institution  satisfactory to Borrower to acquire and assume all or
part of such

                                       21
<PAGE>

Affected  Bank's  Revolving  Loans and Commitment (a  "Replacement  Bank");  (b)
request one or more of the other Banks to acquire and assume all or part of such
Affected Bank's  Revolving Loans and Commitment,  or (c) designate a Replacement
Bank. Any such  designation of a Replacement  Bank under clause (a) or (c) shall
be subject to the prior written consent of the Agent (which consent shall not be
unreasonably  withheld).  If no such  Replacement Bank is obtained within thirty
(30) days  following  receipt of such claim or notice,  Borrower  shall have the
right to prepay,  without  penalty  except as set forth in Section  3.7(b),  the
Revolving Loans, in whole or in part, and reduce or terminate the Commitment, of
the Affected Bank.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

         SECTION 4.1 CONDITIONS  PRECEDENT TO  EFFECTIVENESS  OF THIS AGREEMENT.
The effectiveness of this Agreement is subject to the conditions precedent that:

                 (a) The Agent (which shall promptly distribute such information
to each of the Banks) shall have received, for and on behalf of the Banks, on or
before the date of this  Agreement,  the  following,  each dated such day and in
form and substance satisfactory to the Agent:

                     (i) The Revolving  Notes issued by Borrower to the order of
the respective Banks;

                     (ii) A copy of the Certificate of Incorporation,  certified
as of a recent date by the Secretary of the State of Delaware;

                     (iii) A copy of the Bylaws of the  Borrower,  certified  by
the Secretary or Assistant Secretary of the Borrower;

                     (iv) Copies of  resolutions  of the Board of  Directors  or
other  authorizing  documents of Borrower  approving the Loan  Documents and the
Borrowings hereunder;

                     (v) Borrower's  certificate that the copy of the incumbency
certificate  executed by the Secretary or an Assistant  Secretary of Borrower or
equivalent  document,  certifying  the names and  signatures  of the officers of
Borrower or other Persons  authorized  to sign the Loan  Documents and the other
documents to be delivered hereunder  heretofore provided to the Agent is in full
force and effect and has not been amended and/or supplemented;

                     (vi) Executed copies of all Loan Documents; and

                                       22
<PAGE>

                     (vii) An  executed  letter  agreement  with the Prior Agent
relating to the  termination of its role as agent under the Prior  Agreement and
with Wells Fargo Bank, National Association,  relating to the termination of its
role as a Bank under the Prior  Agreement  and cross  indemnities  in connection
therewith.

                 (b) All corporate and legal proceedings and all instruments and
documents in connection  with the  transactions  contemplated  by this Agreement
shall be reasonably satisfactory in content, form and substance to the Agent and
its  counsel,  and the Agent and such  counsel  shall have  received any and all
further information and documents which the Agent or such counsel may reasonably
have requested in connection  therewith,  such documents where appropriate to be
certified by proper corporate or governmental authorities.

                 (c) No  Revolving  Loans  shall  be  outstanding  as of the day
immediately prior to the Closing Date.

                 (d) Borrower shall have paid the upfront/arrangement fee to the
Agent described in Section 2.1(g).

         SECTION 4.2 CONDITIONS PRECEDENT TO EACH  BORROWING.  The obligation of
any Bank to make a Revolving Loan on the occasion of each  Borrowing  (including
the initial Borrowing) shall be subject to the further conditions precedent that
on the date of such Borrowing (a) the following statements shall be true and the
Agent,  on behalf of the Banks,  shall have  received  the  notice  required  by
Section 2.1(b),  which notice shall be deemed to be a certification  by Borrower
that:

                     (i) The representations and warranties contained in Section
5.1 are correct on and as of the date of such Borrowing as though made on and as
of such date (except to the extent such representations and warranties expressly
refer to an earlier  date,  in which  case they shall be true and  correct as of
such  earlier date and except that  Section  5.1(e)  shall be deemed  instead to
refer to the last day of the most  recent  fiscal  year and fiscal  quarter  for
which financial statements have then been delivered),

                     (ii) No event  has  occurred  and is  continuing,  or would
result from such Borrowing,  which  constitutes an Event of Default or Potential
Event of Default, and

                     (iii) All Loan Documents are in full force and effect,

and (b) the Agent shall have received  such other  approvals or documents as the
Agent may reasonably request.

                                       23
<PAGE>

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         SECTION 5.1  REPRESENTATIONS  AND  WARRANTIES.  In order to induce each
Bank to make the Revolving Loans, Borrower represents and warrants as follows:

                 (a) Organization.  Borrower is duly organized, validly existing
and in good standing under the laws of the state of its  formation.  Borrower is
also duly  authorized,  qualified and licensed in all applicable  jurisdictions,
and under  all  applicable  laws,  regulations,  ordinances  or orders of public
authorities,  to  carry  on its  business  in the  locations  and in the  manner
presently  conducted,  to  the  extent  that  the  failure  to do so  would  not
reasonably  be  expected  to  have  a  Material  Adverse  Effect.   All  of  the
Subsidiaries  and  Consolidated  Subsidiaries  of Borrower and the percentage of
Borrower's  ownership  interest  therein  as of the date of this  Agreement  are
identified on Exhibit 3.

                 (b) Authorization.  The execution,  delivery and performance by
Borrower of the Loan  Documents,  and the making of  Borrowings  hereunder,  are
within Borrower's  corporate powers,  have been duly authorized by all necessary
corporate   action  and  do  not  contravene   (i)  Borrower's   certificate  of
incorporation,  bylaws  or  other  organizational  documents  or (ii) any law or
regulation (including Regulations G, T, U and X) or any contractual  restriction
binding on or affecting Borrower.

                 (c)  Governmental  Consents.  No  authorization  or approval or
other action by, and no notice to or filing with, any governmental  authority or
regulatory  body (except  routine  reports  required  pursuant to the Securities
Exchange Act of 1934, as amended (if such act is applicable to Borrower),  which
reports will be made in the ordinary course of business) is required for the due
execution, delivery and performance by Borrower of the Loan Documents.

                 (d) Validity. The Loan Documents are the binding obligations of
Borrower,  enforceable in accordance with their respective terms; except in each
case  as  such   enforceability  may  be  limited  by  bankruptcy,   insolvency,
reorganization,  liquidation,  moratorium  or  other  similar  laws  of  general
application and equitable principles relating to or affecting creditors' rights.

                 (e) Financial Condition.  The balance sheet of Borrower and its
Consolidated Subsidiaries as at the fiscal year ended December 29, 1996, and the
related  statements of income,  cash flows and stockholders'  equity of Borrower
and its  Consolidated  Subsidiaries to that date for the fiscal year then ended,
copies of which  have been  furnished  to the  Agent  and to the  Banks,  fairly
present the financial condition of Borrower and its Consolidated Subsidiaries as
of such date and the

                                       24
<PAGE>

results of the operations of Borrower and its Consolidated  Subsidiaries for the
respective period ended on such date, all in accordance with GAAP,  consistently
applied.  Since December 29, 1996,  there has been no material adverse change in
the  business,  operations,   properties,  assets  or  condition  (financial  or
otherwise) of Borrower and its Consolidated Subsidiaries, taken as a whole.

                 (f) Litigation. Except as set forth in the financial statements
delivered on or prior to the date hereof,  to the best of  Borrower's  knowledge
there is no pending or threatened action or proceeding affecting Borrower or any
of its  Consolidated  Subsidiaries  before  any  court,  governmental  agency or
arbitrator,  which could  reasonably be expected to materially  adversely affect
the  consolidated  financial  condition or operations of Borrower or which could
reasonably be expected to have a material  adverse effect on Borrower's  ability
to perform its obligations under the Loan Documents, having regard for its other
financial obligations (a "Material Adverse Effect").

                 (g)  Employee  Benefit  Plans.  Borrower  and each of its ERISA
Affiliates  is in  compliance  in all  material  respects  with  any  applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No Termination Event has occurred or
is  reasonably  expected to occur with  respect to any  Pension  Plan that would
reasonably be expected to have a Material Adverse Effect.

                 (h)  Disclosure.  No  representation  or  warranty  of Borrower
contained  in this  Agreement  or any other  document,  certificate  or  written
statement  furnished  to the Agent and the Banks by or on behalf of Borrower for
use in connection with the transactions  contemplated by this Agreement contains
any untrue statement of a material fact or omits to state a material fact (known
to Borrower in the case of any document not  furnished by it) necessary in order
to make the statements  contained herein or therein not misleading.  To the best
of Borrower's knowledge,  there is no fact known to Borrower (other than matters
of a general economic nature) which materially  adversely  affects the business,
operations,  property,  assets or condition (financial or otherwise) of Borrower
and its  Consolidated  Subsidiaries,  taken  as a  whole,  which  has  not  been
disclosed  herein  or in  such  other  documents,  certificates  and  statements
furnished to the Agent and the Banks for use in connection with the transactions
contemplated hereby.

                 (i) Margin Stock.  The aggregate  value of all margin stock (as
defined in  Regulation  U) directly  or  indirectly  owned by  Borrower  and its
Consolidated  Subsidiaries is less than 25% of the aggregate value of Borrower's
assets.

                 (j) Environmental Matters. Except as set forth in the financial
statements  delivered  on or prior to the date  hereof and  except  for  certain
claims  associated  with  Great  Western  Chemical,  neither  Borrower  nor  any
Consolidated

                                       25
<PAGE>

Subsidiary,  nor, to the best of their knowledge, any other person, has treated,
stored, processed,  discharged,  spilled, or otherwise disposed of any substance
defined as hazardous or toxic by any  applicable  federal,  state or local rule,
regulation,  order or directive, or any waste or by-product thereof, at any real
property  or any  other  facility  owned,  leased  or  used by  Borrower  or any
Consolidated Subsidiary,  in violation of any applicable statutes,  regulations,
ordinances  or  directives  of  any  governmental   authority  or  court,  which
violations may result in liability to Borrower or any Consolidated Subsidiary in
an amount for all such  violations  that could  reasonably be expected to have a
Material  Adverse  Effect;  and  the  unresolved  violations  set  forth  in the
financial statements delivered on or prior to the date hereof will not result in
liability to Borrower or any  Consolidated  Subsidiary in an amount for all such
unresolved  violations  that could  reasonably  be  expected  to have a Material
Adverse Effect.  Except as set forth in the financial statements delivered on or
prior to the date  hereof,  no employee or other person has ever made a claim or
demand against Borrower or any  Consolidated  Subsidiary based on alleged damage
to health  caused by any such  hazardous  or toxic  substance or by any waste or
by-product  thereof in an amount  that could  reasonably  be  expected to have a
Material Adverse Effect;  and the unsatisfied claims or demands against Borrower
or any Consolidated  Subsidiary set forth in the financial  statements delivered
on or  prior to the date  hereof  will not  result  in  uninsured  liability  to
Borrower or any  Consolidated  Subsidiary or any of their  respective  officers,
employees,  representatives,  agents or  shareholders  in an amount  that  could
reasonably  be  expected  to  have  a  Material  Adverse  Effect  for  all  such
unsatisfied claims or demands.  Except as set forth in the financial  statements
delivered on or prior to the date hereof,  neither Borrower nor any Consolidated
Subsidiary has been charged by any governmental authority with improperly using,
handling,  storing,  discharging  or  disposing  of any such  hazardous or toxic
substance  or waste or  by-product  thereof or with  causing or  permitting  any
pollution of any body of water in an amount that could reasonably be expected to
have a Material  Adverse Effect;  and the  outstanding  charges set forth in the
financial statements delivered on or prior to the date hereof will not result in
liability to Borrower or any Consolidated  Subsidiary or any of their respective
officers, employees,  representatives,  agents or shareholders in an amount that
could  reasonably  be  expected to have a Material  Adverse  Effect for all such
outstanding charges.

                 (k) Employee  Matters.  There is no strike or work  stoppage in
existence or, to the best of Borrower's knowledge, threatened involving Borrower
or its  Consolidated  Subsidiaries  that would  reasonably be expected to have a
Material Adverse Effect.

                 (l) Status of Dastek,  Inc. Dastek (M) and DHC. Neither Dastek,
Inc. nor Dastek (M) is an active  operating  business.  To the best knowledge of
the  Borrower,  none of  Dastek,  Inc.,  Dastek  (M) or DHC  have  any  material
outstanding liabilities in favor of any Persons that are not affiliated with the
DHC joint-venture.

                                       26
<PAGE>

                                   ARTICLE VI

                                    COVENANTS

         SECTION 6.1 AFFIRMATIVE COVENANTS.  So long as any Revolving Note shall
remain unpaid or the Banks shall have any Commitment  hereunder,  Borrower will,
unless the Majority Banks shall otherwise consent in writing:

                 (a) Financial Information. Furnish to the Agent and each of the
Banks:

                     (i) as soon  as  available,  but in any  event  within  one
hundred twenty (120) days after the end of each fiscal year of Borrower,  a copy
of  Borrower's  consolidated  balance  sheet  of  itself  and  its  Consolidated
Subsidiaries  as at the end of each  fiscal  year and the  related  consolidated
statements of income,  stockholders' equity and statement of cash flows for such
year,  setting  forth  in each  case in  comparative  form the  figures  for the
previous year, accompanied by an unqualified report and opinion thereon of Ernst
& Young or other  independent  certified  public  accountants  acceptable to the
Majority Banks;

                     (ii) as soon as  available,  but in any event  within sixty
(60)  days  after  the end of each of  Borrower's  fiscal  quarters,  Borrower's
unaudited consolidated balance sheet of itself and its Consolidated Subsidiaries
as at the end of such period and the related unaudited  consolidated  statements
of income,  stockholders' equity and statement of cash flows for such period and
year to date,  setting forth in each case in comparative  form the figures as at
the end of the previous  fiscal year as to the balance sheet and the figures for
the previous  corresponding  period as to the other  statements,  certified by a
duly  authorized  officer of Borrower  as being  fairly  stated in all  material
respects  subject to year end adjustments;  all such financial  statements to be
complete and correct in all material  respects and to be prepared in  reasonable
detail  acceptable  to the Majority  Banks and in  accordance  with GAAP applied
consistently  throughout the periods  reflected  therein  (except as approved by
such accountants and disclosed therein);

                     (iii)  together with each delivery of financial  statements
of Borrower and its Consolidated  Subsidiaries  pursuant to subdivisions (i) and
(ii) above, (A) an officer's  certificate stating that the signers have reviewed
the terms of the Loan  Documents and have made, or caused to be made under their
supervision,  a review in reasonable detail of the transactions and condition of
Borrower and its Consolidated  Subsidiaries during the accounting period covered
by such  financial  statements  and  that  such  review  has not  disclosed  the
existence during or at the end of such accounting  period,  and that the signers
do  not  have  knowledge  of  the  existence  as at the  date  of the  officer's
certificate,  of any existing  condition or event which  constitutes an Event of
Default  or  Potential  Event of  Default,  or, if any such  condition  or event
existed or exists,  specifying  the nature and period of  existence

                                       27
<PAGE>

thereof and what action  Borrower has taken, is taking and proposes to take with
respect  thereto;  and  (B) a  compliance  certificate,  in form  and  substance
satisfactory  to Agent,  setting  forth in such  detail as Agent may request the
calculation  of  the  ratios  and  amounts  necessary  to  determine  Borrower's
compliance  with Sections  6.2(b),  6.2(c) and 6.2(i) hereof for the  accounting
period  covered by such  financial  statements,  certified by  Borrower's  chief
executive officer or chief financial officer; and

                     (iv) as soon as  available,  copies  of all  reports  which
Borrower  sends to any of its  security  holders,  and copies of all reports and
registration  statements  which Borrower or any Subsidiary files with the S.E.C.
or any national  securities  exchange,  including,  but not limited to: Form 8-K
Current  Report,  Form 10-K Annual Report,  Form 10-Q Quarterly  Report,  Annual
Report to Shareholders, Proxy Statements, and Registration Statements.

                 (b) Notices and  Information.  Deliver to the Agent and each of
the Banks:

                     (i)  promptly  upon  any  officer  of  Borrower   obtaining
knowledge (A) of any condition or event which constitutes an Event of Default or
existing Potential Event of Default, (B) that any Person has given any notice to
Borrower or any  Consolidated  Subsidiary or taken any other action with respect
to a claimed  default or event or condition  of the type  referred to in Section
7.1(e), (C) of the institution of any litigation  involving an alleged liability
(including   possible  forfeiture  of  property)  of  Borrower  or  any  of  its
Consolidated  Subsidiaries  equal to or greater than  $4,000,000  or any adverse
determination in any litigation  involving a potential  liability of Borrower or
any of its Consolidated Subsidiaries equal to or greater than $4,000,000, or (D)
of a material adverse change in the business, operations,  properties, assets or
condition   (financial   or   otherwise)   of  Borrower  and  its   Consolidated
Subsidiaries,  taken as a whole, an officer's certificate  specifying the nature
and period of existence of any such condition or event, or specifying the notice
given or action  taken by such  holder or Person and the nature of such  claimed
default, Event of Default,  Potential Event of Default, event or condition,  and
what action  Borrower  has taken,  is taking and  proposes to take with  respect
thereto;

                     (ii) promptly upon becoming  aware of the  occurrence of or
forthcoming  occurrence  of  any  (A)  Termination  Event,  or  (B)  "prohibited
transaction,"  as such term is defined in Section 4975 of the  Internal  Revenue
Code or Section 406 of ERISA,  in connection  with any Employee  Benefit Plan or
any trust created  thereunder,  a written notice  specifying the nature thereof,
what action  Borrower  has taken,  is taking or  proposes  to take with  respect
thereto, and, when known, any action taken or threatened by the Internal Revenue
Service,  the Department of Labor, or the Pension Benefit  Guaranty  Corporation
with respect thereto;

                                       28
<PAGE>

                     (iii) with reasonable  promptness copies of (A) all notices
received  by  Borrower or any of its ERISA  Affiliates  of the  Pension  Benefit
Guaranty  Corporation's intent to terminate any material Pension Plan or to have
a trustee  appointed  to  administer  any  Pension  Plan;  (B) each  Schedule  B
(Actuarial  Information)  to the  annual  report  (Form  5500  Series)  filed by
Borrower or any of its ERISA  Affiliates with the Internal  Revenue Service with
respect to each material  Pension Plan; and (C) all notices received by Borrower
or any of its ERISA Affiliates from a Multiemployer  Plan sponsor concerning the
material  imposition  or material  amount of  withdrawal  liability  pursuant to
Section 4202 of ERISA;

                     (iv)  promptly,  and in any event  within  thirty (30) days
after  receipt  thereof,  a copy of any notice,  summons,  citation,  directive,
letter or other form of communication  from any governmental  authority or court
in any way concerning any material action or omission on the part of Borrower or
any of its Consolidated Subsidiaries in connection with any substance defined as
toxic  or  hazardous  by any  applicable  federal,  state or  local  law,  rule,
regulation, order or directive or any waste or by-product thereof, or concerning
the filing of a material lien upon, against or in connection with Borrower,  its
Consolidated  Subsidiaries,  or any of their  leased or owned  real or  personal
property,  in connection with a Hazardous  Substance Superfund or a Post-Closure
Liability Fund as maintained  pursuant to ss. 9507 of the Internal Revenue Code;
and

                     (v)  promptly,  and in any event within ten (10) days after
request,  such other  information and data with respect to the business  affairs
and financial  condition of Borrower or any of its Consolidated  Subsidiaries as
from time to time may be reasonably requested by the Agent and a Bank.

                 (c) Corporate Existence, Etc. At all times preserve and keep in
full force and effect  Borrower's and its Consolidated  Subsidiaries'  corporate
existence and rights and franchises material to Borrower's business and those of
each of its Consolidated  Subsidiaries;  provided,  however,  that the corporate
existence  of any  such  Consolidated  Subsidiary  may  be  terminated  if  such
termination  is  in  the  best  interest  of  Borrower  and  is  not  materially
disadvantageous to the holder of any Revolving Note.

                 (d)  Payment of Taxes and  Claims.  Pay,  and cause each of its
Consolidated  Subsidiaries  (except  Dastek  (M) and  DHC) to  pay,  all  taxes,
assessments  and  other  governmental  charges  imposed  upon  it or  any of its
properties or assets or in respect of any of its franchises, business, income or
property  before  any  penalty  or  interest  accrues  thereon,  and all  claims
(including,  without  limitation,  claims for  labor,  services,  materials  and
supplies)  for sums which have  become due and  payable and which by law have or
may become a lien upon any of its  properties or assets,  prior to the time when
any penalty or fine shall be incurred  with respect  thereto;  provided  that no
such  charge  or  claim  need be paid  if  being  contested  in  good  faith  by
appropriate proceedings promptly instituted and diligently conducted and if such

                                       29
<PAGE>

reserve  or  other  appropriate  provision,  if any,  as shall  be  required  in
conformity with GAAP shall have been made therefor.

                 (e) Maintenance of Properties;  Insurance. Maintain or cause to
be  maintained  in  good  repair,  working  order  and  condition  all  material
properties  used or useful in the  business  of  Borrower  and its  Consolidated
Subsidiaries  (except  Dastek  (M) and DHC) and from  time to time  will make or
cause to be made all appropriate  repairs,  renewals and  replacements  thereof.
Borrower will maintain or cause to be  maintained,  with  financially  sound and
reputable  insurers,  insurance  with respect to its properties and business and
the properties and business of its Consolidated  Subsidiaries (except Dastek (M)
and DHC)  against  loss or damage of the kinds  customarily  insured  against by
corporations of established reputation engaged in the same or similar businesses
and  similarly  situated,  of such types and in such amounts as are  customarily
carried under similar circumstances by such other corporations.

                 (f)   Inspection.   Permit   any   authorized   representatives
designated  by the  Agent  and/or  any  Bank to  visit  and  inspect  any of the
properties of Borrower or any of its  Consolidated  Subsidiaries  (except Dastek
(M) and DHC),  including its and their financial and accounting records,  and to
make copies and take extracts  therefrom,  and to discuss its and their affairs,
finances  and  accounts  with its and  their  officers  and  independent  public
accountants, all at such reasonable times during normal business hours and under
Borrower's  supervision  and as often as may be reasonably  requested.  Any such
additional  information  together  with  other  nonpublic  information  received
hereunder  shall be held in confidence by the Agent and the Banks and may not be
used for any purpose other than to monitor the credit worthiness of Borrower and
its  Consolidated  Subsidiaries  (except  Dastek  (M) and DHC) and  shall not be
disclosed  or  disseminated  to  any  other  Person  for  any  reason,  and  the
Nondisclosure Agreements shall apply thereto.

                 (g) Compliance with Laws, Etc. Exercise,  and cause each of its
Consolidated Subsidiaries to exercise, all due diligence in order to comply with
the  requirements of all applicable laws,  rules,  regulations and orders of any
governmental authority,  including,  without limitation, all environmental laws,
rules,  regulations and orders,  noncompliance  with which would have a Material
Adverse Effect.

         SECTION 6.2 NEGATIVE  COVENANTS.  So long as any  Revolving  Note shall
remain unpaid or the Banks shall have any  Commitment  hereunder,  Borrower will
not, without the written consent of the Majority Banks:

                 (a) Profitability. Permit, on a consolidated after-tax basis, a
net loss in two consecutive fiscal quarter periods after the Closing Date.

                                       30
<PAGE>

                 (b) Leverage  Ratio.  Permit  Borrower's  ratio of Consolidated
Funded Debt to  Consolidated  Capital,  on a quarterly  consolidated  basis,  to
exceed .5 to 1.0.

                 (c)  Consolidated   Tangible  Net  Worth.   Permit   Borrower's
Consolidated  Tangible Net Worth, on a quarterly  consolidated basis, to be less
than  $600,000,000,  plus (i)  seventy-five  percent (75%) of Borrower's  future
fiscal year end  consolidated  net income  (without  deduction  for any losses),
adjusted on an annual basis  beginning  after the end of Borrower's  1997 fiscal
year and including such fiscal year plus (ii) one hundred  percent (100%) of the
net  proceeds  of equity  investments  and issues  received  by  Borrower or its
Consolidated   Subsidiaries  adjusted  on  a  consolidated  quarterly  basis  in
accordance with GAAP,  without  duplication.  For purposes  hereof,  the minimum
Consolidated  Tangible  Net Worth  requirement  shall not be increased by equity
issued  through the exercise of employee  stock options  and/or  employee  stock
purchase plans.

                 (d) Liens, Etc. Create or suffer to exist, or permit any of its
Consolidated  Subsidiaries  (except  Dastek  (M) and DHC) to create or suffer to
exist, any Lien upon or with respect to any of its properties, whether now owned
or hereafter acquired, or assign, or permit any of its Consolidated Subsidiaries
(except Dastek (M) and DHC) to assign, any right to receive income, in each case
to secure  any Debt of any  Person  other  than (i) Liens in favor of the Banks,
(ii) Liens reflected on the financial  statements  referred to in Section 5.1(e)
and other Liens  existing on the date hereof  heretofore  disclosed to the Agent
and the Banks; and (iii) Permitted Liens.

                 (e) Dividends,  Etc. Declare or pay any dividends,  purchase or
otherwise acquire for value its capital stock now or hereafter  outstanding,  or
make any  distribution  of assets to its  stockholders as such, or permit any of
its  Consolidated  Subsidiaries  (except  Dastek  (M) and  DHC) to  purchase  or
otherwise acquire for value any stock of Borrower,  except that (i) Borrower may
declare and deliver  dividends and  distributions  payable in its capital stock,
and (ii) in any fiscal year (A) Borrower  may declare and pay cash  dividends to
its  stockholders  in an aggregate  amount up to five percent (5%) of net income
after taxes of Borrower and its Consolidated Subsidiaries (except Dastek (M) and
DHC) for the immediately  preceding fiscal year and (B) Borrower and each of its
Consolidated  Subsidiaries  may purchase or otherwise  acquire shares of its own
outstanding  capital  stock for cash in an  aggregate  amount up to  twenty-five
percent  (25%) of net  income  after  taxes  of  Borrower  and its  Consolidated
Subsidiaries  (except Dastek (M) and DHC) for the immediately  preceding  fiscal
year;  provided,   further,   that  cash  dividends  paid  together  with  stock
repurchases  for  cash  shall  not  exceed  an  aggregate  amount  greater  than
twenty-five  percent  (25%)  of net  income  after  taxes  of  Borrower  and its
Consolidated  Subsidiaries  (except  Dastek  (M) and  DHC)  for the  immediately
preceding fiscal year.

                                       31
<PAGE>

                 (f)  Consolidation,  Merger or Acquisition.  Regarding Borrower
and its  Consolidated  Subsidiaries  (except  Dastek (M) and DHC),  liquidate or
dissolve  or  enter  into  any  consolidation,   merger,  acquisition,  material
partnership,  material joint venture,  syndication or other combination  without
the  Majority  Banks'  prior  written   consent,   which  consent  will  not  be
unreasonably withheld,  except that Borrower may consolidate with, merge into or
acquire any other  corporation or entity and that any  corporation or entity may
consolidate  with or merge into  Borrower,  provided that Borrower  shall be the
surviving entity of such merger or  consolidation,  and provided  further,  that
immediately  after the consummation of such  consolidation or merger there shall
exist no condition or event which constitutes an Event of Default or a Potential
Event of Default.  In addition  Borrower may purchase any, all or  substantially
all of the assets of any other Person in connection with acquisitions reasonably
related to Borrower's  existing  lines of business,  provided  that  immediately
after the effectiveness of any such  acquisition,  there shall have occurred and
be continuing no Event of Default or Potential Event of Default.

                 (g) Loans, Investments,  Secondary Liabilities.  Make or permit
to remain outstanding,  or permit any Consolidated Subsidiary (except Dastek (M)
and DHC) to make or permit to remain  outstanding,  any loan or  advance  to, or
guarantee,   induce  or  otherwise  become  contingently  liable,   directly  or
indirectly,  in connection with the obligations,  stock or dividends of, or own,
purchase  or  acquire  any  stock,  obligations  or  securities  of or any other
interest in, or make any capital contribution to, any other Person,  except that
Borrower and its Consolidated Subsidiaries may:

                     (i) own, purchase or acquire certificates of deposit,  time
deposits and bankers'  acceptances  issued by the Banks,  commercial paper rated
Moody's P-2 or better  and/or  Standard & Poor's A-2 or better,  obligations  or
instruments issued by or guaranteed by an entity designated as Standard & Poor's
A-2 or  better,  or  Moody's  P-2 or better or the  equivalent  by a  nationally
recognized credit agency,  municipal bonds and other  governmental and corporate
debt  obligations  rated  Standard & Poor's A or better  and/or  Moody's  A-2 or
better, direct obligations of the United States of America or its agencies,  and
obligations guaranteed or insured by the United States of America, and any funds
investing in any of the foregoing;

                     (ii)  acquire  and own  stock,  obligations  or  securities
received in  connection  with debts  created in the ordinary  course of business
owing to Borrower or a Subsidiary;

                     (iii)  continue  to  own  the  existing  capital  stock  of
Borrower's Subsidiaries;

                     (iv)  endorse   negotiable   instruments   for  deposit  or
collection or similar transactions in the ordinary course of business;

                                       32
<PAGE>

                     (v) make loans,  advances to or investments in a Subsidiary
or joint  venture in  connection  with the normal  operations of the business of
such Subsidiary or joint venture and allow Borrower's  Subsidiaries or any joint
venture to which it is a party to make or permit to remain outstanding  advances
from Borrower's Subsidiaries or such joint venture to Borrower;

                     (vi) make or permit to remain outstanding loans or advances
to Borrower's  Subsidiaries or any joint venture to which it is a party or enter
into  or  permit  to  remain  outstanding  guarantees  in  connection  with  the
obligations of Borrower's Subsidiaries or such joint ventures;

                     (vii) make or permit to remain outstanding (A) loans and/or
advances to Borrower's  officers,  stockholders and/or employees,  which, in the
aggregate,  would not exceed $3,000,000  during the term of this Agreement,  (B)
loans to Borrower's  vendors,  in the ordinary  course of  Borrower's  business,
which,  in the aggregate,  do not exceed  $5,000,000,  (C) progress  payments to
Borrower's vendors made in the ordinary course of Borrower's  business,  and (D)
(i) loans and/or  advances for the purpose of  purchasing  Borrower's  shares of
stock pursuant to its employee stock purchase or option plans, (ii) advances for
salary, travel and other expenses, advances against commission and other similar
advances  made to officers or  employees in the  ordinary  course of  Borrower's
business,  and (iii) loans  and/or  advances to or for the benefit of  officers,
directors or employees  in  connection  with  litigation  and other  proceedings
involving  such  persons by virtue of their  status as  officers,  directors  or
employees, respectively;

                     (viii)   make   investments   under   Borrower's   deferred
compensation  plans  for  the  benefit  of the  employees  of  Borrower  and its
Subsidiaries; and

                     (ix)  Komag  Bermuda  Ltd.  and  Komag  Overseas  Ltd.  may
reallocate  between each other their common stock  ownership  interests in Komag
USA  (Malaysia)  Sdn.  and Asahi  Komag Co.,  Ltd.  may make an  initial  public
offering of its common stock.

                 (h) Asset Sales.  Convey,  sell,  lease,  transfer or otherwise
dispose of or write down or off on its books  (individually,  a "Transfer"),  or
permit any Consolidated  Subsidiary  (except Dastek (M) or DHC) to Transfer,  in
one  transaction  or a  series  of  transactions,  all or any part of its or its
Consolidated Subsidiary's (except Dastek (M) or DHC) business, property or fixed
assets outside the ordinary  course of business,  whether now owned or hereafter
acquired,  except that (i) Borrower and its  Consolidated  Subsidiaries  (except
Dastek (M) or DHC) may make  Transfers of business,  property or fixed assets in
transactions  outside the ordinary course of business for consideration which in
the  aggregate  does not exceed 15% of  Consolidated  Tangible  Net Worth in any
fiscal year of Borrower without the prior written

                                       33
<PAGE>

consent of the Majority Banks, which consent shall not be unreasonably  withheld
and (ii) Borrower may Transfer Dastek (M) or DHC.

                     (i) Debt Service  Coverage  Ratio.  Permit  earnings before
interest  expense  plus taxes plus  depreciation  plus  amortization  ("EBITDA")
divided by interest expense plus scheduled principal  payments,  if any (in each
case measured for the Borrower and its  Consolidated  Subsidiaries),  to be less
than  2.0 to  1.0 at the  end of any  fiscal  quarter  during  the  term  of the
Agreement.  This ratio will be  calculated on a rolling prior four quarter basis
for  Borrower  and its  Consolidated  Subsidiaries.  "Earnings  before  interest
expense"  shall be  calculated  in this ratio to (i) exclude  the  undistributed
income of any  Consolidated  Subsidiary  to the extent that the  declaration  or
payment of dividends or other  distributions  by such  Subsidiary  is not at the
time  permitted  by the terms of its charter or  applicable  law binding on such
Subsidiary;  and (ii) exclude minority  interests in the net income (or loss) of
Consolidated Subsidiaries.

                     (j) Transfer of Assets to Dastek,  Inc.  Dastek (M) or DHC.
Transfer any assets or property of the Borrower or its Consolidated Subsidiaries
to Dastek,  Inc.,  Dastek  (M) or DHC in excess of Two  Hundred  Fifty  Thousand
Dollars  ($250,000)  in the aggregate  without the prior written  consent of the
Majority Banks.

                                   ARTICLE VII

                                EVENTS OF DEFAULT

         SECTION 7.1 EVENTS OF DEFAULT.  If any of the following events ("Events
of Default") shall occur and be continuing:

                 (a) Borrower shall fail to pay any installment of the principal
of any Revolving  Note  outstanding  hereunder  when due or any  installment  of
interest on any Revolving Note or other amount payable hereunder within ten (10)
Business Days of the date when due; or

                 (b) Any  representation  or warranty made by Borrower herein or
by Borrower (or any of its officers) in connection with the Loan Documents shall
prove to have been incorrect in any material respect when made; or

                 (c)  Borrower  shall  fail to  perform  or  observe  any  term,
covenant or agreement  contained in this  Agreement or in any and all  documents
executed in conjunction with this Agreement, which failure continues uncured for
more than thirty (30)  consecutive  days.  Notwithstanding  the  foregoing,  any
failure of Borrower to perform or observe Sections 6.1(c) and (f) and/or 6.2(a),
(b), (c),  (d), (e), (f), (h), (i) and (j) shall  constitute an Event of Default
without regard to any lapse of time or cure period; or

                                       34
<PAGE>

                 (d)  Borrower  shall  fail to  perform  or  observe  any  term,
covenant or agreement  contained in this Agreement  other than those referred to
in Subsections 7.1(a), (b) and (c) above on its part to be performed or observed
and any such failure shall remain unremedied for thirty (30) days after Borrower
knows of such failure; or

                 (e) Borrower or any of its  Consolidated  Subsidiaries  (except
Dastek  (M) or DHC)  shall fail to pay at  maturity,  or within  any  applicable
period of grace,  any  obligation  for borrowed money in excess of $1,000,000 in
aggregate  principal  amount,  or fail to observe or perform any material  term,
covenant or agreement  contained in any agreement for such indebtedness by which
it is bound, in each case for such period of time as would permit  (assuming the
giving of  appropriate  notice if required) the holder or holders  thereof or of
any obligations issued thereunder to accelerate the maturity thereof; or

                 (f)  (i)  Borrower  or  any of  its  Consolidated  Subsidiaries
(except Dastek (M) or DHC) shall  commence any case,  proceeding or other action
(A) under any existing or future law of any  jurisdiction,  domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it bankrupt or insolvent,  or seeking reorganization,  arrangement,  adjustment,
winding-up, liquidation,  dissolution,  composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or  other  similar  official  for it or for all or any  substantial  part of its
assets, or Borrower or any of its Consolidated  Subsidiaries  (except Dastek (M)
or DHC) shall make a general  assignment  for the benefit of its  creditors;  or
(ii)  there  shall be  commenced  against  Borrower  or any of its  Consolidated
Subsidiaries (except Dastek (M) or DHC) any case,  proceeding or other action of
a nature  referred  to in clause (i) above  which (A) results in the entry of an
order  for  relief  or any  such  adjudication  or  appointment  or (B)  remains
undismissed, undischarged or unbonded for a period of thirty (30) days; or (iii)
there  shall  be  commenced   against   Borrower  or  any  of  its  Consolidated
Subsidiaries  (except  Dastek (M) or DHC) any case,  proceeding  or other action
seeking  issuance of a warrant of  attachment,  execution,  distraint or similar
process against all or any  substantial  part of its assets which results in the
entry of an  order  for any such  relief  which  shall  not have  been  vacated,
discharged,  or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or (iv) Borrower or any of its Consolidated  Subsidiaries (except
Dastek (M) or DHC) shall take any action in  furtherance  of, or indicating  its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i),  (ii)  and  (iii)  above;  or (v)  Borrower  or  any  of  its  Consolidated
Subsidiaries  (except Dastek (M) or DHC) shall generally not, or shall be unable
to, or shall  admit in writing  its  inability  to, pay its debts as they become
due; or

                 (g) One judgment or decree shall be entered against Borrower or
any of its  Consolidated  Subsidiaries  (except  Dastek (M) or DHC)  involving a
liability (not paid or at least seventy-five  percent (75%) covered by insurance
or the third party

                                       35
<PAGE>

indemnity of a solvent indemnitor) equal to or greater than $5,000,000 or one or
more  judgments  or decrees  shall be  entered  against  Borrower  or any of its
Consolidated  Subsidiaries (except Dastek (M) or DHC) involving in the aggregate
a  liability  (not  paid or at  least  seventy-five  percent  (75%)  covered  by
insurance  or the third party  indemnity  of a solvent  indemnitor)  equal to or
greater than  $10,000,000  and all such judgments or decrees shall not have been
vacated,  discharged, or stayed or bonded pending appeal within thirty (30) days
from the entry thereof; or

                 (h) (i) Borrower or any of its ERISA  Affiliates  fails to make
full payment when due of all material amounts which, under the provisions of any
Pension Plan or Section 412 of the Internal Revenue Code, Borrower or any of its
ERISA Affiliates is required to pay as contributions thereto;

                     (ii) any material  accumulated funding deficiency occurs or
exists, whether or not waived, with respect to any Pension Plan;

                     (iii) the  excess  of the  actuarial  present  value of all
benefit  liabilities under all material Pension Plans over the fair market value
of the assets of such Pension Plans (excluding in such computation Pension Plans
with  assets  greater  than  benefit  liabilities)  allocable  to  such  benefit
liabilities  are greater  than five percent  (5%) of  Consolidated  Tangible Net
Worth;

                     (iv)  Borrower or any of its ERISA  Affiliates  enters into
any  transaction  which has as its  principal  purpose the evasion of  liability
under Subtitle D of Title IV of ERISA;

                     (v) (A) Any material Pension Plan maintained by Borrower or
any of its ERISA Affiliates  shall be terminated  within the meaning of Title IV
of ERISA,  or (B) a trustee shall be appointed by an  appropriate  United States
district  court to  administer  any material  Pension  Plan,  or (C) the Pension
Benefit  Guaranty   Corporation  (or  any  successor  thereto)  shall  institute
proceedings  to terminate  any material  Pension Plan or to appoint a trustee to
administer  any Pension  Plan,  or (D)  Borrower or any of its ERISA  Affiliates
shall withdraw (under Section 4063 of ERISA) from any material  Pension Plan, if
as of the date of the event listed in subclauses (A)-(C) above or any subsequent
date,  either Borrower or its ERISA Affiliates has any material  liability (such
liability to include, without limitation,  any material liability to the Pension
Benefit Guaranty  Corporation,  or any successor thereto,  or to any other party
under  Sections  4062,  4063 or 4064 of ERISA  or any  other  provision  of law)
resulting  from or otherwise  associated  with the events  listed in  subclauses
(A)-(C) above;

                     (vi)  As  used  in  this   subsection   7.1(h)   the   term
"accumulated funding deficiency" has the meaning specified in Section 412 of the
Internal  Revenue Code,  and the terms  "actuarial  present  value" and "benefit
liabilities" have the meanings specified in Section 4001 of ERISA; or

                                       36
<PAGE>

                 (i) There shall be instituted  against Borrower,  or any of its
Consolidated  Subsidiaries  (except Dastek (M) or DHC), any proceeding for which
forfeiture (not paid or  seventy-five  percent (75%) covered by insurance or the
third party  indemnity  of a solvent  indemnitor)  of any  property  equal to or
greater than  $5,000,000 is a potential  penalty and such  proceeding  shall not
have been vacated or discharged within thirty (30) days of its institution;

THEN (i) upon the  occurrence  of any Event of Default  described  in clause (f)
above, the Aggregate  Commitment shall  immediately  terminate and all Revolving
Loans hereunder with accrued interest thereon, and all other amounts owing under
this  Agreement,  the  Revolving  Notes,  and the  other  Loan  Documents  shall
automatically  become  due  and  payable,  and  (ii)  upon  the  occurrence  and
continuance of any other Event of Default,  the Agent, at the instruction of the
Majority Banks, shall, by notice to Borrower,  declare the Aggregate  Commitment
to be terminated forthwith, whereupon the Aggregate Commitment shall immediately
terminate;  and by notice to Borrower,  declare the Revolving  Loans  hereunder,
with accrued interest thereon, and all other amounts owing under this Agreement,
the  Revolving  Notes,  and the  other  Loan  Documents  to be due  and  payable
forthwith,  whereupon the same shall immediately become due and payable.  Except
as expressly provided above in this Section,  presentment,  demand,  protest and
all other notices of any kind are hereby expressly waived.  Notwithstanding  any
other provision of this Agreement,  including  Section 8.2,  notices to Borrower
pursuant to this Section may be communicated orally (including by telephone with
a written  notice to  Borrower to be  subsequently  provided by the Agent) or in
writing (including telex or facsimile transmission).

                                  ARTICLE VIII

                                    THE AGENT

         SECTION 8.1 THE AGENT.  BankBoston is hereby  appointed as the Agent by
each of the Banks to  perform  such  duties  on  behalf  of the other  Banks and
itself,  and to have such powers,  as are set forth herein and as are reasonably
incidental thereto. In performing its functions and duties under this Agreement,
the Agent  shall act  solely as agent of the Banks and does not assume and shall
not be deemed to have assumed any obligation  towards or  relationship of agency
or trust  hereunder  with or for  Borrower.  The  duties of the  Agent  shall be
mechanical and  administrative in nature;  the Agent shall not have by reason of
this Agreement a fiduciary  relationship  in respect of any Bank, and nothing in
this Agreement, expressed or implied, is intended to or shall be so construed as
to impose  upon the Agent any  obligations  in  respect of this  Agreement,  the
Revolving  Loans or the other  instruments  and  agreements  referred  to herein
except as expressly set forth herein or therein.

         SECTION 8.2 DELEGATION OF DUTIES, ETC. The Agent may execute any of its
duties  and  perform  any  of its  powers  hereunder  by or  through  agents  or
employees,  and  shall  be  entitled  to  consult  with  legal  counsel  and any
accountant  or

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<PAGE>

other  professional  selected by it. The Agent shall not be responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

         SECTI0N 8.3 INDEMNIFICATION.  The Banks agree to indemnify the Agent in
its capacity as such,  to the extent not  reimbursed  promptly by Borrower,  pro
rata according to their respective Commitment Percentages,  from and against any
and all claims, 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  Agreement or the Revolving  Notes or
any action  taken or omitted to be taken or  suffered in good faith by the Agent
hereunder or  thereunder,  provided that no Bank shall be liable for any portion
of any of the foregoing  items  resulting  from the gross  negligence or willful
misconduct of the Agent.  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  reasonable  counsel fees and disbursements)
incurred  by  the  Agent  in  connection   with  the   preparation,   execution,
administration  or  enforcement  of,  legal  advice  in  respect  of  rights  or
responsibilities  under,  or amendment,  modification or waiver of any provision
of, this Agreement or the Revolving  Notes,  to the extent that the Agent is not
promptly reimbursed for such expenses by Borrower.

         SECTION 8.4 EXCULPATORY PROVISIONS.

                 (a)  Neither  the  Agent  nor any of its  officers,  directors,
employees  or agents shall be liable for any action taken or omitted to be taken
or suffered in good faith by it or them  hereunder  or in  connection  herewith,
except  that the Agent shall be liable for its own gross  negligence  or willful
misconduct.  The Agent shall not be liable in any manner for the  effectiveness,
enforceability,  collectibility,  genuineness, perfection, validity, sufficiency
or the due  execution of this  Agreement or the  Revolving  Notes or for the due
authorization,  authenticity or accuracy of the  representations  and warranties
herein or in any other certificate,  report, notice, consent, opinion, statement
or other document furnished or to be furnished hereunder,  and shall be entitled
to rely upon any of the  foregoing  believed by it to be genuine and correct and
to have been  signed and sent or made by the proper  Person.  The Agent shall be
under no duty or responsibility to the Banks to ascertain or to inquire into the
performance or observance by Borrower of any of the provisions  hereof or of any
document executed and delivered in connection  herewith.  Each Bank acknowledges
that it has  taken  and will  continue  to take  such  action  and to make  such
investigation  as it deems necessary to inform itself of the affairs of Borrower
and each Bank  acknowledges  that it had the  opportunity  to make, has made and
will continue to make its own independent investigation of the credit worthiness
and the business and  operations  of Borrower  and that,  in entering  into this
Agreement,  and in making its  Revolving  Loans,  it has not relied and will not

                                       38
<PAGE>

rely upon any information or representations  furnished or given by the Agent or
any other Bank.

                 (b) Each  Bank  expressly  acknowledges  that the Agent has not
made any  representations or warranties to it and that no act taken by the Agent
shall be deemed to constitute any representation or warranty by the Agent to the
Banks.

                 (c) If the Agent shall request  instruction from the Banks with
respect  to any act or action  (including  the  failure  to take an  action)  in
connection  with the Revolving  Loans under this  Agreement,  the Agent shall be
entitled to refrain  from such act or taking  such  action  unless and until the
Agent shall have  received  instructions  from all of the Banks or the  Majority
Banks,  as the case may be and as  required  herein.  Without  prejudice  to the
generality of the foregoing,  (i) the Agent shall be entitled to rely, and shall
be fully protected in relying,  upon any  communication,  instrument or document
believed  by it to be genuine and correct and to have been signed or sent by the
proper  Person or Persons,  and shall be entitled to rely and shall be protected
in relying on opinions and  judgments  of  attorneys,  accountants,  experts and
other  professional  advisors  selected  by it;  and (ii) no Bank shall have any
right of action whatsoever  against the Agent as a result of the Agent acting or
(where so instructed)  refraining  from acting under this Agreement with respect
to the Revolving Loans in accordance  with the  instructions of all of the Banks
or the Majority Banks, as the case may be.

         SECTION 8.5 KNOWLEDGE OF DEFAULT. It is expressly understood and agreed
that the Agent shall be entitled to assume that no Event of Default has occurred
and is continuing,  unless the officers of the Agent immediately responsible for
matters concerning this Agreement shall have actual knowledge of such occurrence
or shall have been notified in writing by any Bank that such Bank considers that
an Event of Default has occurred and is  continuing  and  specifying  the nature
thereof. In the event that the Agent shall have acquired actual knowledge of any
Event of Default, it shall promptly give notice thereof to the Banks.

         SECTION 8.6 THE AGENT IN ITS INDIVIDUAL CAPACITY.  With respect to this
Agreement,  and all Revolving  Loans made by it and any renewals,  extensions or
deferrals of the payment thereof and any Revolving Note issued to or held by it,
the Agent shall have the same rights and powers  hereunder as any Bank,  and may
exercise  the same as  though  it were not the  Agent,  and the term  "Bank"  or
"Banks" shall, unless the context otherwise  requires,  include the Agent in its
individual  capacity.  The  Agent  and each of its Bank  Affiliates  may  accept
deposits from, lend money to and generally engage in any kind of banking, trust,
financial  advisory  or  other  business  with  Borrower  or any  Subsidiary  or
Consolidated  Subsidiary  as if it were  not  performing  the  duties  specified
herein,  and may accept fees and other  consideration from Borrower for services
in connection  with this  Agreement and otherwise  without having to account for
the same to the Banks.

                                       39
<PAGE>

         SECTION 8.7 PAYEE OF  REVOLVING  NOTE  TREATED AS OWNER.  The Agent may
deem and treat  the payee of any  Revolving  Note as the owner  thereof  for all
purposes hereof unless and until an Assignment  Agreement shall have been lodged
with the Agent as provided in Section 9.6. Any request,  authority or consent of
any person or entity  who,  at the time of making  such  request or giving  such
authority  or  consent,  is the  holder  of any  such  Revolving  Note  shall be
conclusive and binding on any subsequent holder,  transferee or assignee of that
Revolving  Note or of any Revolving  Note or Revolving  Notes issued in exchange
therefor.

         SECTION  8.8  RESIGNATION  OR REMOVAL OF THE AGENT.  If at any time the
Agent deems it advisable,  in its sole discretion,  it may submit to each of the
Banks and Borrower a written  notification of its resignation as the Agent under
this  Agreement,  such  resignation  (subject to the further  provisions of this
Section 8.8) to be effective on the thirtieth day after the date of such notice.
The  Majority  Banks may at any time  remove  the Agent,  effective  on the date
specified by them, by written  notice to the Agent and  Borrower.  Upon any such
resignation or removal, the Majority Banks, subject to the prior written consent
of Borrower (which consent shall not be unreasonably  withheld),  shall have the
right to appoint a successor  Agent,  which  successor  Agent,  provided that no
Event of Default  shall have  occurred and be  continuing,  shall be  reasonably
satisfactory to Borrower.  If no successor Agent shall have been so appointed by
the Majority Banks and accepted such  appointment  within thirty (30) days after
the retiring  Agent's giving of notice of  resignation,  then the retiring Agent
may, on behalf of the Banks,  appoint a successor  Agent,  which successor Agent
shall be either a Bank or if none of the Banks is willing to serve as  successor
Agent, a bank having combined capital and surplus of at least $100,000,000.  Any
such  appointment  of a successor  Agent  shall be subject to the prior  written
approval of Borrower (which approval shall not be unreasonably  withheld).  Upon
the acceptance of any appointment as Agent hereunder by a successor Agent,  such
successor  Agent  shall  thereupon  succeed  to and become  vested  with all the
rights,  powers,  privileges and duties of the retiring Agent,  and the retiring
Agent shall be discharged from its duties and obligations  under this Agreement.
Borrower  and the Banks shall  execute  such  documents as shall be necessary to
effect such  appointment.  After any  retiring  Agent's  resignation  or removal
hereunder  as Agent,  the  provisions  of this  Article  VIII shall inure to its
benefit  as to any  actions  taken or omitted to be taken by it while it was the
Agent  under  this  Agreement  and  the  Revolving  Notes.  Notwithstanding  the
foregoing  provisions  of this  Section 8.8, if at any time there shall not be a
duly  appointed  and acting  Agent,  Borrower  agrees to make each  payment  due
hereunder and under the Revolving  Notes directly to the Banks entitled  thereto
during such time.

                                       40
<PAGE>

                                   ARTICLE IX

                                  MISCELLANEOUS

         SECTION 9.1  AMENDMENTS, ETC.

                 (a) No  amendment  or  waiver  of  any  provision  of the  Loan
Documents,  nor consent to any  departure  by Borrower  therefrom,  shall in any
event be  effective  unless  the same  shall be in  writing  and  signed  by the
Majority  Banks,  and then such waiver or consent shall be effective only in the
specific  instance  and for the  specific  purpose  for which  given;  provided,
however,  that,  without the written  consent of all of the Banks, no amendment,
waiver or consent shall do any of the following:

                 (i) increase the amount,  or extend the Maturity  Date,  of the
Commitments of the Banks or subject the Banks to any additional obligations;

                 (ii) reduce the  principal  of, or interest  on, the  Revolving
Loans or any fee or other amount payable to the Banks hereunder;

                 (iii)  postpone  any date  fixed for any  payment in respect of
principal  of, or interest  on, the  Revolving  Loans or any fee or other amount
payable to the Banks hereunder;

                 (iv) change the definition of "Majority Banks or any definition
or provision of this Agreement  requiring the approval of Majority Banks or some
other specified amount of Banks;

                 (v) amend the provisions of Section 2.2 (d); or

                 (vi) amend the provisions of this Section 9.1; and

provided, further, that no amendment, waiver or consent shall, unless in writing
and signed by the Agent in addition to the Banks  required  hereinabove  to take
such action,  affect the rights,  obligations  or duties of the Agent under this
Agreement or any other Loan Document.

                 (b) Nonaccepting Entities.

                 (i) If Borrower  requests a modification  of the type specified
in clauses (i) through (iv) of subsection (a) above (a  "Modification  Request")
and any  Bank  (other  than  BankBoston),  assignee  of a Bank or a  participant
refuses to agree to such modification (a "Nonaccepting Entity"), Agent shall use
good faith  efforts to secure a  substitute  lender  acceptable  to Borrower and
Agent and willing to accept

                                       41
<PAGE>

such  modification  and the other  provisions of this Agreement as a replacement
for the Nonaccepting Entity (an "Accepting Entity").

                 (ii) If Agent  shall be unable to  secure an  Accepting  Entity
within  fifty  (50) days from  Agent's  receipt  from  Borrower  of the  related
Modification Request in writing, then Borrower may, at its option and subject to
the remainder of this Section  9.1(b),  prepay the  Prepayment  Amount  (defined
below) (A) without  obtaining the consent of any Person if the principal  amount
of such  Revolving  Loan or  participation  interest  is less  than  thirty-five
percent (35%) of the  Commitment  and (B) with the consent of the Majority Banks
(provided  that for purposes of  determining  such Majority Banks such Revolving
Loan  or  participation  interest  of  such  Nonaccepting  Entity  shall  not be
included)  if the  principal  amount  of such  Revolving  Loan or  participation
interest is greater than thirty-five percent (35%) of the Commitment.

                 (iii) The  prepayment  described  above shall only be available
and  effective  so long as (A)  Borrower  (1)  provides  Agent and Banks two (2)
Business  Days  written  notice  prior to any  prepayment  and (2)  tenders  the
Prepayment  Amount (defined below) in immediately  available funds, (B) no Event
of Default or Potential Event of Default would result from giving effect to such
prepayment,  and (C) the  amount of the  Commitment,  Aggregate  Commitment  and
respective  Commitment  Percentages shall be permanently reduced and adjusted by
the amount of the Revolving Loan or participation  interest of such Nonaccepting
Entity.  The prepayment  option set forth in this Section 9.1(b) shall not apply
to BankBoston but shall apply to its assignees and participants.

                 For purposes of this Section 9.1(b),  "Prepayment Amount" shall
mean the sum of (w) the outstanding  principal  amount of any such  Nonaccepting
Entity's  Revolving  Loan or  participation  interest,  (x)  accrued  and unpaid
interest  thereon to the date of such  prepayment,  (y) the amount to which such
Nonaccepting  Entity is entitled  pursuant  to Section  3.7(b) by reason of such
prepayment,  and (z) all other amounts then due and owing  hereunder by Borrower
to such  Nonaccepting  Entity for which the  Borrower  has  received  reasonably
detailed bills.

         SECTION  9.2  NOTICES,  ETC.  Except  as  otherwise  set  forth in this
Agreement,  all notices and other communications provided for hereunder shall be
in writing (including telegraphic,  telex or facsimile communication) and mailed
or telegraphed or telexed or sent by facsimile or delivered,  if to Borrower, at
Borrower's  address set forth on the signature page hereof;  and if to the Agent
and/or the Banks, at their respective  addresses set forth on the signature page
hereof;  or, as to each party,  at such other  address as shall be designated by
such  party in a written  notice  to the other  parties.  All such  notices  and
communications shall be effective when deposited in the mails,  delivered to the
telegraph company, sent by telex or sent by facsimile, respectively, except that
notices and communications to the Agent and the

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<PAGE>

Banks pursuant to Article II, VI or VII shall not be effective until received by
the Agent and the Banks.

         SECTION 9.3 RIGHT OF SETOFF. Upon and after the occurrence of any Event
of Default,  the Banks are hereby  authorized  by Borrower,  at any time,  after
having first obtained the written  consent of the Agent,  and from time to time,
without prior notice,  (a) to set off against,  and to appropriate  and apply to
the payment  of, the  obligations  and  liabilities  of Borrower  under the Loan
Documents  (whether  matured or unmatured,  fixed or contingent or liquidated or
unliquidated)  any and all  amounts  owing  by the  Banks to  Borrower  (whether
payable in Dollars or any other currency,  whether matured or unmatured, and, in
the case of  deposits,  whether  general or special,  time or demand and however
evidenced)  and (b) pending any such action,  to the extent  necessary,  to hold
such amounts as collateral to secure such  obligations  and  liabilities  and to
return as unpaid for insufficient funds any and all checks and other items drawn
against any  deposits so held as the Banks in their sole  discretion  may elect.
The  Banks  agree  promptly  to  notify  Borrower  after  any  such  setoff  and
application  made by the Banks.  Upon and during the continuance of any Event of
Default and after having first  obtained the written  consent of the Agent,  the
Banks are authorized to debit any account  maintained  with them by Borrower for
any amount of  principal,  interest  or fees which are then due and owing to the
Banks by Borrower.

         SECTION 9.4 NO WAIVER;  REMEDIES.  No failure on the part of the Agent,
on behalf of the Banks,  or the Banks to exercise,  and no delay in  exercising,
any right under any of the Loan Documents shall operate as a waiver thereof; nor
shall  any  single  or  partial  exercise  of any  right  under  any of the Loan
Documents  preclude any other or further exercise thereof or the exercise of any
other right.  The remedies  herein  provided are cumulative and not exclusive of
any remedies provided by law.

         SECTION 9.5 COSTS AND  EXPENSES.  Borrower  agrees to pay on demand all
costs  and  expenses  (i) of the  Agent  (including  reasonable  and  documented
attorney's  fees and  reasonable and  documented  costs of in-house  counsel and
staff) in connection with the preparation  (which in no event will exceed $7,500
for  the  Agent  counsel's  preparation  and  negotiation  of  this  Agreement),
amendment or modification  of the Loan Documents,  and (ii) of the Agent and the
Banks in connection  with the enforcement  (including,  without  limitation,  in
appellate, bankruptcy, insolvency,  liquidation,  reorganization,  moratorium or
other similar  proceedings) or  restructuring  of the Loan Documents  (provided,
that,  with  respect  to  attorneys'  fees,  all such fees  shall be  reasonably
documented). With the concurrence of the Majority Banks, when an outside counsel
is required,  one outside counsel will be retained to represent all of the Banks
in conjunction with any matters related to this Agreement.  Notwithstanding  the
preceding sentence,  if the Majority Banks cannot agree on which outside counsel
should be  retained,  the Agent,  on behalf of all of the Banks,  shall make the
selection and all Banks shall be bound thereby.

                                       43
<PAGE>

         SECTION 9.6  ASSIGNMENTS; PARTICIPATIONS.

                  (a) Any Bank may assign, with the consent of the Agent and the
Borrower  (provided  that the consent of Borrower  shall not be required  (i) if
such  assignment is to a Bank Affiliate of such assigning Bank or (ii) (A) after
the occurrence and (B) during the continuance of an Event of Default), from time
to time, all or any portion of its  Commitment and its Revolving  Notes (1) to a
Bank  Affiliate of that Bank or to any  regulatory  agency,  or (2) to any other
financial  institution  acceptable to the Agent and Borrower,  provided that (x)
the amount of the Commitment of the assigning  Bank being  assigned  pursuant to
each such assignment (determined as of the date of the Assignment Agreement with
respect  to such  assignment)  shall in no event be less  than  $10,000,000  and
larger  integral  multiples  of  $1,000,000;  and (y) the  parties  to each such
assignment  shall  execute and deliver to the Agent and  Borrower an  assignment
executed by the assigning Bank and the assignee in which the assignee  agrees to
be bound as a Bank hereby,  in form and substance  satisfactory to the Agent (an
"Assignment  Agreement).  Notwithstanding the foregoing,  no Bank may assign any
portion of its Commitment to another financial  institution unless it retains at
least  $10,000,000  thereof or another amount as agreed upon by Borrower and the
assigning Bank provided that such $10,000,000  retention  requirement  shall not
apply (aa) (i) after the occurrence and (ii) during the  continuance of an Event
of  Default,  (bb) if such  requirement  conflicts  with  applicable  law or the
instruction of government or regulatory agencies,  or (cc) if such assignment is
to Bank Affiliate of such assigning Bank provided that such Bank Affiliate shall
be required to retain such $10,000,000 unless it assigns its interest to another
Bank  Affiliate  or meets the  requirements  of (aa) or (bb)  herein.  Upon such
execution and  delivery,  from and after the  effective  date  specified in such
Assignment Agreement (X) the assignee thereunder shall be a party hereto and, to
the extent  that  rights and  obligations  hereunder  have been  assigned  to it
pursuant to such Assignment Agreement, have the rights and obligations of a Bank
hereunder and (Y) the Bank assignor  thereunder shall, to the extent that rights
and  obligations  hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations under this
Agreement,   except  with  respect  to  those   obligations  set  forth  in  the
Nondisclosure  Agreement which the assignor had previously executed, and, in the
case of an  Assignment  Agreement  covering all or the  remaining  portion of an
assigning  Bank's rights and obligations  under this Agreement,  such Bank shall
cease to be a party  hereto.  The  Commitments  hereunder  shall be  modified to
reflect the  Commitments  of such assignor and assignee (and Schedule 1 shall be
deemed  amended  and  revised to reflect  such  modification),  and, if any such
assignment  occurs while any Revolving Loan is outstanding,  new Revolving Notes
shall, if requested by the assignor Bank or such assignee, upon the surrender of
the  assigning  Bank's  Revolving  Notes,  be issued to such assignee and to the
assigning Bank as necessary to reflect the new Commitments of the assigning Bank
and of its  assignee.  Any  assigning  Bank  shall pay the Agent a $2,500 fee in
connection with the effectiveness of any assignment it makes.

                                       44
<PAGE>

                 (b) Each Bank may sell,  negotiate or grant  participations  to
Bank Affiliates in all or part of the obligations of Borrower  outstanding under
the Loan  Documents,  without  notice to or the approval of the Agent;  provided
that any such sale, negotiation or participation shall be in compliance with the
applicable  federal and state  securities  laws. No Bank shall transfer or grant
any  participating  interest  under which the  participant  shall have rights to
approve  any  amendment  to, or any  consent or waiver  with  respect  to,  this
Agreement  or any other  Loan  Document,  except to the extent  such  amendment,
consent or waiver  would  require  unanimous  consent as  described in the first
proviso to Section 9.1. No participant  shall constitute a "Bank" under any Loan
Document, and Borrower shall continue to deal solely and directly with the Agent
and the Banks.

                 (c) Each Bank may disclose to any proposed approved assignee or
participant  which  is a  financial  institution  any  information  relating  to
Borrower or any of its Consolidated  Subsidiaries;  provided, that prior to such
disclosure  such  proposed   assignee  or  participant  shall  have  executed  a
Nondisclosure Agreement.

         SECTION  9.7  EFFECTIVENESS;   BINDING  EFFECT;   GOVERNING  LAW.  This
Agreement  is being  executed  on the date  hereof  by  Borrower,  the Banks and
BankBoston  (in its  capacity  as the  Agent and  Bank)  and is  binding  on and
effective  against each such party as of the date hereof.  This Agreement  shall
become effective when it shall have been executed by Borrower, the Agent and the
Banks and thereafter shall be binding upon and inure to the benefit of Borrower,
the Agent and the Banks and their respective  permitted  successors and assigns,
except that Borrower shall not have the right to assign its rights  hereunder or
any  interest  herein  without  the prior  written  consent of the Agent and the
Banks.  THIS  AGREEMENT  AND THE  REVOLVING  NOTES  SHALL BE  GOVERNED  BY,  AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING
EFFECT TO ITS CHOICE OF LAW DOCTRINE.

         SECTION 9.8 CONSENT TO  JURISDICTION;  VENUE;  THE AGENT FOR SERVICE OF
PROCESS.  All judicial proceedings brought against Borrower with respect to this
Agreement and the Loan Documents may be brought in any state or federal court of
competent  jurisdiction  in  the  County  of  San  Francisco  in  the  State  of
California,  and by execution and delivery of this Agreement,  Borrower  accepts
for itself and in connection with its properties, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to
be bound by any judgment  rendered  thereby in connection  with this  Agreement.
Borrower  irrevocably  waives  any right it may have to assert the  doctrine  of
forum non  conveniens  or to object to venue to the  extent  any  proceeding  is
brought in  accordance  with this  Section.  Borrower  designates  and  appoints
Borrower's Chief Financial Officer, from time to time, Komag Incorporated,  1704
Automation Parkway, San Jose, California,  95131-1873, and such other Persons as
may  hereafter  be selected by  Borrower  irrevocably  agreeing in writing to so
serve as its agent to receive on its behalf  service of all  process in any such
proceedings  in any such  court,  such  service  

                                       45
<PAGE>

being hereby  acknowledged  by Borrower to be effective  and binding  service in
every  respect.  A copy of any  such  process  so  served  shall  be  mailed  by
registered mail to Borrower at its address provided in the applicable  signature
page  hereto,  except that unless  otherwise  provided by  applicable  law,  any
failure to mail such copy shall not affect the  validity  of service of process.
If any agent appointed by Borrower  refuses to accept  service,  Borrower hereby
agrees that service upon it by mail shall constitute sufficient notice.  Nothing
herein shall affect the right to serve process in any other manner  permitted by
law or shall limit the right of the Agent,  on behalf of the Banks or the Banks,
to bring proceedings against Borrower in courts of any jurisdiction.

         SECTION 9.9 ENTIRE AGREEMENT.  This Agreement with Exhibits,  the other
Loan  Documents  and the fee letter  referred  to in Section  2.1(g)  embody the
entire agreement and understanding between the parties hereto and supersedes all
prior agreements and understandings relating to the subject matter hereof.

         SECTION 9.10 SEPARABILITY OF PROVISIONS. In case any one or more of the
provisions   contained  in  this  Agreement   should  be  invalid,   illegal  or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  shall  not in any way be  affected  or
impaired thereby.

         SECTION 9.11 EXECUTION IN COUNTERPARTS.  This Agreement may be executed
in any  number of  counterparts  and by  different  parties  hereto in  separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

         SECTION 9.12 SURVIVAL OF CERTAIN AGREEMENTS.  Notwithstanding  anything
in this  Agreement or implied by law to the contrary,  the agreement of Borrower
set  forth in  Section  3.7(a)  and the  agreements  of the  Banks  set forth in
Sections 8.2, 8.3, and 8.4 (as well as any obligations  under any  Nondisclosure
Agreements)  shall survive the payment of the Revolving  Loans and the Revolving
Notes and the  termination of this Agreement.  Notwithstanding  anything in this
Agreement to the contrary,  the agreement of Borrower set forth in Sections 3.6,
3.7(b) and 3.10 of the Agreement  shall survive for one hundred and eighty (180)
days from the date of the later of (i) the  payment of  Revolving  Loans and the
Revolving Notes and (ii) the termination of the Commitments.

         SECTION 9.13 EFFECT OF AMENDMENT  AND  RESTATEMENT.  This  Agreement is
intended to and does completely amend and restate,  without novation,  the Prior
Agreement.  Any new Revolving  Loans made on or after the date of this Agreement
shall be made under the  conditions  set forth in, and shall be governed by, the
terms of this Agreement.


                                       46
<PAGE>


         SECTION 9.14 CERTAIN CLOSING DATE TRANSITIONAL MATTERS.

                 (a) On the Closing  Date,  each Bank hereby  sells and assigns,
without  recourse,  an amount of Revolving Loans equal to the product of (i) the
excess (if any) of its  Original  Percentage  over its Closing  Date  Percentage
times (ii) the aggregate principal amount of Revolving Loans outstanding on such
date and each Bank hereby  purchases an amount of  Revolving  Loans equal to the
product of (i) the  excess  (if any) of its  Closing  Date  Percentage  over its
Original Percentage times (ii) the aggregate principal amount of Revolving Loans
outstanding on such date.  Each Bank selling  Revolving Loans hereunder shall be
deemed to have sold (and each Bank purchasing Revolving Loans shall be deemed to
have purchased) a pro rata portion (based on the aggregate  principal  amount of
Revolving  Loans then  outstanding)  of each of such  selling  Bank's  Revolving
Loans.  Payments by each Bank purchasing Revolving Loans hereunder shall be made
to the Agent not later than 12:00  noon,  (San  Francisco  time) in  immediately
available funds,  without setoff,  deduction or  counterclaim,  for the pro rata
account (based upon the  outstanding  principal  amount of Revolving Loans being
sold) of each selling Bank in an amount equal to the aggregate  principal amount
of outstanding Revolving Loans purchased by such Bank.

                 (b) On and after the Closing Date,  each Bank shall be entitled
to receive a facility fee under Section 2.1(c) of the Agreement and interest and
fees on Revolving Loans and on any other amount due under any Loan Document,  in
each case, (i) accrued and unpaid before the Closing Date in accordance with its
Original Percentage and (ii) accrued on and after the Closing Date in accordance
with its Closing Date Percentage.

                 (c) On and after  the  Closing  Date,  to the  extent  that any
commitment and the other rights and obligations of any Bank existing at the time
immediately  preceding  the Closing  Date have been  assigned or  delegated,  as
applicable,  to any Bank  hereunder,  such  assignee  Bank hereby  assumes  such
commitment and other  obligations and shall have the rights and obligations of a
Bank  hereunder and under the other Loan  Documents  and, to the extent that any
commitment and other  obligations  of any Bank existing at the time  immediately
preceding  the Closing  Date have been  delegated  by any Bank  pursuant to this
Agreement,  such assignor Bank shall be released  from such  commitment  and its
obligations thereunder and under the other Loan Documents.

         For purposes of this Section, (i) "Original Percentage" means, relative
to any Bank,  the percentage set forth with respect to such Bank on the schedule
attached hereto as Schedule 4 and (ii) "Closing Date Percentage" means, relative
to any Bank,  the percentage set forth with respect to such Bank on the schedule
attached hereto as Schedule 4.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       47
<PAGE>


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

KOMAG, INCORPORATED


By: /s/ Stephen Johnson
Title:____________________________

Address:
1704 Automation Parkway
San Jose, California 95131-1873
Facsimile: (408) 944-9255
Attention:  David H. Allen


BANKBOSTON, N.A.,
as the Agent and as a Bank


By: /s/ Kevin F. Malone
Title: Division Executive

Address:
435 Tasso Street, Suite 250
Palo Alto, California  94301
Facsimile: (415) 853-1425
Attention:  Teresa J. Heller

COMERICA BANK - CALIFORNIA,
as a Bank

By: /s/ Lori Edwards
Title: First Vice President

Address:
155 Grand Avenue, Suite 402
Mail Code: 4844
Oakland, California  94612
Facsimile: (510) 645-2220
Attention:  Lori S.  Edwards


                                       S-1
<PAGE>


STANDARD CHARTERED BANK,
as a Bank

By: /s/ M J Machado-Schammel
Title: VP

By: /s/ ?????????????
Title: AVP

Address:
707 Wilshire Blvd. W9
Los Angeles, CA  90017
Facsimile: (213) 614-5158
Attention:  Mary Machado-Schammel


BANQUE NATIONALE DE PARIS,
as a Bank

By: /s/ Rafael C. Lumanlan
Title: Vice President

By: /s/ Charles H. Day
Title: Assistant Vice President

Address:
180 Montgomery Street, 3rd Floor
San Francisco, CA  94104
Facsimile: (415) 296-8954
Attention: Raphael Lumanlan


FLEET NATIONAL BANK,
as a Bank

By: /s/ Michael Barclay
Title: Assistant Vice President

Address:
75 State Street, 4th Floor
Boston, MA  02109
Facsimile: (617) 346-1633
Attention:  Michael Barclay


                                      S-2

<PAGE>


BANK OF MONTREAL, as a Bank

By: /s/ ???????????????
Title: Director

Address:
601 S. Figueroa Street, Suite 4900
Los Angeles, CA  90017
Facsimile: (213) 239-0680
Attention:  Craig Ingram


THE BANK OF NOVA SCOTIA,
as a Bank


By: /s/ Chris Johnson
Title: Sr. Relationship Mgr.

Address:
580 California Street, 21st Floor
San Francisco, CA  94104
Facsimile: (415) 397-0791
Attention:  Chris Johnson


UNION BANK OF CALIFORNIA, N.A.,
as a Bank

By: /s/ Patrick Clemens
Title: Assistant Vice President

Address:
400 California Street, 17th Floor
San Francisco, California  94104
Facsimile:  (415) 765-2634
Attention:  Patrick Clemens


                                      S-3
<PAGE>


ABN AMRO BANK, N.V.,
SAN FRANCISCO BRANCH,
as a former Bank, as to Section 9.14


By: /s/ Robert N. Hartinger
Title: Senior Vice President

By: /s/ Bruce W. Swords
Title: Vice President

Address:
101 California Street
San Francisco, California  94111-5812
Facsimile:  (415) 362-3524
Attention:  Tom R. Wagner


WELLS FARGO BANK,
NATIONAL ASSOCIATION
as former Agent and Bank, as to Section 9.14

By: /s/ Robin S. Apple
Title: Vice President

Address:
121 Park Center Plaza
San Jose, CA 95112
Facsimile:  (408) 295-0639
Attn:  Karen Barone


                                      S-3
<PAGE>


                                    EXHIBIT A

                      AMENDED AND RESTATED PROMISSORY NOTE


$_________________                                           ____________, 199_


         FORVALUE RECEIVED,  KOMAG,  INCORPORATED (the "Borrower"),  promises to
pay to the order of  _____________________(the  "Bank"), the principal amount of
________________  Dollars  ($__________________),  or,  if less,  the  aggregate
amount of  Revolving  Loans (as  defined in the  Credit  Agreement  referred  to
below),  made by the  Bank to the  Borrower  pursuant  to the  Credit  Agreement
referred to below,  outstanding  on the Maturity  Date (as defined in the Credit
Agreement referred to below). All unpaid amounts of principal and interest shall
be due and  payable  in full on the  Maturity  Date  as  defined  in the  Credit
Agreement referred to below.

         The  Borrower  also  promises to pay  interest on the unpaid  principal
amount  hereof  from the date  hereof  until  paid at the rates and at the times
which  shall be  determined  in  accordance  with the  provisions  of the Credit
Agreement referred to below.

         All payments of principal and interest in respect of this Note shall be
made in lawful  money of the  United  States of America in same day funds at the
office of  BankBoston,  N.A.,  as "Agent" (as that term is defined in the Credit
Agreement  referred to below), on behalf of the Bank, at the office of the Agent
located at 435 Tasso Street, Suite 250, Palo Alto,  California 94301, or at such
other place as shall be  designated  in writing for such  purpose in  accordance
with the terms of the Credit Agreement  referred to below. Until notified of the
transfer of this Note,  the Borrower  shall be entitled to deem the Bank or such
person who has been so identified  by the  transferor in writing to the Borrower
as the  holder of this Note,  as the owner and holder of this Note.  Each of the
Bank and any subsequent holder of this Note agrees that before disposing of this
Note or any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been paid
on the schedule attached hereto, if any; provided,  however, that the failure to
make  notation  of any  payment  made on this Note shall not limit or  otherwise
affect the  obligation  of the  Borrower  hereunder  with respect to payments of
principal or interest on this Note.

         This Note is referred to in, and is  entitled to the  benefits  of, the
Amended and Restated Credit Agreement dated as of June 20, 1997 (as amended, the
"Credit  Agreement")  among  Borrower,  the Agent,  the Bank and the other banks
described  therein.  The Credit Agreement,  among other things, (i) provides for
the making of advances  (the  "Loans") by the Bank to the Borrower  from time to
time in an  aggregate  amount  not to  exceed at any time  outstanding  the U.S.
dollar amount first above mentioned,  the indebtedness of the Borrower resulting
from each such

<PAGE>

Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity  hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.

         The terms of this Note are  subject  to  amendment  only in the  manner
provided in the Credit Agreement.

         No reference  herein to the Credit  Agreement  and no provision of this
Note or the  Credit  Agreement  shall  alter or  impair  the  obligation  of the
Borrower,  which is absolute  and  unconditional,  to pay the  principal  of and
interest on this Note at the place, at the respective times, and in the currency
herein prescribed.

         The  Borrower  promises  to  pay  all  costs  and  expenses,  including
reasonable  attorneys' fees,  incurred in the collection and enforcement of this
Note.  The Borrower  hereby  consents to renewals and  extensions  of time at or
after  the  maturity  hereof,  without  notice,  and  hereby  waives  diligence,
presentment,  protest,  demand and notice of every kind and,  to the full extent
permitted by law, the right to plead any statute of  limitations as a defense to
any demand hereunder.

         This  Note  amends,   restates  and  supersedes  in  its  entirety  any
promissory  notes  delivered  pursuant to the Prior Agreement (as defined in the
Credit Agreement) in favor of the Bank.

         IN WITNESS  WHEREOF,  the  Borrower has caused this Note to be executed
and delivered by its duly authorized officer, as of the date and the place first
above written.

                                        KOMAG, INCORPORATED



                                        By:_________________________
                                        Its:________________________


<PAGE>


                                    EXHIBIT B

                            FORM OF BORROWING REQUEST



         The undersigned, KOMAG, INCORPORATED (the "Borrower"), hereby certifies
to BANKBOSTON,  N.A., as Agent for the Banks under (and as all capitalized terms
not otherwise  defined herein are defined in) that certain  Amended and Restated
Credit Agreement dated as of June 20, 1997 among the Borrower, the Agent and the
Banks (the  "Agreement"),  that it desires to borrow a  LIBOR/BASE  RATE (circle
one) Loan in the aggregate amount of $______________  (which amount is a minimum
of $1,000,000  and in an aggregate  multiple of $100,000 above such amount for a
Base Rate Loan and is a minimum of $1,000,000)  and in an aggregate  multiple of
$500,000  above  such  amount  for a LIBOR  Rate Loan at the LIBOR Rate which is
________________   for  an   Interest   Period   of   _____________________   on
______________________________ (the "Borrowing Date").

         1. The Borrower  hereby  represents and warrants to the Agent on behalf
of each Bank the accuracy and completeness of the representations and warranties
set forth in Article V of the Agreement on and as of the Borrowing Date,  except
to the extent such  representations and warranties expressly refer to an earlier
date,  in which case they shall be true and correct as of such  earlier date and
except that Section 5.1 (e) shall be deemed  instead to refer to the last day of
the most recent fiscal year and fiscal  quarter for which  financial  statements
have been delivered pursuant to Section 6.1 of the Agreement.

         2. The Borrower hereby  certifies that no Event of Default or Potential
Event of Default  exists on or as of the  Borrowing  Date or would  exist  after
giving effect to the borrowings requested herein.

         3. The  Borrower  hereby  certifies  that  after  giving  effect to the
borrowings  requested  herein,  the  aggregate  principal  amount of any  Bank's
Revolving  Loans will not  exceed its  Commitment  and the  aggregate  principal
amount  of all  Revolving  Loans  outstanding  will  not  exceed  the  Aggregate
Commitment.

<PAGE>


         The Borrower  hereby  requests that the Agent  telecopy this  Borrowing
Request to the Banks on or before the close of business of the Agent on the date
hereof.



Dated this ____ day of _________________, 19___.


                                        KOMAG, INCORPORATED


 
                                        By:_________________________
                                        Its:________________________


<PAGE>

<TABLE>

                                   SCHEDULE 1

                             SCHEDULE OF COMMITMENTS
<CAPTION>
                                                                                                    Commitment
Name of Bank                             Address                            Commitment              Percentage
-----------------------------------------------------------------------------------------------------------------

<S>                           <C>                                          <C>                    <C>
The First National            435 Tasso Street
Bank of Boston                Suite 250
                              Palo Alto, CA 94301                          $35,000,000            20.0000000000%

Comerica Bank -               333 West Santa Clara Street
California                    San Jose, CA 95113                           $25,000,000            14.2857142857%

Standard                      707 Wilshire Blvd. W9
Chartered Bank                Los Angeles, CA  90017                       $21,000,000            12.0000000000%

Fleet National Bank           75 State Street, 4th Flr.
                              Boston, MA 02109                             $24,000,000            13.7142857143%

The Bank of                   580 California St., 21st Flr.
Nova Scotia                   San Francisco, CA 94104                      $20,000,000            11.4285714286%

Union Bank                    400 California St., 17th Flr.
of California                 San Francisco, CA 94104                      $20,000,000            11.4285714286%

Bank of Montreal              601 S. Figueroa St., Ste. 490
                              Los Angeles, CA  90017                       $15,000,000             8.5714285714%

Banque Nationale              180 Montgomery Street, 3d Flr.
de Paris                      San Francisco, CA 94104                      $15,000,000             8.5714285714%



                                    TOTAL:                                $175,000,000                      100%
</TABLE>


<PAGE>

                                   SCHEDULE 2



                      EXISTING LIENS AND SECURITY INTERESTS




         1. Purchase money security interests in equipment; and

         2. UCC filings evidencing leased equipment.



<PAGE>


                                   SCHEDULE 3

                   SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES


                                                             Percentage of the
                                                           Borrower's Ownership
                                                           --------------------

1.       Komag Material Technology, Inc.                            80%

2.       Komag Technology Partners                                  50%

3.       Asahi Komag Co., Ltd.                                       0%*

4.       Komag Bermuda Ltd.                                        100%

5.       Komag Overseas Ltd.                                       100%

6.       Komag USA (Malaysia) Sdn                                    0%**

7.       Dastek Holding Company                                     60%

8.       Dastek (M) SDN BHD                                          0%**

9.       Asahi Komag (Thailand) Co., Ltd.                            0%****

10.      Komag (Barbados) Ltd.                                     100%

*        The Borrower owns 50% of Komag Technology Partners,  which owns 100% of
         Asahi Komag Co., Ltd.

**       Komag Bermuda Ltd. (97%) and Komag Overseas Ltd. (3%) own 100% of Komag
         USA (Malaysia) Sdn.

***      Dastek Holding Company owns 100% of Dastek (M) SDN BHD.

****     Asahi Komag Co., Ltd. owns 100% of Asahi Komag (Thailand) Co., Ltd.



<PAGE>


                                   SCHEDULE 4

                   BANK ORIGINAL AND CLOSING DATE PERCENTAGES


BANK                       ORIGINAL PERCENTAGE       CLOSING DATE PERCENTAGE

The First National
Bank of Boston                      00.00%                20.000000000%

Comerica Bank -
California                          25.00%                14.2857142857%

Standard
Chartered Bank                      21.43%                12.0000000000%

Fleet National
Bank                                00.00%                13.7142857143%

The Bank of
Nova Scotia                         00.00%                11.4285714286%

Union Bank
of California                       00.00%                11.4285714286%

Bank of Montreal                    00.00%                8.5714285714%

Banque Nationale
de Paris                            00.00%                8.5714285714%

ABN-AMRO Bank, NV                   25.00%                0.00%

First Interstate
Bank of California                  28.57%                0.00%