<PAGE>
                                          
                            LOAN AND SECURITY AGREEMENT
                                          
                                          
                                          
                                   BY AND BETWEEN
                                          
                                          
                      CONGRESS FINANCIAL CORPORATION (WESTERN)
                                          
                                          
                                     AS LENDER
                                          
                                        AND
                                          
                                          
                            MICROTEL INTERNATIONAL, INC.
                                          
                                  XIT CORPORATION
                                          
                               CXR TELCOM CORPORATION
                                          
                                        AND
                                          
                                    HYCOMP, INC.
                                          
                                          
                                    AS BORROWER
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          



                               DATED:  JUNE 23, 1998



<PAGE>




                                  TABLE OF CONTENTS

<TABLE>
                                                                                     PAGE(S)
                                                                                     -------
<S>            <C>                                                                   <C>
SECTION 1.     DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2.     CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
               2.1    Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 7
               2.2    Letter of Credit Accommodations. . . . . . . . . . . . . . . . . . 9
               2.3    Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
               2.4    Cap Ex Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .11

SECTION 3.     INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
               3.1    Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
               3.2    Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
               3.3    Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .13
               3.4    Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . .13
               3.5    Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . . . .13
               3.6    Compensation Adjustment. . . . . . . . . . . . . . . . . . . . . .13

SECTION 4.     CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . .14
               1.1    Conditions Precedent to Initial Loans and Letter of Credit 
                      Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . .14
               1.2    Conditions Precedent to All Loans and Letter of Credit 
                      Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . .16

SECTION 5.     GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . .16

SECTION 6.     COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . .17
               6.1    Borrower's Loan Account. . . . . . . . . . . . . . . . . . . . . .17
               6.2    Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
               6.3    Collection of Accounts . . . . . . . . . . . . . . . . . . . . . .17
               6.4    Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
               6.5    Authorization to Make Loans. . . . . . . . . . . . . . . . . . . .19
               6.6    Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .19

SECTION 7.     COLLATERAL REPORTING AND COVENANTS. . . . . . . . . . . . . . . . . . . .19
               7.1    Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . .19
               7.2    Accounts Covenants . . . . . . . . . . . . . . . . . . . . . . . .19
               7.3    Inventory Covenants. . . . . . . . . . . . . . . . . . . . . . . .21
               7.4    Equipment Covenants. . . . . . . . . . . . . . . . . . . . . . . .21
               7.5    Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . .22
               7.6    Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . . .22
               7.7    Access to Premises . . . . . . . . . . . . . . . . . . . . . . . .22

SECTION 8.     REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . .23
               8.1    Corporate Existence, Power and Authority; Subsidiaries . . . . . .23
               8.2    Financial Statements; No Material Adverse Change . . . . . . . . .23
               8.3    Chief Executive Office; Collateral Locations . . . . . . . . . . .23
               8.4    Priority of Liens; Title to Properties . . . . . . . . . . . . . .23
               8.5    Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
               8.6    Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
               8.7    Compliance with Other Agreements and Applicable Laws . . . . . . .24


                                       i

<PAGE>


                                                                                     PAGE(S)
                                                                                     ------
               8.8    Environmental Compliance . . . . . . . . . . . . . . . . . . . . .24
               8.9    Employee Benefits... . . . . . . . . . . . . . . . . . . . . . . .25
               8.10   Accuracy and Completeness of Information . . . . . . . . . . . . .25
               8.11   Survival of Warranties; Cumulative . . . . . . . . . . . . . . . .25

SECTION 9.     AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . .26
               9.1    Maintenance of Existence . . . . . . . . . . . . . . . . . . . . .26
               9.2    New Collateral Locations . . . . . . . . . . . . . . . . . . . . .26
               9.3    Compliance with Laws, Regulations. . . . . . . . . . . . . . . . .26
               9.4    Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . .27
               9.5    Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
               9.6    Financial Statements and Other Information . . . . . . . . . . . .28
               9.7    Sale of Assets, Consolidation, Merger, Dissolution, Etc. . . . . .29
               9.8    Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . .29
               9.9    Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . .29
               9.10   Loans, Investments, Guarantees, Etc. . . . . . . . . . . . . . . .30
               9.11   Dividends and Redemptions. . . . . . . . . . . . . . . . . . . . .30
               9.12   Transactions with Affiliates . . . . . . . . . . . . . . . . . . .30
               9.13   Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . .30
               9.14   Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . .30
               9.15   Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . .30
               9.16   Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . .31
               9.17   Further Assurances . . . . . . . . . . . . . . . . . . . . . . . .31

SECTION 10.    EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . .32
               10.1   Events of Default. . . . . . . . . . . . . . . . . . . . . . . . .32
               10.2   Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

SECTION 11.    JURY TRIAL WAIVER; OTHER WAIVERS AND
               CONSENTS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .34
               11.1   Governing Law; Choice of Forum; Service of Process; 
                      Jury Trial Waiver. . . . . . . . . . . . . . . . . . . . . . . . .34
               11.2   Waiver of Notices. . . . . . . . . . . . . . . . . . . . . . . . .35
               11.3   Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .35
               11.4   Waiver of Counterclaims. . . . . . . . . . . . . . . . . . . . . .36
               11.5   Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .36

SECTION 12.    TERM OF AGREEMENT; MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . .36
               12.1   Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
               12.2   Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
               12.3   Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . .37
               12.4   Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
               12.5   Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .38
</TABLE>

                                       ii


<PAGE>


                                        INDEX TO
                                EXHIBITS AND SCHEDULES


     Exhibit A                          Information Certificate

















                                      iii


<PAGE>



                            LOAN AND SECURITY AGREEMENT

     This Loan and Security Agreement dated June 23, 1998 is entered into by and
between Congress Financial Corporation (Western), a California corporation
("Lender") and Microtel International, Inc. ("Microtel"), a Delaware
corporation, XIT Corporation ("XIT"), a New Jersey Corporation, CXR Telcom
Corporation ("CXR"), a Delaware corporation, and Hycomp, Inc. ("Hycomp"), a
Massachusetts corporation.   (Microtel, XIT, CXR and Hycomp are sometimes
referred to in this Agreement, jointly and severally, as the "Borrower".)

                                W I T N E S S E T H:

     WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and

     WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.     DEFINITIONS.  

     All terms used herein which are defined in Article 1 or Article 9 of the
California Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement.  All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural.  All references to Borrower and Lender pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns.  The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.  An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3.  Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP.  For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:

     1.1  "ACCOUNTS" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.

     1.2  "ADJUSTED NET WORTH" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any, but not
including foreign subsidiaries), the amount equal to:  (a) the difference
between:  (i) the aggregate net book value of all assets of such Person and its
subsidiaries, calculating the book value of inventory for this purpose on a
first-in-first-out basis, 


                                       - 1 -

<PAGE>

after deducting from such book values all appropriate reserves in accordance 
with GAAP (including all reserves for doubtful receivables, obsolescence, 
depreciation and amortization) and (ii) the aggregate amount of the 
indebtedness and other liabilities of such Person and its subsidiaries 
(including tax and other proper accruals) PLUS (b) indebtedness of such 
Person and its subsidiaries which is subordinated in right of payment to the 
full and final payment of all of the Obligations on terms and conditions 
acceptable to Lender.

     1.3  "AVAILABILITY RESERVES" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
for herein:  (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value
(including without limitation any increase in any dilution with respect to the
Accounts of any Borrower), (ii) the assets, business or prospects of Borrower or
any Obligor or (iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect any state of facts which Lender determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default. Without limiting the generality of the
foregoing, Lender (i) shall establish on the date hereof and maintain throughout
the term of this Agreement and throughout any renewal term an Availability
Reserve for an amount equal to three (3) months of Borrower's gross rent and
other obligations as lessee for each leased premises of Borrower which is
located in a state where a landlord may be entitled to a priority lien on
Collateral to secure unpaid rent and with respect to each such property the
landlord has not executed a form of waiver and consent acceptable to Lender,
(ii) may establish an additional Availability Reserve on the date hereof, and
from time to time hereafter, and maintain such reserve throughout the term of
this Agreement and throughout any renewal term in an amount determined by Lender
in its discretion to be sufficient to cover the anticipated moving expenses and
other costs associated with the transfer of Inventory from each of Borrower's
locations to another location acceptable to Lender, and (iii) may establish and
maintain an additional Availability Reserve from time to time to compensate for
types of Inventory in an amount equal to more than the sales of such Inventory
during the prior 18 months.

     1.4  "BLOCKED ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.

     1.5  "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, the Commonwealth of Pennsylvania or the State
of California, and a day on which First Union National Bank or such other bank
as Lender may from time to time designate, and Lender are open for the
transaction of business.

     1.6  "CODE" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.


                                      - 2 -


<PAGE>


     1.7  "COLLATERAL" shall have the meaning set forth in Section 5 hereof.

     1.8  "ELIGIBLE ACCOUNTS" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below. 
In general, Accounts shall be Eligible Accounts if:

          (a)  such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;

          (b)  such Accounts are not unpaid more than 60 days after their
original due date or more than 90 days after the date of the original invoice
for them;

          (c)  such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;

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

          (e)  the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada, or, at
Lender's option, if either:  (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank in the United States
satisfactory to Lender, sufficient to cover such Account, payable in the United
States of America and in U.S. Dollars, in form and substance satisfactory to
Lender and, if required by Lender, the original of such letter of credit has
been delivered to Lender or Lender's agent and the issuer thereof notified of
the assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender including, but not limited to,
the creditworthiness of the account debtor and the political risk associated
therewith, and the ability of the Lender to collect the foreign Account, subject
to such lending formulas with respect to each foreign Account as Lender may
determine, and each such foreign Account is payable to Borrower at a location in
the United States of America and in U.S. Dollars;

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

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


                                       - 3 -


<PAGE>


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

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

          (j)  neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise; 

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

          (l)  there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition; 

          (m)  such Accounts of a single account debtor or its affiliates do not
constitute more than twenty percent (20%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts); 

          (n)  such Accounts are not owed by an account debtor who has Accounts
unpaid more than 60 days after their original due date or more than 90 days
after the date of the original invoice for them which constitute more than fifty
percent (50%) of the total Accounts of such account debtor;

          (o)  such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and 

          (p)  such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender. 

     General criteria for Eligible Accounts may be established and revised from
time to time by Lender in good faith.  Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.  

     1.9  "ELIGIBLE INVENTORY" shall mean Inventory consisting of 
finished goods held for resale in the ordinary course of the business of 
Borrower and raw materials for such finished 

                                      -4-
<PAGE>

goods which are acceptable to Lender based on the criteria set forth below.  
In general, Eligible Inventory shall not include (a) work-in-process; (b) 
components which are not part of finished goods; (c) spare parts for 
equipment; (d) packaging and shipping materials; (e) supplies used or 
consumed in Borrower's business; (f) Inventory at premises other than those 
owned and controlled by Borrower, except if Lender shall have received an 
agreement in writing from the person in possession of such Inventory and/or 
the owner or operator of such premises in form and substance satisfactory to 
Lender acknowledging Lender's first priority security interest in the 
Inventory, waiving security interests and claims by such person against the 
Inventory and permitting Lender access to, and the right to remain on, the 
premises so as to exercise Lender's rights and remedies and otherwise deal 
with the Collateral; (g) Inventory in-transit; (h) Inventory subject to a 
security interest or lien in favor of any person other than Lender except 
those permitted in this Agreement; (i) bill and hold goods; (j) 
unserviceable, obsolete or slow moving Inventory; (k) Inventory which is not 
subject to the first priority, valid and perfected security interest of 
Lender; (l) returned, damaged and/or defective Inventory; and (m) Inventory 
purchased or sold on consignment.  General criteria for Eligible Inventory 
may be established and revised from time to time by Lender in good faith.  
Any Inventory which is not Eligible Inventory shall nevertheless be part of 
the Collateral.

     1.10 "ENVIRONMENTAL LAWS" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower's business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.

     1.11 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

     1.12 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

     1.13 "ERISA AFFILIATE" shall mean any person required to be aggregated with
Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.

     1.14 "EVENT OF DEFAULT" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.


                                      - 5 -


<PAGE>


     1.15 "EXCESS AVAILABILITY" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the amount of the
Revolving Loans available to Borrower as of such time based on the applicable
lender formulas multiplied by the Net Amount of Eligible Accounts and the Value
of Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Credit (less the then outstanding principal amount of the Term
Loan), MINUS (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations (but not including for this purpose the then outstanding principal
amount of the Term Loan), (ii) the aggregate amount of all then outstanding and
unpaid trade payables of Borrower which are more than sixty (60) days past due
as of such time, (iii) the aggregate amount of Borrower's book overdrafts, and
(iv) the aggregate amount of Borrower's past due lease and notes payable.

     1.16 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

     1.17 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.

     1.18 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).

     1.19 "INFORMATION CERTIFICATE" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

     1.20 "INVENTORY" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.


                                      - 6 - 



<PAGE>

               1.21 "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters 
of credit, merchandise purchase or other guaranties which are from time to 
time either (a) issued, opened or provided by Lender for the account of 
Borrower or any Obligor or (b) with respect to which Lender has agreed to 
indemnify the issuer or guaranteed to the issuer the performance by Borrower 
of its obligations to such issuer.

               1.22 "LOANS" shall mean the Revolving Loans, the Cap Ex Loans 
and the Term Loan.

               1.23 "MAXIMUM CREDIT" shall mean the amount of $10,500,000.

               1.24 "NET AMOUNT OF ELIGIBLE ACCOUNTS" shall mean the gross 
amount of Eligible Accounts less (a) sales, excise or similar taxes included 
in the amount thereof and (b) returns, discounts, claims, credits and 
allowances of any nature at any time issued, owing, granted, outstanding, 
available or claimed with respect thereto.

               1.25 "OBLIGATIONS" shall mean any and all Revolving Loans, the 
Cap Ex Loans, the Term Loan, Letter of Credit Accommodations and all other 
obligations, liabilities and indebtedness of every kind, nature and 
description owing by Borrower to Lender and/or its affiliates, including 
principal, interest, charges, fees, costs and expenses, however evidenced, 
whether as principal, surety, endorser, guarantor or otherwise, whether 
arising under this Agreement or otherwise, whether now existing or hereafter 
arising, whether arising before, during or after the initial or any renewal 
term of this Agreement or after the commencement of any case with respect to 
Borrower under the United States Bankruptcy Code or any similar statute 
(including, without limitation, the payment of interest and other amounts 
which would accrue and become due but for the commencement of such case), 
whether direct or indirect, absolute or contingent, joint or several, due or 
not due, primary or secondary, liquidated or unliquidated, secured or 
unsecured, and however acquired by Lender.

               1.26 "OBLIGOR" shall mean any guarantor, endorser, acceptor, 
surety or other person liable on or with respect to the Obligations or who is 
the owner of any property which is security for the Obligations, other than 
Borrower.

               1.27 "PARTICIPANT" shall mean any person which at any time 
participates with Lender in respect of the Loans, the Letter of Credit 
Accommodations or other Obligations or any portion thereof.

               1.28 "PAYMENT ACCOUNT" shall have the meaning set forth in 
Section 6.3 hereof.

               1.29 "PERSON" or "PERSON" shall mean any individual, sole 
proprietorship, partnership, corporation (including, without limitation, any 
corporation which elects subchapter S status under the Internal Revenue Code 
of 1986, as amended), business trust, unincorporated association, joint stock 
corporation, trust, joint venture or other entity or any government or any 
agency or instrumentality or political subdivision thereof.

               1.30 "PRIME RATE" shall mean the rate from time to time 
publicly announced by First Union National Bank or its successors, at its 
office in Philadelphia, Pennsylvania, as its prime rate, whether or not such 
announced rate is the best rate available at such bank.  

                                       -7-
<PAGE>

               1.31 "RECORDS" shall mean all of Borrower's present and future 
books of account of every kind or nature, purchase and sale agreements, 
invoices, ledger cards, bills of lading and other shipping evidence, 
statements, correspondence, memoranda, credit files and other data relating 
to the Collateral or any account debtor, together with the tapes, disks, 
diskettes and other data and software storage media and devices, file 
cabinets or containers in or on which the foregoing are stored (including any 
rights of Borrower with respect to the foregoing maintained with or by any 
other person).

               1.32 "REVOLVING LOANS" shall mean the loans now or hereafter 
made by Lender to or for the benefit of Borrower on a revolving basis 
(involving advances, repayments and readvances) as set forth in Section 2.1 
hereof. 

               1.33 "TERM LOAN" shall mean collectively the term loans made 
by Lender to Borrower as provided for in Section 2.3 hereof.

               1.34 "VALUE" shall mean, as determined by Lender in good 
faith, with respect to Inventory, the lower of (a) cost computed on a 
first-in-first-out basis in accordance with GAAP or (b) market value. 

SECTION 2.     CREDIT FACILITIES.  

               2.1  REVOLVING LOANS.  

                    (a)  Subject to, and upon the terms and conditions 
contained herein, Lender agrees to make Revolving Loans to Borrower from time 
to time in amounts requested by Borrower up to  the amount equal to the sum 
of:  

                         (i) EIGHTY-FIVE PERCENT (85%) of the Net Amount of 
               Eligible Accounts, plus 

                         (ii) the lesser of:  

                              (A) the sum of FORTY PERCENT (40%) of the Value 
               of Eligible Inventory consisting of finished goods plus 
               TWENTY-FIVE PERCENT (25%) of the Value of Eligible Inventory 
               consisting of raw materials for such finished goods, or 

                              (B) the amount equal to:  (1) $500,000 minus 
               FORTY PERCENT (40%) of the then undrawn amounts of the 
               outstanding Letter of Credit Accommodations for the purpose of 
               purchasing finished goods, plus (2) $1,000,000 minus 
               TWENTY-FIVE PERCENT (25%) of the then undrawn amounts of the 
               outstanding Letter of Credit Accommodations for the purpose of 
               purchasing raw materials for such finished goods, less 

                         (iii) any Availability Reserves;

               PROVIDED THAT:

                                         -8-
<PAGE>

                    (1) Total Revolving Loans to all Borrowers shall not at any
               time exceed $9,000,000;

                    (2) Total Loans to all Borrowers with respect to finished 
               goods shall not exceed $500,000 at any time outstanding; 

                    (3) Total Loans to all Borrowers with respect to raw 
               materials shall not exceed $1,000,000 at any time outstanding;

                    (4)  Borrower shall have the right, not more frequently 
               than once per fiscal year, to have the Eligible Inventory 
               appraised by an appraiser acceptable to Lender in its sole 
               discretion, at Borrower's expense, and to have the percentages 
               set forth in Section 2.1.(a)(ii)(A) and (B) adjusted to the 
               lesser of 80% of the orderly liquidation value of such 
               Eligible Inventory as determined by said appraiser, or 100% of 
               the auction value of such Eligible Inventory as determined by 
               said appraiser, in each case net of Lender's estimate as to 
               the costs and expenses of sale of such Eligible Inventory in 
               an auction or orderly liquidation.

Revolving Loans will be made separately to each Borrower based on the 
Eligible Accounts and Eligible Inventory of each Borrower, but subject to the 
dollar limits set forth above, which shall apply to the total Revolving Loans 
to all Borrowers.

                    (b)  Lender may, in its discretion, from time to time, 
upon not less than five (5) days prior notice to Borrower, (i) reduce the 
lending formula with respect to Eligible Accounts to the extent that Lender 
determines in good faith that: (A) the dilution with respect to the Accounts 
for any period (based on the ratio of (1) the aggregate amount of reductions 
in Accounts other than as a result of payments in cash to (2) the aggregate 
amount of total sales) has increased in any material respect or may be 
reasonably anticipated to increase in any material respect above historical 
levels, or (B) the general creditworthiness of account debtors has declined 
or (ii) reduce the lending formula(s) with respect to Eligible Inventory to 
the extent that Lender determines that: (A) the number of days of the 
turnover, or the mix, of the Inventory for any period has changed in any 
material respect or (B) the liquidation value of the Eligible Inventory, or 
any category thereof, has decreased, or (C) the nature and quality of the 
Inventory has deteriorated in any material respect.  In determining whether 
to reduce the lending formula(s), Lender may consider events, conditions, 
contingencies or risks which are also considered in determining Eligible 
Accounts, Eligible Inventory or in establishing Availability Reserves.

                    (c)  Except in Lender's discretion, the aggregate amount 
of the Loans, the Letter of Credit Accommodations and other Obligations 
outstanding at any time shall not exceed the Maximum Credit.  In the event 
that the outstanding amount of any component of the Loans, or the aggregate 
amount of the outstanding Loans, Letter of Credit Accommodations and other 
Obligations exceed the amounts available under the lending formulas set forth 
in Section 2.1(a) hereof, the sublimits for Letter of Credit Accommodations 
set forth in Section 2.2(c) or the Maximum Credit, as applicable, such event 
shall not limit, waive or otherwise affect any rights of Lender in that 
circumstance or on any future occasions and Borrower shall, upon demand by 
Lender, which may be made at any time or from time to time, immediately repay 
to Lender the entire amount of any such excess(es) for which payment is 
demanded.

                                         -9-
<PAGE>

                    (d)  Without limiting any of the other provisions of this 
Agreement, all payments of principal and interest and all other sums received 
by Borrower under that certain promissory note dated March 31, 1998 in the 
original principal amount of $650,000, which Borrower represents has an 
unpaid principal balance of $650,000, made by Arnold Circuits, Inc. (the 
"Arnold's Note") shall be remitted by Borrower to Lender to be applied to the 
Revolving Loans.

               2.2  LETTER OF CREDIT ACCOMMODATIONS.  

                    (a)  Subject to, and upon the terms and conditions 
contained herein, at the request of Borrower, Lender agrees to provide or 
arrange for Letter of Credit Accommodations for the account of Borrower 
containing terms and conditions acceptable to Lender and the issuer thereof.  
Any payments made by Lender to any issuer thereof and/or related parties in 
connection with the Letter of Credit Accommodations shall constitute 
additional Revolving Loans to Borrower pursuant to this Section 2.

                    (b)  In addition to any charges, fees or expenses charged 
by any bank or issuer in connection with the Letter of Credit Accommodations, 
Borrower shall pay to Lender a letter of credit fee at a rate equal to ONE 
PERCENT (1%) per annum on the daily outstanding balance of the Letter of 
Credit Accommodations for the immediately preceding month (or part thereof), 
payable in arrears as of the first day of each succeeding month; PROVIDED, 
HOWEVER, that such letter of credit fee shall be increased, at Lender's 
option, without notice, to three percent (3%) per annum for the period on or 
after the date of termination or non-renewal of this Agreement, or the date 
of the occurrence of an Event of Default.  Such letter of credit fee shall be 
calculated on the basis of a three hundred sixty (360) day year and actual 
days elapsed and the obligation of Borrower to pay such fee shall survive the 
termination or non-renewal of this Agreement.

                    (c)  No Letter of Credit Accommodations shall be 
available unless on the date of the proposed issuance of any Letter of Credit 
Accommodations, the Revolving Loans available to Borrower (subject to the 
Maximum Credit and any Availability Reserves) are equal to or greater than:  
(i) if the proposed Letter of Credit Accommodation is for the purpose of 
purchasing Eligible Inventory, the sum of (A) the product of the Value of 
such Eligible Inventory multiplied by an amount equal to one minus the then 
applicable Inventory advance rate under Section 2.1(a)(ii), plus (B) freight, 
taxes, duty and other amounts which Lender estimates must be paid in 
connection with such Inventory upon arrival and for delivery to one of 
Borrower's locations for Eligible Inventory within the United States of 
America and (ii) if the proposed Letter of Credit Accommodation is for 
standby letters of credit guaranteeing the purchase of Eligible Inventory or 
for any other purpose, an amount equal to one hundred percent (100%) of the 
face amount thereof and all other commitments and obligations made or 
incurred by Lender with respect thereto.  Effective on the issuance of each 
Letter of Credit Accommodation, the amount of Revolving Loans which might 
otherwise be available to Borrower shall be reduced by the applicable amount 
set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).

                    (d)  Except in Lender's discretion, (i) the amount of all 
outstanding Letter of Credit Accommodations and all other commitments and 
obligations made or incurred by Lender in connection therewith, shall not at 
any time exceed $1,000,000, and (ii) the amount of all outstanding Letter of 
Credit Accommodations for the purpose of purchasing Eligible Inventory 

                                         -10-
<PAGE>

and all other commitments and obligations made or incurred by Lender in 
connection therewith shall not at any time exceed: (A) $500,000 minus the 
amount of the then outstanding Revolving Loans based on Eligible Inventory 
consisting of finished goods, pursuant to Section 2.1(a)(ii) hereof, plus (B) 
$1,000,000 minus the amount of the then outstanding Revolving Loans based on 
Eligible Inventory consisting of raw materials, pursuant to Section 
2.1(a)(ii) hereof.  At any time an Event of Default exists or has occurred 
and is continuing, upon Lender's request, Borrower will either furnish cash 
collateral to secure the reimbursement obligations to the issuer in 
connection with any Letter of Credit Accommodations or furnish cash 
collateral to Lender for the Letter of Credit Accommodations, and in either 
case, the Revolving Loans otherwise available to Borrower shall not be 
reduced as provided in Section 2.2(c) to the extent of such cash collateral.

                    (e)  Borrower shall indemnify and hold Lender harmless 
from and against any and all losses, claims, damages, liabilities, costs and 
expenses which Lender may suffer or incur in connection with any Letter of 
Credit Accommodations and any documents, drafts or acceptances relating 
thereto, including, but not limited to, any losses, claims, damages, 
liabilities, costs and expenses due to any action taken by any issuer or 
correspondent with respect to any Letter of Credit Accommodation.  Borrower 
assumes all risks with respect to the acts or omissions of the drawer under 
or beneficiary of any Letter of Credit Accommodation and for such purposes 
the drawer or beneficiary shall be deemed Borrower's agent.  Borrower assumes 
all risks for, and agrees to pay, all foreign, Federal, State and local 
taxes, duties and levies relating to any goods subject to any Letter of 
Credit Accommodations or any documents, drafts or acceptances thereunder.  
Borrower hereby releases and holds Lender harmless from and against any acts, 
waivers, errors, delays or omissions, whether caused by Borrower, by any 
issuer or correspondent or otherwise, unless caused by the gross negligence 
or willful misconduct of Lender, with respect to or relating to any Letter of 
Credit Accommodation.  The provisions of this Section 2.2(e) shall survive 
the payment of Obligations and the termination or non-renewal of this 
Agreement.  

                    (f)  Nothing contained herein shall be deemed or 
construed to grant Borrower any right or authority to pledge the credit of 
Lender in any manner. Lender shall have no liability of any kind with respect 
to any Letter of Credit Accommodation provided by an issuer other than Lender 
unless Lender has duly executed and delivered to such issuer the application 
or a guarantee or indemnification in writing with respect to such Letter of 
Credit Accommodation. Borrower shall be bound by any interpretation made in 
good faith by Lender, or any other issuer or correspondent under or in 
connection with any Letter of Credit Accommodation or any documents, drafts 
or acceptances thereunder, notwithstanding that such interpretation may be 
inconsistent with any instructions of Borrower.  Lender shall have the sole 
and exclusive right and authority to, and Borrower shall not: (i) at any time 
an Event of Default exists or has occurred and is continuing, (A) approve or 
resolve any questions of non-compliance of documents, (B) give any 
instructions as to acceptance or rejection of any documents or goods or (C) 
execute any and all applications for steamship or airway guaranties, 
indemnities or delivery orders, and (ii) at all times, (A) grant any 
extensions of the maturity of, time of payment for, or time of presentation 
of, any drafts, acceptances, or documents, and (B) agree to any amendments, 
renewals, extensions, modifications, changes or cancellations of any of the 
terms or conditions of any of the applications, Letter of Credit 
Accommodations, or documents, drafts or acceptances 

                                         -11-
<PAGE>


thereunder or any letters of credit included in the 
Collateral.  Lender may take such actions either in its own name or in 
Borrower's name.

                    (g)  Any rights, remedies, duties or obligations granted 
or undertaken by Borrower to any issuer or correspondent in any application 
for any Letter of Credit Accommodation, or any other agreement in favor of 
any issuer or correspondent relating to any Letter of Credit Accommodation, 
shall be deemed to have been granted or undertaken by Borrower to Lender.  
Any duties or obligations undertaken by Lender to any issuer or correspondent 
in any application for any Letter of Credit Accommodation, or any other 
agreement by Lender in favor of any issuer or correspondent relating to any 
Letter of Credit Accommodation, shall be deemed to have been undertaken by 
Borrower to Lender and to apply in all respects to Borrower.

               2.3  TERM LOAN.  

                    (a)  Lender is making Term Loans to Borrower in the 
following original principal amounts (which, as provided in Section 1.33, are 
collectively referred to in this Agreement as the "Term Loan"):

<TABLE>
                    <S>                                     <C>
                    Microtel International, Inc.            $729,000

                    XIT Corporation                         $379,000
               
                    CXR Telcom Corporation                  $193,000

                    Hycomp, Inc.                            $334,000
</TABLE>

The Term Loan is (a) evidenced by Term Promissory Notes in the above original 
principal amounts duly executed and delivered by above Borrowers to Lender 
concurrently herewith; (b) to be repaid, together with interest and other 
amounts, in accordance with this Agreement, the Term Promissory Notes, and 
the other Financing Agreements and (c) secured by all of the Collateral.  
Borrower represents and warrants that the appraisal of its equipment, on 
which the amount of the Term Loan was based, did not include any equipment 
which was subject to any liens or security interests in favor of any other 
party (other than those being terminated concurrently herewith).

                    (b)  The Term Loan shall be repayable in 60 equal monthly 
installments of principal commencing on the first day of the first month 
following the date the Term Loan is made and continuing on the same day of 
each succeeding month, provided that the entire unpaid principal balance of 
the Term Loan shall be due and payable on expiration of the term of this 
Agreement or termination of this Agreement  by either party as provided 
herein.  

                    (c)  Borrower may, at its expense, have all (but not less 
than all) of its machinery and equipment located in the State of California, 
which is free and clear of any and all other liens and security interests 
(including Permitted Liens), appraised by Joseph Finn Co. within 30 days 
after the date hereof, and in the event such appraisal is acceptable to 
Lender in its discretion, the amount of the Term Loan shall be adjusted to an 
amount not to exceed the lesser of (i) 100% of the auction value of all of 
such equipment net of Lender's estimate as to the costs and expenses of sale 
thereof (without duplication), or (ii) 80% of the orderly liquidation value 
of 

                                         -12-
<PAGE>

all such equipment net of Lender's estimate as to the costs and expenses 
of sale thereof (without duplication), or (iii) $3,500,000. In the event the 
amount of the Term Loan is so adjusted, the regular principal payments 
thereunder shall be adjusted so that each regular principal payment is in an 
amount equal to the adjusted principal amount thereof divided by the number 
of remaining payments.

               2.4  CAP EX LOANS.  

               Subject to, and upon the terms and conditions contained 
herein, Lender agrees to make loans (the "Cap Ex Loans") to Borrower from 
time to time in amounts requested by Borrower up to 75% of the net purchase 
price of new Equipment purchased after the date hereof and acceptable to 
Lender in its discretion (provided that not more than $1,000,000 in Cap Ex 
Loans shall be made hereunder).  Cap Ex Loans may not be re-borrowed after 
being repaid.  The net purchase price of Equipment means the purchase price 
thereof, as shown on the applicable invoice, net of all charges for taxes, 
freight, delivery, insurance, installation, set-up, training, manuals, fees, 
service charges and other similar items.  Cap Ex Loans shall be made in 
disbursements of not less than $200,000 each and the proceeds of Cap Ex Loans 
shall be used exclusively to purchase the applicable Equipment.  Each Cap Ex 
Loan shall be repaid by the Borrower to Lender in 60 equal monthly payments 
of principal, commencing on the first day of the first month after such Cap 
Ex Loan was disbursed and continuing until the earlier of the date such Cap 
Ex Loan has been paid in full or the date this Agreement terminates by its 
terms or is terminated, at which date the entire unpaid principal balance of 
the Cap Ex Loans, plus all accrued and unpaid interest thereon, shall be due 
and payable.

SECTION 3.     INTEREST AND FEES.   

               3.1  INTEREST.  

                    (a)  Borrower shall pay to Lender interest on the 
outstanding principal amount of the non-contingent Obligations as follows:

                         (1) Borrower shall pay to Lender interest on the 
outstanding principal amount of the Revolving Loans at the rate of one 
percent (1%) per annum in excess of the Prime Rate; provided that, regardless 
of the amount of Revolving Loans outstanding in any month, Borrower shall pay 
Lender minimum interest on the Revolving Loans in an amount equal to the 
interest which would have been payable thereon at the interest rate in effect 
during such month, if the unpaid principal balance of the Revolving Loans was 
$2,500,000 throughout such month.

                         (2) Borrower shall pay to Lender interest on the 
outstanding principal amount of the Term Loan and the Cap Ex Loans at the 
rate of one and one-quarter percent (1.25%) per annum in excess of the Prime 
Rate.

Notwithstanding the foregoing, Borrower shall pay to Lender interest, at 
Lender's option, without notice, (i) at the rate of 3% per annum in excess of 
the Prime Rate (in the case of the Revolving Loans) and at the rate of 3.25% 
per annum in excess of the Prime Rate (in the case of the Term Loan and the 
Cap Ex Loans) on the non-contingent Obligations for the period from and after 
the date of termination or non-renewal hereof, or the date of the occurrence 
of an Event of Default, 

                                         -13-
<PAGE>

and for so long as such Event of Default is continuing as determined by 
Lender and until such time as Lender has received full and final payment of 
all such Obligations (notwithstanding entry of any judgment against 
Borrower), and (ii) at the rate of 3% per annum in excess of the Prime Rate 
on the Revolving Loans at any time outstanding in excess of the amounts 
available to Borrower under Section 2 (whether or not such excess(es), arise 
or are made with or without Lender's knowledge or consent and whether made 
before or after an Event of Default).  All interest accruing hereunder on and 
after the occurrence of any of the events referred to in Sections 3.1(a)(i) 
or 3.1(a)(ii) above shall be payable on demand.

                    (b)  Interest shall be payable by Borrower to Lender 
monthly in arrears not later than the first day of each calendar month and 
shall be calculated on the basis of a three hundred sixty (360) day year and 
actual days elapsed.  The interest rate shall increase or decrease by an 
amount equal to each increase or decrease in the Prime Rate effective on the 
first day of the month after any change in such Prime Rate is announced based 
on the Prime Rate in effect on the last day of the month in which any such 
change occurs.  In no event shall charges constituting interest payable by 
Borrower to Lender exceed the maximum amount or the rate permitted under any 
applicable law or regulation, and if any part or provision of this Agreement 
is in contravention of any such law or regulation, such part or provision 
shall be deemed amended to conform thereto.

               3.2  CLOSING FEE.  Borrower shall pay to Lender as a closing 
fee the amount of $105,000, which shall be fully earned as of the date 
hereof.  Said closing fee shall be payable $75,000 on the date hereof, and 
the balance of $30,000 shall be payable on the earlier of (i) the first 
anniversary of the date hereof, or (ii) the date this Loan Agreement 
terminates by its terms or is terminated by either party as provided herein.

               3.3  FACILITY FEE.  [Intentionally Omitted.]

               3.4  SERVICING FEE.  Borrower shall pay to Lender annually a 
servicing fee in an amount equal to $36,000 in respect of Lender's services 
for each year (or part thereof) while this Agreement remains in effect and 
for so long thereafter as any of the Obligations are outstanding, which fee 
shall be fully earned in advance as of the date hereof and on each annual 
anniversary hereafter, such annual servicing fee to be payable on a 
semi-annual basis, in advance, with the first such semi-annual payment, in 
the amount of $18,000, payable on the date hereof and successive semi-annual 
payments hereafter, each in the amount of $18,000,  on the first day of each 
six month period hereafter. 

               3.5  UNUSED LINE FEE. [Intentionally Omitted.]

               3.6  COMPENSATION ADJUSTMENT.  

                    (a)  If after the date of this Agreement the introduction 
of, or any change in, any law or any governmental rule, regulation, policy, 
guideline or directive (whether or not having the force of law), or any 
interpretation thereof, or compliance by Lender or any Participant therewith:


                                         -14-
<PAGE>

                         (i)  subjects Lender to any tax, duty, charge or 
               withholding on or from payments due from Borrower (excluding 
               franchise taxes imposed upon, and taxation of the overall net 
               income of, Lender or any Participant), or changes the basis of 
               taxation of payments, in either case in respect of amounts due 
               it hereunder, or

                         (ii)  imposes or increases or deems applicable any 
               reserve requirement or other reserve, assessment, insurance 
               charge, special deposit or similar requirement against assets 
               of, deposits with or for the account of, or credit extended by 
               Lender or any Participant, or

                         (iii) imposes any other condition the result of 
               which is to increase the cost to Lender or any Participant of 
               making, funding or maintaining the Revolving Loans or Letter 
               of Credit Accommodations or reduces any amount receivable by 
               Lender or any Participant in connection with the Loans or 
               Letter of Credit Accommodations, or requires Lender or any 
               Participant to make payment calculated by references to the 
               amount of loans held or interest received by it, by an amount 
               deemed material by Lender or any Participant, or

                         (iv) imposes or increases any capital requirement or 
               affects the amount of capital required or expected to be 
               maintained by Lender or any Participant or any corporation 
               controlling Lender or any Participant, and Lender or any 
               Participant determines that such imposition or increase in 
               capital requirements or increase in the amount of capital 
               expected to be maintained is based upon the existence of this 
               Agreement or the Loans or Letter of Credit Accommodations 
               hereunder, all of which may be determined by Lender's 
               reasonable allocation of the aggregate of its impositions or 
               increases in capital required or expected to be maintained, 
               and the result of any of the foregoing is to increase the cost 
               to Lender or any Participant of making, renewing or 
               maintaining the Loans or Letter of Credit Accommodations, or 
               to reduce the rate of return to Lender or any Participant on 
               the Loans or Letter of Credit Accommodations, then upon demand 
               by Lender, Borrower shall pay to Lender, and continue to make 
               periodic payments to Lender or any Participant, such 
               additional amounts as may be necessary to compensate Lender or 
               any Participant for any such additional cost incurred or 
               reduced rate of return realized.

                    (b)  A certificate of Lender claiming entitlement to 
compensation as set forth above will be conclusive in the absence of manifest 
error.  Such certificate will set forth the nature of the occurrence giving 
rise to such compensation, the additional amount or amounts to be paid and 
the compensation and the method by which such amounts were determined.  In 
determining any additional amounts due from Borrower under this Section 3.6, 
Lender shall act reasonably and in good faith and will, to the extent that 
the increased costs, reductions, or amounts received or receivable relate to 
the Lender's or a Participant's loans or commitments generally and are not 
specifically attributable to the Loans and commitments hereunder, use 
averaging and attribution methods which are reasonable and equitable and 
which cover all loans and commitments under this Agreement by the Lender or 
such Participant, as the case may be, whether or not the loan documentation 
for such other loans and commitments permits the Lender or such Participant 
to receive compensation costs of the type described in this Section 3.6.


                                         -15-
<PAGE>

SECTION 4.     CONDITIONS PRECEDENT.  

               4.1  CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF 
CREDIT ACCOMMODATIONS.   Each of the following is a condition precedent to 
Lender making the initial Loans and providing the initial Letter of Credit 
Accommodations hereunder:

                    (a)  Lender shall have received, in form and substance 
satisfactory to Lender, all releases, terminations and such other documents 
as Lender may request to evidence and effectuate the termination of any 
interest in and to any assets and properties of Borrower, duly authorized, 
executed and delivered by it or each of them, including, but not limited to, 
UCC termination statements for all UCC financing statements and Lender shall 
have satisfied itself that it has valid, perfected and first priority 
security interests in and liens upon the Collateral and any other property 
which is intended as security for the Obligations, or the liability of any 
Obligor in respect thereto, subject only to the security interests and liens 
permitted herein or in the other Financing Agreements;

                    (b)  all requisite corporate action and proceedings in 
connection with this Agreement and the other Financing Agreements shall be 
satisfactory in form and substance to Lender, and Lender shall have received 
all information and copies of all documents, including, without limitation, 
records of requisite corporate action and proceedings which Lender may have 
requested in connection therewith, such documents where requested by Lender 
or its counsel to be certified by appropriate corporate officers or 
governmental authorities;

                    (c)  no material adverse change shall have occurred in 
the assets, business or prospects of Borrower since the date of Lender's 
latest field examination and no change or event shall have occurred which 
would impair the ability of Borrower or any Obligor to perform its 
obligations hereunder or under any of the other Financing Agreements to which 
it is a party or of Lender to enforce the Obligations or realize upon the 
Collateral;

                    (d)  Lender shall have completed a field review of the 
Records and of such other financial information, projections, budgets, 
business plans and cash flows as Lender shall reasonably request from time to 
time, including, but not limited to, current agings of receivables, current 
perpetual inventory records and/or rollforwards of Accounts and Inventory 
through the date of closing (including a physical count of the Inventory by a 
third party acceptable to Lender), together with supporting documentation, 
including documentation with respect to Inventory in-transit, goods in bonded 
warehouses or at other third-party locations, that will enable Lender to 
accurately identify and verify the eligible Collateral at or before closing 
in a manner satisfactory to Lender, the results of which shall be 
satisfactory to Lender;

                    (e)  Lender shall have received, in form and substance 
satisfactory to Lender, all consents, waivers, acknowledgments and other 
agreements from third persons which Lender may deem necessary or desirable in 
order to permit, protect and perfect its security interests in and liens upon 
the Collateral or to effectuate the provisions or purposes of this Agreement 
and the other Financing Agreements, including, without limitation, 
acknowledgments by lessors, mortgagees and warehousemen of Lender's security 
interests in the Collateral, waivers by such persons of any security 
interests, liens or other claims by such persons to the Collateral and 


                                         -16-
<PAGE>

agreements permitting Lender access to, and the right to remain on, the 
premises to exercise its rights and remedies and otherwise deal with the 
Collateral;

                    (f)  Lender shall have received evidence of insurance and 
loss payee endorsements required hereunder and under the other Financing 
Agreements, in form and substance satisfactory to Lender, and certificates of 
insurance policies and/or endorsements naming Lender as loss payee;

                    (g)  Lender shall have received, in form and substance 
satisfactory to Lender, such opinion letters of counsel to Borrower with 
respect to the Financing Agreements and such other matters as Lender may 
request, provided that the legal opinion with respect to the due 
incorporation, valid existence and good-standing of Hycomp, Inc. shall be 
provided by Borrower to Lender within 30 days after the date hereof;

                    (h)  the Excess Availability as determined by Lender as 
of the date hereof, shall be satisfactory to Lender, in its discretion, after 
giving effect to the initial Loans made or to be made hereunder and the 
payment of all fees and expenses payable upon the consummation of the initial 
transactions contemplated by this Agreement; 

                    (i)  Lender shall have received, in form and substance 
satisfactory to Lender and its counsel, the assignment of all of Borrower's 
rights in registered patents, trademarks, service marks and copyrights, as 
Collateral hereunder, on Lender's standard forms of Collateral Assignments;

                    (j)  Lender shall have received, in form and substance 
satisfactory to Lender, an executed copy of a Blocked Account Agreement, 
pursuant to Section 6.3(ii) hereof, among Lender, Borrower and such banks as 
Lender shall specify; and

                    (k)  the other Financing Agreements and all instruments 
and documents hereunder and thereunder shall have been duly executed and 
delivered to Lender, in form and substance satisfactory to Lender; and

                    (l)  Imperial Bank shall have terminated its security 
interests in all assets of all Borrowers, and any other holders of a security 
interest in Borrower's assets including, without limitation, vendors of 
Inventory to Borrower, shall have executed intercreditor and subordination 
agreements in form and substance satisfactory to Lender; and

                    (m)  Borrower shall have executed and delivered to Lender 
a Security Agreement, in such form as Lender shall specify, with respect to 
Borrower's partnership interest in Capital Source Partners, a Real Estate 
Partnership, a California general partnership, which is the owner of the real 
property located at 4290 E. Brickell, Ontario, California, acknowledged and 
agreed to by said partnership and the other partner therein.

                    (n)  Borrower shall have received additional cash equity 
contributions, concurrently herewith, in an amount not less than $900,000, 
and Lender shall have received evidence thereof satisfactory to Lender.


                                      -17-

<PAGE>

                    (o)  Lender shall have received cross-corporate 
continuing guaranties executed by each Borrower with respect to the 
Obligations of the other Borrowers, on such form as it shall specify.

                    (p)  Lender shall have received the original Arnold's 
Note, duly endorsed to Lender.

                    (q)  Lender shall have received, reviewed and approved 
Borrower's audited December 31, 1997 financial statements.

               4.2  CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT 
ACCOMMODATIONS. Each of the following is an additional condition precedent to 
Lender making Loans and/or providing Letter of Credit Accommodations to 
Borrower, including the initial Loans and Letter of Credit Accommodations and 
any future Loans and Letter of Credit Accommodations: 

                    (a)  all representations and warranties contained herein 
and in the other Financing Agreements shall be true and correct in all 
material respects with the same effect as though such representations and 
warranties had been made on and as of the date of the making of each such 
Loan or providing each such Letter of Credit Accommodation and after giving 
effect thereto; and

                    (b)  no Event of Default and no event or condition which, 
with notice or passage of time or both, would constitute an Event of Default, 
shall exist or have occurred and be continuing on and as of the date of the 
making of such Loan or providing each such Letter of Credit Accommodation and 
after giving effect thereto. 

SECTION 5.     GRANT OF SECURITY INTEREST.  

               To secure payment and performance of all Obligations, Borrower 
hereby grants to Lender a continuing security interest in, a lien upon, and a 
right of set off against, and hereby assigns to Lender as security, the 
following property and interests in property, whether now owned or hereafter 
acquired or existing, and wherever located (collectively, the "Collateral"):

               5.1  Accounts;

               5.2  All present and future contract rights, general 
intangibles (including, but not limited to, tax and duty refunds, registered 
and unregistered patents, trademarks, service marks, copyrights, trade names, 
applications for the foregoing, trade secrets, goodwill, processes, drawings, 
blueprints, customer lists, licenses, whether as licensor or licensee, choses 
in action and other claims and existing and future leasehold interests in 
equipment, real estate and fixtures), chattel paper, documents, instruments, 
investment property, letters of credit, bankers' acceptances and guaranties, 
(including without limitation the Arnold's Note);

               5.3  All present and future monies, securities, credit 
balances, deposits, deposit accounts and other property of Borrower now or 
hereafter held or received by or in transit to Lender or its affiliates or at 
any other depository or other institution from or for the account of 
Borrower, whether for safekeeping, pledge, custody, transmission, collection 
or otherwise, and 


                                      -18-

<PAGE>

all present and future liens, security interests, rights, remedies, title and 
interest in, to and in respect of Accounts and other Collateral, including, 
without limitation, (a) rights and remedies under or relating to guaranties, 
contracts of suretyship, letters of credit and credit and other insurance 
related to the Collateral, (b) rights of stoppage in transit, replevin, 
repossession, reclamation and other rights and remedies of an unpaid vendor, 
lienor or secured party, (c) goods described in invoices, documents, 
contracts or instruments with respect to, or otherwise representing or 
evidencing, Accounts or other Collateral, including, without limitation, 
returned, repossessed and reclaimed goods, and (d) deposits by and property 
of account debtors or other persons securing the obligations of account 
debtors;

               5.4  Inventory;

               5.5  Equipment; 

               5.6  Records; and

               5.7  All products and proceeds of the foregoing, in any form, 
including, without limitation, insurance proceeds and all claims against 
third parties for loss or damage to or destruction of any or all of the 
foregoing.

SECTION 6.     COLLECTION AND ADMINISTRATION  

               6.1  BORROWER'S LOAN ACCOUNT.  Lender shall maintain one or 
more loan account(s) on its books in which shall be recorded (a) all Loans, 
all Letter of Credit Accommodations and other Obligations and the Collateral, 
(b) all payments made by or on behalf of Borrower and (c) all other 
appropriate debits and credits as provided in this Agreement, including, 
without limitation, fees, charges, costs, expenses and interest.  All entries 
in the loan account(s) shall be made in accordance with Lender's customary 
practices as in effect from time to time.  

               6.2  STATEMENTS.  Lender shall render to Borrower each month a 
statement setting forth the balance in the Borrower's loan account(s) 
maintained by Lender for Borrower pursuant to the provisions of this 
Agreement, including principal, interest, fees, costs and expenses.  Each 
such statement shall be subject to subsequent adjustment by Lender but shall, 
absent manifest errors or omissions, be considered correct and deemed 
accepted by Borrower and conclusively binding upon Borrower as an account 
stated except to the extent that Lender receives a written notice from 
Borrower of any specific exceptions of Borrower thereto within thirty (30) 
days after the date such statement has been mailed by Lender. Until such time 
as Lender shall have rendered to Borrower a written statement as provided 
above, the balance in Borrower's loan account(s) shall be presumptive 
evidence of the amounts due and owing to Lender by Borrower.

               6.3  COLLECTION OF ACCOUNTS.  

                    (a)  Borrower shall establish and maintain, at its 
expense, blocked accounts or lockboxes and related blocked accounts (in 
either case, "Blocked Accounts"), as Lender may specify, with such banks as 
are acceptable to Lender into which Borrower shall promptly deposit and 
direct its account debtors to directly remit all payments on Accounts and all 
payments constituting proceeds of Inventory or other Collateral in the 
identical form in which such 


                                      -19-

<PAGE>

payments are made, whether by cash, check or other manner.  The banks at 
which the Blocked Accounts are established shall enter into an agreement, in 
form and substance satisfactory to Lender, providing that all items received 
or deposited in the Blocked Accounts are the property of Lender, that the 
depository bank has no lien upon, or right to setoff against, the Blocked 
Accounts, the items received for deposit therein, or the funds from time to 
time on deposit therein and that the depository bank will wire, or otherwise 
transfer, in immediately available funds, on a daily basis, all funds 
received or deposited into the Blocked Accounts to such bank account of 
Lender as Lender may from time to time designate for such purpose ("Payment 
Account").  Borrower agrees that all payments made to such Blocked Accounts 
or other funds received and collected by Lender, whether on the Accounts or 
as proceeds of Inventory or other Collateral or otherwise shall be the 
property of Lender.

                    (b)  For purposes of calculating interest on the 
Obligations, such payments or other funds received will be applied 
(conditional upon final collection) to the Obligations one (1) Business Days 
following the date of receipt of immediately available funds by Lender in the 
Payment Account, or one (1) Business Day following the date of receipt of 
funds that are not immediately available to Lender in the Payment Account, as 
applicable.  For purposes of calculating the amount of the Revolving Loans 
available to Borrower such payments will be applied (conditional upon final 
collection) to the Obligations on the Business Day of receipt by Lender in 
the Payment Account, if such payments are received within sufficient time (in 
accordance with Lender's usual and customary practices as in effect from time 
to time) to credit Borrower's loan account on such day, and if not, then on 
the next Business Day. In the event that there are no outstanding monetary 
Obligations at the time such payments or other funds are received, Borrower 
shall pay a Lender a charge (the "Float Charge") in an amount equal to 
interest at the Reduced Prime Rate on the amount of such payment or other 
funds, for one (1) Business Day following the date of receipt of immediately 
available funds by Lender in the Payment Account, or two (2) Business Days 
following the date of receipt of funds that are not immediately available to 
Lender in the Payment Account, as applicable.

                    (c)  Borrower and all of its affiliates, subsidiaries, 
shareholders, directors, employees or agents shall, acting as trustee for 
Lender, receive, as the property of Lender, any monies, checks, notes, drafts 
or any other payment relating to and/or proceeds of Accounts or other 
Collateral which come into their possession or under their control and 
immediately upon receipt thereof, shall deposit or cause the same to be 
deposited in the Blocked Accounts, or remit the same or cause the same to be 
remitted, in kind, to Lender.  In no event shall the same be commingled with 
Borrower's own funds.  Borrower agrees to reimburse Lender on demand for any 
amounts owed or paid to any bank at which a Blocked Account is established or 
any other bank or person involved in the transfer of funds to or from the 
Blocked Accounts arising out of Lender's payments to or indemnification of 
such bank or person, unless such payment or indemnification obligation of 
Lender was a result of Lender's gross negligence or willful misconduct.  The 
obligation of Borrower to reimburse Lender for such amounts pursuant to this 
Section 6.3 shall survive the termination or non-renewal of this Agreement. 

               6.4  PAYMENTS.  All Obligations shall be payable to the 
Payment Account as provided in Section 6.3 or such other place as Lender may 
designate from time to time.  Lender may apply payments received or collected 
from Borrower or for the account of Borrower (including, without 


                                      -20-

<PAGE>

limitation, the monetary proceeds of collections or of realization upon any 
Collateral) to such of the Obligations, whether or not then due, in such 
order and manner as Lender determines.  At Lender's option, all principal, 
interest, fees, costs, expenses and other charges provided for in this 
Agreement or the other Financing Agreements may be charged directly to the 
loan account(s) of Borrower.  Borrower shall make all payments to Lender on 
the Obligations free and clear of, and without deduction or withholding for 
or on account of, any setoff, counterclaim, defense, duties, taxes, levies, 
imposts, fees, deductions, withholding, restrictions or conditions of any 
kind.  If after receipt of any payment of, or proceeds of Collateral applied 
to the payment of, any of the Obligations, Lender is required to surrender or 
return such payment or proceeds to any Person for any reason, then the 
Obligations intended to be satisfied by such payment or proceeds shall be 
reinstated and continue and this Agreement shall continue in full force and 
effect as if such payment or proceeds had not been received by Lender.  
Borrower shall be liable to pay to Lender, and does hereby indemnify and hold 
Lender harmless for the amount of any payments or proceeds surrendered or 
returned. This Section 6.4 shall remain effective notwithstanding any 
contrary action which may be taken by Lender in reliance upon such payment or 
proceeds.  This Section 6.4 shall survive the payment of the Obligations and 
the termination or non-renewal of this Agreement.

               6.5  AUTHORIZATION TO MAKE LOANS.  Lender is authorized to 
make the Loans and provide the Letter of Credit Accommodations based upon 
telephonic or other instructions received from anyone purporting to be an 
officer of Borrower or other authorized person or, at the discretion of 
Lender, if such Loans are necessary to satisfy any Obligations.  All requests 
for Loans or Letter of Credit Accommodations hereunder shall specify the date 
on which the requested advance is to be made or Letter of Credit 
Accommodations established (which day shall be a Business Day) and the amount 
of the requested Loan.  Requests received after 10:30 a.m. (Los Angeles time) 
on any day shall be deemed to have been made as of the opening of business on 
the immediately following Business Day.  All Loans and Letter of Credit 
Accommodations under this Agreement shall be conclusively presumed to have 
been made to, and at the request of and for the benefit of, Borrower when 
deposited to the credit of Borrower or otherwise disbursed or established in 
accordance with the instructions of Borrower or in accordance with the terms 
and conditions of this Agreement.

               6.6  USE OF PROCEEDS.  Borrower shall use the initial proceeds 
of the Loans provided by Lender to Borrower hereunder only for:  (a) payments 
to each of the persons listed in the disbursement direction letter furnished 
by Borrower to Lender on or about the date hereof and (b) costs, expenses and 
fees in connection with the preparation, negotiation, execution and delivery 
of this Agreement and the other Financing Agreements.  All other Loans made 
or Letter of Credit Accommodations provided by Lender to Borrower pursuant to 
the provisions hereof shall be used by Borrower only for general operating, 
working capital and other proper corporate purposes of Borrower not otherwise 
prohibited by the terms hereof.  None of the proceeds will be used, directly 
or indirectly, for the purpose of purchasing or carrying any margin security 
or for the purposes of reducing or retiring any indebtedness which was 
originally incurred to purchase or carry any margin security or for any other 
purpose which might cause any of the Loans to be considered a "purpose 
credit" within the meaning of Regulation U of the Board of Governors of the 
Federal Reserve System, as amended. 


                                      -21-

<PAGE>

SECTION 7.     COLLATERAL REPORTING AND COVENANTS.  

               7.1  COLLATERAL REPORTING.  Borrower shall provide Lender with 
the following documents in a form satisfactory to Lender: (a) on a regular 
basis as required by Lender, a schedule of Accounts; (b) on a monthly basis 
or more frequently as Lender may request, (i) perpetual inventory reports, 
(ii) inventory reports by category, and reports as to inventory reserves, and 
(iii) agings of accounts payable, (c) upon Lender's request, (i) copies of 
customer statements and credit memos, remittance advices and reports, and 
copies of deposit slips and bank statements, (ii) copies of shipping and 
delivery documents, and (iii) copies of purchase orders, invoices and 
delivery documents for Inventory and Equipment acquired by Borrower; (d) 
agings of accounts receivable on a monthly basis or more frequently as Lender 
may request; and (e) such other reports as to the Collateral as Lender shall 
request from time to time.  If any of Borrower's records or reports of the 
Collateral are prepared or maintained by an accounting service, contractor, 
shipper or other agent, Borrower hereby irrevocably authorizes such service, 
contractor, shipper or agent to deliver such records, reports, and related 
documents to Lender and to follow Lender's instructions with respect to 
further services at any time that an Event of Default exists or has occurred 
and is continuing.

               7.2  ACCOUNTS COVENANTS.  

                    (a)  Borrower shall notify Lender promptly of: (i) any 
material delay in Borrower's performance of any of its obligations to any 
account debtor or the assertion of any claims, offsets, defenses or 
counterclaims by any account debtor, or any disputes with account debtors, or 
any settlement, adjustment or compromise thereof, (ii) all material adverse 
information relating to the financial condition of any account debtor and 
(iii) any event or circumstance which, to Borrower's knowledge would cause 
Lender to consider any then existing Accounts as no longer constituting 
Eligible Accounts.  No credit, discount, allowance or extension or agreement 
for any of the foregoing shall be granted to any account debtor without 
Lender's consent, except in the ordinary course of Borrower's business in 
accordance with practices and policies previously disclosed in writing to 
Lender.  So long as no Event of Default exists or has occurred and is 
continuing, Borrower shall settle, adjust or compromise any claim, offset, 
counterclaim or dispute with any account debtor.  At any time that an Event 
of Default exists or has occurred and is continuing, Lender shall, at its 
option, have the exclusive right to settle, adjust or compromise any claim, 
offset, counterclaim or dispute with account debtors or grant any credits, 
discounts or allowances.

                    (b)  Borrower shall promptly report to Lender any return 
of Inventory by an account debtor having a sales price in excess of $10,000.  
At any time that Inventory is returned, reclaimed or repossessed, the related 
Account shall not be deemed an Eligible Account.  In the event any account 
debtor returns Inventory when an Event of Default exists or has occurred and 
is continuing, Borrower shall, upon Lender's request, (i) hold the returned 
Inventory in trust for Lender, (ii) segregate all returned Inventory from all 
of its other property, (iii) dispose of the returned Inventory solely 
according to Lender's instructions, and (iv) not issue any credits, discounts 
or allowances with respect thereto without Lender's prior written consent.

                    (c)  With respect to each Account: (i) the amounts shown 
on any invoice delivered to Lender or schedule thereof delivered to Lender 
shall be true and complete, (ii) no 


                                      -22-

<PAGE>

payments shall be made thereon except payments immediately delivered to 
Lender pursuant to the terms of this Agreement, (iii) no credit, discount, 
allowance or extension or agreement for any of the foregoing shall be granted 
to any account debtor except as reported to Lender in accordance with this 
Agreement and except for credits, discounts, allowances or extensions made or 
given in the ordinary course of Borrower's business in accordance with 
practices and policies previously disclosed to Lender, (iv) there shall be no 
setoffs, deductions, contras, defenses, counterclaims or disputes existing or 
asserted with respect thereto except as reported to Lender in accordance with 
the terms of this Agreement, (v) none of the transactions giving rise thereto 
will violate any applicable State or Federal laws or regulations, all 
documentation relating thereto will be legally sufficient under such laws and 
regulations and all such documentation will be legally enforceable in 
accordance with its terms.

                    (d)  Lender shall have the right at any time or times, in 
Lender's name or in the name of a nominee of Lender, to verify the validity, 
amount or any other matter relating to any Account or other Collateral, by 
mail, telephone, facsimile transmission or otherwise.

                    (e)  Borrower shall deliver or cause to be delivered to 
Lender, with appropriate endorsement and assignment, with full recourse to 
Borrower, all chattel paper and instruments which Borrower now owns or may at 
any time acquire immediately upon Borrower's receipt thereof, except as 
Lender may otherwise agree.

                    (f)  Lender may, at any time or times that an Event of 
Default exists or has occurred and is continuing, (i) notify any or all 
account debtors that the Accounts have been assigned to Lender and that 
Lender has a security interest therein and Lender may direct any or all 
accounts debtors to make payment of Accounts directly to Lender, (ii) extend 
the time of payment of, compromise, settle or adjust for cash, credit, return 
of merchandise or otherwise, and upon any terms or conditions, any and all 
Accounts or other obligations included in the Collateral and thereby 
discharge or release the account debtor or any other party or parties in any 
way liable for payment thereof without affecting any of the Obligations, 
(iii) demand, collect or enforce payment of any Accounts or such other 
obligations, but without any duty to do so, and Lender shall not be liable 
for its failure to collect or enforce the payment thereof nor for the 
negligence of its agents or attorneys with respect thereto and (iv) take 
whatever other action Lender may deem necessary or desirable for the 
protection of its interests.  At any time that an Event of Default exists or 
has occurred and is continuing, at Lender's request, all invoices and 
statements sent to any account debtor shall state that the Accounts and such 
other obligations have been assigned to Lender and are payable directly and 
only to Lender and Borrower shall deliver to Lender such originals of 
documents evidencing the sale and delivery of goods or the performance of 
services giving rise to any Accounts as Lender may require. 

               7.3  INVENTORY COVENANTS.  With respect to the Inventory: (a) 
Borrower shall at all times maintain inventory records reasonably 
satisfactory to Lender, keeping correct and accurate records itemizing and 
describing the kind, type, quality and quantity of Inventory, Borrower's cost 
therefor and daily withdrawals therefrom and additions thereto; (b) Borrower 
shall conduct a physical count of the Inventory at least once each year, but 
at any time or times as Lender may request on or after an Event of Default, 
and promptly following such physical inventory shall supply Lender with a 
report in the form and with such specificity as may be reasonably 


                                      -23-

<PAGE>

satisfactory to Lender concerning such physical count; (c) Borrower shall not 
remove any Inventory from the locations set forth or permitted herein, 
without the prior written consent of Lender, except for sales of Inventory in 
the ordinary course of Borrower's business and except to move Inventory 
directly from one location set forth or permitted herein to another such 
location; (d) upon Lender's request, Borrower shall, at its expense, no more 
than once in any twelve (12) month period, but at any time or times as Lender 
may request on or after an Event of Default, deliver or cause to be delivered 
to Lender written reports or appraisals as to the Inventory in form, scope 
and methodology acceptable to Lender and by an appraiser acceptable to 
Lender, addressed to Lender or upon which Lender is expressly permitted to 
rely; (e) Borrower shall produce, use, store and maintain the Inventory, with 
all reasonable care and caution and in accordance with applicable standards 
of any insurance and in conformity with applicable laws (including, but not 
limited to, the requirements of the Federal Fair Labor Standards Act of 1938, 
as amended and all rules, regulations and orders related thereto); (f) 
Borrower assumes all responsibility and liability arising from or relating to 
the production, use, sale or other disposition of the Inventory; (g) Borrower 
shall not sell Inventory to any customer on approval, or any other basis 
which entitles the customer to return or may obligate Borrower to repurchase 
such Inventory; (h) Borrower shall keep the Inventory in good and marketable 
condition; and (i) Borrower shall not, without prior written notice to 
Lender, acquire or accept any Inventory on consignment or approval. 

               7.4  EQUIPMENT COVENANTS.  With respect to the Equipment: (a) 
upon Lender's request, Borrower shall, at its expense, at any time or times 
as Lender may request on or after an Event of Default, deliver or cause to be 
delivered to Lender written reports or appraisals as to the Equipment in 
form, scope and methodology acceptable to Lender and by an appraiser 
acceptable to Lender; (b) Borrower shall keep the Equipment in good order, 
repair, running and marketable condition (ordinary wear and tear excepted); 
(c) Borrower shall use the Equipment with all reasonable care and caution and 
in accordance with applicable standards of any insurance and in conformity 
with all applicable laws; (d) the Equipment is and shall be used in 
Borrower's business and not for personal, family, household or farming use; 
(e) Borrower shall not remove any Equipment from the locations set forth or 
permitted herein, except to the extent necessary to have any Equipment 
repaired or maintained in the ordinary course of the business of Borrower or 
to move Equipment directly from one location set forth or permitted herein to 
another such location and except for the movement of motor vehicles used by 
or for the benefit of Borrower in the ordinary course of business; (f) the 
Equipment is now and shall remain personal property and Borrower shall not 
permit any of the Equipment to be or become a part of or affixed to real 
property; and (g) Borrower assumes all responsibility and liability arising 
from the use of the Equipment.

               7.5  POWER OF ATTORNEY.  Borrower hereby irrevocably 
designates and appoints Lender (and all persons designated by Lender) as 
Borrower's true and lawful attorney-in-fact, and authorizes Lender, in 
Borrower's or Lender's name, to: (a) at any time an Event of Default or event 
which with notice or passage of time or both would constitute an Event of 
Default exists or has occurred and is continuing (i) demand payment on 
Accounts or other proceeds of Inventory or other Collateral, (ii) enforce 
payment of Accounts by legal proceedings or otherwise, (iii) exercise all of 
Borrower's rights and remedies to collect any Account or other Collateral, 
(iv) sell or assign any Account upon such terms, for such amount and at such 
time or times as the Lender 


                                      -24-

<PAGE>

deems advisable, (v) settle, adjust, compromise, extend or renew an Account, 
(vi) discharge and release any Account, (vii) prepare, file and sign 
Borrower's name on any proof of claim in bankruptcy or other similar document 
against an account debtor, (viii) notify the post office authorities to 
change the address for delivery of Borrower's mail to an address designated 
by Lender, and open and dispose of all mail addressed to Borrower, and (ix) 
do all acts and things which are necessary, in Lender's determination, to 
fulfill Borrower's obligations under this Agreement and the other Financing 
Agreements and (b) at any time to (i) take control in any manner of any item 
of payment or proceeds thereof, (ii) have access to any lockbox or postal box 
into which Borrower's mail is deposited, (iii) endorse Borrower's name upon 
any items of payment or proceeds thereof and deposit the same in the Lender's 
account for application to the Obligations, (iv) endorse Borrower's name upon 
any chattel paper, document, instrument, invoice, or similar document or 
agreement relating to any Account or any goods pertaining thereto or any 
other Collateral, (v) sign Borrower's name on any verification of Accounts 
and notices thereof to account debtors and (vi) execute in Borrower's name 
and file any UCC financing statements or amendments thereto. Borrower hereby 
releases Lender and its officers, employees and designees from any 
liabilities arising from any act or acts under this power of attorney and in 
furtherance thereof, whether of omission or commission, except as a result of 
Lender's own gross negligence or willful misconduct as determined pursuant to 
a final non-appealable order of a court of competent jurisdiction.

               7.6  RIGHT TO CURE.  Lender may, at its option, (a) cure any 
default by Borrower under any agreement with a third party or pay or bond on 
appeal any judgment entered against Borrower, (b) discharge taxes, liens, 
security interests or other encumbrances at any time levied on or existing 
with respect to the Collateral and (c) pay any amount, incur any expense or 
perform any act which, in Lender's judgment, is necessary or appropriate to 
preserve, protect, insure or maintain the Collateral and the rights of Lender 
with respect thereto. Lender may add any amounts so expended to the 
Obligations and charge Borrower's account therefor, such amounts to be 
repayable by Borrower on demand.  Lender shall be under no obligation to 
effect such cure, payment or bonding and shall not, by doing so, be deemed to 
have assumed any obligation or liability of Borrower.  Any payment made or 
other action taken by Lender under this Section shall be without prejudice to 
any right to assert an Event of Default hereunder and to proceed accordingly.

               7.7  ACCESS TO PREMISES.  From time to time as requested by 
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall 
have complete access to all of Borrower's premises during normal business 
hours and after notice to Borrower, or at any time and without notice to 
Borrower if an Event of Default exists or has occurred and is continuing, for 
the purposes of inspecting, verifying and auditing the Collateral and all of 
Borrower's books and records, including, without limitation, the Records, and 
(b) Borrower shall promptly furnish to Lender such copies of such books and 
records or extracts therefrom as Lender may request, and (c) use during 
normal business hours such of Borrower's personnel, equipment, supplies and 
premises as may be reasonably necessary for the foregoing and if an Event of 
Default exists or has occurred and is continuing for the collection of 
Accounts and realization of other Collateral.

SECTION 8.     REPRESENTATIONS AND WARRANTIES.  


                                      -25-

<PAGE>

               Borrower hereby represents and warrants to Lender the 
following (which shall survive the execution and delivery of this Agreement), 
the truth and accuracy of which are a continuing condition of the making of 
Loans and the providing of Letter of Credit Accommodations by Lender to 
Borrower:

               8.1  CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES.  
Borrower is a corporation duly organized and in good standing under the laws 
of its state of incorporation and is duly qualified as a foreign corporation 
and in good standing in all states or other jurisdictions where the nature 
and extent of the business transacted by it or the ownership of assets makes 
such qualification necessary, except for those jurisdictions in which the 
failure to so qualify would not have a material adverse effect on Borrower's 
financial condition, results of operation or business or the rights of Lender 
in or to any of the Collateral.  The execution, delivery and performance of 
this Agreement, the other Financing Agreements and the transactions 
contemplated hereunder and thereunder are all within Borrower's corporate 
powers, have been duly authorized and are not in contravention of law or the 
terms of Borrower's certificate of incorporation, by-laws, or other 
organizational documentation, or any indenture, agreement or undertaking to 
which Borrower is a party or by which Borrower or its property are bound.  
This Agreement and the other Financing Agreements constitute legal, valid and 
binding obligations of Borrower enforceable in accordance with their 
respective terms.  Borrower does not have any subsidiaries except as set 
forth on the Information Certificate.  

               8.2  FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE.  All 
financial statements relating to Borrower which have been or may hereafter be 
delivered by Borrower to Lender have been prepared in accordance with GAAP 
and fairly present the financial condition and the results of operations of 
Borrower as at the dates and for the periods set forth therein.  Except as 
disclosed in any interim financial statements furnished by Borrower to Lender 
prior to the date of this Agreement, there has been no material adverse 
change in the assets, liabilities, properties and condition, financial or 
otherwise, of Borrower, since the date of the most recent audited financial 
statements furnished by Borrower to Lender prior to the date of this 
Agreement.

               8.3  CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS.  The chief 
executive office of Borrower and Borrower's Records concerning Accounts are 
located only at the address set forth below and its only other places of 
business and the only other locations of Collateral, if any, are the 
addresses set forth in the Information Certificate, subject to the right of 
Borrower to establish new locations in accordance with Section 9.2 below.  
The Information Certificate correctly identifies any of such locations which 
are not owned by Borrower and sets forth the owners and/or operators thereof 
and to the best of Borrower's knowledge, the holders of any mortgages on such 
locations.

               8.4  PRIORITY OF LIENS; TITLE TO PROPERTIES.  The security 
interests and liens granted to Lender under this Agreement and the other 
Financing Agreements constitute valid and perfected first priority liens and 
security interests in and upon the Collateral subject only to the liens 
permitted under Section 9.8 hereof.  Borrower has good and marketable title 
to all of its properties and assets subject to no liens, mortgages, pledges, 
security interests, encumbrances or charges of any kind, except those granted 
to Lender and such others as are permitted under Section 9.8 hereof.


                                      -26-


<PAGE>

               8.5  TAX RETURNS.  Borrower has filed, or caused to be filed, 
in a timely manner all tax returns, reports and declarations which are 
required to be filed by it (without requests for extension except as 
previously disclosed in writing to Lender).  All information in such tax 
returns, reports and declarations is complete and accurate in all material 
respects.  Borrower has paid or caused to be paid all taxes due and payable 
or claimed due and payable in any assessment received by it, except taxes the 
validity of which are being contested in good faith by appropriate 
proceedings diligently pursued and available to Borrower and with respect to 
which adequate reserves have been set aside on its books. Adequate provision 
has been made for the payment of all accrued and unpaid Federal, State, 
county, local, foreign and other taxes whether or not yet due and payable and 
whether or not disputed.

               8.6  LITIGATION.  Except as set forth on the Information 
Certificate, there is no present investigation by any governmental agency 
pending, or to the best of Borrower's knowledge threatened, against or 
affecting Borrower, its assets or business and there is no action, suit, 
proceeding or claim by any Person pending, or to the best of Borrower's 
knowledge threatened, against Borrower or its assets or goodwill, or against 
or affecting any transactions contemplated by this Agreement, which if 
adversely determined against Borrower would result in any material adverse 
change in the assets, business or prospects of Borrower or would impair the 
ability of Borrower to perform its obligations hereunder or under any of the 
other Financing Agreements to which it is a party or of Lender to enforce any 
Obligations or realize upon any Collateral.

               8.7  COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.  
Borrower is not in default in any material respect under, or in violation in 
any material respect of any of the terms of, any agreement, contract, 
instrument, lease or other commitment to which it is a party or by which it 
or any of its assets are bound and Borrower is in compliance in all material 
respects with all applicable provisions of laws, rules, regulations, 
licenses, permits, approvals and orders of any foreign, Federal, State or 
local governmental authority.

               8.8  ENVIRONMENTAL COMPLIANCE.  

                    (a)  Borrower has not generated, used, stored, treated, 
transported, manufactured, handled, produced or disposed of any Hazardous 
Materials, on or off its premises (whether or not owned by it) in any manner 
which at any time violates any applicable Environmental Law or any license, 
permit, certificate, approval or similar authorization thereunder and the 
operations of Borrower complies in all material respects with all 
Environmental Laws and all licenses, permits, certificates, approvals and 
similar authorizations thereunder.  

                    (b)  There has been no investigation, proceeding, 
complaint, order, directive, claim, citation or notice by any governmental 
authority or any other person nor is any pending or to the best of Borrower's 
knowledge threatened, with respect to any non-compliance with or violation of 
the requirements of any Environmental Law by Borrower or the release, spill 
or discharge, threatened or actual, of any Hazardous Material or the 
generation, use, storage, treatment, transportation, manufacture, handling, 
production or disposal of any Hazardous Materials or any other environmental, 
health or safety matter, which affects Borrower or its business, operations 
or assets or any properties at which Borrower has transported, stored or 
disposed of any Hazardous Materials.

                                     -27-
<PAGE>

                    (c)  Borrower has no material liability (contingent or 
otherwise) in connection with a release, spill or discharge, threatened or 
actual, of any Hazardous Materials or the generation, use, storage, 
treatment, transportation, manufacture, handling, production or disposal of 
any Hazardous Materials.

                    (d)  Borrower has all licenses, permits, certificates, 
approvals or similar authorizations required to be obtained or filed in 
connection with the operations of Borrower under any Environmental Law and 
all of such licenses, permits, certificates, approvals or similar 
authorizations are valid and in full force and effect.

               8.9  EMPLOYEE BENEFITS.   

                    (a)  Borrower has not engaged in any transaction in 
connection with which Borrower or any of its ERISA Affiliates could be 
subject to either a civil penalty assessed pursuant to Section 502(i) of 
ERISA or a tax imposed by Section 4975 of the Code, including any accumulated 
funding deficiency described in Section 8.9(c) hereof and any deficiency with 
respect to vested accrued benefits described in Section 8.9(d) hereof.

                    (b)  No liability to the Pension Benefit Guaranty 
Corporation has been or is expected by Borrower to be incurred with respect 
to any employee pension benefit plan of Borrower or any of its ERISA 
Affiliates.  There has been no reportable event (within the meaning of 
Section 4043(b) of ERISA) or any other event or condition with respect to any 
employee pension benefit plan of Borrower or any of its ERISA Affiliates 
which presents a risk of termination of any such plan by the Pension Benefit 
Guaranty Corporation.

                    (c)  Full payment has been made of all amounts which 
Borrower or any of its ERISA Affiliates is required under Section 302 of 
ERISA and Section 412 of the Code to have paid under the terms of each 
employee pension benefit plan as contributions to such plan as of the last 
day of the most recent fiscal year of such plan ended prior to the date 
hereof, and no accumulated funding deficiency (as defined in Section 302 of 
ERISA and Section 412 of the Code), whether or not waived, exists with 
respect to any employee pension benefit plan, including any penalty or tax 
described in Section 8.9(a) hereof and any deficiency with respect to vested 
accrued benefits described in Section 8.9(d) hereof.

                    (d)  The current value of all vested accrued benefits 
under all employee pension benefit plans maintained by Borrower that are 
subject to Title IV of ERISA does not exceed the current value of the assets 
of such plans allocable to such vested accrued benefits, including any 
penalty or tax described in Section 8.9(a) hereof and any accumulated funding 
deficiency described in Section 8.9(c) hereof.  The terms "current value" and 
"accrued benefit" have the meanings specified in ERISA.

                    (e)  Neither Borrower nor any of its ERISA Affiliates is 
or has ever been obligated to contribute to any "multiemployer plan" (as such 
term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV 
of ERISA.

               8.10 ACCURACY AND COMPLETENESS OF INFORMATION.  All 
information furnished by or on behalf of Borrower in writing to Lender in 
connection with this Agreement or any of the other 

                                     -28-
<PAGE>

Financing Agreements or any transaction contemplated hereby or thereby, 
including, without limitation, all information on the Information Certificate 
is true and correct in all material respects on the date as of which such 
information is dated or certified and does not omit any material fact 
necessary in order to make such information not misleading. No event or 
circumstance has occurred which has had or could reasonably be expected to 
have a material adverse affect on the business, assets or prospects of 
Borrower, which has not been fully and accurately disclosed to Lender in 
writing.

               8.11 SURVIVAL OF WARRANTIES; CUMULATIVE.  All representations 
and warranties contained in this Agreement or any of the other Financing 
Agreements shall survive the execution and delivery of this Agreement and 
shall be deemed to have been made again to Lender on the date of each 
additional borrowing or other credit accommodation hereunder and shall be 
conclusively presumed to have been relied on by Lender regardless of any 
investigation made or information possessed by Lender.  The representations 
and warranties set forth herein shall be cumulative and in addition to any 
other representations or warranties which Borrower shall now or hereafter 
give, or cause to be given, to Lender.

SECTION 9.     AFFIRMATIVE AND NEGATIVE COVENANTS.  

               9.1  MAINTENANCE OF EXISTENCE.  Borrower shall at all times 
preserve, renew and keep in full, force and effect its corporate existence 
and rights and franchises with respect thereto and maintain in full force and 
effect all permits, licenses, trademarks, trade names, approvals, 
authorizations, leases and contracts necessary to carry on the business as 
presently or proposed to be conducted.  Borrower shall give Lender thirty 
(30) days prior written notice of any proposed change in its corporate name, 
which notice shall set forth the new name and Borrower shall deliver to 
Lender a copy of the amendment to the Certificate of Incorporation of 
Borrower providing for the name change certified by the Secretary of State of 
the jurisdiction of incorporation of Borrower as soon as it is available.

               9.2  NEW COLLATERAL LOCATIONS.  Borrower may open any new 
location within the continental United States provided Borrower (a) gives 
Lender thirty (30) days prior written notice of the intended opening of any 
such new location and (c) executes and delivers, or causes to be executed and 
delivered, to Lender such agreements, documents, and instruments as Lender 
may deem reasonably necessary or desirable to protect its interests in the 
Collateral at such location, including, without limitation, UCC financing 
statements and, if Borrower leases such new location, provides a favorable 
landlord waiver or subordination, or, in the alternative, Lender may apply an 
Availability Reserve in an amount equal to three (3) months gross rent in a 
manner consistent with the Availability Reserve established to cover rent as 
defined in Section 1.5 hereof.

               9.3  COMPLIANCE WITH LAWS, REGULATIONS.  

                    (a)  Borrower shall, at all times, comply in all material 
respects with all laws, rules, regulations, licenses, permits, approvals and 
orders applicable to it and duly observe all requirements of any Federal, 
State or local governmental authority, including, without limitation, the 
Employee Retirement Security Act of 1974, as amended, the Occupational Safety 
and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938, as 
amended, and all statutes, 

                                     -29-
<PAGE>

rules, regulations, orders, permits and stipulations relating to 
environmental pollution and employee health and safety, including, without 
limitation, all of the Environmental Laws.

                    (b)  Borrower shall establish and maintain, at its 
expense, a system to assure and monitor its continued compliance with all 
Environmental Laws in all of its operations, which system shall include 
annual reviews of such compliance by employees or agents of Borrower who are 
familiar with the requirements of the Environmental Laws.  Copies of all 
environmental surveys, audits, assessments, feasibility studies and results 
of remedial investigations shall be promptly furnished, or caused to be 
furnished, by Borrower to Lender. Borrower shall take prompt and appropriate 
action to respond to any non-compliance with any of the Environmental Laws 
and shall regularly report to Lender on such response.

                    (c)  Borrower shall give both oral and written notice to 
Lender immediately upon Borrower's receipt of any notice of, or Borrower's 
otherwise obtaining knowledge of, (i) the occurrence of any event involving 
the release, spill or discharge, threatened or actual, of any Hazardous 
Material or (ii) any investigation, proceeding, complaint, order, directive, 
claims, citation or notice with respect to: (A) any non-compliance with or 
violation of any Environmental Law by Borrower or (B) the release, spill or 
discharge, threatened or actual, of any Hazardous Material or (C) the 
generation, use, storage, treatment, transportation, manufacture, handling, 
production or disposal of any Hazardous Materials or (D) any other 
environmental, health or safety matter, which affects Borrower or its 
business, operations or assets or any properties at which Borrower 
transported, stored or disposed of any Hazardous Materials.

                    (d)  Without limiting the generality of the foregoing, 
whenever Lender reasonably determines that there is non-compliance, or any 
condition which requires any action by or on behalf of Borrower in order to 
avoid any material non-compliance, with any Environmental Law, Borrower 
shall, at Lender's request and Borrower's expense: (i) cause an independent 
environmental engineer acceptable to Lender to conduct such tests of the site 
where Borrower's non-compliance or alleged non-compliance with such 
Environmental Laws has occurred as to such non-compliance and prepare and 
deliver to Lender a report as to such non-compliance setting forth the 
results of such tests, a proposed plan for responding to any environmental 
problems described therein, and an estimate of the costs thereof and (ii) 
provide to Lender a supplemental report of such engineer whenever the scope 
of such non-compliance, or Borrower's response thereto or the estimated costs 
thereof, shall change in any material respect.

                    (e)  Borrower shall indemnify and hold harmless Lender, 
its directors, officers, employees, agents, invitees, representatives, 
successors and assigns, from and against any and all losses, claims, damages, 
liabilities, costs, and expenses (including attorneys' fees and legal 
expenses) directly or indirectly arising out of or attributable to the use, 
generation, manufacture, reproduction, storage, release, threatened release, 
spill, discharge, disposal or presence of a Hazardous Material, including, 
without limitation, the costs of any required or necessary repair, cleanup or 
other remedial work with respect to any property of Borrower and the 
preparation and implementation of any closure, remedial or other required 
plans.  All representations, warranties, covenants and indemnifications in 
this Section 9.3 shall survive the payment of the Obligations and the 
termination or non-renewal of this Agreement.

                                     -30-
<PAGE>

               9.4  PAYMENT OF TAXES AND CLAIMS.  Borrower shall duly pay and 
discharge all taxes, assessments, contributions and governmental charges upon 
or against it or its properties or assets, except for taxes the validity of 
which are being contested in good faith by appropriate proceedings diligently 
pursued and available to Borrower and with respect to which adequate reserves 
have been set aside on its books.  Borrower shall be liable for any tax or 
penalties imposed on Lender as a result of the financing arrangements 
provided for herein and Borrower agrees to indemnify and hold Lender harmless 
with respect to the foregoing, and to repay to Lender on demand the amount 
thereof, and until paid by Borrower such amount shall be added and deemed 
part of the Loans, PROVIDED, THAT, nothing contained herein shall be 
construed to require Borrower to pay any income or franchise taxes 
attributable to the income of Lender from any amounts charged or paid 
hereunder to Lender.  The foregoing indemnity shall survive the payment of 
the Obligations and the termination or non-renewal of this Agreement.

               9.5  INSURANCE.  Borrower shall, at all times, maintain with 
financially sound and reputable insurers insurance with respect to the 
Collateral against loss or damage and all other insurance of the kinds and in 
the amounts customarily insured against or carried by corporations of 
established reputation engaged in the same or similar businesses and 
similarly situated.  Said policies of insurance shall be satisfactory to 
Lender as to form, amount and insurer. Borrower shall furnish certificates, 
policies or endorsements to Lender as Lender shall require as proof of such 
insurance, and, if Borrower fails to do so, Lender is authorized, but not 
required, to obtain such insurance at the expense of Borrower.  All policies 
shall provide for at least thirty (30) days prior written notice to Lender of 
any cancellation or reduction of coverage and that Lender may act as attorney 
for Borrower in obtaining, and at any time an Event of Default exists or has 
occurred and is continuing, adjusting, settling, amending and canceling such 
insurance.  Borrower shall cause Lender to be named as a loss payee and an 
additional insured (but without any liability for any premiums) under such 
insurance policies and Borrower shall obtain non-contributory lender's loss 
payable endorsements to all insurance policies in form and substance 
satisfactory to Lender.  Such lender's loss payable endorsements shall 
specify that the proceeds of such insurance shall be payable to Lender as its 
interests may appear and further specify that Lender shall be paid regardless 
of any act or omission by Borrower or any of its affiliates.  At its option, 
Lender may apply any insurance proceeds received by Lender at any time to the 
cost of repairs or replacement of Collateral and/or to payment of the 
Obligations, whether or not then due, in any order and in such manner as 
Lender may determine or hold such proceeds as cash collateral for the 
Obligations.

               9.6  FINANCIAL STATEMENTS AND OTHER INFORMATION.  

                    (a)  Borrower shall keep proper books and records in 
which true and complete entries shall be made of all dealings or transactions 
of or in relation to the Collateral and the business of Borrower and its 
subsidiaries (if any) in accordance with GAAP and Borrower shall furnish or 
cause to be furnished to Lender:  (i) within thirty (30) days after the end 
of each fiscal month (or 45 days after the end of a month which is also the 
end of Borrower's fiscal year), monthly unaudited consolidated financial 
statements, and, if Borrower has any subsidiaries, unaudited consolidating 
financial statements (including in each case balance sheets, statements of 
income and loss and statements of shareholders' equity), all in reasonable 
detail, fairly presenting the financial position and the results of the 
operations of Borrower and its subsidiaries as of the

                                      -31-
<PAGE>

end of and through such fiscal month and (ii) within 105 days after the end 
of each fiscal year, audited consolidated financial statements and, if 
Borrower has any subsidiaries, audited consolidating financial statements of 
Borrower and its subsidiaries (including in each case balance sheets, 
statements of income and loss, statements of cash flow and statements of 
shareholders' equity), and the accompanying notes thereto, all in reasonable 
detail, fairly presenting the financial position and the results of the 
operations of Borrower and its subsidiaries as of the end of and for such 
fiscal year, together with the opinion of independent certified public 
accountants, which accountants shall be an independent accounting firm 
selected by Borrower and reasonably acceptable to Lender, that such financial 
statements have been prepared in accordance with GAAP, and present fairly the 
results of operations and financial condition of Borrower and its 
subsidiaries as of the end of and for the fiscal year then ended.

                    (b)  Borrower shall promptly notify Lender in writing of 
the details of (i) any loss, damage, investigation, action, suit, proceeding 
or claim relating to the Collateral or any other property which is security 
for the Obligations or which would result in any material adverse change in 
Borrower's business, properties, assets, goodwill or condition, financial or 
otherwise and (ii) the occurrence of any Event of Default or event which, 
with the passage of time or giving of notice or both, would constitute an 
Event of Default.

                    (c)  Borrower shall promptly after the sending or filing 
thereof furnish or cause to be furnished to Lender copies of all financial 
reports which Borrower sends to its stockholders generally and copies of all 
reports and registration statements which Borrower files with the Securities 
and Exchange Commission, any national securities exchange or the National 
Association of Securities Dealers, Inc.

                    (d)  Borrower shall furnish or cause to be furnished to 
Lender such budgets, forecasts, projections and other information in respect 
of the Collateral and the business of Borrower, as Lender may, from time to 
time, reasonably request.  Lender is hereby authorized to deliver a copy of 
any financial statement or any other information relating to the business of 
Borrower to any court or other government agency or to any participant or 
assignee or prospective participant or assignee.  Borrower hereby irrevocably 
authorizes and directs all accountants or auditors to deliver to Lender, at 
Borrower's expense, copies of the financial statements of Borrower and any 
reports or management letters prepared by such accountants or auditors on 
behalf of Borrower and to disclose to Lender such information as they may 
have regarding the business of Borrower.  Any documents, schedules, invoices 
or other papers delivered to Lender may be destroyed or otherwise disposed of 
by Lender one (1) year after the same are delivered to Lender, except as 
otherwise designated by Borrower to Lender in writing.  

               9.7  SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.  
Borrower shall not, directly or indirectly, (a) merge into or with or 
consolidate with any other Person or permit any other Person to merge into or 
with or consolidate with it, or (b) sell, assign, lease, transfer, abandon or 
otherwise dispose of any stock or indebtedness to any other Person or any of 
its assets to any other Person (except for (i) sales of Inventory in the 
ordinary course of business and (ii) the disposition of worn-out or obsolete 
Equipment or Equipment no longer used in the business of Borrower so long as 
(A) if an Event of Default exists or has occurred and is continuing, any 
proceeds are paid to Lender and (B) such sales do not involve Equipment 
having an aggregate 

                                     -32-
<PAGE>

fair market value in excess of $25,000 for all such Equipment disposed of in 
any fiscal year of Borrower), or (c) form or acquire any subsidiaries, or (d) 
wind up, liquidate or dissolve or (e) agree to do any of the foregoing.

               9.8  ENCUMBRANCES.  Borrower shall not create, incur, assume 
or suffer to exist any security interest, mortgage, pledge, lien, charge or 
other encumbrance of any nature whatsoever on any of its assets or 
properties, including, without limitation, the Collateral, EXCEPT:  (a) liens 
and security interests of Lender; (b) liens securing the payment of taxes, 
either not yet overdue or the validity of which are being contested in good 
faith by appropriate proceedings diligently pursued and available to Borrower 
and with respect to which adequate reserves have been set aside on its books; 
(c) non-consensual statutory liens (other than liens securing the payment of 
taxes) arising in the ordinary course of Borrower's business to the extent: 
(i) such liens secure indebtedness which is not overdue or (ii) such liens 
secure indebtedness relating to claims or liabilities which are fully insured 
and being defended at the sole cost and expense and at the sole risk of the 
insurer or being contested in good faith by appropriate proceedings 
diligently pursued and available to Borrower, in each case prior to the 
commencement of foreclosure or other similar proceedings and with respect to 
which adequate reserves have been set aside on its books; (d) zoning 
restrictions, easements, licenses, covenants and other restrictions affecting 
the use of real property which do not interfere in any material respect with 
the use of such real property or ordinary conduct of the business of Borrower 
as presently conducted thereon or materially impair the value of the real 
property which may be subject thereto; and (e) purchase money security 
interests in Equipment (including capital leases) and purchase money 
mortgages on real estate not to exceed $100,000 in the aggregate at any time 
outstanding so long as such security interests and mortgages do not apply to 
any property of Borrower other than the Equipment or real estate so acquired, 
and the indebtedness secured thereby does not exceed the cost of the 
Equipment or real estate so acquired, as the case may be.

               9.9  INDEBTEDNESS.  Borrower shall not incur, create, assume, 
become or be liable in any manner with respect to, or permit to exist, any 
obligations or indebtedness, EXCEPT (a) the Obligations; (b) trade 
obligations and normal accruals in the ordinary course of business not yet 
due and payable, or with respect to which the Borrower is contesting in good 
faith the amount or validity thereof by appropriate proceedings diligently 
pursued and available to Borrower, and with respect to which adequate 
reserves have been set aside on its books; (c) purchase money indebtedness 
(including capital leases) to the extent not incurred or secured by liens 
(including capital leases) in violation of any other provision of this 
Agreement; and (d) obligations or indebtedness set forth on the Information 
Certificate; PROVIDED, THAT, (i) Borrower may only make regularly scheduled 
payments of principal and interest in respect of such indebtedness in 
accordance with the terms of the agreement or instrument evidencing or giving 
rise to such indebtedness as in effect on the date hereof, (ii) Borrower 
shall not, directly or indirectly, (A) amend, modify, alter or change the 
terms of such indebtedness or any agreement, document or instrument related 
thereto as in effect on the date hereof, or (B) except as otherwise permitted 
under this Agreement, redeem, retire, defease, purchase or otherwise acquire 
such indebtedness, or set aside or otherwise deposit or invest any sums for 
such purpose, and (iii) Borrower shall furnish to Lender all notices or 
demands in connection with such indebtedness either received by Borrower or 
on its behalf, promptly after the receipt thereof, or sent by Borrower or on 
its behalf, concurrently with the sending thereof, as the case may be.

                                      -33-
<PAGE>

               9.10 LOANS, INVESTMENTS, GUARANTEES, ETC.  Borrower shall not, 
directly or indirectly, make any loans or advance money or property to any 
person, or invest in (by capital contribution, dividend or otherwise) or 
purchase or repurchase the stock or indebtedness or all or a substantial part 
of the assets or property of any person, or guarantee, assume, endorse, or 
otherwise become responsible for (directly or indirectly) the indebtedness, 
performance, obligations or dividends of any Person or agree to do any of the 
foregoing, EXCEPT: (a) the endorsement of instruments for collection or 
deposit in the ordinary course of business; (b) investments in:  (i) 
short-term direct obligations of the United States Government, (ii) 
negotiable certificates of deposit issued by any bank satisfactory to Lender, 
payable to the order of the Borrower or to bearer and delivered to Lender, 
and (iii) commercial paper rated A1 or P1; PROVIDED, THAT, as to any of the 
foregoing, unless waived in writing by Lender, Borrower shall take such 
actions as are deemed necessary by Lender to perfect the security interest of 
Lender in such investments, (c) the guarantees set forth in the Information 
Certificate, (d) loans in the ordinary course of business from one Borrower 
to another Borrower, and (e) guarantees by a Borrower of a foreign subsidiary 
of such Borrower in an aggregate amount outstanding at any one time for all 
Borrowers not to exceed $250,000.

               9.11 DIVIDENDS AND REDEMPTIONS.  Borrower shall not, directly 
or indirectly, declare or pay any dividends on account of any shares of any 
class of capital stock of Borrower now or hereafter outstanding, or set aside 
or otherwise deposit or invest any sums for such purpose, or redeem, retire, 
defease, purchase or otherwise acquire any shares of any class of capital 
stock (or set aside or otherwise deposit or invest any sums for such purpose) 
for any consideration other than common stock or apply or set apart any sum, 
or make any other distribution (by reduction of capital or otherwise) in 
respect of any such shares or agree to do any of the foregoing.

               9.12 TRANSACTIONS WITH AFFILIATES.  Borrower shall not enter 
into any transaction for the purchase, sale or exchange of property or the 
rendering of any service to or by any affiliate, except in the ordinary 
course of and pursuant to the reasonable requirements of Borrower's business 
and upon fair and reasonable terms no less favorable to the Borrower than 
Borrower would obtain in a comparable arm's length transaction with an 
unaffiliated person; provided that Borrower may sell Inventory in the 
ordinary course of business to its foreign subsidiaries at not less than 80% 
of Borrower's regular seller price for such Inventory, provided that the 
total of such sales to foreign subsidiaries shall be not more than $2,500,000 
in the aggregate for all Borrowers in any fiscal year and such sales shall be 
at a positive gross profit margin.

               9.13 [Intentionally Omitted.]

               9.14 ADJUSTED NET WORTH.  Borrower shall, at all times, 
maintain Adjusted Net Worth of not less than $_____________.

               9.15 COMPLIANCE WITH ERISA.  Borrower shall not with respect 
to any "employee pension benefit plan" maintained by Borrower or any of its 
ERISA Affiliates:

                    (a)  (i)  terminate any of such employee pension benefit 
plans so as to incur any liability to the Pension Benefit Guaranty 
Corporation established pursuant to ERISA, (ii) allow or suffer to exist any 
prohibited transaction involving any of such employee pension benefit plans 
or any trust created thereunder which would subject Borrower or such ERISA 
Affiliate to a tax or penalty or other liability on prohibited transactions 
imposed under Section 

                                     -34-
<PAGE>

4975 of the Code or ERISA, (iii) fail to pay to any such employee pension 
benefit plan any contribution which it is obligated to pay under Section 302 
of ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or 
suffer to exist any accumulated funding deficiency, whether or not waived, 
with respect to any such employee pension benefit plan, (v) allow or suffer 
to exist any occurrence of a reportable event or any other event or condition 
which presents a material risk of termination by the Pension Benefit Guaranty 
Corporation of any such employee pension benefit plan that is a single 
employer plan, which termination could result in any liability to the Pension 
Benefit Guaranty Corporation or (vi) incur any withdrawal liability with 
respect to any multiemployer pension plan.

                    (b)  As used in this Section 9.15, the term "employee 
pension benefit plans," "employee benefit plans", "accumulated funding 
deficiency" and "reportable event" shall have the respective meanings 
assigned to them in ERISA, and the term "prohibited transaction" shall have 
the meaning assigned to it in Section 4975 of the Code and ERISA.

               9.16 COSTS AND EXPENSES.  Borrower shall pay to Lender on 
demand all costs, expenses, filing fees and taxes paid or payable in 
connection with the preparation, negotiation, execution, delivery, recording, 
administration, collection, liquidation, enforcement and defense of the 
Obligations, Lender's rights in the Collateral, this Agreement, the other 
Financing Agreements and all other documents related hereto or thereto, 
including any amendments, supplements or consents which may hereafter be 
contemplated (whether or not executed) or entered into in respect hereof and 
thereof, including, but not limited to: (a) all costs and expenses of filing 
or recording (including Uniform Commercial Code financing statement filing 
taxes and fees, documentary taxes, intangibles taxes and mortgage recording 
taxes and fees, if applicable); (b) costs and expenses and fees for title 
insurance and other insurance premiums, environmental audits, surveys, 
assessments, engineering reports and inspections, appraisal fees and search 
fees; (c) costs and expenses of remitting loan proceeds, collecting checks 
and other items of payment, and establishing and maintaining the Blocked 
Accounts, together with Lender's customary charges and fees with respect 
thereto; (d) charges, fees or expenses charged by any bank or issuer in 
connection with the Letter of Credit Accommodations; (e) costs and expenses 
of preserving and protecting the Collateral; (f) costs and expenses paid or 
incurred in connection with obtaining payment of the Obligations, enforcing 
the security interests and liens of Lender, selling or otherwise realizing 
upon the Collateral, and otherwise enforcing the provisions of this Agreement 
and the other Financing Agreements or defending any claims made or threatened 
against Lender arising out of the transactions contemplated hereby and 
thereby (including, without limitation, preparations for and consultations 
concerning any such matters); (g) all out-of-pocket expenses and costs 
heretofore and from time to time hereafter incurred by Lender during the 
course of periodic field examinations of the Collateral and Borrower's 
operations, plus a per diem charge at the rate of $650 per person per day for 
Lender's examiners in the field and office; and (h) the fees and 
disbursements of counsel (including legal assistants) to Lender in connection 
with any of the foregoing.

               9.17 FURTHER ASSURANCES.  At the request of Lender at any time 
and from time to time, Borrower shall, at its expense, duly execute and 
deliver, or cause to be duly executed and delivered, such further agreements, 
documents and instruments, and do or cause to be done such further acts as 
may be necessary or proper to evidence, perfect, maintain and enforce the 
security 

                                     -35-
<PAGE>

interests and the priority thereof in the Collateral and to otherwise 
effectuate the provisions or purposes of this Agreement or any of the other 
Financing Agreements.  Lender may at any time and from time to time request a 
certificate from an officer of Borrower representing that all conditions 
precedent to the making of Loans and providing Letter of Credit 
Accommodations contained herein are satisfied.  In the event of such request 
by Lender, Lender may, at its option, cease to make any further Loans or 
provide any further Letter of Credit Accommodations until Lender has received 
such certificate and, in addition, Lender has determined that such conditions 
are satisfied.  Where permitted by law, Borrower hereby authorizes Lender to 
execute and file one or more UCC financing statements signed only by Lender. 

SECTION 10.    EVENTS OF DEFAULT AND REMEDIES.  

               10.1 EVENTS OF DEFAULT.  The occurrence or existence of any 
one or more of the following events are referred to herein individually as an 
"EVENT OF DEFAULT", and collectively as "EVENTS OF DEFAULT": 

                    (a)  Borrower fails to pay when due any of the 
Obligations or fails to perform any of the terms, covenants, conditions or 
provisions contained in this Agreement or any of the other Financing 
Agreements;

                    (b)  Any representation, warranty or statement of fact 
made by Borrower to Lender in this Agreement, the other Financing Agreements 
or any other agreement, schedule, confirmatory assignment or otherwise shall 
when made or deemed made be false or misleading in any material respect; 

                    (c)  Any Obligor revokes, terminates or fails to perform 
any of the terms, covenants, conditions or provisions of any guarantee, 
endorsement or other agreement of such party in favor of Lender;

                    (d)  Any judgment for the payment of money is rendered 
against Borrower or any Obligor in excess of $25,000 in any one case or in 
excess of $50,000 in the aggregate and shall remain undischarged or unvacated 
for a period in excess of thirty (30) days or execution shall at any time not 
be effectively stayed, or any judgment other than for the payment of money, 
or injunction, attachment, garnishment or execution is rendered against 
Borrower or any Obligor or any of their assets; 

                    (e)  Any Obligor (being a natural person or a general 
partner of an Obligor which is a partnership) dies or Borrower or any 
Obligor, which is a partnership, limited liability company or corporation, 
dissolves or suspends or discontinues doing business; 

                    (f)  Borrower or any Obligor becomes insolvent (however 
defined or evidenced), makes an assignment for the benefit of creditors, 
makes or sends notice of a bulk transfer or calls a meeting of its creditors 
or principal creditors;  

                    (g)  A case or proceeding under the bankruptcy laws of 
the United States of America now or hereafter in effect or under any 
insolvency, reorganization, receivership, readjustment of debt, dissolution 
or liquidation law or statute of any jurisdiction now or hereafter 

                                     -36-
<PAGE>

in effect (whether at law or in equity) is filed against Borrower or any 
Obligor or all or any part of its properties and such petition or application 
is not dismissed within thirty (30) days after the date of its filing or 
Borrower or any Obligor shall file any answer admitting or not contesting 
such petition or application or indicates its consent to, acquiescence in or 
approval of, any such action or proceeding or the relief requested is granted 
sooner;

                    (h)  A case or proceeding under the bankruptcy laws of 
the United States of America now or hereafter in effect or under any 
insolvency, reorganization, receivership, readjustment of debt, dissolution 
or liquidation law or statute of any jurisdiction now or hereafter in effect 
(whether at a law or equity) is filed by Borrower or any Obligor or for all 
or any part of its property; or

                    (i)  Any default by Borrower or any Obligor under any 
agreement, document or instrument relating to any indebtedness for borrowed 
money owing to any person other than Lender, or any capitalized lease 
obligations, contingent indebtedness in connection with any guarantee, letter 
of credit, indemnity or similar type of instrument in favor of any person 
other than Lender, in any case in an amount in excess of $25,000, which 
default continues for more than the applicable cure period, if any, with 
respect thereto, or any default by Borrower or any Obligor under any material 
contract, lease, license or other obligation to any person other than Lender, 
which default continues for more than the applicable cure period, if any, 
with respect thereto;

                    (j)  any change in the controlling ownership of Borrower;

                    (k)  the indictment or threatened indictment of Borrower 
or any Obligor under any criminal statute, or commencement or threatened 
commencement of criminal or civil proceedings against Borrower or any 
Obligor, pursuant to which statute or proceedings the penalties or remedies 
sought or available include forfeiture of any of the property of Borrower or 
such Obligor;

                    (l)  there shall be a material adverse change in the 
business, assets or prospects of Borrower or any Obligor after the date 
hereof; or

                    (m)  there shall be an event of default under any of the 
other Financing Agreements.

               10.2 REMEDIES.  

                    (a)  at any time an Event of Default exists or has 
occurred and is continuing, Lender shall have all rights and remedies 
provided in this Agreement, the other Financing Agreements, the Uniform 
Commercial Code and other applicable law, all of which rights and remedies 
may be exercised without notice to or consent by Borrower or any Obligor, 
except as such notice or consent is expressly provided for hereunder or 
required by applicable law.  All rights, remedies and powers granted to 
Lender hereunder, under any of the other Financing Agreements, the Uniform 
Commercial Code or other applicable law, are cumulative, not exclusive and 
enforceable, in Lender's discretion, alternatively, successively, or 
concurrently on any one or more occasions, and shall include, without 
limitation, the right to apply to a court of 

                                     -37-
<PAGE>

equity for an injunction to restrain a breach or threatened breach by 
Borrower of this Agreement or any of the other Financing Agreements.  Lender 
may, at any time or times, proceed directly against Borrower or any Obligor 
to collect the Obligations without prior recourse to the Collateral.

          (b)  Without limiting the foregoing, at any time an Event of 
Default exists or has occurred and is continuing, Lender may, in its 
discretion and without limitation, (i) accelerate the payment of all 
Obligations and demand immediate payment thereof to Lender (PROVIDED, THAT, 
upon the occurrence of any Event of Default described in Sections 10.1(g) and 
10.1(h), all Obligations shall automatically become immediately due and 
payable), (ii) with or without judicial process or the aid or assistance of 
others, enter upon any premises on or in which any of the Collateral may be 
located and take possession of the Collateral or complete processing, 
manufacturing and repair of all or any portion of the Collateral, (iii) 
require Borrower, at Borrower's expense, to assemble and make available to 
Lender any part or all of the Collateral at any place and time designated by 
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize 
upon any and all Collateral, (v) remove any or all of the Collateral from any 
premises on or in which the same may be located for the purpose of effecting 
the sale, foreclosure or other disposition thereof or for any other purpose, 
(vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and 
all Collateral (including, without limitation, entering into contracts with 
respect thereto, public or private sales at any exchange, broker's board, at 
any office of Lender or elsewhere) at such prices or terms as Lender may deem 
reasonable, for cash, upon credit or for future delivery, with the Lender 
having the right to purchase the whole or any part of the Collateral at any 
such public sale, all of the foregoing being free from any right or equity of 
redemption of Borrower, which right or equity of redemption is hereby 
expressly waived and released by Borrower and/or (vii) terminate this 
Agreement.  If any of the Collateral is sold or leased by Lender upon credit 
terms or for future delivery, the Obligations shall not be reduced as a 
result thereof until payment therefor is finally collected by Lender.  If 
notice of disposition of Collateral is required by law, five (5) days prior 
notice by Lender to Borrower designating the time and place of any public 
sale or the time after which any private sale or other intended disposition 
of Collateral is to be made, shall be deemed to be reasonable notice thereof 
and Borrower waives any other notice.  In the event Lender institutes an 
action to recover any Collateral or seeks recovery of any Collateral by way 
of prejudgment remedy, Borrower waives the posting of any bond which might 
otherwise be required.

          (c)  Lender may apply the cash proceeds of Collateral actually 
received by Lender from any sale, lease, foreclosure or other disposition of 
the Collateral to payment of the Obligations, in whole or in part and in such 
order as Lender may elect, whether or not then due.  Borrower shall remain 
liable to Lender for the payment of any deficiency with interest at the 
highest rate provided for herein and all costs and expenses of collection or 
enforcement, including attorneys' fees and legal expenses.

          (d)  Without limiting the foregoing, upon the occurrence of an 
Event of Default or an event which with notice or passage of time or both 
would constitute an Event of Default, Lender may, at its option, without 
notice, (i) cease making Loans or arranging for Letter of Credit 
Accommodations or reduce the lending formulas or amounts of Revolving Loans 
and Letter of Credit Accommodations available to Borrower and/or (ii) 
terminate any provision of 


                                      -38-
<PAGE>

this Agreement providing for any future Loans or Letter of Credit 
Accommodations to be made by Lender to Borrower.

SECTION 11.    JURY TRIAL WAIVER; OTHER WAIVERSAND CONSENTS; GOVERNING LAW.  

     11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL 
WAIVER.

          (a)  The validity, interpretation and enforcement of this Agreement 
and the other Financing Agreements and any dispute arising out of the 
relationship between the parties hereto, whether in contract, tort, equity or 
otherwise, shall be governed by the internal laws of the State of California 
(without giving effect to principles of conflicts of law).

          (b)  Borrower and Lender irrevocably consent and submit to the 
non-exclusive jurisdiction of the state courts of the County of Los Angeles, 
State of California and of the United States District Court for the Central 
District of California and waive any objection based on venue or FORUM NON 
CONVENIENS with respect to any action instituted therein arising under this 
Agreement or any of the other Financing Agreements or in any way connected 
with or related or incidental to the dealings of the parties hereto in 
respect of this Agreement or any of the other Financing Agreements or the 
transactions related hereto or thereto, in each case whether now existing or 
hereafter arising, and whether in contract, tort, equity or otherwise, and 
agree that any dispute with respect to any such matters shall be heard only 
in the courts described above (except that Lender shall have the right to 
bring any action or proceeding against Borrower or its property in the courts 
of any other jurisdiction which Lender deems necessary or appropriate in 
order to realize on the Collateral or to otherwise enforce its rights against 
Borrower or its property).

          (c)  Borrower hereby waives personal service of any and all process 
upon it and consents that all such service of process may be made by 
certified mail (return receipt requested) directed to its address set forth 
on the signature pages hereof and service so made shall be deemed to be 
completed five (5) days after the same shall have been so deposited in the 
U.S. mails, or, at Lender's option, by service upon Borrower in any other 
manner provided under the rules of any such courts.  Within thirty (30) days 
after such service, Borrower shall appear in answer to such process, failing 
which Borrower shall be deemed in default and judgment may be entered by 
Lender against Borrower for the amount of the claim and other relief 
requested.

          (d)  BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY 
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS 
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY 
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO 
IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE 
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR 
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, 
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A 
JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY 
OF THIS 


                                     -39-
<PAGE>

AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES 
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

          (e)  Lender shall not have any liability to Borrower (whether in 
tort, contract, equity or otherwise) for losses suffered by Borrower in 
connection with, arising out of, or in any way related to the transactions or 
relationships contemplated by this Agreement, or any act, omission or event 
occurring in connection herewith, unless it is determined by a final and 
non-appealable judgment or court order binding on Lender, that the losses 
were the result of acts or omissions constituting gross negligence or willful 
misconduct.  In any such litigation, Lender shall be entitled to the benefit 
of the rebuttable presumption that it acted in good faith and with the 
exercise of ordinary care in the performance by it of the terms of this 
Agreement.

     11.2 WAIVER OF NOTICES.  Borrower hereby expressly waives demand, 
presentment, protest and notice of protest and notice of dishonor with 
respect to any and all instruments and commercial paper, included in or 
evidencing any of the Obligations or the Collateral, and any and all other 
demands and notices of any kind or nature whatsoever with respect to the 
Obligations, the Collateral and this Agreement, except such as are expressly 
provided for herein.  No notice to or demand on Borrower which Lender may 
elect to give shall entitle Borrower to any other or further notice or demand 
in the same, similar or other circumstances.

     11.3 AMENDMENTS AND WAIVERS.  Neither this Agreement nor any provision 
hereof shall be amended, modified, waived or discharged orally or by course 
of conduct, but only by a written agreement signed by an authorized officer 
of Lender.  Lender shall not, by any act, delay, omission or otherwise be 
deemed to have expressly or impliedly waived any of its rights, powers and/or 
remedies unless such waiver shall be in writing and signed by an authorized 
officer of Lender.  Any such waiver shall be enforceable only to the extent 
specifically set forth therein.  A waiver by Lender of any right, power 
and/or remedy on any one occasion shall not be construed as a bar to or 
waiver of any such right, power and/or remedy which Lender would otherwise 
have on any future occasion, whether similar in kind or otherwise.

     11.4 WAIVER OF COUNTERCLAIMS.  Borrower waives all rights to interpose 
any claims, deductions, setoffs or counterclaims of any nature (other than 
compulsory counterclaims) in any action or proceeding with respect to this 
Agreement, the Obligations, the Collateral or any matter arising therefrom or 
relating hereto or thereto.

     11.5 INDEMNIFICATION.  Borrower shall indemnify and hold Lender, and its 
directors, agents, employees and counsel, harmless from and against any and 
all losses, claims, damages, liabilities, costs or expenses imposed on, 
incurred by or asserted against any of them in connection with any 
litigation, investigation, claim or proceeding commenced or threatened 
related to the negotiation, preparation, execution, delivery, enforcement, 
performance or administration of this Agreement, any other Financing 
Agreements, or any undertaking or proceeding related to any of the 
transactions contemplated hereby or any act, omission, event or transaction 
related or attendant thereto, including, without limitation, amounts paid in 
settlement, court costs, and the fees and expenses of counsel.  To the extent 
that the undertaking to indemnify, pay and hold harmless set forth in this 
Section may be unenforceable because it violates any law or public policy, 
Borrower shall pay the maximum portion which it is permitted to pay under 
applicable law to Lender in satisfaction of indemnified matters under this 
Section.  


                                     -40-
<PAGE>

The foregoing indemnity shall survive the payment of the Obligations and the 
termination or non-renewal of this Agreement.

SECTION 12.    TERM OF AGREEMENT; MISCELLANEOUS.

     12.1 TERM.

          (a)  This Agreement and the other Financing Agreements shall become 
effective as of the date set forth on the first page hereof and shall 
continue in full force and effect for a term ending on the date two (2) years 
from the date hereof (the "Renewal Date"), and from year to year thereafter, 
unless sooner terminated pursuant to the terms hereof.  Lender or Borrower 
may terminate this Agreement and the other Financing Agreements effective on 
the Renewal Date or on the anniversary of the Renewal Date in any year by 
giving to the other party at least sixty (60) days prior written notice.  
Borrower may terminate this Agreement prior to the end of the then current 
term, including any renewal term, for any reason upon sixty (60) days prior 
written notice to Lender, and in such case Borrower agrees to pay to Lender 
the applicable early termination fee provided for in Section 12.1(c) hereof.  
Regardless of the timing of termination, this Agreement and all other 
Financing Agreements must be terminated simultaneously.  Upon the effective 
date of termination or non-renewal of the Financing Agreements, Borrower 
shall pay to Lender, in full, all outstanding and unpaid Obligations and 
shall furnish cash collateral to Lender in such amounts as Lender determines 
are reasonably necessary to secure Lender from loss, cost, damage or expense, 
including attorneys' fees and legal expenses, in connection with any 
contingent Obligations, including issued and outstanding Letter of Credit 
Accommodations and checks or other payments provisionally credited to the 
Obligations and/or as to which Lender has not yet received final and 
indefeasible payment.  Such cash collateral shall be remitted by wire 
transfer in Federal funds to such bank account of Lender, as Lender may, in 
its discretion, designate in writing to Borrower for such purpose.  Interest 
shall be due until and including the next Business Day, if the amounts so 
paid by Borrower to the bank account designated by Lender are received in 
such bank account later than 10:30 a.m., Los Angeles time.

          (b)  No termination of this Agreement or the other Financing 
Agreements shall relieve or discharge Borrower of its respective duties, 
obligations and covenants under this Agreement or the other Financing 
Agreements until all Obligations have been fully and finally discharged and 
paid, and Lender's continuing security interest in the Collateral and the 
rights and remedies of Lender hereunder, under the other Financing Agreements 
and applicable law, shall remain in effect until all such Obligations have 
been fully and finally discharged and paid.

          (c)  If for any reason this Agreement is terminated prior to the 
end of the then current term or renewal term of this Agreement, Borrower 
agrees to pay to Lender, upon the effective date of such termination, an 
early termination fee in the amount set forth below if such termination is 
effective in the period indicated:

                    AMOUNT                          PERIOD


                                     -41-
<PAGE>

   (i)    3% of the Maximum Credit    from the date of this Agreement to and
                                      including the day preceding the first
                                      anniversary of this Agreement
   (ii)   2% of the Maximum Credit    from the first anniversary of this
                                      Agreement to and including the Renewal
                                      Date, and if the Renewal Date is
                                      extended as provided in Section 12.1(a),
                                      at any time during a renewal term, if
                                      any.


The early termination fee provided for in this Section 12.1 shall be deemed 
included in the Obligations.

          12.2 NOTICES.  All notices, requests and demands hereunder shall be 
in writing and (a) made to Lender at its address set forth below and to 
Borrower at its chief executive office set forth below, or to such other 
address as either party may designate by written notice to the other in 
accordance with this provision, and (b) deemed to have been given or made: if 
delivered in person, immediately upon delivery; if by telex, telegram or 
facsimile transmission, immediately upon sending and upon confirmation of 
receipt; if by nationally recognized overnight courier service with 
instructions to deliver the next Business Day, one (1) Business Day after 
sending; and if by certified mail, return receipt requested, five (5) days 
after mailing.

          12.3 PARTIAL INVALIDITY.  If any provision of this Agreement is 
held to be invalid or unenforceable, such invalidity or unenforceability 
shall not invalidate this Agreement as a whole, but this Agreement shall be 
construed as though it did not contain the particular provision held to be 
invalid or unenforceable and the rights and obligations of the parties shall 
be construed and enforced only to such extent as shall be permitted by 
applicable law.

          12.4 SUCCESSORS.  This Agreement, the other Financing Agreements 
and any other document referred to herein or therein shall be binding upon 
and inure to the benefit of and be enforceable by Lender, Borrower and their 
respective successors and assigns, except that Borrower may not assign its 
rights under this Agreement, the other Financing Agreements and any other 
document referred to herein or therein without the prior written consent of 
Lender.  Lender may, after notice to Borrower, assign its rights and delegate 
its obligations under this Agreement and the other Financing Agreements and 
further may assign, or sell participations in, all or any part of the Loans, 
the Letter of Credit Accommodations or any other interest herein to another 
financial institution or other person, in which event, the assignee or 
participant shall have, to the extent of such assignment or participation, 
the same rights and benefits as it would have if it were the Lender 
hereunder, except as otherwise provided by the terms of such assignment or 
participation.

          12.5 ENTIRE AGREEMENT.  This Agreement, the other Financing 
Agreements, any supplements hereto or thereto, and any instruments or 
documents delivered or to be delivered in connection herewith or therewith 
represents the entire agreement and understanding concerning the subject 
matter hereof and thereof between the parties hereto, and supersede all other 
prior agreements, understandings, negotiations and discussions, 
representations, warranties, 


                                     -42-
<PAGE>

commitments, proposals, offers and contracts concerning the subject matter 
hereof, whether oral or written.

     IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be 
duly executed as of the day and year first above written.

Lender:                                Borrower:


CONGRESS FINANCIAL CORPORATION         MICROTEL INTERNATIONAL, INC.
(WESTERN)                              


By:                                    By:                              
   ------------------------------         ------------------------------
Title:                                 Title:                           
      ---------------------------            ---------------------------
Address:                               Chief Executive Office:          
                                       ---------------------------------
 225 South Lake Avenue                 ---------------------------------
 Suite 1000                            
 Pasadena, California  91101

Borrower:                              Borrower:

XIT CORPORATION                        CXR TELCOM CORPORATION


By:                                    By:                               
   ------------------------------         ------------------------------ 
Title:                                 Title:                            
      ---------------------------            --------------------------- 
Chief Executive Office:                Chief Executive Office:           
---------------------------------      --------------------------------- 
---------------------------------      --------------------------------- 

Borrower:

HYCOMP, INC.


By:                                
   ------------------------------  
Title:                             
      ---------------------------  
Chief Executive Office:            
---------------------------------  
---------------------------------  


                                     -43-