EXHIBIT 10.51
                              AMENDED AND RESTATED
                      ACCOUNTS RECEIVABLE CREDIT AGREEMENT

         This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into this  ___________________  day of May,  1997,  by and between SANWA
BANK CALIFORNIA (the "Bank") and ELEXSYS INTERNATIONAL,  INC. (the "Borrower") ,
on the terms and conditions that follow:

         Whereas Bank and Borrower  entered into an Accounts  Receivable  Credit
Agreement dated as of January 17, 1997, (the "Prior Agreement"); and

         Whereas,  Bank  and  Borrower  wish to  amend  and  restate  the  Prior
Agreement/

         Now, therefore, the parties hereto agree as follows:

                                    SECTION I
                                   DEFINITIONS

         1.01 Certain Defined Terms: Unless elsewhere defined in this Agreement,
the  following  terms shall have the  following  meanings  (such  meanings to be
generally applicable to the singular and plural forms of the terms defined):

                  (a)  "Account  Debtor":   shall  mean  the  person  or  entity
         obligated to the Borrower upon an account.

                  (b) "Advance": shall mean an advance to the Borrower under the
         Line of Credit.

                  (c) "Average Unused Portion of the Line of Credit": shall mean
         for any  quarter:  (a) the Line of Credit less,  (b) the average  daily
         balance  of  Advances  under the Line of Credit  that were  outstanding
         during that quarter less, (c) Letters of Credit.

                  (d)  "Borrowing  Base":  shall mean, the lesser of: (i) 80% of
         the  aggregate  amount of Eligible  Accounts of the  Borrower;  or (ii)
         $13,000,000, this is the total loan commitment.

                  (e) "Business Day": shall mean a day, other than a Saturday or
         Sunday, on which commercial banks are open for business in California.

                  (f) "Collateral": shall mean the property described in Section
         5.01.

                  (g) "Debt":  shall mean all  liabilities  of the Borrower less
         Subordinated Debt.

                  (h) "Effective Tangible Net Worth":  shall mean the Borrower's
         stated net worth plus  Subordinated  Debt less all intangible assets of
         the  Borrower  (i.e.,  goodwill,   trademarks,   patents,   copyrights,
         organization expense and similar intangible items)..

                  (i) "Eligible  Account":  shall mean,  at any time,  the gross
         amount, less returns,  discounts,  credits or offsets of any nature, of
         the  trade  accounts  owing to the  Borrower  by  Account  Debtors  but
         excluding the following:

                           (1) Accounts with respect to which the Account Debtor
                  is an officer, employee or agent of the Borrower.

                           (2)  Accounts  with respect to which goods are placed
                  on  consignment,  guarantied  sale or other terms by reason of
                  which the payment by the Account Debtor may be conditional.
<PAGE>

                           (3) Accounts with respect to which the Account Debtor
                  is not a resident  of the United  States  except to the extent
                  such accounts are supported by adequate Eximbank  insurance or
                  other  insurance  acceptable  to the  Bank  or by  irrevocable
                  letters of credit  issued by banks  satisfactory  to the Bank,
                  and  except in the case of United  States  Dollar  denominated
                  invoices  to  Northern   Telecom,   or  any  of  its  Canadian
                  subsidiaries (collectively "Northern Telecom").

                           (4) Accounts with respect to which the Account Debtor
                  is the United States or any department or agency thereof.

                           (5) Accounts with respect to which the Account Debtor
                  is a subsidiary  of, or affiliated  with,  the Borrower or its
                  shareholders, officers or directors.

                           (6) Net amount of accounts  with respect to which the
                  Borrower  is or may become  liable to the  Account  Debtor for
                  goods sold or services  rendered by the Account  Debtor to the
                  Borrower.

                           (7)  That  portion  of the  accounts  of  any  single
                  Account  Debtor  that  exceeds  15% of  all of the  Borrower's
                  accounts, except for Northern Telecom which may not exceed 20%
                  of all of the Borrower's accounts.

                           (8) Accounts  which have not been paid in full within
                  60 days  from the  date  payment  was due or 90 days  from the
                  original date of invoice, whichever is less.

                           (9) All accounts of any single  Account Debtor if 25%
                  or  more  of the  dollar  amount  of  all  such  accounts  are
                  represented  by  accounts  which  have not  been  paid in full
                  within 60 days from the date  payment  was due or 90 days from
                  the original date of invoice, whichever is less.

                           (10)   Accounts   which  are   subject  to   dispute,
                  counterclaim or setoff.

                           (11)  Accounts  with  respect to which the goods have
                  not been shipped or  delivered,  or the services have not been
                  rendered, to the Account Debtor.

                           (12)  Accounts with respect to which the Bank, in its
                  reasonable  sole  discretion,  deems the  creditworthiness  or
                  financial    condition   of   the   Account   Debtor   to   be
                  unsatisfactory.

                           (13) Accounts of any Account  Debtor who has filed or
                  had  filed  against  it  a  petition  in  bankruptcy,   or  an
                  application  for relief  under any  provision  of any state or
                  federal bankruptcy,  insolvency or  debtor-in-relief  acts; or
                  who has had appointed a trustee, custodian or receiver for the
                  assets of such Account  Debtor;  or who has made an assignment
                  for the benefit of creditors or has become  insolvent or fails
                  generally to pay its debts  (including  its  payrolls) as such
                  debts become due.

                           (14) Accounts which represent  credits or refunds due
                  to the Borrower's customers.

                  (j)  "ERISA":   shall  mean  the  Employee  Retirement  Income
         Security Act of 1974, as amended from time to time,  including  (unless
         the context  otherwise  requires) any rules or regulations  promulgated
         thereunder.

                  (k) "Event of  Default":  shall have the  meaning set forth in
         Section 9.

                  (l) "Expiration Date": shall mean January 31, 1998 or the date
         of  termination  of the Bank's  commitment to lend under this Agreement
         pursuant to Section 8, whichever shall occur first.

                  (m) "Indebtedness":  shall mean, with respect to the Borrower,
         (i) all  indebtedness  for borrowed money or for the deferred  purchase
         price of  property  or  services  in respect of which the  Borrower  is
         liable,  contingently or otherwise, as obligor, guarantor or otherwise,
         or in  respect  of which the  Borrower  otherwise  assures  a  creditor
         against loss and (ii) obligations under leases which shall have been or
         should be, in accordance with generally accepted accounting principles,
         reported as capital  leases in respect of which the Borrower is liable,
         contingently  or  otherwise,  or  in  respect  of  which  the  Borrower
         otherwise assures a creditor against loss.

                  (n) "Line of Credit": shall mean the credit facility described
         in Section 2.
<PAGE>

                  (o)  "Obligations":  shall  mean  all  amounts  owing  by  the
         Borrower to the Bank  pursuant  to this  Agreement  including,  but not
         limited to, the unpaid principal amount of Advances.

                  (p) "Permitted  Indebtedness":  shall mean (i) Indebtedness of
         Borrower in favor of Bank  arising  under this  Agreement  or any other
         Loan  Document;  (ii)  Indebtedness  existing  on the date  hereof  and
         disclosed  in  writing  to the  Bank;  (iii)  Subordinated  Debt;  (iv)
         Indebtedness  to  trade  creditors,   including,   without  limitation,
         affiliates  of Borrower,  incurred in the ordinary  course of business;
         (v) Other  Indebtedness of Borrower not exceeding  $1,000,000.00 in the
         aggregate  outstanding  at any time;  (vi)  Contingent  obligations  of
         Borrowing  consisting of guarantees  (and other credit  support) of the
         obligations  of  vendors  and  suppliers  of  Borrower  in  respect  of
         transactions  entered  into in the ordinary  course of business;  (vii)
         Indebtedness  with respect to capital  lease  obligations  and purchase
         money  indebtedness  incurred in  connection  with the  acquisition  of
         assets  secured  by  Permitted  Liens;  (viii)  Extensions,   renewals,
         refundings, refinancings, modifications, amendments and restatements of
         any of the items of Permitted Indebtedness.

                  (q)  "Permitted   Investment":   shall  mean  (i)  investments
         existing on the date hereof and disclosed in writing to the Bank;  (ii)
         marketable direct obligations  issued or unconditionally  guaranteed by
         the  United  States of  America  or any  agency  or any  State  thereof
         maturing  within  one (1) year  from the date of  acquisition  thereof;
         (iii)commercial  paper maturing no more than one (1) year from the date
         of creation thereof and currently having the highest rating  obtainable
         from either Standard & Poor's Corporation or Moody's Investors Service,
         Inc.; (iv) investments consisting of deposits maturing no more than one
         (1) year  from the  date of  investment  therein  issued  by Bank;  (v)
         extensions  of credit in the  nature of  accounts  receivable  or notes
         receivable  arising  from the sale or lease of goods or services in the
         ordinary  course  of  business;  (vi)  investments  consisting  of  the
         endorsement  of  negotiable  instruments  for deposit or  collection or
         similar  transactions  in  the  ordinary  course  of  business;   (vii)
         investments,  including debt  obligations,  received in connection with
         the  bankruptcy  or  reorganization  of customers  or suppliers  and in
         settlement  of  delinquent  obligations  of, and other  disputes  with,
         customers  or  suppliers  arising in the  ordinary  course of business;
         (viii)  investments  consisting of compensation of employees,  officers
         and directors of Borrower so long as the Board of Directors of Borrower
         determines that such  compensation is in the best interest of Borrower,
         and travel advances, employee relocation loans and other employee loans
         and advances in the ordinary course of business; (ix) other investments
         aggregating not in excess of $250,000.00 at any time.

                  (r)  "Permitted  Liens":  shall mean:  (i) liens and  security
         interests securing  indebtedness owed by the Borrower to the Bank; (ii)
         liens for taxes,  assessments or similar  charges either not yet due or
         being contested in good faith;  (iii) liens of materialmen,  mechanics,
         warehousemen,  or carriers or other like liens  arising in the ordinary
         course  of  business  and  securing   obligations  which  are  not  yet
         delinquent;  (iv)  purchase  money  liens or  purchase  money  security
         interests  upon or in any property  acquired or held by the Borrower in
         the ordinary course of business to secure  Indebtedness  outstanding on
         the date hereof or permitted to be incurred  under Section 8.09 hereof;
         (v) liens and security  interests  which,  as of the date hereof,  have
         been disclosed to and approved by the Bank in writing; (vi) those liens
         and security interests which in the aggregate  constitute an immaterial
         and insignificant  monetary amount with respect to the net value of the
         Borrower's  assets;  liens securing capital lease obligations on assets
         subject to such capital  leases;  (vii) liens  arising from  judgments,
         decrees or attachments to the extent and only so long as such judgment,
         decree or attachment has not caused or resulted in an Event of Default,
         (viii)  easements,  reservations,  rights-of-way,  restrictions,  minor
         defects or  irregularities  in title and other similar liens  affecting
         real property not interfering in any material respect with the ordinary
         conduct of the business of Borrower, (ix) liens in favor of customs and
         revenue  authorities  arising  as a mater of law to secure  payment  of
         customs duties in connection with the  importation of goods,  (x) liens
         arising  solely by  virtue of any  statutory  or common  law  provision
         relating  to  banker's  liens,  rights of setoff or similar  rights and
         remedies  as to  deposit  accounts  or other  funds  maintained  with a
         creditor  depository  institutions;  (xi) liens not otherwise permitted
         which liens do not in the aggregate exceed $250,000.00 at any time.

                  (s)  "Reference  Rate":  shall  mean an index  for a  variable
         interest rate which is quoted, published or announced from time to time
         by the Bank as its reference  rate and as to which loans may be made by
         the Bank at, below or above such reference rate.

                  (t)  "Subordinated  Debt":  shall mean such liabilities of the
         Borrower  which have been  subordinated  to those owed to the Bank in a
         manner  acceptable  to the Bank  including,  but not  limited  to, that
         certain  Indenture  dated as of February 15, 1987 between  Borrower and
         Manufacturers  Hanover Trust Company, as trustee, with respect to the 5
         1/2% Convertible Subordinated Debentures due March 1, 2012. 
<PAGE>

         1.02 Accounting Terms: All references to financial statements,  assets,
liabilities,  and similar accounting items not specifically defined herein shall
mean  such  financial  statements  or  such  items  prepared  or  determined  in
accordance with generally accepted accounting  principles  consistently  applied
and, except where otherwise specified,  all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

         1.03 Other  Terms:  Other terms not  otherwise  defined  shall have the
meanings attributed to such terms in the California Uniform Commercial Code.

                                    SECTION 2
                               THE LINE OF CREDIT

         2.01 The Line of Credit:  On terms and  conditions as set forth herein,
the Bank agrees to make Advances to the Borrower from time to time from the date
hereof to the Expiration  Date,  provided the aggregate  amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, the Borrower may borrow,  partially or wholly prepay, and reborrow under
this Section 2.01.

         2.02 Making Line Advances: Each Advance shall be conclusively deemed to
have been made at the  request of and for the benefit of the  Borrower  (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to the
requirements of Section 6, Advances shall be made by the Bank upon telephonic or
written request in form acceptable to the Bank received from the Borrower, which
request shall be received not later than 2:00 p.m. (California time) on the date
specified  for such Advance,  which date shall be a Business  Day.  Requests for
Advances  received after such time may, at the Bank's option,  be deemed to be a
request for an Advance to be made on the next succeeding Business Day.

         2.03 Mandatory Repayments:

                  (a) If at any  time  the  aggregate  principal  amount  of the
         outstanding  Advances shall exceed the applicable  Borrowing  Base, the
         Borrower  hereby  promises  and  agrees,  immediately  upon  written or
         telephonic  notice from the Bank, to pay to the Bank an amount equal to
         the  difference  between  the  outstanding  principal  balance  of  the
         Advances and the Borrowing Base.

                  (b) On the Expiration  Date, the Borrower  hereby promises and
         agrees to pay to the Bank in full the aggregate unpaid principal amount
         of all Advances then outstanding,  together with all accrued and unpaid
         interest thereon.

         2.04 Interest on Advances:  Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:

                  (a)  Variable  Rate  Advances:   A  variable  rate  per  annum
         equivalent  to an index for a variable  interest  rate which is quoted,
         published or announced  from time to time by the Bank as its  reference
         rate and as to which  loans may be made by the Bank at,  below or above
         such  reference rate (the  "Reference  Rate") plus 0.50% (the "Variable
         Rate").  Interest shall be adjusted concurrently with any change in the
         Reference  Rate. An Advance based upon the Variable Rate is hereinafter
         referred to as a "Variable Rate Advance".

                  (b) Fixed Rate  Advances:  A fixed rate quoted by the Bank for
         30, 60, or 90 days or for such  other  period of time that the Bank may
         quote and offer  (provided that any such period of time does not extend
         beyond the Expiration Date) [the "Interest Period"] for Advances in the
         minimum amount of $100,000 and in $50,000 increments  thereafter.  Such
         interest rate shall be a percentage  approximately  equivalent to 2.50%
         per annum in excess of the rate which the Bank  determines  in its sole
         and  absolute  discretion  to be equal to the Bank's cost of  acquiring
         funds  (adjusted for any and all  assessments,  surcharges  and reserve
         requirements  pertaining  to the  borrowing  or purchase by the Bank of
         such  funds)  in an  amount  approximately  equal to the  amount of the
         relevant  Advance and for a period of time  approximately  equal to the
         relevant  Interest  Period (the "Fixed Rate").  Advances based upon the
         Fixed Rate are hereinafter referred to as "Fixed Rate Advances".

         Interest on any Advance  shall be computed on the basis of 360 days per
year, but charged on the actual number of days elapsed.

         Interest  on  Variable   Rate   Advances   shall  be  paid  in  monthly
installments  commencing on the first day of the month following the date of the
first such Advance and continuing on the first day of each month thereafter.

         Interest on any Fixed Rate Advance shall be paid on the last day of the
Interest Period pertaining to such Fixed Rate Advance.

<PAGE>

         2.05 Notice of Election  to Adjust  Interest  Rate:  The  Borrower  may
elect:

                  (a) That interest on a Variable Rate Advance shall be adjusted
         to accrue at the Fixed Rate; provided,  however, that such notice shall
         be  received by the Bank no later than two  business  days prior to the
         day (which shall be a business day) on which the Borrower requests that
         interest be adjusted to accrue at the Fixed Rate.

                  (b) That  interest on a Fixed Rate Advance  shall  continue to
         accrue at a newly quoted Fixed Rate or shall be adjusted to commence to
         accrue at the Variable Rate; provided,  however, that such notice shall
         be  received by the Bank no later than two  business  days prior to the
         last day of the Interest Period  pertaining to such Fixed Rate Advance.
         If the Bank shall not have received  notice (as  prescribed  herein) of
         the  Borrower's  election that interest on any Fixed Rate Advance shall
         continue to accrue at the newly quoted Fixed Rate the Borrower shall be
         deemed to have  elected  that  interest  thereon  shall be  adjusted to
         accrue at the Variable Rate upon the expiration of the Interest  Period
         pertaining to such Advance.

         2.06  Prepayment:  The  Borrower  may prepay any Advance in whole or in
part, at any time and without penalty, provided,  however, that: (i) any partial
prepayment shall first be applied,  at the Bank's option,  to accrued and unpaid
interest  and next to the  outstanding  principal  balance;  and (ii) during any
period of time in which  interest is accruing on any Advance on the basis of the
Fixed Rate, no prepayment shall be made except on a day which is the last day of
the Interest Period  pertaining  thereto.  If the whole or any part of any Fixed
Rate Advance is prepaid by reason of  acceleration  or on a day which is not the
last day of the interest period pertaining thereto, the Borrower shall, upon the
Bank's  request,  promptly pay to and  indemnify  the Bank for all costs and any
loss (including  interest) actually incurred by the Bank and any loss (including
loss of profit resulting from the  re-employment of funds) sustained by the Bank
as a consequence of such prepayment.

         2.07 Indemnification for Fixed Rate Costs: During any period of time in
which  interest  on any  Advance is  accruing on the basis of the Fixed Rate the
Borrower shall, upon the Bank's request,  promptly pay to and reimburse the Bank
for all costs  incurred  and  payments  made by the Bank by reason of any future
assessment, reserve, deposit or similar requirement or any surcharge, tax or fee
imposed upon the Bank or as a result of the Bank's compliance with any directive
or requirement of any regulatory  authority pertaining or relating to funds used
by the Bank in quoting and  determining  the Fixed Rate.  Borrower  shall not be
obligated to pay to or reimburse Bank for any  reimbursable  amounts which arose
or were incurred during or are otherwise attributable to any period of time more
than 180 days prior to the date on which Bank  delivered  its written  statement
for indemnification or reimbursement of such reimbursable amounts.

         2.08 Conversion from Fixed Rate to Variable Rate: In the event that the
Bank shall at any time  determine  that the  accrual of interest on the basis of
the Fixed Rate (i) is  infeasible  because the Bank is unable to  determine  the
Fixed Rate due to the  unavailability  of U.S.  dollar  deposits,  contracts  or
certificates  of deposit in an amount  approximately  equal to the amount of the
relevant  Advance and for a period of time  approximately  equal to the relevant
Interest Period or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new  interpretation  of any present law, rule,  regulation,  guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower,  in which  event  the  Fixed  Rate  Advance,  shall be  deemed to be a
Variable Rate Advance and interest  shall  thereupon  immediately  accrue at the
Variable Rate.

         2.09  Commitment  Fee: The Borrower  agrees to pay to Bank a commitment
fee of .25% per  annum  on the  Average  Unused  Portion  of the Line of  Credit
payable  quarterly in arrears and computed on a year of 360 days for actual days
elapsed.

         2.10 Line Account:

                  (a) The Bank shall  maintain  on its books a record of account
         in which the Bank shall make  entries  for each  Advance and such other
         debits and credits as shall be appropriate in connection  with the Line
         of Credit (the "Line  Account").  The Bank shall  provide the  Borrower
         with  a  monthly  statement  of  the  Borrower's  Line  Account,  which
         statement shall be considered to be correct and conclusively binding on
         the  Borrower  unless the  Borrower  notifies  the Bank to the contrary
         within 60 days after the Borrower's receipt of any such statement which
         it deems to be incorrect, or unless there is a manifest error.

                  (b) The Borrower  hereby  authorizes  the Bank,  if and to the
         extent  payment  owed to the Bank  under the Line of Credit is not made
         when  due,  to  charge,  from time to time,  against  any or all of the
         Borrower's deposit accounts with the Bank any amount so due.
<PAGE>

         2.11 Late Payment:  If any payment of principal (other than a principal
payment due pursuant to Section  2.03(b)) or interest,  or any portion  thereof,
under this  Agreement is not paid within ten (10) calendar days after it is due,
a late payment charge equal to five percent (5%) of such past due payment may be
assessed and shall be immediately payable.

                                    SECTION 3
                           LETTERS OF CREDIT SUBLIMIT

         In  addition  to making  Advances  under the Line of  Credit,  the Bank
hereby  agrees to make the  following  credit  accommodations  available  to the
Borrower:

         3.01 Letter of Credit Subfacility:  The Bank agrees to issue commercial
and  standby  letters  of credit  (each a "Letter of  Credit")  on behalf of the
Borrower for general corporate purposes.  At no time,  however,  shall the total
face amount of all Letters of Credit outstanding, less any partial draws paid by
the Bank,  exceed the sum of $7,000,000  and,  together with the total principal
amount of all Advances outstanding, exceed the Borrowing Base.

                  (a) Upon the Bank's  request,  the Borrower shall promptly pay
         to the Bank standby letter of credit  issuance fees of 1% per annum and
         commercial  letter of credit issuance fees of .25% and such other fees,
         commissions,  costs and any out-of-pocket  expenses charged or incurred
         by the Bank with respect to any Letter of Credit.

                  (b) The  commitment  by the Bank to issue  Letters  of  Credit
         shall,  unless earlier  terminated in accordance  with the terms of the
         Agreement,  automatically  terminate  on  the  Expiration  Date  and no
         commercial  letter of credit  shall expire on a date which is more than
         90 days after the Expiration Date and no standby letter of credit shall
         expire on a date after the Expiration Date.

                  (c) Each  Letter  of  Credit  shall  be in form and  substance
         satisfactory to the Bank and in favor of beneficiaries  satisfactory to
         the Bank, provided that the Bank may refuse to issue a Letter of Credit
         due to the nature of the transaction or its terms or in connection with
         any  transaction  where  the  Bank,  due  to  the  beneficiary  or  the
         nationality or residence of the beneficiary, would be prohibited by any
         applicable law, regulation or order from issuing such Letter of Credit.

                  (d) Prior to the issuance of each Letter of Credit,  but in no
         event later than 10:00 a.m. (California time) on the day such Letter of
         Credit is to be issued  (which shall be a Business  Day),  the Borrower
         shall deliver to the Bank a duly  executed form of the Bank's  standard
         form of  application  for  issuance  of a Letter of Credit  with proper
         insertions.

                  (e) The Borrower shall, upon presentment of a Letter of Credit
         or upon the Bank's request,  promptly pay to and reimburse the Bank for
         all draws under the Letters of Credit, costs incurred and payments made
         by the Bank by reason of any  future  assessment,  reserve,  deposit or
         similar requirement or any surcharge,  tax or fee imposed upon the Bank
         or  as a  result  of  the  Bank's  compliance  with  any  directive  or
         requirement of any regulatory  authority  pertaining or relating to any
         Letter of Credit.

                                    SECTION 4
                       FOREIGN EXCHANGE FACILITY SUBLIMIT

         4.01  Foreign  Exchange  Subfacility.  Borrower  may from  time to time
request Bank to purchase or sell foreign  currency in a specified  amount,  at a
fixed price, and for delivery at a future date no greater than 365 days from the
date of purchase  (each a "Foreign  Exchange  Contract").  At no time,  however,
shall 20% of the aggregate  settlement price of all Foreign  Exchange  Contracts
outstanding exceed $2,000,000 as determined by Bank at the time of entering into
each Foreign  Exchange  Contract  and,  together with  outstanding  Advances and
issued and unexpired Letters of Credit, exceed the Borrowing Base.

                  (a) Requests for Foreign Exchange Contracts.  Each request for
         a Foreign  Exchange  Contract  shall be made by  telephone  or rapifax,
         confirmed  in  writing  (each  a  "Request").  Each  Request  shall  be
         delivered  or  communicated  to  the  Bank  no  later  than  3:00  p.m.
         (California  time) on the day (which shall be a Business  Day) on which
         the Foreign Exchange Contract is requested. By making any such Request,
         Borrower agrees that all matters relating to each such Foreign Exchange
         Contract shall be governed by this Agreement and Borrower  restates all
         warranties and  representations  made by Borrower  herein as if made on
         the date the Foreign Exchange Contract is entered into.
<PAGE>

                  (b) Expiration  Date. The commitment by the Bank to enter into
         Foreign  Exchange   Contracts  shall,   unless  earlier  terminated  in
         accordance  with  this  Agreement,   automatically   terminate  on  the
         Expiration Date and no Foreign Exchange Contract shall expire on a date
         which is after the Expiration Date.

                  (c)  Availability.  Bank may  refuse  to enter  into a Foreign
         Exchange  Contract  with  the  Borrower  where  the  Bank,  in its sole
         discretion,  determines that such foreign  currency is unavailable,  or
         where Bank would be prohibited  by any  applicable  law,  regulation or
         order from purchasing such foreign currency.

                  (d) Purpose.  The Foreign  Exchange  Contract shall be used to
         hedge foreign exchange exposure and/or risk.

                  (e)  Payment.  Payment  is due on the  settlement  date of any
         Foreign  Exchange  Contract  (the  "Payment  Date").   Bank  is  hereby
         authorized  by  Borrower  to charge  the full  settlement  price of any
         Foreign Exchange  Contract  against the depository  account or accounts
         maintained by the Borrower with Bank on the Payment Date.

                  (f)  Assessments.  Borrower  shall,  upon the Bank's  request,
         promptly  pay to and  reimburse  the Bank for all  costs  incurred  and
         payments  made  by the  Bank  by  reason  of any  assessment,  reserve,
         deposit,  capital  maintenance or similar requirement or any surcharge,
         tax  or fee  imposed  upon  the  Bank  or as a  result  of  the  Bank's
         compliance   with  any  directive  or  requirement  of  any  regulatory
         authority pertaining or relating to any Foreign Exchange Contract.

                                    SECTION 5
                                   COLLATERAL

         5.01 The  Collateral:  To secure  payment  and  performance  of all the
Borrower's  Obligations under this Agreement and all other  liabilities,  loans,
guarantees,  covenants  and duties owed by the Borrower to the Bank,  whether or
not evidenced by this or by any other agreement,  absolute or contingent, due or
to become due, now existing or hereafter  and  howsoever  created,  the Borrower
hereby  grants  the  Bank a  security  interest  in and to all of the  following
property:

                  (a) All goods now owned or hereafter  acquired by the Borrower
         or in which the Borrower now has or may hereafter acquire any interest,
         including,  but not limited to, all  machinery,  equipment,  furniture,
         furnishings, fixtures, tools, supplies and motor vehicles of every kind
         and   description,   and  all  additions,   accessions,   improvements,
         replacements and substitutions thereto and thereof.

                  (b) Bank  agrees  to  release  its  security  interest  in any
         equipment,  fixtures,  leasehold  improvements,  or other  property  if
         within ninety (90) days after Borrower acquires title to such property,
         Borrower  finances  such  property  pursuant  to either  (i) a sale and
         leaseback transaction or (ii) a debt financing transaction in an amount
         not to exceed the purchase price of, and secured by a security interest
         in such property.

                  (c) All  inventory  now  owned or  hereafter  acquired  by the
         Borrower,  including,  but not limited to, all raw  materials,  work in
         process, finished goods, merchandise,  parts and supplies of every kind
         and description,  including inventory temporarily out of the Borrower's
         custody or possession, together with all returns on accounts.

                  (d) All accounts,  contract rights and general intangibles now
         owned or hereafter created or acquired by the Borrower,  including, but
         not limited to, all receivables,  goodwill,  trademarks,  trade styles,
         trade names, patents, patent applications, software, customer lists and
         business records.

                  (e) All documents,  instruments and chattel paper now owned or
         hereafter acquired by the Borrower.

                  (f) All monies, deposit accounts,  certificates of deposit and
         securities  of the  Borrower  now or  hereafter  in the  Bank's  or its
         agents' possession.

         The Bank's  security  interest in the Collateral  shall be a continuing
lien and shall  include the proceeds and products of the  Collateral  including,
but not limited to, the proceeds of any insurance thereon.

<PAGE>

                                    SECTION 6
                              CONDITIONS OF LENDING

         6.01 Conditions Precedent to the Initial Advance: The obligation of the
Bank to make the  initial  Advance  and the first  extension  of credit to or on
account of the Borrower  hereunder is subject to the  conditions  precedent that
the Bank shall have  received  before the date of such initial  Advance and such
first  extension  of  credit  all  of  the  following,  in  form  and  substance
satisfactory to the Bank:

                  (a) Evidence that the execution,  delivery and  performance by
         the  Borrower  of  this  Agreement  and  any  document,  instrument  or
         agreement required hereunder have been duly authorized.

                  (b) Such other  evidence as the Bank may request to  establish
         the  consummation  of  the  transaction   contemplated   hereunder  and
         compliance with the conditions of this Agreement.

         6.02 Conditions  Precedent to All Advances:  The obligation of the Bank
to make each Advance and each other  extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:

                  (a) The Bank shall have  received the  documents  set forth in
         Section 8.06(e).

                  (b) The Bank shall have received such supplemental  approvals,
         opinions or documents as the Bank may reasonably request.

                  (c)   Except   as   disclosed   in   writing   to  Bank,   the
         representations  contained  in  Section  7 and in any  other  document,
         instrument or certificate delivered to the Bank hereunder are correct.

                  (d) No event has occurred and is continuing which constitutes,
         or,  with  the  lapse  of time or  giving  of  notice  or  both,  would
         constitute an Event of Default.

                  (e) The  security  interest  in the  Collateral  has been duly
         authorized,  created and perfected with first  priority,  assuming Bank
         has  timely  filed and taken all  actions  necessary  or  desirable  to
         perfect and protect such security, and is in full force and effect.

         The  Borrower's  acceptance  of  the  proceeds  of any  Advance  or the
Borrower's  execution of any document or  instrument  evidencing or creating any
Obligation hereunder shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.

                                    SECTION 7
                         REPRESENTATIONS AND WARRANTIES

The Borrower  hereby makes the following  representations  and warranties to the
Bank as of the date of this Agreement.

         7.01 Status:  The Borrower is a corporation  duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified  to do business  and in good  standing  in, and,  where  necessary  to
maintain the Borrower's rights and privileges,  has complied with the fictitious
name statute of every  jurisdiction  in which the Borrower is doing business and
where failure to so qualify would have a material adverse effect.

         7.02 Authority: The execution, delivery and performance by the Borrower
of this Agreement and any instrument,  document or agreement  required hereunder
have been duly  authorized and do not and will not: (i) violate any provision of
any  law,  rule,  regulation,   order,  writ,  judgment,   injunction,   decree,
determination  or award presently in effect having  application to the Borrower;
(ii) result in a breach of or constitute a default under any material  indenture
or loan or credit agreement or other material agreement,  lease or instrument
<PAGE>

to which the Borrower is a party or by which it or its  properties  may be bound
or  affected;  (iii)  require any consent or  approval  of its  stockholders  or
violate any provision of its certificate of incorporation.

         7.03 Legal Effect:  This  Agreement  constitutes,  and any  instrument,
document  or  agreement  required   hereunder  when  delivered   hereunder  will
constitute,  legal,  valid and binding  obligations of the Borrower  enforceable
against the Borrower in accordance with their respective terms.

         7.04 Fictitious Trade Styles: There are no fictitious trade styles used
by the Borrower in connection with its business  operations.  The Borrower shall
notify the Bank within 30 days of effecting any change in the matters  described
hereinor  prior to using any other  fictitious  trade style at any future  date,
indicating the trade style and state(s) of its use.

         7.05 Financial Statements:  All financial  statements,  information and
other  data  which may have  been or which may  hereafter  be  submitted  by the
Borrower  to the Bank are true,  accurate  and  correct and have been or will be
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently  applied and  accurately  represent the financial  condition or, as
applicable,  the other  information  disclosed  therein.  Since the most  recent
submission  of such  financial  information  or data to the Bank,  the  Borrower
represents  and  warrants  that no  material  adverse  change in the  Borrower's
financial  condition  or  operations  has  occurred  which  has not  been  fully
disclosed to the Bank in writing.

         7.06 Litigation:  Except as have been disclosed to the Bank in writing,
there are no actions,  suits or proceedings  pending or, to the knowledge of the
Borrower,  threatened  against  or  affecting  the  Borrower  or the  Borrower's
properties  in excess of  $500,000  before  any court or  administrative  agency
which, if determined  adversely to the Borrower,  would have a material  adverse
effect on the Borrower's financial condition or operations or on the Collateral.

         7.07 Title to Assets: The Borrower has good and marketable title to all
of its assets  (including,  but not limited to, the Collateral) and the same are
not subject to any security  interest,  encumbrance,  lien or claim of any third
person except for Permitted Liens.

         7.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan  subject  to ERISA,  such plan has been and will  continue  to be funded in
accordance  with its terms and  otherwise  complies with and continues to comply
with the requirements of ERISA.

         7.09 Taxes: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due,  including  interest and  penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.

         7.10  Accounts:  Each  Eligible  Account  represents  a bona  fide sale
conforming to the requirements of Section 1.01(i).

         7.11  Environmental  Compliance:   The  Borrower  has  implemented  and
complied in all material respects with all applicable  federal,  state and local
laws,  ordinances,  statutes and regulations  with respect to hazardous or toxic
wastes,  substances or related  materials,  industrial  hygiene or environmental
conditions.  There are no suits, proceedings,  claims or disputes pending or, to
the knowledge of the Borrower,  threatened  against or affecting the Borrower or
its property claiming violations of any federal,  state or local law, ordinance,
statute or  regulation  relating to hazardous  or toxic  wastes,  substances  or
related materials.

                                    SECTION 8
                                    COVENANTS

         The  Borrower  covenants  and  agrees  that,  during  the  term of this
Agreement,  and so long thereafter as the Borrower is indebted to the Bank under
this Agreement,  the Borrower will,  unless the Bank shall otherwise  consent in
writing:

         8.01  Preservation  of  Existence;  Compliance  with  Applicable  Laws:
Maintain and preserve its existence and all rights and  privileges  now enjoyed;
not  liquidate or dissolve,  merge or  consolidate  with or into, or acquire any
other  business   organization;   notwithstanding  the  foregoing  Borrower  may
liquidate or dissolve,  or enter into any  consolidation,  merger,  partnership,
joint venture or other combination,  acquire any other business organization, or
acquire  all  or   substantially   all  of  the  assets  of  any  other   person
(collectively, an "Acquisition"),  so long as Borrower is in compliance with the
covenants  contained in Section 8.14  immediately  after such  Acquisition;  and
conduct its business and  operations in  accordance  with all  applicable  laws,
rules and regulations.

         8.02 Maintenance of Insurance:  Maintain  insurance in such amounts and
covering  such  risks as is  usually  carried  by  companies  engaged in similar
businesses and owning similar  properties in the same general areas in which the
Borrower  operates and
<PAGE>

maintain such other  insurance and coverages as may be required by the Bank. All
such insurance  shall be in form and amount and with companies  satisfactory  to
the Bank.  With  respect  to  insurance  covering  properties  in which the Bank
maintains a security  interest or lien,  such  insurance  shall name the Bank as
loss payee pursuant to a loss payable  endorsement  satisfactory to the Bank and
shall not be altered or canceled  except upon 10 days' prior  written  notice to
the Bank. Upon the Bank's request,  the Borrower shall furnish the Bank with the
original policy or binder of all such insurance.

         8.03  Maintenance  of  Collateral  and  Other  Properties:  Except  for
Permitted Liens,  keep and maintain the Collateral free and clear of all levies,
liens,  encumbrances and security interests (including,  but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such  levy,  lien,  encumbrance  or  security  interest;  comply  with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute,  file and record such  statements,  notices and  agreements,  take such
actions  and obtain  such  certificates  and other  documents  as  necessary  to
perfect,  evidence and continue the Bank's  security  interest in the Collateral
and  the  priority  thereof;  maintain  accurate  and  complete  records  of the
Collateral which show all sales,  claims and allowances;  and properly care for,
house,  store and maintain the  Collateral  in good  condition,  free of misuse,
abuse and  deterioration,  other than normal wear and tear.  The Borrower  shall
also  maintain  and  preserve  all its  properties  in good  working  order  and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.

         8.04  Payment of  Obligations  and Taxes:  Make  timely  payment of all
assessments and taxes and all of its liabilities and obligations including,  but
not limited to,  trade  payables,  unless the same are being  contested  in good
faith by  appropriate  proceedings  with  the  appropriate  court or  regulatory
agency.  For  purposes  hereof,  the  Borrower's  issuance of a check,  draft or
similar  instrument  without delivery to the intended payee shall not constitute
payment.

         8.05 Inspection  Rights:  At any reasonable time and from time to time,
permit the Bank or any representative  thereof to examine and make copies of the
records and visit the  properties  of the  Borrower and discuss the business and
operations of the Borrower with any employee or representative  thereof.  If the
Borrower shall  maintain any records  (including,  but not limited to,  computer
generated  records or computer  programs for the  generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide  the Bank with  copies of any records  which it may  request,  at the
Borrower's expense, limited to $20,000 or at Bank's expense, the amount of which
shall be payable within five (5) days of written notice.  In addition,  the Bank
may,  at any  reasonable  time and from time to time,  conduct  inspections  and
audits of the  Collateral  and the  Borrower's  accounts  payable,  the cost and
expenses of which  shall be paid by the  Borrower to the Bank upon five (5) days
prior written notice.

         8.06 Reporting and Certification  Requirements:  Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:

                  (a)  Not  later  than  90  days  after  the end of each of the
         Borrower's  fiscal years,  a copy of (i) the annual  audited  financial
         report of the  Borrower  for such year  prepared by a firm of certified
         public  accountants   reasonably  acceptable  to  Bank,  and  (ii)  the
         Borrower's Form 10-K filed with the Securities  Exchange Commission and
         (iii) the Borrower's  consolidating  balance sheet and income statement
         for such year; and, not later than 60 days after the end of each of the
         Borrower's  fiscal years,  a copy of the Borrower's  projected  balance
         sheet and income statement for the fiscal year then in effect.

                  (b)  Not  later  than  45  days  after  the end of each of the
         Borrower's  fiscal  quarters,  a copy of the Borrower's Form 10-Q filed
         with   the   Securities   Exchange   Commission   and  the   Borrower's
         consolidating  balance sheet and income  statement for such quarter for
         the first three quarters only.

                  (c)  Concurrently  with the delivery of the financial  reports
         required hereunder,  a compliance certificate in substantially the form
         attached hereto as Exhibit "A",  showing the  calculations  which would
         demonstrate  compliance with all of the financial  covenants  contained
         herein.

                  (d) Not later  than 30 days  after the end of each  month,  an
         aging of  accounts  receivable  indicating  separately  the  amount  of
         Eligible Accounts and the amount of total accounts receivable which are
         current, 1 to 30 days past the date of invoice,  31 to 60 days past the
         date of  invoice,  and the amount over 60 days past the date of invoice
         and an aging of accounts payable indicating the amount of such payables
         which are current, 1 to 30 days past the date of invoice, 31 to 60 days
         past the date of invoice,  and the amount over 60 days past the date of
         invoice.

                  (e) Daily or at such other time as required by the Bank: (i) a
         transaction report and schedule of accounts  receivable which indicates
         all sales made and all collections received for each such day; (ii) all
         remittances and collections of accounts in 
<PAGE>

         kind and  without  commingling  to be  applied  to the  payment  of the
         Borrower's  Obligations  on the next  Business  Day  following  receipt
         thereof; provided, however, that if such amounts are received in a form
         other than cash or bank wire, the Bank may withhold application of such
         amounts for such time to the extent  permitted  by law as the Bank,  in
         its sole  discretion,  deems  reasonable  to allow for  collection  and
         provided  further that any remittances and collections  received by the
         Bank later than 2:30 p.m.  (California time) on any day shall be deemed
         received  on the next  succeeding  Business  Day;  and (iii)  clear and
         legible copies of all invoices or sales receipts evidencing the sale of
         goods or services by the Borrower.

                  (f) Promptly upon the Bank's request,  such other  information
         pertaining to the Borrower,  the Collateral or any guarantor  hereunder
         as the Bank may reasonably request.

         8.07  Payment of  Dividends:  Not declare or pay any  dividends  on any
class of stock now or hereafter  outstanding except (i) dividends payable solely
in the Borrower's capital stock, or (ii) dividends approved by Bank.

         8.08  Redemption or  Repurchase  of Stock:  Not redeem or repurchase in
excess  of 5% per  year any  class  of the  Borrower's  stock  now or  hereafter
outstanding without prior written Bank approval.

         8.09 Additional Indebtedness: Not, after the date hereof, create, incur
or assume,  directly or indirectly,  any additional  Indebtedness other than (i)
indebtedness  owed or to be owed to the  Bank  or  (ii)  indebtedness  to  trade
creditors  incurred in the ordinary  course of the Borrower's  business or (iii)
Permitted Indebtedness.

         8.10  Loans:  Not make any loans or  advances  or extend  credit to any
third person, including, but not limited to, directors, officers,  shareholders,
partners,  employees,  affiliated  entities and  subsidiaries  of the  Borrower,
except for (i) credit extended in the ordinary course of the Borrower's business
as presently conducted and (ii) Permitted Investments.

         8.11 Liens and Encumbrances:  Not create, assume or permit to exist any
security  interest,  encumbrance,   mortgage,  deed  of  trust,  or  other  lien
(including,  but not limited to, a lien of  attachment,  judgment or  execution)
affecting any of the Borrower's properties,  or execute or allow to be filed any
financing  statement or continuation  thereof  affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.

         8.12  Transfer  Assets:  Except  for an  amount  not  exceeding  in the
aggregate  $100,000  in any  fiscal  year,  not,  after the date  hereof,  sell,
contract for sale, convey, transfer,  assign, lease or sublet, any of its assets
(including, but not limited to, the Collateral) except in the ordinary course of
business as presently  conducted by the Borrower  and,  then,  only for fair and
reasonable  consideration  and (i) sales of inventory in the ordinary  course of
business,  (ii) transfer of assets in the ordinary  course of business that have
become worn out or obsolete or that are promptly being replaced, (iii) transfers
of  non-exclusive  licenses and similar  arrangements for the use of property of
Borrower  made in the ordinary  course of  business,  and (iv)  transfers  which
constitute liquidation of permitted investments.

         8.13 Change in Nature of Business:  Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.

         8.14  Financial Condition:  Maintain at all times:

                  (a) A  minimum  Effective  Tangible  Net  Worth  of  at  least
         $31,000,000  plus  50% of net  profit  after  taxes  at the end of each
         fiscal quarter.

                  (b) A ratio of Senior Debt to Effective  Tangible Net Worth of
         not more than 1.5 to 1.

                  (c) A minimum working capital (defined as current assets minus
         current liabilities) of not less than $5,000,000.

                  (d) A ratio of the sum of cash, cash  equivalents and accounts
         receivable to current liabilities of not less than .65 to 1.0

                  (e) A minimum  net profit  after tax of at least  $1.00 at the
         end of each fiscal quarter for the immediately preceding two (2) fiscal
         quarters.

                  (f) Maintain a ratio of consolidated earnings before interest,
         taxes, depreciation and amortization expense to the sum of (i) interest
         expense and (ii) the current portion of long term Debt of not less than
         2.00:1.00  at the  end of  each  fiscal  quarter  for  the  immediately
         preceding 4 fiscal quarters..
<PAGE>

         8.15  Compensation of Employees:  Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate  prescribed
by any applicable federal or state law or regulation.

         8.16  Capital  Expense:   Not  make  any  fixed  capital   expenditure,
including, but not limited to, incurring liability for leases which would be, in
accordance with generally accepted  accounting  principles,  reported as capital
leases,  or  purchase  any real or  personal  property  in an  aggregate  amount
exceeding   $15,000,000  in  any  one  fiscal  year,  exclusive  of  acquisition
financing,  provided,  however,  that Borrower may make capital  expenditures in
connection  with  acquisitions  in an amount up to  $3,000,000 in any one fiscal
year without the Bank's  approval  (subject to the terms and  conditions  of the
Term Loan Credit  Agreement  dated as of May __,  1997  between the Bank and the
Borrower.

         8.17  Notice:  Give the Bank prompt  written  notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which  the  Borrower  is a party and in which  the  claim or  liability  exceeds
$500,000 or which  affects the  Collateral;  and (iii) other  matters which have
resulted in, or might result in a material  adverse  change in the Collateral or
the financial condition or business operations of the Borrower.

         8.18  Environmental Compliance.  The Borrower shall:

                  (a)  Implement  and comply in all material  respects  with all
         applicable  federal,  state and local laws,  ordinances,  statutes  and
         regulations  with respect to hazardous or toxic  wastes,  substances or
         related materials, industrial hygiene or to environmental conditions.

                  (b) Not own, use, generate, manufacture, store, handle, treat,
         release or dispose of any  hazardous  or toxic  wastes,  substances  or
         materials,  except in material  compliance with all applicable federal,
         state and local laws, ordinances, statutes and regulations.

                  (c) Give prompt  written  notice of any  discovery of or suit,
         proceeding,  claim,  dispute,  or filing respecting  hazardous or toxic
         wastes, substances or related materials.

                  (d) At all times  indemnify  and hold  harmless  Bank from and
         against  any  and  all  liability   arising  out  of  Borrower's   use,
         generation,  manufacture,  storage, handling, treatment, or disposal by
         Borrower of hazardous or toxic  wastes,  substances or materials at the
         site.

                                    SECTION 9
                                EVENTS OF DEFAULT

         Any one or more of the following  described  events shall constitute an
event of default (an "Event of Default") under this Agreement:

         9.01 Non-Payment: The Borrower shall fail to pay any Obligations within
10 days of when due.

         9.02 Performance  Under This and Other  Agreements:  The Borrower shall
fail in any  material  respect  to  perform or  observe  any term,  covenant  or
agreement  contained  in  this  Agreement  or in  any  document,  instrument  or
agreement  evidencing or relating to any  indebtedness of the Borrower  (whether
such  indebtedness is owed to the Bank or third  persons),  and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument,  document or agreement,  which failure shall constitute and be
an Event of Default if not paid  within 10 days of when due or when  demanded to
be due) shall  continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.

         9.03  Representations  and  Warranties;   Financial   Statements:   Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any  financial  statement  given by the  Borrower or any  guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.

         9.04  Insolvency:  The  Borrower  or any  guarantor  shall:  (i) become
insolvent or be unable to pay its debts as they mature;  (ii) make an assignment
for the  benefit  of  creditors  or to an  agent  authorized  to  liquidate  any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with  creditors;  (iv) file an answer  admitting the material  allegations of an
involuntary  petition  relating to bankruptcy or  reorganization  or join in any
such  petition;  

<PAGE>

(v)  become or be  adjudicated  a  bankrupt;  (vi)  apply for or  consent to the
appointment  of, or  consent  that an order be made,  appointing  any  receiver,
custodian or trustee, for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
substantial  part of its  properties,  assets  or  businesses  and  shall not be
discharged within 60 days after the date of such appointment.

         9.05  Execution:  Any writ of execution or  attachment  or any judgment
lien shall be issued  against  any  property  of the  Borrower  and shall not be
discharged  or bonded  against or released  within 60 days after the issuance or
attachment of such writ or lien.

         9.06 Suspension: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.

         9.07  Change  in  Ownership:   There  shall  occur  a  sale,  transfer,
disposition or encumbrance  (whether voluntary or involuntary),  or an agreement
shall be entered  into to do so, with respect to more than 25% of the issued and
outstanding  capital stock of the  Borrower,  if a  corporation,  or there shall
occur a change in any general  partner or a change  affecting the control of the
Borrower, if a partnership.

                                   SECTION 10
                               REMEDIES ON DEFAULT

         Upon the occurrence and during the continuance of any Event of Default,
the Bank may, at its sole and absolute election,  without demand and with prompt
subsequent notice to Borrower:

         10.01 Acceleration:  Declare any or all of the Borrower's  indebtedness
owing  to  the  Bank,  whether  under  this  Agreement  or any  other  document,
instrument or agreement,  immediately due and payable,  whether or not otherwise
due and payable.

         10.02 Cease  Extending  Credit:  Cease  making  Advances  or  otherwise
extending  credit to or for the account of the Borrower  under this Agreement or
under any other  agreement  now existing or  hereafter  entered into between the
Borrower and the Bank.

         10.03 Termination: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank, the Bank's
obligations  to the Borrower,  or the Bank's or  Borrower's  rights and remedies
under this Agreement or under any other document, instrument or agreement.

         10.04 Notification of Account Debtors:

                  (a) Notify any Account Debtor, any buyers or transferee of the
         Collateral  or  any  other  persons  of  the  Bank's  interest  in  the
         Collateral and the proceeds thereof.

                  (b) Sign the  Borrower's  name (which  authority  the Borrower
         hereby  irrevocably  and  unconditionally  grants  to the  Bank) on any
         invoice or bill of lading  relating to accounts or other drafts against
         the Account Debtors.

                  (c)  Require  the  Borrower  to  indicate  on the  face of all
         invoices (or such other  documentation  as may be specified by the Bank
         relating to the sale,  delivery or shipment of goods giving rise to the
         account)  that the account  has been  assigned to the Bank and that all
         payments  are to be made  directly  to the Bank at such  address as the
         Bank may designate.

         10.05 Protection of Security  Interest:  Make such payments and do such
acts as the Bank, in its sole  judgment,  considers  necessary and reasonable to
protect its security  interest or lien in the  Collateral.  The Borrower  hereby
irrevocably  authorizes  the Bank to pay,  purchase,  contest or compromise  any
encumbrance,  lien or claim which the Bank,  in its sole  judgment,  deems to be
prior or superior to its security interest.  Further, the Borrower hereby agrees
to  pay  to  the  Bank,  upon  demand  therefor,  all  reasonable  expenses  and
expenditures  (including reasonable attorneys' fees) incurred in connection with
the foregoing.  Notwithstanding the foregoing, Bank shall be responsible for its
own gross negligence or willful misconduct.

         10.06  Foreclosure:  Enforce  any  security  interest  or lien given or
provided for under this  Agreement or under any  security  agreement,  mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties  subject to such security  interest or lien, as the Bank,
in its sole  judgment,  deems to be  necessary or  appropriate  and the Borrower
hereby  waives any and all  rights,  obligations  or defenses  now or  hereafter
established by law relating to the foregoing. In the enforcement of its security
interest or lien,  the Bank is authorized  to enter upon the premises  where any
Collateral is located and take possession of the Collateral or any part

<PAGE>

thereof,  together with the Borrower's records pertaining  thereto,  or the Bank
may require  the  Borrower to assemble  the  Collateral  and records  pertaining
thereto and make such  Collateral  and records  available to the Bank at a place
designated  by the  Bank.  The  Bank may sell  the  Collateral  or any  portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such  procedures as are required by law, at
either a public or private sale, or both,  with or without having the Collateral
present  at the  time  of the  sale,  which  sale  shall  be on such  terms  and
conditions  and  conducted  in such  manner as the Bank  determines  in its sole
judgment to be commercially  reasonable.  Any deficiency  which exists after the
disposition or liquidation of the Collateral shall be a continuing  liability of
the  Borrower  to the Bank and shall be paid by the  Borrower to the Bank within
five (5) business days of written notice.

         10.07  Foreign  Exchange  Contracts:  The  Bank  may,  at its  sole and
absolute  discretion  and in  addition  to any other  remedies  available  to it
hereunder or otherwise,  require the Borrower to pay to the Bank within five (5)
business days of written notice,  for application  against the future settlement
price under any outstanding  Foreign  Exchange  Contracts,  the outstanding face
amount of any such Foreign Exchange  Contracts which have not matured or settled
and Borrower hereby grants to Bank a security interest in and to such funds. Any
portion of the amount so paid to the Bank which is not  subsequently  applied to
satisfy  repayment on any such matured Foreign  Exchange  Contracts or any other
obligations of the Borrower to the Bank shall be repaid to the Borrower  without
interest.

         10.08  Letters  of  Credit:  The Bank  may,  at its  sole and  absolute
discretion  and in addition to any other  remedies  available to it hereunder or
otherwise,  require the Borrower to pay within five (5) business days of written
notice to the Bank,  for  application  against  drawings  under any  outstanding
Letters of  Credit,  the  outstanding  principal  amount of any such  Letters of
Credit  which have not  expired.  Any  portion of the amount so paid to the Bank
which is not applied to satisfy  draws  under any such  Letters of Credit or any
other  obligations  of the  Borrower to the Bank shall be repaid to the Borrower
without interest.

         10.09  Non-Exclusivity of Remedies:  Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other  remedies
as may be provided by law, in equity or in any other  agreement  now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

         10.10  Application  of  Proceeds:  All amounts  received by the Bank as
proceeds from the disposition or liquidation of the Collateral  shall be applied
to the Borrower's  indebtedness to the Bank as follows:  first, to the costs and
expenses of collection,  enforcement,  protection and preservation of the Bank's
lien in the Collateral,  including court costs and reasonable  attorneys'  fees,
whether or not suit is commenced by the Bank;  next, to those costs and expenses
incurred  by  the  Bank  in  protecting,   preserving,   enforcing,  collecting,
liquidating,  selling or disposing of the  Collateral;  next,  to the payment of
accrued and unpaid interest on all of the  Obligations;  next, to the payment of
the outstanding  principal balance of the Obligations;  and last, to the payment
of  any  other  indebtedness  owed  by the  Borrower  to the  Bank.  Any  excess
Collateral or excess  proceeds  existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.

                                   SECTION 11
                                  MISCELLANEOUS

         11.01 Amounts  Payable on Demand:  If the Borrower shall fail to pay on
demand any amount so payable under this  Agreement,  the Bank may, at its option
and without any obligation to do so and without  waiving any default  occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable,  which Advance shall
thereafter bear interest as provided under the Line of Credit.

         11.02 Default  Interest  Rate: The Borrower shall pay the Bank interest
on any  indebtedness or amount payable under this Agreement,  from the date that
such  indebtedness  or amount became due or was demanded to be due until paid in
full, at a rate which is 3% in excess of the rate otherwise  provided under this
Agreement.

         11.03 Disposal of Invoices: All documents, schedules, invoices or other
papers  received by the Bank from the Borrower may be destroyed or disposed of 6
months after  receipt by the Bank,  unless the Borrower  requests in writing the
return thereof, which shall be done at the Borrower's expense.

         11.04 Rights of the Bank on Default: Upon written notice from the Bank,
the Borrower agrees that the Bank may at any time and at its option,  whether or
not the Borrower is in default:

                  (a)  Require the  Borrower  to direct all  Account  Debtors to
         forward  all  remittances,  payments  and  proceeds  of the  Collateral
         directly  to the Bank at such  address  as the Bank may  designate.  In
         connection therewith,  the Borrower hereby
<PAGE>

         irrevocably  constitutes and appoints the Bank as its  attorney-in-fact
         to  endorse  the  Borrower's  name on any notes,  acceptances,  checks,
         drafts,  money  orders or other  evidence of payment that may come into
         the Bank's possession.

                  (b) Require the Borrower to deliver to the Bank, at such times
         designated by the Bank, records and schedules which show the status and
         condition of the Collateral,  where it is located and such contracts or
         other matters which affect the Collateral.

                  (c) Send verification requests to any Account Debtor.

                  (d)  Make inquiries of the Borrower's trade vendors.

         11.05  Indemnification:  The Borrower  agrees to hold the Bank harmless
from and  indemnify  and  defend  the Bank from any  liability,  claim,  loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction  between the Borrower and any Account Debtor including,  but not
limited to, any loss, claim or liability arising from:

                  (a) Any violation of any federal or state consumer  protection
         law (including,  but not limited to, the federal  Truth-In-Lending Act)
         and regulations promulgated thereunder.

                  (b)  Improper  collection   practices  or  procedures  of  the
         Borrower.

                  (c) Any unlawful acts taken by the Borrower in connection with
         the collection of any account(s).

                  (d) Any  suit by any  person  against  the Bank  resulting  or
         arising from such person's dealings with the Borrower.

         11.06 Dispute  Resolution.  It is  understood  and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind,  whether  in  contract  or in tort,  statutory  or  common  law,  legal or
equitable  now existing or  hereinafter  arising  between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement,  or any
related agreements,  documents, or instruments,  (2) all past and present loans,
credits,  accounts, deposit accounts (whether demand deposits or time deposits),
safe deposit boxes, safekeeping agreements, guarantees, letters of credit, goods
or services, or other transactions, contracts or agreements of any kind, (3) any
incidents,  omissions,  acts, practices, or occurrences causing injury to either
party whereby the other party or its agents, employees or representatives may be
liable,  in  whole  or in  part,  or (4)  any  aspect  of the  past  or  present
relationships  of the  parties,  shall be  resolved  through a two-step  dispute
resolution process  administered by Judicial  Arbitration & Mediation  Services,
Inc. ("J-A-M-S") as follows:

                  (a) Step I -  Mediation:  At the  request  of any party to the
         dispute,  claim or  controversy  of the matter shall be referred to the
         nearest  office  of  J-A-M-S  for  mediation,  that  is,  an  informal,
         non-binding  conference or  conferences  between the parties in which a
         retired  judge or justice for the J-A-M-S  panel will seek to guide the
         parties to a resolution of the case.

                  (b) Step II - Unsecured  Contracts -  Arbitration:  Should any
         dispute,  claim or controversy  remain  unresolved at the conclusion of
         the Step I Mediation  Phase then all such  remaining  matters  shall be
         resolved by final and binding  arbitration  before a different judicial
         panelist,  unless the parties shall agree to have the mediator panelist
         act as  arbitrator.  The  hearing  shall  be  conducted  at a  location
         determined  by  the   arbitrator  in  San  Jose  County  and  shall  be
         administered  by and in  accordance  with  the then  existing  Rules of
         Practice and Procedure of Judicial  Arbitration  & Mediation  Services,
         Inc.,  and judgement  upon any award  rendered by the arbitrator may be
         entered by any State or Federal Court having jurisdiction  thereof. The
         arbitrator  shall  determine  which is the  prevailing  party and shall
         include in the award that party's reasonable  attorneys fees and costs.
         This  subparagraph  (b)  shall  apply  only  if,  at  the  time  of the
         submission of the matter to J-A-M-S,  the dispute(s) or issue(s) do(es)
         not arise out of a transaction(s) which is/are secured by real property
         collateral or, if so secured, all parties consent to such submission.

                  As soon as practicable after selection of the arbitrator,  the
         arbitrator  or his/her  designated  representative  shall  determine  a
         reasonable  estimate of anticipated  fees and costs of the  Arbitrator,
         and  render a  statement  to each  party  setting  forth  that  party's
         pro-rata  share of said fees and costs.  Thereafter  each party  shall,
         within 10 days of receipt of said statement,  deposit said sum with the
         Arbitrator. Failure of any party to make such a deposit shall result in
         a forfeiture by the  non-depositing  party of the right to prosecute or
         defend the claim which is the subject of the arbitration, but shall not
         otherwise serve to abate, stay or suspend the arbitration proceedings.

<PAGE>

                  (c)  Step II -  Contracts  Secured  By Real  Estate - Trial by
         Court Reference [ss.638 (1)] Code of Civil Procedure):  If the dispute,
         claim or  controversy  is not one required or agreed to be submitted to
         arbitration as provided by  subparagraph  (b) and has not been resolved
         by Step I mediation,  them any remaining dispute,  claim or controversy
         shall be submitted for  determination  by a trial on Order of Reference
         conducted  by a retired  judge or  justice  from the  panel of  J-A-M-S
         appointed  pursuant  to the  provisions  of  California  Code of  Civil
         Procedure  ss.638(1) or any  amendment,  addition or successor  section
         thereto to hear the case and report a statement  of  decision  thereon.
         The parties intend this general reference  agreement to be specifically
         enforceable in accordance with said section. If this parties are unable
         to agree upon a member of the J-A-M-S  panel to act as referee then one
         shall be appointed  by the  Presiding  Judge of the county  wherein the
         hearing  is to be  held.  The  parties  shall  pay in  advance,  to the
         referee, the estimated  reasonable fees and costs of the reference,  as
         may be specified in advance by the referee. The parties shall initially
         share equally,  by paying their  proportionate  amount of the estimated
         fees and costs of the  reference.  Failure  of any party to make such a
         fee deposit shall result in a forfeiture by the non-depositing party of
         the right to prosecute  or defend the cause(s) of action which  is(are)
         the subject of the reference,  but shall not otherwise  serve to abate,
         stay or suspend the reference proceeding.

                  (d)  Provisional  Remedies,  Self  Help  and  Foreclosure:  No
         provision of, or the exercise of any right(s) under  subparagraph  (b),
         nor any other  provision of this Dispute  Resolution  Provision,  shall
         limit the right of any party to exercise self help remedies such as set
         off, to foreclose against any real or personal property collateral,  or
         obtain  provisional or ancillary  remedies such as injunctive relief or
         the  appointment  of a  receiver  from any  court  having  jurisdiction
         before,  during or after the  pendency  of any  arbitration.  At Bank's
         option,   foreclosure  under  a  deed  of  trust  or  mortgage  may  be
         accomplished  either  by  exercise  of power of sale  under the deed of
         trust or mortgage,  or by judicial  foreclosure.  The  institution  and
         maintenance  of  an  action  for   provisional   remedies   pursuit  of
         provisional  or  ancillary  remedies or exercise of self help  remedies
         shall not constitute a waiver of the right of any party,  including the
         plaintiff, to submit the controversy or claim to arbitration.

         11.07 Waiver of Jury Trial.  THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE  RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES  AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL  WITHOUT A JURY.  WITHOUT  LIMITING  THE  FOREGOING,  THE
PARTIES FURTHER AGREE THAT THEIR  RESPECTIVE  RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION,  COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN  DOCUMENTS OR ANY PROVISION  HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,  RENEWALS,  SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         11.08 Reliance: Each warranty, representation, covenant, obligation and
agreement  contained in this Agreement  shall be  conclusively  presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed  by the Bank and  shall be  cumulative  and in  addition  to any other
warranties, representations,  covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.

         11.09  Attorneys'  Fees:  Borrower  shall pay to the Bank all costs and
expenses,  including but not limited to reasonable  attorneys fees,  incurred by
Bank in connection with the administration,  enforcement,  or any refinancing or
restructuring in the nature of a "work-out",  of this Agreement or any document,
instrument  or agreement  executed  with respect to,  evidencing or securing the
indebtedness hereunder.

         11.10 Notices: All notices, payments, requests, information and demands
which either party hereto may desire,  or may be required to give or make to the
other  party  hereto,  shall be given or made to such party by hand  delivery or
through deposit in the United States mail, postage prepaid,  or by Western Union
telegram,  addressed  as set  forth  below or to such  other  address  as may be
specified from time to time in writing by either party to the other.

To the Borrower                              To the Bank:
ELEXSYS INTERNATIONAL, INC.                  SANWA BANK CALIFORNIA
4405 Fortran Court                           San Jose CBC
San Jose, CA  95134                          220 Almaden Blvd.
                                             San Jose, CA  95113
<PAGE>

Attn:    Robert DeLaurentis                  Attn:    Jillian E. Mathur
Title:   C.F.O.                                       Vice President

with a copy to:                              With a copy to:

COOLEY GODWARD LLP                           SANWA BANK CALIFORNIA
Five Palo Alto Square                        Asset Based Financing Department
3000 El Camino Real
Palo Alto, CA  94306-2155                    444 Market Street, 22nd Floor
                                             San Francisco, CA  94111
Attn:    Bill Veatch

         11.11  Waiver:  Neither the failure nor delay by the Bank in exercising
any right  hereunder or under any document,  instrument  or agreement  mentioned
herein  shall  operate  as a waiver  thereof,  nor shall any  single or  partial
exercise  of any right  hereunder  or under any other  document,  instrument  or
agreement  mentioned  herein preclude other or further  exercise  thereof or the
exercise  of any  other  right;  nor shall  any  waiver of any right or  default
hereunder,  or under any  other  document,  instrument  or  agreement  mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.

         11.12 Conflicting Provisions: To the extent the provisions contained in
this  Agreement are  inconsistent  with those  contained in any other  document,
instrument  or agreement  executed  pursuant  hereto,  the terms and  provisions
contained herein shall control.  Otherwise,  such provisions shall be considered
cumulative.

         11.13 Binding Effect; Assignment:  This Agreement shall be binding upon
and inure to the  benefit  of the  Borrower  and the Bank and  their  respective
successors  and assigns,  except that the  Borrower  shall not have the right to
assign its rights  hereunder or any interest  herein  without the prior  written
consent of the Bank. The Bank may sell, assign or grant  participation in all or
any portion of its rights and benefits  hereunder.  The Borrower agrees that, in
connection with any such sale, grant or assignment,  the Bank may deliver to the
prospective  buyer,  participant  or  assignee  financial  statements  and other
relevant information relating to the Borrower and any guarantor.

         11.14  Jurisdiction:  This Agreement,  any notes issued hereunder,  the
rights of the  parties  hereunder  to and  concerning  the  Collateral,  and any
documents,  instruments  or agreements  mentioned or referred to herein shall be
governed by and construed  according to the laws of the State of California,  to
the jurisdiction of whose courts the parties hereby submit.

         11.15  Headings:  The  headings  herein  set forth are  solely  for the
purpose of identification and have no legal significance.

         11.16 Entire Agreement:  This Agreement and all documents,  instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties  with respect to the  transactions  contemplated  hereunder.  All
previous conversations, memoranda and writings between the parties pertaining to
the transactions  contemplated  hereunder not incorporated or referenced in this
Agreement  or in such  documents,  instruments  and  agreements  are  superseded
hereby.

         11.17   Confidentiality   Agreement.   In  handling  any   confidential
information  Bank,  and all  employees  and  agents of Bank,  including  but not
limited  to  accountants,  shall  exercise  the same  degree  of care  that Bank
exercises with respect to its own  proprietary  information of the same types to
maintain the  confidentiality of any non-public  information thereby received or
received  pursuant to this Agreement  except that disclosure of such information
may be made (i) to the  subsidiaries  or affiliates  of Bank in connection  with
their  present  or  prospective  business  relations  with  Borrower;   (ii)  to
prospective  transferees  or purchasers  of any interest in the loans,  provided
that they have entered into a comparable  confidentiality  agreement in favor of
Borrower  and have  delivered  a copy to  Borrower;  (iii) as  required  by law,
regulations,  rule or order, subpoena,  judicial order or similar order; (iv) as
may  be  required  in  connection  with  the   examination,   audit  or  similar
investigation  of Bank  and (v) as Bank may  determine  in  connection  with the
enforcement of any remedies hereunder.  Confidential information hereunder shall
not  include  information  that  either:  (a) is in the public  domain or in the
knowledge or possession  of Bank when  disclosed to Bank, or becomes part of the
public  domain  after  disclosure  to Bank  through no fault of Bank;  or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.

Borrower                                 Bank:

                                         SANWA BANK CALIFORNIA
ELEXSYS INTERNATIONAL, INC.

BY:_________________________________     BY:_______________________________
Name:    Robert DeLaurentis              Name:    Jillian E. Mathur
Title:   C.F.O.                          Title:   Vice President