Exhibit 10.31

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                           LOAN AND SECURITY AGREEMENT

                                  by and among

                        PHIBRO ANIMAL HEALTH CORPORATION

                                       and

              EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO

                                  as Borrowers,

                     THE LENDERS THAT ARE SIGNATORIES HERETO

                                 as the Lenders,

                                       and

                           WELLS FARGO FOOTHILL, INC.

                    as the Arranger and Administrative Agent

                          Dated as of October 21, 2003

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                                TABLE OF CONTENTS

1.    DEFINITIONS AND CONSTRUCTION.............................................1
      1.1      Definitions.....................................................1
      1.2      Accounting Terms...............................................32
      1.3      Code...........................................................32
      1.4      Construction...................................................32
      1.5      Schedules and Exhibits.........................................32

2.    LOAN AND TERMS OF PAYMENT...............................................33
      2.1      Revolver Advances..............................................33
      2.2      Term Loan......................................................33
      2.3      Borrowing Procedures and Settlements...........................34
      2.4      Payments.......................................................41
      2.5      Overadvances...................................................44
      2.6      Interest Rates and Letter of Credit Fee:  Rates,
               Payments, and Calculations.....................................44
      2.7      Cash Management................................................45
      2.8      Crediting Payments; Float Charge...............................46
      2.9      Designated Account.............................................47
      2.10     Maintenance of Loan Account; Statements of Obligations.........47
      2.11     Fees...........................................................48
      2.12     Letters of Credit..............................................48
      2.13     LIBOR Option...................................................52
      2.14     Capital Requirements...........................................54
      2.15     Joint and Several Liability of Borrowers.......................55

3.    CONDITIONS; TERM OF AGREEMENT...........................................58
      3.1      Conditions Precedent to the Initial Extension of Credit........58
      3.2      Conditions Subsequent to the Initial Extension of Credit.......61
      3.3      Conditions Precedent to all Extensions of Credit...............63
      3.4      Term...........................................................63
      3.5      Effect of Termination..........................................63
      3.6      Early Termination by Borrowers.................................64

4.    CREATION OF SECURITY INTEREST...........................................65
      4.1      Grant of Security Interest.....................................65
      4.2      Negotiable Collateral..........................................65
      4.3      Collection of Accounts, General Intangibles,
               and Negotiable Collateral......................................65
      4.4      Filing of Financing Statements; Commercial Tort Claims;
               Delivery of Additional Documentation Required..................65
      4.5      Power of Attorney..............................................66
      4.6      Right to Inspect...............................................67
      4.7      Control Agreements.............................................67


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5.    REPRESENTATIONS AND WARRANTIES..........................................67
      5.1      No Encumbrances................................................68
      5.2      Eligible Accounts..............................................68
      5.3      Eligible Inventory.............................................68
      5.4      Equipment......................................................68
      5.5      Location of Inventory and Equipment............................68
      5.6      Inventory Records..............................................68
      5.7      State of Incorporation; Location of Chief Executive
               Office; FEIN; Organizational ID Number; Commercial
               Tort Claims....................................................68
      5.8      Due Organization and Qualification; Subsidiaries...............69
      5.9      Due Authorization; No Conflict.................................69
      5.10     Litigation.....................................................71
      5.11     No Material Adverse Change.....................................71
      5.12     Fraudulent Transfer............................................71
      5.13     Employee Benefits..............................................72
      5.14     Environmental Condition........................................72
      5.15     Brokerage Fees.................................................72
      5.16     Intellectual Property..........................................72
      5.17     Leases.........................................................73
      5.18     DDAs...........................................................73
      5.19     Complete Disclosure............................................73
      5.20     Indebtedness...................................................73

6.    AFFIRMATIVE COVENANTS...................................................74
      6.1      Accounting System..............................................74
      6.2      Collateral Reporting...........................................74
      6.3      Financial Statements, Reports, Certificates....................75
      6.4      [intentionally omitted]........................................78
      6.5      Returns........................................................78
      6.6      Maintenance of Properties......................................78
      6.7      Taxes..........................................................78
      6.8      Insurance......................................................78
      6.9      Location of Inventory and Equipment............................79
      6.10     Compliance with Laws...........................................79
      6.11     Leases.........................................................79
      6.12     Existence......................................................79
      6.13     Environmental..................................................80
      6.14     Disclosure Updates.............................................80

7.    NEGATIVE COVENANTS......................................................81
      7.1      Indebtedness...................................................81
      7.2      Liens..........................................................82
      7.3      Restrictions on Fundamental Changes............................82
      7.4      Disposal of Assets.............................................83
      7.5      Change Name....................................................83


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      7.6      Nature of Business.............................................83
      7.7      Prepayments and Amendments.....................................83
      7.8      Change of Control..............................................83
      7.9      Consignments...................................................83
      7.10     Distributions..................................................84
      7.11     Accounting Methods.............................................84
      7.12     Investments....................................................84
      7.13     Transactions with Affiliates...................................84
      7.14     Suspension.....................................................84
      7.15     Compensation...................................................84
      7.16     Use of Proceeds................................................85
      7.17     Inventory and Equipment with Bailees...........................85
      7.18     Financial Covenants............................................85

8.    EVENTS OF DEFAULT.......................................................87

9.    THE LENDER GROUP'S RIGHTS AND REMEDIES..................................90
      9.1      Rights and Remedies............................................90
      9.2      Remedies Cumulative............................................92

10.   TAXES AND EXPENSES......................................................92

11.   WAIVERS; INDEMNIFICATION................................................93
      11.1     Demand; Protest; etc...........................................93
      11.2     The Lender Group's Liability for Borrower Collateral...........93
      11.3     Indemnification................................................93

12.   NOTICES.................................................................94

13.   CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..............................95

14.   ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................96
      14.1     Assignments and Participations.................................96
      14.2     Successors.....................................................98

15.   AMENDMENTS; WAIVERS.....................................................99
      15.1     Amendments and Waivers.........................................99
      15.2     Replacement of Holdout Lender.................................100
      15.3     No Waivers; Cumulative Remedies...............................100

16.   AGENT; THE LENDER GROUP................................................100
      16.1     Appointment and Authorization of Agent........................101
      16.2     Delegation of Duties..........................................101
      16.3     Liability of Agent............................................102
      16.4     Reliance by Agent.............................................102
      16.5     Notice of Default or Event of Default.........................102


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      16.6     Credit Decision...............................................103
      16.7     Costs and Expenses; Indemnification...........................103
      16.8     Agent in Individual Capacity..................................104
      16.9     Successor Agent...............................................104
      16.10    Lender in Individual Capacity.................................105
      16.11    Withholding Taxes.............................................105
      16.12    Collateral Matters............................................107
      16.13    Restrictions on Actions by Lenders; Sharing of Payments.......108
      16.14    Agency for Perfection.........................................109
      16.15    Payments by Agent to the Lenders..............................109
      16.16    Concerning the Collateral and Related Loan Documents..........109
      16.17    Field Audits and Examination Reports; Confidentiality;
               Disclaimers by Lenders; Other Reports and Information.........109
      16.18    Several Obligations; No Liability.............................110
      16.19    Legal Representation of Agent.................................111

17.   GENERAL PROVISIONS.....................................................111
      17.1     Effectiveness.................................................111
      17.2     Section Headings..............................................111
      17.3     Interpretation................................................111
      17.4     Severability of Provisions....................................111
      17.5     Amendments in Writing.........................................111
      17.6     Counterparts; Telefacsimile Execution.........................111
      17.7     Revival and Reinstatement of Obligations......................111
      17.8     Confidentiality...............................................112
      17.9     Integration...................................................113
      17.10    Parent as Agent for Borrowers.................................113


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                             EXHIBITS AND SCHEDULES

Exhibit A-1             Form of Assignment and Acceptance
Exhibit C-1             Form of Compliance Certificate
Exhibit L-1             Form of LIBOR Notice

Schedule A-1            Agent's Account
Schedule C-1            Commitments
Schedule D-1            Designated Account
Schedule E-1            Eligible Inventory Locations
Schedule P-1            Permitted Liens
Schedule R-1            Real Property Collateral
Schedule 2.7(a)         Cash Management Banks
Schedule 5.5            Locations of Inventory and Equipment
Schedule 5.7(a)         States of Organization
Schedule 5.7(b)         Chief Executive Offices
Schedule 5.7(c)         FEINS
Schedule 5.7(d)         Commercial Tort Claims
Schedule 5.8(b)         Capitalization of Borrowers
Schedule 5.8(c)         Capitalization of Borrowers' Subsidiaries
Schedule 5.10           Litigation
Schedule 5.14           Environmental Matters
Schedule 5.16           Intellectual Property
Schedule 5.18           Deposit Accounts and Securities Accounts
Schedule 5.20           Permitted Indebtedness


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                           LOAN AND SECURITY AGREEMENT

            THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into
as of October 21, 2003, by and among, on the one hand, the lenders identified on
the  signature  pages  hereof  (such  lenders,  together  with their  respective
successors and permitted assigns,  are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"),  WELLS FARGO FOOTHILL, INC., a
California corporation, as the arranger and administrative agent for the Lenders
("Agent"), and, on the other hand, PHIBRO ANIMAL HEALTH CORPORATION,  a New York
corporation  ("Parent"),  and each of Parent's  Subsidiaries  identified  on the
signature pages hereof (such Subsidiaries, together with Parent, are referred to
hereinafter   each   individually  as  a  "Borrower",   and   individually   and
collectively, jointly and severally, as the "Borrowers").

      The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

      1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:

            "Account"  means an account (as that term is defined in Article 9 of
the Code), and any and all supporting obligations in respect thereof.

            "Account  Debtor"  means any Person  who is  obligated  under,  with
respect  to,  or  on  account  of,  an  Account,  chattel  paper,  or a  General
Intangible.

            "ACH  Transactions"  means any cash  management or related  services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve  Fedline  system)  provided by a Bank Product
Provider for the account of Administrative Borrower or its Subsidiaries.

            "Additional Documents" has the meaning set forth in Section 4.4(c).

            "Administrative  Borrower"  has the  meaning  set  forth in  Section
17.10.

            "Advances" has the meaning set forth in Section 2.1(a).

            "Affiliate"  means, as applied to any Person,  any other Person who,
directly  or  indirectly  through  one  or  more  intermediaries,  controls,  is
controlled  by, or is under common  control with,  such Person.  For purposes of
this definition,  "control" means the possession, directly or indirectly through
one or more  intermediaries,  of the power to direct the management and policies
of a Person,  whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of the definition of Eligible Accounts and
Section 7.13 hereof:  (a) any Person which owns  directly or  indirectly  10% or
more of the Stock having  ordinary voting power for the election of directors or
other members of the governing


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body of a Person or 10% or more of the partnership or other ownership  interests
of a Person (other than as a limited  partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable  manager) of a Person
shall be deemed to be an Affiliate of such Person,  and (c) each  partnership or
joint venture in which a Person is a partner or joint  venturer  shall be deemed
an Affiliate of such Person.

            "Agent"  means WFF, in its capacity as arranger  and  administrative
agent hereunder, and any successor thereto.

            "Agent Advances" has the meaning set forth in Section 2.3(e)(i).

            "Agent-Related  Persons" means Agent,  together with its Affiliates,
officers, directors, employees, attorneys, and agents.

            "Agent's  Account" means the Deposit Account of Agent  identified on
Schedule A-1.

            "Agent's  Liens"  means  the Liens  granted  by  Borrowers  or their
Subsidiaries to Agent under this Agreement or the other Loan Documents.

            "Agreement"  has the  meaning  set  forth  in the  preamble  to this
Agreement.

            "Applicable   Prepayment   Premium"   means,   as  of  any  date  of
determination,  an amount equal to (a) during the period from and after the date
of the  execution  and  delivery  of this  Agreement  up to the date that is the
second  anniversary of the Closing Date, 3% times the Maximum  Revolver  Amount,
(b) during the period from and including the date that is the second anniversary
of the Closing Date up to the date that is the third  anniversary of the Closing
Date, 2% times the Maximum Revolver  Amount,  and (c) during the period from and
including the date that is the third  anniversary  of the Closing Date up to the
Maturity Date, 0%.

            "Asset Sale" has the meaning  ascribed  thereto in the New Indenture
and the Existing Indenture, as applicable.

            "Assignee" has the meaning set forth in Section 14.1(a).

            "Assignment  and  Acceptance"  means an  Assignment  and  Acceptance
Agreement substantially in the form of Exhibit A-1.

            "Authorized  Person" means any officer or employee of Administrative
Borrower.

            "Availability"  means, as of any date of  determination,  the amount
that Borrowers are entitled to borrow as Advances hereunder (after giving effect
to all then outstanding  Obligations  (other than Bank Product  Obligations) and
all sublimits and reserves then applicable hereunder).


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            "Bank  Product"  means  any  financial   accommodation  extended  to
Administrative  Borrower or its  Subsidiaries by a Bank Product  Provider (other
than pursuant to this Agreement)  including:  (a) credit cards,  (b) credit card
processing services,  (c) debit cards, (d) purchase cards, (e) ACH Transactions,
(f) cash management, including controlled disbursement, accounts or services, or
(g) transactions under Hedge Agreements.

            "Bank Product  Agreements" means those agreements  entered into from
time to time by Administrative  Borrower or its Subsidiaries with a Bank Product
Provider in connection with the obtaining of any of the Bank Products.

            "Bank  Product  Obligations"  means  all  obligations,  liabilities,
contingent reimbursement obligations, fees, and expenses owing by Administrative
Borrower  or its  Subsidiaries  to any  Bank  Product  Provider  pursuant  to or
evidenced by the Bank Product  Agreements  and  irrespective  of whether for the
payment of money, whether direct or indirect,  absolute or contingent, due or to
become due, now existing or hereafter  arising,  and  including all such amounts
that  Administrative  Borrower or its Subsidiaries are obligated to reimburse to
Agent or any member of the Lender  Group as a result of Agent or such  member of
the Lender Group  purchasing  participations  from, or executing  indemnities or
reimbursement  obligations to, a Bank Product  Provider with respect to the Bank
Products  provided by such Bank Product Provider to  Administrative  Borrower or
its Subsidiaries.

            "Bank Product Provider" means Wells Fargo or any of its Affiliates.

            "Bank Product Reserve" means, as of any date of  determination,  the
lesser  of (a)  $4,000,000  and  (b) the  amount  of  reserves  that  Agent  has
established (based upon the Bank Product Providers' reasonable  determination of
the credit  exposure in respect of then extant Bank Products) in respect of Bank
Products then provided or outstanding.

            "Bankruptcy  Code" means title 11 of the United  States Code,  as in
effect from time to time.

            "Base LIBOR Rate" means the rate per annum,  determined  by Agent in
accordance with its customary procedures, and utilizing such electronic or other
quotation sources as it considers appropriate (rounded upwards, if necessary, to
the next 1/100%),  to be the rate at which Dollar  deposits (for delivery on the
first day of the  requested  Interest  Period) are offered to major banks in the
London  interbank  market  2  Business  Days  prior to the  commencement  of the
requested  Interest  Period,  for a term  and  in an  amount  comparable  to the
Interest  Period and the amount of the LIBOR Rate Loan requested  (whether as an
initial LIBOR Rate Loan or as a continuation  of an extant LIBOR Rate Loan or as
a  conversion  of a Base  Rate  Loan to a LIBOR  Rate  Loan)  by  Administrative
Borrower  in  accordance  with  this  Agreement,  which  determination  shall be
conclusive in the absence of manifest error.

            "Base  Rate"  means,  the rate of interest  announced,  from time to
time,  within Wells Fargo at its principal office in San Francisco as its "prime
rate", with the understanding that the "prime rate" is one of Wells Fargo's base
rates (not necessarily the


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lowest of such  rates) and serves as the basis  upon  which  effective  rates of
interest  are  calculated  for  those  loans  making  reference  thereto  and is
evidenced by the  recording  thereof  after its  announcement  in such  internal
publications as Wells Fargo may designate.

            "Base  Rate  Loan"  means the  portion  of the  Advances  that bears
interest at a rate determined by reference to the Base Rate.

            "Base Rate Margin" means 0.50 percentage points.

            "Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower or any  Subsidiary or ERISA  Affiliate of
any Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.

            "Board of  Directors"  means the board of directors  (or  comparable
managers) of Parent or any committee thereof duly authorized to act on behalf of
the board of directors (or comparable managers).

            "Books" means all of Administrative Borrower's and its Subsidiaries'
now owned or  hereafter  acquired  books  and  records  (including  all of their
Records  indicating,  summarizing,  or evidencing  their assets  (including  the
Collateral)  or   liabilities,   all  of   Administrative   Borrower's  and  its
Subsidiaries'  Records  relating  to  their  business  operations  or  financial
condition,  and all of  their  goods  or  General  Intangibles  related  to such
information).

            "Borrower" and "Borrowers" have the respective meanings set forth in
the preamble to this Agreement.

            "Borrower  Collateral"  means  all of each  Borrower's  now owned or
hereafter acquired right, title, and interest in and to each of the following:

                  (a) all of its Accounts,

                  (b) all of its Books,

                  (c) all of its commercial tort claims,

                  (d) all of its Deposit Accounts,

                  (e) all of its Equipment,

                  (f) all of its General Intangibles,

                  (g) all of its Inventory,

                  (h)  all  of its  Investment  Property  (including  all of its
                  securities and Securities Accounts),


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                  (i) all of its Negotiable Collateral,

                  (j)  money  or  other  assets  of such  Borrower  that  now or
hereafter  come into the  possession,  custody,  or control of any member of the
Lender Group, and

                  (k) the proceeds and products, whether tangible or intangible,
of any of the foregoing,  including proceeds of insurance covering any or all of
the foregoing,  and any and all Accounts,  Books,  Deposit Accounts,  Equipment,
General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property,  money,  or other tangible or intangible  property  resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.

            Anything    contained   in   this    Agreement   to   the   contrary
notwithstanding,  the term "Borrower  Collateral"  shall not include  Investment
Property  constituting Stock of any of a Borrower's  Subsidiaries that is a CFC,
solely to the extent that such Investment  Property  represents more than 65% of
the total combined  voting power of all classes of Stock of such CFC entitled to
vote.

            "Borrowing" means a borrowing hereunder  consisting of Advances made
on the same day by the Lenders (or Agent on behalf thereof),  or by Swing Lender
in the case of a Swing  Loan,  or by Agent in the case of an Agent  Advance,  in
each case, to Administrative Borrower.

            "Borrowing Base" means, as of any date of determination,  the result
of:

                  (a)   the lesser of

                              (i) 85% of the amount of Eligible  Accounts,  less
                        the amount, if any, of the Dilution Reserve, and

                              (ii) an  amount  equal to  Borrowers'  Collections
                        with respect to Accounts for the  immediately  preceding
                        75 day period, plus

                  (b)   the lowest of

                              (i) 62.5% times the then extant  Maximum  Revolver
                        Amount,

                              (ii) 65% of the value of Eligible Inventory,

                              (iii) 85% times the then  extant  Net  Liquidation
                        Percentage  times the book value of Borrowers'  Eligible
                        Inventory, and

                              (iv) 150% of the  amount  of  credit  availability
                        created by clause (a) above, minus


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<PAGE>

                  (c) without double  counting,  the sum of (i) the Bank Product
Reserve,  (ii) the  Landlord  Reserves,  (iii)  the  Tolling  Reserve,  (iv) the
Indenture Reserve, and (v) aggregate amount of reserves,  if any, established by
Agent under Section 2.1(b).

            "Business  Day"  means any day that is not a  Saturday,  Sunday,  or
other day on which banks are authorized or required to close in the state of New
York,  except that, if a determination of a Business Day shall relate to a LIBOR
Rate Loan, the term "Business Day" also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.

            "Capital  Expenditures"  means,  with  respect to any Person for any
period,  the sum of (a) the aggregate of all expenditures by such Person and its
Subsidiaries  during such period that are capital  expenditures as determined in
accordance with GAAP,  whether such  expenditures  are paid in cash or financed,
and  (b) to  the  extent  not  covered  by  clause  (a),  the  aggregate  of all
expenditures by such Person and its  Subsidiaries  during such period to acquire
by purchase or otherwise the business or  capitalized  assets of, or the Capital
Stock of, any other Person.

            "Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.

            "Capitalized Lease Obligation" means that portion of the obligations
under a Capital  Lease that is required to be  capitalized  in  accordance  with
GAAP.

            "Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally  guaranteed by the United States or issued by any agency thereof
and  backed by the full  faith and  credit of the  United  States,  in each case
maturing  within 1 year from the date of  acquisition  thereof,  (b)  marketable
direct  obligations  issued by any state of the United  States or any  political
subdivision  of any such state or any public  instrumentality  thereof  maturing
within  1 year  from  the  date  of  acquisition  thereof  and,  at the  time of
acquisition,  having  one of the two  highest  ratings  obtainable  from  either
Standard  & Poor's  Rating  Group  ("S&P") or Moody's  Investors  Service,  Inc.
("Moody's"),  (c) commercial  paper maturing no more than 270 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least  P-1 from  Moody's,  (d)  certificates  of  deposit  or
bankers' acceptances maturing within 1 year from the date of acquisition thereof
issued by any bank  organized  under the laws of the United  States or any state
thereof having at the date of acquisition  thereof  combined capital and surplus
of not less than $250,000,000,  (e) demand Deposit Accounts  maintained with any
bank organized  under the laws of the United States or any state thereof so long
as the  amount  maintained  with any  individual  bank is less  than or equal to
$100,000 and is insured by the Federal Deposit  Insurance  Corporation,  and (f)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (e) above.

            "Cash Flow" has the meaning ascribed thereto in the New Indenture.

            "Cash  Management  Account"  has the  meaning  set forth in  Section
2.7(a).



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<PAGE>

            "Cash  Management  Agreements"  means those certain cash  management
agreements,  in form and substance satisfactory to Agent, each of which is among
Administrative  Borrower or one of its Subsidiaries,  Agent, and one of the Cash
Management Banks.

            "Cash Management Bank" has the meaning set forth in Section 2.7(a).

            "CFC"  means a  controlled  foreign  corporation  (as  that  term is
defined in the IRC).

            "Change of Control"  means that (a) any "person" or "group"  (within
the  meaning  of  Sections  13(d) and 14(d) of the  Exchange  Act),  other  than
Permitted Holders,  becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange  Act),  directly or  indirectly,  of 10%, or more,  of the Stock of
Parent having the general voting power under ordinary  circumstances to vote for
the  election of a majority of the members of the Board of  Directors,  or (b) a
majority of the members of the Board of Directors do not  constitute  Continuing
Directors,  or (c) except for the  consummation of the PMC Sale  Transactions or
Permitted Reorganization Transactions,  any Borrower or Guarantor ceases to own,
directly or indirectly, and control 100% of the outstanding Stock of each of its
Subsidiaries,  or such  lesser  percentage  ownership  of  each  of the  Foreign
Subsidiaries  owned and extant as of the Closing Date, or (d) the  occurrence of
an Indenture Change of Control.

            "Closing  Date" means the date of the making of the initial  Advance
(or other  extension  of  credit)  hereunder  or the date on which  Agent  sends
Administrative  Borrower a written notice that each of the conditions  precedent
set forth in Section 3.1 either have been satisfied or have been waived.

            "Closing  Date  Business  Plan"  means  the  set of  Projections  of
Borrowers for the 1 year period  following the Closing Date, on a month by month
basis, in form and substance (including as to scope and underlying  assumptions)
satisfactory to Agent.

            "Closing  Date  Required  Availability"  means  that  the sum of (a)
Excess Availability, plus (b) Qualified Cash exceeds $3,500,000.

            "Code" means the New York Uniform Commercial Code, as in effect from
time to time.

            "Collateral"  means all assets and  interests in assets and proceeds
thereof  now owned or  hereafter  acquired  by  Administrative  Borrower  or its
Subsidiaries in or upon which a Lien is granted under any of the Loan Documents.

            "Collateral  Access  Agreement"  means  a  landlord  waiver,  bailee
letter, or  acknowledgement  agreement of any lessor,  warehouseman,  processor,
consignee,  or other  Person in  possession  of,  having a Lien upon,  or having
rights or interests in  Administrative  Borrower's or its  Subsidiaries'  Books,
Equipment or,  Inventory,  in each case, in form and substance  satisfactory  to
Agent.



                                      -7-
<PAGE>

            "Collections" means all cash, checks, notes, instruments,  and other
items of payment (including  insurance proceeds,  proceeds of cash sales, rental
proceeds, and tax refunds).

            "Commercial  Tort Claim  Assignments"  has the  meaning set forth in
Section 4.4(b).

            "Commitment"  means,  with  respect  to each  Lender,  its  Revolver
Commitment and, with respect to all Lenders, their Revolver Commitments, in each
case as such Dollar  amounts are set forth beside such  Lender's  name under the
applicable heading on Schedule C-1 or in the Assignment and Acceptance  pursuant
to which such Lender became a Lender hereunder in accordance with the provisions
of Section 14.1.

            "Compliance  Certificate"  means a certificate  substantially in the
form of Exhibit C-1 delivered by the chief financial officer of Parent to Agent.

            "Continuing Director" means (a) any member of the Board of Directors
who was a director (or  comparable  manager) of Parent on the Closing Date,  and
(b) any  individual  who  becomes a member of the Board of  Directors  after the
Closing Date if such  individual  was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, by the Noteholders
Representative,  by Permitted Holders,  or by Palladium,  but excluding any such
individual  originally  proposed  for  election  in  opposition  to the Board of
Directors  in office at the  Closing  Date in an actual or  threatened  election
contest  relating to the election of the directors (or  comparable  managers) of
Parent and whose initial  assumption of office resulted from such contest or the
settlement thereof.

            "Control Agreement" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by the Administrative  Borrower or
one of its Subsidiaries, Agent, and the applicable securities intermediary (with
respect to a Securities Account) or a bank (with respect to a Deposit Account).

            "Controlled  Group"  means  all  members  of a  controlled  group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Parent or any of
its Subsidiaries, are treated as a single employer under Section 414 of the IRC.

            "Daily  Balance"  means,  as of any date of  determination  and with
respect to any Obligation, the amount of such Obligation owed at the end of such
day.

            "Default"  means an event,  condition,  or  default  that,  with the
giving of notice, the passage of time, or both, would be an Event of Default.

            "Defaulting  Lender" means any Lender that fails to make any Advance
(or other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.



                                      -8-
<PAGE>

            "Defaulting  Lender  Rate"  means  (a) for the first 3 days from and
after the date the relevant  payment is due, the Base Rate, and (b)  thereafter,
the  interest  rate  then  applicable  to  Advances  that  are Base  Rate  Loans
(inclusive of the Base Rate Margin applicable thereto).

            "Deposit Account" means any deposit account (as that term is defined
in the Code).

            "Designated  Account"  means the Deposit  Account of  Administrative
Borrower identified on Schedule D-1.

            "Designated  Account  Bank"  has the  meaning  ascribed  thereto  on
Schedule D-1.

            "Dilution"  means, as of any date of  determination,  the greater of
(a) the  percentage  based  upon  the  experience  of the  immediately  prior 90
consecutive  days,  or (b) the  percentage  based  upon  the  experience  of the
immediately  prior 12 months,  in each case that is the result of  dividing  the
Dollar amount of (a) bad debt write-downs,  discounts,  advertising  allowances,
credits, or other dilutive items with respect to Borrowers' Accounts during such
period, by (b) Borrowers' billings with respect to Accounts during such period.

            "Dilution Reserve" means, as of any date of determination, an amount
sufficient to reduce the advance rate against Eligible  Accounts by 1 percentage
point for each percentage point by which Dilution is in excess of 5%.

            "Disbursement  Letter" means an  instructional  letter  executed and
delivered by Administrative Borrower to Agent regarding the extensions of credit
to be made on the Closing Date, the form and substance of which is  satisfactory
to Agent.

            "Dollars" or "$" means United States dollars.

            "Domestic  Subsidiary"  means any Subsidiary of any Borrower that is
not a CFC.

            "EBITDA" means, with respect to any fiscal period,  consolidated net
earnings (or loss), minus extraordinary gains, interest income, and intercompany
allocations   plus  interest   expense,   income  taxes,  and  depreciation  and
amortization for such period, as determined in accordance with GAAP.

            "Eligible Accounts" means those Accounts created by one of Borrowers
in the ordinary  course of its business,  that arise out of its sale of goods or
rendition  of  services,  that  comply  with  each  of the  representations  and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible  by virtue of one or more of the  excluding  criteria
set forth below; provided,  however, that such criteria may be revised from time
to time by Agent in Agent's  Permitted  Discretion to address the results of any
audit  performed  by  Agent  from  time to  time  after  the  Closing  Date.  In
determining the amount to



                                      -9-
<PAGE>

be included,  Eligible Accounts shall be calculated net of customer deposits and
unapplied cash. Eligible Accounts shall not include the following:

                  (a) Accounts that the Account  Debtor has failed to pay within
90 days of original  invoice date or Accounts with selling terms of more than 30
days,

                  (b)  Accounts  owed by an Account  Debtor (or its  Affiliates)
where  50% or  more  of all  Accounts  owed  by  that  Account  Debtor  (or  its
Affiliates) are deemed ineligible under clause (a) above,

                  (c) Accounts  with  respect to which the Account  Debtor is an
Affiliate  of any  Borrower  or an  employee  or  agent of any  Borrower  or any
Affiliate of any Borrower,

                  (d) Accounts arising in a transaction wherein goods are placed
on  consignment or are sold pursuant to a guaranteed  sale, a sale or return,  a
sale on  approval,  a bill and hold,  or any other  terms by reason of which the
payment by the Account Debtor may be conditional,

                  (e) Accounts that are not payable in Dollars,

                  (f) Accounts  with respect to which the Account  Debtor either
(i) does not maintain its chief executive  office in the United States,  or (ii)
is not organized  under the laws of the United States or any state  thereof,  or
(iii) is the  government of any foreign  country or sovereign  state,  or of any
state, province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit  satisfactory to
Agent (as to form,  substance,  and issuer or domestic confirming bank) that has
been delivered to Agent and is directly drawable by Agent, or (z) the Account is
covered by credit insurance in form,  substance,  and amount, and by an insurer,
satisfactory to Agent,

                  (g)  Accounts  with  respect  to which the  Account  Debtor is
either (i) the United States or any department,  agency, or  instrumentality  of
the United  States  (exclusive,  however,  of Accounts with respect to which the
applicable Borrower has complied, to the reasonable  satisfaction of Agent, with
the Assignment of Claims Act, 31 USC ss. 3727),  or (ii) any state of the United
States,

                  (h)  Accounts  with  respect to which the Account  Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, or has disputed
its  obligation to pay all or any portion of the Account,  to the extent of such
claim, right of setoff, or dispute,

                  (i)  Accounts  with  respect to an Account  Debtor whose total
obligations  owing to  Borrower  exceed  10% (such  percentage,  as applied to a
particular Account Debtor,  being subject to reduction by Agent in its Permitted
Discretion if the  creditworthiness of such Account Debtor  deteriorates) of all
Eligible Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage; provided,



                                      -10-
<PAGE>

however,  that, in each case, the amount of Eligible  Accounts that are excluded
because they exceed the foregoing  percentage shall be determined by Agent based
on all of  the  otherwise  Eligible  Accounts  prior  to  giving  effect  to any
eliminations based upon the foregoing concentration limit,

                  (j)  Accounts  with  respect  to which the  Account  Debtor is
subject to an Insolvency Proceeding,  has gone out of business, or as to which a
Borrower has received notice of an imminent Insolvency  Proceeding or a material
impairment of the financial condition of such Account Debtor,

                  (k)  Accounts  with  respect  to which the  Account  Debtor is
located  in a state or  jurisdiction  (e.g.,  New  Jersey,  Minnesota,  and West
Virginia)  that  requires,  as a  condition  to  access  to the  courts  of such
jurisdiction,  that a creditor  qualify to  transact  business,  file a business
activities  report or other report or form,  or take one or more other  actions,
unless the applicable Borrower has so qualified, filed such reports or forms, or
taken such actions (and, in each case, paid any required fees or other charges),
except to the extent that the applicable Borrower may qualify  subsequently as a
foreign entity authorized to transact business in such state or jurisdiction and
gain access to such  courts,  without  incurring  any cost or penalty  viewed by
Agent to be significant in amount, and such later qualification cures any access
to such courts to enforce payment of such Account,

                  (l) Accounts, the collection of which, Agent, in its Permitted
Discretion,  believes to be doubtful by reason of the Account Debtor's financial
condition,

                  (m)  Accounts  that are not  subject to a valid and  perfected
first priority Agent's Lien,

                  (n)  Accounts  with respect to which (i) the goods giving rise
to such Account have not been shipped and billed to the Account Debtor,  or (ii)
the services  giving rise to such Account have not been  performed and billed to
the Account Debtor, or

                  (o)  Accounts  that  represent  the right to receive  progress
payments  or other  advance  billings  that are due prior to the  completion  of
performance  by the  applicable  Borrower of the subject  contract  for goods or
services.

            "Eligible  Inventory"  means  Inventory of Borrowers  consisting  of
first  quality raw  materials  or finished  goods held for sale in the  ordinary
course of Borrowers'  business,  that complies with each of the  representations
and warranties  respecting  Eligible  Inventory made in the Loan Documents,  and
that is not excluded as ineligible by virtue of the one or more of the excluding
criteria set forth below;  provided,  however, that such criteria may be revised
from  time to time by Agent in  Agent's  Permitted  Discretion  to  address  the
results of any audit or appraisal performed by Agent from time to time after the
Closing Date. In determining  the amount to be so included,  Inventory  shall be
valued  at the lower of cost or market  on a basis  consistent  with  Borrowers'
historical accounting  practices.  An item of Inventory shall not be included in
Eligible Inventory if:



                                      -11-
<PAGE>

                  (a) a Borrower does not have good, valid, and marketable title
thereto,

                  (b)  it is  not  located  at  one  of  the  locations  in  the
continental  United States set forth on Schedule E-1 unless  in-transit from one
such location to another such location,

                  (c) it is located on real property  leased by a Borrower or in
a  contract  warehouse,  in each  case,  unless  (i) in the case of the Love Box
Locations, from and after the date that is 10 days after the Closing Date, it is
the  subject of a  Collateral  Access  Agreement,  (ii) in the case of all other
locations,  it is either  the  subject of a  Collateral  Access  Agreement  or a
Landlord Reserve,  (iii) the value of the Inventory at such location is at least
$100,000, and (iv) in the case of all such locations,  it is it is segregated or
otherwise  separately  identifiable  from goods of others, if any, stored on the
premises,

                  (d)  it  is  located  at  a  location  of  a  manufacturer  or
processor,  unless (i) in the case of raw materials, it is either the subject of
a Tolling  Agreement  and a Collateral  Access  Agreement or is the subject of a
Landlord Reserve and a Tolling Reserve, (ii) in the case of all other Inventory,
it is either the subject of a Collateral Access Agreement or a Landlord Reserve,
(iii) the value of the Inventory at such location is at least $100,000, and (iv)
in  the  case  of  all  such  locations,  it is it is  segregated  or  otherwise
separately identifiable from goods of others, if any, stored on the premises,

                  (e) it is not subject to a valid and perfected  first priority
security Agent's Lien,

                  (f) it consists of goods  returned or rejected by a Borrower's
customers, or

                  (g) it  consists of goods that are  obsolete  or slow  moving,
restrictive or custom items,  work-in-process,  or goods that  constitute  spare
parts,  packaging  and  shipping  materials,  supplies  used  or  consumed  in a
Borrower's  business,  bill and  hold  goods,  defective  goods,  "seconds,"  or
Inventory acquired on consignment.

            "Eligible  Transferee"  means (a) a commercial  bank organized under
the laws of the United States, or any state thereof,  and having total assets in
excess of  $250,000,000,  (b) a commercial  bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development  or a political  subdivision of any such country and which has total
assets in excess of  $250,000,000,  provided that such bank is acting  through a
branch or agency located in the United States, (c) a finance company,  insurance
company,  or other  financial  institution  or fund that is  engaged  in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000,  (d) any Affiliate  (other than  individuals) of a Lender,  (e) so
long as no Event of Default has  occurred  and is  continuing,  any other Person
approved by Agent and Administrative  Borrower (which approval of Administrative
Borrower shall not be unreasonably, withheld,



                                      -12-
<PAGE>

delayed,  or  conditioned),  and (f)  during  the  continuation  of an  Event of
Default, any other Person approved by Agent.

            "Environmental  Actions"  means any  complaint,  summons,  citation,
notice,  directive,  order,  claim,  litigation,   investigation,   judicial  or
administrative  proceeding,  judgment,  letter, or other  communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of  Hazardous  Materials  from (a) any assets,  properties,  or
businesses  of any  Borrower,  any  Subsidiary  of a  Borrower,  or any of their
predecessors in interest,  (b) from adjoining  properties or businesses,  or (c)
from or onto any facilities which received Hazardous  Materials generated by any
Borrower,  any  Subsidiary  of a  Borrower,  or any  of  their  predecessors  in
interest.

            "Environmental Law" means any applicable federal, state, provincial,
foreign or local statute, law, rule,  regulation,  ordinance,  code, binding and
enforceable guideline,  binding and enforceable written policy or rule of common
law now or hereafter  in effect and in each case as amended,  or any judicial or
administrative  interpretation thereof, including any judicial or administrative
order, consent decree or judgment,  to the extent binding on any Borrower or any
Subsidiary  of a Borrower,  relating  to the  environment,  employee  health and
safety,  or Hazardous  Materials,  including  CERCLA;  RCRA;  the Federal  Water
Pollution Control Act, 33 USC ss. 1251 et seq; the Toxic Substances Control Act,
15 USC ss. 2601 et seq;  the Clean Air Act,  42 USC ss.  7401 et seq.;  the Safe
Drinking  Water Act, 42 USC ss. 3803 et seq.;  the Oil Pollution Act of 1990, 33
USC ss. 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act
of 1986, 42 USC ss. 11001 et seq.; the Hazardous Material Transportation Act, 49
USC ss. 1801 et seq.; and the Occupational  Safety and Health Act, 29 USC ss.651
et  seq.  (to  the  extent  it  regulates  occupational  exposure  to  Hazardous
Materials); any state and local or foreign counterparts or equivalents,  in each
case as amended from time to time.

            "Environmental   Liabilities  and  Costs"  means  all   liabilities,
monetary  obligations,  Remedial  Actions,  losses,  damages,  punitive damages,
consequential  damages,  treble  damages,  costs  and  expenses  (including  all
reasonable fees, disbursements and expenses of counsel, experts, or consultants,
and  costs  of  investigation  and  feasibility  studies),   fines,   penalties,
sanctions,  and  interest  incurred  as a result  of any  claim or demand by any
Governmental Authority or any third party, and which relate to any Environmental
Action.

            "Environmental  Lien"  means  any Lien in favor of any  Governmental
Authority for Environmental Liabilities and Costs.

            "Equipment"  means  equipment (as that term is defined in the Code),
and includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles),  computer hardware, tools, parts, and goods
(other than consumer  goods,  farm products,  or Inventory),  wherever  located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.



                                      -13-
<PAGE>

            "ERISA" means the Employee  Retirement  Income Security Act of 1974,
as amended, and any successor statute thereto.

            "ERISA  Affiliate"  means  (a) any  Person  subject  to ERISA  whose
employees  are treated as employed by the same  employer as the  employees  of a
Borrower or a Subsidiary of a Borrower under IRC Section  414(b),  (b) any trade
or business subject to ERISA whose employees are treated as employed by the same
employer as the employees of a Borrower or a Subsidiary of a Borrower  under IRC
Section 414(c),  (c) solely for purposes of Section 302 of ERISA and Section 412
of the IRC, any organization  subject to ERISA that is a member of an affiliated
service  group of which a Borrower  or a  Subsidiary  of a Borrower  is a member
under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section  412 of the IRC,  any  Person  subject  to  ERISA  that is a party to an
arrangement  with a Borrower or a Subsidiary  of a Borrower and whose  employees
are  aggregated  with the  employees of a Borrower or a Subsidiary of a Borrower
under IRC Section 414(o).

            "Event of Default" has the meaning set forth in Section 8.

            "Excess  Availability"  means, as of any date of determination,  the
amount equal to Availability  minus the aggregate  amount,  if any, of all trade
payables of Borrowers and their  Domestic  Subsidiaries  aged in excess of their
historical  levels with respect thereto and all book overdrafts of Borrowers and
their Domestic Subsidiaries in excess of their historical practices with respect
thereto,  in each  case as  determined  by  Agent in its  Permitted  Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect from time
to time.

            "Excess  Cash  Flow" has the  meaning  ascribed  thereto  in the New
Indenture.

            "Existing  Indenture" means the Indenture dated as of June 11, 1998,
as amended, among Parent, Parent's Subsidiaries that are signatories thereto and
the Existing Indenture Trustee.

            "Existing  Indenture  Change of Control" means a "Change of Control"
as that term is defined in the Existing Indenture.

            "Existing Indenture Trustee" means The Chase Manhattan Bank.

            "Existing  Notes" means Parent's  Senior  Subordinated  Notes issued
pursuant to the Existing Indenture.

            "Existing Lender" means PNC Business Credit.

            "Family  Member" means,  with respect to any  individual,  any other
individual   having  a   relationship   by  blood  (to  the  second   degree  of
consanguinity), marriage, or adoption to such individual.



                                      -14-
<PAGE>

            "Family  Trusts" means,  with respect to any  individual,  trusts or
other estate planning vehicles established for the benefit of such individual or
Family Members of such individual and in respect of which such individual serves
as trustee or in a similar capacity.

            "Fee Letter"  means that  certain fee letter,  dated as of even date
herewith,  between  Borrowers and Agent,  in form and substance  satisfactory to
Agent.

            "FEIN" means Federal Employer Identification Number.

            "Foreign Issuer" means Phillip Brothers Netherlands III BV.

            "Foreign  Subsidiary"  means any  subsidiary of any Borrower that is
not a Domestic Subsidiary.

            "Funding Date" means the date on which a Borrowing occurs.

            "Funding Losses" has the meaning set forth in Section 2.13(b)(ii).

            "GAAP" means generally accepted  accounting  principles as in effect
from time to time in the United States, consistently applied.

            "General  Intangibles"  means general  intangibles  (as that term is
defined in the Code), including payment intangibles,  contract rights, rights to
payment,  rights arising under common law, statutes,  or regulations,  choses or
things in action,  goodwill,  patents,  trade names, trade secrets,  trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to payment and
other  rights under any royalty or licensing  agreements,  infringement  claims,
computer programs,  information contained on computer disks or tapes,  software,
literature,  reports, catalogs,  insurance premium rebates, tax refunds, and tax
refund claims,  and any and all supporting  obligations in respect thereof,  and
any other  personal  property  other than  Accounts,  Deposit  Accounts,  goods,
Investment Property, and Negotiable Collateral.

            "Governing  Documents"  means,  with  respect  to  any  Person,  the
certificate  or  articles of  incorporation,  by-laws,  or other  organizational
documents of such Person.

            "Governmental  Authority" means any federal,  state, local, or other
governmental or administrative body,  instrumentality,  department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.

            "Guarantor"  means each Domestic  Subsidiary of Parent that is not a
Borrower other than Prince Mfg and PMC; provided,  however, that if the PMC Sale
Transactions have not closed on or before December 31, 2003, then each of Prince
Mfg and PMC shall become Guarantors under this Agreement.



                                      -15-
<PAGE>

            "Guarantor Security Agreement" means one or more security agreements
executed and  delivered by each  Guarantor in favor of Agent,  in each case,  in
form and substance satisfactory to Agent.

            "Guaranty" means that certain general  continuing  guaranty executed
and delivered by each Guarantor in favor of Agent, for the benefit of the Lender
Group and the Bank Product  Providers,  in form and  substance  satisfactory  to
Agent.

            "Hazardous  Materials"  means (a)  substances  that are  defined  or
listed  in,  or  otherwise  classified  pursuant  to,  any  applicable  laws  or
regulations  as  "hazardous   substances,"   "hazardous  materials,"  "hazardous
wastes," "toxic substances," or any other formulation  intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity,   reactivity,   carcinogenicity,   reproductive  toxicity,  or  "EP
toxicity",  (b) oil, petroleum,  or petroleum derived  substances,  natural gas,
natural gas liquids,  synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any  radioactive  materials,  and (d)  asbestos  in any  form  or  electrical
equipment  that  contains  any oil or  dielectric  fluid  containing  levels  of
polychlorinated biphenyls in excess of 50 parts per million.

            "Hedge  Agreement"  means any and all  agreements,  or documents now
existing  or  hereafter   entered  into  by   Administrative   Borrower  or  its
Subsidiaries  that  provide for an interest  rate,  credit,  commodity or equity
swap, cap, floor, collar,  forward foreign exchange transaction,  currency swap,
cross currency rate swap, currency option, or any combination of, or option with
respect  to,  these  or  similar  transactions,   for  the  purpose  of  hedging
Administrative  Borrower's  or its  Subsidiaries'  exposure to  fluctuations  in
interest  or  exchange  rates,  loan,  credit  exchange,  security  or  currency
valuations or commodity prices.

            "Holdout Lender" has the meaning set forth in Section 15.2(a).

            "Indebtedness" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures,  notes, or other similar instruments
and all  reimbursement  or other  obligations  in  respect of letters of credit,
bankers acceptances,  interest rate swaps, or other financial products,  (c) all
obligations as a lessee under Capital Leases, (d) all obligations or liabilities
of  others  secured  by a Lien on any  asset  of a Person  or its  Subsidiaries,
irrespective  of whether  such  obligation  or  liability  is  assumed,  (e) all
obligations  to pay the  deferred  purchase  price of assets  (other  than trade
payables incurred in the ordinary course of business and repayable in accordance
with  customary  trade  practices),   (f)  all  obligations  owing  under  Hedge
Agreements,  and  (g) any  obligation  guaranteeing  or  intended  to  guarantee
(whether directly or indirectly guaranteed,  endorsed,  co-made,  discounted, or
sold  with  recourse)  any  obligation  of any  other  Person  that  constitutes
Indebtedness under any of clauses (a) through (f) above.

            "Indemnified Liabilities" has the meaning set forth in Section 11.3.

            "Indemnified Person" has the meaning set forth in Section 11.3.



                                      -16-
<PAGE>

            "Indenture  Change of Control" has the meaning  ascribed to a Change
of Control in the New Indenture or the Existing Indenture, as applicable.

            "Indenture Collateral Agent" means HSBC Bank USA, a New York banking
corporation.

            "Indenture  Purposes" means letters of credit issued in the ordinary
course of  business  (A) in  respect  of (1)  workers'  compensations  claims or
self-insurance  or (2) other  Indebtedness  with respect to  reimbursement  type
obligations  regarding workers' compensation claims or self-insurance or (B) for
regulatory, environmental or insurance purposes.

            "Indenture  Reserve" means a reserve  established  and maintained by
Agent in an amount or amounts  equal to (a)  during the 30 day period  preceding
the  date on which a  scheduled  payment  of  interest  is due on the  Indenture
Securities,  the  aggregate  amount of such  interest  and (b) during the 30 day
period preceding the date on which a scheduled payment of interest is due on the
Existing Notes, the aggregate amount of such interest;  provided,  however, that
from the Closing Date until  November 15, 2003,  the Indenture  Reserve shall be
$2,500,000,  from  November  16, 2003 until  November 30,  2003,  the  Indenture
Reserve shall be $3,250,000,  and after November 30, 2003, the Indenture Reserve
shall be  $4,000,000  until the payment of interest due on December 1, 2003 with
respect to the Indenture Securities and the Existing Notes.

            "Indenture  Securities"  means (a) the 105,000  Units (the  "Units")
issued  by the  Parent  and  the  Foreign  Issuer  pursuant  to  the  Indenture,
consisting of  $85,000,000  aggregate  principal  amount of 13.0% Senior Secured
Notes due 2007 issued by the Parent (the "New Domestic  Notes") and  $20,000,000
aggregate  principal amount of 13.0% Senior Secured Notes due 2007 issued by the
Foreign Issuer (the "New Foreign Notes" and,  together with the Domestic  Notes,
the "Notes") and (b) any units or notes,  as the case may be, that may be issued
by the Parent or the  Foreign  Issuer  pursuant  to the  Indenture  in  exchange
therefor.

            "Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the  Bankruptcy  Code or under any other state
or  federal  bankruptcy  or  insolvency  law,  assignments  for the  benefit  of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization,  arrangement, or other similar
relief.

            "Intercompany  Advances" means loans or advances or the repayment of
loans or advances from Parent or one of its Subsidiaries to Parent or one of its
Subsidiaries.

            "Intercompany   Subordination   Agreement"   means  a  subordination
agreement  executed and  delivered by Borrowers and each of the  Guarantors  and
Agent, the form and substance of which is satisfactory to Agent.

            "Intercreditor  Agreement" means an intercreditor agreement, in form
and substance  satisfactory to Agent, between Agent and the Indenture Collateral
Agent, dated as



                                      -17-
<PAGE>

of the Closing Date, as the same may be amended,  supplemented  or modified from
time to time.

            "Interest  Expense"  means,  for any period,  the  aggregate  of the
interest expense of Parent and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.

            "Interest  Period"  means,  with  respect to each LIBOR Rate Loan, a
period  commencing  on the date of the  making of such  LIBOR  Rate Loan (or the
continuation  of a LIBOR  Rate Loan or the  conversion  of a Base Rate Loan to a
LIBOR  Rate Loan) and ending 1, 2, or 3 months  thereafter;  provided,  however,
that (a) if any Interest  Period would end on a day that is not a Business  Day,
such Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next  succeeding  Business Day, (b) interest shall accrue at the applicable rate
based  upon the LIBOR  Rate from and  including  the first day of each  Interest
Period to, but excluding,  the day on which any Interest Period expires, (c) any
Interest  Period  that  would end on a day that is not a  Business  Day shall be
extended to the next  succeeding  Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding  Business  Day, (d) with respect to an Interest  Period that begins on
the last  Business  Day of a calendar  month (or on a day for which  there is no
numerically  corresponding day in the calendar month at the end of such Interest
Period),  the Interest Period shall end on the last Business Day of the calendar
month  that is 1, 2, or 3 months  after  the date on which the  Interest  Period
began, as applicable,  and (e) Borrowers (or  Administrative  Borrower on behalf
thereof)  may not elect an  Interest  Period  which will end after the  Maturity
Date.

            "Inventory" means inventory (as that term is defined in the Code).

            "Investment"  means,  with respect to any Person,  any investment by
such Person in any other  Person  (including  Affiliates)  in the form of loans,
guarantees,  advances,  or  capital  contributions  (excluding  (a)  commission,
travel,  and similar  advances to officers and  employees of such Person made in
the  ordinary  course of  business,  and (b) bona fide  Accounts  arising in the
ordinary course of business  consistent with past practice),  purchases or other
acquisitions of Indebtedness,  Stock, or all or substantially  all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as  investments on a balance
sheet prepared in accordance with GAAP.

            "Investment  Property"  means  investment  property (as that term is
defined in the Code), and any and all supporting obligations in respect thereof.

            "IRC" means the  Internal  Revenue  Code of 1986,  as in effect from
time to time.

            "Issuing  Lender" means WFF or any other Lender that, at the request
of  Administrative  Borrower  and with the  consent  of Agent,  agrees,  in such
Lender's sole



                                      -18-
<PAGE>

discretion,  to become an Issuing  Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to Section 2.12.

            "Landlord  Reserve" means, with respect to Inventory included within
Eligible  Inventory,  a reserve  in an amount  equal to the  greater  of (a) the
number of months  rent for which a  landlord  will  have,  under the  applicable
statutory  lien, a Lien in the assets of Borrowers to secure the payment of rent
or other amounts under a lease,  or (b) 3 months rent under the lease,  for each
leased location at which Borrowers store  Inventory,  in each case as to which a
Collateral Access Agreement has not been received by Agent.

            "L/C" has the meaning set forth in Section 2.12(a).

            "L/C  Disbursement"  means  a  payment  made by the  Issuing  Lender
pursuant to a Letter of Credit.

            "L/C Undertaking" has the meaning set forth in Section 2.12(a).

            "Lender" and "Lenders" have the respective meanings set forth in the
preamble to this  Agreement,  and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1.

            "Lender Group" means,  individually  and  collectively,  each of the
Lenders (including the Issuing Lender) and Agent.

            "Lender Group Expenses"  means all (a) costs or expenses  (including
taxes,  and  insurance  premiums)  required  to be  paid  by a  Borrower  or its
Subsidiaries  under  any of the Loan  Documents  that  are  paid,  advanced,  or
incurred by the Lender  Group,  (b) fees or charges paid or incurred by Agent in
connection  with  the  Lender  Group's  transactions  with  Borrowers  or  their
Subsidiaries,  including,  fees  or  charges  for  photocopying,   notarization,
couriers and messengers,  telecommunication,  public record searches  (including
tax lien,  litigation,  and UCC searches and including  searches with the patent
and  trademark  office,  the  copyright  office,  or  the  department  of  motor
vehicles),  filing,  recording,   publication,   appraisal  (including  periodic
collateral  appraisals  or  business  valuations  to the  extent of the fees and
charges (and up to the amount of any  limitation)  contained in this  Agreement,
real  estate  surveys,   real  estate  title  policies  and  endorsements,   and
environmental   audits,  (c)  costs  and  expenses  incurred  by  Agent  in  the
disbursement of funds to or for the account of Borrowers or other members of the
Lender Group (by wire  transfer or  otherwise),  (d) charges paid or incurred by
Agent resulting from the dishonor of checks,  (e) reasonable  costs and expenses
paid or  incurred  by the Lender  Group to correct  any  default or enforce  any
provision  of the Loan  Documents,  or in gaining  possession  of,  maintaining,
handling,  preserving,  storing,  shipping,  selling,  preparing  for  sale,  or
advertising to sell the  Collateral,  or any portion  thereof,  irrespective  of
whether a sale is  consummated,  (f) audit fees and expenses of Agent related to
audit examinations of the Books to the extent of the fees and charges (and up to
the amount of any limitation) contained in this Agreement,  (g) reasonable costs
and  expenses  of third  party  claims or any other suit paid or incurred by the
Lender Group in enforcing or defending the Loan Documents or in connection  with
the transactions



                                      -19-
<PAGE>

contemplated by the Loan Documents or the Lender Group's  relationship  with any
Borrower  or any  Subsidiary  of a  Borrower,  (h)  Agent's  and  each  Lender's
reasonable costs and expenses  (including  attorneys fees) incurred in advising,
structuring,  drafting, reviewing,  administering,  syndicating, or amending the
Loan Documents,  and (i) Agent's and each Lender's reasonable costs and expenses
(including  attorneys,  accountants,  consultants,  and other  advisors fees and
expenses) incurred in terminating,  enforcing (including attorneys, accountants,
consultants,  and other advisors fees and expenses incurred in connection with a
"workout,"  a  "restructuring,"  or  an  Insolvency  Proceeding  concerning  any
Borrower or any  Subsidiary  of a Borrower or in  exercising  rights or remedies
under the Loan  Documents),  or defending the Loan  Documents,  irrespective  of
whether  suit is  brought,  or in taking  any  Remedial  Action  concerning  the
Collateral.

            "Lender-Related  Person"  means,  with  respect to any Lender,  such
Lender, together with such Lender's Affiliates,  officers, directors, employees,
attorneys, and agents.

            "Letter  of  Credit"  means  an L/C or an  L/C  Undertaking,  as the
context requires.

            "Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit.

            "LIBOR Deadline" has the meaning set forth in Section 2.13(b)(i).

            "LIBOR Notice" means a written notice in the form of Exhibit L-1.

            "LIBOR Rate"  means,  for each  Interest  Period for each LIBOR Rate
Loan, the rate per annum determined by Agent (rounded upwards, if necessary,  to
the next 1/100%) by dividing (a) the Base LIBOR Rate for such  Interest  Period,
by (b) 100% minus the  Reserve  Percentage.  The LIBOR Rate shall be adjusted on
and as of the effective day of any change in the Reserve Percentage.

            "LIBOR  Rate  Loan"  means each  portion  of an  Advance  that bears
interest at a rate determined by reference to the LIBOR Rate.

            "LIBOR Rate Margin" means 2.75 percentage points.

            "Lien" means any interest in an asset  securing an  obligation  owed
to, or a claim by, any Person other than the owner of the asset, irrespective of
whether (a) such interest is based on the common law, statute, or contract,  (b)
such interest is recorded or perfected, and (c) such interest is contingent upon
the  occurrence  of some future event or events or the  existence of some future
circumstance or circumstances. Without limiting the generality of the foregoing,
the term "Lien" includes the lien or security  interest arising from a mortgage,
deed  of  trust,  encumbrance,   pledge,  hypothecation,   assignment,   deposit
arrangement,  security  agreement,  conditional sale or trust receipt, or from a
lease,  consignment,  or  bailment  for  security  purposes  and  also  includes
reservations, exceptions,



                                      -20-
<PAGE>

encroachments,  easements, rights-of-way,  covenants, conditions,  restrictions,
leases, and other title exceptions and encumbrances affecting Real Property.

            "Loan Account" has the meaning set forth in Section 2.10.

            "Loan Documents" means this Agreement,  the Bank Product Agreements,
the Cash Management Agreements, the Control Agreements, the Disbursement Letter,
the Fee Letter, the Guarantor Security Agreement, the Guaranty, the Intercompany
Subordination  Agreement,  the Letters of Credit,  the Mortgages,  the Officers'
Certificate,  the Patent Security  Agreement,  the Stock Pledge  Agreement,  the
Trademark  Security  Agreement,  any note or notes  executed  by a  Borrower  in
connection with this Agreement and payable to a member of the Lender Group,  and
any other  agreement  entered into, now or in the future,  by a Borrower and the
Lender Group in connection with this Agreement.

            "Love Box Locations" means the contract warehouse locations at which
Borrowers store Inventory that are owned or managed by Love Box Company.

            "Material Adverse Change" means (a) a material adverse change in the
business, prospects,  operations,  results of operations, assets, liabilities or
condition (financial or otherwise) of Borrowers and their Subsidiaries, taken as
a  whole,  (b) a  material  impairment  of a  Borrower's  or a  Subsidiary  of a
Borrower's  ability to perform its obligations under the Loan Documents to which
it is a party or of the Lender  Group's  ability to enforce the  Obligations  or
realize upon the Collateral,  or (c) a material impairment of the enforceability
or priority of the Agent's  Liens with respect to the  Collateral as a result of
an action or  failure  to act on the part of a  Borrower  or a  Subsidiary  of a
Borrower.

            "Maturity Date" has the meaning set forth in Section 3.4.

            "Maximum Revolver Amount" means  $15,000,000,  as such amount may be
increased  up to a  maximum  amount  of  $40,000,000,  upon and  subject  to the
satisfaction of the conditions set forth in Section 2.2 hereof.

            "Mortgages"  means,  individually  and  collectively,  one  or  more
mortgages,  deeds of trust, or deeds to secure debt, executed and delivered by a
Borrower or a Subsidiary  of Borrower in favor of Agent,  in form and  substance
satisfactory  to Agent,  that  encumber  the Real  Property  Collateral  and the
related improvements thereto.

            "MRT"  means  Mineral  Resource   Technologies,   Inc.,  a  Delaware
corporation.

            "MRT Holdings" means MRT Holdings, LLC, a Delaware limited liability
company.

            "Multiemployer  Plan"  means a  multiemployer  plan,  as  defined in
Section  4001(a)(3) of ERISA, which is covered by Title IV of ERISA and to which
the Parent or any member of the  Controlled  Group is or was  obligated  to make
contributions.



                                      -21-
<PAGE>

            "NADAs" means "new animal drug applications" as that term is used by
the U.S. Food and Drug Administration.

            "Negotiable  Collateral"  means letters of credit,  letter of credit
rights,  instruments,  promissory notes,  drafts,  documents,  and chattel paper
(including electronic chattel paper and tangible chattel paper), and any and all
supporting obligations in respect thereof.

            "Net Liquidation  Percentage" means the percentage of the book value
of Borrowers' Inventory that is estimated to be recoverable,  net of expenses of
liquidation,  in an orderly liquidation of such Inventory, such percentage to be
as determined  from time to time by a qualified  appraisal  company  selected by
Agent.

            "New Domestic  Notes" has the meaning set forth in the definition of
Indenture Securities.

            "New Foreign  Notes" has the meaning set forth in the  definition of
Indenture Securities.

            "New  Indenture"  means the  Indenture  dated as of October 21, 2003
among Parent, Foreign Issuer, Parent's Subsidiaries that are signatories thereto
and the Indenture Collateral Agent.

            "New  Indenture  Change of  Control"  means a "Change of Control" as
that term is defined in the New Indenture.

            "Non-Obligor"  means  any  Subsidiary  of  Parent's  that  is  not a
Borrower or a Guarantor.

            "Norwegian   Subsidiaries"   means  Odda   Holdings  A.S.  and  Odda
Smelteverk A.S.

            "Obligations"  means  (a) all  loans,  Advances,  debts,  principal,
interest (including any interest that, but for the commencement of an Insolvency
Proceeding,  would have  accrued),  contingent  reimbursement  obligations  with
respect to outstanding Letters of Credit,  premiums,  liabilities (including all
amounts  charged  to  Borrowers'  Loan  Account  pursuant  hereto),  obligations
(including indemnification  obligations),  fees (including the fees provided for
in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or
expenses that, but for the commencement of an Insolvency Proceeding,  would have
accrued),  lease  payments,  guaranties,  covenants,  and duties of any kind and
description  owing by Borrowers to the Lender Group  pursuant to or evidenced by
the Loan Documents and irrespective of whether for the payment of money, whether
direct or indirect,  absolute or contingent,  due or to become due, now existing
or  hereafter  arising,  and  including  all  interest not paid when due and all
Lender Group  Expenses  that  Borrowers  are required to pay or reimburse by the
Loan Documents, by law, or otherwise, and (b) all Bank Product Obligations.  Any
reference in this Agreement or in the Loan Documents to the Obligations



                                      -22-
<PAGE>

shall include all extensions,  modifications,  renewals, or alterations thereof,
both prior and subsequent to any Insolvency Proceeding.

            "Originating Lender" has the meaning set forth in Section 14.1(e).

            "Overadvance" has the meaning set forth in Section 2.5.

            "Palladium"  means  Palladium  Equity  Partners II, L.P., a Delaware
limited  partnership,  Palladium  Equity Partners II-A, L.P., a Delaware limited
partnership,  and  Palladium  Equity  Investors  II,  L.P.,  a Delaware  limited
partnership or their respective Affiliates.

            "Parent"  has  the  meaning  set  forth  in  the  preamble  to  this
Agreement.

            "Participant" has the meaning set forth in Section 14.1(e).

            "Patent  Security  Agreement"  means  a  patent  security  agreement
executed and delivered by Borrowers  and Agent,  the form and substance of which
is satisfactory to Agent.

            "Pay-Off Letter" means a letter, in form and substance  satisfactory
to Agent,  from Existing Lender respecting the amount necessary to repay in full
all of the  obligations  of Borrowers and their  Subsidiaries  owing to Existing
Lender and obtain a release of all of the Liens  existing  in favor of  Existing
Lender in and to the assets of Borrowers and their Subsidiaries.

            "Permitted  Discretion" means a determination made in good faith and
in the exercise of reasonable  (from the  perspective  of a secured  asset-based
lender) business judgment.

            "Permitted  Dispositions"  means (a) sales or other  dispositions of
Equipment  that is  substantially  worn,  damaged,  or obsolete in the  ordinary
course of business,  (b) sales of Inventory to buyers in the ordinary  course of
business,  (c) the use or transfer of money or Cash Equivalents in a manner that
is not  prohibited by the terms of this  Agreement or the other Loan  Documents,
(d) the licensing of patents,  trademarks,  copyrights,  and other  intellectual
property rights in the ordinary  course of business,  provided that such license
permits the Borrower or any  Subsidiary of the Borrower to use the  intellectual
property so licensed without any payment therefor,  (e) so long as no Default or
Event of Default has occurred and is continuing,  dispositions  of assets (other
than current Accounts,  intellectual  property, or Inventory) so long as made at
fair  market  value and the  aggregate  amount of all such  dispositions  in any
fiscal  year does not  exceed  $250,000,  (f) the  consummation  of the PMC Sale
Transactions  on or before December 31, 2003, (g) so long as no Default or Event
of Default has occurred and is continuing,  any sale or other disposition of any
assets of a Non-Obligor to a Person that is not an Affiliate of Parent or any of
its Subsidiaries for fair market value and on an arm's length basis, (h) so long
as no Default or Event of Default has occurred and is  continuing,  transfers of
property  from a Borrower to another  Borrower or  Guarantor,  (i) so long as no
Default or Event of Default has occurred and is continuing,



                                      -23-
<PAGE>

transfers of property from a Guarantor to a Borrower or another  Guarantor,  and
(j) transfers of assets from any Non-Obligor to any Borrower or Guarantor.

            "Permitted  Distributions"  means the payment, in cash, of dividends
or  distributions  of  capital  stock  (a)  made by any  Borrower  to any  other
Borrower, (b) made by any Guarantor to a Borrower, (c) made by any Borrower to a
Guarantor,  (d) made to a Borrower or a Guarantor by a Non-Obligor,  (e) made by
Non-Obligor to any other Non-Obligor,  (f) made to Palladium as set forth in the
PMC Sale  Transactions;  provided  that such PMC Sale  Transactions  occur on or
before  December 31, 2003, (f) the redemption,  repurchase,  retirement or other
acquisition  of  the  Series  B or  Series  C  Preferred  Stock  of  the  Parent
outstanding  as of the Closing Date in exchange  for, or out of the proceeds of,
the  substantially  concurrent sale of, or equity  contribution with respect to,
capital  stock of the Parent,  and (g) the  repurchase  of capital  stock of the
Parent  (including  options,  warrants or other  rights to acquire  such capital
stock) from  departing  or deceased  directors,  officers  and  employees of the
Parent and its  Subsidiaries  pursuant to the terms of an employee benefit plan,
employee  agreement or shareholders  agreement by utilizing the cash proceeds of
those  insurance  policies  listed on  Exhibit  P-1 plus an amount not to exceed
$500,000 in the aggregate for all such repurchases.

            "Permitted Holder" means Jack C. Bendheim,  his Family Members,  and
his Family Trusts.

            "Permitted  Intercompany  Advance" means  Intercompany  Advances (a)
made by any  Borrower  to any other  Borrower,  (b) made by any  Guarantor  to a
Borrower or a Guarantor,  (c) made by any Borrower to a Guarantor, (d) made by a
Non-Obligor  to any other  Non-Obligor  or to any Borrower or Guarantor,  (e) so
long as no Default or Event of Default has occurred and is  continuing  or would
result therefrom and so long as Excess  Availability is at least $1 million both
before and after giving  effect to any such  Intercompany  Advance,  made by any
Borrower or Guarantor to any Non-Obligor up to the aggregate principal amount of
all  such   Intercompany   Advances  from  all  Borrowers  and  all  Guarantors,
collectively,  to all Non-Obligors,  collectively, of (i) $2,000,000 at any time
outstanding  from the Closing Date through and including  December 31, 2003; and
(ii) $3,000,000 at any time outstanding after December 31, 2003.

            "Permitted  Investments"  means  (a)  Investments  in cash  and Cash
Equivalents,  (b)  Investments in negotiable  instruments  for  collection,  (c)
advances made in connection  with purchases of goods or services in the ordinary
course of business,  (d) Investments  received in settlement of amounts due to a
Borrower or any  Subsidiary  of a Borrower  effected in the  ordinary  course of
business or owing to a Borrower or any  Subsidiary  of a Borrower as a result of
Insolvency  Proceedings  involving an Account Debtor or upon the  foreclosure or
enforcement  of any Lien in favor of a Borrower or any Subsidiary of a Borrower,
(e) loans or  advances to  employees  in the  ordinary  course of business in an
amount not to exceed $200,000 per individual and $500,000 in the aggregate,  (f)
an Investment the sole  consideration for which consists of, or is made with the
proceeds of, the substantially  concurrent sale of, or equity  contribution with
respect to, capital stock of the



                                      -24-
<PAGE>

Parent, (g) Hedge Agreements entered into in the ordinary course of the business
of the  Borrowers  and their  Subsidiaries,  (h) notes,  obligations,  and other
securities received in connection with Permitted  Dispositions,  (i) Investments
by any Non-Obligor; and (j) Investments comprising the PMC Sale Transactions.

            "Permitted  Liens"  means  (a) Liens  held by  Agent,  (b) Liens for
unpaid taxes that either (i) are not yet  delinquent,  or (ii) do not constitute
an Event of Default  hereunder  and are the subject of Permitted  Protests,  (c)
Liens set forth on Schedule P-1, (d) the  interests of lessors  under  operating
leases,  (e)  purchase  money Liens or the  interests of lessors  under  Capital
Leases to the extent  that such Liens or  interests  secure  Permitted  Purchase
Money Indebtedness and so long as such Lien attaches only to the asset purchased
or acquired and the proceeds  thereof,  (f) Liens arising by operation of law in
favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers,  incurred in the ordinary  course of  Borrowers'  business and not in
connection with the borrowing of money,  and which Liens either (i) are for sums
not yet  delinquent,  or (ii) are the subject of Permitted  Protests,  (g) Liens
arising from deposits made in connection with obtaining worker's compensation or
other  unemployment  insurance,  (h) Liens or deposits to secure  performance of
bids,  tenders, or leases incurred in the ordinary course of business and not in
connection with the borrowing of money, (i) Liens granted as security for surety
or appeal bonds in connection  with obtaining such bonds in the ordinary  course
of business, (j) Liens resulting from any judgment or award that is not an Event
of Default hereunder, (k) with respect to any Real Property,  easements,  rights
of way, zoning  restrictions,  title irregularities and other similar charges or
encumbrances  that  do not  materially  interfere  with  or  impair  the  use or
operation  thereof,  (l)  Liens  in and  to the  assets  and  properties  of the
Borrowers and Guarantors in favor of the Indenture  Collateral  Agent, (m) Liens
in and to the assets and properties of the Foreign  Issuer and its  Subsidiaries
in favor of the Indenture Collateral Agent (or any sub-collateral agent thereof)
to secure  the New  Foreign  Notes,  (n) Liens in favor of customs  and  revenue
authorities  arising as a matter of the law to secure the payment of customs and
duties  in  connection  with  the  importation  of  goods,  (o)  Liens  securing
obligations  arising  from  statutory,  regulatory,  or  warranty  requirements,
including the  performance of statutory  obligations,  surety or appeal bonds or
performance  bonds  or  landlords',   carriers',   warehousemen's,   mechanics',
suppliers',  materialmen's  or any other like Liens, in any case incurred in the
ordinary  course  of  business  provided  that the  foregoing  does  not  secure
Indebtedness  and the Liens do not attach to  Accounts or  Inventory,  (p) Liens
securing  Indebtedness  of a Person  existing  at the time that  such  Person is
merged into or consolidated with a Borrower or a Guarantor;  provided,  however,
that such Liens were in existence prior to the  contemplation  of such merger or
consolidation  and do not  extend to any  assets  other than those of the Person
that is merged or  consolidated  with a Borrower  or a  Guarantor,  (q) Liens on
property  acquired by a Borrower or a Guarantor;  provided,  however,  that such
Liens were in existence prior to the  contemplation  of such  acquisition and do
not extend to any other property other than the acquired property,  (r) Liens in
respect of Hedge  Agreements  entered into the ordinary course of business,  (s)
leases or subleases granted to others that do not materially  interfere with the
ordinary course of business of a Borrower or its Subsidiaries, (t) Liens arising
from filing precautionary Uniform Commercial Code financing statements regarding
operating leases, (u) Liens securing Indebtedness incurred to



                                      -25-
<PAGE>

amend, modify,  renew, refund,  replace or refinance  Indebtedness that has been
secured by a Lien  permitted  under this  Agreement,  provided that (1) and such
Lien does not  extend  to or cover  any  assets or  property  not  securing  the
Indebtedness so amended, modified,  renewed,  refunded,  replaced, or refinanced
and (2) the subject Indebtedness is permitted under this Agreement, (v) Liens on
amounts  deposited  with a trustee  under an  indenture  solely  to  secure  the
administrative fees due to such trustee, (w) Liens solely upon assets of Foreign
Subsidiaries  securing  Indebtedness  or  obligations  of Foreign  Subsidiaries,
provided  that no asset of Parent or any Domestic  Subsidiary  is subject to any
such Lien,  (x)  bankers'  acceptances  issued or created for the account of any
Person to the extent that the Indebtedness evidenced thereby was permitted to be
incurred under the terms of this Agreement,  and (y) Liens arising in connection
with the placement by any Borrower or any  Subsidiary,  as the case may be, of a
reasonable amount of cash (as determined in good faith by such Person's board of
directors)  not to exceed  $1  million  in escrow  against  any  obligations  to
Palladium  under the PMC Sale  Transactions  as  permitted  pursuant  to Section
7.1(l).

                  "Permitted Protest" means the right of Administrative Borrower
or any of its Subsidiaries to protest any Lien (other than any Lien that secures
the Obligations),  taxes (other than payroll taxes or taxes that are the subject
of a United States  federal tax lien),  or rental  payment,  provided that (a) a
reserve  with respect to such  obligation  is  established  on the Books in such
amount as is required  under GAAP,  (b) any such protest is instituted  promptly
and prosecuted diligently by Administrative Borrower or any of its Subsidiaries,
as applicable,  in good faith,  and (c) Agent is satisfied that,  while any such
protest is pending,  there will be no material impairment of the enforceability,
validity, or priority of any of the Agent's Liens.

            "Permitted  Purchase Money  Indebtedness"  means,  as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate amount outstanding at any one time not in excess of $5,000,000.

            "Permitted Reorganization  Transactions" means (a) the merger of one
Borrower (other than Parent) with and into another Borrower, (b) the dissolution
and  transfer  of assets or  properties  by a Borrower  (other  than  Parent) to
another  Borrower,  (c) the  merger  of one  Guarantor  with  and  into  another
Guarantor  or into a Borrower,  (d) the  dissolution  and  transfer of assets or
properties by a Guarantor to another Guarantor or a Borrower,  (e) the merger of
a Non-Obligor  with and into another  Non-Obligor,  or (f) the  dissolution  and
transfer of the assets or properties of a Non-Obligor to another Non-Obligor,  a
Guarantor,  or to a  Borrower  (so long  as,  in the  case of a  Guarantor  or a
Borrower they do not become liable, directly or indirectly,  for any liabilities
of such Non-Obligor).

            "Person"  means natural  persons,  corporations,  limited  liability
companies,  limited  partnerships,   general  partnerships,   limited  liability
partnerships,  joint ventures,  trusts,  land trusts,  business trusts, or other
organizations,  irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.



                                      -26-
<PAGE>

            "Pfizer" means Pfizer Inc., a Delaware corporation.

            "Pfizer  Pay-Off  Letter"  means a  letter,  in form  and  substance
satisfactory to Agent,  from Pfizer  respecting the amount necessary to repay in
full all of the  Indebtedness  of  Borrowers  and  their  Subsidiaries  owing to
Pfizer.

            "Plan"  means  an  employee  pension  benefit  plan,  excluding  any
Multiemployer  Plan,  which is  covered  by Title IV of ERISA or  subject to the
minimum funding standards under Section 412 of the IRC as to which the Parent or
any ERISA Affiliate, may have any liability.

            "PMC"   means  The  Prince   Manufacturing   Company,   an  Illinois
corporation.

            "PMC  Sale  Transactions"  means  the  following   transactions  and
payments,  including payments required pursuant to the documents evidencing such
transactions:  (a) the transfer of ownership to Palladium of PMC, which would be
valued at approximately $21 million, (b) the reduction of the preferred stock in
Parent held by Palladium to $15.2 million (as of September  30,  2003),  (c) the
termination  of any obligation of Parent or its  Subsidiaries  in respect of the
$2,250,000  annual  management  advisory fee,  subject to reinstatement if these
transactions  are not  consummated  on or before  December  31,2003,  (d) a cash
payment to Palladium of $10,000,000 from the recent sale of MRT, (e) payments by
PMC to Borrowers  for central  support  services for the three years ending June
30,  2006 of  $1,000,000,  $500,000,  and  $200,000,  respectively,  (f)  supply
arrangements  between  Borrowers and PMC with respect to manganous oxide and red
iron oxide, (g) customary representations,  warranties and indemnities by Parent
and provisions for closing working capital  balance  adjustments,  settlement of
intercompany  accounts  owed  to PMC,  a  closing  fee of  $500,000  payable  to
Palladium  and the  agreement  of Parent to pay or reimburse  Palladium  for its
reasonable out-of-pocket expenses, (h) on or before the date of the consummation
of the other  transactions,  the transfer by PMC to Prince  Agriproducts  of (i)
that portion of the Real Property owned by PMC located in Quincy,  Illinois that
includes the office building, the parking lot, and the laboratory,  and (ii) the
information  technology  and  other  systems  related  to the  operation  of the
business of PMC and Prince Agriproducts,  and (h) the establishment by Parent of
a  $1,000,000  escrow or other  credit  support  for two years to secure its net
working  capital and  indemnification  obligations  and the  indemnification  of
Palladium,  payable after the maturity of the Domestic Notes, for a portion,  at
the rate of $0.65 for every dollar, of the amount they receive in respect of the
disposition of PMC less than $21 million,  up to a maximum  payment by Parent of
$4,000,000.

            "Prince  Agriproducts" means Prince  Agriproducts,  Inc., a Delaware
corporation.

            "Prince Mfg" means  Prince Mfg,  LLC, a Delaware  limited  liability
company.

            "Prince Real Property"  means the Real Property owned by PMC located
in Quincy, Illinois, Bowmanstown, Pennsylvania and Phoenix City, Alabama.



                                      -27-
<PAGE>

            "Projections"  means  Parent's  forecasted (a) balance  sheets,  (b)
profit and loss  statements,  and (c) cash flow  statements,  all  prepared on a
consistent basis with Parent's historical  financial  statements,  together with
appropriate supporting details and a statement of underlying assumptions.

            "Pro Rata Share" means, as of any date of determination:

            (a) with  respect  to a Lender's  obligation  to make  Advances  and
receive payments of principal,  interest, fees, costs, and expenses with respect
thereto,  (i) prior to the Revolver  Commitments  being terminated or reduced to
zero, the percentage obtained by dividing (y) such Lender's Revolver Commitment,
by (z) the  aggregate  Revolver  Commitments  of all Lenders,  and (ii) from and
after the time that the Revolver  Commitments have been terminated or reduced to
zero,  the  percentage  obtained  by  dividing  (y)  the  aggregate  outstanding
principal  amount of such  Lender's  Advances by (z) the  aggregate  outstanding
principal amount of all Advances,

            (b) with respect to a Lender's  obligation to participate in Letters
of Credit, to reimburse the Issuing Lender, and to receive payments of fees with
respect  thereto,  (i) prior to the Revolver  Commitments  being  terminated  or
reduced to zero, the percentage  obtained by dividing (y) such Lender's Revolver
Commitment,  by (z) the aggregate Revolver  Commitments of all Lenders, and (ii)
from and after the time that the Revolver  Commitments  have been  terminated or
reduced  to  zero,  the  percentage  obtained  by  dividing  (y)  the  aggregate
outstanding  principal  amount of such  Lender's  Advances by (z) the  aggregate
outstanding principal amount of all Advances,

            (c) with  respect  to all other  matters as to a  particular  Lender
(including the  indemnification  obligations  arising under Section  16.7),  the
percentage obtained by dividing (i) such Lender's Revolver  Commitment,  by (ii)
the aggregate amount of Revolver Commitments of all Lenders; provided,  however,
that in the event the Revolver  Commitments  have been  terminated or reduced to
zero,  Pro Rata Share  under this  clause  shall be the  percentage  obtained by
dividing (A) the  outstanding  principal  amount of such Lender's  Advances plus
such Lender's ratable portion of the Risk  Participation  Liability with respect
to outstanding Letters of Credit, by (B) the outstanding principal amount of all
Advances  plus the aggregate  amount of the Risk  Participation  Liability  with
respect to outstanding Letters of Credit.

            "Purchase Money  Indebtedness"  means  Indebtedness  (other than the
Obligations, but including Capitalized Lease Obligations),  incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.

            "Qualified Cash" means, as of any date of determination,  the amount
of unrestricted  cash and Cash  Equivalents of Borrowers and their  Subsidiaries
that is in  Deposit  Accounts  or in  Securities  Accounts,  or any  combination
thereof,  and which such Deposit Account or Securities Account is the subject of
a  Control  Agreement  and is  maintained  by a  branch  office  of the  bank or
securities intermediary located within the United States.



                                      -28-
<PAGE>

            "Real  Property" means any estates or interests in real property now
owned or hereafter  acquired by any Borrower or a Subsidiary of any Borrower and
the improvements thereto.

            "Real  Property  Collateral"  means the  parcel or  parcels  of Real
Property  identified on Schedule R-1 and any Real Property hereafter acquired by
a Borrower or any Subsidiary of a Borrower.

            "Record" means information that is inscribed on a tangible medium or
which  is  stored  in an  electronic  or  other  medium  and is  retrievable  in
perceivable form.

            "Remedial  Action" means all actions taken to (a) clean up,  remove,
remediate,  contain,  treat,  monitor,  assess,  evaluate, or in any way address
Hazardous  Materials  in the  indoor or  outdoor  environment,  (b)  prevent  or
minimize a release or threatened  release of Hazardous  Materials so they do not
migrate or endanger or  threaten  to  endanger  public  health or welfare or the
indoor  or  outdoor   environment,   (c)  perform  any   pre-remedial   studies,
investigations,  or post-remedial operation and maintenance  activities,  or (d)
conduct any other actions authorized by 42 USC ss. 9601.

            "Replacement Lender" has the meaning set forth in Section 15.2(a).

            "Report" has the meaning set forth in Section 16.17.

            "Required  Availability"  means  that  Excess  Availability  exceeds
$15,000,000.

            "Required  Lenders" means, at any time,  Lenders whose aggregate Pro
Rata Shares  (calculated  under clause (c) of the definition of Pro Rata Shares)
equal or exceed 50.1%.

            "Reserve  Percentage" means, on any day, for any Lender, the maximum
percentage  prescribed by the Board of Governors of the Federal  Reserve  System
(or  any  successor   Governmental   Authority)  for   determining  the  reserve
requirements  (including  any  basic,   supplemental,   marginal,  or  emergency
reserves) that are in effect on such date with respect to  eurocurrency  funding
(currently  referred to as "eurocurrency  liabilities")  of that Lender,  but so
long as such Lender is not required or directed under applicable  regulations to
maintain such reserves, the Reserve Percentage shall be zero.

            "Revolver  Commitment"  means,  with  respect  to each  Lender,  its
Revolver  Commitment,   and,  with  respect  to  all  Lenders,   their  Revolver
Commitments,  in each case as such  Dollar  amounts  are set forth  beside  such
Lender's name under the applicable  heading on Schedule C-1 or in the Assignment
and  Acceptance  pursuant  to which such  Lender  became a Lender  hereunder  in
accordance with the provisions of Section 14.1.

            "Revolver Usage" means, as of any date of determination,  the sum of
(a) the then extant  amount of  outstanding  Advances,  plus (b) the then extant
amount of the Letter of Credit Usage.



                                      -29-
<PAGE>

            "Risk  Participation  Liability" means, as to each Letter of Credit,
all reimbursement obligations of Borrowers to the Issuing Lender with respect to
an L/C Undertaking,  consisting of (a) the amount available to be drawn or which
may become  available  to be drawn,  (b) all amounts  that have been paid by the
Issuing  Lender  to the  Underlying  Issuer  to the  extent  not  reimbursed  by
Borrowers, whether by the making of an Advance or otherwise, and (c) all accrued
and unpaid interest, fees, and expenses payable with respect thereto.

            "SEC" means the United States Securities and Exchange Commission and
any successor thereto.

            "Securities  Account"  means a "securities  account" as that term is
defined in the Code.

            "Settlement" has the meaning set forth in Section 2.3(f)(i).

            "Settlement Date" has the meaning set forth in Section 2.3(f)(i).

            "Single  Employer  Plan"  means a Plan  maintained  by Parent or any
ERISA  Affiliate  for  employees  of the Parent or any member of the  Controlled
Group.

            "Solvent"  means,  with respect to any Person on a particular  date,
that, at fair valuations, the sum of such Person's assets is greater than all of
such Person's debts.

            "Stock"   means   all   shares,   options,   warrants,    interests,
participations,  or other equivalents  (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other  "equity  security"  (as such term is  defined  in Rule  3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).

            "Stock Pledge Agreement" means a stock pledge agreement, in form and
substance  satisfactory  to Agent,  executed and  delivered by each Borrower and
each Guarantor that owns Stock of a Subsidiary of Parent.

            "Subsidiary" of a Person means a corporation,  partnership,  limited
liability  company,  or other entity in which that Person directly or indirectly
owns or controls  the shares of Stock  having  ordinary  voting power to elect a
majority of the board of directors  (or appoint  other  comparable  managers) of
such corporation, partnership, limited liability company, or other entity.

            "Supplemental   Indenture"   means  a  supplement  to  the  Existing
Indenture, in form and substance reasonably satisfactory to Agent, which defines
this Agreement as a Credit Facility thereunder.



                                      -30-
<PAGE>

            "Swing Lender" means WFF or any other Lender that, at the request of
Administrative  Borrower and with the consent of Agent agrees,  in such Lender's
sole discretion, to become the Swing Lender under Section 2.3(d).

            "Swing Loan" has the meaning set forth in Section 2.3(d)(i).

            "Taxes" has the meaning set forth in Section 16.11.

            "Tolling Agreement" means a tolling agreement executed and delivered
by each  processor  of raw  materials  constituting  Inventory of a Borrower and
Agent, the form and substance of which is satisfactory to Agent.

            "Tolling Reserve" means,  with respect to Inventory  included within
Eligible  Inventory,  a reserve  established  and  maintained  by Agent,  in its
Permitted  Discretion,  in an amount  equal to Agent's  estimate of the costs of
completing the processing of raw materials by a manufacturer  or processor other
than Parent or any of its  Subsidiaries  (and any work in process  with the same
manufacturer or processor) into finished goods and obtaining the release thereof
from the  manufacturer  or processor  (including  the discharge of any Lien that
such Person has as to the subject Inventory).

            "Trademark  Security Agreement" means a trademark security agreement
executed and  delivered by each  Borrower and Agent,  the form and  substance of
which is satisfactory to Agent.

            "UCC Filing  Authorization  Letter"  means a letter duly executed by
each Borrower and each Guarantor authorizing Agent to file appropriate financing
statements on Form UCC-1 without the signature of such Borrower or Guarantor, as
applicable,  in such office or offices as may be necessary or, in the opinion of
Agent,  desirable to perfect the security  interests  purported to be created by
the Loan Documents.

            "Underlying Issuer" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrowers.

            "Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.

            "Unfunded  Liabilities"  means  the  amount,  if any,  by which  the
current  liability as shown on line 1d(2)(a) of the most recently filed Schedule
B of Form 5500  under each  Single  Employer  Plan  subject to Title IV of ERISA
exceeds  the fair  market  value of all such  Plan's  assets  allocable  to such
benefits, all determined as of the then most recent valuation date for such Plan
for which a Schedule B is available.

            "United States" means the United States of America.

            "Voidable Transfer" has the meaning set forth in Section 17.7.



                                      -31-
<PAGE>

            "Wagner Industries  Location" means the contract warehouse locations
at  which  Borrowers  store  Inventory  that  are  owned or  managed  by  Wagner
Industries.

            "Wells  Fargo"  means  Wells  Fargo Bank,  National  Association,  a
national banking association.

            "WFF" means Wells Fargo Foothill, Inc., a California corporation.

      1.2 Accounting Terms. All accounting terms not specifically defined herein
shall  be  construed  in  accordance  with  GAAP.  When  used  herein,  the term
"financial  statements" shall include the notes and schedules thereto.  Whenever
the term  "Borrowers"  or the term  "Parent"  is used in respect of a  financial
covenant or a related definition,  it shall be understood to mean Parent and its
Subsidiaries  on a  consolidated  basis  unless  the  context  clearly  requires
otherwise.

      1.3 Code.  Any terms used in this  Agreement  that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.

      1.4  Construction.  Unless the context of this Agreement or any other Loan
Document  clearly  requires  otherwise,  references  to the plural  include  the
singular, references to the singular include the plural, the term "including" is
not  limiting,  and the term "or" has,  except where  otherwise  indicated,  the
inclusive  meaning  represented  by the  phrase  "and/or."  The words  "hereof,"
"herein,"  "hereby,"  "hereunder,"  and similar  terms in this  Agreement or any
other Loan Document refer to this Agreement or such other Loan Document,  as the
case may be, as a whole and not to any particular provision of this Agreement or
such other  Loan  Document,  as the case may be.  Section,  subsection,  clause,
schedule,  and exhibit  references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement,  instrument,  or document shall include all alterations,  amendments,
changes,  extensions,  modifications,  renewals,  replacements,   substitutions,
joinders,  and supplements,  thereto and thereof,  as applicable (subject to any
restrictions   on   such   alterations,    amendments,    changes,   extensions,
modifications, renewals, replacements,  substitutions, joinders, and supplements
set  forth  herein).  Any  reference  herein  to the  repayment  in  full of the
Obligations  shall mean the repayment in full in cash of all  Obligations  other
than  contingent  indemnification  Obligations  and other than any Bank  Product
Obligations  that,  at such time,  are allowed by the  applicable  Bank  Product
Provider  to  remain  outstanding  and are not  required  to be  repaid  or cash
collateralized  pursuant to the  provisions  of this  Agreement.  Any  reference
herein to any Person shall be construed to include such Person's  successors and
assigns.  Any  requirement  of a writing  contained  herein or in the other Loan
Documents  shall be  satisfied  by the  transmission  of a Record and any Record
transmitted  shall constitute a  representation  and warranty as to the accuracy
and completeness of the information contained therein.

      1.5 Schedules and Exhibits.  All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.



                                      -32-
<PAGE>

2. LOAN AND TERMS OF PAYMENT.

      2.1 Revolver Advances.

                  (a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender with a Revolver Commitment agrees
(severally,  not jointly or jointly and severally) to make advances ("Advances")
to  Borrowers  in an  amount  at any one time  outstanding  not to  exceed  such
Lender's  Pro Rata  Share of an amount  equal to the  lesser of (i) the  Maximum
Revolver  Amount  less the sum of (A) the  Letter of Credit  Usage,  and (B) the
Indenture  Reserve,  (ii) the Borrowing Base less the Letter of Credit Usage, or
(iii) $15,000,000.

                  (b)   Anything   to  the   contrary   in  this   Section   2.1
notwithstanding,  Agent  shall  have the  right  (without  double  counting)  to
establish reserves in such amounts,  and with respect to such matters,  as Agent
in its Permitted  Discretion  shall deem necessary or  appropriate,  against the
Borrowing Base,  including  reserves with respect to (i) sums that Borrowers are
required to pay (such as taxes, assessments, insurance premiums, or, in the case
of leased  assets,  rents or other  amounts  payable  under such leases) and has
failed to pay under any Section of this  Agreement  or any other Loan  Document,
and (ii) amounts owing by Borrowers or their  Subsidiaries  to any Person to the
extent secured by a Lien on, or trust over,  any of the  Collateral  (other than
any Permitted Lien),  which Lien or trust, in the Permitted  Discretion of Agent
likely  would have a priority  superior to the  Agent's  Liens (such as Liens or
trusts in favor of landlords,  warehousemen,  carriers, mechanics,  materialmen,
laborers,  or suppliers,  or Liens or trusts for ad valorem,  excise,  sales, or
other taxes where given  priority under  applicable  law) in and to such item of
the Collateral. In addition to the foregoing, Agent shall have the right to have
the Borrowers'  Inventory  reappraised by a qualified appraisal company selected
by  Agent  from  time to  time  after  the  Closing  Date  for  the  purpose  of
re-determining the Net Liquidation  Percentage of the Eligible Inventory and, as
a result, re-determining the Borrowing Base.

                  (c)  The  Lenders  with  Revolver  Commitments  shall  have no
obligation to make additional  Advances  hereunder to the extent such additional
Advances would cause the Revolver Usage to exceed the Maximum Revolver Amount.

                  (d)  Amounts  borrowed  pursuant  to this  Section  2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.

      2.2  Increase  in the Maximum  Revolver  Amount At any time within 90 days
after  the  Closing  Date,   upon  5  Business  Days  prior  written  notice  by
Administrative  Borrower  to Agent,  Borrowers  may  request an  increase in the
Maximum  Revolver  Amount from  $15,000,000  up to  $40,000,000.  Subject to the
foregoing,  and so long as no Default or Event of Default  has  occurred  and is
continuing  as of the  proposed  date of such  increase,  so long as  Agent  has
completed all of its legal,  business, and collateral due diligence with respect
to Borrowers and Guarantors,  and so long as WFF has obtained  credit  committee
approval for the increase in the Maximum  Revolver  Amount for amounts in excess
of


                                      -33-
<PAGE>

$15,000,000  (it being  expressly  understood and agreed that, as of the Closing
Date,  WFF does not have such credit  approval  and has made no  commitments  or
assurances that such credit approval will be forthcoming),  the Maximum Revolver
Amount shall  automatically  increase by the amount requested by  Administrative
Borrower on the date of the proposed increase.  Borrowers  acknowledge and agree
that the Applicable  Prepayment Premium and the unused line fee set forth in the
Fee Letter are each  calculated by reference to the Maximum  Revolver Amount and
an  increase  in the  amount  thereof  pursuant  hereto  will have the effect of
increasing  such fee. The increase in the Maximum  Revolver  Amount  pursuant to
this  Section  2.2  shall  increase  the  Revolving  Commitment  of each  Lender
proportionately in accordance with its Pro Rata Share thereof.

      2.3 Borrowing Procedures and Settlements.

                  (a) Procedure for Borrowing.  Each Borrowing  shall be made by
an irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 1:00 p.m.  (New York time) on the
Business Day prior to the date that is the requested Funding Date specifying (i)
the amount of such Borrowing,  and (ii) the requested  Funding Date, which shall
be a Business Day;  provided,  however,  that in the case of a request for Swing
Loan in an amount of $3,000,000, or less, such notice will be timely received if
it is received by Agent no later than 1:00 p.m.  (New York time) on the Business
Day  that is the  requested  Funding  Date).  At  Agent's  election,  in lieu of
delivering the above-described  written request,  any Authorized Person may give
Agent  telephonic  notice  of  such  request  by  the  required  time.  In  such
circumstances, Borrowers agree that any such telephonic notice will be confirmed
in  writing  within 24 hours of the  giving of such  notice  and the  failure to
provide such written confirmation shall not affect the validity of the request.

                  (b) Agent's Election.  Promptly after receipt of a request for
a Borrowing  pursuant to Section  2.3(a),  Agent shall elect, in its discretion,
(i) to have the terms of Section  2.3(c) apply to such requested  Borrowing,  or
(ii) if the Borrowing is for an Advance, to request Swing Lender to make a Swing
Loan  pursuant  to the terms of Section  2.3(d) in the  amount of the  requested
Borrowing;  provided,  however,  that  if  Swing  Lender  declines  in its  sole
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
have the terms of Section 2.3(c) apply to such requested Borrowing.

                  (c) Making of Loans.

                  (i) In the event that Agent  shall  elect to have the terms of
            this Section  2.3(c) apply to a requested  Borrowing as described in
            Section  2.3(b),  then  promptly  after  receipt of a request  for a
            Borrowing  pursuant  to  Section  2.3(a),  Agent  shall  notify  the
            Lenders,  not later than 4:00 p.m.  (New York time) on the  Business
            Day immediately  preceding the Funding Date applicable  thereto,  by
            telecopy,  telephone, or other similar form of transmission,  of the
            requested  Borrowing.  Each  Lender  shall  make the  amount of such
            Lender's  Pro Rata Share of the  requested  Borrowing  available  to
            Agent in immediately  available funds, to Agent's Account, not later
            than 1:00 p.m. (New York time)



                                      -34-
<PAGE>

            on the Funding Date applicable thereto. After Agent's receipt of the
            proceeds of such  Advances,  Agent shall make the  proceeds  thereof
            available to Administrative  Borrower on the applicable Funding Date
            by transferring  immediately  available funds equal to such proceeds
            received by Agent to Administrative  Borrower's  Designated Account;
            provided,  however,  that,  subject  to the  provisions  of  Section
            2.3(i),  Agent shall not  request any Lender to make,  and no Lender
            shall have the  obligation to make,  any Advance if Agent shall have
            actual  knowledge that (1) one or more of the applicable  conditions
            precedent  set  forth  in  Section  3 will not be  satisfied  on the
            requested  Funding  Date for the  applicable  Borrowing  unless such
            condition  has been waived,  or (2) the  requested  Borrowing  would
            exceed the Availability on such Funding Date.

                  (ii) Unless Agent receives notice from a Lender on or prior to
            the Closing Date or, with respect to any Borrowing after the Closing
            Date,  prior to noon (New York time) on the date of such  Borrowing,
            that  such  Lender  will not  make  available  as and when  required
            hereunder to Agent for the account of  Borrowers  the amount of that
            Lender's Pro Rata Share of the Borrowing, Agent may assume that each
            Lender  has made or will  make  such  amount  available  to Agent in
            immediately  available  funds on the Funding Date and Agent may (but
            shall not be so required),  in reliance upon such  assumption,  make
            available to Borrowers on such date a corresponding  amount.  If and
            to the  extent  any  Lender  shall  not have  made  its full  amount
            available to Agent in immediately  available funds and Agent in such
            circumstances  has made  available  to Borrowers  such amount,  that
            Lender shall on the Business  Day  following  such Funding Date make
            such  amount  available  to Agent,  together  with  interest  at the
            Defaulting  Lender  Rate for each day during such  period.  A notice
            submitted by Agent to any Lender with respect to amounts owing under
            this subsection shall be conclusive,  absent manifest error. If such
            amount is so made available,  such payment to Agent shall constitute
            such  Lender's  Advance on the date of Borrowing for all purposes of
            this Agreement. If such amount is not made available to Agent on the
            Business  Day  following   the  Funding  Date,   Agent  will  notify
            Administrative  Borrower of such failure to fund and, upon demand by
            Agent, Borrowers shall pay such amount to Agent for Agent's account,
            together with  interest  thereon for each day elapsed since the date
            of such  Borrowing,  at a rate per annum equal to the interest  rate
            applicable at the time to the Advances composing such Borrowing. The
            failure of any Lender to make any Advance on any Funding  Date shall
            not relieve any other Lender of any obligation  hereunder to make an
            Advance on such Funding Date, but no Lender shall be responsible for
            the  failure of any other  Lender to make the  Advance to be made by
            such other Lender on any Funding Date.

            (iii) Agent  shall not be  obligated  to  transfer  to a  Defaulting
            Lender any payments  made by  Borrowers to Agent for the  Defaulting
            Lender's



                                      -35-
<PAGE>

            benefit,  and,  in the absence of such  transfer  to the  Defaulting
            Lender,  Agent  shall  transfer  any  such  payments  to each  other
            non-Defaulting   Lender  member  of  the  Lender  Group  ratably  in
            accordance with their  Commitments (but only to the extent that such
            Defaulting  Lender's  Advance was funded by the other members of the
            Lender Group) or, if so directed by  Administrative  Borrower and if
            no Default or Event of Default had occurred and is  continuing  (and
            to the extent such Defaulting Lender's Advance was not funded by the
            Lender Group), retain same to be re-advanced to Borrowers as if such
            Defaulting  Lender had made  Advances to  Borrowers.  Subject to the
            foregoing, Agent may hold and, in its Permitted Discretion,  re-lend
            to Borrowers for the account of such Defaulting Lender the amount of
            all such payments  received and retained by Agent for the account of
            such  Defaulting  Lender.  Solely  for the  purposes  of  voting  or
            consenting  to  matters  with  respect to the Loan  Documents,  such
            Defaulting  Lender  shall be deemed  not to be a  "Lender"  and such
            Lender's  Commitment  shall be deemed to be zero. This Section shall
            remain   effective  with  respect  to  such  Lender  until  (x)  the
            Obligations  under this Agreement  shall have been declared or shall
            have become  immediately  due and  payable,  (y) the  non-Defaulting
            Lenders,  Agent, and Administrative  Borrower shall have waived such
            Defaulting Lender's default in writing, or (z) the Defaulting Lender
            makes its Pro Rata Share of the applicable Advance and pays to Agent
            all  amounts  owing by  Defaulting  Lender in respect  thereof.  The
            operation  of this  Section  shall not be  construed  to increase or
            otherwise affect the Commitment of any Lender,  to relieve or excuse
            the performance by such Defaulting Lender or any other Lender of its
            duties  and  obligations  hereunder,  or to  relieve  or excuse  the
            performance by Borrowers of their duties and  obligations  hereunder
            to Agent or to the Lenders other than such  Defaulting  Lender.  Any
            such failure to fund by any  Defaulting  Lender  shall  constitute a
            material  breach by such  Defaulting  Lender of this  Agreement  and
            shall entitle  Administrative  Borrower at its option,  upon written
            notice to Agent,  to arrange for a  substitute  Lender to assume the
            Commitment of such Defaulting  Lender,  such substitute Lender to be
            acceptable to Agent.  In connection  with the  arrangement of such a
            substitute  Lender,  the  Defaulting  Lender  shall have no right to
            refuse to be replaced hereunder, and agrees to execute and deliver a
            completed  form  of  Assignment  and  Acceptance  in  favor  of  the
            substitute  Lender  (and  agrees  that it  shall be  deemed  to have
            executed and  delivered  such document if it fails to do so) subject
            only to being repaid its share of the outstanding Obligations (other
            than Bank Product  Obligations,  but  including an assumption of its
            Pro Rata  Share of the Risk  Participation  Liability)  without  any
            premium  or  penalty  of  any  kind  whatsoever;  provided  --------
            however,  that  any  such  assumption  of  the  Commitment  of  such
            Defaulting  Lender shall not be deemed to constitute a waiver of any
            of the Lender Groups' or Borrowers'  rights or remedies  against any
            such Defaulting Lender arising out of or in relation to such failure
            to fund.

                  (d) Making of Swing Loans.



                                      -36-
<PAGE>

                  (i) In the event Agent shall elect,  with the consent of Swing
            Lender,  as a Lender, to have the terms of this Section 2.3(d) apply
            to a requested  Borrowing  as  described  in Section  2.3(b),  Swing
            Lender as a Lender  shall  make such  Advance  in the amount of such
            Borrowing  (any such Advance made solely by Swing Lender as a Lender
            pursuant to this Section  2.3(d) being referred to as a "Swing Loan"
            and such Advances being referred to  collectively  as "Swing Loans")
            available to Borrowers  on the Funding  Date  applicable  thereto by
            transferring   immediately   available   funds   to   Administrative
            Borrower's Designated Account. Each Swing Loan shall be deemed to be
            an  Advance  hereunder  and  shall be  subject  to all the terms and
            conditions  applicable to other Advances,  except that no such Swing
            Loan shall be eligible  to be a LIBOR Rate Loan and all  payments on
            any Swing Loan shall be payable to Swing  Lender as a Lender  solely
            for its own  account  (and  for the  account  of the  holder  of any
            participation  interest with respect to such Swing Loan). Subject to
            the  provisions  of Section  2.3(i),  Agent shall not request  Swing
            Lender as a Lender to make,  and Swing  Lender as a Lender shall not
            make,  any Swing Loan if Agent has actual  knowledge that (i) one or
            more of the applicable  conditions  precedent set forth in Section 3
            will  not be  satisfied  on  the  requested  Funding  Date  for  the
            applicable  Borrowing unless such condition has been waived, or (ii)
            the  requested  Borrowing  would  exceed  the  Availability  on such
            Funding  Date.  Swing  Lender  as a Lender  shall not  otherwise  be
            required to determine  whether the applicable  conditions  precedent
            set forth in  Section  3 have been  satisfied  on the  Funding  Date
            applicable  thereto  prior to making,  in its sole  discretion,  any
            Swing Loan.

                  (ii) The Swing Loans  shall be secured by the  Agent's  Liens,
            constitute  Obligations  hereunder,  and bear  interest  at the rate
            applicable from time to time to Advances that are Base Rate Loans.

                  (e) Agent Advances.

                  (i) Agent hereby is  authorized  by Borrowers and the Lenders,
            from  time  to  time in  Agent's  sole  discretion,  (1)  after  the
            occurrence  and during the  continuance  of a Default or an Event of
            Default,  or (2) at  any  time  that  any  of the  other  applicable
            conditions precedent set forth in Section 3 have not been satisfied,
            to make  Advances to  Borrowers on behalf of the Lenders that Agent,
            in its  Permitted  Discretion  deems  necessary or desirable  (A) to
            preserve or protect the Collateral,  or any portion thereof,  (B) to
            enhance the likelihood of repayment of the  Obligations  (other than
            the  Bank  Product  Obligations),  or (C) to pay  any  other  amount
            chargeable  to  Borrowers  pursuant to the terms of this  Agreement,
            including  Lender Group  Expenses and the costs,  fees, and expenses
            described  in  Section  10 (any of the  Advances  described  in this
            Section 2.3(e) shall be referred to as "Agent Advances"). Each Agent
            Advance shall be deemed to be an Advance  hereunder,  except that no
            such



                                      -37-
<PAGE>

            Agent  Advance  shall be  eligible  to be a LIBOR  Rate Loan and all
            payments  thereon  shall  be  payable  to Agent  solely  for its own
            account.

                  (ii) The Agent Advances shall be repayable on demand,  secured
            by the  Agent's  Liens  granted to Agent  under the Loan  Documents,
            constitute  Obligations  hereunder,  and bear  interest  at the rate
            applicable from time to time to Advances that are Base Rate Loans.

                  (f) Settlement. It is agreed that each Lender's funded portion
of the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the  outstanding  Advances.  Such  agreement  notwithstanding,
Agent,  Swing Lender,  and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrowers)  that in order to facilitate the
administration of this Agreement and the other Loan Documents,  settlement among
them as to the  Advances,  the Swing Loans,  and the Agent  Advances  shall take
place on a periodic basis in accordance with the following provisions:

                  (i) Agent shall  request  settlement  ("Settlement")  with the
            Lenders  on a  weekly  basis,  or on a  more  frequent  basis  if so
            determined by Agent, (1) on behalf of Swing Lender,  with respect to
            each  outstanding  Swing Loan, (2) for itself,  with respect to each
            Agent  Advance,   and  (3)  with  respect  to  Borrowers'  or  their
            Subsidiaries'  Collections  received,  as to each by  notifying  the
            Lenders  by   telecopy,   telephone,   or  other   similar  form  of
            transmission,  of such requested Settlement, no later than 5:00 p.m.
            (New York time) on the Business Day immediately prior to the date of
            such requested  Settlement  (the date of such  requested  Settlement
            being the "Settlement Date"). Such notice of a Settlement Date shall
            include a summary  statement of the amount of outstanding  Advances,
            Swing  Loans,  and Agent  Advances  for the  period  since the prior
            Settlement  Date.  Subject  to the  terms and  conditions  contained
            herein (including Section 2.3(c)(iii)): (y) if a Lender's balance of
            the Advances (including Swing Loans and Agent Advances) exceeds such
            Lender's Pro Rata Share of the Advances  (including  Swing Loans and
            Agent  Advances) as of a Settlement  Date,  then Agent shall,  by no
            later than noon (New York time) on the Settlement Date,  transfer in
            immediately  available funds to a Deposit Account of such Lender (as
            such  Lender may  designate),  an amount  such that each such Lender
            shall, upon receipt of such amount,  have as of the Settlement Date,
            its Pro Rata Share of the Advances  (including Swing Loans and Agent
            Advances),  and (z) if a Lender's balance of the Advances (including
            Swing Loans and Agent  Advances) is less than such Lender's Pro Rata
            Share of the Advances  (including Swing Loans and Agent Advances) as
            of a Settlement Date, such Lender shall no later than noon (New York
            time) on the Settlement Date transfer in immediately available funds
            to the Agent's Account,  an amount such that each such Lender shall,
            upon transfer of such amount,  have as of the  Settlement  Date, its
            Pro Rata  Share of the  Advances  (including  Swing  Loans and Agent
            Advances).  Such amounts made available to Agent under clause (z) of
            the immediately preceding sentence shall be



                                      -38-
<PAGE>

            applied  against the amounts of the applicable  Swing Loans or Agent
            Advances and, together with the portion of such Swing Loans or Agent
            Advances  representing Swing Lender's Pro Rata Share thereof,  shall
            constitute  Advances of such Lenders. If any such amount is not made
            available to Agent by any Lender on the Settlement  Date  applicable
            thereto to the extent  required by the terms hereof,  Agent shall be
            entitled to recover for its account  such amount on demand from such
            Lender together with interest thereon at the Defaulting Lender Rate.

                  (ii)  In  determining   whether  a  Lender's  balance  of  the
            Advances, Swing Loans, and Agent Advances is less than, equal to, or
            greater  than such  Lender's Pro Rata Share of the  Advances,  Swing
            Loans,  and Agent Advances as of a Settlement  Date, Agent shall, as
            part of the relevant  Settlement,  apply to such balance the portion
            of payments actually received in good funds by Agent with respect to
            principal,  interest, fees payable by Borrowers and allocable to the
            Lenders hereunder, and proceeds of Collateral.  To the extent that a
            net amount is owed to any such Lender after such  application,  such
            net amount shall be  distributed  by Agent to that Lender as part of
            such next Settlement.

                  (iii) Between Settlement Dates,  Agent, to the extent no Agent
            Advances  or  Swing  Loans  are  outstanding,  may pay over to Swing
            Lender any payments  received by Agent,  that in accordance with the
            terms of this  Agreement  would be applied to the  reduction  of the
            Advances,  for  application  to Swing Lender's Pro Rata Share of the
            Advances. If, as of any Settlement Date, Collections of Borrowers or
            their  Subsidiaries  received since the then  immediately  preceding
            Settlement  Date have been applied to Swing  Lender's Pro Rata Share
            of the Advances  other than to Swing  Loans,  as provided for in the
            previous sentence,  Swing Lender shall pay to Agent for the accounts
            of the Lenders, and Agent shall pay to the Lenders, to be applied to
            the outstanding  Advances of such Lenders,  an amount such that each
            Lender  shall,  upon  receipt  of  such  amount,  have,  as of  such
            Settlement  Date,  its Pro Rata  Share of the  Advances.  During the
            period between  Settlement Dates, Swing Lender with respect to Swing
            Loans,  Agent  with  respect  to Agent  Advances,  and  each  Lender
            (subject  to the  effect  of  letter  agreements  between  Agent and
            individual  Lenders)  with respect to the Advances  other than Swing
            Loans and Agent  Advances,  shall be  entitled  to  interest  at the
            applicable  rate or rates payable under this  Agreement on the daily
            amount of funds employed by Swing Lender,  Agent, or the Lenders, as
            applicable.

                  (g)  Notation.  Agent shall record on its books the  principal
amount of the Advances owing to each Lender,  including the Swing Loans owing to
Swing Lender,  and Agent Advances owing to Agent,  and the interests  therein of
each Lender,  from time to time and such records shall,  absent  manifest error,
conclusively be presumed to be correct and accurate. In addition, each Lender is
authorized, at such Lender's option, to note the date



                                      -39-
<PAGE>

and amount of each payment or prepayment of principal of such Lender's  Advances
in its books and records, including computer records.

                  (h)  Lenders'  Failure to Perform.  All  Advances  (other than
Swing Loans and Agent Advances)  shall be made by the Lenders  contemporaneously
and in  accordance  with their Pro Rata  Shares.  It is  understood  that (i) no
Lender shall be  responsible  for any failure by any other Lender to perform its
obligation  to make any Advance (or other  extension of credit)  hereunder,  nor
shall any  Commitment of any Lender be increased or decreased as a result of any
failure by any other Lender to perform its  obligations  hereunder,  and (ii) no
failure by any Lender to perform  its  obligations  hereunder  shall  excuse any
other Lender from its obligations hereunder.

                  (i)  Optional  Overadvances.  Any  contrary  provision of this
Agreement  notwithstanding,  the Lenders hereby authorize Agent or Swing Lender,
as  applicable,  and  Agent or Swing  Lender,  as  applicable,  may,  but is not
obligated to, knowingly and intentionally,  continue to make Advances (including
Swing Loans) to Borrowers  notwithstanding that an Overadvance exists or thereby
would be  created,  so long as (i) after  giving  effect to such  Advances,  the
outstanding  Revolver  Usage  does not exceed  the  Borrowing  Base by more than
$4,000,000,  (ii) after giving effect to such Advances, the outstanding Revolver
Usage  (except  for and  excluding  amounts  charged  to the  Loan  Account  for
interest,  fees, or Lender Group Expenses) does not exceed the Maximum  Revolver
Amount, and (iii) at the time of the making of any such Advance,  Agent does not
believe,  in good faith,  that the  Overadvance  created by such Advance will be
outstanding  for  more  than  90  days.  The  foregoing  provisions  are for the
exclusive benefit of Agent,  Swing Lender,  and the Lenders and are not intended
to benefit  Borrowers in any way. The Advances and Swing Loans,  as  applicable,
that are made pursuant to this Section 2.3(i) shall be subject to the same terms
and  conditions as any other Advance or Swing Loan, as  applicable,  except that
they  shall  not be  eligible  for the  LIBOR  Option  and the rate of  interest
applicable  thereto shall be the rate  applicable to Advances that are Base Rate
Loans under Section 2.6(c) hereof without regard to the presence or absence of a
Default or Event of Default.

                        A. In the event Agent obtains actual  knowledge that the
                  Revolver Usage exceeds the amounts  permitted by the preceding
                  paragraph,  regardless  of the amount of, or reason for,  such
                  excess,  Agent shall notify the Lenders as soon as practicable
                  (and  prior  to  making  any (or any  additional)  intentional
                  Overadvances  (except for and excluding amounts charged to the
                  Loan Account for  interest,  fees,  or Lender Group  Expenses)
                  unless  Agent  determines  that prior  notice  would result in
                  imminent harm to the Collateral or its value), and the Lenders
                  with  Revolver  Commitments  thereupon  shall,  together  with
                  Agent,  jointly determine the terms of arrangements that shall
                  be  implemented  with Borrowers  intended to reduce,  within a
                  reasonable  time,  the  outstanding  principal  amount  of the
                  Advances to Borrowers to an amount  permitted by the preceding
                  paragraph. In the event Agent or any Lender disagrees over the
                  terms of reduction or repayment of any



                                      -40-
<PAGE>

                  Overadvance, the terms of reduction or repayment thereof shall
                  be implemented  according to the determination of the Required
                  Lenders.

                        B.  Each  Lender  with a  Revolver  Commitment  shall be
                  obligated  to settle with Agent as provided in Section  2.3(f)
                  for  the  amount  of  such  Lender's  Pro  Rata  Share  of any
                  unintentional  Overadvances  by Agent reported to such Lender,
                  any  intentional  Overadvances  made as  permitted  under this
                  Section  2.3(i),  and  any  Overadvances  resulting  from  the
                  charging  to the Loan  Account of  interest,  fees,  or Lender
                  Group Expenses.

      2.4 Payments.

                  (a) Payments by Borrowers.

                  (i)  Except  as  otherwise   expressly  provided  herein,  all
            payments  by  Borrowers  shall be made to  Agent's  Account  for the
            account  of the  Lender  Group  and  shall  be made  in  immediately
            available funds, no later than 2:00 p.m. (New York time) on the date
            specified herein. Any payment received by Agent later than 2:00 p.m.
            (New  York  time),  shall be deemed  to have  been  received  on the
            following  Business  Day and any  applicable  interest  or fee shall
            continue to accrue until such following Business Day.

                  (ii) Unless Agent receives notice from Administrative Borrower
            prior to the date on which any  payment is due to the  Lenders  that
            Borrowers  will not make such payment in full as and when  required,
            Agent  may  assume  that  Borrowers  have made (or will  make)  such
            payment in full to Agent on such date in immediately available funds
            and Agent may (but shall not be so required),  in reliance upon such
            assumption,  distribute  to each  Lender  on such due date an amount
            equal  to the  amount  then due such  Lender.  If and to the  extent
            Borrowers do not make such payment in full to Agent on the date when
            due,  each  Lender  severally  shall  repay to Agent on demand  such
            amount distributed to such Lender, together with interest thereon at
            the Defaulting Lender Rate for each day from the date such amount is
            distributed to such Lender until the date repaid.

                  (b) Apportionment and Application.

                  (i) Except as otherwise  provided  with respect to  Defaulting
            Lenders  and  except as  otherwise  provided  in the Loan  Documents
            (including letter agreements between Agent and individual  Lenders),
            aggregate  principal  and  interest  payments  shall be  apportioned
            ratably among the Lenders (according to the unpaid principal balance
            of the  Obligations  to  which  such  payments  relate  held by each
            Lender)  and  payments  of fees and  expenses  (other  than  fees or
            expenses that are for Agent's separate account,  after giving effect
            to any letter agreements between Agent and individual Lenders) shall
            be



                                      -41-
<PAGE>

            apportioned ratably among the Lenders having a Pro Rata Share of the
            type of Commitment or Obligation to which a particular  fee relates.
            All payments shall be remitted to Agent and all such  payments,  and
            all proceeds of  Collateral  received by Agent,  shall be applied as
            follows:

                        A. first,  to pay any Lender Group  Expenses then due to
                  Agent under the Loan Documents, until paid in full,

                        B. second,  to pay any Lender Group Expenses then due to
                  the  Lenders  under the Loan  Documents,  on a ratable  basis,
                  until paid in full,

                        C.  third,  to pay any fees  then due to Agent  (for its
                  separate   accounts,   after  giving   effect  to  any  letter
                  agreements between Agent and the individual Lenders) under the
                  Loan Documents until paid in full,

                        D. fourth, to pay any fees then due to any or all of the
                  Lenders (after giving effect to any letter agreements  between
                  Agent and individual  Lenders) under the Loan Documents,  on a
                  ratable basis, until paid in full,

                        E. fifth,  to pay  interest  due in respect of all Agent
                  Advances, until paid in full,

                        F. sixth,  ratably to pay interest due in respect of the
                  Advances  (other  than Agent  Advances),  and the Swing  Loans
                  until paid in full,

                        G. seventh,  to pay the principal of all Agent  Advances
                  until paid in full,

                        H. eighth, to pay the principal of all Swing Loans until
                  paid in full,

                        I. ninth,  so long as no Event of Default  has  occurred
                  and is continuing,  and at Agent's  election  (which  election
                  Agent  agrees  will  not be made if an  Overadvance  would  be
                  created  thereby),  to pay  amounts  then  due  and  owing  by
                  Administrative Borrower or its Subsidiaries in respect of Bank
                  Products, until paid in full,

                        J. tenth,  so long as no Event of Default  has  occurred
                  and is continuing,  to pay the principal of all Advances until
                  paid in full,

                        K. eleventh,  if an Event of Default has occurred and is
                  continuing,  ratably (i) to pay the  principal of all Advances
                  until paid in full,  (ii) to Agent,  to be held by Agent,  for
                  the ratable benefit of Issuing



                                      -42-
<PAGE>

                  Lender and those Lenders having a Revolver Commitment, as cash
                  collateral  in an amount up to 105% of the then extant  Letter
                  of Credit Usage until paid in full, and (iii) to Agent,  to be
                  held by Agent, for the benefit of the Bank Product  Providers,
                  as cash  collateral  in an amount up to the amount of the Bank
                  Product  Reserve  established  prior to the occurrence of, and
                  not in  contemplation  of, the subject  Event of Default until
                  Administrative Borrower's and its Subsidiaries' obligations in
                  respect of the then  extant  Bank  Products  have been paid in
                  full or the cash collateral amount has been exhausted,

                        L.  twelfth,  if an Event of Default has occurred and is
                  continuing,  to  pay  any  other  Obligations  (including  the
                  provision  of amounts to Agent,  to be held by Agent,  for the
                  benefit of the Bank Product  Providers,  as cash collateral in
                  an  amount  up to  the  amount  determined  by  Agent  in  its
                  Permitted   Discretion  as  the  amount  necessary  to  secure
                  Administrative Borrower's and its Subsidiaries' obligations in
                  respect of the then extant Bank Products), and

                        M.  thirteenth,   to  Borrowers  (to  be  wired  to  the
                  Designated  Account)  or such other  Person  entitled  thereto
                  under applicable law.

                  (ii) Agent promptly shall distribute to each Lender,  pursuant
            to the  applicable  wire  instructions  received from each Lender in
            writing,  such funds as it may be entitled to receive,  subject to a
            Settlement delay as provided in Section 2.3(f).

                  (iii) In each  instance,  so long as no Event of  Default  has
            occurred and is continuing,  this Section 2.4(b) shall not be deemed
            to apply to any payment by  Borrowers  specified  by Borrowers to be
            for the  payment of  specific  Obligations  then due and payable (or
            prepayable) under any provision of this Agreement.

                  (iv) For  purposes  of the  foregoing,  "paid  in full"  means
            payment of all amounts owing under the Loan  Documents  according to
            the terms thereof,  including loan fees, service fees,  professional
            fees,  interest (and specifically  including  interest accrued after
            the commencement of any Insolvency  Proceeding),  default  interest,
            interest on interest, and expense reimbursements, whether or not any
            of the foregoing would be or is allowed or disallowed in whole or in
            part in any Insolvency Proceeding.

                  (v) In the event of a direct  conflict  between  the  priority
            provisions of this Section 2.4 and other provisions contained in any
            other Loan Document,  it is the intention of the parties hereto that
            such priority  provisions in such  documents  shall be read together
            and construed, to the fullest extent possible, to be in concert with
            each other. In the event of any actual,



                                      -43-
<PAGE>

            irreconcilable  conflict that cannot be resolved as  aforesaid,  the
            terms and provisions of this Section 2.4 shall control and govern.

      2.5  Overadvances.  If,  at any  time or for any  reason,  the  amount  of
Obligations  (other than Bank  Product  Obligations)  owed by  Borrowers  to the
Lender Group  pursuant to Section 2.1 or Section 2.12 is greater than either the
Dollar or  percentage  limitations  set forth in Section 2.1 or Section 2.12, as
applicable (an  "Overadvance"),  Borrowers  immediately  shall pay to Agent,  in
cash,  the amount of such excess,  which amount shall be used by Agent to reduce
the  Obligations in accordance  with the priorities set forth in Section 2.4(b).
In  addition,  Borrowers  hereby  promise  to  pay  the  Obligations  (including
principal,  interest,  fees, costs, and expenses) in Dollars in full as and when
due and payable under the terms of this Agreement and the other Loan Documents.

      2.6  Interest  Rates and  Letter  of  Credit  Fee:  Rates,  Payments,  and
Calculations.

                  (a)  Interest  Rates.  Except as provided in clause (c) below,
all  Obligations  (except  for  undrawn  Letters  of Credit  and except for Bank
Product  Obligations) that have been charged to the Loan Account pursuant to the
terms hereof shall bear interest on the Daily Balance  thereof as follows (i) if
the relevant  Obligation is an Advance that is a LIBOR Rate Loan, at a per annum
rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise,  at
a per annum rate equal to the Base Rate plus the Base Rate Margin.

                  The foregoing notwithstanding, at no time shall any portion of
the Obligations (other than Bank Product  Obligations or Letters of Credit) bear
interest on the Daily  Balance  thereof at a per annum rate less than 3.50%.  To
the extent that interest accrued hereunder at the rate set forth herein would be
less than the  foregoing  minimum  daily  rate,  the  interest  rate  chargeable
hereunder for such day  automatically  shall be deemed  increased to the minimum
rate.

                  (b) Letter of Credit Fee.  Borrowers  shall pay Agent (for the
ratable benefit of the Lenders with a Revolver Commitment, subject to any letter
agreement  between  Agent and  individual  Lenders),  a Letter of Credit fee (in
addition  to the  charges,  commissions,  fees,  and costs set forth in  Section
2.12(e))  which shall  accrue at a rate equal to 2.75% per annum times the Daily
Balance of the undrawn amount of all outstanding Letters of Credit.

                  (c)  Default  Rate.   Upon  the   occurrence  and  during  the
continuation  of an  Event  of  Default  (and at the  election  of  Agent or the
Required Lenders),

                        (i) all  Obligations  (except  for  undrawn  Letters  of
                  Credit and except for Bank Product Obligations) that have been
                  charged to the Loan Account pursuant to the terms hereof shall
                  bear interest on the Daily Balance thereof at a per annum rate
                  equal  to  4  percentage  points  above  the  per  annum  rate
                  otherwise applicable hereunder, and



                                      -44-
<PAGE>

                        (ii) the Letter of Credit fee  provided  for above shall
                  be increased  to 4 percentage  points above the per annum rate
                  otherwise applicable hereunder.

                  (d)  Payment.  Except as provided  to the  contrary in Section
2.12(a),  interest,  Letter of Credit fees, and all other fees payable hereunder
shall be due and payable, in arrears, on the first day of each month at any time
that  Obligations or Commitments are  outstanding.  Borrowers  hereby  authorize
Agent,  from time to time,  without  prior notice to  Borrowers,  to charge such
interest  and fees,  all  Lender  Group  Expenses  (as and when  incurred),  the
charges,  commissions,  fees, and costs provided for in Section  2.12(e) (as and
when accrued or incurred),  the fees and costs  provided for in Section 2.11 (as
and when  accrued  or  incurred),  and all  other  payments  as and when due and
payable  under any Loan Document  (including  any amounts due and payable to the
Bank Product  Providers in respect of Bank Products up to the amount of the then
extant  Bank  Product  Reserve)  to  Borrowers'  Loan  Account,   which  amounts
thereafter shall constitute  Advances hereunder and shall accrue interest at the
rate then applicable to Advances hereunder. Any interest not paid when due shall
be compounded by being charged to Borrowers'  Loan Account and shall  thereafter
constitute  Advances  hereunder  and  shall  accrue  interest  at the rate  then
applicable to Advances that are Base Rate Loans hereunder.

                  (e)  Computation.  All interest and fees chargeable  under the
Loan  Documents  shall be computed on the basis of a 360 day year for the actual
number of days elapsed.  In the event the Base Rate is changed from time to time
hereafter,   the  rates  of  interest   hereunder   based  upon  the  Base  Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.

                  (f)  Intent to Limit  Charges to Maximum  Lawful  Rate.  In no
event shall the interest rate or rates payable  under this  Agreement,  plus any
other amounts paid in connection  herewith,  exceed the highest rate permissible
under  any  law  that a  court  of  competent  jurisdiction  shall,  in a  final
determination, deem applicable. Borrowers and the Lender Group, in executing and
delivering  this  Agreement,  intend  legally to agree upon the rate or rates of
interest  and  manner of payment  stated  within it;  provided,  however,  that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum  allowable under applicable
law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall
be liable  only for the payment of such  maximum as allowed by law,  and payment
received  from  Borrowers in excess of such legal  maximum,  whenever  received,
shall be applied  to reduce the  principal  balance  of the  Obligations  to the
extent of such excess.

      2.7 Cash Management.

                  (a) Borrowers  shall and shall cause each of the Guarantors to
(i) within 5 Business  Days of the Closing  Date,  establish  and maintain  cash
management  services of a type and on terms satisfactory to Agent at one or more
of the banks set forth on Schedule 2.7(a) (each a "Cash Management  Bank"),  and
shall request in writing and otherwise take



                                      -45-
<PAGE>

such reasonable steps to ensure that all of the Account Debtors of the Borrowers
and the Guarantors  forward payment of the amounts owed by them directly to such
Cash Management Bank, (ii) deposit or cause to be deposited promptly, and in any
event no later than the first  Business  Day after the date of receipt  thereof,
all of their Collections (including those sent directly by their Account Debtors
to a Cash  Management  Bank)  into a bank  account  in  Agent's  name  (a  "Cash
Management  Account") at one of the Cash  Management  Banks,  and (iii) from and
after the Closing  Date,  shall  segregate all Deposit  Accounts,  cash and Cash
Equivalents of the Borrowers and Guarantors from the Deposit Accounts,  cash and
Cash Equivalents of the Non-Obligors.

                  (b) Each Cash  Management  Bank shall  establish  and maintain
Cash  Management  Agreements  with Agent and  Borrowers,  in form and  substance
acceptable to Agent.  Each such Cash Management  Agreement shall provide,  among
other things,  that (i) all items of payment  deposited in such Cash  Management
Account  and  proceeds  thereof are held by such Cash  Management  Bank agent or
bailee-in-possession  for Agent,  (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable  Cash  Management
Account,  other than for payment of its service fees and other charges  directly
related to the  administration of such Cash Management  Account and for returned
checks or other items of payment, and (iii) it immediately will forward by daily
sweep all  amounts in the  applicable  Cash  Management  Account to the  Agent's
Account.

                  (c) So long as no Default or Event of Default has occurred and
is continuing,  Administrative  Borrower may amend Schedule 2.7(a) or (b) to add
or replace a Cash Management Account Bank or Cash Management Account;  provided,
however, that (i) such prospective Cash Management Bank shall be satisfactory to
Agent and Agent  shall have  consented  in writing in advance to the  opening of
such Cash Management Account with the prospective Cash Management Bank, and (ii)
prior to the time of the opening of such Cash Management  Account, a Borrower or
a Guarantor, as applicable, and such prospective Cash Management Bank shall have
executed and  delivered to Agent a Cash  Management  Agreement.  A Borrower or a
Guarantor,  as applicable shall close any of their Cash Management Accounts (and
establish  replacement cash management accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days of notice from Agent that the
creditworthiness  of any Cash Management Bank is no longer acceptable in Agent's
reasonable  judgment,  or as promptly as practicable  and in any event within 60
days of notice from Agent that the operating  performance,  funds  transfer,  or
availability  procedures or performance of the Cash Management Bank with respect
to Cash  Management  Accounts  or Agent's  liability  under any Cash  Management
Agreement  with such Cash  Management  Bank is no longer  acceptable  in Agent's
reasonable judgment.

                  (d) The Cash  Management  Accounts  shall  be cash  collateral
accounts,  with all cash,  checks and similar  items of payment in such accounts
securing payment of the Obligations,  and in which Borrowers are hereby grants a
Lien to Agent.

      2.8 Crediting  Payments;  Float Charge. The receipt of any payment item by
Agent (whether from transfers to Agent by the Cash Management  Banks pursuant to
the Cash



                                      -46-
<PAGE>

Management Agreements or otherwise) shall not be considered a payment on account
unless such payment item is a wire  transfer of  immediately  available  federal
funds made to the  Agent's  Account or unless  and until  such  payment  item is
honored when presented for payment.  Should any payment item not be honored when
presented  for  payment,  then  Borrowers  shall be deemed not to have made such
payment and interest shall be calculated  accordingly.  Anything to the contrary
contained herein  notwithstanding,  any payment item shall be deemed received by
Agent only if it is received  into the Agent's  Account on a Business  Day on or
before 2:00 p.m.  (New York  time).  If any  payment  item is received  into the
Agent's  Account on a  non-Business  Day or after 2:00 p.m. (New York time) on a
Business  Day,  it shall be  deemed  to have  been  received  by Agent as of the
opening of business on the  immediately  following  Business Day. From and after
the Closing Date,  Agent shall be entitled to charge  Borrowers for one Business
Day of `clearance' or `float' at the rate then  applicable  under Section 2.6 to
Advances  that are Base  Rate  Loans on all  Collections  that are  received  by
Borrowers and Guarantors (regardless of whether forwarded by the Cash Management
Banks to Agent).  This  across the board one  Business  Day  clearance  or float
charge on all  Collections  of Borrowers and Guarantors is  acknowledged  by the
parties to  constitute  an integral  aspect of the pricing of the  financing  of
Borrowers and  Guarantors and shall apply  irrespective  of whether or not there
are any outstanding monetary Obligations;  the effect of such clearance or float
charge being the equivalent of charging interest on such Collections through the
completion  of a period ending one Business Day after the receipt  thereof.  The
parties  acknowledge  and  agree  that the  economic  benefit  of the  foregoing
provisions of this Section 2.8 shall be for the exclusive benefit of Agent.

      2.9  Designated  Account.  Agent is authorized  to make the Advances,  and
Issuing  Lender is  authorized  to issue  the  Letters  of  Credit,  under  this
Agreement  based upon  telephonic  or other  instructions  received  from anyone
purporting to be an Authorized  Person,  or without  instructions if pursuant to
Section  2.6(d).  Administrative  Borrower  agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the  proceeds of the Advances  requested  by Borrowers  and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Administrative Borrower,
any Advance,  Agent  Advance,  or Swing Loan  requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.

      2.10 Maintenance of Loan Account;  Statements of Obligations.  Agent shall
maintain an account on its books in the name of Borrowers  (the "Loan  Account")
on which Borrowers will be charged with the Advances  (including  Agent Advances
and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for
Borrowers'  account,  the  Letters  of  Credit  issued  by  Issuing  Lender  for
Borrowers' account,  and with all other payment  Obligations  hereunder or under
the other Loan  Documents  (except  for Bank  Product  Obligations),  including,
accrued interest,  fees and expenses,  and Lender Group Expenses.  In accordance
with Section 2.8, the Loan Account will be credited  with all payments  received
by Agent  from  Borrowers  or for  Borrowers'  account,  including  all  amounts
received in the  Agent's  Account  from any Cash  Management  Bank.  Agent shall
render  statements  regarding  the  Loan  Account  to  Administrative  Borrower,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Lender Group



                                      -47-
<PAGE>

Expenses  owing,   and  such  statements,   absent  manifest  error,   shall  be
conclusively  presumed  to be correct and  accurate  and  constitute  an account
stated  between  Borrowers  and the Lender  Group  unless,  within 30 days after
receipt  thereof  by  Administrative  Borrower,  Administrative  Borrower  shall
deliver  to Agent  written  objection  thereto  describing  the  error or errors
contained in any such statements.

      2.11 Fees.  Borrowers  shall pay to Agent the following  fees and charges,
which  fees and  charges  shall be  non-refundable  when paid  (irrespective  of
whether this Agreement is terminated  thereafter) and shall be apportioned among
the Lenders in accordance with the terms of letter agreements  between Agent and
individual Lenders:

                  (a) Unused Line Fee. On the first day of each month during the
term of this  Agreement,  an unused  line fee in the amount  equal to 0.375% per
annum times the result of (i) the Maximum Revolver Amount,  less (ii) the sum of
(A) the average  Daily  Balance of  Advances  that were  outstanding  during the
immediately preceding month, plus (B) the average Daily Balance of the Letter of
Credit Usage during the immediately preceding month,

                  (b) Fee Letter  Fees.  As and when due and  payable  under the
terms of the Fee Letter, the fees set forth in the Fee Letter, and

                  (c) Audit, Appraisal, and Valuation Charges. Audit, appraisal,
and  valuation  fees and  charges  as  follows  (i) a fee of $850  per day,  per
auditor,  plus  out-of-pocket  expenses  for each  financial  audit of  Borrower
performed by personnel employed by Agent, (ii) if implemented, a fee of $850 per
day,  per   applicable   individual,   plus   out-of-pocket   expenses  for  the
establishment of electronic collateral reporting systems,  (iii) a fee of $1,500
per day per appraiser,  plus out-of-pocket  expenses,  for each appraisal of the
Collateral,  or any portion thereof,  performed by personnel  employed by Agent,
and (iv) the actual charges paid or incurred by Agent if it elects to employ the
services of one or more third Persons to perform  financial  audits of Borrowers
or their Subsidiaries,  to establish electronic collateral reporting systems, to
appraise the Collateral,  or any portion  thereof,  or to assess  Borrowers' and
their Subsidiaries' business valuation.

      2.12 Letters of Credit

                  (a) Subject to the terms and conditions of this Agreement, the
Issuing  Lender  agrees to issue  letters of credit for the account of Borrowers
(each,  an  "L/C") or to  purchase  participations  or  execute  indemnities  or
reimbursement  obligations (each such undertaking,  an "L/C  Undertaking")  with
respect to letters of credit issued by an  Underlying  Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrowers.  To request  the  issuance  of an L/C or an L/C  Undertaking  (or the
amendment,  renewal,  or extension of an  outstanding  L/C or L/C  Undertaking),
Administrative   Borrower  shall  hand  deliver  or  telecopy  (or  transmit  by
electronic communication, if arrangements for doing so have been approved by the
Issuing  Lender) to the Issuing  Lender and Agent  (reasonably in advance of the
requested  date  of  issuance,   amendment,  renewal,  or  extension)  a  notice
requesting the issuance of an L/C or L/C



                                      -48-
<PAGE>

Undertaking,  or identifying the L/C or L/C Undertaking to be amended,  renewed,
or extended, the date of issuance, amendment, renewal, or extension, the date on
which such L/C or L/C  Undertaking  is to expire,  the amount of such L/C or L/C
Undertaking,  the  name  and  address  of  the  beneficiary  thereof  (or of the
Underlying Letter of Credit, as applicable), and such other information as shall
be necessary to prepare, amend, renew, or extend such L/C or L/C Undertaking. If
requested by the Issuing Lender,  Borrowers also shall be an applicant under the
application  with respect to any  Underlying  Letter of Credit that is to be the
subject of an L/C  Undertaking.  The Issuing  Lender shall have no obligation to
issue a Letter of Credit  if any of the  following  would  result  after  giving
effect to the requested Letter of Credit:

                  (i) the Letter of Credit Usage would exceed the Borrowing Base
            less the then extant amount of outstanding Advances, or

                  (ii) the Letter of Credit Usage for Indenture  Purposes  would
            exceed   $20,000,000   and  for  all  other  purposes  would  exceed
            $5,000,000, or

                  (iii) the Letter of Credit  Usage  would  exceed  the  Maximum
            Revolver  Amount  less  the sum of (A) the  then  extant  amount  of
            outstanding Advances and (B) the Indenture Reserve.

            Borrowers  and the Lender Group  acknowledge  and agree that certain
Underlying  Letters of Credit may be issued to  support  letters of credit  that
already  are  outstanding  as of the  Closing  Date.  Each Letter of Credit (and
corresponding  Underlying  Letter  of  Credit)  shall be in form  and  substance
acceptable to the Issuing Lender (in the exercise of its Permitted  Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars.  If Issuing  Lender is  obligated  to advance  funds  under a Letter of
Credit,  Borrowers  immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an  amount  equal to such L/C  Disbursement  not later
than 2:00 p.m., New York time, on the date that such L/C  Disbursement  is made,
if  Administrative  Borrower shall have received written or telephonic notice of
such L/C  Disbursement  prior to 1:00 p.m.,  New York time, on such date, or, if
such notice has not been received by Administrative  Borrower prior to such time
on such date,  then not later than 2:00 p.m., New York time, on (i) the Business
Day that  Administrative  Borrower  receives  such  notice,  if such  notice  is
received prior to 1:00 p.m., New York time, on the date of receipt,  and, in the
absence  of  such   reimbursement,   the  L/C   Disbursement   immediately   and
automatically  shall be deemed to be an Advance  hereunder  (so long as to do so
would not create an  Overadvance)  and,  thereafter,  shall bear interest at the
rate then  applicable to Advances that are Base Rate Loans under Section 2.6. If
deeming an L/C  Disbursement to be an Advance would create an Overadvance,  such
amount shall be immediately  due and payable and the unpaid amount thereof shall
accrue  interest  at the rate then  applicable  to  Advances  that are Base Rate
Loans. To the extent an L/C  Disbursement is deemed to be an Advance  hereunder,
Borrowers' obligation to reimburse such L/C Disbursement shall be discharged and
replaced by the resulting  Advance.  Promptly  following receipt by Agent of any
payment from Borrowers  pursuant to this paragraph,  Agent shall distribute such
payment to



                                      -49-
<PAGE>

the Issuing Lender or, to the extent that Lenders have made payments pursuant to
Section  2.12(c) to reimburse the Issuing  Lender,  then to such Lenders and the
Issuing Lender as their interest may appear.

                  (b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a),  each Lender with a Revolver  Commitment  agrees to
fund its Pro Rata Share of any  Advance  deemed made  pursuant to the  foregoing
subsection on the same terms and  conditions as if Borrowers had requested  such
Advance and Agent shall  promptly pay to Issuing  Lender the amounts so received
by it from the  Lenders.  By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit  increasing  the amount  thereof)  and without any further
action  on  the  part  of  the  Issuing  Lender  or the  Lenders  with  Revolver
Commitment,  the Issuing  Lender  shall be deemed to have granted to each Lender
with a Revolver Commitment,  and each Lender with a Revolver Commitment shall be
deemed to have purchased, a participation in each Letter of Credit, in an amount
equal to its Pro Rata Share of the Risk  Participation  Liability of such Letter
of Credit,  and each such Lender agrees to pay to Agent,  for the account of the
Issuing Lender, such Lender's Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit.  In consideration  and in furtherance of the
foregoing,  each  Lender  with  a  Revolver  Commitment  hereby  absolutely  and
unconditionally  agrees to pay to Agent,  for the account of the Issuing Lender,
such Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not  reimbursed  by  Borrowers  on the date due as provided in clause (a) of
this  Section,  or of any  reimbursement  payment  required  to be  refunded  to
Borrowers for any reason.  Each Lender with a Revolver  Commitment  acknowledges
and agrees  that its  obligation  to deliver  to Agent,  for the  account of the
Issuing  Lender,  an amount equal to its  respective  Pro Rata Share of each L/C
Disbursement  made by the Issuing Lender  pursuant to this Section 2.12(b) shall
be absolute and unconditional and such remittance shall be made  notwithstanding
the occurrence or  continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 3 hereof. If any such Lender fails
to make  available  to Agent the amount of such  Lender's Pro Rata Share of each
L/C Disbursement  made by the Issuing Lender in respect of such Letter of Credit
as provided in this  Section,  such  Lender  shall be deemed to be a  Defaulting
Lender and Agent (for the  account of the Issuing  Lender)  shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the Defaulting Lender Rate until paid in full.

                  (c) Each Borrower  hereby agrees to indemnify,  save,  defend,
and hold the Lender Group harmless from any loss, cost,  expense,  or liability,
and reasonable  attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided,  however, that no Borrower shall
be obligated hereunder to indemnify for any loss, cost, expense, or liability to
the extent that it is caused by the gross  negligence  or willful  misconduct of
the Issuing Lender or any other member of the Lender Group. Each Borrower agrees
to be bound by the Underlying  Issuer's  regulations and  interpretations of any
Underlying  Letter of Credit or by Issuing Lender's  interpretations  of any L/C
issued by Issuing  Lender to or for such  Borrower's  account,  even though this
interpretation  may be different  from such  Borrower's  own, and each  Borrower
understands  and agrees that the Lender Group shall not be liable for any error,
negligence, or mistake, whether of omission



                                      -50-
<PAGE>

or commission,  in following  Borrowers'  instructions or those contained in the
Letter of Credit or any modifications,  amendments, or supplements thereto. Each
Borrower  understands  that the L/C  Undertakings  may require Issuing Lender to
indemnify the Underlying Issuer for certain costs or liabilities  arising out of
claims by Borrowers against such Underlying Issuer.  Each Borrower hereby agrees
to indemnify,  save,  defend, and hold the Lender Group harmless with respect to
any loss,  cost,  expense  (including  reasonable  attorneys fees), or liability
incurred by the Lender Group under any L/C Undertaking as a result of the Lender
Group's  indemnification of any Underlying Issuer;  provided,  however,  that no
Borrower shall be obligated  hereunder to indemnify for any loss, cost, expense,
or liability to the extent that it is caused by the gross  negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.

                  (d) Each Borrower hereby authorizes and directs any Underlying
Issuer to deliver to the Issuing Lender all  instruments,  documents,  and other
writings  and  property  received  by such  Underlying  Issuer  pursuant to such
Underlying  Letter of Credit  and to accept and rely upon the  Issuing  Lender's
instructions  with  respect  to all  matters  arising  in  connection  with such
Underlying Letter of Credit and the related application.

                  (e) Any and all charges, commissions, fees, and costs incurred
by the Issuing Lender  relating to Underlying  Letters of Credit shall be Lender
Group  Expenses  for  purposes  of  this  Agreement  and  immediately  shall  be
reimbursable  by  Borrowers to Agent for the account of the Issuing  Lender;  it
being acknowledged and agreed by each Borrower that, as of the Closing Date, the
usage  charge  imposed by the  prospective  Underlying  Issuer is .60% per annum
times the face amount of each  Underlying  Letter of Credit,  that such issuance
charge may be changed  from time to time,  and that the  Underlying  Issuer also
imposes  a  schedule  of  charges  for  amendments,  extensions,  drawings,  and
renewals.

                  (f) If by reason of (i) any change  after the Closing  Date in
any  applicable  law,  treaty,   rule,  or  regulation  or  any  change  in  the
interpretation  or application  thereof by any Governmental  Authority,  or (ii)
compliance  by the  Underlying  Issuer or the Lender  Group with any  direction,
request, or requirement (irrespective of whether having the force of law) of any
Governmental  Authority  or monetary  authority  including,  Regulation D of the
Federal Reserve Board as from time to time in effect (and any successor thereto)
and not in effect on the Closing Date:

                  (i) any reserve,  deposit,  or similar requirement is or shall
            be imposed  or  modified  in respect of any Letter of Credit  issued
            hereunder, or

                  (ii) there  shall be imposed on the  Underlying  Issuer or the
            Lender Group any other condition  regarding any Underlying Letter of
            Credit or any Letter of Credit issued pursuant hereto;

and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing,  or maintaining any Letter
of Credit or to reduce the amount  receivable  in respect  thereof by the Lender
Group,  then,  and in any such case,  Agent may, at any time within a reasonable
period after the additional cost is incurred or the



                                      -51-
<PAGE>

amount received is reduced, notify Administrative  Borrower, and Borrowers shall
pay on demand such amounts as Agent may specify to be  necessary  to  compensate
the Lender Group for such  additional  cost or reduced  receipt,  together  with
interest  on such  amount  from the date of such  demand  until  payment in full
thereof  at  the  rate  then  applicable  to  Base  Rate  Loans  hereunder.  The
determination by Agent of any amount due pursuant to this Section,  as set forth
in a certificate  setting forth the  calculation  thereof in reasonable  detail,
shall, in the absence of manifest or demonstrable error, be final and conclusive
and binding on all of the parties hereto.

      2.13 LIBOR Option.

                  (a)  Interest and Interest  Payment  Dates.  In lieu of having
interest charged at the rate based upon the Base Rate,  Borrowers shall have the
option (the "LIBOR Option") to have interest on all or a portion of the Advances
be charged at a rate of interest  based upon the LIBOR  Rate.  Interest on LIBOR
Rate Loans shall be payable on the  earliest of (i) the last day of the Interest
Period  applicable  thereto,  (ii) the  occurrence  of an Event  of  Default  in
consequence  of which  the  Required  Lenders  or Agent on behalf  thereof  have
elected to accelerate the maturity of all or any portion of the Obligations,  or
(iii)  termination of this Agreement  pursuant to the terms hereof.  On the last
day of each applicable Interest Period, unless Administrative  Borrower properly
has  exercised  the  LIBOR  Option  with  respect  thereto,  the  interest  rate
applicable  to such LIBOR Rate Loan  automatically  shall convert to the rate of
interest then applicable to Base Rate Loans of the same type  hereunder.  At any
time that an Event of Default  has  occurred  and is  continuing,  Borrowers  no
longer shall have the option to request that Advances bear interest at the LIBOR
Rate  and  Agent  shall  have the  right to  convert  the  interest  rate on all
outstanding  LIBOR  Rate  Loans to the rate then  applicable  to Base Rate Loans
hereunder.

                  (b) LIBOR Election.

                  (i) Administrative  Borrower may, at any time and from time to
            time, so long as no Event of Default has occurred and is continuing,
            elect to exercise the LIBOR Option by notifying  Agent prior to 2:00
            p.m.  (New  York  time)  at  least  3  Business  Days  prior  to the
            commencement of the proposed Interest Period (the "LIBOR Deadline").
            Notice of Administrative Borrower's election of the LIBOR Option for
            a permitted  portion of the Advances and an Interest Period pursuant
            to this Section shall be made by delivery to Agent of a LIBOR Notice
            received by Agent before the LIBOR Deadline, or by telephonic notice
            received by Agent  before the LIBOR  Deadline  (to be  confirmed  by
            delivery to Agent of a LIBOR Notice  received by Agent prior to 5:00
            p.m. (New York time) on the same day).  Promptly upon its receipt of
            each such LIBOR  Notice,  Agent shall provide a copy thereof to each
            of the Lenders having a Revolver Commitment.

                  (ii) Each LIBOR  Notice  shall be  irrevocable  and binding on
            Borrowers.  In connection  with each LIBOR Rate Loan,  each Borrower
            shall



                                      -52-
<PAGE>

            indemnify,  defend,  and hold Agent and the Lenders harmless against
            any loss,  cost,  or  expense  incurred  by Agent or any Lender as a
            result of (a) the  payment of any  principal  of any LIBOR Rate Loan
            other than on the last day of an Interest Period applicable  thereto
            (including as a result of an Event of Default),  (b) the  conversion
            of any LIBOR Rate Loan  other  than on the last day of the  Interest
            Period applicable  thereto,  or (c) the failure to borrow,  convert,
            continue or prepay any LIBOR Rate Loan on the date  specified in any
            LIBOR Notice  delivered  pursuant  hereto (such losses,  costs,  and
            expenses,  collectively,  "Funding  Losses").  Funding Losses shall,
            with  respect to Agent or any Lender,  be deemed to equal the amount
            determined by Agent or such Lender to be the excess,  if any, of (i)
            the amount of  interest  that would  have  accrued on the  principal
            amount of such LIBOR Rate Loan had such event not  occurred,  at the
            LIBOR Rate that would have been applicable  thereto,  for the period
            from  the date of such  event  to the  last day of the then  current
            Interest  Period  therefor  (or, in the case of a failure to borrow,
            convert  or  continue,  for the  period  that  would  have  been the
            Interest  Period  therefor),  minus (ii) the amount of interest that
            would  accrue  on such  principal  amount  for  such  period  at the
            interest rate which Agent or such Lender would be offered were it to
            be offered, at the commencement of such period, Dollar deposits of a
            comparable  amount  and  period in the London  interbank  market.  A
            certificate  of  Agent  or  a  Lender  delivered  to  Administrative
            Borrower  setting  forth any  amount or  amounts  that Agent or such
            Lender is entitled to receive pursuant to this Section 2.13 shall be
            conclusive absent manifest error.

                  (iii) Borrowers shall have not more than 5 LIBOR Rate Loans in
            effect at any given  time.  Borrowers  only may  exercise  the LIBOR
            Option  for LIBOR  Rate Loans of at least  $1,000,000  and  integral
            multiples of $500,000 in excess thereof.

                  (c) Prepayments.  Borrowers may prepay LIBOR Rate Loans at any
time; provided,  however, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the  Interest  Period  applicable  thereto,
including  as  a  result  of  any  automatic  prepayment  through  the  required
application  by  Agent  of  proceeds  of  Borrowers'  and  their   Subsidiaries'
Collections in accordance with Section 2.4(b) or for any other reason, including
early  termination of the term of this Agreement or  acceleration  of all or any
portion of the  Obligations  pursuant to the terms hereof,  each Borrower  shall
indemnify,  defend,  and hold  Agent  and the  Lenders  and  their  Participants
harmless against any and all Funding Losses in accordance with clause (b) above.

                  (d) Special Provisions Applicable to LIBOR Rate.

                  (i) The LIBOR Rate may be  adjusted  by Agent with  respect to
            any  Lender  on  a  prospective  basis  to  take  into  account  any
            additional  or  increased  costs to such  Lender of  maintaining  or
            obtaining any eurodollar  deposits or increased costs due to changes
            in applicable law occurring subsequent to the



                                      -53-
<PAGE>

            commencement  of the  then  applicable  Interest  Period,  including
            changes in tax laws  (except  changes of  general  applicability  in
            corporate  income tax laws) and changes in the reserve  requirements
            imposed by the Board of Governors of the Federal  Reserve System (or
            any successor),  excluding the Reserve Percentage,  which additional
            or increased  costs would increase the cost of funding loans bearing
            interest at the LIBOR Rate. In any such event,  the affected  Lender
            shall  give  Administrative  Borrower  and  Agent  notice  of such a
            determination  and  adjustment and Agent promptly shall transmit the
            notice to each other Lender and, upon its receipt of the notice from
            the affected Lender,  Administrative Borrower may, by notice to such
            affected Lender (y) require such Lender to furnish to Administrative
            Borrower a  statement  setting  forth the basis for  adjusting  such
            LIBOR  Rate  and the  method  for  determining  the  amount  of such
            adjustment,  or (z) repay the LIBOR Rate Loans with respect to which
            such  adjustment is made (together with any amounts due under clause
            (b)(ii) above).

                  (ii) In the event that any change in market  conditions or any
            law, regulation,  treaty, or directive,  or any change therein or in
            the interpretation of application  thereof,  shall at any time after
            the date hereof,  in the reasonable  opinion of any Lender,  make it
            unlawful or  impractical  for such Lender to fund or maintain  LIBOR
            Advances or to continue such funding or maintaining, or to determine
            or charge  interest rates at the LIBOR Rate,  such Lender shall give
            notice of such  changed  circumstances  to Agent and  Administrative
            Borrower and Agent  promptly shall transmit the notice to each other
            Lender and (y) in the case of any LIBOR  Rate  Loans of such  Lender
            that are  outstanding,  the date  specified in such Lender's  notice
            shall be  deemed to be the last day of the  Interest  Period of such
            LIBOR Rate  Loans,  and  interest  upon the LIBOR Rate Loans of such
            Lender  thereafter shall accrue interest at the rate then applicable
            to Base Rate Loans, and (z) Borrowers shall not be entitled to elect
            the LIBOR  Option  until  such  Lender  determines  that it would no
            longer be unlawful or impractical to do so.

                  (e)  No  Requirement  of  Matched  Funding.  Anything  to  the
contrary  contained herein  notwithstanding,  neither Agent, nor any Lender, nor
any of their  Participants,  is required actually to acquire eurodollar deposits
to fund or otherwise  match fund any Obligation as to which interest  accrues at
the LIBOR Rate.  The provisions of this Section shall apply as if each Lender or
its  Participants  had match  funded  any  Obligation  as to which  interest  is
accruing at the LIBOR Rate by acquiring  eurodollar  deposits for each  Interest
Period in the amount of the LIBOR Rate Loans.

      2.14  Capital  Requirements.   If,  after  the  date  hereof,  any  Lender
determines  that (i) the adoption of or change in any law,  rule,  regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the  interpretation  or  application  thereof by any  Governmental
Authority charged with the  administration  thereof,  or (ii) compliance by such
Lender or its parent bank holding company with any guideline,



                                      -54-
<PAGE>

request or directive of any such entity regarding  capital adequacy  (whether or
not having the force of law) not in effect on the Closing  Date,  has the effect
of reducing the return on such Lender's or such holding  company's  capital as a
consequence of such Lender's  Commitments  hereunder to a level below that which
such Lender or such holding  company could have achieved but for such  adoption,
change, or compliance  (taking into  consideration such Lender's or such holding
company's then existing  policies with respect to capital  adequacy and assuming
the full  utilization  of such  entity's  capital) by any amount  deemed by such
Lender to be material,  then such Lender may notify Administrative  Borrower and
Agent thereof.  Following  receipt of such notice,  Borrowers  agree to pay such
Lender on demand the amount of such  reduction  of return of capital as and when
such reduction is determined,  payable within 90 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable  detail such
Lender's calculation thereof and the assumptions upon which such calculation was
based (which  statement shall be deemed true and correct absent manifest error).
In determining  such amount,  such Lender may use any  reasonable  averaging and
attribution methods.

      2.15 Joint and Several Liability of Borrowers.

            (a) Each Borrower is accepting joint and several liability hereunder
and  under  the  other  Loan  Documents  in   consideration   of  the  financial
accommodations to be provided by the Agent and the Lenders under this Agreement,
for the  mutual  benefit,  directly  and  indirectly,  of each  Borrower  and in
consideration  of the  undertakings  of the other  Borrowers to accept joint and
several liability for the Obligations.

            (b) Each Borrower,  jointly and severally,  hereby  irrevocably  and
unconditionally  accepts, not merely as a surety but also as a co-debtor,  joint
and several liability with the other Borrowers,  with respect to the payment and
performance  of all of  the  Obligations  (including,  without  limitation,  any
Obligations  arising  under this Section  2.15),  it being the  intention of the
parties  hereto  that  all  the  Obligations  shall  be the  joint  and  several
obligations  of  each  Person  composing   Borrowers   without   preferences  or
distinction among them.

            (c) If and to the extent  that any of  Borrowers  shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance  with the terms thereof,  then in each such
event the other Persons composing  Borrowers will make such payment with respect
to, or perform, such Obligation.

            (d) The  Obligations of each Person  composing  Borrowers  under the
provisions of this Section 2.15 constitute the absolute and unconditional,  full
recourse Obligations of each Person composing Borrowers enforceable against each
such Borrower to the full extent of its properties and assets,  irrespective  of
the  validity,  regularity  or  enforceability  of this  Agreement  or any other
circumstances whatsoever.

            (e) Except as otherwise  expressly provided in this Agreement,  each
Person  composing  Borrowers hereby waives notice of acceptance of its joint and
several  liability,  notice of any Advances or Letters of Credit issued under or
pursuant to this  Agreement,



                                      -55-
<PAGE>

notice of the occurrence of any Default,  Event of Default, or of any demand for
any  payment  under  this  Agreement,  notice of any action at any time taken or
omitted by Agent or Lenders under or in respect of any of the  Obligations,  any
requirement of diligence or to mitigate  damages and,  generally,  to the extent
permitted by applicable law, all demands, notices and other formalities of every
kind in connection  with this  Agreement  (except as otherwise  provided in this
Agreement). Each Person composing Borrowers hereby assents to, and waives notice
of, any  extension  or  postponement  of the time for the  payment of any of the
Obligations,  the  acceptance  of any  payment  of any of the  Obligations,  the
acceptance of any partial payment thereon,  any waiver,  consent or other action
or  acquiescence  by Agent or  Lenders  at any time or times in  respect  of any
default by any Person composing  Borrowers in the performance or satisfaction of
any term, covenant,  condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the Obligations,
and the taking,  addition,  substitution or release, in whole or in part, at any
time or times,  of any  security  for any of the  Obligations  or the  addition,
substitution or release, in whole or in part, of any Person composing Borrowers.
Without  limiting the generality of the foregoing,  each Borrower assents to any
other  action or delay in acting or  failure  to act on the part of any Agent or
Lender with respect to the failure by any Person  composing  Borrowers to comply
with any of its  respective  Obligations,  including,  without  limitation,  any
failure strictly or diligently to assert any right or to pursue any remedy or to
comply fully with applicable laws or regulations  thereunder,  which might,  but
for  the  provisions  of this  Section  2.15  afford  grounds  for  terminating,
discharging or relieving any Person  composing  Borrowers,  in whole or in part,
from any of its  Obligations  under this Section 2.15, it being the intention of
each  Person  composing  Borrowers  that,  so  long  as any  of the  Obligations
hereunder remain unsatisfied, the Obligations of such Person composing Borrowers
under this Section 2.15 shall not be discharged  except by performance  and then
only to the extent of such performance. The Obligations of each Person composing
Borrowers   under  this  Section  2.15  shall  not  be  diminished  or  rendered
unenforceable  by any  winding  up,  reorganization,  arrangement,  liquidation,
reconstruction  or similar  proceeding  with  respect  to any  Person  composing
Borrowers or any Agent or Lender. The joint and several liability of the Persons
composing   Borrowers   hereunder  shall  continue  in  full  force  and  effect
notwithstanding  any  absorption,  merger,  amalgamation  or  any  other  change
whatsoever in the name, constitution or place of formation of any of the Persons
composing Borrowers or any Agent or Lender.

            (f) Each Person composing Borrowers represents and warrants to Agent
and Lenders that such Borrower is currently informed of the financial  condition
of  Borrowers  and of all other  circumstances  which a diligent  inquiry  would
reveal  and which  bear upon the risk of  nonpayment  of the  Obligations.  Each
Person composing  Borrowers further represents and warrants to Agent and Lenders
that such Borrower has read and understands the terms and conditions of the Loan
Documents.  Each Person composing  Borrowers hereby covenants that such Borrower
will continue to keep informed of Borrowers' financial condition,  the financial
condition of other guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment or nonperformance of the Obligations.



                                      -56-
<PAGE>

            (g) Each of the Persons  composing  Borrowers  waives all rights and
defenses arising out of an election of remedies by the Agent or any Lender, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security  for a  guaranteed  obligation,  has  destroyed  the Agent's or such
Lender's  rights of subrogation and  reimbursement  against such Borrower by the
operation  of  Section  580(d)  of the  California  Code of Civil  Procedure  or
otherwise:

            (h) Each of the Persons  composing  Borrowers  waives all rights and
defenses that such Borrower may have because the Obligations are secured by Real
Property. This means, among other things:

                  (i) Agent and Lenders may collect from such  Borrower  without
            first  foreclosing  on any  Real  or  Personal  Property  Collateral
            pledged by Borrowers.

                  (ii) If Agent or any Lender  forecloses  on any Real  Property
            Collateral pledged by Borrowers:

                        A. The amount of the  Obligations may be reduced only by
                  the price for which that collateral is sold at the foreclosure
                  sale,  even if the  collateral  is  worth  more  than the sale
                  price.

                        B. Agent and Lenders may collect from such Borrower even
                  if Agent  or  Lenders,  by  foreclosing  on the Real  Property
                  Collateral,  has destroyed any right such Borrower may have to
                  collect from the other Borrowers.

This is an unconditional and irrevocable  waiver of any rights and defenses such
Borrower may have because the  Obligations  are secured by Real Property.  These
rights and  defenses  include,  but are not  limited  to, any rights or defenses
based upon  Section  580a,  580b,  580d or 726 of the  California  Code of Civil
Procedure.

                  (i) The  provisions  of this  Section  2.15  are  made for the
benefit of the Agent, the Lenders and their  respective  successors and assigns,
and may be  enforced  by it or them from time to time  against any or all of the
Persons composing  Borrowers as often as occasion therefor may arise and without
requirement on the part of any such Agent, Lender,  successor or assign first to
marshal  any of its or their  claims or to exercise  any of its or their  rights
against any of the other Persons composing  Borrowers or to exhaust any remedies
available to it or them against any of the other Persons composing  Borrowers or
to resort  to any  other  source  or means of  obtaining  payment  of any of the
Obligations  hereunder  or to elect any other  remedy.  The  provisions  of this
Section 2.15 shall remain in effect until all of the Obligations shall have been
paid in full or otherwise fully satisfied.  If at any time, any payment,  or any
part thereof,  made in respect of any of the  Obligations,  is rescinded or must
otherwise  be restored  or returned by any Agent or Lender upon the  insolvency,
bankruptcy  or  reorganization  of any of the Persons  composing  Borrowers,  or
otherwise,  the  provisions of



                                      -57-
<PAGE>

this Section 2.15 will forthwith be reinstated in effect, as though such payment
had not been made.

                  (j) Each of the Persons composing Borrowers hereby agrees that
it will not enforce any of its rights of contribution or subrogation against the
other Persons composing  Borrowers with respect to any liability  incurred by it
hereunder or under any of the other Loan  Documents,  any payments made by it to
the  Agent  or the  Lenders  with  respect  to any  of  the  Obligations  or any
collateral security therefor until such time as all of the Obligations have been
paid in full in cash.  Any claim which any  Borrower  may have against any other
Borrower with respect to any payments to any Agent or Lender  hereunder or under
any other Loan  Documents are hereby  expressly made  subordinate  and junior in
right of payment,  without  limitation  as to any  increases in the  Obligations
arising  hereunder or  thereunder,  to the prior  payment in full in cash of the
Obligations  and,  in the  event of any  insolvency,  bankruptcy,  receivership,
liquidation,  reorganization  or other similar  proceeding under the laws of any
jurisdiction  relating  to  any  Borrower,  its  debts  or its  assets,  whether
voluntary or  involuntary,  all such  Obligations  shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.

                  (k) Each of the  Persons  composing  Borrowers  hereby  agrees
that, after the occurrence and during the continuance of any Default or Event of
Default,  the payment of any amounts due with respect to the indebtedness  owing
by any  Borrower  to any  other  Borrower  is hereby  subordinated  to the prior
payment in full in cash of the  Obligations.  Each  Borrower  hereby agrees that
after the  occurrence  and during  the  continuance  of any  Default or Event of
Default,  such Borrower will not demand, sue for or otherwise attempt to collect
any  indebtedness  of any  other  Borrower  owing  to such  Borrower  until  the
Obligations  shall  have  been  paid in full in cash.  If,  notwithstanding  the
foregoing sentence, such Borrower shall collect,  enforce or receive any amounts
in respect of such indebtedness,  such amounts shall be collected,  enforced and
received  by such  Borrower as trustee for the Agent,  and such  Borrower  shall
deliver  any such  amounts  to  Agent  for  application  to the  Obligations  in
accordance with Section 2.4(b).

3. CONDITIONS; TERM OF AGREEMENT.

      3.1  Conditions   Precedent  to  the  Initial  Extension  of  Credit.  The
obligation  of the Lender  Group (or any  member  thereof)  to make the  initial
Advance (or otherwise to extend any credit provided for  hereunder),  is subject
to the  fulfillment,  to the  satisfaction  of Agent,  of each of the conditions
precedent set forth below:

                  (a) the  Closing  Date shall  occur on or before  October  22,
2003;

                  (b) Agent shall have  received (i) a UCC Filing  Authorization
Letter, duly executed by each Borrower and each Guarantor, and (ii) confirmation
that  appropriate   financing  statements  respecting  each  Borrower  and  each
Guarantor have been duly filed in such office or offices as may be necessary or,
in the opinion of Agent,  desirable  to perfect the Agent's  Liens in and to the
Collateral;



                                      -58-
<PAGE>

                  (c) Agent shall have received each of the following documents,
in form and  substance  satisfactory  to  Agent,  duly  executed,  and each such
document shall be in full force and effect:

                  (i) the Disbursement Letter,

                  (ii) the Fee Letter,

                  (iii) the Guarantor Security Agreement,

                  (iv) the Guaranty,

                  (v) the Intercompany Subordination Agreement,

                  (vi) the Intercreditor Agreement,

                  (vii) the Patent Security Agreement,

                  (viii)  the  Pay-Off  Letter,  together  with UCC  termination
            statements and other  documentation  evidencing  the  termination by
            Existing  Lender of its Liens in and to the properties and assets of
            Borrowers and their Subsidiaries,

                  (ix) the Pfizer Pay-Off Letter,

                  (x) the Stock Pledge Agreement, together with all certificates
            representing  the  shares of Stock  pledged  thereunder,  as well as
            Stock powers with respect thereto endorsed in blank, and

                  (xi) the Trademark Security Agreement.

                  (d) Agent shall have received a certificate from the Secretary
of each  Borrower  attesting  to the  resolutions  of such  Borrower's  Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan  Documents to which such Borrower is a party and  authorizing
specific officers of such Borrower to execute the same;

                  (e)  Agent  shall  have  received  copies  of each  Borrower's
Governing Documents, as amended,  modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower;

                  (f) Agent  shall have  received a  certificate  of status with
respect  to each  Borrower,  dated  within  10 days of the  Closing  Date,  such
certificate  to be issued by the  appropriate  officer  of the  jurisdiction  of
organization  of such  Borrower,  which  certificate  shall  indicate  that such
Borrower is in good standing in such jurisdiction;

                  (g) Agent  shall have  received  certificates  of status  with
respect to each  Borrower,  each dated within 30 days of the Closing Date,  such
certificates to be issued by the



                                      -59-
<PAGE>

appropriate  officer  of the  jurisdictions  (other  than  the  jurisdiction  of
organization  of such  Borrower)  in which its failure to be duly  qualified  or
licensed would constitute a Material Adverse Change,  which  certificates  shall
indicate that such Borrower is in good standing in such jurisdictions;

                  (h) Agent shall have received a certificate from the Secretary
of each  Guarantor  attesting to the  resolutions of such  Guarantor's  Board of
Directors  authorizing  its  execution,  delivery,  and  performance of the Loan
Documents to which such Guarantor is a party and authorizing  specific  officers
of such Guarantor to execute the same;

                  (i) Agent  shall  have  received  copies  of each  Guarantor's
Governing Documents, as amended,  modified, or supplemented to the Closing Date,
certified by the Secretary of such Guarantor;

                  (j) Agent  shall have  received a  certificate  of status with
respect  to each  Guarantor,  dated  within 10 days of the  Closing  Date,  such
certificate  to be issued by the  appropriate  officer  of the  jurisdiction  of
organization  of such  Guarantor,  which  certificate  shall  indicate that such
Guarantor is in good standing in such jurisdiction;

                  (k) Agent  shall have  received  certificates  of status  with
respect to each  Guarantor,  each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of such Guarantor) in which its failure to
be duly qualified or licensed would constitute a Material Adverse Change,  which
certificates  shall  indicate  that such  Guarantor is in good  standing in such
jurisdictions;

                  (l) Agent  shall have  received a  certificate  of  insurance,
together with the endorsements thereto, as are required by Section 6.8, the form
and substance of which shall be satisfactory to Agent;

                  (m) Agent shall have received  opinions of Borrowers'  counsel
in form and substance satisfactory to Agent;

                  (n) Agent shall have received satisfactory evidence (including
a  certificate  of the chief  financial  officer of Parent) that all tax returns
required to be filed by Borrowers and their  Subsidiaries have been timely filed
and all taxes upon Borrowers and their Subsidiaries or their properties, assets,
income, and franchises  (including Real Property taxes, sales taxes, and payroll
taxes)  have been paid  prior to  delinquency,  except  such  taxes that are the
subject of a Permitted Protest;

                  (o)   Borrowers   shall  have  the   Closing   Date   Required
Availability  after giving effect to the initial  extensions of credit hereunder
and the payment of all fees and expenses required to be paid by Borrowers on the
Closing Date under this Agreement or the other Loan Documents;

                  (p) [Intentionally omitted];



                                      -60-
<PAGE>

                  (q) Agent shall have received Borrowers' Closing Date Business
Plan;

                  (r)  Borrowers  shall  have  paid all  Lender  Group  Expenses
incurred in connection with the transactions evidenced by this Agreement;

                  (s) Agent shall have  received a copy of the New Indenture and
each of the  other  material  agreements  entered  into in  connection  with the
issuance of the New Domestic  Notes and the New Foreign  Notes,  together with a
certificate of the Secretary of Parent  certifying each such document as being a
true, correct, and complete copy thereof;

                  (t) Parent shall have provided Agent with evidence  sufficient
to  demonstrate  that the offering of the New Domestic Notes and the New Foreign
Notes described in the New Indenture has closed;

                  (u)  Agent  shall  have  received  a copy of the  Supplemental
Indenture  to  the  Existing  Indenture,  together  with  a  certificate  of the
Secretary of Parent certifying each such document as being a true, correct,  and
complete copy thereof;

                  (v)  Borrowers  and  each of  their  Subsidiaries  shall  have
received all licenses,  approvals or evidence of other  actions  required by any
Governmental  Authority  in  connection  with  the  execution  and  delivery  by
Borrowers or their Subsidiaries of the Loan Document or with the consummation of
the transactions contemplated thereby; and

                  (w) all other  documents and legal matters in connection  with
the  transactions  contemplated  by this  Agreement  shall have been  delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent.

      3.2  Conditions  Subsequent  to  the  Initial  Extension  of  Credit.  The
obligation  of the Lender  Group (or any member  thereof)  to  continue  to make
Advances (or otherwise  extend credit  hereunder) is subject to the fulfillment,
on or before the date applicable thereto,  of each of the conditions  subsequent
set forth below (the failure by Borrowers to so perform or cause to be performed
constituting an Event of Default):

                  (a)  within  30 days of the  Closing  Date,  deliver  to Agent
certified  copies of the policies of insurance,  together with the  endorsements
thereto,  as are required by Section 6.8, the form and  substance of which shall
be satisfactory to Agent and its counsel; and

                  (b)  within 30 days of the  Closing  Date,  Agent  shall  have
received an appraisal of the  Liquidation  Percentage  applicable  to Borrowers'
Inventory, the results of which shall be satisfactory to Agent;

                  (c) within 10 Business Days of the Closing  Date,  Agent shall
have  received  completed  reference  checks with respect to  Borrowers'  senior
management,  the  results  of  which  are  satisfactory  to  Agent  in its  sole
discretion;



                                      -61-
<PAGE>

                  (d) (i) within 30 days of the Closing  Date,  Agent shall have
received the Mortgages relative to the Real Property  Collateral (other than the
Prince Real Property),  and (ii) within 30 days of the Closing Date, Agent shall
have received mortgagee title insurance policies (or marked commitments to issue
the same) for the Real Property Collateral (other than the Prince Real Property)
issued by a title  insurance  company  satisfactory  to Agent  (each a "Mortgage
Policy" and,  collectively,  the "Mortgage Policies") in amounts satisfactory to
Agent  assuring  Agent that the Mortgages on such Real Property  Collateral  are
valid and  enforceable  first  priority  mortgage  Liens on such  Real  Property
Collateral  free and clear of all  defects  and  encumbrances  except  Permitted
Liens,  and the  Mortgage  Policies  otherwise  shall be in form  and  substance
satisfactory to Agent;

                  (e) (i) on or before December 31, 2003, if the PMC Sale
Transactions shall not have been closed, Agent shall have received the Mortgages
relative to the Prince Real Property, (ii) on or before December 31, 2003, if
the PMC Sale Transactions have been closed, Agent shall have received the
Mortgages relative to the Prince Real Property that is not part of the PMC Sale
Transactions; and (iii) on or before December 31, 2003, Agent shall have
received a Mortgage Policy in amounts satisfactory to Agent assuring Agent that
the Mortgages on such Real Property Collateral are valid and enforceable first
priority mortgage Liens on such Real Property Collateral free and clear of all
defects and encumbrances except Permitted Liens, and the Mortgage Policies
otherwise shall be in form and substance satisfactory to Agent;

                  (f) on January 1, 2004, if the PMC Sale  Transactions have not
been  closed,  Parent  shall  pledge the Stock of Prince  Mfg to Agent,  for the
benefit of the Lender Group and the Bank Product Providers, cause PMC and Prince
Mfg to execute a Control Agreement and joinder to the Guaranty and the Guarantor
Security  Agreement,  and cause  Prince  Mfg to  execute a joinder  to the Stock
Pledge  Agreement  and pledge the stock of PMC to Agent,  for the benefit of the
Lender Group and the Bank Product Providers;

                  (g) within 10 Business Days of the Closing  Date,  Agent shall
have received evidence  satisfactory to it that MRT Holdings has been dissolved;
and

                  (h) within 10 Business Days of the Closing  Date,  Agent shall
have  received  Collateral  Access  Agreements  with  respect  to the  Love  Box
Locations and the Wagner Industries Location;

                  (i)  within 45 days of the  Closing  Date,  Agent  shall  have
received  Collateral  Access  Agreements  with respect to: (i) One Parker Plaza,
Fort Lee, NJ 07024,  (ii) 8851 Dice Road, Santa Fe Springs,  CA 90670, and (iii)
710 Route 46 East, Suite 401, Fairfield, NJ 07004;

                  (j)  within 60 days of the  Closing  Date,  Agent  shall  have
completed its audit of the books and records of the Borrowers and their Domestic
Subsidiaries,  with the results of such audit to be satisfactory to Agent in its
sole discretion;



                                      -62-
<PAGE>

                  (k)  within 20 days of the  Closing  Date,  Agent  shall  have
received  confirmation  that the Borrowers and their Domestic  Subsidiaries have
registered their NADAs with the United States Copyright Office;

                  (l)  within 30 days of the  Closing  Date,  Agent  shall  have
received a copyright security agreement,  in form and substance  satisfactory to
Agent, to be filed with the United States Copyright Office; and

                  (m)  within 30 days of the  Closing  Date,  Agent  shall  have
received an updated  Schedule  5.18 which shall  include  information  regarding
Deposit Accounts and Securities Accounts of Borrowers' Foreign Subsidiaries.

      3.3 Conditions  Precedent to all  Extensions of Credit.  The obligation of
the Lender Group (or any member  thereof) to make any Advances  hereunder at any
time (or to extend any other credit hereunder) shall be subject to the following
conditions precedent:

                  (a)  the  representations  and  warranties  contained  in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such  extension  of credit,  as though made on
and as of  such  date  (except  to the  extent  that  such  representations  and
warranties  relate solely to an earlier date),  except for changes  permitted by
the Loan Documents;

                  (b) no Default or Event of Default  shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;

                  (c) no injunction,  writ, restraining order, or other order of
any nature restricting or prohibiting,  directly or indirectly, the extending of
such  credit  shall have been  issued  and  remain in force by any  Governmental
Authority  against any Borrower,  Agent, any Lender, or any of their Affiliates;
and

                  (d) no Material Adverse Change shall have occurred.

      3.4 Term.  This  Agreement  shall  continue in full force and effect for a
term  ending  on  October  31,  2007  (the  "Maturity   Date").   The  foregoing
notwithstanding,  the Lender Group,  upon the election of the Required  Lenders,
shall  have  the  right  to  terminate  its  obligations  under  this  Agreement
immediately  and without notice upon the occurrence and during the  continuation
of an Event of Default.

      3.5 Effect of  Termination.  On the date of termination of this Agreement,
all Obligations  (including  contingent  reimbursement  obligations of Borrowers
with  respect  to any  outstanding  Letters  of Credit  and  including  all Bank
Products Obligations) immediately shall become due and payable without notice or
demand  (including (a) either (i) providing cash  collateral to be held by Agent
for the benefit of those  Lenders with a Revolver  Commitment in an amount equal
to 105% of the then extant Letter of Credit Usage,  or (ii) causing the original
Letters of Credit to be returned to the Issuing Lender, and (b) providing



                                      -63-
<PAGE>

cash  collateral (in an amount  determined by Agent as sufficient to satisfy the
reasonably estimated credit exposure) to be held by Agent for the benefit of the
Bank  Product   Providers   with  respect  to  the  then  extant  Bank  Products
Obligations).  No  termination  of this  Agreement,  however,  shall  relieve or
discharge  Borrowers or their  Subsidiaries  of their  duties,  Obligations,  or
covenants  hereunder  and the Agent's  Liens in the  Collateral  shall remain in
effect  until all  Obligations  have been  paid in full and the  Lender  Group's
obligations to provide  additional  credit hereunder have been terminated.  When
this Agreement has been terminated and all of the Obligations  have been paid in
full and the Lender Group's  obligations to provide  additional credit under the
Loan Documents have been terminated irrevocably,  Agent will, at Borrowers' sole
expense,  execute and deliver any UCC  termination  statements,  lien  releases,
mortgage  releases,   re-assignments  of  trademarks,   discharges  of  security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably  necessary to release,  as of record,  the
Agent's Liens and all notices of security  interests and liens  previously filed
by Agent with respect to the Obligations.

      3.6 Early Termination by Borrowers. Borrowers have the option, at any time
upon 90 days  prior  written  notice by  Administrative  Borrower  to Agent,  to
terminate this Agreement by paying to Agent, in cash, the Obligations (including
(a) either (i) providing cash  collateral to be held by Agent for the benefit of
those Lenders with a Revolver  Commitment in an amount equal to 105% of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to the Issuing  Lender,  and (b) providing  cash  collateral  (in an
amount  determined by Agent as sufficient  to satisfy the  reasonably  estimated
credit  exposure)  to be held by  Agent  for the  benefit  of the  Bank  Product
Providers with respect to the then extant Bank Products  Obligations),  in full,
together  with the  Applicable  Prepayment  Premium (to be allocated  based upon
letter  agreements  between Agent and  individual  Lenders).  If  Administrative
Borrower has sent a notice of  termination  pursuant to the  provisions  of this
Section,  then the Commitments  shall terminate and Borrowers shall be obligated
to repay the Obligations  (including (a) either (i) providing cash collateral to
be held by Agent for the benefit of those Lenders with a Revolver  Commitment in
an amount  equal to 105% of the then  extant  Letter of  Credit  Usage,  or (ii)
causing the original Letters of Credit to be returned to the Issuing Lender, and
(b) providing cash collateral (in an amount determined by Agent as sufficient to
satisfy the reasonably  estimated  credit  exposure) to be held by Agent for the
benefit of the Bank  Product  Providers  with  respect to the then  extant  Bank
Products Obligations), in full, together with the Applicable Prepayment Premium,
on the date  set  forth as the date of  termination  of this  Agreement  in such
notice.  In the event of the  termination of this Agreement and repayment of the
Obligations  at any time  prior to the  Maturity  Date,  for any  other  reason,
including (a) termination upon the election of the Required Lenders to terminate
after the occurrence  and during the  continuation  of an Event of Default,  (b)
foreclosure and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (d) restructure,  reorganization or compromise of the Obligations
by  the  confirmation  of a  plan  of  reorganization,  or  any  other  plan  of
compromise,  restructure, or arrangement in any Insolvency Proceeding,  then, in
view of the  impracticability  and extreme difficulty of ascertaining the actual
amount of damages to the Lender  Group or profits  lost by the Lender Group as a
result of such early termination,



                                      -64-
<PAGE>

and by  mutual  agreement  of the  parties  as to a  reasonable  estimation  and
calculation of the lost profits or damages of the Lender Group,  Borrowers shall
pay the  Applicable  Prepayment  Premium  to Agent (to be  allocated  based upon
letter agreements between Agent and individual Lenders), measured as of the date
of such termination. The foregoing to the contrary notwithstanding, in the event
that Borrower  repays the  Obligations  in full and  terminates  this  Agreement
pursuant to the first sentence of this Section 3.6 and if such repayment  occurs
with the proceeds of a refinancing  provided by Wells Fargo, then the Applicable
Prepayment Premium shall equal zero.

4. CREATION OF SECURITY INTEREST.

      4.1 Grant of Security  Interest Each Borrower hereby grants to Agent,  for
the benefit of the Lender  Group and the Bank  Product  Providers,  a continuing
security  interest in all of its right,  title,  and  interest in all  currently
existing  and  hereafter  acquired or arising  Borrower  Collateral  in order to
secure prompt repayment of any and all of the Obligations in accordance with the
terms  and  conditions  of the Loan  Documents  and in order  to  secure  prompt
performance  by Borrowers of each of their  covenants  and duties under the Loan
Documents.  The Agent's Liens in and to the Borrower  Collateral shall attach to
all Borrower  Collateral  without further act on the part of Agent or Borrowers.
Anything  contained in this Agreement or any other Loan Document to the contrary
notwithstanding,   except  for  Permitted  Dispositions,   Borrowers  and  their
Subsidiaries  have no authority,  express or implied,  to dispose of any item or
portion of the Collateral.

      4.2  Negotiable  Collateral.  In the event that any  Borrower  Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that Agent  determines  that perfection or priority of Agent's
security  interest is dependent  on or enhanced by  possession,  the  applicable
Borrower,  immediately  upon the  request of Agent,  shall  endorse  and deliver
physical possession of such Negotiable Collateral to Agent.

      4.3   Collection  of  Accounts,   General   Intangibles,   and  Negotiable
Collateral.  At any time after the occurrence and during the  continuation of an
Event of Default,  Agent or Agent's  designee may (a) notify Account  Debtors of
Borrowers that the Borrowers'  Accounts,  chattel paper, or General  Intangibles
have been assigned to Agent or that Agent has a security  interest  therein,  or
(b) collect the  Borrowers'  Accounts,  chattel  paper,  or General  Intangibles
directly and charge the collection costs and expenses to the Loan Account.  Each
Borrower  agrees that it will hold in trust for the Lender Group,  as the Lender
Group's trustee, any of its or any Guarantor's  Collections that it receives and
immediately  will deliver such Collections to Agent or a Cash Management Bank in
their original form as received by such Borrower or the Guarantors.

      4.4 Filing of Financing  Statements;  Commercial Tort Claims;  Delivery of
Additional  Documentation  Required.  Borrowers  authorize  Agent  to  file  any
financing  statement  necessary  or  desirable to  effectuate  the  transactions
contemplated by the Loan Documents,  and any continuation statement or amendment
with respect thereto,  in any appropriate filing office without the signature of
Borrowers where permitted by applicable



                                      -65-
<PAGE>

law. Borrowers hereby ratify the filing of any financing statement filed without
the signature of Borrowers prior to the date hereof.

                  (b) If Borrowers or  Guarantors  acquire any  commercial  tort
claims after the date hereof,  Borrowers shall promptly (but in any event within
3 Business Days after such acquisition)  deliver to Agent a written  description
of such commercial tort claim and shall deliver a written agreement, in form and
substance  satisfactory to Agent,  pursuant to which the applicable  Borrower or
its Subsidiary shall pledge and collaterally  assign all of its right, title and
interest in and to such  commercial  tort claim to Agent,  as  security  for the
Obligations (a "Commercial Tort Claim Assignment").

                  (c) At any time upon the  request  of Agent,  Borrowers  shall
execute or  deliver  to Agent and shall  cause  their  Guarantors  to execute or
deliver to Agent any and all financing statements, original financing statements
in  lieu of  continuation  statements,  fixture  filings,  security  agreements,
pledges,  assignments,  Commercial  Tort  Claim  Assignments,   endorsements  of
certificates of title,  and all other documents  (collectively,  the "Additional
Documents")  that Agent may  request in its  Permitted  Discretion,  in form and
substance  satisfactory to Agent, to create,  perfect, and continue perfected or
to  better  perfect  the  Agent's  Liens in the  assets of  Borrowers  and their
Guarantors  (whether  now owned or hereafter  arising or  acquired,  tangible or
intangible,  real or personal), to create and perfect Liens in favor of Agent in
any  Real  Property  acquired  after  the  Closing  Date,  and in order to fully
consummate all of the transactions  contemplated hereby and under the other Loan
Documents.  To the maximum  extent  permitted by  applicable  law, each Borrower
authorizes  Agent to execute any such  Additional  Documents  in the  applicable
Borrower's name and authorizes Agent to file such executed Additional  Documents
in any appropriate  filing office. In addition,  on such periodic basis as Agent
shall  require,  Borrowers  shall  (i)  provide  Agent  with a report of all new
material  patentable,  copyrightable,  or  trademarkable  materials  acquired or
generated by any Borrower or its Guarantors during the prior period,  (ii) cause
all  material  patents,  copyrights,  and  trademarks  acquired or  generated by
Borrowers or their Guarantors that are not already the subject of a registration
with the  appropriate  filing  office  (or an  application  therefor  diligently
prosecuted)  to be registered  with such  appropriate  filing office in a manner
sufficient  to impart  constructive  notice  of a  Borrower's  or a  Guarantor's
ownership thereof,  and (iii) cause to be prepared,  executed,  and delivered to
Agent  supplemental  schedules to the applicable Loan Documents to identify such
patents,  copyrights,  and trademarks as being subject to the security interests
created thereunder.

      4.5  Power  of  Attorney.   Each  Borrower   hereby   irrevocably   makes,
constitutes,  and appoints  Agent (and any of Agent's  officers,  employees,  or
agents  designated by Agent) as such Borrower's true and lawful  attorney,  with
power to (a) if such Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of such Borrower on
any of the documents  described in Section 4.4, (b) at any time that an Event of
Default has occurred and is continuing, sign such Borrower's name on any invoice
or bill of lading  relating to the Borrower  Collateral,  drafts against Account
Debtors,  or notices to Account  Debtors,  (c) send requests for verification of
Borrowers' or their Domestic Subsidiaries' Accounts, (d) endorse such Borrower's
name on any of its payment



                                      -66-
<PAGE>

items (including all of its  Collections)  that may come into the Lender Group's
possession,  (e) at any time  that an  Event  of  Default  has  occurred  and is
continuing,  make, settle, and adjust all claims under such Borrower's  policies
of insurance  and make all  determinations  and  decisions  with respect to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is continuing,  settle and adjust disputes and claims respecting  Borrowers'
or their Domestic Subsidiaries' Accounts,  chattel paper, or General Intangibles
directly with Account Debtors,  for amounts and upon terms that Agent determines
to be reasonable, and Agent may cause to be executed and delivered any documents
and releases that Agent determines to be necessary.  The appointment of Agent as
each Borrower's attorney, and each and every one of its rights and powers, being
coupled with an interest,  is irrevocable until all of the Obligations have been
fully and finally  repaid and performed and the Lender  Group's  obligations  to
extend credit hereunder are terminated.

      4.6  Right  to  Inspect.  Agent  and  each  Lender  (through  any of their
respective  officers,  employees,  or agents) shall have the right, from time to
time hereafter to inspect the Books and make copies or abstracts  thereof and to
check,  test, and appraise the Collateral,  or any portion thereof,  in order to
verify  Borrowers' and their  Subsidiaries'  financial  condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.

      4.7 Control  Agreements.  Borrowers agree that they will not, and will not
permit  their  Domestic  Subsidiaries  to,  transfer  assets out of any of their
Deposit Accounts or Securities Accounts;  provided, however, that (a) Prince Mfg
and  PMC may  transfer  assets  out of  their  respective  Deposit  Accounts  or
Securities Accounts to Palladium under the PMC Sale Transactions  (regardless of
whether or not an Event of  Default  has  occurred  and is  continuing  or would
result  therefrom);  and (b) so long as no Event of Default has  occurred and is
continuing or would result therefrom,  Borrowers and their Domestic Subsidiaries
may use such assets (and the proceeds  thereof) to the extent not  prohibited by
this  Agreement or the other Loan  Documents  and, if the transfer is to another
bank or securities intermediary,  so long as the applicable Borrower or Domestic
Subsidiary,  Agent,  and the  substitute  bank or securities  intermediary  have
entered into a Control Agreement.  Borrowers agree that they will and will cause
their  Domestic  Subsidiaries  to take any or all  reasonable  steps  that Agent
requests in order for Agent to obtain control in accordance with Sections 9-104,
9-105,  9-106,  and  9-107  of the  Code  with  respect  to any of its or  their
Securities  Accounts,  Deposit Accounts,  electronic  chattel paper,  Investment
Property, and letter-of-credit  rights. No arrangement contemplated hereby or by
any Control Agreement in respect of any Securities  Accounts or other Investment
Property  shall be modified by Borrowers  without the prior  written  consent of
Agent.  Upon the occurrence and during the  continuance of a Default or Event of
Default,  Agent may notify any bank or securities  intermediary to liquidate the
applicable  Deposit  Account or  Securities  Account or any  related  Investment
Property  maintained  or held  thereby  and remit the  proceeds  thereof  to the
Agent's Account.

5. REPRESENTATIONS AND WARRANTIES.

            In order to induce  the Lender  Group to enter into this  Agreement,
each Borrower makes the following  representations  and warranties to the Lender
Group which



                                      -67-
<PAGE>

shall be true, correct, and complete,  in all material respects,  as of the date
hereof, and shall be true, correct, and complete,  in all material respects,  as
of the Closing Date, and at and as of the date of the making of each Advance (or
other extension of credit) made thereafter, as though made on and as of the date
of such Advance (or other  extension of credit)  (except to the extent that such
representations  and  warranties  relate  solely  to an  earlier  date) and such
representations  and warranties shall survive the execution and delivery of this
Agreement:

      5.1 No Encumbrances.  Each Borrower and its Domestic Subsidiaries has good
and indefeasible title to their personal property assets and good and marketable
title to their Real Property,  in each case,  free and clear of Liens except for
Permitted Liens.

      5.2  Eligible  Accounts.  The  Eligible  Accounts  are bona fide  existing
payment  obligations  of Account  Debtors  created by the sale and  delivery  of
Inventory or the  rendition of services to such Account  Debtors in the ordinary
course of Borrowers'  business,  owed to Borrowers  without any known  defenses,
disputes,  offsets,  counterclaims,  or rights of return or cancellation.  As to
each  Account  that is  identified  by  Administrative  Borrower  as an Eligible
Account in a borrowing base report submitted to Agent, such Account is as of the
date of such report not excluded as  ineligible  by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Accounts.

      5.3 Eligible Inventory. All Eligible Inventory is of good and merchantable
quality,  free  from  known  defects.  As to  each  item  of  Inventory  that is
identified by Administrative  Borrower as Eligible Inventory in a borrowing base
report  submitted to Agent,  such Inventory is not as of the date of such report
excluded as ineligible  by virtue of one or more of the  excluding  criteria set
forth in the definition of Eligible Inventory.

      5.4  Equipment.  All of the  Equipment  of  Borrowers  and their  Domestic
Subsidiaries in all material  respects is used or held for use in their business
and is fit for such purposes, subject to ordinary wear and tear.

      5.5 Location of Inventory and  Equipment.  Except as set forth on Schedule
5.5, the Inventory and  Equipment of Borrowers and their  Domestic  Subsidiaries
are not stored  with a bailee,  warehouseman,  or similar  party and are located
only at, or in-transit  between,  the  locations  identified on Schedule 5.5 (as
such Schedule may be updated pursuant to Section 6.9).

      5.6 Inventory  Records.  Each Borrower keeps correct and accurate  records
itemizing and describing the type, quality, and quantity of its and its Domestic
Subsidiaries' Inventory and the book value thereof.

      5.7 State of  Incorporation;  Location of Chief  Executive  Office;  FEIN;
Organizational ID Number; Commercial Tort Claims.

                  (a) The jurisdiction of organization of each Borrower and each
of its Subsidiaries is set forth on Schedule 5.7(a).



                                      -68-
<PAGE>

                  (b) The chief  executive  office of each  Borrower and each of
its Subsidiaries is located at the address indicated on Schedule 5.7(b) (as such
Schedule may be updated pursuant to Section 6.9).

                  (c) Each  Borrower's  and each of its  Domestic  Subsidiaries'
FEIN  and  organizational  identification  number,  if any,  are  identified  on
Schedule 5.7(c).

                  (d) As of the  Closing  Date,  Borrowers  and  their  Domestic
Subsidiaries  do not hold any  commercial  tort  claims,  except as set forth on
Schedule 5.7(d).

      5.8 Due Organization and Qualification; Subsidiaries

                  (a) Each  Borrower is duly  organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified  reasonably  could
be expected to have a Material Adverse Change.

                  (b) Set forth on Schedule  5.8(b),  is a complete and accurate
description of the authorized capital Stock of each Borrower,  by class, and, as
of the Closing  Date, a  description  of the number of shares of each such class
that are issued and  outstanding.  Other than as described  on Schedule  5.8(b),
there are no subscriptions,  options,  warrants, or calls relating to any shares
of each Borrower's capital Stock,  including any right of conversion or exchange
under  any  outstanding  security  or other  instrument.  Except as set forth on
Schedule  5.8(b),  no  Borrower  is subject  to any  obligation  (contingent  or
otherwise)  to  repurchase  or  otherwise  acquire  or retire  any shares of its
capital Stock or any security  convertible  into or exchangeable  for any of its
capital Stock.

                  (c) Set forth on Schedule  5.8(c),  is a complete and accurate
list of each  Borrower's  direct and  indirect  Subsidiaries,  showing:  (i) the
jurisdiction of their  organization;  (ii) the number of shares of each class of
common and preferred Stock authorized for each of such  Subsidiaries;  and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly  or  indirectly  by the  applicable  Borrower.  All of the  outstanding
capital Stock of each such Domestic  Subsidiary  has been validly  issued and is
fully paid and non-assessable.

                  (d)  Except  as set  forth on  Schedule  5.8(d),  there are no
subscriptions,  options,  warrants,  or  calls  relating  to any  shares  of any
Borrower's  Subsidiaries'  capital  Stock,  including any right of conversion or
exchange under any outstanding security or other instrument. Except as set forth
on Schedule 5.8(d), no Borrower or any of its respective Subsidiaries is subject
to any obligation  (contingent or otherwise) to repurchase or otherwise  acquire
or  retire  any  shares of any  Borrower's  Subsidiaries'  capital  Stock or any
security convertible into or exchangeable for any such capital Stock.

      5.9 Due Authorization; No Conflict.



                                      -69-
<PAGE>

                  (a)  As  to  each  Borrower,  the  execution,   delivery,  and
performance  by such Borrower of this  Agreement and the other Loan Documents to
which it is a party have been duly  authorized  by all  necessary  action on the
part of such Borrower.

                  (b)  As  to  each  Borrower,  the  execution,   delivery,  and
performance  by such Borrower of this  Agreement and the other Loan Documents to
which it is a party do not and will not (i)  violate any  provision  of federal,
state,  or local law or regulation  applicable  to any  Borrower,  the Governing
Documents of any  Borrower,  or any order,  judgment,  or decree of any court or
other Governmental Authority binding on any Borrower, (ii) conflict with, result
in a breach  of,  or  constitute  (with  due  notice or lapse of time or both) a
default under any material contractual obligation of any Borrower,  (iii) result
in or require the creation or  imposition  of any Lien of any nature  whatsoever
upon any properties or assets of Borrower,  other than Permitted  Liens, or (iv)
require  any  approval  of any  Borrower's  interestholders  or any  approval or
consent of any Person under any material contractual obligation of any Borrower,
other than in the case of clause (iii) and (iv), consents or approvals that have
been obtained and that are still in force and effect.

                  (c)  Other  than  the  filing  of  financing  statements,  the
recordation of the Mortgages,  the filings  required with the Patent & Trademark
Office  and any  consents  required  in  foreign  jurisdictions  as a matter  of
applicable law with respect to the stock pledges of the equity  interests in the
Non-Obligors,  the execution, delivery, and performance by each Borrower of this
Agreement and the other Loan  Documents to which such Borrower is a party do not
and will not require any registration with,  consent,  or approval of, or notice
to, or other action with or by, any Governmental Authority,  other than consents
or approvals that have been obtained and that are still in force and effect.

                  (d) As to each  Borrower,  this  Agreement  and the other Loan
Documents  to  which  such  Borrower  is  a  party,   and  all  other  documents
contemplated  hereby and thereby,  when  executed and delivered by such Borrower
will be the legally valid and binding obligations of such Borrower,  enforceable
against such  Borrower in  accordance  with their  respective  terms,  except as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization,  moratorium,  or similar laws relating to or limiting creditors'
rights generally.

                  (e) The Agent's  Liens are  validly  created,  perfected,  and
first priority Liens, subject only to Permitted Liens.

                  (f) The execution, delivery, and performance by each Guarantor
of the Loan  Documents to which it is a party have been duly  authorized  by all
necessary action on the part of such Guarantor.

                  (g) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party do not and will not (i) violate any
provision  of federal,  state,  or local law or  regulation  applicable  to such
Guarantor, the Governing Documents of such Guarantor, or any order, judgment, or
decree of any court or other  Governmental  Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute



                                      -70-
<PAGE>

(with  due  notice  or lapse  of time or  both) a  default  under  any  material
contractual  obligation  of such  Guarantor,  (iii)  result  in or  require  the
creation or imposition of any Lien of any nature  whatsoever upon any properties
or assets of such  Guarantor,  other than Permitted  Liens,  or (iv) require any
approval of such Guarantor's  interestholders  or any approval or consent of any
Person under any material contractual  obligation of such Guarantor,  other than
in the case of clause  (iii)  and (iv),  consents  or  approvals  that have been
obtained and that are still in force and effect.

                  (h)  Other  than  the  filing  of  financing  statements,  the
recordation of the Mortgages,  the filings  required with the Patent & Trademark
Office  and any  consents  required  in  foreign  jurisdictions  as a matter  of
applicable law with respect to the stock pledges of the equity  interests in the
Non-Obligors,  the execution, delivery, and performance by each Guarantor of the
Loan  Documents  to which such  Guarantor is a party do not and will not require
any registration  with,  consent,  or approval of, or notice to, or other action
with or by, any  Governmental  Authority,  other than consents or approvals that
have been obtained and that are still in force and effect.

                  (i) The Loan Documents to which each Guarantor is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by such  Guarantor  will be the legally  valid and binding  obligations  of such
Guarantor,   enforceable   against  such  Guarantor  in  accordance  with  their
respective terms,  except as enforcement may be limited by equitable  principles
or by  bankruptcy,  insolvency,  reorganization,  moratorium,  or  similar  laws
relating to or limiting creditors' rights generally.

      5.10  Litigation.  Other than those  matters  disclosed on Schedule  5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrowers,  threatened  against  Borrowers,  or any of  their  Subsidiaries,  as
applicable,  except for (a) matters that are fully covered by insurance (subject
to customary deductibles),  and (b) matters arising after the Closing Date that,
if decided adversely to Borrowers, or any of their Subsidiaries,  as applicable,
reasonably could not be expected to result in a Material Adverse Change.

      5.11 No Material  Adverse  Change.  All financial  statements  relating to
Borrowers and their  Subsidiaries  that have been  delivered by Borrowers to the
Lender Group have been prepared in accordance with GAAP (except,  in the case of
unaudited financial  statements,  for the lack of footnotes and being subject to
year-end  audit  adjustments)  and  present  fairly  in all  material  respects,
Borrowers' and their  Subsidiaries'  financial  condition as of the date thereof
and  results of  operations  for the  period  then  ended.  There has not been a
Material Adverse Change with respect to Borrowers and their  Subsidiaries  since
the date of the latest financial  statements submitted to the Lender Group on or
before the Closing Date.

      5.12 Fraudulent Transfer.

                  (a) Each Borrower and each  Domestic  Subsidiary of a Borrower
is Solvent.



                                      -71-
<PAGE>

                  (b) No transfer  of property is being made by any  Borrower or
any Domestic Subsidiary of a Borrower and no obligation is being incurred by any
Borrower  or any  Domestic  Subsidiary  of a  Borrower  in  connection  with the
transactions contemplated by this Agreement or the other Loan Documents with the
intent to hinder,  delay,  or defraud  either  present  or future  creditors  of
Borrowers or their Domestic Subsidiaries.

      5.13  Employee  Benefits.  Except as set forth on Schedule  5.13,  none of
Borrowers, any of their Domestic Subsidiaries,  or any of their ERISA Affiliates
maintains or  contributes to any Benefit Plan. As of June 30, 2002, the Unfunded
Liabilities of all Benefit Plans do not in the aggregate exceed $250,000.  As of
the Closing Date, each such Plan complies with all minimum funding  requirements
under ERISA. As of the Closing Date, there are no Multiemployer  Plans nor could
Borrower  or any  Controlled  Group  member  reasonably  be expected to have any
liability to any Multiemployer Plan.

      5.14  Environmental  Condition.  Except as set forth on Schedule 5.14, and
except for items that could not  reasonably  be expected to result in a Material
Adverse  Change,  (a) to  Borrowers'  knowledge,  none of  Borrowers'  or  their
Domestic  Subsidiaries'  properties  or assets has ever been used by  Borrowers,
their Domestic Subsidiaries,  or by previous owners or operators in the disposal
of, or to produce,  store, handle, treat,  release, or transport,  any Hazardous
Materials,  where such  production,  storage,  handling,  treatment,  release or
transport was in violation, in any material respect, of applicable Environmental
Law,  (b) to  Borrowers'  knowledge,  none  of  Borrowers'  nor  their  Domestic
Subsidiaries' properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) none of Borrowers nor any of their Domestic Subsidiaries have
received notice that a currently  effective Lien arising under any Environmental
Law has  attached to any revenues or to any Real  Property  owned or operated by
Borrowers  or their  Subsidiaries,  and (d) none of  Borrowers  nor any of their
Domestic  Subsidiaries have received a currently  effective  summons,  citation,
notice,  or  directive  from the  Environmental  Protection  Agency or any other
federal or state  governmental  agency  concerning any action or omission by any
Borrower or any Subsidiary of a Borrower resulting in the releasing or disposing
of Hazardous Materials into the environment.

      5.15 Brokerage Fees.  Borrowers and their  Subsidiaries  have not utilized
the services of any broker or finder in connection with obtaining financing from
the Lender Group under this Agreement except  Jefferies & Company,  Inc. and any
brokerage  commission  or finders fee is payable  solely by  Borrowers  or their
Subsidiaries in connection herewith.

      5.16 Intellectual Property.  Each Borrower and each Domestic Subsidiary of
a Borrower owns, or holds licenses in, all trademarks,  trade names, copyrights,
patents,  patent  rights,  and licenses that are necessary to the conduct of its
business as currently  conducted..  Attached hereto as Schedule 5.16 (as updated
from time to time) is a true,  correct,  and  complete  listing of all  material
patents, patent applications, trademarks, trademark



                                      -72-
<PAGE>

applications,  copyrights, and copyright registrations as to which each Borrower
or one of its Domestic Subsidiaries is the owner or is an exclusive licensee.

      5.17 Leases.  Borrowers and their Domestic Subsidiaries enjoy peaceful and
undisturbed  possession under all leases material to their business and to which
they are parties or under which they are operating. All of such leases are valid
and subsisting and no material default by Borrowers or their Subsidiaries exists
under any of them.

      5.18 Deposits and Securities Accounts.  Set forth on Schedule 5.18 are all
of Borrowers' and their Subsidiaries'  Deposit Accounts and Securities Accounts,
including, with respect to each bank or securities intermediary (i) the name and
address of such Person,  and (ii) the account numbers of the Deposit Accounts or
Securities Accounts maintained with such Person.

      5.19  Complete  Disclosure.  All  factual  information  (taken as a whole)
furnished by or on behalf of Borrowers or their Subsidiaries in writing to Agent
or any Lender (including all information contained in the Schedules hereto or in
the other Loan  Documents) for purposes of or in connection with this Agreement,
the other Loan Documents or any transaction  contemplated  herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of Borrowers or their  Subsidiaries  in writing to the Agent or any
Lender will be, true and  accurate  in all  material  respects on the date as of
which such  information  is dated or certified and not incomplete by omitting to
state  any fact  necessary  to make  such  information  (taken  as a whole)  not
misleading  in any material  respect at such time in light of the  circumstances
under which such information was provided. On the Closing Date, the Closing Date
Projections  represent,  and as of the date on which any other  Projections  are
delivered to Agent, such additional  Projections represent Borrowers' good faith
best  estimate  of their  and their  Subsidiaries'  future  performance  for the
periods covered thereby.

      5.20 Indebtedness.  Set forth on Schedule 5.20 is a true and complete list
of  all  Indebtedness  of  each  Borrower  and  each  Subsidiary  of a  Borrower
outstanding  immediately prior to the Closing Date that is to remain outstanding
after the Closing  Date and such  Schedule  accurately  reflects  the  aggregate
principal amount of such Indebtedness and the principal terms thereof.

      5.21 MRT Holdings.  MRT Holdings has no assets or liabilities and conducts
and has conducted no business activities.

      5.22 Prince Mfg.  Prince Mfg conducts no business  activities and its only
assets are Cash Equivalents of approximately  $18,000,000 as of the Closing Date
and the Stock of PMC,  has no other assets or  liabilities  and conducts and has
conducted no business activities.



                                      -73-
<PAGE>

6. AFFIRMATIVE COVENANTS.

            Each Borrower covenants and agrees that, until termination of all of
the  Commitments  and payment in full of the  Obligations,  Borrowers  shall and
shall cause each of their respective Subsidiaries to do all of the following:

      6.1  Accounting  System.  Maintain  a system of  accounting  that  enables
Borrowers to produce  financial  statements in accordance with GAAP and maintain
records  pertaining to the Collateral  that contain  information as from time to
time  reasonably  may be  requested  by  Agent.  Borrowers  also  shall  keep an
inventory reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their Subsidiaries' Inventory.

      6.2  Collateral  Reporting.  Provide  Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following times
in form satisfactory to Agent:

================================================================================
Daily                   (a)  Accounts  Receivable  rollforward  with  respect to
                        Borrowers and their Domestic Subsidiaries and support in
                        form and substance satisfactory to Agent,

                        (b) notice of all claims,  offsets, or disputes asserted
                        by Account  Debtors with respect to Borrowers' and their
                        Domestic Subsidiaries' Accounts,

--------------------------------------------------------------------------------
Weekly                  (c) a sales  journal,  collection  journal,  and  credit
                        register  since  the  last  such   schedule,   a  report
                        regarding  credit  memoranda that have been issued since
                        the last such report, and a calculation of the Borrowing
                        Base as of such date,

                        (d) A  detailed  aging,  by total,  of the  Accounts  of
                        Borrowers in electronic form,

                        (e) Electronic  Inventory reports specifying the cost of
                        Borrowers' and their Domestic  Subsidiaries'  Inventory,
                        by category and location,

--------------------------------------------------------------------------------
Monthly (not later      (f)  a  detailed   calculation  of  the  Borrowing  Base
than the 20th day       (including  detail regarding those Accounts of Borrowers
of each month)          that are not Eligible  Accounts),

                        (g) a  detailed  aging,  by total,  of the  Accounts  of
                        Borrowers,   together  with  a  reconciliation   to  the
                        detailed calculation of the Borrowing Base and financial
                        statements previously provided to Agent,

                        (h) a detailed aging, by vendor, of Borrowers' and their
                        Domestic  Subsidiaries'  accounts  payable  and any book
                        overdraft,   and  a  reconciliation   to  the  financial
                        statements,

================================================================================


                                      -74-
<PAGE>

================================================================================
                        (i) a detailed  report  regarding  Borrowers'  and their
                        Domestic   Subsidiaries'   cash  and  Cash   Equivalents
                        including  an  indication  of which  amounts  constitute
                        Qualified Cash,

                        (j)  a  calculation  of  Dilution  for  the  month  most
                        recently ended,

                        (k) a  reconciliation  of the Inventory  reports for the
                        month to the financial statements,

--------------------------------------------------------------------------------
Quarterly               (l) a detailed list of each Borrower's and each Domestic
                        Subsidiary of a Borrower's customers, and

                        (m) a report regarding each Borrower's and each Domestic
                        Subsidiary  of a  Borrower's  accrued,  but  unpaid,  ad
                        valorem taxes.

--------------------------------------------------------------------------------
Upon request            (n) copies of invoices in connection with Borrowers' and
by Agent                their  Domestic  Subsidiaries'  Accounts,  credit memos,
                        remittance advices, deposit slips, shipping and delivery
                        documents  in  connection   with  Borrowers'  and  their
                        Domestic  Subsidiaries'  Accounts and, for Inventory and
                        Equipment   acquired  by  Borrowers  or  their  Domestic
                        Subsidiaries, purchase orders and invoices, and

                        (o)  such  other  reports  as to the  Collateral  or the
                        financial  condition  of  Borrowers  and their  Domestic
                        Subsidiaries, as Agent may request.

================================================================================

            In addition,  each Borrower  agrees to cooperate fully with Agent to
facilitate and implement a system of electronic collateral reporting in order to
provide electronic reporting of each of the items set forth above.

      6.3 Financial Statements,  Reports,  Certificates.  Deliver to Agent, with
copies to each Lender:

                  (a) as soon as available,  but in any event within 30 days (45
days in the case of a month that is the end of one of Parent's fiscal  quarters)
after the end of each month during each of Parent's fiscal years,

                  (i) a company prepared  consolidated and consolidating balance
            sheet,  income  statement,  and  statement  of  cash  flow  covering
            Parent's and its Subsidiaries' operations during such period,

                  (ii) a  certificate  signed  on  behalf of Parent by the chief
            financial officer of Parent to the effect that:

                        A. the financial  statements  delivered  hereunder  have
                  been prepared in accordance  with GAAP (except for the lack of
                  footnotes



                                      -75-
<PAGE>

                  and being subject to year-end  audit  adjustments)  and fairly
                  present in all material  respects the  financial  condition of
                  Parent and its Subsidiaries,

                        B.  the  representations  and  warranties  of  Borrowers
                  contained in this  Agreement and the other Loan  Documents are
                  true and  correct in all  material  respects  on and as of the
                  date of such  certificate,  as  though  made on and as of such
                  date  (except  to the  extent  that such  representations  and
                  warranties  relate  solely to an  earlier  date and except for
                  changes permitted under the Loan Documents and reflected in an
                  updated schedule delivered by the Borrowers), and

                        C.  there  does not exist any  condition  or event  that
                  constitutes  a Default or Event of Default  (or, to the extent
                  of any  non-compliance,  describing such  non-compliance as to
                  which he or she may have  knowledge and what action  Borrowers
                  have  taken,  are  taking,  or  propose  to take with  respect
                  thereto), and

                  (iii)  for each  month  that is the date on which a  financial
            covenant in Section 7.18 is to be tested,  a Compliance  Certificate
            demonstrating,  in reasonable detail,  compliance at the end of such
            period with the applicable  financial covenants contained in Section
            7.18,

                  (b) as soon as  available,  but in any  event  within  90 days
after the end of each of Parent's fiscal years,

                  (i)  consolidated  financial  statements  of  Parent  and  its
            Subsidiaries  for each such  fiscal  year,  audited  by  independent
            certified  public  accountants  reasonably  acceptable  to Agent and
            certified (other than as to consolidating  statements),  without any
            qualifications,  by  such  accountants  to  have  been  prepared  in
            accordance with GAAP (such audited financial statements to include a
            consolidated and consolidating balance sheet, income statement,  and
            statement of cash flow and, if prepared, such accountants' letter to
            management), and

                  (ii) a certificate of such accountants  addressed to Agent and
            the Lenders  stating that such  accountants do not have knowledge of
            the existence of any Default or Event of Default under Section 7.18,

                  (c) as soon as  available,  but in any  event  within  30 days
prior to the  start of each of  Parent's  fiscal  years,  copies  of  Borrowers'
Projections,  in form  and  substance  (including  as to  scope  and  underlying
assumptions) satisfactory to Agent, in its sole discretion,  for the forthcoming
fiscal  year,  month by  month,  certified  on  behalf  of  Parent  by the chief
financial  officer  of Parent  as being  its good  faith  best  estimate  of the
financial  performance of Parent and its Subsidiaries  during the period covered
thereby,



                                      -76-
<PAGE>

                  (d) if and when filed by any Borrower,

                  (i) 10-Q quarterly reports, Form 10-K annual reports, and Form
            8-K current reports,

                  (ii) any other filings made by any Borrower with the SEC,

                  (iii) copies of Borrowers' federal income tax returns, and any
            amendments thereto, filed with the Internal Revenue Service, and

                  (iv) any other  information  that is provided by Parent to its
            noteholders generally,

                  (e)  if  and  when  filed  by any  Borrower  or  any  Domestic
Subsidiary  of a Borrower and as requested  by Agent,  satisfactory  evidence of
payment  of  applicable  excise  taxes in each  jurisdiction  in  which  (i) any
Borrower  or any  Domestic  Subsidiary  of a Borrower  conducts  business  or is
required to pay any such excise tax,  (ii) where any  Borrower's or any Domestic
Subsidiary of a Borrower's  failure to pay any such applicable  excise tax would
result in a Lien on the  properties  or assets of such Borrower or such Domestic
Subsidiary,  or (iii)  where any  Borrower's  or any  Domestic  Subsidiary  of a
Borrower's  failure to pay any such  applicable  excise tax reasonably  could be
expected to result in a Material Adverse Change,

                  (f) as  soon as a  Borrower  has  knowledge  of any  event  or
condition that constitutes a Default or an Event of Default,  notice thereof and
a statement of the curative  action that Borrowers  propose to take with respect
thereto,

                  (g) promptly after the commencement  thereof, but in any event
within 5 days after the service of process with respect  thereto on any Borrower
or any  Domestic  Subsidiary  of a Borrower,  notice of all actions,  suits,  or
proceedings  brought by or against any Borrower or any Domestic  Subsidiary of a
Borrower before any  Governmental  Authority  which, if determined  adversely to
such  Borrower  or such  Domestic  Subsidiary,  reasonably  could be expected to
result in a Material Adverse Change, and

                  (h) upon the  request of Agent,  any other  report  reasonably
requested  relating to the  financial  condition of Borrowers or their  Domestic
Subsidiaries.

            In addition to the financial statements referred to above, Borrowers
agree to  deliver  financial  statements  prepared  on both a  consolidated  and
consolidating  basis and agree that no Domestic Subsidiary of Parent will have a
fiscal year  different  from that of Parent.  Borrowers  agree to cooperate with
Agent  to  allow  Agent to  consult  with  their  independent  certified  public
accountants  if Agent  reasonably  requests the right to do so and that, in such
connection,  their  independent  certified public  accountants are authorized to
communicate  with Agent and to release to Agent whatever  financial  information
concerning Borrowers or their Subsidiaries that Agent reasonably may request.



                                      -77-
<PAGE>

      6.4 [intentionally omitted].

      6.5 Returns.  Cause returns and allowances as between  Borrowers and their
Domestic  Subsidiaries and their Account Debtors, to be on the same basis and in
accordance  with the usual  customary  practices of Borrowers and their Domestic
Subsidiaries,  as they exist at the time of the  execution  and delivery of this
Agreement.

      6.6  Maintenance  of  Properties.  Maintain  and  preserve  all  of  their
properties which are necessary or useful in the proper conduct to their business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times with the  provisions of all leases to which it is a party as lessee
and  necessary  or useful in the proper  conduct of their  businesses,  so as to
prevent any loss or forfeiture thereof or thereunder.

      6.7 Taxes.  Cause all assessments and taxes,  whether real,  personal,  or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers,
their Domestic  Subsidiaries,  or any of their  respective  assets to be paid in
full,  before  delinquency  or before the  expiration of any  extension  period,
except to the extent that the  validity of such  assessment  or tax shall be the
subject of a Permitted  Protest.  Borrowers  will and will cause their  Domestic
Subsidiaries  to  make  timely  payment  or  deposit  of all  tax  payments  and
withholding  taxes  required of them by applicable  laws,  including  those laws
concerning F.I.C.A.,  F.U.T.A., state disability,  and local, state, and federal
income taxes, and will, upon request,  furnish Agent with proof  satisfactory to
Agent  indicating  that the  applicable  Borrower  or Domestic  Subsidiary  of a
Borrower has made such payments or deposits.

      6.8  Insurance At Borrowers'  expense,  maintain  insurance  respecting
their and their Domestic Subsidiaries' assets wherever located, covering loss or
damage by fire, theft, explosion,  and all other hazards and risks as ordinarily
are insured against by other Persons engaged in the same or similar  businesses.
Borrowers also shall  maintain  business  interruption,  public  liability,  and
product liability insurance, as well as insurance against larceny, embezzlement,
and criminal  misappropriation.  All such policies of insurance shall be in such
amounts and with such  insurance  companies as are  reasonably  satisfactory  to
Agent.  Borrowers  shall  deliver  copies of all such  policies  to Agent with a
satisfactory  lender's loss payable  endorsement naming Agent as sole loss payee
or additional insured, as appropriate, with respect to insurance covering Parent
and its Domestic Subsidiaries.  Each policy of insurance or endorsement covering
Parent  and its  Domestic  Subsidiaries  shall  contain a clause  requiring  the
insurer to give not less than 30 days prior written notice to Agent in the event
of cancellation of the policy for any reason whatsoever.

                  (b) Administrative  Borrower shall give Agent prompt notice of
any loss  covered by such  insurance.  So long as no Default or Event of Default
has occurred  and is  continuing,  Borrowers  shall have the right to adjust any
losses  claimed  after  the  Closing  Date  with  Agent's  consent.  At any time
following the occurrence and during the  continuance of a Default or an Event of
Default, Agent shall have the exclusive right to adjust any losses claimed after
the Closing Date without any liability to Borrower whatsoever in respect of such
adjustments.  During the continuance of a Default or an Event of Default,  Agent
shall



                                      -78-
<PAGE>

have the exclusive  right to adjust any losses  claimed under any such insurance
policies,  without any  liability  to  Borrowers  whatsoever  in respect of such
adjustments, and any monies received as payment for any loss under any insurance
policy mentioned above (other than liability  insurance  policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be paid over to Agent to be applied at the option of the Required Lenders either
to the  prepayment of the  Obligations  or shall be disbursed to  Administrative
Borrower  under staged  payment terms  reasonably  satisfactory  to the Required
Lenders for application to the cost of repairs,  replacements,  or restorations.
Any  such  repairs,   replacements,  or  restorations  shall  be  effected  with
reasonable promptness and shall be of a value at least equal to the value of the
items or property destroyed prior to such damage or destruction.

                  (c) Borrowers  shall not, and shall not suffer or permit their
Domestic  Subsidiaries  to, take out separate  insurance  concurrent  in form or
contributing in the event of loss with that required to be maintained under this
Section  6.8,  unless Agent is included  thereon as named  insured with the loss
payable to Agent under a lender's loss payable  endorsement  or its  equivalent.
Administrative  Borrower  immediately  shall notify Agent whenever such separate
insurance is taken out,  specifying the insurer  thereunder and full particulars
as to the policies  evidencing  the same,  and copies of such policies  promptly
shall be provided to Agent.

      6.9  Location  of  Inventory  and  Equipment.  Keep  Borrowers'  and their
Domestic Subsidiaries'  Inventory and Equipment only at the locations identified
on  Schedule  5.5 and  their  chief  executive  offices  only  at the  locations
identified on Schedule 5.7(b);  provided,  however, that Administrative Borrower
may amend  Schedule  5.5 and Schedule  5.7 so long as such  amendment  occurs by
written  notice  to Agent not less  than 30 days  after  the date on which  such
Inventory or  Equipment  is moved to such new  location or such chief  executive
office is  relocated,  so long as such new  location  is within the  continental
United  States,  and so long as, at the time of such written  notification,  the
applicable  Borrower  provides Agent a Collateral  Access Agreement with respect
thereto.

      6.10 Compliance with Laws.  Comply with the requirements of all applicable
laws, rules,  regulations,  and orders of any Governmental Authority,  including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the  aggregate,  could not  reasonably be expected to result in a Material
Adverse Change.

      6.11 Leases.  Pay when due all rents and other  amounts  payable under any
leases to which any Borrower or any Domestic Subsidiary of a Borrower is a party
or by which any Borrower's or any Domestic Subsidiary of a Borrower's properties
and  assets are bound,  unless  such  payments  are the  subject of a  Permitted
Protest.

      6.12 Existence.  Except for the consummation of the PMC Sale  Transactions
or the  Permitted  Reorganization  Transactions,  and other  than the  Norwegian
Subsidiaries,  at all times  preserve  and keep in full  force and  effect  each
Borrower's and each Subsidiary of a



                                      -79-
<PAGE>

Borrower's  valid  existence  and good  standing  and any rights and  franchises
material to their businesses.

      6.13 Environmental.  (a) Keep any property either owned or operated by any
Borrower or any  Domestic  Subsidiary  of a Borrower  free of any  Environmental
Liens or post bonds or other  financial  assurances  sufficient  to satisfy  the
obligations or liability  evidenced by such Environmental  Liens, (b) comply, in
all  material   respects,   with   Environmental   Laws  and  provide  to  Agent
documentation of such compliance which Agent reasonably  requests,  (c) promptly
notify Agent of any release of a Hazardous  Material of any reportable  quantity
from  or onto  property  owned  or  operated  by any  Borrower  or any  Domestic
Subsidiary  of a Borrower and take any Remedial  Actions  required to abate said
release or otherwise to come into compliance with applicable  Environmental Law,
and (d) promptly, but in any event within 5 days of its receipt thereof, provide
Agent  with  written  notice  of  any of  the  following:  (i)  notice  that  an
Environmental  Lien has been filed against any of the real or personal  property
of any Borrower or any Domestic  Subsidiary of a Borrower,  (ii) commencement of
any  Environmental  Action or notice that an Environmental  Action will be filed
against any Borrower or any Domestic Subsidiary of a Borrower,  and (iii) notice
of a violation, citation, or other administrative order, which in any case under
clause (i), (ii) or (iii)  reasonably  could be expected to result in a Material
Adverse Change.

      6.14  Disclosure  Updates.  Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, notify Agent if any written information,
exhibit,  or report furnished to the Lender Group contained any untrue statement
of a material fact or omitted to state any material  fact  necessary to make the
statements  contained  therein not misleading in light of the  circumstances  in
which made.  The  foregoing to the contrary  notwithstanding,  any  notification
pursuant to the  foregoing  provision  will not cure or remedy the effect of the
prior untrue  statement of a material  fact or omission of any material fact nor
shall any such  notification  have the  affect of  amending  or  modifying  this
Agreement or any of the Schedules hereto.

      6.15  Formation  of  Subsidiaries.  At the time that any  Borrower  or any
Guarantor  forms any direct or indirect  Domestic  Subsidiary  or  acquires  any
direct or indirect Domestic  Subsidiary after the Closing Date, such Borrower or
such Guarantor shall (a) cause such new Subsidiary to provide to Agent a joinder
to this Agreement or the Guaranty and the Guarantor Security Agreement, together
with such other security documents (including Mortgages with respect to any Real
Property  of  such  new  Subsidiary),  as well as  appropriate  UCC-1  financing
statements  (and with  respect to all  property  subject to a Mortgage,  fixture
filings),  all in form and  substance  satisfactory  to Agent  (including  being
sufficient to grant Agent a first priority Lien (subject to Permitted  Liens) in
and to the assets of such newly formed or acquired  Subsidiary),  (b) provide to
Agent a pledge  agreement and appropriate  certificates  and powers or financing
statements,  hypothecating all of the direct or beneficial ownership interest in
such new  Subsidiary,  in form and  substance  satisfactory  to  Agent,  and (c)
provide to Agent all other  documentation,  including  one or more  opinions  of
counsel  satisfactory to Agent, which in its opinion is appropriate with respect
to the execution and delivery of the applicable  documentation referred to above
(including policies of title



                                      -80-
<PAGE>

insurance  or other  documentation  with  respect to all  property  subject to a
Mortgage). Any document, agreement, or instrument executed or issued pursuant to
this Section 6.15 shall be a Loan Document.

7. NEGATIVE COVENANTS.

            Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the  Obligations,  Borrowers will not and
will not permit any of their respective Subsidiaries to do any of the following:

      7.1  IndebtednessCreate,  incur, assume,  suffer to exist,  guarantee,  or
otherwise become or remain,  directly or indirectly,  liable with respect to any
Indebtedness, except:

                  (a)  Indebtedness  evidenced by this  Agreement  and the other
Loan  Documents,  together with  Indebtedness  owed to  Underlying  Issuers with
respect to Underlying Letters of Credit;

                  (b) Indebtedness set forth on Schedule 5.20;

                  (c) Permitted Purchase Money Indebtedness;

                  (d)  refinancings,  renewals,  or extensions  of  Indebtedness
permitted  under  clauses  (b),  (c),  (h), (i) and (k) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated  therewith) so long as:
(i) the terms and conditions of such  refinancings,  renewals,  or extensions do
not, in Agent's  judgment,  materially  impair the prospects of repayment of the
Obligations by Borrowers or materially impair Borrowers' creditworthiness,  (ii)
such refinancings,  renewals,  or extensions do not result in an increase in the
then extant  principal  amount of the  Indebtedness so refinanced,  renewed,  or
extended or add one or more  Borrowers  as liable with  respect  thereto if such
additional Borrowers were not liable with respect to the original  Indebtedness,
(iii) such refinancings,  renewals,  or extensions do not result in a shortening
of the average weighted maturity of the Indebtedness so refinanced,  renewed, or
extended,  nor are they on  terms or  conditions,  that,  taken as a whole,  are
materially  more burdensome or restrictive to the applicable  Borrower,  (iv) if
the Indebtedness  that is refinanced,  renewed,  or extended was subordinated in
right of  payment  to the  Obligations,  then the  terms and  conditions  of the
refinancing,  renewal, or extension  Indebtedness must be include  subordination
terms and conditions that are at least as favorable to the Lender Group as those
that were applicable to the refinanced,  renewed, or extended Indebtedness,  and
(v) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons
which were  obligated  with  respect to the  Indebtedness  that was  refinanced,
renewed, or extended;

                  (e)  endorsement  of  instruments  or other  payment items for
deposit;

                  (f) Indebtedness  composing Permitted  Investments  (including
Permitted Intercompany Advances);



                                      -81-
<PAGE>

                  (g)  Hedge  Agreements  of  Borrowers  or  any  Subsidiary  of
Borrower  covering  Indebtedness  of Borrowers or any  Subsidiary  of Borrowers;
provided,  however,  that such Hedge Agreements are entered into in the ordinary
course of business,  are not for  speculative  purposes and are entered into for
the  purpose of fixing or hedging  interest  rates with  respect to any fixed or
variable rate Indebtedness that is permitted hereunder;

                  (h)  Indebtedness  of a  Non-Obligor  to Persons  that are not
Affiliates  of  Parent  or any  Permitted  Holder  in an  aggregate  outstanding
principal amount not to exceed  $16,000,000  (which amount shall not include any
other amounts otherwise permitted under this Section 7.1);

                  (i) any  guaranty  by any  Borrower or any  Guarantor  of each
other's  Indebtedness or performance of obligations;  provided that such other's
Indebtedness or obligation is permitted to be incurred under this Agreement;

                  (j)  Indebtedness  incurred in connection with the purchase or
redemption of shares of Parent or a Subsidiary permitted under this Agreement;

                  (k)  Indebtedness  arising  from  agreements  of  Parent  or a
Subsidiary  with  Palladium   providing  for  the  guarantee,   indemnification,
adjustment of purchase price or similar  obligations,  in each case, incurred in
connection with the PMC Sales Transactions;  provided that the maximum aggregate
liability  in respect  of such  Indebtedness  shall at no time  exceed the gross
proceeds  or value of the  consideration  actually  received  by Parent  and its
Subsidiaries in connection with such transaction; and

                  (l)  Indebtedness  arising  from  agreements  of  Parent  or a
Subsidiary providing for the guarantee, indemnification,  adjustment of purchase
price  or  similar  obligation,  in each  case,  incurred  under  the  PMC  Sale
Transactions;  provided that in no event may the maximum aggregate  liability in
respect of such  Indebtedness  exceed the gross  proceeds  actually  received by
Parent and its Domestic Subsidiaries in the PMC Sale Transactions.

      7.2  Liens.  Create,  incur,  assume,  or  suffer to  exist,  directly  or
indirectly,  any Lien on or with  respect  to any of its  assets,  of any  kind,
whether now owned or  hereafter  acquired,  or any income or profits  therefrom,
except for Permitted Liens  (including  Liens that are replacements of Permitted
Liens to the extent that the original  Indebtedness is refinanced,  renewed,  or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).

      7.3 Restrictions on Fundamental Changes.

                  (a) Except in connection with the consummation of the PMC Sale
Transactions or the consummation of the Permitted  Reorganization  Transactions,
enter into any merger, consolidation,  reorganization,  or recapitalization,  or
reclassify its Stock.



                                      -82-
<PAGE>

                  (b) Except in connection with the consummation of the PMC Sale
Transactions or the consummation of the Permitted  Reorganization  Transactions,
liquidate,   wind  up,  or  dissolve   itself  (or  suffer  any  liquidation  or
dissolution).

                  (c) Except in connection with the consummation of the PMC Sale
Transactions or the consummation of the Permitted  Reorganization  Transactions,
convey, sell, lease, license,  assign, transfer, or otherwise dispose of, in one
transaction  or a series of  transactions,  all or any  substantial  part of its
assets.

      7.4 Disposal of Assets.  Other than Permitted  Dispositions  and except in
connection with the consummation of the Permitted  Reorganization  Transactions,
convey, sell, lease, license,  assign,  transfer, or otherwise dispose of any of
the assets of any Borrower or any Subsidiary of a Borrower.

      7.5 Change Name.  Change any  Borrower's  or any Domestic  Subsidiary of a
Borrower's  name,  FEIN,   organizational   identification   number,   state  of
organization,  or organizational identity; provided, however, that a Borrower or
a  Subsidiary  of a  Borrower  may  change  its name upon at least 30 days prior
written  notice by  Administrative  Borrower to Agent of such change and so long
as, at the time of such written  notification,  such Borrower or such Subsidiary
provides any financing  statements  necessary to perfect and continue  perfected
Agent's Liens.

      7.6 Nature of Business.  Engage in any business other than the business in
which  they  are  engaged  as of the  Closing  Date  and  any  business  that is
reasonably related to or complimentary to such business.

      7.7 Prepayments  and  Amendments.  Except in connection with a refinancing
permitted  by Section  7.1(d) and except for  mandatory  redemptions  of the Old
Notes and/or New Notes required under the terms of the Existing Indenture or the
New  Indenture  (as in effect on the date  hereof)  as a result of an  Indenture
Change of Control or as a result of Asset Sales (for the avoidance of doubt, the
foregoing  shall not  include  mandatory  prepayments  on account of Excess Cash
Flow),

                  (a) prepay,  redeem,  defease,  purchase, or otherwise acquire
any Indebtedness of any Borrower or any Subsidiary of a Borrower, other than the
Obligations in accordance with this Agreement, or

                  (b) directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any  agreement,  instrument,  document,
indenture,  or other writing  evidencing or  concerning  Indebtedness  permitted
under Section 7.1(b) or (c).

      7.8 Change of Control.  Cause, permit, or suffer,  directly or indirectly,
any Change of Control.

      7.9  Consignments.  In the  case of  Borrowers  or any of  their  Domestic
Subsidiaries,  consign any of their  Inventory or sell any of their Inventory on
bill and hold, sale or return,



                                      -83-
<PAGE>

sale on approval,  or other  conditional terms of sale in an aggregate amount of
more than $2,000,000 at any time outstanding;  provided however that in no event
shall any such Inventory constitute Eligible Inventory.

      7.10  Distributions.   Other  than  Permitted   Distributions,   make  any
distribution or declare or pay any dividends (in cash or other  property,  other
than common  Stock) on, or  purchase,  acquire,  redeem,  or retire the Stock of
Parent  or any of its  Subsidiaries,  of any  class,  whether  now or  hereafter
outstanding.

      7.11  Accounting  Methods.  Modify or change  their  fiscal  year or their
method of accounting (other than as may be required to conform to GAAP) or enter
into,  modify,  or terminate any agreement  currently  existing,  or at any time
hereafter  entered into with any third party  accounting  firm or service bureau
for the preparation or storage of Borrowers' or their  Subsidiaries'  accounting
records without said accounting firm or service bureau agreeing to provide Agent
information regarding Borrowers' and their Subsidiaries' financial condition.

      7.12   Investments.   Except  for  Permitted   Investments,   directly  or
indirectly,  make or acquire any Investment, or incur any liabilities (including
contingent  obligations)  for or in connection  with any  Investment;  provided,
however,  that Administrative  Borrower and its Domestic  Subsidiaries shall not
have  Permitted  Investments  (other than in the Cash  Management  Accounts)  in
Deposit  Accounts or  Securities  Accounts in an  aggregate  amount in excess of
$100,000  outstanding  at any one time  unless  Administrative  Borrower  or its
Domestic Subsidiary,  as applicable,  and the applicable securities intermediary
or bank have entered into Control Agreements or similar  arrangements  governing
such  Permitted  Investments  in order to perfect  (and further  establish)  the
Agent's Liens in such Permitted  Investments.  Subject to the foregoing proviso,
Borrowers  shall  not,  and shall not permit  their  Domestic  Subsidiaries  to,
establish or maintain any Deposit  Account or  Securities  Account  unless Agent
shall have  received a Control  Agreement in respect of such Deposit  Account or
Securities Account.

      7.13  Transactions  with Affiliates.  Except as disclosed in Schedule 7.13
hereto  and  except  for (a)  Permitted  Intercompany  Advances,  (b)  Permitted
Distributions,  (c) payments  permitted to be made under Section  7.15,  (d) the
consummation  of the  PMC  Sale  Transactions,  and  (e)  Permitted  Investments
pursuant to clauses (e), (f) and (i) of the definition of Permitted Investments,
directly or indirectly  enter into or permit to exist any  transaction  with any
Affiliate  of any  Borrower  except for  transactions  that are in the  ordinary
course of Borrowers'  business,  upon fair and reasonable  terms, that are fully
disclosed to Agent,  and that are no less  favorable to Borrowers  than would be
obtained in an arm's length transaction with a non-Affiliate.

      7.14  Suspension.  Suspend  or go out of a  substantial  portion  of their
business.

      7.15  Compensation.  Pay cash  salary and bonus in the  aggregate  to Jack
Bendheim in respect of each fiscal year  beginning  on or after July 1, 2004 (a)
for which Cash Flow of the prior fiscal year is less than  $25,000,000 in excess
of $750,000, (b) for which Cash Flow



                                      -84-
<PAGE>

of the prior fiscal year is greater than or equal to  $25,000,000  but less than
$36,000,000, in excess of the sum of (i) $1,000,000 plus (ii) (A) $650,000 times
(B) a ratio,  the  numerator  of which is Cash Flow with  respect  to such prior
fiscal year less  $25,000,000 and the  denominator of which is $11,000,000,  and
(c) for which Cash Flow of the prior  fiscal  year is  greater  than or equal to
$36,000,000,  in  excess  of the  lesser  of (y) the  amount  determined  by the
Compensation Committee of the Board of Directors, and (z) $2,000,000.

      7.16 Use of  Proceeds.  Use the  proceeds of the  Advances for any purpose
other  than (a) on the  Closing  Date,  (i) to  repay  in full  the  outstanding
principal,  accrued  interest,  and accrued fees and expenses  owing to Existing
Lender,  and (ii) to pay  transactional  fees,  costs, and expenses  incurred in
connection with this Agreement,  the other Loan Documents,  and the transactions
contemplated hereby and thereby,  and (b) thereafter,  consistent with the terms
and conditions hereof, for its lawful and permitted purposes.

      7.17 Inventory and Equipment with Bailees.  Except as otherwise  expressly
permitted under this Agreement, store the Inventory or Equipment of Borrowers or
their  Domestic  Subsidiaries  at any  time  now  or  hereafter  with a  bailee,
warehouseman, or similar party without Agent's prior written consent.

      7.18  Financial  Covenants(a)  At any  time  that  Borrowers  do not  have
Required Availability:

                  (i)  Minimum  Domestic  EBITDA.  Fail to  maintain  or achieve
            EBITDA for  Parent  and its  Domestic  Subsidiaries,  measured  on a
            month-end  basis,  of at least the required  amount set forth in the
            following  table  for  the  applicable  period  set  forth  opposite
            thereto:

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

            Applicable Amount                  Applicable Period

--------------------------------------------------------------------------------
                $2,700,000                   For the 2 month period
                                            ending November 30, 2003

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

                $4,100,000                   For the 3 month period
                                            ending December 31, 2003

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

                $5,000,000                   For the 4 month period
                                            ending January 31, 2004

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

                $6,000,000                   For the 5 month period
                                            ending February 29, 2004

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

                $8,000,000                   For the 6 month period
                                             ending March 31, 2004

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

                $9,000,000                   For the 7 month period
                                             ending April 30, 2004

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


                                      -85-
<PAGE>

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

               $10,000,000                   For the 8 month period
                                              ending May 31, 2004

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

               $12,000,000                   For the 9 month period
                                              ending June 30, 2004

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

                  (ii) Consolidated  Minimum EBITDA. Fail to maintain or achieve
            EBITDA for  Parent and its  Subsidiaries,  measured  on a  month-end
            basis,  of at least the required  amount set forth in the  following
            table for the applicable period set forth opposite thereto:

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

            Applicable Amount                    Applicable Period

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

                $5,200,000                     For the 2 month period
                                              ending November 30, 2003

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

                $7,500,000                     For the 3 month period
                                              ending December 31, 2003

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

               $10,000,000                     For the 4 month period
                                              ending January 31, 2004

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

               $12,000,000                     For the 5 month period
                                              ending February 29, 2004

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

               $15,500,000                     For the 6 month period
                                               ending March 31, 2004

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

               $18,000,000                     For the 7 month period
                                               ending April 30, 2004

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

               $21,000,000                     For the 8 month period
                                                ending May 31, 2004

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

               $24,000,000                     For the 9 month period
                                                ending June 30, 2004

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

                  (b) Make:

                  (i) Capital  Expenditures.  Capital Expenditures in any fiscal
            year in excess of the  amount set forth in the  following  table for
            the applicable period:



                                      -86-
<PAGE>

--------------------------------------------------------------------------------
Fiscal Year 2004     Fiscal Year 2005     Fiscal Year 2006     Fiscal Year 2007
--------------------------------------------------------------------------------
$11,300,000          $11,300,000          $11,300,000          $11,300,000
--------------------------------------------------------------------------------

                  (c)  Determination  of  Future  Levels.  Agent  shall,  in its
Permitted   Discretion,   establish  the  monthly  minimum  EBITDA  and  capital
expenditures covenants for the 10 month period ended July 31, 2004, the 11 month
period ended August 31, 2004, and the 12 month period ended  September 30, 2004,
and  for  each  trailing  12  month  period  thereafter  based  upon  Borrowers'
Projections  for such fiscal year  delivered  pursuant to Section 6.3(c) of this
Agreement,  which Borrowers'  Projections  shall be satisfactory to Agent in all
respects.  Borrowers  shall execute any amendment to this Section 7.18 requested
by Agent to document the inclusion of such covenant levels. If Borrowers fail to
timely deliver the Borrowers' Projections pursuant to Section 6.3(c), the EBITDA
level for (i) the 10 month period ended July 31, 2004, the 11 month period ended
August 31,  2004,  and the 12 month period ended  September  30, 2004,  shall be
measured on a monthly  basis at an amount equal to 110% of the most recent prior
period and (ii) each  succeeding  trailing 12 month period after  September  30,
2004 shall be measured on a monthly basis at an amount equal to 110% of the last
trailing 12 months.

8. EVENTS OF DEFAULT.

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

      8.1 If Borrowers fail to pay when due and payable or when declared due and
payable, all or any portion of the Obligations  (whether of principal,  interest
(including any interest  which,  but for the provisions of the Bankruptcy  Code,
would have  accrued on such  amounts),  fees and charges  due the Lender  Group,
reimbursement   of  Lender  Group  Expenses,   or  other  amounts   constituting
Obligations) ); provided,  however,  that in the case of  Overadvances  that are
caused  by the  charging  of  interest,  fees,  or Lender  Expenses  to the Loan
Account,  such  event  shall not  constitute  an Event of Default  if,  within 3
Business Days of its receipt of telephonic notice of such Overadvance, Borrowers
eliminate such Overadvance;

      8.2 If any Borrower:

                  (a) fails to perform,  keep,  or observe any term,  provision,
covenant, or agreement contained in Sections 2.7, 3.2, 4.2, 4.4, 4.6, 6.8, 6.12,
6.15, 6.16, 6.17, and 7.1 through 7.18 of this Agreement;

                  (b) fails or neglects to perform,  keep,  or observe any term,
provision, covenant, or agreement contained in Sections 4.5, 6.2, 6.3, 6.5, 6.6,
6.7, 6.9, 6.10, 6.11, and 6.14 of this Agreement and such failure  continues for
a period of 5 Business Days; or

                  (c) fails or neglects to perform,  keep,  or observe any other
term, provision,  covenant, or agreement contained in this Agreement,  or in any
of the other Loan Documents  (giving effect to any grace periods,  cure periods,
or required notices, if any, expressly provided for in such Loan Documents);  in
each case, other than any such term,



                                      -87-
<PAGE>

provision,  covenant,  or agreement that is the subject of another  provision of
this  Section 8 (in which  event such other  provision  of this  Section 8 shall
govern), and such failure continues for a period of 10 Business Days;

            ; provided that,  during any period of time that any such failure or
neglect referred to in this paragraph exists, even if such failure or neglect is
not yet an  Event  of  Default,  the  Lender  Group  shall  be  relieved  of its
obligation to extend credit hereunder;

      8.3 If any  material  portion of any  Borrower's  or any  Subsidiary  of a
Borrower's assets is attached,  seized, subjected to a writ or distress warrant,
levied upon, or comes into the possession of any third Person;

      8.4 If an  Insolvency  Proceeding  is  commenced  by any  Borrower  or any
Subsidiary of a Borrower;

      8.5 If an Insolvency  Proceeding is commenced  against any Borrower or any
Subsidiary  of a  Borrower,  and  any of the  following  events  occur:  (a) the
applicable  Borrower or Subsidiary consents to the institution of the Insolvency
Proceeding against it, (b) the petition commencing the Insolvency  Proceeding is
not timely controverted;  provided,  however,  that, during the pendency of such
period,  each member of the Lender Group shall be relieved of its obligations to
extend credit hereunder,  (c) the petition commencing the Insolvency  Proceeding
is not  dismissed  within 45  calendar  days of the date of the filing  thereof;
provided,  however, that, during the pendency of such period, each member of the
Lender Group shall be relieved of its obligation to extend credit hereunder, (d)
an interim  trustee is appointed to take  possession  of all or any  substantial
portion of the  properties  or assets of, or to operate  all or any  substantial
portion of the business of, any Borrower or any Subsidiary of a Borrower, or (e)
an order for relief shall have been entered therein;

      8.6  If  any  Borrower  or  any  Subsidiary  of a  Borrower  is  enjoined,
restrained,  or in any way  prevented by court order from  continuing to conduct
all or any material part of its business affairs;

      8.7 If (a) a notice of Lien is filed of record with respect to  Borrower's
or any  of its  Domestic  Subsidiaries'  assets  by  the  United  States  or any
department,  agency,  or  instrumentality  thereof (a "Federal Lien"), or by any
state,  county,  municipal,  or  governmental  agency  and such  state,  county,
municipal,  or governmental agency Lien has priority over the Liens of Lender in
and to the Collateral or any portion thereof (a "Non-Federal Priority Lien"); or
(b) a notice of Lien is filed of record with respect to Borrowers' assets or any
of its Subsidiaries'  assets by any state,  county,  municipal,  or governmental
agency that is not a  Non-Federal  Priority  Lien (a  "Non-Federal  Non-Priority
Lien"); provided, however, that, if the aggregate amount claimed with respect to
any such Non-Federal  Non-Priority  Liens, or combination  thereof, is less than
$500,000,  an Event of  Default  shall not occur  under this  subsection  if the
claims that are the subject of such Liens are the subject of Permitted  Protests
and if the Liens are released,  discharged,  or bonded against within 30 days of
each such Lien first being filed of record or, if earlier, at least 5 days prior
to the date on which  assets that are subject to such Liens are subject to being
sold



                                      -88-
<PAGE>

or forfeited  and, in any such case,  Lender  shall have the  absolute  right to
establish  and  maintain a reserve  against the  Borrowing  Base and the Maximum
Revolver  Amount in an amount equal to the  aggregate  amount of the  underlying
claims (determined by Lender, in its Permitted  Discretion,  and irrespective of
any  Permitted  Protests  with respect  thereto and  including  any penalties or
interest that are estimated by Lender, in its Permitted Discretion,  to arise in
connection therewith);

      8.8 If one or more judgments or other claims involving an aggregate amount
of $500,000,  or more, in excess of the amount  covered by insurance,  becomes a
Lien or encumbrance upon any of Borrower's  assets and the same is not released,
discharged,  bonded  against,  or stayed pending appeal before the earlier of 30
days  after the date it first  arises or 5 days  prior to the date on which such
asset is subject to being forfeited by Borrower;

      8.9 If:

            (a) there is a  default  (that is not  waived or cured  prior to the
earlier of (i) 30 days of the initial occurrence thereof,  (ii) the acceleration
of the subject Indebtedness,  or (iii) the expiration of any applicable grace or
cure  period  provided  in the  subject  documents)  in respect  of  outstanding
Indebtedness of Parent or its Subsidiaries of $500,000, or more;

            (b) there is a breach by Parent or any of its Domestic  Subsidiaries
of any  material  provision of any other  material  agreement to which Parent or
such  Subsidiary  is a party,  and such  breach  results in a right by the other
party thereto,  irrespective of whether exercised, to accelerate the maturity of
such Person's obligations thereunder,  to terminate such agreement, or to refuse
to renew such agreement pursuant to an automatic renewal right therein; or

            (c) on or before June 30, 2007,  Borrowers and Guarantors shall have
failed  to  obtain an  extension  of the  scheduled  maturity  of the  Indenture
Securities to a date on or after March 1, 2008;

      8.10 If any Borrower or any  Subsidiary of a Borrower makes any payment on
account of  Indebtedness  that has been  contractually  subordinated in right of
payment to the payment of the Obligations,  except to the extent such payment is
permitted  by the  terms  of the  subordination  provisions  applicable  to such
Indebtedness;

      8.11 If any  material  misstatement  or  misrepresentation  exists  now or
hereafter  in any  warranty,  representation,  statement,  or Record made to the
Lender Group by any  Borrower,  any  Subsidiary  of a Borrower,  or any officer,
employee, agent, or director of any Borrower or any Subsidiary of a Borrower;

      8.12 If the  obligation of any Guarantor  under the Guaranty is limited or
terminated by operation of law or by such Guarantor thereunder;



                                      -89-
<PAGE>

      8.13 If this  Agreement or any other Loan Document that purports to create
a Lien,  shall,  for any reason,  fail or cease to create a valid and  perfected
and,  except to the  extent  permitted  by the terms  hereof or  thereof,  first
priority  Lien on or  security  interest  in the  Collateral  covered  hereby or
thereby; or

      8.14 Any provision of any Loan  Document  shall at any time for any reason
be declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower or any  Subsidiary  of a Borrower,  or a proceeding
shall be commenced by any Borrower or any  Subsidiary  of a Borrower,  or by any
Governmental  Authority having  jurisdiction over any Borrower or any Subsidiary
of a Borrower,  seeking to establish the invalidity or unenforceability thereof,
or any Borrower or any Domestic  Subsidiary of a Borrower shall deny that it has
any liability or obligation purported to be created under any Loan Document.

9. THE LENDER GROUP'S RIGHTS AND REMEDIES.

      9.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default,  the  Required  Lenders (at their  election  but without
notice of their election and without demand) may authorize and instruct Agent to
do any one or more of the  following  on behalf of the Lender  Group (and Agent,
acting  upon the  instructions  of the  Required  Lenders,  shall do the same on
behalf of the Lender Group), all of which are authorized by Borrowers:

                  (a)  Declare  all  Obligations,   whether  evidenced  by  this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;

                  (b) Cease  advancing  money or extending  credit to or for the
benefit of Borrowers under this Agreement,  under any of the Loan Documents,  or
under any other agreement between Borrowers and the Lender Group;

                  (c)  Terminate  this  Agreement  and  any  of the  other  Loan
Documents as to any future  liability or  obligation  of the Lender  Group,  but
without  affecting  any of the  Agent's  Liens  in the  Collateral  and  without
affecting the Obligations;

                  (d)  Settle  or  adjust  disputes  and  claims  directly  with
Borrowers'  Account  Debtors for  amounts  and upon terms which Agent  considers
advisable,  and in such cases,  Agent will credit the Loan Account with only the
net  amounts  received  by Agent in  payment  of such  disputed  Accounts  after
deducting  all  Lender  Group  Expenses   incurred  or  expended  in  connection
therewith;

                  (e) Cause Borrowers to hold all of their returned Inventory in
trust for the  Lender  Group and  segregate  all such  Inventory  from all other
assets of Borrowers or in Borrowers' possession;

                  (f) Without  notice to or demand upon any Borrower,  make such
payments and do such acts as Agent considers  necessary or reasonable to protect
its security



                                      -90-
<PAGE>

interests in the Collateral.  Each Borrower agrees to assemble the Collateral if
Agent so requires, and to make the Collateral available to Agent at a place that
Agent  may  designate  which is  reasonably  convenient  to both  parties.  Each
Borrower authorizes Agent to enter the premises where the Collateral is located,
to take and maintain  possession  of the  Collateral,  or any part of it, and to
pay,  purchase,  contest,  or compromise any Lien that in Agent's  determination
appears to conflict with the Agent's Liens in and to the  Collateral  and to pay
all expenses  incurred in  connection  therewith and to charge  Borrowers'  Loan
Account  therefor.  With respect to any of Borrowers'  owned or leased premises,
each  Borrower  hereby  grants Agent a license to enter into  possession of such
premises and to occupy the same, without charge, in order to exercise any of the
Lender  Group's  rights or  remedies  provided  herein,  at law,  in equity,  or
otherwise;

                  (g)  Without   notice  to  any  Borrower  (such  notice  being
expressly waived),  and without  constituting an acceptance of any collateral in
full or partial  satisfaction of an obligation (within the meaning of the Code),
set off and apply to the  Obligations  any and all (i)  balances and deposits of
any Borrower  held by the Lender Group  (including  any amounts  received in the
Cash Management Accounts),  or (ii) Indebtedness at any time owing to or for the
credit or the account of any Borrower held by the Lender Group;

                  (h)  Hold,  as  cash  collateral,  any and  all  balances  and
deposits of any Borrower held by the Lender Group,  and any amounts  received in
the Cash Management  Accounts,  to secure the full and final repayment of all of
the Obligations;

                  (i) Ship, reclaim,  recover, store, finish, maintain,  repair,
prepare  for sale,  advertise  for sale,  and sell (in the manner  provided  for
herein) the Borrower Collateral.  Each Borrower hereby grants to Agent a license
or  other  right  to use,  without  charge,  such  Borrower's  labels,  patents,
copyrights,   trade  secrets,  trade  names,  trademarks,   service  marks,  and
advertising  matter,  or any property of a similar nature, as it pertains to the
Borrower  Collateral,  in completing  production of,  advertising  for sale, and
selling any Borrower  Collateral and such  Borrower's  rights under all licenses
and all franchise agreements shall inure to the Lender Group's benefit;

                  (j) Sell the Borrower Collateral at either a public or private
sale, or both, by way of one or more contracts or  transactions,  for cash or on
terms,  in such manner and at such places  (including  Borrowers'  premises)  as
Agent  determines  is  commercially  reasonable.  It is not  necessary  that the
Borrower Collateral be present at any such sale;

                  (k) Agent shall give notice of the disposition of the Borrower
Collateral as follows:

                  (i) Agent shall give Administrative  Borrower (for the benefit
            of the  applicable  Borrower)  a notice in  writing  of the time and
            place of public  sale,  or,  if the sale is a  private  sale or some
            other  disposition  other  than a  public  sale is to be made of the
            Borrower Collateral,  the time on or after which the private sale or
            other disposition is to be made; and



                                      -91-
<PAGE>

                  (ii) The  notice  shall be  personally  delivered  or  mailed,
            postage prepaid,  to Administrative  Borrower as provided in Section
            12, at least 10 days before the  earliest  time of  disposition  set
            forth in the  notice;  no  notice  needs  to be  given  prior to the
            disposition  of any  portion  of the  Borrower  Collateral  that  is
            perishable or threatens to decline speedily in value or that is of a
            type customarily sold on a recognized market;

                  (l) Agent,  on behalf of the  Lender  Group may credit bid and
purchase at any public sale;

                  (m) Agent may seek the  appointment of a receiver or keeper to
take  possession of all or any portion of the Borrower  Collateral or to operate
same and, to the maximum  extent  permitted by law, may seek the  appointment of
such a receiver without the requirement of prior notice or a hearing; and

                  (n) The Lender  Group shall have all other rights and remedies
available  to it at law or in  equity  pursuant  to any  other  Loan  Documents;
provided, however, that upon the occurrence of any Event of Default described in
Section 8.4 or Section 8.5, in addition to the remedies set forth above, without
any notice to Borrowers or any other Person or any act by the Lender Group,  the
Commitments shall automatically  terminate and the Obligations then outstanding,
together  with all accrued  and unpaid  interest  thereon,  and all fees and all
other  amounts  due under this  Agreement  and the other Loan  Documents,  shall
automatically  and  immediately  become due and  payable,  without  presentment,
demand,  protest,  or notice of any kind,  all of which are expressly  waived by
Borrowers.

      9.2 Remedies Cumulative. The rights and remedies of the Lender Group under
this Agreement,  the other Loan  Documents,  and all other  agreements  shall be
cumulative.  The Lender  Group  shall have all other  rights  and  remedies  not
inconsistent  herewith as  provided  under the Code,  by law,  or in equity.  No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the  Lender  Group of any  Event of  Default  shall be deemed a
continuing  waiver.  No delay by the Lender  Group  shall  constitute  a waiver,
election, or acquiescence by it.

10. TAXES AND EXPENSES.

            If any Borrower fails to pay any monies (whether taxes, assessments,
insurance  premiums,  or, in the case of leased  properties or assets,  rents or
other amounts payable under such leases) due to third Persons,  or fails to make
any  deposits  or furnish  any  required  proof of payment  or  deposit,  all as
required under the terms of this Agreement,  then, Agent, in its sole discretion
and without  prior notice to any Borrower,  may do any or all of the  following:
(a) make payment of the same or any part  thereof,  (b) set up such  reserves in
Borrowers'  Loan  Account as Agent deems  necessary  to protect the Lender Group
from the exposure created by such failure,  or (c) in the case of the failure to
comply with Section 6.8 hereof,  obtain and maintain  insurance  policies of the
type  described in Section 6.8 and take any action with respect to such policies
as Agent deems prudent.  Any such amounts paid by Agent shall constitute  Lender
Group Expenses and any such payments shall not constitute an



                                      -92-
<PAGE>

agreement by the Lender Group to make similar payments in the future or a waiver
by the Lender Group of any Event of Default under this Agreement. Agent need not
inquire as to, or contest the  validity of, any such  expense,  tax, or Lien and
the  receipt of the usual  official  notice  for the  payment  thereof  shall be
conclusive evidence that the same was validly due and owing.

11. WAIVERS; INDEMNIFICATION.

      11.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest,  notice of  default or  dishonor,  notice of  payment  and  nonpayment,
nonpayment at maturity, release, compromise,  settlement,  extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which any such Borrower may in any way be liable.

      11.2 The Lender Group's Liability for Borrower  Collateral.  Each Borrower
hereby  agrees  that:  (a) so  long  as  the  Lender  Group  complies  with  its
obligations,  if any,  under the Code,  Agent  shall not in any way or manner be
liable or responsible for: (i) the safekeeping of the Borrower Collateral,  (ii)
any loss or damage  thereto  occurring  or arising in any manner or fashion from
any cause, (iii) any diminution in the value thereof, or (iv) any act or default
of any carrier,  warehouseman,  bailee,  forwarding agency, or other Person, and
(b) all risk of loss, damage, or destruction of the Borrower Collateral shall be
borne by Borrowers.

      11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and hold
the Agent-Related  Persons,  the  Lender-Related  Persons,  and each Participant
(each, an  "Indemnified  Person")  harmless (to the fullest extent  permitted by
law)  from  and   against  any  and  all  claims,   demands,   suits,   actions,
investigations,  proceedings, and damages, and all reasonable attorneys fees and
disbursements  and other costs and  expenses  actually  incurred  in  connection
therewith  (as and when they are  incurred and  irrespective  of whether suit is
brought), at any time asserted against, imposed upon, or incurred by any of them
(a) in connection with or as a result of or related to the execution,  delivery,
enforcement,  performance,  or  administration  (including any  restructuring or
workout with respect hereto) of this Agreement, any of the other Loan Documents,
or  the  transactions  contemplated  hereby  or  thereby  or the  monitoring  of
Borrowers'  and  their  Subsidiaries'  compliance  with  the  terms  of the Loan
Documents, and (b) with respect to any investigation,  litigation, or proceeding
related to this Agreement,  any other Loan Document,  or the use of the proceeds
of the credit provided hereunder (irrespective of whether any Indemnified Person
is a party thereto), or any act, omission,  event, or circumstance in any manner
related   thereto   (all   the   foregoing,   collectively,   the   "Indemnified
Liabilities").  The foregoing to the contrary  notwithstanding,  Borrowers shall
have no  obligation  to any  Indemnified  Person  under this  Section  11.3 with
respect to any  Indemnified  Liability  that a court of  competent  jurisdiction
finally  determines  to have  resulted  from the  gross  negligence  or  willful
misconduct  of  such  Indemnified  Person.  This  provision  shall  survive  the
termination  of this  Agreement  and the  repayment of the  Obligations.  If any
Indemnified  Person  makes any  payment  to any other  Indemnified  Person  with
respect to an Indemnified Liability as to which Borrowers were



                                      -93-
<PAGE>

required to  indemnify  the  Indemnified  Person  receiving  such  payment,  the
Indemnified  Person  making  such  payment is  entitled  to be  indemnified  and
reimbursed by Borrowers with respect thereto. WITHOUT LIMITATION,  THE FOREGOING
INDEMNITY  SHALL APPLY TO EACH  INDEMNIFIED  PERSON WITH RESPECT TO  INDEMNIFIED
LIABILITIES  WHICH  IN  WHOLE  OR IN PART  ARE  CAUSED  BY OR  ARISE  OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

12. NOTICES.

            Unless otherwise provided in this Agreement,  all notices or demands
by Borrowers or Agent to the other  relating to this Agreement or any other Loan
Document  shall be in writing  and (except for  financial  statements  and other
informational  documents which may be sent by first-class mail, postage prepaid)
shall be personally  delivered or sent by registered or certified  mail (postage
prepaid, return receipt requested),  overnight courier, electronic mail (at such
email  addresses  as  Administrative  Borrower  or  Agent,  as  applicable,  may
designate to each other in accordance  herewith),  or telefacsimile to Borrowers
in care of  Administrative  Borrower  or to  Agent,  as the case may be,  at its
address set forth below:

            If to Administrative
            Borrower:                 PHIBRO ANIMAL HEALTH CORPORATION
                                      One Parker Plaza
                                      400 Kelby Street
                                      Fort Lee, New Jersey 07024
                                      Attn:    President
                                      Fax No. 201-944-5937

            with copies to:           GOLENBECK EISEMAN ASSOR BELL & PESKOE LLP

                                      437 Madison Avenue
                                      New York, New York 10022
                                      Attn:  Lawrence M. Bell, Esq.
                                      Fax No. 212-754-0330

            If to Agent:              WELLS FARGO FOOTHILL, INC.
                                      Wells Fargo Foothill, Inc.
                                      Attn:  Business Finance Division Manager
                                      One Boston Place, Suite 1800
                                      Boston, MA  02108

            with copies to:           PAUL, HASTINGS, JANOFSKY & WALKER LLP
                                      515 South Figueroa Street, 25th Floor
                                      Los Angeles, California 90071
                                      Attn: John Francis Hilson, Esq.
                                      Fax No. 213-996-3300



                                      -94-
<PAGE>

            Agent and  Borrowers  may  change  the  address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other party. All notices or demands sent in accordance with this Section 12,
other than notices by Agent in connection  with  enforcement  rights against the
Borrower  Collateral  under the provisions of the Code, shall be deemed received
on the  earlier  of the date of actual  receipt  or 3  Business  Days  after the
deposit thereof in the mail. Each Borrower  acknowledges and agrees that notices
sent by the Lender Group in connection  with the exercise of enforcement  rights
against  Borrower  Collateral  under the  provisions of the Code shall be deemed
sent when deposited in the mail or personally delivered,  or, where permitted by
law, transmitted by telefacsimile or any other method set forth above.

13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

            (a) THE  VALIDITY  OF THIS  AGREEMENT  AND THE OTHER LOAN  DOCUMENTS
(UNLESS  EXPRESSLY  PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION,  INTERPRETATION, AND ENFORCEMENT
HEREOF AND  THEREOF,  AND THE RIGHTS OF THE  PARTIES  HERETO  AND  THERETO  WITH
RESPECT TO ALL MATTERS  ARISING  HEREUNDER OR  THEREUNDER  OR RELATED  HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

            (b) THE  PARTIES  AGREE THAT ALL ACTIONS OR  PROCEEDINGS  ARISING IN
CONNECTION  WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS  SHALL BE TRIED AND
LITIGATED  ONLY IN THE  STATE AND  FEDERAL  COURTS  LOCATED  IN THE  BOROUGH  OF
MANHATTAN,  STATE  OF  NEW  YORK;  PROVIDED,  HOWEVER,  THAT  ANY  SUIT  SEEKING
ENFORCEMENT AGAINST ANY BORROWER COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
AGENT'S OPTION,  IN THE COURTS OF ANY  JURISDICTION  WHERE AGENT ELECTS TO BRING
SUCH ACTION OR WHERE SUCH BORROWER  COLLATERAL  OR OTHER  PROPERTY MAY BE FOUND.
BORROWERS AND THE LENDER GROUP WAIVE, TO THE EXTENT  PERMITTED UNDER  APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON  CONVENIENS  OR
TO OBJECT TO VENUE TO THE EXTENT ANY  PROCEEDING IS BROUGHT IN  ACCORDANCE  WITH
THIS SECTION 13(b).

            BORROWERS AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE  RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWERS AND THE



                                      -95-
<PAGE>

LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY  WAIVES  ITS JURY TRIAL  RIGHTS  FOLLOWING  CONSULTATION  WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION,  A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

      14.1 Assignments and Participations.

                  (a)  Any  Lender  may  assign  and  delegate  to one  or  more
assignees (each an "Assignee") that are Eligible Transferees all, or any ratable
part of all,  of the  Obligations,  the  Commitments  and the other  rights  and
obligations of such Lender  hereunder and under the other Loan  Documents,  in a
minimum amount of $5,000,000;  provided,  however,  that Borrowers and Agent may
continue to deal solely and  directly  with such Lender in  connection  with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment  instructions,  addresses,  and related  information  with
respect to the Assignee, have been given to Administrative Borrower and Agent by
such Lender and the Assignee,  (ii) such Lender and its Assignee have  delivered
to Administrative Borrower and Agent an Assignment and Acceptance, and (iii) the
assignor  Lender or Assignee  has paid to Agent for Agent's  separate  account a
processing  fee in the  amount  of  $5,000.  Anything  contained  herein  to the
contrary notwithstanding,  the payment of any fees shall not be required and the
Assignee need not be an Eligible  Transferee if such assignment is in connection
with any merger,  consolidation,  sale, transfer, or other disposition of all or
any  substantial  portion of the  business or loan  portfolio  of the  assigning
Lender.

                  (b) From and after the date that Agent  notifies  the assignor
Lender (with a copy to Administrative Borrower) that it has received an executed
Assignment and Acceptance and payment of the  above-referenced  processing  fee,
(i) the  Assignee  thereunder  shall be a party  hereto  and, to the extent that
rights and  obligations  hereunder  have been  assigned  to it  pursuant to such
Assignment  and  Acceptance,  shall have the rights and  obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and  obligations  hereunder and under the other Loan  Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(except with  respect to Section  11.3  hereof) and be released  from any future
obligations  under  this  Agreement  (and  in  the  case  of an  Assignment  and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations  under this Agreement and the other Loan Documents,  such Lender
shall cease to be a party hereto and thereto),  and such assignment shall effect
a novation between Borrowers and the Assignee;  provided,  however, that nothing
contained  herein  shall  release any  assigning  Lender from  obligations  that
survive the  termination of this  Agreement,  including such assigning  Lender's
obligations under Article 16 and Section 17.8 of this Agreement.

                  (c) By executing and delivering an Assignment and  Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each



                                      -96-
<PAGE>

other and the other  parties  hereto as  follows:  (1) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or  representations  made in or in connection  with this Agreement or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of this Agreement or any other Loan Document  furnished  pursuant  hereto,
(2) such  assigning  Lender makes no  representation  or warranty and assumes no
responsibility  with  respect to the  financial  condition  of  Borrowers or the
performance  or observance by Borrowers of any of their  obligations  under this
Agreement  or any  other  Loan  Document  furnished  pursuant  hereto,  (3) such
Assignee  confirms that it has received a copy of this Agreement,  together with
such other  documents and  information as it has deemed  appropriate to make its
own credit  analysis and decision to enter into such  Assignment and Acceptance,
(4) such Assignee  will,  independently  and without  reliance upon Agent,  such
assigning  Lender  or  any  other  Lender,  and  based  on  such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under this Agreement,  (5) such
Assignee appoints and authorizes Agent to take such actions and to exercise such
powers under this  Agreement as are  delegated  to Agent,  by the terms  hereof,
together with such powers as are  reasonably  incidental  thereto,  and (6) such
Assignee agrees that it will perform all of the  obligations  which by the terms
of this Agreement are required to be performed by it as a Lender.

                  (d)   Immediately   upon  Agent's   receipt  of  the  required
processing fee payment and the fully executed  Assignment and  Acceptance,  this
Agreement  shall be deemed to be amended to the extent,  but only to the extent,
necessary to reflect the addition of the Assignee and the  resulting  adjustment
of the Commitments arising therefrom.  The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.

                  (e) Any Lender may at any time,  with the  written  consent of
Agent, sell to one or more commercial banks,  financial  institutions,  or other
Persons not Affiliates of such Lender (a "Participant")  participating interests
in its Obligations,  the Commitment,  and the other rights and interests of that
Lender (the "Originating  Lender")  hereunder and under the other Loan Documents
(provided that no written  consent of Agent shall be required in connection with
any  sale  of any  such  participating  interests  by a  Lender  to an  Eligible
Transferee);  provided,  however, that (i) the Originating Lender shall remain a
"Lender" for all purposes of this Agreement and the other Loan Documents and the
Participant  receiving  the  participating  interest  in  the  Obligations,  the
Commitments,  and the other  rights  and  interests  of the  Originating  Lender
hereunder  shall not  constitute  a "Lender"  hereunder  or under the other Loan
Documents and the Originating  Lender's  obligations  under this Agreement shall
remain unchanged,  (ii) the Originating  Lender shall remain solely  responsible
for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders
shall  continue  to deal  solely and  directly  with the  Originating  Lender in
connection  with the  Originating  Lender's  rights and  obligations  under this
Agreement and the other Loan  Documents,  (iv) no Lender shall transfer or grant
any participating  interest under which the Participant has the right to approve
any  amendment  to, or any consent or waiver with respect to, this  Agreement or
any other Loan Document, except to the extent such amendment to, or



                                      -97-
<PAGE>

consent or waiver with respect to this  Agreement or of any other Loan  Document
would (A) extend the final maturity date of the  Obligations  hereunder in which
such  Participant is  participating,  (B) reduce the interest rate applicable to
the  Obligations  hereunder  in which such  Participant  is  participating,  (C)
release all or substantially all of the Collateral or guaranties  (except to the
extent expressly provided herein or in any of the Loan Documents) supporting the
Obligations  hereunder in which such Participant is participating,  (D) postpone
the  payment of, or reduce the amount of, the  interest or fees  payable to such
Participant  through  such  Lender,  or (E)  change  the  amount or due dates of
scheduled principal  repayments or prepayments or premiums;  and (v) all amounts
payable by Borrowers  hereunder  shall be  determined  as if such Lender had not
sold  such  participation;  except  that,  if  amounts  outstanding  under  this
Agreement  are due and unpaid,  or shall have been declared or shall have become
due and payable upon the  occurrence  of an Event of Default,  each  Participant
shall be deemed to have the right of set-off  in  respect  of its  participating
interest  in amounts  owing  under this  Agreement  to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
this Agreement.  The rights of any Participant only shall be derivative  through
the  Originating   Lender  with  whom  such  Participant   participates  and  no
Participant  shall  have any  rights  under  this  Agreement  or the other  Loan
Documents or any direct rights as to the other Lenders,  Agent,  Borrowers,  the
Collections of Borrowers or their Subsidiaries,  the Collateral, or otherwise in
respect of the Obligations.  No Participant  shall have the right to participate
directly in the making of decisions by the Lenders among themselves.

                  (f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may, subject to the provisions of
Section 17.8,  disclose all documents and information  which it now or hereafter
may have  relating to  Borrowers  and their  Subsidiaries  and their  respective
businesses.

                  (g) Any other provision in this Agreement notwithstanding, any
Lender may at any time  create a  security  interest  in, or pledge,  all or any
portion of its  rights  under and  interest  in this  Agreement  in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR ss. 203.24, and such Federal Reserve Bank may
enforce  such  pledge  or  security  interest  in  any  manner  permitted  under
applicable law.

      14.2 Successors. This Agreement shall bind and inure to the benefit of the
respective  successors  and assigns of each of the parties;  provided,  however,
that Borrowers may not assign this  Agreement or any rights or duties  hereunder
without the Lenders' prior written consent and any prohibited  assignment  shall
be  absolutely  void ab initio.  No consent to  assignment  by the Lenders shall
release any Borrower from its  Obligations.  A Lender may assign this  Agreement
and the other Loan Documents and its rights and duties  hereunder and thereunder
pursuant to Section 14.1 hereof and,  except as expressly  required  pursuant to
Section  14.1  hereof,  no consent or  approval  by any  Borrower is required in
connection with any such assignment.



                                      -98-
<PAGE>

15. AMENDMENTS; WAIVERS.

      15.1  Amendments  and Waivers.  No amendment or waiver of any provision of
this  Agreement or any other Loan  Document,  and no consent with respect to any
departure by Borrowers therefrom, shall be effective unless the same shall be in
writing and signed by the Required  Lenders (or by Agent at the written  request
of  the  Required  Lenders)  and  Administrative  Borrower  (on  behalf  of  all
Borrowers)  and then any such waiver or consent  shall be effective  only in the
specific  instance  and for the  specific  purpose  for which  given;  provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all of the Lenders  affected thereby and  Administrative  Borrower (on
behalf of all Borrowers) and acknowledged by Agent, do any of the following:

                  (a) increase or extend any Commitment of any Lender,

                  (b) postpone or delay any date fixed by this  Agreement or any
other Loan  Document  for any payment of  principal,  interest,  fees,  or other
amounts due hereunder or under any other Loan Document,

                  (c) reduce the  principal  of, or the rate of interest on, any
loan or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,

                  (d) change the percentage of the Commitments  that is required
to take any action hereunder,

                  (e) amend or  modify  this  Section  or any  provision  of the
Agreement providing for consent or other action by all Lenders,

                  (f)  release  Collateral  other than as  permitted  by Section
16.12,

                  (g) change the  definition of "Required  Lenders" or "Pro Rata
Share",

                  (h) contractually subordinate any of the Agent's Liens,

                  (i) release any Borrower or Guarantor  from any obligation for
the payment of money, or

                  (j) change the definition of Borrowing Base or the definitions
of Eligible  Accounts,  Eligible  Inventory,  Maximum Revolver Amount, or change
Section 2.1(b); or

                  (k) amend any of the provisions of Section 16.

and,  provided  further,  however,  that no amendment,  waiver or consent shall,
unless in writing and signed by Agent,  Issuing Lender, or Swing Lender,  affect
the rights or duties of Agent,  Issuing Lender,  or Swing Lender, as applicable,
under this Agreement or any other Loan Document. The foregoing  notwithstanding,
any amendment, modification, waiver,



                                      -99-
<PAGE>

consent,  termination,  or release of, or with respect to, any provision of this
Agreement or any other Loan  Document that relates only to the  relationship  of
the  Lender  Group  among  themselves,  and that does not  affect  the rights or
obligations  of  Borrowers,  shall not require  consent by or the  agreement  of
Borrowers.

      15.2 Replacement of Holdout Lender If any action to be taken by the Lender
Group or Agent  hereunder  requires the  unanimous  consent,  authorization,  or
agreement  of all Lenders,  and a Lender  ("Holdout  Lender")  fails to give its
consent,  authorization, or agreement, then Agent, upon at least 5 Business Days
prior  irrevocable  notice to the Holdout Lender,  may  permanently  replace the
Holdout  Lender  with  one or more  substitute  Lenders  (each,  a  "Replacement
Lender"),  and the Holdout  Lender shall have not right to refuse to be replaced
hereunder.  Such notice to replace the Holdout Lender shall specify an effective
date for such  replacement,  which date shall not be later than 15 Business Days
after the date such notice is given.

            Prior to the effective date of such replacement,  the Holdout Lender
and each  Replacement  Lender  shall  execute  and  deliver  an  Assignment  and
Acceptance Agreement,  subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk  Participation  Liability)  without  any premium or penalty of any kind
whatsoever.  If the Holdout  Lender  shall refuse or fail to execute and deliver
any  such  Assignment  and  Acceptance  prior  to the  effective  date  of  such
replacement,  the Holdout  Lender shall be deemed to have executed and delivered
such Assignment and  Acceptance.  The replacement of any Holdout Lender shall be
made in  accordance  with the  terms of  Section  14.1.  Until  such time as the
Replacement Lenders shall have acquired all of the Obligations, the Commitments,
and the other rights and  obligations of the Holdout Lender  hereunder and under
the other Loan Documents,  the Holdout Lender shall remain obligated to make the
Holdout  Lender's Pro Rata Share of Advances and to purchase a participation  in
each  Letter of  Credit,  in an amount  equal to its Pro Rata  Share of the Risk
Participation Liability of such Letter of Credit.

      15.3 No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right,  remedy,  or option under this  Agreement or, any other Loan
Document,  or delay by Agent or any Lender in exercising the same,  will operate
as a waiver thereof.  No waiver by Agent or any Lender will be effective  unless
it is in writing,  and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion  shall  affect or diminish  Agent's and each
Lender's  rights  thereafter to require  strict  performance by Borrowers of any
provision  of this  Agreement.  Agent's  and each  Lender's  rights  under  this
Agreement and the other Loan  Documents  will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.

16. AGENT; THE LENDER GROUP.

      16.1 Appointment and Authorization of Agent. Each Lender hereby designates
and appoints WFF as its  representative  under this Agreement and the other Loan
Documents and each Lender  hereby  irrevocably  authorizes  Agent to execute and
deliver each of the other



                                     -100-
<PAGE>

Loan  Documents  on its behalf and to take such other action on its behalf under
the  provisions  of this  Agreement and each other Loan Document and to exercise
such powers and perform such duties as are  expressly  delegated to Agent by the
terms of this Agreement or any other Loan Document, together with such powers as
are reasonably  incidental  thereto.  Agent agrees to act as such on the express
conditions  contained  in this  Section 16. The  provisions  of this  Section 16
(other  than the  proviso to  Section  16.11(d))  are solely for the  benefit of
Agent,  and the Lenders,  and  Borrowers  and their  Subsidiaries  shall have no
rights as a third party  beneficiary of any of the provisions  contained herein.
Any provision to the contrary  contained  elsewhere in this  Agreement or in any
other  Loan  Document  notwithstanding,  Agent  shall  not  have any  duties  or
responsibilities,  except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary  relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this  Agreement  or any other  Loan  Document  or  otherwise  exist
against Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience  only, that WFF is merely the  representative  of the
Lenders,  and only has the  contractual  duties  set  forth  herein.  Except  as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole  discretion  with respect to exercising or refraining  from  exercising any
discretionary  rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this  Agreement and
the other Loan Documents.  Without limiting the generality of the foregoing,  or
of any other  provision of the Loan Documents that provides  rights or powers to
Agent,  Lenders  agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain,  in accordance
with its customary business practices, ledgers and records reflecting the status
of the  Obligations,  the  Collateral,  the  Collections  of Borrowers and their
Subsidiaries,  and related matters, (b) execute or file any and all financing or
similar statements or notices,  amendments,  renewals,  supplements,  documents,
instruments,  proofs of claim, notices and other written agreements with respect
to the Loan Documents,  (c) make Advances, for itself or on behalf of Lenders as
provided in the Loan Documents,  (d) exclusively receive,  apply, and distribute
the  Collections  of Borrowers  and their  Subsidiaries  as provided in the Loan
Documents, (e) open and maintain such bank accounts and cash management accounts
as Agent deems  necessary and  appropriate in accordance with the Loan Documents
for the foregoing purposes with respect to the Collateral and the Collections of
Borrowers and their Subsidiaries, (f) perform, exercise, and enforce any and all
other rights and remedies of the Lender  Group with  respect to  Borrowers,  the
Obligations,   the   Collateral,   the   Collections   of  Borrowers  and  their
Subsidiaries,  or  otherwise  related  to any of same as  provided  in the  Loan
Documents,  and (g) incur and pay such Lender  Group  Expenses as Agent may deem
necessary or appropriate  for the  performance  and fulfillment of its functions
and powers pursuant to the Loan Documents.

      16.2 Delegation of Duties.  Agent may execute any of its duties under this
Agreement  or any  other  Loan  Document  by or  through  agents,  employees  or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters  pertaining  to such  duties.  Agent  shall not be  responsible  for the
negligence  or misconduct  of any agent or  attorney-in-fact  that it selects as
long as such selection was made without gross negligence or willful misconduct.



                                     -101-
<PAGE>

      16.3 Liability of Agent.  None of the  Agent-Related  Persons shall (i) be
liable  for any  action  taken or omitted to be taken by any of them under or in
connection  with this  Agreement or any other Loan Document or the  transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be  responsible  in any manner to any of the  Lenders  for any  recital,
statement,  representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer or director thereof, contained in this
Agreement  or in  any  other  Loan  Document,  or in  any  certificate,  report,
statement or other document referred to or provided for in, or received by Agent
under or in connection  with, this Agreement or any other Loan Document,  or the
validity,  effectiveness,  genuineness,  enforceability  or  sufficiency of this
Agreement or any other Loan Document,  or for any failure of any Borrower or any
other  party to any Loan  Document  to  perform  its  obligations  hereunder  or
thereunder.  No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the  observance  or  performance  of any of the
agreements  contained  in, or  conditions  of, this  Agreement or any other Loan
Document,  or to inspect the Books or  properties  of  Borrowers or the books or
records or properties of any of Borrowers' Subsidiaries or Affiliates.

      16.4  Reliance by Agent.  Agent  shall be  entitled to rely,  and shall be
fully  protected in relying,  upon any  writing,  resolution,  notice,  consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement  or other  document or  conversation  believed by it to be genuine and
correct and to have been signed,  sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel  (including counsel to Borrowers
or counsel to any Lender), independent accountants and other experts selected by
Agent.  Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received,  Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction  by the Lenders  against any and all liability and expense that may
be incurred  by it by reason of taking or  continuing  to take any such  action.
Agent shall in all cases be fully  protected in acting,  or in  refraining  from
acting,  under this  Agreement or any other Loan Document in  accordance  with a
request or consent of the  requisite  Lenders  and such  request  and any action
taken or  failure  to act  pursuant  thereto  shall be  binding  upon all of the
Lenders.

      16.5 Notice of Default or Event of  Default.  Agent shall not be deemed to
have  knowledge or notice of the  occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except
with  respect to Events of Default of which Agent has actual  knowledge,  unless
Agent  shall  have  received  written  notice  from a Lender  or  Administrative
Borrower  referring  to this  Agreement,  describing  such  Default  or Event of
Default,  and stating that such notice is a "notice of default."  Agent promptly
will  notify the  Lenders of its  receipt of any such  notice or of any Event of
Default  of which  Agent has actual  knowledge.  If any  Lender  obtains  actual
knowledge of any Event of Default,  such Lender  promptly shall notify the other
Lenders  and  Agent of such  Event  of  Default.  Each  Lender  shall be  solely
responsible for giving any notices to its Participants, if any. Subject to


                                     -102-
<PAGE>

Section 16.4, Agent shall take such action with respect to such Default or Event
of Default as may be  requested  by the  Required  Lenders  in  accordance  with
Section 9; provided,  however, that unless and until Agent has received any such
request,  Agent may (but shall not be obligated to) take such action, or refrain
from taking such action,  with respect to such Default or Event of Default as it
shall deem advisable.

      16.6  Credit  Decision.   Each  Lender   acknowledges  that  none  of  the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrowers
and  their  Subsidiaries  or  Affiliates,  shall be  deemed  to  constitute  any
representation  or warranty  by any  Agent-Related  Person to any  Lender.  Each
Lender represents to Agent that it has,  independently and without reliance upon
any  Agent-Related  Person and based on such documents and information as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,  prospects,  operations,  property,  financial and other condition and
creditworthiness of Borrowers and any other Person party to a Loan Document, and
all applicable bank regulatory  laws relating to the  transactions  contemplated
hereby,  and made its own  decision to enter into this  Agreement  and to extend
credit to Borrowers. Each Lender also represents that it will, independently and
without reliance upon any  Agent-Related  Person and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such investigations as
it deems necessary to inform itself as to the business,  prospects,  operations,
property,  financial and other condition and  creditworthiness  of Borrowers and
any other Person party to a Loan  Document.  Except for  notices,  reports,  and
other  documents  expressly  herein  required to be  furnished to the Lenders by
Agent,  Agent  shall not have any duty or  responsibility  to provide any Lender
with any  credit  or  other  information  concerning  the  business,  prospects,
operations,  property,  financial  and other  condition or  creditworthiness  of
Borrowers  and any other Person party to a Loan  Document that may come into the
possession of any of the Agent-Related Persons.

      16.7 Costs and Expenses;  Indemnification.  Agent may incur and pay Lender
Group Expenses to the extent Agent reasonably deems necessary or appropriate for
the  performance  and  fulfillment of its  functions,  powers,  and  obligations
pursuant  to the Loan  Documents,  including  court  costs,  attorneys  fees and
expenses, fees and expenses of financial accountants, advisors, consultants, and
appraisers, costs of collection by outside collection agencies,  auctioneer fees
and  expenses,  and costs of  security  guards  or  insurance  premiums  paid to
maintain the  Collateral,  whether or not  Borrowers  are obligated to reimburse
Agent or Lenders for such expenses  pursuant to the Loan Agreement or otherwise.
Agent is authorized  and directed to deduct and retain  sufficient  amounts from
the  Collections  of  Borrowers  and  their  Subsidiaries  received  by Agent to
reimburse  Agent  for  such  out-of-pocket  costs  and  expenses  prior  to  the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses from the Collections of Borrowers and their Subsidiaries
received by Agent,  each Lender  hereby agrees that it is and shall be obligated
to pay to or  reimburse  Agent for the  amount of such  Lender's  Pro Rata Share
thereof.  Whether or not the transactions  contemplated  hereby are consummated,
the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or



                                     -103-
<PAGE>

on behalf of Borrowers  and without  limiting the  obligation of Borrowers to do
so),  according  to  their  Pro  Rata  Shares,  from  and  against  any  and all
Indemnified Liabilities;  provided,  however, that no Lender shall be liable for
the  payment to any  Agent-Related  Person of any  portion  of such  Indemnified
Liabilities  resulting  solely from such  Person's  gross  negligence or willful
misconduct nor shall any Lender be liable for the  obligations of any Defaulting
Lender in failing to make an Advance  or other  extension  of credit  hereunder.
Without  limitation of the  foregoing,  each Lender shall  reimburse  Agent upon
demand for such Lender's Pro Rata Share of any costs or  out-of-pocket  expenses
(including attorneys, accountants,  advisors, and consultants fees and expenses)
incurred  by Agent in  connection  with the  preparation,  execution,  delivery,
administration,   modification,   amendment,  or  enforcement  (whether  through
negotiations,  legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities  under, this Agreement,  any other Loan Document,  or
any document  contemplated by or referred to herein, to the extent that Agent is
not reimbursed for such expenses by or on behalf of Borrowers.  The  undertaking
in this Section shall survive the payment of all  Obligations  hereunder and the
resignation or replacement of Agent.

      16.8 Agent in Individual  Capacity.  WFF and its Affiliates may make loans
to, issue letters of credit for the account of, accept  deposits  from,  acquire
equity  interests  in,  and  generally  engage  in any kind of  banking,  trust,
financial  advisory,  underwriting,  or other  business with Borrowers and their
Subsidiaries  and Affiliates and any other Person party to any Loan Documents as
though WFF were not Agent  hereunder,  and, in each case,  without  notice to or
consent  of the other  members  of the Lender  Group.  The other  members of the
Lender  Group  acknowledge  that,  pursuant  to  such  activities,  WFF  or  its
Affiliates may receive  information  regarding Borrowers or their Affiliates and
any other Person party to any Loan Documents that is subject to  confidentiality
obligations  in favor of Borrowers  or such other  Person and that  prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such  circumstances  (and in the absence of a waiver of such  confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include WFF in its individual capacity.

      16.9 Successor Agent. Agent may resign as Agent upon 45 days notice to the
Lenders.  If Agent  resigns  under this  Agreement,  the Required  Lenders shall
appoint a successor  Agent for the Lenders.  If no successor  Agent is appointed
prior to the  effective  date of the  resignation  of Agent,  Agent may appoint,
after  consulting with the Lenders,  a successor  Agent. If Agent has materially
breached or failed to perform any  material  provision  of this  Agreement or of
applicable law, the Required  Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights,  powers,  and duties of the retiring  Agent and
the term  "Agent"  shall  mean such  successor  Agent and the  retiring  Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation  hereunder as Agent, the provisions of this Section 16 shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent



                                     -104-
<PAGE>

has  accepted  appointment  as Agent by the date  which is 45 days  following  a
retiring Agent's notice of resignation,  the retiring Agent's  resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent  hereunder  until such time,  if any, as the  Lenders  appoint a
successor Agent as provided for above.

      16.10  Lender  in  Individual  Capacity.  Any  Lender  and its  respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from,  acquire equity  interests in and generally engage in any kind of
banking,  trust,  financial  advisory,   underwriting  or  other  business  with
Borrowers and their Subsidiaries and Affiliates and any other Person (other than
the Lender  Group) party to any Loan  Documents as though such Lender were not a
Lender hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that,  pursuant to such
activities,  such Lender and its respective  Affiliates may receive  information
regarding  Borrowers or their  Affiliates and any other Person party to any Loan
Documents that is subject to  confidentiality  obligations in favor of Borrowers
or such other Person and that prohibit the disclosure of such information to the
Lenders,  and the Lenders  acknowledge that, in such  circumstances  (and in the
absence  of a waiver of such  confidentiality  obligations,  which  waiver  such
Lender will use its reasonable best efforts to obtain), such Lender not shall be
under any obligation to provide such  information  to them.  With respect to the
Swing  Loans and Agent  Advances,  Swing  Lender  shall have the same rights and
powers  under this  Agreement  as any other  Lender and may exercise the same as
though it were not the sub-agent of the Agent.

      16.11 Withholding Taxes.

                  (a) If any Lender is a "foreign  person" within the meaning of
the IRC  and  such  Lender  claims  exemption  from,  or a  reduction  of,  U.S.
withholding  tax under Sections 1441 or 1442 of the IRC, such Lender agrees with
and in favor of Agent and  Borrowers,  to  deliver  to Agent and  Administrative
Borrower:

                  (i) if such Lender claims an exemption  from  withholding  tax
            pursuant to its portfolio interest exception, (A) a statement of the
            Lender,  signed  under  penalty of  perjury,  that it is not a (I) a
            "bank" as described in Section  881(c)(3)(A)  of the IRC, (II) a 10%
            shareholder   of  a  Borrower   (within   the   meaning  of  Section
            871(h)(3)(B) of the IRC), or (III) a controlled foreign  corporation
            related to a Borrower within the meaning of Section 864(d)(4) of the
            IRC,  and (B) a properly  completed  and  executed  IRS Form W-8BEN,
            before the first payment of any interest under this Agreement and at
            any  other  time  reasonably  requested  by Agent or  Administrative
            Borrower;

                  (ii) if such Lender  claims an exemption  from, or a reduction
            of,  withholding  tax under a United  States  tax  treaty,  properly
            completed  and executed IRS Form W-8BEN  before the first payment of
            any interest under this  Agreement and at any other time  reasonably
            requested by Agent or Administrative Borrower;



                                     -105-
<PAGE>

                  (iii) if such  Lender  claims  that  interest  paid under this
            Agreement is exempt from United States withholding tax because it is
            effectively connected with a United States trade or business of such
            Lender,  two  properly  completed  and  executed  copies of IRS Form
            W-8ECI  before the first  payment of any  interest is due under this
            Agreement  and at any other time  reasonably  requested  by Agent or
            Administrative Borrower;

                  (iv) such other form or forms as may be required under the IRC
            or other laws of the United States as a condition to exemption from,
            or reduction of, United States withholding tax.

Such Lender agrees promptly to notify Agent and  Administrative  Borrower of any
change  in  circumstances  which  would  modify or render  invalid  any  claimed
exemption or reduction.

                  (b) If any Lender  claims  exemption  from,  or reduction  of,
withholding  tax under a United  States tax treaty by providing  IRS Form W-8BEN
and  such  Lender  sells,  assigns,  grants a  participation  in,  or  otherwise
transfers  all or part of the  Obligations  of Borrowers  to such  Lender,  such
Lender agrees to notify Agent of the percentage  amount in which it is no longer
the beneficial  owner of Obligations of Borrowers to such Lender.  To the extent
of such percentage amount,  Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.

                  (c) If any Lender is entitled to a reduction in the applicable
withholding  tax, Agent may withhold from any interest payment to such Lender an
amount  equivalent to the applicable  withholding  tax after taking into account
such reduction.  If the forms or other documentation  required by subsection (a)
of this  Section are not  delivered to Agent,  then Agent may withhold  from any
interest payment to such Lender not providing such forms or other  documentation
an amount equivalent to the applicable withholding tax.

                  (d) If the  IRS or any  other  Governmental  Authority  of the
United States or other jurisdiction  asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender  (because the
appropriate form was not delivered,  was not properly executed,  or because such
Lender failed to notify Agent of a change in  circumstances  which  rendered the
exemption from, or reduction of,  withholding tax ineffective,  or for any other
reason)  such Lender  shall  indemnify  and hold Agent  harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise,  including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable  to Agent  under  this  Section,  together  with all costs and  expenses
(including  attorneys  fees and  expenses).  The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.

                  (e) All payments made by Borrowers hereunder or under any note
or other Loan  Document  will be made  without  setoff,  counterclaim,  or other
defense,  except as required by applicable  law other than for Taxes (as defined
below).  All such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts,  duties, fees,
assessments or other charges of whatever nature now or



                                     -106-
<PAGE>

hereafter  imposed by any jurisdiction  (other than the United States) or by any
political  subdivision or taxing authority thereof or therein (other than of the
United States) with respect to such payments (but excluding,  any tax imposed by
any jurisdiction or by any political  subdivision or taxing authority thereof or
therein  (i)  measured by or based on the net income or net profits of a Lender,
or (ii) to the extent that such tax results  from a change in the  circumstances
of the Lender,  including a change in the residence,  place of organization,  or
principal place of business of the Lender,  or a change in the branch or lending
office of the Lender participating in the transactions set forth herein) and all
interest,  penalties  or similar  liabilities  with  respect  thereto  (all such
non-excluded taxes, levies, imposts,  duties, fees, assessments or other charges
being  referred  to  collectively  as  "Taxes").  If any  Taxes are so levied or
imposed,  each  Borrower  agrees to pay the full amount of such Taxes,  and such
additional  amounts as may be necessary so that every payment of all amounts due
under this  Agreement or under any note,  including  any amount paid pursuant to
this Section  16.11(e)  after  withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein; provided,  however,
that  Borrowers  shall not be required to increase any such  amounts  payable to
Agent or any  Lender  (i) that is not  organized  under  the laws of the  United
States,  if such  Person  fails to comply  with the other  requirements  of this
Section  16.11,  or (ii) if the  increase in such amount  payable  results  from
Agent's or such Lender's own willful  misconduct or gross negligence.  Borrowers
will furnish to Agent as promptly as possible  after the date the payment of any
Taxes is due  pursuant  to  applicable  law  certified  copies  of tax  receipts
evidencing such payment by Borrowers.

      16.12 Collateral Matters.

                  (a) The Lenders hereby  irrevocably  authorize  Agent,  at its
option and in its sole  discretion,  to release any Lien on any  Collateral  (i)
upon the termination of the Commitments and payment and  satisfaction in full by
Borrowers of all Obligations,  (ii) constituting property being sold or disposed
of if a  release  is  required  or  desirable  in  connection  therewith  and if
Administrative  Borrower  certifies  to Agent  that the sale or  disposition  is
permitted  under Section 7.4 of this  Agreement or the other Loan Documents (and
Agent may rely conclusively on any such  certificate,  without further inquiry),
(iii)  constituting  property in which no Borrower or its Subsidiaries owned any
interest at the time the Agent's Lien was granted nor at any time thereafter, or
(iv)  constituting  property  leased to a Borrower or its  Subsidiaries  under a
lease that has expired or is terminated in a  transaction  permitted  under this
Agreement.  Except as  provided  above,  Agent will not  execute  and  deliver a
release of any Lien on any Collateral without the prior written authorization of
(y) if the release is of all or substantially all of the Collateral,  all of the
Lenders,  or (z)  otherwise,  the  Required  Lenders.  Upon  request by Agent or
Administrative Borrower at any time, the Lenders will confirm in writing Agent's
authority to release any such Liens on  particular  types or items of Collateral
pursuant to this Section 16.12;  provided,  however, that (1) Agent shall not be
required to execute any  document  necessary  to evidence  such release on terms
that,  in  Agent's  opinion,  would  expose  Agent to  liability  or create  any
obligation or entail any consequence other than the release of such Lien without
recourse,  representation,  or warranty,  and (2) such release  shall not in any
manner  discharge,  affect,  or impair the  Obligations or any Liens (other than
those expressly being released) upon (or



                                     -107-
<PAGE>

obligations  of Borrowers in respect of) all  interests  retained by  Borrowers,
including,  the proceeds of any sale,  all of which shall continue to constitute
part of the Collateral.

                  (b) Agent shall have no  obligation  whatsoever  to any of the
Lenders to assure  that the  Collateral  exists or is owned by  Borrowers  or is
cared for,  protected,  or insured or has been  encumbered,  or that the Agent's
Liens  have been  properly  or  sufficiently  or  lawfully  created,  perfected,
protected,  or  enforced  or are  entitled  to any  particular  priority,  or to
exercise  at all or in  any  particular  manner  or  under  any  duty  of  care,
disclosure  or  fidelity,  or  to  continue  exercising,   any  of  the  rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral,  or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein,  Agent may act in any manner it may deem  appropriate,  in its
sole discretion  given Agent's own interest in the Collateral in its capacity as
one of the  Lenders  and  that  Agent  shall  have no  other  duty or  liability
whatsoever  to  any  Lender  as to any of the  foregoing,  except  as  otherwise
provided herein.

      16.13 Restrictions on Actions by Lenders; Sharing of Payments.

                  (a) Each of the Lenders agrees that it shall not,  without the
express  written  consent  of  Agent,  and that it  shall,  to the  extent it is
lawfully  entitled to do so, upon the written request of Agent,  set off against
the  Obligations,  any amounts  owing by such Lender to Borrowers or any deposit
accounts of Borrowers now or hereafter  maintained with such Lender. Each of the
Lenders further agrees that it shall not, unless specifically requested to do so
in  writing  by Agent,  take or cause to be taken  any  action,  including,  the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.

                  (b) If, at any time or times any Lender  shall  receive (i) by
payment,  foreclosure,  setoff, or otherwise,  any proceeds of Collateral or any
payments  with  respect  to the  Obligations,  except for any such  proceeds  or
payments  received  by such  Lender  from  Agent  pursuant  to the terms of this
Agreement,  or (ii)  payments  from  Agent in  excess of such  Lender's  ratable
portion of all such  distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent,  in kind, and with such  endorsements as may be required
to  negotiate  the  same  to  Agent,  or  in  immediately  available  funds,  as
applicable,  for the account of all of the Lenders  and for  application  to the
Obligations in accordance with the applicable  provisions of this Agreement,  or
(2)  purchase,   without  recourse  or  warranty,   an  undivided  interest  and
participation  in the Obligations  owed to the other Lenders so that such excess
payment  received  shall be applied  ratably as among the Lenders in  accordance
with their Pro Rata  Shares;  provided,  however,  that to the extent  that such
excess payment received by the purchasing party is thereafter recovered from it,
those  purchases of  participations  shall be rescinded in whole or in part,  as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing  party, but without interest except to the extent
that such  purchasing  party is required to pay interest in connection  with the
recovery of the excess payment.



                                     -108-
<PAGE>

      16.14 Agency for  Perfection.  Agent hereby  appoints each other Lender as
its agent (and each Lender hereby accepts such  appointment)  for the purpose of
perfecting  the Agent's Liens in assets which,  in accordance  with Article 9 of
the Code can be  perfected  only by  possession  or  control.  Should any Lender
obtain  possession or control of any such  Collateral,  such Lender shall notify
Agent  thereof,  and,  promptly  upon Agent's  request  therefor  shall  deliver
possession or control of such  Collateral to Agent or in accordance with Agent's
instructions.

      16.15  Payments by Agent to the Lenders.  All payments to be made by Agent
to the  Lenders  shall be made by bank wire  transfer of  immediately  available
funds  pursuant to such wire transfer  instructions  as each party may designate
for  itself by written  notice to Agent.  Concurrently  with each such  payment,
Agent shall identify  whether such payment (or any portion  thereof)  represents
principal, premium, or interest of the Obligations.

      16.16 Concerning the Collateral and Related Loan Documents. Each member of
the Lender Group  authorizes  and directs Agent to enter into this Agreement and
the other Loan Documents. Each member of the Lender Group agrees that any action
taken by Agent in accordance  with the terms of this Agreement or the other Loan
Documents relating to the Collateral and the exercise by Agent of its powers set
forth  therein or herein,  together  with such other powers that are  reasonably
incidental thereto, shall be binding upon all of the Lenders.

      16.17 Field Audits and Examination Reports;  Confidentiality;  Disclaimers
by  Lenders;  Other  Reports  and  Information.  By  becoming  a  party  to this
Agreement, each Lender:

                  (a) is  deemed  to have  requested  that  Agent  furnish  such
Lender,  promptly  after it becomes  available,  a copy of each  field  audit or
examination  report (each a "Report" and  collectively,  "Reports")  prepared by
Agent, and Agent shall so furnish each Lender with such Reports,

                  (b) expressly agrees and acknowledges  that Agent does not (i)
make any  representation or warranty as to the accuracy of any Report,  and (ii)
shall not be liable for any information contained in any Report,

                  (c) expressly agrees and acknowledges that the Reports are not
comprehensive  audits or examinations,  that Agent or other party performing any
audit or examination will inspect only specific information  regarding Borrowers
and will rely  significantly  upon the Books, as well as on  representations  of
Borrowers' personnel,

                  (d) agrees to keep all Reports and other material,  non-public
information  regarding  Borrowers and their  Subsidiaries and their  operations,
assets, and existing and contemplated business plans in a confidential manner in
accordance with Section 17.8, and



                                     -109-
<PAGE>

                  (e)   without   limiting   the   generality   of   any   other
indemnification provision contained in this Agreement, agrees: (i) to hold Agent
and any such  other  Lender  preparing  a Report  harmless  from any  action the
indemnifying  Lender may take or fail to take or any conclusion the indemnifying
Lender may reach or draw from any Report in  connection  with any loans or other
credit  accommodations  that  the  indemnifying  Lender  has made or may make to
Borrowers,  or the indemnifying  Lender's  participation in, or the indemnifying
Lender's purchase of, a loan or loans of Borrowers; and (ii) to pay and protect,
and  indemnify,  defend and hold Agent,  and any such other  Lender  preparing a
Report harmless from and against,  the claims,  actions,  proceedings,  damages,
costs,  expenses,  and  other  amounts  (including,  attorneys  fees and  costs)
incurred by Agent and any such other Lender  preparing a Report as the direct or
indirect  result of any third parties who might obtain all or part of any Report
through the indemnifying Lender.

In addition to the  foregoing:  (x) any Lender may from time to time  request of
Agent in  writing  that  Agent  provide  to such  Lender a copy of any report or
document  provided  by  Borrowers  to Agent that has not been  contemporaneously
provided by Borrowers to such Lender,  and, upon receipt of such request,  Agent
shall  provide a copy of same to such  Lender,  (y) to the extent  that Agent is
entitled,  under any  provision  of the Loan  Documents,  to request  additional
reports  or  information  from  Borrowers,  any Lender  may,  from time to time,
reasonably  request  Agent to exercise  such right as specified in such Lender's
notice to Agent,  whereupon  Agent  promptly  shall  request  of  Administrative
Borrower the  additional  reports or  information  reasonably  specified by such
Lender, and, upon receipt thereof from Administrative  Borrower,  Agent promptly
shall provide a copy of same to such Lender, and (z) any time that Agent renders
to Administrative  Borrower a statement regarding the Loan Account,  Agent shall
send a copy of such statement to each Lender.

      16.18 Several Obligations;  No Liability.  Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in  favor  of  Agent  in its  capacity  as  such,  and not by or in favor of the
Lenders,  any and all  obligations  on the  part of  Agent  (if any) to make any
credit  available  hereunder  shall  constitute  the  several  (and  not  joint)
obligations  of the respective  Lenders on a ratable  basis,  according to their
respective  Commitments,  to make an amount of such  credit  not to  exceed,  in
principal amount,  at any one time  outstanding,  the amount of their respective
Commitments.  Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability  for, or in respect of, the business,
assets,  profits,  losses, or liabilities of any other Lender. Each Lender shall
be solely  responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required,  and no Lender
shall have any  obligation,  duty, or liability to any  Participant of any other
Lender.  Except as provided in Section 16.7, no member of the Lender Group shall
have any  liability  for the acts or any other  member of the Lender  Group.  No
Lender shall be  responsible to any Borrower or any other Person for any failure
by any  other  Lender  to  fulfill  its  obligations  to make  credit  available
hereunder,  nor to  advance  for it or on its  behalf  in  connection  with  its
Commitment,  nor to  take  any  other  action  on  its  behalf  hereunder  or in
connection with the financing contemplated herein.



                                     -110-
<PAGE>

      16.19 Legal  Representation  of Agent. In connection with the negotiation,
drafting,  and execution of this Agreement and the other Loan  Documents,  or in
connection  with future legal  representation  relating to loan  administration,
amendments,  modifications, waivers, or enforcement of remedies, Paul, Hastings,
Janofsky & Walker  LLP ("Paul  Hastings")  only has  represented  and only shall
represent WFF in its capacity as Agent and as a Lender. Each other Lender hereby
acknowledges  that Paul Hastings  does not  represent it in connection  with any
such matters.

17. GENERAL PROVISIONS.

      17.1  Effectiveness.  This Agreement shall be binding and deemed effective
when executed by Borrowers,  Agent,  and each Lender whose signature is provided
for on the signature pages hereof.

      17.2 Section Headings. Headings and numbers have been set forth herein for
convenience  only.  Unless the contrary is compelled by the context,  everything
contained in each Section applies equally to this entire Agreement.

      17.3  Interpretation.  Neither  this  Agreement  nor  any  uncertainty  or
ambiguity  herein  shall be  construed  or resolved  against the Lender Group or
Borrowers, whether under any rule of construction or otherwise. On the contrary,
this  Agreement  has been  reviewed by all parties  and shall be  construed  and
interpreted  according  to the  ordinary  meaning  of the  words  used  so as to
accomplish fairly the purposes and intentions of all parties hereto.

      17.4 Severability of Provisions. Each provision of this Agreement shall be
severable  from every  other  provision  of this  Agreement  for the  purpose of
determining the legal enforceability of any specific provision.

      17.5  Amendments  in  Writing.  This  Agreement  only can be  amended by a
writing in accordance with Section 15.1.

      17.6 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which,  when executed and delivered,  shall be deemed to be an original,
and all of which,  when taken  together,  shall  constitute but one and the same
Agreement.   Delivery  of  an  executed   counterpart   of  this   Agreement  by
telefacsimile  shall be equally as effective as delivery of an original executed
counterpart of this Agreement.  Any party delivering an executed  counterpart of
this  Agreement  by  telefacsimile  also  shall  deliver  an  original  executed
counterpart  of this  Agreement but the failure to deliver an original  executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.  The foregoing  shall apply to each other Loan Document  mutatis
mutandis.

      17.7  Revival and  Reinstatement  of  Obligations.  If the  incurrence  or
payment of the  Obligations  by any Borrower or Guarantor or the transfer to the
Lender Group of any property  should for any reason  subsequently be declared to
be void or  voidable  under any state or  federal  law  relating  to  creditors'
rights, including provisions of the Bankruptcy Code



                                     -111-
<PAGE>

relating  to  fraudulent   conveyances,   preferences,   or  other  voidable  or
recoverable  payments  of  money  or  transfers  of  property  (collectively,  a
"Voidable  Transfer"),  and if the Lender Group is required to repay or restore,
in whole or in part,  any such  Voidable  Transfer,  or elects to do so upon the
reasonable advice of its counsel, then, as to any such Voidable Transfer, or the
amount  thereof that the Lender Group is required or elects to repay or restore,
and as to all reasonable costs, expenses, and attorneys fees of the Lender Group
related thereto, the liability of Borrowers or Guarantor  automatically shall be
revived,  reinstated,  and  restored  and shall  exist as though  such  Voidable
Transfer had never been made.

      17.8 Confidentiality. The Agent and the Lenders each individually (and not
jointly or jointly and severally)  agree that material,  non-public  information
regarding  Borrowers  and their  Subsidiaries,  their  operations,  assets,  and
existing  and  contemplated  business  plans  shall be  treated by Agent and the
Lenders in a  confidential  manner,  and shall not be disclosed by Agent and the
Lenders  to  Persons  who are not  parties  to this  Agreement,  except:  (a) to
attorneys for and other advisors, accountants,  auditors, and consultants to any
member of the Lender Group,  (b) to Subsidiaries and Affiliates of any member of
the Lender Group (including the Bank Product Providers),  provided that any such
Subsidiary or Affiliate shall have agreed to receive such information  hereunder
subject to the terms of this  Section  17.8,  (c) as may be required by statute,
decision, or judicial or administrative  order, rule, or regulation,  (d) as may
be agreed to in advance by  Administrative  Borrower or its  Subsidiaries  or as
requested or required by any Governmental  Authority pursuant to any subpoena or
other legal process, (e) as to any such information that is or becomes generally
available  to the public  (other than as a result of  prohibited  disclosure  by
Agent  or the  Lenders),  (f) in  connection  with any  assignment,  prospective
assignment, sale, prospective sale, participation or prospective participations,
or pledge or prospective  pledge of any Lender's  interest under this Agreement,
provided that any such assignee,  prospective assignee,  purchaser,  prospective
purchaser, participant, prospective participant, pledgee, or prospective pledgee
shall have agreed in writing to receive such  information  hereunder  subject to
the terms of this Section,  and (g) in connection  with any  litigation or other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties under
this Agreement or the other Loan Documents.  The provisions of this Section 17.8
shall survive for 2 years after the payment in full of the Obligations. Anything
contained herein or in any other Loan Document to the contrary  notwithstanding,
the obligations of confidentiality  contained herein and therein, as they relate
to the  transactions  contemplated  hereby,  shall not apply to the  federal tax
structure or federal tax treatment of such  transactions,  and each party hereto
(and any employee, representative, or agent of any party hereto) may disclose to
any and all Persons,  without  limitation of any kind, the federal tax structure
and federal tax treatment of such transactions  (including all written materials
related to such tax structure  and tax  treatment).  The  preceding  sentence is
intended  to cause the  transactions  contemplated  hereby to not be  treated as
having been offered under conditions of confidentiality  for purposes of Section
1.6011-4(b)(3)  (or  any  successor   provision)  of  the  Treasury  Regulations
promulgated  under  Section  6011 of the IRC, and shall be construed in a manner
consistent with such purpose.  In addition,  each party hereto acknowledges that
it has no proprietary or



                                     -112-
<PAGE>

exclusive rights to the tax structure of the transactions contemplated hereby or
any tax matter or tax idea related thereto.

      17.9 Integration.  This Agreement, together with the other Loan Documents,
reflects  the  entire   understanding   of  the  parties  with  respect  to  the
transactions  contemplated  hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

      17.10  Parent as Agent for  Borrowers  Each  Borrower  hereby  irrevocably
appoints  Parent as the borrowing agent and  attorney-in-fact  for all Borrowers
(the "Administrative Borrower") which appointment shall remain in full force and
effect unless and until Agent shall have received prior written notice signed by
each Borrower that such  appointment has been revoked and that another  Borrower
has been appointed  Administrative  Borrower.  Each Borrower hereby  irrevocably
appoints and  authorizes the  Administrative  Borrower (i) to provide Agent with
all notices  with  respect to Advances  and Letters of Credit  obtained  for the
benefit  of any  Borrower  and all other  notices  and  instructions  under this
Agreement  and (ii) to take such  action as the  Administrative  Borrower  deems
appropriate  on its  behalf to obtain  Advances  and  Letters  of Credit  and to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes  of this  Agreement.  It is  understood  that the  handling of the Loan
Account and  Collateral  of Borrowers in a combined  fashion,  as more fully set
forth  herein,  is done  solely as an  accommodation  to  Borrowers  in order to
utilize the collective  borrowing  powers of Borrowers in the most efficient and
economical  manner and at their  request,  and that Lender Group shall not incur
liability to any Borrower as a result  hereof.  Each Borrower  expects to derive
benefit,  directly or indirectly,  from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each Borrower
is dependent on the continued successful performance of the integrated group. To
induce the Lender Group to do so, and in  consideration  thereof,  each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender Group
and hold each member of the Lender Group harmless against any and all liability,
expense, loss or claim of damage or injury, made against the Lender Group by any
Borrower or by any third party whosoever,  arising from or incurred by reason of
(a) the  handling of the Loan  Account and  Collateral  of  Borrowers  as herein
provided,   (b)  the  Lender  Group's   relying  on  any   instructions  of  the
Administrative  Borrower,  or (c) any other  action  taken by the  Lender  Group
hereunder or under the other Loan Documents,  except that Borrowers will have no
liability to the relevant  Agent-Related  Person or Lender-Related  Person under
this Section 17.9 with respect to any liability that has been finally determined
by a court of  competent  jurisdiction  to have  resulted  solely from the gross
negligence or willful misconduct of such Agent-Related  Person or Lender-Related
Person, as the case may be.

                                      [Signature page to follow.]


                                     -113-
<PAGE>

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

                              PHIBRO ANIMAL HEALTH CORPORATION,
                              a New York corporation

                              By:     /s/ Richard G. Johnson
                                      ------------------------------------------
                              Name:   Richard G. Johnson
                              Title:  Vice President & Chief Financial Officer

                              PHIBRO ANIMAL HEALTH U.S., INC.,
                              a Delaware corporation

                              By:     /s/ David C. Storbeck
                                      ------------------------------------------
                              Name:   David C. Storbeck
                              Title:  Vice President

                              PHIBRO ANIMAL HEALTH HOLDINGS, INC.,
                              a Delaware corporation

                              By:     /s/ David C. Storbeck
                                      ------------------------------------------
                              Name:   David C. Storbeck
                              Title:  Vice President

                              PHIBRO AGRIPRODUCTS, INC.,
                              a Delaware corporation

                              By:     /s/ David C. Storbeck
                                      ------------------------------------------
                              Name:   David C. Storbeck
                              Title:  Vice President

                              PHIBRO-TECH, INC.,
                              a Delaware corporation

                              By:     /s/ David C. Storbeck
                                      ------------------------------------------
                              Name:   David C. Storbeck
                              Title:  Vice President

                              WELLS FARGO FOOTHILL, INC.
                              a California corporation, as Agent and as a Lender

                              By:     /s/ Renee D. LeFebvre
                                      ------------------------------------------
                              Title:  Renee D. LeFebvre


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