LOAN AND SECURITY AGREEMENT


                                 by and between


                                  ANACOMP, INC.


                                  as Borrower,


                                       and


                           WELLS FARGO FOOTHILL, INC.


                                    as Lender


                            Dated as of July 30, 2004









                                      -1-
<PAGE>



                           LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (this "Agreement"),  is entered into as of
July 30, 2004,  between WELLS FARGO  FOOTHILL,  INC., a California  corporation,
("Lender"), and, ANACOMP, INC., an Indiana corporation ("Borrower").

     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 the Code).

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

     "Acquisition"   means  (a)  any  Stock   Acquisition,   or  (b)  any  Asset
Acquisition.

     "Acquisition Funding Conditions" means that Lender shall have completed its
audit,  appraisal  and  standard  due  diligence  with  respect to the  proposed
Acquisition and the results thereof are satisfactory to Lender.

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

     "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  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.

     "Agreement" has the meaning set forth in the preamble hereto.

     "Anacomp Holdings UK" means Anacomp Holdings  Limited,  a company organized
under the laws of the United Kingdom.

     "Anacomp UK" means Anacomp Limited,  a company  organized under the laws of
the United Kingdom.

     "Anacomp  Germany"  means  Anacomp  GmbH & Co.,  KG, a limited  partnership
formed under the laws of Germany.

     "Annualized  Recurring  Document Imaging Revenue" means, as of the last day
of any fiscal  quarter,  an amount  equal to the  product  of (a) the  Recurring
Document Imaging Revenue for such fiscal quarter multiplied by (b) 4.

     "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 first  anniversary of
the Closing Date, 3% times the Maximum  Revolver  Amount,  (b) during the period
from and including the date that is the first anniversary of the Closing Date up
to the date that is the second  anniversary  of the Closing  Date,  2% times the
Maximum Revolver Amount,  (c) 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, 1% times the Maximum Revolver  Amount,  and (d)
during the period from and including the date that is the third  anniversary  of
the Closing Date and thereafter, zero.

     "Asset  Acquisition"  means any purchase or other  acquisition by Borrower,
directly or indirectly,  of all or substantially all of the assets or a division
of any other Person.

     "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 Borrower.

     "Availability"  means,  as of any date of  determination,  the amount  that
Borrower is entitled to borrow as Advances hereunder (after giving effect to all
then  outstanding  Obligations  and all sublimits  and reserves then  applicable
hereunder).

     "Bankruptcy Code" means title 11 of the United States Code;  provided that,
when the context  requires  with  respect to the Canadian  Obligor,  "Bankruptcy
Code" shall mean the  Bankruptcy  and  Insolvency Act (Canada) or the Companies'
Creditors Arrangement Act (Canada), each as in effect from time to time.

     "Base  LIBOR  Rate"  means  the rate per  annum,  determined  by  Lender 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 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 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,  as of any date of  determination,  the following
margin  based  upon  the TTM  EBITDA  as set  forth in the  following  paragraph
provided,  however,  that for the period from the Closing  Date through the date
Lender  receives the certified  calculation  of the TTM EBITDA in respect of the
testing  period ended with December 31, 2004  delivered by Borrower  pursuant to
Section 6.3, the applicable Base Rate Margin shall be 0.75 percentage points:

<TABLE>
<CAPTION>


Level            TTM EBITDA                                                     Base Rate Margin
-----            ----------                                                     ----------------
<S>              <C>                                                            <C>
I                Less than $9,000,000                                           1.00 percentage points
II               Greater than or equal to $9,000,000 but less than $17,000,000  0.75 percentage points
III              Greater than or equal to $17,000,000                           0.50 percentage points

</TABLE>

     Except as set forth in the foregoing proviso, the Base Rate Margin shall be
based upon the most  recent TTM  EBITDA,  which  will be  calculated  quarterly.
Except as set forth in the  initial  proviso in this  definition,  the Base Rate
Margin  shall be  re-determined  each  quarter  on the  first  day of the  month
following the date Borrower delivers to Lender the certified  calculation of the
TTM EBITDA pursuant to Section 6.3 hereof;  provided,  however, that if Borrower
fails  to  provide  such  certification  when  such  certification  is due,  the
applicable  Base Rate Margin shall be set at the margin in the row styled "Level
I"  as of  the  first  day  of  the  month  following  the  date  on  which  the
certification  was  required  to be  delivered  until  the  date on  which  such
certification  is  delivered  (on which  date (but not  retroactively),  without
constituting  a waiver of any  Default  or Event of  Default  occasioned  by the
failure to timely deliver such certification,  the Base Rate Margin shall be set
at the  margin  based  upon  the  amount  of the TTM  EBITDA  disclosed  by such
certification).

     "Benefit  Plan" means the German  Benefit Plan, the UK Benefit Plan and any
other Plan that is or is intended to be a "defined  benefit plan" (as defined in
Section 3(35) of ERISA), or a benefit plan under Canadian Employee Benefit Laws,
or a benefit plan under German Employee Benefit Laws, or a benefit plan under an
arrangement  or agreement for the provision of  retirement,  death or disability
benefits or  otherwise  for the  provision  of  "relevant  benefits"  within the
meaning of section  612(1) of the Income &  Corporation  Taxes Act 1988, in both
cases  other than money  purchase  benefits  (as  defined in section  181 of the
Pension Schemes Act 1993), or a benefit plan under any other applicable  foreign
law for which  Borrower or any  Subsidiary  or ERISA  Affiliate  of Borrower has
maintained,  contributed  to, has an obligation to contribute to, or has been an
"employer" (as defined in Section 3(5) of ERISA),  or has held equivalent status
under Canadian Employee Benefit Laws, German Employee Benefit Laws, or any other
applicable foreign law within the past six years.

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

     "Books"  means  all of  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 Borrower's or its  Subsidiaries'  Records relating to their
business  operations or financial  condition,  and all of their goods or General
Intangibles related to such information).

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

     "Borrower  Collateral"  means  all of  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 described on Schedule 5.7(d),

     (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),

     (i) all of its Negotiable Collateral,

     (j) all of its Supporting Obligations,

     (k) money or other assets of Borrower  that now or hereafter  come into the
possession, custody, or control of Lender, and

     (l) 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,  Supporting  Obligations,  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 (a) any  Investment  Property of
Borrower constituting Stock of Borrower's  Subsidiaries that are CFCs, solely to
the extent  that such  Investment  Property  is in excess of 65% of the Stock of
such CFC and (b) any rights or interest in any contract, lease, permit, license,
charter or license  agreement  covering real or personal property of Borrower if
under the terms of such contract,  lease,  permit,  license,  charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Lender is prohibited as a matter of law or under the
terms of such contract, lease, permit, license, charter or license agreement and
such prohibition has not been or is not waived or the consent of the other party
to such contract,  lease, permit, license,  charter or license agreement has not
been or is not otherwise  obtained;  provided,  that,  the foregoing  exclusions
shall  in no way be  construed  (x) to  apply if any  described  prohibition  is
unenforceable  under  Sections  9-406,  9-407,  or  9-408  of the  Code or other
applicable  law, or (y) so as to limit,  impair,  or otherwise  affect  Lender's
continuing  security  interests  in and Liens  upon any rights or  interests  of
Borrower  in or to monies  due or to become  due under any  described  contract,
lease, permit,  license,  charter or license agreement (including any Accounts),
or (z) to limit,  impair,  or  otherwise  affect  Lender's  continuing  security
interests  in and Liens upon any rights or  interests  of Borrower in and to any
proceeds  from the  sale,  license,  lease,  or other  dispositions  of any such
contract, lease, permit, license, charter, license agreement or Stock.

     "Borrowing" means a borrowing hereunder consisting of Advances.

     "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 Borrower's  Collections and, so
                    long  as  the  Canadian   Conditions  have  been  satisfied,
                    Canadian Obligor's  Collections,  in each case, with respect
                    to Accounts  for the  immediately  preceding  45 day period,
                    plus

                    (b) the least of

                         (i) $12,500,000,

                         (ii) 50% of the Value of the Recurring Contract Revenue
                    Stream,

                         (iii)  12.5%  of  the  Annualized   Recurring  Document
                    Imaging  Revenue for the fiscal  quarter then most  recently
                    ended, and

                         (iv) 125% of the  credit  availability  created  by the
                    calculation set forth in clause (a) above minus

                    (c)  the  sum of (i)  the  Landlord  Reserve,  (ii)  the Tax
               Reserve  and (iii) the  aggregate  amount  of  reserves,  if any,
               established by Lender 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.

     "Canadian  Conditions"  means  that  Lender  shall have  received  (a) duly
executed  originals of the Canadian Security  Documents and evidence  reasonably
satisfactory  to Lender that the security  interests  granted in favor of Lender
pursuant  thereto  have been duly  perfected  and are senior in  priority to all
other liens, claims, security interests,  or encumbrances,  except for Permitted
Liens,  (b) such opinions of foreign  counsel to Canadian  Obligor,  in form and
substance  reasonably  satisfactory  to  Lender,  as Lender may  request,  (c) a
certificate from an authorized  senior official of Canadian Obligor attesting to
the incumbency and signatures of authorized officials of Canadian Obligor and to
the resolutions of Canadian Obligor's board of directors (or foreign equivalent)
(and, if necessary,  resolutions of Canadian Obligor's shareholders) authorizing
the  execution  and  delivery  of  the  Canadian  Security   Documents  and  the
performance of the same, and authorizing  specific officials of Canadian Obligor
to execute and deliver the same,  (d) Lender  shall have  completed a collateral
audit with  respect to the assets of  Canadian  Obligor  and an  examination  of
Canadian  Obligor's Books, the results of which shall be satisfactory to Lender,
(e)  certified   copies  of  the  policies  of  insurance,   together  with  the
endorsements  thereto,  in respect of assets owned by Canadian  Obligor,  as are
required   hereby,   the  form  and  substance  of  which  shall  be  reasonably
satisfactory to Lender,  and (f) such evidence as Lender may reasonably  require
demonstrating  that all conditions to the effectiveness of the Canadian Security
Documents have been satisfied,  including any actions required by any applicable
Canadian financial assistance legislation.

     "Canadian Dollars" or "C$" each means the lawful money of Canada.

     "Canadian  Employee  Benefit  Laws"  means the  Canadian  Pension  Plan Act
(Canada), the Pension Benefit Act (Ontario), the Health Insurance Act (Ontario),
the  Employment  Standard Act  (Ontario) and any federal,  provincial,  or local
counterparts or equivalents, in each case, as amended from time to time.

     "Canadian  Guarantee" means a guarantee  executed and delivered by Canadian
Obligor in favor of Lender,  in form and substance  reasonably  satisfactory  to
Lender.

     "Canadian  Obligor" means Anacomp Canada Inc. a New Brunswick  corporation.

     "Canadian  Security  Agreement" means that security  agreement executed and
delivered  by  Canadian  Obligor  in favor  of  Lender,  in form  and  substance
reasonably satisfactory to Lender.

     "Canadian  Security  Documents"  means,  collectively,   such  instruments,
agreements,  and  documents  governed  by the laws of  Canada  or any  political
subdivision  thereof,  as Lender may  reasonably  require in order to secure the
obligations of Canadian Obligor,  including the Canadian Security  Agreement and
the Canadian Guarantee.

     "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 Domestic Cash Equivalents and International Cash
Equivalents.

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

     "Cash   Management   Agreements"   means  those  certain  cash   management
agreements,  in form and substance  reasonably  satisfactory to Lender,  each of
which is among Borrower or a Guarantor,  Lender,  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 35%, or more, of the Stock of Borrower
having the right to vote for the election of 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) Borrower ceases to own, directly or indirectly, and
control 100% of the outstanding  Stock of each of its Subsidiaries  extant as of
the Closing Date other than the Stock of its Inactive Subsidiaries.

     "Closing  Date"  means the date of the making of the  initial  Advance  (or
other extension of credit) hereunder.

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

     "Code" means the New York Uniform  Commercial  Code, as in effect from time
to time; provided,  however, that in the event by reason of mandatory provisions
of law, any or all of the  attachment,  perfection,  priority,  or remedies with
respect to Lender's Lien on any Collateral is governed by the Uniform Commercial
Code as  enacted  and in effect in a  jurisdiction  other  than the State of New
York, the term "Code" shall mean the Uniform  Commercial  Code as enacted and in
effect in such other jurisdiction  solely for purposes of the provisions thereof
relating to such attachment,  perfection, priority or remedies; and when used to
define a category or categories of collateral owned or hereafter acquired by the
Canadian  Obligor,  such  reference  shall  include the  equivalent  category or
categories of collateral set out under the PPSA.

     "Collateral"  means all assets and interests in assets and proceeds thereof
now owned or hereafter acquired by 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 Borrower's or its Subsidiaries' Books, Equipment, or Inventory, in each case,
in form and substance reasonably satisfactory to Lender.

     "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  Assignment"  has the  meaning set forth in Section
4.4(b).

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

     "Continuing  Director"  means (a) any member of the Board of Directors  who
was a director (or comparable  manager) of Borrower 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,  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
Borrower and whose initial  assumption  of office  resulted from such contest or
the settlement thereof.

     "Control  Agreement"  means a  control  agreement,  in form  and  substance
reasonably  satisfactory  to Lender,  executed  and  delivered  by Borrower or a
Guarantor, Lender, and the applicable securities intermediary (with respect to a
Securities Account) or bank (with respect to a Deposit Account).

     "Copyright   Security  Agreement"  means  a  copyright  security  agreement
executed and  delivered by Borrower and Lender,  the form and substance of which
is reasonably satisfactory to Lender.

     "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.

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

     "Designated  Account" means the Deposit  Account of 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, a percentage, based upon
the experience of the immediately  prior 90 consecutive days, 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
Borrower's and each Guarantor's  Accounts during such period,  by (b) Borrower's
and each Guarantor's 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  Borrower  to Lender  regarding  the  extensions  of credit to be made on the
Closing Date, the form and substance of which is satisfactory to Lender.

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

     "Domestic Cash Equivalents"  means (a) marketable direct obligations issued
by, 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) Deposit Accounts maintained with (i) any bank
that  satisfies  the criteria  described in clause (d) above,  or (ii) any other
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.

     "Due  Diligence  Letter"  means the due  diligence  letter sent by Lender's
counsel  to  Borrower,  together  with  Borrower's  completed  responses  to the
inquiries  set forth  therein,  the form and  substance of such  responses to be
satisfactory to Lender.

     "EBITDA"  means,  with  respect to any fiscal  period,  Borrower's  and its
Subsidiaries' consolidated net earnings (or loss), minus extraordinary gains and
interest income,  plus (a) interest expense,  (b) income taxes, (c) depreciation
and amortization for such period, (d) any non-cash charges, and (e) any non-cash
extraordinary losses, all as determined in accordance with GAAP.

     "Eligible  Accounts"  means those  Accounts  created by Borrower,  Canadian
Obligor and any other Guarantor in the ordinary  course of their business,  that
arise out of Borrower's,  Canadian  Obligor's and such Guarantor's 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 (a) Canadian Obligor's Accounts will be
considered for purposes of this definition only if the Canadian  Conditions have
been satisfied to Lender's  satisfaction and any other Guarantor's Accounts will
be  considered  for  purposes of this  definition  only if the  requirements  of
Section 6.15 have been satisfied to Lender's  satisfaction and Lender shall have
completed a collateral audit with respect to the assets of such Guarantor and an
examination  of  such   Guarantor's   books,  the  results  of  which  shall  be
satisfactory to Lender, (b) Accounts acquired by Borrower,  Canadian Obligor, or
any  other  Guarantor  in  connection  with any  Permitted  Acquisition  will be
considered  for  purposes of this  definition  only if the  Acquisition  Funding
Conditions have been satisfied to Lender's  satisfaction,  and (c) such criteria
may be revised from time to time by Lender in Lender's Permitted Discretion from
time to time after the Closing Date. In  determining  the amount to 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 60 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
Borrower or Canadian  Obligor or any other  Guarantor or an employee or agent of
Borrower or Canadian Obligor or any other Guarantor or any Affiliate of Borrower
or Canadian Obligor or any other Guarantor,

     (d) [Intentionally Omitted],

     (e) Accounts that are not payable in Dollars or Canadian 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 Canada or
a  province  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 (other than Canada or a province  thereof),  unless (y)
the  Account  is  supported  by  an  irrevocable  letter  of  credit  reasonably
satisfactory to Lender (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Lender and is directly  drawable by Lender,  or
(z) the Account is covered by credit insurance in form,  substance,  and amount,
and by an insurer, reasonably satisfactory to Lender,

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

     (h)  Accounts  with  respect to which the  Account  Debtor is a creditor of
Borrower or Canadian Obligor or any other Guarantor, 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 or Canadian  Obligor or any other  Guarantor  exceed 10% (such
percentage,  as  applied  to a  particular  Account  Debtor,  being  subject  to
reduction by Lender 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,
however,  that the amount of Eligible  Accounts  that are excluded  because they
exceed the  foregoing  percentage  shall be determined by Lender based on all of
the otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit,

     (j) Maintenance Revenue Accounts,

     (k) [Intentionally Omitted],

     (l) Accounts, the collection of which, Lender, 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
Lender's Lien,

     (n) [Intentionally Omitted] 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 Borrower
of the subject contract for goods or services.

     "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 Borrower  (which  approval  of  Borrower  shall not be  unreasonably
withheld, delayed, or conditioned),  and (f) during the continuation of an Event
of Default, any other Person approved by Lender.

     "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 Borrower,  its Subsidiaries,  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 Borrower,  its Subsidiaries,  or
any of their predecessors in interest.

     "Environmental  Law"  means  any  applicable  federal,  state,  provincial,
foreign or local  statute,  law,  rule,  regulation,  ordinance,  code,  permit,
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,  in each case to the extent
binding on Borrower or its Subsidiaries, relating to the environment, the effect
of the  environment  on employee  health and  safety,  or  Hazardous  Materials,
including the Comprehensive Environment Response Compensation and Liability Act,
42 USC ss.9691 et seq.;  the  Resource  Conservation  and  Recovery  Act, 42 USC
ss.6901 et seq.;  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);   the  Canadian
Environmental   Protection  Act  (Canada);   the  Fisheries  Act  (Canada);  the
Transportation of Dangerous Goods Act (Canada); the Environmental Protection Act
(Ontario); the Water Resource Act (Ontario); any state, provincial, 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,  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, or Remedial Action required,  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.

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

     "ERISA  Affiliate"  means (a) any  Person  subject  to ERISA or  comparable
foreign law whose  employees are treated as employed by the same employer as the
employees  of  Borrower  or its  Subsidiaries  under IRC  Section  414(b) or any
applicable foreign law, (b) any trade or business subject to ERISA or comparable
foreign law whose  employees are treated as employed by the same employer as the
employees  of  Borrower  or its  Subsidiaries  under IRC  Section  414(c) or any
applicable  foreign  law,  (c) solely for  purposes  of Section 302 of ERISA and
Section 412 of the IRC or any comparable  foreign law, any organization  subject
to ERISA or any comparable foreign law that is a member of an affiliated service
group of which Borrower or any of its Subsidiaries is a member under IRC Section
414(m) or any applicable  foreign law, or (d) solely for purposes of Section 302
of ERISA and Section 412 of the IRC or any  applicable  foreign  law, any Person
that is a party to an arrangement  with Borrower or any of its  Subsidiaries and
whose   employees  are  aggregated   with  the  employees  of  Borrower  or  its
Subsidiaries  under IRC Section 414(o) or any applicable foreign law, or (e) any
Person with respect to which Borrower or any of its Subsidiaries  could have any
liability with respect to such Person's Benefit Plans.

     "ERISA Event" means,  with respect to Borrower,  its  Subsidiaries,  or any
ERISA  Affiliate,  (a) any event  described  in Section  4043(c) of ERISA or any
comparable event under applicable foreign law with respect to the German Benefit
Plan,  the UK Benefit Plan or any other  Benefit  Plan;  (b) the  withdrawal  of
Borrower, its Subsidiaries, or ERISA Affiliate from the (i) German Benefit Plan,
(ii) the UK Benefit Plan or (iii) any other Benefit Plan subject to Section 4063
of ERISA or any  applicable  foreign  law  during a plan  year in which it was a
substantial  employer,  as defined in Section  4001(a)(2) of ERISA or comparable
concept  under  applicable  foreign law; (c) the filing of a notice of intent to
terminate  the German  Benefit  Plan,  the UK Benefit Plan or any other  Benefit
Plan, or the treatment of a plan  amendment as a termination  under Section 4041
of ERISA or any  applicable  foreign law; (d) the  institution of proceedings to
terminate the German Benefit Plan, the UK Benefit Plan or any other Benefit Plan
by the PBGC or any other  Governmental  Authority;  (e) the failure by Borrower,
its Subsidiaries, or any ERISA Affiliate to make when due required contributions
to the German  Benefit Plan,  the UK Benefit Plan or any other Benefit Plan; (f)
any other event or condition  that might  reasonably  be expected to  constitute
grounds  under  Section  4042  of  ERISA  or  any  applicable  foreign  law  for
termination  of, or the  appointment  of a trustee  to  administer,  the  German
Benefit  Plan,  the UK  Benefit  Plan  or any  other  Benefit  Plan  or for  the
imposition of liability under Section 4069 or 4212(c) of ERISA or any applicable
foreign  law;  (g) the loss of a Qualified  Plan's  qualification  or tax exempt
status;  (h)  the  termination  of any  Plan  to  which  Borrower  or any of its
Subsidiaries  or ERISA  Affiliates is required to  contribute;  or (j) any other
event that reasonably  could be expected to result in a material  liability with
respect to the German  Benefit  Plan,  the UK Benefit Plan or any other  Benefit
Plan.

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

     "Excess  Availability"  means, as of any date of determination,  the amount
equal to (a) Availability  minus (b) the aggregate  amount, if any, of all trade
payables of Borrower and each Guarantor aged in excess of historical levels with
respect thereto and all book overdrafts of Borrower and each Guarantor in excess
of  historical  practices  with respect  thereto,  in each case as determined by
Lender in its Permitted Discretion;  provided, however, that for the purposes of
the definition of "Required  Availability" clause (b) shall be calculated by all
trade payables of Borrower and each Guarantor aged in excess of 60 days.

     "Exchange Act" means the Securities Exchange Act of 1934, as in effect from
time to time.

     "Exchange Rate" means and refers to the nominal rate of exchange (vis-a-vis
Dollars) for a currency other than Dollars  published in the Wall Street Journal
(Western Edition) on the date of determination (which shall be a Business Day on
which the Wall Street Journal (Western Edition) is published),  expressed as the
number of units of such other currency per one Dollar.

     "Existing   Lender"  means  Fleet   National   Bank,  a  national   banking
association.

     "Federal Lien" has the meaning set forth in Section 8.7.

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

     "FEIN" means Federal Employer Identification Number.

     "Foreign Pledge  Agreements" means those certain Stock pledge agreements or
similar  agreements which are governed by Dutch,  English,  French,  German, and
Italian law,  executed and delivered by Borrower on the one hand, and Lender, on
the other hand, with respect to the Stock of the Material Subsidiaries and which
are in form and substance reasonably satisfactory to Lender.

     "Funded Debt" of any Person means  Indebtedness  of such Person that by its
terms  matures  more than one year after the date of creation or matures  within
one year from such date but is  renewable or  extendible,  at the option of such
Person, to a date more than one year after such date or arises under a revolving
credit or  similar  agreement  that  obligates  the  lender or lenders to extend
credit  during a period of more than one year  after such  date,  including  all
amounts of Funded Debt of such Person  required to be paid or prepaid within one
year after the date of determination.

     "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 other personal  property  other than Accounts,  Deposit
Accounts, goods, Investment Property, and Negotiable Collateral.

     "German    Benefit    Plan"    means   the   Group    Insurance    Contract
(Gruppenversicherungsvertrag)  No. G 5639 between  DATAGRAPHIX  GmbH (Wiesbaden,
later  operating  under the firm Anacomp GmbH,  Wiesbaden,  now known as Anacomp
GmbH  &  Co.  KG)  and   Niederlassung   fur  Deutschland  der   Schweizerischen
Lebensversicherungs-  und  Rentenanstalt  in Munchen dated November 21, 1978, in
each case as amended from time to time.

     "German  Employee  Benefit  Laws" means the German Act on Company  Pensions
(Gesetz zur betrieblichen  Altersversorgung)  and any other federal or state law
or regulation relating to company pensions, in each case, as in effect from time
to time.

     "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,  provincial,  local,
foreign, or other governmental or administrative body,  instrumentality,  board,
department,  or agency or any  court,  tribunal,  administrative  hearing  body,
arbitration panel, commission, or other similar dispute-resolving panel or body.

     "Guarantor"  means (a) each Subsidiary of Borrower that becomes a guarantor
pursuant to Section 6.15 and (b) Canadian Obligor.

     "Guarantor  Security  Agreement"  means  one or  more  security  agreements
executed and delivered by each  Guarantor  (other than the Canadian  Obligor) in
favor of Lender, in each case, in form and substance reasonably  satisfactory to
Lender.

     "Guaranty"  means that certain  general  continuing  guaranty  executed and
delivered  by each  Guarantor  (other  than the  Canadian  Obligor)  in favor of
Lender, in form and substance reasonably satisfactory to Lender.

     "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 Borrower or any of 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 Borrower's or any of its Subsidiaries'
exposure to fluctuations in interest or exchange rates,  loan,  credit exchange,
security, or currency valuations or commodity prices.

     "Inactive  Subsidiary"  means  each of (a) AIS  Limited,  a United  Kingdom
company, (b) Data/Ware Development International, Ltd., a Barbados foreign sales
corporation, (c) Martec Systems Limited, a United Kingdom company, (d) The Fiche
Centre, a United Kingdom company,  (e) Xidex New Zealand, a New Zealand company,
(f) Xidex (Pty) Ltd., a South Africa company,  (g) Xidex (UK) Limited,  a United
Kingdom  company,  and (h) Anacomp  Technical  Services  Ltd., a United  Kingdom
company.

     "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.

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

     "Intercompany   Advances"  means  loans  or  advances  in  cash  (excluding
therefrom  extensions of trade credit in the ordinary  course of business)  from
Borrower  or one or more of its  Subsidiaries  to Borrower or one or more of its
Subsidiaries.

     "Intercompany  Subordination  Agreement"  means a  subordination  agreement
executed and delivered by Borrower and each of its Subsidiaries and Lender,  the
form and substance of which is reasonably satisfactory to Lender.

     "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, 3, or 6 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, 3, or 6 months after the date on which the  Interest  Period
began,  as applicable,  and (e) Borrower may not elect an Interest  Period which
will end after the Maturity Date.

     "International  Cash Equivalents"  means (a) marketable direct  obligations
issued or unconditionally guaranteed by the government of any Specified State or
issued by any  agency  thereof  and  backed by the full faith and credit of such
government,  in each case  maturing  within 1 year from the date of  acquisition
thereof,  (b) marketable direct obligations issued by any Specified State or any
political subdivision of any such Specified 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 Investor 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-2, from S&P or at least P-2 from Moody's,  (d) Deposit Accounts,  certificates
of deposit,  bankers'  acceptances or time deposits  maturing within 1 year from
the date of acquisition  thereof, in each case payable in an Agreed Currency and
issued by any bank organized under the laws of any Specified  State,  and having
at the date of acquisition thereof combined capital and surplus of not less than
$250,000,000  (calculated at the then  applicable  Exchange  Rate),  (e) Deposit
Accounts  maintained with (i) any bank that satisfies the criteria  described in
clause (d) above, or (ii) any other bank demand Deposit Accounts maintained with
any bank organized  under the laws of any Specified  State so long as the amount
maintained with any individual  bank is less than or equal to $100,000,  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.

     "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).

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

     "Landlord Reserve" means a reserve in an amount equal to the greater of (i)
the number of months rent for which a landlord will have,  under the  applicable
statutory  lien, a Lien in the assets of Borrower or any Guarantor to secure the
payment of rent or other amounts under a lease for a Material Location,  or (ii)
3 months rent under the lease,  for each Material  Location at which Borrower or
any Guarantor stores Inventory and as to which a Collateral Access Agreement has
not been received by Lender.

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

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

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

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

     "Lender's Account" means the account identified in Schedule L-1.

     "Lender's Liens" means the Liens granted by Borrower,  and its Subsidiaries
to Lender under this Agreement in accordance with the other Loan Documents.

     "Lender  Expenses" means all (a) costs or expenses  (including  taxes,  and
insurance  premiums)  required to be paid by Borrower or its Subsidiaries  under
any of the Loan Documents that are paid,  advanced,  or incurred by Lender,  (b)
out-of-pocket  fees or charges  paid or  incurred by Lender in  connection  with
Lender's  transactions  with Borrower or its  Subsidiaries,  including,  fees or
charges   for    photocopying,    notarization,    couriers   and    messengers,
telecommunication,  public record searches (including tax lien, litigation,  and
UCC and PPSA  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 Lender in the  disbursement  of funds to Borrower (by wire
transfer or  otherwise),  (d) charges paid or incurred by Lender  resulting from
the dishonor of checks,  (e)  reasonable  costs and expenses paid or incurred by
Lender 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 Lender 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  Lender in  enforcing  or  defending  the Loan
Documents  or in  connection  with  the  transactions  contemplated  by the Loan
Documents or Lender's relationship with Borrower or any of its Subsidiaries, (h)
Lender's  reasonable costs and expenses  (including  attorneys fees) incurred in
advising,  structuring,  drafting,  reviewing,  administering,  syndicating,  or
amending  the Loan  Documents,  and (i) 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 Borrower or
its Subsidiaries 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;  provided,  however,  that
Borrower's obligation to reimburse Lender for costs or expenses (including audit
fees and expenses and attorneys  fees) incurred by Lender in connection with the
negotiation, execution, and delivery of the Loan Documents required hereunder to
be executed and delivered on or prior to the Closing Date, and any and all costs
and expenses  incurred by Lender in  connection  with the filing or recording of
such Loan  Documents,  shall be limited  to a maximum  amount of  $390,000.  The
foregoing  limitation  on costs  and  expenses  shall not apply to any costs and
expenses incurred by Lender after the Closing Date.

     "Lender-Related   Person"  means  Lender,  together  with  its  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.

     "Leverage  Ratio"  means,  at any date of  determination,  the ratio of (a)
Total Debt at such date, to (b) TTM EBITDA.

     "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 Option" has the meaning set forth in Section 2.13(a).

     "LIBOR Rate" means,  for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by Lender (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 as of any date of  determination,  the following
margin  based  upon  the TTM  EBITDA  as set  forth in the  following  paragraph
provided,  however,  that for the period from the Closing  Date through the date
Lender  receives the certified  calculation  of the TTM EBITDA in respect of the
testing  period ended with December 31, 2004  delivered by Borrower  pursuant to
Section 6.3, the applicable LIBOR Rate Margin shall be 2.75 percentage points:

<TABLE>
<CAPTION>


Level            TTM EBITDA                                                     LIBOR Rate Margin
-----            ----------                                                     -----------------
<S>              <C>                                                            <C>
I                Less than $9,000,000                                           3.00 percentage points
II               Greater than or equal to $9,000,000 but less than $17,000,000  2.75 percentage points
III              Greater than or equal to $17,000,000                           2.50 percentage points

</TABLE>

     Except as set forth in the foregoing  proviso,  the LIBOR Rate Margin shall
be based upon the most recent TTM EBITDA,  which will be  calculated  quarterly.
Except as set forth in the initial  proviso in this  definition,  the LIBOR Rate
Margin  shall be  re-determined  each  quarter  on the  first  day of the  month
following the date Borrower delivers to Lender the certified  calculation of the
TTM EBITDA pursuant to Section 6.3 hereof;  provided,  however, that if Borrower
fails  to  provide  such  certification  when  such  certification  is due,  the
applicable LIBOR Rate Margin shall be set at the margin in the row styled "Level
I"  as of  the  first  day  of  the  month  following  the  date  on  which  the
certification  was  required  to be  delivered  until  the  date on  which  such
certification  is  delivered  (on which  date (but not  retroactively),  without
constituting  a waiver of any  Default  or Event of  Default  occasioned  by the
failure to timely deliver such certification, the LIBOR Rate Margin shall be set
at the  margin  based  upon  the  amount  of the TTM  EBITDA  disclosed  by such
certification).

     "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, 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 Canadian Security Documents, the
Cash  Management  Agreements,  the Control  Agreements,  the Copyright  Security
Agreement,  the Disbursement  Letter,  the Due Diligence Letter, the Fee Letter,
the Foreign Pledge Agreements,  the Guarantor Security Agreement,  the Guaranty,
the Intercompany  Subordination  Agreement, the Letters of Credit, the Officers'
Certificate,  the Patent Security  Agreement,  the Stock Pledge  Agreement,  the
Trademark  Security  Agreement,  any  note or  notes  executed  by  Borrower  in
connection  with this Agreement and payable to Lender,  and any other  agreement
entered into,  now or in the future,  by Borrower and Lender in connection  with
this Agreement.

     "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 Borrower and its Subsidiaries,  taken as a
whole, (b) a material  impairment of Borrower's and its Subsidiaries  ability to
perform their  obligations under the Loan Documents to which they are parties or
of Lender's  ability to enforce the  Obligations or realize upon the Collateral,
or (c) a material impairment of the enforceability or priority of Lender's Liens
with respect to the Collateral as a result of an action or failure to act on the
part of Borrower or its Subsidiaries.

     "Material  Location" means (a) any location listed on Schedule M-1, and (b)
any other location (i) which is used for processing  data (such as a data center
or a regional  center or  satellite  center) or (ii) has  Inventory or Equipment
with an aggregate value in excess of $50,000.

     "Material  Subsidiary"  means any Subsidiary of Borrower that (a) generates
more than  $2,000,000 in annual  revenue or (b) has cash or Cash  Equivalents in
excess of $500,000.

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

     "Maximum Revolver Amount" means $25,000,000, or such greater amount as such
amount may be increased up to the maximum of $50,000,000 upon and subject to the
conditions in Section 2.1(e).

     "Multiemployer  Plan"  means a  "multiemployer  plan" as defined in Section
4001(a)(3)  of ERISA or any  comparable  concept under foreign law, and to which
Borrower,  its  Subsidiaries or any ERISA  Affiliate is making,  is obligated to
make or has made or been obligated to make,  contributions  or has any actual or
potential liability.

     "Maintenance  Revenue  Account" means any Account  arising from,  resulting
from or in  connection  with  (a) any  invoice  coded as "D," "R" or "X," or (b)
multi-vendor services conducted by Borrower or any of its Subsidiaries.

     "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).

     "Non-Federal Priority Lien" has the meaning set forth in Section 8.7.

     "Obligations"  means  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  Borrower's  Loan  Account  pursuant  hereto),  obligations
(including indemnification  obligations),  fees (including the fees provided for
in the Fee Letter),  charges,  costs,  Lender  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 Borrower to Lender  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
Expenses that Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise.  Any reference in this  Agreement or in the Loan Documents to
the  Obligations  shall  include all  extensions,  modifications,  renewals,  or
alterations thereof, both prior and subsequent to any Insolvency Proceeding.

     "Officers'   Certificate"  means  the  representations  and  warranties  of
officers  form  submitted  by  Lender  to  Borrower,  together  with  Borrower's
completed  responses to the inquiries set forth therein,  the form and substance
of such responses to be reasonably satisfactory to Lender.

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

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

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

     "Pay-Off  Letter"  means  a  letter,  in  form  and  substance   reasonably
satisfactory  to Lender,  from Existing  Lender to Lender  respecting the amount
necessary  to  repay  in  full  all of  the  obligations  of  Borrower  and  its
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 Borrower  and its
Subsidiaries.

     "PBGC" means the Pension Benefit Guaranty Corporation.

     "Permitted  Acquired   Indebtedness"   means,  with  respect  to  Borrower,
Indebtedness  of any other Person whose assets or Stock are acquired by Borrower
in a Permitted  Acquisition,  provided that such  Indebtedness  (a) was existing
prior  to the  date of such  Permitted  Acquisition  and  was  not  incurred  in
connection with, or in contemplation  of, such Permitted  Acquisition and (b) is
not  Indebtedness  for borrowed  money or  obligations  in respect of letters of
credit  (other than  Permitted  Purchase  Money  Indebtedness  or Capital  Lease
Obligations).

     "Permitted  Acquisition"  means a Permitted Cash Acquisition or a Permitted
Non-Cash Acquisition, as the context requires.

     "Permitted Cash Acquisition" means any Acquisition that does not qualify as
a Permitted  Non-Cash  Acquisition  solely because the consideration  payable in
respect of the proposed  Acquisition  includes some form of consideration  other
than solely the common Stock of Borrower and so long as the consideration (other
than Stock of Borrower) for such  Acquisition or series of related  Acquisitions
is not more than $5,000,000.

     "Permitted  Discretion"  means  a  determination  made 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,  on a non-exclusive basis, of patents,  trademarks,  copyrights,  and
other intellectual  property rights in the ordinary course of business,  (e) the
transfer of assets by any Subsidiary of Borrower (other than a Guarantor) to (i)
Borrower, (ii) any Guarantor, or (iii) any Material Subsidiary, and (f) the sale
of all or substantially all of the Stock or assets of any Inactive Subsidiary so
long as (i) no Event of Default has  occurred or is  continuing  or would result
therefrom,   (ii)  Borrower  has  provided  Lender  with  written  confirmation,
supported by reasonably detailed calculations,  that on a pro forma basis if the
disposition  had been  accomplished  at the  beginning of the  relevant  period,
Borrower would have been in compliance  with the financial  covenants in Section
7.18 hereof for the 12 months ending as of the fiscal quarter ended  immediately
prior to the proposed date of consummation of such proposed  disposition,  (iii)
such sales or  dispositions  are made at or greater  than fair market value with
non-Affiliates, (iv) the aggregate amount of proceeds received in respect of all
such sales or dispositions is less than $5,000,000 in the aggregate,  (v) Excess
Availability or Qualified Cash is at least  $10,000,000  before and after giving
effect to the proposed  sale, and (vi) all such proceeds are subject to Lender's
Lien.

     "Permitted Holder" means, collectively, Special Value Bond Fund, II, LLC, a
Delaware limited liability  company,  Special Value Absolute Return Fund, LLC, a
Delaware  limited  liability  company,  and any other fund or account managed by
Tennebaum Capital Partners, LLC, a Delaware limited liability company.

     "Permitted  Intercompany  Advances" means Intercompany  Advances (a) by any
Subsidiary  to Borrower;  (b) by any  Subsidiary  to any  Guarantor;  (c) by any
Subsidiary  (other  than  a  Subsidiary  that  is  a  Guarantor)  to  any  other
Subsidiary;  and  (d) by  Borrower  to any  Subsidiary  so  long  as (i)  Excess
Availability  is at least  $10,000,000  before  and after  giving  effect to the
making of such  advance,  (ii) no Default  or Event of  Default  exists or would
result  therefrom,  and (iii)  such  advances  do not exceed  $1,000,000  in the
aggregate at any time outstanding.

     "Permitted Investments" means (a) (i) in the case of Borrower,  Investments
in cash and  Domestic  Cash  Equivalents,  and  (ii) in the  case of  Borrower's
Subsidiaries,  Investments  in cash  and  International  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 Borrower or
any of its Subsidiaries  effected in the ordinary course of business or owing to
Borrower  or any of its  Subsidiaries  as a  result  of  Insolvency  Proceedings
involving an Account  Debtor or upon the  foreclosure or enforcement of any Lien
in favor of  Borrower  or its  Subsidiaries,  (e)  Permitted  Acquisitions,  (f)
Permitted  Stock  Repurchases,   (g)  Permitted   Intercompany   Advances,   (h)
Investments  made by a Subsidiary  (other than a Guarantor) in any other Person,
(i) Investments  constituting non-cash consideration received by Borrower or any
Subsidiary in connection with a Permitted Disposition.

     "Permitted  Liens"  means (a) Liens  held by  Lender,  (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 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, and zoning restrictions that do not materially  interfere with or impair
the  use or  operation  thereof,  and  (l)  Liens  securing  Permitted  Acquired
Indebtedness,  provided that:  (i) the Liens  securing such  Permitted  Acquired
Indebtedness  at the  time of and  prior  to the  incurrence  of such  Permitted
Acquired  Indebtedness  by Borrower were not granted in  connection  with, or in
anticipation  of, the  incurrence of such  Permitted  Acquired  Indebtedness  by
Borrower;  and (ii) such Liens do not extend to or cover any  property or assets
of  Borrower  other than the  Equipment  that  secured  the  Permitted  Acquired
Indebtedness  prior to the time  such  Indebtedness  became  Permitted  Acquired
Indebtedness  of Borrower and are no more favorable to the  lienholders  thereof
than those securing the Permitted Acquired  Indebtedness prior to the incurrence
of such Permitted Acquired Indebtedness by Borrower.

     "Permitted Non-Cash Acquisition" means any Acquisition so long as:

     (a)  Borrower  obtains  the  written  consent  of  Lender  to the  proposed
Acquisition prior to the date of the consummation  thereof;  provided,  however,
that  such  consent  shall not be  required  if the  consideration  for all such
Acquisitions  consummated  since the Closing Date is less than $5,000,000 in the
aggregate,

     (b) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed Acquisition,

     (c) after giving  effect to such  Acquisition,  Borrower will have at least
$10,000,000 in Excess Availability or Qualified Cash,

     (d) the assets being acquired, or the Person whose Stock is being acquired,
are useful in or engaged  in, as  applicable,  the  business  of  Borrower  or a
business reasonably related thereto,

     (e) the consideration  payable in respect of the proposed Acquisition shall
be composed solely of common Stock of Borrower,

     (f) Borrower has provided  Lender with written  confirmation,  supported by
reasonably detailed  calculations,  that on a pro forma basis, created by adding
the historical combined financial statements of Borrower (including the combined
financial  statements  of any other  Person or assets that were the subject of a
prior  Permitted  Acquisition  during the  relevant  period)  to the  historical
consolidated  financial  statements  of  the  Person  to  be  acquired  (or  the
historical  financial  statements related to the assets to be acquired) pursuant
to the proposed Acquisition  (adjusted to eliminate expense items that would not
have been incurred and include income items that would have been recognized,  in
each case,  if the  combination  had been  accomplished  at the beginning of the
relevant period;  such eliminations and inclusions to be mutually agreed upon by
Borrower and Lender),  Borrower would have been in compliance with the financial
covenants  in  Section  7.18  hereof  for the 12 months  ending as of the fiscal
quarter ended  immediately  prior to the proposed date of  consummation  of such
proposed Acquisition for which there are available financial statements,

     (g) Borrower has provided  Lender with prior written notice of the proposed
Acquisition not less than 10 Business Days prior to the anticipated closing date
of the subject  Acquisition  together  with such  documentation  that Lender may
require  demonstrating  that after  giving  effect to the  subject  Acquisition,
Borrower  and its  Subsidiaries  (taken  as a whole)  could  not  reasonably  be
expected  to suffer a  Material  Adverse  Change  as a result  of such  proposed
Acquisition  (and Lender  shall have five (5)  Business  Days from and after the
receipt by Lender of such  documentation  to notify  Borrower of its  contention
that the proposed  Acquisition  cannot proceed because a Material Adverse Change
could reasonably be expected to result from the proposed Acquisition),

     (h) in the case of an Asset  Acquisition,  the  subject  assets  are  being
acquired by Borrower or a Subsidiary  organized solely to facilitate the subject
Acquisition,

     (i) in the case of a Stock Acquisition, the subject Stock is being acquired
in such  Acquisition  directly by Borrower or a Subsidiary  organized  solely to
facilitate the subject Acquisition,

     (j) in the case of an Asset  Acquisition,  not later than 2  Business  Days
following  consummation of such Asset Acquisition,  Borrower shall have executed
and delivered or  authorized,  as applicable,  any and all security  agreements,
financing  statements,  fixture  filings,  and  other  documentation  reasonably
requested  by Lender in order to include the newly  acquired  assets  within the
collateral hypothecated under the Loan Documents,

     (k) in the case of a Stock  Acquisition,  not later  than 2  Business  Days
following  consummation of such Stock Acquisition,  Borrower shall have executed
and delivered a pledge  agreement  respecting the Stock being acquired and shall
have  delivered  to  Lender  possession  of  the  original  Stock   certificates
respecting  all (or, in the case of an acquired  Person that is a CFC and if the
pledge of all such interest would have adverse tax  consequences to Borrower and
its  Subsidiaries,  65%) of the issued and  outstanding  shares of Stock of such
acquired  Person,  together with stock powers with respect  thereto  endorsed in
blank, and

     (l) in the case of a Stock Acquisition of a Person organized under the laws
of the United  States,  Canada or a  political  subdivision  of either  thereof,
Borrower shall have caused such acquired Person to execute and deliver a joinder
to either this  Agreement  or the  Guaranty in order to make such Person a party
hereto or thereto,  together  with any and all  security  agreements,  financing
statements,  fixture filings,  and other documentation  reasonably  requested by
Lender in order to cause such cause acquired Person to be obligated with respect
to the  Obligations  and to include the assets of the acquired Person within the
collateral hypothecated under the Loan Documents.

     "Permitted  Protest" means the right of 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 Borrower or its Subsidiary,  as applicable, in good faith, and (c)
Lender is satisfied  that,  while any such protest is pending,  there will be no
impairment  of the  enforceability,  validity,  or  priority  of any of Lender's
Liens.

     "Permitted  Purchase  Money   Indebtedness"   means,  as  of  any  date  of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate  principal  amount  outstanding  at any  one  time  not in  excess  of
$1,750,000.

     "Permitted  Subordinated Debt" means unsecured Indebtedness of Borrower the
terms  of which  are  satisfactory  to  Lender  and  which  has  been  expressly
subordinated in right of payment to all  Indebtedness of Borrower under the Loan
Documents  and  otherwise is on terms and  conditions  (including  subordination
provisions,  payment terms, interest rates,  covenants,  remedies,  defaults and
other material terms) satisfactory to Lender.

     "Permitted  Stock  Repurchases"  means open market purchases by Borrower of
the Borrower's  common Stock from Persons other than Permitted Holders and their
Affiliates on a public exchange so long as:

     (a) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed repurchase,

     (b) the total amount expended by Borrower in making such purchases does not
exceed $15,000,000 in the aggregate,

     (c) Borrower  makes all such  purchases in accordance  with all  applicable
laws,

     (d) after  giving  effect to such  repurchase  Borrower  will have at least
$10,000,000 in Excess Availability and Qualified Cash, and

     (e) promptly upon repurchase, such Stock is cancelled.

     "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.

     "Plan"  means an  "employee  benefit  plan," as defined in Section  3(3) of
ERISA or any comparable  concept under foreign law, including the German Benefit
Plan,  the  UK  Benefit  Plan  and a  Multiemployer  Plan,  that  Borrower,  its
Subsidiaries,  or ERISA Affiliates maintain, contribute to or have an obligation
to  contribute  to or with  respect  to which  any of them  have any  actual  or
potential liability.

     "PPSA" means the Personal Property Security Act of the applicable  Canadian
jurisdiction or jurisdictions in respect of the Canadian Obligor.

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

     "Purchase  Money   Indebtedness"   means   Indebtedness   (other  than  the
Obligations, but including Capitalized Lease Obligations),  incurred at the time
of, or within 90 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 Borrower and its 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 or Canada.

     "Qualified  Plan" means a Plan that is intended to be  tax-qualified  under
Section 401(a) of the IRC.

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

     "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.

     "Recurring  Contract  Revenue"  means,  the  revenue  of  Borrower  and its
Subsidiaries  derived from contractual  provisions  providing for an agreed upon
periodic  payment  (as  opposed to an episodic  payment)  in  consideration  for
document  imaging  services,  vendor  services,  supply services and maintenance
contracts as reflected on the Recurring Revenue Certificate.

     "Recurring  Document  Imaging  Revenue"  means,  with respect to any fiscal
period,  the revenue of Borrower and its  Subsidiaries  for such period that are
derived  from  contractual  provisions  providing  for an agreed  upon  periodic
payment (as  opposed to an  episodic  payment)  in  consideration  for  document
imaging services (such services defined in accordance with historical practices)
and as reflected on the Recurring Revenue Certificate.

     "Recurring Revenue Certificate" means a certificate,  in form and substance
satisfactory to Lender,  executed by the chief financial officer of Borrower and
certifying  the  Recurring  Contract  Revenue for the quarter then most recently
ended.

     "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) restore or reclaim natural resources or the
environment,   (d)  perform  any  pre-remedial   studies,   investigations,   or
post-remedial  operation and  maintenance  activities,  or (e) conduct any other
actions with respect to Hazardous Materials authorized by Environmental Laws.

     "Reportable Event" has the meaning set forth in Section 4043(c) of ERISA.

     "Required Availability" means that the sum of (a) Excess Availability, plus
(b) Qualified Cash exceeds $10,000,000.

     "Reserve  Percentage" means, on any day, for 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 Lender, but so long as Lender is not required
or directed under applicable  regulations to maintain such reserves, the Reserve
Percentage shall be zero.

     "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.

     "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).

     "Specified State" means Canada,  England,  France,  Germany,  Italy, or any
other country approved by Lender in its Permitted Discretion.

     "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  Acquisition"  means the purchase or other  acquisition by Borrower,
directly or indirectly, of all of the Stock of any other Person.

     "Stock  Pledge  Agreement"  means a stock  pledge  agreement,  in form  and
substance reasonably  satisfactory to Lender, executed and delivered by Borrower
to Lender with respect to the pledge of the Stock owned by Borrower.

     "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.

     "Supporting   Obligation"  means  a  letter-of-credit  right  or  secondary
obligation  that  supports  the payment or  performance  of an Account,  chattel
paper, document, General Intangible, Instrument, or Investment Property.

     "Tax Reserve" means a reserve in the amount of $200,000, which such reserve
shall be released as and when Borrower  delivers  evidence in form and substance
satisfactory  to  Lender  that the tax  liens  filed  with the  counties  of Los
Angeles, CA; Madera, CA; Santa Clara, CA; Fullerton,  CA; Marion, IN; and Young,
TX have been either satisfied in full or released.

     "Taxes" has the meaning set forth in Section 16.5.

     "Total Debt" means, as of any date of determination,  without  duplication,
the  sum of (a)  the  outstanding  amount  of the  Obligations  (including,  the
Advances and the Letter of Credit Usage),  (b) the outstanding  principal amount
of Purchase Money  Indebtedness  of Borrower and its  Subsidiaries,  and (c) the
outstanding  principal  amount  of all  Funded  Debt  (excluding  therefrom  all
Permitted Subordinated Debt) of Borrower and its Subsidiaries.

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

     "Triggering  Event" means either (a) the occurrence and the  continuance of
an Event of Default, or (b) Excess Availability plus Qualified Cash is less than
$5,000,000 for 3 consecutive Business Days.

     "TTM EBITDA" means, as of any date of determination, the EBITDA of Borrower
and its Subsidiaries for the 12 month period most recently ended as of such date
of determination.

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

     "UK Benefit Plan" means The Anacomp Limited (1997) Pension Plan, as amended
from time to time.

     "Unfunded  Current  Liability" means, with respect to any Benefit Plan, the
aggregate amount, if any, of the sum of (a) the greater of (i) the amount at any
time by which the projected  benefit  obligation  (PBO) for that Benefit Plan as
determined in accordance with FAS 87 exceeds the actual fair market value of its
assets as at any time;  or (ii) the  amount  by which the  present  value of all
accrued benefits under that Benefit Plan exceeds the actual fair market value of
all assets of such Benefit Plan  allocable to such benefits in  accordance  with
Title IV of ERISA or any comparable  foreign law determined at any time for such
Benefit Plan using the actuarial assumptions for funding purposes then in effect
under such Benefit Plan, and (b) for a period of 5 years following a transaction
that might  theoretically  be covered by Section 4069 of ERISA or any comparable
concept under foreign law, the  liabilities  (whether or not accrued) that could
be avoided by the Borrower, its Subsidiaries, or any ERISA Affiliate as a result
of such transaction. The foregoing sentence notwithstanding, with respect to the
German Benefit Plan and the UK Benefit Plan,  Unfunded  Current  Liability shall
mean the greater of the amount determined according to the preceding sentence or
the amount that would result using the  standards  set forth in the  immediately
preceding sentence as if FAS 87 applied to such plans.

     "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 Lender for
the benefit of Borrower.

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

     "United States" means the United States of America.

     "Value of the  Recurring  Contract  Revenue  Stream"  means the net orderly
liquidation value of Borrower's and its Subsidiaries' Recurring Contract Revenue
as determined by the most recent appraisal  thereof by an appraiser  selected by
Lender.

     "Voidable Transfer" has the meaning set forth in Section 16.8.

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

     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  "Borrower"  is used in respect of a  financial  covenant  or a related
definition,  it shall be understood to mean Borrower 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 provided, however, that to the extent that the Code is used to define any
term herein and such term is defined  differently  in different  Articles of the
Code, the definition of such term contained in Article 9 shall govern.

     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 terms "includes"
and "including" are 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
satisfaction or repayment in full of the Obligations shall mean the repayment in
full in cash (or cash  collateralization in accordance with the terms hereof) of
all Obligations other than contingent indemnification Obligations. 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.  Any reference herein to
the phrases  "comparable  foreign law,"  "applicable  foreign law," and "foreign
law" as they apply to any Benefit  Plan in or governed by the laws of the United
Kingdom shall include (without prejudice to the generality of the foregoing) the
Social  Security Acts 1973,  1985 and 1989,  the Income & Corporation  Taxes Act
1988, the Pension  Schemes Act 1993, the Pensions Act 1995, the Welfare Reform &
Pensions Act 1999 and relevant  Finance Acts, all as in effect from time to time
and as they  apply to any  Benefit  Plan in or  governed  by the laws of Germany
shall include German Employee Benefit Laws.

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

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,  Lender agrees to make advances ("Advances") to Borrower
in an amount at any one time  outstanding  not to exceed an amount  equal to the
lesser of (i) the Maximum  Revolver  Amount less the Letter of Credit Usage,  or
(ii) the Borrowing Base less the Letter of Credit Usage.

     (b) Anything to the contrary in this  Section 2.1  notwithstanding,  Lender
shall have the right to establish reserves in such amounts,  and with respect to
such matters,  as Lender in its  Permitted  Discretion  shall deem  necessary or
appropriate,  against the Borrowing Base, including (i) reserves with respect to
sums that  Borrower is 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,  (ii) reserves with respect to amounts owing by Borrower or
its  Subsidiaries  to any  Person to the  extent  secured by a Lien on, or trust
over, any of the Collateral (other than any existing Permitted Lien set forth on
Schedule  P-1 which is  specifically  identified  thereon  as  entitled  to have
priority over Lender's Liens),  which Lien or trust, in the Permitted Discretion
of Lender likely would have a priority superior to Lender'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, (iii) the Landlord Reserve and (iv) the Tax Reserve. In addition
to the foregoing, Lender shall have the right to have the Value of the Recurring
Contract Revenue Stream reappraised by a qualified appraisal company selected by
Lender  from  time  to  time  after  the   Closing   Date  for  the  purpose  of
re-determining  the Value of the  Recurring  Contract  Revenue  Stream and, as a
result,  re-determining the Borrowing Base, subject to the limitations set forth
in Section 2.11(c).

     (c) Lender 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.

     (e) At any time after the Closing Date,  upon 5 Business Days prior written
notice by Borrower to Lender, Borrower may from time to time request an increase
in the  Maximum  Revolver  Amount  from  $25,000,000  up to a maximum  amount of
$50,000,000,  which  request  shall be delivered to Lender  concurrent  with the
consummation of Permitted  Acquisitions;  provided that such request will not be
effective  and  the  Maximum  Revolver  Amount  shall  not be  increased  by the
requested  amount  unless  (i) the  Acquisition  Funding  Conditions  have  been
satisfied within 30 days of the consummation of the proposed  Acquisition and to
Lender's  satisfaction,  (ii) the proposed  Acquisition  constitutes a Permitted
Acquisition  and  (iii) no  Default  or  Event of  Default  exists.  Subject  to
satisfaction of clauses (i)-(iii) of the immediately preceding sentence,  and so
long as no Default or Event of Default has occurred and is  continuing as of the
proposed date of such increase,  the Maximum Revolver Amount shall automatically
increase  by the  amount  requested  by  Borrower  on the  date of the  proposed
increase.  Anything to the contrary contained in this Agreement notwithstanding,
the  Maximum  Revolver  shall not  exceed  $50,000,000  at any  time.  Each such
increase  shall  be in  an  amount  which  is a  minimum  integral  multiple  of
$5,000,000  and  an  integral  multiple  of  $2,500,000   thereafter.   Borrower
acknowledges  and agrees that the unused  line fee set forth in Section  2.11(a)
and the Applicable  Prepayment Premium is calculated by reference to the Maximum
Revolver Amount and an increase in the amount thereof  pursuant hereto will have
the effect of increasing such fees.

     2.2 [Intentionally Omitted.]

     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 Lender which notice must be
received  by  Lender  on a  Business  Day  (and  by no  later  than  10:00  a.m.
(California time) on such Business Day if the requested Funding Date is the same
day) specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day. At Lender's election, in lieu of delivering
the  above-described  written  request,  any  Authorized  Person may give Lender
telephonic  notice of such request by the required time. In such  circumstances,
Borrower  agrees that any such  telephonic  notice will be  confirmed in writing
within 24 hours of the  giving of such  telephonic  notice,  but the  failure to
provide such written confirmation shall not affect the validity of the request.

     (b) Making of  Advances.  If Lender has  received  a timely  request  for a
Borrowing  in  accordance  with  the  provisions  hereof,  and  subject  to  the
satisfaction  of the applicable  terms and  conditions set forth herein,  Lender
shall make the proceeds of such Advance  available to Borrower on the applicable
Funding  Date  by  transferring  available  funds  equal  to  such  proceeds  to
Borrower's Designated Account.

     2.4 Payments.

     (a) Payments by Borrower.  Except as otherwise  expressly  provided herein,
all  payments by Borrower  shall be made to Lender's  Account for the account of
Lender and shall be made in  immediately  available  funds,  no later than 11:00
a.m.  (California  time) on the date specified  herein.  Any payment received by
Lender  later  than 11:00 a.m.  (California  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.

     (b) Apportionment and Application.

          (i) Application of Payments.  All payments shall be remitted to Lender
     and all such payments,  and all proceeds of Collateral  received by Lender,
     shall be applied as follows:

               (A) first,  to pay any Lender  Expenses  then due to Lender under
          the Loan Documents, until paid in full,

               (B)  second,  to pay any fees then due to  Lender  under the Loan
          Documents until paid in full,

               (C) third,  to pay  interest  due in respect of the  Advances and
          under the Loan Documents until paid in full,

               (D) fourth,  to pay the  principal of all Advances  until paid in
          full,

               (E) fifth,  if an Event of Default has occurred and is continuing
          to Lender,  to be held by Lender,  as cash  collateral in an amount to
          105% of the then extant Letter of Credit Usage until paid in full,

               (F) sixth, if an Event of Default has occurred and is continuing,
          to pay any other Obligations, and

               (G) seventh,  to Borrower (to be wired to the Designated Account)
          or such other Person entitled thereto under applicable law.

          (ii) 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 made by Borrower to Lender and  specified by Borrower to be for the
     payment of specific  Obligations then due and payable (or prepayable) under
     any provision of this Agreement.

          (iii) 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.

          (iv) 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,  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  owed by Borrower to Lender  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"),  Borrower  immediately
shall pay to Lender,  in cash, the amount of such excess,  which amount shall be
used by Lender to reduce the  Obligations in accordance  with the priorities set
forth in Section  2.4(b).  In  addition,  Borrower  hereby  promises  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 ) 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  bear interest on the Daily Balance thereof at a per annum rate less
than 3.75%. 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.  Borrower shall pay Lender 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 the  following  amount per annum
times the Daily  Balance of the  undrawn  amount of all  outstanding  Letters of
Credit  based  upon the TTM  EBITDA  as set  forth in the  following  paragraph;
provided,  however,  that for the period from the Closing  Date through the date
Lender  receives the certified  calculation  of the TTM EBITDA in respect of the
testing  period ended with December 31, 2004  delivered by Borrower  pursuant to
Section  6.3,  the  applicable  Letter  of Credit  fee shall be 2.00  percentage
points:

<TABLE>
<CAPTION>


Level            TTM EBITDA                                                     Letter of Credit Fee
-----            ----------                                                     --------------------
<S>              <C>                                                            <C>
I                Less than $9,000,000                                           2.25 percentage points
II               Greater than or equal to $9,000,000 but less than $17,000,000  2.00 percentage points
III              Greater than or equal to $17,000,000                           1.75 percentage points

</TABLE>


     Except as set forth in the  foregoing  proviso,  the  Letter of Credit  fee
shall be based  upon  the most  recent  TTM  EBITDA,  which  will be  calculated
quarterly.  Except as set forth in the initial proviso in this  definition,  the
Letter of Credit fee shall be re-determined each quarter on the first day of the
month following the date Borrower  delivers to Lender the certified  calculation
of the TTM EBITDA  pursuant to Section 6.3 hereof;  provided,  however,  that if
Borrower fails to provide such certification when such certification is due, the
applicable  Letter of Credit  Fee shall be set at the  margin in the row  styled
"Level  I" as of the  first  day of the  month  following  the date on which the
certification  was  required  to be  delivered  until  the  date on  which  such
certification  is  delivered  (on which  date (but not  retroactively),  without
constituting  a waiver of any  Default  or Event of  Default  occasioned  by the
failure to timely deliver such certification,  the Letter of Credit fee shall be
set at the margin  based upon the  amount of the TTM  EBITDA  disclosed  by such
certification).

     (c) Default Rate.  Upon the  occurrence and during the  continuation  of an
Event of Default (and at the election of Lender),

          (i) all  Obligations  (except for undrawn Letters of Credit) 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 2
     percentage points above the per annum rate otherwise applicable  hereunder,
     and

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

     (d) Payment.  Except as provided to the contrary in Section 2.11 or Section
2.13(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 are outstanding or at any time that Lender has an obligation to
extend credit hereunder.  Borrower hereby authorizes  Lender,  from time to time
without prior notice to Borrower,  to charge such interest and fees,  all Lender
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 to Borrower's
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 Borrower's
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.  Borrower and Lender,  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,  Borrower is and shall be liable only for the payment of
such maximum as allowed by law, and payment  received from Borrower 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) Borrower  and each  Guarantor  shall (i)  establish  and maintain  cash
management services of a type and on terms satisfactory to Lender 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 such reasonable steps to ensure that
all of  their  Account  Debtors  forward  payment  of the  amounts  owed by them
directly to such Cash Management Bank, and (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  Borrower  or one of its  Subsidiaries)  into a bank
account  in  Lender's  name (a  "Cash  Management  Account")  at one of the Cash
Management Banks.

     (b) Each Cash  Management Bank shall establish and maintain Cash Management
Agreements  with Lender and Borrower and each  Guarantor,  in form and substance
reasonably  acceptable  to Lender.  Each such Cash  Management  Agreement  shall
provide,  among other things, that (i) the Cash Management Bank will comply with
any instructions  originated by Lender directing the disposition of the funds in
such  Cash  Management  Account  without  further  consent  by  Borrower  or its
Subsidiaries,  as  applicable,  (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) from and after the date it receives
written notification from Lender, it immediately will forward by daily sweep all
amounts in the applicable Cash Management Account to Lender's Account.  Anything
contained  herein to the contrary  notwithstanding,  Lender agrees that it shall
not provide the  above-described  notice to the Cash Management Banks unless and
until a Triggering Event has occurred and is continuing. Once a Triggering Event
has  occurred  and  during  the  continuance  thereof,  Lender  shall be free to
exercise its right to issue such notice and the  subsequent  elimination  of the
subject  Triggering  Event shall not eliminate the  effectiveness  of any notice
that has been given during the continuance of a Triggering Event.

     (c) So long as no  Default  or Event of  Default  or  Triggering  Event has
occurred and is  continuing,  Borrower  and each  Guarantor  may amend  Schedule
2.7(a) to add or  replace a Cash  Management  Bank or Cash  Management  Account;
provided,  however,  that (i) such  prospective  Cash  Management  Bank shall be
reasonably  satisfactory to Lender and Lender 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,   Borrower  (or  a  Guarantor,   as  applicable)  and  such
prospective  Cash  Management Bank shall have executed and delivered to Lender a
Cash Management Agreement.  Borrower (or a Guarantor, as applicable) shall close
any of its 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  Lender  that the  creditworthiness  of any Cash
Management Bank is no longer acceptable in Lender's reasonable  judgment,  or as
promptly as  practicable  and in any event  within 60 days of notice from Lender
that the operating  performance,  funds transfer, or availability  procedures or
performance of the Cash Management Bank with respect to Cash Management Accounts
or  Lender's  liability  under  any Cash  Management  Agreement  with  such Cash
Management Bank is no longer acceptable in Lender's reasonable judgment.

     (d) The Cash  Management  Accounts  shall  be cash  collateral  subject  to
Control Agreements.

     2.8 Crediting Payments.

     The receipt of any payment item by Lender (whether from transfers to Lender
by the Cash  Management  Banks  pursuant to the Cash  Management  Agreements  or
otherwise)  shall be  considered a payment on account  upon receipt  unless such
payment item is not honored when presented for payment.  Should any payment item
not be honored when presented for payment,  then Borrower 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 Lender only if it is received  into  Lender's  Account on a Business
Day on or before 11:00 a.m.  (California  time). If any payment item is received
into  Lender's  Account on a  non-Business  Day or after 11:00 a.m.  (California
time) on a Business  Day, it shall be deemed to have been  received by Lender as
of the opening of business on the immediately following Business Day.

     2.9  Designated  Account.  Lender is authorized  to make the Advances,  and
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).
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 Borrower and made by Lender  hereunder.  Unless otherwise
agreed by Lender and  Borrower,  any Advance  requested  by Borrower and made by
Lender hereunder shall be made to the Designated Account.

     2.10   Maintenance   of   Loan   Account;    Statements   of   Obligations.

     Lender shall  maintain an account on its books in the name of Borrower (the
"Loan  Account") on which  Borrower  will be charged  with all Advances  made by
Lender to Borrower or for  Borrower's  account,  the Letters of Credit issued by
Lender for Borrower's account, and with all other payment Obligations  hereunder
or under  the  other  Loan  Documents,  including,  accrued  interest,  fees and
expenses,  and Lender Expenses. In accordance with Section 2.8, the Loan Account
will be credited  with all  payments  received  by Lender  from  Borrower or for
Borrower's account,  including all amounts received in Lender's Account from any
Cash Management Bank. Lender shall render statements  regarding the Loan Account
to Borrower,  including principal,  interest, fees, and including an itemization
of all  charges  and  expenses  constituting  Lender  Expenses  owing,  and such
statements shall be presumed to be correct and accurate.

     2.11 Fees.

     Borrower shall pay to Lender the following fees and charges, which fees and
charges  shall  be  non-refundable  when  paid  (irrespective  of  whether  this
Agreement is terminated thereafter):

     (a) Unused Line Fee. On the first day of each month during the term of this
Agreement,  an unused line fee in an 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 Lender,  (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 Lender,  and (iv) the
actual charges paid or incurred by Lender if it elects to employ the services of
one or more  third  Persons  to  perform  financial  audits of  Borrower  or its
Subsidiaries,  to establish electronic collateral reporting systems, to appraise
the  Collateral,  or  any  portion  thereof,  or to  assess  Borrower's  or  its
Subsidiaries'  business  valuation;  provided,  however,  Borrower  shall not be
required to pay the fees and charges of more than 4 audits per fiscal year and 1
business   valuation   per  fiscal   year.   The   foregoing   to  the  contrary
notwithstanding,  the limitation on Borrower's payment for audits and valuations
shall not apply  (i) if an Event of  Default  has  occurred  or (ii) the  audit,
appraisal, or valuation is in connection with an Acquisition.

     2.12 Letters of Credit.

     (a) Subject to the terms and conditions of this Agreement, Lender agrees to
issue  letters of credit  for the  account of  Borrower  (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  Borrower.  Each
request for the issuance of a Letter of Credit,  or the amendment,  renewal,  or
extension of any  outstanding  Letter of Credit,  shall be made in writing by an
Authorized Person and delivered to Lender via hand delivery,  telefacsimile,  or
other electronic  method of transmission  reasonably in advance of the requested
date of issuance,  amendment,  renewal, or extension. Each such request shall be
in form and substance  satisfactory  to Lender in its Permitted  Discretion  and
shall  specify  (i) the  amount  of such  Letter  of  Credit,  (ii)  the date of
issuance,  amendment,  renewal, or extension of such Letter of Credit, (iii) the
expiration  of  such  Letter  of  Credit,  (iv)  the  name  and  address  of the
beneficiary  thereof (or the beneficiary of the Underlying  Letter of Credit, as
applicable),  and (v)  such  other  information  (including,  in the  case of an
amendment,  renewal,  or extension,  identification of the outstanding Letter of
Credit to be so amended, renewed, or extended) as shall be necessary to prepare,
amend, renew, or extend such Letter of Credit. If requested by Lender,  Borrower
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.  Lender shall
have no  obligation  to issue a Letter of Credit if any of the  following  would
result after giving effect to the issuance of such requested Letter of Credit:

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

          (ii) the Letter of Credit Usage would exceed $12,500,000, or

          (iii) the Letter of Credit  Usage would  exceed the  Maximum  Revolver
     Amount less the outstanding amount of Advances.

     Borrower and Lender  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
Lender (in the exercise of its Permitted Discretion),  including the requirement
that the amounts  payable  thereunder  must be payable in Dollars.  If Lender is
obligated to advance funds under a Letter of Credit,  Borrower immediately shall
reimburse such L/C Disbursement to Lender by paying to Lender an amount equal to
such L/C  Disbursement  not later than 11:00 a.m.,  California time, on the date
that such L/C  Disbursement is made, if Borrower shall have received  written or
telephonic notice of such L/C Disbursement prior to 10:00 a.m., California time,
on such date, or, if such notice has not been received by Borrower prior to such
time on such date,  then not later  than 11:00  a.m.,  California  time,  on the
Business Day that  Borrower  receives  such  notice,  if such notice is received
prior to 10:00  a.m.,  California  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 and, thereafter,  shall
bear  interest at the rate then  applicable to Advances that are Base Rate Loans
under Section 2.6. To the extent an L/C  Disbursement is deemed to be an Advance
hereunder,  Borrower's  obligation to reimburse such L/C  Disbursement  shall be
discharged and replaced by the resulting Advance.

     (b) Borrower  hereby agrees to  indemnify,  save,  defend,  and hold Lender
harmless from any loss, cost,  expense, or liability,  and reasonable  attorneys
fees  incurred  by Lender  arising  out of or in  connection  with any Letter of
Credit;  provided,  however,  that Borrower shall not 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 Lender.  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  Borrower's  account,  even  though  this
interpretation  may be different from Borrower's  own, and Borrower  understands
and  agrees  that  Lender  shall not be liable  for any  error,  negligence,  or
mistake, whether of omission or commission, in following Borrower's instructions
or those contained in the Letter of Credit or any modifications,  amendments, or
supplements  thereto  except  to  extent  of the  gross  negligence  or  willful
misconduct of Lender. 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 Borrower  against such Underlying  Issuer.
Borrower hereby agrees to indemnify, save, defend, and hold Lender harmless with
respect to any loss, cost,  expense  (including  reasonable  attorneys fees), or
liability  incurred by Lender under any L/C  Undertaking as a result of Lender's
indemnification of any Underlying Issuer; provided, however, that Borrower shall
not 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 Lender.  Borrower hereby acknowledges and agrees that Lender shall
not  be  responsible  for  delays,  errors,  or  omissions  resulting  from  the
malfunction of equipment in connection with any Letter of Credit.

     (c) Borrower hereby authorizes and directs any Underlying Issuer to deliver
to 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 Lender's  instructions  with respect to all matters arising
in connection with such Underlying Letter of Credit and the related application.

     (d) Any and all charges,  commissions,  fees,  and costs incurred by Lender
relating to Underlying  Letters of Credit shall be Lender  Expenses for purposes
of this Agreement and  immediately  shall be  reimbursable by Borrower to Lender
for the account of Lender; it being acknowledged and agreed by Borrower that, as
of the Closing Date, the issuance charge imposed by the  prospective  Underlying
Issuer is .825% 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.

     (e) 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  Lender  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):

          (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 Lender 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 Lender of issuing, making, guaranteeing,  or maintaining any Letter of Credit
or to reduce the amount  receivable in respect  thereof by Lender,  then, and in
any such case,  Lender  may, at any time within a  reasonable  period  after the
additional cost is incurred or the amount received is reduced,  notify Borrower,
and  Borrower  shall pay on demand  such  amounts  as Lender  may  specify to be
necessary to  compensate  Lender for such  additional  cost or reduced  receipt,
together  with interest on such amount  commencing  five (5) Business Days after
the  date of  such  demand  until  payment  in full  thereof  at the  rate  then
applicable  to Base Rate Loans  hereunder.  The  determination  by Lender of any
amount due pursuant to this Section, as set forth in a certificate setting forth
the  calculation  thereof in reasonable  detail,  shall  presumed to be true and
correct.

     2.13 LIBOR Option.

     (a) Interest and Interest Payment Dates. In lieu of having interest charged
at the rate based upon the Base Rate, Borrower 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  (provided,  however,  that  subject to the  following  clauses (ii) and
(iii),  in the case of any  Interest  Period  greater than 3 months in duration,
interest shall be payable at 3 month  intervals  after the  commencement  of the
applicable  Interest Period and on the last day of such Interest  Period),  (ii)
the occurrence of an Event of Default in consequence of which Lender has 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  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,  Borrower no longer  shall have the option to
request that  Advances bear interest at the LIBOR Rate and Lender 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)  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 Lender prior to 11:00 a.m.  (California  time) at
     least three (3)  Business  Days prior to the  commencement  of the proposed
     Interest Period (the "LIBOR  Deadline").  Notice of 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 Lender of a
     LIBOR Notice received by Lender before the LIBOR Deadline, or by telephonic
     notice  received by Lender  before the LIBOR  Deadline  (to be confirmed by
     delivery to Lender of a LIBOR Notice  received by Lender prior to 5:00 p.m.
     (California time) on the same day).

          (ii) Each LIBOR Notice shall be  irrevocable  and binding on Borrower.
     In connection with each LIBOR Rate Loan, Borrower shall indemnify,  defend,
     and hold Lender  harmless  against any loss,  cost, or expense  incurred by
     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 be deemed  to equal the  amount
     determined  by  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 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 Lender  delivered to Borrower
     setting  forth any amount or amounts  that  Lender is  entitled  to receive
     pursuant to this Section 2.13 shall be presumed to be correct.

          (iii)  Borrower  shall have not more than 5 LIBOR Rate Loans in effect
     at any given time.  Borrower  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.  Borrower  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  Lender  of  proceeds  of  Borrower's   and  its   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,  Borrower  shall
indemnify, defend, and hold Lender and its participants harmless against any and
all Funding Losses in accordance with clause (b)(ii) above.

     (d) Special Provisions Applicable to LIBOR Rate.

          (i) The LIBOR Rate may be adjusted by Lender on a prospective basis to
     take  into  account  any  additional  or  increased   costs  to  Lender  of
     maintaining or obtaining any Eurodollar  deposits or increased costs due to
     changes in applicable law occurring  subsequent to the  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, Lender
     shall give Borrower notice of such a determination and adjustment and, upon
     its receipt of the notice from  Lender,  Borrower  may, by notice to Lender
     (y) require  Lender to furnish to 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  Lender,   make  it  unlawful  or
     impractical  for 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,  Lender  shall  promptly  give  notice  of  such  changed
     circumstances  to Borrower and (y) in the case of any LIBOR Rate Loans 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  thereafter shall accrue interest at the
     rate then  applicable  to Base Rate Loans,  and (z)  Borrower  shall not be
     entitled to elect the LIBOR Option until 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 Lender, nor any of its 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 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,  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 Lender
or its parent bank holding company with any guideline,  request, or directive of
any such entity regarding  capital adequacy  (whether or not having the force of
law),  has the  effect of  reducing  the  return  on  Lender's  or such  holding
company's capital as a consequence of Lender's obligations  hereunder to a level
below that which Lender or such holding company could have achieved but for such
adoption,  change,  or compliance  (taking into  consideration  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
Lender to be  material,  then Lender shall  promptly  notify  Borrower  thereof.
Following  receipt of such notice,  Borrower  agrees to pay 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 Lender of a statement
in the  amount and  setting  forth in  reasonable  detail  Lender's  calculation
thereof  and the  assumptions  upon  which  such  calculation  was based  (which
statement shall be presumed to be true and correct). In determining such amount,
Lender may use any reasonable averaging and attribution methods.

3. CONDITIONS; TERM OF AGREEMENT.

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

     (a) the Closing Date shall occur on or before August 3, 2004;

     (b) Lender  shall have  received a UCC Filing  Authorization  Letter,  duly
executed by Borrower and each  Guarantor,  together with  appropriate  financing
statements  on Form  UCC-1 (or such  applicable  PPSA  filings in respect of the
Canadian  Obligor)  duly filed in such office or offices as may be necessary or,
in the  opinion of Lender,  desirable  to perfect  Lender's  Liens in and to the
Collateral, and Lender shall have received searches reflecting the filing of all
such financing statements;

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

          (i) the Canadian Security Documents,

          (ii) the Cash Management Agreements,

          (iii) the Control Agreements,

          (iv) the Copyright Security Agreement,

          (v) the Disbursement Letter,

          (vi) the Due Diligence Letter,

          (vii) the Fee Letter,

          (viii) the Intercompany Subordination Agreement,

          (ix) the Officers' Certificate,

          (x) the Patent Security Agreement,

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

          (xii) 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

          (xiii) the Trademark Security Agreement;

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

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

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

     (g) Lender  shall have  received  certificates  of status  with  respect to
Borrower, 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  Borrower)  in which its  failure  to be duly
qualified  or  licensed  would  constitute  a  Material  Adverse  Change,  which
certificates   shall  indicate  that  Borrower  is  in  good  standing  in  such
jurisdictions;

     (h) Lender shall have  received a  certificate  from the  Secretary of each
Guarantor  (i)  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, and (ii) attesting to the incumbency and
signatures of such specific officers of Guarantor;

     (i)  Lender  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) Lender 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) Lender 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) Lender 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 Lender;

     (m) Lender shall have received an opinion of Borrower's counsel in form and
substance satisfactory to Lender;

     (n) Lender shall have received a certificate of the chief financial officer
of Borrower in form and substance  satisfactory to Lender,  that all tax returns
required to be filed by Borrower and its Subsidiaries have been timely filed and
all taxes  upon  Borrower  and its  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) Borrower  shall have the 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  Borrower  on the  Closing  Date  under  this
Agreement or the other Loan Documents;

     (p) Lender shall have  completed its business,  legal,  and  collateral due
diligence,  including (i) a collateral  audit and review of  Borrower's  and its
Subsidiaries  books and records and  verification of Borrower's  representations
and warranties to Lender,  (ii) a review of the customer  contracts  relative to
the document imaging  services,  supply services and vendor services provided by
Borrower and Canadian Obligor, (iii) review of financial statements for May 2004
and June 2004, and (iv) searches  regarding  copyrights,  patents and trademarks
owned by Borrower and Canadian Obligor; in each case, the results of which shall
be satisfactory to Lender;

     (q) Lender shall have received  completed  reference checks with respect to
Borrower's senior management, the results of which are satisfactory to Lender in
its sole discretion;

     (r) Lender  shall have  received an  appraisal  of (i)  Borrower's  and its
Subsidiaries'  enterprise value, and (ii) the Recurring  Contract Revenue,  each
prepared  by an  appraiser  selected by Lender and the results of which shall be
consistent  with  any  draft   appraisals   received  by  Lender  and  otherwise
satisfactory to Lender;

     (s) Lender shall have received Borrower's Closing Date Business Plan;

     (t) Borrower  shall have paid all Lender  Expenses  incurred in  connection
with the transactions evidenced by this Agreement;

     (u) Lender shall have received copies of the top 5 contracts (as determined
by the total  fees and  revenue  payable  to  Borrower  thereunder)  for each of
Borrower's  business  segments,  together with a certificate of the Secretary of
Borrower  certifying each such document as being a true,  correct,  and complete
copy thereof;

     (v) Borrower and each of its 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 Borrower or its  Subsidiaries  of
the Loan Documents or with the  consummation  of the  transactions  contemplated
thereby;

     (w) Lender shall  either have  received  duly  executed  Collateral  Access
Agreements  with respect to each  Material  Location or  established  a Landlord
Reserve with respect to such Material Location;

     (x) Lender shall have received evidence in form and substance  satisfactory
to Lender that the financing  statement  bearing number  9932160333 filed by Com
Lease,  Inc.  with the  Secretary of the State of  California  and the financing
statements  bearing the numbers  142978628 and 14077299  filed by Com Lease Inc.
with the Secretary of the State of Maryland shall have been terminated; and

     (y)  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 Lender.

     3.2  Conditions   Subsequent  to  the  Initial  Extension  of  Credit.  The
obligation of Lender 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
Borrower  to so  perform  or  cause  to be  performed  constituting  an Event of
Default):

     (a) within 30 days of the Closing Date,  deliver to Lender 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  reasonably
satisfactory to Lender and its counsel;

     (b) within 90 days of the  Closing  Date,  deliver to Lender the results of
the Canadian statutory lien searches,  which results shall not reflect any Liens
other than Permitted Liens and which shall be otherwise satisfactory to Lender;

     (c) within 30 days of the Closing  Date,  Borrower  shall deliver to Lender
(i) duly  executed  Foreign  Pledge  Agreements  by  Borrower  pursuant to which
Borrower pledges in favor of Lender 65% of the Stock held by Borrower of Anacomp
Holdings UK, Xidex GmbH, a company organized under the laws of Germany,  Anacomp
B.V., a company  organized  under the laws of Holland,  Anacomp  S.A., a company
organized under the laws of France and Anacomp Italia s.r.l, a company organized
under the laws of Italy and 100% of the Stock held by Borrower of Anacomp GmbH &
Co.  KG, a limited  partnership  organized  under the laws of  Germany,  held by
Borrower,  (ii) all  certificates  representing  the  shares  of  Stock  pledged
thereunder,  (iii) all stock powers with respect thereto endorsed in blank, (iv)
all consents  from third  parties that are  necessary or desirable to effectuate
the pledge,  (v) an opinion of  Borrower's  counsel with respect to each Foreign
Pledge  Agreement,  and (vi) all  other  instruments,  agreements  or  documents
requested by Lender that are necessary or desirable to effectuate  the pledge of
such Stock; all in form and substance satisfactory to Lender;

     (d) on or before August 5, 2004, Borrower shall file termination statements
in form and  substance  satisfactory  to  Lender  for the  financing  statements
bearing numbers 2308357 and  1999-0760600  filed with the Secretary of the State
of Indiana  and San Diego  County  recorder's  office,  respectively,  and shall
deliver to Lender  evidence in form and substance  satisfactory to Lender of the
filing of such termination statements;

     (e) within 10 days of the Closing Date,  Borrower  shall have  delivered to
Lender a Cash  Management  Agreement duly executed and delivered by the Canadian
Obligor and Bank One, N.A. with respect to Deposit  Account  numbers  4652833210
and 4652883101;

     (f) within 3 days of the Closing Date,  Lender shall have received evidence
in form and  substance  satisfactory  to  Lender  that  Deposit  Account  number
1510352-3156 with Fleet National Bank has been closed; and

     (g) on or before August 6, 2004, Lender shall have received (i) evidence in
form  and  substance   satisfactory  to  Lender  that  the  Stock   certificates
representing  all of the  Stock  of  Anacomp  Holdings  UK  and  denominated  as
Certificate 7 for 115 shares, Certificate 8 for 112 shares, Certificate 9 for 98
shares,  Certificate 13 for 4 shares, Certificate 15 for 325 shares, Certificate
16 for 3 shares have been canceled,  and (ii) a Stock certificate for 427 shares
of the Stock of Anacomp  Holdings  UK  representing  the shares of Stock of such
company  pledged  under the Stock Pledge  Agreement,  together with Stock powers
with respect to such Stock  certificate  executed in blank in form and substance
satisfactory to Lender.


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

     (a) after giving effect to those Schedules that are permitted to be updated
pursuant to the terms  hereof and that have been duly  updated and  delivered to
Lender, 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);

     (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
Borrower, 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 July 30, 2009 (the  "Maturity  Date").  The foregoing  notwithstanding
Lender 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 Borrower with
respect  to  outstanding  Letters of Credit)  immediately  shall  become due and
payable without notice or demand (including either (i) providing cash collateral
to be held by  Lender 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
Lender.  No termination of this Agreement,  however,  shall relieve or discharge
Borrower  or  its  Subsidiaries  of  their  duties,  Obligations,  or  covenants
hereunder or under any other Loan Documents and Lender's Liens in the Collateral
shall remain in effect until all Obligations have been paid in full and Lender'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  Lender's  obligations  to  provide  additional  credit  under the Loan
Documents  have been  terminated  irrevocably,  Lender will, at Borrower's  sole
expense,  execute  and  deliver  any UCC or PPSA  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,  Lender's  Liens  and  all  notices  of  security  interests  and  liens
previously filed by Lender with respect to the Obligations.

     3.6 Early  Termination  by Borrower.  Borrower has the option,  at any time
upon 45 days prior  written  notice to Lender,  to terminate  this  Agreement by
paying to Lender, in cash, the Obligations  (including either (i) providing cash
collateral to be held by Lender (or other assurance of repayment satisfactory to
Lender  in its  Permitted  Discretion)  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 Lender, in full, together with the Applicable Prepayment Premium.
If Borrower has sent a notice of termination  pursuant to the provisions of this
Section,  then Lender's  obligations to extend credit  hereunder shall terminate
and Borrower shall be obligated to repay the Obligations  (including  either (i)
providing cash collateral to be held by Lender 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  Lender)  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 Lender 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  Lender  or  profits  lost by  Lender  as a  result  of  such  early
termination,  and  by  mutual  agreement  of  the  parties  as  to a  reasonable
estimation and  calculation  of the lost profits or damages of Lender,  Borrower
shall pay the Applicable  Prepayment Premium to Lender,  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 or one or more of its
Affiliates, then the Applicable Prepayment Premium shall equal zero.

4. CREATION OF SECURITY INTEREST.

     4.1  Grant  of  Security  Interest.  Borrower  hereby  grants  to  Lender 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 Borrower of each of its  covenants  and duties under the
Loan  Documents.  The  Lender's  Liens in and to the Borrower  Collateral  shall
attach to all Borrower  Collateral  without further act on the part of Lender or
Borrower. Anything contained in this Agreement or any other Loan Document to the
contrary  notwithstanding,  except for Permitted Dispositions,  Borrower and its
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 (other
than letter of credit rights and promissory  notes in an aggregate  amount of up
to  $200,000;  provided,  however,  that if a Default or an Event of Default has
occurred and is continuing, Borrower will deliver physical possession or control
of such items of Negotiable Collateral to Lender), and if and to the extent that
Lender  determines that perfection or priority of Lender's  security interest is
dependent on or enhanced by possession,  Borrower,  promptly upon the request of
Lender,  shall  endorse  and  deliver  physical  possession  of such  Negotiable
Collateral to Lender.

     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,  Lender or Lender's designee may (a) notify Account Debtors of Borrower
that  Borrower's  Accounts,  chattel  paper,  or General  Intangibles  have been
assigned  to Lender or that  Lender  has a  security  interest  therein,  or (b)
collect Borrower's Accounts,  chattel paper, or General Intangibles directly and
charge  the  reasonable  collection  costs  and  expenses  to the Loan  Account.
Borrower agrees that it will hold in trust for Lender, as Lender's trustee,  any
of its or the Guarantors' Collections that it receives and promptly will deliver
such  Collections to Lender or a Cash  Management Bank in their original form as
received by Borrower or such Guarantor.

     4.4 Filing of Financing  Statements;  Commercial  Tort Claims;  Delivery of
Additional Documentation Required.

     (a) Borrower authorizes Lender to file any financing statement necessary or
desirable to effectuate  the  transactions  contemplated  by the Loan  Documents
(including any financing  statements  that (i) indicate the Borrower  Collateral
(A) as all assets of Borrower or words of similar effect,  regardless of whether
any particular asset of Borrower falls within the scope of Article 9 of the Code
or whether any portion of the assets of Borrower constitute part of the Borrower
Collateral,  or (B) as being of an equal or lesser scope or with greater detail,
and (ii)  contain any other  information  required by part 5 of Article 9 of the
Code for the sufficiency or filing office acceptance of any financing  statement
or amendment,  including (x) whether  Borrower is an  organization,  the type of
organization and any organization  identification number issued to Borrower, and
(y) in the case of a financing statement filed as a fixture filing or indicating
the  Borrower  Collateral  as  as-extracted  collateral  or timber to be cut,  a
sufficient  description  of real  property  to  which  the  Borrower  Collateral
relates),  and any continuation  statement or amendment with respect thereto, in
any appropriate  filing office without the signature of Borrower where permitted
by  applicable  law.  Borrower  hereby  ratifies  the  filing  of any  financing
statement  filed  without the  signature  of Borrower  prior to the date hereof.
Borrower also delegates to Lender  Borrower's  authority to file the termination
statements reflected on Schedule 1 to the Pay-Off Letter.

     (b) If Borrower or a Guarantor  acquires any  commercial  tort claims after
the date hereof with an estimated value of greater than $500,000, Borrower shall
promptly  (but in any event  within 3  Business  Days  after  such  acquisition)
deliver to Lender a written  description of such commercial tort claim in excess
of  $500,000  and  shall  deliver  a written  agreement,  in form and  substance
satisfactory  to  Lender,  pursuant  to which  Borrower  or such  Guarantor,  as
applicable, shall grant a perfected security interest in all of its right, title
and interest in and to such commercial tort claim to Lender, as security for the
Obligations (a "Commercial Tort Claim Assignment").

     (c) At any time upon the  request  of  Lender,  Borrower  shall  execute or
deliver  to  Lender,  and shall  cause the  Guarantors  to execute or deliver to
Lender, any and all financing statements,  original financing statements in lieu
of continuation statements, amendments to financing 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 Lender may request in its Permitted Discretion,
in form and substance  satisfactory to Lender, to create,  perfect, and continue
perfected or to better perfect  Lender's Liens in the assets of Borrower and the
Guarantors  (whether  now owned or hereafter  arising or  acquired,  tangible or
intangible, real or personal), to create and perfect Liens in favor of Lender 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. Without limiting the generality of the foregoing, Borrower shall also
execute and deliver to Lender,  and shall  cause the  Guarantors  to execute and
deliver to Lender,  any and all pledge  agreements  governed by foreign law that
Lender or its successor or assignee may request in connection with an assignment
pursuant to Section 14.1. To the maximum extent  permitted by applicable law, if
Borrower has failed to execute any such  Additional  Document  within 2 Business
Days of  Lender's  request,  Borrower  authorizes  Lender  to  execute  any such
Additional  Documents  in  Borrower's  name and  authorizes  Lender to file such
executed Additional Documents in any appropriate filing office. In addition,  on
such  periodic  basis as Lender  shall  require  (but not more  frequently  than
quarterly,  so long as no Default or Event of Default  shall have occurred or be
continuing), Borrower shall (i) provide Lender with a report of all new material
patentable,  copyrightable,  or trademarkable materials acquired or generated by
Borrower or its  Subsidiaries  during the prior period,  (ii) cause all material
patents,  copyrights,  and  trademarks  acquired or generated by Borrower or any
Guarantor  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 Borrower's or the applicable Guarantor's ownership
thereof,  and (iii) cause to be  prepared,  executed,  and  delivered  to Lender
supplemental  schedules  to the  applicable  Loan  Documents  to  identify  such
patents,  copyrights,  and trademarks as being subject to the security interests
created thereunder;  provided,  however, that neither Borrower nor any Guarantor
shall  register  with the U.S.  Copyright  Office  any  unregistered  copyrights
(whether in existence on the Closing Date or thereafter  acquired,  arising,  or
developed)  unless (i) the Borrower  provides  Lender with written notice of its
intent to register  such  copyrights  not less than 30 days prior to the date of
the proposed registration,  and (ii) prior to such registration,  the applicable
Person  executes and delivers to Lender a copyright  security  agreement in form
and substance  satisfactory  to Lender,  supplemental  schedules to any existing
copyright security  agreement,  or such other documentation as Lender reasonably
deems  necessary in order to perfect and continue  perfected  Lender's Lien's on
such copyrights following such registration.

     4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes,  and
appoints Lender (and any of Lender's officers,  employees,  or agents designated
by Lender) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses  to,  or fails  timely  to  execute  and  deliver  any of the  documents
described  in Section  4.4,  sign the name of 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  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 Borrower's or its
Subsidiaries'  Accounts  provided such requests do not identify  Lender by name,
(d) endorse  Borrower's  name on any of its payment items  (including all of its
Collections)  that may come into  Lender's  possession,  (e) at any time that an
Event of Default has occurred and is continuing,  make,  settle,  and adjust all
claims under 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  Borrower's or a Guarantor's  Accounts,  chattel paper, or
General  Intangibles  directly with Account Debtors,  for amounts and upon terms
that Lender determines to be reasonable, and Lender may cause to be executed and
delivered any documents  necessary in connection  therewith.  The appointment of
Lender as 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 Lender's  obligations to extend
credit hereunder are terminated.

     4.6 Right to Inspect.  Lender and its officers,  employees, or agents shall
have the right, at such reasonable times as Lender may designate and, so long as
no Default or Event of Default exists, with reasonable prior notice to Borrower,
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
Borrower's and its  Subsidiaries'  financial  condition or the amount,  quality,
value, condition of, or any other matter relating to, the Collateral.

     4.7 Control  Agreements.  Borrower  agrees  that it will not,  and will not
permit the Guarantors to, transfer  assets out of any of their Deposit  Accounts
or Securities Accounts;  provided,  however, that so long as no Triggering Event
in the case of any Cash Management  Account has occurred and so long as no Event
of  Default  in the  case of any  other  Deposit  Account  has  occurred  and is
continuing or would result  therefrom,  Borrower and each Guarantor 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 Borrower (or such Guarantor),  Lender, and
the  substitute  bank or  securities  intermediary  have  entered into a Control
Agreement  (subject to Section 2.7 and the  proviso in Section  7.12).  Borrower
agrees that it will and will cause each  Guarantor to take any or all reasonable
steps that Lender  requests in order for Lender to obtain  control in accordance
with Sections 8-106,  9-104, 9-105, 9-106, and 9-107 of the Code with respect to
(subject  to the  proviso  contained  in  Section  7.12)  all  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 Borrower  without the prior  written  consent of
Lender.  Upon the occurrence and during the continuance of a Default or Event of
Default,  Lender 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 Lender's
Account.

5. REPRESENTATIONS AND WARRANTIES.

     In order to induce Lender to enter into this Agreement,  Borrower makes the
following representations and warranties to Lender which 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.  Borrower  and its  Subsidiaries  have good and legal
title to, or a valid leasehold  interest in, their personal  property assets and
good and  marketable  title to, or a valid  leasehold  interest  in,  their Real
Property, in each case, free and clear of Liens except for Permitted Liens.

     5.2 Eligible Accounts. As to each Account that is identified by Borrower or
any  Guarantor as an Eligible  Account in a borrowing  base report  submitted to
Lender  such  Account  is (a) bona  fide  existing  payment  obligations  of the
applicable  Account Debtors created by the sale and delivery of Inventory or the
rendition  of  services  to such  Account  Debtors  in the  ordinary  course  of
Borrower's and each Guarantor's business, (b) owed to Borrower or such Guarantor
without  any known  defenses,  disputes,  offsets,  counterclaims,  or rights of
return or  cancellation,  and (c) not excluded as ineligible by virtue of one or
more of the excluding  criteria set forth in the definition of Eligible Accounts
(other  than  as a  result  of the  criteria  set  forth  in  clause  (l) of the
definition of Eligible Accounts).

     5.3 [Intentionally Omitted.]

     5.4  Equipment.  All of the Equipment of Borrower and its  Subsidiaries  is
used or held for use in their business and is fit for such purposes.

     5.5 Location of Inventory  and  Equipment.  Except as set forth on Schedule
5.5, as of the Closing  Date,  the  Inventory and Equipment of Borrower and each
Guarantor are not stored with a bailee or warehouseman and, except for Inventory
and Equipment with a fair market value of less than $1,000,000 in the aggregate,
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.   Borrower  keeps  correct  and  accurate  records
itemizing  and  describing  the  type,  quality,  and  quantity  of its  and its
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  Borrower  and  each  of  its
Subsidiaries is set forth on Schedule 5.7(a) (as such Schedule may be updated in
accordance with Section 7.5).

     (b) The chief executive  office of 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)   Borrower's   and  each  of  its  Material   Subsidiaries'   FEIN  and
organizational  identification number, if any, are identified on Schedule 5.7(c)
(as such Schedule may be updated in accordance with Section 7.5).

     (d) As of the Closing Date,  Borrower and its  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) 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 or  province  where the  failure to be so  qualified  reasonably  could be
expected to result in a Material Adverse Change.

     (b) Set forth on Schedule  5.8(b) as of the Closing  Date is a complete and
accurate description of the authorized capital Stock of 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 Borrower's capital Stock, including any right of conversion or exchange under
any  outstanding  security or other  instrument.  Borrower is not 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) (as such  Schedule may be updated so long
as Borrower has complied  with the  requirements  of Section 6.15) is a complete
and accurate list of 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  (other
than the Inactive Subsidiaries),  and (iii) the number and the percentage of the
outstanding  shares of each such class owned directly or indirectly by Borrower.
All of the  outstanding  capital Stock of each such  Subsidiary has been validly
issued and is fully paid and non-assessable.

     (d) Except as set forth on  Schedule  5.8(c),  there are no  subscriptions,
options,  warrants, or calls relating to any shares of Borrower's  Subsidiaries'
capital  Stock,  including  any  right  of  conversion  or  exchange  under  any
outstanding  security  or  other  instrument.  Neither  Borrower  nor any of its
Subsidiaries  is  subject  to  any  obligation   (contingent  or  otherwise)  to
repurchase or otherwise acquire or retire any shares of Borrower's Subsidiaries'
capital  Stock or any security  convertible  into or  exchangeable  for any such
capital Stock.

     5.9 Due Authorization; No Conflict.

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

     (b) The execution,  delivery, and performance by 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 Borrower,  the Governing Documents of Borrower,  or any order,  judgment,  or
decree of any court or other  Governmental  Authority binding on 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 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  Borrower's  interestholders  or any
approval or consent of any Person under any material  contractual  obligation of
Borrower,  other than consents or approvals that have been obtained and that are
still in force and effect.

     (c) Other than the filing of financing statements, the execution, delivery,
and  performance  by Borrower of this  Agreement and the other Loan Documents to
which  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) This  Agreement  and the other Loan  Documents  to which  Borrower is a
party, and all other documents  contemplated  hereby and thereby,  when executed
and delivered by Borrower will be the legally valid and binding  obligations  of
Borrower,  enforceable  against  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)  Upon  the  filing  of  financing  statements  in the  jurisdiction  of
organization for Borrower and the execution and delivery of Control  Agreements,
Lender's Liens will be 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,  provincial,  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  (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 consents or approvals that
have been obtained and that are still in force and effect.

     (h) Other than the filing of financing statements, 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.  As of the Closing Date other than those matters disclosed
on  Schedule  5.10 and those  matters  fully  covered by  insurance  (subject to
customary  deductibles),  there are no actions,  suits,  or proceedings  pending
which  Borrower  has  notice of or, to the  knowledge  of  Borrower,  threatened
against Borrower,  or any of its Subsidiaries.  Other than matters arising after
the  Closing  Date  that,  if  decided  adversely  to  Borrower,  or  any of its
Subsidiaries,  as  applicable,  reasonably  could not be expected to result in a
Material  Adverse Change,  there are no actions,  suits, or proceedings  pending
which  Borrower  has  notice of or, to the  knowledge  of  Borrower,  threatened
against Borrower, or any of its Subsidiaries, as applicable.

     5.11 No Material  Adverse  Change.  All  financial  statements  relating to
Borrower and its  Subsidiaries or Guarantor that have been delivered by Borrower
to Lender 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,
Borrower's and its  Subsidiaries'  (or  Guarantor's,  as  applicable)  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 Borrower and
its  Subsidiaries  (or Guarantor,  as  applicable)  since the date of the latest
financial statements submitted to Lender on or before the Closing Date.

     5.12 Fraudulent Transfer.

     (a) The  Borrower  and each of its  Subsidiaries,  taken  as a  whole,  are
Solvent.

     (b) No transfer  of property is being made by Borrower or its  Subsidiaries
and  no  obligation  is  being  incurred  by  Borrower  or its  Subsidiaries  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 Borrower or its Subsidiaries.

     5.13 Employee Benefits.

     (a) Except as set forth on  Schedule  5.13,  none of  Borrower,  any of its
Subsidiaries,  or any of their ERISA Affiliates  maintains or contributes to any
Benefit Plan.

     (b) No Plan is a Multiemployer Plan.

     (c) Schedule  5.13 lists all Plans and  separately  identifies  all Benefit
Plans.  Copies of all such listed  Benefit  Plans,  together  with a copy of the
latest  form  5500-series  for each such  Benefit  Plan have been  delivered  to
Lender.  Each  Qualified  Plan has been  determined  by the IRS to qualify under
Section 401 of the IRC, the trusts created thereunder have been determined to be
exempt from tax under the  provisions of Section 501 of the IRC, and nothing has
occurred that would cause the loss of such  qualification or tax-exempt  status.
Each Plan is in compliance  with the applicable  provisions of ERISA and the IRC
and all  applicable  foreign  law,  including  the timely  filing of all reports
required  under  the IRC,  ERISA,  and  applicable  foreign  law  including  the
statement required by 29 CFR Section  2520.104-23.  Borrower,  its Subsidiaries,
and each ERISA Affiliate have made all contributions and paid all amounts due as
and when required by either  Section 412 of the IRC,  Section 302 of ERISA,  and
any  applicable  foreign  law,  and the terms of any such  Plan.  Borrower,  its
Subsidiaries,  and each  ERISA  Affiliate  have  not  engaged  in a  "prohibited
transaction,"  as defined in Section 406 of ERISA and Section 4975 of the IRC or
any  comparable  concept under  applicable  foreign law, in connection  with any
Plan, that would subject Borrower, its Subsidiaries, or any ERISA Affiliate to a
material liability.

     (d)  Except as set forth in  Schedule  5.13:  (i) no  Benefit  Plan has any
Unfunded  Current  Liability;  (ii) no ERISA Event or event described in Section
4062(e) of ERISA or any comparable  event under any applicable  foreign law with
respect to any Benefit  Plan has  occurred or is  reasonably  expected to occur;
(iii) there are no pending,  or to the knowledge of Borrower,  threatened claims
(other than claims for  benefits in the normal  course),  sanctions,  actions or
lawsuits,  asserted or instituted against any Plan or any Person as fiduciary or
sponsor  of any  Plan;  (iv)  within  the last  five  years no  Benefit  Plan of
Borrower, its Subsidiaries, or any ERISA Affiliate has been terminated,  whether
or not in a "standard  termination" as that term is used in Section 404(b)(1) of
ERISA,  nor has any Benefit Plan of  Borrower,  its  Subsidiaries,  or any ERISA
Affiliate  (determined  at any time within the past five  years)  with  Unfunded
Current  Liabilities been transferred  outside of the "controlled group" (within
the meaning of Section 4001(a)(14) of ERISA) of Borrower,  its Subsidiaries,  or
any ERISA Affiliate;  (v) Stock of Borrower,  its  Subsidiaries,  and each ERISA
Affiliate  makes up, in the aggregate,  no more than 10% of fair market value of
the  assets of any Plan  measured  on the basis of fair  market  value as of the
latest  valuation date of any Plan; and (vi) no liability under any Benefit Plan
has been  satisfied  with the purchase of a contract  from an insurance  company
that is not rated AAA by the  Standard  & Poor's  Corporation  or an  equivalent
rating by another nationally recognized rating agency.

     (e) Except as disclosed  on Schedule  5.13,  no agreement  has been entered
into with any Governmental Authority with respect to any Benefit Plan.

     5.14  Environmental  Condition.  Except as set forth on  Schedule  5.14 and
except to the extent any of the  following  reasonably  could not be expected to
have a Material Adverse Change, (i) to Borrower's knowledge,  none of Borrower's
or its Subsidiaries' assets has ever been used by Borrower, its 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, (ii) to Borrower's
knowledge, none of Borrower's or its 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,  (iii)  neither
Borrower nor any of its  Subsidiaries  has  received  notice that a Lien arising
under any Environmental Law has attached to any revenues or to any Real Property
owned or operated by Borrower or its Subsidiaries, and (iv) neither Borrower nor
its Subsidiaries has received a summons,  order, citation,  notice, or directive
from the  Environmental  Protection Agency or any other  Governmental  Authority
concerning any action or omission by Borrower or its  Subsidiaries  resulting in
the releasing or disposing of Hazardous Materials into the environment.

     5.15  Brokerage  Fees.  Neither  Borrower nor any of its  Subsidiaries  has
utilized  the  services of any broker or finder in  connection  with  Borrower's
obtaining financing from Lender under this Agreement and no brokerage commission
or  finders  fee is  payable  by  Borrower  or its  Subsidiaries  in  connection
herewith.

     5.16  Intellectual  Property.  Borrower and its  Subsidiaries  own, or hold
licenses in, all material 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 in accordance with Section 4.4(c)) is a true, correct, and complete listing
of  all   material   patents,   patent   applications,   trademarks,   trademark
applications,  copyrights,  and copyright  registrations as to which Borrower or
one of its Subsidiaries is the owner or is an exclusive licensee.

     5.17 Leases.  Borrower and its 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 Borrower or its Subsidiaries  exists under
any of them.

     5.18 Deposit Accounts and Securities  Accounts.  Set forth on Schedule 5.18
(which may be updated from time to time by Borrower as permitted  hereunder) are
all of the  Deposit  Accounts  and  Securities  Accounts  of  Borrower  and each
Guarantor,  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 Borrower or its  Subsidiaries  in writing to 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  Borrower or its  Subsidiaries  in writing to 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 Lender, such additional
Projections  represent  Borrower's  good  faith  best  estimate  of its  and its
Subsidiaries  future  performance for the periods covered  thereby.  The Closing
Date  Projections  are  based  upon the good  faith  estimates  and  assumptions
believed by  management  of Borrower to be accurate and  reasonable  at the time
made,  it being  recognized  by Lender  that such  financial  information  as it
relates  to future  events is not to be viewed as fact and that  actual  results
during the period or periods  covered by such financial  information  may differ
from the  projected  results  set  forth  therein  and such  differences  may be
material.

     5.20  Indebtedness(a)  . Set forth on Schedule  5.20 is a true and complete
list  of  all  Indebtedness  of  Borrower  and  its   Subsidiaries   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  Inactive  Subsidiaries.   As  of  the  Closing  Date,  each  Inactive
Subsidiary  does not own any material  assets  (i.e.,  assets  having a value in
excess of $50,000).

     5.22  Material  Location.  Set forth on Schedule M-1 is a true and complete
list of each Material  Location of Borrower and each Guarantor (as such Schedule
may be updated in accordance with Section 6.9).

     5.23 Material Subsidiary. Set forth on Schedule 5.23 is a true and complete
list of each Material Subsidiary of Borrower (as such Schedule may be updated so
long as Borrower has complied with the  requirements of Section 6.15 to Lender's
satisfaction).

     5.24  Benefit  Plans.  As of  September  30,  2003,  the  Unfunded  Current
Liability  of the  German  Benefit  Plan was  (euro)5,237,300  and the  Unfunded
Current Liability of the UK Benefit Plan was (pound)4,333,000.

     5.25  IP  Liens.  Neither  Borrower  nor  any of its  Subsidiaries  has any
outstanding  obligations in favor of Citibank,  N.A. or First National Bank, and
any Liens granted to Citibank, N.A. and First National Bank have been terminated
and released.

6. AFFIRMATIVE COVENANTS.

     Borrower  covenants and agrees that, so long as any credit  hereunder shall
be available and until payment in full of the  Obligations,  Borrower  shall and
shall cause each of its Subsidiaries to do all of the following:

     6.1  Accounting  System.  Maintain  a system  of  accounting  that  enables
Borrower 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 Lender. Borrower also shall keep a reporting
system that shows all additions,  sales,  claims,  returns,  and allowances with
respect to its and its Subsidiaries' sales.

     6.2 Collateral  Reporting.  Provide Lender with the following  documents at
the following times in form satisfactory to Lender:
________________________________________________________________________________
               Monthly (not later than the 10th day of each month)
________________________________________________________________________________

(a)  detailed  aging,  by total, of the Accounts of Borrower and each Guarantor,
     together with a reconciliation to the detailed calculation of the Borrowing
     Base  previously  provided  to Lender and a  reconciliation  to the general
     ledger,

(b)  a summary aging,  by vendor,  of Borrower's and each  Guarantor's  accounts
     payable  and any book  overdraft,  together  with a  reconciliation  to the
     general ledger,

(c)  a detailed  calculation of the Borrowing Base (including  detail  regarding
     those  Accounts  of  Borrower  and each  Guarantor  that  are not  Eligible
     Accounts), and

(d)  a   calculation   of   Dilution   for  the  month  most   recently   ended.
________________________________________________________________________________

              Monthly (not later than the 15th day of each month)
________________________________________________________________________________

(e)  a detailed report regarding  Borrower and its  Subsidiaries'  cash and Cash
     Equivalents  including an indication of which amounts constitute  Qualified
     Cash and regarding any purchases of Stock made by Borrower,
________________________________________________________________________________

     Quarterly (not later than the 45th day after the end of each quarter)
________________________________________________________________________________

(f)  a detailed list of Borrower's and its Subsidiaries' data centers,  regional
     centers, satellite offices, store fronts and maintenance centers, and

(g)  a Recurring Revenue Certificate,
________________________________________________________________________________

                             Upon request by Lender
________________________________________________________________________________

(h)  a detailed list of Borrower's and its Subsidiaries' customers,

(i)  a report regarding Borrower's and its Subsidiaries' accrued, but unpaid, ad
     valorem taxes,

(j)  copies of invoices in  connection  with  Borrower's  and its  Subsidiaries'
     Accounts,  credit memos,  remittance advices,  deposit slips,  shipping and
     delivery  documents in connection  with  Borrower's  and its  Subsidiaries'
     Accounts  and,  for  Inventory  and  Equipment  acquired by Borrower or its
     Subsidiaries, purchase orders and invoices, and

(k)  such other  reports as to the  Collateral  or the  financial  condition  of
     Borrower and its Subsidiaries, as Lender may request.
________________________________________________________________________________

     The foregoing to contrary notwithstanding, if the sum of Qualified Cash and
Excess  Availability is less than $10,000,000 at any time Borrower shall provide
Lender with the  documents  specified in Sections  6.2(a)-(e)  above on a weekly
basis (except for any reconciliations to the general ledger which Borrower shall
provide  Lender  with on a monthly  basis)  commencing  with the  calendar  week
following  the date on which the sum of Qualified  Cash and Excess  Availability
was less than  $10,000,000  and continuing  until the first  consecutive 120 day
period in which the sum of Qualified  Cash and Excess  Availability  was greater
than  $10,000,000  at which time Borrower  will revert to the monthly  reporting
contemplated above. In addition,  Borrower agrees to cooperate fully with Lender
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 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 Borrower's  fiscal quarters) after the
end of each  month  (other  than the month  corresponding  to the last  month of
Borrower's fiscal year) during each of Borrower's fiscal years,

          (i) an unaudited  consolidated  and  consolidating  balance sheet, and
     income  statement  and an  unaudited  consolidated  statement  of cash flow
     covering Borrower's and its Subsidiaries' operations during such period,

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

               (A)  the  financial  statements  delivered  hereunder  have  been
          prepared in accordance with GAAP (except for the lack of footnotes and
          being subject to year-end audit adjustments) and fairly present in all
          material  respects  the  financial   condition  of  Borrower  and  its
          Subsidiaries, and

               (B) 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 Borrower has taken,  is taking,  or
          proposes 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 and for each month that is
     the end of a fiscal  quarter,  a  certificate  detailing the TTM EBITDA for
     such period.

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

          (i) consolidated and  consolidating  financial  statements of Borrower
     and its  Subsidiaries  for each such fiscal  year,  audited by  independent
     certified public accountants reasonably acceptable to Lender and certified,
     without any  qualifications,  by such  accountants to have been prepared in
     accordance  with GAAP  (such  audited  financial  statements  to  include a
     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 Lender  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 no later than the start of each
of  Borrower's  fiscal  years,  copies of  Borrower's  Projections,  in form and
substance  (including as to scope and underlying  assumptions)  satisfactory  to
Lender,  in its sole discretion,  for the forthcoming 3 years, year by year, and
for the  forthcoming  fiscal  year,  month  by  month,  certified  by the  chief
financial  officer of Borrower as being such  officer's good faith best estimate
of the financial  performance of Borrower  during the period covered thereby and
based upon the good faith  estimates and  assumptions  believed by management of
Borrower to be accurate and reasonable at the time made, it being  recognized by
Lender that such financial  information as it relates to future events is not to
be viewed as fact and that actual results  during the period or periods  covered
by such financial  information  may differ from the projected  results set forth
therein and such differences may be material,

     (d) if and when filed by Borrower,

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

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

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

          (iv)  any  other  information  that is  provided  by  Borrower  to its
     shareholders generally,

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

     (f) as soon as  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 Borrower proposes 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  Borrower or any of its
Subsidiaries, notice of all actions, suits, or proceedings brought by or against
Borrower or any of its Subsidiaries before any Governmental  Authority which, if
determined  adversely  to  Borrower  or such  Subsidiary,  reasonably  could  be
expected to result in a Material Adverse Change, and

     (h) upon the  request  of  Lender,  any  information  reasonably  requested
relating to the financial condition of Borrower or its Subsidiaries.

     In addition,  Borrower  agrees that no  Subsidiary  of Borrower will have a
fiscal year different from that of Borrower.  Borrower  agrees to cooperate with
Lender  to allow  Lender  to  consult  with  its  independent  certified  public
accountants if Lender  reasonably  requests the right to do so and that, in such
connection  so long as no Default or Event of Default  shall have occurred or is
continuing,   Lender  shall  not  consult  with  Borrower's   certified   public
accountants  unless  Borrower has been given prior notice of and the opportunity
to participate  in, such  consultation.  Subject to the foregoing  notice as set
forth in the immediately  preceding sentence,  Borrower's  independent certified
public  accountants are authorized to communicate  with Lender and to release to
Lender whatever financial  information  concerning  Borrower or its Subsidiaries
that Lender reasonably may request.

     6.4 Guarantor Reports. Cause each Guarantor to deliver its annual financial
statements at the time when Borrower provides its audited  financial  statements
to Lender, but only to the extent such Guarantor's  financial statements are not
consolidated  with Borrower's  financial  statements,  and copies of all federal
income tax returns as soon as the same are available.

     6.5 Returns.  Cause  returns and  allowances,  as between  Borrower and its
Subsidiaries  and  their  Account  Debtors,  to be on  the  same  basis  and  in
accordance with the usual customary  practices of Borrower and its Subsidiaries,
as they exist at the time of the execution and delivery of this  Agreement or as
may be changed in good faith to meet market demands.

     6.6  Maintenance of  Properties.  Maintain and preserve all of its material
properties  which are necessary or useful in the proper  conduct to its 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
so as to prevent any loss or forfeiture thereof or thereunder,  except where the
loss or forfeiture of such lease reasonably could not be expected to result in a
Material Adverse Change.

     6.7 Taxes.  Cause all assessments  and taxes,  whether real,  personal,  or
otherwise,  due or payable by, or imposed, levied, or assessed against Borrower,
its  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.  Borrower will and will cause its Subsidiaries to make timely
payment or deposit of all tax payments and withholding  taxes required of it and
them by applicable  laws,  including those laws concerning  F.I.C.A.,  F.U.T.A.,
state disability,  and local, state,  provincial,  and federal income taxes, and
will, upon request,  furnish Lender with proof satisfactory to Lender indicating
that Borrower and its Subsidiaries have made such payments or deposits.

     6.8 Insurance.

     (a) At  Borrower's  expense,  maintain  insurance  respecting  its  and its
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.  Borrower 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 Lender. Borrower
shall deliver copies of all such policies to Lender with a satisfactory lender's
loss payable endorsement naming Lender as sole loss payee or additional insured,
as appropriate.  Each policy of insurance or endorsement  shall contain a clause
requiring  the  insurer  to give not less than 30 days prior  written  notice to
Lender in the event of cancellation of the policy for any reason whatsoever.

     (b) Borrower  shall give Lender  prompt  notice of any loss covered by such
insurance.  So long as no Event  of  Default  has  occurred  and is  continuing,
Borrower  shall have the exclusive  right to adjust any losses payable under any
such insurance  policies which are less than $250,000.  Following the occurrence
and during the continuation of an Event of Default, or in the case of any losses
payable under such insurance exceeding $250,000, Lender shall have the exclusive
right to adjust any losses  payable under any such insurance  policies,  without
any liability to Borrower whatsoever in respect of such adjustments.  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
Lender to be  applied at the option of Lender  either to the  prepayment  of the
Obligations  or shall be  disbursed  to  Borrower  under  staged  payment  terms
reasonably  satisfactory  to  Lender  for  application  to the cost of  repairs,
replacements, or restorations; provided, however, that, with respect to any such
monies in an  aggregate  amount  during any 12  consecutive  month period not in
excess of  $250,000,  so long as (A) no Default  or Event of Default  shall have
occurred and is continuing,  (B) Borrower's Excess  Availability is greater than
$10,000,000, (C) Borrower shall have given Lender prior written notice of its or
its  Subsidiary's  intention  to apply  such  monies  to the  costs of  repairs,
replacement,  or  restoration  of the property which is the subject of the loss,
destruction,  or  taking  by  condemnation,  (D) the  monies  are held in a cash
collateral  account in which  Lender has a  perfected  first  priority  security
interest,   and  (E)  Borrower  or  its   Subsidiary   completes  such  repairs,
replacements,  or restoration  within 180 days after the initial receipt of such
monies,  Borrower  shall have the  option to apply  such  monies to the costs of
repairs, replacement, or restoration of the property which is the subject of the
loss, destruction,  or taking by condemnation unless and to the extent that such
applicable  period shall have expired  without such  repairs,  replacements,  or
restoration  being  made,  in which  case,  any  amounts  remaining  in the cash
collateral account shall be paid to Lender and applied as set forth above.

     (c)  Borrower  will not and will not suffer or permit its  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 Lender
is included  thereon as named  insured  with the loss  payable to Lender under a
lender's loss payable endorsement or its equivalent.  Borrower immediately shall
notify  Lender  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 Lender.

     6.9  Location  of  Inventory  and  Equipment.   Keep  Borrower's  and  each
Guarantor's  Inventory  and  Equipment  with an  aggregate  fair market value in
excess of $1,000,000 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 Borrower may amend Schedule 5.5 and Schedule 5.7(b) so
long as such amendment  occurs by written notice to Lender not less than 30 days
prior to 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 or Canada,  and so long as, at
the time of such written  notification,  Borrower  provides  Lender a Collateral
Access  Agreement with respect thereto if such location  qualifies as a Material
Location;  provided,  however,  if Borrower fails to timely deliver a Collateral
Access  Agreement for any such location that  qualifies as a Material  Location,
Lender shall  establish a Landlord  Reserve for such location and the failure to
deliver a Collateral Access Agreement for such location shall not be an Event of
Default hereunder.

     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
material  leases with respect to Real  Property to which  Borrower or any of its
Subsidiaries  is a  party  or by  which  Borrower's  or any  such  Subsidiaries'
properties  and assets are bound,  unless  such  payments  are the  subject of a
Permitted  Protest  or the  termination  of such lease  reasonably  could not be
expected to result in a Material Adverse Change.

     6.12  Existence.  At all times  preserve  and keep in full force and effect
Borrower's and its Subsidiaries valid existence and good standing and any rights
and franchises  material to their  businesses  except where the failure to do so
could not reasonably be expected to result in a Material Adverse Change.

     6.13 Environmental.

     (a)  Keep  any  property  either  owned  or  operated  by  Borrower  or its
Subsidiaries  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  Lender  documentation  of such  compliance  which  Lender
reasonably  requests,  (c) promptly  notify Lender of any material  release of a
Hazardous  Material from or onto  property  owned or operated by Borrower or its
Subsidiaries  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 10 days of its receipt thereof, provide Lender
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 Borrower or
its Subsidiaries,  (ii) commencement of any Environmental  Action or notice that
an Environmental Action will be filed against Borrower or its Subsidiaries,  and
(iii)  notice of a  violation,  citation,  or other  administrative  order which
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  Lender  if  any  written
information,  exhibit,  or report furnished to Lender contained,  at the time it
was furnished,  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 Borrower or any Guarantor
forms a direct  Subsidiary  after the Closing  Date or any  Inactive  Subsidiary
becomes  a  Material  Subsidiary,  Borrower  or such  Guarantor  shall  within 5
Business Days of such  acquisition  or formation  (except if such  Subsidiary is
organized solely to facilitate an Acquisition,  in which case, Borrower and such
Subsidiary shall satisfy the provision of this Section within five Business Days
of the  consummation of the subject  Acquisition)  or the delivery,  pursuant to
Section 6.3 of financial statements demonstrating a change of Subsidiary from an
Inactive  Subsidiary to a Material  Subsidiary  (a) cause such new Subsidiary to
provide to Lender a Guaranty and the Guarantor Security Agreement, together with
such other  security  documents  (including  mortgages  with  respect to any fee
simple Real Property of such new Subsidiary),  as well as appropriate  UCC-1 and
PPSA  financing  statements  (and with  respect  to all  property  subject  to a
mortgage, fixture filings), all in form and substance reasonably satisfactory to
Lender  (including  being  sufficient  to  grant  Lender a first  priority  Lien
(subject  to  Permitted  Liens)  in and to the  assets of such  newly  formed or
acquired  Subsidiary),  (b) provide to Lender a pledge agreement and appropriate
certificates  and powers or UCC-1 and PPSA financing  statements,  hypothecating
all of the direct or beneficial  ownership interest in such Subsidiary,  in form
and substance  satisfactory to Lender or 65% of all of the ownership interest in
such  Subsidiary if the pledge of all such interest  would result in adverse tax
consequences  to Borrower  and its  Subsidiaries,  and (c) provide to Lender all
other  documentation,  including  one or more  opinions  of  counsel  reasonably
satisfactory to Lender,  which in its opinion is appropriate with respect to the
execution  and  delivery  of the  applicable  documentation  referred  to  above
(including  policies of title insurance or other  documentation  with respect to
all  property  subject  to a  mortgage);  provided,  however,  Borrower  and any
Guarantor  shall not have to comply  with  clause  (a) of this  Section  6.15 if
causing the  Subsidiary  to comply with  clause (a) of this  Section  6.15 would
result in  adverse  tax  consequences  to  Borrower  and its  Subsidiaries.  Any
document,  agreement,  or instrument executed or issued pursuant to this Section
6.15 shall be a Loan Document.

     6.16 Benefit Plans.

     (a)  Deliver to Lender  written  notice,  as soon as  possible  and, in any
event, no later than

          (i) Ten (10) Business Days after Borrower,  its  Subsidiaries,  or any
     ERISA  Affiliate  knows or has reason to know that:  (1) an ERISA  Event or
     Reportable Event or any comparable  event under any applicable  foreign law
     has occurred or is likely to occur; or (2) that a contributing sponsor of a
     Benefit  Plan is  subject  to the  advance  reporting  requirement  of PBGC
     Regulation Section 4043.61 (without regard to subparagraph  (b)(1) thereof)
     or under any  applicable  foreign law and an event  described in subsection
     .62-.68  of PBGC  Regulation  Section  4043  or a  comparable  event  under
     applicable foreign law is reasonably expected to occur with respect to such
     Benefit Plan within the following 30 days;

          (ii) Three (3) Business Days after Borrower, its Subsidiaries,  or any
     ERISA  Affiliate  knows or has  reason to know that:  (1) any  Governmental
     Authority  intends to  investigate or terminate any Benefit Plan or to have
     or consider  having a trustee  appointed to administer  any Benefit Plan or
     any trustee seeks to terminate any Benefit  Plan;  (2) that an  accumulated
     funding  deficiency has been incurred or an application  may be or has been
     made for a waiver or  modification  of the minimum  funding  standard  with
     respect to a Plan; (3) any Person files a lawsuit involving a Plan; (4) any
     contribution required to be made with respect to a Plan has been or will be
     made late; (5) a Benefit Plan has been or may be involuntarily  terminated,
     reorganized,  partitioned or declared insolvent;  (6) a Benefit Plan has an
     Unfunded  Current  Liability  in excess  of  $9,200,000,  or the  aggregate
     Unfunded   Current   Liability  of  all  Benefit  Plans  is  in  excess  of
     $16,240,000; (7) proceedings may be or have been instituted to terminate or
     appoint  a  trustee  to  administer  a  Benefit  Plan;  (8) an  involuntary
     proceeding  has been  instituted  pursuant to Section 515 of ERISA or under
     any  applicable  foreign  law to  collect a  delinquent  contribution  to a
     Benefit Plan; (9) Borrower,  its Subsidiaries,  or any ERISA Affiliate will
     or may  incur any  liability  to or on  account  of the  termination  of or
     withdrawal  from a Benefit Plan; or (10) a material  adverse  change in the
     funding  status of, or accrued  benefits  under,  a Benefit  Plan from that
     reflected  on  the  documents  attached  as  Schedule  5.13  has  occurred.

     (b) Any  such  notice  shall  (i) set  forth  to the  extent  known  and in
reasonable  detail the  occurrence and the action,  if any, that  Borrower,  its
Subsidiaries,  any ERISA  Affiliate,  Plan,  or Benefit  Plan  administrator  is
required or proposes to take,  (ii) attach any notice required or proposed to be
given to or filed by any entity  listed in clause (i) to or with the PBGC or any
other  Governmental  Authority or provided to any Benefit Plan participant;  and
(iii) any notice  received  by any entity  listed in clause (i) from the PBGC or
any other Governmental Authority.

     (c)  Deliver to Lender  copies of  documents  required to be filed with any
Governmental  Authority with respect to any Benefit Plan within 20 Business Days
of filing such documents,  including all documents that must be furnished to the
PBGC and a complete copy of the annual report (5500 series) of each Benefit Plan
(including all related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information) required to be
filed with the Internal Revenue Service or any other Governmental Authority.

     (d)  Deliver to Lender,  upon  Lender's  request,  a copy of each Plan (or,
where any such plan is not in writing,  complete  description  thereof)  (and if
applicable,  related  trust  agreements or other  funding  instruments)  and all
amendments thereto, all written interpretations thereof and written descriptions
thereof that have been distributed to employees or former employees of Borrower,
any of its Subsidiaries or any of its ERISA Affiliates;  (ii) for the three most
recent plan  years,  annual  reports on Form 5500  Series  required or any other
report to be filed with any Governmental  Authority for the German Benefit Plan,
the UK Benefit Plan and any other  Benefit  Plan;  (iii) all  actuarial  reports
prepared  for the last  three plan years for the  German  Benefit  Plan,  the UK
Benefit Plan and any other  Benefit  Plan;  (iv) a listing of all  Multiemployer
Plans,  with the  aggregate  amount  of the  most  recent  annual  contributions
required to be made by Borrower or any of its  Subsidiaries or ERISA  Affiliates
to each such plan and copies of the collective  bargaining  agreements requiring
such  contributions;  (v) any information  that has been provided to Borrower or
any of its Subsidiaries or ERISA Affiliates regarding withdrawal liability under
any  Multiemployer  Plan or any liability under any other Benefit Plan; and (vi)
the aggregate amount of the most recent annual payments made to former employees
of Borrower or any of its Subsidiaries or ERISA Affiliates under any Plan.

     (e) Cause  Anacomp UK to pay or contribute to the UK Benefit Plan an amount
equal to the amounts required to be paid or contributed by Anacomp UK, under the
rules of the UK Benefit Plan or  applicable  law and cause  Anacomp  Germany and
Xidex GmbH, a company  organized  under the laws of Germany to pay or contribute
to the German  Benefit Plan, an amount equal to the amounts  required  under the
rules of the German Benefit Plan or applicable law.

     6.17 Patent Lien  Releases.  Borrower  shall use its best efforts to obtain
the release of any Liens  filed with the Patent  Trademark  Office by  Citibank,
N.A. and First  National  Bank with  respect to the patents  with the  following
numbers:  5,477,343,  5,659,833,  5,809,358 and  4,555,437,  and Borrower  shall
provide Lender with (a) written  status reports of Borrower's  efforts to obtain
the release on the first day of each month,  in form and substance  satisfactory
to Lender,  and (b) evidence of such release in form and substance  satisfactory
to Lender when obtained.

7. NEGATIVE COVENANTS.

     Borrower  covenants and agrees that, so long as any credit  hereunder shall
be available and until payment in full of the Obligations, Borrower will not and
will not permit any of its Subsidiaries to do any of the following:

     7.1 Indebtedness.  Create,  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) and (i) 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 Lender's
Permitted  Discretion,  materially  impair the  prospects  of  repayment  of the
Obligations by Borrower or materially impair Borrower's  creditworthiness,  (ii)
such refinancings,  renewals,  or extensions do not result in an increase in the
principal  amount of, or  interest  rate with  respect to, the  Indebtedness  so
refinanced,  renewed,  or  extended,  (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 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 include
subordination  terms and conditions  that are at least as favorable to Lender 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,

     (g)  Indebtedness  pursuant  to  Hedge  Agreements  so  long  as  (i)  such
Indebtedness  is unsecured,  and (ii) such Hedge  Agreements  are used solely as
part of  normal  business  operations  as a risk  management  strategy  or hedge
against changes resulting from market operations and not as a means to speculate
for  investment  purposes  on trends  and  shifts in  financial  or  commodities
markets,

     (h) unsecured  Indebtedness and any Permitted Acquired  Indebtedness not to
exceed $2,000,000 in the aggregate at any one time, and

     (i) Permitted Subordinated Debt.

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.

     Except in connection with (i) any Permitted Acquisitions,  (ii) pursuant to
any merger or  consolidation  involving  Borrower  and a  Subsidiary  or between
Subsidiaries,  provided,  that in the case of a merger  involving  Borrower or a
Subsidiary  that is a  Guarantor,  Borrower or such  Guarantor  is the  survivor
thereof,  and (iii) the recapitalization of any Subsidiary formed under the laws
of a jurisdiction other than the United States and Canada to the extent required
under  such  foreign  law so long as the  amount  of  such  recapitalization  is
otherwise  a  Permitted  Investment,  enter  into  any  merger,   consolidation,
reorganization, or recapitalization, or reclassify its Stock.

     (b) Except for the  liquidation or  dissolution of an Inactive  Subsidiary,
liquidate,   wind  up,  or  dissolve   itself  (or  suffer  any  liquidation  or
dissolution).

     (c)  Except for  Permitted  Dispositions,  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,  convey, sell,
lease, license,  assign,  transfer, or otherwise dispose of , in one transaction
or a series of transactions, any of Borrower's or its Subsidiaries assets.

     7.5  Change  Name.  Change  Borrower's  or any  Guarantor's  names,  FEINs,
organizational  identification  number,  state or  province of  organization  or
organizational identity;  provided,  however, that Borrower or any Guarantor may
change their names upon at least 30 days prior written  notice to Lender of such
change and so long as, at the time of such  written  notification,  Borrower  or
such  Guarantor  provides  any  financing  statements  necessary  to perfect and
continue perfected Lender's Liens.

     7.6 Nature of Business.  Make any change in the principal  nature of its or
their business.

     7.7  Prepayments  and  Amendments.  Except in connection with a refinancing
permitted by Section 7.1(d),

     (a) solely with  respect to Borrower  and any  Guarantor,  prepay,  redeem,
defease,  purchase,  or otherwise  acquire any  Indebtedness  of Borrower or its
Subsidiaries, 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.  Consign any of its or their Inventory with a fair market
value  greater  than  $1,000,000  in the  aggregate  or sell any of its or their
Inventory  on  bill  and  hold,  sale or  return,  sale on  approval,  or  other
conditional terms of sale.

     7.10  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  any of  Borrower's  Stock,  of any  class,  whether  now or
hereafter outstanding; provided, however, that Borrower may (a) redeem its Class
B common  Stock or warrants for Class B Stock so long as (i) no Event of Default
exists or would result therefrom and (ii) the  consideration for the redemptions
does  not  exceed  $50,000  in the  aggregate  at any  time  and (b)  consummate
Permitted Stock Repurchases.

     7.11 Accounting Methods.  Modify or change its fiscal year or its 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 Borrower's or its  Subsidiaries'  accounting  records
without  said  accounting  firm or service  bureau  agreeing  to provide  Lender
information regarding Borrower's and its 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
Borrower and the Guarantors 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 $25,000 at any one time  unless  Borrower or such
Guarantor,  as applicable,  and the applicable  securities  intermediary or bank
have entered into Control  Agreements  governing such  Permitted  Investments in
order to perfect (and further  establish)  the Lender's  Liens in such Permitted
Investments.  Subject to the foregoing proviso, Borrower shall not and shall not
permit any Guarantor to establish or maintain any Deposit  Account or Securities
Account unless Lender shall have received a Control Agreement in respect of such
Deposit Account or Securities Account.

     7.13  Transactions  with  Affiliates.  Directly or indirectly enter into or
permit to exist any  transaction  with any Affiliate of Borrower  except for (i)
transactions that (a) are in the ordinary course of Borrower's business, (b) are
upon fair and  reasonable  terms,  (c) if they  involve one or more  payments by
Borrower or its  Subsidiaries  in excess of  $100,000,  are fully  disclosed  to
Lender,  and (d) are no less  favorable  to  Borrower  or its  Subsidiaries,  as
applicable,  than  would be  obtained  in an  arm's  length  transaction  with a
non-Affiliate,  (ii) transactions between Borrower and any Guarantor,  and (iii)
transactions  between  any  Subsidiary  (other  than  a  Subsidiary  that  is  a
Guarantor)  and  any  other  Subsidiary  (other  than  a  Subsidiary  that  is a
Guarantor).

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

     7.15 [Intentionally Omitted.]

     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. Store the Inventory or Equipment
of Borrower or any  Guarantor  with an aggregate  fair market value in excess of
$1,000,000 at any time now or hereafter  with a bailee or  warehouseman  without
Lender's prior written consent.

     7.18 Financial Covenants.

     (a) Fail to maintain or achieve:

          (i) Minimum  EBITDA.  EBITDA,  measured on a quarter-end  basis, of at
     least  the  required  amount  set  forth  in the  following  table  for the
     applicable period set forth opposite thereto:
<TABLE>
<CAPTION>

         ----------------------------------------------- -----------------------------------------------------------
                       Applicable Amount                                     Applicable Period
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
         <S>                                             <C>
                           $8,000,000                    For the 12 month period ending June 30, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                           $6,500,000                    For the 12 month period ending September 30, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                           $6,296,000                    For the  12 month period ending December 31, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                           $7,820,000                    For the  12 month period ending March 31, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $11,255,000                    For the  12 month period ending June 30, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $13,543,000                    For the 12 month period ending September 30, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $13,358,000                    For the 12 month period ending December 31, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $13,694,000                    For the 12 month period ending March 31, 2006
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $14,029,000                    For the 12 month period ending June 30, 2006
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $15,342,000                    For the 12 month period ending September 30, 2006 and for
                                                         each 12 month period ending on the last day of each
                                                         calendar quarter thereafter
         ----------------------------------------------- -----------------------------------------------------------
</TABLE>

          (ii) Minimum Recurring  Document Imaging Revenue.  Recurring  Document
     Imaging Revenue,  measured on a quarter-end basis, of at least the required
     amount set forth in the following table for the applicable period set forth
     opposite thereto:

<TABLE>
<CAPTION>

         ----------------------------------------------- -----------------------------------------------------------
                       Applicable Amount                                     Applicable Period
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
         <S>                                             <C>
                          $103,315,000                          For the 12 month period ending June 30, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $96,566,000                        For the 12 month period ending September 30, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $89,535,000                        For the  12 month period ending December 31, 2004
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $81,907,000                          For the  12 month period ending March 31, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $80,925,000                          For the  12 month period ending June 30, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $80,370,000                        For the 12 month period ending September 30, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $81,823,000                         For the 12 month period ending December 31, 2005
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $82,122,000                          For the 12 month period ending March 31, 2006
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $82, 380,000                          For the 12 month period ending June 30, 2006
         ----------------------------------------------- -----------------------------------------------------------
         ----------------------------------------------- -----------------------------------------------------------
                          $81,452,000                    For the 12 month period ending September 30, 2006 and for
                                                            each 12 month period ending on the last day of each
                                                                        calendar quarter thereafter
         ----------------------------------------------- -----------------------------------------------------------
</TABLE>

          (iii)  Leverage  Ratio.  A Leverage  Ratio,  measured on a quarter-end
     basis,  of not greater than the amount set forth in the following table for
     the applicable date set forth opposite thereto:

<TABLE>
<CAPTION>

------------------------------------------------------------ --------------------------------------------------------
                     Applicable Ratio                                            Applicable Date
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
<S>                                                          <C>
                         3.37:1.00                                                June 30, 2004
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
                         4.08:1.00                                             September 30, 2004
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
                         3.70:1.00                                              December 31, 2004
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
                         2.86:1.00                                               March 31, 2005
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
                         3.00:1.00                                                June 30, 2005
------------------------------------------------------------ --------------------------------------------------------
------------------------------------------------------------ --------------------------------------------------------
                         3.00:1.00                               September 30, 2005 and on the last day of each
                                                                           calendar quarter thereafter
------------------------------------------------------------ --------------------------------------------------------
</TABLE>

          (iv) Excess  Availability.  Excess Availability plus Qualified Cash of
     at least $5,000,000 at all times.

     (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:

<TABLE>
<CAPTION>

----------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Fiscal Year 2004        Fiscal Year 2005     Fiscal Year 2006     Fiscal Year 2007     Fiscal Year 2008     Fiscal Year 2009
----------------------- -------------------- -------------------- -------------------- -------------------- --------------------
----------------------- -------------------- -------------------- -------------------- -------------------- --------------------
<S>                     <C>                  <C>                  <C>                  <C>                  <C>
8,024,000               9,720,000            6,728,000            6,728,000            6,728,000            6,728,000
----------------------- -------------------- -------------------- -------------------- -------------------- --------------------
</TABLE>

     7.19 Contracts. Make any change in its billing practices for any customer's
contract that would result in a reduction in the average  weighted value of such
contract without Lender's prior written consent; provided however, that Borrower
may make pricing  adjustments  to contracts with its customers in its reasonable
business  judgment so long as such pricing  adjustments  are consistent with its
historical practices in this regard.

     7.20 ERISA.

     (a) Cause or permit to occur an event that could  result in the  imposition
of a Lien under  Section 412 of the IRC or Section 302 or 4068 of ERISA or under
any applicable foreign law,

     (b) Cause or permit to occur an ERISA Event,

     (c) Adopt, maintain, contribute to or become obligated to contribute to any
employee benefit plan not disclosed on Schedule 5.13,  within the meaning of (i)
Section (3)(3) of ERISA that provides benefits to employees after termination of
employment,  including a Multiemployer  Plan,  other than as required by Section
601 of ERISA and Section 4980B of the Code, (ii) Canadian Employee Benefit Laws,
(ii) German Employee Benefit Laws, or (iii) any other applicable foreign law,

     (d) Fail, or permit any of its Subsidiaries or ERISA Affiliates to fail, to
pay timely required contributions or annual installments due with respect to any
waived  funding  deficiency to the German  Benefit Plan, the UK Benefit Plan and
any other Benefit Plan,

     (e) Terminate,  or permit any of its  Subsidiaries  or ERISA  Affiliates to
terminate,  the German  Benefit  Plan,  the UK Benefit Plan or any other Benefit
Plan where such event would result in any liability to Borrower or any Guarantor
(other than an immaterial liability),

     (f) Fail, or permit any of its Subsidiaries or ERISA Affiliates to fail, to
make any required contribution or payment to any Multiemployer Plan,

     (g) Fail, or permit any of its Subsidiaries or ERISA Affiliates to fail, to
pay any required  installment or any other payment required under Section 412 of
the IRC or  under  applicable  foreign  law on or  before  the due date for such
installment or other payment,

     (h) Amend, or permit any of its  Subsidiaries or ERISA Affiliates to amend,
a Plan resulting in an increase in current liability for the plan year such that
any of Borrower,  any Subsidiary of Borrower or any ERISA  Affiliate is required
to provide  security to such Plan under  Section  401(a)(29) of the IRC or under
comparable foreign law,

     (i)  Withdraw,  or permit any of its  Subsidiaries  or ERISA  Affiliates to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability to Borrower or a Guarantor  (other than an immaterial
liability),

     (j) Adopt any amendment to a Plan that would materially raise the amount of
benefits payable after termination of employment, or

     (k) Cause or permit to occur any  event  that  could  result in a  material
liability  with respect to a Plan to Borrower or a Guarantor or otherwise  could
result in a Material Adverse Change.

     7.21 Maintenance Revenue Accounts.  Change or permit or cause to be changed
the  coding or the  marking  on any  invoices  related  to  Maintenance  Revenue
Accounts as in effect on the Closing Date.

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 Borrower fails 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 Lender,  reimbursement
of  Lender  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, Borrower eliminates such Overadvance;

     8.2 If 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, 6.14, 6.15,
6.16, 6.17, and 7.1 through 7.21 of this Agreement;

     (b) fails or  neglects to perform,  keep,  or observe any term,  provision,
covenant,  or agreement contained in Sections 6.2, 6.3, 6.7, 6.9, 6.10, and 6.11
of this  Agreement  and such failure  continues for a period of 5 days after the
earlier of (i) the date on which such  failure  shall first  become known to any
officer of  Borrower  or (ii)  written  notice  thereof is given to  Borrower by
Lender; 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,  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 days after the earlier of (i) the date on which such failure  shall
first become known to any officer of Borrower or (ii) written  notice thereof is
given to Borrower by Lender;

     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, Lender shall be relieved of its obligation to extend credit
hereunder;

     8.3 If any  material  portion  of  Borrower's  or any of its  Subsidiaries'
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 Borrower or any of its
Subsidiaries (other than an Inactive Subsidiary);

     8.5 If an Insolvency  Proceeding is commenced against  Borrower,  or any of
its Subsidiaries (other than an Inactive  Subsidiary),  and any of the following
events occur:  (a) Borrower or such  Subsidiary  consents to the  institution of
such  Insolvency   Proceeding  against  it,  (b)  the  petition  commencing  the
Insolvency  Proceeding  is not timely  controverted;  provided,  however,  that,
during the pendency of such period,  Lender shall be relieved of its obligations
to  extend  credit  hereunder,   (c)  the  petition  commencing  the  Insolvency
Proceeding  is not  dismissed  within 60 calendar days of the date of the filing
thereof;  provided,  however,  that, during the pendency of such period,  Lender
shall be relieved of its obligations 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,  Borrower  or any of its  Subsidiaries  (other  than  an  Inactive
Subsidiary), or (e) an order for relief shall have been entered therein;

8.6 If Borrower or any of its Subsidiaries (other than an Inactive Subsidiary)
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 (a) If a notice of Lien is filed of record with  respect to  Borrower's
or any of its Subsidiaries'  (other than an Inactive  Subsidiary)  assets by the
United States or Canada or any department, agency, or instrumentality thereof (a
"Federal Lien"), or by any state, provincial, county, municipal, or governmental
agency and such state,  provincial,  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) If a notice  of Lien is filed of  record  with  respect  to  Borrower's
assets or any of its Subsidiaries' assets (other than an Inactive Subsidiary) by
any state,  province,  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 $250,000,
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 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 $400,000,  or more, in excess of the amount  covered by insurance,  becomes a
Lien or encumbrance upon any of Borrower's or its  Subsidiaries'  (other than an
Inactive  Subsidiary)  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 or such Subsidiary;

     8.9 If there is a default in any  agreement in respect of  Indebtedness  of
greater  than  $250,000  aggregate  amount  to  which  Borrower  or  any  of its
Subsidiaries is a party and such default (a) occurs at the final maturity of the
obligations  thereunder,  or (b) results in a right by the other party  thereto,
irrespective of whether  exercised,  to accelerate the maturity of Borrower's or
its  Subsidiaries'  obligations  thereunder  or  to  terminate  such  agreement;
provided, however, a timely cure of such default shall be a cure hereunder;

     8.10 If Borrower or any of its Subsidiaries 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 Lender
by Borrower, its Subsidiaries,  or any officer,  employee, agent, or director of
Borrower or any of its Subsidiaries;

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

     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; except
as a result of a  disposition  of the  applicable  Collateral  in a  transaction
permitted under this Agreement;

     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 Borrower or its Subsidiaries, or a proceeding shall be commenced by
Borrower  or  its  Subsidiaries,   or  by  any  Governmental   Authority  having
jurisdiction  over  Borrower  or its  Subsidiaries,  seeking  to  establish  the
invalidity or  unenforceability  thereof,  or Borrower or its Subsidiaries shall
deny that Borrower or its Subsidiaries has any liability or obligation purported
to be created under any Loan Document; or

     8.15 An ERISA Event shall have occurred or is likely to occur or the German
Benefit Plan,  the UK Benefit Plan or any other Benefit Plan shall have been, or
is likely to be wound up or terminated or likely to be the subject of winding up
or termination proceedings.

9. THE LENDER'S RIGHTS AND REMEDIES.

     9.1 Rights and Remedies. Upon the occurrence,  and during the continuation,
of an Event of  Default,  Lender  (at its  election  but  without  notice of its
election  and without  demand) may do any one or more of the  following,  all of
which are authorized by Borrower:

     (a) Declare all or any portion of the  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
Borrower under this  Agreement,  under any of the Loan  Documents,  or under any
other agreement between Borrower and Lender;

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

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

     (e)  Cause  Borrower  to hold all of its  returned  Inventory  in trust for
Lender and segregate all such  Inventory from all other assets of Borrower or in
Borrower's possession;

     (f) Without  notice to or demand upon  Borrower,  make such payments and do
such acts as Lender  considers  necessary or  reasonable to protect its security
interests  in the  Collateral.  Borrower  agrees to assemble the  Collateral  if
Lender so requires,  and to make the  Collateral  available to Lender at a place
that  Lender may  designate  which is  reasonably  convenient  to both  parties.
Borrower  authorizes  Lender  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  Lender's
determination  appears to conflict with the priority of Lender's Liens in and to
the Collateral and to pay all expenses  incurred in connection  therewith and to
charge Borrower's Loan Account therefor. With respect to any of Borrower's owned
or leased  premises,  Borrower  hereby  grants  Lender a license  to enter  into
possession of such premises and to occupy the same,  without charge, in order to
exercise any of Lender's rights or remedies  provided herein, at law, in equity,
or otherwise;

     (g) Without notice to 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 Borrower held
by Lender (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
Borrower held by Lender;

     (h) Hold, as cash collateral, any and all balances and deposits of Borrower
held by Lender,  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.  Borrower hereby grants to Lender a license or other right
to use, without charge, 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
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender'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  Borrower's  premises)  as  Lender
determines is  commercially  reasonable.  It is not necessary  that the Borrower
Collateral be present at any such sale;

     (k) Except in those  circumstances  where no notice is  required  under the
Code, Lender shall give notice of the disposition of the Borrower  Collateral as
follows:

     (i) Lender shall give 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

     (ii) The notice shall be personally  delivered or mailed,  postage prepaid,
to 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) Lender may credit bid and purchase at any public sale;

     (m)  Lender  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) Lender shall have all other rights and remedies  available at law or in
equity or pursuant to any other Loan Document.

The foregoing to the contrary notwithstanding,  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 Borrower or any other Person or any act
by Lender,  Lender's  obligation to extent credit  hereunder shall 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 Borrower.

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

10. TAXES AND EXPENSES.

     If 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, Lender, in its sole discretion and without prior
notice to Borrower, may do any or all of the following:  (a) make payment of the
same or any part thereof, (b) set up such reserves against the Borrowing Base or
the  Maximum  Revolver  Amount  as  Lender  deems  necessary  in  its  Permitted
Discretion to protect Lender 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 Lender deems  prudent.  Any such amounts
paid by Lender shall constitute  Lender Expenses and any such payments shall not
constitute  an agreement  by Lender to make similar  payments in the future or a
waiver by Lender of any Event of Default under this  Agreement.  Lender 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.  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
Lender on which Borrower may in any way be liable.

     11.2 Lender's  Liability for Borrower  Collateral.  Borrower  hereby agrees
that:  (a) so long as Lender  complies with its  obligations,  if any, under the
Code,  Lender 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
Borrower.

     11.3 Indemnification.  Borrower shall pay, indemnify,  defend, and hold 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 or in connection with the enforcement
of this  indemnification  (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 Borrower's and its 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,
Borrower 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  Borrower  was  required  to
indemnify the Indemnified Person receiving such payment,  the Indemnified Person
making such payment is entitled to be  indemnified  and  reimbursed  by Borrower
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
Borrower  or Lender 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 Borrower or Lender,  as  applicable,  may  designate to each
other in accordance  herewith),  or telefacsimile to Borrower or Lender,  as the
case may be, at its address set forth below:

                  If to Borrower:               ANACOMP, INC.
                                                15378 Avenue of Science
                                                San Diego, California  92128

                                                Attn:  Linster Fox
                                                Fax No. 858-716-3770

                  If to Lender:                 WELLS FARGO FOOTHILL, INC.
                                                2450 Colorado Avenue
                                                Suite 3000 West
                                                Santa Monica, California  90404

                                                Attn:  Business Finance Manager
                                                Fax No. 310-453-7413

                                                with copies to:

                      PAUL, HASTINGS, JANOFSKY & WALKER LLP
                                                515 S. Flower Street
                                                Twenty-fifth Floor
                                                Los Angeles, California  90071

                                                Attn:  John Francis Hilson, Esq.
                                                Fax No. 213-627-0705

     Lender and  Borrower  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 Lender 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. Borrower  acknowledges and agrees that notices sent
by Lender 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, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK,  PROVIDED,  HOWEVER,  THAT
ANY SUIT SEEKING  ENFORCEMENT  AGAINST ANY  COLLATERAL OR OTHER  PROPERTY MAY BE
BROUGHT,  AT LENDER'S  OPTION,  IN THE COURTS OF ANY  JURISDICTION  WHERE LENDER
ELECTS TO BRING SUCH ACTION OR WHERE SUCH  COLLATERAL  OR OTHER  PROPERTY MAY BE
FOUND.  BORROWER AND LENDER 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).

     (c) BORROWER  AND LENDER  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.  BORROWER AND LENDER  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)  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,  and the other rights and obligations of Lender  hereunder and
under the other Loan  Documents;  in a minimum  amount of  $5,000,000  provided,
however,  that  Borrower may continue to deal solely and directly with 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 Borrower by Lender
and the Assignee, and (ii) Lender and its Assignee have delivered to Borrower an
Assignment  and   Acceptance.   Anything   contained   herein  to  the  contrary
notwithstanding,  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 Lender provides Borrower with such written
notice and an executed  Assignment and Acceptance,  (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) 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  Borrower  and the  Assignee;
provided,  however,  that nothing  contained  herein shall  release an assigning
Lender  from  obligations  that  survive  the  termination  of  this  Agreement,
including  such  assigning  Lender's  obligations  under  Section  16.9  of this
Agreement.

     (c) Immediately upon Borrower's  receipt of such 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 rights and duties of Lender arising therefrom.

     (d) Lender may at any time sell to one or more commercial banks,  financial
institutions,  or other Persons not Affiliates of such Lender (a  "Participant")
participating  interests in the Obligations,  and the other rights and interests
of Lender hereunder and under the other Loan Documents provided,  however,  that
(i) Lender shall remain the "Lender" for all purposes of this  Agreement and the
other Loan Documents and the Participant receiving the participating interest in
the  Obligations,  and the other rights and interests of Lender  hereunder shall
not  constitute  a  "Lender"  hereunder  or under the other Loan  Documents  and
Lender's  obligations under this Agreement shall remain  unchanged,  (ii) Lender
shall remain solely  responsible for the performance of such obligations,  (iii)
Borrower and Lender shall  continue to deal solely and directly  with each other
in connection with Lender's rights and obligations  under this Agreement and the
other Loan Documents,  (iv) Lender shall not 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 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 Lender,  or (E) change the amount or due dates of scheduled
principal repayments or prepayments or premiums,  and (v) all amounts payable by
Borrower  hereunder  shall  be  determined  as  if  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 Lender under this Agreement.
The rights of any  Participant  only shall be derivative  through  Lender and no
Participant  shall  have any  rights  under  this  Agreement  or the other  Loan
Documents or any direct rights as to Borrower,  the  Collections  of Borrower or
its 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 Lender.

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

     (f) Any other  provision in this Agreement  notwithstanding,  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  Borrower may not assign this  Agreement or any rights or duties  hereunder
without  Lender's prior written consent and any prohibited  assignment  shall be
absolutely  void ab initio.  No consent to  assignment  by Lender shall  release
Borrower from its  Obligations.  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 Borrower is required in  connection  with any
such assignment.

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 Borrower therefrom,  shall be effective unless the same shall be in
writing  and signed by Lender and  Borrower  and then any such waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
for which given.

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

16. GENERAL PROVISIONS.

     16.1  Effectiveness.  This Agreement shall be binding and deemed  effective
when executed by Borrower and Lender.

     16.2 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.

     16.3  Interpretation.   Neither  this  Agreement  nor  any  uncertainty  or
ambiguity  herein shall be construed  against Lender or Borrower,  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.

     16.4 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.

     16.5 Withholding  Taxes.  All payments made by Borrower  hereunder or under
any note or other Loan Document will be made without  setoff,  counterclaim,  or
other  defense.  In addition,  all such payments will be made free and clear of,
and without  deduction or withholding  for, any present or future Taxes,  and in
the event any  deduction or  withholding  of Taxes is required,  Borrower  shall
comply with the  penultimate  sentence of this Section 16.5.  "Taxes" shall mean
any taxes,  levies,  imposts,  duties,  fees,  assessments  or other  charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein 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  Lender,  or (ii) to the extent  that such tax
results  from a change  in the  circumstances  of  Lender  (or in the case of an
assignee of Lender, a change in the circumstances  occurring after such assignee
became  a  lender  hereunder)  including  a change  in the  residence,  place of
organization,  or  principal  place of  business  of Lender,  or a change in the
branch or lending office of Lender  participating  in the transactions set forth
herein) and all interest, penalties or similar liabilities with respect thereto.
If any Taxes are so levied or imposed, 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 or Loan
Document,  including  any  amount  paid  pursuant  to this  Section  16.5  after
withholding  or deduction for or on account of any Taxes,  will not be less than
the amount provided for herein;  provided,  however,  that Borrower shall not be
required to increase any such amounts  payable to Lender if the increase in such
amount payable results from Lender's own willful  misconduct or gross negligence
(as finally  determined  by a court of competent  jurisdiction).  Borrower  will
furnish to Lender 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 Borrower.

     16.6 Amendments in Writing. This Agreement only can be amended by a writing
signed by Lender and Borrower.

     16.7 Counterparts;  Electronic 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  or other  electronic  method of transmission  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 or
other electronic  method of transmission 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.

     16.8 Revival and Reinstatement of Obligations. If the incurrence or payment
of the  Obligations  by Borrower or  Guarantor  or the transfer to Lender of any
property  should for any reason  subsequently be declared to be void or voidable
under any state,  provincial,  or federal  law  relating to  creditors'  rights,
including provisions of the Bankruptcy Code relating to fraudulent  conveyances,
preferences,  or other voidable or recoverable payments of money or transfers of
property  (collectively,  a "Voidable  Transfer"),  and if Lender 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 Lender is required or elects to repay or
restore, and as to all reasonable costs,  expenses, and attorneys fees of Lender
related thereto,  the liability of Borrower or Guarantor  automatically shall be
revived,  reinstated,  and  restored  and shall  exist as though  such  Voidable
Transfer had never been made.

     16.9 Confidentiality.  Lender agrees that material,  non-public information
regarding Borrower and its Subsidiaries,  their operations, assets, and existing
and  contemplated  business  plans shall be treated by Lender in a  confidential
manner,  and shall not be  disclosed by Lender to Persons who are not parties to
this Agreement,  except:  (a) to attorneys for and other advisors,  accountants,
auditors,  and  consultants  to Lender,  (b) to  Subsidiaries  and Affiliates of
Lender,  provided  that any such  Subsidiary  or Affiliate  shall have agreed to
receive such  information  hereunder  subject to the terms of this Section 16.9,
(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 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  Lender),  (f) in  connection  with  any  assignment,
prospective  assignment,  sale,  prospective sale,  participation or prospective
participations,  or pledge or prospective pledge of 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 16.9 shall  survive for 2 years after the payment in
full of the Obligations.

     16.10 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.

                          [Signature pages to follow.]


<PAGE>




                 [Signature Page to Loan and Security Agreement]


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


                                        ANACOMP, INC.,
                                        an Indiana corporation
                                        By: Linster W. Fox
                                        Title: Executive Vice President
                                               and Chief Financial Officer


                                        WELLS FARGO FOOTHILL, INC.,
                                        a California corporation

                                        By: Charles W. Kim
                                        Title:   Vice President






<PAGE>



<TABLE>
<CAPTION>


                             EXHIBITS AND SCHEDULES
<S>                        <C>
Exhibit A-1                Form of Assignment and Acceptance
Exhibit C-1                Form of Compliance Certificate
Exhibit L-1                Form of LIBOR Notice


Schedule D-1               Designated Account
Schedule L-1               Lender's Account
Schedule M-1               Material Locations
Schedule P-1               Permitted Liens
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 Borrower
Schedule 5.8(c)            Capitalization of Borrower's Subsidiaries
Schedule 5.10              Litigation
Schedule 5.13              Employee Benefits
Schedule 5.14              Environmental Matters
Schedule 5.16              Intellectual Property
Schedule 5.18              Deposit Accounts and Securities Accounts
Schedule 5.20              Permitted Indebtedness
Schedule 5.23              Material Subsidiaries

</TABLE>




<PAGE>





                                  Schedule A-1
                                Lender's Account

     An account at a bank  designated by Lender from time to time as the account
into which  Borrower  shall make all payments to Lender under this Agreement and
the other Loan  Documents;  unless and until  Lender  notifies  Borrower  to the
contrary, Lender's Account shall be that certain deposit account bearing account
number  323-266193 and maintained by Lender with JPMorgan Chase Bank, 4 New York
Plaza, 15th Floor, New York, New York 10004, ABA #021000021.



<PAGE>



                                  Schedule D-1
                               Designated Account

     Account number _________ of Borrower maintained with Borrower's  Designated
Account  Bank,  or such other deposit  account of Borrower  (located  within the
United  States) that has been  designated  as such,  in writing,  by Borrower to
Lender.

     "Designated  Account Bank" means  ____________,  whose office is located at
_________, and whose ABA number is _________________.



<PAGE>






                                  Schedule M-1
                               Material Locations

Atlanta
     3980 Dekalb Tech. Parkway
     Suite 640
     Atlanta, GA  30340
---------------------------------------------
---------------------------------------------

Baltimore
     6007 Corporate Drive
     Suite H
     Baltimore, MD  21236
---------------------------------------------
---------------------------------------------

Boston
     39 Brooks Drive
     Braintree, MA  02184
---------------------------------------------

Chicago
     150 Spring Lake Drive
     Itasca, IL  60143
---------------------------------------------
---------------------------------------------

Dallas
     2214 Paddock Way Drive
     Suite 200
     Grand Prairie, TX  75050
---------------------------------------------
---------------------------------------------

Phoenix
     4829 S. 36th Street
     Suite 3, 4 & 5
---------------------------------------------
---------------------------------------------

Herndon
     13873 Park Center Road
     Herndon, VA 20171
---------------------------------------------
---------------------------------------------

Sacramento
     3855 N. Freeway Blvd.
     Suite 110
     Sacramento, CA  95834
---------------------------------------------
---------------------------------------------

San Diego
     15378 Ave. of Science
     San Diego, CA  92128
---------------------------------------------
---------------------------------------------

Vista
     1491 Poinsettia Avenue
     Vista, CA  92081-8541
---------------------------------------------
---------------------------------------------
New Jersey
---------------------------------------------
     105 Newfield Avenue
     Edison, NJ  08837




<PAGE>

<TABLE>
<CAPTION>

                                Table of Contents

                                                                                                              Page

1.       DEFINITIONS AND CONSTRUCTION............................................................................1
<S>      <C>                                                                                                   <C>

         1.1      Definitions....................................................................................1

         1.2      Accounting Terms..............................................................................34

         1.3      Code..........................................................................................34

         1.4      Construction..................................................................................34

         1.5      Schedules and Exhibits........................................................................35

2.       LOAN AND TERMS OF PAYMENT..............................................................................35

         2.1      Revolver Advances.............................................................................35

         2.2      [Intentionally Omitted.]......................................................................36

         2.3      Borrowing Procedures and Settlements..........................................................36

         2.4      Payments......................................................................................37

         2.5      Overadvances..................................................................................38

         2.6      Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations...................38

         2.7      Cash Management...............................................................................40

         2.8      Crediting Payments............................................................................42

         2.9      Designated Account............................................................................42

         2.10     Maintenance of Loan Account; Statements of Obligations........................................42

         2.11     Fees..........................................................................................42

         2.12     Letters of Credit.............................................................................43

         2.13     LIBOR Option..................................................................................46

         2.14     Capital Requirements..........................................................................48

3.       CONDITIONS; TERM OF AGREEMENT..........................................................................49

         3.1      Conditions Precedent to the Initial Extension of Credit.......................................49

         3.2      Conditions Subsequent to the Initial Extension of Credit......................................53

         3.3      Conditions Precedent to all Extensions of Credit..............................................54

         3.4      Term..........................................................................................54

         3.5      Effect of Termination.........................................................................54

         3.6      Early Termination by Borrower.................................................................55

4.       CREATION OF SECURITY INTEREST..........................................................................56

         4.1      Grant of Security Interest....................................................................56

         4.2      Negotiable Collateral.........................................................................56

         4.3      Collection of Accounts, General Intangibles, and Negotiable Collateral........................56

         4.4      Filing of Financing Statements; Commercial Tort Claims; Delivery of
                  Additional Documentation Required.............................................................56

         4.5      Power of Attorney.............................................................................58

         4.6      Right to Inspect..............................................................................58

         4.7      Control Agreements............................................................................59

5.       REPRESENTATIONS AND WARRANTIES.........................................................................59

         5.1      No Encumbrances...............................................................................59

         5.2      Eligible Accounts.............................................................................59

         5.3      [Intentionally Omitted.]......................................................................60

         5.4      Equipment.....................................................................................60

         5.5      Location of Inventory and Equipment...........................................................60

         5.6      Inventory Records.............................................................................60

         5.7      State of Incorporation; Location of Chief Executive Office; FEIN;
                  Organizational ID Number; Commercial Tort Claims..............................................60

         5.8      Due Organization and Qualification; Subsidiaries..............................................60

         5.9      Due Authorization; No Conflict................................................................61

         5.10     Litigation....................................................................................63

         5.11     No Material Adverse Change....................................................................63

         5.12     Fraudulent Transfer...........................................................................63

         5.13     Employee Benefits.............................................................................63

         5.14     Environmental Condition.......................................................................65

         5.15     Brokerage Fees................................................................................65

         5.16     Intellectual Property.........................................................................65

         5.17     Leases........................................................................................66

         5.18     Deposit Accounts and Securities Accounts......................................................66

         5.19     Complete Disclosure...........................................................................66

         5.20     Indebtedness..................................................................................66

         5.21     Inactive Subsidiaries.........................................................................66

         5.22     Material Location.............................................................................66

         5.23     Material Subsidiary...........................................................................67

         5.24     Benefit Plans.................................................................................67

         5.25     IP Liens......................................................................................67

6.       AFFIRMATIVE COVENANTS..................................................................................67

         6.1      Accounting System.............................................................................67

         6.2      Collateral Reporting..........................................................................67

         6.3      Financial Statements, Reports, Certificates...................................................68

         6.4      Guarantor Reports.............................................................................71

         6.5      Returns.......................................................................................71

         6.6      Maintenance of Properties.....................................................................71

         6.7      Taxes.........................................................................................71

         6.8      Insurance.....................................................................................71

         6.9      Location of Inventory and Equipment...........................................................73

         6.10     Compliance with Laws..........................................................................73

         6.11     Leases........................................................................................73

         6.12     Existence.....................................................................................73

         6.13     Environmental.................................................................................73

         6.14     Disclosure Updates............................................................................74

         6.15     Formation of Subsidiaries.....................................................................74

         6.16     Benefit Plans.................................................................................75

         6.17     Patent Lien Releases..........................................................................77

7.       NEGATIVE COVENANTS.....................................................................................77

         7.1      Indebtedness..................................................................................77

         7.2      Liens.........................................................................................78

         7.3      Restrictions on Fundamental Changes...........................................................78

         7.4      Disposal of Assets............................................................................78

         7.5      Change Name...................................................................................79

         7.6      Nature of Business............................................................................79

         7.7      Prepayments and Amendments....................................................................79

         7.8      Change of Control.............................................................................79

         7.9      Consignments..................................................................................79

         7.10     Distributions.................................................................................79

         7.11     Accounting Methods............................................................................79

         7.12     Investments...................................................................................80

         7.13     Transactions with Affiliates..................................................................80

         7.14     Suspension....................................................................................80

         7.16     Use of Proceeds...............................................................................80

         7.17     Inventory and Equipment with Bailees..........................................................80

         7.18     Financial Covenants...........................................................................80

         7.19     Contracts.....................................................................................83

         7.20     ERISA.........................................................................................83

         7.21     Maintenance Revenue Accounts..................................................................84

8.       EVENTS OF DEFAULT......................................................................................84

9.       THE LENDER'S RIGHTS AND REMEDIES.......................................................................87

         9.1      Rights and Remedies...........................................................................87

         9.2      Remedies Cumulative...........................................................................90

10.      TAXES AND EXPENSES.....................................................................................90

11.      WAIVERS; INDEMNIFICATION...............................................................................90

         11.1     Demand; Protest; etc..........................................................................90

         11.2     Lender's Liability for Borrower Collateral....................................................90

         11.3     Indemnification...............................................................................91

12.      NOTICES................................................................................................91

13.      CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.............................................................92

14.      ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.............................................................93

         14.1     Assignments and Participations................................................................93

         14.2     Successors....................................................................................95

15.      AMENDMENTS; WAIVERS....................................................................................96

         15.1     Amendments and Waivers........................................................................96

         15.2     No Waivers; Cumulative Remedies...............................................................96

16.      GENERAL PROVISIONS.....................................................................................96

         16.1     Effectiveness.................................................................................96

         16.2     Section Headings..............................................................................96

         16.3     Interpretation................................................................................96

         16.4     Severability of Provisions....................................................................96

         16.5     Withholding Taxes.............................................................................96

         16.6     Amendments in Writing.........................................................................97

         16.7     Counterparts; Electronic Execution............................................................97

         16.8     Revival and Reinstatement of Obligations......................................................97

         16.9     Confidentiality...............................................................................98

         16.10    Integration...................................................................................98

</TABLE>