<PAGE>
 
                                 EXHIBIT 10.23

                   REVOLVING CREDIT AGREEMENT BY AND BETWEEN
                   THE REGISTRANT AND CORESTATES BANK, N.A.
<PAGE>
 
                          REVOLVING CREDIT AGREEMENT


                          dated as of August 15, 1996


                                    between


                                   RYKA INC.


                                      and


                             CORESTATES BANK, N.A.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<S>                                                                           <C> 
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS ................................... 1
          --------------------------------
     SECTION 1.01. Defined Terms ............................................. 1
     SECTION 1.02. Accounting Terms .......................................... 5
     
ARTICLE II AMOUNT AND TERMS OF THE LOANS; SECURITY FOR THE LOANS ............. 6
           -----------------------------------------------------
     SECTION 2.01. Revolving Credit .......................................... 6
     SECTION 2.02. Termination or Reduction of Commitment .................... 6
     SECTION 2.03. Notice and Manner of Borrowing ............................ 6
     SECTION 2.04. Interest .................................................. 6
     SECTION 2.05. Note ...................................................... 6
     SECTION 2.06. Mandatory and Optional Prepayments ........................ 7
     SECTION 2.07. Method of Payment; Negative Collected Balance Charge ...... 7
     SECTION 2.08. Use of Proceeds ........................................... 8
     SECTION 2.09. Letter of Credit .......................................... 8
     SECTION 2.10. Security for the Loans .................................... 8

ARTICLE III CONDITIONS PRECEDENT ............................................. 9
            --------------------
     SECTION 3.01. Condition Precedent to First Loan ......................... 9
     SECTION 3.02. Condition Precedent to All Loans ..........................11

ARTICLE IV REPRESENTATION AND WARRANTIES .....................................11
           -----------------------------
     SECTION 4.01. Incorporation, Good Standing, Due Qualification,           
                        Corporate Power and Authority ........................11
     SECTION 4.02. Due Authorization; No Consents or Contravention ...........12
     SECTION 4.03. Legally Enforceable Agreement .............................12
     SECTION 4.04. Financial Statements; Accuracy of Information .............12
     SECTION 4.05. Labor Disputes and Acts of God ............................13
     SECTION 4.06. Other Agreements ..........................................13
     SECTION 4.07. Litigation ................................................13
     SECTION 4.08. No Defaults on Outstanding Judgments or Orders ............13
     SECTION 4.09. Ownership and Liens .......................................14
     SECTION 4.10. Ownership of Stock; Subsidiaries ..........................14
     SECTION 4.11. ERISA .....................................................14
     SECTION 4.12. Operation of Business .....................................14
     SECTION 4.13. Taxes .....................................................14
     SECTION 4.14. Debt ......................................................15
     SECTION 4.15. Environmental Matters......................................15

ARTICLE V AFFIRMATIVE COVENANTS ..............................................15
          ---------------------
     SECTION 5.01. Maintenance of Existence ..................................15
     SECTION 5.02. Maintenance of Records ....................................15
     SECTION 5.03. Maintenance of Properties .................................15
</TABLE> 

                                       1
<PAGE>
 
<TABLE> 
<S>                                                                           <C>
     SECTION 5.04. Conduct of Business; Permits and Approvals; Compliance
                      with Laws ..............................................15
     SECTION 5.05. Maintenance of Insurance ..................................15
     SECTION 5.06. Payment of Debt; Payment of Taxes; Etc.....................16
     SECTION 5.07. Right of Inspection .......................................16
     SECTION 5.08. Reporting Requirements ....................................16
     SECTION 5.09. Lockbox ...................................................19
     SECTION 5.10. Principal Deposit Bank ....................................19
     SECTION 5.11. Further Assurances ........................................19
                                                                             
ARTICLE VI  NEGATIVE COVENANTS ...............................................19
            ------------------
     SECTION 6.01. Liens .....................................................19
     SECTION 6.02. Debt ......................................................21
     SECTION 6.03. Mergers, Etc. .............................................21
     SECTION 6.04. Sales and Leaseback .......................................21
     SECTION 6.05. Dividends .................................................21
     SECTION 6.06. Sale of Assets ............................................21
     SECTION 6.07. Investments ...............................................22
     SECTION 6.08. Guaranties, Etc. ..........................................22
     SECTION 6.09. Transaction With Affiliate ................................22
     SECTION 6.10. Hazardous Materials; Indemnification ......................22

ARTICLE VII  FINANCIAL COVENANTS .............................................23
             -------------------
     SECTION 7.01. Minimum Working Capital ...................................23
     SECTION 7.02. Minimum Tangible Net Worth ................................23
     SECTION 7.03. Leverage Ratio ............................................23

ARTICLE VIII  EVENTS OF DEFAULT ..............................................23
              -----------------
     SECTION 8.01. Event of Default ..........................................23

ARTICLE IX  MISCELLANEOUS ....................................................26
            -------------
     SECTION 9.01. Amendments, Etc. ..........................................26
     SECTION 9.02. Notices, Etc. .............................................26
     SECTION 9.03. No Waiver; Remedies .......................................27
     SECTION 9.04. Successors and Assigns ....................................27
     SECTION 9.05. Costs, Expenses, and Taxes ................................27
     SECTION 9.06. Right of Set Off ..........................................27
     SECTION 9.07. Governing Law .............................................28
     SECTION 9.08. Severability of Provisions ................................28
     SECTION 9.09. Survival of Agreement .....................................28
     SECTION 9.10. Heading ...................................................28
     SECTION 9.11. JURISDICTION AND VENUE ....................................28
     SECTION 9.12. WAIVER OF JURY TRIAL ......................................28
</TABLE> 

                                       2
<PAGE>
 
                          REVOLVING CREDIT AGREEMENT


     This REVOLVING CREDIT AGREEMENT, dated as of August 15, 1996, is between 
RYKA INC., a Delaware corporation (the "Borrower"), and CORESTATES BANK, N.A., a
national banking association (the "Bank"). The parties hereto agrees as follows:

                                   ARTICLE I

                       DEFINITIONS AND ACCOUNTING TERMS
                       --------------------------------

     SECTION 1.01.  Defined Terms.  As used in this Agreement, the following 
terms have the following meanings (terms defined in the singular to have the 
same meaning when used in the plural and vice versa):

     "Accounts" has the meaning given to that term in the Security Agreement.

     "Account Debtor" has the meaning given to that term in the Security 
Agreement.

     "Affiliate" meaning any Person (1) which directly or indirectly controls, 
or is controlled by, or is under common control with the Borrower or a 
Subsidiary (including, but not limited to KPR; (2) which directly or indirectly 
beneficially owns or holds five percent (5%) or more of any class of voting 
stock of the Borrower or any Subsidiary; or (3) five percent (5%) or more of the
voting stock of which is directly or indirectly beneficially owned or held by
the Borrower or a Subsidiary. The term control means the possession, directly or
indirectly, of the power to direct or cause the directly of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.

     "Agreement" means this Revolving Credit Agreement, as amended, 
supplemented, or modified from time to time.

     "Application and Agreement" means the Application and Agreement in the 
Bank's form to be delivered by the Borrower as a condition to the insurance by 
the Bank of a letter of credit for the account of the Borrower under the terms 
of this Agreement.

     "Assignment of Life Insurance" means the Assignment of Life Insurance in 
the Bank's form assigning a policy of life insurance insuring the life of
Micheal G. Rubin to the Bank, to be delivered by Michael G. Rubin under the
terms of this Agreement.

     "Borrower's Certificate" means the certificate in the Bank's form to be 
furnished by the Borrower to the Bank pursuant to Section 5.08(1).
<PAGE>
 
     "Borrowing Base" means (1) 80% of the Borrower's Qualified Accounts plus 
(2) 50% of the Borrower's Eligible Inventory not exceeding the lessor of 
$3,500,000 or advances supported by Qualified Accounts for the months of January
through April and August through December, increasing to 55% of the Borrower's 
Eligible Inventory not exceeding $3,500,000 for the months of May through July.

     "Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial bank in Philadelphia are authorized or required to close under 
the laws of the Commonwealth of Pennsylvania.

     "Capital Lease" means all leases which have been or should be capitalized
on the books of the lessee in accordance with GAAP.

     "Cash Collateral Account" means the deposit account to be established by 
the Borrower at the Bank to receive the deposit of payments from the Borrower's 
Account Debtor

     "Collateral" means all property which is subject or is to be subject to the
Liens granted by the Security Agreement and the Assignment of Life Insurance.

     "Commitment" means the Bank obligation to make Loans to the Borrower 
pursuant to Section 2.01 in the amount referred to therein.

     Debtor" means (1) indebtedness or liability for borrowed money or for the 
deferred purchase price of property or services (including trade obligations); 
(2) obligations as lessee under Capital Leases; (3) current liabilities in 
respect of unfunded vested benefits under any Plan; (4) obligations under 
letters of credit issued for the account of any Person; (5) all obligations 
arising under acceptance facilities; (6) all guaranties, endorsements (other 
than for collection or deposit in the ordinary course of business), and other 
contingent obligations to purchase, to provide funds for payment, to supply 
funds to invest in any Person, or otherwise to assure a creditor against loss; 
and (7) obligations secured by any Lien on property owned by any Person, whether
or not the obligations have been assumed.

     Default" means any of the events specified in Section 8.01, whether or not 
any requirement for the giving of notice, the lapse of time, or both, or any 
other condition, has been satisfied.

     "Eligible Inventory: means Inventory, as such term is defined in the 
Security Agreement, (1) which is not more than nine months from purchase date 
and is not off-price inventory, and (2)with respect to Inventory in a warehouse,
said Inventory is located in a warehouse reported to the Bank as one utilized by
the Borrower as required by this Agreement and the Security Agreement.

     "Environmental Law" means any presently existing or hereafter enacted or 
decided federal, state or local statutory or common laws relating to pollution 
or protection of the 

                                       2
<PAGE>
 
environment, including without limitation, any common law of nuisance or 
trespass, and any law or regulation relating to emissions, discharges, releases 
or threatened release of pollutants, contaminations or chemicals or industrial, 
toxic or hazardous substances or wastes into the environment (including without 
limitation, ambient air, surface water, groundwater, land surface or subsurface 
strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants 
or chemicals, or industrial, toxic hazardous substances or wastes.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as 
amended from time to time, and the regulations and published interpretations 
thereof.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
which together with the Borrower would be treated as a single employer under
Section 4001 of ERISA.

     "Event of Default" means any of the events specified in Section 8.01, 
provided that any requirement for the giving of notice, the lapse of time, or 
both, or any other condition, has been satisfied.

     "GAAP" means generally accepted accounting principles in the United States.

     "Guarantor" means Michael G. Rubin.

     "Guaranty" means the Guaranty in the Bank's form guarantying the 
obligations of the Borrower to the Bank, to be delivered by the Guarantor under 
the terms of this Agreement.

     "Hazardous Material" means any contaminations, hazardous substances, 
regulated substances or hazardous wastes which may be the subject of liability 
pursuant to any Environmental Law.

     "Head Office" means the principal office of the Bank at Board and Chestnut 
Streets, Philadelphia, Pennsylvania 19107.

     "KPR" means KPR Sports International, Inc., a Pennsylvania corporation.

     "Lien" means any mortgage, deed of trust, pledge, security interest, 
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or 
other), or preference, priority, or other security agreement or preferential 
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effects as any of the 
foregoing, and the recording of any mortgage or deed of trust or the filing of 
any financing statement under the Uniform Commercial Code or comparable law of 
any jurisdiction to evidence any of the foregoing).

                                       3
<PAGE>
 
     "Loan" has the meaning assigned to such term in Section 2.01.

     "Loan Documents" means this Agreement, the Note, the Security Agreement, 
the Assignment of Life Insurance, the Subordination Agreement, any Application 
and Agreement and the Guaranty.

     "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA 
which covers employees of the Borrower or any ERISA Affiliate.

     "Note" has the meaning assigned to such term in Section 2.05.

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

     "Person" means an individual, partnership, corporation, limited liability 
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other entity of whatever nature.

     "Plan" means any plan established, maintained, or to which contributions 
have been made by the Borrower or any ERISA Affiliate.

     "Prime Rate" means the rate of interest for loans established by the Bank 
at its Head Office from time to time as its prime rate.

     "Prohibited Transaction" means any transaction set forth in Section 406 of 
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.

     "Qualified Account" has the meaning assigned to such term in the Security 
Agreement with the further addition that in order for any Account of the 
Borrower to be a Qualified Account, (1) it shall be aged less than 90 days from 
date of invoice; and (2) it shall not be (a) a foreign receivable, unless 
supported by credit insurance or a letter of credit or a bank guaranty 
acceptable to the Bank, (b) a "contra account" (defined by the Bank as an
Account off set by any claim owning to the Account Debtor), provided, however,
that the ineligible amount for any contra account shall not exceed the amount of
the applicable claim or claims, or (c) a "tainted receivable" (defined by the
Bank as an Account owned by an Account Debtor 50% or more of whose Accounts are
not Qualified Accounts); or (3) it shall be an Account otherwise approved by the
Bank.

     "Reportable Event" means any of the events set forth in Section 4043 of 
ERISA.

     "Security Agreement" means the Security Agreement (Account, Inventory and
Equipment) in the Bank's form granting to the Bank a security interest in the
Borrowers assets,

                                       4
<PAGE>
 
including but not limited to its Accounts, inventory and equipment, to be 
delivered by the Borrower under the terms of this Agreement.

     "Subordinated Debt" means indebtedness for borrowed money of the Borrower 
subordinated to all indebtedness of the Borrower to the Bank on terms 
satisfactory to the Bank.

     "Subordination Agreement" means the Subordination Agreement in the Bank's 
form subordinating the indebtedness of the Borrower to KPR to the indebtedness 
of the Borrower to the Bank, to be delivered by the Borrower and KPR under the 
terms of this Agreement.

     "Subsidiary" means a corporation shares of stock of which having ordinary 
voting power (other than stock having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other 
managers of such corporation are at the time owned, or the management of which 
is otherwise controlled, directly or indirectly through one or more 
intermediaries or both, by the Borrower.

     "Tangible Net Worth" of any corporation means (1) the aggregate amount of 
all assets of such corporation as may be properly classified as such, other than
(a) all assets of such corporation which are properly classified as intangible 
assets including, without limiting the generality of the foregoing, franchises, 
licenses, permits, patents, patent applications, copyrights, trademarks, trade 
names, goodwill, experimental or organizational expense and other like 
intangibles, including the excess paid for assets acquired over their respective
book values on the books of the corporation from which acquired, and (b) all 
loans to shareholders, officers and employees, less (2) the aggregate amount of 
all liabilities of such corporation, all determined in accordance with GAAP, 
consistently applied.

     "Termination Date" means the earlier of the date which is one year from the
date of this Agreement or the date of the termination in full of the obligations
of the Bank hereunder in accordance with the terms hereof.

     "Working Capital" means the excess of current assets (limited to cash, 
trade receivables, inventory and prepaid expenses) over current liabilities 
(including outstandings under this Agreement, trade payables, accrued expenses, 
current maturities of long term debt and Capital Leases) of the Borrower 
determined in accordance with GAAP consistently applied.

     SECTION 1.02. Accounting Terms. All accounting terms not specifically 
defined herein shall be construed in accordance with GAAP consistent with those 
applied in the preparation of the financial statements referred to in Section 
4.04, and all financial data submitted pursuant to this Agreement shall be 
prepared in accordance with such principles.

                                       5
<PAGE>
 
                                  ARTICLE II

             AMOUNT AND TERMS OF THE LOANS: SECURITY FOR THE LOANS
             -----------------------------------------------------

     SECTION 2.01.  Revolving Credit.  The Bank agrees on the terms and
conditions hereinafter set forth, to make loans (the "Loans") to the Borrower
from time to time during the period from the date of this Agreement up to but
not including the Termination Date in an aggregate amount not to exceed at any
time outstanding the lesser of Four Million Five Hundred Thousand Dollars
($4,500,000), as such amount may be reduced pursuant to Section 2.02, or the
Borrowing Base (the "Commitment"). Within the limits of the Commitment, the
Borrower may reborrow, prepay pursuant to Section 2.06(2), and reborrow under
this Section 2.01.

     SECTION 2.02.  Termination or Reduction of Commitment. The Borrower shall
have the right, upon at least five (5) Business Days' notice to Bank, to
terminate in whole or reduce in part the unused portion of the Commitment,
provided that each partial reduction shall be in the amount of not less than
Five Hundred Thousand Dollars ($500,000). The Commitment once reduced or
terminated may not be reinstated.

     SECTION 2.03.  Notice and Manner of Borrowing. The Borrower shall give the 
Bank written or telegraphic notice (effective upon receipt) not later than 12:00
noon on the day (which must be a Business Day) of any Loans under this
Agreement, specifying the date and amount thereof. On the date of such Loan and
upon fulfillment of the applicable conditions set forth in Article III, the Bank
will make such Loan available to the Borrower in immediately available funds by
crediting the amount thereof to the Borrower's account with the Bank.
 
     SECTION 2.04.  Interest. The Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Loans made under this Agreement
at a rate per annum equal to one-quarter percent (1/4%) in excess of the Prime
Rate. Any change in the interest rate resulting from a change in the Prime Rate
shall become effective as of the opening of business on the day on which such
change in the Prime Rate shall become effective. Interest shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Interest
shall be paid in immediately available funds on the first day of each month and
at maturity at the Head Office. At any time after the occurrence of an Event of
Default hereunder, the Bank may at its option and upon five (5) days written
notice to the Borrower specifying the Event of Default begin to charge and
accrue interest on the unpaid principal balance of the Note, on any other
amounts owing hereunder or thereunder and, to the extent permitted by law, on
any overdue interest thereon, until paid in full, payable on demand, at a rate
per annum which shall be three percent (3%) above the rate which would otherwise
be applicable.

     SECTION 2.05.  Note. All Revolving Credit Loans made by the Bank under this
Agreement shall be evidenced by, and repaid with interest in accordance with, a 
single promissory note of the Borrower in substantially the form of Exhibit A 
duly completed, in the principal amount of Four Million Five Hundred Thousand 
Dollars ($4,500,000), dated the date of 

                                       6


<PAGE>
 
this Agreement, payable to the Bank, and maturing as to principal on the 
Termination Date (said promissory note, as it may be hereafter amended, renewed 
or extended, the "Note"). The amount of each Loan and of each payment of 
principal and interest received by the Bank on account of the Loans shall be 
evidenced by the Bank's records, which shall, in the absence of error 
demonstrated by the Borrower, be conclusive as to the outstanding balance of the
Loans made by the Bank and interest thereon.

     SECTION 2.06.  Mandatory and Optional Prepayments.

          (1) The Borrower shall immediately prepay Loans upon the occurrence 
     of the following:

          (a)  If, after a reduction of the Commitment as provided in Section
               2.02 or at any other time, the aggregate unpaid principal balance
               of the Loans exceeds the Commitment, the Borrower shall
               immediately prepay Loans in an amount sufficient to reduce such
               aggregate unpaid principal balance to an amount that is not
               greater than the Commitment.

          (b)  If at any time the aggregate unpaid principal balance of the
               Loans exceeds the Borrowing Base, the Borrower shall immediately
               prepay Loans in an amount sufficient to reduce such aggregate
               unpaid principal balance to an amount that is not greater than
               the Borrowing Base.

          (2) The Borrower may prepay the Note in whole or in part with accrued 
     interest to the date of such prepayment on the amount prepaid.

          (3) Upon any prepayment by the Borrower, the Bank shall advise the 
     Borrower of, and the Borrower shall immediately pay to the Bank, accrued
     and unpaid interest on the amount of each prepayment of each Loan accrued
     at the rate applicable to such Loan to the date of such prepayment.

     SECTION 2.O7.  Method of Payment; Negative Collected Balance Charge. The 
Borrower shall make each payment under this Agreement and under the Note in 
lawful money of the United States to the Bank at the Head Office in immediately 
available funds. The Borrower hereby authorizes the Bank to apply all ledger 
balances (uncollected funds) in the Cash Collateral Account at the end of each 
Business Day to the payment of Loans outstanding on said day, provided that at 
the end of each month the Bank will assess a negative collected balance charge. 
Notwithstanding the foregoing, if the Borrower does not handle the Cash 
Collateral Account in a satisfactory manner, including by way of example but not
limited to allowing repeated overdrafts thereon, of if the Borrower's financial
condition is deteriorating or if required due to a change in applicable 
regulatory policies, the Bank reserve the right upon notice to the Borrower to 
apply only balances which are collected balances in the Cash Collateral Account 
at the end of each Business Day to the payment of Loans outstanding on said day.
The Borrower hereby authorized

                                       7
<PAGE>
 
the Bank to charge from time to time against the Cash Collateral Account or, if 
there are insufficient funds in the Cash Collateral Account, against any other 
account of the Borrower with the Bank any amount due under this Agreement or the
other Loan Documents when and as due. Whenever any payment to be made under 
this Agreement or under the Note shall be stated to be due on a day which is 
not a Business Day, such extension of time shall in such case included in the 
computation of the payment of interest and the commitment fee, as the case may 
be.

     SECTION 2.08.  Use of Proceeds. The proceeds of the Loans hereunder shall
be used by the Borrower for working capital purposes. The Borrower will not,
directly or indirectly, use any part of such proceeds for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
Person for the purpose of purchasing or carrying any such margin stock.

     SECTION 2.09.  Letters of Credit. On the terms and conditions set forth 
herein and upon request of the Borrower, the Bank from time to time prior to the
Termination Date, in lieu of one or more Revolving Credit Loans, will issue 
documentary letters of credit for the account of the Borrower, in favor of such 
beneficiaries, expiring on such dates and specifying availability on such 
terms and conditions as shall be requested by the Borrower and be reasonably 
satisfactory to the Bank, provided that in no event shall any such letter of 
credit be written with a tenor of more than 120 days or to expire more than 
ninety (90) days after the Termination Date. In no event shall any such letter 
of credit be issued, if, after giving effect thereto, (1) the aggregate amount 
available under all letters of credit issued on behalf of the Borrower and 
outstanding (the "Letter of Credit Balance") would exceed $5,000,000 or (2) the 
Letter of Credit Balance plus the then outstanding principal balance of all 
Revolving Credit Loans would exceed the Commitment. Each letter of credit shall 
be supported by Collateral in the same manner and subject to the same advance 
ratios as Revolving Credit Loans and shall be shown as part of outstanding loan 
balances on the Borrower's Certificates required by Section 5.08(1). Any such 
letter of credit shall be issued on the express condition, to which the Borrower
agrees, that the Borrower shall provide to the Bank on its forms an Application 
and Agreement for the issuance of such letter of credit providing for the 
reimbursement to be made by the Borrower if or when drafts are paid under any 
such letter of credit. The Borrower may reimburse the Bank for the payment of 
such drafts out of proceeds of a Revolving Credit Loan, if the Borrower is then 
otherwise entitled to borrow hereunder, Any provision of Section 2.01 to the 
contrary notwithstanding, the Commitment shall at all times be deemed to be 
utilized by the amount of the Letter of Credit Balance from time to time for all
purposes of the Agreement.

     SECTION 2.10. Security for the Loans. As Security for the Loans and for all
amounts payable hereunder and under the Notes as well as for all other existing 
and future liabilities, whether absolute or contingent, due or to become due of 
the Borrower to the Bank under any other loans or extensions of credit by the 
Bank to the Borrower, the Bank shall have a valid, perfected first lien on and 
security interest in the following Collateral:

                                       8
<PAGE>
 
          (1) all of the property, real or personal, tangible or intangible of
     the Borrower, including without limiting the generality of the foregoing,
     all of the Borrower's accounts receivable, inventory, machinery, equipment,
     fixtures, documents of title, contract rights, general intangibles,
     instruments and deposits;

          (2) an assignment of life insurance insuring the life of Michael G.
     Rubin in the amount of not less than $4,000,000 (subject to finalization
     with the related insurance company post-closing);

and in addition the Bank shall have

          (3) the unconditional guaranty by the Guarantor of the payment and 
performance by the Borrower of the liabilities of the Borrower to the Bank, 
limited to $2,000,000; and

          (4) the subordination of the Borrower's indebtedness to KPR to the 
Borrower's indebtedness to the Bank.

     The Borrower shall establish and maintain a lockbox at a Bank location and 
shall direct all of its Account Debtors to remit all payments owing to the 
Borrower to said lockbox. All said remittances shall be deposited by the Bank 
into and processed through the Cash Collateral Account and shall be applied to 
pay outstanding Loans on a daily basis pursuant to Section 2.07.

     To the foregoing ends, the Borrower will prior to or contemporaneously with
the execution and delivery of this Agreement (A) execute and deliver to the Bank
the Security Agreement, the Assignment of Life Insurance and the Subordination
Agreement; (B) establish the lockbox and the Cash Collateral Account; (C)
procure the execution and delivery of the Guaranty by the Guarantor and (D)
procure the execution and delivery of the Subordination Agreement by KPR.

                                  ARTICLE III

                             CONDITIONS PRECEDENT
                             --------------------

     SECTION 3.01. Condition Precedent to First Loan. The obligation of the Bank
to make the first Loan to the Borrower is subject to the condition precedent 
that the Bank shall have received on or before the day of such Loan each of the 
following, in form and substance satisfactory to the Bank and its counsel:

          (1)  The Note duly executed by the Borrower.

          (2)  The Security Agreement duly executed by the Borrower, together 
               with

                                       9
<PAGE>
 
          (a)  such number of Financing Statements (UCC-1) duly executed by the
     Borrower, as debtor, for filing under the Uniform Commercial Code of all
     jurisdictions necessary or, in the opinion of the Bank, desirable to
     perfect the security interests created by the Security Agreement;

          (b)  evidence satisfactory to the Bank of the rental of warehouse
     space, including name, address (including county) and square footage, for
     all warehouses utilized by the Borrower for delivery and storage of
     Collateral; and

          (c)  completion of all steps necessary to establish the lockbox and 
     the Cash Collateral Account.

     (3) The Assignment of Life Insurance duly executed by the Michael G. Rubin.
     
     (4) The Guaranty duly executed by the Guarantor.

     (5) Landlord's Waiver(s) and or Warehouseman's Waiver(s) as required by the
Security Agreement.

     (6) Releases and terminations executed by Midlantic Bank, N.A. of existing 
liens, security interests and assignments in favor of Midlantic Bank, N.A.

     (7) The Subordination Agreement duly executed by the Borrower and KPR.

     (8) Evidence satisfactory to the Bank of infusion into the Borrower of at 
least $2,000,000 of additional equity or Subordinated Debt from some source 
other than KPR.

     (9) A certificate (dated the date of this Agreement) of the Secretary of 
the Borrower (a) setting forth and certifying as true and correct all corporate 
action taken by the Borrower, including resolutions of its Board of Directors, 
authorizing the execution, delivery, and performance of the Loan Documents to 
which it is a party and each other document to be delivered pursuant to this 
Agreement and (b) certifying the names and true signatures of the officers of 
the Borrower authorized to sign the Loan Documents to which it is a party and 
the other documents to be delivered by the Borrower under this Agreement;

     (10) Insurance policies designating the Bank as loss payee, as required by 
the Security Agreement.
     
     (11) A favorable opinion of Astor, Weiss, Kaplan & Rosenblum, counsel for 
the Borrower and the Guarantor, in form and substance satisfactory to the Bank.

                                      10
<PAGE>
 
     SECTION 3.02. Conditions Precedent to All Loans. The obligation of the Bank
to make each Loan (including the first Loan) shall be subject to the further 
conditions precedent that on the date of such Loan:

          (1) The Bank shall have received a Borrower's Certificate duly 
     completed and executed by the Borrower evidencing compliance with the 
     Borrowing Base and availability for the requested Loan; and 
     
          (2) The following statements shall be true and the Bank shall have 
received a certificate signed by a duly authorized officer of the Borrower dated
the date of such Loan, stating that

          (a)   The representations and warranties contained in Article IV of
                this Agreement are correct on and as of the date of such Loan as
                though made on and as of such date; and

          (b)   No material development not disclosed in writing by the Borrower
                to the Bank prior to the date of the last previous Loan
                hereunder (or in the case of the initial Loan, prior to the date
                of execution and delivery of this Agreement) has occurred in any
                litigation (including, without limitation, derivative actions),
                arbitration proceedings or governmental proceedings so
                disclosed, which in the reasonable opinion of the Bank is likely
                to materially adversely affect the financial condition or
                business of the Borrower or the Guarantor or impair the ability
                of the Borrower or the Guarantor to perform their obligations
                under the Loan Documents to which they are a party; and

          (c)   No Default or Event of Default has occurred and is continuing, 
                or would result from such Loan; and

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


                                  ARTICLE IV

                         REPRESENTATION AND WARRANTIES
                         -----------------------------

     The Borrower represents and warrants to the Bank that

     SECTION 4.01. Incorporation, Good Standing, Due Qualification, Corporate 
Power and Authority. The Borrower is a corporation duly incorporated, validly 
existing, and in good standing under the laws of the jurisdiction of its 
incorporation; is duly qualified as a foreign corporation and in good standing 
under the laws of each other jurisdiction in which such 

                                      11
<PAGE>
 
qualification is required; and has the corporate power and authority to own its 
assets and to transact the business in which it is now engaged or proposed to be
engaged, to enter into this Agreement and the other Loan Documents to which it
is a party and to borrow the Loans and pledge the Collateral as contemplated by 
this Agreement;

     SECTION 4.02.  Due Authorization; No Consents or Contravention. The 
execution, delivery, and performance by the Borrower of the Loan Documents to 
which it is a party have been duly authorized by all necessary corporate action
and do not and will not (1) require any consent or approval of the shareholders
of such corporation; (2) contravene such corporation's charter or bylaws; and,
with respect to the Borrower and the Guarantor, will not (3) violate any
provision of or cause or result in a breach of or constitute a default under any
law, rule, regulation (including, without limitation, Regulation U of the Board 
of Governors of the Federal Reserve System), order writ, judgment, injunction, 
decree, determination, or award presently in effect having applicability to the 
Borrower or the Guarantor; (4) cause or result in a breach of or constitute a 
default under any indenture or loan or credit agreement or any other agreement, 
lease, or instrument to which the Borrower or the Guarantor is a party or by 
which it or its properties may be bound or affected or; (5) cause or result in 
or require the creation or imposition of any Lien, upon or with respect to any 
of the properties now owned or hereafter acquired by the Borrower or the 
Guarantor except as contemplated by this Agreement.

     SECTION 4.03.  Legally Enforceable Agreement. This Agreement is, and each 
of the other Loan Documents when delivered under this Agreement will be, legal, 
valid, and binding obligations of the Borrower or the Guarantor, as the case may
be, enforceable against the Borrower or the Guarantor, as the case may be, in 
accordance with their respective terms, except to the extent that such 
enforcement may be limited by applicable bankruptcy, insolvency, and other 
similar laws affecting creditors' rights generally.

     SECTION 4.04.  Financial Statements; Accuracy of Information.

          (1)  The balance sheet of the Borrower as of December 31, 1995, and 
     the related statements of income, retained earnings and cash flows of the
     Borrower for the fiscal year then ended, and the accompanying footnotes,
     together with the opinion thereon, dated January 19, 1996 of Margolis &
     Company, P.C., independent certified public accountants, copies of which
     have been furnished to the Bank, are complete and correct and fairly
     present the financial condition of the Borrower for the periods covered by
     such statements, all in accordance with GAAP consistently applied, and
     since December 31, 1995, there has been no material adverse change in the
     condition (financial or otherwise), business, or operations of the
     Borrower. There are no liabilities of the Borrower, fixed or contingent,
     which are material but are not reflected in the financial statements or in
     the notes thereto, other than liabilities arising in the ordinary course
     of business since December 31, 1995.

                                      12




<PAGE>
 
               (2) The personal financial statement dated as of December 31,
     1995 and the tax returns for the years 1994 and 1995 of the Guarantor (or,
     if no tax return has been filed by the Guarantor for 1995 as of the
     closing, evidence of the Guarantor's request for extension, with copy of
     tax return to follow when filed), copies of which have been furnished to
     the Bank, are complete and correct and fairly present the financial
     condition of the Guarantor for the periods covered thereby.

               (3) All information, financial statements, exhibits and reports
     furnished by the Borrower and the Guarantor to the Bank in connection with
     this Agreement, the other Loan Documents and the borrowings contemplated
     hereby are, and all such information, financial statements, exhibits and
     reports hereafter furnished by the Borrower or the Guarantor to the Bank
     will be true and correct in every material respect on the date furnished to
     the Bank, and no such information, financial statements, exhibit or report
     contains or will contain any material misstatement of fact or omits or
     will omit to state a material fact or any fact necessary to make the
     statement contained therein not materially misleading.

     SECTION 4.05.  Labor Disputes and Acts of God. Neither the business nor the
properties of the Borrower or the Guarantor are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) materially and adversely affecting such business or
properties or the operation of the Borrower or the Guarantor.

     SECTION 4.06.  Other Agreements. Neither the Borrower nor the Guarantor is 
a party to any indenture, loan, or credit agreement, or to any lease or other 
agreement or instrument, or subject to any charter or corporate restriction 
which could have a material adverse effect on the business, properties, assets, 
operations, or conditions, financial or otherwise, of the Borrower or the 
Guarantor, or the ability of the Borrower or the Guarantor to carry out its 
obligations under the Loan Documents to which it is a party. Neither the
Borrower nor the Guarantor is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.

     Section 4.07.  Litigation. There is no pending or threatened action or 
proceeding against or affecting the Borrower or the Guarantor before any court, 
governmental agency, or arbitrator which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties, or business of the Borrower or the Guarantor or the ability of the
Borrower or the Guarantor to perform its obligation under the Loan Documents to
which it is a party.

     SECTION 4.08.  No Defaults on Outstanding Judgments or Orders. The 
Borrower and the Guarantor have satisfied all judgments and neither the 
Borrower not the Guarantor is in default with respect to any judgment, writ, 
injunction decree, rule, or regulation of any court, 

                                      13
<PAGE>
 
arbitrator, or federal, state, municipal, or other governmental authority, 
commission, board, bureau, agency or instrumentality, domestic or foreign.

     SECTION 4.09.  Ownership and Liens.  Each of the Borrower and the Guarantor
has title to, or valid leasehold interests, in all of its properties and assets,
real and personal, including the properties and assets and leasehold interest
reflected in the financial statements referred to in Section 4.04 (other than
any properties or assets disposed of in the ordinary course of business), and
none of the properties and assets owned by the Borrower or the Guarantor and
none of their leasehold interests is subject to any Lien, except such as may be
permitted pursuant to Section 6.01 of this Agreement.

     SECTION 4.10  Ownership of Stock; Subsidiaries.  At least 30% of the issued
and outstanding capital stock of the Borrower is owned by the Guarantor, free 
and clear of all Liens. All of the issued and outstanding capital stock of the 
Borrower has been validly issued, is fully paid and nonassessable. The common 
stock of the Borrower is publicly traded on the OTC Bulletin Board. The Borrower
has no Subsidiaries.

     SECTION 4.11.  ERISA.  The Borrower is in compliance in all material 
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed nor has any Plan
been terminated; no circumstances exist which constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4202 of ERISA from a Multiemployer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the Plan and
in accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of the Borrower or any ERISA Affiliate to 
the PBGC or the Plan under Title IV of ERISA; and neither the Borrower nor any 
ERISA Affiliate has incurred any liability to the PBGC under ERISA.

     SECTION 4.12.  Operation of Business.  The Borrower and the Guarantor
possess all licenses, permits, franchises, patents, copyrights, trademarks, and
trade names, or rights thereto, be conducted, and the Borrower and the Guarantor
are not in violation of any valid rights of others with respect to any of the
foregoing.

     SECTION 4.13.  Taxes.  The Borrower and the Guarantor have filed all tax
returns (federal, state, and local) required to be filed and have paid all
taxes, assessments, and governmental charges and levies thereon to be due,
including interest and penalties, except the filing of tax returns or the
payment of taxes, if any, being contested by the Borrower or the Guarantor as
permitted pursuant to Section 5.06 and disclosed to the Bank on Schedule 4.13.

                                      14
<PAGE>
 
     SECTION 4.14.  Debt.  Neither the Borrower nor the Guarantor is indebted 
under any credit agreement, indenture, purchase agreement, guaranty, Capital 
Lease, or other investment, agreement, or arrangement except as disclosed in the
Borrower's or the guarantor's financial statements referred to in Section 4.04 
or as disclosed to the Bank on Schedule 4.14.

     SECTION 4.15.  Environmental Matters.  To the best of the Borrower's 
knowledge, no real property owned or leased by the Borrower or the Guarantor is 
in violation of any Environmental Laws, no Hazardous Materials are present on 
said real property and neither the Borrower nor the Guarantor has been 
identified in any litigation, administrative proceedings or investigation as a 
responsible party for any liability under any Environmental Laws.

                                   ARTICLE V

                             AFFIRMATIVE COVENANTS
                             ---------------------

     So long as the Note shall remain unpaid or the Bank shall have any 
Commitment under this Agreement, the Borrower will (and will cause any 
Subsidiary it may create or acquire to):

     SECTION 5.01.  Maintenance of Existence.  Preserve and maintain its 
corporate existence and good standing in the jurisdiction of its incorporation, 
and qualify and remain qualified as a foreign corporation in each jurisdiction 
in which such qualification is required.

     SECTION 5.02.  Maintenance of Records.  Keep accurate records and books of 
account in which complete entries will be made in accordance with GAAP 
consistently applied, reflecting all financial transactions of the Borrower and 
any Subsidiaries.

     SECTION 5.03.  Maintenance of Properties.  Maintain, keep, and preserve all
of its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear expected.

     SECTION 5.04.  Conduct of Business; Permits and Approvals; Compliance with 
Laws.  Continue to engage in an efficient and economical manner in a business of
the same general type as conducted by it on the date of this Agreement; maintain
in full force and effect, its franchises, and all licenses, patents, trademarks,
trade names, contracts, permits, approvals and other rights necessary to the 
profitable conduct of its business; and comply in all respects with all 
applicable laws, rules, regulations, and orders.

     SECTION 5.05.  Maintenance of Insurance.  Maintain insurance with 
financially sound and reputable insurance companies or associations in such 
amounts and covering such risks as are usually carried by companies engaged in 
the same or a similar business and similar situated, which insurance may provide
for reasonable deductibility from coverage thereof.

                                      15
<PAGE>
 
     SECTION 5.06.  Payment of Debt; Payment of Taxes; Etc.  Promptly pay and 
discharge

          (1)  all of its Debt in accordance with the terms thereof;

          (2)  all taxes, assessments, and governmental charges or levies 
     imposed upon it or upon its income and profits, upon any of its property,
     real, personal or mixed, or upon any part thereof, before the same shall
     become in default;

          (3)  all lawful claims for labor, materials and supplies or otherwise,
     which, if unpaid, might become a lien or charge upon such property or any
     part thereof;

provided, however, that so long as the Borrower first notifies the Bank of its 
intention to do so, the Borrower shall not be required to pay and discharge (or 
to cause any Subsidiary to pay and discharge) any such Debt, tax, assessment, 
charge, levy or claim so long as the failure to so pay or discharge does not 
constitute or result in a Default or an Event of Default under Section 8.01(4) 
or (6) and so long as no foreclosure or other similar proceedings shall have 
been commenced against such property or any part thereof and so long as the 
validity thereof shall be contested in good faith by appropriate proceedings 
diligently pursued and it shall have set aside on its books adequate reserves 
with respect thereto.

     SECTION 5.07.  Right of Inspection.  At any reasonable time and from time 
to time, during normal business hours, permit the Bank or any agent or 
representative thereof to examine and make copies of and abstracts from the 
records and books of account of, and visit the properties of, the Borrower and 
any Subsidiary, and to discuss the affairs, finances, and accounts of the 
Borrower and any Subsidiary with any of their respective officers and directors 
and the Borrower's independent abilities.

     SECTION 5.08.  Reporting Requirements. Furnish to the Bank:

          (1)  At the time of, and as a condition to, each Loan, a Borrower's 
     Certificate duly completed and executed by the Borrower evidencing
     compliance with the Borrowing Base and availability for the requested Loan;

          (2)  As soon as available and in any event within fifteen (15) days 
     after the end of each month, (a) a monthly aging of accounts receivable,
     indicating those Accounts which are not Qualified Accounts by category as
     listed in the definition of Qualified Accounts, (b) an account status
     report, (c) a monthly aging of accounts payable, and (d) a monthly
     inventory summary report, with subtotals for all categories of inventory
     which is not Eligible Inventory, together with any other information which
     the Bank may reasonable request;

          (3)  As soon as available and in any event within forty-five (45) days
     after the end of each month, balance sheets of the Borrower as of the end
     of such month, statements of

                                      16


<PAGE>
 
income and retained earnings of the Borrower for the period commencing at the 
end of the previous fiscal year and ending with the end of such month, and a 
statement of cash flows of Borrower for the portion of the fiscal year ended 
with the last day of such month, all in reasonable detail and stating in 
comparative form the respective figures for the corresponding date and period in
the previous fiscal year and all prepared in accordance with GAAP consistently
applied and certified by the chief financial officer of the Borrower (subject to
year-end adjustments);

     (4)  As soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Borrower, audited financial statements of
Borrower, including a balance sheet of the Borrower as of the end of such fiscal
year and a statement of income and retained earnings of the Borrower for such 
fiscal year, and a statement of cash flows of the Borrower for such fiscal year,
all in reasonable detail and stating in comparative from the respective figures
for the corresponding date and period in the prior fiscal year and all prepared
in accordance with GAAP consistently applied and as to the consolidated
statements accompanied by an opinion thereon acceptable to the Bank by Margolis
& Company, P.C. or other independent certified public accountants selected by
the Borrower and acceptable to the Bank;

     (5)  As soon as available and in any event at the end of each fiscal year 
of the Borrower, Borrower's projections for the upcoming fiscal year;

     (6)  As soon as available, and in any event within ninety (90) days after
the end of each calendar year, the personal statement of the Guarantor on the
Bank's form and, as soon as available, and in any event within 30 days after
filing, a copy of the federal tax return fro said year of the Guarantor;

     (7)  Promptly upon receipt thereof, copies of any reports submitted to the 
Borrower by independent certified public accountants in connection with 
examination of the financial statements of the Borrower made by such 
accountants;

     (8)  Simultaneously with the delivery of the monthly and fiscal year end 
financial statements referred to in Section 5.08(3) and (4), a certificate of 
the chief financial officer of the Borrower (a) certifying that to the best of 
his knowledge no Default or Event of Default has occurred and is continuing or, 
if a Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof and the action which is proposed to be taken with respect
thereto, and (b) with computations demonstrating compliance with the covenants
contained in Article VII;

     (9)  Simultaneously with the delivery of the annual financial statements 
referred to in Section 5.08(4), a certificate of the independent public 
accountants who audited such statements to the effect that, in making the 
examination necessary for the audit of such 

                                      17
<PAGE>
 
     statements, they obtained no knowledge of any condition or event which
     constitutes a Default or Event of Default, or if such accountants shall
     have obtained knowledge of any such condition or event, specifying in such
     certificate each such condition or event of which they have knowledge and
     the nature and status hereof;

          (10) All reports regarding or relating to the Collateral as required
     by the Security Agreement;

          (11) Promptly after the commencement thereof, notice of all actions,
     suits, and proceedings before any court or governmental department,
     commission, board, bureau, agency, or instrumentality, domestic or foreign,
     affecting the Borrower, which, if determined adversely to the Borrower,
     could have material adverse effect on the financial condition, properties,
     or operations of the Borrower;

          (12) Immediately upon the occurrence of each Default or Event of
     Default, a written notice setting forth the details of such Default or
     Event of Default and the action which is proposed to be taken by the
     Borrower with respect thereto;

          (13) Immediately upon the creation or occurrence thereof, notice that
     the Borrower has created a purchase money Lien permitted by Section
     6.01(10) or has actual knowledge or has received notice of the existence or
     filing of any other Lien against the Borrower or its property, whether or
     not permitted by Section 6.01.

          (14) As soon as possible and in any event within five (5) days after
     the Borrower knows or has reason to know that any Reportable Event or
     Prohibited Transaction has occurred with respect to any Plan or that the
     PBGC or the Borrower has instituted or will institute proceedings under
     Title IV of ERISA to terminate any Plan, the Borrower will deliver to the
     Bank a certificate of the chief financial officer of the Borrower setting
     forth details as to such Reportable Event or Prohibited Transaction or Plan
     termination and the action the Borrower proposes to take with respect
     thereto;

          (15) Promptly after the sending or filing thereof, copies of all proxy
     statements, financial statements, and reports which the Borrower sends to
     its shareholders, and copies of all regular, periodic, and special reports,
     and all registration statements which the Borrower files with the
     Securities and Exchange Commission or any governmental authority which may
     be substituted therefor, or with any national securities exchange; and

          (16) Such other information respecting the condition or operations,
     financial or otherwise, of the Borrower or any Subsidiary as the Bank may
     from time to time reasonably request.

                                      18
<PAGE>
 
     SECTION 5.09. Lockbox. Maintain at all times a lockbox at a Bank location 
into which all Account Debtors shall be instructed to remit all payments owing 
to the Borrower for deposit into and processing through the Cash Collateral 
Account.

     SECTION 5.10. Principal Deposit Bank. Maintain at all times the Cash 
Collateral Account at the Bank and maintain the Bank as its principal bank 
of deposit.

     SECTION 5.11. Further Assurances. Do such further acts and things and 
execute and deliver to the Bank such additional assignments, agreements, powers 
and instruments, as the Bank may reasonably require or reasonably deem advisable
to carry into effect the purposes of this Agreement or to better assure and 
confirm unto the Bank its rights, powers and remedies hereunder.

                                  ARTICLE VI

                              NEGATIVE COVENANTS
                              ------------------

     So long as the Note shall remain unpaid or the Bank shall have any 
Commitment under this Agreement, the Borrower will not (and will not permit any 
Subsidiary it may create or acquire to):

     SECTION 6.01. Liens. Create, incur, assume, or suffer to exist any Lien 
upon or with respect to any of its properties, now owned or hereafter acquired, 
except:

          (1)  Liens in favor of the Bank;

          (2)  Liens for taxes or assessments or other government charges or
     levies if not yet due and payable or, if due and payable, if they are being
     contested in good faith by appropriate proceedings promptly initiated and
     diligently conducted and for which appropriate reserves are maintained and
     so long as no foreclosure, distraint, sale or other similar proceedings
     shall have been commenced with respect thereto;

          (3)  Liens imposed by law, such as mechanics', materialmen's,
     landlords' warehousemen's, and carriers' Liens, and other similar Liens,
     securing obligations incurred in the ordinary course of business which are
     not past due for more than thirty (30) days or which are being contested in
     good faith by appropriate proceedings promptly initiated and diligently
     conducted and for which appropriate reserves have been established and so
     long as no foreclosure, distraint, sale or other similar proceedings shall
     have been commenced with respect thereto;

          (4)  Liens under workmen's compensation, unemployment insurance,
     social security, or similar legislation;

                                      19
<PAGE>
 
          (5) Liens, deposits, or pledges to secure the performance of bids,
     tenders, contracts (other than contracts for the payment of money), leases
     (permitted under the terms of this Agreement), or public or statutory
     obligations; surety, indemnity, performance, or other similar bonds; or
     other similar obligations arising in the ordinary course of business;

          (6) Liens existing on the date hereof and listed on Schedule 6.01
     securing amounts not in excess of the amounts set forth on Schedule 6.01,
     but not the extension of the Lien to other property, or the granting of the
     Lien to secure the extension of the maturity, refunding, or modification of
     such obligation, in whole or in part;

          (7) Judgment and other similar Liens arising in connection with court
     proceedings, provided the execution or other enforcement of such Liens is
     effectively stayed and the claims secured thereby are being actively
     contested in good faith and by appropriate proceedings promptly initiated
     and diligently conducted;

          (8) Easements, rights-of-way, restrictions, and other similar
     encumbrances which, in the aggregate, do not materially interfere with the
     occupation, use, and enjoyment by the Borrower or any Subsidiary of the
     property or assets encumbered thereby in the normal course of its business
     or materially impair the value of the property subject thereto;

          (9) Purchase-money Liens on any property acquired or the assumption of
     any Lien on property existing at the time of such acquisition, or a Lien
     incurred in connection with any conditional sale or other title retention
     agreement or a Capital Lease; provided that

          (a)   Any property subject to any of the foregoing is acquired by the
                Borrower or any Subsidiary in the ordinary course of its
                respective business and the Lien on any such property is created
                contemporaneously with such acquisition;

          (b)   The obligation secured by any Lien so created, assumed, or
                existing shall equal at least eighty percent (80%) and shall not
                exceed one hundred percent (100%) of the lesser of cost or fair
                market value as of the time of acquisition of the property
                covered thereby to the Borrower or Subsidiary acquiring the
                same;

          (c)   Each such Lien shall attach only to the property so acquired and
                fixed improvements thereon; and

          (d)   The Debt secured by all such Liens shall not exceed Two Hundred
                Fifty Thousand Dollars ($250,000) at any time outstanding in the
                aggregate.

                                      20
<PAGE>
 
     SECTION 6.02.  Debt, Create, incur, assume, or suffer to exist any Debt, 
except:

          (1)  Debt of the Borrower to the Bank;

          (2)  Debt existing on the date hereof and disclosed in the Borrower's 
     financial statements referred to in Section 4.04 or otherwise disclosed to
     the Bank on Schedule 4.14, but no renewals, extension, or refinancings
     thereof;

          (3)  Subordinated Debt acceptable to the Bank;

          (4)  Accounts payable to trade creditors for goods or services and 
     current operating liabilities (other than for borrowed money), in each case
     incurred in the ordinary course of business and paid within the specified
     time, unless contested in good faith and by appropriate proceedings;

          (5)  Debt of the Borrower secured by purchase-money Liens permitted by
     Section 6.01(9).

     SECTION 6.03. Mergers, Etc. Merge or consolidate with, or sell, assign, 
lease, or otherwise dispose of (whether in one transaction or in a series of 
transactions) all or substantially all of its assets (whether now owned or 
hereafter acquired) to any Person, or acquire all or substantially all of the 
assets or the business of any Person, or permit any Subsidiary to do so.

     SECTION 6.04. Sale and Leaseback. Sell, transfer, or otherwise dispose any 
real or personal property to any Person and thereafter directly or indirectly 
lease back the same or similar property.

     SECTION 6.05. Dividends. Declare or pay any dividends; or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its shareholders as such 
whether in cash, assets, or obligations of the Borrower; or allocate or 
otherwise set apart any sum for the payment of any dividend or distribution on, 
or for the purchase, redemption, or retirement of, any shares of its capital 
stock; or make any other distribution by reduction of capital or otherwise in 
respect of any shares of its capital stock, except that (1) the Borrower may 
declare and deliver dividends and make distributions payable solely in common 
stock of the Borrower and (2) the Borrower may purchase or otherwise acquire 
shares of its capital stock by exchange for or out of the proceeds from a 
substantially concurrent issue of new shares of its capital stock.

     SECTION 6.06. Sale of Assets. Sell, lease, assign, transfer, or otherwise 
dispose any of its now owned or hereafter acquired assets (including, without 
limitation receivables and leasehold interests), except: (1) for inventory 
disposed of in the ordinary course of business; and (2) the sale or other 
disposition of assets no longer used or useful in the conduct of its business.

                                      21

<PAGE>
 
     SECTION 6.07.  Investments. Make any loan or advance to any Person, or 
purchase or otherwise acquire any capital stock, assets, obligations, or other 
securities of, make any capital contribution to, or otherwise invest in or 
acquire any interest in any Person, except: (1) direct obligations of the United
States or any agency thereof with maturities of one year or less from the date 
of acquisition; (2) commercial paper of a domestic issuer rates at least "A-1" 
by Standard & Poor's Corporation or "P-1" by Moody's Investors Services, Inc.; 
(3) certificates of deposit with maturities of one year or less from the date of
acquisition issued by any commercial bank having capital and surplus in excess 
of One Hundred Million Dollars ($100,000,000); (4) stock, obligations, or 
securities received in settlement of debts (created in the ordinary course of 
business) owing to the Borrower; and (5) loans to employees up to Twenty-Five 
Thousand Dollars ($25,000) in the aggregate.

     SECTION 6.08.  Guaranties, Etc. Assume, guarantee, endorse, or otherwise 
be or become directly or contingently responsible or liable (including, but not 
limited to, an agreement to purchase any obligation, stock, assets, goods, or 
services, or to supply or advance any funds, assets, goods, or services, or to 
maintain or cause such Person to maintain a minimum working capital or net
worth, or otherwise to assure the creditors of any Person against loss) for
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.

     SECTION 6.09.  Transaction With Affiliate. Enter into any transaction, 
including, without limitation, the purchase, sale, or exchange of property or 
the rendering of any service, with any Affiliate except in the ordinary course 
of and pursuant to the reasonable requirements of the Borrower's business and 
upon fair and reasonable terms no less favorable to the Borrower than would 
obtain in a comparable arm's-length transaction with a Person not an 
Affiliate.

     SECTION 6.10.  Hazardous Materials; Indemnification. Use, generate, treat, 
store, dispose of or otherwise introduce any Hazardous Materials into or on any 
real property owned or leased by the Borrower and will not cause, suffer allow 
or permit anyone else to do so, except in an environmentally safe manner through
methods which have been approved by and meet all of the standards of the federal
Environmental Protection Agency and any other federal, state or local agency 
with authority to enforce Environmental Laws. The Borrower hereby agrees to 
indemnify, reimburse, defend and hold harmless the Bank and its directors, 
officers, agents and employees ("Indemnified Parties") for, from and against all
demands, liabilities, damages, costs, claims, suits, actions, legal or 
administrative proceedings, interest, losses, expenses and reasonable attorney's
fees (including any such fees and expenses incurred in enforcing this indemnity)
asserted against, imposed on or incurred by any of the Indemnified Parties, 
directly or indirectly pursuant to or in connection with the application of any 
Environmental Law to acts or omissions occurring at any time on or in connection
with any real estate owned or leased by the Borrower or any business conducted 
thereon.

                                      22
<PAGE>
 
                                  ARTICLE VII

                              FINANCIAL COVENANTS
                              -------------------

     So long as the Note shall remain unpaid or the Bank shall have any 
Commitment under this Agreement:

     SECTION 7.01  Minimum Working Capital. The Borrower will maintain as at the
end of each fiscal quarter of the Borrower Working Capital of not less than
$1,000,000; provided that Working Capital shall not less than $750,000 at June 
30, 1996.

     SECTION 7.O2. Minimum Tangible Net Worth. The Borrower will maintain as at 
the end of each fiscal quarter of the Tangible Net Worth plus Subordinated Debt
of not less than $1,000,000 at June 30, 1996 and not less than $1,750,000 as at
September 30, 1996 and thereafter.

     SECTION 7.03. Leverage Ratio. The Borrower will maintain as at the end of 
each fiscal quarter of the Borrower a ratio of total liabilities to Tangible 
Net Worth plus Subordinated Debt of not greater than (1) 5.1 to 1.00 from the 
date hereof to and including June 30, 1996; and (2) 2.5 to 1.00 as at September 
30, 1996 and December 31, 1996 and thereafter.

                                 ARTICLE VIII

                               EVENTS OF DEFAULT
                              ----------------- 

     SECTION 8.01. Events of Default. If any of the following events("Events of 
Default") shall occur:

          (1)  The Borrower shall fail to make any payment or mandatory 
     prepayment under this Agreement or the Note, within one (1) day after the
     date when due and payable;

          (2)  Any representation or warranty made or deemed made by the 
     Borrower or by the Guarantor in any Loan Document or which is contained in
     any certificate, document, opinion, or financial or other statement
     furnished at any time under or in connection with any Loan Documents shall
     prove to have been incorrect in any material respect on or as of the date
     made or deemed made;

          (3)  The Borrower or the Guarantor shall fail to perform or observe
     any term, covenant, or agreement contained in any Loan Document (other than
     the Note) to which it is a party on its part to be performed or observed,
     provided that with respect to any such failure to perform a covenant or
     agreement contained in Section 5.08(11) or (13) - (15), the Borrower or the
     Guarantor, as the case may be, shall have fifteen (15) days to cure such
     Default;

                                      23
<PAGE>
 
          (4)  The Borrower or the Guarantor shall (a) fail to pay any 
     indebtedness for borrowed money (other than the Note) of the Borrower or
     the Guarantor, as the case may be, or any interest or premium thereon, when
     due (whether by scheduled maturity, required prepayment, acceleration,
     demand, or otherwise), or (b) fail to perform or observe any term,
     covenant, or condition on its part to be performed or observed under any
     agreement or instrument relating to any such indebtedness, when required to
     be performed or observed, if the effect of such failure to perform or
     observe is to accelerate, or to permit the acceleration after the giving of
     notice or passage of time, or both, of the maturity of such indebtedness,
     unless such failure to perform or observe shall be waived by the holder of
     such indebtedness; or any such indebtedness shall be declared to be due and
     payable, or required to be prepaid (other than by a regularly scheduled
     required prepayment), prior to the stated maturity thereof;

          (5)  The Borrower or the Guarantor (a) shall generally not, or shall
     be unable to, or shall admit in writing its inability to pay its debts as
     such debts become due; or (b) shall make an assignment for the benefit of
     creditors, petition or apply to any tribunal for the appointment of a
     custodian, receiver, or trustee for it or a substantial part of its assets;
     or (c) shall commence any proceeding under any bankruptcy, reorganization,
     arrangements, readjustment of debt, dissolution, or liquidation law or
     statute of any jurisdiction, whether now or hereafter in effect; (d) shall 
     have any such petition or application filed or any such proceeding
     commenced against it in which an order for relief is entered or
     adjudication or appointment is made and which remains undismissed for a
     period of thirty (30) days or more; or (e) by any act or omission shall
     indicate its consent to, approval of, or acquiescence in any such petition,
     application, or proceeding, or order for relief, or the appointment of a
     custodian, receiver, or trustee for all or any substantial part of its
     properties; or (f) shall suffer any such custodianship, receivership, or
     trusteeship to continue undischarged for a period of thirty (30) days or
     more;

          (6)  One or more judgments, decrees, or orders for the payment of
     money in excess of One Hundred Thousand Dollars ($100,000) in the aggregate
     shall be rendered against the Borrower and such judgments, decrees, or
     orders shall continue unsatisfied and in effect for a period of thirty (30)
     consecutive days without being vacated, discharged, satisfied, or stayed or
     bonded pending appeal;

          (7)  The Security Agreement or the Assignment of Life Insurance shall
     at any time after its execution and delivery and for any reason: (a) cease
     to create a valid and perfected first priority security interest in or
     assignment of the property purported to be subject thereto, unless due
     solely to acts or omissions on the part of the Bank in performing its
     duties related thereto; or (b) cease to be in full force and effect or be
     declared null and void, unless due solely to acts or omissions on the part
     of the Bank in performing its duties related thereto; or (c) the validity
     or enforceability thereof shall be contested by the Borrower, or the
     Borrower shall deny it has any further liability or obligation thereunder,
     or the Borrower shall fail to perform any of its obligations

                                      24

<PAGE>
 
     thereunder;

          (8)  The Guaranty shall, at any time after its execution and delivery
     and for any reason, cease to be in full force and effect or shall be
     declared null and void, or the validity or enforceability thereof shall be
     contested by the Guarantor, or the Guarantor shall deny it has any further
     liability or obligation under or shall fail to perform its obligations
     under the Guaranty;

          (9)  The Subordination Agreement shall at any time after its execution
     and delivery and for any reason cease to be in full force and effect or
     shall be declared null and void, or the validity or enforceability thereof
     shall be contested by the Borrower or KPR, or the Borrower or KPR shall
     deny it has any further liability or obligation under the Subordination
     Agreement, or the Borrower or KPR shall fail to perform any of its
     obligations under the Subordination Agreement;

          (10) Any of the following events occur or exist with respect to the
     Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving
     any Plan; (b) any Reportable Event with respect to any Plan; (c) the filing
     under Section 4041 of ERISA of a notice of intent to terminate any Plan or
     the termination of any Plan; (d) any event or circumstance that might
     constitute grounds entitling the PBGC to institute proceedings under
     Section 4042 of ERISA for the termination of, or for the appointment of a
     trustee to administer, any Plan, or the institution by the PBGC of any such
     proceedings; (e) complete or partial withdrawal under Section 4201 or 4204
     of ERISA from a Multiemployer Plan or the reorganization, insolvency, or
     termination of any Multiemployer Plan; and in each case above, such event
     or condition, together with all other events or conditions, if any, could
     in the opinion of the Bank subject the Borrower to any tax, penalty, or
     other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or
     any combination thereof) which in the reasonable determination of the Bank
     may have a material adverse effect on the financial condition, properties
     or operations of the Borrower;

          (11)  The Guarantor shall cease to maintain voting control, but in any
     event ownership of at least 30% of the issued and outstanding voting
     capital stock, of the Borrower, or the Borrower shall cease to be managed
     by Michael G. Rubin or other senior management satisfactory to the Bank;

then, and in any such event, the Commitment shall terminate and the Note and all
interest thereon and all other amounts payable under this Agreement shall become
and be immediately due and payable upon declaration to such effect delivered by
the Bank to the Borrower; provided that upon the happening of a Default
specified in Section 8.01(5), the Commitment shall terminate and the Note and
all interest thereon and all other amounts payable under this Agreement shall be
immediately due and payable without declaration or other notice to the Borrower.
Thereupon, the Bank shall have the right to charge and accrue interest at the
default

                                      25
<PAGE>
 
rate of interest provided for in this Agreement and shall have all of the rights
and remedies available to it under the Loan Documents and otherwise at law or in
equity. The Borrower expressly waives any presentment, demand, protest or 
further notice of any kind.

                                  ARTICLE IX

                                 MISCELLANEOUS
                                 -------------

     SECTION 9.01.  Amendments, Etc. No amendments, modification, termination, 
or waiver of any provision of any Loan Document to which the Borrower is a 
party, nor consent to any departure by the Borrower from any Loan Document to 
which it is a party, shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be 
effective only in the specific instance and for the specific purpose for which 
given.

     SECTION 9.02   Notices, Etc. All notices and other communications provided 
for under this Agreement and under the other Loan Documents to which the 
Borrower is a party shall be in writing (including telegraphic and telex 
transmission and facsimile transmissions if subject to pre-established 
verification procedures) and mailed or transmitted or delivered, 

     if to the Borrower at  RYKA Inc.
                            555 South Henderson Road
                            King of Prussia, PA 19406
                            Attn: Steve Wolf
                            Fax# (610) 768-0753

     with a copy to         David S. Mandel, Esq.
                            Astor, Weiss, Kaplan & Rosenblum
                            The Bellevue, 6th Floor
                            Broad Street at Walnut
                            Philadelphia, PA 19102
                            Fax# (215) 790-0509

     if to the Bank at      CoreStates Bank, N.A.

               if by mail:  P.O. Box 7618
                            Philadelphia, PA 19101-7618

               if delivered: 1339 Chestnut Street
                             Philadelphia, PA 19107

                                      26
<PAGE>
 
              in all cases: Attn: John P. Bradey, Vice President
                              F.C. 1-8-4-12
                              Fax# (215) 973-6680

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms 
of this Section 9.02. Except as otherwise provided in this Agreement all such 
notices and communications shall be effective when deposited in the mails or 
delivered to the telegraph company, or sent, answerback received, respectively, 
addressed as aforesaid, except that notices to the Bank pursuant to the 
provisions of Article II shall not be effective until received by the Bank.

     SECTION 9.03.  No Waiver; Remedies. No failure on the part of the Bank to 
exercise, and no delay in exercising, any right, power, or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any single or partial 
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.

     SECTION 9.04.  Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective 
successors and assigns, except that the Borrower may not assign or transfer any 
of its rights under any Loan Document to which the Borrower is a party without 
the prior written consent of the Bank.

     SECTION 9.05.  Costs, Expenses, and Taxes. The Borrower agrees to pay (1)
on the date hereof a facility fee of $10,000; and (2) after the occurrence of an
Event of Default, all costs and expenses, if any, in connection with the
enforcement of any of the Loan Documents and the collection of the Loans,
including but not limited to the reasonable fees and out-of-pocket expenses of
counsel for the Bank and local counsel who may be retained by said counsel
incurred by the Bank in connection with the enforcement of the Loan Documents
and collection of the Loans and with respect to advising the Bank as to its
rights and responsibilities under any of the Loan Documents. In addition, the
Borrower shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the Loan Documents and the other documents to be delivered
under any such Loan Documents, and agrees to save the Bank harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.

     SECTION 9.06. Right of Set Off. Upon the occurrence and during the 
continuance of any Event of Default the Bank is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement or the Note or any other Loan
Document, irrespective of whether or not the

                                      27
<PAGE>
 
Bank shall have made any demand under this Agreement or the Note or such other 
Loan Document and although such obligations may be unmatured. The Bank agrees 
promptly to notify the Borrower after any such setoff and application, provided 
that the failure to give such notice shall not affect the validity of such 
setoff and application. The rights of the Bank under this Section 9.06 are in 
addition to other rights and remedies (including, without limitation, other 
rights of setoff) which the Bank may have.

     SECTION 9.07.  Governing Law. This Agreement and the Note shall be governed
by, and construed in accordance with, the laws of the Commonwealth of 
Pennsylvania.

     SECTION 9.08.  Severability of Provisions. Any provision of any Loan 
Document which is prohibited or unenforceable in any jurisdiction shall, as to 
such jurisdiction, be ineffective to the extent of such prohibition or 
unenforceability without invalidating the remaining provisions of such Loan 
Document or affecting the validity or enforceability of such provision in any 
other jurisdiction.

     SECTION 9.09.  Survival of Agreement. All covenants, agreements, 
representations and warranties made herein and in the certificates delivered 
pursuant hereto shall survive the making by the Bank of the Loans and the 
execution and delivery to the Bank of the Note and shall continue in full force 
and effect so long as the Loan Documents or any amounts due thereunder or 
hereunder are outstanding and unpaid.

     SECTION 9.10.  Headings. Article and Section headings in the Loan Documents
are included in such Loan Documents for the convenience of reference only and 
shall not constitute a part of the application Loan Documents for any other 
purpose.

     SECTION 9.11.  JURISDICTION AND VENUE. IN ANY JUDICIAL PROCEEDING 
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS 
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER, THE BORROWER HEREBY 
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL 
COURT LOCATED IN MONTGOMERY OR PHILADELPHIA COUNTY IN THE COMMONWEALTH OF 
PENNSYLVANIA AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO 
THE LAYING OR MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. 
THE BORROWER AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY 
EFFECTED UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID,
TO THE BORROWER.

     SECTION 9.12.  WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL 
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY 
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING 
OUT OF OR RELATED TO THIS AGREEMENT

                                      28
<PAGE>
 
OR THE RELATIONSHIP ESTABLISHED HEREUNDER. THIS PROVISION IS A MATERIAL 
INDUCEMENT FOR THE BANK TO ENTER INTO THIS AGREEMENT.

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

                                   RYKA INC.


                                   By  /s/ Steven Wolf  VP CFO
                                     ---------------------------------

                                           Steven Wolf  VP CFO
                                     ---------------------------------
                                      Print Name and Title

                                   CORESTATES BANK, N.A.


                                   By  /s/ Ann B. Delaura  VP
                                     ---------------------------------
                                   
                                           Ann B. Delaura  VP
                                     ---------------------------------
                                      Print Name and Title

                                      29
<PAGE>
 
                                   EXHIBIT A

                             REVOLVING CREDIT NOTE

$4,500,000                                                       August 15, 1996


     FOR VALUE RECEIVED, the undersigned, RYKA INC., a Delaware corporation (the
"Borrower"), DOES HEREBY PROMISE to pay to the order of CORESTATES BANK, N.A. 
(the "Bank"), at its office at Broad and Chestnut Streets, Philadelphia, 
Pennsylvania, in lawful money of the United States and in immediately available 
funds, the principal amount of Four Million Five Hundred Thousand Dollars 
($4,500,000) or the aggregate unpaid principal amount of all loans made to the 
Borrower by the Bank (the "Loans") pursuant to the Revolving Credit Agreement 
hereinafter referred to, whichever is less, on the Termination Date (as defined 
in said Revolving Credit Agreement), and to pay interest (computed on the basis 
of a year of 360 days) from the date of this Revolving Credit Note on the unpaid
principal amount of this Revolving Credit Note, in like money, at said office, 
at rates per annum equal to one quarter percent (1/4%) above the rate as 
announced from time to time by the Bank at its principal office in Philadelphia,
Pennsylvania as its prime lending rate ("Prime Rate") payable on the first day 
of each month, commencing September 1, 1996 and at maturity. Any amount of 
principal hereof which is not paid when due, whether at stated maturity, by 
acceleration, or otherwise, and, to the extent permitted by law, any overdue 
interest shall bear interest from the date when due until said principal amount
is paid in full, payable on demand, at a rate per annum equal at all times to 
three percent (3%) above the rate which would otherwise be applicable. Any
change in the interest rate resulting from a change in the Prime Rate shall be
effective at the beginning of the day on which such change in the Prime Rate
becomes effective.

     The Borrower hereby authorizes the Bank to keep computer stored records of 
the amount and type of all Revolving Credit Loans made to the Borrower and all 
renewals, conversions, and payment of principal amounts in respect of such 
Revolving Credit Loans, which records shall, in the absence of error 
demonstrated by the Borrower, be conclusive as to the outstanding principal 
amount of all Revolving Credit Loans; provided, however, that the failure to
keep such records with respect to any Revolving Credit Loan or renewal,
conversion or payment shall not limit or otherwise affect the obligations of the
Borrower under the Revolving Credit Agreement or this Revolving Credit Note.

     This Revolving Credit Note is the Note referred to in the Revolving Credit 
Agreement dated as of August 15, 1996, between the Borrower and the Bank (said 
Revolving Credit Agreement, as it may be hereafter amended, renewed or extended,
the "Revolving Credit Agreement"). The Revolving Credit Agreement, among other 
things, contains provisions for acceleration of the maturity of this Revolving 
Credit Note upon the happening of certain stated events and also for prepayments
on account of the principal of this Revolving Credit Note prior to the maturity 
of the Revolving Credit Agreement. This Revolving Credit Note is secured by 
<PAGE>
 
and pursuant to a Security Agreement and certain other collateral referred to in
the Revolving Credit Agreement, reference to which is hereby made for a 
description of the collateral and the rights of the Borrower and the Bank with 
respect to such collateral.

     This Revolving Credit Note shall be governed by the laws of the 
Commonwealth of Pennsylvania.


                                   RYKA INC.



                                   By _____________________________


                                      _____________________________
                                        Print Name and Title

                                       2
<PAGE>
 
                             Disclosure Schedules
                       [To Be Provided by the Borrower]


Schedule 4.13.      Contested Taxes.         None

Schedule 4.14.      Existing Debt not otherwise disclosed in the Borrowers' 
                    Financial Statements.     None

Schedule 6.01.      Existing Permitted Liens
                    (list property subject to the Lien, name of lienholder, 
                    current amount of Debt secured by the Lien)
<PAGE>
 
                                 Schedule 6.01


Security Party                KPR Sport International, Inc.
Description of Collateral:    See Attached
Debt:                         $851,440
Subordinated to Bank

<PAGE>
 
--------------------------------------------------------------------------------
Debtor name (last name first if individual) and mailing address: 
                                                                 
Ryka, Inc.                                                       
555 S. Henderson Road                                            
King of Prussia, PA 19406                                                     1 
--------------------------------------------------------------------------------
Debtor name (last name first if individual) and mailing address:
                                                                 
                                                                 
                                                                            1a  
--------------------------------------------------------------------------------
Debtor name (last name first if individual) and mailing address: 
                                                                 
                                                                 
                                                                            1b 
--------------------------------------------------------------------------------
Secured Party(ies) name(s) (last name first if individual) and address for
security interest information:

  KPR Sports International, Inc.                                 
  555. S Henderson Road                                          
  King of Prussia, PA 19406                                      
                                                                            2  
--------------------------------------------------------------------------------
Assignee(s) of Secured Party name(s) (last name first if individual) and address
for security interest information:
                                                                           2a
--------------------------------------------------------------------------------
Special Types of Parties (check if applicable):                  
                                                                 
----                                                             
----  The terms "Debtor" and "Secured Party" mean "Lessee" and   
      "Lessor," respectively                                     
                                                                 
----                                                             
----  The terms "Debtor" and "Secured Party" mean "Consignee"     
      and "Consignor" respectively                              
                                                                 
----                                                             
----  Debtor is a Transmitting Utility                           
                                                                           3 
--------------------------------------------------------------------------------
                    SECURED PARTY SIGNATURE(S)
--------------------------------------------------------------------------------
This statement is filed with only the Secured Party's signature to perfect a 
security interest in collateral (check applicable box(es))--

a   ----  acquired after a change of name, identity or corporate structure 
    ----  of the Debtor


b   ----  as to which the filing has lapsed.

c   already subject to a security interest in another county in Pennsylvania--

    ----
    ----   when the collateral was moved to this county.

    ----
    ----   when the Debtor's residence or place of business 
           was moved to this county

d   already subject to a Security interest in another jurisdiction-- 

    ----
    ----   when the collateral was moved to Pennsylvania.

    ----
    ----   when the Debtor's location was moved to Pennsylvania.

e  ----
   ----  which is proceeds of the collateral described in block 9, 
         in which a security interest was previously perfected 
         (also describe proceeds in block 9, if purchased with cash 
         proceeds and not adequately described on the original 
         financing statement)

                    Secured Party Signature(s)
              (required only if box(es) is checked above)

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

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

--------------------------------------------------------------------------------
                                                                              4
--------------------------------------------------------------------------------
                    Uniform Commercial Code ????  ?????            
                IMPORTANT  Please read instructions on             
                  reverse side page 4 before completing            
--------------------------------------------------------------------------------
Filing No. (stamped by filing officer): Date, Time, Filing Officer)
                                                                   
                                                                   
                                                                   
                                                                   
 -------------------------------------------------------------------------------
 This Financing Statement is presented for filing pursuant to the-Uniform
Commercial Code, and is to ??? with the (check applicable box):

 ----  Secretary of the Commonwealth                               
 ----                                                              
 ----                                                              
 ---- Prothonotary of  Montgomery                        County.   
                     ------------------------------------          
 ----                                                              
 ---- real estate records of ---------------------------- County.  
--------------------------------------------------------------------------------
Number of Additional Sheets (if any):                              
--------------------------------------------------------------------------------
Optional Special Identification (Max. 10 characters):              
--------------------------------------------------------------------------------
                               COLLATERAL                          
--------------------------------------------------------------------------------
 Identify collateral by item and/or type:                          
                                                                   
                                                                   
  See Collateral Description Attached                              
                                                                   
                                                                   

                                                                   
                                                                   
                                                                   
  ----                                                             
  ---- (check only if desired) Products of the collateral are also covered. 
  ------------------------------------------------------------------------------
  Identify related real estate, if applicable: The collateral is, or includes
  (check appropriate box(es))

  a. ---                                                           
     --- crops growing or to be grown on --                        
  b. ---                                                           
     --- goods which are or are to become fixtures on --           
  c. ---                                                           
     --- minerals or the like (including oil and gas) as extracted on --
  d  ---
     --- accounts resulting from the sale of minerals or the like (including oil
         and gas) at the wellhead minehead on --

the following real estate

   Street Address:
   Described at : Book __________ of (check one) ---          ---
                                                 ---  Deeds   --- Mortgages, at 
   Page(s) ______ for _________________ County. Uniform Parcel Indentifier______

   ----
   ----  Described on Additional Sheet.

   Name of record owner (required only if no Debtor has an interest of record):

-------------------------------------------------------------------------------
                              DEBTOR SIGNATURE(S)
--------------------------------------------------------------------------------
Debtor signature(s)

1
--------------------------------------------------------------------------------

1a
--------------------------------------------------------------------------------

1b
--------------------------------------------------------------------------------
RETURN RECEIPT TO:
  David S. Mandel, Esquire
  ASTOR WEISS KAPLAN & ROSENBLUM
  The Bellevue, 6th Floor
  Broad Street at Walnut
  Philadelphia, PA 19102




--------------------------------------------------------------------------------
<PAGE>
 
                                  EXHIBIT "A"
                                  -----------


                           DESCRIPTION OF COLLATERAL



Debtor grants to Secured Party a lien and security interest in all existing and 
future accounts, chattel paper, contracts, documents, equipment, fixtures, 
general tangibles, instruments, inventory and all records pertaining to the 
collateral and proceeds of the foregoing.