LOAN AND SECURITY AGREEMENT

                                  by and among

                       GENERAL DATACOMM INDUSTRIES, INC.,
                             GENERAL DATACOMM, INC.
                          DATACOMM LEASING CORPORATION,
                            GDC HOLDING COMPANY, LLC,
                     GDC NAUGATUCK, INC., GDC REALTY, INC.,
                           GDC FEDERAL SYSTEMS, INC.,
                                  as Borrowers,

                                       and

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,
                                 as the Lenders

                                       and

                               ABLECO FINANCE LLC,
                                  as the Agent



                           Dated as of August 20, 2002


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                                TABLE OF CONTENTS


1.       DEFINITIONS AND CONSTRUCTION.......................................2
         1.1      Definitions...............................................2
         1.2      Accounting Terms.........................................17
         1.3      Code.....................................................17
         1.4      Construction.............................................17
         1.5      Schedules and Exhibits...................................17

2.       LOAN AND TERMS OF PAYMENT.........................................17
         2.1      [Intentionally Omitted]..................................17
         2.2      [Intentionally Omitted]..................................17
         2.3      [Intentionally Omitted]..................................17
         2.4      Term Loans...............................................17
         2.5      Payments.................................................20
         2.6      Agent Advances...........................................22
         2.7      Interest:  Rates, Payments, and Calculations.............22
         2.8      Collection of Accounts...................................23
         2.9      Crediting Payments.......................................24
         2.10     [Intentionally Omitted]..................................24
         2.11     Maintenance of Loan Account; Statements of Obligations...24
         2.12     Joint and Several Liability of the Borrowers.............24

3.       DELIVERIES; TERM OF AGREEMENT.....................................26
         3.1      Deliveries By Borrower...................................26
         3.2      [Intentionally Omitted]..................................28
         3.3      [Intentionally Omitted]..................................28
         3.4      Term.....................................................28
         3.5      Effect of Termination....................................28
         3.6      Early Termination by Borrower............................28

4.       CREATION OF SECURITY INTEREST.....................................29
         4.1      Grant of Security Interest...............................29
         4.2      Negotiable Collateral....................................29
         4.3      Collection of Accounts, General Intangibles, and
                  Negotiable Collateral....................................29
         4.4      Filing of Financing Statements; Commercial Tort Claims;
                  Pledge Amendments; Delivery of Additional
                  Documentation Required...................................29
         4.5      Power of Attorney........................................30
         4.6      Right to Inspect.........................................31
         4.7      Control Agreements.......................................31
<PAGE>

5.       REPRESENTATIONS AND WARRANTIES....................................31
         5.1      No Encumbrances..........................................31
         5.2      [Intentionally Omitted]..................................31
         5.3      [Intentionally Omitted]..................................31
         5.4      Equipment................................................31
         5.5      Location of Inventory and Equipment......................31
         5.6      Inventory Records........................................31
         5.7      State of Incorporation; Location of Chief Executive
                  Office; FEIN, Organizational ID Number;
                  Commercial Tort Claims...................................32
         5.8      Due Organization and Qualification; Subsidiaries.........32
         5.9      Due Authorization; No Conflict...........................33
         5.10     Litigation...............................................33
         5.11     Financial Statements; No Material Adverse Change.........34
         5.12     [Intentionally Omitted]..................................34
         5.13     Employee Benefits........................................34
         5.14     Environmental Condition..................................34
         5.15     Brokerage Fees...........................................35
         5.16     Permits and other Intellectual Property..................35
         5.17     Material Contracts; Restrictive Agreements...............35
         5.18     Government Contracts.....................................35

6.       AFFIRMATIVE COVENANTS.............................................35
         6.1      Accounting System........................................35
         6.2      Financial Statements, Reports, Certificates..............36
         6.3      Tax Returns..............................................37
         6.4      [Intentionally Omitted]..................................37
         6.5      Returns..................................................37
         6.6      Title to Equipment.......................................37
         6.7      Maintenance of Equipment.................................37
         6.8      Taxes....................................................37
         6.9      Insurance................................................38
         6.10     No Setoffs or Counterclaims..............................39
         6.11     Location of Inventory and Equipment; Segregation of
                  Inventory................................................39
         6.12     Compliance with Laws.....................................39
         6.13     Employee Benefits........................................39
         6.14     Leases...................................................40

7.       NEGATIVE COVENANTS................................................40
         7.1      Indebtedness.............................................40
         7.2      Liens....................................................41
         7.3      Restrictions on Fundamental Changes......................41
         7.4      Disposal of Assets.......................................41
         7.5      Change Name..............................................42

<PAGE>

         7.6      Guarantee................................................42
         7.7      Nature of Business.......................................42
         7.8      Prepayments and Amendments...............................42
         7.9      Change of Control........................................42
         7.10     Consignments.............................................43
         7.11     Distributions............................................43
         7.12     Accounting Methods.......................................43
         7.13     Investments..............................................43
         7.14     Transactions with Affiliates.............................43
         7.15     Suspension...............................................43
         7.16     [Intentionally Omitted]..................................44
         7.17     Use of Proceeds..........................................44
         7.18     Change in Location of Chief Executive Office; Inventory
                  and Equipment with Bailees...............................44
         7.19     No Prohibited Transactions Under ERISA...................44
         7.20     Financial Covenant.......................................45
         7.21     Capital Expenditures.....................................45
         7.22     Securities Accounts......................................45

8.       EVENTS OF DEFAULT.................................................45

9.       LENDER GROUP'S RIGHTS AND REMEDIES................................47
         9.1      Rights and Remedies......................................47
         9.2      Remedies Cumulative......................................49

10.      TAXES AND EXPENSES................................................50

11.      WAIVERS; INDEMNIFICATION..........................................50
         11.1     Demand; Protest; etc.....................................50
         11.2     Lender Group's Liability for Collateral..................50
         11.3     Indemnification..........................................50

12.      NOTICES...........................................................51

13.      CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................52

14.      DESTRUCTION OF BORROWER'S DOCUMENTS...............................53

15.      ISSUANCE OF EQUITY INTERESTS TO ________..........................53
         15.1     Authorization and Issuance of Warrants...................53
         15.2     Securities Act Matters...................................53
         15.3     Certain Taxes............................................54
         15.4     Cancellation and Issuance................................54
<PAGE>

16.      ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS........................55
         16.1     Assignments and Participations...........................55
         16.2     Successors...............................................57

17.      AMENDMENTS; WAIVERS...............................................58
         17.1     Amendments and Waivers...................................58
         17.2     No Waivers; Cumulative Remedies..........................59

18.      AGENT; LENDER GROUP...............................................59
         18.1     Appointment and Authorization of Agent...................59
         18.2     Delegation of Duties.....................................60
         18.3     Liability of Agent-Related Persons.......................60
         18.4     Reliance by Agent........................................60
         18.5     Notice of Default or Event of Default....................61
         18.6     Credit Decision..........................................61
         18.7     Costs and Expenses; Indemnification......................62
         18.8     Agent in Individual Capacity.............................62
         18.9     Successor Agent..........................................63
         18.10    Withholding Tax..........................................63
         18.11    Collateral Matters.......................................65
         18.12    Restrictions on Actions by Lenders; Sharing of Payments..66
         18.13    Agency for Perfection....................................66
         18.14    Payments by Agent to Lenders.............................67
         18.15    Concerning the Collateral and Related Loan Documents.....67
         18.16    Field Audits and Examination Reports; Confidentiality;
                  Disclaimers by Lenders; Other Reports and
                  Information..............................................67
         18.17    Several Obligations; No Liability........................68

19.      GENERAL PROVISIONS................................................69
         19.1     Effectiveness............................................69
         19.2     Successors and Assigns...................................69
         19.3     Section Headings.........................................69
         19.4     Interpretation...........................................69
         19.5     Severability of Provisions...............................69
         19.6     Amendments in Writing....................................69
         19.7     Counterparts; Telefacsimile Execution....................69
         19.8     Revival and Reinstatement of Obligations.................69
         19.9     Integration..............................................70
         19.10    General DataComm as Agent for Borrowers..................70


<PAGE>



SCHEDULES AND EXHIBITS

Schedule C-1               Term Loan Commitments
Schedule G-1               Guarantors
Schedule P-1               Permitted Liens
Schedule R-1               Real Property Collateral
Schedule 5.7               Borrowers' Organizational Information
Schedule 5.8               Capital Stock of Parent; Subsidiaries
Schedule 5.10              Litigation
Schedule 5.13              ERISA Benefit Plans
Schedule 5.14              Environmental Matters
Schedule 5.16              Permits and other Intellectual Property
Schedule 5.17              Material Contracts
Schedule 6.11              Location of Inventory and Equipment
Schedule 7.1               Indebtedness
Schedule 7.4               Permitted Dispositions
Schedule 7.6               Guarantees
Schedule 7.13              Investments

Exhibit C-1                Form of Compliance Certificate
Exhibit W-1                Form of Warrants

1.

<PAGE>

                           LOAN AND SECURITY AGREEMENT

         THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as
of August  20,  2002,  among  GENERAL  DATACOMM  INDUSTRIES,  INC.,  a  Delaware
corporation,  with its  chief  executive  office  located  at 6  Rubber  Avenue,
Naugatuck,  Connecticut  06770 ("Parent"),  GENERAL  DATACOMM,  INC., a Delaware
corporation,  with its  chief  executive  office  located  at 6  Rubber  Avenue,
Naugatuck, Connecticut 06770 ("General DataComm"), DATACOMM LEASING CORPORATION,
a Delaware  corporation,  with its chief  executive  office  located at 6 Rubber
Avenue, Naugatuck,  Connecticut 06770 ("DataComm Leasing"), GDC FEDERAL SYSTEMS,
INC.,  a Delaware  corporation,  with its chief  executive  office  located at 6
Rubber  Avenue,  Naugatuck,  Connecticut  06770  ("GDC  Federal"),  GDC  HOLDING
COMPANY,  LLC, a Delaware  limited  liability  company  formerly  known as Vital
Network  Services,  L.L.C.,  with its chief executive office located at 6 Rubber
Avenue, Naugatuck,  Connecticut 06770 ("GDC Holding"), GDC REALTY, INC., a Texas
corporation  with its mailing  address  located at 6 Rubber  Avenue,  Naugatuck,
Connecticut  06770  ("GDC  Realty"),   and  GDC  NAUGATUCK,   INC.,  a  Delaware
corporation,  with its  chief  executive  office  located  at 6  Rubber  Avenue,
Naugatuck,  Connecticut  06770 ("GDC  Naugatuck",  and together with the Parent,
General  DataComm,  DataComm Leasing,  GDC Federal,  GDC Holding and GDC Realty,
each a "Borrower"  and  collectively  the  "Borrowers"),  each of the  financial
institutions  signatories  hereto (such  financial  institutions,  together with
their respective successors and assigns,  each a "Lender" and collectively,  the
"Lenders"), and ABLECO FINANCE LLC, a Delaware limited liability company, with a
place of business located at 450 Park Avenue, New York, NY 10022 ("Ableco"),  as
arranger and  administrative  agent for the Lenders (in such capacity,  together
with its successors in such capacity, the "Agent").

                  WHEREAS,  each of the Debtors  (as  hereinafter  defined)  are
parties to that certain Loan and  Security  Agreement,  dated as of May 14, 1999
(as amended to date, the "Pre-Petition  Loan Agreement," among the Debtors,  the
lenders party  thereto from time to time and Foothill  Capital  Corporation,  as
agent for such lenders;

                  WHEREAS,  on November 2, 2001 (the "Filing Date"), each of the
Debtors commenced cases (the "Chapter 11 Cases") under Chapter 11 of Title 11 of
the United States Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court");

                  WHEREAS, the Lenders have filed claims in the Chapter 11 Cases
and the Debtors and Lenders have agreed to the payment of Lenders' allowed claim
as provided in the Reorganization  Plan (as hereinafter  defined);  which claims
aggregate $30,000,000 subject to certain adjustments; and

                  WHEREAS,  Agent and the Lenders have agreed to such  repayment
in accordance with the  Reorganization  Plan subject to the terms and conditions
hereinafter set forth,

                  NOW,  THEREFORE,  in consideration of the promises,  covenants
and agreements contained herein, the parties hereto agree as follows:

<PAGE>

1.       DEFINITIONS AND CONSTRUCTION.

1.1 Definitions.  As used in this Agreement,  the following terms shall have the
following definitions:
        "Account Debtor" means any Person who is or who may become
obligated under, with respect  to, or on account   of, an Account,  chattel
paper or a General  Intangible.
        "Accounts"  means all  currently  existing  and  hereafter
arising accounts, contract rights, and all other
forms of obligations  owing to any one of the Borrowers  arising out of the sale
or lease of goods or the  rendition  of  services  by any one of the  Borrowers,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
         "Administrative  Borrower"  has the meaning set forth
in Section 19.10.

         "Adversary Proceeding" means that certain proceeding in the Bankruptcy
Court captioned Foothill Capital Corporation et. al. v. General DataComm
Industries, Inc. et. al. (In re General DataComm, Inc.),
Adversary Proceeding No. 02-2018.

         "Affiliate" means, as applied to any Person, any other Person
who directly or indirectly controls, is controlled  by, is under common control
with or is a director or officer of such Person.  For  purposes  of this
definition,  "control"  means  the  possession, directly  or  indirectly,
of the  power to vote  15% or more of the  securities having  ordinary  voting
power for the election of directors or other members of
the  governing  body of a Person or the direct or  indirect  power to direct the
management and policies of a Person.

          "Agent" means Ableco, solely in its capacity as agent for the
Lenders, and shall include any successor agent.

         "Agent's  Account"  means an  account  maintained  by
Agent at a depository selected by Agent.

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

        "Agent's Liens" means the Liens granted by the Borrowers to Agent for
the benefit of the Lender Group under this Agreement or the other
Loan Documents.

      "Agent-Related Persons" means the Agent, together with its Affiliates,
and the officers, directors, employees, counsel, agents and attorneys-in-fact
of the Agent and such Affiliates.

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

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

        "Assignment and Acceptance" means an assignment and acceptance
agreement in form and substance reasonably acceptable to Agent.
                                       2
<PAGE>

         "Assignment  of Claims Act" means the  Assignment  of
Claims Act of 1940, as amended from time to time,
codified at 31 U.S.C.ss. 3727 and 41 U.S.C.ss. 15, and the
rules and regulations promulgated thereunder.

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

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

          "Bankruptcy  Court" has the  meaning set forth in the
recitals to this Agreement.

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

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

             "Borrower" and  "Borrowers" has the meaning set forth in the
preamble hereto.

             "Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.

             "Change of Control" shall be deemed to have occurred at
such time, other than as provided in the Reorganization  Plan,  as (i) a
"person"  or  "group"  (within  the  meaning of Sections 13(d) and 14(d)(2) of
the Securities  Exchange Act of 1934) becomes the "beneficial  owner"
(as defined in Rule 13d-3 under the Securities  Exchange Act
of 1934), directly or indirectly,  of more than 35% of the total voting power of
all classes of stock then outstanding of Parent entitled to vote in the election
of  directors,  or (ii) the Parent shall cease to,  directly or  indirectly,  of
record and  beneficially,  own and control 100% of the then outstanding Stock of
each of the Borrowers (other than the Parent).

               "Class B Stock"  means  the  Parent's  Class B Common
Stock, par value $.01 per share.

                "Closing Date" means August 20, 2002.

                "Code" means the New York Uniform Commercial Code.

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

                (a)      Accounts,


                                      3

<PAGE>

                (b)      Books,

                (c)      Equipment,

                (d)      General Intangibles,

                (e)      Inventory,

                (f)      Investment Property,

                (g)      Negotiable Collateral,

                (h)      Real Property Collateral,

                (i)      money or other assets of any Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
                (j)      the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of  insurance
covering any or all of the  Collateral,  and any and all Accounts, Books,
Equipment, General Intangibles,  Inventory, Investment Property Negotiable
Collateral, Real Property, money, deposit accounts, or other tangible
or intangible property resulting from the sale, exchange,  collection,  or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.

                 "Collateral Access Agreement" means a landlord waiver or
consent, mortgagee waiver or consent, bailee letter, or a similar
acknowledgment  agreement of any warehouseman,  processor, lessor,  consignee,
or other Person in  possession  of,  having a Lien upon, or
having rights or interests in the Equipment or Inventory,  in each case, in form
and substance satisfactory to Agent.

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

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

                 "Commitment" means, as to any Lender, the Term A Loan
Commitment of such Lender, and the Term B Loan Commitment of such Lender, as
applicable, and "Commitments" means, collectively, the aggregate amount of the
Commitments of the Lenders.

                  "Common Stock" shall mean the common stock, par value
$0.01 per share, of the Parent.

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

                                       4
<PAGE>


                 "Confirmation  Order" means that certain order of the
Bankruptcy Court, dated August 5, 2003, confirming the
Reorganization  Plan,  as the same may be  amended  from  time to time  with the
written consent of the Agent.

                 "Control Agreement" means a control agreement, in form and
substance reasonably satisfactory to Agent, between a Borrower,  Agent,  and
the  applicable  securities  intermediary  with
respect to a Securities Account or a bank with respect to a deposit account.

                 "DataComm    Leasing"    means    DataComm    Leasing
Corporation, a Delaware corporation.

                 "Debentures" means the 10% Adjustable Senior Subordinated
Debentures due 2008 issued to unsecured general creditors of Debtors under
the Indenture and in accordance with the Reorganization Plan.

                 "Debenture  Trustee"  means  HSBC  Bank  USA,  as the
trustee for the Debentures issued pursuant to the Indenture.

                 "Debtors" means,  collectively,  each Borrower, prior
to its reorganization at the Effective Time.

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

                  "Dollars or $" means United States dollars.

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

                 "Effective   Date"  shall  mean  the  Effective  Date
defined in Section 1.27 of the Reorganization Plan.

                 "Effective Time" shall mean the time on the Effective Date at
which the Reorganization Plan becomes effective in accordance with its terms.

                 "Eligible Transferee" means: (a) a commercial bank organized
under the laws of the United  States,  or any state  thereof,  and having  total
assets in excess of $100,000,000; (b) a commercial bank organized under the laws
of any  other  country  which  is a  member  of the  Organization  for  Economic
Cooperation and Development or a political  subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States;  (c) a finance company,
insurance  company  or other  financial  institution  or fund that is engaged in
making,  purchasing or otherwise  investing in commercial  loans in the ordinary
course of its business and having total assets in excess of $50,000,000; (d) any
Affiliate  (other than  individuals) of a Lender that was party hereto as of the
Closing Date, or any fund,  money market  account,  investment  account or other
account  managed by a Lender or an Affiliate  of such Lender;  (e) so long as no
Event of Default has occurred and is  continuing,  any other Person  approved by
Agent; and (f) during the continuation of an Event of Default,  any other Person
approved by Agent.

                                       5
<PAGE>

                "Equipment" means all of each Borrower's now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture,  furnishings, fixtures,  vehicles
(including motor vehicles),  tools, parts, goods (other than consumer goods,
farm products,  or Inventory),  wherever located,  including all
attachments,  accessories, accessions, replacements,  substitutions,  additions,
and improvements to any of the foregoing.

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

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

                           "ERISA  Event"  means  (a) a  Reportable  Event  with
respect to any Benefit Plan or Multiemployer Plan, (b) the
withdrawal of a Borrower,  any of its  Subsidiaries  or ERISA  Affiliates from a
Benefit  Plan during a plan year in which it was a  "substantial  employer"  (as
defined in Section  4001(a)(2) of ERISA),  (c) the providing of notice of intent
to terminate a Benefit Plan in a distress  termination  (as described in Section
4041(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a
Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides
a basis under Section  4042(a)(1),  (2), or (3) of ERISA for the termination of,
or the appointment of a trustee to administer, any Benefit Plan or Multiemployer
Plan, or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section  4041A of ERISA,  (f) the  partial  or  complete  withdrawal  within the
meaning  of  Sections  4203  and  4205  of  ERISA,  of a  Borrower,  any  of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under  Section  401(a)(29)  of the IRC by a Borrower or its
Subsidiaries or any of their ERISA Affiliates.

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

               "Exchange Act" means the  Securities  Exchange Act of
1934, as amended, and any successor statute thereto.

                "FEIN" means Federal Employer Identification Number.

                "Final Order" means an order or judgment of the Bankruptcy
Court as entered on the docket that has not been reversed,  stayed,  modified or
amended,  and as to which the time to appeal,  petition for certiorari,  or seek
reargument  or  rehearing  has  expired  and as to which no appeal,  reargument,
petition  for  certiorari,  or  rehearing is pending or as to which any right to
appeal,  reargue,  petition for  certiorari or seek rehearing has been waived in
writing  in a manner  reasonably  satisfactory  to the Agent or, if any  appeal,
reargument,  petition for certiorari,  or rehearing thereof has been sought, the
order or judgment of the Bankruptcy Court has been affirmed by the highest court
to which the order was appealed or from which the  reargument  or rehearing  was
sought,  or certiorari has been denied,  and the time to take any further appeal
or to seek certiorari or further reargument has expired.

                                       6
<PAGE>

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

                 "GDC Federal" means GDC Federal Systems, Inc., a Delaware
corporation.

                 "GDC  Holding"  means GDC  Holding  Company,  LLC,  a
Delaware limited liability company formerly known as Vital
Network Services, L.L.C.

                  "GDC Naugatuck" means GDC Naugatuck, Inc., an indirect
Subsidiary of the Parent that is organized under the laws of Delaware.

                   "GDC Realty" means GDC Realty, Inc., a Texas corporation.

                    "General DataComm" means General DataComm, Inc., a
Delaware corporation.

                   "General Intangibles" means all of each Borrower's now
owned or hereafter acquired right, title, and interest with respect to general
intangibles  (including  payment  intangibles, contract rights,  rights to
payment,  rights arising under common law, statutes,
or  regulations,  choses or things in action,  goodwill,  patents,  trade names,
trademarks,  servicemarks,  copyrights,  blueprints,  drawings, purchase orders,
customer  lists,  monies due or  recoverable  from pension  funds,  route lists,
rights to payment and other rights  under any royalty or  licensing  agreements,
infringement claims, computer programs,  information contained on computer disks
or tapes,  software,  literature,  reports,  catalogs,  money, deposit accounts,
insurance premium rebates,  tax refunds, and tax refund claims), and any and all
supporting obligations in respect thereof, and any other personal property other
than goods, Accounts, Investment Property, and Negotiable Collateral.

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

                  "Governmental Authority" means any nation or government,
any state, province, or other political
subdivision  thereof,  any  central  bank (or  similar  monetary  or  regulatory
authority)  thereof,  any entity exercising  executive,  legislative,  judicial,
regulatory or administrative  functions of or pertaining to government,  and any
corporation  or other  entity  owned or  controlled,  through  Stock or  capital
ownership or otherwise, by any of the foregoing.

                                       7
<PAGE>

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

                  "Holder" has the meaning set forth in Section 15.1

                  "Indebtedness" means: (a) all obligations of Borrowers for
borrowed money, (b) all obligations of Borrower evidenced by bonds,  debentures,
notes, or other similar  instruments and all  reimbursement or other obligations
of Borrowers in respect of letters of credit, bankers acceptances, interest rate
swaps,  or other  financial  products,  (c) all  obligations of Borrowers  under
capital  leases,  (d) all obligations or liabilities of others secured by a Lien
on any property or asset of a Borrower,  irrespective of whether such obligation
or liability is assumed,  and (e) any obligation of a Borrower  guaranteeing  or
intended to guarantee (whether guaranteed,  endorsed,  co-made,  discounted,  or
sold with recourse to such Borrower) any indebtedness,  lease, dividend,  letter
of credit, or other obligation of any other Person.

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

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

                  "Indenture" means the trust indenture dated as of the
Effective Date between Parent and Debenture Trustee,
as amended, supplemented or otherwise modified from time to time entered into in
connection with the issuance of the Debentures.

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

                  "Intellectual  Property" has the meaning set forth in
Section 5.16.

                  "Inventory" means all present and future inventory in which
any Borrower has any interest, including goods
held for sale or lease or to be furnished under a contract of service and all of
any  Borrower's  present and future raw  materials,  work in  process,  finished
goods, and packing and shipping materials, wherever located.

                  "Investment Property" means all of each Borrower's now
owned or hereafter acquired right, title, and
interest  with respect to  "investment  property" as that term is defined in the
Code, and any and all supporting obligations in respect thereof.

                                       8
<PAGE>

                  "IRC" means the  Internal  Revenue  Code of 1986,  as
amended, and the regulations thereunder.

                  "IRS" has the meaning set forth in Section 6.4.

                  "Legal Requirements" means all applicable international,
 foreign, federal, state, and local laws, judgments, decrees, orders,
statutes, ordinances, rules, regulations, or Permits.

                  "Lender" and "Lenders" have the respective meanings set forth
 in the preamble hereto, and shall include any
other Person made a party to this Agreement in accordance with the provisions of
Section 16.1.

                  "Lender Group" means,  individually and collectively,
each of the Lenders and the Agent.

                  "Lender Group Expenses" means all:  costs or expenses
(including taxes, and insurance premiums) required to
be paid by Borrowers  under any of the Loan  Documents that are paid or incurred
by any one or more members of the Lender Group; fees or charges paid or incurred
by any one or more  members of the Lender  Group in  connection  with any one or
more members of the Lender Group's transactions with Borrowers,  including, fees
or  charges   for   photocopying,   notarization,   couriers   and   messengers,
telecommunication, public record searches (including tax lien, judgment, and UCC
searches  and  including  searches  with the patent and  trademark  office,  the
copyright  office,  or the  department of motor  vehicles),  filing,  recording,
publication,  periodic Personal Property  Collateral or Real Property Collateral
appraisals,  real estate surveys,  real estate title policies and  endorsements,
and environmental audits; costs and expenses incurred by any one or more members
of the Lender Group in the  disbursement of funds to Borrowers (by wire transfer
or otherwise); charges paid or incurred by any one or more members of the Lender
Group resulting from the dishonor of checks; costs and expenses paid or incurred
by any one or more members of the Lender Group to correct any default or enforce
any provision of the Loan Documents,  or in gaining possession of,  maintaining,
handling,  preserving,  storing,  shipping,  selling,  preparing  for  sale,  or
advertising  to sell the  Personal  Property  Collateral  or the  Real  Property
Collateral,  or  any  portion  thereof,   irrespective  of  whether  a  sale  is
consummated;  costs and expenses  paid or incurred by any one or more members of
the Lender Group in examining Books; costs and expenses of third party claims or
any other suit paid or incurred by any one or more  members of the Lender  Group
in  enforcing  or  defending  the  Loan  Documents  or in  connection  with  the
transactions  contemplated  by the Loan  Documents or any one or more members of
the Lender Group's relationship with any Borrower or any Guarantor;  and any one
or more members of the Lender  Group's  reasonable  attorneys  fees and expenses
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating,  enforcing  (including  attorneys  fees and  expenses  incurred  in
connection  with a "workout," a  "restructuring,"  or an  Insolvency  Proceeding
concerning  any Borrower or any  Guarantor of the  Obligations),  defending,  or
concerning the Loan Documents, irrespective of whether suit is brought. No other
fees or expenses are  included in Lender  Group  Expenses or shall be payable by
Borrowers to Lenders under this Agreement.

                                       9
<PAGE>

              "Lender-Related  Persons" means,  with respect to any
Lender, such Lender, together with such Lender's
Affiliates,  and  the  officers,  directors,  employees,  counsel,  agents,  and
attorneys-in-fact of such Lender and such Lender's Affiliates.

               "Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than
the owner of the property,  whether such  interest  shall be based on the common
law, statute, or contract, whether such interest shall be recorded or perfected,
and whether such interest shall be contingent upon the occurrence of some future
event or events or the existence of some future  circumstance or  circumstances,
including the lien or security interest arising from a mortgage,  deed of trust,
encumbrance,  pledge, hypothecation,  assignment, deposit arrangement,  security
agreement, adverse claim or charge, conditional sale or trust receipt, or from a
lease,  consignment,  or  bailment  for  security  purposes  and also  including
reservations,  exceptions, encroachments,  easements, rights-of-way,  covenants,
conditions,  restrictions,  leases,  and other title exceptions and encumbrances
affecting Real Property.

                "Loan  Account"  has the meaning set forth in Section 2.11.

                "Loan Documents" means this Agreement, the Lockbox Agreements,
each Pledge Agreement, the Patent Security
Agreement,  the Trademark Security  Agreement,  the Mortgages,  the Registration
Rights  Agreement,  the  Warrants,  any note or notes  executed by Borrowers and
payable to any Lender in connection with this Agreement, and any other agreement
entered into, now or in the future, in connection with this Agreement.

                "Lockbox  Account"  shall mean a  depository  account
established pursuant to one of the Lockbox Agreements.

                "Lockbox Agreements" means those certain Control Agreements,
in form and substance satisfactory to Agent, each of which is among the
applicable Borrower, Agent, and one of the Lockbox Banks.

                "Lockbox Banks" means, collectively,  The Bank of New
York, American National Bank and Peoples Bank.

                "Lockboxes" has the meaning set forth in Section 2.8.

                "Material Adverse Change" means (a) a material adverse change
in the business, operations, results of
operations,  assets,  liabilities  or financial  condition of the Parent and its
Subsidiaries  taken as a whole,  (b) the material  impairment of the Parent's or
any of its Subsidiaries' ability to perform their material obligations under the
Loan  Documents  to which  they are a party or of Agent or the  Lender  Group to
enforce the Obligations or realize upon the Collateral,  (c) a material  adverse
effect on the value of the  Collateral  or the  amount  that Agent or the Lender
Group  would be likely  to  receive  (after  giving  consideration  to delays in
payment and costs of enforcement) in the liquidation of such Collateral,  or (d)
a material  impairment  of the priority of Agent's or the Lender  Group's  Liens
with respect to the Collateral.

            "Material Contract" means any agreement or contract of any Borrower
or any Subsidiary of a Borrower

                                       10


(excluding  subcontracts  the  costs of which  by their  terms  are paid by such
Borrower's or Subsidiary's  customer) which (a) involves  consideration  to such
Borrower or Subsidiary of $250,000 or more, (b) involves  consideration  by such
Borrower or Subsidiary of $250,000 or more, (c) imposes financial obligations on
any Borrower or any Subsidiary of a Borrower of $250,000 or more (other than any
agreement  that by its terms may be terminated by any Borrower or any Subsidiary
of a Borrower upon sixty (60) days' notice or less) or (d) is otherwise material
(or  together  with  related  agreements  and  contracts,  is  material)  to the
business,  operations,  financial  condition,  performance  or properties of any
Borrower  excluding  from  clauses  (a),  (b),  (c) and (d),  however,  customer
purchase orders or purchase  orders to any vendor,  in each case entered into in
the ordinary course of a Borrower's business.

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

             "Mortgages" means one or more mortgages, deeds of trust,
or deeds to secure debt, executed by any Borrower
in favor of Agent for the benefit of the Lender Group, the form and substance of
which shall be satisfactory to Agent, that encumber the Real Property Collateral
and the related improvements thereto.

              "Multiemployer Plan" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which a Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute,  within the
past six years.
                           "Naugatuck Property" means that certain Real Property
owned by GDC Naugatuck and located at 6 Rubber
Avenue, Naugatuck, Connecticut 06770.

                "Negotiable Collateral" means all of each Borrower's now owned
and hereafter  acquired  right,  title,  and interest with respect to letters of
credit,  letter  of  credit  rights,  instruments,   promissory  notes,  drafts,
Investment Property, security entitlements,  securities (including the shares of
stock of subsidiaries of each Borrower),  documents,  personal  property leases,
and chattel  paper  (including  electronic  chattel  paper and tangible  chattel
paper), and any and all supporting obligations in respect thereof.

               "Net Proceeds" means:  (a) with respect to the sale or other
disposition of any asset (other than any
capital  stock or debt  security)  by any  Borrower  or any of its  Subsidiaries
(including in connection with any  sale-leaseback),  the excess,  if any, of (i)
the aggregate  amount  received in cash  (including  any cash received by way of
deferred payment pursuant to a note receivable,  other non-cash consideration or
otherwise,  but only as and when such cash is so  received) in  connection  with
such sale or other disposition, over (ii) the sum of (A) the principal amount of
any  Indebtedness  which is secured by any such asset  (other than  Indebtedness
assumed by the  purchaser  of such  asset) or which is  required  to be, and is,
repaid in  connection  with the sale or other  disposition  thereof  (other than
Indebtedness  hereunder),  (B) the  reasonable  out-of-pocket  expenses and fees
incurred by the such Borrower or its  Subsidiaries  in connection with such sale
or other  disposition (but only to the extent that such  out-of-pocket  expenses
and fees, if paid to an Affiliate of such Borrower, are approved by the Agent in
its sole discretion exercised  reasonably),  and provided that all such expenses
and fees are set forth on a certificate  provided to the Agent,  and (C) federal
and state taxes  incurred  in  connection  with such sale or other  disposition,
whether payable at such time or thereafter;  and (b) with respect to the sale or
other  disposition  of any capital stock or debt security by any Borrower or any
of its Subsidiaries,  excluding any sale or disposition of capital stock of such
Borrower pursuant to employee stock option or purchase plans or warrants of such

                                       11

<PAGE>

Borrower, the excess of (i) the aggregate amount received in cash (including any
cash received by way of deferred payment  pursuant to a note  receivable,  other
non-cash  consideration  or  otherwise,  but  only as and when  such  cash is so
received) in connection with such sale or other  disposition,  over (ii) the sum
of (A)  the  reasonable  fees,  commissions  and  other  out-of-pocket  expenses
incurred by such Borrower or its  Subsidiaries  in connection  with such sale or
other  disposition (but only to the extent such fees,  commissions and expenses,
if paid to an Affiliate of such Borrower,  are approved by the Agent in its sole
discretion  exercised  reasonably and provided that all such fees,  commissions,
discounts and expenses are set forth on a certificate provided to the Agent) and
(B)  federal  and state taxes  incurred  in  connection  with such sale or other
disposition, whether payable at such time or thereafter.

        "Obligations"  means all loans,  Term  Loans,  debts,
principal (including the Term B PIK Amount), interest
(including any interest  that,  but for the  provisions of the Bankruptcy  Code,
would have accrued),  liabilities  (including all amounts  charged to Borrowers'
Loan Account pursuant hereto),  obligations, or Lender Group Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy  Code, would
have accrued), lease payments,  guaranties,  covenants, and duties owing by each
Borrower to the Agent or the Lender Group of any kind and  description  (whether
pursuant  to or  evidenced  by the  Loan  Documents  or  pursuant  to any  other
agreement between a Borrower and the Agent or the Lender Group, and irrespective
of whether for the payment of money),  whether  direct or indirect,  absolute or
contingent,  due or to become  due,  now  existing  or  hereafter  arising,  and
including any debt,  liability,  or  obligation  owing from a Borrower to others
that the Agent or the Lender Group may have obtained by assignment or otherwise,
and  further  including  all  interest  not paid when due and all  Lender  Group
Expenses  that  any  Borrower  is  required  to pay  or  reimburse  by the  Loan
Documents, by law, or otherwise.  Any reference in this Agreement or in the Loan
documents to the Obligations shall include all amendments,  changes, extensions,
modifications,  renewals, replacements,  substitutions, and supplements, thereto
and thereof, as applicable.

        "Parent" means General DataComm Industries, Inc., a Delaware
corporation.

         "Participant" means any Person to which a Lender has sold a
participation interest in its rights under the Loan Documents.

         "Patent Security Agreement" means that certain Patent
Security Agreement, dated as of even date herewith,
between Borrowers and Agent, in form and substance satisfactory to Agent.

         "PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.

         "Permits" of a Person shall mean all rights, franchises, permits,
authorities, licenses, certificates of
approval or authorizations, including licenses and other authorizations issuable
by a Governmental Authority, which pursuant to applicable Legal Requirements are
necessary to permit such Person  lawfully to conduct and operate its business as
currently conducted and to own and use its assets.

                                       12
<PAGE>


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

         "Permitted Liens" means (a) Liens in favor of the Agent for the
benefit of the Lender Group, (b) Liens for
unpaid taxes that either (i) are not yet delinquent or (ii) do not constitute an
Event of Default  hereunder  and are the  subject  of  Permitted  Protests,  (c)
subordinated  Liens in favor of the Debenture  Trustee under the Indenture,  (d)
Liens set forth on Schedule  P-1, (e) purchase  money Liens or the  interests of
lessors under capital  leases to the extent that such Liens or interests  secure
Purchase Money  Indebtedness  permitted  under Section 7.1 hereof and so long as
the Lien  attaches  only to the assets  purchased  or acquired  and the proceeds
thereof,  (f)  Liens  arising  by  operation  of law in favor  of  warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary  course of business of each Borrower and not in connection with the
borrowing  of money,  and which  Liens  either  (i) are for sums not yet due and
payable, or (ii) are the subject of Permitted  Protests,  (g) Liens arising from
deposits  made in  connection  with  obtaining  worker's  compensation  or other
unemployment  insurance,  (h) Liens or deposits to secure  performance  of bids,
tenders,  or leases (to the extent permitted under this Agreement),  incurred in
the ordinary  course of business of each Borrower and not in connection with the
borrowing of money, (i) Liens arising by reason of security for surety or appeal
bonds in the ordinary  course of business of each Borrower,  (j) Liens resulting
from any judgment or award that would not have a Material  Adverse Change and as
to which the time for  appeal or  petition  for  rehearing  of which has not yet
expired,  or in  respect of which a Borrower  is in good  faith  prosecuting  an
appeal or proceeding  for a review,  and in respect of which a stay of execution
pending such appeal or proceeding  for review has been  secured,  (k) Liens with
respect to the Real Property  Collateral  that are exceptions to the commitments
for title  insurance  issued in connection  with the  Mortgages,  as accepted by
Agent,  (l)  with  respect  to any  Real  Property  that is not part of the Real
Property Collateral,  easements, rights of way, zoning and similar covenants and
restrictions,  and similar  encumbrances that customarily exist on properties of
Persons  engaged in similar  activities  and similarly  situated and that in any
event do not  materially  interfere  with or impair the use or  operation of the
Collateral  by any  Borrower  or the value of Lender  Group's  Lien  thereon  or
therein,  or materially  interfere with the ordinary  conduct of the business of
any  Borrower,  (m)  Liens on leases  (and the  underlying  Equipment)  in which
Datacomm  Leasing is the lessor,  provided that (i) Agent receives not less than
30  days  prior  written  notice  of  the  incurrence  of  such  Liens  and  the
Indebtedness  secured thereby and (ii) the proceeds of the Indebtedness  secured
by such  Liens are  deposited  in a lockbox,  and (n) Liens with  respect to the
Naugatuck  Property described on Schedule P-1 or as provided for or contemplated
under the Reorganization Plan.

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

                                       13
<PAGE>


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

            "Personal  Property  Collateral" means all Collateral
other than the Real Property Collateral.

           "Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by a Borrower
or with respect to which it may incur liability.

           "Pledge Agreements" means, collectively, (i) the Pledge Agreement,
dated as of even date herewith, made by
the Parent in favor of the Agent for the  benefit of the  Lenders,  as  amended,
supplemented or otherwise modified from time to time, (ii) the Pledge Agreement,
dated as of even date herewith,  made by General  DataComm in favor of the Agent
for the benefit of the Lenders,  as amended,  supplemented or otherwise modified
from  time to time,  and  (iii)  the  Pledge  Agreement,  dated as of even  date
herewith,  made by GDC  Realty  in favor of the  Agent  for the  benefit  of the
Lenders, as amended, supplemented or otherwise modified from time to time.

            "Pre-Petition  Loan  Agreement"  has the  meaning set
forth in the recitals to this Agreement.

             "Pro Rata Share" means:


                           (a)      with respect to a Lender's obligation to
make the Term A Loan and receive payments of principal,  interest,  fees, costs,
and expenses with respect thereto,  the percentage  obtained by dividing (i) the
principal  amount of such Lender's Term A Loan  Commitment by (ii) the principal
amount of the Term A Loan,

                           (b)      with respect to a Lender's obligation to
make the Term B Loan and receive payments of principal,  interest,  fees, costs,
and expenses with respect thereto,  the percentage  obtained by dividing (i) the
principal  amount of such Lender's Term B Loan  Commitment by (ii) the principal
amount of the Term B Loan,

                           (c)      with respect to all other matters as to a
particular  Lender  (including  the  indemnification  obligations  arising under
Section  18.7,  the  percentage  obtained by dividing  (i) the unpaid  principal
amount of such Lender's portion of the Term A Loan plus such Lender's portion of
the Term B Loan (inclusive of such Lender's portion of the Term B PIK Amount) by
the aggregate  amount of (ii) the Term A Loan plus the Term B Loan (inclusive of
the Term B PIK Amount).

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

                                       14
<PAGE>


               "Real Property" means any estates or interests in real property
now owned or hereafter acquired by any Borrower.

               "Real Property Collateral" means the parcel or parcels of real
property and the related improvements thereto identified on Schedule R-1, and
any Real Property hereafter acquired by any Borrower.

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

                "Reference  Bank"  means  JPMorgan  Chase  Bank,  its
successors or any other commercial bank designated by Agent
to the Administrative Borrower from time to time.

                "Reference Rate" means the rate of interest  publicly
announced by the Reference Bank in New York, New York
from time to time as its reference  rate, base rate or prime rate. The reference
rate,  base rate or prime rate is determined  from time to time by the Reference
Bank as a means of pricing  some loans to its  borrowers  and neither is tied to
any external rate of interest or index nor necessarily  reflects the lowest rate
of interest  actually  charged by the Reference Bank to any particular  class or
category of customers. Each change in the Reference Rate shall be effective from
and including the date such change is publicly announced as being effective.

                "Registration Rights Agreement" means the Registration Rights
Agreement, in form and substance satisfactory
to the Agent,  by and between the Parent and Holder,  with respect to the shares
of Warrant  Stock that Holder may acquire  pursuant to the  Warrants and certain
rights associated with such shares.

                "Reorganization" shall mean the reorganization of the Debtors
pursuant to the Reorganization Plan and the Confirmation Order.

                "Reorganization Plan" means the Plan of Reorganization of the
Debtors dated April 29, 2003 proposed pursuant to Section 1121 et. seq. of the
Bankruptcy Code.

                "Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder  other than a Reportable  Event
as to which the  provision of 30 days notice to the PBGC is waived under
applicable regulations.

                "Required  Lenders" means, at any time, Lenders whose
Pro Rata Shares aggregate fifty-one percent (51%) or
more of the Commitments or, if the Commitments have been terminated irrevocably,
51% of the Obligations then outstanding.

                "Retiree  Health  Plan"  means an  "employee  welfare
benefit plan" within the meaning of Section 3(1) of ERISA
that provides  benefits to individuals  after  termination of their  employment,
other than as required by Section 601 of ERISA.

                "SEC" means the United States Securities and Exchange
Commission and any successor Federal agency having similar powers.

                                       15

<PAGE>

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

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

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

            "Term A Loan" has the  meaning  set forth in  Section
2.4(a)(i).

            "Term A Loan  Commitment"  means the amount set forth
opposite such Lender's name on Schedule C-1 as such
Lender's "Term A Loan Commitment", as the same may be adjusted from time to time
pursuant to the terms of this Agreement.

            "Term B Loan" has the  meaning  set forth in  Section
2.4(b)(i).

            "Term B Loan  Commitment"  means the amount set forth
opposite such Lender's name on Schedule C-1 as such
Lender's "Term B Loan Commitment", as the same may be adjusted from time to time
pursuant to the terms of this Agreement.

             "Term  B  PIK  Amount"  means,  as  of  any  date  of
determination, the amount of all interest accrued with respect
to the  Term B Loan  that has been  paid in kind by being  added to the  balance
thereof in accordance with Section 2.7(a).

             "Term Loans" means, collectively, the Term A Loan and
the Term B Loan.

              "Trademark  Security  Agreement"  means that  certain
Trademark Security Agreement, dated as of even date
herewith, among Borrowers and Agent, in form and substance satisfactory to
Agent.

              "UCC  Filing  Authorization  Letter"  means a  letter
executed by each Borrower authorizing Agent to file
appropriate  financing statements on Form UCC-1 in such office or offices as may
be necessary  or, in the opinion of Agent,  desirable to perfect the Liens to be
created by each applicable Loan Document.

             "Voidable  Transfer"  has the  meaning  set  forth in
Section 19.8.

             "Warrants" has the meaning set forth in Section 15.

                                       16

<PAGE>

            "Warrant  Stock"  means  each  share of Common  Stock
issuable by the Parent upon the exercise of the Warrants.

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

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

1.4  Construction.  Unless  the  context  of this  Agreement  or any other  Loan
Document  clearly  requires  otherwise,  references  to the plural  include  the
singular, references to the singular include the plural, the term "including" is
not  limiting,  and the term "or" has,  except where  otherwise  indicated,  the
inclusive  meaning  represented  by the  phrase  "and/or."  The words  "hereof,"
"herein,"  "hereby,"  "hereunder,"  and similar  terms in this  Agreement or any
other Loan Document refer to this Agreement or any other Loan Documents,  as the
case may be, as a whole and not to any particular provision of this Agreement or
such  other  Loan  Document,  as the case may be.  An  Event  of  Default  shall
"continue"  or be  "continuing"  until such Event of Default  has been waived in
writing by Agent or cured. Section,  subsection,  clause,  schedule, and exhibit
references are to this Agreement  unless otherwise  specified.  Any reference in
this  Agreement or in the Loan  Documents  to this  Agreement or any of the Loan
Documents  shall  include  all  alterations,  amendments,  changes,  extensions,
modifications, renewals, replacements,  substitutions, joiners, and supplements,
thereto  and  thereof,  as  applicable  (subject  to any  restrictions  on  such
alterations,   amendments,   changes,   extensions,   modifications,   renewals,
replacements,  substitutions,  joinders,  and supplements set forth herein). Any
reference  herein to any Person  shall be  construed  to include  such  Person's
successors and assigns.  Any requirement of a writing contained herein or in the
other Loan Documents shall be satisfied by the  transmission of a Record and any
Record  transmitted  shall  constitute a  representation  and warranty as to the
accuracy and completeness of the information contained therein.

1.5      Schedules and Exhibits.  All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated  herein by reference.  Disclosure in
any schedule to this  Agreement  shall be deemed  disclosure for all purposes of
this Agreement

2.       LOAN AND TERMS OF PAYMENT.

2.1      [Intentionally Omitted].

2.2      [Intentionally Omitted].

2.3      [Intentionally Omitted].

2.4 Term Loans.  (a)(i) Subject to the terms and  conditions of this  Agreement,
each Lender that has a Term A Loan  Commitment  severally  agrees to make a term
loan as of the Closing  Date (the "Term A Loan") to  Borrowers  in the  original
aggregate  principal  amount  equal  to such  Lender's  Term A Loan  Commitment.

                                       17
<PAGE>

Notwithstanding the forgoing,  Borrower and Lenders agree that the entire Term A
Loan is  outstanding  as of the Closing Date. The Term A Loan shall be repaid on
the first day of each month during the applicable periods set forth below and in
the amounts corresponding to such periods, as follows:

                                            (A)      during the period from
 August 20, 2002 to and including December 31, 2004, the
Term A Loan  shall be repaid  in  monthly  installments  of  principal  equal to
$250,000,  provided that any and all adequate assurance payments made by Debtors
on or after  the  Closing  Date  shall be  deemed to have been made on and shall
reduce the  principal  balance of the Term A Loan on a dollar for dollar  basis;
and

                                            (B)      on January 1, 2005 and
 each month thereafter, the Term A Loan shall be repaid in
monthly installments of principal equal to the greater of (I) the product of (x)
the  principal  amount  of the Term A Loan  outstanding  on  December  31,  2004
multiplied by (y) 1/36th and (II) $250,000.

(ii)  Notwithstanding  the foregoing,  with respect to any monthly  amortization
installment  due and payable on the Term A Loan during the 2003  calendar  year,
Borrowers shall have the right to defer the payment of any such  installment for
thirty (30) days from the date such  installment  is  otherwise  due  hereunder,
provided that  Borrowers  may exercise such deferral  right once during the 2003
calendar year.

(iii)  Borrowers shall repay (A) at least  $7,500,000 of the original  principal
amount  of the  Term A Loan by  September  30,  2003  (i.e.,  the Term A Loan is
reduced  to  $17,500,000  by such  date)  and (B) at  least  $10,000,000  of the
original  principal  amount of the Term A Loan by December  31, 2003 (i.e.,  the
Term A Loan is reduced to $15,000,000  by such date);  provided,  however,  that
each  deadline set forth in clauses (A) and (B) above shall be extended by sixty
(60) days from the applicable  deadline if, at least two (2) Business Days prior
to such deadline,  Borrowers deliver to Agent a fully executed letter of intent,
in form and  substance  reasonably  satisfactory  to  Agent,  providing  for the
purchase by a Person  (other  than an  Affiliate  of a  Borrower)  of any of the
assets set forth on Schedule 7.4 and the Net Proceeds  resulting  from such sale
would,  when aggregated with all prior principal  repayments of the Term A Loan,
enable Borrowers to satisfy the minimum  repayment amount  corresponding to such
deadline.

(iv) The outstanding principal balance and all accrued and unpaid interest under
the Term A Loan shall be due and payable upon the termination of this Agreement,
whether by its terms, by prepayment,  by acceleration,  or otherwise. The unpaid
principal  balance of the Term A Loan may be prepaid in whole or in part without
penalty or premium at any time  during the term of this  Agreement  upon 10 days
prior  written  notice by  Borrowers to Agent,  all such  prepaid  amounts to be
applied  to the  principal  installments  due on the Term A Loan in the  inverse
order of their  maturity.  All amounts  outstanding  under the Term A Loan shall
constitute Obligations.

(v) Notwithstanding  anything contained in this Agreement to the contrary if (A)
on or before  June 30,  2003,  the  Borrowers  have  repaid  $23,000,000  of the
aggregate  principal  amount  of the  Term A Loan,  together  with  all  accrued
interest  thereon,  the remaining  principal  balance of the Term A Loan and any

                                       18

<PAGE>

interest accrued thereon shall be forgiven by the Lenders,  and (B) on or before
December  31, 2003,  the  Borrowers  have repaid  $24,000,000  of the  aggregate
principal amount of the Term A Loan, together with all accrued interest thereon,
the  remaining  principal  balance of the Term A Loan and any  interest  accrued
thereon shall be forgiven by the Lenders.

(b) (i) Subject to the terms and conditions of this Agreement,  each Lender that
has a Term B Loan  Commitment  severally  agrees  to make a term  loan as of the
Closing  Date  (the  "Term B  Loan")  to  Borrowers  in the  original  aggregate
principal amount equal to such Lender's Term B Loan Commitment.  Notwithstanding
the  foregoing,  Borrower  and Lenders  agree  that,  subject to  adjustment  in
accordance  with the subsequent  provisions of this Section  2.4(b),  the entire
Term B Loan is outstanding as of the Closing Date. The following portions of the
outstanding principal amount of the Term B Loan shall be forgiven, together with
all accrued interest on the principal amount so forgiven,  upon the satisfaction
of the condition corresponding to such forgiven amount:

                                            (A)      $1,250,000, if at
least $5,000,000 of the aggregate principal balance of the
Term A Loan has been  repaid  during the period from August 20, 2002 to June 30,
2003;

                                            (B)      $1,250,000, if at least
$10,000,000 of the aggregate principal balance of the
Term A Loan has been  repaid  during the period from August 20, 2002 to December
31, 2003;

                                            (C)      $1,250,000, if at least
$15,000,000 of the aggregate principal balance of the
Term A Loan has been  repaid  during the period from August 20, 2002 to June 30,
2004; and

                                            (D)      $1,250,000, if the
aggregate principal amount of the Term A Loan has been repaid
in full,  together with all accrued  interest  thereon,  by December 31, 2004 or
forgiven as provided in Section 2.4(a)(v).

(ii) If any  principal  amount of the Term B Loan is  outstanding  on January 1,
2005,  the  balance  owing  under  the Term B Loan  shall be  determined  by the
Bankruptcy  Court based upon the aggregate  amount  claimed by the Lenders to be
owing by the  Debtors  under the  Pre-Petition  Agreement  Loan as of August 20,
2002, less the amount  determined by the Bankruptcy Court in accordance with the
Reorganization  Plan as not owing to the Lenders thereunder (such  determination
having been made in connection with the Adversary Proceeding),  less $25,000,000
and less any reductions to the principal  balance of the Term B Loan pursuant to
clauses (A) through (D) of Section 2.4(b)(i).

(iii) The  outstanding  principal  balance and all  accrued and unpaid  interest
under the Term B Loan  shall be due and  payable  upon the  termination  of this
Agreement,  whether by its terms, by prepayment, by acceleration,  or otherwise.
If and only if the Term A Loan has been  repaid in full,  the  unpaid  principal
balance  of the Term B Loan may be  prepaid  in  whole or in part  without  fee,
penalty or premium at any time during the term of this  Agreement  upon  written
notice by  Borrowers  to Agent.  All amounts  outstanding  under the Term B Loan
shall constitute Obligations.

                                       19
<PAGE>


2.5      Payments.

(a)      Payments by Borrower.

(i) All  payments  to be made  by  Borrowers  shall  be  made  without  set-off,
recoupment,  deduction,  or counterclaim,  except as otherwise  required by law.
Except as otherwise  expressly  provided herein, all payments by Borrowers shall
be made to Agent for the account of the Lenders, at Agent's address set forth in
Section 12, and shall be made in immediately available funds, no later than 2:00
p.m. (New York time) on the date specified herein. Any payment received by Agent
later than 2:00 p.m. (New York time), at the option of Agent, shall be deemed to
have been received on the following Business Day and any applicable  interest or
fee shall continue to accrue until such following Business Day.

(ii)  Whenever  any  payment  is due on a day other than a  Business  Day,  such
payment shall be made on the following  Business Day, and such extension of time
shall in such case be included in the  computation  of interest or fees,  as the
case may be.

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

(iv)  Immediately upon the receipt by any Borrower or any of its Subsidiaries of
any Net Proceeds from the disposition of the assets set forth on Schedule 7.4 of
such Borrower or any of its Subsidiaries,  such Borrower shall prepay the Term A
Loan in an amount equal to 100% of such Net Proceeds. Lenders agree to cooperate
with  Borrowers  on the  realization  of  proceeds  from the sale of the  assets
identified in Schedule 7.4,  including (A) consent to the sale of such assets in
which Agent has security interests, provided that the Net Proceeds of such sales
are  applied  in  accordance  with the  immediately  preceding  sentence  to the
reduction  of the  Term A Loan,  and (B)  consent  to a  prior  mortgage  on the
Naugatuck  Property  and/or the  satisfaction  of Agent's Lien on the  Naugatuck
Property in  connection  with the sale or mortgage  of the  Naugatuck  Property,
provided  the  Net  Proceeds  therefrom  are  applied  in  accordance  with  the
immediately  preceding  sentence to the reduction of the Term A Loan and applied
to the satisfaction of any existing prior mortgages on the Naugatuck Property in
an  amount  not  exceeding  $635,000  using  cash on hand.  In  addition  to the
foregoing,  any Net  Proceeds  received  by  Borrowers  from any life  insurance
policies  maintained  by  Borrowers  on the life of  Howard S.  Modlin  shall be
promptly paid to Agent to prepay the Term A Loan.

(b) Apportionment, Application of Payments, and Reversal of Payments. (i) Except
as otherwise provided with respect to Defaulting  Lenders,  aggregate  principal

                                       20
<PAGE>


and interest payments shall be apportioned  ratably among the Lenders (according
to the unpaid  principal  balance of each  Lender's  Term Loans as to which such
payments  relate),  and  payments of the fees (other  than fees  designated  for
Agent's sole and separate account) shall, as applicable,  be apportioned ratably
among the Lenders.  Except as otherwise provided in paragraph (b)(ii) below, all
payments  shall be  remitted  to Agent and all such  payments  not  relating  to
principal of or interest on specific  Term Loans (other than  payments  received
while no Event of Default has occurred and is continuing  and that relate to the
payment of principal or interest of specific  Obligations  or that relate to the
payment of specific fees or other amounts) and all proceeds of Accounts or other
Collateral  received  by Agent  pursuant  to this  Agreement  or any other  Loan
Document, shall be applied as follows:

          first, to pay any Lender Group Expenses then due to Agent from
          Borrowers until paid in full;

          second, to pay any Lender Group Expenses then due to Lenders from
          Borrowers;

          third, to pay interest due in respect of all Agent Advances until
          paid in full;

          fourth, to pay interest due in respect of the Term A Loan until paid
          in full;

          fifth, to pay or prepay principal of Agent Advances until paid in
          full;

          sixth, to pay or prepay the principal of the Term A Loan until paid
          in full;

          seventh, when due and payable, to pay all Obligations in respect of
          the Term B Loan until paid in full; and

          eighth, ratably to pay any other Obligations due to Agent or any
          Lender by Borrowers.

Agent shall promptly distribute to each Lender,  pursuant to the applicable wire
transfer instructions received from each Lender in writing, such funds as it may
be entitled to receive, subject to a settlement delay.

(ii) In each  instance,  so long as no  Event of  Default  has  occurred  and is
continuing,  Section  2.5(b)(i)  shall not be deemed to apply to any  payment by
Borrowers  specified by Borrowers to Agent to be for the payment of  Obligations
in  respect  of a Term Loan when due and  payable  under any  provision  of this
Agreement or the  prepayment  of all or part of the principal of the Term A Loan
pursuant to Section 2.5(a)(iv).

(iii) For  purposes of the  foregoing,  "paid in full" with  respect to interest
shall  include  interest  accrued  after  the  commencement  of  any  Insolvency
Proceeding  irrespective  of whether a claim for such  interest is  allowable in
such Insolvency Proceeding.

(iv) In the event of a direct conflict  between the priority  provisions of this
Section 2.5(b) and other provisions contained in any other Loan Document,  it is
the intention of the parties  hereto that both such priority  provisions in such
documents shall be read together and construed,  to the fullest extent possible,
to be in concert  with each other.  In the event of any  actual,  irreconcilable
conflict that cannot be resolved as aforesaid,  the terms and provisions of this
Section 2.5(b) shall control and govern.

                                       21

2.6      Agent Advances.

(a)  Subject  to the  limitations  set forth in the  proviso  contained  in this
Section 2.6(a),  Agent hereby is authorized by Borrowers and Lenders,  from time
to time in  Agent's  sole  discretion,  after  the  occurrence  and  during  the
continuance  of a Default or an Event of Default  (but  without  constituting  a
waiver of such  Default or Event of Default),  to make  advances to Borrowers on
behalf of  Lenders  that  Agent,  in its  reasonable  business  judgment,  deems
necessary or desirable (i) to preserve or protect the Collateral, or any portion
thereof,  (ii) to enhance  the  likelihood  of, or  maximize  the amount of, the
repayment of the Obligations, or (iii) to pay any other amount chargeable to the
Borrowers  pursuant  to the  terms of this  Agreement,  including  Lender  Group
Expenses and the advances described in Section 10 (any of the advances described
in this  Section  2.6(a)  being  hereinafter  referred to as "Agent  Advances");
provided, that the Required Lenders may at any time revoke Agent's authorization
contained in this Section 2.6(a) to make Agent Advances,  any such revocation to
be in writing and to become effective upon Agent's receipt thereof.

(b) Agent  Advances shall be repayable by Borrowers on demand and secured by the
Collateral,  shall constitute Obligations hereunder,  and shall bear interest at
the rate then applicable to Obligations pursuant to Section 2.7.

2.7      Interest:  Rates, Payments, and Calculations.

(a) Interest Rate. Except as provided in clause (c) below, all Obligations shall
bear interest at a per annum rate of 7.25 percentage points, provided that after
December 31, 2003, all Obligations shall bear interest at a per annum rate equal
to the greater of (i) 7.25  percentage  points and (ii) the Reference  Rate plus
2.5 percentage points;  provided,  however, that the interest on the outstanding
principal amount of the Term B Loan shall be paid by capitalizing  such interest
and adding such capitalized interest to the then outstanding principal amount of
the Term B Loan. Any interest to be capitalized shall be capitalized on the date
such  interest is to be paid  pursuant  to Section  2.7(e) and added to the then
outstanding  principal  amount of the Term B Loan and,  thereafter,  shall  bear
interest  as  provided  hereunder  as if it  had  originally  been  part  of the
outstanding principal of the Term B Loan.

(b)      [Intentionally Omitted]
          ---------------------

(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default,  all Obligations  shall bear interest at a per annum rate equal to 2.00
percentage points above the interest rate applicable to such Obligations at such
time.

(d) Minimum  Interest.  In no event shall the rate of interest  chargeable under
Section  2.7(a)  for any day be less than 7.25% per  annum.  To the extent  that
interest  accrued  hereunder at the rate set forth herein would be less than the
foregoing  minimum daily rate, the interest rate  chargeable  hereunder for such
day automatically shall be deemed increased to the minimum rate.

                                       22
<PAGE>


(e)  Payments.  Interest  (other than the Term B PIK Amount)  payable  hereunder
shall be due and payable,  in arrears, on the first day of each month during the
term hereof. Borrowers will pay on demand, all Lender Group Expenses incurred by
Agent and each Lender.  Lenders and  Borrowers  hereby  authorize  Agent to, and
Agent may,  from time to time,  charge the Loan  Account of  Borrowers  with any
amount  due and  payable  by  Borrowers  under any Loan  Document.  Lenders  and
Borrowers  agree that Agent shall have the right to make such charges whether or
not any Default or Event of Default shall have occurred and be  continuing.  Any
amount  charged to the Loan Account of Borrowers  shall be deemed an  Obligation
hereunder and, if not paid within 10 days after the same are billed to Borrowers
by Agent,  thereafter  shall bear  interest as provided  hereunder.  Lenders and
Borrowers  confirm that any charges  which Agent may so make to the Loan Account
of Borrowers as herein  provided will be made as an  accommodation  to Borrowers
and solely at Agent's discretion.

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

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

2.8  Collection  of  Accounts.  (a) Each  Borrower  shall at all times  maintain
lockboxes (the "Lockboxes")  and,  immediately after the Closing Date, (i) shall
instruct all Account Debtors with respect to the Accounts,  General Intangibles,
and Negotiable  Collateral of such Borrower to remit all  Collections in respect
thereof to such Lockboxes and (ii) shall deposit all other Collections  received
by such Borrower from any source  immediately  upon receipt into the  Lockboxes.
Each  Borrower,  Agent,  and the  Lockbox  Banks  shall  enter into the  Lockbox
Agreements,  which among other things shall provide for the opening of a Lockbox
Account for the deposit of Collections at a Lockbox Bank.  Each Borrower  agrees
that all  Collections  and other  amounts  received  by such  Borrower  from any
Account Debtor or any other source  immediately  upon receipt shall be deposited
into a Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby
shall be modified by any Borrower without the prior written consent of Agent. In
the absence of an Event of Default,  Borrowers shall be permitted to use any and
all cash deposited into any Lockbox Account.

                                       23
<PAGE>

(b) The  Lockbox  Accounts  shall be cash  collateral  accounts,  with all cash,
checks and similar  items of payment in such  accounts  securing  payment of the
Obligations,  and in which Borrowers are hereby deemed to have granted a Lien to
Agent.

2.9 Crediting  Payments.  Borrowers  will make each payment under this Agreement
not later  than 2:00 p.m.  (New York City  time) on the day when due,  in lawful
money of the United States of America and in immediately available funds, to the
Agent's Account.  All payments  received by Agent after 2:00 p.m. (New York City
time) on any  Business  Day will be  credited  to the Loan  Account  on the next
succeeding  Business  Day.  All  payments  shall  be made by  Borrowers  without
set-off, counterclaim, deduction or other defense to Agent and Lenders.

2.10     [Intentionally Omitted].

2.11 Maintenance of Loan Account; Statements of Obligations.  Agent on behalf of
the Lender Group shall maintain an account on its books in the name of Borrowers
(the "Loan Account") on which Borrowers will be charged with the Term Loans made
by Agent or the  Lenders to  Borrowers  or for  Borrowers'  account,  including,
accrued interest and Lender Group Expenses.  In accordance with Section 2.9, the
Loan Account will be credited with all payments received by Agent from Borrowers
or for Borrowers' account, including all amounts received in the Agent's Account
from any Lockbox Bank. Agent shall render statements  regarding the Loan Account
to Administrative  Borrower,  including  principal,  interest,  and including an
itemization  of all charges and  expenses  constituting  Lender  Group  Expenses
owing,  and such  statements  shall be  conclusively  presumed to be correct and
accurate and constitute an account stated between Borrowers and the Lender Group
unless,  within  30 days  after  receipt  thereof  by  Administrative  Borrower,
Administrative  Borrower  shall  deliver  to  Agent  written  objection  thereto
describing the error or errors contained in any such statements.

2.12     Joint and Several Liability of the Borrowers.

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

(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts,  not  merely as a surety  but also as a  co-debtor,  joint and  several
liability with the other Borrowers,  with respect to the payment and performance
of  all of the  Obligations  (including,  without  limitation,  any  Obligations
arising under this Section  2.12),  it being the intention of the parties hereto
that all the  Obligations  shall be the joint and  several  obligations  of each
Borrower without preferences or distinction among them.

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

                                       24
<PAGE>

(d) The  Obligations  of each Borrower under the provisions of this Section 2.12
constitute  the absolute and  unconditional,  full recourse  Obligations of each
Borrower  enforceable  against  each  such  Borrower  to the full  extent of its
properties   and  assets,   irrespective   of  the   validity,   regularity   or
enforceability of this Agreement or any other circumstances whatsoever.

(e) Except as otherwise  expressly  provided in this  Agreement,  each  Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
the  occurrence  of any  Default,  Event of  Default,  or of any  demand for any
payment under this Agreement,  notice of any action at any time taken or omitted
by Agent or the Lender Group under or in respect of any of the Obligations,  any
requirement of diligence or to mitigate  damages and,  generally,  to the extent
permitted by applicable law, all demands, notices and other formalities of every
kind in connection  with this  Agreement  (except as otherwise  provided in this
Agreement). Each Borrower hereby assents to, and waives notice of, any extension
or  postponement  of the time for the  payment  of any of the  Obligations,  the
acceptance  of any  payment of any of the  Obligations,  the  acceptance  of any
partial payment thereon, any waiver,  consent or other action or acquiescence by
Lender  Group at any time or times in respect of any default by any  Borrower in
the performance or satisfaction of any term, covenant, condition or provision of
this  Agreement,  any and all other  indulgences  whatsoever  by Lender Group in
respect of any of the  Obligations,  and the taking,  addition,  substitution or
release,  in whole or in part, at any time or times,  of any security for any of
the Obligations or the addition,  substitution or release,  in whole or in part,
of any Borrower. Without limiting the generality of the foregoing, each Borrower
assents to any other  action or delay in acting or failure to act on the part of
Agent or Lender Group with respect to the failure by any Borrower to comply with
any of its respective Obligations,  including,  without limitation,  any failure
strictly or  diligently to assert any right or to pursue any remedy or to comply
fully with applicable laws or regulations  thereunder,  which might, but for the
provisions of this Section 2.12 afford grounds for  terminating,  discharging or
relieving any Borrower,  in whole or in part, from any of its Obligations  under
this Section 2.12, it being the intention of each Borrower  that, so long as any
of the  Obligations  hereunder  remain  unsatisfied,  the  Obligations  of  such
Borrowers under this Section 2.12 shall not be discharged  except by performance
and  then  only to the  extent  of such  performance.  The  Obligations  of each
Borrower   under  this  Section  2.12  shall  not  be   diminished  or  rendered
unenforceable  by any  winding  up,  reorganization,  arrangement,  liquidation,
reconstruction or similar proceeding with respect to any Borrower,  Agent or any
Lender.  The  joint and  several  liability  of the  Borrowers  hereunder  shall
continue  in full  force and  effect  notwithstanding  any  absorption,  merger,
amalgamation or any other change  whatsoever in the name,  constitution or place
of formation of any Borrower, Agent or any Lender.

(f) The  provisions  of this  Section 2.12 are made for the benefit of Agent and
each Lender and their respective  successors and assigns, and may be enforced by
them from time to time against any or all of the  Borrowers as often as occasion
therefor may arise and without requirement on the part of Agent or any Lender or
such  successor  or assign  first to marshall  any of its or their  claims or to
exercise  any of its or their  rights  against any of the other  Borrowers or to
exhaust any remedies  available to it or them against any of the other Borrowers
or to resort to any other  source or means of  obtaining  payment  of any of the
Obligations  hereunder  or to elect any other  remedy.  The  provisions  of this

                                       25
<PAGE>


Section 2.12 shall remain in effect until all of the Obligations shall have been
indefeasibly  paid in full or otherwise fully and finally  satisfied.  If at any
time,  any  payment,  or  any  part  thereof,  made  in  respect  of  any of the
Obligations,  is rescinded  or must  otherwise be restored or returned by Lender
Group upon the  insolvency,  bankruptcy or  reorganization  of any Borrower,  or
otherwise,  the  provisions of this Section 2.12 will forthwith be reinstated in
effect, as though such payment had not been made.

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

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

3.       DELIVERIES; TERM OF AGREEMENT.

3.1      Deliveries By Borrower.  On or before the Effective Date, Borrowers
shall deliver to Agent the following:

(a) The UCC Filing  Authorization  Letter  duly  executed by each  Borrower  and
satisfactory evidence of the filing of all financing statements on Form UCC-1 in
such  office  or  offices  as may be  necessary  or,  in the  opinion  of Agent,
desirable  to perfect the  security  interests  purported  to be created by each
applicable Loan Document;

(b) The following documents,  in form and substance  satisfactory to Agent, duly
executed, and each such document shall be in full force and effect:

a.       the Lockbox Agreements;

b.       a Pledge Agreement, duly executed by the Parent, General DataComm, and
         GDC Realty;

                                       26
<PAGE>


c.       the Patent Security Agreement;

d.       the Trademark Security Agreement;

e.       the Warrants;

f.       the Registration Rights Agreement; and

g.       a collateral  assignment  of any and
         all life insurance policies owned by
         Parent on the life of Howard  Modlin
         together    with    duly    executed
         beneficiary  designations  for  such
         policies   naming   Agent   as   the
         Beneficiary of such policies.

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

(d)Copies of each Borrower's Governing Documents, as amended, modified, or
supplemented to the Effective Date, certified by the Secretary of such Borrower;

(e) A certificate of status with respect to each Borrower,  dated within 10 days
of the Effective Date, such certificate to be issued by the appropriate  officer
of the jurisdiction of organization of such Borrower,  which  certificate  shall
indicate that such Borrower is in good standing in such  jurisdiction  except as
otherwise disclosed in the Chapter 11 Case;

(f)  Certificates of status with respect to each Borrower,  each dated within 15
days of the Effective  Date,  such  certificates to be issued by the appropriate
officer  of the  jurisdictions  in which its  failure  to be duly  qualified  or
licensed would constitute a Material Adverse Change,  which  certificates  shall
indicate that such Borrower is in good standing in such jurisdictions;

(g) A certificate of insurance,  together with the endorsements  thereto, as are
required by Section 6.11, the form and substance of which shall be  satisfactory
to Agent and its counsel;

(h) Agent shall have received such  Collateral  Access  Agreements from lessors,
warehousemen, bailees, and other third persons as Agent may require;

(i) Agent shall have received a certificate from the chief executive  officer of
each  Borrower  (on  behalf  of such  Borrower)  certifying  as to the truth and
accuracy of the representations and warranties of Borrowers contained in Article
5 and as to the absence of any Defaults or Events of Default;

(j) Agent shall have received evidence,  satisfactory to the Agent, that each of
the  conditions  precedent  to  the  Effective  Date  and  consummation  of  the
Reorganization  Plan shall have been satisfied and that the Effective Date shall
have occurred;

                                       27
<PAGE>


(k)  Borrowers  shall  have paid or caused to be paid all  amounts  accrued  and
unpaid  through and including  the  Effective  Time with respect to any adequate
protection  provided under the Bankruptcy  Code in accordance with the terms of,
and to the extent required by, the  Reorganization  Plan, the Confirmation Order
or any other order of the Bankruptcy Court;

(l) A copy of the  Confirmation  Order shall have become a Final Order and Agent
shall have received a copy thereof  certified by a clerk of the Bankruptcy Court
as true, complete and correct and such order shall be in full force and effect;

(m) Agent shall have received a fully executed copy of the Indenture  pertaining
to the Debentures and the Subordinated  Security  Agreement  securing payment of
the  Debentures,  each  certified  by the  Parent  as a true and  complete  copy
thereof; and

(n) all other  documents and legal matters in connection  with the  transactions
contemplated by this Agreement shall have been delivered,  executed, or recorded
and shall be in form and substance satisfactory to Agent and its counsel and the
fees and  disbursements  of Schulte  Roth & Zabel LLP and all other  accrued and
unpaid Lender Group Expenses (including the fees and disbursements of counsel to
any member of the Lender  Group on the  Effective  Date) that are required to be
paid under this Agreement shall be paid if invoiced as of the Effective Date.

Execution  and  delivery  to the  Agent by a  Lender  of a  counterpart  of this
Agreement  shall be deemed  confirmation  by such Lender that (i) all conditions
precedent in this Section 3.1 have been  fulfilled to the  satisfaction  of such
Lender and (ii) the  decision of such Lender to execute and deliver to the Agent
an executed  counterpart of this Agreement was made by such Lender independently
and without  reliance on the Agent or any other Lender as to the satisfaction of
any condition set forth in this Section 3.1.

3.2      [Intentionally Omitted].

3.3      [Intentionally Omitted].

3.4 Term. This Agreement shall become  effective upon the execution and delivery
hereof by each Borrower,  each of the Lenders and the Agent,  and shall continue
in full force and effect for a term ending on December  31, 2007 (the  "Maturity
Date"),  unless sooner  terminated  pursuant to the terms hereof.  The foregoing
notwithstanding,  Agent (on behalf of the Lender  Group) shall have the right to
terminate  Lender  Group's  obligations  under this  Agreement  immediately  and
without notice upon the occurrence  and during the  continuation  of an Event of
Default.

3.5 Effect of  Termination.  On the date of termination of this  Agreement,  all
Obligations  immediately  shall become due and payable without notice or demand.
No  termination  of this  Agreement,  however,  shall  relieve or discharge  any
Borrower of Borrower's duties,  Obligations, or covenants hereunder or under the
other Loan Documents,  and Lender Group's  continuing  security interests in the
Collateral  shall  remain in effect  until all  Obligations  have been fully and
finally  discharged and Lender Group's  obligation to provide  additional credit
hereunder is terminated.

                                       28

<PAGE>

3.6 Early  Termination by Borrower.  Borrowers have the option, at any time upon
written notice to Agent, to terminate this Agreement by paying to Agent (for the
ratable benefit of Lender Group),  in cash, the  Obligations,  in full,  without
fee, premium or penalty.

4.       CREATION OF SECURITY INTEREST.

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

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

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

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

(a) Each  Borrower  authorizes  Agent to file any financing  statement  required
hereunder,  and any continuation statement or amendment with respect thereto, in
any  appropriate  filing  office  without the  signature of any  Borrower  where
permitted by applicable  law. Each  Borrower  hereby  ratifies the filing of any
financing  statement,  and any continuation  statement or amendment with respect
thereto, filed without the signature of any Borrower prior to the date hereof.

(b) If any Borrower  acquires any commercial  tort claims after the date hereof,
such Borrower shall immediately  deliver to Agent a written  description of such

                                       29
<PAGE>

commercial  tort  claim and  shall  deliver  a  written  agreement,  in form and
substance  reasonably  satisfactory  to Agent,  pursuant to which such  Borrower
shall pledge and collaterally assign all of its right, title and interest in and
to such  commercial  tort claim to Agent,  for the  benefit of the  Lenders,  as
security for the Obligations (a "Commercial Tort Claim Assignment").

(c) At any time upon the  request of Agent,  each  Borrower  shall  execute  and
deliver  to  Agent,  any  and  all  financing  statements,   original  financing
statements  in  lieu  of  continuation  statements,  fixture  filings,  security
agreements,   pledges,   assignments,   Commercial   Tort   Claim   Assignments,
endorsements of certificates of title,  and all other documents (the "Additional
Documents")  that Agent may  request in its  Permitted  Discretion,  in form and
substance reasonably satisfactory to Agent, to perfect and continue perfected or
better  perfect  the  Agent's  Liens in the  Collateral  (whether  now  owned or
hereafter arising or acquired), to create and perfect Liens in favor of Agent in
any  Real  Property  acquired  after  the  Closing  Date,  and in order to fully
consummate all of the transactions  contemplated hereby and under the other Loan
Documents, including any Mortgages.

(d) To the maximum extent permitted by applicable law, each Borrower  authorizes
Agent to execute  any such  Additional  Documents  in such  Borrower's  name and
authorizes Agent to file such executed  Additional  Documents in any appropriate
filing office.  To the maximum extent permitted by applicable law, each Borrower
authorizes the filing of any such Additional  Documents without the signature of
such Borrower in any appropriate  filing office.  In addition,  on such periodic
basis as Agent shall  require,  each  Borrower  shall (i)  provide  Agent with a
report of all new patentable, copyrightable, or trademarkable materials acquired
or generated by such Borrower  during the prior period,  (ii) cause all patents,
copyrights,  and trademarks  acquired or generated by such Borrower that are not
already the subject of a registration with the appropriate  filing office (or an
application   therefor  diligently   prosecuted)  to  be  registered  with  such
appropriate filing office in a manner sufficient to impart  constructive  notice
of such Borrower's ownership thereof, and (iii) cause to be prepared,  executed,
and delivered to Agent  supplemental  schedules to the applicable Loan Documents
to identify such  patents,  copyrights,  and  trademarks as being subject to the
security interests created thereunder.

4.5 Power of Attorney. Each Borrower hereby irrevocably makes, constitutes,  and
appoints Agent (and any of Agent's officers,  employees, or agents designated by
Agent)  as  Borrower's  true  and  lawful  attorney,  with  power to (a) if such
Borrower refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of such Borrower on any of the documents
described  in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing,  sign such  Borrower's  name on any invoice or bill of lading
relating  to  any  Account,  drafts  against  Account  Debtors,   schedules  and
assignments  of  Accounts,  verifications  of  Accounts,  and notices to Account
Debtors,  (c) send  requests  for  verification  of  Accounts,  (d) endorse such
Borrower's  name on any  Collection  item  that may  come  into  Lender  Group's
possession,  (e) at any time  that an  Event  of  Default  has  occurred  and is
continuing,  make,  settle,  and adjust all claims under Borrower's  policies of
insurance  and  make all  determinations  and  decisions  with  respect  to such
policies of insurance, and (f) at any time that an Event of Default has occurred
and is  continuing,  settle  and  adjust  disputes  and  claims  respecting  the
Accounts,  chattel paper or General  Intangibles  directly with Account Debtors,
for amounts and upon terms that Agent determines to be reasonable, and Agent may
cause to be  executed  and  delivered  any  documents  and  releases  that Agent

                                       30
<PAGE>

determines  to be  necessary.  The  appointment  of  Agent  as  each  Borrower's
attorney,  and each and every one of Agent's  rights and powers,  being  coupled
with an interest,  is irrevocable  until all of the Obligations  have been fully
and finally repaid and performed and Lender Group's obligations to extend credit
hereunder have been terminated.

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

4.7 Control  Agreements.  Each Borrower  agrees that it will not transfer assets
out of any Securities  Accounts other than as permitted  under Section 7.22 and,
if to another  securities  intermediary,  unless such Borrower,  Agent,  and the
substitute  securities  intermediary have entered into a Control  Agreement.  No
arrangement  contemplated  hereby or by any Control  Agreement in respect of any
Securities  Accounts  or other  investment  property  shall be  modified  by any
Borrower  without the prior written  consent of Agent.  Upon the  occurrence and
during the  continuance  of a Default or Event of Default,  Agent may notify any
securities  intermediary  to  liquidate or transfer  the  applicable  Securities
Account or any related investment  property maintained or held thereby and remit
the proceeds thereof to the Agent's Account.

5.       REPRESENTATIONS AND WARRANTIES.

                  In order to induce Lender Group to enter into this  Agreement,
each Borrower makes the following  representations and warranties which shall be
true, correct,  and complete in all respects as of the Effective Date (except to
the extent that such  representations and warranties relate solely to an earlier
date) and such  representations  and warranties  shall survive the execution and
delivery of this Agreement:

5.1      No Encumbrances.  Each Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.

5.2      [Intentionally Omitted]

5.3      [Intentionally Omitted]

5.4      Equipment.  All of the Equipment is used or held for use in
Borrowers' business.

5.5     Location of Inventory  and  Equipment.  The  Inventory and Equipment
are not stored with a bailee,  warehouseman,  or similar party (without  Agent's
prior  written  consent) and no material  part of the  Inventory or Equipment is
located at locations  other than those  identified on Schedule 6.11 or otherwise
permitted by Section 6.11.

5.6      Inventory Records.  Each Borrower keeps records itemizing and
describing the kind,  type,  quality,  and quantity of the  Inventory,  and such
Borrower's cost therefor that are correct and accurate in all material respects.

                                       31
<PAGE>

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

(a)      The state of incorporation of each Borrower is set forth in Schedule
5.7(a).

(b)      The chief executive office of each Borrower is located at the address
indicated in Schedule 5.7(b).

(c)      Each Borrower's FEIN and organizational identification number is
identified in Schedule 5.7(c).

(d)      None of the Borrowers holds any commercial tort claim as of the date
hereof, except as set forth in Schedule 5.7(d).

5.8      Due Organization and Qualification; Subsidiaries.

(a)  Except as  disclosed  in the  Chapter  11 Cases or in  Schedule  5.8,  each
Borrower is duly  organized and existing and in good standing  under the laws of
the  jurisdiction of its  organization and qualified and licensed to do business
in, and in good  standing  in, any state  where the failure to be so licensed or
qualified reasonably could be expected to have a Material Adverse Change.

(b) Set forth on Schedule  5.8, is a complete  and accurate  description  of the
authorized  capital stock of Parent,  by class, and, as of the Effective Date, a
description  of the  number of shares of each such  class  that are  issued  and
outstanding  and the number of such shares  that are held in Parent's  treasury.
All such  outstanding  shares have been validly  issued and, as of the Effective
Date,  are fully  paid,  nonassessable  shares  free of  contractual  preemptive
rights.  The issuance and sale of all such shares have been in  compliance  with
all applicable  federal and state  securities  laws.  Other than as described on
Schedule   5.8  or  disclosed  in  the   Reorganization   Plan,   there  are  no
subscriptions,  options,  warrants,  or calls relating to any shares of Parent's
capital  stock,  including  any  right  of  conversion  or  exchange  under  any
outstanding  security  or other  instruments  and  Parent is not  subject to any
obligation  (contingent  or otherwise)  to  repurchase  or otherwise  acquire or
retire any  shares of its  capital  stock or any  security  convertible  into or
exchangeable for any of its capital stock.

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

(d) Except as set forth on Schedule  5.8, no capital  stock (or any  securities,
instruments,  warrants, options, purchase rights, conversion or exchange rights,
calls,  commitments or claims of any character  convertible  into or exercisable
for  capital  stock) of any direct or  indirect  Subsidiary  of any  Borrower is
subject to the issuance of any security,  instrument,  warrant, option, purchase
right,  conversion or exchange  right,  call,  commitment or claim of any right,
title, or interest therein or thereto.

                                       32
<PAGE>

(e) The Parent  has  reserved,  out of its  authorized  but  unissued  Stock,  a
sufficient  number of shares of Stock to permit Holder to purchase shares of the
Warrant Stock in accordance with the Warrants.

5.9      Due Authorization; No Conflict.

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

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

(c)  Except  as set  forth on  Schedule  5.9(c)  and  other  than the  filing of
appropriate financing statements,  filings or registrations in the United States
Patent  and   Trademark   Office  and  the   equivalent   foreign   filings  and
registrations,  fixture filings, mortgages and compliance with the Assignment of
Claims  Act or  any  state  or  foreign  statutory  equivalent,  the  execution,
delivery,  and  performance  by each  Borrower  of this  Agreement  and the Loan
Documents  to which such  Borrower  is a party do not and will not  require  any
registration with,  consent,  or approval of, or notice to, or other action with
or by, any federal,  state,  foreign,  or other Governmental  Authority or other
Person.

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

(e)  Upon  the  filing  of   appropriate   financing   statements,   filings  or
registrations  in  the  United  States  Patent  and  Trademark  Office  and  the
equivalent foreign filings and registrations, fixture filings and mortgages, and
upon  delivery  to the  Agent  of the  Pledged  Collateral  (as  defined  in the
respective Pledge  Agreements),  the Liens granted by each Borrower to Agent for
the benefit of the Lender Group in and to its properties and assets  pursuant to
this Agreement and the other Loan Documents are validly created,  perfected, and
first priority Liens, subject only to Permitted Liens.

5.10 Litigation.  There are no actions or proceedings  pending by or against any
Borrower before any court or administrative agency and no Borrower has knowledge

                                       33
<PAGE>

of any pending, threatened, or imminent litigation, governmental investigations,
or claims,  actions,  or  prosecutions  involving any Borrower,  except for: (a)
ongoing  collection  matters in which a Borrower is the  plaintiff;  (b) matters
disclosed on Schedule  5.10 or in the  Reorganization  Plan;  (c) other  matters
existing on the  Effective  Date that,  if decided  adversely to such  Borrower,
would in the  aggregate  result in liability  to such  Borrower of not more than
$100,000 in the  aggregate;  and (d) matters  arising after the  Effective  Date
hereof that are not reasonably likely to have a Material Adverse Change.

5.11 Financial Statements; No Material Adverse Change. The most recent financial
statements (excluding financial projections) filed in the Bankruptcy Court prior
to the Effective  Date relating to any Borrower have been prepared in accordance
with GAAP (except for the lack of footnotes and being subject to year-end  audit
adjustments)  and fairly present such Borrower's  financial  condition as of the
date  thereof  and such  Borrower's  results of  operations  for the period then
ended. There has not been a Material Adverse Change with respect to any Borrower
since the date of such  financial  statements  submitted  to Lender  Group on or
before the Effective Date.

5.12     [Intentionally Omitted]

5.13 Employee Benefits.  No Borrower,  any of its Subsidiaries,  or any of their
ERISA Affiliates  maintains or contributes to any Benefit Plan, other than those
listed on Schedule 5.13. Each Borrower,  each of its Subsidiaries and each ERISA
Affiliate have satisfied the minimum funding standards of ERISA and the IRC with
respect to each Benefit Plan to which it is  obligated to  contribute.  No ERISA
Event has occurred nor has any other event  occurred that may result in an ERISA
Event that reasonably  could be expected to result in a Material Adverse Change.
No Borrower or its  Subsidiaries,  any ERISA Affiliate,  or any fiduciary of any
Plan is subject to any direct or  indirect  liability  with  respect to any Plan
under any applicable law, treaty, rule, regulation, or agreement. No Borrower or
its  Subsidiaries or any ERISA Affiliate is required to provide  security to any
Benefit Plan under Section 401(a)(29) of the IRC.

5.14 Environmental Condition.  Except as set forth in Schedule 5.14, none of any
Borrower's properties or assets has ever been used by a Borrower in the disposal
of, or to produce,  store, handle, treat,  release, or transport,  any Hazardous
Materials in violation of applicable  environmental  laws or, if in violation of
applicable  environmental laws, all such violations have been cured, none of any
Borrower's properties or assets has, to the best of Borrower's  knowledge,  been
designated or identified in any manner pursuant to any environmental  protection
statute as a Hazardous  Materials  disposal  site,  or a  candidate  for closure
pursuant to any  environmental  protection  statute,  no Lien arising  under any
environmental  protection statute has attached to any revenues or to any real or
personal  property  owned or  operated  by any  Borrower,  and no  Borrower  has
received  a summons,  citation,  notice,  or  directive  from the  Environmental
Protection Agency or any other federal or state  governmental  agency during the
year  prior to the  Effective  Date  concerning  any action or  omission  by any
Borrower resulting in the releasing or disposing of Hazardous Materials into the
environment.
                                       34
<PAGE>


5.15  Brokerage  Fees.  No brokerage  commission or finders fees has or shall be
incurred or payable in connection  with or as a result of  Borrowers'  obtaining
financing  from the Lender  Group  under this  Agreement,  and no  Borrower  has
utilized  the  services of any broker or finder in  connection  with  Borrowers'
obtaining financing from the Lender Group under this Agreement.

5.16 Permits and other  Intellectual  Property.  Set forth on Schedule 5.16 is a
complete  and  accurate  list  of all  Permits,  patents,  patent  applications,
trademarks,  trademark  applications,  service marks, service mark applications,
trade  names,  copyrights,   trade  secrets  and  know-how  (collectively,   the
"Intellectual Property"),  owned by each Borrower, showing as of the date hereof
the jurisdiction in which  registered,  the registration or application  number.
Each  Borrower  owns or  possesses  adequate  licenses or other  rights that are
necessary for the  operation of its business as currently  conducted or proposed
to be  conducted.  No  claim is  pending  or,  to the  knowledge  of  Borrowers,
threatened to the effect that any Borrower  infringes  upon, or conflicts  with,
the asserted rights of any other Person under any Intellectual Property, and, to
the best of each Borrower's  knowledge without  independent  investigation other
than  those   investigations   customarily   undertaken  by  owners  of  similar
businesses, there is no basis for any such claim (whether pending or threatened)
which is reasonably  likely to result in a Material Adverse Change.  No claim is
pending or, to the  knowledge of  Borrowers,  threatened  to the effect that any
such  Intellectual  Property owned or licensed by any Borrower,  or in which any
Borrower  otherwise  has the right to use is  invalid  or  unenforceable  by any
Borrower,  and, to the best of each  Borrower's  knowledge  without  independent
investigation other than those investigations  customarily  undertaken by owners
of  similar  businesses,  there is no basis for any such claim  (whether  or not
pending or threatened).

5.17 Material Contracts; Restrictive Agreements. Except for such changes as have
been  provided to Agent in writing,  each other  Material  Contract to which any
Borrower  or any  Subsidiary  of a Borrower is a party is set forth in Part I of
Schedule  5.17.  Borrower has  provided to Agent or its counsel each  definitive
written agreement relating to each such Material  Contract.  Except as set forth
in Part II of Schedule 5.17, no Borrower nor Subsidiary of a Borrower is a party
to or bound by any  agreement or instrument or subject to any corporate or other
restriction,  the  performance  or  observance of which has caused or, as far as
such  Borrower  or  Subsidiary  can  reasonably  foresee,  is  likely to cause a
Material Adverse Change.

5.18  Government  Contracts.  No Borrower nor any Subsidiary of a Borrower is in
receipt of any notice from any Governmental Authority that such Borrower or such
Subsidiary of a Borrower is disqualified, barred or suspended from bidding on or
performing any contract or proposed contract.

6.       AFFIRMATIVE COVENANTS.

                  Each Borrower  covenants and agrees that, until full and final
payment of the  Obligations,  each Borrower  shall,  and shall cause each of its
Subsidiaries to, do all of the following:

6.1 Accounting System.  Maintain a standard and modern system of accounting that
enables each Borrower to produce  financial  statements in accordance with GAAP,

                                       35
<PAGE>


and maintain  records  pertaining to the Collateral that contain  information as
from time to time may be reasonably requested by Agent. Each Borrower also shall
keep a modern  inventory  reporting  system  that  shows all  additions,  sales,
claims, returns, and allowances with respect to the Inventory.

6.2 Financial Statements, Reports, Certificates. Deliver to Agent with copies to
each Lender: (a) as soon as available, but in any event within 20 days after the
end of each month during each of  Borrowers'  fiscal years,  a company  prepared
balance sheet and income  statement,  covering the  operations of the Parent and
its  Subsidiaries  on a  consolidated  basis during such period;  (b) as soon as
available,  but in any event within 45 days after the end of each fiscal quarter
during each of Borrowers' fiscal years, a company prepared balance sheet, income
statement,  and  statements of cash flows  covering the operations of the Parent
and its Subsidiaries on a consolidated basis during such period; and (c) as soon
as  available,  but in any  event  within  90  days  after  the  end of  each of
Borrowers'  fiscal years,  consolidated  financial  statements of Parent and its
Subsidiaries for each such fiscal year, audited by independent  certified public
accountants  reasonably  acceptable to Agent and  certified  that they have been
prepared  in  accordance  with  GAAP,   together  with  a  certificate  of  such
accountants  addressed  to  Agent  stating  that  such  accountants  do not have
knowledge  of the  existence  of  any  Default  or  Event  of  Default  that  is
continuing.  Such audited  financial  statements  shall include a balance sheet,
profit and loss  statement,  and  statement of cash flow and, if prepared,  such
accountants' letter to management.

                  In addition to the above,  Parent also shall  deliver to Agent
Parent's Form 10-Q Quarterly  Reports,  Form 10-K Annual  Reports,  and Form 8-K
Current  Reports,  and any other filings made by Parent with the  Securities and
Exchange Commission, if any, as soon as the same are filed, or any other written
information  that is provided by  Borrower  to its  shareholders,  and any other
report  reasonably  requested by Agent  relating to the  financial  condition of
Parent and its Subsidiaries.

                  Each month,  together with the financial  statements  provided
pursuant to Sections  6.2(a) and (b),  Administrative  Borrower shall deliver to
Agent a certificate  signed by its chief  financial  officer to the effect that:
(i) all  financial  statements  delivered  or  caused to be  delivered  to Agent
hereunder  have been  prepared in accordance  with GAAP (except,  in the case of
unaudited financial  statements,  for the lack of footnotes and being subject to
year-end audit  adjustments) and fairly present the financial  condition of each
Borrower,  (ii) the representations and warranties of each Borrower contained in
this Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate,  as though made on and as of
such date (except to the extent that such  representations and warranties relate
solely to an earlier date),  (iii) for each month that also is the date on which
a financial  covenant in Section 7.20 is to be tested, a Compliance  Certificate
demonstrating in reasonable detail compliance at the end of such period with the
applicable financial covenant contained in Section 7.20, and (iv) on the date of
delivery  of such  certificate  to Agent there does not exist any  condition  or
event that  constitutes a Default or Event of Default that is continuing (or, in
the case of clauses  (i),  (ii),  or (iii),  the  extent of any  non-compliance,
describing such non-compliance as to which he or she may have knowledge and what
action  Borrowers  have  taken,  is taking,  or  proposes  to take with  respect
thereto).

                                       36
<PAGE>

6.3 Tax  Returns.  Deliver to Agent  copies of each  Borrower's  future  federal
income tax returns, and any amendments thereto,  within 30 days after the filing
thereof with the Internal Revenue Service ("IRS").

6.4      [Intentionally Omitted]

6.5 Returns. Cause returns and allowances, if any, as between a Borrower and its
Account  Debtors  to be on the same  basis  and in  accordance  with  the  usual
customary practices of such Borrower, as they exist at the time of the execution
and  delivery  of this  Agreement.  If, at a time when no Event of  Default  has
occurred  and is  continuing,  any Account  Debtor  returns any  Inventory  to a
Borrower, such Borrower promptly shall determine the reason for such return and,
if such Borrower accepts such return,  issue a credit memorandum (with a copy to
be sent to Agent) in the  appropriate  amount to such Account  Debtor.  If, at a
time when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to a Borrower,  such Borrower promptly shall determine the
reason for such  return  and,  if Agent  consents  (which  consent  shall not be
unreasonably  withheld),  issue a credit  memorandum  (with a copy to be sent to
Agent) in the appropriate amount to such Account Debtor.

6.6 Title to  Equipment.  Upon Agent's  request,  each Borrower  promptly  shall
deliver to Agent,  properly  endorsed,  any and all  evidences of ownership  of,
certificates of title, or applications for title to any items of Equipment.

6.7  Maintenance of Equipment.  Maintain the Equipment that is presently used in
Borrowers'  operations in its present  operating  condition and repair (ordinary
wear and tear excepted), and make all necessary replacements thereto so that the
value and operating  efficiency  thereof  shall at all times be  maintained  and
preserved.  Other than (i) those items of Equipment that constitute  fixtures on
the Effective Date and (ii) heating, ventilation and air conditioning equipment,
no  Borrower  shall  permit  any item of  Equipment  to become a fixture to real
estate or an accession to other property,  and such Equipment shall at all times
remain personal property.

6.8  Taxes.  Cause  all  assessments  and  taxes,  whether  real,  personal,  or
otherwise, due or payable by, or imposed, levied, or assessed against a Borrower
or any of its Subsidiaries or any of their  respective  properties to be paid in
accordance with the Reorganization Plan, in the case of any taxes accruing prior
to the  Filing  Date,  or,  in all  other  cases,  to be  paid in  full,  before
delinquency  or before the  expiration  of any extension  period,  except to the
extent that the validity of such  assessment or tax (other than payroll taxes or
taxes that are the  subject of a United  States  federal  tax lien) shall be the
subject  of a  Permitted  Protest.  Each  Borrower  shall  make,  and  cause its
Subsidiaries  to make,  due and timely  payment or deposit of all such  federal,
state,  and  local  taxes,  assessments,  or  contributions  accruing  after the
Effective  Date  required of them by law, and will execute and deliver to Agent,
on demand,  appropriate certificates attesting to the payment thereof or deposit
with respect  thereto.  Each Borrower will make, and cause its  Subsidiaries  to
make,  timely  payment or  deposit of all tax  payments  and  withholding  taxes
accruing after the Effective Date required of them by applicable laws, including
those laws concerning F.I.C.A.,  F.U.T.A.,  state disability,  and local, state,
and federal  income  taxes,  and will,  upon  request,  furnish Agent with proof
satisfactory to Agent  indicating that such Borrower and such  Subsidiaries  has
made such payments or deposits.

                                       37
<PAGE>


6.9      Insurance.

(a) At its expense,  keep the Personal Property  Collateral insured against loss
or damage by fire,  theft,  explosion,  sprinklers,  and all other  hazards  and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar  businesses.  Each Borrower also shall maintain  business  interruption,
public liability,  product liability,  and property damage insurance relating to
such Borrower's ownership and use of the Personal Property  Collateral,  as well
as insurance against larceny, embezzlement, and criminal misappropriation to the
same extent as maintained on the Effective Date.

(b) At its expense,  obtain and maintain (i) insurance of the type  necessary to
insure  the  Improvements  and  Chattels  (as  such  terms  are  defined  in the
Mortgages),  for the full  replacement  cost  thereof,  subject  to  deductibles
consistent  with  historical  business  practice,  against  any  loss  by  fire,
lightning,  windstorm, hail, explosion,  aircraft, smoke damage, vehicle damage,
earthquakes,  elevator  collision,  and other  risks from time to time  included
under  "extended  coverage"  policies,  in such amounts as Agent may  reasonably
require,  but in any event in amounts  sufficient  to prevent any Borrower  from
becoming a co-insurer  under such  policies;  (ii) combined  single limit bodily
injury and property damages  insurance against any loss,  liability,  or damages
on, about, or relating to each parcel of Real Property Collateral,  in an amount
reasonably  acceptable to the Agent;  (iii) business rental  insurance  covering
annual  receipts  for a 12  month  period  for  each  parcel  of  Real  Property
Collateral;  and (iv)  insurance  for such  other  risks as Agent  may  require.
Replacement  costs,  at Agent's  option,  may be  redetermined  by an  insurance
appraiser,  satisfactory to Agent, not more frequently than once every 12 months
at Borrowers' cost. All such insurance shall be to the same extent as maintained
on the Effective Date.

(c) All such policies of insurance  shall be in such form,  with such companies,
and in such amounts as may be reasonably  satisfactory  to Agent.  All insurance
required  herein shall be written by companies  which have a Best's  rating of A
for capital and X for financial  stability.  All hazard insurance and such other
insurance as Agent shall  reasonably  require and shall  contain a  satisfactory
lender's  loss payable  endorsement  naming Agent as sole loss payee (other than
with  respect  to the  Real  Property  Collateral)  or  additional  insured,  as
appropriate, and shall contain a waiver of warranties. Every policy of insurance
referred to in this  Section 6.9 shall  contain an agreement by the insurer that
it will not cancel  such policy  except  after 30 days prior  written  notice to
Agent and that any loss payable thereunder shall be payable  notwithstanding any
act or negligence of any Borrower or Agent which might,  absent such  agreement,
result  in a  forfeiture  of  all  or a  part  of  such  insurance  payment  and
notwithstanding  (i)  occupancy  or use  of the  Real  Property  Collateral  for
purposes more  hazardous  than  permitted by the terms of such policy,  (ii) any
foreclosure  or other  action or  proceeding  taken by Agent or the Lender Group
pursuant to the Mortgages  upon the  happening of an Event of Default,  or (iii)
any change in title or ownership of the Real Property Collateral.  Each Borrower
shall  deliver to Agent  certified  copies of such  policies  of  insurance  and
evidence  of the  payment of all  premiums  therefor.  Agent  acknowledges  that
Borrowers'  policies  and  coverages  in  effect  as of the  Effective  Date are
satisfactory.

(d) Original policies or certificates  thereof  satisfactory to Agent evidencing
such  insurance  shall be  delivered  to  Agent  at  least 30 days  prior to the

                                       38
<PAGE>

expiration of the existing or preceding policies. Each Borrower shall give Agent
prompt  notice of any loss  covered  by such  insurance.  Agent  shall  have the
exclusive  right to adjust all losses payable under any such insurance  policies
without any liability to any Borrower whatsoever in respect of such adjustments;
provided  that either (i) an Event of Default has occurred and is  continuing at
the time of such adjustment, or (ii) the amount of any such loss covered by such
insurance is in excess of $750,000.  Any monies received as payment for any loss
under any insurance  policy  including the insurance  policies  mentioned above,
shall be paid over to Agent (for the ratable  benefit of the Lender Group) to be
applied  at the  option of Agent  either  to the  repayment  of the  Obligations
without  premium,  or shall be disbursed to a Borrower under stage payment terms
satisfactory to Agent for application to the cost of repairs,  replacements,  or
restorations,  except to the extent such  insurance  proceeds are required to be
paid to the holders of Permitted  Liens to the extent  required by the agreement
creating or evidencing such Permitted Lien or the indebtedness  secured thereby.
All repairs,  replacements,  or  restorations  shall be effected with reasonable
promptness  and shall be of a value at least  equal to the value of the items or
property  destroyed prior to such damage or destruction.  Upon the occurrence of
an Event of Default that is continuing,  Agent shall have the right to apply all
prepaid premiums to the payment of the Obligations.

6.10 No Setoffs or  Counterclaims.  Make payments  hereunder and under the other
Loan Documents by or on behalf of any Borrower  without  setoff or  counterclaim
and free and clear of, and without  deduction or  withholding  for or on account
of, any federal, state, or local taxes.

6.11 Location of Inventory and Equipment;  Segregation of Inventory. (a)Keep the
Inventory and  Equipment  only at the  locations  identified  on Schedule  6.11;
provided,  however,  that  Borrowers  may  amend  Schedule  6.11 so long as such
amendment  occurs by written  notice to Agent not less than 30 days prior to the
date on which the Inventory or Equipment is moved to such new location,  so long
as such new location is within the continental United States, and so long as, at
the  time of such  written  notification,  each  Borrower  provides  to  Agent a
Collateral Access Agreement.

(b)  Keep  all bill and hold  Inventory  physically  segregated  from all  other
Inventory of the Borrowers and marked to indicate that such segregated Inventory
is not the property of a Borrower.

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

6.13     Employee Benefits.

(a) Cause to be delivered  to Agent:  (i)  promptly,  and in any event within 10
Business Days after a Borrower or any of its Subsidiaries knows or has reason to
know that an ERISA  Event has  occurred  that  reasonably  could be  expected to

                                       39
<PAGE>

result in a Material Adverse Change, a written  statement of the chief financial
officer of such  Borrower  describing  such ERISA  Event and any action  that is
being taking with respect thereto by such Borrower, any such Subsidiary or ERISA
Affiliate,  and any action taken or threatened by the IRS,  Department of Labor,
or PBGC. A Borrower or such Subsidiary,  as applicable,  shall be deemed to know
all facts known by the administrator of any Benefit Plan of which it is the plan
sponsor, (ii) promptly, and in any event within 3 Business Days after the filing
thereof with the IRS, a copy of each funding  waiver  request filed with respect
to any Benefit Plan and all  communications  received by a Borrower,  any of its
Subsidiaries  or, to the knowledge of such  Borrower,  any ERISA  Affiliate with
respect to such request, and (iii) promptly,  and in any event within 3 Business
Days after receipt by a Borrower,  any of its  Subsidiaries or, to the knowledge
of such Borrower,  any ERISA  Affiliate,  of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies
of each such notice.

(b) Cause to be delivered to Agent, upon Agent's request, each of the following:
(i) a copy of each Plan (or,  where any such plan is not in writing,  a complete
description  thereof)  (and if  applicable,  related  trust  agreements or other
funding  instruments) and all amendments  thereto,  all written  interpretations
thereof and written descriptions thereof that have been distributed to employees
or former  employees  of a Borrower  or its  Subsidiaries;  (ii) the most recent
determination  letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three  most  recent  plan  years,  annual  reports  on Form 5500  Series
required to be filed with any  governmental  agency for each Benefit Plan;  (iv)
all  actuarial  reports  prepared for the last three plan years for each Benefit
Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions  required to be made by a Borrower or any ERISA
Affiliate to each such plan and copies of the collective  bargaining  agreements
requiring such  contributions;  (vi) any information that has been provided to a
Borrower  or any  ERISA  Affiliate  regarding  withdrawal  liability  under  any
Multiemployer  Plan;  and (vii) the  aggregate  amount of the most recent annual
payments made to former  employees of a Borrower or its  Subsidiaries  under any
Retiree Health Plan.

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

7.       NEGATIVE COVENANTS.

                  Each Borrower covenants and agrees that, so long as any credit
hereunder   shall  be  available  and  until  full  and  final  payment  of  the
Obligations,  no Borrower will, nor will permit any of its  Subsidiaries  to, do
any of the following:

7.1 Indebtedness.  Create, incur, assume, permit, guarantee, or otherwise become
or remain,  directly or  indirectly,  liable with  respect to any  Indebtedness,
except:

(a)      Indebtedness evidenced by this Agreement;

(b)      Indebtedness set forth on Schedule 7.1;
                                   ------------

(c)      Indebtedness secured by Permitted Liens;

                                       40
<PAGE>

(d) refinancings,  renewals,  exchanges, or extensions of Indebtedness permitted
by clauses (b) and (c) of this  Section 7.1 (and  continuance  or renewal of any
Permitted Liens  associated  therewith) so long as: (i) the terms and conditions
of such  refinancings,  renewals,  or  extensions do not  materially  impair the
prospects of repayment of the  Obligations  by any  Borrower,  (ii) the net cash
proceeds  of such  refinancings,  renewals,  or  extensions  do not result in an
increase in the aggregate  principal  amount of the  Indebtedness so refinanced,
renewed,  or  extended,  (iii)  such  refinancings,   renewals,  refundings,  or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced,  renewed,  or extended,  and (iv) to the extent that
Indebtedness  that is  refinanced  was  subordinated  in right of payment to the
Obligations,  then the  subordination  terms and  conditions of the  refinancing
Indebtedness  must be at least as favorable to Lender Group as those  applicable
to the refinanced Indebtedness;

(e) Debentures in an aggregate  principal amount not to exceed the total allowed
general  unsecured claims allowed in the Chapter 11 cases at any time,  provided
that none of the  Borrowers  shall make any payment of  principal  of,  interest
(other  than  interest  that  is  paid-in-kind)  on or fees  in  respect  of the
Debentures  until all Obligations  have been paid in full and this Agreement has
terminated;

(f) Purchase Money Indebtedness  incurred after the Closing Date in an aggregate
amount  outstanding  at any  one  time  not to  exceed  the  amount  of  capital
expenditures permitted under Section 7.21.

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

7.3 Restrictions on Fundamental Changes.  Enter into any merger,  consolidation,
reorganization,  or  recapitalization,  or  reclassify  its  capital  Stock,  or
liquidate,   wind  up,  or  dissolve   itself  (or  suffer  any  liquidation  or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of  transactions,  all or any substantial part of
its  property or assets,  except that (a) a Borrower  may be merged into another
Borrower, (b) a Subsidiary of a Borrower may be merged into a Borrower and (c) a
Subsidiary that is not a Borrower may be merged into another  Subsidiary that is
not a Borrower, or liquidated or dissolved,  provided that if any such Person is
merged with or into the Administrative  Borrower,  the  Administrative  Borrower
shall be the surviving entity.

7.4 Disposal of Assets. Sell, lease, assign,  transfer,  or otherwise dispose of
any of such Borrower's properties or assets other than (a) sales of Inventory to
buyers in the ordinary  course of such  Borrower's  business and (b) the sale of
the assets  listed on Schedule 7.4 hereto so long as the Net Proceeds  from such
sales are remitted to Agent in accordance with Section 2.5(a)(iv).

                                       41
<PAGE>

7.5  Change  Name.  Change  its  name,  organizational   identification  number,
structure, or identity, or add any new fictitious name; provided,  however, that
any Borrower may change its name upon at least 30 days prior  written  notice to
Agent of such change and so long as, at the time of such  written  notification,
it provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens.

7.6 Guarantee.  Guarantee or otherwise  become in any way liable with respect to
the  obligations  of any third Person except by  endorsement  of  instruments or
items of  payment  for  deposit  to the  account  of a  Borrower  or  which  are
transmitted or turned over to Agent, except as set forth in Schedule 7.6.

7.7      Nature of Business.  Make any change in the principal nature of any
Borrower's business.

7.8      Prepayments and Amendments.

(a) Except in connection  with a refinancing  or exchange  permitted by Sections
7.1(d), and except for the prepayment,  redemption, retirement or defeasement of
any Indebtedness for a consideration  consisting solely of Stock, and except for
the prepayment of any  Indebtedness  that is secured solely by the Real Property
Collateral,  prepay, redeem, refinance,  retire, defease, purchase, or otherwise
acquire any Indebtedness  owing to any third Person,  other than the Obligations
in accordance with this Agreement, and

(b) Except in connection  with a refinancing  or exchange  permitted by Sections
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement,  instrument,  document,  indenture, or
other writing  evidencing or concerning  Indebtedness  permitted  under Sections
7.1(b), (c), (d) or (e); and

(c) (i) Except as provided in or contemplated by the Reorganization Plan, amend,
modify  or  otherwise  change  its  Governing  Documents,   including,   without
limitation, by the filing or modification of any certificate of designation,  or
any  agreement  or  arrangement  entered  into by it with  respect to any of its
capital Stock  (including any  shareholders'  agreement),  or enter into any new
agreement  with respect to any of its capital  Stock,  or (ii) amend,  modify or
otherwise   change  any   Material   Contract,   except  any  such   amendments,
modifications or changes or any such new agreements or arrangements  pursuant to
this paragraph (c) that,  either  individually  or in the  aggregate,  could not
reasonably  be expected (A) to have a Material  Adverse  Effect,  (B) to have an
adverse impact on the Warrants or the Registration  Rights Agreement,  or (C) to
materially  impair any Borrower's  ability to conduct any aspect of its business
or perform or satisfy any representation, warranty or covenant contained in this
Agreement or any other Loan Document.

(d) The Parent  shall not satisfy  any of its  obligations  with  respect to any
redemption,  tender,  put or other similar  obligation  under the  Debentures by
paying cash or any other consideration other than its Common Stock.

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

                                       42
<PAGE>

7.10 Consignments. Consign any Inventory or sell any Inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale, except (i)
bill and hold Inventory  having an aggregate  value up to  $1,000,000,  and (ii)
consignment  Inventory for short term demonstration  purposes,  and (iii) spares
used to service products.

7.11  Distributions.  Make any  distribution or declare or pay any dividends (in
cash or other property,  other than Stock) on, or purchase,  acquire, redeem, or
retire  any of such  Borrower's  capital  Stock,  of any class,  whether  now or
hereafter  outstanding,  except that (i) a Subsidiary of a Borrower  (other than
Parent) may pay dividends to such  Borrower,  (ii) Parent may receive  shares of
its Stock in  consideration  for the  exercise of stock  options  granted to its
employees and directors (so long as no cash  consideration  is paid by Parent or
any of  its  Subsidiaries),  (iii)  Parent  may  cancel  or  retire  options  in
accordance with its stock option plans (so long as Parent does not make any cash
payments in connection therewith),  and (iv) Parent may issue shares of Parent's
Stock upon the exercise of Parent's warrants  outstanding as of the Closing Date
(including the Warrants).

7.12 Accounting  Methods.  Modify or change its method of accounting,  except as
required to comply with GAAP or enter into,  modify,  or terminate any agreement
currently  existing,  or at any time hereafter entered into with any third party
accounting  firm or  service  bureau  for the  preparation  or  storage  of such
Borrower's  accounting  records  without said  accounting firm or service bureau
agreeing  to  provide  Agent  information   regarding  the  Collateral  or  such
Borrower's  financial  condition.  Each  Borrower  waives  the right to assert a
confidential  relationship,  if any,  it may have  with any  accounting  firm or
service bureau in connection with any information requested by Agent pursuant to
or in accordance with this Agreement, and agrees that Agent may contact directly
any such accounting firm or service bureau in order to obtain such information.

7.13 Investments. Directly or indirectly make, acquire, or incur any liabilities
(including contingent obligations) for or in connection with (a) the acquisition
of the securities  (whether debt or equity) of, or other interests in, a Person,
except for (i) those  securities  listed in Schedule 7.13, or (ii) securities of
the  aggregate  value of which does not exceed  $350,000,  (b) loans,  advances,
capital contributions, or transfers of property to a Person, except intercompany
loans made by a Borrower to a Borrower  provided  that (A) the repayment of each
such  intercompany loan shall be subordinated to the payment of the Obligations,
pursuant to the terms of and evidenced by one or more  promissory  notes in form
and substance  satisfactory to the Agent, and (B) such notes shall be pledged to
the Agent  pursuant to the Pledge  Agreement  or (c) the  acquisition  of all or
substantially all of the properties or assets of a Person.

7.14 Transactions  with Affiliates.  Directly or indirectly enter into or permit
to exist any material  transaction  with any Affiliate of a Borrower  except for
transactions  permitted  under Sections 7.11 and 7.13 hereof,  issuance of Stock
under  its 2003  Stock  and  Bonus  Plan  and  other  stock  option  plans,  and
transactions that are in the ordinary course of a Borrower's business, upon fair
and reasonable  terms,  that are fully disclosed to Agent,  and that are no less
favorable to such Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.

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

                                       43
<PAGE>

7.16     [Intentionally Omitted]

7.17 Use of Proceeds.  Use the proceeds of the Term Loans made hereunder for any
purpose other than a purpose  consistent  with the terms and conditions  hereof,
for its lawful and  permitted  corporate  purposes.  7.18  Change in Location of
Chief Executive Office; Inventory and Equipment with Bailees. Relocate its chief
executive  office to a new  location  without  providing  30 days prior  written
notification  thereof  to  Agent,  and so long as,  at the time of such  written
notification,  the  applicable  Borrower  provides any  financing  statements or
fixture filings  necessary to perfect and continue  perfected  Agent's Liens and
also provides to Agent a Collateral  Access  Agreement  with respect to such new
location.  Except as set forth in Schedule  7.18,  the  Inventory  and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent.

7.19     No Prohibited Transactions Under ERISA.  Directly or indirectly:

(a) engage,  or permit any Subsidiary of a Borrower to engage, in any prohibited
transaction  which is  reasonably  likely to result in a civil penalty or excise
tax  described in Sections 406 of ERISA or 4975 of the IRC for which a statutory
or  class  exemption  is not  available  or a  private  exemption  has not  been
previously obtained from the Department of Labor;

(b)      permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA
and 412 of the IRC), whether or not waived;

(c) fail, or permit any Subsidiary of a Borrower to fail, to pay timely required
contributions  or annual  installments  due with  respect to any waived  funding
deficiency to any Benefit Plan;

(d) terminate, or permit any Subsidiary of a Borrower to terminate,  any Benefit
Plan where such event would result in any  liability  of a Borrower,  any of its
Subsidiaries or any ERISA Affiliate under Title IV of ERISA;

(e)      fail, or permit any Subsidiary of a Borrower to fail, to make any
required contribution or payment to any Multiemployer Plan;

(f) fail,  or permit any  Subsidiary  of a Borrower to fail, to pay any required
installment  or any other  payment  required  under Section 412 of the IRC on or
before the due date for such installment or other payment;

(g) amend,  or permit any Subsidiary of a Borrower to amend, a Plan resulting in
an  increase  in  current  liability  for the plan year  such  that  either of a
Borrower,  any Subsidiary of such Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or

                                       44

<PAGE>

(h)  withdraw,  or permit any  Subsidiary  of a Borrower to  withdraw,  from any
Multiemployer  Plan where such withdrawal is reasonably  likely to result in any
liability of any such entity under Title IV of ERISA;

which,  individually  or in the  aggregate,  results in or  reasonably  would be
expected to result in a claim  against or  liability  of a Borrower,  any of its
Subsidiaries or any ERISA Affiliate in excess of $250,000.

7.20  Financial  Covenant.  Fail  to  maintain  EBITDA,  measured  on  a  fiscal
quarter-end  basis,  of not less than (a) for the fiscal quarter ending December
31, 2003, $0.01 and (b) for each fiscal quarter ending  thereafter,  the greater
of (i) $1,100,000 and (ii) $750,000 plus the aggregate amount of all interest on
the Term A Loan accrued during such fiscal quarter. For purposes of this Section
7.20,  EBITDA  shall be  calculated  on a  cumulative  basis by (i)  adding  the
aggregate  amount of EBITDA for each fiscal  quarter  subsequent to December 31,
2003 and (ii)  subtracting from such sum the aggregate amount of EBITDA required
to be maintained by the Borrowers  pursuant to this Section 7.20 for each fiscal
quarter  subsequent  to  December  31,  2003.   Notwithstanding  the  foregoing,
Borrowers  shall not be  required  to  maintain  the  applicable  EBITDA for any
particular fiscal quarter and thereafter if Borrowers' loan  availability  based
on the  traditional  asset-based  loan borrowing  structure in the  Pre-Petition
Agreement (as in effect  immediately prior to the Filing Date), as determined on
the last day of any fiscal  quarter,  equals or exceeds the aggregate  principal
amount of the Term A Loan outstanding as of such date.

7.21     Capital Expenditures.  Make capital expenditures in any fiscal year
in excess of $12,000,000.

7.22 Securities Accounts. No Borrower shall establish or maintain any Securities
Account unless Agent shall have received a Control Agreement,  duly executed and
in full force and effect, in respect of such Securities  Account.  Each Borrower
agrees  that  it  will  not  transfer  assets  out of any  Securities  Accounts;
provided,  however,  that,  so long as no Event of Default has  occurred  and is
continuing or would result  therefrom,  each Borrower may use such assets to the
extent permitted by this Agreement.

8.       EVENTS OF DEFAULT.

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

                  8.1 ....If  Borrowers fail to pay when due and payable or when
declared due and payable,  any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code,  would  have  accrued  on such  amounts),  reimbursement  of Lender  Group
Expenses  within  10 days  after  such  Lender  Group  Expenses  are  billed  to
Borrowers, or other amounts constituting Obligations);

                  8.2 ....If any Borrower fails to perform, keep, or observe any
term,  provision,  condition,  covenant, or agreement contained in 6.1, 6.2 (but
only up to three  times  during any  12-month  period,  and only in  relation to

                                       45
<PAGE>

Defaults caused by the failure of third Persons to provide required  information
or reporting,  and not in relation to Defaults caused by a Borrower),  6.3, 6.5,
6.7, 6.8, 6.12, 6.13 and 6.14 of this Agreement, or comparable provisions of the
other Loan Documents, within 10 days of the date when required (or within 5 days
of the date when  required in the case of Section  6.2 or Section  6.3) and such
failure  continues for 30 days after written notice thereof,  or if any Borrower
otherwise  fails to  perform,  keep,  or  observe  any  other  term,  provision,
condition,  covenant,  or agreement  contained in this Agreement,  in any of the
other Loan Documents,  or in any other present or future  agreement  between any
Borrower, Agent and/or the Lender Group and (with the exception of any breach of
Section 7.20 hereof) such failure  continues  for 30 days after  written  notice
thereof;

                  8.3  ....[Intentionally Omitted];

                  8.4 ....If any material  portion of any Borrower's  properties
or assets is attached,  seized,  subjected to a writ or distress warrant,  or is
levied upon,  or comes into the  possession  of any third Person and the same is
not  dismissed  or stayed  prior to the  earliest to occur of (x) any seizure or
taking and (y) the expiration of 30 days after any  attachment,  issuance of any
writ or distress warrant, or notice of levy;

                  8.5  ....If an Insolvency Proceeding is commenced by any
Borrower;

                  8.6 ....If an Insolvency  Proceeding is commenced  against any
Borrower and any of the following  events occur:  (a) such Borrower  consents to
the  institution  of the  Insolvency  Proceeding  against  it; (b) the  petition
commencing  the  Insolvency  Proceeding  is not  timely  controverted;  (c)  the
petition  commencing  the  Insolvency  Proceeding  is not  dismissed  within  45
calendar  days of the date of the  filing  thereof;  (d) an  interim  trustee is
appointed to take  possession of all or a substantial  portion of the properties
or assets of, or to operate all or any  substantial  portion of the business of,
such  Borrower;  or (e) an order for relief  shall  have been  issued or entered
therein;

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

                  8.8 ....If a notice of Lien  (other  than a  Permitted  Lien),
levy, or assessment in excess of $100,000 is filed of record with respect to any
Borrower's  properties  or  assets  by  the  United  States  Government,  or any
department,  agency,  or  instrumentality  thereof,  or by  any  state,  county,
municipal,  or governmental  agency,  or if any taxes or debts owing at any time
hereafter  to any one or more of such  entities  becomes  a Lien  (other  than a
Permitted Lien), whether choate or otherwise,  upon any Borrower's properties or
assets and the same is not paid on the payment date thereof;

                  8.9 ....If a judgment  or other  claim for an amount in excess
of  $100,000  becomes a Lien or  encumbrance  upon any  material  portion of any
Borrower's  properties  that  is not a  Permitted  Lien  and is  not  stayed  or
dismissed within 30 days thereafter;

                  8.10  ...Except  as  provided  in or  contemplated  under  the
Reorganization  Plan,  if there is a default in any material  agreement to which
any Borrower is a party with one or more third  Persons and such Borrower has an
obligation  to pay money  thereunder in an amount in excess of $1,000,000 to one
or more such third Persons and such default (a) occurs at the final  maturity of
                                       46
<PAGE>

the obligations  thereunder,  or (b) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of such Borrower's
obligations thereunder,  to terminate such agreement, or to refuse to renew such
agreement pursuant to an automatic renewal right therein;

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

                  8.12  ...If any  material  misstatement  or  misrepresentation
exists now or  hereafter  as at the time made in any  warranty,  representation,
statement,  or  report  made to Lender  Group by any  Borrower  or any  officer,
authorized employee, agent, or director of any Borrower, or if any such material
warranty or representation is withdrawn;

                  8.13  ...[Intentionally Omitted]

                  8.14 ...If this  Agreement  or any other  Loan  Document  that
purports to create a Lien,  shall, for any reason (other than failure of Lenders
or Agent to make any required  filings or  registrations or to perform any other
action  authorized  hereunder to perfect such Liens),  fail or cease to create a
valid and perfected and,  except to the extent  permitted by the terms hereof or
thereof,  first priority Lien on or security  interest in the Collateral with an
aggregate value in excess of $250,000 covered hereby or thereby; or

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

Upon the occurrence of any of the foregoing Events of Default or the cure of the
same by Borrowers,  Agent, without any liability for the failure to do so, shall
provide  notice (in the same manner  provided for notice to a party set forth in
Section 12 hereof)  of such  Event of Default to the  Debenture  Trustee at such
address  as the  Debenture  Trustee  may from time to time  provide to Agent for
purposes of such notice.

9.       LENDER GROUP'S RIGHTS AND REMEDIES.

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

                                       47
<PAGE>

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

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

(c)  Terminate  this  Agreement  and any of the other Loan  Documents  as to any
future  liability or obligation of Lender Group,  but without  affecting  Lender
Group's rights and security interests in the Personal Property Collateral or the
Real Property Collateral and without affecting the Obligations;

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

(e) Cause a Borrower to hold all returned  Inventory in trust for Lender  Group,
segregate all returned  Inventory from all other property of such Borrower or in
such Borrower's  possession and conspicuously  label said returned  Inventory as
the property of Lender Group;

(f)  Without  notice to or demand  upon  Borrower  or any  Guarantor,  make such
payments and do such acts as Agent considers  necessary or reasonable to protect
its  security  interests in the  Collateral  of Agent (for the benefit of Lender
Group).  Each Borrower  agrees to assemble the Personal  Property  Collateral if
Agent so requires,  and to make the Personal  Property  Collateral  available to
Agent as Agent  may  designate.  Each  Borrower  authorizes  Agent to enter  the
premises where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property  Collateral,  or any part of it, and to pay,
purchase,  contest,  or  compromise  any  encumbrance,  charge,  or Lien that in
Agent's  determination  appears to conflict  with the security  interests of the
Agent and to pay all expenses incurred in connection therewith.  With respect to
a Borrower's  owned or leased  premises,  such  Borrower  hereby  grants Agent a
license  to enter  into  possession  of such  premises  and to occupy  the same,
without  charge,  for up to 120 days in order to exercise any of Lender  Group's
rights or remedies provided herein, at law, in equity, or otherwise;

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

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

                                       48
<PAGE>

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

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

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

(1)  Agent  shall  give the  Borrower  with  rights in the  applicable  Personal
Property  Collateral  and each  holder of a security  interest  in the  Personal
Property  Collateral  who has filed with Agent a written  request for notice,  a
notice in  writing  of the time and place of public  sale,  or, if the sale is a
private sale or some other disposition other than a public sale is to be made of
the Personal  Property  Collateral,  then the time on or after which the private
sale or other disposition is to be made;

(2) The notice shall be personally delivered or mailed,  postage prepaid, to the
Borrower with rights in the applicable  Personal Property Collateral as provided
in Section 12, at least 5 days before the date fixed for the sale, or at least 5
days before the date on or after which the private sale or other  disposition is
to be made; no notice needs to be given prior to the  disposition of any portion
of the Personal  Property  Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized  market.
Notice to Persons other than the Borrower with rights in the applicable Personal
Property  Collateral  shall be sent to such  addresses as they have furnished to
Agent;

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

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

(n)      The Lender Group shall have all other rights and remedies available
to it at law or in equity pursuant to any other Loan Documents; and

(o) Any  deficiency  that exists  after  disposition  of the  Personal  Property
Collateral as provided above will be paid  immediately by Borrowers.  Any excess
will be returned,  without  interest and subject to the rights of third Persons,
by Agent to Borrowers.

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<PAGE>

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

10.      TAXES AND EXPENSES.

                  If any  Borrower  fails  to pay  any  monies  (whether  taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required  under the terms of this  Agreement,  then,  to the  extent  that Agent
reasonably  determines  that such  failure by such  Borrower  could  result in a
Material  Adverse  Change,  in  its  discretion  and  without  prior  notice  to
Borrowers,  Agent for the  benefit of the Lender  Group may do any or all of the
following:  (a) make payment of the same or any part thereof;  or (b) obtain and
maintain  insurance  policies of the type described in Section 6.9, and take any
action with respect to such  policies as Agent deems  prudent.  Any such amounts
paid by Agent shall constitute Lender Group Expenses.  Any such payments made by
Lender Group shall not  constitute  an agreement by Lender Group to make similar
payments in the future or a waiver by Lender Group of any Event of Default under
this  Agreement.  Agent need not inquire as to, or contest the  validity of, any
such expense,  tax, or Lien and the receipt of the usual official notice for the
payment  thereof shall be conclusive  evidence that the same was validly due and
owing.

11.      WAIVERS; INDEMNIFICATION.

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

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

11.3 Indemnification.  Each Borrower shall pay, indemnify, defend, and hold each
Agent-Related Person, each Lender-Related Person, each Lender, each Participant,
and each of their respective officers,  directors,  employees,  counsel, agents,
and  attorneys-in-fact  (each, an "Indemnified Person") harmless (to the fullest
extent  permitted by law) from and against any and all claims,  demands,  suits,
actions, investigations,  proceedings, and damages, and all reasonable attorneys
fees and  disbursements  and  other  costs and  expenses  actually  incurred  in
connection  therewith (as and when they are incurred and irrespective of whether

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suit is brought), at any time asserted against, imposed upon, or incurred by any
of them in  connection  with or as a  result  of or  related  to the  execution,
delivery, enforcement, performance, and administration of this Agreement and any
other Loan Documents or the transactions  contemplated  herein, and with respect
to any investigation,  litigation,  or proceeding related to this Agreement, the
Pre-Petition  Agreement,  any other Loan Document, or the use of the proceeds of
the credit provided hereunder (irrespective of whether any Indemnified Person is
a party  thereto),  or any act,  omission,  event or  circumstance in any manner
related   thereto   (all   the   foregoing,   collectively,   the   "Indemnified
Liabilities"). Borrowers shall not have any obligation to any Indemnified Person
under this Section 11.3 with respect to any  Indemnified  Liability that a court
of competent  jurisdiction  finally  determines  to have resulted from the gross
negligence or willful  misconduct of such  Indemnified  Person.  This  provision
shall  survive  the  termination  of this  Agreement  and the  repayment  of the
Obligations.   If  any  Indemnified  Person  makes  any  payment  to  any  other
Indemnified  Person with  respect to an  Indemnified  Liability  as to which any
Borrower  was  required to  indemnify  the  Indemnified  Person  receiving  such
payment,   the  Indemnified  Person  making  such  payment  is  entitled  to  be
indemnified  and reimbursed by Borrowers with respect thereto in accordance with
and subject to the terms of this Agreement.

12.      NOTICES.

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

                If to a Borrower
                or Administrative Borrower:

                      c/o GENERAL DATACOMM INDUSTRIES, INC.
                          6 Rubber Avenue
                          Naugatuck, Connecticut  06770
                          Attn:  Mr. Howard Modlin, Chief Executive Officer
                          Fax No.  203-729-3182

   with copies to:        YOUNG CONAWAY STARGATT & TAYLOR
                          1000 West Street, 17th Floor
                          Wilmington, Delaware  19801
                          Attn:  Joel Waite, Esq.
                          Fax No.  302-571-6688

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<PAGE>

                If to Agent:

                         ABLECO FINANCE LLC
                         299 Park Avenue, 23rd Floor
                         New York, NY  10171
                         Attn:  Timothy Fording
                         Fax No.  212-909-1421

   with copies to:       SCHULTE ROTH & ZABEL LLP
                         919 Third Avenue
                         New York, New York  10022
                         Attn:  Eliot L. Relles, Esq.
                         Fax No.  212-593-5955

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

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

                  EXCEPT  TO  THE  EXTENT   JURISDICTION   IS  RETAINED  BY  THE
BANKRUPTCY  COURT,  THE VALIDITY OF THIS  AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS AND TO THE EXTENT  EXPRESSLY  PROVIDED TO THE  CONTRARY IN ANOTHER  LOAN
DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
AND THE RIGHTS OF THE  PARTIES  HERETO AND THERETO  WITH  RESPECT TO ALL MATTERS
ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
UNDER,  GOVERNED BY, AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF
NEW  YORK.  THE  PARTIES  AGREE  THAT ALL  ACTIONS  OR  PROCEEDINGS  ARISING  IN
CONNECTION  WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS  SHALL BE TRIED AND
LITIGATED  ONLY IN THE STATE AND  FEDERAL  COURTS  LOCATED  IN THE COUNTY OF NEW
YORK,  STATE OF NEW YORK OR, AT THE SOLE OPTION OF AGENT,  IN ANY OTHER COURT IN
WHICH AGENT SHALL INITIATE LEGAL OR EQUITABLE  PROCEEDINGS AND WHICH HAS SUBJECT
MATTER  JURISDICTION  OVER THE MATTER IN CONTROVERSY.  EACH BORROWER,  AGENT AND
EACH LENDER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY  PROCEEDING IS BROUGHT IN  ACCORDANCE  WITH THIS SECTION 13.

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<PAGE>

EACH
BORROWER,  AGENT AND EACH LENDER HEREBY WAIVE THEIR RESPECTIVE  RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR  ARISING  OUT OF ANY OF THE
LOAN  DOCUMENTS  OR ANY  OF THE  TRANSACTIONS  CONTEMPLATED  THEREIN,  INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY  CLAIMS.  EACH BORROWER,  AGENT AND EACH LENDER REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER AND EACH  KNOWINGLY AND  VOLUNTARILY  WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,  A
COPY OF THIS  AGREEMENT  MAY BE FILED  AS A  WRITTEN  CONSENT  TO A TRIAL BY THE
COURT.

14.      DESTRUCTION OF BORROWER'S DOCUMENTS.

                  All documents (excluding  Negotiable  Collateral),  schedules,
invoices,  agings,  or other  papers  delivered  to Agent  may be  destroyed  or
otherwise  disposed of by Agent 4 months after they are delivered to or received
by Agent, unless  Administrative  Borrower requests,  in writing,  the return of
said documents, schedules, or other papers and makes arrangements, at Borrowers'
expense, for their return.

15.      ISSUANCE OF EQUITY INTERESTS TO HOLDER.

15.1  Authorization  and Issuance of Warrants.  On the Closing Date,  the Parent
shall issue to Ableco Holding,  LLC, a Delaware limited  liability  company (the
"Holder"), one or more warrant certificates covering the purchase of the Warrant
Stock of the Parent substantially in the form of and upon the terms set forth in
Exhibit  W-1 hereto  (such  certificates,  together  with the rights to purchase
Common Stock provided thereby and all warrant  certificates  covering such stock
issued upon transfer,  division or combination of, or in  substitution  for, any
thereof,  being herein called the "Warrants").  The exercise price thereof shall
be an amount  equal to $0.01 per share.  It is  understood  and agreed  that the
Warrants contain provisions  affecting the number of shares of Common Stock that
may be  acquired by the holder of such  Warrant or issued by the  Parent,  which
provisions are set forth in the Warrants.

15.2     Securities Act Matters.  (a)  Holder represents and warrants to
the Parent that:

(i)      Holder is acquiring the Warrants hereunder for its own account, without
         a view to the distribution thereof, all without prejudice,  however, to
         the right of Holder at any time, in accordance with this Reorganization
         Plan,  lawfully to sell or  otherwise  to dispose of all or any part of
         the Warrants or Warrant Stock held by it after the fifth anniversary of
         the  Effective  Date  or,  prior  to  such  fifth  anniversary,  to any
         Affiliate of Holder.

(ii)     Holder is an "accredited  investor"  within the meaning of Regulation D
         under the Securities Act and was not organized for the specific purpose
         of acquiring the Warrant or the Warrant Stock.

(iii)    Holder  has  sufficient   knowledge  and  experience  in  investing  in
         companies  similar to Parent so as to be able to evaluate the risks and
         merits of its investment in Parent and is able  financially to bear the
         risks thereof; and

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<PAGE>

(iv)     Holder understands that (A) this Warrant and the Warrant Stock have not
         been registered  under the Securities Act in reliance upon an exemption
         from the  registration  requirements  of the Securities Act pursuant to
         Section 4(2) thereof or Rule 506  promulgated  under such act and under
         applicable  state  securities  laws,  (B) this  Warrant and the Warrant
         Stock must be held indefinitely unless a subsequent disposition thereof
         is  registered  under the  Securities  Act and under  applicable  state
         securities laws or is exempt from such  registration,  (C) this Warrant
         and the Warrant Stock will bear a legend to such effect, and (D) Parent
         will make a notation on its transfer books to such effect.

(b)      The Parent represents and warrants to Holder that:

(i)      Assuming  the  truth  and  accuracy  of  Holder's  representations  and
         warranties  contained  in the  immediately  preceding  paragraphs,  the
         issuance of the Warrants to Holder hereunder and the issuance of shares
         of Common Stock to Holder  pursuant to the Warrants are exempt from the
         registration  and prospectus  delivery  requirements  of the Securities
         Act.

(ii)     All stock and  securities of the Parent  heretofore  issued and sold by
         the Parent were,  and all  securities  of the Parent issued and sold by
         the Parent on and after the date  hereof are or will be issued and sold
         in accordance with, or are or will be exempt from, the registration and
         prospectus delivery requirements of the Securities Act.

(iii)    The Parent  agrees that neither it nor any Person  acting on its behalf
         has  offered or will offer the  Warrants  or Warrant  Stock or any part
         thereof  or any  similar  securities  for  issue  or  sale  to,  or has
         solicited  or will  solicit  any offer to acquire any of the same from,
         any  Person so as to bring the  issuance  and sale of the  Warrants  or
         Warrant Stock hereunder  within the provisions of the  registration and
         prospectus delivery requirements of the Securities Act.

15.3 Certain Taxes. The Parent shall pay all taxes (other than federal, state or
local income taxes) which may be payable in connection  with the issuance of the
Warrants or Warrant Stock hereunder and shall hold the Lenders  harmless without
limitation as to time against any and all  liabilities  with respect to all such
taxes.  The  obligations of the Parent under this Section 15.3 shall survive any
redemption,  repurchase  or  acquisition  of  Warrants  or Warrant  Stock by the
Parent,  any termination of this Agreement,  and any cancellation or termination
of the Warrants.

15.4 Cancellation and Issuance.  If Holder assigns or otherwise transfers all or
any of its  portion  of the Term  Loans  (including  by  selling  participations
therein) to any Person,  Holder may request  (upon 10 days' prior  notice to the
Parent) that (a) a number of Warrants  held by Holder be canceled on the date of
such  assignment and transfer and (b) a like number of Warrants be issued by the
Parent to the Person to whom such  Obligations  are being  assigned or otherwise
transferred. Upon the date specified in such request:

                                       54
<PAGE>


(i)      The Parent shall  issue,  and Holder  shall  surrender  (or cause to be
         surrendered)  for  cancellation,  such number of Warrants as aforesaid,
         provided that such issuance shall not violate the Securities Act or any
         applicable state securities laws;

(ii)     The Parent will deliver to each Person that receives a certificate  for
         Warrants  a  favorable   legal  opinion  from  counsel  to  the  Parent
         acceptable  to such  Person,  covering  the  matters  set  forth in the
         opinion of counsel to the Parent and its Subsidiaries  delivered to the
         Agent on the Closing Date (to the extent relating to the Warrants);

(iii)    each Person that receives  Warrants  will deliver a certificate  to the
         Parent  affirming  the  representations  and  warranties  contained  in
         Section 15.2(a) hereof as applied to such Person as of such date; and

(iv)     The Parent will  deliver a  certificate  to each  Person that  receives
         Warrants  affirming the  representations  and  warranties  contained in
         Section 15.2(b) hereof as of such date.

16.      ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

16.1     Assignments and Participations.

(a) Any Lender may,  with the written  consent of Agent,  assign and delegate to
one or more  assignees  (provided  that no  written  consent  of Agent  shall be
required in  connection  with any  assignment  and  delegation by a Lender to an
Eligible  Transferee)  (each an  "Assignee")  all, or any ratable  part,  of the
Obligations,  the  Commitments,  and the other  rights and  obligations  of such
Lender  hereunder  and under the other Loan  Documents,  in a minimum  amount of
$1,000,000  (provided  that no such minimum amount shall be required in the case
of an  Assignee  that is an  Affiliate  of a Lender),  provided,  however,  that
Borrowers and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment,  together with payment instructions,  addresses, and related
information with respect to the Assignee, shall have been given to Borrowers and
Agent by such Lender and the Assignee;  (ii) such Lender and its Assignee  shall
have  delivered  to  Borrowers  and  Agent  a  fully  executed   Assignment  and
Acceptance;  and (iii) other than with respect to an  assignment  by an existing
Lender to any Affiliate of such Lender, the assignor Lender or Assignee has paid
to Agent for Agent's sole and separate account a processing fee in the amount of
$2,500;  provided,  further,  that the written consent of the Borrowers shall be
required for an Assignment  and  Acceptance to be effective if, but only if, the
proposed  Assignee  has been a lender to a Borrower at any time during the three
years prior to the Closing Date unless the  assignor  Lender is selling all or a
substantial  portion of its loan portfolio to such proposed  Assignee,  in which
case no such  written  consent  of the  Borrowers  shall be  required.  Anything
contained herein to the contrary notwithstanding, the consent of Agent shall not
be required  (and payment of any fees shall not be required) if such  assignment
is in  connection  with any  merger,  consolidation,  sale,  transfer,  or other
disposition of all or any substantial  portion of the business or loan portfolio
of such Lender.

(b) From and after the date that Agent notifies the assignor  Lender that it has
received a fully executed  Assignment and Acceptance and payment (if applicable)

                                       55
<PAGE>

of the  above-referenced  processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations  hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and  obligations  of a Lender  under the Loan  Documents,  and (ii) the assignor
Lender shall, to the extent that rights and obligations  hereunder and under the
other Loan  Documents  have been assigned by it pursuant to such  Assignment and
Acceptance,  relinquish  its rights (except with respect to Section 11.3 hereof)
and be released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's  rights  and  obligations  under  this  Agreement  and the  other  Loan
Documents,  such Lender shall cease to be a party hereto and thereto),  and such
assignment shall effect a novation between Borrowers and the Assignee.

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

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

(e) Any Lender may at any time, with the written  consent of Agent,  sell to one
or  more  commercial  banks,  financial  institutions,   or  other  Persons  not
Affiliates  of such  Lender (a  "Participant")  participating  interests  in the
Obligations owing to such Lender, such Lender's Commitment, and the other rights
and interests of that Lender (the "Originating  Lender") hereunder and under the
other  Loan  Documents  (provided  that no  written  consent  of Agent  shall be
required in connection with any sale of such participating interests by a Lender
to an Eligible Transferee); provided, however, that (i) the Originating Lender's

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<PAGE>

obligations  under this Agreement shall remain  unchanged,  (ii) the Originating
Lender shall remain solely  responsible for the performance of such obligations,
(iii)  Borrowers  and Agent shall  continue to deal solely and directly with the
Originating  Lender in  connection  with the  Originating  Lender's  rights  and
obligations  under  this  Agreement  and  the  other  Loan  Documents,  (iv)  no
Originating  Lender shall  transfer or grant any  participating  interest  under
which the  Participant has the sole and exclusive right to approve any amendment
to, or any consent or waiver with  respect to, this  Agreement or any other Loan
Document,  except to the extent  such  amendment  to, or consent or waiver  with
respect to this  Agreement  or of any other Loan  Document  would (A) extend the
final maturity date of the  Obligations  hereunder in which such  Participant is
participating;  (B) reduce  the  interest  rate  applicable  to the  Obligations
hereunder  in which such  Participant  is  participating;  (C)  release all or a
material portion of the Collateral or guaranties (except to the extent expressly
provided  herein or in any of the Loan  Documents)  supporting  the  Obligations
hereunder in which such Participant is  participating;  (D) postpone the payment
of, or reduce  the  amount  of, the  interest  or fees  hereunder  in which such
Participant  is  participating;  (E) change the amount or due dates of scheduled
principal  repayments or prepayments  or premiums in respect of the  Obligations
hereunder in which such  Participant is  participating;  or (F)  subordinate the
Liens of Agent for the  benefit  of the  Lender  Group to the Liens of any other
creditor of any  Borrower;  and (v) all amounts  payable by Borrowers  hereunder
shall  be  determined  as  if  such   Originating   Lender  had  not  sold  such
participation;  except that, if amounts outstanding under this Agreement are due
and  unpaid,  or shall have been  declared  or shall have become due and payable
upon the occurrence of an Event of Default,  each Participant shall be deemed to
have the right of set-off in respect of its  participating  interest  in amounts
owing  under  this  Agreement  to  the  same  extent  as if  the  amount  of its
participating  interest  were  owing  directly  to it  as a  Lender  under  this
Agreement.  The rights of any Participant  shall only be derivative  through the
Originating  Lender with whom such  Participant  participates and no Participant
shall have any direct  rights as to the other  Lenders,  Agent,  Borrowers,  the
Collections,  the  Collateral,  or  otherwise  in respect of the Term Loans.  No
Participant  shall  have the  right to  participate  directly  in the  making of
decisions by Lenders among  themselves.  The provisions of this Section  16.1(e)
are  solely for the  benefit of Lender  Group,  and no  Borrower  shall have any
rights as a third party beneficiary of any of such provisions.

(f) In  connection  with  any  such  assignment  or  participation  or  proposed
assignment or participation,  subject to Section 18.16(d), a Lender may disclose
to a third party all  documents  and  information  which it now or hereafter may
have relating to any Borrower's business.

(g) Notwithstanding any other provision in this Agreement, any Lender may at any
time create a security interest in, or pledge,  all or any portion of its rights
under and  interest in this  Agreement  in favor of any Federal  Reserve Bank in
accordance  with  Regulation  A of the  Federal  Reserve  Bank or U.S.  Treasury
Regulation 31 C.F.R.  ss.203.14,  and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.

16.2  Successors.  This  Agreement  shall  bind and inure to the  benefit of the
respective  successors  and  assigns of each of the  parties  hereto;  provided,
however,  that no  Borrower  may assign this  Agreement  or any rights or duties
hereunder  without Lenders' prior written consent and any prohibited  assignment

                                       57
<PAGE>

shall be absolutely  void. No consent to assignment by Lenders shall release any
Borrower from the Obligations.  A Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder pursuant to Section 16.1 and,
except as expressly required pursuant to Section 16.1, no consent or approval by
any Borrower is required in connection with any such assignment.

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

(a)      increase or extend the Commitment of any Lender;

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

(c)      reduce the principal of, or the rate of interest  specified  herein on,
         the Term Loans or any fees or other amounts payable  hereunder or under
         any other Loan Document;

(d)      change the  percentage  of the  Commitments  or the  percentage  of the
         aggregate unpaid  principal amount of the Obligations,  as the case may
         be,  which is  required  for  Lenders or any of them to take any action
         hereunder;

(e)      amend this Section 17.1 or any provision of this Agreement providing
         for consent or other action by all Lenders;

(f)      release Collateral other than as permitted by Section 18.11;

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

(h)      release a Borrower from any Obligation for the payment of money;

(i)      amend any of the provisions of Article 17; or

(j)      subordinate the Liens of Agent for the benefit of the Lender Group to
the Liens of any other creditor of a Borrower.  and, provided  further,  that no
amendment,  waiver or  consent  shall,  unless in  writing  and signed by Agent,

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affect the  rights or duties of Agent  under  this  Agreement  or any other Loan
Document. The foregoing notwithstanding,  any amendment,  modification,  waiver,
consent,  termination,  or release of or with  respect to any  provision of this
Agreement or any other Loan  Document that relates only to the  relationship  of
Lender  Group  among  themselves,  and  that  does  not  affect  the  rights  or
obligations  of any Borrower,  shall not require  consent by or the agreement of
Borrowers.

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

18.      AGENT; LENDER GROUP.

18.1 Appointment and  Authorization of Agent.  Each Lender hereby designates and
appoints  Ableco as its Agent under this Agreement and the other Loan Documents.
Each Lender hereby  irrevocably  authorizes the Agent to take such action on its
behalf under the  provisions of this  Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this  Agreement or any other Loan  Document,  together with such
powers as are reasonably incidental thereto.  Agent agrees to act as such on the
express conditions  contained in this Article 18. The provisions of this Article
18 are solely for the benefit of Agent and Lenders,  and the Borrowers shall not
have any rights as a third party beneficiary of any of the provisions  contained
herein;  provided,  however,  that the provisions of Sections 18.10,  18.11, and
18.16(d)  also  shall be for the  benefit of  Borrowers.  Any  provision  to the
contrary  contained  elsewhere in this  Agreement or in any other Loan  Document
notwithstanding,  Agent  shall not have any duties or  responsibilities,  except
those expressly set forth herein,  nor shall Agent have or be deemed to have any
fiduciary  relationship with any Lender,  and no implied  covenants,  functions,
responsibilities,  duties,  obligations,  or liabilities shall be read into this
Agreement or any other Loan Document or otherwise  exist against Agent; it being
expressly  understood  and  agreed  that  the  use of the  word  "Agent"  is for
convenience only, that Ableco is merely the  representative of the Lenders,  and
has only the contractual duties set forth herein.  Except as expressly otherwise
provided in this  Agreement,  Agent  shall have and may use its sole  discretion
with respect to exercising  or  refraining  from  exercising  any  discretionary
rights or taking or refraining  from taking any actions which Agent is expressly
entitled to take or assert  under or pursuant  to this  Agreement  and the other
Loan  Documents.  Without  limiting the generality of the  foregoing,  or of any
other  provision of the Loan Documents that provides  rights or powers to Agent,
Lenders agree that Agent shall have the right to exercise the  following  powers
and to delegate  the  exercise of any such powers to any  sub-agent  of Agent as
long as this Agreement remains in effect:  (a) maintain,  in accordance with its
customary business  practices,  ledgers and records reflecting the status of the
Term Loans, the other Obligations,  the Collateral, the Collections, and related
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matters;  (b) execute and/or file any and all financing or similar statements or
notices, amendments,  renewals, supplements,  documents,  instruments, proofs of
claim for Lenders, notices and other written agreements with respect to the Loan
Documents;  (c) make the Term  Loans,  for  itself or on behalf  of  Lenders  as
provided  in  the  Loan  Documents;  (d)  receive,  apply,  and  distribute  the
Collections as provided in the Loan  Documents;  (e) open and maintain such bank
accounts and lock boxes as Agent deems  necessary and  appropriate in accordance
with  the  Loan  Documents  for  the  foregoing  purposes  with  respect  to the
Collateral and the Collections;  (f) perform,  exercise, and enforce any and all
other rights and remedies of Lender  Group with respect to  Borrowers,  the Term
Loans, the other  Obligations,  the Collateral,  the  Collections,  or otherwise
related to any of same as provided in the Loan Documents;  and (g) incur and pay
such Lender Group Expenses as Agent may deem  necessary or  appropriate  for the
performance  and  fulfillment  of its functions and powers  pursuant to the Loan
Documents.

18.2  Delegation of Duties.  Except as otherwise  provided in this Section 18.2,
Agent may  execute  any of its  duties  under this  Agreement  or any other Loan
Document by or through  agents,  employees,  or  attorneys-in-fact  and shall be
entitled to advice of counsel  concerning all matters pertaining to such duties.
Agent shall not be responsible  for the negligence or misconduct of any agent or
attorney-in-fact  that  it  selects  as  long  as  such  selection  was  made in
compliance  with this  Section  18.2 and  without  gross  negligence  or willful
misconduct.

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

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

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continuing to take any such action.  Agent shall in all cases be fully protected
in acting, or in refraining from acting,  under this Agreement or any other Loan
Document  in  accordance  with a request or consent of  Required  Lenders or all
Lenders, as applicable,  and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of Lenders.

18.5  Notice of Default or Event of  Default.  Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with  respect to defaults  in the  payment of  principal,  interest,  fees,  and
expenses  required  to be paid to Agent  for the  account  of Agent or  Lenders,
except with  respect to Defaults and Events of Default of which Agent has actual
knowledge,  unless  Agent shall have  received  written  notice from a Lender or
Borrowers  referring  to this  Agreement,  describing  such  Default or Event of
Default,  and stating that such notice is a "notice of default."  Agent promptly
will notify Lenders of its receipt of any such notice or of any Event of Default
of which Agent has actual  knowledge.  If any Lender obtains actual knowledge of
any Event of Default,  such Lender  promptly  shall notify the other Lenders and
Agent of such Event of Default.  Each  Lender  shall be solely  responsible  for
giving any notices to its  Participants,  if any. Subject to Section 18.4, Agent
shall take such action with  respect to such  Default or Event of Default as may
be  requested  by  Required  Lenders in  accordance  with  Section 9;  provided,
however,  that unless and until Agent has received any such  request,  Agent may
(but shall not be obligated  to) take such  action,  or refrain from taking such
action,  with  respect  to such  Default  or Event of  Default  as it shall deem
advisable:

(a)      At all times,  Agent may  propose  and,  with the  consent of  Required
         Lenders  (which shall not be  unreasonably  withheld and which shall be
         deemed to have been given by a Lender  unless such Lender has  notified
         Agent to the contrary in writing within three (3) days of  notification
         of such proposed  actions by Agent)  exercise any remedies on behalf of
         Lender Group; and

(b)      At all times,  once Agent and Required  Lenders or all Lenders,  as the
         case may be,  have  approved  the  exercise of a  particular  remedy or
         pursuit of a course of action,  Agent may,  but shall not be  obligated
         to, make all administrative  decisions in connection  therewith or take
         all other  actions  reasonably  incidental  thereto  (for  example,  if
         Required Lenders approve the foreclosure of certain  Collateral,  Agent
         shall not be required to seek consent for the administrative aspects of
         conducting such sale or handling of such Collateral).

18.6  Credit  Decision.  Each  Lender  acknowledges  that none of  Agent-Related
Persons has made any  representation or warranty to it, and that no act by Agent
hereinafter taken,  including any review of the affairs of each Borrower and its
respective  Subsidiaries  or  Affiliates,  shall be  deemed  to  constitute  any
representation  or warranty  by any  Agent-Related  Person to any  Lender.  Each
Lender represents to Agent that it has,  independently and without reliance upon
any  Agent-Related  Person and based on such documents and information as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,  prospects,  operations,  property, financial and other condition, and
creditworthiness  of any Borrower and any other Person (other than Lender Group)
party to a Loan Document,  and all applicable  bank  regulatory laws relating to
the transactions  contemplated  hereby,  and made its own decision to enter into
this  Agreement and to extend credit to Borrowers.  Each Lender also  represents
that it will,  independently and without reliance upon any Agent-Related  Person
and based on such documents and information as it shall deem  appropriate at the
time,  continue to make its own credit  analysis,  appraisals,  and decisions in
taking or not taking action under this  Agreement and the other Loan  Documents,

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<PAGE>

and to make such investigations as it deems necessary to inform itself as to the
business,  prospects,  operations,  property, financial and other condition, and
creditworthiness of any Borrower, and any other Person (other than Lender Group)
party to a Loan  Document.  Except for  notices,  reports,  and other  documents
expressly  herein required to be furnished to Lenders by Agent,  Agent shall not
have any duty or  responsibility  to provide any Lender with any credit or other
information concerning the business, prospects,  operations, property, financial
and other condition,  or creditworthiness of any Borrower,  and any other Person
party  to a  Loan  Document  that  may  come  into  the  possession  of  any  of
Agent-Related Persons.

18.7 Costs and Expenses;  Indemnification.  Agent may incur and pay Lender Group
Expenses to the extent Agent deems  reasonably  necessary or appropriate for the
performance and fulfillment of its functions,  powers, and obligations  pursuant
to the  Loan  Documents,  including,  without  limiting  the  generality  of the
foregoing,  but subject to any requirements of the Loan Documents that it obtain
any  applicable  consents or engage in any required  consultation,  court costs,
reasonable  attorneys  fees  and  expenses,   costs  of  collection  by  outside
collection  agencies  and  auctioneer  fees and  costs  of  security  guards  or
insurance premiums paid to maintain the Collateral, whether or not Borrowers are
obligated to reimburse  Agent or Lenders for such expenses  pursuant to the Loan
Agreement or otherwise.  Agent is  authorized  and directed to deduct and retain
sufficient  amounts from  Collections to reimburse Agent for such  out-of-pocket
costs and expenses prior to the  distribution of any amounts to Lenders.  In the
event Agent is not reimbursed for such costs and expenses from Collections, each
Lender  hereby  agrees that it is and shall be  obligated to pay to or reimburse
such Agent for the amount of such  Lender's Pro Rata Share  thereof.  Whether or
not  the  transactions  contemplated  hereby  are  consummated,   Lenders  shall
indemnify upon demand Agent-Related  Persons (to the extent not reimbursed by or
on behalf of Borrowers  and without  limiting the  obligation of Borrowers to do
so),  according  to  their  Pro  Rata  Shares,  from  and  against  any  and all
Indemnified Liabilities;  provided,  however, that no Lender shall be liable for
the  payment  to  Agent-Related  Persons  of any  portion  of  such  Indemnified
Liabilities  resulting  solely from such Person's gross  negligence,  or willful
misconduct.  Without  limitation of the foregoing,  each Lender shall  reimburse
Agent upon demand for its ratable share of any costs or  out-of-pocket  expenses
(including  attorney fees and expenses) incurred by Agent in connection with the
preparation,  execution, delivery, administration,  modification,  amendment, or
enforcement (whether through  negotiations,  legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities  under, this Agreement,
any other Loan Document,  or any document contemplated by or referred to herein,
to the extent that Agent is not  reimbursed for such expenses by or on behalf of
Borrowers. The undertaking in this Section 18.7 shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.

18.8 Agent in Individual Capacity.  Ableco and its Affiliates may make loans to,
issue letters of credit for the account of, accept deposits from, acquire equity
interests  in, and  generally  engage in any kind of  banking,  lending,  trust,
financial  advisory,  underwriting,  or other business with any Borrower and its
Subsidiaries  and Affiliates and any other Person party to any Loan Documents as
though  Ableco  were not Agent  hereunder  and  without  notice to or consent of
Lenders.  Lenders acknowledge that, pursuant to such activities,  Ableco and its

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Affiliates may receive  information  regarding a Borrower and its Affiliates and
any other Person (other than Lender Group) party to any Loan  Documents  that is
subject to  confidentiality  obligations in favor of such Borrower or such other
Person and that prohibit the  disclosure  of such  information  to Lenders,  and
Lenders  acknowledge that, in such circumstances (and in the absence of a waiver
of such confidentiality obligations,  which waiver Agent will use its reasonable
best  efforts to obtain),  Agent shall be under no  obligation  to provide  such
information to them. With respect to Agent Advances,  Ableco shall have the same
rights and powers under this  Agreement as any other Lender and may exercise the
same as though it were not Agent,  and the terms "Lender" and "Lenders"  include
Ableco in its individual  capacity.  With respect to Ableco Loans, Agent, in its
individual  capacity,  shall, if it is a Lender hereunder,  have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not Agent,  and the terms "Lender" and "Lenders"  shall,  in such
case, include Agent in its individual capacity.

18.9  Successor  Agent.  Agent may  resign as Agent  upon 45 days  notice to the
Lenders.  If Agent  resigns  under this  Agreement,  the Required  Lenders shall
appoint a successor  Agent for the Lenders.  If no successor  Agent is appointed
prior to the  effective  date of the  resignation  of Agent,  Agent may appoint,
after  consulting with the Lenders,  a successor  Agent. If Agent has materially
breached or failed to perform any  material  provision  of this  Agreement or of
applicable law, the Required  Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights,  powers,  and duties of the retiring  Agent and
the term  "Agent"  shall  mean such  successor  Agent and the  retiring  Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation  hereunder as Agent, the provisions of this Section 18 shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it  was  Agent  under  this  Agreement.  If  no  successor  Agent  has  accepted
appointment as Agent by the date which is 45 days  following a retiring  Agent's
notice of  resignation,  the retiring  Agent's  resignation  shall  nevertheless
thereupon  become  effective  and the Lenders shall perform all of the duties of
Agent  hereunder  until such time,  if any, as the  Lenders  appoint a successor
Agent as provided for above.

18.10    Withholding Tax.

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

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

(ii) if such Lender claims an exemption from, or a reduction of, withholding tax
under a United States tax treaty,  properly completed IRS Form W-8BEN before the

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<PAGE>

first  payment  of any  interest  under  this  Agreement  and at any other  time
reasonably requested by Agent or Administrative Borrower;

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

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

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

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

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

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

(e) All  payments  made by  Borrowers  hereunder  or under any note will be made
without setoff, counterclaim, or other defense, except as required by applicable
law other than for Taxes (as defined below). All such payments will be made free
and clear of, and without  deduction or  withholding  for, any present or future
taxes, levies,  imposts,  duties, fees, assessments or other charges of whatever
nature now or  hereafter  imposed  by any  jurisdiction  (other  than the United
States) or by any political  subdivision or taxing authority  thereof or therein
(other than of the United States) with respect to such payments (but  excluding,

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any tax imposed by any  jurisdiction  or by any political  subdivision or taxing
authority  thereof or therein (i)  measured by or based on the net income or net
profits of a Lender,  or (ii) to the extent that such tax results  from a change
in the circumstances of the Lender,  including a change in the residence,  place
of  organization,  or principal place of business of the Lender,  or a change in
the branch or lending office of the Lender participating in the transactions set
forth herein) and all interest,  penalties or similar  liabilities  with respect
thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed,  Borrowers  agree to pay the full  amount of such Taxes,  and
such additional amounts as may be necessary so that every payment of all amounts
due under this  Agreement or under any note,  including any amount paid pursuant
to this Section 18.10(e) after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein; provided,  however,
that  Borrowers  shall not be required to increase any such  amounts  payable to
Agent or any  Lender  (i) that is not  organized  under  the laws of the  United
States,  if such  Person  fails to comply  with the other  requirements  of this
Section  18.10,  or (ii) if the  increase in such amount  payable  results  from
Agent's or such  Lender's  own  willful  misconduct  or gross  negligence.  Each
Borrower  will  furnish  to Agent as  promptly  as  possible  after the date the
payment of any Taxes is due pursuant to applicable  law certified  copies of tax
receipts evidencing such payment by such Borrower.

18.11    Collateral Matters.

(a)  Lenders  hereby  irrevocably  authorize  Agent to  release  any Lien on any
Collateral  (i)  upon  the  termination  of  the  Commitments  and  payment  and
satisfaction in full by or on behalf of Borrowers of all  Obligations;  and upon
such  termination  and payment Agent shall  deliver to Borrowers,  at Borrowers'
sole cost and expense,  all UCC  termination  statements and any other documents
necessary to terminate the Loan  Documents and release the Liens with respect to
the  Collateral;  (ii)  constituting  property  being sold or  disposed  of if a
release is required or desirable in  connection  therewith  and if each Borrower
certifies to Agent that the sale or disposition  is permitted  under Section 7.4
of this Agreement or the other Loan  Documents (and Agent may rely  conclusively
on any such certificate,  without further inquiry);  (iii) constituting property
in which a Borrower does not own an interest at the time the Lien was granted or
at any time thereafter; or (iv) constituting property leased to a Borrower under
a lease that has expired or been  terminated  in a transaction  permitted  under
this Agreement. Except as provided above, Agent will not release any Lien on any
Collateral  without the prior written  authorization of (y) if the release is of
all or any material portion of the Collateral,  of all Lenders or (z) otherwise,
of the Required Lenders. Upon request by Agent or Borrowers at any time, Lenders
will  confirm  in  writing  Agent's  authority  to  release  any  such  Liens on
particular  types  or  items  of  Collateral  pursuant  to this  Section  18.11;
provided,  however,  that (i) the Agent  shall not be  required  to execute  any
document  necessary to evidence such release on terms that, in Agent's  opinion,
would  expose  Agent to  liability  or  create  any  obligation  or  entail  any
consequence   other   than  the   release   of  such  Lien   without   recourse,
representation,  or  warranty,  and (ii) such  release  shall not in any  manner
discharge,  affect or impair  the  Obligations  or any Liens  (other  than those
expressly being released),  upon (or obligations of Borrowers in respect of) all
interests  retained by Borrowers,  including,  the proceeds of any sale,  all of
which shall continue to constitute part of the Collateral.

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<PAGE>

(b) Agent shall not have any obligation  whatsoever to any Lender to assure that
the Collateral  exists or is owned by a Borrower,  is cared for,  protected,  or
insured or has been  encumbered,  or that the Liens of Agent (for the benefit of
Lender Group) have been properly or sufficiently or lawfully created, perfected,
protected,  or  enforced  or are  entitled  to any  particular  priority,  or to
exercise  at all or in  any  particular  manner  or  under  any  duty  of  care,
disclosure,  or  fidelity,  or  to  continue  exercising,  any  of  the  rights,
authorities  and powers granted or available to the Agent pursuant to any of the
Loan  Documents,  it  being  understood  and  agreed  that  in  respect  of  the
Collateral,  or any act, omission or event related thereto, subject to the terms
and  conditions  contained  herein,  the Agent may act in any manner it may deem
appropriate,  absent Agent's gross negligence or willful misconduct, in its sole
discretion given the Agent's own interest in the Collateral in their capacity as
Lenders and that the Agent shall have no other duty or liability  whatsoever  to
any Lender as to any of the foregoing, except as otherwise provided herein.

18.12    Restrictions on Actions by Lenders; Sharing of Payments.

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

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

18.13 Agency for Perfection. Agent hereby appoints each Lender as its agent (and
each Lender  hereby  accepts  such  appointment)  for the purpose of  perfecting
Agent's Liens in assets which,  in accordance with Article 9 of the Code, can be

                                       66
<PAGE>

perfected  only by possession.  Should any Lender obtain  possession of any such
Collateral,  such Lender shall notify Agent thereof,  and, promptly upon Agent's
request  therefor,  shall deliver such Collateral to Agent or in accordance with
Agent's instructions.

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

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

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

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

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

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

(d)  agrees to keep all  Reports  and  other  material,  non-public  information
regarding a Borrower and its  Subsidiaries  and their  operations,  assets,  and
existing and  contemplated  business  plans in a confidential  manner;  it being
understood  and agreed by the  Borrowers  that in any event such Lender may make
disclosures (i) to counsel for and other advisors,  accountants, and auditors to
such  Lender,  (ii)  reasonably  required by any bona fide  potential  or actual
Assignee,  transferee,  or Participant in connection  with any  contemplated  or
actual  assignment  or  transfer  by such  Lender of an  interest  herein or any
participation  interest in such Lender's  rights  hereunder,  provided that such
potential or actual  Assignee,  transferee or Participant  agrees to comply with
this Section  18.16(d) as if it were a Lender  hereunder,  (iii) of  information
that has become  public by  disclosures  made by Persons other than such Lender,

                                       67

<PAGE>

its Affiliates,  Assignees, transferees, or Participants, or (iv) as required or
requested by any court,  governmental or administrative agency,  pursuant to any
subpoena or other legal process,  or by any law, statute,  regulation,  or court
order;  provided,  however,  that, unless prohibited by applicable law, statute,
regulation,  or court order,  such Lender shall promptly  notify  Administrative
Borrower of any request by any court,  governmental or administrative agency, or
pursuant  to any  subpoena or other legal  process  for  disclosure  of any such
non-public material information concurrent with, or where practicable,  prior to
the disclosure thereof; and

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

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

18.17 Several  Obligations;  No Liability.  Notwithstanding  that certain of the
Loan  Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such,  and not by or in favor of Lenders,  any
and all  obligations  on the part of the  Lenders to make any  credit  available
hereunder  shall  constitute  the  several  (and not joint)  obligations  of the
respective   Lenders  on  a  ratable  basis,   according  to  their   respective
Commitments,  to make an amount  of such  credit  not to  exceed,  in  principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing  contained  herein  shall  confer  upon any Lender any  interest  in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its  Participants of any matters  relating to the Loan
Documents  to the extent any such notice may be  required,  and no Lender  shall
have any obligation,  duty, or liability to any Participant of any other Lender.
Except as provided  in Section  18.7,  no member of Lender  Group shall have any
liability for the acts of any other member of Lender Group.

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<PAGE>

19.      GENERAL PROVISIONS.

19.1  Effectiveness.  This Agreement shall be binding and deemed  effective when
executed by each Borrower,  the Agent and each of the Lenders whose signature is
provided for on the signature page hereof.

19.2  Successors and Assigns.  This Agreement shall inure to the benefit of, and
be binding  upon,  the parties  hereto and their  successors  and assigns to the
extent set forth in Section 18.

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

19.4  Interpretation.  Neither this  Agreement nor any  uncertainty or ambiguity
herein shall be construed  against Lender Group or Borrowers,  whether under any
rule of  construction  or otherwise.  On the contrary,  this  Agreement has been
reviewed by all parties and shall be construed and interpreted  according to the
ordinary  meaning of the words used so as to accomplish  fairly the purposes and
intentions of all parties hereto.
19.5  Severability  of Provisions.  Each  provision of this  Agreement  shall be
severable  from every  other  provision  of this  Agreement  for the  purpose of
determining the legal enforceability of any specific provision.

19.6     Amendments in Writing.  This Agreement can only be amended by a
writing signed in accordance with Section 17.

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

19.8 Revival and  Reinstatement of Obligations.  If the incurrence or payment of
the  Obligations  by  Borrowers  or the transfer to Lender Group of any property
should for any reason  subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights,  including provisions of the
Bankruptcy  Code  relating  to  fraudulent  conveyances,  preferences,  or other
voidable   or   recoverable   payments  of  money  or   transfers   of  property
(collectively,  a "Voidable Transfer"), and if Lender Group is required to repay
or restore, in whole or in part, any such Voidable Transfer,  or elects to do so
upon the  reasonable  advice  of its  counsel,  then,  as to any  such  Voidable
Transfer, or the amount thereof that Lender Group is required or elects to repay
or restore,  and as to all  reasonable  costs,  expenses,  and attorneys fees of

                                       69
<PAGE>

Lender Group related thereto, the liability of Borrowers  automatically shall be
revived,  reinstated,  and  restored  and shall  exist as though  such  Voidable
Transfer had never been made.

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

19.10 General DataComm as Agent for Borrowers.  Each Borrower hereby irrevocably
appoints  General DataComm as the borrowing agent and  attorney-in-fact  for the
Borrowers (the "Administrative Borrower") which appointment shall remain in full
force and effect unless and until Agent shall have received prior written notice
signed by all of the Borrowers that such  appointment  has been revoked and that
another  Borrower has been  appointed  Administrative  Borrower.  Each  Borrower
hereby irrevocably  appoints and authorizes the Administrative  Borrower to take
such action as the  Administrative  Borrower deems  appropriate on its behalf to
exercise such other powers as are reasonably incidental thereto to carry out the
purposes  of this  Agreement.  It is  understood  that the  handling of the Loan
Account and Collateral of the Borrowers in a combined fashion, as more fully set
forth herein,  is done solely as an  accommodation  to the Borrowers in order to
utilize the collective  borrowing  powers of the Borrowers in the most efficient
and  economical  manner and at their  request,  and that Lender  Group shall not
incur  liability to the  Borrowers  as a result  hereof.  Each of the  Borrowers
expects to derive benefit, directly or indirectly, from the handling of the Loan
Account and the Collateral in a combined fashion since the successful  operation
of each Borrower is dependent on the  continued  successful  performance  of the
integrated group. To induce Lender Group to do so, and in consideration thereof,
each of the Borrowers  hereby jointly and severally  agrees to indemnify  Lender
Group and hold Lender Group  harmless  against any and all  liability,  expense,
loss or claim of damage  or  injury,  made  against  Lender  Group by any of the
Borrowers or by any third party whosoever, arising from or incurred by reason of
(a) the  handling  of the Loan  Account and  Collateral  of the  Borrowers  in a
combined  fashion  as  herein  provided,  (b)  Lender  Group's  relying  on  any
instructions of the  Administrative  Borrower,  or (c) any other action taken by
Lender Group hereunder or under the other Loan Documents,  except that Borrowers
will have no liability to the relevant  Agent-Related  Person or  Lender-Related
Person under this  Section  19.10 with  respect to any  liability  that has been
finally determined by a court of competent  jurisdiction to have resulted solely
from the gross negligence or willful misconduct of such Agent-Related  Person or
Lender-Related Person, as the case may be.



                            {Signature Page Follows}


                                       70
<PAGE>


<PAGE>
IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be
executed on the date set forth above.

                             Borrowers:
                             ---------

                             GENERAL DATACOMM INDUSTRIES, INC.,
                             a Delaware corporation


                             By  /S/ HOWARD MODLIN
                             Title:  CHAIRMAN

                             GENERAL DATACOMM, INC.,
                             a Delaware corporation


                             By  /S/ HOWARD MODLIN
                             Title: CHAIRMAN


                             DATACOMM LEASING CORPORATION,
                             a Delaware corporation

                             By  /S/ HOWARD MODLIN
                             Title: CHAIRMAN

                             GDC HOLDING COMPANY, LLC,
                             a Delaware limited liability company

                             By  /S/ HOWARD MODLIN
                             Title:  CHAIRMAN

                             GDC FEDERAL SYSTEMS, INC.,
                             a Delaware corporation


                             By /S/ HOWARD MODLIN
                             Title:CHAIRMAN
<PAGE>


                              GDC REALTY, INC.,
                              a Texas corporation

                              By  /S/ HOWARD MODLIN
                              Title  CHAIRMAN

                              GDC NAUGATUCK, INC.,
                              a Delaware Corporation

                              By  /S/ HOWARD MODLIN
                              Title:  CHAIRMAN


                               Agent and Lender:
                               ----------------
                               ABLECO FINANCE LLC,
                               a Delaware limited liability company

                               By
                               Title:

<PAGE>

                                  Schedule C-1

                        Lenders and Lenders' Commitments


                                 Term A Loan             Term B Loan
Lender                            Commitment             Commitment
Ableco Finance LLC           $                       $

[Other Lenders]

All Lenders                   $25,000,000             $5,000,000