$10,000,000
                              AMENDED AND RESTATED
                                CREDIT AGREEMENT


                                December 1, 1998


                                     between


                               DISC GRAPHICS, INC.

                                       and

                          KEYBANK NATIONAL ASSOCIATION









          AMENDED AND RESTATED  CREDIT  AGREEMENT dated December 1, 1998 between
Disc  Graphics,  Inc., 10 Gilpin Avenue,  Hauppauge,  New York 11788, a Delaware
corporation  ("Borrower") and KeyBank National Association,  1377 Motor Parkway,
Islandia, New York 11788, a national banking association (the "Bank").

          WHEREAS, Borrower and the Bank are parties to a credit agreement dated
February 26, 1997 (the "Prior Credit Agreement"); and

          WHEREAS,  Borrower desires to modify and extend the terms of the Prior
Credit Agreement;  and WHEREAS, the Bank is willing to do in accordance with the
terms provided below;  NOW,  THEREFORE,  in consideration of the foregoing,  the
parties agree as follows:

ARTICLE 1.  DEFINITIONS; ACCOUNTING TERMS.

          Section 1.01.  Definitions.  As used in this Agreement,  the following
terms have the following meanings:

          "Acquisition" means any transaction  pursuant to which Borrower or any
of its  Subsidiaries  (a) acquires  equity  securities (or warrants,  options or
other  rights to  acquire  such  securities)  of any  corporation,  partnership,
limited liability company or other business organization, or any entity which is
not then a  Subsidiary  of  Borrower,  pursuant  to a  solicitation  of  tenders
therefor,  or in one or more negotiated block,  market or other transactions not
involving a tender offer, or a combination of any of the foregoing, or (b) makes
any entity not then a Subsidiary of Borrower a Subsidiary of Borrower, or causes
any such  entity  to be  merged  into or  purchased  by  Borrower  or any of its
Subsidiaries,  in any case  pursuant  to a  merger,  purchase  of  assets or any
reorganization  providing  for the  delivery  or issuance to the holders of such
entity's then outstanding securities,  in exchange for such securities,  of cash
or securities of Borrower or any of its Subsidiaries,  or a combination thereof,
or (c)  purchases  all or  substantially  all of the  business  or assets of any
entity.

          "Additional  Costs"  shall  have the  meaning  given  to that  term in
Section 4.01 hereof.

          "Affiliate"  means,  with  respect to any Person,  any Person (a) that
directly or indirectly controls, or is controlled by, or is under common control
with, such Person, (b) that directly or indirectly beneficially owns or holds 5%
or more of any  class  of  voting  stock of such  Person,  (c) 5% or more of the
voting stock of which is directly or indirectly beneficially

                                      - 1 -


owned or held by such Person,  (d) which is a partnership  or limited  liability
company in which such Person is respectively a general partner or manager or (e)
who is among such Person's  officers,  directors  joint  venturers,  managers or
partners.  The term "control" means the possession,  directly or indirectly,  of
the power to direct or cause the direction of the  management  and policies of a
Person,  whether  through the ownership of voting  securities,  by contract,  or
otherwise.  

          "Aggregate  Outstandings"  means, at a particular  time, the aggregate
outstanding  principal balance of all Revolving Credit Loans.  "Agreement" means
this credit agreement, as amended or supplemented from time to time.

          "Amortization"  means  amortization  as determined in accordance  with
GAAP.

          "Bank" means  KeyBank  National  Association  and its  successors  and
assigns.

          "Banking  Day"  means  any  day on  which  commercial  banks  are  not
authorized or required to close in New York State, and whenever such day relates
to a LIBOR  Loan or  notice  with  respect  to any  LIBOR  Loan,  a day on which
dealings in dollar deposits are also carried out in the London interbank market.

          "Capital Lease" means any lease which is required to be capitalized on
the balance sheet of the lessee in accordance with GAAP.

          "Closing  Date"  means the date this  Agreement  has been  executed by
Borrower and the Bank.

          "Code" means the Internal  Revenue Code of 1986,  as amended from time
to time.

          "Collateral"   means  all  personal   property  of  Borrower  and  its
Subsidiaries,  whether now  existing or hereafter  arising,  which is subject or
which is to be subject to the Liens granted by the Security Agreement.

          "Commitment Fee" means the fee described in Section 3.01.

          "Current Assets" means, at a particular date, all amounts which would,
in accordance  with GAAP, be included  under  current  assets on a  consolidated
balance sheet of Borrower and its Subsidiaries as at such date.

                                      - 2 -


          "Current Debt" means, on the date of determination with respect to any
entity,  that  portion of such  entity's  Total Funded Debt  (including  Capital
Leases) that is due and payable within 12 months of the date of determination.

          "Current  Liabilities"  means, at a particular date, all amounts which
would,  in accordance  with GAAP, be included  under  current  liabilities  on a
consolidated  balance  sheet of Borrower  and its  Subsidiaries  as at such date
including,  without limitation,  (a) all obligations payable on demand or within
one year after the date in which the  determination is made, and (b) installment
and sinking fund payments  required to be made within one year after the date on
which  determination  is made, but excluding all such liabilities or obligations
which are  renewable or extendable at the option of Borrower to a date more than
one year from the date of determination.

          "Current  Ratio" means the ratio of (a) Current Assets of Borrower and
its Subsidiaries, on a consolidated basis to (b) Current Liabilities of Borrower
and its Subsidiaries on a consolidated basis.

          "Debt"  means,  with  respect to any Person (a)  indebtedness  of such
Person for borrowed money, (b)  indebtedness for the deferred  purchase price of
property or services,  (c) the face amount of any outstanding  letters of credit
issued for the account of such Person, (d) obligations  arising under acceptance
facilities,  (e)  guaranties,  endorsements  (other than for  collection  in the
ordinary course of business) and other  contingent  obligations to purchase,  to
provide funds for payment, to supply funds to invest in any Person, or otherwise
to assure a  creditor  against  loss,  (f)  obligations  secured  by any Lien on
property of such Person,  (g) obligations of such Person as lessee under Capital
Leases and (h) indebtedness of such Person evidenced by a note, bond,  indenture
or similar instrument.


                                      - 3 -

          "Debt Coverage  Ratio" means (a) the  consolidated  EBITDA of Borrower
and its  Subsidiaries,  minus any cash  Dividends paid or declared to be paid to
shareholders  of  Borrower  during  such  period,  (b) divided by the sum of the
Current Debt and  Interest  Expense of Borrower  and its  Subsidiaries  all on a
consolidated basis, as determined at the end of each fiscal quarter,  based upon
Borrower's  financial  statements  delivered in accordance with Section 8.08 for
the period of 12 months preceding the date of determination.

          "Default"  means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.

          "Default  Rate" means,  with respect to the principal of any Loan and,
to the extent  permitted by law, any other amount payable by Borrower under this
Agreement  or the Note a rate per annum  equal to 2% above the rate of  interest
otherwise applicable to such Loan or other amount.

          "Depreciation"  means  depreciation  as determined in accordance  with
GAAP.

          "Dividends"  means, for any period,  dividends paid by Borrower or any
Subsidiary during such period.

          "EBITDA" means, for any period,  the sum of (a) Net Income, (b) income
taxes paid or payable to any government or government  instrumentality,  (c) all
Interest  Expense  paid  or  accrued  on any  Debt,  (d)  Depreciation  and  (e)
Amortization during such period.

          "Environmental   Laws"  means  (i)  the  Comprehensive   Environmental
Response,   Compensation  and  Liability  Act  ("CERCLA"),   (ii)  the  Resource
Conservation  and  Recovery  Act  ("RCRA"),  (iii) the Federal  Water  Pollution
Control Act, (iv) the Clean Air Act, (v) the Toxic Substances  Control Act, (vi)
the Safe Drinking  Water Act,  (vii) the  Occupational  Safety and Health Act of
1970,  and (viii) the New York State  Environmental  Conservation  Law  ("ECL"),
Articles 1 through 71, (ix) the Hazardous Material  Transportation  Act, and (x)
any so-called  federal,  state or local  "Superfund" or "Superlien" laws and (b)
any and all other laws, rules or regulations, relating to or imposing liability,
including  without  limitation (i) strict  liability,  (ii) standards of conduct
concerning hazardous materials,  (iii) protection of the environment (including,
without  limitation,  air,  surface water,  ground water,  or soil),  including,
without  limitation,  any of the same relating to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport,  or handling of
pollutants,   contaminants,   chemicals,  or  industrial,   toxic  or  hazardous
substances or wastes.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended  from time to time,  including  any rules  and  regulations  promulgated
thereunder.


                                      - 4 -


          "ERISA  Affiliate" means any corporation or trade or business which is
a member of the same  controlled  group of  corporations  (within the meaning of
Section 414(b) of the Code) as Borrower or is under common  control  (within the
meaning of Section 414(c) of the Code) with Borrower.

          "Event of Default" has the meaning given such term in Section 11.01.

          "Extension  and  Modification  Fee" means the fee described in Section
2.09(b) hereof.

          "Facility Fee" means the fee described in Section 2.09(a) hereof.

          "Forfeiture  Proceeding"  means the  commencement  of any  prejudgment
action or proceeding  affecting Borrower or any of its Subsidiaries  pursuant to
any  statute,  rule or  regulation  which  permits  any  governmental  agency or
instrumentality  to obtain a  prejudgment  seizure or forfeiture of any of their
property.

          "GAAP" means generally  accepted  accounting  principles in the United
States of America as in effect from time to time,  applied on a basis consistent
with those used in the  preparation of the financial  statements  referred to in
Section 7.05.

          "Guaranty"  means the  Guaranty  in the form of Exhibit B executed  by
each of the Guarantors, secured by a Security Agreement.

          "Guarantor  Confirmation  Agreement" means the Guarantor  Confirmation
Agreement in the form of Exhibit B-1, to be executed by each of the Guarantors.

          "Guarantors"  means Four Seasons  Litho,  Inc.,  Disc  Graphics  Label
Group,  Inc., and Cosmetic  Sampling  Technologies,  Inc.,  each a Subsidiary of
Borrower  and  each a  party  to the  Guaranty  and the  Guaranty  Confirmation.
Guarantors  shall include each future  Subsidiary  which is required to become a
party to the Guaranty in accordance with Section 9.10 hereof.

          "Hazardous Substance" means any substance, waste or material regulated
under by any Environmental  Law, and any substance which, due to its toxicity or
reactivity (as determined by any court,  governmental or regulatory authority or
agency having jurisdiction or interpretative  power thereon),  poses a threat to
human health or the environment,  including,  but not limited to, all materials,
wastes,  substances,  pollutants and  contaminants  from time to time defined or
classified as such under any Environmental Law.

          "Interest   Expense"  means  interest  expense  of  Borrower  and  its
Subsidiaries on a consolidated basis for a particular period as reflected in its
financial statements and calculated in accordance with GAAP.


                                      - 5 -


          "Interest Period" means the period commencing on the date a LIBOR Loan
is made (or, with respect to a LIBOR Loan that represents the  continuation of a
previous LIBOR Loan, the day immediately  following the last day of the Interest
Period of such previous LIBOR Loan),  and ending,  as Borrower may select on the
30th, 60th or 90th day thereafter, provided that no Interest Period shall extend
beyond the Revolving Credit Termination Date.

          "LIBOR" means, for any LIBOR Loan, the rate per annum (rounded upwards
if  necessary  to the nearest  1/16 of 1%) quoted by the Bank two  Banking  Days
prior to the first day of the Interest Period for such Revolving Credit Loan for
the  offering to leading  banks in the London  interbank  market of U.S.  dollar
deposits  in  immediately  available  funds,  for a  period,  and in an  amount,
comparable to such Interest Period and principal  amount of the LIBOR Loan which
shall be outstanding during such Interest Period.

          "LIBOR  Loan" means any  Revolving  Credit Loan when and to the extent
the interest rate therefor is determined on the basis of LIBOR.

          "Lien" means any lien  (statutory or  otherwise),  security  interest,
mortgage,  deed of trust,  priority,  pledge,  charge,  conditional  sale, title
retention  agreement,  Capital  Lease or other  encumbrance  or similar right of
others, or any agreement to give any of the foregoing.

          "Loan"  means any loan made by the Bank  pursuant  to Section  2.01 or
3.01 hereof.

          "Loan  Documents" means this Agreement,  the Notes, the Guaranty,  the
Guarantor  Confirmation  Agreement,   the  Security  Agreements,   the  Security
Agreement  Confirmations,  the Notice of  Borrowing  and all other  documents or
instruments executed in connection herewith or therewith.

          "Margin"  means (a) if Borrower's  Debt Coverage  Ratio is equal to or
less than 1.30:1.0,  150 basis points per annum, (b) if Borrower's Debt Coverage
Ratio is greater than  1.30:1.0  but less than or equal to  2.25:1.0,  125 basis
points per annum,  and (c) if  Borrower's  Debt  Coverage  Ratio is greater than
2.25:1.0, 100 basis points per annum.

          "Multiemployer   Plan"  means  a  Plan  defined  as  such  in  Section
4001(a)(3)  of ERISA to which  contributions  have been made by  Borrower or any
ERISA affiliate and which is covered by Title IV of ERISA.

          "Net Income"  means,  with respect to any entity for any period,  such
entity's net income  after taxes for such period as  reflected on such  entity's
financial statements.

          "Notes" mean the Revolving Credit Note and the Term Note.


                                      - 6 -


          "Notice  of  Borrowing"  means the  document  signed by an  officer of
Borrower in the form annexed as Exhibit F.

          "Original Closing Date" shall mean February 26, 1997.

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

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

          "Plan"  means  any  employee  benefit  or other  plan  established  or
maintained,  or to which  contributions have been made, by Borrower or any ERISA
Affiliate  and which is covered by Title IV of ERISA or to which  Section 412 of
the Code  applies  provided  that such term shall not include  plans  terminated
prior to the date hereof.

          "Prime Rate" means that rate of interest from time to time  determined
or announced by the Bank at its Principal  Office from time to time as its prime
lending  rate.  The Prime Rate is not  necessarily  the lowest  rate of interest
charged by the Bank on loans or other credit relationships.

          "Prime  Rate  Loans"  mean any  Revolving  Credit Loan when and to the
extent  the  interest  rate for such  Revolving  Credit  Loan is  determined  in
relation to the Prime Rate.

          "Principal  Office" means the principal office of the Bank,  presently
located at 66 South Pearl Street, Albany, New York.

          "Regulation  D" means  Regulation  D of the Board of  Governors of the
Federal Reserve System as the same may be amended or  supplemented  from time to
time.

          "Regulatory  Change" means any change after the date of this Agreement
in  federal,   state,  municipal  or  foreign  laws  or  regulations  (including
Regulation D) or the adoption or making after such date of any  interpretations,
directives  or requests  applying to a class of banks  including the Bank of any
federal,  state, municipal or foreign laws or regulations (whether or not having
the force of law) by any court or  governmental  or monetary  authority  charged
with the interpretation or administration thereof.

          "Reportable  Event"  means  any of the  events  set  forth in  Section
4043(b) of ERISA as to which  events the PBGC by  regulation  has not waived the
requirement  of Section  4043(a) of ERISA that it be notified  within 30 days of
the  occurrence  of such  event,  provided  that a failure  to meet the  minimum
funding standard of Section 412 of the Code or Section

                                      - 7 -


302 of ERISA shall be a Reportable  Event  regardless of any waivers given under
Section 412(d) of the Code.

          "Revolving  Credit  Commitment"  means the  obligation  of the Bank to
extend  revolving  credit to Borrower in accordance with the terms hereof in the
aggregate  principal  amount not to exceed  $10,000,000,  as such  amount may be
reduced or otherwise  modified  from time to time in  accordance  with the terms
hereof.

          "Revolving  Credit  Facility"  means  the  Revolving  Credit  Facility
provided for in Article II hereof.

          "Revolving  Credit  Loans" mean any Loan made by the Bank  pursuant to
Section 2.01 hereof.

          "Revolving  Credit  Note" means a  promissory  note of Borrower in the
form of Exhibit A-1 hereto  evidencing  the  Revolving  Credit Loans made by the
Bank hereunder.

          "Revolving Credit  Termination Date" means the earlier of (i) the date
on which the  Revolving  Credit  Loan is paid in full and the  Revolving  Credit
Commitments  shall  terminate  hereunder  and the  obligations  of  Borrower  in
connection  therewith  have been satisfied or (ii) February 25, 2001 unless such
date is not a Banking Day, then the next succeeding Banking Day.

          "Security  Agreement"  means,  with respect to Borrower,  the Security
Agreement  in  substantially  the form of Exhibit  C-I, and with respect to each
Guarantor,  in the form of Exhibit C-2, delivered by Borrower under the terms of
this Agreement.

          "Security  Agreement  Confirmations"  means, with respect to Borrower,
the Confirmation of Security Agreement in substantially the form of Exhibit C-3,
and with respect to each Guarantor,  the Confirmation of Security Agreement,  in
the form of Exhibit  C-4, to be  delivered  by Borrower  under the terms of this
Agreement.

          "Solvent" means,  when used with respect to any Person on a particular
date,  that on such date (a) the fair saleable  value of its assets is in excess
of the total  amount of its  liabilities,  including,  without  limitation,  the
reasonably  expected  amount  of  such  Person's  obligations  with  respect  to
contingent  liabilities,  (b) the present fair  saleable  value of the assets of
such  Person  is not less  than the  amount  that  will be  required  to pay the
probable  liability  of such  Person on its Debts as they  become  absolute  and
matured,  (c) such Person  does not intend to and does not believe  that it will
incur Debts or liabilities beyond such Person's ability to pay as such Debts and
liabilities  mature  and  (d)  such  Person  is not  engaged  in  business  or a
transaction,  for which such Person's property, would constitute an unreasonably
small capital.


                                      - 8 -


          "Subsidiary"  means, as to any Person,  any corporation,  partnership,
limited liability  company or other business  organization or entity of which at
least a majority of the securities or other ownership  interests having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons  performing  similar  functions  are  at  the  time  owned  directly  or
indirectly by such Person.

          "Tangible  Net Worth" means,  at any  particular  date,  the amount of
excess of Total Assets over Total  Liabilities  which would,  in accordance with
GAAP, be included under shareholders'  equity on a consolidated balance sheet of
Borrower and its  Subsidiaries  as at such date,  excluding,  however,  from the
determination  of  Total  Assets  all  intangible  assets,  including,   without
limitation,  organizational expenses, patents, trademarks, copyrights, goodwill,
covenants not to compete,  research and  developmental  costs,  training  costs,
treasury  stock,  deferred  charges and any loans  receivable  from  officers or
Affiliates.

          "Term Loan" means the Loan to Borrower pursuant to Section 3.01.

          "Term Loan Maturity Date" means February 25, 2005.

          "Term Loan Note" means the promissory  note of Borrower in the form of
Exhibit A-2 hereto evidencing a Term Loan made by the Bank hereunder.

          "Total Assets" means,  at a particular  date, all amounts which would,
in accordance  with GAAP,  be included  under assets on a  consolidated  balance
sheet of Borrower and its Subsidiaries as at such date.

          "Total   Funded  Debt"  means,   with  respect  to  any  Person,   (a)
indebtedness of such Person for borrowed  money,  (b) obligations of such Person
as lessee under Capital Leases,  (c)  indebtedness of such Person evidenced by a
note, bond, indenture or a similar instrument  evidencing an obligation to repay
money and (d) the face amount of any  outstanding  letters of credit  issued for
the account of such Person.

          "Total  Liabilities"  means,  at a particular  date, all amounts which
would, in accordance with GAAP, be included under  liabilities on a consolidated
balance sheet of Borrower and its Subsidiaries as at such date.

          "Unfunded  Vested  Liabilities"  means,  with respect to any Plan, the
amount (if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits,  as
determined on the most recent  valuation date of the Plan and in accordance with
the provisions of ERISA for calculating  the potential  liability of Borrower or
any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.


                                      - 9 -






          Section 1.02.  Accounting Terms. All accounting terms not specifically
defined  herein shall be construed in  accordance  with GAAP,  and all financial
data required to be delivered  hereunder  shall be prepared in  accordance  with
GAAP.

ARTICLE 2.  REVOLVING CREDIT FACILITY

          Section 2.01. Revolving Credit Loans.

          (a) Subject to the terms and  conditions of this  Agreement,  the Bank
agrees to make  Revolving  Credit  Loans to Borrower  from time to time from and
including the date hereof to but excluding the Revolving Credit Termination Date
up to but not exceeding at any one time  outstanding the amount of its Revolving
Credit  Commitment;  provided,  that no Revolving  Credit Loan shall be made if,
after giving effect to such Revolving Credit Loan, the Aggregate Outstandings at
the time would exceed the  Revolving  Credit  Commitment in effect on such date.
The  Revolving  Credit Loans may be Prime Rate Loans or LIBOR  Loans;  provided,
however,  that during the occurrence and continuance of an Event of Default, the
Bank shall have no obligation to make any Revolving Credit Loans. Subject to the
foregoing limits,  Borrower may borrow, repay and reborrow, on or after the date
hereof and prior to the Revolving Credit  Termination  Date, all or a portion of
the Revolving Credit Commitment hereunder.

          (b) If at any time for any reason the  Aggregate  Outstandings  exceed
the amount of the Revolving Credit Commitment,  Borrower shall pay the amount of
such excess to the Bank immediately on demand.

          Section 2.02. The Revolving  Credit Note.  The Revolving  Credit Loans
shall  be  evidenced  by a  single  Revolving  Credit  Note in favor of the Bank
substantially  in the form of  Exhibit  A-1 with  appropriate  insertions,  duly
executed and  completed by Borrower.  The Bank is authorized to record the date,
type and  amount of each  Revolving  Credit  Loan,  the date and  amount of each
payment or  prepayment  of principal  thereof,  the date of each  interest  rate
conversion pursuant to Section 2.05 and the principal amount subject thereto and
the Interest  Period and interest rate with respect thereto in its records or on
the schedules  annexed to and  constituting a part of the Revolving Credit Note,
and, absent manifest error,  any such recordation  shall  constitute  conclusive
evidence of the  information so recorded;  provided that the failure to make any
such recordation shall not in any way affect Borrower's  obligation to repay the
Revolving  Credit Loans.  The Revolving  Credit Note shall (a) be dated the date
hereof,  (b)  mature  on the  Revolving  Credit  Termination  Date  and (c) bear
interest  from and  including  the date  hereof on the unpaid  principal  amount
thereof from time to time outstanding as provided herein.


                                     - 10 -






          Section 2.03. Use of Proceeds.

          (a) Borrower  shall use the proceeds of the Revolving  Credit Loans to
repay existing bank  indebtedness,  for general  working capital  purposes,  and
subject to the sublimit described in Section 2.08, to finance  Acquisitions.  No
part of the  proceeds  of any of the Loans  will be used for any  purpose  which
violates the  provisions of Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System as in effect on the date of making such Loans.

          (b) Borrower  shall  indemnify  the Bank and hold it harmless from and
against any and all liabilities, losses, damages, costs and expenses (including,
without  limitation,  the reasonable fees and  disbursements  of counsel for the
Bank  in  connection  with  any   investigative,   administrative   or  judicial
proceeding,  whether or not the Bank is designated a party thereto) which may be
incurred by the Bank, relating to or arising out of this Agreement or any actual
or proposed use of proceeds of Loans  hereunder;  provided,  that the Bank shall
not have the right to be indemnified  hereunder for its own gross  negligence or
willful misconduct.

          Section  2.04.   Borrowing  Procedures  for  Revolving  Credit  Loans.
Borrower  may request a  borrowing  under the  Revolving  Credit  Commitment  as
provided  in Section  4.01.  Not later than 2:00 p.m.  New York City time on the
date of such  borrowing  as stated in the  Notice of  Borrowing,  subject to the
conditions  of this  Agreement,  the Bank shall make  available to Borrower,  in
immediately  available  funds,  the  amount  of such  Revolving  Credit  Loan by
crediting a designated account of Borrower maintained with the Bank.

          Section 2.05. Interest on Revolving Credit Loans.

          (a) Base Rate Loans.  Borrower  shall pay interest on the  outstanding
and unpaid principal amount of each Prime Rate Loan made under this Agreement at
a  fluctuating  rate per  annum  equal to the  Prime  Rate  from time to time in
effect.  Each change in the interest rate shall take effect  simultaneously with
the corresponding change in the Prime Rate. Borrower shall pay interest on Prime
Rate Loans in arrears on the first day of each month and on the Revolving Credit
Termination  Date,  calculated on the basis of the actual number of days elapsed
divided by a 360 day year. Any principal  amount not paid when due (at maturity,
on acceleration,  or otherwise) shall bear interest thereafter until paid at the
Default Rate.

          (b) LIBOR  Loans.  Borrower  shall  pay  interest  on the  outstanding
principal  amount of each LIBOR Loan made under this  Agreement  at a fixed rate
equal to LIBOR plus the applicable Margin.  Borrower shall pay interest on LIBOR
Loans  calculated on the basis of the actual number of days elapsed divided by a
360  day  year.  Any  principal  amount  not  paid  when  due  (at  maturity  or
acceleration  or  otherwise)  shall bear interest  thereafter  until paid at the
Default Rate. Accrued interest on LIBOR Loans shall be due and payable in

                                     - 11 -






arrears upon any payment of principal and on the last day of the Interest Period
with respect thereto;  provided that, after an Event of Default,  interest shall
accrue at the  Default  Rate and shall be due and  payable  from time to time on
demand of the Bank.  Any  principal  amount of LIBOR Loans not paid when due (at
maturity,  on acceleration,  or otherwise) shall bear interest  thereafter until
paid at such Default Rate.

          (c) Adjustments to Margin. The applicable Margin shall be adjusted for
all LIBOR Loans based upon  Borrower's  Debt Coverage  Ratio as reflected in its
financial  statements  delivered  to the  Bank  from  time to  time as  required
hereunder.  Once  determined,  the Margin shall remain in effect until the fifth
Banking Day after the Bank's receipt on or before the dates set forth in Section
8.08 of the relevant financial  statements,  whereupon if appropriate based upon
the then existing Debt Coverage Ratio, the Margin shall adjust for all new LIBOR
Loans  and for  any  continuation  of an  existing  LIBOR  Loan at the end of an
Interest Period. If Borrower delivers its annual audited statements more than 90
days after the end of its fiscal year and if the Debt Coverage Ratio as reported
in such  financial  statements is lower than the Debt Coverage Ratio as reported
in  Borrower's  quarterly  financial  statements  for the third  quarter of such
fiscal year with the result that a higher Margin would apply, Borrower shall pay
the Bank,  within ten Banking  Days of demand,  an amount equal to the excess of
the  interest  that would have been paid at such higher  rate over the  interest
actually  paid during the relevant  period  between  March 30th and the date the
annual statements are delivered.  In no event shall Borrower receive a refund of
interest paid to the Bank under the provision of this Section.

          (d) Interest  Periods for LIBOR Loans. In the case of each LIBOR Loan,
Borrower shall select an Interest  Period of any duration in accordance with the
definition  of  Interest  Period  in  Section  1.01,  subject  to the  following
limitations:  (a) no Interest  Period shall have a duration less than one month,
and if any such  proposed  Interest  Period  would  otherwise  be for a  shorter
period,  such  Interest  Period  shall not be  available  and (b) if an Interest
Period would end on a day which is not a Banking Day, such Interest Period shall
be extended to the next Banking  Day,  unless such Banking Day would fall in the
next  calendar  month in which  event  such  Interest  Period  shall  end on the
immediately  preceding  Banking Day. Any Interest  Period which would  otherwise
extend beyond the Revolving  Credit  Termination Date shall end on the Revolving
Credit Termination Date.

          (e)  Conversions.  Upon the  expiration of an Interest  Period for any
LIBOR Loan, or any portion thereof,  such LIBOR Loan or portion thereof shall be
automatically  converted  to a Prime Rate Loan  except to the  extent  that such
Revolving  Credit Loan shall be repaid hereunder or shall be required to be paid
hereunder  or unless  Borrower  shall have  notified  the Bank,  as  provided in
Section 4.01 hereof, of its intention to continue such LIBOR Loan or any portion
thereof as a LIBOR Loan.  Subject to the following  conditions  and to the terms
and conditions of this Agreement, Borrower may convert any Revolving Credit Loan
or portion thereof to a different type of Revolving Credit Loan:


                                     - 12 -






               (i)  if  less  than  all  Revolving  Credit  Loans  at  the  time
outstanding  shall be converted,  the notice given by Borrower to the Bank shall
specify  the  aggregate  amount  of  Revolving  Credit  Loans in each case to be
converted;

               (ii) in the case of a  conversion  of less  than all  outstanding
Revolving Credit Loans, the aggregate principal amount of Revolving Credit Loans
to be  converted  shall not be less than  $50,000  (and if greater  in  integral
multiples of $10,000);

               (iii) no  Revolving  Credit Loan may be converted to a LIBOR Loan
less than one month before the Revolving Credit Termination Date;

               (iv) a LIBOR Loan may be  converted  to a Prime Rate Loan only on
the last day of an Interest Period; and

               (v) no Revolving  Credit Loan or portion thereof may be converted
to a LIBOR Loan during the occurrence and continuance of an Event of Default.

          Section 2.06. Changes of Commitment.  Borrower may reduce or terminate
the amount of unused Revolving Credit  Commitment from time to time but not more
than four times  during the term of this  Agreement or more than once during any
calendar year by giving notice to the Bank of each such reduction or termination
to the Bank as provided in Section  4.01.  Any partial  reduction  shall be in a
minimum aggregate amount of $1,000,000 or, if greater,  in integral multiples of
$250,000. Once reduced or terminated, the Revolving Credit Commitment may not be
reinstated.

          Section 2.07. Minimum Amounts. Except for borrowings which exhaust the
full remaining  amount of the Revolving Credit  Commitment,  and prepayments (in
the case of Prime Rate Loans only) which result in the  prepayment of all Loans,
each borrowing and each prepayment of principal  shall be at least $50,000,  and
if greater, in integral multiples of $10,000.

          Section  2.08.  Acquisitions.  Subject  to the  terms  and  conditions
hereof,  the Bank agrees to make one or more  Revolving  Credit Loans to finance
Borrower's Acquisitions, provided that, (a) the requirements of Section 9.07 are
satisfied and (b) no Revolving Credit Loan for  Acquisitions  shall be permitted
if (i) an Event of Default has occurred which continues at such time, (ii) after
giving  effect to such  Loan,  the  Aggregate  Outstandings  at the time of such
issuance would exceed the Revolving Credit  Commitment in effect on such date or
(iii) as a result of such  Acquisition  or the making of such Loan,  an Event of
Default would occur.

          Section 2.09.  Fees.  (a) Borrower has paid to the Bank a Facility Fee
equal to  $5,000  on the  Original  Closing  Date and  shall  continue  to pay a
Facility  Fee on  each  anniversary  of the  Original  Closing  Date  until  the
Revolving Credit Termination Date.

                                     - 13 -







          (b) Borrower shall pay to the Bank an Extension and  Modification  Fee
equal to $5,000 on the Closing Date.

          Section  2.10.  Conversion  to  Term  Loan.  On the  Revolving  Credit
Termination  Date,  provided  there  has been no  Default  or Event of  Default,
Borrower  may  convert  all or a  part,  but not  less  than  $2,000,000  of the
outstanding  principal  balance of the Revolving  Credit Loans to the Term Loan,
having the terms and conditions specified in Article 3.


                                     - 14 -






ARTICLE 3.  TERM LOAN.

          Section 3.01. Term Loan. If Borrower exercises the option described in
Section  2.10,  Borrower  shall give the Bank notice three Banking Days prior to
the Revolving Credit  Termination  Date, and together with such notice,  pay the
Bank a Commitment Fee equal to 0.5% of the amount of the Revolving  Credit Loans
to be converted to a Term Loan.  Subject to the terms and conditions hereof, the
Bank shall make a four year Term Loan to Borrower in the amount of the Aggregate
Outstandings or such lesser amount permitted under Section 2.10 at and effective
as of the Revolving Credit Termination Date.

          Section  3.02.  The Term Note.  The Term Loan shall be  evidenced by a
single  promissory  note of  Borrower  substantially  in the form of Exhibit A-2
hereto,  with  appropriate  insertions,  payable  to the  order  of the Bank and
representing  the obligation of Borrower to pay the unpaid  principal  amount of
the Term Loan,  with interest  thereon as described  herein.  The Term Loan Note
shall (a) be dated the Revolving  Credit  Termination  Date,  mature in 48 equal
consecutive  monthly  installments,  be  payable  on the first day of each month
commencing  on the  first  day of  the  month  following  the  Revolving  Credit
Termination  Date  and  ending  on the Term  Loan  Maturity  Date,  and (c) bear
interest for a period from the date hereof until the Term  Maturity Loan Date on
the unpaid  principal amount thereof at the applicable rates per annum specified
herein. All accrued and unpaid interest and fees shall be due and payable on the
Term Loan Maturity Date.

          Section 3.03. Interest on the Term Loans.  Borrower shall pay interest
on the outstanding and unpaid  principal  balance of the Term Loan a fluctuating
rate per annum  equal to (i) the Prime  Rate or (ii)  LIBOR plus a margin of 250
basis points. Each change in the interest rate shall take effect  simultaneously
with the corresponding change in the Prime Rate. Interest on the Term Loan shall
be calculated on the basis of a 360 day year and shall be paid in arrears on the
first day of each month and on the Term Loan Maturity Date. Any principal amount
not paid  when due (at  maturity,  on  acceleration  or  otherwise)  shall  bear
interest  thereafter until paid at the Default Rate. At Borrower's election made
during the period beginning on the Revolving Credit Termination Date through two
years thereafter,  provided no Default or Event of Default then exists, Borrower
may effect a change in the  interest  rate on the Term Loan to a fixed rate from
the Prime Rate by entering  into a Swap  Agreement  between the Borrower and the
Bank, at the rate established by exchange, through Key Capital Markets, Inc., of
the  obligation  evidenced  by the  Term  Loan  Note for an  obligation  bearing
interest  at a fixed rate  having a term that is  equivalent  to the term of the
Term Loan. The rights and  obligations of Borrower and the Bank  respecting such
exchange shall be set forth in a Swap Agreement to be executed between them.

ARTICLE 4.  GENERAL CREDIT PROVISIONS; FEES AND PAYMENTS.

          Section 4.01. Certain Notices. Borrower shall give Notice of Borrowing
to the Bank of each borrowing pursuant to Section 2.04, each prepayment pursuant
to Section 4.02,

                                     - 15 -






each conversion or continuation of LIBOR Loans pursuant to Section 2.05 and each
reduction or  termination  of Revolving  Credit  Commitment  pursuant to Section
2.06. Each such notice shall be irrevocable,  and shall be effective on the date
of receipt only if received by the Bank not later than 11:00 a.m., New York City
time as follows:

          (a) In the case of borrowings and  prepayments of Prime Rate Loans, at
least one Banking Day prior thereto;

          (b) In the case of LIBOR  Loans,  at least  three  Banking  Days prior
thereto;

          (c) In the case of reductions or termination  of the Revolving  Credit
Commitment, ten days prior thereto; and

          (d) In the case of conversions or  continuations  of Loans pursuant to
Section 2.05, three Banking Days prior thereto.

Each such notice  relating to the borrowing,  conversion or prepayment of a Loan
shall specify the Loans to be borrowed,  converted or prepaid and the amount and
type  of the  Loans  to be  borrowed  or  prepaid  and the  date  of  borrowing,
conversion  or prepayment  (which shall be a Banking  Day).  Each such notice of
reduction or termination of the Revolving  Credit  Commitment  shall specify the
amount of the Revolving Credit Commitment to be reduced or terminated.

          Section 4.02. Prepayments.

          (a) Borrower shall have the right at any time and from time to time to
prepay any Prime Rate Loan, in whole or in part, upon at least one Banking Day's
prior  written  notice to the Bank;  provided,  however,  that each such partial
prepayment of Prime Rate Loans shall not be less than $50,000 or if greater,  in
amounts which are integral multiples of $10,000. Except as required by paragraph
(b)  below  or on the last  day of an  Interest  Period  with  respect  thereto,
Borrower shall not be permitted to prepay LIBOR Loans.

          (b) On the date of any reduction of the Revolving Credit Commitment as
provided in Section 2.06,  Borrower  shall pay or prepay so much of the Loans as
shall be necessary in order that the Aggregate  Outstandings will not exceed the
Revolving  Credit  Commitment  after  giving  effect  to  such  reduction.   All
prepayments of LIBOR Loans due to a reduction of the Revolving Credit Commitment
shall be subject to Section 5.05.

          (c) All prepayments of principal required by paragraph (b) above shall
be  applied  first to Prime  Rate  Loans  outstanding,  and then to LIBOR  Loans
outstanding.


                                     - 16 -






          (d) All  prepayments of principal  shall be accompanied by the payment
of all  accrued  interest  on the  amount so prepaid  and,  in the case of LIBOR
Loans, by all amounts required to be paid pursuant to Section 5.05.

          Section 4.03. Default Interest. Notwithstanding any other provision of
this Agreement, upon the occurrence and continuance of an Event of Default, each
Loan outstanding  hereunder shall bear interest at a rate per annum equal to the
Default Rate.

          Section 4.04. Payments Generally. All payments under this Agreement or
the Notes shall be made in immediately  available funds not later than 1:00 p.m.
New York City time on the relevant dates specified above at the Bank's office at
1377 Motor Parkway, Islandia, New York 11788.

          (a) Any payment  made after such time on such due date shall be deemed
to have been made on the next succeeding Banking Day.

          (b)  Whenever a new Loan is to be made on a date  Borrower  repays any
principal of an outstanding  Loan, the Bank shall apply the proceeds of such new
Loan to the payment of the  principal  to be repaid and only an amount  equal to
the  difference  between the  principal to be borrowed  and the  principal to be
repaid  shall be made  available  by the Bank to Borrower as provided in Section
2.04 or paid by Borrower to the Bank  pursuant to this Section 4.04, as the case
may be.

          (c) The Bank may (but shall not be  obligated  to) debit the amount of
any such payment which is not made by the time  specified in Section  4.04(a) to
any ordinary  deposit account of Borrower with the Bank.  Borrower shall, at the
time of making each payment  under this  Agreement  or the Note,  specify to the
Bank the principal or other amount payable by Borrower under this Agreement.  If
Borrower fails to so specify,  the payment will be applied first to interest and
then to  principal,  unless a Default or Event of Default  has  occurred  and is
continuing, in which case the Bank may apply such payment as it may elect in its
sole discretion. If the due date of any payment under this Agreement or the Note
would  otherwise  fall on a day which is not a Banking  Day,  such date shall be
extended to the next  succeeding  Banking Day and interest  shall be payable for
any principal so extended for the period of such extension.

ARTICLE 5.  YIELD PROTECTION; ETC.

          Section 5.01. Additional Costs.

          (a)  Borrower  shall  pay  directly  to the Bank  from time to time on
demand  such  amounts  as the Bank may  determine  (in the  manner  set forth in
Section  5.01(d)) to be necessary to  compensate  it for any  increases in costs
attributable  to its making or maintaining  any LIBOR Loans under this Agreement
or its Note or its obligation to make any LIBOR

                                     - 17 -






Loans hereunder or any reduction in any amount  receivable by the Bank hereunder
in respect of any LIBOR Loans or such  obligation  or capital in respect of this
Agreement  (such increases in costs and reductions in amounts  receivable  being
herein called "Additional  Costs"),  resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts  payable to the Bank under this
Agreement  or the  Revolving  Credit  Note in respect of any of such LIBOR Loans
(other  than taxes  imposed on the  overall net income of the Bank for any LIBOR
Loans by the jurisdiction in which the Bank has its principal  office);  or (ii)
imposes  or  modifies  any  reserve,   special  deposit,  deposit  insurance  or
assessment,  minimum capital,  capital ratio or similar requirements relating to
any  extensions  of credit or other  assets  of, or any  deposits  with or other
liabilities  of, the Bank; or (iii) imposes any other  condition  affecting this
Agreement or the Note (or any of such extensions of credit or liabilities).  The
Bank  will  notify  Borrower  of any  event  occurring  after  the  date of this
Agreement which will entitle the Bank to  compensation  pursuant to this Section
as promptly as  practicable  after it obtains  knowledge  thereof by  furnishing
Borrower a written  statement  describing the Additional  Costs  entitling it to
compensation  hereunder  and the Bank's  method of  allocating  to Borrower such
Additional  Costs.  If the Bank requests  compensation  from Borrower under this
Section or under  Section  5.01(c),  Borrower may suspend the  obligation of the
Bank to make  Loans of the type  with  respect  to which  such  compensation  is
requested.

          (b) Without  limiting the effect of the  foregoing  provisions of this
Section  if by reason of any  Regulatory  Change,  the Bank  either  (i)  incurs
Additional Costs based on or measured by the excess above a specified level of a
category of deposits or other liabilities of the Bank which includes deposits by
reference to which the interest rate on LIBOR Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets of the Bank
which includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if the Bank
so elects by notice to  Borrower,  the  obligation  of the Bank to make Loans of
such type hereunder  shall be suspended  until the date such  Regulatory  Change
ceases to be in effect.

          (c) Without  limiting the effect of the  foregoing  provisions of this
Section,  Borrower  shall pay  directly to the Bank from time to time on request
such  amounts  as the Bank may  determine  (in the  manner  set forth in Section
5.01(d)) to be necessary to compensate the Bank for any  Additional  Costs which
are attributable to the maintenance by it or any of its affiliates  (pursuant to
any  Regulatory  Change) of capital  in  respect of its Loans  hereunder  or its
obligation  to make Loans  hereunder  (such  compensation  to  include,  without
limitation,  an amount  equal to any  reduction in return on assets or equity of
the  Bank to a level  below  that  which  it would  have  achieved  but for such
Regulatory  Change).  The  Bank  will  notify  Borrower  if  it is  entitled  to
compensation  pursuant  to this  Section as  promptly  as  practicable  after it
obtains  knowledge  thereof  by  furnishing  Borrower  with a written  statement
describing the Additional  Costs entitling it to compensation  hereunder and the
Bank's method of allocating to Borrower such Additional Costs.


                                     - 18 -






          (d) Reasonable determinations and allocations by the Bank for purposes
of the effect of any Regulatory Change pursuant to Sections 5.01(a),  (b) or (c)
on its costs of making or maintaining  Loans or its obligation to make Loans, or
on  amounts  receivable  by, or the rate of return to, it in respect of Loans or
such obligation,  and of the additional amounts required to compensate the Bank,
shall be conclusive absent demonstrated error.

          (e) Any amounts the Bank receives pursuant to the foregoing provisions
of this Section 5.01 shall not be  duplicative  of  compensation  payable to the
Bank under Section 5.05.

          Section  5.02.  Limitation on Types of Loans.  Anything  herein to the
contrary notwithstanding, if:

          (a) the Bank  determines  (which  determination  shall  be  conclusive
absent  demonstrated  error) that  quotations of interest rates for the relevant
deposits  referred to in the definition of "LIBOR" in Section 1.01 are not being
provided in the relevant amounts or for the relevant  maturities for purposes of
determining the rate of interest for any type of LIBOR Loans as provided in this
Agreement; or

          (b) the Bank  determines  (which  determination  shall  be  conclusive
absent  demonstrated  error) that the relevant rates of interest  referred to in
the  definition  of LIBOR in  Section  1.01  upon the basis of which the rate of
interest for any type of LIBOR Loans is to be determined do not adequately cover
the cost to the Bank of making or maintaining such Loans;

then the Bank shall give  Borrower  prompt notice  thereof,  and so long as such
condition  remains in effect,  the  obligations  of the Bank to make LIBOR Loans
shall be  suspended  (in which  case the  provisions  of  Section  5.04 shall be
applicable).

          Section 5.03. Illegality.  Notwithstanding any other provision in this
Agreement,  if it becomes  unlawful for the Bank to honor its obligation to make
or maintain LIBOR Loans  hereunder,  the Bank shall promptly notify Borrower and
the  Bank's  obligation  to make or  maintain  LIBOR  Loans  hereunder  shall be
suspended  until such time as the Bank may again make and maintain such affected
Loans (in which case the provisions of Section 5.04 shall be applicable).

          Section 5.04.  Conversion to Prime Rate Loans.  If the  obligations of
the Bank to make LIBOR Loans shall be suspended pursuant to any of the foregoing
Sections  all Loans  which  would  otherwise  be made by the Bank as LIBOR Loans
shall be made  instead  as Prime  Rate Loans  and,  if an event  referred  to in
Section  5.01(b)  or 5.03 has  occurred  and the Bank so  requests  by notice to
Borrower,  all LIBOR Loans of the Bank then  outstanding  shall be automatically
converted  into  Prime  Rate  Loans  on the date  specified  by the Bank in such
notice,  and, to the extent that LIBOR Loans are so made as (or converted  into)
Prime Rate

                                     - 19 -






Loans,  all payments of principal which would otherwise be applied to the Bank's
LIBOR Loans shall be applied  instead to its Prime Rate Loans. If any LIBOR Loan
is converted to a Prime Rate Loan pursuant to this Section prior to the last day
of the Interest  Period with respect to such LIBOR Loan,  Borrower  shall pay to
the Bank all amounts required to be paid pursuant to Section 5.05 hereof.

          Section 5.05. Certain Compensation.

          (a) Borrower shall pay to the Bank such  reasonable  amount or amounts
as shall be sufficient (in the reasonable  opinion of the Bank) to compensate it
for any loss, cost or expense which the Bank determines is attributable to:

               (i)  Borrower's  prepayment of a LIBOR Loan (whether by reason of
the mandatory or voluntary prepayment provisions of this Agreement or otherwise)
or failure to pay principal or interest on a LIBOR Loan when due; or

               (ii)  Borrower's  failure to borrow,  convert  into or continue a
LIBOR Loan on the date  specified  therefor in the  relevant  notice given under
Section 4.01; or

               (iii)  Borrower's  failure  to  prepay  a LIBOR  Loan on the date
specified therefor in the relevant notice under Section 4.02.

          (b) A reasonable determination by the Bank of amounts payable pursuant
to this  Section  shall be  conclusive  absent  manifest  error.  In the case of
prepayments of LIBOR Loans,  Borrower shall pay to the Bank a prepayment premium
equal to any costs,  loss or expense that it may sustain or incur as a result of
Borrower's  prepaying the LIBOR Loan,  including (but not limited to) the Bank's
loss of anticipated interest on such LIBOR Loan at the applicable interest rate,
or any interest or other charge payable by the Bank to others who provided funds
to the Bank to enable it to make or  maintain  such  LIBOR  Loan.  In  addition,
Borrower shall reimburse the Bank for all  administrative  costs incurred by the
Bank as a result of such prepayment.

ARTICLE 6.  CONDITIONS PRECEDENT.

          Section 6.01. Conditions to the Initial Borrowings. The obligations of
the Bank to make the Loans constituting the initial borrowing under 3.01, or the
Term Loan under 3.01, were subject to the conditions precedent listed below, all
of which were satisfied by the Borrower:

          (a) the Bank's receipt of each of the following, in form and substance
satisfactory to the Bank and its counsel:


                                     - 20 -







               (i)  the  Revolving  Credit  Note  or  the  Term  Loan  Note,  as
applicable, duly executed by Borrower;

               (ii) a  certificate  of the  Secretary or Assistant  Secretary of
Borrower and of each Guarantor, dated the Original Closing Date or the Revolving
Credit Termination Date, as applicable,  attesting to all corporate action taken
by Borrower or such Guarantor,  including  resolutions of its Board of Directors
authorizing  the execution,  delivery and  performance of the Loan Documents and
each other  document  delivered  pursuant to this  Agreement and  certifying the
names  and  true  signatures  of the  officers  of  Borrower  or each  Guarantor
executing the Loan  Documents and the other  documents  delivered by Borrower or
such Guarantor under this Agreement;

               (iii)  certified   copies  of  the  certificate  or  articles  of
incorporation and the by-laws of Borrower or such Guarantor, as the case may be,
stating that the resolutions and corporate  documents  thereby certified had not
been amended, modified, revoked or rescinded as of the date of such certificate;

               (iv) a  certificate  of a duly  authorized  officer of  Borrower,
dated the Original  Closing Date or the Revolving  Credit  Termination  Date, as
applicable,  stating that the  representations  and warranties in Article 7 were
true and correct on such date as though made on and as of such date (unless made
as of a specific date earlier than the date hereof,  in which case they shall be
true and correct as of such earlier date) and that no event had occurred and was
continuing which would constitute a Default or Event of Default;

               (v) the Guaranty duly executed by each of the Guarantors;

               (vi) the Security Agreement, duly executed by Borrower,  together
with such UCC-1 financing statements as were required by the Bank;

               (vii)  such duly  executed  UCC-3  Revolving  Credit  Termination
Statements  as were  necessary  to  terminate  existing  liens on the  assets of
Borrower;

               (viii) a  favorable  opinion of counsel for  Borrower,  dated the
Original Closing Date or the Revolving Credit  Termination  Date, as applicable,
in substantially  the form of Exhibit E and as to such other matters as the Bank
had reasonably requested;

               (ix)  satisfactory   evidence  that  Borrower  and  each  of  the
Guarantors were duly organized,  validly existing and in good standing under the
laws of its jurisdiction of incorporation; and

               (x) such other documents,  instruments,  approvals,  opinions and
evidence of compliance with the terms hereof as the Bank had required;


                                     - 21 -






          (b) Borrower's payment of all fees required to be paid hereunder or in
connection  herewith and all accrued fees and expenses of the Bank in connection
with the  preparation,  execution and delivery of this Agreement,  and the other
Loan Documents and the consummation of the transactions contemplated thereby;

          (c) Borrower's and Guarantors' obtainment of all consents, permits and
approvals required in connection with the execution, delivery and performance by
Borrower and the Guarantors of their respective  obligations hereunder and under
the other Loan Documents and such consents, permits and approvals shall continue
in full force and effect; and

          (d)  all  legal  matters  in  connection   with  this  financing  were
satisfactory to the Bank and its counsel.

          Section 6.02.  Conditions to All  Borrowings.  The  obligations of the
Bank to make any Loan  (including the initial  Revolving  Credit Loan) hereunder
have been and shall continue to be subject to the further  conditions  precedent
that on the date of such Loan:

          (a) the truth of the following statements:

               (i) the  representations  and  warranties  contained in Article 7
were and are true and  correct on and as of the date of such Loan as though made
on and as of such date (unless such  representations  and warranties are made as
of a specific  earlier  date in which case they shall be true and  correct as at
such date);

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

               (iii) no material  adverse  change has occurred in the  business,
financial  condition or operations of Borrower since the date of the most recent
financial  statements  of  Borrower  delivered  to  the  Bank  hereunder  or  in
connection herewith; and

          (b) the  Bank's  receipt of such  approvals,  opinions,  documents  or
instruments as the Bank may have reasonably requested.

          Section  6.03.  Deemed  Representations.   Unless  Borrower  otherwise
notifies the Bank prior to any borrowing  hereunder,  the acceptance by Borrower
of the proceeds of any Loan shall constitute a representation  and warranty that
the statements  contained in Section 6.02(a) are true and correct as of the date
of such Loan.

ARTICLE 7.  REPRESENTATIONS AND WARRANTIES.

          Borrower hereby represents and warrants that:

                                     - 22 -


          Section  7.01.  Incorporation,  Good  Standing and Due  Qualification;
Compliance  with Law. Each of Borrower and the Guarantors is duly  incorporated,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation,  has the  corporate  power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged,  and
is duly qualified as a foreign  corporation  and in good standing under the laws
of each other  jurisdiction in which such qualification is required except where
the failure to so qualify and/or be in good standing could not in any case or in
the  aggregate,  have a material  adverse  effect on the  operations,  business,
property or financial  condition  of any of Borrower or any  Guarantor or on its
respective ability to perform its respective obligations hereunder. In addition,
each of Borrower and the  Guarantors is in compliance  with all laws,  treaties,
rules or  regulations,  or  determination  of an arbitration or a court or other
governmental  authority, in each case applicable to or binding upon it or any of
its  property or to which it or any of its  property  is subject,  except to the
extent that the failure to so comply could not, in any case or in the aggregate,
have  a  material  adverse  effect  on the  operations,  business,  property  or
financial  condition of Borrower  and the  Guarantors,  taken as a whole,  or on
their ability to perform their obligations under the Loan Documents.

          Section  7.02.  Corporate  Power  and  Authority;  No  Conflicts.  The
execution,  delivery  and  performance  by  each  of  Borrower  and  each of the
Guarantors  of the Loan  Documents  have been duly  authorized  by all necessary
corporate  action and do not and will not (a) require any consent or approval of
its  stockholders  that has not been  obtained,  (b)  contravene  its charter or
by-laws, (c) violate any provision of, or require any filing (other than filings
contemplated hereby and/or by the other Loan Documents),  registration,  consent
or approval under, any law, rule, regulation (including, without limitation, the
provisions  of  Regulation G, T, U or X of the Board of Governors of the Federal
Reserve  System  as in  effect  from  time  to  time),  order,  writ,  judgment,
injunction,   decree,   determination   or  award  presently  in  effect  having
applicability  to  Borrower  or such  Guarantor,  (d)  result  in a breach of or
constitute  a default or require  any  consent  under any  indenture  or loan or
credit agreement or any other  agreement,  lease or instrument to which Borrower
or such  Guarantor is a party or by which any of its  properties may be bound or
affected,  (e) result in, or require,  the creation or  imposition  of any Lien,
upon or with respect to any of the properties now owned or hereafter acquired by
Borrower or such Guarantor other than Liens created by this Agreement and/or the
other Loan  Documents,  or (f) cause Borrower or such Guarantor to be in default
under any such rule,  regulation,  order, writ,  judgment,  injunction,  decree,
determination or award or any such indenture, agreement, lease or instrument.

          Section 7.03. Legally Enforceable  Agreements.  Each Loan Document is,
or when  delivered  under this  Agreement  will be, a legal,  valid and  binding
obligation of Borrower or each  Guarantor  party  thereto,  enforceable  against
Borrower or such Guarantor in accordance with its terms.

          Section 7.04.  Litigation.  There are no actions, suits or proceedings
pending or to Borrower's knowledge,  threatened against or affecting Borrower or
any of the Guarantors

                                     - 23 -


or any of their respective Subsidiaries before any court, governmental agency or
arbitrator,  which could, in any one case or in the aggregate,  adversely affect
the financial condition, operations,  properties or business of Borrower and the
Guarantors,  taken as a whole,  or their  ability  to perform  their  respective
obligations under the Loan Documents.

          Section 7.05. Financial Statements.  The consolidated balance sheet of
Borrower  and  its  Subsidiaries  as  at  December  31,  1997  and  the  related
consolidated  income  statement  and  statement of cash flow of Borrower and its
Subsidiaries  for the  fiscal  year  then  ended,  and the  accompanying  notes,
together  with the  opinion  thereon,  of KPMG  Peat  Marwick  LLP,  independent
certified public  accountants (the  "Auditor"),  and the consolidated  financial
statements  for the six month period  ended June 30, 1998,  copies of which were
delivered to the Bank,  fairly present the consolidated  financial  condition of
Borrower and its Subsidiaries as at such dates and the  consolidated  results of
the operations of Borrower and its  Subsidiaries for the periods covered by such
statements,  all in accordance with GAAP  consistently  applied.  As of the date
hereof,  there are no  liabilities  of Borrower and its  Subsidiaries,  fixed or
contingent,  which  are  material  but  are  not  reflected  in  such  financial
statements  or in the notes  thereto,  other  than  liabilities  arising  in the
ordinary course of business since June 30, 1998 and the  liabilities  created by
this Agreement. Since the date of the most recent financial statements delivered
to the Bank and the Closing Date,  there has been no material  adverse change in
the  condition  (financial  or  otherwise),  business,  operations  or,  to  the
knowledge of  Borrower,  prospects  of any of Borrower or the  Guarantors.  With
respect to any Loans made after the Original Closing Date, since the date of the
most recent financial statements delivered to the Bank hereunder and the date of
such Loan, there has been no material adverse change in the condition (financial
or otherwise),  business, operations or, to the knowledge of Borrower, prospects
of Borrower and the Guarantors, taken as a whole.

          Section 7.06. Ownership and Liens. Each of Borrower and the Guarantors
has title to, or valid leasehold interests in, all of its properties and assets,
real and personal,  reflected in the financial statements referred to in Section
7.05 (other  than any  properties  or assets  disposed of since the date of such
financial  statements  as no  longer  used or  useful  in the  conduct  of their
respective  business  or as have  been  disposed  of in the  ordinary  course of
business),  and none of the  properties  and  assets  owned by  Borrower  or the
Guarantors, or any of them, and none of their leasehold interests, is subject to
any Lien, except as disclosed in Schedule I or as may be permitted hereunder.

          Section 7.07. Taxes. Each of Borrower and the Guarantors has filed all
tax returns  (federal,  state and local)  required to be filed  except where the
failure  to file  could not,  in any case or in the  aggregate,  have an adverse
effect upon the operations,  business, property or financial condition of any of
Borrower or the  Guarantors  or on their  ability to perform  their  obligations
under the Loan Documents.  Each of Borrower and the Guarantors has paid when due
all taxes,  assessments and governmental  charges and levies shown thereon to be
due,  including  interest  and  penalties,  other than  taxes,  assessments  and
governmental charges

                                     - 24 -






and levies being  contested in good faith by  appropriate  proceedings  and with
respect  to which  adequate  reserves  in  conformity  with GAAP shall have been
provided on the books of Borrower or the Guarantors, as the case may be.

          Section  7.08.  ERISA.  Each  of  Borrower  and the  Guarantors  is in
compliance in all material respects with all applicable  provisions of ERISA. No
Reportable  Event has occurred  with respect to any Plan, no notice of intent to
terminate  a  Plan  has  been  filed  nor  has  any  Plan  been  terminated,  no
circumstance  exists  which  constitutes  grounds  under  Section  4042 of ERISA
entitling the PBGC to institute  proceedings to terminate,  or appoint a trustee
to administer, a Plan, nor has the PBGC instituted any such proceedings, none of
Borrower nor its ERISA  Affiliates has completely or partially  withdrawn  under
Sections  4201 or 4204 of ERISA from a  Multiemployer  Plan and each of Borrower
and each of its ERISA Affiliates has met its minimum funding  requirements under
ERISA  with  respect  to all of its  Plans  and  there  are no  Unfunded  Vested
Liabilities.  None of  Borrower  nor  its  ERISA  Affiliates  has  incurred  any
liability  to the PBGC  under  ERISA,  other than to make  contributions  in the
ordinary  course and other than contingent  liabilities  that would arise on the
termination  of any Plan (no  such  termination  being  reasonably  foreseen  by
Borrower).

          Section 7.09.  Subsidiaries  and Ownership of Stock.  Schedule II is a
complete  and  accurate  list  of the  Subsidiaries  of  Borrower,  showing  the
jurisdiction  of  incorporation  or  organization  of  each  Subsidiary  and the
percentage of Borrower's ownership of the outstanding stock or other interest of
each such Subsidiary.

          Section  7.10.  Credit  Arrangements.  Schedule  III is a complete and
correct list of all credit agreements,  indentures,  purchase agreements outside
the ordinary course of Borrower's business, guaranties, Capital Leases and other
investments, agreements and arrangements in effect on the date of this Agreement
providing  for or  relating  to  extensions  of  credit  to  Borrower  or to the
Guarantors or to any of them  (including  agreements  and  arrangements  for the
issuance of letters of credit or for  acceptance  financing) in respect of which
Borrower,  the  Guarantors  or  any  of  them  is  in  any  manner  directly  or
contingently obligated. Schedule III shows the maximum principal or face amounts
of the  credit  in  question,  outstanding  and which  can be  outstanding,  are
correctly  stated,  and all Liens of any  nature  given or agreed to be given as
security  therefor are  correctly  described  or indicated in such  Schedule and
Schedule I.

          Section  7.11.  Operation  of  Business.  Each of  Borrower  and  each
Guarantor  possesses  all  material  licenses,  permits,  franchises,   patents,
copyrights,  trademarks  and trade names,  or rights  thereto,  to conduct their
business as now  conducted  and as  presently  proposed to be  conducted  and to
Borrower's  best  knowledge,  none of Borrower nor any of the  Guarantors  is in
violation of any valid rights of others with respect to any of the foregoing.

          Section  7.12.  Hazardous   Substances.   Each  of  Borrower  and  the
Guarantors is in compliance  with all  Environmental  Laws, and has obtained all
necessary licenses and

                                     - 25 -


<PAGE>



permits  required  to be  issued  pursuant  to any  Environmental  Law.  None of
Borrower  nor  any  of  the  Guarantors  has  received  any  written  notice  or
communication  from  any  governmental  agency  with  respect  to any  Hazardous
Substance  relative to its  operations,  property or acts or any  investigation,
demand or request pursuant to or enforcing any  Environmental Law relating to it
or its operations,  and no such investigation is pending or, to the knowledge of
Borrower, threatened.

          Section 7.13.  Compliance with Loans and Judgments.  Borrower and each
Subsidiary are in compliance,  in all material  respects,  with all laws, rules,
regulations,  orders  and  decrees  which  are  applicable  to  Borrower  or its
Subsidiaries, or to any of their respective properties. Each of Borrower and the
Guarantors  has  satisfied  all  judgments  and none of Borrower  nor any of the
Guarantors is in default with respect to any judgment, writ, injunction, decree,
rule or regulation  of any court,  arbitrator  or federal,  state,  municipal or
other   governmental   authority,   commission,   board,   bureau,   agency   or
instrumentality, domestic or foreign.

          Section 7.14. No Defaults on Other Agreements.  Except as disclosed on
Schedule  IV,  none of  Borrower  nor any of the  Guarantors  is a party  to any
indenture,  loan  or  credit  agreement  or any  lease  or  other  agreement  or
instrument or subject to any charter or corporate restriction which would in any
case or in the aggregate  have an adverse effect on its ability to carry out its
obligations under the Loan Documents. None of Borrower nor any of the Guarantors
is in default in any respect in the  performance,  observance or  fulfillment of
any of the  obligations,  covenants or conditions  contained in any agreement or
instrument  material to its  business to which it is a party  except  where such
default would not, in any case or in the aggregate,  have a material and adverse
effect on the business,  properties,  assets, operations or condition, financial
or  otherwise,  of Borrower and the  Guarantors,  taken as a whole,  or on their
ability to perform their obligations under the Loan Documents.

          Section 7.15.  Labor  Disputes and Force Majure.  Neither the business
nor the properties of Borrower or any of the Guarantors is affected by any fire,
explosion,  accident,  strike, lockout or other labor dispute,  drought,  storm,
hail, earthquake, embargo, force majure or of the public enemy or other casualty
(whether or not covered by insurance),  materially and adversely  affecting such
business or properties or the operations of Borrower and the  Guarantors,  taken
as a whole,  or their  ability  to  perform  their  obligations  under  the Loan
Documents.

          Section  7.16.  Governmental  Regulation.  None  of  Borrower  or  the
Guarantors is subject to regulation under the Public Utility Holding Company Act
of 1935, the  Investment  Company Act of 1940 or any other statute or regulation
limiting its ability to incur  indebtedness  for money borrowed as  contemplated
hereby.

          Section 7.17.  Partnerships.  None of Borrower or the  Guarantors is a
partner in any partnership or a member of any joint venture or limited liability
company.

                                     - 26 -


<PAGE>




          Section  7.18.  No  Forfeiture.  None  of  Borrower  nor  any  of  the
Guarantors  is engaged in or  proposes  to be engaged in any  unlawful  activity
which  is  reasonably  likely  to  result  in a  Forfeiture  Proceeding  and  no
Forfeiture  Proceeding  against  any of  them  is  pending  or,  to the  best of
Borrower's knowledge, threatened.

          Section  7.19.  Security  Agreement.  The  provisions  of the Security
Agreements, as confirmed by the Security Agreement Confirmations,  are effective
to create in favor of the Bank legal,  valid and enforceable  security interests
in all right,  title and  interest of Borrower in all the  Collateral  described
therein,  assuming the same has been duly  executed by the Bank and the Bank has
filed the forms UCC-1 referred to therein.

          Section  7.20.  Disclosure.  This  Agreement,  each Loan Document and,
except as set forth in Section 7.21, each other document, certificate,  exhibit,
report or written statement furnished to the Bank by or on behalf of Borrower or
for use in  connection  with the Loans,  do not contain any untrue  statement of
material fact or omit to state a material  fact  necessary to make the statement
contained herein or therein not misleading under the circumstances in which they
were made.

                  Section  7.21.   Projections  and  Forecasts.   Any  financial
projection or forecast  furnished by Borrower or any Guarantor shall be prepared
in  accordance  with  GAAP to the  extent  applicable,  based on the good  faith
judgment of Borrower's management of present circumstances,  expected conditions
and expected  courses of action,  and with respect to projections,  based on the
occurrence  of  the  hypothetical  events  described  therein.   The  underlying
assumptions  in  such  forecasts  and  projections   shall  be  appropriate  and
reasonable under the circumstances and, if the forecast or projection presents a
range, such range shall not be selected in a misleading manner.

ARTICLE 8.  AFFIRMATIVE COVENANTS.

     So long as the  Note  shall  remain  unpaid  or the  Bank  shall  have  any
obligations under this Agreement,  Borrower shall and shall cause the Guarantors
to:

          Section 8.01.  Maintenance of Existence.  Except as otherwise provided
in this  Agreement,  preserve  and  maintain its  corporate  existence  and good
standing  in the  jurisdiction  of its  incorporation,  and  qualify  and remain
qualified  as  a  foreign   corporation  in  each  jurisdiction  in  which  such
qualification is required.

          Section 8.02.  Conduct of Business.  Continue to engage in its current
business or related businesses.

          Section 8.03. Maintenance of Properties.  Maintain,  keep and preserve
all of its properties (tangible and intangible)  necessary to the conduct of its
business in good working order and condition, ordinary wear and tear excepted.

                                     - 27 -







          Section  8.04.  Maintenance  of  Records.  Keep  records  and books of
account, in which complete entries will be made in accordance with GAAP.

          Section  8.05.  Maintenance  of  Insurance.  Maintain  insurance  with
financially  sound and reputable  insurance  companies or  associations  in such
amounts and covering such risks as are usually  carried by companies  engaged in
the same or a similar business and similarly situated.

          Section 8.06.  Compliance  with Laws.  Comply in all respects with all
applicable laws, rules, regulations and orders.

          Section 8.07.  Right of Inspection.  At any  reasonable  time and from
time to time,  upon reasonable  notice during normal business hours,  permit the
Bank or any agent or  representative  thereof,  to examine  and make  copies and
abstracts from the records and books of account of, and visit the properties of,
such entity,  to discuss the affairs,  finances and accounts of such entity with
any of their  respective  officers and directors  and such entity's  independent
accountants,  and  from  time to time at  Borrower's  expense  to  conduct  such
collateral and other audits as the Bank deems necessary.

          Section 8.08. Reporting Requirements.  Furnish directly to each of the
Bank:

          (a) as soon as  available  and in any event  within 120 days after the
end of each  fiscal  year of  Borrower,  consolidated  financial  statements  of
Borrower and its  Consolidated  Subsidiaries  which shall include a consolidated
balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year
and a consolidated income statement and statement of cash flows of such entities
for such fiscal year,  stating in comparative  form the respective  consolidated
figures for the  corresponding  date and period in the prior fiscal year and all
prepared in accordance with GAAP,  accompanied by an opinion thereon  acceptable
to the Bank by the Auditor,  which opinion  neither  includes an exception as to
adherence with GAAP nor contains a disclaimer;

          (b) as soon as available and in any event within 45 days after the end
of each  of the  first  three  quarters  of each  fiscal  year  of  Borrower,  a
consolidated  balance  sheet of Borrower and its  Subsidiaries  as of the end of
such quarter and a consolidated income statement and statements of cash flows of
such entities for the period  commencing at the end of the previous  fiscal year
and ending with the end of such quarter, all in reasonable detail and stating in
comparative form the respective  consolidated figures for the corresponding date
and period in the previous  fiscal year and all prepared in accordance with GAAP
and attested to by the president or chief financial officer of Borrower (subject
to year-end adjustments);

          (c)  simultaneously  with the  delivery  of the  financial  statements
referred  to in (a) and (b)  above,  a  certificate  of the  president  or chief
financial  officer of Borrower (i) certifying  that to the best of his knowledge
no Default or Event of Default has occurred and

                                     - 28 -


is  continuing  or,  if a  Default  or  Event of  Default  has  occurred  and is
continuing,  a  statement  as to the  nature  thereof  and the  action  which is
proposed  to  be  taken  with  respect  thereto,   and  (ii)  with  computations
demonstrating compliance with the covenants contained in Article 10;

          (d)  within 30 days after the  delivery  of the  financial  statements
referred  to in (a)  above,  annual  forecasts  and  Borrower's  budget  for the
upcoming  fiscal  year,  with a comparison  of actual  results to budget for the
fiscal year then ended;

          (e) promptly upon receipt thereof, a copy of the management letter, if
any, prepared by the Auditor;

          (f) on or  prior  to the  fifteenth  day of  each  calendar  month,  a
schedule  of  inventory  of the Company and its  Subsidiaries  certified  by the
President or Chief  Financial  Officer and current as of the last Banking Day of
the preceding  month,  which shall contain a breakdown of the inventory by type,
amount and location and such other information reasonably requested by the Bank;

          (g) promptly after Borrower becomes aware of the commencement thereof,
notice of all actions,  suits, and proceedings  before any court or governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  involving claims of $150,000 or more affecting Borrower, or any of its
Subsidiaries, including, without limitation, any such proceeding relating to any
alleged violation of any Environmental Law;

          (h) as soon as  possible  and in any event  within five days after the
occurrence of each Default or Event of Default,  a written notice specifying and
describing in reasonable  detail such Default or Event of Default and describing
in  reasonable  detail the action which is proposed to be taken by Borrower with
respect thereto;

          (i) promptly after the commencement thereof or promptly after Borrower
knows  of  the  commencement  or  threat  thereof,   notice  of  any  Forfeiture
Proceeding;

          (j) promptly after submission to any government or regulatory  agency,
all documents and information  furnished to such government or regulatory agency
other than such  documents  and  information  prepared  in the normal  course of
business  and which would not result in any  adverse  action to be taken by such
agency;

          (k) as soon as  possible  and in any event  within five  Banking  Days
after Borrower knows that any of the events or conditions  specified  below with
respect to any Plan or  Multiemployer  Plan have occurred or exist,  a statement
signed by a chief financial officer of Borrower setting forth details respecting
such event or  condition  and the action,  if any,  which  Borrower or the ERISA
Affiliate  propose  to take with  respect  thereto  (and a copy of any report or
notice  required  to be  filed  with or given  to PBGC by  Borrower  or an ERISA
Affiliate with respect to such event or condition):

                                     - 29 -



               (i) any reportable  event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder,  with respect to a Plan, as to which PBGC
has not by regulation waived the requirement of Section 4043(a) of ERISA that it
be notified  within 30 days of the  occurrence  of such event  (provided  that a
failure to meet the  minimum  funding  standard  of  Section  412 of the Code or
Section 302 of ERISA shall be a reportable  event  regardless of the issuance of
any waivers in accordance with Section 412(d) of the Code);

               (ii) the filing under Section 4041 of ERISA of a notice of intent
to terminate any Plan or the termination of any Plan;

               (iii) the  institution by PBGC of proceedings  under Section 4042
of ERISA for the  termination of, or the appointment of a trustee to administer,
any Plan, or the receipt by Borrower or any ERISA Affiliate,  of a notice from a
Multiemployer  Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;

               (iv) the complete or partial  withdrawal by Borrower or any ERISA
Affiliate under Section 4201 or 4204 of ERISA from a Multiemployer  Plan, or the
receipt by Borrower, or any ERISA Affiliate, of notice from a Multiemployer Plan
that it is in reorganization  or insolvency  pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has  terminated  under Section 4041A of
ERISA; and

               (v)  the  institution  of a  proceeding  by a  fiduciary  or  any
Multiemployer  Plan against  Borrower or any ERISA  Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days;

          (l)  promptly,  and in any event within five  business  days after the
sending or filing thereof, copies of all proxy statements, financial statements,
and reports which Borrower sends to its stockholders, and copies of all regular,
periodic and special  reports and all  registration  statements  which  Borrower
files with the  Securities  and Exchange  Commission  or any other  governmental
authority, or with any national securities exchange;

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

          Section  8.09.  Payment of  Obligations.  Pay,  discharge or otherwise
satisfy at or before maturity or before they become delinquent,  as the case may
be, all material Debt except for any Debt which is being contested in good faith
and with  respect to which,  on a  consolidated  basis,  adequate  reserves  are
maintained in conformity with GAAP.

          Section 8.10.  Payment of Taxes. Pay and discharge promptly all taxes,
assessments and government  charges or levies imposed upon it or upon its income
and profits,  or upon any of its property,  real, personal or mixed, or upon any
part thereof, before the same

                                     - 30 -



shall become in default,  and all other material  obligations  (including lawful
claims for labor,  materials and supplies which, if unpaid, might become a Lien)
except that neither the Company nor any  Guarantor  shall be required to pay any
such tax,  assessment,  charge,  levy or claim so long as the  validity  thereof
shall be contested in good faith by appropriate proceedings and there shall have
been set aside on its books adequate reserves determined in accordance with GAAP
with respect to any such tax,  assessment,  charge,  levy or claim so contested,
provided  that,  except as  provided  in  Section  9.02,  the  Company  and each
Guarantor  shall  pay all such  taxes,  assessments,  charges,  levies or claims
promptly if any Lien has attached as security therefor.

          Section  8.11.  Acquisitions.  Prior to  entering  into any  letter of
intent,  agreement or other  commitment or proposed  commitment  relating to any
Acquisition,  furnish  the Bank with  notice  of same and with such  information
relating to the Acquisition as Borrower possesses at the time it provides notice
to the Bank and which the Bank may reasonably request.

          Section 8.12. Management. Use its best efforts to cause Donald Sinkin,
Stephen Frey,  Margaret  Krumholz and John Rebecchi to continue in the employ of
the  Borrower  in their  present  positions  with their  existing  authority  as
executive  officers  of  Borrower,  and  consult  with  the Bank  regarding  the
replacement of any of them.

ARTICLE 9.  NEGATIVE COVENANTS.

          So long as the Note  shall  remain  unpaid or the Bank  shall have any
obligations under this Agreement, Borrower shall not:

          Section 9.01. Debt and Guaranties.

          (a) Create, incur, assume or suffer to exist, or permit any Guarantors
to create, incur, assume or suffer to exist any Debt, except:

               (i) Debt arising under this Agreement or the Note;

               (ii) Debt described in Schedule III, and any renewals, extensions
or refinancings thereof, provided that such renewals,  extensions or refinancing
are on terms no less  favorable to Borrower or the  Guarantor  than the original
terms of such Debt (except for increases in interest rates not inconsistent with
increases in prevailing interest rates);

               (iii) Debt incurred in connection  with operating  leases entered
into by Borrower, the Guarantors, or any of them, consistent with past practices
or in the ordinary course of business; and


                                     - 31 -


               (iv) Debt of Borrower, or the Guarantors, or any of them, secured
by purchase money Liens permitted by Section 9.02.

          (b)  Guaranty,  endorse,  become  surety for or  otherwise  in any way
become or be responsible  for the Debt or obligations of any Person,  whether by
agreement to maintain capital,  equity,  net worth or solvency of any Person, by
agreement  to purchase or  discharge  the Debt of any Person,  or  agreement  to
purchase merchandise,  materials,  supplies or other property, if such agreement
provides that payment shall be made whether or not delivery of such merchandise,
materials, supplies or other property is ever made or tendered except:

               (i) guarantees  executed prior to the date hereof as described on
Schedule V attached hereto;

               (ii)  endorsements  of negotiable  instruments  for collection or
deposit in the ordinary course of business; and

               (iii)  guarantees  under this Agreement or of Debt of Borrower or
any Guarantor owing to the Bank.

          Section 9.02.  Liens.  Create,  incur,  assume or suffer to exist,  or
permit any of the Guarantors to create,  incur,  assume or suffer to exist,  any
Lien,  upon or with  respect to any of its  properties,  now owned or  hereafter
acquired, except:

          (a) Liens in favor of the Bank securing the Loans hereunder;

          (b) Liens for taxes or  assessments  or other  government  charges  or
levies  if not yet due and  payable  or if due and  payable  if they  are  being
contested in good faith by  appropriate  proceedings  and for which  appropriate
reserves are maintained in conformity with GAAP;

          (c)  Liens  (i)  imposed  by  law,  such  as  mechanic's,  supplier's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar
Liens,  securing  obligations  incurred in the ordinary course of business which
are not past due for more than 30 days or (ii) which are being contested in good
faith by appropriate  proceedings and for which  appropriate  reserves have been
established  which,  when aggregated with all  indebtedness  secured by all such
other Liens,  secure  indebtedness  having an aggregate principal balance not in
excess of $50,000;

          (d) Liens under workers' compensation  unemployment insurance,  social
security or similar legislation (other than ERISA);

          (e) judgment and other similar Liens arising in connection  with court
proceedings  that have been in  existence  for fewer than 30 days after entry of
the judgment or

                                     - 32 -






the  execution or other  enforcement  of which is  effectively  stayed,  and the
claims secured thereby are being actively  contested,  in Borrower's  reasonable
judgment,  in good  faith and by  appropriate  proceedings,  or which  relate to
judgments which, when aggregated with all other judgments secured by such Liens,
total less than $50,000; and

          (f)  purchase  money Liens on any  property  heretofore  or  hereafter
acquired or the assumption of any Lien on property  existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title  retention  agreement or a Capital Lease;  provided that such liens attach
only to the property as acquired and do not extend to any additional property of
Borrower.

          Section 9.03. Investments and Advances.  Make or permit any Subsidiary
to make any loan or advance to any  Person,  or  purchase,  redeem or  otherwise
acquire, or permit any such Subsidiary to purchase,  redeem or otherwise acquire
any capital stock, assets,  obligations or other securities, or make any capital
contribution  to  otherwise  invest in or  acquire  any  interest  in any Person
(including,  without limitation,  any Borrower or any Subsidiary or Affiliate of
any Borrower), except:

          (a)  obligations  issued or  guaranteed  by  states or  municipalities
within  the  United  States of  American  and rated at least A-1 by  Standard  &
Poor's;

          (b)  obligations  issued or guaranteed by the United States of America
or any  agency  or  subdivision  thereof,  the  payment  or  guarantee  of which
constitutes a full faith and credit obligation of the United States of America;

          (c) certificates of deposit, time deposits, Eurodollar certificates of
deposit,  bankers  acceptances and other money market  instruments issued by any
bank,  trust company or financial  institution  organized  under the laws of the
United States of America or any state (or in the case of Eurodollar certificates
of deposit,  a branch of any such bank, trust company or financial  institution)
having capital and surplus in an aggregate amount not less than $200,000,000 and
with such instrument rated at least A-1 by Standard & Poor's;

          (d)  commercial  paper  rated at least  Prime-1  by  Moody's  Investor
Services or A-1 by Standard & Poor's;

          (e) repurchase agreements entered into with any bank, trust company or
other  financial  institution  organized  under the laws of the United States of
America or any state having capital and surplus in an aggregate  amount not less
than  $200,000,000  and which  are  fully  secured  by  obligations  of the type
described in Section 9.03(b);

          (f) Acquisitions permitted pursuant to Section 9.07 hereof; and


                                     - 33 -



<PAGE>



          (g)  Investments  of Borrower in any  Subsidiary  or investment of any
Subsidiary in any other Subsidiary.

          Section  9.04.  Sale of  Assets.  Sell,  lease,  assign,  transfer  or
otherwise  dispose of, or permit any of the Guarantors to sell,  lease,  assign,
transfer or  otherwise  dispose of, any of its now owned or  hereafter  acquired
assets (including,  without limitation, shares of stock and indebtedness of such
Subsidiaries,  receivables  and  leasehold  interests)  except  for  (i)  assets
disposed  of as no  longer  used or useful in the  conduct  of their  respective
business  or as  have  been  disposed  of in the  ordinary  course  of  business
consistent  with Borrower's past practice or (ii) transfers of assets between or
among Borrower and Subsidiaries of Borrower,  provided all such Subsidiaries are
Guarantors which have executed Security Agreements.

          Section   9.05.   Transactions   with   Affiliates.   Enter  into  any
transaction,  including,  without limitation,  the purchase, sale or exchange of
property or the  rendering of any service,  with any  Affiliate or permit any of
the Guarantors to enter into any transaction, including, without limitation, the
purchase, sale or exchange of property or the rendering of any service, with any
Affiliate,  except in the  ordinary  course of and  pursuant  to the  reasonable
requirements  of  Borrower's  or such  Guarantors  business  and  upon  fair and
reasonable  terms not  materially  less  favorable to Borrower or such Guarantor
than would be obtained in a comparable  arm's length  transaction  with a Person
not an Affiliate.

          Section 9.06. Mergers. Except as permitted in Section 9.07, and except
for mergers of any  Subsidiary  with and into either  Borrower or any Subsidiary
which is at such time a Guarantor,  merge or consolidate with, or sell,  assign,
lease or  otherwise  dispose of  (whether in one  transaction  or in a series of
transactions)  all or  substantially  all of its  assets  (whether  now owned or
hereafter  acquired) to any Person,  or acquire all or substantially  all of the
assets or the  business of any Person (or enter into any  agreement to do any of
the foregoing), or permit any of the Guarantors to do so.

          Section 9.07. Acquisitions. Make any Acquisition, unless the entity to
be acquired  is  primarily  in the  business of  manufacturing  and  printing of
specialty  packaging and the Bank has been  furnished with (a) such documents as
are  necessary in the Bank's  discretion  to provide the Bank with a Guaranty of
the entity to be acquired (if it is to be a Subsidiary)  and to grant the Bank a
perfected lien upon the assets so acquired,  (b) satisfactory  evidence that the
ratio of Borrower's  Total Funded Debt to EBITDA,  on a  consolidated  basis and
after  giving  effect  to  such  Acquisition,  does  not  exceed  3.0:1,  (c)  a
certificate of the president or chief financial  officer of Borrower  certifying
that no Default or Event of Default has occurred and is  continuing  and that no
Default or Event of Default  would occur as a result of  Borrower's  making such
Acquisition  and (d) within 15 days of completing  such  Acquisition,  a balance
sheet  of  the  Borrower   prepared  by  Borrower's   management   demonstrating
compliance,  on a pro forma basis,  with the  covenants  contained in Article 10
immediately after the Acquisition.


                                     - 34 -



          Section 9.08. No Activities Leading to Forfeiture  Proceeding.  Engage
in or permit  any  Guarantor  to engage in any  unlawful  activity  which  could
reasonably be expected to result in a Forfeiture Proceeding.

          Section  9.09.  Corporate  Documents;  Fiscal Year.  Change its fiscal
year,  or  amend,   modify  or  supplement   its   certificate  or  articles  of
incorporation  or by-laws in any way with the result that any of the individuals
identified  in Section 8.12 have  diminished  responsibilities  or operating and
management authority over Borrower and its Subsidiaries.

          Section 9.10. New Subsidiaries. Form, or permit any Guarantor to form,
any Subsidiary unless such Subsidiary shall become a party to the Guaranty.

ARTICLE 10.  FINANCIAL COVENANTS.

          So long as any of the Notes  shall  remain  unpaid or the Bank has any
obligations under this Agreement:

          Section  10.01.  Net Income.  Borrower  shall  maintain at all times a
positive Net Income on a fiscal year basis.

          Section 10.02.  Current Ratio.  Borrower shall maintain at all times a
Current Ratio of not less than 1.25:1.00.


          Section  10.03.  Maximum  Liabilities  to Worth Ratio.  Borrower shall
maintain on a  consolidated  basis at all times a ratio of Total  Liabilities to
Tangible Net Worth of not more than 2.75:1.0.

          Section  10.04.  Debt Coverage  Ratio.  Borrower  shall  maintain on a
consolidated basis at all times a Debt Coverage Ratio of not less than 1.25:1.0.

          Section  10.05.  Total  Funded Debt to EBITDA  Ratio.  Borrower  shall
maintain on a  consolidated  basis at all times a ratio of Total  Funded Debt to
EBITDA of not more than 3.00:1.00.

          Section  10.06.  Determination  of Compliance.  Compliance  with these
financial  covenants  shall  be  determined  by  reference  to the  consolidated
financial  statements of Borrower and its Subsidiaries  delivered to the Bank in
accordance  with  Section  8.08.  Except as set forth in  10.01,  all  financial
covenants  shall be  applicable  at all  times and shall be tested at the end of
each fiscal quarter based upon the balance sheet  information and the results of
operations for the period of 12 months preceding the date of determination.  For
purposes of calculating  compliance  with Sections 10.02,  10.03 and 10.04,  the
principal portion of all

                                     - 35 -



Revolving  Credit  Loans and the  Revolving  Credit Note shall be deemed to be a
current liability and not long-term indebtedness.


ARTICLE 11.  EVENTS OF DEFAULT.

          Section  11.01.  Events  of  Default.  The  occurrence  of  any of the
following events shall be an "Event of Default":

          (a)  Borrower  shall  fail to pay  within  five  days of due  date (i)
principal  of the  Note,  (ii)  interest  on the Note or (iii)  any fee or other
amount due hereunder as and when due and payable.

          (b) Any  representation or warranty made or deemed made by Borrower in
this  Agreement,  or by Borrower or any Guarantor in any  certificate  delivered
pursuant to this Agreement or any other Loan Document,  or which is contained in
any certificate,  document,  opinion,  financial or other statement furnished to
the Bank at any time  pursuant  to any Loan  Document,  shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;

          (c)  Borrower  shall fail to perform or observe any term,  covenant or
agreement contained in Section 2.03 or Articles 8, 9 or 10;

          (d)  Borrower  or any  Guarantor  shall fail to perform or observe any
term,  covenant or agreement on its part to be performed or observed in any Loan
Document and such failure shall continue for 15 consecutive days;

          (e) Borrower or any  Guarantor  shall (i) fail to pay any amounts with
respect  to any  Debt  in  favor  of the  Bank,  including  but not  limited  to
indebtedness for borrowed money (other than the payment obligations described in
(a) above) of Borrower or such Guarantor, as the case may be, or any interest or
premium  thereon,  when due  (giving  effect to any  applicable  grace  period),
whether by scheduled  maturity,  required  prepayment,  acceleration,  demand or
otherwise,  (ii) fail to pay any  amounts in excess of $50,000 in the  aggregate
with respect to any other Debt,  including but not limited to  indebtedness  for
borrowed  money of  Borrower  or such  Guarantor,  as the  case  may be,  or any
interest or premium  thereon,  when due (giving effect to any  applicable  grace
period),  whether by  scheduled  maturity,  required  prepayment,  acceleration,
demand or  otherwise,  (iii) fail to perform or observe  any term,  covenant  or
condition  on its part to be  performed  or  observed  under  any  agreement  or
instrument  relating to any Debt when  required to be performed or observed,  if
the effect of such failure to perform or observe is to accelerate,  or to permit
the  acceleration of, after the giving of notice or passage of time or both, the
maturity of such Debt,  whether or not such failure to perform or observe  shall
be waived by the holder of such

                                     - 36 -


Debt or (iv) any Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly  scheduled required  prepayment) prior to the
stated maturity thereof;

          (f) Borrower or any Guarantor shall (i) generally not, be unable to or
admit in writing its or their inability to, pay its or their debts as such debts
become due; or (ii) make an assignment for the benefit of creditors, petition or
apply to any court or otherwise for the appointment of a custodian,  receiver or
trustee for it or a substantial  part of its or their  assets,  (iii) as debtor,
commence  any  proceeding  under any  bankruptcy,  reorganization,  arrangement,
readjustment  of  debt,  dissolution  or  liquidation  law  or  statute  of  any
jurisdiction,  whether  now or  hereafter  in  effect,  (iv)  have  had any such
petition or application  filed or any such proceeding shall have been commenced,
against it or them, in which an adjudication or appointment is made or order for
relief is  entered,  and  which  petition,  application  or  proceeding  remains
undismissed for a period of 30 days or more, or (v) by any act or omission shall
indicate  its or their  consent  to,  approval  of or  acquiescence  in any such
petition,  application or proceeding or order for relief or the appointment of a
custodian,  receiver or trustee for all or any substantial  part of its or their
property,  (vi) suffer any such  custodianship,  receivership  or trusteeship to
continue  undischarged  for a  period  of 30 days or more or  (vii)  cease to be
Solvent;

          (g) one or more judgments,  decrees or orders for the payment of money
in excess of $50,000 in the aggregate in respect of uninsured or unbonded claims
shall be rendered  against  Borrower  or any of  Guarantor  and such  judgments,
decrees or orders shall  continue  unsatisfied  and in effect for a period of 30
consecutive  days  without  being  vacated,  discharged,  satisfied or stayed or
bonded pending appeal;

          (h) An event or condition  specified in Section  8.08(m)  hereof shall
occur or exist with respect to any Plan or  Multiemployer  Plan and, as a result
of such event or condition,  together with all other such events or  conditions,
Borrower or any ERISA  Affiliate shall incur or in the opinion of the Bank shall
be  reasonably  likely to incur a liability to a Plan, a  Multiemployer  Plan or
PBGC (or any combination of the foregoing) which is, in the determination of the
Bank, material in relation to the financial condition,  operations,  business or
prospects of Borrower or the Guarantors;

          (i) Any Forfeiture Proceeding shall have been commenced; or

          (j) The Security  Agreement  shall at any time after its execution and
delivery and for any reason cease to create a valid and perfected first security
interest  in the  Collateral  or to be in full  force  and  effect,  or shall be
declared  null and void,  or the  validity or  enforceability  thereof  shall be
contested by Borrower,  or Borrower shall deny that it has any further liability
or  obligation  under a Security  Agreement to which it is a party,  or Borrower
shall  fail to  perform  any of its  material  obligations  under  any  Security
Agreement.


                                     - 37 -



          Section 11.02. Remedies. If any Event of Default shall occur, the Bank
shall (a) declare the Revolving  Credit  Commitment to be terminated,  whereupon
the same shall forthwith terminate, and (b) declare the outstanding principal of
the  Notes,  all  interest  thereon  and all other  amounts  payable  under this
Agreement  and the Notes to be forthwith  due and payable,  whereupon the Notes,
all such  interest  and all such amounts  shall become and be forthwith  due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by Borrower;  provided that, in the case of
an Event of Default  referred to in Section  11.01(e) or Section 11.01(h) above,
the  Commitments  shall be  immediately  terminated,  and the Note, all interest
thereon and all other amounts payable under this Agreement and the Note shall be
immediately  due and payable  without notice,  presentment,  demand,  protest or
other  formalities  of any kind,  all of which are  hereby  expressly  waived by
Borrower.

ARTICLE 12.  MISCELLANEOUS

          Section  12.01.  All of  Borrower's  and  each  Subsidiary's  computer
hardware and software which performs or supports  Borrower's  principal business
functions,  or its  accounting,  financial  reporting or management  information
systems (collectively, "Principal Systems") have the ability to (a) consistently
handle date information before,  during and after January 1, 2000, including but
not limited to  accepting  date  input,  providing  date  output and  performing
calculations  on  dates  or  portions  of  dates,  (b)  function  accurately  in
accordance  with the  specifications  of such computer  hardware or software and
without  interruption  before,  during and after  January 1, 2000,  without  any
change in operations  associated with the advent of the new century, (c) respond
to two-digit  date input in a way that resolves any ambiguity as to century in a
disclosed,  defined and predetermined manner and (d) store and provide output of
date information in ways that are unambiguous as to century. With respect to the
Principal Systems, any reprogramming or other corrective  modifications required
to permit the proper functioning  beginning  immediately after December 31, 1999
of (i) the computer  systems of Borrower,  its  Subsidiaries  and Affiliates and
(ii) equipment  containing embedded microchips  (including systems and equipment
supplied  by others or with which  systems of  Borrower,  its  Subsidiaries  and
Affiliates  interface) and the testing of all such systems and equipment,  as so
reprogrammed, has been completed.

          Section 12.02.  Amendments and Waivers.  Except as otherwise expressly
provided in this  Agreement,  any provision of this  Agreement may be amended or
modified only by an instrument in writing  signed by Borrower and the Bank,  and
any  provision  of this  Agreement  may be  waived by  Borrower  or by the Bank;
provided that no amendment, modification or waiver shall be effective, unless by
an  instrument  signed  by the  Bank.  No  failure  on the  part of the  Bank to
exercise,  and no delay in exercising,  any right  hereunder  shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.


                                     - 38 -


          Section 12.03. Usury. Anything herein to the contrary notwithstanding,
the  obligations of Borrower under this Agreement and the Notes shall be subject
to the limitation  that payments of interest shall not be required to the extent
that receipt  thereof would be contrary to provisions of applicable law limiting
rates of interest which the Bank may charge or collect.

          Section 12.04.  Expenses.  Borrower shall reimburse the Bank on demand
for all reasonable costs, expenses, and charges (including,  without limitation,
reasonable  fees and charges of external legal counsel for the Bank) incurred by
the Bank in connection with the preparation or performance of this Agreement and
the Loan  Documents.  In addition,  Borrower shall reimburse the Bank for all of
its  reasonable  costs  and  expenses  in  connection  with the  enforcement  or
preservation  of any  rights  under this  Agreement,  the Note or the other Loan
Documents.  Borrower  agrees to indemnify the Bank and its directors,  officers,
employees and agents from, and hold each of them harmless  against,  any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any  investigation  or  litigation  or other  proceedings
(including  any  threatened  investigation  or litigation or other  proceedings)
relating  to any actual or  proposed  use by  Borrower,  of the  proceeds of the
Loans, including,  without limitation,  the reasonable fees and disbursements of
counsel  incurred in  connection  with any such  investigation  or litigation or
other proceedings (but excluding any such losses,  liabilities,  claims, damages
or expenses incurred by reason of the gross negligence or willful  misconduct of
the Person to be indemnified).

          Section  12.05.  Survival.  The  obligations of Borrower under Section
2.03(b),  Article 5 and Section  12.03 shall  survive the repayment of the Loans
for a period  corresponding to the maximum  applicable statute of limitations in
effect in the State of New York from time to time.

          Section 12.06.  Assignment.  This Agreement shall be binding upon, and
shall  inure to the  benefit  of,  Borrower  and the Bank and  their  respective
successors  and  assigns,  except that  Borrower  may not assign or transfer its
rights or obligations hereunder.

          Section 12.07.  Notices.  All notices,  consents,  approvals and other
communications required or permitted to be given to a party under this Agreement
shall be in writing and shall be delivered  personally to the party, sent by any
national  overnight courier or mailed first class certified mail, return receipt
requested,  to the party at the address  indicated on page one, to the attention
of Joseph  Burns for the Bank and to the  attention  of  Margaret  Krumholz  for
Borrower.  Any item delivered in accordance  with the provisions of this Section
shall be deemed to have been  delivered  (i) on the date of  personal  delivery,
(ii) on the business day following the date sent by overnight courier or (ii) on
the fifth day following the date on which it was so mailed, as the case may be.

          Section  12.08.  Setoff.  Borrower  agrees  that,  in addition to (and
without  limitation of) any right of setoff,  banker's lien or counterclaim  the
Bank may otherwise have,

                                     - 39 -


the Bank shall be entitled,  at its option  without any prior notice to Borrower
(any such notice being expressly  waived by Borrower to the extent  permitted by
applicable  law),  to offset  balances  (general  or  special,  time or  demand,
provisional  or final)  held by it for the  account  of  Borrower  at any of the
Bank's  offices  against any amount then due and payable by Borrower to the Bank
under  this  Agreement  or the Note  which is not paid when due  (regardless  of
whether such balances are then due to Borrower), in which case it shall promptly
notify  Borrower  thereof,  provided that the Bank's failure to give such notice
shall not affect the validity thereof.  Payments by Borrower  hereunder shall be
made without setoff or counterclaim.

          Section 12.09. Jurisdiction; Immunities.

          (a) Borrowers  hereby  irrevocably  submits to the jurisdiction of any
New York  State or United  States  Federal  court  sitting  in Suffolk or Nassau
County  over  any  action  or  proceeding  arising  out of or  relating  to this
Agreement or the Note, and Borrower hereby irrevocably agrees that all claims in
respect of such action or  proceeding  may be heard and  determined  in such New
York State or Federal court. To the extent permitted by applicable law, Borrower
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing (by  certified or  registered  mail) of copies of such
process to it.  Borrower  agrees  that a final  judgment  in any such  action or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the  judgment  or in any other  manner  provided  by law.  To the extent
permitted by applicable law,  Borrower  further waives any objection to venue in
such State or Federal Court and any objection to an action or proceeding in such
State or Federal Court on the basis of forum non  conveniens.  Borrower  further
agrees that any action or proceeding  brought  against the Bank shall be brought
only in New York  State or United  States  Federal  court  sitting in Suffolk or
Nassau County.

          (b) THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL.

          (c)  Nothing  in this  Section  shall  affect the right of the Bank to
serve legal process in any other manner  permitted by law or affect the right of
the Bank to bring any action or proceeding  against  Borrower or its property in
the courts of any other jurisdictions.

          (d) To the extent  that  Borrower  has or  hereafter  may  acquire any
immunity from  jurisdiction of any court or from any legal process (whether from
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property,  Borrower hereby
irrevocably  waives, to the extent permitted by applicable law, such immunity in
respect of its obligations under this Agreement and the Note.

          Section  12.10.  Severability.  The  provisions of this  Agreement are
intended to be  severable.  If for any reason any  provision  of this  Agreement
shall be held invalid or unenforceable in whole or in part in any  jurisdiction,
such provision shall, as to such

                                     - 40 -


jurisdiction,   be   ineffective   to  the   extent   of  such   invalidity   or
unenforceability  without in any manner affecting the validity or enforceability
thereof in any other  jurisdiction  or the  remaining  provisions  hereof in any
jurisdiction.

          Section  12.11.  Integration.  The Loan Documents set forth the entire
agreement  among the parties hereto  relating to the  transactions  contemplated
thereby and  supersede any prior oral or written  statements or agreements  with
respect to such transactions.


                                     - 41 -


          Section 12.12. Governing Law. This Agreement shall be governed by, and
interpreted  and construed in accordance  with, the law of the State of New York
applicable to agreements made and to be performed wholly within the State of New
York.

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

DISC GRAPHICS, INC.                         KEYBANK NATIONAL ASSOCIATION


By:____________________________             By:______________________
     Name:   Donald Sinkin                     Name:  Joseph Burns
     Title:     President and                  Title:    Vice President
               Chief Executive Officer

                                     - 42 -


                         List of Schedules and Exhibits



Schedule I                   Description of Liens

Schedule II                  List of subsidiaries of Borrower

Schedule III                 List  of   Credit   Agreements
                             (including   indentures,    purchase
                             agreements,    guaranties,   Capital
                             Leases, etc.)

Schedule IV                  Agreements effecting Loan Documents

Schedule V                   List of Guaranties



                              *     *     *     *     *



Exhibit A-1                  Form of Revolving Credit Note

Exhibit A-2                  Form of Term Note

Exhibit B                    Form of Guaranty

Exhibit B-1                  Form of Guarantor Confirmation Agreement

Exhibit C-1                  Security Agreement of Borrower

Exhibit C-2                  Security Agreement of Guarantors

Exhibit C-3                  Security Agreement Confirmation of Borrower

Exhibit C-4                  Security Agreement Confirmation of Guarantors

Exhibit E                    Form of Opinion of Counsel

Exhibit F                    Form of Notice of Borrowing

                                     - 43 -





                                                                     EXHIBIT A-1

                              AMENDED AND RESTATED
                              REVOLVING CREDIT NOTE


$10,000,000                                                    December 1, 1998
                                                             Islandia, New York

          For value  received,  Disc  Graphics,  Inc.,  a  Delaware  corporation
("Borrower"),   hereby  promises  to  pay  to  the  order  of  KeyBank  National
Association,  a national banking  association (the "Bank"), at the Bank's office
at 1377 Motor Parkway, Islandia, New York 11788, on or before February 25, 2001,
the principal amount of $10,000,000,  or the actual amount loaned by the Bank to
Borrower pursuant to the "Credit Agreement"  (defined below), in lawful money of
the United States of America and in immediately available funds, on the date and
in the manner  provided in the Credit  Agreement.  Borrower also promises to pay
interest on the unpaid principal balance hereof at the rate or rates of interest
as provided  in the Credit  Agreement,  on the dates and in the manner  provided
therein.

          The holder of this  Revolving  Credit  Note shall  record the date and
amount of each  Revolving  Credit Loan made by the Bank, and the date and amount
of each  payment of  principal  or  interest,  either on the  schedule  attached
hereto,  or on such computer,  magnetic disk, tape or other such electronic data
storage and retrieval system as the Bank considers adequate for such purpose, in
its sole and absolute  discretion.  Any such record shall constitute prima facie
evidence of the accuracy of the  information  so recorded,  but no failure so to
record,  or any  error in so  recording,  shall  affect  the  obligation  of the
Borrower to repay any Revolving Credit Loans, with interest thereon, as provided
herein or in the Credit Agreement.

          This  is  the  Revolving  Credit  Note  referred  to in  that  certain
Revolving Credit Agreement dated February 26, 1997 between Borrower and the Bank
as amended  and  restated  on December  1, 1998 (the  "Credit  Agreement"),  and
evidences the Revolving Credit Loans made by the Bank thereunder. This Note is a
substitute  for the one given by Borrower  in the same  amount on  February  26,
1997.  All terms not defined herein shall have the meanings given to them in the
Credit Agreement.

          The Credit Agreement  provides for the acceleration of the maturity of
principal upon the  occurrence of certain Events of Default,  for a Default Rate
of interest and for prepayments on the terms and conditions specified therein.

          Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Revolving Credit Note, except as may be
set forth in the Credit Agreement.

          The terms of this Revolving Credit Note may not be changed orally, but
only by an instrument duly executed by Borrower and the Bank.


          This Revolving  Credit Note shall be governed by, and  interpreted and
construed in accordance with, the laws of the State of New York.

                                  DISC GRAPHICS, INC.



                                  By:_______________________________
                                     Name:
                                     Title:


<PAGE>



                       SCHEDULE OF REVOLVING CREDIT LOANS


Date        Type                          Principal                    Principal
of          of           Interest         Amount of    Maturity         Paid or
Loan        Loan          Rate               Loan                       of Loan 
Unpaid 




                                                                     EXHIBIT A-2

                                    TERM NOTE


$                                                              February 25, 2001
                                                              Islandia, New York

          For value  received,  Disc  Graphics,  Inc.,  a  Delaware  corporation
("Borrower"),   hereby  promises  to  pay  to  the  order  of  KeyBank  National
Association,  a national banking  association (the "Bank"), at the Bank's office
at 1377 Motor Parkway,  Islandia,  New York 11788,  the principal sum of [insert
amount  between  $2,000,000 and  $10,000,000]  in 48 equal  consecutive  monthly
installments of [insert  principal amount divided by 48], in lawful money of the
United  States of America  and in  immediately  available  funds,  in the manner
provided  in the  "Credit  Agreement"  (defined  below) on the first day of each
calendar  month  commencing  on  __________,   2001  and  ending  with  a  final
installment  of all unpaid  principal  hereunder on the Term Loan Maturity Date.
Borrower also promises to pay interest on the unpaid principal balance hereof at
the fluctuating  annual rate of interest equal to the Base Rate plus a margin of
0.5%,  as provided in the Credit  Agreement,  on the dates and in the manner set
forth therein.

          This  is the  Term  Loan  Note  referred  to in  that  certain  Credit
Agreement  dated  February  26, 1997 by and between  Borrower  and the Bank,  as
amended and restated on December 1, 1998 (the "Credit Agreement"), and evidences
the Term Loan made by the Bank  thereunder.  All terms not defined  herein shall
have the meanings given to them in the Credit Agreement.

          The Credit Agreement  provides for the acceleration of the maturity of
principal upon the  occurrence of certain Events of Default,  for a Default Rate
of interest and for prepayments on the terms and conditions specified therein.

          Borrower waives presentment, notice of dishonor, protest and any other
notice or formality  with respect to this Term Loan Note. The terms of this Term
Loan Note may not be changed orally,  but only by an instrument duly executed by
Borrower and the Bank.

          This  Term  Loan  Note  shall be  governed  by,  and  interpreted  and
construed in accordance with, the laws of the State of New York.

                                        DISC GRAPHICS, INC.



                                        By:_______________________________
                                           Name:
                                           Title: