LOAN AND SECURITY AGREEMENT

                               (NON-EXIM FACILITY)

This Agreement is between the undersigned  Borrower and the  undersigned  Lender
concerning  loans  and  other  credit  accommodations  to be made by  Lender  to
Borrower.

SECTION 1.        PARTIES

         1.1 "BORROWER" is identified in Section 10.5(B) and includes successors
and assigns.  If more than one Borrower is  specified  in Section  10.5(B),  all
references  to  Borrower  shall  mean  each  of  them,  jointly  and  severally,
individually and collectively, and the successors and assigns of each.

         1.2 "LENDER"  shall mean THE CIT  GROUP/BUSINESS  CREDIT,  INC. and its
agents, designees, representatives, successors and assigns.

SECTION 2.        LOANS AND OTHER CREDIT ACCOMMODATIONS

         2.1 Revolving Loans. Lender shall,  subject to the terms and conditions
contained  herein,  make  revolving  loans to  Borrower  ("REVOLVING  LOANS") in
amounts  requested by Borrower from time to time,  but not in excess of the then
existing Net  Availability  and provided the requested  loan would not cause the
outstanding  Obligations to exceed the Maximum Credit.  Subject to the terms and
conditions set forth in this Agreement, Revolving Loans may be Prime Rate Loans,
LIBOR Loans or any combination thereof.

                  (a)  "MAXIMUM  CREDIT"  shall  have the  meaning  set forth in
Section 10.1(a).

                  (b) "GROSS AVAILABILITY" is at any time (i) the product of the
outstanding  amount of Eligible  Accounts  multiplied  by the Eligible  Accounts
Percentage set forth in Section 10.1(b) minus (ii) Reserves.

                  (c) "NET AVAILABILITY"  shall mean an amount equal to the then
Gross  Availability minus the aggregate amount of all Obligations other than the
then  outstanding  principal  balance  of EXIM  Revolving  Loans (as  defined in
Section 10.7).

                  (d)  "ELIGIBLE  ACCOUNTS"  shall mean the accounts  created by
Borrower in the ordinary  course of business which are and remain  acceptable to
Lender and (1) which have not  remained  unpaid for more than the number of days
after the invoice date set forth in Section  10.1(d);  (2) which are  absolutely
owing  to  Borrower  and  payment  is not  conditional  or  contingent  (such as
consignments,  guaranteed sales or right of return or other similar terms);  (3)
which are owed by an account debtor having a chief executive office or principal
place of  business  is located in the United  States and such  accounts  are not
"Eligible  Accounts" under and as defined in the EXIM Loan Agreement;  (4) which
do not arise from  progress  billings,  retainages  or bill and hold sales;  (5)
which are not subject to contras,  setoffs,  counterclaims  or disputes and with
respect to which there are no other facts  existing  or  threatened  which would
impair or delay the collectibility of all or any portion thereof, or which might
result in any adverse change in the account debtor's  financial  condition;  (6)
with respect to which the goods

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giving rise thereto were not at the time of the sale subject to any liens except
those  permitted  in this  Agreement;  (7) which are not due from any (x) entity
affiliated (directly or indirectly) with Borrower, or (y) any officer, employee,
shareholder or agent of Borrower or any affiliate  thereof;  (8) with respect to
which there has been  compliance  with the  Assignment  of Claims Act or similar
State or local law, if applicable, if the account debtor is the United States or
any domestic governmental unit; (9) with respect to which Borrower has delivered
to Lender such  documents as Lender may have  requested  pursuant to Section 5.9
hereof  and  Lender  shall  have  received  satisfactory  verifications  of such
accounts;  (10) the  account  debtor  owing such  accounts  (together  with such
account debtor's  affiliates) does not owe more than twenty percent (20%) of all
Eligible  Accounts  (the  amount  exceeding  twenty  percent  (20%) shall not be
eligible);  (11) which are owed by an account  debtor if more than fifty percent
(50%) of the accounts  owed by such account  debtor are unpaid after the invoice
date for more than the  number of days set forth in Section  10.1 (D);  and (12)
which are owed by an account debtor deemed  creditworthy  at all times by Lender
in its reasonable business judgment.

                  (e) Intentionally Deleted.

                  (f)  Lender  shall  have a  continuing  right to reduce  Gross
Availability by implementing reserves ("RESERVES"), and to increase and decrease
such Reserves,  if and to the extent that, in Lender's sole judgment  reasonably
exercised,  such Reserves are necessary to protect  Lender  against any state of
facts which does, or would,  with notice or passage of time or both,  constitute
an Event of Default or have an adverse effect on any Collateral.

         2.2 Intentionally Deleted.

         2.3 Borrowing of LIBOR Loans.  Upon not less than three (3)  Eurodollar
Business  Days'  irrevocable  written  notice from Borrower to Lender  (each,  a
"NOTICE OF LIBOR  BORROWING"),  Borrower  shall  have the right,  subject to the
terms and conditions of this  Agreement,  to request on that portion of any Loan
be made as LIBOR  Loans,  to request  that any LIBOR Loans be continued as LIBOR
Loans or to request that all or any portion of the Prime Rate Loans be converted
into LIBOR Loans, which notice shall in each case specify:

                  (i) the  date on  which  such  LIBOR  Loans  are to be made or
         continued  as such or the date on which such Prime Rate Loans are to be
         converted into LIBOR Loans, as applicable (which day shall in each case
         be a Eurodollar Business Day);

                  (ii) the aggregate  principal amount of such loans that are to
         be made or continued as, or converted into,  LIBOR Loans, as applicable
         (which, in the case of each such LIBOR Loan, shall be at least equal to
         $1,000,000 or any larger multiple of $1,000,000); and

                  (iii) the Interest Period applicable to such LIBOR Loan.

If Borrower shall not have delivered a Notice of LIBOR Borrowing with respect to
any outstanding LIBOR Loan as set forth above in this paragraph within three (3)
Eurodollar Business Days' prior to the end of the Interest Period for such LIBOR
Loan, such LIBOR Loan

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shall,  without any further action required by Borrower or Lender,  be converted
into a Prime Rate Loan  effective  from and after the last day of such  Interest
Period.  Notwithstanding  the  foregoing,  (x) no more than  three (3)  separate
Interest  Periods in respect of LIBOR Loans may be  outstanding at any one time,
and (y) upon the occurrence  and during the  continuance of an Event of Default,
Borrower shall not have the right to submit a Notice of LIBOR  Borrowing and all
then   existing   LIBOR   Loans  shall  be   converted   to  Prime  Rate  Loans.
Notwithstanding  anything  to the  contrary  contained  herein,  Lender  (or any
participant,  if  applicable)  shall not be required to purchase  United  States
Dollar  deposits  in the London  interbank  market or from any other  applicable
LIBOR  market or source or otherwise  "match fund" to fund LIBOR Loans,  but any
and all provisions hereof relating to LIBOR Loans shall be deemed to apply as if
Lender (and any participant,  if applicable) had purchased such deposits to fund
any LIBOR Loans. Lender shall be entitled to charge the Borrower a $500 fee upon
the first effective day of any such election for a LIBOR Loan.

         2.4 Additional Provisions Relating to LIBOR Loans.

                  (a) If,  after the date of this  Agreement,  any change in any
law or the application of the  requirements  thereof (whether such change occurs
in accordance with the terms of such law as enacted, as a result of amendment or
otherwise), any change in the interpretation or administration of any law by any
governmental  authority,  or  compliance by Lender with any request or directive
(whether or not having the force of law) of any governmental  authority (each, a
"CHANGE OF LAW"):

                           (i) shall  subject  Lender to any tax,  duty or other
         charge  with  respect to any LIBOR Loan,  or shall  change the basis of
         taxation  of  payments  by  Borrower to Lender on such LIBOR Loan under
         this  Agreement  (except  for  changes in the rate of  taxation  on the
         overall net income of Lender); or

                           (ii)  shall  impose,  modify or hold  applicable  any
         reserve, special deposit or similar requirement against assets held by,
         deposits or other  liabilities  in or for the  account of,  advances or
         loans  by, or any other  acquisition  of funds by Lender  for any LIBOR
         Loan; or

                           (iii)  shall  impose  on Lender  any other  condition
         related to any LIBOR Loan;

and the  effect of any of the  foregoing  is to  increase  the cost to Lender of
making,  renewing,  or  maintaining  any such LIBOR Loan or to reduce any amount
receivable  by Lender  hereunder;  then Borrower  shall from time to time,  upon
demand by Lender,  pay to Lender  additional  amounts  sufficient  to  reimburse
Lender  for  such  increased  costs or to  compensate  Lender  for such  reduced
amounts.  A  certificate  as to the  amount of such  increased  costs or reduced
amounts,  submitted  by Lender to  Borrower  shall,  in the  absence of manifest
error, be conclusive and binding on Borrower for all purposes.

                  (b) If, after the date of this  Agreement,  Lender  determines
that (i) any Change of Law affects the amount of capital required or expected to
be maintained by Lender or any entity  controlling  Lender (a "CAPITAL  ADEQUACY
REQUIREMENT") and (ii) the amount of capital

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maintained by Lender or such entity which is  attributable  to or based upon the
extensions of credit under this  Agreement must be increased as a result of such
Capital  Adequacy  Requirement  (taking into account  Lender's or such  entity's
policies with respect to capital adequacy), Borrower shall pay to Lender or such
entity,  upon  demand of Lender,  such  amounts as Lender or such  entity  shall
determine are  necessary to  compensate  Lender or such entity for the increased
costs to Lender or such  entity of such  increased  capital.  A  certificate  of
Lender setting forth in reasonable  detail the computation of any such increased
costs,  delivered by Lender to Borrower shall, in the absence of manifest error,
be conclusive and binding on Borrower for all purposes.

                  (c) If on or prior to the first day of any Interest Period for
any LIBOR Loan:

                           (i) Lender determines,  which  determination shall be
         conclusive, that quotations of interest rates for the relevant deposits
         referred to in the  definition  of "LIBOR" in Section 3.1 are not being
         provided  in the  relevant  amounts  for the  relevant  maturities  for
         purposes of  determining  rates of interest for LIBOR Loans as provided
         in this Agreement, or

                           (ii) Lender determines,  which determination shall be
         conclusive,  that LIBOR will not adequately and fairly reflect the cost
         to Lender of making or  maintaining  any LIBOR  Loan for such  Interest
         Period,

then Lender shall give prompt notice of such  determination  to Borrower and, so
long as such  condition  remains  in  effect,  the  Lender  shall  be  under  no
obligation to make additional LIBOR Loans, to continue LIBOR Loans or to convert
Prime Rate Loans into LIBOR Loans,  and Borrower  shall, on the last day or days
of the then current Interest Period or Periods for the outstanding  LIBOR Loans,
either prepay such LIBOR Loans or convert such LIBOR Loans into Prime Rate Loans
in accordance with Section 2.3.

                  (d) Notwithstanding any other provision of this Agreement,  in
the event that it becomes unlawful or, by reason of a Change of Law,  impossible
for Lender to honor its obligation to make or maintain LIBOR Loans,  then Lender
shall promptly notify Borrower of such event and Lender's  obligation to make or
to continue  LIBOR Loans,  or to convert Prime Rate Loans into LIBOR Loans shall
be suspended until such time as Lender may again make and maintain LIBOR Loans.

                  (e) If all or a portion of the outstanding principal amount of
the Obligations  shall not be paid when due (whether at the stated maturity,  by
acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR
Loan,  shall  be  automatically  converted  to a Prime  Rate  Loan  on the  next
succeeding Business Day.

                  (f) The  Borrower  agrees  to  indemnify  and to  hold  Lender
(including  any  participant ) harmless from any loss or expense which Lender or
such  participant  may  sustain  or incur as a  consequence  of: (i) an Event of
Default due to Borrower's  failure to make payment of the principal amount of or
interest  on any LIBOR  Loans,  as and when the same shall be due and payable in
accordance with the terms of this Agreement,  including, but not limited to, any
such loss or expense  arising  from  interest or fees  payable by Lender or such
participant to lenders of

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<PAGE>

funds obtained by either of them in order to maintain the LIBOR Loans hereunder;
(ii)  default by the  Borrower in making a  borrowing  or  conversion  after the
Borrower has given a Notice of LIBOR  Borrowing;  (iii) any  prepayment of LIBOR
Loans  on a day  which is not the last  day of the  Interest  Period  applicable
thereto, including,  without limitation,  prepayments arising as a result of the
application  of the proceeds of  Collateral  to the  Revolving  Loans;  and (iv)
default by the  Borrower in making any  prepayment  after the Borrower had given
notice to Lender thereof.  The determination by Lender of the amount of any such
loss or expense, when set forth in a written notice to the Borrower,  containing
Lender's  calculations  thereof in reasonable detail, shall be conclusive on the
Borrower in the absence of manifest  error.  Calculation of all amounts  payable
under this  paragraph  with regard to LIBOR Loans shall be made as though Lender
had  actually  funded the LIBOR Loans  through  the  purchase of deposits in the
relevant market and currency,  as the case may be, bearing  interest at the rate
applicable  to such  LIBOR  Loans in an amount  equal to the amount of the LIBOR
Loans  and  having  a  maturity  comparable  to the  relevant  interest  period;
provided,  however,  that  Lender may fund each of the LIBOR Loans in any manner
Lender sees fit and the foregoing  assumption shall be used only for calculation
of amounts payable under this paragraph. In addition,  notwithstanding  anything
to the contrary contained herein,  Lender shall apply all proceeds of Collateral
and all other  amounts  received  by it from or on behalf  of the  Borrower  (A)
initially to the Prime Rate Loans and (B) subsequently to LIBOR Loans; provided,
however,  (1) upon the occurrence of an Event of Default or (2) in the event the
aggregate amount of outstanding Loans exceeds Net Availability or the applicable
maximum levels set forth therefor, Lender may apply all such amounts received by
it to the payment of  Obligations in such manner and in such order as Lender may
elect in its reasonable  business  judgment.  In the event that any such amounts
are applied to Revolving Loans which are LIBOR Loans,  such application shall be
treated  as a  prepayment  of  such  loans  and  Lender  shall  be  entitled  to
indemnification  hereunder.  This  covenant  shall survive  termination  of this
Agreement and payment of the outstanding Obligations.

         2.5  Accommodations.  Lender  may,  in its sole  discretion  reasonably
exercised,  issue or cause to be issued, from time to time at Borrower's request
and on terms and  conditions  and for purposes  satisfactory  to Lender,  credit
accommodations   consisting   of  letters  of  credit,   bankers'   acceptances,
merchandise   purchase   guaranties  or  other  guaranties  or  indemnities  for
Borrower's account ("ACCOMMODATIONS"). Any payments made by Lender in connection
with the Accommodations shall constitute additional Revolving Loans to Borrower.

SECTION 3.        INTEREST AND FEES

         3.1 Interest.

                  (a)  Interest  shall  accrue  on the  principal  amount of the
Revolving  Loans at the  following  rates:  (i) during such  periods as any such
Obligation is a Prime Rate Loan,  at a  fluctuating  rate per annum equal to the
per annum  rate set forth as the  Interest  Rate in  Section  10.3(A);  and (ii)
during such periods as any such  Obligation  is a LIBOR Loan,  for each Interest
Period, at the per annum rate set forth as the Interest Rate in Section 10.3(B).
The  Interest  Rate on all Prime Rate Loans  shall  increase  or  decrease by an
amount equal to each increase or decrease,  respectively,  in the Prime Rate (as
defined  below)  effective as of the date of each such  change.  Interest on all
Obligations  shall be calculated  upon the closing daily  outstanding  principal
balances in the loan  account(s) of Borrower for each day during the immediately

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preceding  month and shall be payable by Borrower on the first day of each month
and, in the case of LIBOR Loans,  additionally  on the last day of each Interest
Period. On and after any Event of Default or termination hereof, interest on all
Obligations shall accrue at a rate equal to two percent (2%) per annum in excess
of the Interest Rate otherwise  payable until such time as all  Obligations  are
paid in full. In no event shall charges  constituting  interest  exceed the rate
permitted  under any applicable law or regulation,  and if any provision of this
Agreement is in  contravention  of any such law or  regulation,  such  provision
shall be deemed amended to conform thereto.

                  (b) For  purposes  of this  Section  3.1 and each other  place
where such terms appear, the following terms shall have the respective  meanings
set forth below:

                  "EURODOLLAR BUSINESS DAY" shall mean any Business Day on which
         commercial  lending  institutions are open for  international  business
         (including dealings in United States Dollar deposits) in London.

                  "EUROCURRENCY RESERVE REQUIREMENTS" for any day, as applied to
         a LIBOR Loan,  shall mean the aggregate  (without  duplication)  of the
         maximum rates of reserve requirements (expressed as a decimal fraction)
         in effect with respect to Lender and/or any present or future lender or
         participant  on  such  day  (including,   without  limitation,   basic,
         supplemental, marginal and emergency reserves under Regulation D or any
         other  applicable  regulations of the Board of Governors of the Federal
         Reserve System or other governmental authority having jurisdiction with
         respect thereto,  as now and from time to time in effect,  dealing with
         reserve  requirements  prescribed for Eurocurrency  funding  (currently
         referred  to as  "Eurocurrency  Liabilities"  in  Regulation  D of such
         Board)  maintained  by  Lender  and/or  participants  (such  rate to be
         adjusted to the nearest one  sixteenth of one percent  (1/16 of 1%) or,
         if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
         the next higher one sixteenth of one percent (1/16 of 1%)).

                  "INTEREST  PERIOD" shall mean, with respect to any LIBOR Loan,
         a one month,  two month or three month  period  commencing  on the date
         such LIBOR Loan is made or the date on which any  Obligation  begins to
         bear  interest  based upon  LIBOR and  ending one month,  two months or
         three months  thereafter,  as applicable,  as the Borrower may elect in
         the applicable Notice of LIBOR Borrowing. Notwithstanding the foregoing
         (i)  no  Interest  Period  may  end  after  the  initial  Term  or,  if
         applicable,  any renewal  Term;  (ii) each  Interest  Period that would
         otherwise end on a day which is not a Eurodollar Business Day shall end
         on the  next  succeeding  Eurodollar  Business  Day or,  if  such  next
         succeeding  Eurodollar  Business  Day  falls  in  the  next  succeeding
         calendar  month, on the next preceding  Eurodollar  Business Day, (iii)
         any Interest Period that begins on the last Eurodollar  Business Day of
         a  calendar  month  (or on a day  for  which  there  is no  numerically
         corresponding  day in the calendar  month,  at the end of such Interest
         Period)  shall end on the last  Eurodollar  Business  Day of a calendar
         month,  and (iv) no  Interest  Period  for any LIBOR  Loan shall have a
         duration  of less than one month and,  if the  Interest  Period for any
         such LIBOR Loan would  otherwise be a shorter  period,  such LIBOR Loan
         shall not be available under this Agreement for such period.

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<PAGE>

                  "LIBOR" shall mean, at any time of determination,  and subject
         to availability,  for each applicable  Interest Period, a variable rate
         of interest equal to: (a) at Lender's election (i) the applicable LIBOR
         quoted  to  Lender  by The  Chase  Manhattan  Bank  (or  any  successor
         thereof),  or (ii) the rate of interest  determined  by Lender at which
         deposits in U.S.  dollars are offered for the relevant  Interest Period
         based on information  presented on Telerate  Systems at Page 3750 as of
         11:00  A.M.  (London  time) on the day which is two (2)  Business  Days
         prior to the first day of such Interest  Period,  provided  that, if at
         least two such offered rates appear on the Telerate System at Page 3750
         in respect of such Interest  Period,  the  arithmetic  mean of all such
         rates (as determined by Lender) will be the rate used; divided by (b) a
         number equal to 1.0 minus the aggregate  (but without  duplication)  of
         the rates  (expressed as a decimal  fraction) of  Eurocurrency  Reserve
         Requirements  in effect on the day which is two (2) Business Days prior
         to the beginning of such Interest Period.

                  "LIBOR LOANS" shall mean Revolving Loans that bear interest at
rates based on LIBOR.

                  "NOTICE OF LIBOR  BORROWING"  shall have the meaning  given to
         that term in Section 2.3 of this Agreement.

                  "PRIME  RATE" is the rate of interest  publicly  announced  by
         Chase  Manhattan  Bank in New York,  New York,  or its  successors  and
         assigns,  from  time  to  time  as  its  prime  rate  or  similar  such
         designation  (such  rate  is not  intended  to be the  lowest  rate  of
         interest charged by such bank to its borrowers).

                  "PRIME  RATE  LOANS"  shall mean loans that bear  interest  at
         rates based upon the Prime Rate.

         3.2 Fees. Borrower shall pay to Lender:

                  (a)  Closing  Fee. A closing  fee fully  earned and payable at
closing in the amount set forth in Section 10.3(D).

                  (b) Intentionally Deleted.

                  (c)  Collateral  Management  Fee. A collateral  management fee
fully  earned  and  payable at closing  and on each  anniversary  thereof in the
amount set forth in Section 10.3(f).

                  (d) Unused Line Fee. An unused  line fee payable  monthly,  on
the first day of each month,  in  arrears,  for each month at the rate per annum
set forth in Section 10.3(G),  calculated upon the amount,  if any, by which the
Unused Line Fee Basis exceeds the average  outstanding  daily principal  balance
during the preceding  month of all Revolving  Loans,  EXIM  Revolving  Loans and
Accommodations. The "Unused Line Fee Basis" means an amount equal to (i) for the
period  beginning  on the Closing  Date  through and  including  March 31, 2002,
$20,000,000,  (ii)  for the  period  beginning  on  April 1,  2002  through  and
including March 31, 2003, $22,500,000,  and (iii) beginning on April 1, 2003 and
at all times thereafter, the Maximum Credit.

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SECTION 4.        GRANT OF SECURITY INTEREST

         4.1 Grant of Security  Interest.  To secure the payment and performance
in full of all  Obligations,  Borrower  hereby  grants  to  Lender a  continuing
security interest in, and lien upon, the Collateral.

         4.2  "OBLIGATIONS"  shall  mean  any  and  all  Revolving  Loans,  EXIM
Revolving Loans and all other indebtedness, liabilities and obligations of every
kind,  nature and description owing by Borrower to Lender and/or its affiliates,
including principal,  interest,  charges, fees and expenses,  however evidenced,
whether as principal,  surety, endorser, guarantor or otherwise, whether arising
under this  Agreement or otherwise,  whether now existing or hereafter  arising,
whether arising before, during or after the initial or any renewal Term or after
the  commencement  of any case with respect to Borrower  under the United States
Bankruptcy Code or any similar statute, whether direct or indirect,  absolute or
contingent,  joint or several, due or not due, primary or secondary,  liquidated
or unliquidated, secured or unsecured, original, renewed or extended and whether
arising directly or howsoever acquired by Lender including from any other entity
outright,  conditionally or as collateral security,  by assignment,  merger with
any other entity,  participations  or interests of Lender in the  obligations of
Borrower to others,  assumption,  operation of law, subrogation or otherwise and
shall also include all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.

         4.3 "COLLATERAL" shall mean all of the following property of Borrower:

                  (a) All of the  Borrower's  now owned and hereafter  acquired:
(i) accounts (as defined in the UCC), and any and all other receivables (whether
or not specifically listed on schedules furnished to Lender), including, without
limitation,  all accounts  created by, or arising  from,  all of the  Borrower's
sales,  leases,  rentals of goods or  renditions  of services to its  customers,
including but not limited to, those accounts arising under any of the Borrower's
trade names or styles, or through any of the Borrower's divisions;  (ii) any and
all instruments,  documents, chattel paper (including electronic chattel paper);
(iii)  unpaid  seller's  or lessor's  rights  (including  rescission,  replevin,
reclamation,  repossession and stoppage in transit) relating to the foregoing or
arising therefrom; (iv) rights to any goods represented by any of the foregoing,
including rights to returned,  reclaimed or repossessed  goods; (v) reserves and
credit balances arising in connection with or pursuant hereto;  (vi) guarantees,
supporting  obligations,  payment intangibles and letter of credit rights; (vii)
insurance policies or rights relating to any of the foregoing; (viii) all rights
to payment,  including those arising in connection with bank and non-bank credit
cards and including any electronic media and software, pertaining to any and all
of the foregoing;  (ix) notes,  deposits or property of account debtors securing
the  obligations of any such account  debtors to the Borrower;  and (x) cash and
non-cash  proceeds  (as  defined  in the  UCC) of any  and all of the  foregoing
(herein "ACCOUNTS");

                  (b) All of the  Borrower's  now owned and  hereafter  acquired
inventory  (as  defined  in the  UCC) and  including,  without  limitation,  all
additions,  substitutions and replacements thereof,  wherever located,  together
with all  goods and  materials  used or  usable  in  manufacturing,  processing,
packaging  or shipping  same in all stages of  production  - from raw  materials
through work-in-process to finished goods - and all proceeds thereof of whatever
sort (herein "INVENTORY");

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<PAGE>

                  (c) to the  extent  related to the  license  granted to Lender
under  Section 7.2 or as  necessary,  appropriate  or desirable as determined by
Lender for the  disposition  of the  Accounts  and  Inventory,  all  present and
hereafter acquired general intangibles (as defined in the UCC);

                  (d) Intentionally Deleted.

                  (e) All present and future  documents  (as defined in the UCC)
and any and all warehouse receipts, bills of lading, shipping documents, chattel
paper,  instruments and similar documents, all whether negotiable or not and all
goods and Inventory  relating thereto and all cash and non-cash  proceeds of the
foregoing (herein "DOCUMENTS OF TITLE"); and

                  (f) All books and records of Borrower pertaining to any of the
foregoing.

SECTION 5.        COLLECTION AND ADMINISTRATION

         5.1  Collections.  Borrower  will,  at its expense as Lender  requests,
direct that all  remittances  and all other  proceeds of Collateral be sent to a
lock box  designated by Lender,  and deposited  into a bank account  selected by
Lender with arrangements with the bank providing that all funds deposited in the
bank account are to be  transferred  solely to Lender.  Borrower  shall bear all
risk of loss of any funds deposited into such account. In connection  therewith,
Borrower  shall execute such lock box  agreements as Lender shall  specify.  All
collections  and all other proceeds of Collateral  received by Borrower shall be
held in trust for Lender and immediately remitted to Lender in kind.

         5.2  Charges to Loan  Account.  At  Lender's  option,  all  payments of
principal,  interest,  fees,  costs,  expenses and other charges provided for in
this  Agreement,  or in any other  agreement now or hereafter  existing  between
Lender and Borrower,  may be charged on the date when due to any loan account of
Borrower maintained by Lender.  Interest,  fees for  Accommodations,  the Unused
Line Fee and any other  amounts  payable by  Borrower  to Lender  based on a per
annum  rate  shall be  calculated  on the basis of actual  days  elapsed  over a
360-day year.

         5.3 Payments.  All Obligations  shall be payable at Lender's Office set
forth in  Section  10.5(A)  or at such  other  place  as  Lender  may  expressly
designate in writing.  Lender shall apply all proceeds of Collateral received by
Lender and all other  payments in respect of the  Obligations  to the  Revolving
Loans or to any other  Obligations  then due, in whatever order or manner Lender
shall determine,  upon the date of Lender's receipt of advice from Lender's bank
that such  remittances or other payments have been credited to Lender's  account
or in the case of  remittances or other  payments  received  directly in kind by
Lender,  upon the date of Lender's deposit thereof at Lender's bank,  subject to
final payment and collection.  In consideration thereof,  Lender will charge the
Borrower's  account with Collection Days which shall mean the number of days set
forth in Section 10.3(C) to provide for the deposit, clearance and collection of
checks or other instruments representing the proceeds of Collateral,  the amount
of which  has been  credited  to the  Borrower's  loan  account,  and for  which
interest may be charged on the aggregate  amount of such  deposits,  at the rate
provided for in Section 10.3(a). For purposes of this Agreement,  "BUSINESS DAY"
shall mean any day on which Lender and Lender's banks are open.

                                      -9-
<PAGE>

         5.4 Loan Account Statements.  Lender shall, monthly, render to Borrower
a loan  account  statement  which shall be  considered  correct and binding upon
Borrower as an account stated, except to the extent that Lender receives, within
ninety  (90) days  after the  mailing of such  statement,  written  notice  from
Borrower of any specific exceptions to that statement.

         5.5  Direct  Collections.  Lender  may,  at any  time,  (a)  after  the
occurrence  of an Event of Default  (unless such Event of Default has been cured
to the extent permitted hereunder),  notify any account debtor that the Accounts
and other Collateral have been assigned to Lender and that payment thereof is to
be made to the order of and directly to Lender, (b) send, or cause to be sent by
its  designee,  requests  (which may  identify  the sender by a  pseudonym)  for
verification  by  telephone,  in  writing or  otherwise  of  Accounts  and other
Collateral  directly  to any account  debtor or any other  obligor or any bailee
with respect  thereto,  (c) after the occurrence of an Event of Default  (unless
such Event of Default has been cured to the extent permitted hereunder), demand,
collect or enforce payment of any Accounts or such other Collateral, but without
any duty to do so, and Lender  shall not be liable for any failure to collect or
enforce payment thereof, (d) after the occurrence of an Event of Default (unless
such Event of Default has been cured to the extent permitted hereunder), take or
bring,  in the name of Lender or  Borrower,  all actions,  suits or  proceedings
deemed by Lender  necessary  or  desirable  to  effect  collection  of, or other
realization upon, the Collateral,  and (e) after an Event of Default, (i) change
the  address  for  delivery  of  Borrower's  mail and to  receive  and open mail
addressed  to Borrower  and (ii) extend the time of payment  of,  compromise  or
settle  (for  cash,  credit,  return  of  merchandise),  and upon  any  terms or
conditions,  any and all Accounts or other  Collateral  and discharge or release
the account  debtor or other  obligor.  At Lender's  request,  all  invoices and
statements sent to any account debtor, other obligor or bailee, shall state that
the  Accounts  and such other  Collateral  have been  assigned to Lender and are
payable directly and only to Lender.

         5.6  Attorney-in-Fact.  Borrower  hereby  appoints Lender as Borrower's
attorney-in-fact and authorizes Lender at Borrower's sole expense to exercise at
any time in Lender's discretion reasonably exercised all or any powers necessary
for Lender to obtain  information  about the  Collateral or to enforce  Lender's
rights  which  appointment  and  authorization  shall be  irrevocable  until the
Obligations  have been paid in full and  Lender  has no  further  obligation  to
provide financial accommodations to Borrower.

         5.7 Liability.  Borrower  hereby  releases and exculpates  Lender,  its
officers,  agents and employees  from any liability  arising from any acts under
this Agreement or in furtherance  thereof except for gross negligence or willful
misconduct.  Lender will not have any  liability to Borrower for lost profits or
other special or consequential damages.

         5.8  Administration  of  Accounts.  After  written  notice by Lender to
Borrower or without  notice  after an Event of Default,  Borrower  shall not (a)
amend, modify,  settle or compromise any of the Accounts,  (b) release, in whole
or in part,  any account  debtor or other  person  liable for the payment of any
other Collateral or (c) grant any credits,  discounts,  allowances,  deductions,
return  authorizations  or the like with  respect  to any  Account  or any other
Collateral.

         5.9 Documents. Borrower shall deliver to Lender, as Lender may request,
all  documents,  schedules,  invoices,  proofs  of  delivery,  purchase  orders,
statements,  contracts and all

                                      -10-

<PAGE>

other  information  evidencing  or  relating  to the  Collateral,  in  form  and
substance  satisfactory  to Lender and duly executed by Borrower.  Borrower will
promptly report to Lender all credits, discounts, allowances, deductions, return
authorizations  or the like.  In no event  shall any  schedule  or  confirmatory
assignment  (or the absence  thereof or omission of any of the Accounts or other
Collateral  therefrom) limit or in any way be construed as a waiver,  limitation
or modification of the security interests or rights of Lender or the warranties,
representations and covenants of Borrower under this Agreement.

         5.10 Access.  Lender shall have access (a) upon 2 Business Days written
notice from Lender to Borrower and during  reasonable  business hours (absent an
Event of Default) and (b) after an Event of Default  (unless cured to the extent
permitted  hereunder)  at any time during  normal  business  hours to all of the
premises  where  Collateral is located for the purposes of inspecting or copying
the Collateral,  and Borrower's books and records. Lender, at no charge, may use
such of Borrower's personnel, equipment, including computer equipment, programs,
printed  output and  computer  readable  media,  supplies  and  premises for the
collection of Accounts and  realization  on other  Collateral.  Borrower  hereby
authorizes all  accountants and third parties to disclose and deliver to Lender,
at  Borrower's  expense,  all  financial  information,  books and records,  work
papers,  management reports and other information in their possession  regarding
Borrower which  authorization  shall be irrevocable  until the Obligations  have
been paid in full and  Lender  has no further  obligation  to provide  financial
accommodations to Borrower.

SECTION 6.        ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS

         Borrower  hereby  represents,  warrants  and  covenants  to Lender  the
following,  the truth and accuracy of which, and compliance with which, shall be
continuing  conditions of the making of loans or other credit  accommodations by
Lender to Borrower:

         6.1 Financial and Other Reports.  Borrower shall: (a) keep and maintain
its  books  and  records  in  accordance  with  generally  accepted   accounting
principles,  consistently applied; (b) at its expense on or before the fifteenth
(15th) day of each month, deliver to Lender (i) true and complete monthly agings
of its Accounts and accounts payable;  (ii) monthly Inventory reports; and (iii)
internally  prepared interim financial  statements  consisting of a statement of
profit and loss, a balance sheet and statement of cash flow;  (c) within 45 days
of the end of each  fiscal  quarter but  concurrent  with  Borrower's  quarterly
filings with the  Securities  and  Exchange  Commission,  Borrower's  internally
prepared  financial  statements  consisting of a statement of profit and loss, a
balance  sheet and statement of cash flow;  (d) annually,  as soon as available,
but in no event later than ninety (90) days after the end of  Borrower's  fiscal
year, deliver audited financial  statements  consisting of a statement of profit
and loss, a balance sheet and statement of cash flow  accompanied  by the report
and opinion  thereon of  independent  certified  public  accountants  reasonably
acceptable to Lender;  (e) promptly upon request,  provide  financial  statement
projections  consisting  of a statement of profit and loss, a balance  sheet and
statement  of cash flow in a format  reasonably  acceptable  to Lender;  and (f)
promptly notify Lender in writing of any loss,  damage,  investigation,  action,
suit,  proceeding or claim  relating to a material  portion of the Collateral or
which may result in any material adverse change in Borrower's business,  assets,
liabilities or condition,  financial or otherwise. All of the foregoing shall be
in such form,  and  together  with such  information,  as Lender may  reasonably
request.

                                      -11-
<PAGE>

         6.2 Books and  Records.  Borrower's  (a) books and  records  concerning
Accounts and its chief executive  office are and shall be maintained only at the
address set forth in Section  10.5(c),  and (b) other places of business and the
only other locations of Collateral  (including,  without limitation,  Borrower's
Inventory),  are and  shall be at the  addresses  set forth in  Section  10.5(e)
hereof,  except  Borrower  may  change  such  locations  or open a new  place of
business after thirty (30) days prior written  notice to Lender.  Borrower shall
execute and  deliver,  or cause to be  executed  and  delivered,  to Lender such
financing  statements,  amendments and other agreements as Lender may reasonably
require.

         6.3 Title; Liens. Borrower has, and at all times will continue to have,
good and marketable title to all of the Collateral, free and clear of all liens,
security interests, claims or encumbrances of any kind except in favor of Lender
or as set forth on Schedule A hereto.

         6.4  Disposition of Assets.  Borrower shall not directly or indirectly:
(a) sell, lease, transfer,  assign or otherwise dispose of any Collateral or any
material  portion of its other  assets  (other  than sales of  Inventory  in the
ordinary course of business);  (b) consolidate  with, or merge with or into, any
other  entity or permit any other  entity to  consolidate  with or merge with or
into Borrower;  or (c) form or acquire any interest in any firm,  corporation or
other  entity;  provided  that if no Event of Default has  occurred  unless such
Event of Default  has been cured to the extent  permitted  herein  Borrower  may
undertake  acquisitions  of other business  entities within the same industry as
Borrower  without  Lender's prior written  approval,  so long as (i) immediately
after  giving  effect  to  such   acquisition,   Borrower's   Aggregate   Excess
Availability  plus  unrestricted and unencumbered  (other than liens in favor of
Lender) cash equivalents and cash (in U.S. Dollars in domestic bank accounts) of
the Borrower and its subsidiaries is no less than $7,500,000,  (ii) the proforma
financial   projections  (which  shall  be  in  form  and  substance  reasonably
acceptable to the Lender) of the Borrower and its subsidiaries on a consolidated
basis after giving  effect to any such  acquisition  reflects  that the proforma
consolidated unrestricted and unencumbered (other than liens in favor of Lender)
cash  equivalents  and cash (in U.S.  Dollars in domestic bank  accounts) of the
Borrower and its subsidiaries plus the Borrower's  Aggregate Excess Availability
will be positive over the 12 months immediately  following the completion of any
such  acquisition,  and  (iii)  Borrower  executes  any  and  all  documents  or
agreements  or performs such acts as Lender may  reasonably  require to preserve
Lender's  perfected first priority  security  interest in the assets of Borrower
and its rights and remedies under this Agreement and applicable law.

         6.5  Insurance.  Borrower  shall at all times  maintain,  with insurers
reasonably  acceptable  to  Lender,   adequate  insurance  (including,   without
limitation,  at the  option of  Lender,  flood  insurance)  with  respect to the
Collateral  and other assets.  All insurance  shall be in such form,  substance,
amounts and  coverage  as may be  satisfactory  to Lender and shall  provide for
thirty (30) days' prior written notice to Lender of cancellation or reduction of
coverage. Lender may adjust or settle any claim or other matter under or arising
pursuant to such insurance on the Collateral. Borrower shall provide evidence of
such insurance and a lender's loss payable  endorsement  satisfactory to Lender.
Lender may obtain, at Borrower's expense, such insurance should Borrower fail to
do so.  Borrower  shall deliver to Lender all proceeds of insurance  received by
Borrower on the Collateral.  Lender may apply any insurance proceeds received to
the cost of repairs to, or replacement  of, any Collateral  and/or,  at Lender's
option,  to payment of or as security for any of the Obligations in any order or
manner as Lender determines.

                                      -12-
<PAGE>

         6.6 Compliance With Laws.  Borrower is, and at all times will, continue
to be  in  material  compliance  with  the  requirements  of  all  laws,  rules,
regulations and orders of any governmental  authority  relating to its business.
All  of  Borrower's   Inventory   shall  be  produced  in  accordance  with  the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto.  Borrower shall pay and discharge
all  taxes,  assessments  and  governmental  charges  against  Borrower  or  any
Collateral when due,  unless the same are being contested in good faith.  Lender
may establish  Reserves for the amount  contested and penalties which may accrue
thereon.  Borrower  shall not be deemed to have  breached any  provision of this
Section 6.6 if (i) the failure to comply with the  requirements  of this Section
6.6 resulted from good faith error or innocent omission,  (ii) Borrower promptly
commences and diligently  pursues a cure of such breach,  and (iii) such failure
is cured  within  (30)  days  following  Borrower's  receipt  of  notice of such
failure,  or if such  breach  cannot in good faith be cured  within  thirty (30)
days,  then such breach is cured within a  reasonable  time frame based upon the
extent and nature of the breach and the necessary remediation, and in conformity
with any applicable consent order, consensual agreement and applicable law.

         6.7 Accounts.  All  statements  made and all unpaid  balances and other
information  appearing  in the  invoices,  agreements,  proofs of  rendition  of
services and delivery of goods and other documentation relating to the Accounts,
and all confirmatory assignments, schedules, statements of account and books and
records with respect thereto, are true and correct and in all respects what they
purport to be.

         6.8  Equipment.  Borrower  shall keep its  equipment  in good order and
repair, ordinary wear and tear excepted.

         6.9  Financial  Covenants.  Borrower  shall  maintain  positive  EBITDA
measured  quarterly and  calculated on a trailing four quarter  basis;  provided
that the above EBITDA requirement shall only be tested as of the end of a fiscal
quarter if, at any time in the following  fiscal quarter,  the sum of Borrower's
unrestricted  and  unencumbered  (other  than  liens in favor  of  Lender)  cash
equivalents and cash (in U.S. Dollars in domestic bank accounts) plus Borrower's
Aggregate Excess Availability was less than $7,500,000.  "EBITDA" for any fiscal
period of Borrower means the net income of Borrower for such fiscal period, plus
interest  expense,  depreciation and amortization and provision for income taxes
for such fiscal period, and minus  non-recurring  miscellaneous  income and plus
non-recurring and non-cash miscellaneous  expenses, all calculated in accordance
with generally accepted accounting principles.

         6.10   Affiliated   Transactions.   Borrower  will  not,   directly  or
indirectly:  (a) lend or  advance  money or  property  to,  guarantee  or assume
indebtedness of, or invest (by capital contribution or otherwise) in any person,
firm,  corporation or other entity; (b) declare,  pay or make any cash dividend,
redemption or other cash  distribution  on account of any shares of any class of
stock of  Borrower  now or  hereafter  outstanding;  (c) make any payment on the
principal  amount of, or interest  on, any  indebtedness  owing to any  officer,
director,  shareholder, or affiliate of Borrower; (d) make any loans or advances
to any officer, director, employee, shareholder or affiliate of Borrower; or (e)
enter into any sale,  lease or other  transaction  with any  officer,  director,
employee,  shareholder or affiliate of Borrower on terms that are less favorable
to Borrower  than those which might be obtained at the time from persons who are
not an officer, director, employee, shareholder or affiliate of Borrower.

                                      -13-
<PAGE>

         6.11 Fees and Expenses.  Borrower  shall pay, on Lender's  demand,  all
reasonable costs, expenses, filing fees and taxes payable in connection with the
preparation,   execution,  delivery,  recording,   administration,   collection,
liquidation,  enforcement and defense of the Obligations, Lender's rights in the
Collateral,  this  Agreement  and all other  existing and future  agreements  or
documents  contemplated  herein or related  hereto,  including  any  amendments,
waivers,  supplements or consents which may hereafter be made or entered into in
respect  hereof,  or in any way  involving  claims or defenses  asserted  by, or
against, Lender, including, but not limited to, the following: (a) all filing or
recording  taxes and fees,  documentary  taxes,  intangibles  taxes and mortgage
recording taxes and fees; (b) all title insurance and other insurance  premiums,
appraisal fees, fees incurred in connection with any environmental report, audit
or survey and search fees;  (c) all fees as then in effect  relating to the wire
transfer of loan  proceeds  and other funds and fees then in effect for returned
checks and credit reports;  (d) all reasonable expenses and costs heretofore and
from time to time  hereafter  incurred  by Lender  during the course of periodic
field examinations of the Collateral and Borrower's  operations  including field
examiner travel, food and lodging,  plus a per diem charge at the rate set forth
in Section 10.3(h) for Lender's  examiners in the field and office;  and (e) the
reasonable  costs,  disbursements  and fees of in-house  and outside  counsel to
Lender,  including  but not limited to such  reasonable  fees and  disbursements
incurred as a result of a workout, restructuring,  reorganization,  liquidation,
insolvency  proceeding or litigation between the parties hereto, any third party
and in any appeals arising therefrom.

         6.12 Further  Assurances.  At the request of Lender, at Borrower's sole
expense,  Borrower  shall  execute  and  deliver,  or cause to be  executed  and
delivered,  to Lender such  agreements,  documents  and  instruments,  including
waivers,  consents and subordination agreements from mortgagees or other holders
of security  interests or liens,  landlords  or bailees,  and do, or cause to be
done, such further acts as Lender, in its discretion reasonably exercised, deems
necessary to effectuate the provisions and purposes of this Agreement.  Borrower
hereby  authorizes  Lender to file  financing  statements or amendments  against
Borrower in favor of Lender with respect to the  Collateral  without  Borrower's
signature and to file as financing statements any carbon,  photographic or other
reproduction of this Agreement.  Without limiting the foregoing,  the obligation
of Lender to make the  initial  advance  hereunder  is subject  to,  among other
things, the delivery or satisfaction in Lender's discretion reasonably exercised
of each of the following conditions, agreements and documents as applicable: (a)
a blocked or Lender bank account established for the proceeds of Collateral; (b)
the EXIM Loan Agreement has been executed by all the parties thereto and all the
conditions precedent therein have been satisfied; (c) Lender shall have received
the written  waiver of the  Export-Import  Bank with  respect to such matters as
Lender deems necessary or  appropriate;  (d) all  Export-Import  Bank approvals,
guaranties,  waivers  and  other  documentation  shall  have been  executed  and
delivered  by all  parties  thereto  and  Lender  shall  be  satisfied  that the
Export-Import  Bank Working Capital  Guarantee Program is in effect with respect
to the Exim Revolving  Loans;  (e) on a best efforts basis,  landlord waivers on
all of Borrower's  domestic leased locations;  (f) first priority lien on all of
the Collateral; (g) perfection in consigned Inventory to the extent requested by
Lender;  (h) the  Lender's  satisfaction  with the  financial  condition  of the
Borrower and an updated  examination  of the books and records of the  Borrower;
(i) the  absence of any  material  adverse  change in the  financial  condition,
business, prospects,  profitability,  assets (including, without limitation, the
Collateral)  or  operations  of the Borrower as determined by Lender in its sole
discretion

                                      -14-

<PAGE>

reasonably  exercised;  and (j) receipt by the Borrower of the proceeds from the
secondary common stock offering, which became effective on February 16, 2001.

         6.13 Environmental  Condition.  None of Borrower's properties or assets
has ever been designated or identified pursuant to any environmental  protection
statute as a hazardous waste or hazardous substance disposal site or a candidate
for closure pursuant to any environmental  protection  statute.  No lien arising
under any  environmental  protection  statute has attached to any revenues or to
any real or personal  property  owned by  Borrower.  Borrower has not received a
summons,  citation, notice or directive from the Environmental Protection Agency
or any other  federal  or state  governmental  agency  concerning  any action or
omission by Borrower  resulting  in the  releasing,  or  otherwise  exposing of,
hazardous waste or hazardous  substances into the environment.  Borrower is, and
will  continue to be, in material  compliance  with all  statutes,  regulations,
ordinances and other legal requirements  pertaining to the production,  storage,
handling, treatment, release,  transportation or disposal of any hazardous waste
or hazardous substance.

         6.14 State of Incorporation.  If Borrower is a corporation,  it is duly
organized,  existing and in good standing  under the laws of the state set forth
in Section 10.5(F).

SECTION 7.        EVENTS OF DEFAULT AND REMEDIES

         7.1 Events of Default.  All  Obligations  shall be immediately  due and
payable,  without  notice or demand,  and any provisions of this Agreement as to
future loans and credit accommodations by Lender shall terminate  automatically,
upon the  termination of this Agreement or, at Lender's  option,  upon or at any
time  after the  occurrence  or  existence  of any one or more of the  following
"EVENTS OF DEFAULT":

                  (a)  Borrower  fails to pay  when  due any of the  Obligations
within five (5) Business  Days of the due date  thereof;  provided  that nothing
contained  herein  shall  prohibit  Lender  from  charging  such  amounts to the
Borrower's loan account on the due date thereof;

                  (b) Breach by  Borrower  of any  warranty,  representation  or
covenant contained herein or in any other written agreement between Borrower and
Lender (other than the Exim Loan  Agreement),  provided  that, in the absence of
fraud, conversion and gross misrepresentation, such breach by Borrower of any of
the warranties,  representations  or covenants referred in this clause (b) shall
not be deemed to be an Event of  Default  unless  and until  such  breach  shall
remain  unremedied to Lender's  satisfaction  for a period of seven (7) Business
Days from the date of such breach;

                  (c) Intentionally Deleted.

                  (d) Any  judgment or  judgments  aggregating  in excess of the
amount set forth in Section  10.5 (G) except to the extent  such  judgments  are
fully covered by insurance  without a reservation of rights or any injunction or
attachment is obtained against Borrower,  which remains unstayed for a period of
ten (10) days (provided  that such period shall be extended  during such time as
any  such  judgment  is  being  contested  in  good  faith  and  by  appropriate
proceedings  so long as there has been no execution on any of Borrower's  assets
by the judgment creditor);

                                      -15-
<PAGE>

                  (e) Borrower ceases to exist or the usual business of Borrower
ceases or is suspended;

                  (f) Any  acquisition  by any  group  of  persons  (within  the
meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
or by any person,  of beneficial  ownership (within the meaning of Rule 13d-3 of
the Exchange Act),  directly or  indirectly,  of more than 50% of the issued and
outstanding  capital stock of Borrower having the right to vote for the election
of  directors  of  Borrower;  or more than  one-third  of the  persons  who were
directors of Borrower on the first day of any period  consisting  of twelve (12)
consecutive  calendar  months  (the first of which  twelve  (12)  month  periods
commencing  on the  first day of the  month  during  which  this  Agreement  was
executed), cease, for any reason other that death or disability, to be directors
of  Borrower,  and the  board of  directors  as  thereafter  constituted  is not
reasonably acceptable to Lender;

                  (g) Borrower  becomes  insolvent,  makes an assignment for the
benefit  of  creditors,  makes or sends  notice  of a bulk  transfer  or calls a
general meeting of its creditors or principal creditors;

                  (h) Any  petition  or  application  for any  relief  under the
bankruptcy  laws of the United  States now or  hereafter  in effect or under any
insolvency, reorganization,  receivership,  readjustment of debt, dissolution or
liquidation  law or  statute  of any  jurisdiction  now or  hereafter  in effect
(whether at law or in equity) is filed by or against Borrower, provided that any
such petition or application filed against Borrower shall not be deemed an Event
of Default if such proceeding is controverted within ten (10) days and dismissed
and vacated  within thirty (30) days of  commencement,  except in the event that
any of the actions sought in any such  proceeding  shall occur or Borrower shall
take action to authorize or effect any of the actions in any such proceeding;

                  (i) The indictment of Borrower  under any criminal  statute or
the commencement of (A) any criminal  proceedings  against Borrower or (B) civil
proceedings (under the Racketeer Influenced and Corrupt Organizations  statutes,
18 U.S.C.  ss.1961  et seq.)  against  Borrower  pursuant  to which  statute  or
proceedings the penalties or remedies sought or available include  forfeiture of
any  of  the  property  of  Borrower  which  forfeiture  Lender  believes  could
reasonably  be  expected  to have a  material  adverse  effect  on either of the
following:  (x)  Borrower's  business or (y)  Collateral  with a market value in
excess of $250,000;

                  (j) Any  default  or event of  default  occurs  on the part of
Borrower under any material agreement,  document or instrument to which Borrower
is a party or by which Borrower or any of its property is bound which default or
event of  default  Lender  believes  may have a material  adverse  effect on the
Collateral or Borrower's business; or

                  (k) Any Event of Default  under,  and as defined  in, the EXIM
Loan Agreement shall occur.

         7.2  Remedies.  Upon the  occurrence  of an Event of Default and at any
time thereafter,  Lender shall have all default rights and remedies  provided in
this Agreement,  any other agreements  between Borrower and Lender,  the Uniform
Commercial  Code (the "UCC") and

                                      -16-

<PAGE>

other applicable law, all of which rights and remedies may be exercised  without
notice to Borrower  (except as otherwise  required by applicable  law), all such
notices  being hereby  waived,  except such notice as is expressly  provided for
hereunder or is not waivable  under  applicable  law. All rights and remedies of
Lender  are  cumulative  and not  exclusive  and are  enforceable,  in  Lender's
discretion,  alternatively,  successively,  or  concurrently  on any one or more
occasions and in any order Lender may determine. Without limiting the foregoing,
Lender may (a) accelerate the payment of all  Obligations  and demand  immediate
payment  thereof,  (b) with or without judicial process or the aid or assistance
of others,  enter upon any premises on or in which any of the  Collateral may be
located  and  take   possession  of  the  Collateral  or  complete   processing,
manufacturing  and repair of all or any portion of the  Collateral,  (c) require
Borrower,  at Borrower's  expense,  to assemble and make available to Lender the
Collateral at any place and time designated by Lender,  (d) collect,  foreclose,
receive,  appropriate,  setoff and realize  upon any or all  Collateral,  or (e)
sell,  lease,  transfer,  assign,  or otherwise dispose of any or all Collateral
(including,  without limitation,  entering into contracts with respect thereto),
by public or private sales at any exchange, broker's board, any office of Lender
or  elsewhere) at such prices  and/or terms as Lender may deem  reasonable,  for
cash,  upon credit or for future  delivery,  with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all of
the  foregoing  being free from any right or equity of  redemption  of Borrower,
which right or equity of redemption is hereby  expressly  waived and released by
Borrower. If any of the Collateral is sold or leased by Lender upon credit terms
or for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally  collected by Lender. If notice of disposition
of  Collateral  is  required  by law,  ten (10) days  prior  notice by Lender to
Borrower  designating  the time and place of any  public  sale or the time after
which any private sale or other  intended  disposition  of  Collateral  is to be
made,  shall be deemed to be reasonable  notice thereof and Borrower  waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks  recovery of any  Collateral  by way of  prejudgment  remedy,  Borrower
waives the  posting of any bond which might  otherwise  be  required.  Lender is
hereby  granted a license  or other  right to use,  without  charge,  Borrower's
labels,  patents,  copyrights,  rights  of  use  of  any  name,  trade  secrets,
tradenames, trademarks and advertising matter, or any intellectual property of a
similar nature as it pertains to the  Collateral,  in  advertising  for sale and
selling,  collecting on or otherwise  disposing of any Collateral and Borrower's
rights under all licenses and all franchise  agreements  shall inure to Lender's
benefit.

         7.3  Application  of  Proceeds.  Lender may apply the cash  proceeds of
Collateral  received  by  Lender  from any  sale,  lease,  foreclosure  or other
disposition of the Collateral to payment of any of the Obligations,  in whole or
in part,  and in such  order as  Lender  may  elect,  whether  or not then  due.
Borrower  shall  remain  liable  to Lender  for the  payment  of any  deficiency
together with interest at the highest rate provided for herein and all costs and
expenses of collection or enforcement,  including reasonable attorneys' fees and
legal expenses.

         7.4 Lender's Cure of Third Party Agreement Default.  Lender may, at its
option,  cure any default by Borrower  under any agreement with a third party or
pay or bond on appeal any judgment  entered against  Borrower,  discharge taxes,
liens,  security  interests  or other  encumbrances  at any time  levied  on, or
existing with respect to, the Collateral  and pay any amount,  incur any expense
or perform any act which, in Lender's sole judgment, is necessary or appropriate
to preserve,  protect, insure, maintain, or realize upon the Collateral.  Lender
may charge Borrower's loan account for any amounts so expended,  such amounts to
be repayable by

                                      -17-
<PAGE>

Borrower on demand.  Lender  shall be under no  obligation  to effect such cure,
payment,  bonding or  discharge,  and shall not,  by doing so, be deemed to have
assumed any obligation or liability of Borrower.

SECTION 8.        JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS

         8.1 JURY TRIAL  WAIVER.  BORROWER  AND LENDER  EACH WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING  INSTITUTED BY EITHER OF THEM AGAINST
THE OTHER WHICH PERTAINS  DIRECTLY OR INDIRECTLY TO THIS AGREEMENT.  IN NO EVENT
WILL  LENDER  BE LIABLE  FOR LOST  PROFITS  OR OTHER  SPECIAL  OR  CONSEQUENTIAL
DAMAGES.

         8.2 Counterclaims.  Borrower waives all rights to interpose any claims,
deductions,  setoffs or counterclaims of any kind,  nature or description in any
action or proceeding  instituted by Lender with respect to this  Agreement,  the
Obligations, the Collateral or any matter arising therefrom or relating thereto,
except compulsory counterclaims.

         8.3 Jurisdiction.  Borrower hereby irrevocably  submits and consents to
the  nonexclusive  jurisdiction  of the State and Federal  Courts located in the
State in which the office of Lender designated in Section 10.5(a) is located and
any other State where any  Collateral  is located  with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto.  In any such action or proceeding,
Borrower waives  personal  service of the summons and complaint or other process
and papers  therein  and agrees  that the  service  thereof  may be made by mail
directed  to Borrower at its chief  executive  office set forth  herein or other
address thereof of which Lender has received notice as provided herein,  service
to be deemed  complete five (5) days after  mailing,  or as permitted  under the
rules of either of said  Courts.  Any such  action or  proceeding  commenced  by
Borrower against Lender will be litigated only in a Federal Court located in the
district,  or a State  Court in the State  and  County,  in which the  office of
Lender  designated  in  Section  10.5(A)  is  located  and  Borrower  waives any
objection based on FORUM NON CONVENIENS and any objection to venue in connection
therewith.

         8.4 No Waiver by Lender.  Lender shall not, by any act, delay, omission
or otherwise,  be deemed to have expressly or impliedly waived any of its rights
or remedies  unless such waiver shall be in writing and signed by an  authorized
officer of Lender. A waiver by Lender of any right or remedy on any one occasion
shall not be construed as a bar to, or waiver of, any such right or remedy which
Lender would otherwise have on any future  occasion,  whether similar in kind or
otherwise.

SECTION 9.        TERM OF AGREEMENT; MISCELLANEOUS

         9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall  continue in full force and effect for
a term set  forth in  Section  10.6  from the date  hereof  and  shall be deemed
automatically  renewed, as of the end of the initial or any renewal term (each a
"TERM"),  based on the same terms and provisions  for successive  terms of equal
duration  thereafter  unless terminated by either party giving the other written

                                      -18-

<PAGE>

notice at least  sixty (60)  days'  prior to the end of the then  current  Term.
Neither this Agreement nor the EXIM Loan Agreement may be terminated singly.

         9.2  Termination.  Borrower may also terminate this Agreement by giving
Lender at least sixty (60) days prior written  notice and payment in full of all
of the Obligations as provided herein, including any unpaid fees. If termination
is other  than at the end of a Term,  than  Borrower  shall  also pay Lender the
Early  Termination  Fee set forth in Section  10.3(I)  hereof.  Sixty days after
receipt of such early termination notice, Lender need not make any further loans
or accommodations.  Lender shall also have the right to terminate this Agreement
at any time  upon or after  the  occurrence  of an Event of  Default.  If Lender
terminates  this  Agreement upon or after the occurrence of an Event of Default,
Borrower shall pay Lender  forthwith,  in full, all  Obligations,  including the
Early  Termination  Fee,  and any unpaid fees.  Notwithstanding  anything to the
contrary herein, the Borrower shall not be required to pay the Early Termination
Fee if (a) no Event of Default has  occurred and is  continuing  at the time the
Obligations  are paid in full and (b) the funds utilized to pay the  Obligations
in full are (i) the  proceeds  of a public  offering  of the  stock of  Borrower
and/or (ii) from cash not obtained through a refinancing.

         9.3 Termination  Indemnity Deposit.  Upon termination of this Agreement
by Borrower,  as  permitted  herein,  in addition to payment of all  Obligations
which are not contingent,  Borrower shall deposit such amount of cash collateral
as Lender  determines is necessary to secure Lender from loss,  cost,  damage or
expense,  including  reasonable  attorneys'  fees, in  connection  with any open
Accommodations or remittance items or other payments  provisionally  credited to
the  Obligations  and/or  to  which  Lender  has  not  yet  received  final  and
indefeasible payment.

         9.4 Notices.  Except as otherwise provided,  all notices,  requests and
demands  hereunder  shall be (a) made to  Lender  at its  address  set  forth in
Section  10.5(A)  and to  Borrower  at its chief  executive  office set forth in
Section  10.5(C),  or to such other  address as either  party may  designate  by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by facsimile,
immediately  upon  receipt;  if by  overnight  delivery  service,  one day after
dispatch; and if by first class or certified mail, three (3) days after mailing.

         9.5  Severability.  If any  provision  of this  Agreement is held to be
invalid or  unenforceable,  such provision  shall not affect this Agreement as a
whole but this  Agreement  shall be  construed  as though it did not contain the
particular provision held to be invalid or unenforceable.

         9.6 Entire Agreement; Amendments;  Assignments. This Agreement contains
the entire  agreement of the parties as to the subject matter hereof,  all prior
commitments,  proposals and  negotiations  concerning  the subject matter hereof
being merged herein.  Neither this  Agreement nor any provision  hereof shall be
amended,  modified or discharged,  orally or by course of conduct, but only by a
written  agreement  signed by an authorized  officer of Lender.  This  Agreement
shall be binding upon,  and inure to the benefit of, each of the parties  hereto
and their  respective  successors  and assigns,  except that any  obligation  of
Lender under this Agreement  shall not be assignable nor inure to the successors
and assigns of Borrower.

                                      -19-
<PAGE>

         9.7  Discharge of Borrower.  No  termination  of this  Agreement  shall
relieve or discharge Borrower of its Obligations,  grants of Collateral,  duties
and  covenants  hereunder or  otherwise  until such time as all  Obligations  to
Lender have been indefeasibly paid and satisfied in full.

         9.8 Usage.  All terms used  herein  which are  defined in the UCC shall
have the meanings given therein unless  otherwise  defined in this Agreement and
all  references  to the singular or plural  herein shall also mean the plural or
singular, respectively.

         9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the office of Lender set forth in
Section 10.5(a) below is located.

SECTION 10.         ADDITIONAL DEFINITIONS AND TERMS

         10.1

                 (a)  Maximum Credit (including
                      any sums advanced under the
                      EXIM Loan Agreement):               $25,000,000

                 (b)  Gross Availability Formulas:

                      Eligible  Accounts  Percentage:   85%  provided  that  the
                      Dilution  Percentage  does not  exceed  5%.  The  Dilution
                      Percentage is the sum of Borrower's  credits,  allowances,
                      discounts,  write-offs,  contra-accounts  and  offsets and
                      deductions  which reduce the value of Accounts  divided by
                      gross   invoices.   The  Dilution   Percentage   shall  be
                      calculated  on a rolling 90 day  average.  If the Dilution
                      Percentage   exceeds  5%,  then  the   Eligible   Accounts
                      Percentage shall be reduced at Lender's discretion by such
                      excess Dilution Percentage and Lender may create a Reserve
                      for such excess.

                 (c)  Intentionally Deleted.

                 (d)  Maximum days after Invoice
                      Date for Eligible Accounts:          90 days

                 (e)  Intentionally Deleted.

         10.2 Intentionally Deleted.

<TABLE>
         10.3 Interest, Fees & Charges:
<CAPTION>

<S>                                                         <C>
                 (a)  Prime Rate Loan Interest Rate:        Prime Rate plus .50% per annum
                 (b)  LIBOR Loan Interest Rate:             LIBOR plus 3.25% per annum

                 (c)  Collection Days:                      One (1) Business Day
                 (d)  Closing Fee:                          $200,000

                                      -20-

<PAGE>

                 (e)  Intentionally Deleted.
                 (f)  Collateral Management Fee:            $50,000
                 (g)  Unused Line Fee:                      0.50% per annum
                 (h)  Field Examination per diem charge
                      per examiner:                         Not Applicable

                 (i)  Early Termination Fee:
                             First year of closing:         2.0% of the Maximum Credit
                             Second year of closing:        1.0% of the Maximum Credit
                             Third year of closing:         1.0% of the Maximum Credit

         10.4 Intentionally Deleted.

         10.5 Offices and Locations

                 (a)  Lender's Office:                      300 S. Grand Avenue
                                                            3rd Floor
                                                            Los Angeles, CA 90071

                 (b)  Borrower:                             Adept Technology, Inc.

                 (c)  Borrower's Chief Executive Office:    150 Rose Orchard Way
                                                            San Jose, CA  95134

                 (d)  Intentionally Deleted.

                 (e)  Borrower's Other Offices and Locations
                             of Collateral:                 2575  N. Dragoon St.
                                                            Tucson, Arizona  95745

                 (f)  Borrower's State of Incorporation:    California

                 (g)  Judgment Amount                       $400,000
</TABLE>

         10.6 Term:                                         Three (3) Years

         10.7 As used in this  Agreement,  the following terms have the meanings
set forth below:

                  (a) "EXIM LOAN AGREEMENT" means that certain Loan and Security
Agreement  (EXIM  Facility)  dated the date hereof between  Borrower and The CIT
Group/Commercial Services, Inc. (on behalf of its affiliate, Lender).

                  (b) "EXIM REVOLVING  LOANS" means the "Revolving  Loans" under
and as defined in the EXIM Loan Agreement.

                  (c) "AGGREGATE  EXCESS  AVAILABILITY"  means, at any time, the
sum of (i)  Borrower's  excess Net  Availability  under this  Agreement and (ii)
Borrower's excess Net Availability under the EXIM Loan Agreement.

                                      -21-

<PAGE>


         IN  WITNESS  WHEREOF,  Borrower  and  Lender  have duly  executed  this
Agreement this 5th day of April, 2001.


LENDER:                                          BORROWER:

THE CIT GROUP/                                   ADEPT TECHNOLOGY, INC.
BUSINESS CREDIT, INC.



By:  /s/  Kelly Wu                               By:  /s/ Michael W. Overby
   ---------------                                  -----------------------
Title:  VP                                       Title:  VP and CFO
      ----                                             ------------


                                      -22-

<PAGE>

<TABLE>
                                             SCHEDULE A

                                          PERMITTED LIENS
<CAPTION>


      Secured Party                             UCC Filing No.                    Types of Collateral
      -------------                             --------------                    -------------------

<S>                                      <C>                                  <C>
Zions Credit Corporation                 Arizona Filing: 0974310-0            Leased Equipment
                                         filed 6/30/97

Zions Credit Corporation                 Arizona Filing: 01008530-0           Leased Equipment
                                         filed 3/17/98

Telogy, Inc.                             California Filing: 0016760535        Leased Equipment
                                         filed 6/8/00

Zions Credit Corporation                 California Filing: 0017160255        Leased Equipment
                                         filed 6/12/00

Zions Credit Corporation                 California Filing: 0017160245        Leased Equipment
                                         filed 6/12/00
</TABLE>

                                                A-1