LOAN AND SECURITY AGREEMENT

     This is a Loan and Security Agreement made this 6th day of February,  1997,
between  SUMMIT  BANK  ("Lender"),  a  banking  corporation  of the State of New
Jersey, having an address at 750 Walnut Street,  Cranford, New Jersey 07016, and
BOGEN COMMUNICATIONS,  INC., a corporation of the State of Delaware,  having its
principal  place of  business  at 50 Spring  Street,  Ramsey,  New Jersey  07446
("Borrower").

     RECITAL:

     WHEREAS,  Borrower  and  Lender,  wish to enter into a  commercial  lending
arrangement whereby Lender shall make loans to Borrower on a revolving basis and
Borrower shall repay same under the terms and conditions set forth herein; and

     WHEREAS,  the loans and other  financial  accommodations  to be provided to
Borrower  by Lender  are to be  secured  by  substantially  all of the assets of
Borrower including,  without  limitation,  all accounts  receivable,  equipment,
inventory and the other personal property of Borrower; and

     WHEREAS,  by this  writing  Borrower and Lender wish to set forth the terms
and conditions of the lending arrangement between Borrower and Lender.

     NOW,  THEREFORE,  in consideration of the mutual covenants herein contained
and  other  good  and  valuable  consideration,   receipt  of  which  is  hereby
acknowledged, the parties agree as follows:

1. DEFINITIONS:

     For the purposes of this Agreement,  the following  definitions shall apply
to the terms set forth below:

     A.   The term  "Account  Debtor"  shall mean and include all  customers  of
          Borrower or other Persons who are indebted to Borrower.

     B.   The term "Acceptable  Conditional Sales" shall mean sales to Sprint or
          other  Account   Debtors  who  are   satisfactory  to  Lender  in  its
          commercially reasonable discretion,  who are allowed to return certain
          merchandise  which remains  unsold by such Account  Debtor for six (6)
          months after  delivery of the  merchandise  and who receive credit for
          the  value  of  the  returned  merchandise  against  future  Inventory
          purchases,  but who also are required to pay Borrower, in the ordinary
          course of business,  the entire  amount  invoiced by Borrower for such
          merchandise in accordance with the terms of the invoice.

<PAGE>

     C.   The term "Accounts  Receivable"  shall mean all accounts as defined in
          the  Uniform  Commercial  Code of the  State of New  Jersey,  and,  in
          addition,  any and all  obligations of any kind at any time due and/or
          owing to Borrower and all rights of Borrower to receive payment or any
          other  consideration  (whether classified under the Uniform Commercial
          Code of the  State of New  Jersey  or any  other  State  as  accounts,
          accounts   receivable,   contract  rights,   chattel  paper,   General
          Intangibles,  or otherwise)  including without  limitation,  invoices,
          contract rights, accounts receivable, choses in action, notes, drafts,
          acceptances,   instruments  and  all  other  debts,   obligations  and
          liabilities in whatever form owing to Borrower from any Person,  firm,
          governmental authority,  corporation or any other entity, all security
          therefor,  and all Borrower's rights to goods sold (whether delivered,
          undelivered,  in  transit  or  returned),  which  may  be  represented
          thereby, whether now existing or hereafter arising,  together with all
          proceeds and products of any and all of the foregoing.

     D.   The term "Advances" shall mean all loans made to Borrower  pursuant to
          Section 2.1 hereof.

     E.   The  term  "Advance  Limit"  shall  mean  the  maximum  amount  of the
          Revolving Loans and Advances Borrower may request of Lender based upon
          the  percentages  and/or amounts of Advance with respect to Borrower's
          Qualified  Accounts  Receivable and Qualified  Inventory against which
          Lender is willing to make  Revolving  Loans.  

     F.   The term "Affiliate" shall mean and include any Person in which one or
          more of the stockholders owning ten percent (10%) or more of Borrower,
          any  subsidiary  and/or  any  parent,  now or at  any  time  or  times
          hereafter hold, individually, jointly or severally, an equity or other
          ownership  interest in excess of ten percent (10%) of the total equity
          or ownership interest in such Person.

     G.   The term "Agreement"  shall mean this Loan and Security  Agreement and
          any  extensions  or renewals  thereof or  modifications  or amendments
          thereto.

     H.   The term  "Banking  Day"  shall  mean any day other  than a  Saturday,
          Sunday or other day on which  Lender is closed for a United  States of
          America or any state declared bank holiday.

     I.   The  term  "Borrower"  shall  mean  Bogen   Communications,   Inc.,  a
          corporation of the State of Delaware.

     J.   The  term  "Borrowing  Base  Certificate"  shall  mean a  certificate,
          substantially  in the form of Exhibit "A"  attached  hereto and made a
          part  hereof,  which  shall be  completed  and signed by a  authorized
          officer of Borrower  and shall be  utilized by 

                                      -2-
<PAGE>

          Borrower and Lender to calculate the sums  available to be borrowed as
          Revolving Loans.

     K.   The term  "Collateral"  shall  mean and  include  Borrower's  Accounts
          Receivable,  Inventory,  General  Intangibles,  Machinery,  Equipment,
          returned  or  repossessed  merchandise,  and  all  other  property  of
          Borrower or others,  which or in which  Lender,  by this  Agreement or
          otherwise,  is  given a  security  interest  or the  right  to hold as
          security for or to apply to the payment of Borrower's  Obligations and
          all  proceeds of same,  all as more fully  described  on Schedule  1.K
          hereto.

     L.   The term  "Equipment"  shall  mean all  equipment  as  defined  in the
          Uniform  Commercial  Code of the State of New Jersey and, in addition,
          all equipment,  machinery, furniture, fixtures, and all other tangible
          assets,  and all replacements,  repairs,  modifications,  alterations,
          additions,   controls  and   operating   accessories   therefor,   all
          substitutions  and  replacements  therefor,  and  all  accessions  and
          additions  thereto and all proceeds and products of the  foregoing now
          owned or hereafter acquired by Borrower.

     M.   The term  "Event of  Default"  shall  mean a  default  as set forth in
          Section 11 of this Agreement.

     N.   The term "GAAP" shall mean generally accepted accounting principles.

     O.   The  term  "General   Intangibles"  shall  mean  and  include  all  of
          Borrower's now owned or hereafter acquired choses in action, causes of
          action and all other intangible personal property  including,  without
          limitation,  corporate or other business records, inventions, designs,
          patents,  patent  applications,  trademarks,  trademark  applications,
          trade names,  trade  secrets,  good will,  registrations,  copyrights,
          licenses, franchises,  customer lists, tax refunds, tax refund claims,
          insurance claims,  rights and claims against carriers and shippers and
          rights to indemnification.

     P.   The term "Guarantors" shall mean Bogen  Communications  International,
          Inc.,  Bogen  Corporation  and any other  Person who shall at any time
          agree to be a guarantor and/or surety for Borrower.

     Q.   The term  "Inventory"  shall mean all items  described  in the Uniform
          Commercial Code of the State of New Jersey definition  thereof and all
          of the  following,  whether or not so described  (in all cases whether
          now owned or hereafter acquired by Borrower and wherever located): all
          goods,  merchandise  or other  personal  property held by Borrower for
          sale or lease or to be furnished under labels and other devices, names
          or marks affixed  thereto for purposes of selling or  identifying  the
          same or the seller or manufacturer  thereof,  and all right, title and
          interest of Borrower therein and thereto;  all raw materials,  work or
          goods in

                                      -3-
<PAGE>

          process;  and all  materials  and supplies of any kind or  description
          used  or  usable  in  connection  with  the  manufacture,   packaging,
          shipping,  advertisement,  sale or finishing of any of the  foregoing,
          together with all proceeds and products of any of the foregoing.

     R.   The term  "Lender"  shall  mean  Summit  Bank,  a banking  corporation
          organized and existing under the laws of the State of New Jersey,  its
          successors and assigns.

     S.   The  term  "Letter  of  Credit"  shall  mean  any and all  irrevocable
          documentary  or  stand-by  letters of credit  issued by Lender for the
          account and at the request of  Borrower  which shall not exceed  Seven
          Hundred  Thousand  ($700,000.00)  Dollars in  aggregate  undrawn  face
          amounts at any time.

     T.   The term "Line of Credit"  shall mean the maximum  amount Lender could
          be requested  to lend to Borrower  under the terms and  conditions  of
          this  Agreement  as  evidenced  by the  face  amount  of  the  Secured
          Revolving Note in effect from time to time.

     U.   The term "Machinery" shall mean and include,  without limitation,  all
          inanimate  mechanisms for utilizing or applying  power,  including the
          appurtenances thereto, used by or for Borrower in the operation of its
          business and all accessories,  substitutions,  additions, replacements
          and parts thereof, whether now owned or hereafter acquired.

     V.   The term  "Obligation" or "Obligations"  shall mean all  indebtedness,
          obligations,  liabilities,  and agreements of every kind and nature of
          Borrower to or with Lender,  or to or with any affiliate of Lender, or
          any  guaranty  of  Borrower  of  any  other   Person's   indebtedness,
          liabilities  and  agreements  to or with  Lender,  or to or  with  any
          affiliate of Lender,  now existing or  hereafter  arising,  and now or
          hereafter  contemplated,  pursuant  to this  Agreement,  the  Relevant
          Documents (as hereinafter  defined) or otherwise,  whether in the form
          of refinancing,  letters of credit,  bankers acceptances,  guarantees,
          loans, interest,  charges, expenses or otherwise,  direct or indirect,
          (including without limitation, any participation or interest of Lender
          [or of any  affiliate  of Lender] in any  obligations  of  Borrower to
          others),  acquired outright,  conditionally or as collateral  security
          from another, absolute or contingent,  joint or several, liquidated or
          unliquidated,  secured or  unsecured,  arising by  operation of law or
          otherwise, including without limitation any future advances, renewals,
          extensions  or changes in form of, or  substitutions  for, any of said
          indebtedness,  obligations or liabilities,  the other sums and charges
          to be paid to Lender  pursuant to Sections 2, 3 and 4 hereof,  and all
          interest and late charges on any of the foregoing.

     W.   The term  "Person"  shall mean any  individual,  sole  proprietorship,
          partnership,   joint  venture,  trust,  unincorporated   organization,
          association, limited liability

                                      -4-
<PAGE>

          company,  corporation,   institution,   entity,  party  or  government
          (including any political subdivision thereof).

     X.   The term  "Qualified  Account",  "Qualified  Accounts"  or  "Qualified
          Accounts  Receivable"  shall mean the Accounts  Receivable as to which
          Borrower has furnished to Lender information  adequate to identify the
          same, at such times and in such form as has been or, from time to time
          may be, requested by Lender,  which meet all of the following criteria
          on the origination date of the said Accounts and continuing thereafter
          until  collected,  and which are in all other  respects  acceptable to
          Lender:

          (i)  Borrower is the sole owner of the Accounts Receivable and has not
               sold,  assigned,  mortgaged or  hypothecated,  nor released  from
               Lender's security interest,  all or any portion thereof,  nor are
               they  subject  to any claim,  lien or  security  interest  of any
               Persons or  entities,  including  without  limitation  the United
               States, or any agencies or instrumentalities thereof;

          (ii) They shall be valid and  legally  enforceable,  owing to Borrower
               for the  performance  of services or the sale of goods arising in
               the ordinary  course of business for which Borrower has delivered
               or, at the time of origination of the said Accounts,  if required
               by Lender,  will  deliver to the Lender  invoices,  billings  and
               shipping documents and other documents  evidencing the obligation
               of the Borrower's customer to pay the Account Receivable;

          (iii)They do not  represent  a  conditional  sale  (except  Acceptable
               Conditional  Sales  which  must  be  disclosed  as  such  on each
               Borrowing Base Certificate),  sale on consignment,  bill and hold
               or other sale on a basis  other than that of absolute  sale,  are
               not  evidenced  by any note,  instrument,  chattel  paper or like
               document,  and do not arise  out of a  contract  with the  United
               States or any of its departments, agencies, or instrumentalities,
               unless  accepted by Lender and  Borrower  has  complied  with the
               Federal  Assignment  of Claims Act in all respects to assign such
               Account to Lender;

          (iv) No financing  statement  covering any Account  Receivable  or its
               proceeds,  except in favor of  Lender,  is on file in any  public
               office,  and neither  Borrower nor Lender has received any notice
               of any proposed  acquisition,  of any Account Receivable security
               interest therein;

          (v)  The goods or  services  were  shipped or  supplied on the invoice
               date and the  invoice for the  Account  Receivable  is dated less
               than ninety (90) days or, as Lender in its  discretion  may allow
               from  time to time  with  respect  to  Accounts  Receivable  with
               extended  terms,  dated less than  one-hundred  twenty (120) days
               prior to the date on which the amount of the Accounts Receivables
               are being determined;


                                      -5-
<PAGE>

          (vi) If the aggregate  amount of an Account  Debtor's  indebtedness to
               Borrower in  calculating  the Advance Limit exceeds  twenty (20%)
               percent of  Borrower's  total  Accounts at the time  outstanding,
               then such  excess  shall not be eligible  to be  classified  as a
               Qualified Account Receivable;

         (vii) They are not  subject  to any  offsets,  credits,  allowances  or
               adjustments  due the Account  Debtor  except usual and  customary
               prompt payment discounts, nor has any Account Debtor returned the
               goods or indicated any dispute or complaint  concerning  them and
               the Account is not otherwise subject to any right of set-off;

        (viii) Not  more  than fifty  (50%)  percent of the total  amount of the
               Accounts   Receivable  due  from  the  Account  Debtor  has  been
               classified not Qualified by Lender;

          (ix) Borrower has not received any notice, nor has it any knowledge of
               any facts  which  adversely  affect  the  credit  of the  Account
               Debtor;

          (x)  The Account  Debtor is not a  Subsidiary  or other  Affiliate  of
               Borrower nor a director or officer of Borrower or an Affiliate of
               any director or officer;

          (xi) The Account  Debtor is located in the United States of America or
               Canada;

          (xii)The Account Receivable does not arise from the sale of the Friday
               Home Office Receptionist Line; and

         (xiii)Lender  has not  notified  Borrower  that  either  the  Account
               Receivable or the Account Debtor is not qualified.

     Y.   The term "Qualified Inventory" shall mean the Inventory which has been
          identified and described to Lender's  satisfaction,  is represented by
          Borrower (by its acceptance of Revolving Loans thereon) as meeting all
          of the  following  criteria  on the date of any  Revolving  Loan based
          thereon and thereafter  while any of the  Obligations  are outstanding
          and is in all other respects acceptable to Lender:

          (i)  Borrower  is  the  sole  owner  of  the  Inventory;  none  of the
               Inventory  is being  held by  Borrower  on a  consignment  basis;
               Borrower has not sold,  assigned or otherwise  transferred all or
               any portion  thereof,  and none  thereof is subject to any claim,
               lien or security interest;

          (ii) If any of the Inventory is represented or covered by any document
               of title, instrument or chattel paper, Borrower is the sole owner
               of all such documents,  instruments and paper, all thereof are in
               the possession of the

                                       -6-
<PAGE>

               Lender,  none  thereof  has  been  sold,  assigned  or  otherwise
               transferred  and none  thereof is  subject to any claim,  lien or
               security interest;

          (iii)The  Inventory  shall  consist  of  saleable  raw  materials  and
               finished  goods  manufactured  or  acquired  by  Borrower  in the
               ordinary course of Borrower's  business,  subject to its contract
               or sole  possession,  stored in  locations  with respect to which
               landlord or warehousemen waivers, as applicable,  satisfactory to
               Lender have been obtained; and

          (iv) The Inventory does not constitute  part of the Friday Home Office
               Receptionist Line.

     Z.   The term  "Relevant  Documents"  shall mean any and all  documents and
          instruments  executed or delivered  by Borrower to Lender  pursuant or
          incident to this  Agreement,  or heretofore  or hereafter  executed or
          delivered  by Borrower  with respect to its  Revolving  Loan and other
          financial accommodations extended to Borrower by Lender.

     AA.  The term  "Revolving  Loan" or "Revolving  Loans" shall mean the loans
          made pursuant to Section 2 of this Agreement and the  indebtedness  of
          Borrower to Lender incurred pursuant to this Agreement.

     BB.  The term  "Secured  Revolving  Note" shall mean the Secured  Revolving
          Promissory Note executed  contemporaneously  herewith and any renewal,
          extension, modification or amendment thereto or substitution therefor.

     CC.  The term  "Subsidiary"  shall mean any  Person at least a majority  of
          whose  issued  and  outstanding  equity  now or at any  time or  times
          hereafter  is owned by the  Borrower  and/or one or more  Subsidiaries
          thereof.

     DD.  The term  "Summit  Bank  Floating  Base  Rate"  shall mean the rate of
          interest established from time to time by Lender as its "floating base
          rate". This rate of interest is determined from time to time by Lender
          as a means of pricing some loans to its  customers and is neither tied
          to any  external  rate of interest or index,  nor does it  necessarily
          reflect the lowest rate of interest  actually charged by Lender to any
          particular class or category of customers of Lender.

2. REVOLVING LOAN:

     2.1 (a) Amount.  During the term of this Agreement,  provided there has not
occurred  an Event of Default  hereunder  (as  hereinafter  defined) or an event
which,  with the giving of notice or the lapse of time, or both, would become an
Event of Default  hereunder,  Lender will  provide,  at one time or from time to
time, at the request of Borrower, Revolving Loans to

                                      -7-
<PAGE>

Borrower  in an  aggregate  amount  up to but not in  excess  of the  Borrower's
Advance  Limit,  which  Revolving  Loans may be borrowed,  repaid and reborrowed
pursuant  to the terms of this  Agreement  and which  Revolving  Loans  shall be
payable, in full together with all accrued and unpaid interest,  fees and costs,
if any,  on  February  5,  1999.  If the  outstanding  aggregate  amount  of the
Revolving Loans shall exceed the Advance Limit at any time, such excess shall be
deemed  secured by the Collateral (as  hereinbefore  defined),  shall be payable
immediately upon demand and shall be subject to the terms of this Agreement.

     (b) Advance Request Procedure.  Each Advance under the Revolving Loan shall
be  requested  telephonically,  not later  than 2:00  P.M.  Eastern  Time on any
Banking  Day, by a Person  authorized  in writing by  Borrower  to make  Advance
requests,  and each such request  shall be confirmed in writing,  via  facsimile
transfer, prior to the close of business on such Banking Day.

     (c) Advance Limit. The Advance Limit shall not in the aggregate at any time
outstanding exceed the lesser of:

          (i) Seven Million ($7,000,000.00) Dollars; or

          (ii) The result of the following calculation:  (x) eighty-five percent
     (85%) of the face amount of Borrower's Qualified Accounts Receivable, plus

               (y) the lesser of (A) thirty-five  percent (35%) of the value (at
          the lower of cost or market  values  then  prevailing)  of  Borrower's
          Qualified Inventory  consisting of raw materials,  not to exceed Three
          Hundred Fifty Thousand  ($350,000.00) Dollars plus fifty percent (50%)
          of the value (at the lower of cost or market  values then  prevailing)
          of Borrower's Qualified Inventory consisting of finished goods, or (B)
          Two Million ($2,000,000.00) Dollars; minus

               (z) the aggregate of the undrawn face amounts of all  outstanding
          Letters  of  Credit  plus  unreimbursed  time  drafts  and/or  bankers
          acceptances,  if any, which sum shall not exceed Five Hundred Thousand
          ($500,000.00) Dollars at any time; provided also, however,

          (iii) Loans  outstanding with respect to Acceptable  Conditional Sales
     shall not exceed One Hundred Seventy-Five Thousand  ($175,000.00)  Dollars,
     in the aggregate, at any time.

     (d) Lender  shall have the right,  from time to time,  in its  commercially
reasonable discretion, to increase and/or decrease the percentages or amounts of
advance or amount of the Advance  Limit  and/or  establish  such  reserves as it
shall deem necessary from time to time; and the sums advanced  pursuant  thereto
shall nevertheless be secured by the Collateral and subject to the terms of this
Agreement.

                                      -8-
<PAGE>

     (e) It is understood that the total of the aggregate  outstanding principal
balance of  Revolving  Loans plus the  aggregate  of the undrawn face amounts of
Letters of Credit unreimbursed time drafts and/or bankers  acceptances,  if any,
shall not, at any time, exceed Seven Million ($7,000,000.00) Dollars.

     2.2  Collateral  and Proceeds of  Collateral.  (a) Borrower  shall promptly
deliver or cause to be delivered to Lender or to a dominion  account or lockbox,
over which Lender shall have the sole power of  withdrawal,  all proceeds of the
Collateral,  in the form received.  Upon receipt  thereof,  Lender shall deposit
said proceeds to a cash collateral account over which Lender shall have the sole
power of  withdrawal.  In the  event  any  proceeds  are  received  directly  by
Borrower,  such  proceeds  shall  be  deposited,  in  the  form  received,  to a
collection account to be opened with Lender.

     (b) Such cash collateral account and collection  account,  if any, shall be
swept  daily  and  the  amount  of each  such  sweep  shall  be  applied  to the
Obligations,  notwithstanding that the sums credited may constitute  uncollected
funds. All such credits shall be conditioned upon final payment to Lender of the
items  giving rise to them and, if any items are not so paid,  the amount of any
credit given shall be charged as a debit to  Borrower's  Revolving  Loan account
(or to any deposit  account of Borrower with Lender)  whether or not the item is
returned.  The Borrower shall not commingle any proceeds of the Collateral  with
any other  funds or  property  of the  Borrower,  and shall  hold such  proceeds
separate  and  apart  therefrom  and upon an  express  trust  for  Lender  until
deposited in the cash collateral  account.  Credit for the proceeds deposited in
the cash  collateral  account  shall be  conditioned  upon final  payment of the
deposited item, notwithstanding the application by Lender of the proceeds of the
Collateral to the Obligations.

     2.3 Determination of Loan Balance.

     (a) In determining the Borrower's  outstanding  Revolving Loan balance, the
following shall govern:

          (i) Domestic  checks received by the Lender on or before 12:00 Noon of
     any Banking Day, shall be credited  against the balance of the  Obligations
     on such Banking Day;

          (ii)  Domestic  checks  received by the Lender after 12:00 Noon of any
     Banking Day,  shall be credited  against the balance of the  Obligations on
     the following Banking Day;

          (iii) Any other  form of  proceeds  received  by the  Lender  shall be
     credited  against  the  balance  of the  Obligations  when the  Lender  has
     received  notification  of  collection  (it being  understood,  that if the
     Lender  receives  notice of  collection on or before 12:00 Noon of any such
     Banking Day,  such  proceeds  shall be deemed to have been  received by the
     Lender on such day, and if Lender receives notice of collection after 12:00
     Noon of any such Banking Day,  such  proceeds  shall be deemed to have been
     received by the Lender as of the following Banking Day);


                                      -9-
<PAGE>

          (iv) Such credits shall be conditioned upon final payment to Lender at
     its own office in cash or solvent  credits of the items giving rise to them
     and if any item is not so paid, the amount of any credit given for it shall
     be  charged  to the  Revolving  Loan  balance  whether  or not the  item is
     returned.

     (b) For the purpose of computing  interest on the Revolving Loan,  interest
shall  continue to accrue on the amount of any domestic  checks  received by the
Lender for a period of two (2) Banking Days after  receipt (it being  understood
that if a domestic check is received on or before 12:00 Noon of any Banking Day,
it shall be deemed  received by the Lender on such  Banking Day, and if received
after 12:00 Noon of such Banking Day, it shall be deemed  received by the Lender
on the following Banking Day),  notwithstanding that the Lender has credited the
amount thereof against the outstanding Revolving Loan balance on the Banking Day
of receipt.

     2.4 Monthly and Interim  Statements.  Once each month Lender shall render a
statement  of account to Borrower  showing the current  status of the  Revolving
Loan  account  and the  interest  thereon.  If these  statements  or any interim
statements  indicate that the outstanding  balance of the Revolving Loan exceeds
the Advance  Limit,  such excess  shall at all times be governed  and secured by
this  Agreement  and  Borrower   forthwith   either  shall  furnish   additional
collateral, which shall be satisfactory to Lender in its sole discretion, or pay
the  difference in cash.  The  statement of account  rendered by Lender shall be
considered  correct,  accepted by Borrower  and  conclusively  binding  upon the
Borrower,  unless  Borrower  gives  notice to Lender to the  contrary in writing
within  twenty  (20)  Banking  Days after the sending of said  statement  by the
Lender. If Borrower disputes the correctness of Lender's  statement,  Borrower's
notice  shall  specify in detail the  particulars  of why it  contends  Lender's
statement of account is incorrect.

     2.5 Negative Balances.  In the event Borrower's  operating  account(s) with
Lender  contain a negative  balance at any time,  then Lender shall be deemed to
have made an Advance to Borrower in the amount of such  deficiency,  pursuant to
the terms hereof,  on the Lender's Banking Day immediately  preceding the day on
which such deficiency  occurs.  Nothing  contained  herein shall be deemed or be
construed to (a) obligate the Lender to honor any items  presented to Lender for
payment against any account of Borrower in which a deficiency exists, whether or
not it has ever done so in the past; or (b) relieve  Borrower of its obligations
to pay usual and customary  charges of Lender imposed  generally with respect to
such  deficiencies  in  addition  to the  interest  accrued as the result of any
Advances made pursuant to this subsection. 

                                      -10-
<PAGE>

3. LETTERS OF CREDIT:

     3.1  Issuance  of  Letters  of  Credit.  From  time  to  time,  subject  to
satisfaction  by Borrower  of the terms and  conditions  hereinafter  set forth,
Lender may, at its discretion,  upon the request of Borrower,  issue one or more
Letters of Credit for the account of Borrower. Each Letter of Credit shall be in
form and substance  satisfactory to Lender.  Without  limiting the generality of
the  preceding  sentence,  issuance  of all  Letters  of Credit  shall be on the
following terms and conditions:

          (a)  Stated  Amount.  The  aggregate  undrawn  face  amount(s)  of all
     outstanding  Letters of Credit plus  outstanding time drafts and/or bankers
     acceptance shall not exceed the sum of Seven Hundred Thousand ($700,000.00)
     Dollars at any one time.

          (b) Term.  No Letter of Credit  shall have a stated  term of more than
     one (1) year as to  stand-by  Letters of Credit and ninety  (90) days as to
     documentary Letters of Credit.

          (c)  Application.  Each Letter of Credit shall be issued in accordance
     with Lender's then current practices  relating to the issuance by Lender of
     standby or documentary  letters of credit,  including,  but not limited to,
     the  payment  by  Borrower  of all  applicable  fees and other  charges  as
     customarily  imposed by Lender  generally  upon the  issuance of Letters of
     Credit.  Each Letter of Credit shall be issued only after receipt by Lender
     of its then current  application and agreement for a standby or documentary
     letter of credit, properly completed and executed by Borrower and delivered
     to Lender at least three (3) Banking Days prior to the  requested  issuance
     date.

          (d) Requests for Letters of Credit;  Conditions Precedent.  Letters of
     Credit may be  requested  by the  Borrower  at any time  during  which this
     Agreement is in effect so long as (i) no Event of Default has occurred, and
     (ii) no demand for payment has been made by Lender. Once requested, Letters
     of Credit will be issued, at Lender's discretion, only after all conditions
     precedent to the issuance thereof,  have been satisfied,  and all fees have
     been paid.

          (e) No Violation of Advance  Limit.  At no time may a Letter of Credit
     be issued if such issuance  would cause  Borrower to be in violation of the
     Advance Limit.

          (f) Payment  Obligations.  The payment  obligations  of Borrower under
     this Section 3 shall be absolute,  unconditional  and irrevocable and shall
     be paid strictly in accordance  with the terms of this Agreement  under all
     circumstances, including, without limitation, the following circumstances:

               (i) the existence of any claim,  set-off,  defense or other right
          which  Borrower may have at any time against any  beneficiary,  or any
          transferee,  of any Letter of Credit (or any persons or  entities  for
          whom any such beneficiary or any such transferee may be


                                      -11-
<PAGE>

          acting),  or  Lender  or  any  other  person  or  entity,  whether  in
          connection with this Agreement,  the transactions  contemplated herein
          or any unrelated transaction;

               (ii) any  statement  or any other  document  presented  under any
          Letter  of  Credit  proving  to  be  forged,  fraudulent,  invalid  or
          insufficient  in any respect or any statement  therein being untrue or
          inaccurate in any respect;

               (iii)  payment  by  Lender  under any  Letter  of Credit  against
          presentation of a draft or certificate  which does not comply with the
          terms  of such  Letter  of  Credit,  except  payment  where a court of
          competent jurisdiction determines in a final,  non-appealable judgment
          to have resulted  primarily and directly from the gross  negligence or
          willful misconduct of Lender; and

               (iv) any other circumstances or occurrences  whatsoever,  whether
          or not  similar  or  dissimilar  to any one or more of the  foregoing,
          except  circumstances  or  occurrences  which  a  court  of  competent
          jurisdiction  determines in a final,  non-appealable  judgment to have
          resulted  primarily and directly from the gross  negligence or willful
          misconduct of Lender.

               (v)  Supplemental  Provisions.  The provisions of any application
          and agreement for any Letter of Credit are supplemental to, and not in
          derogation of, any rights and remedies of Lender under this Agreement,
          at law, in equity, by arbitration or otherwise.

     3.2. Payments Under Letters of Credit

     (a) Payments  upon Draw.  Upon the  occurrence of any draw on any Letter of
Credit,  Borrower  hereby agrees to repay  immediately to Lender on the same day
such draw is honored by Lender,  in immediately  available  funds, the amount of
such draw, together with any and all costs or expenses which Lender may incur in
connection  with such  Letter of  Credit,  without  any  requirement  of notice,
presentment or demand by Lender, all of which are hereby waived by Borrower.  In
order to implement the foregoing, upon the occurrence of a draw under any Letter
of Credit,  unless Lender is  immediately  so  reimbursed by Borrower,  Borrower
hereby irrevocably authorizes and directs Lender to treat such draw as a request
for a Revolving Loan in the amount of such draw, and Borrower hereby irrevocably
authorizes and directs Lender to make a Revolving Loan,  bearing interest as set
forth in this Agreement,  in the aggregate amount of such draw. Borrower further
hereby  irrevocably  authorizes and directs Lender to retain the proceeds of any
such Revolving Loan and credit such proceeds so as to immediately  eliminate the
liability of Borrower to Lender pertaining to such draw.

     (b)  Payment  Upon   Bankruptcy  Etc.  If  any  Event  of  Default  occurs,
specifically  including  those  pursuant to Section 11.5, and at such time there
are  outstanding  unexpired  Letters  of  Credit,  Borrower  hereby  irrevocably
authorizes  and  directs  Lender to make a  Revolving  Loan in the amount of the
aggregate  undrawn  face  amount(s)  of such  unexpired  Letters of Credit,  the
proceeds of which Revolving Loan shall be placed in an interest-bearing


                                      -12-
<PAGE>

deposit  account for the sole benefit of and under the sole dominion and control
of Lender (the "Reimbursement Deposit Amount"), which shall be used to reimburse
Lender for draws  upon any such  unexpired  Letters  of Credit.  If from time to
time,  as draws on  outstanding  Letters  of  Credit  have been  honored  and as
outstanding Letters of Credit expire, funds remain in the Reimbursement  Deposit
Account in excess of the then aggregate  undrawn face amount(s) of the remaining
Letters of Credit,  those funds shall be returned to Lender and shall be applied
by Lender to reduce the outstanding Obligations.

     (c) Payments After  Termination of Facility.  If all Obligations  have been
paid and  this  Agreement  terminated  for any  reason,  Borrower  shall  either
immediately  cause to be issued a standby  letter of credit  for the  benefit of
Lender  which  shall  be in all  respects  acceptable  to  Lender  in  its  sole
discretion  or  immediately  upon demand by Lender,  deposit  into,  and keep on
deposit in, the Reimbursement Deposit Account, for the sole benefit of and under
the sole dominion and control of Lender, an amount equal to at least 105% of the
aggregate undrawn face amount(s) of all outstanding  Letters of Credit,  for the
purpose of providing  Lender with a means of repayment of draws under any of the
Letters of  Credit.  At such time as Lender  shall  have no further  obligations
under and pursuant to any Letter of Credit, Lender, after reimbursing itself for
all draws under any Letter of Credit and any  customary  fees or other  expenses
due and owing in connection  therewith,  shall promptly remit the balance of the
Reimbursement Deposit Account, if any, to the order of Borrower.

     (d) Reserve to Revolving  Loan/Advances Not Discretionary.  (i) Anything in
this  Agreement  to the  contrary  notwithstanding,  the Advance  Limit shall be
reduced  at all  times  by the  aggregate  amounts  to be  drawn  upon  plus the
aggregate  amounts drawn and remaining  unpaid under all Letters of Credit;  and
(ii) in no event  shall any  Revolving  Loan made by Lender  pursuant  to and in
compliance  with the  terms  and  provisions  of this  Section 3 be deemed to be
discretionary  or voluntary and Borrower  covenants and agrees to pay,  protect,
indemnify  and hold  harmless  Lender  from and  against  any and all  costs and
expenses,  including but not limited to, reasonable attorneys' fees and experts'
costs and  expenses,  incurred  by Lender as a result of the  allegation  by any
Person or entity  that the  Revolving  Loan in  question  was  discretionary  or
voluntary on the part of Lender.

     3.3 Uniform Customs and Practices for Documentary  Credits.  Each Letter of
Credit  shall be governed by,  construed  and  enforced in  accordance  with the
Uniform  Customs and Practices  for  Documentary  Credits,  1993  Revision,  ICC
Publication  No. 500 as amended,  updated or  superseded  from time to time (the
"UCP"). Anything in this Agreement to the contrary notwithstanding,  in no event
shall Lender have any  obligation to (a) issue a revolving  documentary  credit;
(b) issue an  authenticated  teletransmission  or  pre-advice  of any  Letter of
Credit;  or  (c)  issue  any  Letter  of  Credit  if  Lender  determines,  which
determination  shall be final and conclusive  and binding on Borrower,  that the
terms and  conditions  of the  Letter of Credit  sought by  Borrower  are not in
compliance with the internal policies of Lender,  including, but not limited to,
if Lender  determines  that the use of  proceeds  of the Letter of Credit  being
sought by Borrower,  if drawn upon,  are not in  compliance  with such  internal
policies.


                                      -13-
<PAGE>

4. INTEREST AND OTHER CHARGES:

     4.1 Interest Rate. Except as herein provided, the Revolving Loan shall bear
interest  during each calendar  month at a  fluctuating  interest rate per annum
equal at all times to the Summit Bank  Floating  Base Rate plus  one-half  (1/2)
percentage  point  per  annum.  Each  change  in such  rate  shall  take  effect
contemporaneously with the corresponding change in the Summit Bank Floating Base
Rate, without notice to Borrower.  Interest shall be calculated on a daily basis
upon the unpaid balance with each day representing 1/360th of a year.

     4.2 Payment of Interest. Interest on the Revolving Loan shall be calculated
as at the end of each  calendar  month,  is due on the fifth  Banking Day of the
following  month and shall be charged by Lender to any  checking or loan account
maintained by Borrower.  Any failure or delay by Lender in  submitting  invoices
for interest  payments shall not discharge or relieve Borrower of the obligation
to make such interest payments.

     4.3 Default Rate. Anything herein to the contrary notwithstanding, upon the
occurrence  and during the  continuance  of an Event of Default  hereunder,  the
interest  rate  charged to Borrower  on the  Revolving  Loan shall,  at Lender's
discretion,  be increased by two and three-quarters (2.75) percentage points per
annum in excess of the then applicable rate.

     4.4 Maximum  Rate.  In no event shall the interest  rate charged under this
Agreement be higher than the maximum lawful rate. In the event the interest rate
exceeds the maximum  lawful  rate,  any such excess  received by Lender shall be
deemed and applied as a payment of the principal balance.

     4.5 Late Charge.  Any payment of interest or principal due hereunder  which
is  received  more than ten (10) days  after the date due shall be  subject to a
late charge of five (5%) percent of the amount of such  payment  which shall not
be less  than  $25.00  nor more than  $2,500.00.  Such  late  charge  represents
reimbursement  of  various  costs  incurred  by Lender in  processing  such late
payments and shall not be deemed to be additional interest hereunder.

     4.6 Collateral  Management  Fee.  Borrower shall pay to Lender a collateral
management  fee in the sum of Fifteen  Thousand  ($15,000.00)  Dollars per annum
which shall be deemed fully earned and  non-refundable  upon  receipt.  Such fee
shall be due and  payable  upon the  execution  hereof and  annually,  upon each
anniversary date hereof thereafter during the term of this Agreement.

     4.7 Letter of Credit Fees. There shall be due and payable upon the issuance
and renewal of each  standby  Letter of Credit a fee of one (1%)  percent of the
face  amount of each such  Letter of Credit  together  with the  customary  fees
generally  charged to Lender's  customers and upon issuance of each  documentary
Letter of Credit, such customary fees only.


                                      -14-
<PAGE>

5. SECURITY INTEREST:

     5.1  Security  Interest.  (a) As  collateral  security  for (i) the due and
punctual  payment of the Revolving  Loan,  all interest  thereon and any and all
extensions,  renewals, substitutions and changes in form thereof; (ii) all other
Obligations of Borrower to Lender;  and (iii) all costs and expenses incurred or
paid by Lender to enforce its rights  pursuant to this  Agreement,  the Relevant
Documents or otherwise (including without limitation  attorney's fees), Borrower
hereby pledges,  transfers,  assigns, sets over and grants to Lender, a security
interest in the  Collateral,  whether  now  existing  or  hereafter  created and
whether now owned or hereafter  acquired,  wherever located,  and all accessions
and additions thereto,  replacements and substitutions therefor and proceeds and
products thereof.

     (b) All  Collateral  heretofore,  herein or  hereafter  given to the Lender
shall  secure  payment of the  Revolving  Loan and all of the  Borrower's  other
Obligations  to Lender.  Lender shall be under no obligation to proceed  against
any or all of the Collateral  before proceeding  directly against Borrower,  any
Guarantor  or  against  any  item  of  Collateral  prior  to any  other  item of
Collateral.

     5.2  Continuation of Security  Interest.  The security  interest granted in
this  Agreement  shall  continue in full force and effect until the Borrower has
fully paid and discharged all Obligations.

     5.3  Further  Assurances.  Borrower  shall take such steps and  execute and
deliver such financing  statements and other documents all in form and substance
satisfactory to Lender  relating to the creation,  validity or perfection of the
security  interests  provided for herein,  under the Uniform  Commercial Code or
other laws of the State of New Jersey or of any other  state or states as Lender
may from time to time request.

6. REPRESENTATIONS AND WARRANTIES:

     6.1 Organization and Qualification. Borrower hereby represents and warrants
to Lender,  knowing and  intending  that Lender shall rely thereon in making the
Loans contemplated hereby, that:

          (a)  Borrower  has been and will  continue  to be a  corporation  duly
     organized and validly  existing and in good standing  under the laws of the
     State of  Delaware  and is and will  continue to be  qualified  and in good
     standing in all  jurisdictions  wherein the character of the property owned
     or the nature of the business  transacted  by Borrower  makes  licensing or
     qualification as a foreign entity necessary.

          (b) A true,  accurate and complete copy of Borrower's valid resolution
     authorizing the transaction contemplated herein, and Borrower's certificate
     of incorporation and by-laws all


                                      -15-
<PAGE>

     as in effect on the date hereof and  certified by the Secretary of Borrower
     have heretofore been delivered to Lender.

     6.2  Due  Authorization;  No  Default.  (a)  The  execution,  delivery  and
performance  of  this  Agreement  and  the  Relevant  Documents  has  been  duly
authorized by all necessary action on the part of Borrower;  is not inconsistent
with its certificate of  incorporation,  by-laws and other governing  documents;
does not contravene any law,  governmental rule,  regulation or order applicable
to  Borrower;  and does  not and  will  not  contravene  any  provision  of,  or
constitute  a  default  under,  any  indenture,   mortgage,  contract  or  other
instrument or any order, writ, injunction or decree to which Borrower is a party
or by which it or its properties or assets are bound.

     (b) This  Agreement and the Relevant  Documents,  upon their  execution and
delivery,  will constitute the legal,  valid and binding agreements of Borrower,
enforceable in accordance with their terms.

     6.3 No Governmental Consent Necessary. No consent or approval of, giving of
notice  to,  registration  with or taking of any other  action in respect of any
governmental  authority  or agency is required  with  respect to the  execution,
delivery  and  performance  by  Borrower  of this  Agreement  and  the  Relevant
Documents.

     6.4 No Proceedings. There are no actions, suits, or proceedings pending or,
to the best of Borrower's knowledge, threatened against or affecting Borrower in
any court or before any  governmental  commission,  board or authority which, if
adversely determined,  will have an adverse effect on the ability of Borrower to
perform its responsibilities under this Agreement or the Relevant Documents; the
Borrower is not in default with respect to any order of any court, arbitrator or
governmental or  non-governmental  body; and the Borrower is not subject to or a
party to any order of any court or governmental or non-governmental body arising
out of any action,  suit or proceeding under any statute or other law respecting
antitrust, monopoly, restraint of trade, unfair competition or similar matters.

     6.5 Financial Statements. (a) Subject to any limitation stated therein, all
balance  sheets,  income  statements and other financial data which have been or
shall  hereafter  be  furnished  to  Lender  to  induce  it to enter  into  this
Agreement,  and to  continue  to  provide  financing  under  this  Agreement  or
otherwise in connection herewith, do and will truly and accurately represent the
financial  condition  of Borrower  as at the  respective  dates  thereof and the
results of its  operations  for the periods for which the same are  furnished to
Lender.  All other  information,  reports and other papers and data furnished to
Lender are, or will be at the time the same are so furnished, true, accurate and
complete in all material respects to the best of Borrower's knowledge.  All such
financial  statements and other  information have been, or will have been at the
time of issuance:  (i) as to annual financial statements,  prepared by certified
public accountants in accordance with GAAP consistently  applied; and (ii) as to
all other financial statements, internally prepared generally in accordance with
GAAP consistently applied.

                                      -16-
<PAGE>

     (b) Except as shown on the most recent financial statements which have been
delivered  to Lender and are set forth on Schedule  6.5 annexed  hereto and made
part hereof, Borrower has no other liabilities as of the date hereof which would
materially  and  adversely  affect the  financial  condition  of Borrower or the
Collateral.

     6.6 Changes in Financial  Condition.  (a) There has been no material change
in  Borrower's  financial  condition  since  the  date  of  its  last  financial
statements as are set forth on Schedule 6.5.

     (b) Borrower's  assets, at fair valuation,  exceed  Borrower's  liabilities
(including without limitation  contingent  liabilities);  Borrower is paying its
debts as they become due;  and  Borrower  has capital and assets  sufficient  to
carry on its business.

     6.7 Accounts  Receivable.  The most recent list of Accounts  Receivable  of
Borrower delivered to Lender is complete as of the date thereof, and contains an
accurate aging thereof.  All of said Accounts Receivable are collectible subject
only to the reserves established by Borrower, are subject to no counterclaims or
setoffs of any nature  whatsoever  except for bona fide disputes  arising in the
ordinary  course of business,  and require no further act on the Borrower's part
to make  such  accounts  owing  by the  Account  Debtors.  None of the  Accounts
Receivable  include any conditional  sales (unless disclosed as to such Lender),
consignments  or sales on any  basis  other  than that of  absolute  sale in the
ordinary  and usual course of  business,  except as otherwise  set forth on said
list. No agreement has been made under which any  deductions or discounts may be
claimed as to any such  account  except  customary  discounts  or rebates in the
ordinary course of business.

     6.8 Inventory.  Borrower's  Inventory  (except as to the values of obsolete
items,  items below  standard  quality and items in the process of repair all of
which have been written down to realizable  market value,  or adequate  reserves
have been provided therefore) consists of items of a quality and quantity usable
or saleable in the ordinary  course of its  business  and the values  carried on
Borrower's  balance sheet are set at the lower of cost or market,  in accordance
with GAAP consistently applied.

     6.9 Taxes and  Assessments.  Borrower has paid and discharged  when due all
taxes,  assessments and other governmental  charges which may lawfully be levied
or  assessed  upon its income  and  profits,  or upon all or any  portion of any
property  belonging to it, whether real,  personal or mixed,  to the extent that
such taxes,  assessments  and other charges have become due.  Borrower has filed
all tax returns, federal, state and local, and all related information, required
to be filed by it.

     6.10 ERISA.  Borrower is in  compliance  in all material  respects with the
provisions of the Employee  Retirement  Income  Security Act of 1974, as amended
("ERISA"), and the related provisions of the Internal Revenue Code, and with all
regulations and published interpretations issued thereunder by the United States
Treasury  Department,  the United  States  Department  of Labor and the  Pension
Benefit Guaranty Corporation ("PBGC"). Neither a reportable event as


                                      -17-
<PAGE>

defined in Section  4043 of ERISA,  nor a prohibited  transaction  as defined in
Section 406 of ERISA or Section 4975 of the Internal  Revenue Code, has occurred
and is  continuing  with respect to any  employee  benefit plan subject to ERISA
established or maintained,  or to which  contributions have been or may be made,
by  Borrower or by any trade or business  (whether  or not  incorporated)  which
together with Borrower would be treated as a single  employer under Section 4001
of ERISA (any such trade or business  being referred to hereinafter as an "ERISA
Affiliate," and any such employee  benefit plan being referred to hereinafter as
a "Plan"). No notice of intention to terminate a Plan has been filed nor has any
Plan been terminated;  the PBGC has not instituted proceedings to terminate,  or
to appoint a trustee to administer,  any Plan, nor do  circumstances  exist that
constitute grounds for any such proceedings;  and neither Borrower nor any ERISA
Affiliate has  completely or partially  withdrawn  from any  multiemployer  Plan
described in Section 4001(a)(3) of ERISA.  Borrower and each ERISA Affiliate has
met the minimum funding standards under ERISA with respect to each of its Plans;
no Plan  of  Borrower  or of any  ERISA  Affiliate  has an  accumulated  funding
deficiency  or waived  funding  deficiency  within the meaning of ERISA;  and no
material  liability to the PBGC under ERISA has been incurred by Borrower or any
ERISA Affiliate.

     6.11  O.S.H.A/EPA.  Borrower has duly complied  with,  and its  facilities,
business  assets,  property,  leaseholds  and equipment are in compliance in all
material  respects with, the provisions of the Federal  Occupational  Safety and
Health Act and the  Environmental  Protection Act, and all rules and regulations
thereunder  and all similar  state and local laws,  rules and  regulations;  and
there have been no  outstanding  citations,  notices or orders of  noncompliance
issued to Borrower or relating to its business, assets, property,  leaseholds or
equipment under any such laws, rules or regulations.

     6.12  Environmental  Matters.  (a) Except as disclosed in Schedule  6.12 to
this  Agreement,  no property owned or used by Borrower and located in the State
of New Jersey is an  "industrial  establishment"  within the  meaning of the New
Jersey  Industrial  Site  Recovery  Act  ("ISRA") or is or has been used for the
generation, manufacture, refining, transportation,  treatment, storage, handling
or disposal of any  "hazardous  substances"  or  "hazardous  wastes"  within the
meaning of ISRA. The following are all of the Standard Industrial Classification
Codes applicable to the properties and operations of Borrower: 3651.

     (b) Borrower is in compliance in all material  respects with all applicable
federal,  state  and  local  statutes,  rules,  regulations,  orders  and  other
provisions of law relating to air emissions,  water discharge,  noise emissions,
solid  and  liquid   disposal,   hazardous  waste  and  substances,   and  other
environmental, health and safety matters.

     6.13 No Other  Violation.  Borrower is not in  violation of any term of its
certificate  or articles of  incorporation  or by-laws and no event or condition
has  occurred  and is  continuing  which  constitutes  or results  in, (or would
constitute  or result  in,  with the  giving of  notice,  lapse of time or other
condition):


                                      -18-
<PAGE>

     (a) A breach of or a default under any material  agreement,  undertaking or
instrument to which Borrower is a party or by which it may be affected; or

     (b) The imposition of any lien,  encumbrance or restriction on any property
of Borrower, except as noted in Schedule 6.16 hereof.

     6.14 Margin Stock.  No part of the proceeds of any  Revolving  Loan will be
used,  directly or  indirectly,  to  purchase  or carry any  "margin  stock" (as
defined in Regulation U issued by the Board of Governors of the Federal  Reserve
System),  to extend  credit to others for the purpose of  purchasing or carrying
any such margin  stock,  or for any  purpose  that  violates  any  provision  of
Regulations G, T, U or X issued by the Board of Governors of the Federal Reserve
System.

     6.15 Location of Collateral.  As of the date hereof, none of the Collateral
to be granted to Lender pursuant to this Agreement or any Relevant Document,  or
to be hereafter conveyed, is or will be located in or on any premises other than
those  premises set forth on Schedule 6.15 annexed  hereto and made part hereof.
Said  Schedule  contains an accurate  record of all of the landlords of property
leased by and mortgagees of property owned by Borrower.

     6.16 Other Liens. Borrower has good and marketable title to and owns all of
the Collateral  and Inventory free and clear of any and all liens,  encumbrances
or security interests whatsoever, except (a) those encumbrances created pursuant
to this Agreement; and (b) those encumbrances set forth on Schedule 6.16 annexed
hereto and made part hereof.  None of the  Collateral or Inventory is subject to
any prohibition against  encumbering,  pledging,  hypothecating or assigning the
same or requires notice or consent prior to Borrower's doing of the same.

     6.17 Books and Records.  Borrower  maintains its books and records relative
to the Collateral at 50 Spring Street, Ramsey, New Jersey 07446.

     6.18 Representations and Warranties True, Accurate, and Complete.

     (a) None of the  representations,  warranties or statements  made to Lender
pursuant  hereto  or in  connection  with  this  Agreement  or the  transactions
contemplated  hereby contains any untrue  statement of a material fact, or omits
or will omit to state a material fact  necessary in order to make the statements
contained  herein and therein,  in light of the  circumstances in which they are
made, not misleading.

     (b) All  warranties  and  representations  made  herein or in the  Relevant
Documents by Borrower  will be true and accurate at the time it requests  Lender
to make Advances to it hereunder.

     6.19 Names; Location of Office.  Schedule 6.19 annexed hereto and made part
hereof sets forth a complete and accurate list of:


                                      -19-
<PAGE>

          (a) All  names by which  the  Borrower  is  known or under  which  the
     Borrower  is  conducting  business,   including,  without  limitation,  its
     corporate names and all trade names; and

          (b) All offices and locations at or out of which the Borrower conducts
     any of its business or operations,  said Schedule 6.19  identifies  each of
     Borrower's chief executive offices if there are more than one.

7. AFFIRMATIVE COVENANTS:

     Until  payment  in full of all  Obligations  and  the  termination  of this
Agreement, Borrower covenants and agrees that it will:

     7.1  Notify  Lender.  Promptly  inform  Lender  if any  one or  more of the
representations  and  warranties  made by Borrower in this  Agreement  or in any
documents  related  hereto  shall no  longer  be  entirely  true,  accurate  and
complete.

     7.2 Pay Taxes and Liabilities;  Comply with Agreements,  Promptly pay, when
due, all  indebtedness,  sums and liabilities of any kind now or hereafter owing
by Borrower to any party however created, incurred, evidenced, acquired, arising
or payable,  including  without  limitation the  Obligations,  income and excise
taxes and taxes with respect to any of the Collateral,  or any wages or salaries
paid by Borrower or otherwise,  except such taxes or liabilities which are being
disputed in good faith in an appropriate  forum for which adequate reserves have
been set aside.

     7.3 Observe Covenants. etc. Observe, perform and comply with the covenants,
terms and  conditions of this  Agreement,  the Relevant  Documents and any other
agreement or document entered into between Borrower and Lender.

     7.4 Maintain Corporate Existence and Qualifications. Maintain and preserve,
and cause any Subsidiary to maintain and preserve, in full force and effect, its
corporate  existence  and  rights,   franchises,   licenses  and  qualifications
necessary to continue its businesses,  and comply in all material  respects with
all  applicable  statutes,  rules and  regulations  pertaining to the operation,
conduct  and  maintenance  of its  existence  and  business  including,  without
limitation,  all  federal,  state and local  laws  relating  to  Benefit  Plans,
environmental,  safety,  or health  matters,  and  hazardous  or liquid waste or
chemicals  or  other  liquids  (including  use,  sale,  transport  and  disposal
thereof).

     7.5  Information  and Documents to Be Furnished to Lender.  Borrower  shall
furnish to Lender:

          (a) Annual  Financial  Statements.  As soon as  delivered to any other
     creditor, but in no event later than ninety-five (95) days after the end of
     each fiscal year, Borrower's balance


                                      -20-
<PAGE>
     sheet as at the end of such fiscal year, Borrower's statements of cash flow
     for such fiscal year and Borrower's income and surplus  statements for such
     fiscal year, all in reasonable detail, all prepared in accordance with GAAP
     consistently  applied,  on a consolidated and consolidating  basis with the
     Guarantors,  and all audited without qualification by independent certified
     public  accountants  of  recognized   standing  selected  by  Borrower  and
     reasonably  satisfactory  to  Lender,  all in the  form  of  the  Form  10K
     delivered  by Borrower  to the  Securities  and  Exchange  Commission,  and
     certified by the Chief Financial Officer of Borrower,  which  certification
     shall  include  evidence  of the  method  of  calculating  compliance  with
     financial covenants (if applicable) and shall affirmatively state as to all
     quarterly  statements  that (i) such  statements  are  true,  accurate  and
     correct,  (ii)  such  statements  were  internally  prepared  generally  in
     accordance  with GAAP applied on a consistent  basis and will be subject to
     revisions only to the extent of immaterial year-end  adjustments imposed by
     Borrower's  accountants;  and  (iii) as of the date of such  statements  no
     Event of  Default  or event  which,  but for the lapse of time or giving of
     notice  or both,  would  constitute  an Event of  Default  existed,  and in
     addition to such statements, any supplementary information to the financial
     reports as Lender shall reasonably require.


          (b) Quarterly Financial Statements.  As soon as delivered to any other
     creditor  but in no event  later than sixty (60) days after the end of each
     quarterly  fiscal period of Borrower,  except the fourth such period in any
     fiscal year,  Borrower's  balance  sheet as at the end of such period,  and
     Borrower's   cumulative  income  and  surplus  statements  for  the  period
     beginning  on the  first day of such  fiscal  year and ended on the date of
     such  balance  sheet,  all in  reasonable  detail all  internally  prepared
     generally in accordance with GAAP consistently  applied,  on a consolidated
     and  consolidating  basis with the Guarantors,  all in the form of Form 10Q
     delivered  by Borrower  to the  Securities  and  Exchange  Commission,  and
     certified by the Chief Financial Officer of Borrower,  which  certification
     shall  include  evidence  of the  method  of  calculating  compliance  with
     financial  covenants and shall affirmatively state that (i) such statements
     are true,  accurate  and  correct,  (ii) such  statements  were  internally
     prepared  generally in accordance  with GAAP applied on a consistent  basis
     and will be subject to revisions only to the extent of immaterial  year-end
     adjustments imposed by Borrower's accountants;  and (iii) as of the date of
     such  statements  no Event of Default or event which,  but for the lapse of
     time or  giving of notice or both,  would  constitute  an Event of  Default
     existed, and in addition to such statements,  any supplementary information
     to the financial reports as Lender shall reasonably require.

          (c) Accountant  Privity Letter.  Contemporaneous  with the delivery of
     each of the audited  financial  statements  required by  Subsection  7.5(a)
     above, a written acknowledgment by the accountants auditing such statements
     of Lender's reliance upon such statements in making the Revolving Loans and
     other accommodations contemplated by this Agreement.

          (d)  Attestation  Form.  Contemporaneously  with the  delivery of each
     financial   statement  required  by  Sections  7.5(a)  and  (b)  above,  an
     attestation  form  substantially in the form of Exhibit "B" attached hereto
     and made a part  hereof,  signed by an  authorized  officer of Borrower and
     attesting to the  truthfulness and accuracy of the information set forth in
     such financial statements.

                                      -21-
<PAGE>

          (e)  Borrowing  Base  Certificate.  Not  less  than  weekly,  or  more
     frequently if Lender shall require at any time during the continuance of an
     Event of Default  and/or  when the  aggregate  outstanding  Revolving  Loan
     exceeds the Advance  Limit,  a complete,  dated and signed  Borrowing  Base
     Certificate in form and substance acceptable to Lender.

          (f) Daily Reports.  Daily,  if Lender shall require at any time during
     the  continuance  of an Event of Default  and/or the aggregate  outstanding
     Revolving Loan exceeds the Advance Limit, reports of all sales and receipts
     for  the  previous  business  day  together  with  copies  of all  invoices
     evidencing such sales.

          (g) Inventory  Reports.  (i) On or before the tenth (10th) day of each
     month (but on or before the thirtieth  (30th) day of the last month in each
     fiscal year only),  or (ii) more  frequently if Lender shall require at any
     time  during  the  continuance  of an  Event  of  Default  and/or  when the
     aggregate  outstanding  Revolving  Loan exceeds the Advance Limit, a report
     satisfactory to Lender setting forth the type and value of Inventory (which
     value  shall be  determined  on the  basis of the  lower of cost of  market
     values then prevailing) and the location of said Inventory.

          (h) Accounts  Receivable Aging Reports.  On or before the tenth (10th)
     day of each month (but on or before  the  thirtieth  (30th) day of the last
     month in each fiscal  year  only),  a detailed  and  summary  aging  report
     setting forth the amount due and owing on Accounts Receivable on Borrower's
     books  as  of  the  close  of  the   preceding   month,   together  with  a
     reconciliation   report   satisfactory   to  Lender   showing   all  sales,
     collections,  payments and adjustments to Accounts Receivable on Borrower's
     books and showing a  reconciliation,  substantially  in the form of Exhibit
     "C" attached hereto and made a part hereof to Borrower's bank statement(s),
     all as of the close of the preceding month.

          (i)  Accounts  Payable  Reports.  On or before the tenth (10th) day of
     each month (but on or before the thirtieth  (30th) day of the last month in
     each fiscal year only), a detailed  report setting forth the amount due and
     owing on the  Borrower's  accounts  payable on  Borrower's  books as of the
     close of the preceding month, in a form satisfactory to Lender.

          (j) Customer  Lists.  Within thirty (30) days of the execution  hereof
     and annually on the same date of each year thereafter,  a detailed customer
     list  setting  forth each of  Borrower's  customers to whom sales were made
     during the immediately  preceding  twelve (12) month period,  including the
     address, telephone number and contact person for each.

          (k)  Income  Tax  Return.  Within  ten (10)  days of  filing  with the
     Internal  Revenue  Service,  a true and complete copy of its signed Federal
     income  tax  return and of the  signed  Federal  income tax  returns of the
     Guarantors.


                                      -22-
<PAGE>

          (l) Change in Status, Immediately,  notice of any change in the status
     of an Account  Receivable or Inventory from that which is Qualified to that
     which is not, if such change would result in the outstanding Revolving Loan
     exceeding the Advance Limit.

          (m) Rejection, Delay, Claims. Immediately,  notice of the rejection of
     goods,  delay  in  performance,  or  claims  made  in  regard  to  Accounts
     Receivable which, would result in the outstanding  Revolving Loan exceeding
     the Advance Limit.

          (n) ERlSA Documents. All ERISA reports, notices, returns and all other
     documents filed as required by or in compliance with ERISA,  whether to the
     Internal  Revenue  Service,  the Department of Labor,  the Pension  Benefit
     Guaranty Corporation or any other appropriate agency, and all documents and
     information distributed to participants in any Plan.

          (o) Notice of Environmental,  Health or Safety Complaints. Within five
     (5)  Banking  Days of  receipt,  notice or copies if written of all claims,
     complaints,  orders,  citations  or notices,  whether  formal or  informal,
     written or oral,  from any  governmental  body or private person or entity,
     relating to air emissions, water discharge, noise emission, solid or liquid
     waste disposal,  hazardous waste or materials,  or any other environmental,
     health  or  safety  matter.   Such  notices  shall  include,   among  other
     information,  the name of the  party who filed  the  claim,  the  potential
     amount of the claim, and the nature of the claim.

          (p) Other Information. Immediately upon demand:

               (i) Certificates of insurance for all policies of insurance to be
          maintained by Borrower pursuant hereto;

               (ii) An estoppel certificate executed by an authorized officer of
          the Borrower indicating that there then exists no Event of Default and
          no event which,  with the giving of notice or lapse of time,  or both,
          would  constitute  an Event of Default  under any  agreement  to which
          Borrower is a party;

               (iii)  All  original  and  other  documents  evidencing  right to
          payment,  including  but not  limited to  invoices,  original  orders,
          shipping and delivery receipts;

               (iv) All information  received by Borrower  indicating an adverse
          change in the financial status or condition of any Account Debtor;

               (v)  Assignments,  in form acceptable to Lender,  of all Accounts
          Receivable,  and  of  the  monies  due or to  become  due on  specific
          contracts  relating  to  the  same  in  any  instance  where  such  an
          assignment  is required  in order for Lender to act upon its  security
          interest in such Accounts; and

               (vi) From time to time,  such  other  information  as Lender  may
          reasonably request.


                                      -23-
<PAGE>

     7.6 Access to Records and Property. At any time and from time to time, upon
request by Lender,  give any  representatives  of Lender  access  during  normal
business  hours to,  and permit any of them to  examine,  copy or make  extracts
from, any and all books,  records and documents in the possession of Borrower or
any independent  contractor  relating to Borrower's  affairs and the Collateral,
and to inspect any of its properties wherever located.

     7.7 Comply With Laws.  Comply with the requirements of all applicable laws,
rules,  regulations and orders of any  governmental  authority,  compliance with
which is  necessary to maintain  its  corporate  existence or the conduct of its
business or  noncompliance  with which would materially and adversely affect its
ability to perform  its  responsibilities  or any  security  given to secure its
Obligations.

     7.8  Insurance  Required.  (a) Cause to be  maintained,  in full  force and
effect  on all  property  given  as  collateral  security  for all  Obligations,
insurance in such amounts and against such risks as is  satisfactory  to Lender,
including,  but without  limitation,  product liability,  fire,  boiler,  theft,
burglary,  pilferage,  loss in transit,  and hazard  insurance.  Said  insurance
policy or policies shall:

          (i) Be in a form and with insurers which are satisfactory to Lender;

          (ii) Be for such  risks and for such  insured  values as Lender or its
     assigns may require in order to replace the property in the event of actual
     or constructive total loss;

          (iii) Designate Lender and its assignees,  as additional  insureds and
     lender loss payees as their interests may from time to time appear;

          (iv) Contain a "breach of warranty  clause" whereby the insurer agrees
     that a breach of the insuring  conditions or any  negligence by Borrower or
     any other person shall not  invalidate  the  insurance as to Lender and its
     assigns; and

          (v)  Provide  that  they may not be  canceled  or  materially  altered
     without thirty (30) days prior notice to the Lender and its assigns.

     (b) Additional  Insurance.  Obtain such additional  insurance as Lender may
reasonably require.

     (c) Notice of Loss. In the event of loss or damage, forthwith notify Lender
and file proofs of loss with the appropriate insurer. Borrower hereby authorizes
Lender to endorse any checks or drafts constituting insurance proceeds.

     (d)  Policies  and Proof of  Payment.  Upon  demand,  deliver to Lender the
original of each policy  evidencing  insurance  required to be maintained  under
this Agreement, together with evidence of payment of all premiums therefor.

                                      -24-
<PAGE>

     (e)  Proceeds,  Forthwith  upon receipt of insurance  proceeds  endorse and
deliver the same to  Lender.

     (f) No Duty for Lender.  In no event shall Lender be required either to (i)
ascertain  the  existence  of or examine  any  insurance  policy or (ii)  advise
Borrower  in the  event  such  insurance  coverage  shall  not  comply  with the
requirements of this Agreement.

     7.9  Condition of  Property;  No Liens.  Maintain all property  conveyed to
Lender as collateral  security for any  Obligations in good condition and repair
at all times, preserve it against any loss, damage, or destruction of any nature
whatsoever relating to said property or its use, and keep said property free and
clear  of  any  liens  and  encumbrances  whatsoever,  except  those  liens  and
encumbrances created pursuant hereto or disclosed herein.

     7.10  Payment  of  Proceeds.  Forthwith  upon  receipt of all  proceeds  of
Collateral,  pay such  proceeds  over to Lender in the form  received,  and such
proceeds shall thereupon become Lender's sole property.

     7.11 Further  Assurances.  At any time or from time to time upon request of
Lender,  execute and deliver such further  documents  and do such other acts and
things as Lender may  reasonably  request in order to effectuate  more fully the
purposes of this Agreement,  the Relevant  Documents and any other  instruments,
documents and agreements  which shall be executed  simultaneously  herewith,  or
which may  hereafter  be executed by  Borrower  with regard to the  transactions
contemplated hereby.

     7.l2 Pay Legal Fees and Expenses. Pay to Lender, upon demand, together with
interest at the rate set forth in Section 4.3 hereof,  from the date when billed
or advanced by Lender until repaid by Borrower all costs, expenses or other sums
billed or advanced by Lender (including reasonable legal fees and disbursements)
to preserve,  collect, protect its interest in or realize on the Collateral, and
to enforce Lender's rights as against Borrower, any Account Debtor or Guarantor,
or in the  prosecution  or defense of any  action or  proceeding  related to the
subject matter of this Agreement or the Relevant  Documents,  including  without
limitation  legal fees,  expenses and  disbursements  unless a court  determines
otherwise.  All such expenses,  costs and other sums shall be deemed Obligations
secured by the Collateral.

     7.13  Records.  At all times  keep  accurate  and  complete  records of the
Collateral and the status of each Account Receivable.

     7.14 Banking  Relationship.  Borrower shall maintain its primary  operating
account(s) at a branch of Lender.

     7.15 Delivery of Documents.  If any proceeds of Accounts  Receivable  shall
include or any of the Accounts  Receivable  shall be  evidenced by notes,  trade
acceptances  or  instruments  or  documents,  or if any  Inventory is covered by
documents of title or chattel paper, whether or not 

                                      -25-
<PAGE>

negotiable,  Borrower  shall  immediately  deliver them to Lender  appropriately
endorsed.  Borrower waives protest regardless of the form of the endorsement. If
Borrower  fails to endorse any  instrument or document,  Lender is authorized to
endorse it on Borrower's behalf.

     7.16 United States Contracts.  If any of the Qualified Accounts  Receivable
arise  out of  contracts  with  the  United  States  or any of its  departments,
agencies or  instrumentalities,  Borrower will notify Lender, and if required by
Lender,  execute  any  necessary  instruments  in order that all money due or to
become due under such contract  shall be assigned to Lender and proper notice of
the assignment given under the Federal Assignment of Claims Act.

8. NEGATIVE COVENANTS:

     Until  payment in full of all  Obligations,  Borrower  covenants and agrees
that it will not:

     8.1 No Consolidation, Merger, Acquisition. Consolidate with, merge with, or
acquire the stock or assets of any Person,  firm,  joint  venture,  partnership,
corporation,  or other  entity,  whether by merger,  consolidation,  purchase of
stock  or  otherwise,  provided,  however,  that  Borrower  (a) may  merge  with
Guarantor,  Bogen Corporation,  so long as: (i) Borrower is the survivor of such
merger;  (ii) Borrower does not change its name; (iii) there are no encumbrances
on the assets of Bogen  Corporation  existing as of the  effective  date of such
merger;  and (d) the consummation of such merger will not cause or result in the
occurrence  of an Event  of  Default  hereunder;  and (b) may  request  Lender's
consent  for  acquisitions  in the  future  which  Lender  shall  consider  on a
case-by-case basis and any such request shall be subject to Lender's consent.

     8.2 Disposition of Assets or Collateral.  Sell, lease, transfer,  convey or
otherwise dispose of any or all of its assets or Collateral, other than the sale
or lease of Inventory in the ordinary course of business.

     8.3 Other Liens Incur, create or permit to exist any mortgage,  assignment,
pledge,  hypothecation,  security interest,  lien or other encumbrance on any of
its  property or assets,  whether now owned or  hereafter  acquired,  except (a)
liens for taxes not  delinquent;  (b) those liens in favor of Lender  created by
this Agreement and Relevant Documents; and (c) those liens set forth on Schedule
6.16 annexed hereto and made part hereof.

     8.4 Negative Pledges.  Incur, create or permit to exist any negative pledge
in any  other  mortgage,  security  agreement,  pledge,  hypothecation  or other
agreement entered into between Borrower with any other Person.

     8.5  Other  Liabilities,  Incur,  create,  assume  or  permit  to exist any
indebtedness  or liability on account of either  borrowed  money or the deferred
purchase  price  of  property,   except  (a)  Obligations  to  Lender;   or  (b)
indebtedness  subordinated  to payment of the  Obligations  on terms approved by
Lender in writing; or (c) those liabilities existing on the date hereof.


                                      -26-
<PAGE>

     8.6 Loans. Make loans to any Person,  except loans to Bogen  Communications
International,  Inc.  which shall not, in the  aggregate,  exceed Three  Hundred
Fifty Thousand  ($350,000.00)  Dollars per annum,  so long as the making of such
loan does not cause or result in the occurrence of an Event of Default.

     8.7  Guarantees.  Except  for the  benefit of  Lender,  assume,  guarantee,
endorse,  contingently  agree to purchase or  otherwise  become  liable upon the
obligation  of any  Person,  firm or entity  except  (a) by the  endorsement  of
negotiable  instruments for deposit or collection or similar transactions in the
ordinary  course of business;  or (b)  contingent  obligations  under letters of
credit  entered  into in the  ordinary  course of business  for the  purchase of
merchandise for resale.

     8.8 Remove  Property.  Remove,  or cause or permit to be removed any of its
Collateral  or assets from those  premises  set forth on Schedule  6.15  annexed
hereto and made part  hereof,  except  for sales of  Inventory  in the  ordinary
course of Borrower's business.

     8.9  Transfers of Notes or Accounts  Receivable.  Sell,  assign,  transfer,
discount or otherwise dispose of any Accounts  Receivable or any promissory note
payable to it with or without recourse,  except for collection  without recourse
in the ordinary course of business.

     8.10 Dividends.  Declare or pay any cash dividend or make any  distribution
on, or redeem, retire or otherwise acquire directly or indirectly,  any share of
its stock,  including all payments to any Person of which Borrower or Borrower's
parent is a Subsidiary, whether characterized as management fees or interest, or
any  other  upstreaming  of funds,  however  characterized  except as  expressly
permitted by Subsection 8.6 above.

     8.11  Modification  of Documents.  Change,  alter or modify,  or permit any
change, alteration or modification of its certificate of incorporation,  by-laws
or other governing documents.

     8.12  Change  Business.  Materially  change  or  alter  the  nature  of its
business.

     8.13  Settlements.  Compromise,  settle or adjust  any claims in a material
amount relating to any of the Collateral.

     8.14 Change Location or Name.  Change the place where its books and records
are maintained or change its name or transact business under any other names.

     8.15  Transactions  With  Affiliates.  Enter into any  transaction  with an
Affiliate or Subsidiary on terms less  advantageous  to Borrower than those that
could be obtained from any other Person in an arms-length transaction.

                                      -27-
<PAGE>

     8.16  Sale of  Inventory.  Sell any of its  Inventory  on a  bill-and-hold,
guaranteed sale, sale-and-return,  sale on approval or consignment basis, or any
other  basis  subject to a  repurchase  obligation  or right to  return,  except
Acceptable Conditional Sales.

     8.17  Tangible Net Worth.  Cause,  suffer or permit  Tangible Net Worth (as
hereinafter  defined)  to be or become  less than Four  Million  ($4,000,000.00)
Dollars  as  at  June  30,  1997,  Six  Million  Seven  Hundred  Fifty  Thousand
($6,750,000.00)  Dollars as at December 31,  1997,  and Six Million Nine Hundred
Thousand  ($6,900,000.00) Dollars as at June 30, 1998, and as at the time of any
determination  thereof  thereafter.  For the purposes of this Agreement the term
"Tangible  Net Worth" shall mean, as of the time of any  determination  thereof,
the difference  between (a) the sum of (i) the par value (or value stated on the
books of  Borrower)  of the capital  stock of all  classes of Borrower  plus (or
minus in the case of a deficit) (ii) the amount of Borrower's  surplus,  whether
capital  or  earned,  minus  (b) the sum of  treasury  stock,  unamortized  debt
discount and expense,  good will,  trademarks,  trade names,  patents,  deferred
charges  and  other  intangible  assets,  and any  write-up  of the value of any
assets, all determined in accordance with GAAP applied on a consistent basis.

     8.18  Leverage  Ratio.  Cause,  suffer,  or permit the ratio of  Borrower's
Indebtedness  (as  hereinafter  defined) to  Borrower's  Tangible  Net Worth (as
hereinabove  defined),  as  determined  in  accordance  with GAAP  applied  on a
consistent  basis, to exceed:  2.00 to 1.00 as at June 30, 1997, 1.50 to 1.00 as
at December 31, 1997; 1.25 to 1.00 as at June 30, 1998 and as at the time of any
determination thereof thereafter.  For the purposes of this Agreement,  the term
"Indebtedness" shall mean all obligations of Borrower, which, in accordance with
GAAP, should be classified upon the balance sheet of Borrower as liabilities, or
to which  reference  should  be made by  footnotes  thereto,  including  without
limitation, in any event and whether or not so classified:  all debt and similar
monetary obligations; all obligations arising or incurred under or in respect of
any guarantees  (whether direct or indirect) of liabilities of any other Person;
all obligation  arising or incurred  under or in respect of any mortgage,  lien,
pledge, charge, security interest or other encumbrance upon or in property owned
by Borrower for the benefit of any other  Person,  even though  Borrower has not
assumed or become liable for the payment of the obligations secured thereby.

     8.19  Pretax  Profit.  Cause,  suffer  or  permit  Borrower's  net  profit,
determined in accordance  with GAAP applied on a consistent  basis (but prior to
deductions for taxes and  extraordinary  items), to be or become less than Seven
Hundred Fifty  Thousand  ($750,000.00)  Dollars as at June 30, 1997, One Million
Two Hundred Fifty Thousand  ($1,250,000.00) Dollars as at December 31, 1997, and
Eight Hundred Fifty Thousand ($850,000.00) Dollars as at June 30, 1998 and as at
any time of the determination thereof thereafter.

     8.20 Capital Expenditures. Enter into any agreements to purchase or pay for
or become obligated to pay for capital expenditures,  long term leases,  capital
leases and/or sale lease-backs  during any fiscal year in an amount  aggregating
in excess of One Million ($1,000,000.00) Dollars.


                                      -28-
<PAGE>

9. MISCELLANEOUS RIGHTS AND DUTIES OF LENDER:

     9.1 Charges Against Credit Balances.  Lender,  without demand and acting in
its sole and absolute discretion, in each instance, may charge and withdraw from
any  credit  balance  which  Borrower  may then have  with  Lender or any of its
branches,  or which  Borrower may have with any affiliate of Lender,  any amount
which shall become due from Borrower to the Lender under this Agreement.

     9.2 Remittances.  Borrower covenants and agrees (a) to receive in trust for
Lender, all payments for the sale of goods or the performance of services and in
each case, whether by cash, checks, drafts, notes, acceptances or other forms of
payment;  and (b) deliver such payments to Lender in the identical form in which
received.

     9.3  Collections;  Modification  of  Terms.  Lender  may,  in its  sole and
absolute  discretion,  and at any  time  after  the  occurrence  or  during  the
continuance  of an Event of  Default,  with  respect  to any of the  Collateral,
demand,  sue for, collect or receive any money or property,  at any time payable
or receivable on account of or in exchange for, or make any compromises it deems
desirable including without limitation extending the time of payment,  arranging
for payment in  installments,  or otherwise  modifying  the terms or rights with
respect to any of the Collateral, all of which may be effected without notice to
or consent by Borrower  and  without  otherwise  discharging  or  affecting  the
Obligations, the Collateral or the security interests granted hereunder.

     9.4 Notification of Account  Debtors.  At any time after the occurrence and
during the  continuance  of an Event of  Default,  Lender may notify the Account
Debtors on any of the Accounts  Receivable  to make payment  directly to Lender,
and Lender may endorse all items of payment  received by it which are payable to
Borrower.  Borrower,  at the request of Lender, shall notify the Account Debtors
of Lender's  security  interest in its Accounts  Receivable.  Until such time as
Lender elects to exercise its right of  notification,  Borrower is authorized to
collect and enforce the Accounts  Receivable  under the terms and conditions set
forth in Section 9.2 hereof.

     9.5 Uniform  Commercial Code. At all times prior and subsequent to an Event
of Default, Lender shall be entitled to all the rights and remedies of a secured
party under the Uniform  Commercial  Code as enacted in New Jersey,  as the same
may be amended from time to time, (N.J.S.A.  12A:9-101 et seq.), with respect to
all Collateral.

     9.6  Preservation  of  Collateral.  At all times prior and subsequent to an
Event of Default hereunder, Lender may take any and all action which in its sole
and absolute  discretion is necessary and proper to preserve its interest in the
Collateral,  including without limitation the payment of debts of Borrower which
might in  Lender's  sole and  absolute  discretion,  impair  the  Collateral  or
Lender's  security  interest  therein,  purchasing  insurance on the Collateral,
repairing the Collateral,  or paying taxes or assessments  thereon, and the sums
so expended by Lender shall be secured by the Collateral,  shall be added to the
amount of the Obligation due Lender and shall


                                      -29-
<PAGE>

be payable on demand  with  interest at the rate set forth in Section 4.3 hereof
from the date expended by Lender until repaid by Borrower.

     9.7 Mails. From and after an Event of Default, Lender is authorized to (and
Borrower shall, upon request of Lender) notify the postal authorities to deliver
all mail,  correspondence  or parcels  addressed  to  Borrower to Lender at such
address as Lender may direct,  provided,  however,  that Lender  shall  promptly
forward all mail to Borrower which is unrelated to the Collateral.

     9.8 Lender's Right to Cure. In the event Borrower shall fail to perform any
of its responsibilities  hereunder or under any of the Relevant Documents,  then
Lender, in addition to all of its rights and remedies hereunder, may perform the
same,  but shall not be obligated to do so, at the cost and expense of Borrower.
In any such event,  Borrower  shall  promptly  reimburse  Lender  together  with
interest at the rate set forth in Section 4.3 hereof from the date such sums are
expended until repaid by Borrower.

     9.9  Test  Verifications.   Lender  shall  have  the  right  to  make  test
verifications of any and all Accounts Receivable in any manner,  whether oral or
written,  and  through  any  medium,  including  telephonically,   which  Lender
considers  advisable,  and Borrower  shall render any  necessary  assistance  to
Lender.

     9.10 Power of Attorney.  Lender is hereby irrevocably appointed by Borrower
as its lawful  attorney and agent in fact to execute  financing  statements  and
other  documents and  agreements as Lender may deem necessary for the purpose of
perfecting any security interests,  mortgages or liens under any applicable law.
Further, Lender is hereby authorized to file on behalf of Borrower, in its name,
and at its expense,  such financing  statements,  documents or agreements in any
appropriate  governmental office.  Borrower hereby grants a Power of Attorney to
Lender to endorse Borrower's names on checks, notes, acceptances, drafts and any
other instruments requiring Borrower's endorsement,  to change the address where
Borrower's  mail  should be sent and to open all mail and to do such  other acts
and things  necessary to effectuate the purposes of this Agreement.  All acts by
the Lender or its designee are hereby  ratified  and  approved,  and neither the
Lender, nor its designee shall be liable for any acts of omission or commission,
or for any error of judgment or mistake,  except for gross negligence or willful
misconduct.  Borrower hereby grants a Power of Attorney to Lender to file proofs
of loss respecting the Collateral  with the  appropriate  insurer and to endorse
any checks or drafts  constituting  insurance  proceeds.  The powers of attorney
granted  to  Lender in this  Agreement  are  coupled  with an  interest  and are
irrevocable so long as this Agreement is in force or any Obligation shall remain
unpaid.  Although  fully vested  hereby as Borrower's  attorney-in-fact,  Lender
shall refrain from  exercising  such powers unless and until an Event of Default
occurs hereunder.


                                      -30-
<PAGE>

10. CONDITIONS TO MAKING EXTENSIONS OF CREDIT:

     10.1 Initial  Extension  of Credit.  The  obligation  of Lender to make the
first Advance  hereunder is subject to the satisfaction of each of the following
conditions precedent:

          (a) Loan Documents. Receipt by Lender of a fully executed copy of this
     Agreement with complete Schedules and all Related Documents.

          (b) Financing  Statements.  Receipt by Lender of verification that all
     required Uniform Commercial Code Financing  Statements requested by it have
     been filed in the appropriate jurisdiction(s).

          (c) Landlord's  Waivers.  Receipt by Lender of landlord's  waivers for
     each real  property  location  occupied by Borrower,  executed by the owner
     and/or lessor of such location.

          (d)  Guaranty  Agreement.  Receipt by Lender of a  guaranty  agreement
     executed by the  Guarantors in form and substance  acceptable to Lender and
     its  counsel  and any  Relevant  Document  to be  delivered  in  connection
     therewith.

          (e)  Deposit  Account;  Lockbox  Agreements.  Receipt by Lender of (i)
     evidence satisfactory to it that Borrower has opened a deposit account with
     Lender, and (ii) the fully executed lockbox agreement.

          (f)  Insurance.  Receipt by Lender of copies of  Borrower's  insurance
     policies   containing   a  long-form   lender  loss   payable   endorsement
     satisfactory  to Lender  and which in all other  respects  comply  with the
     requirements hereof.

          (g)  Searches.  Receipt  by  Lender  of lien,  judgment  and  standing
     searches  with  respect to  Borrower  and each  Guarantor  satisfactory  to
     Lender.

          (h) Inventory Appraisal. Receipt by Lender of Inventory appraisals for
     all locations  operated by Borrower in form and substance  satisfactory  to
     Lender.

          (i) Field Examination.  Completion by Lender of its field examinations
     of Borrower's Accounts and Inventory, with results satisfactory to Lender.

          (j) Accountant Review Letter. Receipt by Lender of a written review by
     Borrower's  accountant,  of  Borrower's  financial  statement for the third
     quarterly fiscal period of 1996.

          (k) Completion of Due Diligence.  Receipt by Lender of all information
     requested from Borrower in connection with Lender's due diligence review of
     Borrower and all other  parties,  and  completion of such review by Lender,
     with results satisfactory to Lender.


                                      -31-
<PAGE>

          (l)  Officer's   Certificate.   Receipt  by  Lender  of  an  officer's
     certificate  for  Borrower  and each  Guarantor,  showing  the names of the
     officers,  directors and  shareholders  (except for any public  company) of
     such Person with their  respective  titles and  appending  as exhibits  all
     governing documents and enabling resolutions for this transaction.

          (m) Opinion of Counsel. Receipt by Lender of an opinion of the counsel
     to Borrower  and the  Guarantors,  addressed  to Lender and in all respects
     satisfactory  to Lender  and its  counsel  including,  without  limitation,
     confirmation  of  the  status  of  the  outstanding   accounts  payable  to
     Borrower's supplier, Reshef, Inc.

          (n) Borrowing Base Certificate.  Receipt by Lender of a Borrowing Base
     Certificate,  dated as of the date  hereof and  executed  by an  authorized
     officer of  Borrower,  evidencing  sufficient  availability  to support the
     initial Advance requested hereunder.

          (o)  Payoff  Letters/Termination.  Receipt  by Lender  of (i)  pay-off
     letters from each existing  lender to Borrower whose loans are being repaid
     with proceeds of the Loans in form satisfactory to Lender; and (ii) receipt
     of all UCC  Termination  Statements and other  documents and instruments of
     termination and release necessary so that the security interests granted to
     Lender pursuant to this Agreement and the Relevant  Documents are first and
     prior liens and security interests.

          (p) Fees. Receipt by Lender of all fees and expenses which are payable
     to Lender, its counsel, or to third-party  providers of services related to
     the closing of this transaction.

          (q) Existing Lockbox.  Receipt by Lender,  within forty-five (45) days
     of the date hereof,  written  confirmation  that Borrower's  lockbox at PNC
     Bank, N.A. has been closed.

          (r)  Miscellaneous.   Receipt  by  Lender  of  such  other  documents,
     instruments,  records,  opinions,  assurances  and  papers as Lender or its
     counsel may reasonably require,  all in form and substance  satisfactory to
     Lender and its counsel.

10.2 Conditions to All Advances.

     (a)  Lender's  obligation  to advance  any  Revolving  Loan or to issue any
Letter  of Credit  is  subject  to the  condition  that,  as of the date of such
advance or issuance,  no Event of Default or event which,  for the lapse of time
or giving of notice or both would  constitute  an Event of  Default,  shall have
occurred and be continuing.

     (b) Borrower's acceptance of each Revolving Loan under this Agreement shall
constitute reaffirmation of all representations and warranties set forth herein.


                                      -32-
<PAGE>

11. DEFAULT:

The occurrence of any of the following shall constitute an Event of Default:

     11.1  Failure  to Pay.  Borrower  fails  to pay,  when due any  payment  of
principal,  interest or other  charges  due and owing to Lender  pursuant to any
Obligations  of  Borrower  to  Lender  including,   without  limitation,   those
Obligations  arising  pursuant to this  Agreement or any Relevant  Document,  or
under any other  agreement  for the  payment of monies  then due and  payable to
Lender;

     11.2  Failure to  Perform.  Borrower's  failure  to perform or observe  any
covenant, term or condition of this Agreement or under any Relevant Documents to
be performed or observed by Borrower;

     11.3  Cross  Default;  Default  on  Other  Debt.  A  default  on any of the
Obligations  (with the exception of defaults covered by Subsection 11.1 and 11.2
above) or any default on any other obligation or indebtedness of Borrower or any
Guarantor to any Person so that the holder of such  indebtedness  declares  such
indebtedness  due prior to its date of maturity  because of  Borrower's  or such
Guarantor's default thereunder;

     11.4 False Representation or Warranty. Borrower or any Guarantor shall have
made any  statement,  representation  or  warranty in this  Agreement  or in any
document or certificate  executed by Borrower incident to this Agreement,  which
is at any time found to have been false in any material respect at the time such
representation or warranty was made;

     11.5 Petition by or Against  Borrower.  Borrower or any Guarantor ceases to
do business as a going concern,  or there is filed by or against Borrower or any
Guarantor,  any petition with respect to its own financial  condition  under any
bankruptcy law or any amendment thereto (including without limitation a petition
for reorganization, arrangement or extension) or under any other insolvency laws
providing for the relief of debtors and, in the case of involuntary  proceedings
only, such proceeding is not stayed or dismissed within  forty-five (45) days of
its filing;

     11.6 Appointment of Receiver. A receiver,  custodian,  trustee, conservator
or  liquidator  is  appointed  for  Borrower  or  any  Guarantor,  or  all  or a
substantial  part  of  its  assets;  or  Borrower  or  any  Guarantor  shall  be
adjudicated bankrupt,  insolvent or in need of any relief provided to debtors by
any court;

     11.7 Judgments;  Levies.  If any final judgment or judgments  (except those
covered by insurance), or any levy, sequestration,  or attachment,  which in the
aggregate exceed $25,000.00,  against Borrower or its property,  remains unpaid,
undischarged,  unsatisfied,  unbonded or undismissed for a period of thirty (30)
days after Borrower has received notification of the entry thereof;


                                      -33-
<PAGE>

     11.8 Change in Condition.  There occurs any material and adverse  change in
the  condition  or  affairs,  financial  or  otherwise,  of  Borrower  or of any
Guarantor  which,  in the  opinion  of  Lender,  impairs  Lender's  security  or
increases its risk;

     11.9 Change in Ownership/Management. At any time there is any change in the
ownership of a controlling or significant interest (more than 30%) of the issued
and outstanding  voting stock of Borrower or any material and adverse change (as
reasonably determined by Lender) in the management of Borrower;

     11.10  Liquidation or Dissolution.  The liquidation  and/or  dissolution of
Borrower or any Guarantor;

     11.11  Environmental  Claim.  At any time  the  Lender  determines  that an
environmental  claim  will have a  potentially  material  adverse  effect on the
financial condition of Borrower; or

     11.12  Failure  to  Notify.  If at any time the  Borrower  fails to provide
Lender immediately with notice or copies, if written, of all complaints, orders,
citations or notices with respect to environmental,  health or safety complaints
as required by Section 7.5.

12. REMEDIES:

     12.1 Acceleration;  Proceed Against  Collateral.  Upon the occurrence of an
Event of Default:

          (a) The total  amount  (the  "Default  Amount")  of (i) the  aggregate
     amount of all  Obligations  for  principal  and  interest,  including  late
     charges thereon, and all other sums which are then due and unpaid; and (ii)
     an amount equal to the aggregate  amount of all  principal  remaining to be
     repaid on all Obligations; and (iii) interest on the foregoing sums, at the
     rate provided for in Section 4.3 hereof, from said occurrence until paid in
     full shall,  at the option of Lender,  become  immediately  due and payable
     without notice or demand; and

          (b) Lender may forthwith  give written  notice to Borrower,  whereupon
     Borrower shall, at its expense,  promptly  deliver any or all Collateral to
     such place as Lender may designate, or Lender shall have the right to enter
     upon the  premises  where the  Collateral  is  located  and take  immediate
     possession of and remove the Collateral  without liability to Lender except
     such as is occasioned by the gross  negligence of Lender,  its employees or
     agents.  In the event Lender obtains  possession of the Collateral,  Lender
     may sell,  lease or otherwise  dispose of any or all of the  Collateral  at
     public or  private  sale,  at such price or prices as Lender may deem best,
     either for cash, on credit,  or for future delivery,  in bulk or in parcels
     and/or lease or retain the  Collateral  repossessed  using it or keeping it
     idle.  Notice  of any  sale or  other  disposition  shall  be  given to the
     Borrower  at least ten (10) days  before the time of any  intended  sale or
     disposition  of the  Collateral  is to be made,  which the Borrower  hereby
     agrees shall be reasonable notice of such sale or other disposition. Lender
     may also elect to retain the Collateral or any part thereof


                                      -34-
<PAGE>

     in satisfaction  of Borrower's  Obligations.  The proceeds,  if any, of any
     such sale or leasing by Lender shall be applied:  First,  to the payment of
     all fees and expenses incurred by Lender,  including without limitation any
     reasonable  legal fees and expenses;  Second,  to pay the Default Amount to
     the extent not previously  paid by Borrower;  and Third,  to pay any excess
     remaining thereafter to Borrower.

     12.2 Set-off.

     (a) Upon the  occurrence  of an Event of  Default,  Lender  shall  have the
right,  immediately and without notice or other action to set-off against any of
the Borrower's  liabilities to Lender any money owed by Lender (or any affiliate
of Lender) in any capacity to Borrower,  whether or not due, and Lender shall be
deemed to have exercised such right of set-off and to have made a charge against
any such money  immediately  upon the  occurrence  of such Event of Default even
though the actual book entries may be made at a time subsequent thereto.

     (b) If other lenders have  participated with the Lender with respect to the
Lender's  making  loans to the  Borrower  pursuant  to the terms  hereof,  then,
Borrower hereby authorizes such other participating lenders, upon the occurrence
of an Event of Default,  immediately and without notice or other action,  at the
request of Lender,  to set off  against  any of the  Borrower's  liabilities  to
Lender any money owed by such participating lenders in any capacity to Borrower,
whether or not due, and to remit the monies set off to the Lender.

     12.3 Cumulative Remedies; Waivers. No remedy referred to herein is intended
to be  exclusive,  but each shall be  cumulative  and in  addition  to any other
remedy  referred to above or otherwise  available to Lender at law or in equity.
No  express  or  implied  waiver by Lender of any  default  or Event of  Default
hereunder  shall in any way be, or be construed to be, a waiver of any future or
subsequent  default  or Event of  Default.  The  failure  or delay of  Lender in
exercising  any rights  granted it hereunder  upon any  occurrence of any of the
contingencies  set forth herein shall not  constitute a waiver of any such right
upon the  continuation  or  recurrence  of any  such  contingencies  or  similar
contingencies  and any single or partial  exercise  of any  particular  right by
Lender  shall not  exhaust  the same or  constitute  a waiver of any other right
provided herein.  The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other  rights and  remedies of Lender
provided for by this Agreement and applicable law.

     12.4 WAIVE JURY  TRIAL.  LENDER AND  BORROWER  HEREBY  WAIVE ALL RIGHT TO A
TRIAL  BY JURY  IN ANY  LITIGATION  RELATING  TO THIS  AGREEMENT,  THE  RELEVANT
DOCUMENTS OR OTHER AGREEMENTS OR INSTRUMENTS BETWEEN THEM.

     12.5 Costs and Expenses.  Borrower  shall be liable for all costs,  charges
and expenses,  including reasonable attorney's fees and disbursements,  incurred
by Lender by reason of the occurrence of any Event of Default or the exercise of
the Lender's remedies with respect thereto.


                                      -35-
<PAGE>

     12.6 No  Marshalling.  Lender shall be under no  obligation  whatsoever  to
proceed first against any of the Collateral before proceeding  against any other
of the  Collateral.  It is  expressly  understood  and  agreed  that  all of the
Collateral  stands as equal security for all Obligations,  and that Lender shall
have the right to proceed  against any or all of the Collateral in any order, or
simultaneously, as in its sole and absolute discretion it shall determine. It is
further  understood  and agreed that Lender  shall have the right,  as it in its
sole  and  absolute  discretion  shall  determine,  to  sell  any  or all of the
Collateral in any order or simultaneously.

l3. WAIVERS, CONSENTS:

     13.1 Waivers.  Borrower waives demand,  presentment,  notice of dishonor or
protest of any instruments either of Borrower or others which may be included in
the Collateral or which may evidence the Obligations.

     l3.2 Consents. Borrower consents:

          (a) To any extension,  postponement of time of payment,  indulgence or
     to any substitution, exchange or release of Collateral.

          (b) To any addition to, or release of, any party or persons  primarily
     or secondarily  liable,  or acceptance of partial  payments on any Accounts
     Receivable or instruments  and the  settlement,  compromising or adjustment
     thereof which shall be in compliance with Section 9.3 at all times.

14. SURVIVAL;

     All  representations  and warranties  made herein or in any  certificate or
instrument contemplated hereby shall survive any independent  investigation made
by  Lender  and  the  execution  and  delivery  of  this  Agreement,   and  said
certificates  or instruments  and shall continue so long as any  Obligations are
outstanding and unsatisfied,  applicable  statutes of limitation to the contrary
notwithstanding.

15. EFFECT OF HOLIDAYS:

     If any  payment  pursuant  to this  Agreement  becomes due and payable on a
Saturday, Sunday or legal holiday under the laws of the State of New Jersey, the
maturity thereof shall be extended to the next succeeding Banking Day.


                                      -36-
<PAGE>

16. NOTICES:

     16.1  Written;   Effective  Date.  All  notices  and  other  communications
hereunder  shall be in writing,  shall be deemed to have been duly given  either
when sent, postage prepaid,  by certified mail, return receipt requested or when
deposited with a recognized overnight courier and shall be deemed received three
(3) Banking Days after deposit with the United States Postal Service and one (1)
Banking Day after deposit with a recognized  overnight courier. Any notification
of a sale or other  disposition  of  Collateral  or any  other  action by Lender
required to be given by Lender  shall be  sufficient  if given not less than ten
(10) days  prior to the days on which  such sale or other  disposition  would be
made, and such notification shall be deemed reasonable notice.

     16.2 To  Lender.  Notices  to Lender  shall be  directed  to the  following
address:

      Summit Bank
      750 Walnut Avenue
      Cranford, New Jersey 07016
      Attn: Asset-Based Lending

     16.3 To  Borrower.  Notice to Borrower  shall be directed to the  following
address:

      Bogen Communications, Inc
      50 Spring Street
      Ramsey, New Jersey 07446
      Attn: Chief Financial Officer

17. TERMINATION OF AGREEMENT:

     17.1 Termination by Lender. Lender may terminate this Agreement at any time
on or after February 5, 1999, whereupon the Obligations shall be due and payable
immediately.

     17.2  Termination  by Borrower.  (a) Borrower may terminate  this Agreement
without  premium or penalty at any time on or after  February 5, 1999,  upon not
less than  ninety (90) days' prior  written  notice to Lender.  Upon giving such
notice,  this Agreement shall  thereafter  terminate if and only if the Borrower
has paid to the Lender in full all of the Obligations.

     (b)  Anything  contained  in  Subsection  17.2(a)  above  to  the  contrary
notwithstanding,  Borrower may terminate this Agreement at any time by repaying,
in full,  all of the  Obligations  accompanied by a prepayment fee calculated as
follows:


                                      -37-
<PAGE>

          (i) If this  Agreement is  terminated at any time prior to February 5,
     1998, then  there shall  be due  a prepayment fee equal to one and one-half
    (1 1/2%) percent of the Line of Credit; and

          (ii) If this  Agreement is terminated at any time on or after February
     5, 1998 but prior to February 5, 1999, or at any time  thereafter with less
     than  ninety  (90) days' prior  written  notice,  then there shall be due a
     prepayment fee of one-half (1/2%) percent of the Line of Credit.

     (c) No  prepayment  fee  shall  be due (i)  upon  any  termination  of this
Agreement in conjunction with Borrower's refinancing of the Revolving Loans with
another  department  of Lender;  or (ii) upon  payment in full upon the maturity
date whether or not prior written notice is given.

     17.3 Rights  Upon  Termination.  Notwithstanding  the  termination  of this
Agreement as herein provided,  Lender's security  interest,  rights and remedies
herein set forth  shall  remain in full force and  effect  until all  Borrower's
Obligations are paid in full.

18. INDEMNITIES BY BORROWER:

     18.1 (a) Yield Protection.  If any statute or governmental  regulation,  or
the  interpretation  or  application  thereof  by any court or any  governmental
authority charged with the  administration  thereof,  or the compliance with any
guideline  or request  from any central  bank or other  governmental  authority,
whether or not having the force of law:

          (i) subjects the Lender to any tax, levy, impost,  charge,  fee, duty,
     deduction or withholding of any kind hereunder  (other than any tax imposed
     or based  upon the income of the  Lender  and  payable to any  governmental
     authority or taxing  authority of the United States of America or any state
     thereof) or changes  the basis of  taxation  of the Lender with  respect to
     payments by the Borrower of  principal,  interest or other amounts due from
     the Borrower  hereunder  (other than any change which  affects,  and to the
     extent that it affects, the taxation by the United States of America or any
     state thereof of the total net income of the Lender); or

          (ii)  imposes,  modifies  or deems  applicable  any  reserve,  special
     deposit, special assessment or similar requirements against assets held by,
     deposits with or for the account or credit extended by the Lender; or

          (iii) imposes upon the Lender any other condition with respect to this
     Agreement,  and the result of any of the  foregoing is to increase the cost
     to the Lender,  reduce the income receivable by the Lender, reduce the rate
     of return on the Lender's  capital or impose any expense upon the Lender by
     an amount which the Lender in its discretion deems to be material, the


                                      -38-
<PAGE>

     Lender shall from time to time notify the Borrower of the amount determined
     by the  Lender  (which  determination,  absent  manifest  error,  shall  be
     conclusive)  to be  reasonably  necessary to  compensate  the Lender (on an
     after-tax basis) for such increase in cost, reduction in income,  reduction
     in rate of return or additional  expense,  setting  forth the  calculations
     therefor,  and the  Borrower  shall  pay  such  amount  to the  Lender,  as
     additional consideration hereunder,  within ten (10) days of the Borrower's
     receipt of such notice.  All such amounts shall be part of the  Obligations
     and shall bear  interest  at the rate set forth in Section  4.3 if not paid
     when due.

     (b)  Method of  Calculation.  In  determining  the  amount  due the  Lender
hereunder by reason of the  application of this  Subsection,  the Lender may use
any reasonable  averaging or attribution  method;  provided,  however,  that the
Lender must use reasonable efforts to minimize such losses and costs.

     18.2 Capital Adequacy.  If (a) any adoption of, change in or interpretation
of  any  statute  or  governmental  regulation  applicable  to  Lender,  or  (b)
compliance with any guideline, request or direction of any central bank or other
governmental  authority or quasi-governmental  authority exercising control over
banks or financial institutions  generally, or any court requires the agreements
of Lender hereunder be treated as an asset or otherwise be included for purposes
of calculating the appropriate  amount of capital to be maintained by the Lender
or any corporation  controlling  the Lender (a "Capital  Adequacy  Event"),  the
result of which is to reduce  the rate of return on the  Lender's  capital  as a
consequence  of such  requirement  to a level below that which the Lender  could
have achieved but for such Capital Adequacy Event, taking into consideration the
Lender's  policies  with  respect to capital  adequacy,  by an amount  which the
Lender deems to be material, the Lender shall promptly deliver to the Borrower a
statement of the amount  necessary to compensate the Lender for the reduction in
the rate of return on its capital attributable to such commitments (the "Capital
Compensation  Amount").  The Lender  shall  determine  the Capital  Compensation
Amount in good faith, using reasonable  attribution and averaging  methods.  The
Lender shall from time to time notify the  Borrower of the amount so  determined
(which determination,  absent manifest error, shall be conclusive).  Such amount
shall be due and payable by the  Borrower to the Lender ten (10)  business  days
after such notice is given.  All such amounts  shall be part of the  Obligations
and shall bear interest at the rate set forth in Subsection 4.3 if not paid when
due.

     18.3  Indemnification  of Lender.  Borrower hereby  covenants and agrees to
indemnify,  defend  and  hold  harmless  Lender  and  its  officers,  directors,
employees and agents from and against any and all claims, damages,  liabilities,
costs and expenses  (including,  without  limitation,  the  reasonable  fees and
out-of-pocket  expenses of counsel) which may be incurred by or asserted against
Lender or any such other individual or entity, except as a result of their gross
negligence or willful misconduct in connection with:

          (a) any  investigation,  action or proceeding arising out of or in any
     way  relating  to  this  Agreement,  any  Relevant  Documents,  any  of the
     Revolving Loans, any of the Collateral,  or any act or omission relating to
     any of the foregoing; or


                                      -39-
<PAGE>

          (b) any taxes (except taxes imposed with reference to Lender's  income
     or continued corporate existence),  liabilities, claims or damages relating
     to the Collateral or Lender's liens thereon; or

          (c) the  correctness,  validity or genuineness  of any  instruments or
     documents  that may be released  or  endorsed to Borrower by Lender  (which
     shall  automatically  be deemed  to be  without  recourse  to Lender in any
     event), or the existence, character, quantity, quality, condition, value or
     delivery of any goods  purporting to be represented by any such  documents;
     or

          (d) any broker's commission,  finder's fee or similar charge or fee in
     connection with the transactions contemplated in this Agreement.

     18.4 Claims by Borrower Limited. To the extent permitted by applicable law,
no claims may be made by Borrower or any other person  against  Lender or any of
its Affiliates, directors, officers, employees, agents, attorneys or consultants
for any special,  indirect,  consequential or punitive damages in respect of any
claim for breach of contract,  tort or any other theory of liability arising out
of or related to the  transactions  contemplated  by this  Agreement or any act,
omission or event  occurring in connection  therewith  except those arising as a
result of the gross  negligence  or willful  misconduct  of Lender or any of its
affiliates,  directors,  officers,  employees, agents, attorneys or consultants;
and Borrower  hereby  waives,  releases and agrees not to sue upon any claim for
any such  damages,  whether or not accrued and whether or not known or suspected
to exist in its  favor.  Neither  Lender nor any of its  Affiliates,  directors,
officers, employees or agents shall be liable for any action taken or omitted to
be taken  by it or them  under  or in  connection  with  this  Agreement  or the
transactions  contemplated hereby,  except for its or their own gross negligence
or willful misconduct.

19. AMENDMENTS AND MISCELLANEOUS:

     19.1 Amendment.  The terms of this Agreement shall not be waived,  altered,
modified, amended, supplemented or terminated in any manner whatsoever except by
a written instrument signed by Lender and Borrower.

     19.2 Binding on Successors.  This Agreement shall be binding upon and inure
to the  benefit  of the  parties  hereto  and their  respective  successors  and
assigns.

     19.3 Invalidity. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such  jurisdiction,  be ineffective  to the extent of such  prohibition or
unenforceability  without  invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.


                                      -40-
<PAGE>

     19.4 Gender.  Throughout  this  Agreement,  the masculine shall include the
feminine  and vice  versa and the  singular  shall  include  the plural and vice
versa, unless the context of this Agreement indicates otherwise.

     19.5 Cross Default/Cross Collateral.  All other agreements between Borrower
and Lender and/or any of Lender's  affiliates or subsidiaries are hereby amended
so that a default under this  Agreement is a default under all other  agreements
and a default  under any one of the other  agreements  is a default  under  this
Agreement.  Further,  such  agreements are amended so that the Collateral  under
this Agreement  secures the Obligations now or hereafter  outstanding  under all
other  agreements  of  Borrower  with  Lender  and/or  Lender's   affiliates  or
subsidiaries  and the collateral  pledged under any other  agreement with Lender
and/or  its  affiliates  or  subsidiaries  secures  the  Obligations  under this
Agreement.

     19.6 Expenses of Lender.  Borrower  agrees to pay all costs and expenses of
the  Lender  in  connection  with  the  preparation,   execution,  delivery  and
administration of this Agreement or any amendments,  extensions or modifications
thereto and other  instruments  and  documents to be executed  contemporaneously
herewith,  including  reasonable  attorney's  fees and out of pocket expenses of
counsel for Lender,  which fees and costs  shall not, in the  aggregate,  exceed
Twenty  Thousand  ($20,000.00)  Dollars for the  documentation,  negotiation and
closing of this Agreement.

     19.7 Section and Paragraph Headings. Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.

     19.8 Law/Forum.  (a) This Agreement shall be construed in accordance  with,
and shall be governed by, the laws of the State of New Jersey.

     (b) Lender and Borrower  hereby  consent to the  jurisdiction  of the State
Courts of the State of New Jersey or the Federal  Courts of the  District of New
Jersey and hereby  agree that the defense of forum non  conveniens  shall not be
brought in response to any action brought in such Courts.

     IN WITNESS  WHEREOF,  the  undersigned  have  caused  these  presents to be
executed by their proper corporate  officers and sealed with their seals the day
and year first above written.

ATTEST:                                 BOGEN COMMUNICATIONS, INC.
BY:  /s/ Frank DiPalma                  BY: /s/ Yoav M. Cohen
   ----------------------------------      ------------------------------
   FRANK DIPALMA, Assistant Secretary      YOAV M. COHEN, Vice President, 
                                           Finance

                                      -41-
<PAGE>


                                        SUMMIT BANK
                                        By: /s/ Robert Munns
                                           ------------------------------
                                           ROBERT MUNNS, Vice President

                                      -42-
<PAGE>

                                  SCHEDULE 1.K

                            Description of Collateral

     (a) Accounts, as that term is defined by the Uniform Commercial Code of the
State of New Jersey and in addition thereto,  all obligations of any kind at any
time due and/or owing to Borrower and all rights of Borrower to receive  payment
or any other consideration (whether classified under the Uniform Commercial Code
of the State of New  Jersey or any other  state as  accounts,  contract  rights,
chattel  paper,  General  Intangibles,  leases or otherwise)  including  without
limitation, invoices, contract rights, accounts receivable, General Intangibles,
leases choses-in-action,  notes, drafts, acceptances, instruments, and all other
debts,  obligations  and liabilities in whatever form owing to Borrower from any
person,  firm,  governmental  authority,  corporation  or any other entity,  all
security therefor,  and all Borrower's rights to goods sold (whether  delivered,
undelivered,  in transit or returned), which may be represented thereby, whether
now existing or hereafter  arising,  together  with all proceeds and products of
any and all of the foregoing.

     (b)  Equipment,  which shall mean,  in addition to the  definition  thereof
contained  in the  Uniform  Commercial  Code of the  State  of New  Jersey,  all
equipment,  machinery,  furniture,  fixtures, and all other tangible assets, and
all replacements,  repairs, modifications,  alterations, additions, controls and
operating accessories therefor, all substitutions and replacements therefor, and
all  accessions  and  additions  thereto and all  proceeds  and  products of the
foregoing now owned or hereafter acquired by Borrower.

     (c) General Intangibles, which shall mean and include all of the Borrower's
now owned or hereafter acquired choses in action, causes of action and all other
intangible personal property including,  without limitation,  corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark  applications,  trade names, trade secrets, good will,  registrations,
copyrights,  licenses,  franchises,  customer  lists,  tax  refunds,  tax refund
claims,  insurance  claims,  rights and claims against carriers and shippers and
rights to indemnification.

     (d)  Inventory,  which  shall  have the  meaning  set forth in the  Uniform
Commercial Code of the State of New Jersey and in addition  thereto,  all goods,
merchandise  or other  tangible  personal  property held by Borrower for sale or
lease or to be  furnished  under  labels and other  devices,  the names or marks
affixed thereto for purposes of selling or identifying the same or the seller or
manufacturer  thereof, and all right, title and interest of Borrower therein and
thereto, all raw materials,  work or goods in process, or materials and supplies
of every nature used, consumed or to be consumed in the Borrower's business, all
packaging  and shipping  materials,  and all proceeds and products of any of the
foregoing,  whether now owned or hereafter  acquired by  Borrower,  and wherever
located.

     (e)  Machinery,  which  shall mean and  include,  without  limitation,  all
inanimate mechanisms for utilizing or applying power including the appurtenances
thereto used by or for

                                      -43-
<PAGE>

Borrower in the operation of its businesses and all accessories,  substitutions,
additions,  replacements  and parts  thereof,  whether  now  owned or  hereafter
acquired.

     (f)  Merchandise,  which shall include all goods,  inventory,  chattels and
other personal property of Borrower, now owned or hereafter acquired.

     (g) Any claims of Borrower  against third parties for loss or damage to, or
destruction of, any and all of the foregoing, all guarantees, security and liens
for  payment  of any  Accounts  Receivable  and  documents  of title,  policies,
certificates of insurance,  insurance proceeds,  securities,  chattel paper, and
other documents and instruments evidencing or pertaining thereto, and all files,
correspondence,  computer  programs,  tapes,  discs and related data  processing
software  owned by Borrower or in which  Borrower has an interest  which contain
information  identifying any one or more of the items in (a), (b) and (c) above,
this subsection (d), or (e), (f) or (g) below, or any Account Borrower,  showing
the amounts owed by each,  payments thereon or otherwise necessary or helpful in
the realization thereon or the collection thereof.

     (h)  Any and all  monies,  securities,  drafts,  notes,  contracts  leases,
licenses,  General  Intangibles,  and  other  property  of  Borrower,  including
customer  lists and all proceeds and products  thereof,  and all other assets of
Borrower,  now or hereafter held or received by or in transit to the Lender from
or for Borrower, or which may now or hereafter be in the possession of Lender or
as to which  Lender may now or  hereafter  control  possession,  by documents of
title or otherwise,  whether for  safekeeping,  custody,  pledge,  transmission,
collection or otherwise, and any and all deposits, general or special, balances,
sums,  proceeds and credits of Borrower,  and all rights and remedies  which the
Borrower  might  exercise  with  respect  to any of the  foregoing,  but for the
execution of this Agreement in favor of Lender.

     (i) All Borrower's right,  title and interest  throughout the world, in and
to the trade secrets'  rights in the  information  regarding  computer  software
programs  developed by or for the Borrower,  including without  limitation,  the
right to prevent all  persons,  including  Borrower,  from using the programs or
from  using  and   transferring  the  information   contained   therein  without
authorization.

     (j)  All  proceeds,  including  insurance  proceeds,  and  products  of the
Collateral.


                                      -44-
<PAGE>

                                  SCHEDULE 6.5

                              Financial Statements

                             September 30, 1996 10Q


                                      -45-
<PAGE>

                                  SCHEDULE 6.12

                              Environmental Matters

                                      NONE


                                      -46-
<PAGE>

                                  SCHEDULE 6.15

                             Location of Collateral

                                50 Spring Street
                            Ramsey, New Jersey 07446

                              16610 Southeast 128th
                            Renton, Washington 98059



                                      -47-
<PAGE>

                                 SCHEDULE 6.16

                                   Other Liens

The lien of the CIT Group  Credit  Finance,  Inc.  in and to  substantially  all
assets of the Borrower as evidenced by various UCC financing  statements  (which
are to be terminated as a result of this transaction) as follows:

(a)  Secretary of State of Washington
     (i)  No. 921430553 filed May 22, 1992,
     (ii) No. 942100000 filed July 29, 1994

(b)  Secretary of State of New Jersey
     (i)  No. 1584573 filed July 29, 1994;
     (ii) No. 1273446 filed June 21, 1989


                                      -48-
<PAGE>

                                  SCHEDULE 6.19

                           Names, Locations of Officer

                  Names under which Borrower conducts business:

                           BOGEN COMMUNICATIONS, INC.

            Locations where Borrower conducts Business or Operations:

                             Chief Executive Office:

                                50 Spring Street
                            Ramsey, New Jersey 07446

                                Other locations.

                              16610 Southeast 128th
                            Renton, Washington 98059



                                      -49-
<PAGE>

          ACCOUNTS RECEIVABLE AND INVESTORY BORROWING BASE CERTIFICATE
[SUMMIT BANK LOGO]  [                           ]    Certificate No. __________
                    [                           ]    Your Date ________________

To induce  Summit Bank - (herein  called  "Bank") to make a loan pursuant to the
Loan and Security Agreement between the undersigned and Bank, and any amendments
thereto, the undersigned hereby certifies, as of the above date, as follows:

A. Summary of Collateral:

1. Balance of Accounts Receivable previously certified to Bank .....$__________
      a) Plus new sales since last certificate date __________
         through______ ......................................$__________
      b) Plus debit memos_____; other______ .................$__________
      c) Less credits ____________; other _______ ...........$__________
      d) Less returns and allowances ______; other _______ ..$__________
      e) Less net receivable reductions since last 
         certificate ........................................$__________
2. Total of all Accounts Receivable now being certified to Bank ....$__________
3. Less total amount of unqualified Accounts Receivable 
   Dated __________ .........................................$__________
4. Net amount of qualified Accounts Receivable ..............$__________
5. Total loan value of Accounts Receivable @ ___% (of item 4) ......$__________
6. Value of Inventory as of ________________, 19__
      a) Raw Materials .......$__________
      b) Work in Process .....$__________
      c) Finished Goods ......$__________
      d) Other (+/-) .........$__________
      e) Total Inventory .....$__________
      f) Total  Inventory  value  @ __% of  item  ___ or  limit  of $__________
         whichever is lower   $__________
7. Other Availability (Explain _________) Amount __________@ __% ...$__________
8. Other Availability (Explain _________) Amount __________@ __% ...$__________
9. Total loan value of Accounts  Receivable  (item 5) and Inventory 
   (item 6) and Other (items 7&8) ..................................$__________

B. Summary of Loan:
1. Previous loan balance ....................................$__________
2. Less collections: Deposits $__________
                 Wires .......$__________
                 Non-A/R .....$__________
                 Total ......................................$__________
3. Plus today's borrowing ...................................$__________
4. New principal loan balance ...............................$__________
5. Plus Bankers Acceptance ...$__________
6. Plus Letters of Credit ....$__________
7. Total loan  outstandings  (which may not exceed item A9 or 
   limit whichever is lower) .......................................$__________
8. Remaining Availability (item A9 less B7) ...........$__________

The  undersigned  certifies  that they are not in  default  under  the  Security
Agreement and any amendments thereto, or on any of the loans made thereunder, or
on any other liability.

------------------------------                   ------------------------------
       (Prepared By)                            (Authorized Signature and Title)

                                   EXHIBIT A
<PAGE>

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

                              STATEMENT ATTESTATION

TO: SUMMIT BANK

I hereby submit to Summit Bank (the "Bank"), on behalf of: _____________ BOGEN
COMMUNICATIONS. INC.________________ (the "Borrower"), Reviewed, Compilation,
House-prepared(1) financial statements dated ________ for the purpose of either
applying for credit of for supporting its continuing credit accommodations.

I am submitting this statement to the bank as being true, accurate and not
misleading as of the date it has been submitted and understand that the Bank
will rely on this statement in making its credit decision.

                                   Company: BOGEN COMMUNICATIONS, INC.

                                   ------------------------------------------
                                   Signature & Title

                                   Date:
                                        -------------------------------------

(1)  The scope of the Statement listed above should be indicated by crossing out
     options that do not apply.

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

                                    EXHIBIT B

<PAGE>

                    Account Receivable & Loan Reconciliation
                               As of ___________

Company Name  ______________________________________________________

Please  furnish  the  information  requested  below which  details  should be in
agreement with the books and records of the company.

A.   Accounts Receivable Reconciliation
     Balance: Beginning of month          ________________
     Add:     Sales (invoices)            ________________
              Miscellaneous Sales         ________________
              Other Debits                ________________
     Less:    Credit Memos                ________________
     Less:    Net Cash (Applied)          ________________
              Discounts, Allowances, etc. ________________
              Others                      ________________

1)   Balance: General Ledger as of End of Month                ________________

2)   Accounts Receivables Aging Balance at Month End
     If there is a difference between A/R Aging & G/L, please explain:
     ___________________________________________________________________________
     ___________________________________________________________________________

3)   Account  Receivable  balance  reported  to bank  
     at  months  end  per  BBCS  _____________

     If item  (3) does not  agree  with  item  (1) & (2),  please  complete  the
     information below.

3a)  Sales and/or debits reported to  3b) Accounts Receivables, credits or other
     the Bank after month end:            reductions reported to bank after
                                          month end:
     Certificate # ___________________  Certificate # ______________________
     Certificate # ___________________  Certificate # ______________________
     Certificate # ___________________  Certificate # ______________________
     Certificate # ___________________  Certificate # ______________________
     Certificate # ___________________  Certificate # ______________________
     Total In-Transit                   Total In-Transit 
        sales are: ___________________  reductions are: ____________________

4)   Adjusted Bank  collateral  figure:  (Add (3) & (3a),  
     Less (3b) equals (4))                                     ________________
     If there is a difference, please explain:
     ___________________________________________________________________________
     ___________________________________________________________________________
================================================================================
B)   Inventory
         Inventory value: End of Month  _______________
         Method of Computation
         RM ________ FG ________ WIP ________ Other ________

================================================================================
C)   Loan Reconciliation
     As of ____________  loan balance per Bank Statement 
     As of ____________ loan balance per Company G/L
     Difference between (1) & (2) and breakdown:
     ___________________________________________________________________________
     ___________________________________________________________________________
     Other Liabilities
     EOM LC(s) (if any):_________________   EOM BA's (if any):_________________

-------------------------                     -----------------
Prepared by; Name & Title                            Date

                                   EXHIBIT C