UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION

                            Washington D.C. 20549

                                  FORM 10-K

      (Mark One)

(X)   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

                 For the fiscal year ended December 31, 1998

                                     or

( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

      For the transition period from                  to                   
                                     -----------------   ------------------

Commission File Number 0-23426
                       -------

                          REPTRON ELECTRONICS, INC.                 
             ---------------------------------------------------
           (Exact name of registrant as specified in its charter)

                Florida                             38-2081116       
------------------------------------------    -----------------------
   (State or other jurisdiction              (I.R.S. Employer 
    of incorporation or organization)         Identification Number)

            14401 McCormick Drive, Tampa, Florida            33626
            -------------------------------------            -------
          (Address of principal executive offices)          (Zip Code)



Registrant's telephone number, including area code: (813) 854-2351
                                                    --------------
Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  

Title of Each Class          Name of Each Exchange on Which Registered
-------------------          -----------------------------------------
Common Stock, $.01 par value                         None
6 3/4 Convertible Subordinated Notes, due 2004       None

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

             Yes    X              No        
                 -------              -------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.   ( )

The aggregate market value of shares of the registrant's common stock held by 
non-affiliates of the registrant as of March 16 1999, was 
                                              -------------
approximately $14,415,346.
               ----------

The number of shares of the registrant's common stock issued and outstanding 
as of March 16, 1999 was 6,147,119.
                  -------------     ---------
Documents Incorporated by Reference:

Parts of the Company's definitive proxy statement for the Annual Meeting of 
the Company's Shareholders to be held on May 1, 1998 are incorporated by 
reference into Part III of this Form.

                           REPTRON ELECTRONICS, INC.
                                   FORM 10-K
                      Fiscal Year ended December 31, 1998


  Item 
Number in
Form 10-K                     PART I                           Page
---------                                                      ----
    1.    Business.............................................  1
    2.    Properties........................................... 11
    3.    Legal Proceedings.................................... 11
    4.    Submission of Matters to a Vote of Security Holders.  11
                                    PART II
    5.    Market for the Registrant's Common Stock and
          Related Stockholder Matters.........................  12
    6.    Selected Financial Data.............................  13
    7.    Management's Discussion and Analysis of Financial
          Condition and Results of Operations.................  14
    7a.   Quantitative and Qualitative Disclosures about
          Market Risk.........................................  19
    8.    Financial Statements and Supplementary Data.........  19
    9.    Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure..............  20
                                   PART III
   10.    Directors and Executive Officers of the Registrant..  20
   11.    Executive Compensation..............................  20
   12.    Security Ownership of Certain Beneficial Owners
          and Management......................................  20
   13.    Certain Relationships and Related Transactions......  20
                                    PART IV
   14.    Exhibits, Financial Statements, Schedule,
          and Reports on Form 8-K.............................  21


                                 PART I

    This document contains certain forward-looking statements that involve 
a number of risks and uncertainties.  Such forward-looking statements are 
within the meaning of that term in Section 27A of the Securities Act of 
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as 
amended.  Factors that could cause actual results to differ materially 
include the following: business conditions and growth in Reptron's industry 
and in the general economy; competitive factors; risks due to shifts in 
market demand; the ability of Reptron to complete acquisitions; and the 
risk factors listed from time to time in Reptron's reports filed with the 
Securities and Exchange Commission as well as assumptions regarding the 
foregoing.  The words "believe", "plans", "estimate", "expect", "intend", 
"anticipate", and similar expressions and variations thereof identify 
certain of such forward-looking statements, which speak only as of the 
dates on which they were made.  Reptron undertakes no obligation to 
publicly update or revise any forward-looking statements, whether as a 
result of new information, future events, or otherwise.  Readers are 
cautioned that any such forward-looking statements are not guarantees of 
future performance and involve risks and uncertainties, and that actual 
results may differ materially from those indicated in the forward-looking 
statements as a result of various factors.  Readers are cautioned not to 
place undue reliance on these forward-looking statements.


Item 1.   Business

General

    Reptron Electronics, Inc. ("Reptron") is one of the leading electronics 
companies providing both value-added distribution of electronic components 
and targeted contract manufacturing services through its two divisions, 
Reptron Distribution and K-Byte Manufacturing.  The two divisions, although 
operated independently, are complementary, enabling Reptron to provide 
customers with a wide range of products and value-added services, as well 
as a single source for their product, material, assembly and test 
requirements.  Reptron believes that its approach to manufacturing and 
distribution distinguishes it in the electronics industry, provides a high 
level of value to its customer base and enables it to obtain sole source 
relationships with an increasing number of its customers.  As a result of 
the successful implementation of Reptron's business strategy, it has 
increased net sales from approximately $164.0 million in 1994 to $302.8 
million in 1998.

    Reptron was incorporated under the laws of Michigan in 1973 and 
reincorporated under the laws of Florida in 1993.  Reptron's principal 
executive offices are located at 14401 McCormick Drive, Tampa, Florida 
33626, and its telephone number is (813) 854-2351.

The Electronics Distribution and Contract Manufacturing Industry

    Distribution.  Most manufacturers of electronics components rely on 
independent distributors, such as Reptron, to extend their marketing 
operations.  As a stocking, marketing and financial intermediary, a 
distributor relieves the manufacturer of part of the costs associated with 
the stocking and selling of its products, including otherwise potentially 
sizeable investments in inventories, accounts receivable and personnel.  At 
the same time, the distributor offers to a broad range of customers the 
convenience of diverse inventory, flexible deliveries and a wide range of 
value-added services to help manage material procurement requirements.  The 
growth of the electronics component distribution industry has been fueled 
by the growing number of electronic component manufacturers that view their 
distributors as essential extensions of their marketing organizations and 
by customers who recognize the value that distributors add to the total 
material procurement process.

    Two important trends have developed recently in the U.S. electronic 
components distribution industry.  First, manufacturers of electronic 
components are reducing the number of distributors who are authorized to 
sell their products, while maintaining or growing their respective market 
share.  Consequently, the reduced number of authorized distributors must be 
able to service the market historically addressed by the previous and 
larger pool of distributors.  This trend is the result of the need for 
electronic component manufacturers to reduce their operating costs.  
Engaging a smaller number of distributors allows the manufacturer to reduce 
support staff.

    A second trend in the industry is the increasing percentage of 
distribution sales associated with value-added services.  This trend is the 
result of the need for original equipment manufacturers ("OEMs") to reduce 
their operating costs.  By interacting with distributors through the use of 
in-plant stores, automated inventory replenishment systems 

                                    1

utilizing electronic data interchange ("EDI") and outsourcing of product 
assembly, among other actions, OEMs may reduce their total materials 
acquisition cost.  The distributor assumes a larger role in the management 
of the supply chain in these types of engagements.

    Contract Manufacturing.  The contract manufacturing industry has 
experienced rapid growth over the past several years as an increasing 
number of OEMs have chosen to outsource to contract manufacturing 
specialists such as K-Byte Manufacturing for the assembly of printed 
circuit board assemblies.  As a result of outsourcing manufacturing 
services, Industry sources estimate that the contract manufacturing 
industry has grown at an average annual rate of 25% from 1988 to 1997.  
Factors driving OEMs to favor outsourcing to contract manufacturing 
specialists include:

  -  Reduced Time to Market.  Because of the intense competitive pressures 
and rapidly progressing technology in the electronics industry, OEMs are 
faced with increasingly short product life-cycles and therefore have a 
growing need to reduce the time required to bring a product to market.  
OEMs can reduce their time to market by using a contract manufacturer's 
established manufacturing expertise and infrastructure.

  -  Minimized Capital Investment.  As electronic products have become more 
technologically advanced, the manufacturing process has become increasingly 
automated and highly intricate, and manufacturers have had to invest in new 
capital equipment at an accelerated rate.  By outsourcing to contract 
manufacturing specialists, OEMs are able to lower their investment in 
inventory,  facilities and equipment, thereby enabling them to allocate 
capital to other activities such as sales and marketing and research and 
development. 

  -  Focused Resources.  Because the electronics industry is experiencing 
greater levels of competition and more rapid technological change, many 
OEMs increasingly seek to focus their resources on activities and 
technologies that add greater value.  By offering turnkey manufacturing 
services and comprehensive electronic assembly, contract manufacturing 
specialists permit OEMs to focus on their core business activities, such as 
product development, marketing and distribution.

  -  Access to Leading Edge Manufacturing Technology.  Electronic products 
and electronics manufacturing technology have become increasingly 
sophisticated and complex.  OEMs desire to work with contract manufacturing 
specialists in order to gain access to their technological expertise in 
process development and control.

  -  Improved Inventory Management and Purchasing Power.  Electronics 
industry OEMs are faced with increasing difficulties in planning, procuring 
and managing their inventories efficiently due to frequent design changes, 
short product life-cycles, large investments in electronic components, 
component price fluctuations and the need to achieve economies of scale in 
materials procure-ment.  Contract manufacturing specialists are able to 
manage both procurement and inventory, and have demonstrated proficiency in 
purchasing components at improved pricing.

    The increasing cost of automated equipment used in the industry, the 
working capital requirements relating to inventory and the additional 
services that contract manufacturers are providing make it more difficult 
for smaller contract manufacturers and start-up companies to compete with 
the services provided by larger, well-capitalized companies.  Additionally, 
the purchasing power generated by the volumes of material purchased by 
larger contract manufacturers makes it difficult for smaller manufacturers 
to be price competitive.  Reptron believes that these factors are driving 
consolidation in the industry and may provide opportunities for growth 
through acquisitions.


Strategy

    Reptron's principal business objective is to expand its presence as a 
leading electronics distributor and contract manufacturer.  In order to 
implement its objective, Reptron has formulated a strategy based upon the 
following key elements:

  -  Continue to Leverage Complementary Businesses.  Reptron operates as an 
electronics company that provides value-added distribution of electronic 
components and targeted contract manufacturing services.  Reptron 
Distribution emphasizes its value-added services as a method to lower the 
customer's total material acquisition costs.  K-Byte Manufacturing provides 
turnkey manufacturing, including materials management, board assembly and 
post production testing.  The two divisions, although operated 
independently,

                                    2

are complimentary, enabling Reptron to provide customers with a wide range 
of products and value-added services, as well as a single source for their 
product, material, assembly and test requirements.  

  -  Increase Sales from Value-Added Services. Reptron seeks to enhance 
sales by providing value-added services.  Reptron Distribution has 
developed a comprehensive value-added service offering which includes 
inventory control programs (e.g., bonded, consigned, just-in-time), in-
plant stores, automated inventory replenishment systems utilizing EDI 
technology, component programming, custom display integration and contract 
manufacturing (through K-Byte Manufacturing).  These value-added programs 
allow the OEMs to reduce their total acquisition costs for materials.  An 
increasing percentage of industry sales are being generated from value-
added engagements and management believes Reptron is well positioned to 
capitalize on this trend.  In 1998, approximately 31% of Reptron 
Distribution sales were generated through value-added services.

  -  Target Manufacturing Customers in Specific Market Segments.  K-Byte 
Manufacturing follows a well-defined strategy in its contract manufacturing 
business.  K-Byte Manufacturing focuses on complex assemblies in low-to-
medium volumes for commercial and industrial customers.  Additionally, K-
Byte Manufacturing seeks customers that will utilize its ability to 
assemble customers' products by integrating printed circuit board 
assemblies into other elements of the customers' products (sometimes 
referred to as total "box build").  K-Byte Manufacturing also seeks 
customer relationships in which K-Byte Manufacturing is the primary source 
and avoids engagements requiring an overflow supplier.  K-Byte 
Manufacturing targets customers in a variety of industries to establish 
diversity among customers and industries served.

  -  Leverage Investments Made in its Manufacturing Facilities.  Reptron 
has invested in facilities that will allow it to expand its business.  
Reptron believes its combined manufacturing facilities, including Hibbing 
Electronics Corporation ("Hibbing") can accommodate the equipment and 
infrastructure capable of generating approximately $300 million in annual 
contract manufacturing net sales based on the types of business currently 
transacted by K-Byte Manufacturing.  K-Byte Manufacturing's 1998 combined 
sales, including Hibbing sales during the period January 1, 1998 through 
May 29, 1998, totaled approximately $179 million.  Consequently, there is 
substantial capacity to support future sales growth.  Management believes 
that significant opportunities exist for additional business from present 
and new customers which will utilize the fixed investment already made in 
these facilities. (See "Certain Considerations - Integration of Hibbing 
Electronics Acquisition.")

  -  Expand Through Business Combinations and Internal Growth.  Reptron 
seeks to expand its operations into geographic areas that it currently does 
not serve and to increase its presence in existing markets.  Reptron 
Distribution has a presence in over 85% of the total available U.S. market 
(based upon 1998 industry sales) through its 22 sales offices.  However, 
Reptron believes that significant opportunities exist to expand its 
business in existing regions and into new regions, either by combining with 
distributors in these markets or by opening new sales offices.


Recent Developments

    On January 8, 1999, Reptron entered into a $50 million Revolving Credit 
Agreement ("Credit Agreement") to replace the $15 million revolving credit 
facility in place through December 31, 1998.  Borrowings under the Credit 
Agreement are collateralized by all of Reptron's inventory, accounts 
receivable, equipment and general intangibles.  The Credit Agreement limits 
the amount of capital expenditures and prohibits the payment of dividends, 
thereby restricting the distribution of Reptron's retained earnings.  
Reptron may, at its option, and upon notice to the lender, draw funds under 
the Credit Agreement pursuant to either a Domestic Rate Loan (7.75% as of 
March 16, 1999) or a Eurodollar Rate loan (LIBOR plus applicable index, 
7.19% as of March 16, 1999).  Upon notice to the lender, Reptron may 
convert advances from one type of loan to the other.


Certain Considerations

    Dependence upon Key Vendors.  Many of the components distributed by 
Reptron Distribution are currently manufactured by a relatively small 
number of independent vendors.  Four vendors collectively accounted for 
approximately 32.0% and 32.5% of Reptron Distribution's net sales in 1998 
and 1997, respectively (16.6% and 20.0% of Reptron's total 1998 and 1997 
net sales, respectively).  Reptron does not have long-term distribution 
contracts with its vendors.  These contracts are non-exclusive and 
typically are cancelable upon 30 days written notice.  On July 1,

                                 3

1998, Reptron received notice from one of its significant vendors that 
after September 30, 1998, with the exception of certain identifiable 
accounts, Reptron Distribution was no longer authorized to generally sell 
that vendor's products as a franchised distributor.  Sales generated from 
this vendor's product lines accounted for 5.3% and 6.9% of Reptron 
Distribution's sales in 1998 and 1997, respectively (2.7% and 4.2% of 
Reptron's total 1998 and 1997 net sales, respectively).  Additionally, 
management believes that vendors are consolidating their distribution 
relationships.  Reptron's future success will depend, in large part, on 
maintaining its vendor relationships.  The loss of, or significant 
disruptions in the relationship with, one or more of Reptron's principal 
vendors could have a material adverse effect on Reptron's future operating 
results.  See "Reptron Distribution - Vendors" and "Management's Discussion 
and Analysis of Financial Condition and Results of Operations."

    Customer Concentration and Other Factors Affecting Operating Results.  
Reptron's divisions have certain customers that account for a significant 
part of their net sales.  K-Byte Manufacturing currently transacts business 
with approximately 89 customers with the largest three customers accounting 
for approximately 10.0%, 9.8% and 7.1% of its net sales in 1998, 
respectively, and 16.0%, 13.1% and 7.8% of its net sales in 1997, 
respectively, (4.8%, 4.7% and 3.4% of Reptron's total net sales in 1998, 
respectively, and 6.9%, 5.7% and 3.4% of Reptron's total net sales in 1997, 
respectively).  Reptron Distribution's largest two customers collectively 
represented 10.5% of its net sales in 1998 and 8.3% of its net sales in 
1997 (5.4% and 4.8% of Reptron's total net sales in 1998 and 1997, 
respectively).  The loss of one or more of these major customers, or a 
reduction in their level of purchasing, could have a material adverse 
effect on Reptron's business, results of operations and financial 
condition.  K-Byte Manufacturing's operating results are affected by a 
number of factors, including fixed plant utilization, price competition, K-
Byte's ability to keep pace with technological developments, the degree of 
automation that can be used in an assembly process, efficiencies that can 
be achieved by K-Byte in managing inventories and fixed assets, the timing 
of orders from major customers, the timing of capital expenditures in 
anticipation of increased sales, customer product delivery requirements and 
increased costs and shortages of components and labor.  In addition, 
because of the limited number of K-Byte Manufacturing's customers and the 
corresponding concentration of its accounts receivable, the insolvency or 
other inability or unwillingness of its customers to pay for manufacturing 
services could have a material adverse effect on Reptron's operating 
results.  See - "Reptron Distribution - Marketing and Customers" and "K-
Byte Manufacturing - Marketing and Customers."

    Integration of Hibbing Electronics Acquisition.  On May 29, 1998, 
Reptron completed its acquisition of Hibbing.  Hibbing is a contract 
manufacturer competing in a market niche similar to that of K-Byte 
Manufacturing.  Hibbing leases 110,000 square feet of manufacturing and 
headquarter facilities in Hibbing, Minnesota.  Hibbing has approximately 
500 employees and generated approximately $33.1 million in net sales from 
the date of acquisition through December 31, 1998.  The transaction was 
valued at approximately $53 million consisting of approximately $30 million 
in cash and the remainder in the form of assumption of liabilities.  This 
represents the largest acquisition ever completed by Reptron.  The 
successful integration of Hibbing into K-Byte's manufacturing operations 
will depend upon several factors including: (i) maintaining significant 
customers previously serviced by Hibbing, (ii) maintaining key management 
of both Hibbing and K-Byte Manufacturing as these operations are 
integrated, (iii) realizing operating efficiencies, and (iv) taking 
advantage of available manufacturing capacity.  There can be no assurance 
that the expected benefits of this acquisition will be realized or that 
this acquisition will not adversely affect the future operating results of 
Reptron.

    The Volume and Timing of Customer Sales May Vary.  The volume and 
timing of purchase orders placed by K-Byte Manufacturing's customers are 
affected by a number of factors, including variation in demand for 
customers' products, customer attempts to manage inventory and changes in 
the customers' manufacturing strategies. K-Byte Manufacturing typically 
does not obtain long-term purchase orders or commitments but instead works 
with its customers to develop nonbinding forecasts of future volume of 
orders.  Based on such nonbinding forecasts, K-Byte Manufacturing makes 
commitments regarding the level of business that it will seek and accept, 
the timing of production schedules and the levels and utilization of 
personnel and other resources.  A variety of conditions, both specific to 
each individual customer and generally affecting each customer's industry, 
may cause customers to cancel, reduce or delay orders that were either 
previously made or anticipated.  Generally, customers may cancel, reduce or 
delay purchase orders and commitments without penalty, except for payment 
for services rendered, materials purchased and, in certain circumstances, 
charges associated with such cancellation, reduction or delay.  Significant 
or numerous cancellations, reductions or delays in orders by customers, or 
any inability by customers to pay for services provided by Reptron or to 
pay for components and materials purchased by Reptron on such customers' 
behalf, could have a material adverse effect on Reptron's operating 
results.

    Substantial Set-Up Costs for Manufacturing Customers.  K-Byte 
Manufacturing targets customers requiring the production of a wide variety 
of technologically complex printed circuit board assemblies.  The 
integration of new customers or new products of existing customers into K-
Byte Manufacturing's facilities and processes involves a 

                                   4

substantial amount of set-up costs which are incurred prior to any sales 
being generated from these customers.  These set-up costs could have a 
material adverse effect on K-Byte Manufacturing's operating results.

    Competition; Effects on Gross Margin.  Reptron faces substantial 
competition.  Many of Reptron's competitors have international operations 
and significantly greater manufacturing, financial, marketing and research 
and development resources and broader name recognition.  Reptron 
Distribution faces competition from hundreds of electronic component 
distributors of various sizes, locations and market focuses (e.g., 
military, commercial, consumer) and competes principally on the basis of 
product selection, reputation and customer service.  Vendor representation 
and product diversity create segmentation among distributors.  Reptron 
Distribution has several primary competitors that carry similar lines.  K-
Byte Manufacturing competes in a highly fragmented market composed of a 
diverse group of contract manufacturers.  K-Byte Manufacturing believes 
that the key competitive factors in its markets are manufacturing 
flexibility, price, manufacturing quality, advanced manufacturing 
technology and reliable delivery.  Additionally, K-Byte Manufacturing faces 
the potential risk that its customers may elect to produce their products 
internally thereby, eliminating manufacturing opportunities for K-Byte 
Manufacturing.  There can be no assurance that Reptron will be able to 
continue to compete effectively with existing or potential competitors.  In 
addition, gross margins in the businesses in which Reptron compete have 
declined in recent years due to competitive pressures, and management 
believes that this trend will continue.  See " - Competition."

    Availability of Components.  Reptron Distribution and K-Byte 
Manufacturing rely on third-party suppliers for electronic components.  
Component shortages may have a material adverse effect on Reptron's ability 
to service its customers.  At various times, there have been shortages of 
components in the electronics industry and from time to time the supply of 
certain electronic components is subject to limited allocations.  If 
shortages of these or other components should occur in the future, Reptron 
may be forced to delay shipment or to purchase components at higher prices 
(which it may not be able to pass on to its customers), which may have a 
material adverse effect on customer demand for Reptron's services, on gross 
margins or both.  Any of these events could have a material adverse effect 
on Reptron's operating results.

    Dependence Upon Key Personnel.  The success of Reptron to date has been 
largely dependent upon the efforts and abilities of Reptron's key 
managerial and technical employees.  The loss of the services of certain of 
these key employees or an inability to attract or retain qualified 
employees could have a material adverse effect on Reptron.

    Management of Growth.  Reptron has grown rapidly in recent years, with 
combined net sales increasing from approximately $164.0 million in 1994 to 
approximately $302.8 million in 1998.  The ability to continue this growth 
rate will depend upon several factors, including Reptron's ability to 
recruit, train and retain a skilled workforce to support its expanding 
operations.  There can be no assurance that Reptron will be able to sustain 
the historic rates of net sales growth experienced by Reptron, develop the 
required workforce or manage any future growth successfully.  See "Reptron 
Management's Discussion and Analysis of Financial Condition and Results of 
Operations."

    Volatility of Component Pricing.  Reptron Distribution sells a 
significant amount of commodity-type components that have historically 
experienced volatile pricing.  These components include dynamic random 
access memory ("DRAM") and static random access memory ("SRAM") products.  
If market pricing for these components decreases significantly, Reptron may 
experience periods when its investment in component inventory exceeds the 
market price of such components.  Such market conditions could have a 
negative impact on sales and gross profit margins unless and until 
Reptron's vendors reduce the cost of such components (through price 
protection rights, if any, outlined in the vendor agreements).  Most of the 
components sold through the memory module division are not supplied under 
distribution agreements and consequently, this inventory is not subject to 
those contractual protections afforded under standard distribution 
agreements.  See - "Reptron Distribution - Vendors."

    The Year 2000.  The Year 2000 issue results from the potential 
inability for computer hardware and software systems and computer 
controlled devices, including equipment used in Reptron's manufacturing and 
distribution operations, to differentiate between centuries, resulting in 
partial or complete systems failure unless necessary modifications are 
implemented.  Reptron utilizes computer hardware and software systems 
across its entire operation, which may be subject to system failure as a 
result of Year 2000 non-compliance.  In the normal course of business, 
Reptron relies on products and services from critical vendors, large 
customers and other third parties whose computer systems are also subject 
to this issue.  In the event that critical Year 2000 issues are encountered 
by Reptron it cannot be determined, with certainty, whether it will have 
material adverse impact on Reptron's financial position  See "Management's 
Discussion and Analysis of Financial Condition and Results of Operations - 
Year 2000 Statement."

                                      5


Reptron Distribution

    Reptron was founded in 1973 in Detroit as a distributor of electronic 
components.  From 1973 through 1989, Reptron expanded its operations by 
opening nine sales offices in the midwestern and southeastern U.S.  
Additionally, sales offices were added through a series of acquisitions:

  -  In 1993, Reptron acquired a distributor with offices in Philadelphia, 
Pennsylvania and Baltimore, Maryland.

  -  In 1995, Reptron acquired a distributor with offices in Boston, 
Massachusetts and Hartford, Connecticut and acquired a distribution 
business with offices in Boston, Massachusetts; Irvine, Los Angeles, San 
Diego and San Jose, California; Portland, Oregon; and Seattle, Washington.

    Reptron Distribution now operates from 22 sales offices that allow 
Reptron to market to over 85% of the total available electronic components 
market in the U.S.

    Products.  Reptron Distribution represents over 60 vendor lines and 
distributes more than 45,000 separate items. The products that Reptron 
distributes can be broadly divided into three main groups: semiconductors, 
passive products and electromechanical components.

    Semiconductors accounted for approximately 67% of Reptron 
Distribution's net sales in 1998.  Reptron Distribution's product offering 
includes application specific integrated circuits ("ASICs"), flat panel 
displays, a variety of memory devices (e.g., dynamic, static, programmable) 
and microprocessors and controllers produced by over 25 vendors.  Reptron 
represents a number of leading semiconductor manufacturers, including 
Hitachi, Sharp, OKI, Samsung, Epson and Rise Semiconductor.  Passive 
products and electromechanical components accounted for the remaining 33% 
of net sales of Reptron Distribution in 1998.  Among these components are 
capacitors, resistors, relays, power supplies and connectors manufactured 
by over 35 vendors, such as Astec, Dale/Vishay, Potter & Brumfield and 
Sprague/Vishay.  Reptron Distribution's largest four vendor lines 
represented 32.0% of Reptron Distribution's net sales in 1998 (16.6% of 
Reptron's total net sales in 1998).  See "Risk Factors-Dependence Upon Key 
Vendors."

    In December 1995, Reptron Distribution created a Memory Module 
division, which is devoted solely to selling memory modules. This memory 
modules division employs a separate sales and support staff that focuses on 
a different market niche and customer base than was previously serviced by 
Reptron Distribution.  This division sells primarily to computer 
integrators, retail stores and value-added resellers.  Sales in this niche 
are generally characterized by higher volumes, lower gross profit margins 
and lower selling, general and administrative expenses than other 
electronic component sales generated by Reptron Distribution.  Sales from 
the memory module division accounted for 12.7% and 9.5% of Reptron 
Distribution's net sales in 1998 and 1997, respectively (6.6% and 5.9% of 
Reptron's total net sales in 1998 and 1997, respectively).

    Services. Reptron Distribution sells to approximately 6,000 customers 
representing diverse industries including: robotics, telecommunications, 
computers and computer peripherals, consumer electronics, healthcare, 
industrial controls and contract manufacturing.  Services provided to these 
customers include component sales, inventory replenishment programs, in-
plant stores, component programming and EDI.  During 1998 and 1997, 
approximately 31% and 37%, respectively, of Reptron Distribution's net 
sales were generated through these value-added services.  Reptron believes 
that an increasing percentage of Reptron Distribution's net sales will be 
generated through its value-added services as customers continue to search 
for ways to reduce costs.  Reptron has invested significantly in 
information technology and support staff to help increase net sales from 
value-added services.  For its vendors, Reptron Distribution has developed 
product promotion and customer identification programs that help vendors 
build recognition of individual products and target and market to specific 
types of customers.

    Vendors. In selecting vendors to represent, Reptron Distribution 
considers numerous factors, including product demand, availability and 
compatibility with existing product lines. Reptron Distribution has non-
exclusive, geographically limited agreements with its vendors for the sale 
of their products, which is customary in the industry.  Reptron 
Distribution's agreements with vendors do not restrict Reptron from selling 
similar products manufactured by its vendors competitors, and typically 
allow termination by either party upon 30 to 90 days' notice.

    Reptron Distribution's franchised vendors generally protect Reptron 
against potential write-downs of inventories based upon vendors' price 
reductions or technological change.  Under the terms of most of Reptron 
Distribution's franchised distributor agreements, if Reptron complies with 
certain conditions, the vendor is required, pursuant to price protection 
privileges, to credit Reptron for decreases in inventory value resulting 
from reductions in 

                                    6

the vendor's list prices of the items.  In addition, under the stock 
rotation terms of Reptron Distribution's franchised distributor agreements, 
Reptron has the right to return to the vendor for credit against current 
obligations or future orders a specified portion of those inventory items 
purchased within a designated period.  A vendor that elects to terminate a 
distributor agreement is generally required to purchase from Reptron the 
total amount of its products carried in inventory.  Reptron believes that 
its distributor agreements are on terms and conditions consistent with 
industry standards.  Most of the components sold through the memory module 
division are not supplied under distribution agreements with Reptron's 
vendors, and consequently, this inventory is not subject to the price 
protection and stock rotation privileges.

    Marketing and Customers.  Reptron Distribution has developed a focused 
sales strategy.  Large key accounts are identified in each market and field 
sales personnel are assigned to serve these accounts directly.  All other 
customers in each market are served by a corporate sales team which 
operates from Reptron's corporate headquarters. The corporate sales team 
also services customers in regions of the country where Reptron does not 
have a sales office.

    Reptron Distribution has approximately 6,000 customers located 
throughout the United States.  Reptron Distribution's customers are in 
diverse industries, including robotics, telecommunications, computers and 
computer peripherals, consumer electronics, healthcare, industrial controls 
and contract manufacturing.

    Property and Offices. Reptron owns a 77,500 square-foot facility in 
Tampa, Florida, which houses centralized division support personnel, 
management staff and executive offices for Reptron Distribution.  Reptron 
Distribution's main warehouse is located in a portion of a 150,000-square 
foot facility located adjacent to Reptron's Tampa headquarters.  
Substantially all Reptron Distribution shipments originate from this 
warehouse.  Reptron leases twenty-two office suites serving as sales 
offices for Reptron Distribution.  These offices average approximately 
2,000 square feet in size and contain a small space for warehousing of 
inventory and sales materials. Lease terms on these facilities range from 
three to five years and expire at various dates through July 2003.  One of 
these facilities, located in the Detroit area, is owned by the chief 
executive officer of Reptron.  The table below shows the location of each 
office and the date it was established.  The Los Angeles, California sales 
office has operated as a satellite office of the Irvine, California 
location since it was acquired in 1995.  During 1998, management elected to 
fully staff the Los Angeles sales office in conjunction with an emphasis on 
building market share in California.

                  Office                  Date Established
	
           Detroit, Michigan                  1973
           Chicago, Illinois                  1979
           Tampa, Florida                     1982
           Atlanta, Georgia                   1985
           Ft. Lauderdale, Florida            1985
           Minneapolis, Minnesota             1986
           Cleveland, Ohio                    1988
           Huntsville, Alabama                1988
           Raleigh, North Carolina            1989
           Philadelphia, Pennsylvania         1993
           Baltimore, Maryland                1993
           San Jose, California               1994
           Boston, Massachusetts              1995
           Hartford, Connecticut              1995
           Hauppauge (Long Island), New York  1995
           Irvine, California                 1995
           Los Angeles, California            1995
           Portland, Oregon                   1995
           San Diego, California              1995
           Seattle, Washington                1995
           Salem, New Hampshire               1996
           Dallas, Texas                      1997

                                    7


K-Byte Manufacturing

    Reptron entered into the contract manufacturing business through its 
acquisition of K-Byte Manufacturing in 1986.  K-Byte Manufacturing's net 
sales have grown from approximately $2 million in 1986 to $146 million in 
1998, inclusive of $33.1 million in net sales of Hibbing, subsequent to its 
acquisition on May 29, 1998.

    Manufacturing Operations.  K-Byte Manufacturing provides turnkey 
manufacturing services, including the purchase of customer-specified 
components from its extensive network of component suppliers (including 
Reptron Distribution), assembly of components onto printed circuit boards 
and performance of post production testing.  In addition, total box build 
assembly generated approximately 35% of K-Byte Manufacturing's 1998 net 
sales.  K-Byte Manufacturing attempts to perform as much of a given 
manufacturing process as is feasible and generally does not perform labor-
only, consignment assembly functions unless management believes that such 
engagements may provide a direct route to turnkey contracts.

    K-Byte Manufacturing provides design-for-manufacturability engineering 
services as well as surface mount technology ("SMT") conversion and printed 
circuit board layout services for existing products.  K-Byte Manufacturing 
also provides test process design capabilities that include the design and 
development of test fixtures and procedures and software for both in-
circuit tests and functional tests of circuit boards, components and 
products.

    As part of its manufacturing services, K-Byte Manufacturing offers both 
SMT and pin through hole ("PTH") interconnection technologies.  SMT is a 
computer-automated process that allows the placement of a higher density of 
components directly on both sides of a printed circuit board. The SMT 
process is a more recent advancement over the mature PTH technology which 
normally permits electronic components to be attached to only one side of a 
printed circuit board by inserting components into holes drilled through 
the board.  The SMT process allows OEMs to use advanced circuitry, while at 
the same time permitting the placement of a greater number of components on 
a printed circuit board without having to increase the size of the board.  
By allowing increasingly complex circuits to be packaged with the 
components placed in closer proximity to each other, SMT greatly enhances 
circuit processing speed and thus board and system performance.  The SMT 
process allows a reduction in the number of printed circuit boards required 
per system and allows the use of more fully automated production processes.

    K-Byte Manufacturing performs PTH assembly both manually and with 
computer-automated component insertion and soldering equipment.  Although 
SMT is the leading interconnection technology, K-Byte Manufacturing intends 
to continue providing PTH assembly services for its customers.  PTH is of 
continuing viability because most printed circuit boards assembled using 
SMT require some PTH assembly.  In addition, certain current and 
prospective customers have not shifted or do not wish to change their 
manufacturing process to utilize SMT.

    K-Byte Manufacturing is able to efficiently manage its materials 
procurement and inventory management functions.  The inherent scheduling 
and procurement challenges in low-to-medium volume production of a large 
number of different circuit board assemblies requires a high level of 
expertise in material procurement.  K-Byte Manufacturing obtains its 
electronic components from a wide variety of manufacturers and 
distributors, some of which are procured through Reptron Distribution.

    Marketing and Customers. K-Byte Manufacturing follows a well-defined 
marketing strategy, which includes the following key elements:

  -  Target Customers Requiring Low-to-Medium Volume Production of Multiple 
Products.  K-Byte Manufacturing focuses on complex assemblies in low-to-
medium volumes for customers primarily in the telecommunications, 
healthcare, industrial/instrumentation, banking and office products 
industries.  K-Byte Manufacturing does not manufacture high volume printed 
circuit board assemblies for the personal computer, consumer products or 
automotive industries.  K-Byte Manufacturing targets customers requiring a 
high number of different circuit board assemblies, thereby seeking to 
minimize its exposure to any one product made for a specific customer.  K-
Byte Manufacturing focuses on the low-to-medium volume batch business 
because of its reduced volatility.  K-Byte Manufacturing gains access to a 
significant number of these kinds of customers through its relationship 
with Reptron Distribution and the efforts of its direct sales force.  
Additionally and as a consequence of the acquisition of Hibbing, K-Byte 
Manufacturing is expanding its market and customer development through 
independent sales representatives.

  -  Target Customer Relationships where K-Byte Manufacturing is the 
Primary Source.  K-Byte Manufacturing seeks engagements with customers that 
have decided to strategically outsource substantially all circuit board 

                                   8

assembly.  Consequently, K-Byte Manufacturing markets its services as a 
"partnership" with the customer and encourages the customer to view K-Byte 
Manufacturing as an extension of its own manufacturing capabilities. K-Byte 
Manufacturing attempts to avoid relationships where K-Byte Manufacturing is 
used as an overflow supplier to manage volume requirements.

  -  Maintain a Diverse Customer and Industry Base.  K-Byte Manufacturing 
targets customers primarily in the telecommunications, healthcare, 
industrial/instrumentation, banking and  office products industries and 
seeks to maintain a diversity of customers among these industries and 
within each industry.  In addition, K-Byte Manufacturing believes that the 
industries that it targets make products that generally have longer life 
cycles, more stable demand and less price pressure compared to consumer 
oriented products.  Nevertheless, K-Byte Manufacturing's customers from 
time to time, experience downturns in their respective businesses resulting 
in fluctuations in demand for K-Byte Manufacturing's services.  See 
"Certain Considerations - The Volume and Timing of Customer Sales may 
Vary."

    The marketing cycle for customers meeting these criteria typically 
spans six-to-twelve months.  Additionally, the start-up phase for an 
engagement may run an additional six months.  Typically, during this phase, 
significant investments are made by K-Byte Manufacturing and the customer 
to successfully launch a high number of different, complex circuit board 
assemblies.  K-Byte Manufacturing works closely with its customers in all 
phases of design, start-up and production, and through this cooperative 
effort develops a close working relationship with the customer.  These 
relationships, and the investments made both in time and financial 
resources by the customer and K-Byte Manufacturing, promote long-term 
customer loyalty.  K-Byte Manufacturing intends to deploy a broad marketing 
approach which includes the Reptron Distribution sales force, 
manufacturers' sales representatives and a direct sales force.

    K-Byte Manufacturing seeks to maintain diversity within its customer 
base and industries served.  During 1998, K-Byte Manufacturing had 
approximately 89 principal customers (inclusive of 48 customers of 
Hibbing), with the largest three customers representing 10.0%, 9.8% and 
7.1% of K-Byte Manufacturing's 1998 net sales (4.8%, 4.7% and 3.4% of total 
Reptron net sales).  During 1997, K-Byte Manufacturing had 39 principal 
customers, with the largest three customers representing 15.2%, 9.9% and 
7.7% of K-Byte Manufacturing's 1997 net sales (5.8%, 3.8% and 2.9% of total 
Reptron net sales).  The following table sets forth the number of principal 
customers and percentage of K-Byte Manufacturing sales derived from various 
industries for 1997 and 1998.


                                   1997                     1998 
Industry                   Customers  % of Sales   Customers  % of Sales
-------------------------  ---------  ----------   ---------  ----------
Telecommunications             6         20.5%         15        27.1%
Healthcare                     7         22.0%         17        27.0%
Industrial/Instrumentation    17         29.2%         39        24.5%
Banking                        2         19.0%          2        12.1%
Office Products                2          6.1%          9         5.6%
Other                          5          3.2%          7         3.7%


    Training.  K-Byte Manufacturing believes that its highly trained and 
productive work force is an essential element in its ability to compete 
effectively, and is committed to investing in training its employees.  K-
Byte Manufacturing has developed a formal training program taught by 
Company employees at an in-house "K-Byte Academy," which includes classes 
in technical training and employee personal skills in areas such as 
communication, team building and leadership.  Additionally, K-Byte 
Manufacturing cross-trains its employees to perform multiple job functions. 
 Likewise, all Hibbing manufacturing employees receive regular training by 
way of a curriculum developed and administered through in-house human 
resources personnel.

    Manufacturing Facilities. K-Byte Manufacturing operates three plants.  
The Gaylord, Michigan 72,000 square foot manufacturing facility is owned by 
Reptron and was constructed in 1988.  The Tampa, Florida 150,000 square 
foot manufacturing and warehouse facility is owned by Reptron and was 
completed in the first quarter of 1997.  Hibbing leases a five building 
manufacturing campus in Hibbing, Minnesota, which totals 110,000 square 
feet.  These buildings are owned in part by four individuals on the 
Hibbing's senior management team.  These manufacturing facilities are 
equipped with advanced SMT assembly equipment and PTH insertion equipment. 
 K-Byte Manufacturing has a variety 

                                    9

of automated and manual test equipment capable of performing in-circuit and 
functional testing, as well as a skilled staff of technicians who perform 
customer-specific or product-specific testing requirements.  

    The Tampa, Florida manufacturing plant accounted for approximately 42% 
of K-Byte Manufacturing's 1998 net sales, with the Gaylord, Michigan plant 
totaling approximately 36% of 1998 net sales and the Hibbing manufacturing 
plant accounting for the remaining 22% of 1998 net sales.


Competition

    Both Reptron Distribution and K-Byte Manufacturing face substantial 
competition.  Many of Reptron's competitors in each division have 
international operations and significantly greater manufacturing, 
financial, marketing and research and development resources and broader 
name recognition than Reptron.  Reptron Distribution faces competition from 
hundreds of electronic component distributors of various sizes, locations 
and market focuses (e.g. military, commercial, consumer) and competes 
principally on the basis of product selection and value-added customer 
service.  Vendor representation and product diversity create segmentation 
among distributors.  Reptron Distribution has several primary competitors 
that carry similar significant Asian semiconductor vendors.  Reptron 
Distribution attempts to differentiate itself from these competitors 
through its wide offering of value-added services, including contract 
manufacturing (through K-Byte Manufacturing).

    K-Byte Manufacturing competes in a highly fragmented market composed of 
a diverse group of contract manufacturers.  K-Byte Manufacturing believes 
that the key competitive factors in its markets are manufacturing 
flexibility, price, manufacturing quality, advanced manufacturing 
technology and reliable delivery.  Many contract manufacturers operate 
high-volume facilities and focus on target markets, such as the computer 
industry, that K-Byte Manufacturing does not seek to serve.  K-Byte 
Manufacturing considers its key competitive advantages to include its 
expertise in low-to-medium volume, flexible batch processing, its provision 
of value-added services and its material management techniques.  Reptron 
believes that K-Byte Manufacturing's expertise in flexible, batch 
processing differentiates it from its high-volume competitors because of 
the relative complexity of economically fulfilling a large number of batch 
contracts.  Reptron believes that by focusing on low-to-medium volume 
production runs, by manufacturing products using Reptron Distribution's 
product line and by leveraging Reptron Distribution's sales force and 
customer base, K-Byte Manufacturing competes effectively. See "Certain 
Considerations-Competition; Effects on Gross Margin."


Management Information Systems

    Reptron has made significant investments in computer hardware, software 
and MIS personnel. The Reptron Distribution and K-Byte Manufacturing MIS 
departments employ approximately 30 individuals who are responsible for 
hardware upgrades, maintenance of current software and related databases 
and augmenting software packages with custom programming.  Reptron 
currently maintains an internet web page that provides a wide variety of 
information, as well as, links to vendors and customers.  Expanded use of 
web based technologies include enhanced e-mail and interactive use of the 
Reptron intranet for data warehouse applications such as quality 
documentation, human resources documentation, MIS systems documentation and 
interactive corporate forms.  Reptron operates MIS departments within 
Reptron Distribution and K-Byte Manufacturing with UNIX-based software 
packages written in a fourth generation language.

    The UNIX-based software packages used by Reptron Distribution and K-
Byte Manufacturing may be operated on a variety of hardware platforms.  
Therefore, both divisions are not restricted to the use of computer 
hardware from any one supplier and do not have the constraints associated 
with proprietary hardware or software.

    Reptron Distribution operates an integrated distribution software 
package that has been greatly enhanced with custom programming.  This 
system allows management to direct the entire Reptron Distribution 
operation by connecting all twenty-two sales offices to the corporate 
headquarters.  In 1996, Reptron Distribution significantly upgraded the 
software which operates its main warehouse in Tampa, Florida.  This upgrade 
combines bar code technology with sophisticated conveyor systems and random 
storage of electronic components.  The entire warehouse system is 
controlled and organized by software written and implemented by Reptron 
Distribution's MIS staff.

                                      10

    K-Byte Manufacturing operates an integrated MRP II package which has 
also been greatly enhanced by its MIS staff through custom programming.  
This system is used to operate and integrate K-Byte's manufacturing plants 
with central administrative functions and is currently being implemented 
into the MIS system of Hibbing Electronics.


Employees

    As of March 15, 1999, Reptron employed 1,869 persons, of whom 351 were 
dedicated to Reptron Distribution, 1,506 were dedicated to K-Byte 
Manufacturing and 12 were corporate employees.  Hourly employees at the 
manufacturing plant in Hibbing, Minnesota are covered under a collective 
bargaining agreement with the International Brotherhood of Electrical 
Workers.  The current term of the collective bargaining agreement expires 
in September 2000.


Item 2.   Properties

    Reptron occupies a number of facilities located throughout the United 
States.  Currently, it operates three manufacturing facilities, 22 sales 
offices, one main warehouse and a corporate headquarters facility.

    Owned facilities.  Reptron owns a 77,500 square foot facility in Tampa, 
Florida which houses corporate personnel, management staff and executive 
offices for Reptron Distribution.  The Tampa sales office and corporate 
sales operations for Reptron Distribution are also located in this 
facility.  Reptron also owns a 150,000 square foot facility located on 
property adjacent to the corporate headquarters facility.  The Tampa K-Byte 
Manufacturing plant and administrative offices and the main warehouse for 
Reptron Distribution occupy this facility.  This building was completed in 
the first quarter of 1997 at a cost of approximately $8.0 million, 
exclusive of land costs.  As of December 31, 1998, the two Tampa, Florida 
buildings were subject to a mortgage totaling approximately $8.0 million.  
Reptron also owns a 72,000 square foot K-Byte Manufacturing facility in 
Gaylord, Michigan, which is subject to a mortgage of approximately 
$259,000.

    Leased facilities.  Reptron leases twenty-two office suites serving as 
sales offices for Reptron Distribution.  These offices average 
approximately 2,000 square feet in size and contain a small space for 
warehousing inventory and sales materials.  Lease terms on these offices 
range from three to five years and expire at various dates through 
November, 2003.  One of these locations, in the Detroit area, is owned by 
the Chief Executive Officer of Reptron.

    Reptron also leases a total of 110,000 square feet of manufacturing and 
administrative offices for the Hibbing manufacturing operation.  Lease 
terms on the buildings expire December, 2002.  These properties are owned, 
in part, by four individuals on the senior management team of the Hibbing 
manufacturing operation.


Item 3.   Legal Proceedings

    Reptron is, from time to time, involved in litigation relating to 
claims arising out of its operations in the ordinary course of business.  
Reptron believes that none of these claims, which were outstanding as of 
December 31, 1998, should have a material adverse impact on its financial 
condition or results of operations.


Item 4.   Submission of Matters to a Vote of Security Holders

    No matters were submitted to a vote of Reptron's security holders 
during the fourth quarter of the fiscal year ending December 31, 1998.

                                     11


                                  PART II

Item 5.   Market for the Registrant's Common Stock and Related 
          Stockholder Matters

    Reptron's common stock is traded on The NASDAQ National Market System 
under the symbol "REPT".  The following table sets forth, for the periods 
indicated, the high and low  bid prices of the common stock as reported by 
the NASDAQ National Market System.

     Fiscal 1997                               High           Low
     ----------                                ----           ---
     First Quarter                           $23 3/4        $18
     Second Quarter                          $24 1/2        $17 5/8
     Third Quarter                           $26 1/4        $17
     Fourth Quarter                          $16 3/4        $10

     Fiscal 1998                               High           Low
     -----------                               ----           ---
     First Quarter                           $12 7/8        $10 3/8
     Second Quarter                          $14 1/4        $ 9 1/2
     Third Quarter                           $11 11/16      $ 4 1/2
     Fourth Quarter                          $ 6 7/16       $ 3 7/8

     Fiscal 1999                               High            Low
     -----------                               ----            ---
     First Quarter (through March 26, 1999)  $ 4 1/8        $ 3 1/4

    On March 26, 1999 the last sale price of the common stock, as reported 
by The NASDAQ National Market System was $3 1/2 per share.

    As of March 26, 1999, there were approximately 107 holders of record of 
Reptron's common stock and approximately 2,000 beneficial shareholders.

     Reptron has never declared or paid dividends on its common stock.  
Reptron does not intend, for the foreseeable future, to declare or pay any 
cash dividends and intends to retain earnings, if any, for the future 
operation and expansion of Reptron's business.  Reptron's current line of 
credit prohibits the payment of dividends.

                                      12


Item 6.    Selected Financial Data

   The following table summarizes selected financial data of the Company and
should be read in conjunction with Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein. 
<TABLE>
                                                    Year Ended December 31,
                                       ----------------------------------------------
                                        1994        1995        1996        1997        1998
                                     ---------   ---------   ---------   ---------   ---------
                                          (In thousands, except share and per share data)
Operating Statement Data:
<S>                                  <C>         <C>         <C>         <C>         <C>
Net sales, Reptron Distribution     $   96,003  $  140,146  $  168,279  $  187,267  $  156,507
Net sales, K-Byte Manufacturing         68,002      83,198     100,658     116,644     146,282
                                     ---------   ---------   ---------   ---------   ---------

   Total net sales                  $  164,005  $  223,344  $  268,937  $  303,911  $  302,789
                                     =========   =========   =========   =========   =========
Gross profit, Reptron Distribution  $   18,780  $   26,057  $   34,214  $   35,375  $   25,081
Gross profit, K-Byte Manufacturing      11,431      13,531      17,382      18,780      12,847
                                     ---------   ---------   ---------   ---------   ---------
   Total gross profit                   30,211      39,588      51,596      54,155      37,928
Selling, general and administrative
   expenses                             19,051      26,011      34,770      38,154      51,206
                                     ---------   ---------   ---------   ---------   ---------
Operating income (loss)                 11,160      13,577      16,826      16,001     (13,278)
Interest expense, net                    1,474       2,767       4,025       6,184       8,339
                                     ---------   ---------   ---------   ---------   ---------
Earnings (loss) before income taxes      9,686      10,810      12,801       9,817     (21,617)
Income tax provision (benefit)           3,823       4,324       5,148       3,677      (8,470)
                                     ---------   ---------   ---------   ---------   ---------
Net earnings (loss)                 $    5,863  $    6,486  $    7,653  $    6,140  $  (13,147)
                                     =========   =========   =========   =========   =========
Net earnings (loss) per share
   - basic                          $     1.05  $     1.07  $     1.26  $     1.01  $    (2.15)
                                     =========   =========   =========   =========   =========
Weighted average number of shares
 used in computing above amounts     5,581,105   6,046,159   6,058,889   6,077,084   6,118,023
                                     =========   =========   =========   =========   =========
Net earnings (loss) per share
   - diluted                        $     1.03  $     1.05  $     1.24  $      .98  $    (2.15)
                                     =========   =========   =========   =========   =========
Weighted average number of shares
 used in computing above amounts     5,694,092   6,163,094   6,179,458   6,247,040   6,118,023
                                     =========   =========   =========   =========   =========

                                                            December 31,
                                     ---------------------------------------------------------
                                        1994        1995        1996        1997        1998
                                     ---------   ---------   ---------   ---------   ---------
                                                            (In thousands)
Balance Sheet Data:
Working capital                    $    40,490  $   75,629  $   77,231  $  137,572  $  101,829
Total assets                            70,073     133,738     138,632     222,514     210,083
Long-term obligations, including
  note payable and current portion      20,798      65,110      67,345     133,693     133,163
Shareholders' equity                    34,415      40,948      48,690      54,975      42,126
</TABLE>



                                              13


Item 7.   Management's Discussion and Analysis of Financial Condition and 
Results of Operations

    This document contains certain forward-looking statements that involve a 
number of risks and uncertainties.  Such forward-looking statements are 
within the meaning of that term in Section 27A of the Securities Act of 
1933, as amended and Section 21E of the Securities Exchange Act of 1934, as 
amended.  Factors that could cause actual results to differ materially 
include the following: business conditions and growth in Reptron's industry 
and in the general economy; competitive factors; risks due to shifts in 
market demand; the ability of Reptron to complete acquisitions; and the risk 
factors listed from time to time in Reptron's reports filed with the 
Securities and Exchange Commission as well as assumptions regarding the 
foregoing.  The words "believe", "plans", "estimate", "expect", "intend", 
"anticipate", and similar expressions and variations thereof identify 
certain of such forward-looking statements, which speak only as of the dates 
on which they were made.  Reptron undertakes no obligation to publicly 
update or revise any forward-looking statements, whether as a result of new 
information, future events, or otherwise.  Readers are cautioned that any 
such forward-looking statements are not guarantees of future performance and 
involve risks and uncertainties, and that actual results may differ 
materially from those indicated in the forward-looking statements as a 
result of various factors.  Readers are cautioned not to place undue 
reliance on these forward-looking statements.

    This Management's Discussion and Analysis of Financial Condition and 
Results of Operations should be read in conjunction with the Consolidated 
Financial Statements and Notes thereto included elsewhere in this report.

General

    Reptron has grown rapidly through the implementation of its strategy of 
integrating value-added distribution services with contract manufacturing.  
Since the acquisition of K-Byte Manufacturing in 1986, and other subsequent 
acquisitions, Reptron's net sales have increased from approximately $25 
million to approximately $303 million in 1998.  Reptron has also focused on 
improving its operating margin through such measures as: (i) shifting 
Reptron Distribution's business mix from standard component sales to higher 
margin value-added services, which now represent 31% of its net sales; (ii) 
continuing to increase the number of customers using both of Reptron's 
distribution and contract manufacturing services, thereby lowering overall 
selling expenses; (iii) investing in facilities technology in order to 
improve efficiencies; and (iv) creating a corporate sales operation to more 
efficiently access smaller volume customers.

    K-Byte Manufacturing offers contract manufacturing services to its 
customers on a turnkey basis pursuant to customer designs.  Under turnkey 
arrangements, and pursuant to the customers' design, schematics and bill of 
materials K-Byte Manufacturing purchases the electronic components and other 
materials used in assembly and delivers a completed product.  For strategic 
reasons, K-Byte Manufacturing does not pursue consignment business in which 
the customer supplies the product material and pays only for labor and 
manufacturing costs.  Reptron believes that by retaining total 
responsibility for material procurement it can achieve greater control of 
the manufacturing process and leverage the strengths of Reptron 
Distribution.  The marketing cycle for K-Byte Manufacturing engagements 
tends to span six to twelve months and the start-up phase typically spans 
another six months.  During start-up, significant investments are made by K-
Byte Manufacturing and its customers to prepare for the successful launch of 
the contract manufacturing engagement.  K-Byte Manufacturing's contracts 
with customers address the customers' obligations relative to cancellation, 
inventory risks, component price increases, engineering change notices, 
inventory (stores, work-in-process and vendor stock) and payment terms.

    In 1995, Reptron acquired the electronic components distribution 
businesses of two distributors (collectively, the "1995 Acquisitions").  The 
1995 Acquisitions, which were accounted for using the purchase method, 
involved a total consideration of $19.5 million, consisting of $12.6 million 
in cash and the balance in assumed liabilities.

    In December 1995, Reptron also created a division devoted solely to 
selling memory modules.  This division sells memory modules primarily to 
computer integrators, retail stores and value-added resellers, a customer 
base not historically served by Reptron Distribution.  Sales in this market 
segment are generally characterized by lower gross margins and lower 
selling, general and administrative expenses than other sales generated by 
Reptron Distribution.  Sales from this division have consistently increased 
and accounted for $19.9 million or 12.7% and $17.4 million or 9.5% of 
Reptron Distribution's net sales in 1998 and 1997, respectively (6.6% and 
5.9% of Reptron's total net sales in 1998 and 1997, respectively).

    In 1998 pursuant to a stock transaction, Reptron acquired all of the 
assets and liabilities of Hibbing.  The transaction was valued at 
approximately $53.0 million consisting of the sum of a cash payment of 
approximately 

                                   14

$30.0 million and the remainder in the form of assumption of liabilities.  
The purchase was recorded using the purchase method of accounting.

    Also in 1998, Reptron incurred expenses of approximately $2.5 million in 
connection with a proposed business combination with All American 
Semiconductor, which ultimately did not come to fruition.

    Sales for Reptron Distribution and K-Byte Manufacturing are recognized 
upon shipment, except for sales from in-plant stores.  Sales from in-plant 
stores are recognized when a customer removes a product from Reptron's in-
plant inventory.  Sales from in-plant stores represented 8.4% and 17.6% of 
Reptron Distribution's 1998 and 1997 net sales, respectively (4.4% and 11.2% 
of Reptron's total net sales in 1998 and 1997, respectively).  In-plant 
inventories are tracked using bar-code labeling technology or frequent 
inventory counts.  Cost of sales for Reptron Distribution includes only the 
cost of materials (electronic components).  Cost of sales for K-Byte 
Manufacturing includes the cost of materials, labor and manufacturing 
overhead.

    Reptron Distribution and K-Byte Manufacturing operate as independent 
businesses.  The needs of Reptron Distribution and K-Byte Manufacturing 
differ and management believes that a focused organizational structure is 
beneficial.  This decentralized organizational structure allows each 
division to focus on all aspects of their business operations and the 
critical factors required to be successful within a very competitive 
marketplace.  Reptron's senior management, treasury and finance and legal 
functions are centralized to ensure a consistent level of corporate strategy 
and appropriate oversight.


Results of Operations

   The following table sets forth, for the periods indicated, the 
percentage of the Company's net sales represented by each line item 
presented, except for Reptron Distribution and K-Byte Manufacturing 
gross profit, which is presented as a percentage of net sales of the 
respective segments:
<TABLE>
                                                  Year Ended December 31,
                                             ------------------------------
                                               1996       1997       1998
                                             --------   --------   --------
<S>                                          <C>         <C>         <C>
Net sales, Reptron Distribution .............   62.6%      61.6%      51.7%
Net sales, K-Byte Manufacturing .............   37.4       38.4       48.3
                                             --------   --------   --------
   Total net sales ..........................  100.0%     100.0%     100.0%
                                             ========   ========   ========
Gross profit, Reptron Distribution ..........   20.3%      18.9%      16.0%
                                             ========   ========   ========
Gross profit, K-Byte Manufacturing ..........   17.3%      16.1%       8.8%
                                             ========   ========   ========
Total gross profit ............................ 19.2%      17.8%      12.5%
Selling, general and administrative expenses .. 12.9       12.6       16.9
                                             --------   --------   --------
Operating income (loss) ....................     6.3        5.2       (4.4)
Interest expense, net .......................... 1.5        2.0        2.8
                                             --------   --------   --------
Earnings (loss) before income taxes .........    4.8%       3.2%      (7.2)%
                                             ========   ========   ========
Net earnings (loss) ..........................   2.8%       2.0%      (4.3)%
                                             ========   ========   ========
</TABLE>


1998 Compared to 1997

    Net sales.  Total net sales decreased $1.1 million, or 0.4%, from $303.9 
million in 1997 to $302.8 million in 1998.

    Reptron Distribution net sales decreased $30.8 million, or 16.4%, from 
$187.3 million in 1997 to $156.5 million in 1998.  This decrease was, in 
part, attributed to an $18.0 million decrease in sales to a single customer 
from $26.3 million in 1997 to $8.3 million in 1998.  Additionally, severe 
price erosion, primarily due to abundant supply of many types of electronic 
components sold by Reptron Distribution, had a negative effect on net sales. 
 The largest Reptron Distribution customer accounted for approximately 5.3% 
and 14.0% of Reptron Distribution net sales and 2.7% and 9.2% of total 
Company net sales in 1998 and 1997, respectively.  The highest volume sales 
office accounted for 12.7% and 20.9% of Reptron Distribution net sales in 
1998 and 1997, respectively.

                                          15

    Sales of semiconductors, passive components and electromechanical 
components accounted for 67.3%, 22.5% and 10.2%, respectively, of Reptron 
Distribution 1998 net sales.  Reptron Distribution's 1997 net sales were 
comprised of 66.8% semiconductors, 24.9% passive components and 8.3% 
electromechanical components.  Representation by Reptron Distribution of its 
major vendor lines remained relatively stable with sales from the top four 
vendors accounting for approximately $50.1 million, or 32.0% of Reptron 
Distribution 1998 net sales, as compared with approximately $60.9 million, 
or 32.5% of Reptron Distribution 1997 net sales.

    K-Byte Manufacturing net sales increased $29.7 million, or 25.4%, from 
$116.6 million in 1997 to $146.3 million in 1998.  Net sales generated by 
Hibbing, acquired on May 29, 1998, were approximately $33.1 million in 1998. 
 New customers accounted for an increase of $1.6 million in net sales, which 
was off-set by a net decrease in net sales of $5.0 million, primarily 
attributable to reductions in customer orders from the previously existing 
K-Byte Manufacturing customer base.  K-Byte Manufacturing transacted 
business with approximately 89 customers (inclusive of 48 Hibbing customers) 
in 1998.  The three largest customers represented approximately 10.0%, 9.8% 
and 7.1%, respectively, of the division's 1998 net sales (4.8%, 4.7% and 
3.4%, respectively, of Reptron's total 1998 net sales).  Sales to customers 
in the telecommunications industry accounted for approximately 27.1% of K-
Byte Manufacturing 1998 net sales, while sales to customers in the 
healthcare , industrial/instrumentation and banking industries accounted for 
approximately 27.0%, 24.5% and 12.1%, respectively, of K-Byte Manufacturing 
1998 net sales.  K-Byte Manufacturing's 1997 net sales included 29.2%, 
22.0%, 20.5%, and 19.0% from the industrial/instrumentation, healthcare, 
telecommunications and banking industries, respectively.

    The Tampa, Florida, Gaylord, Michigan and Hibbing, Minnesota 
manufacturing plants accounted for approximately 41.7%, 35.8% and 22.5%, 
respectively, of K-Byte Manufacturing 1998 total net sales.

    Gross Profit.  Total gross profit decreased $16.3 million, or 30.0% from 
$54.2 million in 1997 to $37.9 million in 1998.  Gross margin decreased from 
17.8% in 1997 to 12.5% in 1998.

    Reptron Distribution gross profit decreased $10.3 million, or 29.1% from 
$35.4 million in 1997 to $25.1 million in 1998 and the gross margin 
decreased from 18.9% in 1997 to 16.0% in 1998.  This decrease in gross 
margin is primarily attributed to an industry-wide decrease in average 
selling prices, sales mix shift to lower margin products and the write down 
of certain inventory due to the loss of certain vendor lines and the 
acceleration of industry-wide price declines.

    K-Byte Manufacturing gross profit decreased $6.0 million, or 31.6% from 
$18.8 million in 1997 to $12.8 million in 1998.  Gross margin decreased from 
16.1% in 1997 to 8.8% in 1998.  This decrease in gross margin is primarily 
attributed to the underutilization of fixed costs and overhead at current 
sales levels, a change in customer demand to a sales mix of lower margin 
business, the amortization of capitalized costs and the write off of certain 
capitalized costs and inventory.

    Selling, General and Administrative Expenses.  Selling, general and 
administrative expenses increased $13.0 million, or 34.2% from $38.2 million 
in 1997 to $51.2 million in 1998.  Hibbing accounted for approximately $3.3 
million of the increase in 1998.  The remaining increase was primarily due 
to investments in sales operations, management information systems, 
engineers and senior management; the costs associated with the aborted All 
American Semiconductor transaction,  the write-off of certain bad debts; the 
costs of consultants used in re-engineering the manufacturing process and 
employee severance costs.

    Interest Expense.  Net interest expense increased $2.1 million, or 34.8% 
from $6.2 million in 1997 to $8.3 million in 1998.  This increase is 
primarily attributed to the increase in average outstanding net debt (total 
debt less invested cash reserves) of $28.1 million, or 38.7% from $72.7 
million during 1997 to $100.8 million during 1998.  This $28.1 million 
increase in average outstanding net debt during 1998 is primarily attributed 
to the decrease in cash as a result of the May, 1998 purchase of Hibbing.


1997 Compared to 1996

    Net Sales.  Total net sales increased $35.0 million, or 13.0%, from 
$268.9 million in 1996 to $303.9 million in 1997.

                                      16

    Reptron Distribution net sales increased $19.0 million, or 11.3%, from 
$168.3 million in 1996 to $187.3 million in 1997.  The largest customer of 
Reptron is a customer of both Reptron Distribution and K-Byte Manufacturing. 
 This customer accounted for approximately 14.0% of Reptron Distribution 
1997 net sales, 1.5% of K-Byte Manufacturing 1997 net sales and 9.2% of 
total Company 1997 net sales.  The highest volume sales office accounted for 
20.9% of total Reptron Distribution net sales.

    Sales of semiconductors, passive components and electromechanical 
components accounted for 66.8%, 24.9% and 8.3%, respectively, of Reptron 
Distribution's 1997 net sales.  The percentage of net sales revenue derived 
from semiconductor sales decreased from 74.8% in 1996, primarily as a result 
of the decline in average selling prices for SRAMS and DRAMS.  
Representation by Reptron Distribution of its major vendor lines remained 
relatively stable in 1997, with sales generated from the top four vendors 
accounting for approximately $60.9 million, or 32.5% of Reptron 
Distribution's 1997 net sales, as compared with approximately $63.0 million 
or 37.5% of Reptron Distribution's 1996 net sales.

    K-Byte Manufacturing net sales increased $15.9 million, or 15.9%, from 
$100.7 million in 1996 to $116.6 million in 1997.  Sales to new customers 
accounted for approximately $11.7 million of the increase in net sales in 
1997.  The remainder of the increase in net sales, approximately $4.2 
million, was generated by the previously existing K-Byte Manufacturing 
customer base.  K-Byte Manufacturing transacted business with approximately 
39 customers in 1997 with the largest three customers representing 
approximately 15.2%, 9.9% and 7.7%, respectively, of K-Byte Manufacturing 
1997 net sales (5.8%, 3.8% and 2.9% of Reptron's total 1997 net sales).  
Sales to customers in the industrial/instrumentation industry accounted for 
29.2% of K-Byte Manufacturing 1997 net sales, while sales to customers in 
the healthcare industry, telecommunications industry and banking industry 
accounted for 22.0%, 20.5% and 19.0%, respectively, of net sales in 1997.

    The Tampa, Florida manufacturing plant accounted for 55.7% of K-Byte 
Manufacturing 1997 net sales, with the Gaylord, Michigan plant totaling 
40.6% of 1997 net sales and the Saline, Michigan, short production run 
plant, accounting for the remaining 3.7%.

    Gross Profit.  Total gross profit increased $2.6 million, or 5.0%, from 
$51.6 million in 1996 to $54.2 million in 1997.  Gross margin decreased from 
19.2% in 1996 to 17.8% in 1997.

    Reptron Distribution's gross profit increased $1.2 million, or 3.4%, 
from $34.2 million in 1996 to $35.4 million in 1997 and the gross margin 
decreased from 20.3% in 1996 to 18.9% in 1997.  This decrease in gross 
margin is primarily attributed to industry-wide semiconductor pricing 
declines and increased competition.  For example, although 1997 memory 
module division units shipped increased approximately 69.0%, 1997 memory 
module division net sales increased by only 3.0%.

    K-Byte Manufacturing's gross profit increased $1.4 million, or 8.0%, 
from $17.4 million in 1996 to $18.8 million in 1997.  The gross margin 
decreased from 17.3% in 1996 to 16.1% in 1997.  During 1997, nine new 
customers were integrated into the K-Byte contract manufacturing operation. 
 In order to meet the demands of this integration process, Reptron added 
significant production staff which resulted in production inefficiencies and 
declining margins.  These actions were necessary to meet the demand of 
existing customers as well as the commitments made to the new customers.

    Selling, General, and Administrative Expenses.  Selling, general and 
administrative expenses increased $3.4 million, or 9.7%, from $34.8 million 
in 1996 to $38.2 million in 1997.  The increase in expense is primarily 
reflective of investments in senior management and field application 
engineers, as well as, higher variable costs associated with the increase in 
net sales. These expenses, as a percentage of net sales, decreased from 
12.9% in 1996 to 12.6% in 1997.

    Interest Expense.  Net interest expense increased $2.2 million, or 
53.6%, from $4.0 million in 1996 to $6.2 million in  1997.  In August, 1997, 
Reptron issued $115.0 million of subordinated convertible notes at a coupon 
rate of 6.75%.  A portion of the proceeds was used to pay down existing 
indebtedness under a revolving credit facility.  The remainder of the 
proceeds has been invested in short-term municipal bonds.  The increase in 
net interest expense is primarily attributed to the net increase in 
outstanding net debt (total debt less cash) of $11.7 million from $66.9 
million as of December 31, 1996 to $78.6 million as of December 31, 1997.

                                    17


Currency Fluctuation

    Reptron pays for its purchases from foreign sources, including Asian 
manufacturers, in U.S. dollars, which reduces the adverse effects of 
currency fluctuations.  Reptron has not experienced substantial adverse 
effects from currency fluctuations to date.


Liquidity and Capital Resources

    Reptron primarily finances its operations through subordinated notes, 
operating cash flows, bank credit lines, capital equipment leases and short-
term financing through supplier credit lines.  

    On January 8, 1999, Reptron entered into a $50.0 million Revolving 
Credit Agreement ("Credit Agreement") with PNC Bank (the "Lender") to 
replace its existing $15.0 million revolving credit facility with 
NationsBank (the "NationsBank Credit Facility").  Borrowings under the 
Credit Agreement are collateralized by all of Reptron's inventory, accounts 
receivable, equipment and general intangibles.  The Credit Agreement limits 
the amount of capital expenditures and prohibits the payment of dividends 
thereby restricting the distribution of the retained earnings of Reptron.  
Reptron may, at its option, and upon notice to the lender, request advance 
funds pursuant to either a Domestic Rate Loan or a Eurodollar Rate loan.  
Upon notice to the Lender, Reptron may convert advances from one type of 
loan to the other.  Amounts outstanding under the Credit Agreement as of 
March 24, 1999 were approximately $8.0 million.  This amount was drawn in 
conjunction with a Reptron subsidiary's purchase from NationsBank of the 
mortgage note on the buildings located in Tampa, Florida.  It is 
contemplated that this mortgage note will be sold to another financial 
institution during 1999.

    As of December 31, 1998, Reptron was in compliance with, or received 
waivers, on all financial covenants under the NationsBank Credit Facility.  
There were no amounts outstanding under the NationsBank Credit Facility as 
of December 31, 1998.

    Reptron has entered into various capital lease transactions with several 
financial institutions to finance capital expenditures, primarily for the K-
Byte Manufacturing operation.  These leases had an aggregate balance of $6.4 
million as of December 31, 1998.  The leases bear interest at rates ranging 
from approximately 7.5% to 11.1% and expire at various dates through July, 
2002.

    Reptron's operating activities generated cash of approximately $0.4 
million in 1998.  This increase was primarily a result of a decrease in 
inventories of $11.4 million, a decrease in accounts receivable of $6.1 
million, and an increase in accrued expenses of $2.1 million.  These items 
were off-set by a decrease in accounts payable of $9.0 million, an increase 
in prepaid expenses and other current assets of $4.3 million, a decrease in 
deferred taxes payable of $2.6 million and a decrease in deferred revenue of 
$1.2 million.  The decrease in inventories was experienced primarily as a 
result of an increase in K-Byte Manufacturing's average inventory turns from 
3.3 times in 1997 to 4.0 times in 1998.  Reptron Distribution's average 
inventory turns decreased from 3.8 times in 1997 to 3.2 times in 1998.  
Reptron's accounts receivable collections averaged 57 days as of December 
31, 1998 and 51 days as of December 31, 1997.

    Reptron used cash of approximately $33.6 million in investing activities 
in 1998, comprised of approximately $30.3 million in connection with the 
acquisition of Hibbing and $3.7 million in purchase of property, plant and 
equipment.  These uses of cash were off-set by proceeds from the sale of 
property, plant and equipment of approximately $400,000.  	Payments on 
long-term obligations used approximately $12.1 million of cash.  Stock sales 
in connection with the exercise of outstanding Reptron options provided cash 
of approximately $300,000 in 1998.

    Reptron believes that cash generated from operations, available cash 
reserves and available credit facilities will be sufficient for Reptron to 
meet its capital expenditures and working capital needs for its operations 
as presently conducted.  Reptron's future liquidity and cash requirements 
will depend on a wide range of factors, including the level of business in 
existing operations, expansion of facilities and possible acquisitions.  In 
particular, if cash flows from operations and available credit facilities 
are not sufficient, it will be necessary for Reptron to seek additional 
financing.  While there can be assurance that such financing would be 
available in amounts and on terms acceptable to Reptron, Reptron believes 
that such financing would likely be available on acceptable terms.

                                   18


Year 2000 Statement

    The Year 2000 issue encompasses the required recognition of computer 
hardware and software systems and computer controlled devices, including 
equipment, used in Reptron's manufacturing and distribution operations to 
properly acknowledge the change from Year 1999 to Year 2000.  The failure of 
any hardware and software systems or equipment to timely and accurately 
recognize such change could result in partial or complete systems failure.  
In the normal course of business, Reptron relies on products and services 
from critical vendors, customers and other third parties whose computer 
systems must also be Year 2000 compliant in order for Reptron to realize the 
uninterrupted flow of its business operations.  Reptron is actively taking 
steps to ensure that its systems and equipment will be Year 2000 compliant, 
including assessing the scope of work, prioritizing, certifying compliance, 
and testing compliance.

    Reptron has identified those systems and equipment in its Reptron 
Distribution and K-Byte Manufacturing (including Hibbing) divisions and in 
its central corporate operations that are considered to be critical to 
Reptron's day to day operations.  Approximately 80% to 85% of the systems 
and equipment utilized in Reptron Distribution and Reptron's central 
corporate operations were tested for Year 2000 compliance during November 
1998, with such systems and equipment being certified as Year 2000 compliant 
as of March 15, 1999.  Reptron expects to complete the balance of its Year 
2000 compliance testing of these systems and equipment during the middle of 
1999.  K-Byte Manufacturing has received written assurances from its third-
party software providers that the software used in its manufacturing 
operations is Year 2000 compliant.  Although K-Byte Manufacturing has not 
begun validating such third parties' Year 2000 representations, it has 
conducted preliminary internal tests of certain of its hardware and software 
systems, and expects to complete such validation and testing during the 
middle of 1999.  

    While Reptron is actively seeking assurances of Year 2000 compliance 
from each of its key suppliers, customers and other third-parties with whom 
Reptron conducts business, this assessment primarily relies upon such third-
parties' representations of Year 2000 compliance.  A lack of response or 
inadequate or inaccurate information from such third parties could 
materially affect Reptron's assessment of Year 2000 readiness.  Until these 
assessments are completed, which is expected to occur during the middle of 
1999, Reptron cannot predict whether the failure of any such third-party to 
be Year 2000 compliant will have a material adverse effect on Reptron's 
business.  

    To date, the costs incurred by Reptron to address Year 2000 issues have 
been immaterial, and Reptron expects that the costs to complete Year 2000 
compliance certification, testing and verification will also be immaterial. 
 Where appropriate, Reptron will develop contingency plans in areas it 
determines that Year 2000 readiness is insufficient.  However, no assurances 
can be given that Reptron's Year 2000 efforts are appropriate, adequate or 
complete.  In addition, Reptron is unable to fully determine the effect of a 
failure of its own systems or those of any third-party with whom it conducts 
business, but any significant failures could have a material adverse effect 
on Reptron's financial condition, results of operations and cash flows.  See 
"Certain Considerations - Year 2000 Statement."


Item 7a.   Quantitative and Qualitative Disclosures about Market Risk

    Reptron entered into an interest rate swap agreement during 1997.  The 
swap agreement effectively converts a portion of Reptron's floating interest 
rate debt to fixed interest rate debt.  Notional amounts of interest rate 
swap agreements are used to measure interest to be paid or received relating 
to such agreements and do not represent an amount of exposure to credit 
loss.  Under the terms of the agreement, Reptron is obligated to pay 
interest on a notional amount to the extent that the fixed rate of 6.99%, 
under the interest rate swap agreement, exceeds the LIBOR rate, as measured 
pursuant to the agreement.  Furthermore, Reptron will receive interest to 
the extent that the LIBOR rate exceeds the fixed rate.  As of December 31, 
1998, the notional amount of the swap agreement totaled approximately $8.0 
million which will mature in March, 2004.  Interest received, if any, as a 
result of this agreement is netted against interest expense in the 
accompanying consolidated statements of operations.  Based on average 
floating rate borrowings outstanding throughout 1998, a 100 basis point 
change in LIBOR would have caused Reptron's interest expense to change by 
approximately $84,000.  Reptron believes that this amount is not significant 
to the 1998 results of operations.


Item 8.   Financial Statements and Supplementary Data

    The financial statements required by this Item are contained in pages 
F-1 through F-23 of this Report.


                                      19

Item 9.   Changes in and Disagreements With Accountants on Accounting and 
Financial Disclosure

    None


                                  PART III

Item 10.   Directors and Executive Officers of the Registrant

   Information required by this Item is incorporated by reference to 
the definitive proxy statement to be filed by Reptron for the Annual 
Meeting of Shareholders to be held May 28, 1999.

Item 11.   Executive Compensation

   Information required by this Item is incorporated by reference to 
the definitive proxy statement to be filed by Reptron for the Annual 
Meeting of Shareholders to be held May 28, 1999.

Item 12.   Security Ownership of Certain Beneficial Owners and 
Management

   Information required by this Item is incorporated by reference to 
the definitive proxy statement to be filed by Reptron for the Annual 
Meeting of Shareholders to be held May 28, 1999.

Item 13.   Certain Relationships and Related Transactions

   Information required by this Item is incorporated by reference to 
the definitive proxy statement to be filed by Reptron for the Annual 
Meeting of Shareholders to be held May 28, 1999.

                                    20

                         REPTRON ELECTRONICS, INC.

                 INDEX TO FINANCIAL STATEMENTS AND SCHEDULE




                                                                 Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                F-2


CONSOLIDATED FINANCIAL STATEMENTS

  Consolidated Balance Sheets as of December 31, 1997 and 1998    F-3

  Consolidated Statements of Operations for the years ended
    December 31, 1996, 1997 and 1998                              F-4

  Consolidated Statement of Shareholders' Equity for the years 
    ended December 31, 1996, 1997 and 1998                        F-5

  Consolidated Statements of Cash Flows for the years ended
    December 31, 1996, 1997 and 1998                              F-6

  Notes to Consolidated Financial Statements                      F-7

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
  ON SCHEDULE                                                    F-22

  Schedule II -- Valuation and Qualifying Accounts for
    the years ended December 31, 1996, 1997 and 1998             F-23






             Report Of Independent Certified Public Accountants
             --------------------------------------------------




Board of Directors
Reptron Electronics, Inc.


We have audited the accompanying consolidated balance sheets of Reptron 
Electronics, Inc. and its wholly owned subsidiary as of December 31, 1997 
and 1998, and the related consolidated statements of earnings, 
shareholders' equity, and cash flows for each of the three years in the 
period ended December 31, 1998.  These financial statements are the 
responsibility of the Company's management.  Our responsibility is to 
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe our audits 
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, 
in all material respects, the consolidated financial position of Reptron 
Electronics, Inc. as of December 31, 1997 and 1998, and the consolidated 
results of operations and cash flows for each of the three years in the 
period ended December 31, 1998, in conformity with generally accepted 
accounting principles.




GRANT THORNTON LLP


Tampa, Florida
February 5, 1999





                                         F-2

                                 REPTRON ELECTRONICS, INC.

                                CONSOLIDATED BALANCE SHEETS

                             (in thousands, except share data)
<TABLE>

                                         ASSETS
                                                                 December 31,
                                                               1997        1998
                                                             --------    -------
-
<S>                                                          <C>         <C>
CURRENT ASSETS
  Cash and cash equivalents                                  $ 55,135    $ 10,065
  Accounts receivable - trade, less allowances
    for doubtful accounts of $350 and $483, respectively       45,033      49,503
  Inventories, net                                             68,732      69,331
  Prepaid expenses and other                                    3,906       9,296
  Deferred tax benefit                                            110       2,295
                                                              -------     -------
     Total current assets                                     172,916     140,490

PROPERTY, PLANT AND EQUIPMENT - AT COST, NET                   35,405      38,273
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET                    4,272      25,527
OTHER ASSETS                                                    9,921       5,794
                                                              -------     -------
                                                             $222,514    $210,084
                                                              =======     =======
                         LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable - trade                                   $ 24,782    $ 25,542
  Current portion of long-term obligations                      3,708       3,866
  Accrued expenses                                              5,574       9,183
  Deferred Revenue                                              1,280          70
                                                              -------     -------
     Total current liabilities                                 35,344      38,661

LONG-TERM OBLIGATIONS, less current portion                   129,985     129,297
DEFERRED INCOME TAXES                                           2,210           -
COMMITMENTS AND CONTINGENCIES                                       -           -
SHAREHOLDERS' EQUITY
  Preferred Stock - authorized 15,000,000
    shares of $.10 par value; no shares issued                      -           -
  Common Stock - authorized, 50,000,000 shares of
    $.01 par value; issued and outstanding,
    6,088,369 and 6,147,119 shares, respectively                   61          61
  Additional paid-in capital                                   21,378      21,676
  Retained earnings                                            33,536      20,389
                                                              -------     -------
                                                               54,975      42,126
                                                              -------     -------
                                                             $222,514    $210,084
                                                              =======     =======
</TABLE>
         The accompanying notes are an integral part of these statements.
                                       F-3

                              REPTRON ELECTRONICS, INC.

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                    (in thousands except share and per share data)

<TABLE>
                                                       Year Ended December 31,
                                                 ----------------------------------
                                                    1996        1997        1998
                                                 ----------  ----------  ----------
<S>                                              <C>         <C>         <C>
Net sales                                        $  268,937  $  303,911  $  302,789
Cost of goods sold                                  217,341     249,756     264,861
                                                  ---------   ---------   ---------
   Gross profit                                      51,596      54,155      37,928
Selling, general and administrative expenses         34,770      38,154      51,206
                                                  ---------   ---------   ---------
   Operating income (loss)                           16,826      16,001     (13,278)
Interest expense, net                                 4,025       6,184       8,339
                                                  ---------   ---------   ---------
   Earnings (loss) before income taxes               12,801       9,817     (21,617)
Income tax provision (benefit)                        5,148       3,677       8,470
                                                  ---------   ---------   ---------
   Net earnings (loss)                           $    7,653  $    6,140  $  (13,147)
                                                  =========   =========   =========
  Net earnings (loss) per common share - basic   $     1.26  $     1.01  $    (2.15)
                                                  =========   =========   =========
Weighted average Common Stock 
  shares outstanding - basic                      6,058,889   6,077,084   6,118,023
                                                  =========   =========   =========

  Net earnings (loss) per common share - diluted $     1.24  $      .98  $    (2.15)
                                                  =========   =========   =========
Weighted average Common Stock equivalent
  share outstanding - diluted                     6,179,458   6,247,040   6,118,023
                                                  =========   =========   =========
</TABLE>

         The accompanying notes are an integral part of these statements.

                                        F-4

                           REPTRON ELECTRONICS, INC.

                CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                       (in thousands, except share data)

<TABLE>
                                 Total             Additional
                                Shares      Par     Paid-In    Retained   
Shareholders'
                              Outstanding   Value    Capital    Earnings     
Equity
                              -----------   -----   --------    --------    ----
----
<S>                            <C>          <C>     <C>         <C>         <C>
Balance at January 1, 1996     6,048,519    $ 60    $ 21,145    $ 19,743    $ 40,948
Exercise of stock options         17,000       1          88           -          89
Net earnings                           -       -           -       7,653       7,653
                               ---------     ---      ------     -------     -------
Balance at December 31, 1996   6,065,519      61      21,233      27,396      48,690
Exercise of stock options         22,850       -         145           -         145
Net earnings                           -       -           -       6,140       6,140
                               ---------     ---      ------     -------     -------
Balance at December 31, 1997   6,088,369      61      21,378      33,536      54,975
Exercise of stock options         58,750       -         298           -         298
Net loss                               -       -           -     (13,147)    (13,147)
                               ---------     ---      ------     -------     -------
Balance at December 31, 1998   6,147,119    $ 61    $ 21,676    $ 20,389    $ 42,126
                               =========     ===     =======     =======     =======
</TABLE>





             The accompanying notes are an integral part of this statement.
                                            F-5

                                  REPTRON ELECTRONICS, INC.

                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                      (in thousands)
<TABLE>
                                                                Year Ended December 31,
                                                              --------------------------
                                                              1996      1997       1998
                                                            -------    -------    -------
<S>                                                        <C>        <C>      <C>
Increase (decrease) in cash and cash equivalents

Cash flows from operating activities:
  Net earnings (loss)                                      $  7,653   $  6,140   $(13,147)
  Adjustments to reconcile net earnings (loss) to net
   cash provided by (used in) operating activities
    Depreciation and amortization                             3,638      5,657     11,067
      Gain on sale of assets                                    (47)       (44)      (218)
      Deferred income taxes                                     588        732     (2,585)
      Change in assets and liabilities 
        (net of effect of acquisition):
       Accounts receivable-trade                              1,427     (5,226)     6,108
       Inventories                                            4,344    (10,038)    11,437
       Prepaid expenses and other                              (920)    (1,143)    (4,298)
       Other assets                                            (396)    (9,683)        50
       Accounts payable-trade                                (6,607)     6,443     (8,973)
       Accrued expenses                                         678      3,068      2,122
       Deferred Revenue                                           -      1,280     (1,210)
       Income taxes payable                                     246       (246)         -
                                                            -------    -------    -------
         Net cash provided by (used in) operating activities  10,604    (3,060)       353

Cash flows from investing activities:
  Net cash paid for acquisitions                                   -         -     (30,337)
  Purchases of property, plant and equipment                  (7,586)   (6,248)     (3,698)
  Proceeds from sale of property, plant and equipment             72        44         446
                                                             -------    -------    -------
         Net cash used in investing activities                (7,514)   (6,204)    (33,589)

Cash flows from financing activities:
  Payments on notes payable to banks                          (3,582)  (48,550)          -
  Proceeds from long-term obligations                          3,409   124,041           -
  Payments on long-term obligations                           (2,751)  (11,716)    (12,132)
  Proceeds from exercise of stock options                         89       145        298
                                                             -------    -------    -------
         Net cash provided by (used in) financing activities  (2,835)    63,920    (11,834)
                                                             -------    -------    -------
         Net increase (decrease) in cash and cash equivalents    255     54,656    (45,070)

Cash and cash equivalents at beginning of period                 224        479     55,135
                                                             -------    -------    -------
Cash and cash equivalents at end of period                  $    479   $ 55,135   $ 10,065
                                                             =======    =======    =======
</TABLE>


    The accompanying notes are an integral part of these statements.

                                    F-6

                           REPTRON ELECTRONICS, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       December 31, 1996, 1997 and 1998


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reptron Electronics, Inc. ("Reptron") is an integrated electronics company 
operating as a national distributor of electronic components ("Reptron 
Distribution") and a contract manufacturer of electronic products ("K-Byte 
Manufacturing").  Reptron Distribution is authorized to sell over 60 vendor 
lines of semiconductors, passive products and electromechanical components 
to customers representing diverse industries throughout the country.  K-
Byte Manufacturing produces electronic products for a select number of 
customers throughout the country representing a diverse range of 
industries.

A summary of the significant accounting policies consistently applied in 
the preparation of the accompanying consolidated financial statements 
follows.

1.  Principles of Consolidation
    ---------------------------
The financial statements include the accounts of Reptron Electronics, Inc. 
and its wholly-owned subsidiaries.  All significant inter-company balances 
and transactions have been eliminated.

2.  Cash Equivalents
    ----------------
For purposes of the statement of cash flows, Reptron considers all highly 
liquid debt instruments purchased with a maturity of three months or less 
to be cash equivalents.

3.  Inventories
    -----------
Inventories are stated at the lower of cost or market.  For K-Byte 
Manufacturing, cost is determined using the first-in, first-out method 
(FIFO).  In 1996, Reptron changed its inventory method from FIFO to the 
average cost method in order to better reflect the movement of Reptron 
Distribution inventory.  Since the average cost method and FIFO generally 
yield similar results, the change had and will have an immaterial impact to 
the financial statements of Reptron.

4.  Property, Plant and Equipment
    -----------------------------
Depreciation is provided for, using the straight-line method, in amounts 
sufficient to relate the cost of depreciable assets to operations over 
their estimated service lives (buildings 39 1/2 years, all other asset 
categories 5 years).  Leasehold improvements are amortized using the 
straight-line method over the lives of the respective leases or the service 
lives of the improvements, whichever is shorter.  Leased equipment under 
capital leases is amortized using the straight-line method over the lives 
of the respective leases or over the service lives of the assets for those 
leases which substantially transfer ownership.  Accelerated methods are 
used for tax depreciation.

5.  Production Set-up Costs
    -----------------------
Under certain contractual arrangements with customers, Reptron incurs set-
up costs.  These costs are capitalized, included in prepaid expenses and 
other assets, and are recognized in cost of sales as units are delivered 
over the contract period, or two years, whichever is less.  Recognition of 
the costs begins after the development stage of each assembly within a 
contract is complete and the production stage begins.

                                F-7

                        REPTRON ELECTRONICS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    December 31, 1996, 1997 and 1998


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

6.  Excess of Cost Over Net Assets Acquired
    ---------------------------------------
The excess of cost over net assets acquired is amortized over a twenty or 
thirty year period, as applicable, using the straight-line method.  
Accumulated amortization totaled approximately $617,000 and $1,257,000 at 
December 31, 1997 and 1998, respectively.

7.  Impairment of Assets
    --------------------
Reptron's policy is to periodically review and evaluate whether there has 
been a permanent impairment in the value of long-lived assets, certain 
identifiable intangibles and goodwill.  Factors considered in the valuation 
include current operating results, trends and anticipated undiscounted 
future cash flows.  There have been no impairment losses in 1996, 1997 or 
1998.

8.  Income Taxes
    ------------
Reptron accounts for income taxes on the liability method, as provided by 
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting For 
Income Taxes."  Under the liability method specified by SFAS 109, deferred 
tax assets and liabilities are determined based on the difference between 
the financial statement and tax bases of assets and liabilities as measured 
by the enacted tax rates which will be in effect when these differences 
reverse.  Deferred tax expense is the result of changes in deferred tax 
assets and liabilities.

9.  Earnings Per Common Share
    -------------------------
Earnings per share are computed using the basic and diluted calculations, 
as provided by SFAS No. 128 "Earnings per Share".  SFAS No. 128 eliminates 
primary and fully diluted earnings per share and requires presentation of 
basic and diluted earnings per share together with disclosure of how the 
per share amounts were computed. 

10.  Use of Estimates
     ----------------
In preparing financial statements in conformity with generally accepted 
accounting principles, management makes estimates and assumptions that 
affect the reported amounts of assets and liabilities and disclosures of 
contingent assets and liabilities at the date of the financial statements, 
as well as the reported amounts of revenues and expenses during the 
reporting period.  Actual results could differ from those estimates.

11.  Stock Based Compensation
     ------------------------
Reptron presents only the disclosure provisions of SFAS No. 123 "Accounting 
for Stock Based Compensation" as it relates to stock options granted to 
employees.  As permitted by SFAS No. 123, Reptron applies Accounting 
Principals Board Opinion No. 25 "Accounting for Stock Issued to Employees" 
and related interpretations in measuring compensation for stock options 
issued.  See Note J.










                                      F-8
                          REPTRON ELECTRONICS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                      December 31, 1996, 1997 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

12.  New Accounting Pronouncements
     -----------------------------
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures 
about Segments of an Enterprise and Related Information" is effective for 
fiscal years beginning after December 15, 1997.  This Statement supersedes 
SFAS No.14 "Financial Reporting for Segments of a business Enterprise" and 
amends SFAS no. 94 "Consolidation of All Majority-Owned Subsidiaries."  
This statement requires annual financial statements to disclose information 
about products and services, geographic areas and major customers based on 
a management approach, along with interim reports.  The management approach 
requires disclosing financial and descriptive information about an 
enterprises' reportable operating segments based on reporting information 
the way management organizes the segments for making business decisions and 
assessing performance.  It also eliminates the requirement to disclose 
additional information about subsidiaries that were not consolidated.  
Reptron has adopted SFAS No. 131 in 1998 with no impact to Reptron's 
disclosure information or its results of operations.

Reptron has adopted Statement of Position ("SOP") 98-1, "Accounting for the 
Costs of Computer Software Developed or Obtained for Internal Use."  This 
SOP segments an internal software project into stages and the accounting is 
based on the stage in which a cost is incurred.  Specified costs related to 
the application development stage are capitalized if the preliminary 
project stage is complete, management has authorized the project and 
completion of the project is probable.  Capitalizable costs of internal-use 
software projects consist of (1) external direct costs of materials and 
services used to develop or purchase internal-use software, (2) payroll and 
payroll related costs for time spent directly on the project be employees 
directly associated with the internal-use software project and (3) internal 
costs incurred during the development of internal-use software.  There was 
no material financial statement impact upon adoption of this pronouncement.

SOP No. 98-5 "Reporting on the Costs of Start-Up Activities" is effective 
for fiscal years beginning after December 15, 1998.  This SOP requires the 
costs of start-up activities and organizational costs to be expensed as 
incurred.  As permitted by SOP 98-5, Reptron has elected to early adopt the 
provisions of this SOP.  The impact of adopting SOP 98-5 did not have and 
is not expected to have a significant impact on Reptron's results of 
operations.
























                                       F-9


NOTE B - STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information (in thousands):
<TABLE>

                                                             Year Ended December 31,
                                                          ----------------------------
                                                            1996      1997      1998  
                                                          --------  --------  --------
<S>                                                         <C>       <C>       <C>
  Cash paid during the year for:
    Interest                                                $4,879    $4,260    $8,091
    Income taxes                                            $4,269    $4,593    $  507
</TABLE>

Reptron incurred approximately $5,209,000 and $2,573,000 of obligations 
under capital leases for the acquisition of equipment during 1996 and 1997, 
respectively.  No capital leases were entered into during the year ended 
December 31, 1998.

On May 29, 1998 Reptron completed the acquisition of Hibbing Electronics 
Corporation ("Hibbing").  The transaction was valued at approximately $53.0 
million, consisting of the sum of a cash payment of $30.0 million and the 
remainder in the form of the assumption of liabilities.  Reptron allocated 
approximately $31.0 million of the purchase price to tangible assets.  See 
Note K.


NOTE C - INVENTORIES

Inventories consist of the following (in thousands):

                                                      December 31,
                                                   ------------------
                                                     1997      1998
                                                   --------  --------
   Reptron Distribution:
      Inventories                                   $42,126   $37,026

   K-Byte Manufacturing:
      Work in process                                10,945     9,043
      Raw materials                                  15,661    23,262
                                                     ------    ------
                                                    $68,732   $69,331
                                                     ======    ======


NOTE D - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

                                                       December 31,
                                                     ----------------
                                                      1997      1998
                                                     ------    ------
   Land and buildings                              $ 15,512   $16,328
   Furniture, fixtures and equipment                 32,380    39,650
   Leasehold improvements                             1,305     2,498
   Construction in progress                             984         -
                                                     ------    ------
                                                     50,181    58,476
    Less accumulated depreciation and amortization   14,776    20,203
                                                     ------    ------
                                                    $35,405   $38,273
                                                     ======    ======







                                   F-10

                         REPTRON ELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                      December 31, 1996, 1997 and 1998


NOTE E - NOTES PAYABLE TO BANKS

As of December 31, 1998, there were no amounts outstanding under Reptron's 
$15 million Amended and Restated Revolving Credit Facility and Reptron was 
in compliance with or received waivers on all financial covenants.  On 
January 8, 1999, Reptron entered into a $50 million Revolving Credit 
Agreement ("Credit Agreement") to replace the aforementioned $15 million 
revolving credit facility.  Borrowings under the Credit Agreement are 
collateralized by all of Reptron's inventory, accounts receivable, equipment 
and general intangibles.  The Credit Agreement limits the amount of capital 
expenditures and prohibits the payment of dividends thereby restricting the 
distribution of the retained earnings of Reptron.  Reptron may, at its 
option, and upon notice to the lender, request advance funds pursuant to 
either a Domestic Rate Loan (variable at the prime rate) or a Eurodollar 
Rate loan (LIBOR plus 2.25 basis points).  Upon notice to the lender, 
Reptron may convert advances from one type of loan to the other.


NOTE F - LONG-TERM OBLIGATIONS
<TABLE>
Long-term obligations consist of the following at December 31 (in thousands):

                                                                  1997            1998
                                                               --------        --------
<S>                                                            <C>             <C>

Convertible subordinated notes, due August, 2004, with
  semi-annual interest installments at a rate of 6.75%.
  The notes are unsecured obligations subordinated to
  all existing indebtedness, as defined, and are
  convertible at anytime prior to maturity at a conversion
  price of $28.50 per share.                                    $115,000       $115,000

Notes payable collateralized by real property, due in
  monthly principal installments of $37.5 and interest
  at a rate of 8.115% through February, 2005, requiring
  a ballon payment due March, 2005.                               8,537          8,083

Capitalized lease obligations (net of interest of
  approximately $1.3) for equipment, due in monthly
  principal and interest payments of approximately
  $296, through 2002.                                             7,194          6,442

Notes payable collateralized by certain equipment, due in
  monthly principal and interest installments of $118, through
  January 2003, interest rates range from 7.1% to 10.75%.         2,007          3,379

Notes payable collateralized by real property, currently due in
  monthly principal and interest installments of $4, through
  September 2007, at an interest rate of 10%.                       955            259
                                                                -------        -------
                                                               $133,693        133,163
Less current maturities                                           3,708          3,866
                                                                 ------        -------
                                                               $129,985       $129,297
                                                                =======        =======

</TABLE>



                                    F-11


                        REPTRON ELECTRONICS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    December 31, 1996, 1997 and 1998


NOTE F - LONG-TERM OBLIGATIONS - Continued

At December 31, 1998, aggregate maturities of long-term obligations are as 
follows (in thousands):

    Year ending December 31,
    ------------------------
            1999                                            $  3,866
            2000                                               3,129
            2001                                               2,234
            2002                                                 738
            2003                                                  32
            Thereafter                                       123,164
                                                             -------
                                                            $133,163
                                                             =======

Reptron has entered into various capital leases for equipment, totaling 
approximately $5,209,000 in 1996 and $2,573,000 in 1997.  No capital leases 
were entered into during 1998.  At December 31, 1997 and 1998, the net book 
value of equipment under capital leases (inclusive of Hibbing acquired 
equipment) is approximately $8,638,000 and $8,906,000, respectively.  The 
related capital lease obligations are included with long-term obligations.

Total interest expense was $4,025,000, $6,880,000 and $9,390,000, in 1996, 
1997 and 1998, respectively.  Interest payable was $2,986,000 and $3,310,000 
at December 31, 1997 and 1998, respectively.


NOTE G - INCOME TAXES

The provision for income taxes for the years ended December 31, 1996, 
1997 and 1998, respectively, is as follows (in thousands):

                                              December 31,
                                     ------------------------------
                                      1996        1997         1998
                                     ------      ------       ------
Current                              $4,560      $2,946      $(5,885)
Deferred                                588         732       (2,585)
                                      -----       -----        -----
                                     $5,148      $3,677      $(8,470)
                                      =====       =====       ======








                                     F-12
                          REPTRON ELECTRONICS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                      December 31, 1996, 1997 and 1998


NOTE G - INCOME TAXES - Continued

The Company's effective tax rate differs from the statutory U. S. 
federal income tax rate as a result of the following:

                                              Year Ended December 31,
                                              -----------------------
                                                1996    1997    1998
                                               ------  ------  ------

Statutory federal tax rate                      34.0%   34.0%   34.0%
State income taxes of approximately 6.9%, 7.4%
  and 7.5% in 1996, 1997, and 1998, net of 
  federal tax benefit                            4.6     4.9     4.9
Tax exempt interest                                -    (2.8)   (0.8)
Meals and entertainment                          1.2     1.8     0.8
Other                                            0.4    (0.4)    0.3
                                                ----    ----    ----
Effective tax rate                              40.2%   37.5%   39.2%
                                                ====    ====    ====

Deferred income tax assets and liabilities resulting from differences 
between accounting for financial statement purposes and tax purposes 
pursuant to SFAS No. 109, are summarized as follows (in thousands):

                                                       December 31
                                                    -----------------
                                                     1997       1998
                                                    ------     ------
Deferred tax assets
   Net operating loss carryforward                 $     -    $2,600
   Inventory reserves                                    -     1,441
   Deferred compensation                                 -       320
   Contingency reserve                                   -       160
   Accrued vacation                                     86       136
   Allowance for bad debts                              99       343
   Other                                                14       311
                                                    ------    ------
                                                       199     5,311
                                                    ------    ------
Deferred tax liabilities
   Depreciation                                      2,064     2,838
   Excess of cost over net assets acquired             107       141
   Other                                               128        37
                                                    ------    ------
                                                     2,299     3,016
                                                    ------    ------
Net deferred tax asset (liability)                 $(2,100)   $2,295
                                                    ======    ======

In connection with the acquisition of Hibbing, Reptron recorded deferred 
assets of approximately $1,810,000.

                                 F-13

                    REPTRON ELECTRONICS, INC.

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                December 31, 1996, 1997 and 1998


NOTE G - INCOME TAXES - Continued

Reptron has net operating loss carryforwards of approximately $3.5 million 
and $20.0 million for federal and state income tax purposes, respectively, 
which generally expire in the year 2018.  Reptron also has an Alternative 
Minimum Tax credit carryforward of approximately $400,000.  A valuation 
allowance has not been recorded against the deferred tax assets for 1997 and 
1998 as management anticipates that net income in future periods will be 
sufficient to utilize the net operating loss carryforward.


NOTE H - COMMITMENTS AND CONTINGENCIES

Operating Leases
----------------
Reptron has operating leases for facilities and certain machinery and 
equipment which expire at various dates through 2003.  Certain leases 
provide for payment by Reptron of any increases in property taxes and 
insurance over a base amount and others provide for payment of all property 
taxes and insurance by Reptron.  See Note L

Future minimum payments, by year and in the aggregate, under noncancellable 
operating leases consist of the following at December 31, 1998 (in 
thousands):

       Year ending December 31,
       ------------------------
                1999                                         $1,292
                2000                                            833
                2001                                            664
                2002                                            589
                2003                                            536

Total rent expense for the years ended December 31, 1996, 1997 and 1998 was 
approximately, $1,555,000, $1,258,000, and $1,837,000 respectively.

Litigation
----------
The Company is, from time to time, involved in litigation relating to claims 
arising out of its operations in the ordinary course of business.  The 
Company believes that none of these claims which were outstanding as of 
December 31, 1998 should have a material adverse impact on its financial 
condition or results of operations.

Year 2000 Issue
---------------
The Year 2000 issue relates to limitations in computer systems and 
applications that may prevent proper recognition of the Year 2000.  The 
potential effect of the Year 2000 issue on Reptron and its business partners 
will not be fully determinable until the Year 2000 and thereafter.  If 
Reptron or entities with which Reptron conducts business do not properly 
complete either the Year 2000 modifications, Reptron's revenues and 
financial condition could be adversely impacted.

                                F-14

                       REPTRON ELECTRONICS, INC.

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                   December 31, 1996, 1997 and 1998


NOTE I - SHAREHOLDERS' EQUITY

The Board of Directors is authorized, without further shareholder action, to 
divide any or all shares of the authorized Preferred Stock into series and 
to fix and determine the designations, preferences, relative rights, 
qualifications, limitations or restrictions thereon, of any series so 
established, including voting powers, dividend rights, liquidation 
preferences, redemption rights and conversion privileges.  The Board of 
Directors has not authorized any issuance of Preferred Stock and there are 
no plans, agreements, or understandings for the authorization or issuance of 
any shares of Preferred Stock.


NOTE J - EMPLOYEE BENEFITS

Incentive Stock Option Plan
---------------------------
The Company's Incentive Stock Option Plan (the "ISO Plan") was adopted in 
November, 1993 to provide for the grant to employees of incentive stock 
options within the meaning of Section 422 of the Internal Revenue Code.  The 
ISO Plan is intended to provide incentives to directors, officers, and other 
key employees and to enhance the Company's ability to attract and retain 
qualified employees.  A total of 1,500,000 shares of Common Stock has been 
reserved for issuance under the ISO Plan.  Stock options are granted for the 
purchase of Common Stock at a price not less than the fair market on the 
date of grant.

The following table summarizes the activity in Common Stock subject to 
options for the three years ended December 31, 1998:


<TABLE>
                                                                             Weighted
                                                   Range          Weighted   Average
                                                    of           Average    Remaining
                                                 Exercise         Exercise Contractual
                                    Shares        Price             Price      Life
                                   -------    --------------    --------   -----------
                                                                            (In Years)
<S>                                 <C>        <C>                   <C>        <C>
Outstanding at January 1, 1996      191,800    $ 5.00 - 15.07        $ 5.74      8.0
    Granted                          22,000    $12.75 - 14.75        $14.30
    Exercised                       (17,000)   $ 5.00 -  9.13        $ 5.18
    Forfeited                        (2,750)   $ 5.00 -  9.13        $ 8.38
                                  ---------
Outstanding at December 31, 1996    194,050    $ 5.00 - 15.07        $ 6.72      7.3
    Granted                         579,500    $12.00 - 18.00        $12.69
    Exercised                       (22,850)   $ 5.00 - 14.75        $ 6.35
    Forfeited                       (20,250)   $ 5.00 - 14.75        $12.34
                                  ---------
Outstanding at December 31, 1997    730,450    $ 5.00 - 18.00        $11.31      8.6
    Granted                         629,264    $ 4.38 - 12.07        $ 9.43
    Exercised                       (58,750)   $ 5.00 -  9.13        $ 5.09
    Forfeited                      (110,625)   $ 5.00 - 14.75        $11.13
                                  ---------
Outstanding at December 31, 1997  1,190,339    $ 4.38 -  9.13        $ 5.95      8.6
                                  =========
</TABLE>



                                           F-15

                              REPTRON ELECTRONICS, INC.

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1996, 1997 and 1998


NOTE J - EMPLOYEE BENEFITS - Continued

On November 2, 1998 Reptron re-priced 898,139 stock options to $6.00, which 
was above the market price of Reptron's Common stock on that date.  Only 
options outstanding at December 31, 1998 reflect the re-pricing.

The following table summarizes information about Common Stock options 
outstanding at December 31, 1998:
<TABLE>
                       Options Outstanding                        Options Exercisable  
-----------------------------------------------------------     -----------------------
                                    Weighted       Weighted                    Weighted
                       Number        Average        Average        Number       Average
   Range of         Outstanding     Remaining      Exercise      Exercisable   Exercise
Exercise Prices     at 12/31/98  Contractual Life    Price       at 12/31/98    Price  
---------------     -----------  ----------------  ---------     -----------   --------
                                    (In Years)
<S>                    <C>             <C>           <C>          <C>           <C>
$ 4.38 - 5.00           75,200         5.0           $ 4.99        74,200       $ 4.99
$ 6.00               1,110,139         8.9           $ 6.00       131,438       $ 6.00
$ 9.13                   5,000         5.8           $ 9.13         5,000       $ 9.13
                     ---------                                    -------
$ 4.38 - 9.13        1,190,339         8.6           $ 5.95       210,638       $ 5.72
                     =========                                    =======
</TABLE>


At December 31, 1996 and 1997, exercisable shares totaled 122,038 and 
148,450 at weighted average exercise prices of $5.33 and $5.73, 
respectively.

The duration of options granted under the ISO Plan is ten years from the 
date of grant, or such other date as determined by the Board of Directors.  
In general, the options must be exercised while employed by Reptron or 90 
days thereafter.  The options may be exercised in four equal annual 
increments, cumulatively, beginning one year after the date of grant, and 
all such options may be exercised in full four years after the date of 
grant.  The options are non-transferable other than by will or by the laws 
of descent and distribution.

Reptron has adopted only the disclosure provisions of SFAS No. 123, as it 
relates to employee awards.  APB No. 25 is applied in accounting for 
Reptron's plans.  Accordingly, no compensation expense is recognized related 
to the stock based compensation plans.  The pro forma net earnings and net 
earnings per common share, if Reptron had elected to account for its plans 
consistent with the methodology prescribed by SFAS No. 123, are as follows:

                                  1996      1997      1998  
                                --------  --------  --------
                            (in thousands except per share data)
                            ------------------------------------
Net earnings (loss):
As reported                      $7,653    $6,140   $(13,147)
Pro forma                        $7,604    $5,230   $(14,201)

Net earnings (loss) per common
  share - basic:
As reported                      $ 1.26    $ 1.01   $  (2.15)
Pro forma                        $ 1.26    $ 0.87   $  (2.34)

Net earnings (loss) per common
  share - diluted:
As reported                      $ 1.24    $ 0.98   $  (2.15)
Pro forma                        $ 1.23    $ 0.84   $  (2.34)


                                    F-16

                         REPTRON ELECTRONICS, INC.

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        December 31, 1996, 1997 and 1998


NOTE J - EMPLOYEE BENEFITS - Continued

The fair value of each option grant is estimated on the date of grant using 
the Binomial options pricing model with the following weighted average 
assumptions used for grants in 1996, 1997 and 1998, respectively, no 
dividend yields for all years; expected volatility of 43.6%, 40.5% and 
46.4%; risk free interest rates of 5.87%, 6.69% and 4.94%; and expected 
lives of 3.0, 3.7 and 4.3 years.  The weighted average fair value of options 
granted in 1996, 1997 and 1998 are $5.07, $6.92 and $2.59, respectively.

Profit Sharing Plan
-------------------
Reptron previously maintained a discretionary Profit Sharing Plan (the 
"Profit Sharing Plan"), for the benefit of its employees.  The amount, if 
any, of Reptron's previous contribution to the Profit Sharing Plan for any 
year was determined by the Board of Directors at its sole discretion, 
subject to certain limitations imposed by the Internal Revenue Code.  In 
1992, the Administrator of the Profit Sharing Plan approved termination of 
the Profit Sharing Plan and the Internal Revenue Service has issued a 
favorable determination.  The Profit Sharing Plan completed its final 
distributions to its participants during 1998.

401(k) Plans
------------
In 1993, Reptron established a deferred compensation plan (the "Plan") under 
section 401(a) of the Code.  Substantially all of the officers and employees 
of Reptron are eligible to participate in the Plan.  Employees are eligible 
to participate in the Plan after six months of service and after attaining 
age 21.  At its discretion, Reptron may make matching contributions to the 
Plan.  Employees are always vested in their contributions and are fully 
vested in the employer contributions after five years of service.  Reptron 
contributed approximately $82,000, $101,000 and $105,000 to the Plan in 
1996, 1997 and 1998, respectively.

Hibbing Electronics Corporation's ("Hibbing") employees are eligible to 
participate in Hibbing's voluntary retirement savings plan upon completion 
of six months of qualified service.  Employee contributions up to 4% of 
wages, as defined, are partially matched by Hibbing.  Hibbing contributed 
approximately $28,000 during the period immediately following the May, 1998 
acquisition through December 31, 1998.

NOTE K - ACQUISITIONS

On May 29, 1998, Reptron acquired all of the assets and liabilities of 
Hibbing Electronics Corporation and its subsidiary, ("Hibbing") by way of 
the purchase of all of the issued and outstanding common stock of OECO 
Corporation, the parent of Hibbing, under the purchase method of accounting. 
 Of the approximately $53.0 million in total costs involved in the 
acquisition, approximately $30.0 million was in cash with the remainder in 
the form of the assumption of liabilities.  Reptron allocated approximately 
$31.0 million of the purchase price to tangible assets.  Of the $30.0 
million in cash, approximately $7.4 million was deposited in an escrow 
account as security for collection of designated accounts receivable, 
liquidation of identified inventory and breach of representations and 
warranties.  As of December 31, 1998, approximately $5.3 million has been 
disbursed from this escrow account ($4.8 million to the sellers and $465,000 
to Reptron).  In addition, Reptron assumed certain building and equipment 
lease obligations.  Management has determined that the goodwill associated 
with this transaction will be amortized over a 30 year life.  The results of 
operations of Hibbing have been reflected in Reptron's results of operations 
beginning immediately subsequent to the acquisition date of May 29, 1998.








                                    F-17

                         REPTRON ELECTRONICS, INC.

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    December 31, 1996, 1997 and 1998


NOTE K - ACQUISITIONS - Continued

The following unaudited pro forma summary combines the historical results of 
operations of Reptron with the historical results of operations of Hibbing 
as if the acquisition had occurred at the beginning of the respective 
periods.  Pro forma adjustments include additional net interest expense, 
goodwill amortization and an adjustment to Reptron's effective tax rate.  
This pro forma summary does not necessarily reflect the results of 
operations, as they would have been if Reptron and Hibbing operated as a 
single entity during such periods.
                                              Year ended December 31,   
                                            1996      1997        1998  
                                                 (in thousands)

Net sales                                $335,513   $380,857   $335,484
                                          =======    =======    =======
Gross Profit                             $ 60,616   $ 63,943   $ 41,368
                                          =======    =======    =======
Operating income (loss)                  $ 20,063   $ 19,041   $(12,659)
                                          =======    =======    =======
Net earnings (loss)                      $  7,435   $  6,113   $(12,811)
                                          =======    =======    =======
Net earnings (loss) per share - basic    $   1.23   $   1.01   $  (2.09)
                                          =======    =======    =======
Net earnings (loss) per share - diluted  $   1.21   $   0.98   $  (2.09)
                                          =======    =======    =======

NOTE L - RELATED PARTY TRANSACTIONS

Reptron has a non-interest bearing loan receivable from the profit sharing 
plan totaling approximately $279,000, $194,000 and $29,000 as of December 
31, 1996, 1997 and 1998, respectively.

A director of Reptron serves as its general counsel and received 
approximately $185,000, $205,000 and $374,000 for services rendered during, 
1996 1997 and 1998, respectively.

Reptron leased an aircraft from a company controlled by the CEO of Reptron. 
 Rent paid for the use of the aircraft totaled approximately $240,000, 
$200,000 and $160,000 in 1996, 1997 and 1998, respectively.  Reptron 
believes that the rent paid for the aircraft was comparable to the rent that 
would be paid to an unrelated party.  Reptron was responsible for all costs 
associated with the operation of the aircraft, including: fuel, maintenance, 
storage and crew salaries and expenses.  To the extent that the CEO used the 
aircraft for personal purposes, he was required to reimburse Reptron for the 
cost associated with such personal use.  The CEO reimbursed Reptron 
$1,000,000, reflected in Reptron's 1997 third quarter, for personal use of 
the aircraft and for travel and entertainment expenses for the 1997 and 
prior years.  The CEO reimbursed Reptron approximately $40,000 in 1998 for 
personal use of the aircraft.  Reptron terminated the lease as of August 
1998 in conjunction with the sale of the aircraft.

Reptron leases one of its Reptron Distribution sales offices (located in 
Detroit, Michigan) from the CEO of Reptron.  This facility served as 
Reptron's headquarters before the relocation to Tampa in 1986.  The building 
includes office and warehouse space and totals approximately 10,000 square 
feet.  Rent expenses on this facility totaled $68,000 in 1996, 1997 and 
1998, which management believes to be comparable to the rent that would be 
paid to an unrelated party.  The lease expires in November 2003.  Reptron 
also leases a total of 110,000 square feet of manufacturing and 
administrative offices for the Hibbing manufacturing operation.  These 
properties are owned, in part, by four individuals on the senior management 
team of Hibbing.  Subsequent to the acquisition of Hibbing, 1998 rent 
expense on these properties totaled $336,000.



                                  F-18

                       REPTRON ELECTRONICS, INC.

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                     December 31, 1996, 1997 and 1998




NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1998, the carrying amount of cash, accounts 
receivable, accounts payable and accrued expenses approximate fair 
value because of the short-term maturities of these items.

The fair market value of the Company's convertible subordinated 6.75% 
notes is $58,650,000, based on the average of the bid and ask prices 
of the notes on December 31, 1998.  The carrying amounts of all other 
current and long-term portions of notes payable, and long-term 
obligations approximate fair market value since the interest rates on 
most of these instruments change with market interest rates.


NOTE N - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net 
earnings per common share:

                                             1996        1997        1998   
                                            ------     --------   ----------
Numerator:
  Net earnings (loss) (in thousands)      $    7,653   $   6,140  $  (13,147)
                                           =========    ========   =========
Denominator:
  For basic earnings (loss) per share -
    Weighted average shares                6,058,889   6,077,084   6,118,023
  Effect of dilutive securities:
    Employee stock options                   120,569     169,956           -
                                           ---------   ---------   ---------
  For diluted earnings (loss) per share    6,179,458   6,247,040   6,118,023
                                           =========   =========   =========
Net earnings (loss) per common share - 
   basic                                  $     1.26  $     1.01  $    (2.15)
                                           =========   =========   =========
Net earnings per common share - 
   diluted                                $     1.24  $      .98  $    (2.15)
                                           =========   =========   =========

Options to purchase 591,750 shares of common stock were not included for a 
portion of the fourth quarter of 1997 computation of diluted earnings per 
share due to the options' exercise price exceeded the average market price 
of the common stock and, therefore, the effect would be anti-dilutive.  For 
1998, all options have been excluded due to their anti-dilutive effect.

The convertible notes (See Note F) were not included in the computation of 
diluted earnings per share for 1997 or 1998 due to the conversion price of 
$28.50 exceeding the average market price of the common stock and, 
therefore, the effect would be anti-dilutive.








                                  F-19

                        REPTRON ELECTRONICS, INC.

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                     December 31, 1996, 1997 and 1998


NOTE O - FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company has two industry segments:  Distribution and Contract 
Manufacturing.  Distribution purchases a wide variety of electronic 
components, including semiconductors, passive products and electromechanical 
components, for distribution to manufacturers and wholesalers throughout the 
United States.  Contract Manufacturing manufactures electronic products 
according to customer design for customers in various industries, including 
telecommunications, banking and medical services.

The following table shows net sales, operating income, identifiable assets, 
depreciation and amortization expense and capital expenditures as of and for 
the years 1996, 1997 and 1998.
<TABLE>
                                        Year Ended December 31,
                                  ----------------------------------
                                    1996         1997         1998
                                  --------     --------     --------
                                            (in thousands)
<S>                              <C>          <C>          <C>
Net Sales
  Unaffiliated customers
    Distribution                  $168,279     $187,267     $156,507
    Contract Manufacturing         100,658      116,644      146,282
                                   -------      -------      -------
                                   268,937      303,911      302,789
  Intersegment sales                13,328        9,187        8,046
                                   -------      -------      -------
                                  $282,265     $313,098     $310,835
                                   =======      =======      =======

Operating income (loss)
  Distribution                    $  7,035     $  6,053     $ (11,833)
  Contract Manufacturing             9,791        9,948        (1,445)
                                   -------      -------       -------
                                  $ 16,826     $ 16,001     $ (13,278)
                                   =======      =======       =======
Identifiable Assets
  Distribution                    $ 76,324     $ 94,864     $ 87,386
  Contract Manufacturing            44,010       51,180       95,389
                                   -------      -------      -------
                                   120,334      146,044      182,775
  Corporate                         18,298       76,470       27,309
                                   -------      -------      -------
                                  $138,632     $222,514     $210,084
                                   =======      =======      =======

Capital Expenditures (includes equipment
  under capitalized leases)
    Distribution                  $  1,516     $  1,392     $    613
    Contract Manufacturing           5,033        6,314        3,085
                                   -------      -------      -------
                                     6,549        7,706        3,698
    Corporate                        6,149        1,115            -
                                   -------      -------      -------
                                  $ 12,698     $  8,821     $  3,698
                                   =======      =======      =======
</TABLE>

Net interest expense is not reflected in the industry segment information, 
presented above, as it is not taken into consideration in management's 
analysis of segment performance.

                                     F-20

                       REPTRON ELECTRONICS, INC.

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                    December 31, 1996, 1997 and 1998


NOTE P - SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the quarterly results of operations for 
the quarterly periods of 1997 and 1998, (See Note L) (in thousands 
except per share data):


<TABLE>
                                                      Three Months Ended
                           -----------------------------------------------------------
      1997                   March 31        June 30       September 30    December 31
      ----                 ------------    ------------    ------------    -----------
<S>                            <C>             <C>             <C>           <C>
Net sales                      $76,251         $79,102         $74,278       $74,280
Gross profit                    14,072          14,602          13,002        12,481
Operating income                 4,822           5,216           3,844         2,119
Net earnings                     2,156           2,382           1,439           163
Net earnings per common share
  - basic                      $   .36         $   .39         $   .24       $   .03
Net earnings per common share
  - diluted                    $   .35         $   .38         $   .23       $   .03

      1998
      ----

Net sales                      $70,835         $73,636         $77,527       $80,791
Gross profit                    11,471          10,781          11,273         4,403
Operating income (loss)            738            (509)           (827)      (12,680)
Net earnings (loss)               (502)         (1,466)         (1,957)       (9,222)
Net earnings (loss) per common
  share - basic                $  (.08)        $  (.24)        $  (.32)      $ (1.50)
Net earnings (loss) per common
  share - diluted              $  (.08)        $  (.24)        $  (.32)      $ (1.50)
</TABLE>








                                        F-21

       Report Of Independent Certified Public Accountants On Schedule





Board of Directors
Reptron Electronics, Inc.


In connection with our audit of the consolidated financial statements of 
Reptron Electronics, Inc., referred to in our report dated February 5, 1999, 
which is included in this Annual Report on SEC Form 10-K for the year ended 
December 31, 1998, we have also audited Schedule II for each of the three 
years in the period then ended.  In our opinion, this schedule presents 
fairly, in all material respects, the information required to be set forth 
therein.





GRANT THORNTON LLP

Tampa, Florida
February 5, 1999











                                       F-22


                                                                 SCHEDULE II

                             REPTRON ELECTRONICS, INC.

                          Valuation and Qualifying Accounts
    For the Years Ended December 31, 1996, December 31, 1997 and December 31,
 1998
                                (in thousands)
<TABLE>
<S>                                       <C>         <C>         <C>         <C>
Column A                                 Column B    Column C    Column D    Column E
--------                                 --------    --------    --------    --------
                                        Balance at  Charged to   Accounts     Balance
                                        Beginning   Costs and   Written Off,  at End
Description                              of Year     Expenses       Net       of Year
-----------                             ----------  ----------  ------------  -------
Allowance for Doubtful Accounts
Year Ended December 31, 1996               $180        $ 193        $   (23)     $350
Year Ended December 31, 1997               $350        $ 273        $  (273)     $350
Year Ended December 31, 1998               $350        $1,335       $(1,202)     $483
</TABLE>







                                            F-23

                                  PART IV

Item 14.   Exhibits, Financial Statements, Schedule, and Reports on 
Form 8-K

    (a)     The following documents are filed as part of the report:

            1. and 2.  The financial statements and schedule filed as 
part of this report are listed separately in the Index to 
Financial Statements and Schedule beginning on page F-1 of 
this report.

            3.  For Exhibits see Item 14(c), below.  Each management 
contract or compensatory plan or arrangement required to be 
filed as an exhibit hereto is listed in Exhibits Nos. 10.1 
of Item 14(c), below.

    (b)     No reports on Form 8-K have been filed during the period 
ended December 31, 1998, by the Company.

    (c)     List of Exhibits:


Exhibit No. Description
----------- -----------

 3.1    Articles of Incorporation*

 3.2    Bylaws*

 4.1    Specimen Certificate for the Common Stock of Registrant *

 4.2    Form of Indenture **

 4.3    Form of Convertible Subordinated Note (included in Exhibit 4.2)

10.1    Employment Agreement between Reptron and Michael L. Musto ***

10.2    Distributor Agreement between Rise Technology Company and Reptron, 
        dated August 1, 1998.

10.3    Distributor Agreement between Samsung Semiconductor, Inc. and Reptron,
        dated June 1, 1998.

10.4    Revolving Credit and Security Agreement between PNC Bank, National
        Association and Reptron, dated January 8, 1999.

21.0    Subsidiaries of the Registrant

23.1    Consent of Grant Thornton, LLP

24.1    Power of Attorney relating to subsequent amendments (included on the
        signature page of this report).

27.1    Financial Data Schedule

-----------
        *   Filed with the Company's Registration Statement on Form S-
1, dated February 8, 1994, Registration No. 33-75040 and incorporated 
herein by reference.

       **   Filed with the Company's Registration Statement on Form 
S-3, dated July 18, 1997, Registration No. 333-31605 and incorporated
Herein by reference.

     ***   Filed with the Company's Form 10-Q for the period ended 
September 30, 1998.

           (d)   Financial Schedule:  the financial statement schedule 
filed as part of this report is listed separately in the Index to 
Financial Statements and Schedule beginning on page F-1 of this 
report.

                                21

                               SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereto duly authorized, in the 
City of Tampa, State of Florida, on March 30, 1999.

  
                               REPTRON ELECTRONICS, INC.



                               By:/s/ Michael L. Musto
                                  ----------------------------
                                  Michael L. Musto, President
                                  Chief Executive Officer



    Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated. Each person whose
signature appears below constitutes and appoints Paul J. Plante and Michael
Branca and each of them individually, his true and lawful attorney-in-fact
and agent, with full power of substitution and revocation, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, may lawfully do
or cause to be done by virtue hereof.


     SIGNATURES                        TITLE                        DATE
     ----------                        -----                        ----
/s/ Michael L. Musto
---------------------------
Michael L. Musto           President, Chief Executive
                           Officer, and Director 
                           (Principal Executive Officer)     March 30, 1999

/s/ Paul J. Plante
----------------------------
Paul J. Plante             Chief Operating Officer and 
                           Director                          March 30, 1999

/s/ M. Branca
---------------------------
Michael Branca             Chief Financial Officer (Principal
                           Financial and Accounting Officer) March 30, 1999

/s/ Leigh A. Adams
----------------------------
Leigh A. Adams              Secretary and Director           March 30, 1999

/s/ William L. Elson
-----------------------------
William L. Elson             Director                        March 30, 1999

/s/ J. Mitcham
-----------------------------
John J. Mitcham              Director                        March 30, 1999





                                     22

    Supplemental Information to be Furnished with Reports Filed Pursuant to 
Section 15(d) of the Act by Registrants Which Have Not Registered Securities 
Pursuant to Section 12 of the Act.

Annual Reports to the Shareholders and proxy materials will be furnished to 
the shareholders subsequent to the filing of this annual report on Form 10-
K.  The registrant will furnish copies of such materials to the Commission 
when they are sent to the shareholders.












                                      23

















                                EXHIBIT 10.2












DISTRIBUTOR AGREEMENT
by and between
RISE TECHNOLOGY COMPANY

and

REPTRON ELECTRONICS, INC.
dated
August 1, 1998



DISTRIBUTOR AGREEMENT

Contents

ARTICLES
Article 1. . CONSTRUCTION AND DEFINITIONS Article 2 . APPOINTMENT
Article 3 . SALES, SERVICE, SUPPORT AND TRAINING
Article 4 . TRADEMARKS/TRADE NAMES 
Article 5 . REPORTS, RECORDS, INSPECTIONS AND FORECASTS
Article 6 . PURCHASE PROCEDURES AND ORDERS
Article 7 . PRICING
Article 8 . PAYMENT
Article 9 . REJECTION/RETURN
Article 10 .PRODUCT WARRANTIES
Article 11 .WARRANTIES, INDEMNITIES AND DISCLAIMERS
Article 12 LIMITATION OF LIABILITY 
Article 13 CONFIDENTIALITY AND PROPRIETARY RIGHTS 
Article 14 TERM AND TERMINATION
Article I5 MISCELLANEOUS PROVISIONS

EXHTBITS
Exhibit A . . Products
Exhibit B . . Territory
Exhibit C . . Current Rise Price List
Exhibit D . . Example of Point of Sale Report
Exhibit E .....Example of Inventory Report
Exhibit F . . Rise Product Limited Warranty
Exhibit G . . . Trademarks


DISTRIBUTOR AGREEMENT

This Agreement ("Agreement"), is entered into effective as of the 1st day 
of August, 1998, (the "Effective Date") by and between Rise Technology 
Company, a California corporation having offices 2451 Mission College 
Blvd., Santa Clara, CA 95054, USA ("Rise"), and Reptron Electronics, Inc., 
a Florida corporation, having offices at 14401 McCormick Drive, Tampa, F1 
33626-3021 ("Distributor") (each, a "Party"; together, the "Parties").

WITNESSETH:
WHEREAS, Rise is a fabless semiconductor company in the business of 
designing and selling
microprocessors;

and

WHEREAS, Distributor wishes to distribute certain Rise products on the 
terms and conditions set forth herein;

and

WHEREAS, Rise desires to appoint Distributor to distribute certain Rise 
products on the terms and conditions
set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and 
promises contained herein, the Parties hereto hereby agree as follows:

ARTICLE 1. CONSTRUCTION AND DEFINITIONS

Section 1.1 Construction

(a) All references in this Agreement to "Articles," "Sections" and 
"Exhibits" refer to the articles, sections and exhibits of this 
Agreement.
(b) The words "hereof," "herein" and "hereunder" and other words of 
similar import refer to this Agreement as a whole and not to any 
subdivision contained in this Agreement.
(c) Tile words "include" and "include - " when used herein are not
exclusive and mean "include, without limitation" and (1)
''including, without limitation," respectively.

Section 1.2 Definitions

As used herein:

(a) "Acknowledgment'` shall mean the written acceptance by Rise, wider 
section 6.2 (a), of a Purchase Order, Change Order, or Cancellation 
Order.
(b) "Cancellation Order" shall mean the written instructions from 
Distributor that request a cancellation of an Order.
(c) "Change Order" shall mean the written instructions from Distributor 
that request a change to an Order.
(d) "Confidential Information" has the meaning set forth in Section 13.1
(e) "CP Pricing" shall mean the one of the methods for pricing
Products to Distributor specified under Section 7.2.
(f) "Credit" shall mean a credit against payment for future
purchases issued by Rise to Distributor in accordance with
Section 7.1 1.
(g) "Current Shipment Date" shall mean the date specified in the
most recent Acknowledgment.
(h) "Customers" shall mean those companies or individuals within
the Territory that purchase Products from Distributor.
(i) "Documentation" shall mean manuals, data sheets, specifications, 
drawings, catalogs, bulletins, price lists, brochures, marketing and 
technical documents, promotional
materials, publications, photographs and any other documents provided by 
Rise to Distributor hereunder.
(j) "DPPM" shall mean the Distribution Policy and Procedures Manual 
supplied by Rise, which Rise may change at any time in its sole 
discretion.
(k) "Inventory Report" shall mean a report, an example of which is set 
forth in Exhibit E, showing Distributor's inventory of Products at the 
end of each month by part number, quantity, location, purchase price, 
purchase date, Distributor Purchase Order number, and Rise invoice 
number.
(l)"Meet Competition" or "Meeting Competition" shall mean the 
circumstances in accordance with Section 7.8 under which Distributor will 
reduce the price at which it otherwise sells Products to its Customers in 
order to meet a competitive bid.
(m) "Obligated Shipment" has the meaning set forth in Section 6.3(b).
(n) "Order" has the meaning set forth in Section 6.2 (a).
(o) "Original Shipment Date" shall mean the date specified h1 the first 
Acknowledgment.
(p) "Point-of-Sale Report" or "POS Report" shall mean a report, an example 
of which is set forth set forth in Exhibit D, containing the 
information identified therein and any other information pertaining to 
Distributor's resale of Products to Customers under this Agreement as 
Rise may reasonably request.
(q)"Price" or "Pr " shall mean the prices to be paid by Distributor to 
Rise for Products as set forth in Section 7.2.
(r) "Price Protection" shall mean the reduction h1 the Price to which 
Distributor may be entitled, in accordance with Section 7.7.
(s) "Product" or "Products" shall mean the Rise products listed in Exhibit 
A, as may be amended from time to time by Rise in Rise's sole 
discretion
(t) "Purchase Order" shall have the meaning set forth h1 Section 6.1(a).
(u) "Quote" shall mean a Price quote issued by Rise to Distributor in 
accordance with Section 7.2(f).

Distributor Agreement	page 1 of 11	07/30/98


(v) "Report Date" has the meaning set forth in Section 5.1.
(w) Shipment" shall mean that portion of an Order containing all scheduled 
shipments that fall inside or outside of a specified time frame.
(x) "Shipment Date" shall mean the date the Shipment is scheduled to be 
shipped from Rise to Distributor.
(y) "SP Pricing" shall mean the one of the methods for pricing Products to 
Distributor specified under Section 7.2.
(z) "Territory" shall mean the territory or territories identified in 
Exhibit B.

ARTICLE 2. APPOINTMENT

Section 2.1 Grant
Subject to the terms and conditions of this Agreement, Rise hereby 
appoints Distributor, and Distributor hereby accepts such appointment, as 
a non-exclusive distributor to distribute Products directly to Customers 
b1 the Territory.

Section 2.2 Reservations

Rise reserves the right and power to, directly and indirectly, distribute, 
market, advertise, promote, solicit, offer to sell, support, sub-license, 
and perform any other acts related to the Products in the Territory and 
anywhere else.

Section 2.3 Sub-distributors

Distributor shall not appoint sub-distributors or any independent sales 
representatives without the prior written consent of Rise, which consent 
shall be in Rise's sole discretion.

Section 2.4 Distributor Duties

Distributor shall use all reasonable means and diligence to distribute 
Products and to otherwise perform its duties under this Agreement, 
including:

(a) Distributing, marketing, advertising, promoting, soliciting, selling, 
offering to sell, and supporting Products to realize the maximum sales 
volume of Products in the Territory;
(b) Sales, service and support in accordance with Article 3;
(c) Participating and ensuring that its personnel participates in 
appropriate training in accordance with Section 3.4;
(d) Purchasing and maintaining an inventory of Products sufficient to meet 
efficiently and prompt!' the needs of Customers in the Territory; and
(e) Providing reports, records and forecasts to, and authorizing 
inspections by, Rise in accordance with Article 5.
(f) Working harmoniously with Rise's sales personnel and authorized sales 
representatives.

Section 2.5 Rise Duties

Rise will reasonably assist Distributor in performing its duties hereunder 
as follows:
(a) Provide training and assistance as set forth in Section 3.4;
(b) Provide Documentation, other material, and technical and sales support 
and assistance as set forth in Article 3.

Section 2.6 Distributor Remuneration
'The difference between the Price for Products paid to Rise by Distributor 
and the price for such Products paid to Distributor by its Customers shall 
be Distributor's sole remuneration under this Agreement.

Section 2.7 Costs and Expenses

Except as otherwise expressly provided herein, Distributor shall solely 
bear all costs and expenses of performing its obligations hereunder, 
including all taxes, duties, and other costs and expenses.

Rise shall bear the costs of making available Documentation under

Section 3.1 (b) and training under Section 3.4. Without limiting the 
foregoing, Rise shall not be liable for any costs or expenses incurred 
without its prior written authorization.

ARTICLE 3. SALES, SERVICE, SUPPORT AND TRAINING

Section 3.1 Sales and Sales Support

(a) Distributor shall maintain resources, facilities, and a competent 
sales force as necessary to meet its distribution and related 
obligations under this Agreement. Upon Rise's request, Distributor 
shall provide information related to such resources, facilities, and 
sales force to Rise.
(b) Rise will make available to Distributor reasonable quantities of 
Documentation and such technical and sales support and assistance as 
Rise, h1 its sole discretion, deems necessary and makes generally 
available to similarly situated distributors.

Section 3.2 Product Support

Distributor shall provide prompt technical support to its Customers, 
including:

(a) Maintaining trained and competent technical and engineering personnel 
to answer Customers' questions regarding Products; and
(b) Fully cooperating with Rise should Rise furnish any such support.

Section 3.3 Service

Distributor shall provide prompt and effective service for Products h the 
Territory. Such service shall include:

(a) Assisting Customers in returning to Distributor defective Products 
covered by Rise's warranty;
(b) Reporting all problems to Rise in writing;
(c) Providing sufficient information to enable Rise to duplicate reported 
Product problems; and
(d) Fully cooperating with any Rise service and any Customer returns as 
requested by Rise.

Section 3.4 Training

As requested by Rise, Distributor shall participate and shall ensure that 
its personnel and any other individuals involved h1 meeting Distributor's 
obligations hereunder participate h1 any training programs offered by 
Rise. Rise shall provide such training as Rise deems necessary to assist 
Distributor h1 carrying out its duties under this Agreement.

ARTICLE 4. TRADEMARKS/TRADE NAMES

Section 4.1 Use of Rise Trademarks

(a) Rise hereby grants to Distributor a non-exclusive right to use the 
Rise trade names and trademarks set forth in Exhibit G ("Rise's 
Trademarks") during the tend of this Agreement for the purposes of 
identifying itself to the public as an authorized distributor of the 
Products and for distributing, marketing, advertising, promoting, 
soliciting, selling, offering to sell, supporting and servicing of any 
Products purchased hereunder. Distributor shall submit samples of each 
use of Rise's trade names or trademarks to Rise for pre-approval; and 
Distributor shall not use any trade name of trademark of Rise without 
such pre-approval in writing. Unless they are exact copies of those 
used by Rise, all representations of Rise's Trademarks that Distributor 
intends to use shall first be submitted to Rise for approval of design, 
color, placement and other details. Without limiting the foregoing, if 
any of Rise's Trademarks are to be

	Distributor Agreement	page 2 of 11	07/30/98



used in conjunction with another trademark, then Rise's mark shall be 
presented equally legibly, equally prominently, but nevertheless separated 
from the other so that each appears to be a mark in its own right, 
distinct from the other mark.
(c) Distributor shall obtain no rights with respect to any of Rise's 
Trademarks, other than the rights set forth herein. Distributor hereby 
assigns to Rise any such right, title and interest exceeding the rights 
granted herein that Distributor may obtain in Rise's Trademarks and the 
associated goodwill. All goodwill arising out of any uses of Rise's 
Trademarks will inure solely to the benefit of Rise.
(d) If, during the term of this Agreement, Distributor challenges or 
assists others to challenge Rise's Trademarks, or the registration 
thereof, this Agreement shall terminate automatically in the minimum 
time allowed by law.
(e) Distributor shall not attempt to register any trademarks, marks or 
trade names confusingly similar to those of Rise in any country.
(f) Distributor shall fully comply with all guidelines, if any, 
communicated by Rise to Distributor concerning the use of Rise's 
Trademarks.

Section 4.2 Restrictions

(a) Distributor shall not alter or remove any Rise's Trademarks applied to 
the Products or the Documentation provided by Rise to Distributor.
(b) Except as expressly set forth in this Article 4, Distributor shall 
have no right in, or to use, any trademark, trade name, logo, service 
mark or other mark, identification, or name of Rise.

Section 4.3 Use of Distributor Trademarks
Rise may state publicly that Distributor is a distributor of Rise's
products, and Distributor hereby grants to Rise the right to reproduce 
Distributor's logos, trademarks, and trade names in connection with its 
rights under this Section 4.3.

ARTICLE 5. REPORTS, RECORDS, INSPECTIONS AND FORECASTS

Section 5.1 Point of Sale Reports
Within fifteen (15) business days after the last day of each calendar
month (each such date a "Report Date"), Distributor shall deliver to
Rise a completed Point-of-Sale Report containing the Customer's
name and address, ship-to address, bill-to address, ship date,
quantity, Rise part number, and Customer price, an example of
which is in Exhibit D.

Section 5.2 Inventory Reports

On each Report Date, Distributor shall deliver to Rise a completed 
Inventory Report, an example of which is set forth in Exhibit E, showing 
Distributor's inventory of Products at the end of the prior month by Rise 
part number, quantity, location, purchase price, purchase date, 
Distributor PO number, and Rise invoice number.

Section 5.3 Inventory Inspection

Distributor shall make its inventory available for Rise's inspection as 
Rise may from time to time request upon reasonable notice to Distributor.

Section 5.4 Records and Reports
Distributor shall maintain records of purchases, resales, returns,
backlogs, inventory and any other information required to be
reported to Rise hereunder. Distributor shall permit Rise's inspection

of such records (including computer database records) as Rise may from 
time to time request. Distributor shall supply to Rise any relevant 
information including information pertaining to

Distributor's purchases, resale, returns, backlogs, or inventories of 
Products, as Rise may request. Distributor shall maintain such records for 
five (5) years from the date of the transaction to which the records 
relate.

Section 5.5 Forecasts

During the third week of each month, Distributor shall provide Rise with a 
written forecast of Distributor's anticipated sales, by potential 
Customer, Product part number, volume, and intended Shipment Date for the 
twelve (12) month period beginning on the first day of the next month. 
Such forecasts shall constitute good faith, non-binding estimates by 
Distributor. Distributor shall provide weekly updates to such forecasts if 
requested by Rise.

ARTICLE 6. PURCHASE PROCEDURES AND ORDERS

Section 6.1 Purchase Orders

(a) Distributor shall initiate ail orders for Products by written 
instructions sent to Rise via fax, mail, electronic mail or any written 
form ("Purchase Order"). Rise will not be obligated to accept verbal 
orders.
(b) All Purchase Orders shall specify the Products ordered by part number, 
requested quantities, requested delivery date, Prices, and any shipping 
instructions.
(c) All Purchase Orders are subject to Rise's then current lead times that 
shall be communicated by Rise to Distributor upon Distributor's 
request. Rise may change its lead times in its sole discretion.
(d) The total for all items on each Purchase Order must be no less than 
ten thousand dollars ($10,000), and the total for each Product line 
item on each Purchase Order must be no less than five thousand dollars 
($5,000).
(e) All Purchase Orders shall be governed by and incorporate the terms of 
this Agreement. Any terms set forth in a Purchase Order that purport to 
limit, add to, vary, alter, supplement, or modify the terms of this 
Agreement are hereby rejected by Rise and shall be of no force or effect.

Section 6.2 Acknowledgment

(a) Purchase Orders, Change Orders, and Cancellation Orders are subject to 
acceptance by Rise. Only acceptance in the form of a written 
acknowledgment (''Acknowledgment'') from Rise shall be binding on Rise. 
Rise shall have no obligation to Distributor or any third party with 
respect to Purchase Orders, Change Orders, or Cancellation Orders for 
which Rise does not issue an Acknowledgment. Partial acceptance of a 
Purchase Order, Change Order, or Cancellation Order shall not 
constitute acceptance of the entire Purchase Order, Change Order, or 
Cancellation Order. Purchase Orders, Change Orders, or Cancellation 
Orders for which Rise does issue an Acknowledgment ("Orders") shall be 
binding upon Rise only to the extent specified in the Acknowledgment.
(b) An Acknowledgment shall either: (i) confirm Distributor's requested 
shipment and delivery dates; or (ii) specify alternative dates. 
Shipping dates set forth h1 an Acknowledgment are estimates only; 
Distributor acknowledges that such dates may change due to 
unpredictable market trends, and Rise, in its discretion, may make 
shipments and deliveries within a reasonable time of such dates. An 
Acknowledgment may set, add to or vary payment and credit terms with 
respect to each Purchase Order.
(c) Provided Distributor does not send to Rise a written objection to 
Rise's Acknowledgment within ten (10) days of the date of such 
Acknowledgment, Distributor's Purchase Order, to the extent of, and as may 
be amended or supplemented by, such

	Distributor Agreement	page ~ of 11	07/30/98



Acknowledgment, shall constitute a binding obligation on Distributor to 
purchase Products in accordance with the terms
thereof and this Agreement.

Section 6.3 Changes and Cancellations

(a) General. Distributor must issue written instructions ("Change Order" 
or "Cancellation Order") to initiate all requests to change or cancel 
an Order. Orders will not be changed or canceled without an 
Acknowledgment of the Change Order or Cancellation Order. Changes or 
cancellations not in accordance with this Section 6.3 may be subject to 
charges for costs or losses incurred by Rise.
(b) Obligated Shipment. Whenever the present calendar date falls within 
the time period delimited by thirty (30) days prior to the Current 
Shipment Date and the Current Shipment Date, that Shipment becomes an 
"Obligated Shipment."
(c) Cancellations. Shipments (but not Obligated Shipments) may be canceled 
at any time provided that the Cancellation Order is received by Rise at 
least thirty (30) days prior to the Current Shipment Date. Obligated 
Shipments are non-cancelable regardless of any cancellation or 
reschedule requests.
(d) Reschedules. Shipments (but not Obligated Shipments) may be delayed at 
any time at Distributor's discretion. Obligated Shipments may be 
delayed up to 30 days after the Original Shipment Date, or after the 
Current Shipment Date at the time the Shipment becomes an Obligated 
Shipment (whichever is later), provided that the Change Order is 
received by Rise at least seven (7) days prior to the Current Shipment 
Date. Shipments may be accelerated from the Current Shipment Date only 
at Rise's discretion.
(e) Quantity changes. A Change Order that requests a quantity change will 
be treated as a reschedule, a Cancellation Order, a new Purchase Order or 
any combination of these, as the case dictates.
(f) Product Changes. A Change Order that requests a change in Product will 
be treated as a Cancellation Order and new Purchase Order. For the 
purpose of this Section 6.3, a change in the Rise part number used for 
order entry will be considered a change in Product.
(g) Administrative Changes. Changes in the bill-to, ship-to, shipping 
method, etc. may be made provided that the Change Order is received by 
Rise at least seven (7) days prior to the Current Shipment Date, or 
such longer time as is reasonably required by Rise to affect the 
change.
(h) Non-standard goods and services. Sections 6.3 (b) - (g) applies to 
Orders for standard goods shipped to Distributor and to other Customers 
according to Rise's standard methods and procedures. Orders for 
non-standard goods, or any additional services, may be changed or 
canceled provided Distributor gives written notice longer than the 
lead-time quoted for those goods or services.

Section 6.4 Shipment and Risk of Loss

(a) Products delivered pursuant to this Agreement shall be packed for 
shipment in Rise's standard shipping cartons, marked for shipment to 
the destination specified in Distributor's Purchase Order, and 
delivered to the carrier agent FOB Rise's shipping location, at whicl1 
time risk of loss shall pass to Distributor and Rise's delivery 
obligations are deemed fulfilled.
(b) The thee of delivery shall be the time at which the Products are ready 
for pickup by the carrier.
(c) Rise shall select the carrier and shipping method unless Distributor's 
Purchase Order specifies a carrier and shipping method from Rise's 
approved carrier list specified in the DPPM, as may be amended by Rise 
from time to time.
(d) Distributor shall pay all freight, insurance, and other shipping 
expenses, as well as expenses for any special packing requested by 
Distributor and provided by Rise.
(e) All shipments and charges set forth on any invoice will be deemed 
correct unless Rise receives from Distributor, no later than fifteen 
(15) days after the date of shipment, a written notice specifying the 
shipment, the Purchase Order number, and the exact nature of the 
discrepancy between the order and the shipment in number or type of 
Products shipped, or freight

Section 6.5 Product Changes (30 Days notice)

Rise may, from time to time in its sole discretion, without incurring any 
liability to Distributor with respect to any previously placed or accepted 
Purchase Order: (i) discontinue or limit its production of any Product; 
(ii) allocate, terminate or limit deliveries (which are contingent upon 
market trends) of any Product h1 thee of shortage; (iii) modify the design 
of, specifications for, or construction of any Product, provided the 
modification has equivalent fond, fit and function; and (iv) Upon 
reasonable notice to Distributor, change its distribution policies not 
inconsistent with the terms of this Agreement. Rise shall amend Rise's 
Product List following such changes and send Distributor a copy of such 
amended Product List.


ARTICLE 7. PRICING

Section 7.1 Price to Customer
Notwithstanding anything to the contrary set forth in this Article 7, 
Distributor solely shall determine the actual prices for Products sold to 
its Customers.

Section 7.2 Distributor Pricing
(a) Unless otherwise provided, all Prices are in U. S. dollars, FOB Rise's 
shipping point, include packaging for domestic shipment, and are 
exclusive of any other amounts including without limitation fees for 
export, special packaging, transportation and insurance. If not 
otherwise arranged by Distributor, charges for transportation, special 
packaging, etc. will be added to Distributor's invoice.
(b) All Prices are for standard goods and services and are subject to 
adjustment for any specification, teens, procedures or other requests 
of Distributor that are non-standard to Rise.
(c) Distributor shall designate on each Purchase Order whether it wishes 
to purchase the Products covered by such Purchase Order under SP 
Pricing or under CP Pricing.
(d) The purchase Price payable to Rise for Products under SP Pricing shall 
be as set forth under the heading 'Distributor Price' in Rise's 
then-current published price list ("Price List"), or as otherwise 
indicated on a Rise Quote that specifies SP Pricing. Exhibit C is 
Rise's current Price List as of the Effective Date. The Price List may 
be changed at any time by Rise with 30 day notice.
(e) The purchase Price payable to Rise for Products under CP Pricing shall 
be as indicated on a Rise Quote that specifies CP Pricing.
(f) Offers to sell Product under certain terms ("Quotes") shall only be 
valid if made by Rise in writing. Each Quote shall specify the Price 
and whether it is calculated using SP Pricing or CP Pricing, the part 
number, and the quantity of the Products to which such Quote applies. 
Quotes may also specify availability of the Products to which such 
Quote applies. If availability is not specified, or if availability is 
(explicitly or implicitly) specified as a lead-time, then the Quote 
shall expire automatically thirty (30) days from the date of the Quote. 
If availability is specified as a fixed calendar date, then the Quote

	Distributor Agreement	page 4 Of 11	07/30/98



shall expire automatically three (3) days from the date of the Quote.

Section 7.3 Price Changes
Rise may amend its Price List and, except as provided herein, otherwise 
change or adjust the Price for Products at any time without notice. A 
change to the Price List may result in either an increase in the Price 
("Price Increase") or a reduction in the Price ("Price Decrease") for the 
relevant Product. The Price List or Quote shall state the effective date 
of any Price change. Prices shall apply to all purchases under Purchase 
Orders received at any time after the effective date of any Price change.

Section 7.4 Prices Increases
Except for Obligated Shipments, Price Increases shall apply to all 
Shipments made after the effective date of such Price Increase.

(with 30 day notice)

Section 7.5 Rights Under CP Pricing
If Distributor selects CP Pricing, then between the time of the Order and 
the thee Products are shipped by Rise to Distributor, Distributor shall be 
entitled to Price Protection under section 7.7 (a).

Section 7.6 Rights Under SP Pricing

If Distributor selects SP Pricing, then between the time of the Order and 
the time Products are shipped by Rise to Distributor, Distributor shall be 
entitled to Price Protection under section 7.7 (a) and, during the time 
Products are held in Distributor's inventory, shall be entitled to:

1. Price Protection under Section 7.7 (b).
2. Special Pricing Authorization, in accordance with the Ship and Debit 
Program described in Section 7.8, if necessary to Meet Competition.
3. Stock Rotation privileges in accordance with Section 7.9. 4. 
Obsolete Product Protection in accordance with Section 7.10.

Section 7.7 Price Protection
(a) For all Products, if the effective date of a Price Decrease is between 
the time of the Order and the time Products are shipped by Rise to 
Distributor, Rise shall adjust the Price paid by Distributor by reducing 
Distributor's backlog in accordance with the Price Decrease. 
(b) For Products that have been purchased by Distributor under SP Pricing, 
if there is a Price Decrease during the time Products are held in 
Distributor's inventory, Rise shall allow a Credit for those Products in 
accordance with Section 7.11.

Section 7.8 Ship and Debit Program
Meeting Competition. For Products that have been purchased by Distributor 
under SP Pricing and are currently held in Distributor's inventory, if 
Distributor in good faith believes with respect to a particular sale of 
Products to a Customer that:

1. Distributor must reduce the price to such Customer compared to the 
price at which Distributor otherwise sells Products in order to meet an 
equally low price of a competitor; and
2. Distributor could not reduce such price to its Customer and maintain a 
reasonable profit on such sale, then Distributor shall be entitled to 
request a Special Pricing Authorization ("SPA") in which Rise reduces 
the effective Price of such Products to Distributor h accordance with 
the following procedure.
In order to obtain a SPA to Meet Competition, Distributor shall complete 
and submit to Rise a SPA Request, the form of which is specified in the 
DPPM. Upon receipt of the SPA Request, and any other relevant information 
that Rise may reasonably request, Rise shall evaluate the request. If Rise 
is prepared to reduce the effective Price to allow Distributor to Meet 
Competition for the specific Customer situation, then Rise will issue a 
SPA that may be used in connection with Distributor's request for Credit. 
The amount of the Credit, if any, shall be in Rise's sole discretion. 
Within ten (10) days after receiving the SPA (or within such other time as 
specified in the SPA), Distributor shall sell such Products to such 
Customer at the price specified in the SPA and request a Credit from Rise 
in accordance with Section 7.11.

Section 7.9 Stock Rotation Program
For Products that have been purchased by Distributor under SP Pricing and 
are currently held in Distributor's inventory, Distributor will be allowed 
to replace a portion of such Product ("Stock Rotation") if Distributor 
wishes to replace slow moving Products. For the purpose of this section 
7.9, "slow moving Products" are defined as Products that have date codes 
at least six (6) months old but not more than eighteen (18) months old and 
are not Obsolete Products. Distributor may be required to demonstrate to 
Rise that Distributor's warehouse reasonably complies with FIFO procedures 
to be eligible for this program. In order to participate in the Stock 
Rotation program, Distributor shall comply with the following:

(a) With Rise's approval, which approval shall not be unreasonably 
withheld, every six (6) months, or longer, Distributor may make a 
return of slow moving Products in exchange for other Products ordered 
simultaneously with the return.
(b) Except for Products purchased under Distributor's first Purchase Order 
for each Product, the maximum value of all slow moving Products 
returned during each Stock Rotation shall be limited to five percent 
(5%) of Distributor's net purchases from Rise under SP Pricing during 
the preceding six (6) month, or longer, period since the last stock 
rotation. There shall be no limit for Products resumed during any Stock 
Rotation for Products purchased under Distributor's first Purchase 
Order for each Product.
(c) To make a return, Distributor must request a RMA by submitting a 
completed Stock Rotation request, the form of which is to be specified 
in the DPPM. At the same thee, Distributor must place a Purchase Order 
with Rise for equivalent value with a notation that the Purchase Order 
is associated with the Stock Rotation RMA.
(d) Upon receipt of the Stock Rotation RMA request and the associated 
Purchase Order, and any other relevant information that Rise may 
reasonably request, Rise shall evaluate the request. If all the 
conditions of this section 7.9 have been met, Rise shall issue the RMA 
number and Acknowledge the associated Purchase Order.
(e) Upon receiving the RMA number, Distributor shall return the Products 
to Rise according to Section 9.3.

Section 7.10 Obsolete Product Protection
For Products that have been purchased by Distributor under SP Pricing and 
are currently held in Distributor's inventory, Distributor will be allowed 
to return all such Products that are discontinued by Rise. To participate 
in this program, Distributor must comply with the following:

(a) Rise shall give at least thirty (30) days notification to Distributor 
that Products are to be discontinued.
(b) Within thirty (30) days of the date Products are discontinued, 
Distributor shall submit an RMA request to Rise for all discontinued 
Products purchased under SP Pricing that are still held in 
Distributor's inventory.
(c) Upon receipt of the RMA Request, Rise shall evaluate the request, 
Distributor's records and Rise's records to ascertain

	Distributor Agreement	page 5 Of 11	07/30/98



the validity of the request. If all the conditions of this section 7.10 
are met, Rise will issue the RMA number.
(d) Upon receiving the RMA number, Distributor shall return the Products 
to Rise according to Section 9.3.

Section 7.11 Credits
Rise may from time to time grant Credits to Distributor to be used against 
Distributor's account receivables.

(a) Credit for Price Decreases. If a Price Decrease occurs during the time 
that Products purchased under SP Pricing are in Distributor's 
inventory, Distributor shall be entitled to a Credit for those Products 
provided that Distributor complies with the following:
1. Within thirty (30) days of the effective date of the Price Decrease, 
Rise may request an inspection of Distributor's inventory.
2. Distributor shall facilitate the inspection by freezing its inventory 
of Products and making all pertinent records and facilities available for 
inspection by Rise.
3. Distributor shall supply Rise with an inventory report that includes 
all Products, including those purchased under SP Pricing and those 
purchased under CP Pricing, held in inventory at the time of 
inspection.
4. Distributor shall permit Rise to inspect Distributor's inventory and 
records to verify the amount of the Credit. Rise shall have no 
obligation to issue any such Credit until Rise so verifies the amount.
5. Distributor shall submit its form of a Credit request to Rise and shall 
coordinate the application of any Credit given to the invoice specified 
by Rise.
6. The amount of any Credit given shall be as determined by Rise in 
Subsection 7.11 (a) 4.

(b) Credit for SPA. If it is necessary to Meet Competition as defined in 
Section 7.8, Distributor shall be entitled to a Credit provided 
Distributor complies with all of section 7.8 and completes the 
following. Within thirty (30) days of shipping Products under the SPA, 
Distributor must submit to Rise a copy of the SPA Request, a copy of 
the SPA issued by Rise, and a copy of Distributor's invoice to 
Customer. If approved, the amount of the Credit in this instance shall 
be that specified in the SPA.
(c) Credit for RMA. If Distributor properly returns Products to Rise under 
the RMA procedures authorized under Sections 7.9, 7.10, 9.1 or 9.4, 
Distributor shed be eligible for a Credit to the extent provided under 
those Sections. If approved, the amount of the Credit in these 
instances shall be as specified hi the RMA.
(d) Credit Adjustments. Any Credit granted by Rise shall be adjusted to 
reflect any prior Credit(s) given for the same Products.
(e) Credit Authorization. The granting of a Credit by Rise, for any 
reason, shall not be effective until Rise issues a written Credit 
authorization to Distributor. The Credit authorization shall entitle 
Distributor to a reduction in amounts otherwise payable to Rise and no 
Credit shall entitle Distributor to any payment from Rise. Distributor 
must make the payment reductions only on the particular invoice(s) 
specified in the Credit authorization.
(f) Separate Records. Distributor shall maintain separate and adequate 
accounts payable records for Products purchased under SP Pricing and 
under CP Pricing to facilitate the coordination of any Credit(s) that 
may occur under this Section 7.1 1.

ARTICLE 8. PAYMENT

Section 8.1 Currency, Miscellaneous Charges. Remittance
Payment shall be in U.S. Dollars. Payment shall be in an amount equal to 
the Price for the Products (as set forth in the Acknowledgment) plus all 
applicable taxes, shipping charges, and other charges to be borne by 
Distributor as provided in this Agreement. Distributor shall pay all 
exchange, interest, banking, and collection charges. Payment shall be made 
directly to Rise at the address set forth in Section 15.7, or at such 
other address as may be designated by Rise in writing.

Section 8.2 Payment Terms with Credit
To be eligible for credit, Distributor must apply for credit from Rise and 
provide Rise with an audited financial report. Rise shall review 
Distributor's financial conditions and, if, in Rise's sole judgment, 
Distributor is creditworthy, approve Distributor's credit application. 
Rise may revoke such approval at any time if there is a change in 
Distributor's financial condition. The payment terms in this Section 8.2 
will apply only during the time that Distributor has an approved credit 
application.

(a) Rise shall invoice Distributor upon shipment of each Order. If all 
Products in an Order are not shipped at the same time, Rise shall 
invoice Distributor at the time of shipment for the Products that are 
shipped.
(b) Unless otherwise specified h1 an Acknowledgment, Payment for all 
Products purchased hereunder by Distributor shall be due net thirty 
(30) days from date of Rise's invoice.
(c) A service charge of one and one half percent (1.5%) per month, or, if 
less, the maximum rate allowed by law, shall apply to Distributor's 
outstanding balance on any invoice that has not been paid h1 full 
within thirty (30) days from date of invoice.

Section 8.3 Payment Terms without Credit
Except during the time that Distributor has an approved credit 
application, Distributor shall pay COD (or other means of guaranteed 
payment acceptable to Rise) for all shipments.

Section 8.4 Taxes, Duties, Tariffs and License Fees
Prices do not include any taxes (including any excise, sales, use, value 
added, withholding, and similar taxes), customs duties, tariffs or license 
fees and payments to Rise are payable in full without reduction for any 
such taxes, duties, tariffs or fees. Distributor shall be responsible for 
and shall indemnify Rise for any and all taxes, customs duties, tariffs 
and license fees paid or payable, however designated, levied, or based on 
payments to Rise hereunder or On Distributor's or a Customer's use or 
possession of Rise Products, but exclusive of United States federal, state 
and local taxes based on Rise's net income. When Rise has the legal 
obligation to pay or collect any such taxes or charges, excluding taxes on 
the net income of Rise, the appropriate amount shall be invoiced to 
Distributor and paid by Distributor within thirty (30) days of the date of 
invoice unless Distributor provides Rise with a valid tax or other 
exemption certificate issued or authorized by the appropriate authority.  
Distributor shall provide Rise with official receipts issued by the 
appropriate taxing or other authority or such other evidence as is 
reasonably requested by Rise to establish that sucl1 taxes or charges have 
been paid. In the event that any taxes, duties, tariffs, or license fees 
are exempted, Distributor shall provide Rise, at least one (1) week prior 
to any scheduled shipping date, an exemption certificate issued by the 
appropriate authority or such other evidence as is reasonably requested by 
Rise to establish such exemption.

Section 8.5 Exports

Payment for Products to be exported shall be made by a confirmed, 
irrevocable letter of credit ("LOC") from a bank or other financial

	Distributor Agreement	page 6 Of 11	07/30/98



institution that Rise designates in writing. Payment by such LOC shall be 
made against Rise's invoice upon delivery of Rise's then-standard shipping 
documents and shall be sufficient to cover the full amount of the invoice 
and any other payments related to such Products that are owed.

Section 8.6 Title
Rise shall retain title to all Products for which Rise has not received 
full payment.

ARTICLE 9. Rejection/Return

Section 9.1 Inspection and Rejection
Distributor may inspect all Products it receives from Rise.  Distributor 
may reject any defective Product, provided that Distributor notifies Rise 
of its rejection and returns such Product within thirty (30) days after 
receipt thereof in accordance with the procedure set forth in Section 9.3. 
Products shall be deemed accepted if Distributor fails to act within the 
foregoing time period.

Section 9.2 Rise Evaluation
(a) In the event that Rise determines that the returned Product is 
defective and properly rejected by Distributor, Rise shall, at its 
option, either (i) repair or replace such Product, or (ii) issue a 
Credit for the value of such defective Product. Rise shall return to 
Distributor, freight prepaid, all repaired or replaced Products 
properly rejected by Distributor.
(b) In the event that any rejected Product is determined by Rise to not be 
defective, or to have been modified or subjected to unusual electrical 
or physical stress, misuse, abuse or unauthorized repair, Distributor 
shall reimburse Rise for all costs and expenses related to the 
inspection, repair, if any, and return of such Product to Distributor.

Section 9.3 Return Procedures
(a) If Distributor wishes to return Product to Rise, Distributor shall 
request a Return Material Authorization ("RMA") number from Rise. The 
RMA request must be accompanied by complete technical and other 
information detailing the reason for the return, and Rise will not be 
obligated to authorize a return without such information. No Product 
may be returned to Rise without a RMA number issued by Rise.
(b) Within ten (10) days after receiving the RMA request, Rise shall 
either reject the request or issue an RMA number for all of the Product 
or for a sample of the Product to be returned to Rise. If Rise issues a 
RMA for a sample, then upon receipt of such sample Rise shall evaluate 
the sample and determine if the balance is to be returned. If Rise 
determines, in Rise's sole judgment, that the balance should be 
returned, then Rise will issue an RMA for the balance of the Product.
(c) Within ten ( 10) days after receiving the RMA number, Distributor 
shall return the Product, or sample of the Product, accompanied by the 
RMA number. Rise shall pay the freight and insurance for such return.
(d) Any Product returned to Rise by Distributor as authorized under this 
Agreement must be packed in its original packing material, or the 
equivalent, with the RMA number prominently displayed and must include 
all documentation and other information requested by Rise in the DPPM.
(c) Rise may refuse to accept returns of any Product not packed and 
shipped as provided in this Section 9.3.

Section 9.4 Customer Returns
Distributor shall be responsible for all Customer returns of Product, and 
shall not refer any Customer to Rise regarding returns. If a Customer 
returns Products to Distributor, Distributor shall accept such returns 
according to its policies therefor and may request an RMA pursuant to 
Section 9.3.

ARTICLE 10. PRODUCT WARRANTIES

Section 10.1 Customer Warranty
Rise may offer a warranty, in the form of Exhibit F ("Rise Product Limited 
Warranty") with respect to Products sold to Customers.  Any such Rise 
Product Limited Warranty shall apply to Distributor only to the extent 
that Distributor purchases Products as an end user.

Section 10.2 Distributor Covenants
(a) Distributor shall assure that all Products sold by Distributor to 
Customers are accompanied by the Rise Product Limited Warranty.
(b) Distributor shall not: (i) grant, or purport to grant, to Customers 
by, or on behalf of, Rise, a warranty of greater scope or duration than 
that set forth in the Rise Product Limited Warranty; (ii) accept, or 
purport to accept, by or on behalf of Rise, liability of greater scope 
than that provided in the Rise Product Limited Warranty; or (iii) fail 
to disclaim implied warranties and limit remedies and liabilities, by 
and on behalf of Rise, to at least the same extent set forth in the 
Rise Product Limited Warranty.
(c) In accordance with Article 12, Distributor shall indemnify and hold 
harmless Rise against any damages, costs, expenses, liabilities, or 
other losses that Rise may suffer or incur as a result of a breach by 
Distributor of the foregoing.

Section 10.3 Warranty Assistance
In the event that a Customer returns a Product to Distributor for failure 
to conform to the Rise Product Limited Warranty, Distributor shall obtain 
Tom such Customer a detailed explanation of any alleged nonconformity and 
suspected defect, including complete information and explanation of the 
application in which the Product was used, of any failure symptoms 
exhibited by the Product and such application, and any other information 
related to the alleged failure or defect. Distributor shall return any 
such Products to Rise in accordance with the return procedures set forth 
h1 Section 9.3.

Section 10.4 Dangerous Applications

THE PRODUCTS ARE NOT INTENDED OR SUITABLE FOR USE, AND SHALL NOT BE USED, 
AS COMPONENTS IN LIFE SUPPORT DEVICES OR SYSTEMS OR ANY AVIATION, NUCLEAR, 
OR OTHER APPLICATION THAT PROTECTS, SUPPORTS, OR SUSTAINS LIFE, WHERE THE 
FAILURE OF SUCH COMPONENT TO PERFORM CAN REASONABLY BE EXPECTED TO RESULT 
IN SIGNIFICANT BODILY INJURY, CAUSE THE FAILURE OF, OR AFFECT THE SAFETY 
OR EFFECTIVENESS OF SUCH DEVICE, SYSTEM OR APPLICATION.

ARTICLE 11. WARRANTIES, INDEMNI1 1ES AND DISCLAIMERS

Section 11.1 Mutual Representations and Warranties
Each Party represents and warrants to the other that: (i) it has the right 
and power to enter into this Agreement and to fulfill its obligations 
hereunder; and (ii) entering into, and performance of its obligations 
under, this Agreement does not and will not violate any agreements between 
such Party and any third parties.

	Distributor Agreement	page 7 of 11	07/30/98



Section.11.2 Intellectual Property Warranty
Rise represents and warrants to Distributor that, to Rise's knowledge on 
the Effective Date, the Products do not infringe any third party's patent, 
copyright, mask work or trade secret rights arising under any state or 
federal laws of the United States. The foregoing warranty shall not apply 
to the extent that the infringement arises from the use of a Product in a 
manner for which it was not intended or in any equipment or assembly, 
circuit, combination, method, or process where the Product used alone 
would not have infringed a third party's rights.

Section 11.3 Mutual Indemnity
(a) Except for matters covered by Section 11.4, each Party (an 
"Indemnifying Party") shall indemnify, defend and hold harmless the 
other and its officers, directors and employees (an "Indemnified 
Party"), from and against any and all losses, damages, third party 
claims and liability (including reasonable defense costs and reasonable 
legal fees) to the extent directly and proximately caused by a breach 
by the Indemnifying Party of this Agreement, including any 
representations and warranties hereunder.
(b) As a condition to the foregoing indemnity obligation of the 
Indemnifying Party, the Indemnified Party shall provide the 
Indemnifying Party with prompt notice of any claim for which 
indemnification is sought hereunder and shall cooperate in all 
reasonable respects with the Indemnifying Party in connection with any 
such claim. The Indemnifying Party shall be entitled to control the 
handling of any such claim and to defend or settle any such claim, in 
the Indemnifying Party's sole discretion, with counsel of its own 
choosing.

Section 11.4 Intellectual Property Indemnification
Rise shall indemnify and hold Distributor harmless against and from any 
and all damages and costs paid by Distributor to any third party as a 
result of a final adjudication of a court of competent jurisdiction that 
Rise has breached any warranty set forth in Section 11.2; provided that 
Rise is promptly informed in writing and furnished a copy of each 
communication, notice or other action relating to any claim, suit or 
proceeding out of which such breach and costs and damages arise and Rise 
is given all authority, information and assistance necessary to defend, 
settle or otherwise remove or avoid any such claims, suits or proceedings. 
Rise shall have the sole discretion under this Section 11.4 to defend, 
settle or otherwise remove or avoid any claim, suit or proceedings 
relating to such costs and damages.

Section 11.5 Intellectual Property Remedy
(a) In the event of a breach by Rise of the warranty set forth in Section 
11.2, Rise shall, at its discretion, either: (i) purchase at no cost to 
Distributor a license to permit Distributor to continue to distribute 
Products in accordance with the terms of this Agreement; or (ii) 
repurchase any Products previously shipped to Distributor that 
Distributor has not sold.
(b) ARTICLE 11 STATES THE ENTIRE LIABILITY AND OBLIGATIONS OF RISE AND THE 
EXCLUSIVE REMEDY OF DISTRIBUTOR WITH RESPECT TO INFRINGEMENT OF ANY 
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS AND WITH RESPECT TO A 
BREACH OF RISE'S WARRANTIES SET FORTH IN ARTICLE 11.

Section 11.6 Disclaimer of Warranties
EXCEPT AS EXPRESSLY SET FORTH HEREIN, RISE MAKES NO WARRANTIES, EXPRESS, 
STATUTORY, IMPLIED, OR OTHERWISE TO DISTRIBUTOR OR CUSTOMERS, AND RISE 
SPECIFICALLY HEREBY DISCLAIMS ALL OTHER EXPRESS AND IMPLIED WARRANTIES, 
INCLUDING WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR 
A PARTICULAR PURPOSE.

ARTICLE 12. LIMITATION OF LIABILITY
RISE'S TOTAL AGGREGATE LIABILITY TO DISTRIBUTOR ARISING OUT OF OR RELATING 
TO THIS AGREEMENT, INCLUDING UNDER ARTICLE 11, SHALL NOT EXCEED THE 
AGGREGATE AMOUNTS PAID BY DISTRIBUTOR TO RISE HEREUNDER.  

IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR LOST USE, PROFITS, REVENUE, 
COST OF PROCUREMENT OF SUBSTITUTE GOODS, OR ANY OTHER SPECIAL, INDIRECT, 
RELIANCE, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND UNDER 
ANY THEORY OF LIABILITY, WHETHER BASED IN CONTRACT, TORT (INCLUDING 
NEGLIGENCE), OR OTHERWISE.

THE FOREGOING LIMITATIONS SHALL APPLY REGARDLESS OF WHETHER THE PARTY 
AGAINST WHOM LIABILITY IS ASSERTED HAS BEEN ADVISED OF THE POSSIBILITY OF 
SUCH DAMAGES AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY 
LIMITED REMEDY.

ARTICLE 13. CONFIDENTIALITY AND PROPRIETARY RIGHTS

Section 13.1 Confidentiality
(a) "Confidential Information" shall mean any information Rise discloses 
to Distributor, which, (i) if in written, graphic, machine-readable or 
other tangible form, is marked as "Confidential" or "Proprietary," (ii) 
if disclosed orally or by demonstration, is identified at the time of 
initial disclosure as confidential and confirmed in writing to be 
''Confidential'' within thirty (30) days of such disclosure; or (iii) 
is otherwise deemed to be confidential by the terms of this Agreement.
(b) Confidentiality Obligation. Distributor shall treat as confidential 
all of Rise's Confidential Information and shall not use such 
Confidential Information in any way, for Distributor's own account or 
the account of any third party, nor disclose to any third party any 
Confidential Information except as expressly permitted under this 
Agreement. Without limiting the foregoing, Distributor shall use at 
least the same degree of care which it uses to prevent the disclosure 
of its own confidential information of like importance, but in no event 
less than reasonable care, to prevent the disclosure of Rise's 
Confidential Information. Distributor shall not publish any technical 
description of the Products beyond the description thereof published by 
Rise.
(c) Confidential Information Exclusions. Notwithstanding the provisions of 
Subsection 13.1(a), Confidential Information shall exclude information 
that Distributor demonstrates: (i) was independently developed by 
Distributor without any use of Rise's Confidential Information or by 
Distributor's employees or other agents (or independent contractors hired 
by Distributor) who have not been exposed to Rise's Confidential 
Information; (ii) becomes known to Distributor, without restriction, from 
a source other than Rise, without breach of this Agreement, that had a 
right to disclose it; (iii) was in the public domain at the time it was 
disclosed or becomes in the public domain through no act or omission of 
Distributor; or (iv) was rightfully known to Distributor, without 
restriction, at the time of disclosure. In the event that Confidential 
Information

	Distributor Agreement	page 8 of 11	07/30/98



is disclosed pursuant to an order or requirement of a court, 
administrative agency, or other governmental body, Distributor shall 
provide prompt notice thereof to Rise and shall use its best efforts to 
obtain a protective order or otherwise prevent public disclosure of such 
information.
(d)Remedies. Unauthorized use by Distributor of Rise's Confidential 
Information will diminish the value of such information. Therefore, if 
Distributor breaches any of its obligations in this Agreement with respect 
to confidentiality or use of Confidential Information, Rise shall be 
entitled to seek legal and equitable relief to protect Rise's interests, 
including but not limited to injunctive relief and money damages.
(e) No Confidential Information of Other Parties. Distributor represents 
and warrants that it has not and shall not disclose to Rise, or use in 
the course of performance under this Agreement, any confidential 
information of any third party, unless such Distributor is expressly 
authorized in writing by such third party to do so.

Section 13.2 Proprietary Rights Notices
Distributor shall not (and shall require that its Customers do not) 
remove, alter, cover or obfuscate any proprietary rights notices, such as 
patent, copyright, mask work or trademark, or confidentiality notices, 
placed or embedded by Rise on or in any Product or Documentation.

ARTICLE 14. TERM AND TERMINATION

Section 14.1 Term
This Agreement shall commence upon the Effective Date and continue in full 
force and effect for a fixed term of three (3) years, unless earlier 
terminated in accordance with the provisions of this Agreement. This 
Agreement may be renewed for subsequent one (1) year terms only by written 
agreement of the Parties.

Section 14.2 Termination for Convenience
This Agreement may be terminated at any time, without cause for any reason 
or no reason, upon at least thirty (30) days prior written notice by the 
terminating Party to the other Party.

Section 14.3 Termination for Cause By Either Party
This Agreement may be terminated immediately for cause by a Party in the 
event that the other Party:
(a) Ceases to function as a going concern or to conduct its operations in 
the normal course of business;
(b) Has a petition filed by or against it under any state or federal 
bankruptcy or insolvency law which petition is not dismissed within 
sixty (60) days of its filing; or
(c) Is in default of its obligations under this Agreement and fails to 
cure such default within thirty (30) days after written notice thereof

Section 14.4 Purchase Orders; No Waiver
Distributor shall be obligated to accept deliveries of Products for which 
Purchase Orders were accepted by Rise prior to the effective date of 
termination of this Agreement. After any notice of termination has been 
delivered by either Party hereunder, deliveries of Product from Rise to 
Distributor, unless otherwise agreed by Rise in its sole discretion, shall 
require prepayment by wire transfer by Distributor to Rise. The 
Acknowledgment of any Purchase Order from. or the sale of any Product to, 
Distributor after the termination or expiration of this Agreement shall 
not be construed as a renewal or extension of this Agreement or any 
provision hereof nor as a waiver of termination of this Agreement.

Upon termination Reptron shall be liable for all deliveries within commit 
window only and shall inform Rise of revised or cancelled P/Os outside the 
commitment window,

Distributor Agreement page 9 of 11

Section 14.5 Product Repurchase
Unless this Agreement is terminated for cause by Rise, upon termination of 
this Agreement, Rise shall repurchase all Products purchased by 
Distributor under SP Pricing that Rise previously shipped to Distributor 
and that Distributor has not sold as of the effective date of termination 
of the Agreement. The repurchase price for such Products shall be the 
actual net invoice price paid by Distributor for such Products as adjusted 
for any prior Credits, and, in the case of termination for convenience by 
Distributor, J^3P~ additional twenty five percent JO). I 5 % ~J JO

Section 14.6 Return of Materials
Any and all Products owned by Rise or for which Rise has not received full 
payment and any and all specifications, drawings, photographs, samples, 
literature, Product information or data, financial information, business 
plans and unused Documentation of every kind shall remain the property of 
Rise. If Rise requests, Distributor will return any such materials to Rise 
or destroy such materials at Rise's expense.

Section 14.7 Survival
The provisions of Articles and Sections 1, 4.1 (c), 4.2 (a), 8.6, 10.2, 
10.3, 10.4, 11, 12, 13, 14.4, 14.5, 14.6, and 15 shall survive the 
termination of this Agreement for any reason. All other rights and 
obligations of the Parties shall cease upon termination of this Agreement

ARTICLE 15. MISCELLANEOUS PROVISIONS

Section 15.1 Insurance
Distributor shall obtain, keep in force, and provide Rise with proof of 
comprehensive, general liability insurance, naming Rise as loss payee, 
with limits sufficient to cover the total retail value of any and all 
materials in Distributor's possession or in transit to Distributor, 
including demonstration systems, that are owned by Rise or for which Rise 
has not received full payment.

Section 15.2 Independent Contractors
Rise and Distributor are independent contractors, and nothing in this 
Agreement shall be construed to (a) give either Party the power to direct 
and control the day-to-day activities of the other, (b) constitute the 
Parties as partners, joint venturers, co-owners, employers or employees of 
the other or otherwise participants in a joint undertaking, or (c) 
authorize Distributor to create or assume any obligation on behalf of Rise 
for any purpose whatsoever.

Section 15.3 Entire Agreement
This Agreement, including the Exhibits attached hereto, sets forth the 
entire agreement and understanding of the Parties with respect to the 
subject matter hereof and supersedes all prior agreements relating 
thereto, written or oral, between the Parties. No modification of or 
amendment to this Agreement, nor any waiver of any rights under this 
Agreement, shall be effective unless in writing signed by the Party to be 
charged

Section 15.4 Conflicting Terms
The terms and conditions of this Agreement, including the Exhibits 
attached hereto, shall prevail, notwithstanding any limitations on 
acknowledgments or any contrary, additional, different, altering or 
conflicting terms in any policy, quotation, Purchase Order, sales, 
acceptance or acknowledgment, confirmation or any other document issued by 
either Party affecting the purchase and/or sale of Products. The body of 
this Agreement shall prevail in the event of a conflict with any of the 
Exhibits attached hereto.

07/30/98



Section 15.5 Export Control
None of the products or underlying information or technology subject to 
this Agreement may be exported or reexported, directly or indirectly, (i) 
into (or to a national or resident of) Cuba, Iraq, Libya, Sudan, North 
Korea, Iran, Syria or any other country to which the United States has 
chosen to embargo goods ("Embargoed Countries"); or (ii) to anyone on the 
U.S. Treasury Department's list of Specially Designated Nationals, the 
U.S. Commerce Department's Table of Denial Orders. Any and all obligations 
of Rise and Distributor regarding Products subject to this Agreement, as 
well as any other technical information or assistance, shall be subject in 
all respects to such United States laws and regulations as shall from time 
to time govern the license and delivery of technology and products abroad, 
including, as necessary, the International Traffic in Arms Regulations 
("ITAR"), the Export Administration Act of 1979, as amended, any successor 
legislation, and the Export Administration Regulations ("EAR") issued by 
the Department of Commerce, Bureau of Export Administration ("BXA"). 
Distributor warrants that it will comply with all United States laws and 
regulations, including the ITAR and EAR, as then currently in effect. 
Distributor agrees that unless prior written authorization is obtained 
from the BXA, or the EAR explicitly permit the reexport without such 
written authorization, Distributor will not export, reexport, or 
transship, directly or indirectly, the Products or any technical data 
disclosed or provided to Distributor, or the direct product of such 
technical data, to countries, or nationals or residents of such countries, 
as applicable U.S. law, statute or regulation exclude from receipt of the 
such Products or technical data.

Section 15.G Foreign Corrupt Practices Act
In conformity with the United States Foreign Corrupt Practices Act, 
Distributor and its employees and agents shall not directly or indirectly 
make any offer, payment, or promise to pay; authorize payment; nor offer a 
gift, promise to give, or authorize the giving of anything of value for 
the purpose of influencing any act or decision of an official of any 
government within the Territory or the United States Government (including 
a decision not to act) or inducing such a person to use his or her 
influence to affect any such governmental act or decision in order to 
assist Rise in obtaining, retaining or directing any such business.

Section 15.7 Notices
Any notice, Purchase Order, Acknowledgment, report or other information 
required or permitted to be given under this Agreement shall be delivered 
(i) by hand, (ii) first class mail, postage prepaid, to the address of the 
other Party as first set forth below, or to such other address as a Party 
may designate by written notice in accordance with this Section 15.7, 
(iii) by overnight courier, or (iv) by fax with confirming letter mailed 
under the conditions described in (ii) above. Notice so given shall be 
deemed effective when received, or if not received by reason of fault of 
addressee, when delivered.

Rise:
Rise Technology Company
2451 Mission College Blvd
Santa Clara, CA 95054
Attn: Corporate Legal Department
Copy: Vice President of Sales

Distributor:
Reptron Electronics, Inc.
14401 McCormick Drive
Tampa, FL 333626-3021
Attn: Vice President Marketing, Semiconductors

Section 15.8 Force Majeure
Other than the payment of monies, nonperformance of either Party shall be 
excused to the extent that performance is rendered impossible by acts of 
God, fire, flood, riots, material shortages, strikes, governmental acts, 
man-made or natural disasters, earthquakes, inability to obtain labor or 
materials through its regular sources, or any other reason where failure 
to perform is beyond the reasonable control and not caused by the 
negligence of the non-performing Party. The time for performance shall be 
extended for the time period lost due to the delay.

Section 15.9 Non-Assignability and Binding Effect
Distributor's rights and obligations under this Agreement are personal and 
may not be transferred or assigned directly or indirectly except upon 
written consent of Rise. This Agreement shall terminate automatically if 
Distributor attempts to assign or transfer, voluntarily or by operation of 
law, directly or indirectly, any or all of its rights or obligations under 
this Agreement without having obtained the prior written consent of Rise. 
Subject to the foregoing, this Agreement shall be binding upon and inure 
to the benefit of the Parties hereto, their successors and assigns.

Section 15.10 Severability
If, for any reason, a court of competent jurisdiction finds any provision 
of this Agreement, or portion thereof, to be invalid or unenforceable, 
such provision of the Agreement will be enforced to the maximum extent 
permissible so as to effect the intent of the Parties, and the remainder 
of this Agreement will continue in full force and effect. The Parties 
shall negotiate in good faith an enforceable substitute provision for any 
invalid or unenforceable provision that most nearly achieves the intent 
and economic effect of such provision.

Section 15.11 No Waivers
The failure of either Party to require performance of any provision of 
this Agreement shall not affect the right of such Party to require 
performance at any time thereafter, nor shall the waiver of either Party 
of a breach or default be taken or held to be a waiver of a provision 
itself or a waiver of any other right hereunder.

Section 15.12 Disputes
Each Party shall pay the other Party's reasonable attorneys' fees and 
legal costs incurred to enforce any of the provisions of this Agreement.

Section 15.13 Arbitration and Dispute Resolution
In the event of a dispute between the Parties arising out of this 
agreement, the Parties shall attempt in good faith to resolve such dispute 
within ninety (90) days after one party gives notice of such dispute. In 
the event the parties cannot resolve the dispute within such time, the 
parties shall submit the dispute to binding arbitration to be held in 
Santa Clara County, California by a panel of three arbitrators 
knowledgeable regarding the semiconductor market.

Notwithstanding the above, either party may apply to a court of competent 
jurisdiction for injunctive or other equitable relief

Section 15.14 Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF TFIE 
STATE OF CALIFORNIA WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES. The 
U.N. Convention on Contracts for the International Sale of Goods shall not 
govern this Agreement or any counterparts hereto.

Distributor Agreement	page l0 Of 11	07/30/98



Section 15.15 Jurisdiction and Venue

The federal and state courts within the State of California shall have 
exclusive jurisdiction to adjudicate any dispute arising out of this 
Agreement. Distributor hereby expressly consents to (i) the personal 
jurisdiction and venue of the federal and state courts within California 
and (ii) service of process being effected upon it by registered mail sent 
to the address set forth at the beginning of this Agreement.

Date.

Section 15.16 Headings Article, Section, Exhibit and paragraph headings 
herein are inserted for convenience of reference only and shall not affect 
the construction or interpretation of this Agreement.

Section 15.17 Counterparts This Agreement may be executed in counterparts 
which taken together shall be regarded as one and the same Agreement.

IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement 
effective as of the Effective

1

Rise Technology Company

By:/s/ David T. Lin

Name: David T. Lin

Title: Chairman & CEO



Reptron Electronics, Inc.

By /s/ KW Steenland

Name: Keith W. Steenland

Title: Vice President Marketing
Semiconductors

Distributor Agreement page 11 of 11

07/30/98



















                         Exhibit 10.3

















DISTRIBUTOR AGREEMENT

Made this 1st day of June, 1998 by and between SAMSUNG SEMICONDUCTOR, INC., 
a California corporation having its principal place of business at 3655 
North First Street, San Jose, California 95134 ("SAMSUNG") and (Reptron 
Electronics, Inc.) ~ a Distributor with offices at 4401 McCormick Drive, 
Tampa FL 33626.

RECITALS

WHEREAS, SAMSUNG is engaged in the business of manufacturing and selling 
semiconductor components; and

WHEREAS, (Reptron Electronics, Inc.) wishes to act as a distributor of 
certain products sold by SAMSUNG

NOW THEREFORE, in consideration of the mutual promises and covenants set 
form below, the Parties hereto agree as follows:

AGREEMENT

1. Definitions.

1.1 "Distributor Commodity BUY Price List" (or "Price List") means the list 
of SAMSUNG Standard Products and the prices therefore as distributed by 
SAMSUNG from time to time. The current version of the Price List is 
attached hereto as Exhibit A.

1.2 "Memory Products" means those Products defined in the Price List as 
memory devices, and TFT-LCD Display products. Memory Products does not 
include any custom memory products.

1.3 "System-LSI Products" means those Products defined in the Price List as 
Linear, Transistor, Mosfet, MCUs, CPU's, Audio, LCD-IC, Multi-Media, 
Telecomm, DSP, Micom, ASIC, IGBT, Industrial, Mosfets, Power Transistor, or 
other non-memory devices, but does not include Small Signal Transistor 
products.

1.4 "Products" means those Memory Products and System-LSI Products 
collectively.

1.5 "Territory" means the regions of the United States, Mexico and or 
Canada listed in Exhibit B.

2. "Appointment". SAMSUNG hereby appoints (Reptron Electronics, Inc.) a 
nonexclusive distributor of the Products in accordance with the provisions 
of this Agreement, and (Reptron Electronics, Inc.) hereby accepts the 
appointment.

Confidential
98DistiAgreement.form

1



	3.	Independent Contractor. The relationship between SAMSUNG and 
(Reptron Electronics, Inc.) under this Agreement is solely that of buyer 
and seller. (Reptron Electronics, Inc.) is and shall be
an independent contractor in the performance of the services set forth by 
this Agreement. Neither (Reptron Electronics, Inc.) nor anyone employed by 
(Reptron Electronics, Inc.) shall act or purport to act or be deemed to be 
the agent' representative, employee or servant of SAMSUNG in performing the 
services covered by this Agreement or with respect to the application of 
any social security, unemployment insurance' workers, compensation or 
industrial accident laws. (Reptron Electronics, Inc.) shall have no right 
to enter into contracts or commitments in the name or on behalf of SAMSUNG 
or to bind SAMSUNG in any respect whatsoever. (Reptron Electronics,
Inc.) shall defend, indemnify, and hold SAMSUNG harmless from any and all 
claims, suits, loss, damages, and costs (including reasonable attorneys 
fees) arising out of or attributable to any acts of (Reptron Electronics, 
Inc.) except as expressly authorized hereunder.

4. Duties of Distributor, In connection with its appointment, (Reptron 
Electronics, Inc.) shall perform the following duties:

4.1 Use its best efforts to actively promote the sale of the Products to 
customers in the territory. Such efforts shall include, but not be limited 
to, promptly servicing all customer accounts and cooperation with 
participation in SAMSUNG'S advertising and sales promotional programs. All 
promotional and advertising material for the Products, unless supplied by 
SAMSUNG, must be approved in writing by SAMSUNG before its use.

4.2 Maintain adequate office and warehouse facilities.

4.3 Maintain a trained and aggressive sales organization to sell the 
Products, and participate in sales training provided by SAMSUNG at the 
(Reptron Electronics, Inc.) locations and on the schedule as determined by 
SAMSUNG from time to time.

4.4 Maintain an inventory of the Products, as recommended by SAMSUNG, and 
mutually agreed to by (Reptron Electronics, Inc.), sufficient to support 
the sale plan for each location of (Reptron Electronics, Inc.), which is 
agreed to periodically between SAMSUNG and (Reptron Electronics, Inc.).

4.5 Prepare and forward to SAMSUNG reports as may be reasonably requested 
by SAMSUNG and described in the current Procedures Manual, including, 
without limitation, monthly reports of inventory on hand by each location, 
and sales data by each location. Sales data should include part number, 
customer, customer address and zip code, quantity, net cost and extension, 
net resale and extension, type of transaction (i.e. drop ship, or work-off 
cost and billing adjustments and returns), Distributor invoice number, line 
item number, and date. Inventory data should include part number, quantity, 
quantity buy price, special purchase item, and any bonded or specially 
segregated stock (with reason identified). (Reptron Electronics, Inc.) will 
also submit monthly reports by location showing all customer returns for 
the previous month indicating Product part number, quantity, cost price 
(net of special cost debits), resale cost, total dollar value extension, 
customer name, zip code and credit memo number, if applicable, and original 
invoice number for the purpose of determining the cost. It is preferred 
that (Reptron Electronics, Inc.) use a First In, First Out ("FIFO") 
accounting system for the purposes of its reports to SAMSUNG. For purposes 
of calculating return refunds or credit memos, SAMSUNG will recognize only 
a FIFO calculation.  (Reptron Electronics, Inc.) will send this data to 
SAMSUNG on a timely basis each month and in no case later than the 10th 
working day of the following month. (Reptron Electronics, Inc.) failure to 
comply with the requirements of Section 4.5 shall constitute a material 
breach of the Agreement.

Confidential 98DistiAgreement.form

2



5. Territory. (Reptron Electronics, Inc.) area of primary responsibility 
for distribution of the Products shall be the Territory, but nothing in 
this Agreement shall prevent (Reptron Electronics, Inc.) from distributing 
the Products outside the Territory. SAMSUNG shall have no obligation to 
support, via cooperative advertising or otherwise, any (Reptron 
Electronics, Inc.) sales activity outside of the Territory. SAMSUNG, in its 
sole discretion, may make sales of all SAMSUNG products' directly or 
through any other channel, in the territory or elsewhere.

6. Changes in Products and Price List. SAMSUNG reserves the right to amend 
the list of products on the Price List from time to time by issuing a 
revised Price List to (Reptron Electronics, Inc.). In addition, SAMSUNG 
may, from time to time, in its absolute discretion and without thereby
incurring any liability to the (Reptron Electronics, Inc.) with respect to 
any sales contract or purchase order already placed, alter the design or 
construction of any Products, and substitute
such altered Product in filling orders.

7. Order Placement.

7.1 Minimum Order
Memory and System-LSI products have a $1000.00 minimum per line item.
Non- standard product orders must be at least $50,000.00 per year with 
$2,500.00 per shipment.

7.2 No order or any portion of an order may be canceled or rescheduled less 
than thirty (30) days before the scheduled shipment date.

7.3 The terms and conditions of this Agreement shall apply to all orders 
and supersede any different or additional terms on purchase orders or other 
documents from (Reptron Electronics, Inc.). Orders issued by (Reptron 
Electronics, Inc.) are solely for the purpose of requesting delivery dates, 
price, quantities and destinations. All orders placed with SAMSUNG for 
products shall be subject to acceptance by SAMSUNG at its principal place 
of business.

8. Prices


8.1 The prices to (Reptron Electronics, Inc.) shall be those prices 
established from time to time by SAMSUNG as shown in the Price List and in 
effect at the time of shipment by Samsung. All prices shall be subject to 
change or withdrawal at the discretion of SAMSUNG, with or without advance 
notice. Notice of any price changes shall be given in written format to 
(Reptron Electronics, Inc.). All such changes shall be effective on the 
date specified by SAMSUNG.

8.1.1 If SAMSUNG increases any prices for the Products, orders for Products 
received by SAMSUNG prior to notification to (Reptron Electronics, Inc.) of 
the price increase but filled after the effective date of the increase will 
be billed at the price in effect at the time of order placement for the 
calendar month in which the order was placed and for the next two (2) 
calendar months. Thereafter, the applicable price for such orders shall be 
the price in effect at the time of shipment by SAMSUNG.

Confidential
98DistiAgreement.form

3



8.1.2 If SAMSUNG decreases any prices for the Products, (Reptron 
Electronics, Inc.) may request application of the decreased price for 
these Products received by SAMSUNG before the effective date of the 
decrease and with a requested or scheduled shipping date after the 
effective date of the decrease may be requested by (Reptron 
Electronics, Inc.). If (Reptron Electronics, Inc.) does not timely 
contact SAMSUNG to request a reduction in the order prices the order 
shall automatically be filled at the price in effect when the order 
was received.

8.2 The only exception to the prices set forth on the Price List will be 
special prices for contract sales, which shall be granted only in 
accordance with the procedures set forth in the current Procedures Manual.

8.3 Unless otherwise agreed to in writing by SAMSUNG, all prices quoted are 
exclusive of transportation and insurance costs, and all taxes (as defined 
below). In addition to any other payments due under this Agreement, 
(Reptron Electronics, Inc.) agrees to pay, indemnify and hold SAMSUNG 
harmless from any sales, use, excise, import or export, value-added or 
similar tax or duty, and any other tax not based on SAMSUNG'S net income, 
including any penalties and interest, due to any payment to be made by 
(Reptron Electronics, Inc.) pursuant to this Agreement, and any costs 
associated with the collection of or withholding of any of the foregoing 
items ("the Taxes"). When applicable, such transportation costs and Taxes 
shall appear as separate items on SAMSUNG'S invoice. (Reptron Electronics, 
Inc.) shall be responsible for obtaining and paying for all insurance. If 
(Reptron Electronics, Inc.) fails to pay any Taxes as of the original due 
date for such Taxes and SAMSUNG receives any assessment or other notice 
(collectively the," Assessment") from any governmental taxing authority 
providing that such Taxes are due from SAMSUNG, SAMSUNG shall give (Reptron 
Electronics, Inc.) written notice of the Assessment and (Reptron 
Electronics, Inc.) shall pay to SAMSUNG, or the taxing authority, the 
amount set forth as due in the Assessment within thirty (30) business days 
of receipt of such written notice from SAMSUNG.

8.4 Shipments. All shipments will be made F.O.B. SAMSUNG'S shipping point. 
Delivery will be deemed complete and risk of loss or damage to the Products 
will pass to (Reptron Electronics, Inc.) upon delivery to the carrier. 
Consignee billing is acceptable, provided (Reptron Electronics, Inc.) shows 
proof to Samsung of written authorization for consignee billing to shipper.

8.5 SAMSUNG reserves the right, among other remedies, to suspend further 
deliveries under this Agreement in the event (Reptron Electronics, Inc.) 
fails to pay for any shipment when it becomes due. Should (Reptron 
Electronics, Inc.) credit worthiness become unsatisfactory to SAMSUNG, cash 
payments or satisfactory security may be required by SAMSUNG for future 
deliveries and for Products already delivered.

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9 Trademarks and Trade Names.

9.1 Subject to the terms and conditions of this Agreement, SAMSUNG grants 
to (Reptron Electronics, Inc.) a nonexclusive, nontransferable, 
royalty-free right to use the SAMSUNG logo and other trademarks found on 
the Products to promote and sell the Products ("Trademarks"). (Reptron 
Electronics, Inc.) shall use such Trademarks in accordance with the 
SAMSUNG'S policies for such use as communicated to (Reptron Electronics, 
Inc.) from time to time. (Reptron Electronics, Inc.) acknowledges that 
SAMSUNG is the owner of the Trademarks and (Reptron Electronics, Inc.) 
agrees that it will do nothing inconsistent with such ownership and all use 
of the Trademarks by (Reptron Electronics, Inc.) shall inure to the benefit 
of and be on behalf of SAMSUNG. (Reptron Electronics, Inc.) acknowledges 
that the Trademarks are valid under applicable law. (Reptron Electronics, 
Inc.) shall not register or attempt to register the Trademarks without the 
prior written permission of an of dicer of SAMSUNG.

9.2 (Reptron Electronics, Inc.) may use SAMSUNG'S trade name as used by 
SAMSUNG in or on (a) the Products delivered by SAMSUNG to (Reptron 
Electronics, Inc.) under this Agreement and (b) written promotional 
material provided by SAMSUNG for distribution. (Reptron Electronics, Inc.) 
may use SAMSUNG'S trade name only in connection with the distribution of 
the Products and each such use shall inure only to the benefit of SAMSUNG.

9.3 (Reptron Electronics, Inc.) agrees that it shall not adopt a trademark 
or trade name confusingly Similar to Samsung Semiconductor, Inc., or the 
Trademarks. (Reptron Electronics, Inc.) further agrees to that it will not 
oppose, contest or challenge in any manner SAMSUNG'S ownership and use of 
its trade name and Trademarks.

10. Acceptance. The Products shall be deemed accepted by (Reptron 
Electronics, Inc.) unless written notice of defect is received by SAMSUNG 
within thirty (30) days after receipt of each shipment and the Products are 
returned to SAMSUNG within sixty (60) days after such notice receipt. If 
(Reptron Electronics, Inc.) discovers any defective Products, (Reptron 
Electronics, Inc.) shall notify SAMSUNG, obtain a return authorization, and 
return the defective Products, freight prepaid, to SAMSUNG'S designated 
facility, along with a written statement describing the defect. (Reptron 
Electronics, Inc.) exclusive remedy, shall be the replacement of such 
Products or (at SAMSUNG'S sole option) the issuing of a credit memo 
therefore in the amount of the net price invoiced to (Reptron Electronics, 
Inc.).

11. Limited Warranty.

11.1 SAMSUNG warrants that the Products to be delivered hereunder will be 
free from defects in material and workmanship and substantially conform to 
SAMSUNG'S published specifications therefore under normal use and service 
for a period of one (1) year from shipment from Samsung Semiconductor Inc., 
San Jose, CA. Deviations from specifications, which do not materially 
affect performance of the Products covered hereby, shall not be deemed to 
constitute defects of material or workmanship or failure to comply with the 
specifications referred to herein. (Reptron Electronics, Inc.) shall notify 
SAMSUNG during the warranty period, of any nonconformance, obtain a return 
authorization for the nonconforming Products, and return the non-conforming 
Products, freight prepaid, to SAMSUNG'S designated facility, along with a 
written statement describing the nonconformity. The obligations of SAMSUNG 
under this warranty are limited to, at SAMSUNG'S option, replacing or 
refunding to (Reptron Electronics, Inc.) the purchase price paid, including 
freight expense therefore, any Products which are, within the warranty 
period, returned as provided herein to SAMSUNG and which are after 
examination disclosed to the satisfaction of SAMSUNG to be thus defective. 
(Reptron Electronics, Inc.) ACKNOWLEDGES AND AGREES THAT THE FOREGOING 
PROVISIONS OF THIS SECTION CONSTITUTE THE SOLE AND EXCLUSIVE REMEDIES 
AVAILABLE TO (Reptron Electronics, Inc.) FOR BREACH OF WARRANTY BY SAMSUNG 
WITH RESPECT TO THE PRODUCTS.

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11.2 The Warranty provided for herein is subject to the following 
conditions:

11.2.1 Samsung will accept products for Warranty claim verification only 
when returned by (Reptron Electronics, Inc.) in a condition which 
allows for suitable testing by SAMSUNG.

11.2.2 When more than one type of Product is returned, the Products must be 
segregated by product type.

11.2.3 SAMSUNG shall reimburse (Reptron Electronics, Inc.) for shipping 
charges to the extent of the percent of the total returns that are 
found by SAMSUNG to be defective as specified herein.

11.2.4 In no event shall SAMSUNG be liable for any defective Products if 
examination disclosed that the defective condition of such Products 
was caused by misuse, abuse, improper installation or application, 
accident or negligence in use, storage, transportation or handling.

11.2.5 Unless otherwise specified in writing, any returned Products 
determined by SAMSUNG to have been electrically or mechanically 
destroyed by (Reptron Electronics, Inc.) will not be covered by this 
Warranty, and will not be returned to (Reptron Electronics, Inc.), 
but will be scrapped by SAMSUNG.

11.2.6 The original Warranty period of any Product shall be extended for an 
additional one (1) year period from the date, if it is replaced by 
SAMSUNG.

11.2.7 These Warranties are made solely to (Reptron Electronics, Inc.) and 
SAMSUNG makes no warranties to customers of (Reptron Electronics, 
Inc.). Only (Reptron Electronics, Inc.) personnel may request 
Warranty service. (Reptron Electronics, Inc.) shall defend, indemnify 
and save harmless SAMSUNG from and against all claims, actions, 
suits, losses, damages and costs (including reasonable attorney's 
fees) in respect of any warranties or representations (Reptron 
Electronics, Inc.) makes to its customers or any other party to the 
contrary.

11.3 EXCEPT FOR THE EXPRESS WARRANTIES PROVIDED IN THIS SECTION, ALL 
WARRANTIES, WHETHER EXPRESS OR IMPLIED, ALL GUARANTEES AND ALL 
REPRESENTATIONS AS TO PERFORMANCE, INCLUDING ALL WARRANTIES WHICH, BUT FOR 
THIS PROVISION, MIGHT ARISE FROM COURSE OF DEALING, CUSTOM OR TRADE AND 
INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A 
PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED BY 
SAMSUNG.

12. SAMSUNG Indemnification Obligation for Proprietary Rights.

12.1 SAMSUNG agrees to indemnify and hold harmless (Reptron Electronics, 
Inc.) against any claims, actions or demands alleging that the manufacture 
or distribution of the Products Infringes any patents or mask works of any 
third parties arising under United States law. To terminate such 
obligation, SAMSUNG may, at its option, (a) replace or modify the Products 
with non- infringing ones which are functionally equivalent, (b) obtain a 
license for the (Reptron Electronics, Inc.) to continue the distribution of 
the Products, or (c) accept the return of the Products held by (Reptron
Electronics, Inc.) and return the price paid by the (Reptron Electronics, 
Inc.) for such Products. THESE REMEDIES SHALL BE THE SOLE AND EXCLUSIVE 
REMEDIES OF (Reptron Electronics, Inc.) FOR ANY INFRINGEMENT OF THIRD PARTY 
RIGHTS BY THE PRODUCTS.

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12.2 The obligations under this Section 12 are contingent upon (a) (Reptron 
Electronics, Inc.) giving prompt written notice to SAMSUNG of any such 
claim, action or demand, (b) (Reptron Electronics, Inc.) allowing SAMSUNG 
to control the defense and related settlement negotiations, and (c) 
(Reptron Electronics, Inc.) full cooperation in the defense.

12.3 SAMSUNG shall have no obligation hereunder for any such claims, 
actions, or demands which result from:

12.3.1 (Reptron Electronics, Inc.) use of the products in a combination 
which violates the rights of third parties or in combination with 
materials or products not supplied by SAMSUNG.

12.3.2 The modification or attempted modification of the Products by 
parties other than SAMSUNG or the use or distribution of such 
modified Products.

12.3.3 The use of other than the latest version of the Product if such 
claim would have been avoided by the use of such later version and 
the (Reptron Electronics, Inc.) had such knowledge that the latest 
version should have avoided the claim.

13. Limitation of liability. IN NO EVENT SHALL SAMSUNG BE LIABLE FOR ANY 
SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES EVEN IF SAMSUNG HAS BEEN 
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL SAMSUNG'S 
LIABILITY IN CONNECTION WITH THIS AGREEMENT EXCEED AN AMOUNT EQUAL TO THE 
PURCHASE PRICE OF THE PRODUCTS IN QUESTION, WHETHER (Reptron Electronics, 
Inc.) CLAIM IS FOR BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE OR 
OTHERWISE.

14. Advertising and Sales Promotion.

14.1 SAMSUNG may, from time to time, in its sole discretion, disclose its 
promotional plans, render sales assistance and merchandising advise, or 
furnish advertising materials and promotional campaign material to (Reptron 
Electronics, Inc.).

14.2 SAMSUNG will contribute an amount equal to one half (1/2) of the cost 
of jointly approved promotional and advertising activities designed to 
stimulate the sale of SAMSUNG'S Products. Such total contribution shall not 
exceed one percent ( I %) of the actual net price paid to SAMSUNG for 
Products sold hereunder during the calendar one (1) year period. However, 
prior approval must be obtained in writing from SAMSUNG before any 
expenditure by (Reptron Electronics, Inc.) is eligible for reimbursement. 
Previous calendar accruals of SAMSUNG'S contribution can be expended 
through March 31st, of the succeeding year.

14.3 (Reptron Electronics, Inc.) agrees to conduct promotional and 
advertising activities only as authorized by SAMSUNG and shall defend, 
indemnify and hold SAMSUNG harmless from any and all claims, suits, losses, 
damages, and costs (including reasonable attorney's fees) arising out of or 
attributable to any unauthorized promotional or advertising activities of 
(Reptron Electronics, Inc.).

14.4 (Reptron Electronics, Inc.) represents and warrants that it will 
engage in no unfair or restrictive trade practices.

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14.5 (Reptron Electronics, Inc.) understands and agrees that in the event 
that (Reptron Electronics, Inc.) engages in any unauthorized activities in 
violation of the terms of this section, SAMSUNG shall be entitled to 
injunctive relief in addition to any other remedies available to it under 
law or the terms hereof.

15. Returns. The following conditions will apply in the event (Reptron 
Electronics, Inc.) desires to return any Products to SAMSUNG for credit:

15.1 Products shall be returned only after authorization by SAMSUNG. Any 
returns made without SAMSUNG'S prior written approval shall be returned to 
(Reptron Electronics, Inc.) at (Reptron Electronics, Inc.) expense. On a 
quarterly basis, (Reptron Electronics, Inc.) may request return of 
slow-moving Products. Products authorized to return that are contained in 
samsung's current Price List, must be free of damage, in merchantable 
condition (i.e., no bent leads, no electrical failure, not opened dry 
pack), and were obtained by (Reptron Electronics, Inc.) directly from 
SAMSUNG. In addition, a Restocking order for equal value must accompany the 
request for return. Such restocking order will not be shipped or billed 
before the return credit is processed. Slow-moving product returns shall 
not exceed five percent (5o/O) of the dollar value of (Reptron Electronics, 
Inc.) previous three (3) months' net purchases from SAMSUNG. There shall be
allowed four (4) returns per year for Memory Products and four (4) returns 
per year for System-LSI Products. Amounts accrued for Memory Products 
returns and System-LSI Products returns are mutually exclusive.

15.2 Discontinued Products may be returned if they are in merchantable 
condition as described in Section 15.1. No offsetting order is required for 
returning Discontinued Products.

15.3 During the period beginning six (6) months after the Effective Date 
and ending twelve (12) months following the Effective Date, (Reptron 
Electronics Inc.) may elect to return to Samsung for credit any remaining 
inventory of Products received in the initial stocking package. Such 
returns shall be subject to the terms, conditions and procedures specified 
of this paragraph 15. Requests for returns of the Products under this 
subparagraph shall not be counted as "stock rotation" for the purposes of 
computing the amount of products returnable by (Reptron Electronics, Inc.) 
under subparagraph 15.1.

15.4 Any credit for returned Products is subject to the inspection end 
testing of such Products by SAMSUNG. If, in samsung's judgment, any of such 
Products have been improperly handled or used, no credit or replacement for 
those Products will be allowed.

15.5 The credit for any returned Products shall be equal to the net 
purchase price paid by (Reptron Electronics, Inc.) and calculated on a FIFO 
basis and may be applied to future invoices for SAMSUNG Products only.

15.6 All custom or semi-custom products shall not be included in definition 
of "Products" for purpose of this Section 15.

16. Audits. SAMSUNG reserves the right to have an authorized SAMSUNG 
representative, at samsung's cost, audit (Reptron Electronics, Inc.) 
records relating to sales and inventory of Products including, without 
limitation, records pertaining to any claim submitted by (Reptron 
Electronics, Inc.) for stock rotation, returned Products, or any other 
reason. (Reptron Electronics, Inc.) agrees that with Reasonable notice by 
SAMSUNG, (Reptron Electronics, Inc.) will allow SAMSUNG or a representative 
of SAMSUNG access to all SAMSUNG inventories for the purpose of inspecting 
or auditing such inventory, at samsung's request.

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17. Assignment. (Reptron Electronics7 Inc.) shall not assign its rights or 
delegate its performance hereunder without the prior written consent of 
SAMSUNG and any attempted assignment or delegation without such consent 
shall be void.

18. Confidential Information.

18.1 (Reptron Electronics, Inc.) acknowledges that, in the course of 
promoting and selling SAMSUNG Products and performing its duties under this 
Agreement, it may obtain information relating to SAMSUNG, its customers and 
its Products which (Reptron Electronics, Inc.) knows or has reason to know 
is of a confidential and/or proprietary nature ("Confidential 
Information'). Such Confidential Information may include' but is not 
limited to, minimum price guidelines, future product releases, trade 
secrets, know-how, inventions, methods of manufacture, techniques, 
processes, programs, schematics, data, pricing and discount lists and 
schedules, customer lists, financial information and sales and marketing 
plans. (Reptron Electronics, Inc.) shall at all times, both during the tend 
of this Agreement and thereafter, keep and hold such Confidential 
Information in the strictest of confidence, and shall not use or disclose 
such Confidential Information for any purpose, other than as may be 
reasonably necessary for the performance of its duties as samsung's 
(Reptron Electronics, Inc.) pursuant to and during the term of this 
Agreement. The obligations of this paragraph shall survive the termination 
of this Agreement.

18.2 (Reptron Electronics, Inc.) acknowledges and agrees that all 
information concerning (Reptron Electronics, Inc.) sales activities and 
customers for the Products provided to SAMSUNG pursuant to Section 4, shall 
become the property of SAMSUNG. (Reptron Electronics, Inc.) acknowledges 
that SAMSUNG may use such information in its planning and marketing 
strategies.

19. Term and Termination.

19.1 This Agreement shall become effective as of the 1st day of June, 1998 
and shall continue until expiration of the last day of June, 1999, or until 
terminated by either party as set forth below.

19.2 EITHER PARTY MAY TERMINATE THIS AGREEMENT AT ANY TIME AND FOR ANY 
REASON, WITH OR WITHOUT CAUSE, WITHOUT WARNING OR PENALTY AND WITHOUT 
COMPENSATION OF ANY KIND EXCEPT AS EXPRESSLY SET FORTH HEREIN.

19.2.1 The effective termination date shall be deemed to be the thirtieth 
(30th) day following the giving of written notice by the terminating 
party, and any inaccuracies in the designation of the effective 
termination date (in the termination notice or elsewhere) shall not 
constitute a breach of this Agreement or a waiver of any right 
hereunder and shall not in any way impact the rights or obligations 
of the parties hereto.

19.3 Notwithstanding the foregoing, upon the occurrence of any of the 
events described below, SAMSUNG may terminate this Agreement immediately by 
giving to (Reptron Electronics, Inc.) written notice of such termination. 
In the event of a termination pursuant to this Section 19.3, the effective 
termination date shall be the date on which written notice of termination 
is given.

19.3.1 SAMSUNG may terminate this Agreement immediately upon the occurrence 
of the Following events:

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19.3.1.1 (Reptron Electronics, Inc.) materially breaches or defaults in any 
of the terms or condition of this Agreement.

19.3. 1.2 (Reptron Electronics, Inc.) ceases to exist as a business entity, 
or otherwise terminates or significantly limits its business 
operations.

19.3.1.3 (Reptron Electronics, Inc.) is liquidated, dissolved, reorganized, 
merged, sells substantially all of its assets, enters into 
receivership or changes its management, voting control or Corporate 
form.

19.3.1.4 (Reptron Electronics, Inc.) fails to secure or renew any license 
or permit necessary for the conduct of its business, or if any license is 
revoked or suspended for any reason.

19.3.1.5 (Reptron Electronics, Inc.) makes an assignment for the benefit of 
creditors.

19.3.1.6 (Reptron Electronics, Inc.) is insolvent or unable to pay its 
debts as they mature in ordinary course of business, or if there are 
any proceedings instituted by or against (Reptron Electronics, Inc.) 
in bankruptcy or under any insolvency laws or for reorganization, 
receivership or dissolution.

19.4 In the event of a termination pursuant to this Section 19, SAMSUNG 
will repurchase all Products which appear in samsung's current Price List 
and are in (Reptron Electronics, Inc.) inventory at the time of such 
termination, and which are undamaged and in salable condition, on the 
following terms and conditions:

19.4.1 (Reptron Electronics, Inc.) shall within thirty (30) days following 
such termination, furnish SAMSUNG with an inventory of all Products 
which it desires to have SAMSUNG repurchase pursuant to this 
subparagraph 19.4. SAMSUNG shall not be obligated to repurchase any 
Products from (Reptron Electronics, Inc.) if (Reptron Electronics, 
Inc.) has not submitted the inventory report within such thirty- (30) 
day period.

19.4.2 (Reptron Electronics, Inc.) shall ship Products, freight prepaid, to 
Samsung's plant at San Jose, California, or such other location or 
locations as SAMSUNG may designate.

19.4.3 SAMSUNG shall not be obligated to repurchase any Products which are 
defective or not in salable condition at the time of their receipt by 
SAMSUNG. In no event shall SAMSUNG be obligated to repurchase any 
obsolete, custom or semi-custom SAMSUNG Products that (Reptron 
Electronics, Inc.) may have in its inventory.

19.4.4 The price paid by SAMSUNG for any Products repurchased shall be the 
net price determined on a FIFO basis, actually paid by (Reptron 
Electronics, Inc.).

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19.4.5 In the event (Reptron Electronics, Inc.) terminates this Agreement, 
or SAMSUNG terminates this agreement for breach, the price determined 
pursuant to sub- paragraph 19.4.4 above shall be reduced by a ten- 
percent (10%) re-stocking charge. If Samsung terminates without 
cause, there will be no re-stocking charge

19.5 SAMSUNG shall not, by reason of the termination or non-renewal of this 
Agreement, be liable to (Reptron Electronics, Inc.) for compensation, 
reimbursement of damages, either on account present or prospective profits 
on sales or anticipated sales, or on account of expenditures, investments 
or commitments made in connection with this Agreement, or in connection 
with the establishment, development or maintenance of the business or 
goodwill of (Reptron Electronics, Inc.), or on account of any other cause 
or matter whatsoever. Such termination or non-renewal shall not affect, 
however, the rights or liabilities of the parties with respect to any 
breach of his Agreement prior to such termination, any Products previously 
ordered or sold hereunder, or any indebtedness then owing by either party 
to the other. The acceptance of any order for the sales of any of this 
Agreement shall not be construed as a renewal or extension of this 
Agreement, nor as a waiver of any such termination or expiration.

20. FORCE MAJEURE. The obligations of the parties may be suspended by 
either party in the event of an act of God, war, riot, explosion, accident, 
flood, sabotage; lack of or inability to obtain adequate fuel, power, raw 
materials, labor, containers or transportation facilities; excessive demand 
for any Products over the supply available to SAMSUNG; customs duties or 
surcharges; any interruption for any reason in the manufacture of Products 
to SAMSUNG; any interruption for any reason in the manufacture of Goods by 
Samsung's supplier, compliance with governmental requests, laws, 
regulations, orders or action; breakage or failure of machinery or 
apparatus; national defense requirements, or any other event beyond the 
reasons able control of such party; or in the event of labor trouble, 
strike, lockout, or injunction (provided that neither party shall be 
required to settle a labor dispute against its own best judgment). In the 
event that Samsung's capacity to perform is excused under the above 
conditions, either in whole or part, SAMSUNG shall be under no duty to 
allocate deliveries among its various customers. Orders subject to excuse 
under this Section 20 shall be canceled without liability, but this 
Agreement shall otherwise need to remain unaffected

21. General Provisions.

21.1 The failure of either party to enforce at any time or for any period 
of the provisions of this Agreement shall not be construed to be a waiver 
of those provisions or of the right of that party thereafter to enforce 
each and every provision hereof.

21.2 Promptly upon the termination of this Agreement, (Reptron Electronics, 
Inc.) shall on its own initiative turn over to SAMSUNG all Confidential 
Information and all other SAMSUNG information and material, including 
without limitation, all samples, pamphlets, catalogs, booklets and other 
technical advertising data and literature, and all copies thereof, in the 
possession, custody or control of (Reptron Electronics, Inc.).

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21.3 All notices which any party to this Agreement may be required or may 
wish to give may be given by addressing them to the other party at the 
addresses set forth below (or at such other addresses as may be designated 
by written notices given in the manner designated herein) by: (a) personal 
delivery; or (b) sending such notices by commercial overnight courier with 
written verification of actual receipt; or (c) sending them by registered 
or certified mail. If so mailed or otherwise delivered, such notices shall 
be deemed and presumed to have been given on the earlier of the date of 
actual receipt or three (3) days after mailing or authorized form of 
delivery. The parties' addresses are:
SAMSUNG
Samsung Semiconductor, Inc.
3655 North First Street
San Jose, Ca 95134
Attn: Sr. Vice President
Sales and Marketing

(Reptron Electronics, Inc.) 14401 McCormick Drive Tampa, FL 33626

21.4 This Agreement (and any other documents referred to herein) shall in 
all respects be interpreted, enforced and governed by and under the laws of 
the State of California, applicable to instruments, persons and 
transactions which have legal contacts and relationships solely within the 
State of California. The language of this Agreement shall be construed as a 
whole according to its fair meaning, and not strictly for or against any of 
the parties. Any litigation under this Agreement may be instituted in a 
court of competent jurisdiction of the State of California seated in San 
Jose, California, or the U.S. District Court located in San Jose, 
California, and the parties hereby submit to the jurisdiction of such 
courts.

21.5 (Reptron Electronics, Inc.) represents and acknowledges that it is 
relying solely on its own judgment, including its own estimate of the 
market for Products, in entering into this Agreement (Reptron Electronics, 
Inc.) further represents and acknowledges that SAMSUNG has made no written 
or verbal representations or warranties, either expressed or implied, 
regarding the subject matter hereof, including, without limitation, the 
duration of the distribution right created hereby, the circumstances under 
which this Agreement shall or may be terminated, or the size of the market 
for Products, or the amount of revenue (Reptron Electronics, Inc.) will, 
could or might expect to receive from the sales of Products.

21.6 The title of the various paragraphs of this Agreement are used for 
convenience of reference only and are not intended to and shall not in any 
way enlarge or diminish the rights or obligations of the parties or affect 
the meaning or construction of this document.

21.7 Each party has had adequate opportunity to make whatever investigation 
or inquiry it deems necessary or desirable in connection with the subject 
matter of this Agreement to the execution hereof. Each party has read and 
understands each provision of this Agreement. 

21.8 This Agreement may be executed in two counterparts, each of which 
shall be deemed an original but both of which constitute one and the same 
Agreement.

21.9 If any of the provisions of this Agreement are found invalid or 
unenforceable, those parts will be amended to achieve as nearly as possible 
the same effect as the original provisions, and the remainder of this 
Agreement will remain in full force.

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21.10 Integration/Modification/Entire Agreement. This Agreement constitutes 
the entire Agreement and final understanding of the parties with 
respect to the subject matter hereof and supersedes and terminates 
any and all prior and/or contemporaneous communications, 
negotiations, representations, understandings, statements, 
discussions, offers and/or agreements between the parties, whether 
written or verbal, express or implied, direct or indirect, relating 
in any way to the subject matter hereof. This Agreement is intended 
by the parties to be complete and wholly integrated expression of 
their understanding and agreement, and it may not be altered, 
amended, revised modified or otherwise changed in any way except by 
a written instrument, which specifically identifies the intended 
alteration, amendment, revision modification or other change and 
clearly expresses the intention to so change this agreement, signed 
by an office of (Reptron Electronics, Inc.) and by samsung's Senior 
Vice-President of Sales and Marketing.

(Reptron Electronics, Inc.):

By /s/ Michael L. Musto
TITLE: CEO

SAMSUNG SEMICONDUCTOR, INC.

By /s/Keith D. McDonald

TITLE: Sr. Vice President Sales and Marketing


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                                EXHIBIT 10.4
















REVOLVING CREDIT AND SECURITY AGREEMENT

THIS REVOLVING CREDIT AND SECURITY AGREEMENT (this "Agreement") 
dated January 8, 1999, among REPTRON ELECTRONICS, INC, a corporation 
organized under the laws of the State of Florida ("Reptron"), REPTRON 
ELECTRONICS OF PA, INC., a corporation organized under the laws of the 
State of Pennsylvania ("Reptron Pennsylvania"), LAKE SUPERIOR MERGER 
CORPORATION, a corporation organized under the laws of the State of 
Florida ("Superior"), HIBBING ELECTRONICS CORPORATION, a corporation 
organized under the laws of the State of Minnesota ("Hibbing"; Reptron, 
Reptron Pennsylvania, Superior and Hibbing, each a "Borrower" and 
collectively "Borrowers"); the financial institutions which are now or 
which hereafter become a party hereto (collectively, the "Lenders" and 
individually a "Lender"); and PNC BANK, NATIONAL ASSOCIATION, a national 
association ("PNC"), as collateral and administrative agent for Lenders 
(PNC, together with its successors and assigns in such capacity, the 
"Agent").

IN CONSIDERATION of the mutual covenants and undertakings herein 
contained, Borrowers, Lenders and Agent hereby agree as follows:

SECTION 1. DEFINITIONS.

1.1 Accounting Terms. As used in this Agreement, each 
Revolving Credit Note, or any certificate, report or other document made 
or delivered pursuant to this Agreement, accounting terms not defined in 
Section 1.2 or elsewhere in this Agreement and accounting terms partly 
defined in Section 1.2 to the extent not defined, shall have the 
respective meanings given to them under GAAP; provided, however, whenever 
such accounting terms are used for the purposes of determining compliance 
with financial covenants in this Agreement, such accounting terms shall be 
defined in accordance with GAAP as applied in preparation of the audited 
financial statements of Borrowers for the Fiscal Year ended December 31, 
1997.

1.2 General Terms. For purposes of this Agreement the 
following terms shall have the following meanings (terms defined in the 
singular to have the same meaning when used in the plural, and vice 
versa):

"Accountants" shall have the meaning set forth in Section 9.7 hereof.

"Acquisition" shall mean any transaction, or any series of 
related transactions, by which a Borrower directly or indirectly (i) 
acquires any ongoing business of all or substantially all of the assets of 
any Person, whether through the purchase of assets, merger or otherwise, 
(ii) acquires (in one transaction or as the most recent transaction in a 
series of transactions) control of at least a majority in ordinary voting 
power of the Equity Interests having ordinary voting power for the 
election of directors, or (iii) acquires control of 50% or more of the 
Equity Interests in any other Person.

		~.

~ 72406.7 ~ 00 1 246-00024



-

"Acquisition Documents" shall mean all stock purchase 
agreements, merger agreements, asset purchase agreements or similar 
agreements, documents or instruments entered into by a Borrower in 
connection with an Acquisition and all schedules, exhibits and attachments 
forming a part thereof.

"Acquisition Target" shall mean a Person whose assets or 
Equity Interests are to be acquired by a Borrower or a wholly-owned 
Subsidiary of a Borrower.

"Advance" shall mean a Revolving Advance and each other 
advance made by Agent or Lenders pursuant to the terms of this Agreement 
or any of the Other Documents to or for the benefit of any Borrower.

"Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.

"Affiliate" of any Person shall mean (a) any Person (other 
than a Subsidiary) which, directly or indirectly, is in control of, is 
controlled by, or is under common control with such Person, or (b) any 
Person who is a director or officer (i) of such Person, (ii) of any 
Subsidiary of such Person or (iii) of any Person described in clause (a) 
above. For purposes of this definition, control of a Person shall mean the 
power, direct or indirect, (x) to vote 15% or more of the Equity Interests 
having ordinary voting power for the election of directors of such Person 
or the individuals performing similar functions for any such Person, or 
(y) to direct or cause the direction of the management and policies of 
such Person whether by contract or otherwise.

"Agent" shall have the meaning set forth in the preamble to 
this Agreement and shall include its successors and assigns.

"Alternate Base Rate" shall mean, for any day, a rate per 
annum equal to the higher of (i) the Base Rate in effect on such day and 
(ii) the Federal Funds Rate in effect on such day plus /: of 1%.

"Applicable Facility Fee Percentage" shall mean a percentage 
equal to three-tenths of one percent (0.30%) per annum; provided that, 
commencing on April 1, 2000, if there exists no Default or Event of 
Default, then the Applicable Facility Fee Percentage shall be increased or 
decreased based upon the Pricing Formula Ratio as set forth on Exhibit E. 
The Applicable Facility Fee Percentage shall be subject to reduction or 
increase, as applicable and as set forth in the table above, on a 
quarterly basis according to the performance of Borrowers as measured by 
the Pricing Formula Ratio for the immediately preceding four (4) Fiscal 
Quarters of Borrowers on a consolidated basis. If the financial statements 
of Borrowers and the attached calculations setting forth Pricing Formula 
Ratio are not received by Agent by the date required pursuant to Sections 
9.7 and 9.8 of this Agreement, the Applicable Facility Fee Percentage 
shall be determined as if the Pricing Formula Ratio is less than 1.10 to 
1.00 until such time as such financial statements attached calculations 
are received and any Event of Default resulting from a failure timely to 
deliver such financial statements or calculations is waived in writing; 
provided, however, that nothing herein shall be deemed to prevent Lenders 
from charging interest at the Default Rate for so long as an Event of 
Default exists. For the final Fiscal Quarter of any Fiscal Year of 
Borrowers, Borrowers may provide the unaudited financial statements of 
Borrowers, subject only to year-end adjustments, for the purpose of 
determining the Applicable Facility Fee Percentage; provided, however, 
that if, upon delivery of the annual audited financial statements required 
to be submitted by Borrowers pursuant to Section 9.7 of this Agreement, 
Borrowers have not met the criteria for reduction of the Applicable 
Facility Fee Percentage pursuant to the terms herein above for the final 
Fiscal Quarter of the Fiscal Year of Borrowers then ended, then (a) such

~ 72406 7 ~ 00 1 246-00024

-2



Applicable Facility Fee Percentage reduction shall be terminated and the 
Applicable Facility Fee Percentage shall be the Applicable Facility that 
would have been in effect if such reduction had not been implemented based 
upon the unaudited financial statements of Borrowers for the final Fiscal 
Quarter of the Fiscal Year of Borrowers then ended, and (b) Borrowers 
shall pay to Agent, for the ratable benefit of the Lenders, on the first 
day of the month following receipt by Agent of such audited financial 
statements, an amount equal to the difference between the amount of 
interest that would have been paid using the Applicable Facility Fee 
Percentage determined based upon such audited financial statements and the 
amount of the fee actually paid during the period in which the reduction 
of the Applicable Facility Fee Percentage was in effect based upon the 
unaudited financial statements for the final Fiscal Quarter of the Fiscal 
Year of Borrowers then ended.

"Applicable Law" shall mean all laws, rules and regulations 
applicable to the Person, conduct, transaction, covenant, Loan Document or 
Material Contract in question, including all applicable common law and 
equitable principles; all provisions of all applicable state, federal and 
foreign constitutions, statutes, rules, regulations and orders of 
governmental bodies; and all orders, judgments and decrees of all courts 
and arbitrators.

"Applicable Margin" shall mean percentage equal to two and 
one-quarter percent (2.25%) for Eurodollar Rate Loans and zero (0) for 
Domestic Rate Loans; provided that, commencing on April 1, 2000, if there 
exists no Default or Event of Default, then the Margin Fee shall be 
increased or decreased based upon the Pricing Formula Ratio as set forth 
on Exhibit E. The Applicable Margin shall be subject to reduction or 
increase, as applicable and as set forth in the table above, on a 
quarterly basis according to the performance of Borrowers as measured by 
the Pricing Formula Ratio for the immediately preceding four (4) Fiscal 
Quarters of Borrowers. Except as set forth in the last sentence hereof, 
any such increase or reduction in the Applicable Margin provided for 
herein shall be effective three (3) Business Days after receipt by Lender 
of the applicable financial statements and corresponding calculations; 
provided, however, that any reduction in the Applicable Margin shall not 
apply to any LIBOR Loans outstanding on the effective date of such 
reduction that have an Interest Period commencing prior to the effective 
date of such reduction. If the financial statements and the corresponding 
calculations of Borrowers setting forth the Pricing Formula Ratio are not 
received by Agent by the date required pursuant to Sections 9.7 and 9.8 of 
the Agreement, the Applicable Margin shall be determined as if the Pricing 
Formula Ratio is less than 1.10 to 1.00 until such time as such financial 
statements and corresponding calculations are received and any Event of 
Default resulting from a failure timely to deliver such financial 
statements or Compliance Certificate is waived in writing; provided, 
however, that nothing herein shall be deemed to prevent Lenders from 
charging interest at the Default Rate for so long as an Event of Default 
exists. For the final Fiscal Quarter of any Fiscal Year of Borrowers, 
Borrowers may provide the unaudited financial statements of Borrowers, 
subject only to year-end adjustments, for the purpose of determining the 
Applicable Margin; provided, however, that if, upon delivery of the annual 
audited financial statements required to be submitted by Borrowers 
pursuant to Section 9.7 of the Agreement, Borrowers have not met the 
criteria for reduction of the Applicable Margin pursuant to the terms 
herein above for the final Fiscal Quarter of the Fiscal Year of Borrowers 
then ended, then (a) such Applicable Margin reduction shall be terminated 
and, effective on the first day of the month following receipt by Agent of 
such audited financial statements, the Applicable Margin shall be the 
Applicable Margin that would have been in effect if such reduction had not 
been implemented based upon the unaudited financial statements of 
Borrowers for the final Fiscal Quarter of the Fiscal Year of Borrowers 
then ended, and (b) Borrowers shall pay to Agent, for the ratable benefit 
of the Lenders, on the first day of the month following receipt by Agent 
of such audited financial statements, an amount equal to the difference 
between the amount of interest that would have been paid on the principal 
amount of the Obligations using the Applicable Margin determined based 
upon such audited financial statements and the amount of interest actually 
paid during the

{72406 7} 001246-00024



period in which the reduction of the Applicable Margin was, in effect, 
based upon the unaudited financial statements for the final Fiscal Quarter 
of the Fiscal Year of Borrowers then ended.

"Authority" shall have the meaning set forth in Section 4.19(d).

"Base Rate" shall mean the base commercial lending rate of PNC 
as publicly announced to be in effect from time to time, such rate to be 
adjusted automatically, without notice, on the effective date of any 
change in such rate. This rate of interest is determined from time to time 
by PNC 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 PNC to any 
particular class or category of customers of PNC.

"Blocked Account" shall have the meaning ascribed to it in Section 4.1 
5(h) hereof.

"Board of Directors" shall mean either the board of directors 
of Reptron or any duly authorized committee of such board.

"Borrower" or "Borrowers" shall have the meaning set forth in 
the preamble to this Agreement, all Persons who become a Borrower by 
executing and delivering a Joiner Agreement at Agent's request, and shall 
extend to all permitted successors and assigns of such Persons.

"Borrowers on a consolidated basis" shall mean the Borrowers' 
accounts or other items as to which such term applies consolidated in 
accordance with GAAP.

"Borrowers' Account" shall have the meaning set forth in Section 2.8.

"Borrowing Agent" shall mean Reptron.

"Borrowing Base Certificate" shall mean a certificate from the 
President or Chief Financial Officer of the Borrowing Agent to Agent by 
which such officer shall certify to Agent the Formula Amount and 
calculation thereof as of the date of the certificate, such certificate to 
be in form and substance satisfactory to Agent.

"Building Fixtures" shall mean any Property of a Borrower that 
is permanently affixed to and made a part of Owned Real Estate of such 
Borrower and that consists of electrical wiring incorporated into any 
building on such Owned Real Estate, light fixtures, boilers, heating and 
air conditioning units, elevators, carpeting, plumbing, screens, awnings, 
radiators, mirrors, mantels, sprinkler systems and built-in cabinets.

"Business Day" shall mean with respect to Eurodollar Rate 
Loans, any day on which commercial banks are open for domestic and 
international business, including dealings in Dollar deposits in London, 
England and New York, New York, and with respect to all other matters, any 
day other than a day on which commercial banks in New York are authorized 
or required by law to close.

"Business Interruption Insurance Assignment" shall mean the 
Collateral Assignment of Business Interruption Insurance to be executed by 
each Borrower on the Closing Date in favor of Agent, for its benefit and 
for the ratable benefit of Lenders, as security for the payment of the 
Obligations.

-

~ 72406.7 ~ 00 1 246-00024

- 4 -



/

-

- '

"Capital Expenditures" shall mean expenditures made or 
liabilities incurred for the acquisition of any fixed assets or 
improvements, replacements, substitutions or additions thereto which have a 
useful life of more than one year, including the total principal portion of 
Capitalized Lease Obligations; provided, however, that Capital Expenditures 
shall not include the purchase price paid by any Borrower in connection 
with a Permitted Acquisition.

"Capitalized Lease Obligation" shall mean any Indebtedness of 
a Borrower represented by obligations under a lease that is required to be 
capitalized for financial reporting purposes in accordance with GAAP.

"Cash Taxes" shall mean, for any period, the actual federal, 
state and location taxes of a Person based on income or business activity 
paid in cash during such period.

"CERCLA" shall mean the Comprehensive Environmental Response, 
Compensation and Liability Act of 1980, as amended, 42 U.S.C.   9601 et 
seq.

by the parties hereto.

~72406 7) 001246-00024

"Change of Control" shall mean (a) the acquisition by any 
Person (including any syndicate or group deemed to be a "person" under 
Section 13(d)(3) of the Exchange Act of (i) beneficial ownership, directly 
or indirectly, through a purchase, merger or other acquisition transaction 
or series of transactions, of shares of capital stock of Reptron entitling 
such Person to exercise fifty percent (50%) or more of the total voting 
power of all share of capital stock of Reptron entitled to vote generally 
in the elections of the Board of Directors, other than any such acquisition 
by any Borrower, any employee benefit plan of Reptron or by Michael L. 
Musto, the President and Chief Executive Officer of Reptron, or (ii) the 
right or ability by voting power, contract or otherwise to elect or 
designate a majority of the entire Board of Directors; (b) any 
consolidation of any Borrower with, or merger of any Borrower into, any 
other Person, any merger of another Person into any Borrower, or any 
conveyance, sale, transfer or lease, in one transaction or a series of 
related transactions, of all or substantially all of the assets (other than 
to another Borrower) of any Borrower to any other Person, other than a 
Permitted Acquisition or a Permitted Spinoff; (c) at any time Continuing 
Directors cease to constitute a majority of the Board of Directors then in 
of rice; (d) Reptron shall cease to own 100% of the issued and outstanding 
capital stock of Superior and Reptron Pennsylvania; (e) Superior shall 
cease to own 100% of the issued and outstanding capital stock of Hibbing; 
(f) Hibbing shall cease to own 100% of the issued and outstanding capital 
stock of Hibbing Maryland; or (g) any merger, consolidation or sale of 
substantially all of the property or assets of any Borrower, except any 
such merger, consolidation or sale by one Borrower with or to another 
Borrower.

"Charges" shall mean all taxes, charges, fees, imposts, levies 
or other assessments, including all net income, gross income, gross 
receipts, sales, use, ad valorem, value added, transfer, franchise, 
profits, inventory, capital stock, license, withholding, payroll, 
employment, social security, unemployment, excise, severance, stamp, 
occupation and property taxes, custom duties, fees, assessments, Liens, 
claims and charges of any kind whatsoever, together with any interest and 
any penalties, additions to tax or additional amounts, imposed by any 
taxing or other authority, domestic or foreign (including the Pension 
Benefit Guaranty Corporation or any environmental agency or superfund), 
upon the Collateral, any Borrower or any of its Affiliates.

"Closing Date" shall mean January 8, 1999 or such other date as may be 
agreed to in writing

- 5 -



"Code" shall mean the Internal Revenue Code of 1986.

"Collateral" shall mean and include all of the following types 
or items of property or interests in property of each Borrower:

(a) all Receivables (including the NationsBank Term Loan as 
well as the NationsBank Term Note evidencing the obligation of Reptron to 
pay same);

(b) all Equipment;

	(c)	all General Intangibles;

(d) all Inventory;

(e) all of each Borrower's right, title and interest in and to 
(i) its respective goods and other property including all merchandise 
returned or rejected by Customers, relating to or securing any of the 
Receivables; (ii) all of each Borrower's rights as a consignor, a 
consignee, an unpaid vendor, mechanic, artisan, or other lien or, 
including stoppage in transit, setoff, detinue, replevin, reclamation and 
repurchase; (iii) all additional amounts due to any Borrower from any 
Customer relating to the Receivables; (iv) other property, including 
warranty claims, relating to any goods securing this Agreement; (v) all of 
each Borrower's contract rights, rights of payment which have been earned 
under a contract right, instruments, documents, chattel paper, warehouse 
receipts, deposit accounts, money, securities and investment property; 
(vi) if and when obtained by any Borrower, all real and personal property 
of third parties in which such Borrower has been granted a Lien or 
security interest as security for the payment or enforcement of 
Receivables; and (vii) any other goods, personal property or real property 
now owned or hereafter acquired in which any Borrower has expressly 
granted a security interest or may in the future grant a security interest 
to Agent hereunder, or in any amendment or supplement hereto or thereto, 
or under any other agreement between Agent and any Borrower;

(f) all of each Borrower's ledger sheets, ledger cards, files, 
correspondence, records, books of account, business papers, computers, 
computer software (owned by any Borrower or in which it has an interest), 
computer programs, tapes, disks and documents relating to (a), (b), (c), 
(d) or (e) of this Paragraph; and

(g) all proceeds and products of (a), (b), (c), (d), (e) and 
(f) in whatever form, including: cash, deposit accounts (whether or not 
comprised solely of proceeds), certificates of deposit, insurance proceeds 
(including hazard, flood and credit insurance), negotiable instruments and 
other instruments for the payment of money, chattel paper, security 
agreements, documents, eminent domain proceeds, condemnation proceeds and 
tort claim proceeds.

"Commitment Percentage" of any Lender shall mean the 
percentage set forth below such Lender's name on the signature page hereof 
as same may be adjusted upon any assignment by a Lender pursuant to 
Section 16.3(b) hereof.

"Commitment Transfer Supplement" shall mean a document in the 
form of Exhibit D hereto, properly completed and otherwise in form and 
substance satisfactory to Agent by which the Eligible Assignee purchases 
and assumes a portion of the obligation of Lenders to make Advances under 
this Agreement.

~ 72406 7 ~ 00 1 246-00024

- 6 -



"Compliance Certificate" shall mean a compliance certificate 
to be signed by the chief financial officer of Borrowing Agent, which 
shall state that, based on an examination sufficient to permit him to make 
an informed statement, no Default or Event of Default exists, or if such 
is not the case, specifying such Default or Event of Default, its nature, 
when it occurred, whether it is continuing and the steps being taken by 
Borrowers with respect to such default and, such certificate shall have 
appended thereto calculations which set forth Borrowers' compliance with 
the requirements or restrictions imposed by Section 6.5, 7.6 and 7.1 I 
hereof.

"Consents" shall mean all filings and all licenses, permits, 
consents, approvals, authorizations, qualifications and orders of 
Governmental Bodies and other third parties, domestic or foreign, 
necessary to carry on any Borrower's business, including all consents 
required by Applicable Law.

"Consigned Inventory" shall mean Inventory of a Borrower that 
is in the possession of another Person on a consignment, sale or return, 
or other basis that does not constitute a final sale and acceptance of 
such Inventory.

"Continuing Director" shall mean, at any date, a member of 
Reptron's Board of Directors who (i) was a member of such Board of 
Directors on the Closing Date or (ii) was nominated or elected by at least 
two-thirds of the directors who were Continuing Directors at the time of 
such nomination or election or whose election to such Board of Directors 
was recommended or endorsed by at least two-thirds of the directors who 
where Continuing Directors at the time of such election.

"Controlled Group" shall mean all members of a controlled 
group of corporations and all trades or businesses (whether or not 
incorporated) under common control which, together with any Borrower, are 
treated as a single employer under Section 414 of the Code.

"Customer" shall mean and include the account debtor with 
respect to any Receivable and/or the prospective purchaser of goods, 
services or both with respect to any contract or contract right, and/or 
any party who enters into or proposes to enter into any contract or other 
arrangement with any Borrower, pursuant to which such Borrower is to 
deliver any personal property or perform any services.

"Default" shall mean an event which, with the giving of notice 
or passage of time or both, would constitute an Event of Default.

"Default Rate" shall have the meaning set forth in Section 3.1 hereof.

"Defaulting Lender" shall have the meaning set forth in Section 2.16(a) 
hereof.

"Depository Accounts" shall have the meaning set forth in Section 4.1 S(h) 
hereof.

"Documents" shall have the meaning set forth in Section 8.1(c) hereof.

"Dollar" and the sign "$" shall mean lawful money of the United States of 
America.

Base Rate.

,

|72406.7) 00 1 246-00024

"Domestic Rate Loan" shall mean any Advance that bears interest based upon 
the Alternate

- 7 -



~ -

"Early Termination Date" shall have the meaning set forth in Section 13.1 
hereof.

"Earnings Before Interest and Taxes" shall mean, for any 
period, the sum of (i) net income (or loss) of Borrowers on a consolidated 
basis for such period (excluding extraordinary gains), ~ (ii) all interest 
expense of Borrowers on a consolidated basis for such period, p1~ (iii) 
all charges against income of Borrowers on a consolidated basis for such 
period for federal, state and local taxes.

"EBITDA" shall mean for any period the sum, for Borrowers on a 
consolidated basis, of (i) Earnings Before Interest and Taxes for such 
period plus (ii) depreciation expenses for such period,

(iii) amortization expenses for such period.

"Eligible Assignee" shall mean a Lender or a U.S. based 
Affiliate of a Lender; a commercial bank organized under the laws of the 
United States or any state and having total assets in excess of 
$5,000,000,000 or an asset-based lending Affiliate of any such banks; or 
any other financial institution that is acceptable to Agent and Lenders 
and that in the ordinary course of its business extends credit of the type 
evidenced by the Revolving Credit Notes and as total assets in excess of 
$1,000,000,000.

"Eligible Inventory" shall mean and include, with respect to 
each Borrower, all Inventory of such Borrower (excluding work-in-process 
and packaging materials), valued at the lower of cost or market value, 
determined on a first-in-first-out basis, which is not, in Agent's 
opinion, obsolete, slow moving or unmerchantable and which Agent, in its 
sole discretion, shall not deem ineligible Inventory based on such 
considerations as Agent may from time to time deem to be appropriate, 
including whether the Inventory is subject to a perfected, first priority 
security interest in favor of Agent, whether the Inventory is subject to 
any other Lien that is not a Permitted Encumbrance, and whether the 
Inventory conforms to all standards imposed by any Governmental Body that 
has regulatory authority over such goods or the use or sale thereof. 
Without limiting the generality of the foregoing, no Inventory shall be 
Eligible Inventory if it does not meet all standards imposed by any 
Governmental Body, is in transit, is located outside the continental 
United States, is situated at a location (other than a location owned by a 
Borrower) and not subject to a landlord, mortgagee or warehouse agreement 
satisfactory to Agent, is situated at a location that is not otherwise in 
compliance with this Agreement, is Inventory owned by Hibbing that is not 
covered by a final appraisal received by Agent from MB Valuation Services, 
Inc. and in form and substance satisfactory to Agent, or constitutes 
Consigned Inventory.

"Eligible Receivables" shall mean and include, with respect to 
each Borrower, each Receivable of such Borrower arising in the ordinary 
course of such Borrower's business and which Agent, in its sole credit 
judgment, shall deem to be an Eligible Receivable, based on such 
considerations as Agent may from time to time deem appropriate. A 
Receivable shall not be deemed eligible unless such Receivable is subject 
to Agent's first priority perfected security interest and no other Lien 
(other than Permitted Encumbrances), and is evidenced by an invoice or 
other documentary evidence satisfactory to Agent. In addition, no 
Receivable shall be an Eligible Receivable if:

(a) it arises out of a sale made by any Borrower to an 
Affiliate of any Borrower or to a Person controlled by an Affiliate of any 
Borrower;

	(b)	it is due or unpaid more than ninety (90) days after the 
original invoice date;

{70406 7} 001246-00024



(c) fifty percent (50%) or more of the Receivables from such 
Customer are not deemed Eligible Receivables hereunder. Such percentage 
may, in Agent's sole discretion, be increased or decreased from time to 
time;

(d) any covenant, representation or warranty contained in this 
Agreement with respect to such Receivable has been breached;

(e) the Customer shall (i) apply for, suffer, or consent to 
the appointment of, or the taking of possession by, a receiver, custodian, 
trustee or liquidator of itself or of all or a substantial part of its 
property or call a meeting of its creditors, (ii) admit in writing its 
inability, or be generally unable, to pay its debts as they become due or 
cease operations of its present business, (iii) make a general assignment 
for the benefit of creditors, (iv) commence a voluntary case under any 
state or federal bankruptcy laws (as now or hereafter in effect), (v) be 
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take 
advantage of any other law providing for the relief of debtors, (vii) 
acquiesce to, or fail to have dismissed, any petition which is filed 
against it in any involuntary case under such bankruptcy laws, or (viii) 
take any action for the purpose of effecting any of the foregoing;

(f) the sale is to a Customer outside the continental United 
States of America, unless the sale is on letter of credit, guaranty or 
acceptance terms, in each case acceptable to Agent in its sole discretion;

(g) the sale to the Customer is on a bill-and-hold, guaranteed 
sale, sale-and-return, sale on approval, consignment or any other 
repurchase or return basis or is evidenced by chattel paper;

(h) Agent believes, in its sole judgment, that collection of 
such Receivable is insecure or that such Receivable may not be paid by 
reason of the Customer's financial inability to pay;

(i) the Customer is the United States of America, any state or 
any department, agency or instrumentality of any of them, unless the 
applicable Borrower assigns its right to payment of such Receivable to 
Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 
U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or 
has otherwise complied with other applicable statutes or ordinances;

(j) the goods giving rise to such Receivable have not been 
shipped and delivered to and accepted by the Customer or the services 
giving rise to such Receivable have not been performed by the applicable 
Borrower and accepted

by the Customer or the Receivable otherwise does not represent a final 
sale;

(k) the Receivables of the Customer exceed a credit limit 
determined by Agent, in its sole discretion, to the extent such Receivable 
exceeds such limit;

(1) the Receivable is subject to any offset, deduction, 
defense, dispute, or counterclaim, the Customer is also a creditor or 
supplier of a Borrower or the Receivable is contingent in any respect or 
for

any reason;

(m) the applicable Borrower has made any agreement with any 
Customer for any deduction therefrom, except for discounts or allowances 
made in the ordinary course of business for prompt payment, all of which 
discounts or allowances are reflected in the calculation of the face value 
of each respective invoice related thereto;

{72406.7) 00 1 246-00024

_ 9 _



	(n)	shipment of the merchandise or the rendition of services has 
not been completed;

(o)

any return, rejection or repossession of the merchandise has occurred;

(p) such Receivable is not payable to a Borrower; or

(q) such Receivable is not otherwise satisfactory to Agent as 
determined in good faith by Agent in the exercise of its discretion in a 
reasonable manner.

"Environmental Complaint" shall have the meaning set forth in Section 
4.19(d) hereof.

"Environmental Laws" shall mean all federal, state and local 
environmental, land use, zoning, health, chemical use, safety and 
sanitation laws, statutes, ordinances and codes relating to the protection 
of the environment and/or governing the use, storage, treatment, 
generation, transportation, processing, handling, production or disposal 
of Hazardous Substances and the rules, regulations, policies, guidelines, 
interpretations, decisions, orders and directives of federal, state and 
local governmental agencies and authorities with respect thereto.

"Equipment" shall mean and include, as to each Borrower, all 
of such Borrower's goods (other than Inventory) whether now owned or 
hereafter acquired and wherever located, including all equipment, 
machinery, apparatus, motor vehicles, fittings, furniture, furnishings, 
fixtures (other than Building Fixtures), parts, accessories and all 
replacements and substitutions therefor or accessions thereto.

"Equity Interest" shall mean the interest of (i) a shareholder 
in a corporation, (ii) a partner (whether general or limited) in a 
partnership (whether general, limited or limited liability), (iii) a 
member in a limited liability company, or (iv) any other Person having any 
other form of equity security or ownership interest.

F;,-~

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

Eurodollar Rate.

hereof.

"Eurodollar Rate Loan" shall mean an Advance at any time that bears 
interest based on the

"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for 
the then current Interest Period relating thereto the interest rate per 
annum determined by PNC by dividing (the resulting quotient rounded 
upwards, if necessary, to the nearest 1/lOOth of 1% per annum) (i) the 
rate of interest determined by PNC in accordance with its usual procedures 
(which determination shall be conclusive absent manifest error) to be the 
eurodollar rate two (2) Business Days prior to the first day of such 
Interest Period for an amount comparable to such Eurodollar Rate Loan and 
having a borrowing date and a maturity comparable to such Interest Period 
by (ii) a number equal to 1.00 minus the Reserve Percentage.

"Event of Default" shall mean the occurrence of any of the events set 
forth in Article X

"Exchange Act" shall mean the United State Securities Exchange 
Act of 1934 (or any successor statute), as amended from time to time.

{72406 7} 001246-00024

- 10



"Excluded Equipment" shall mean each of the items of Equipment 
described on Schedule 1.2A hereto. but only so long as (i) such item of 
Equipment is subject to a valid and enforceable Lien that is in favor of a 
Person other than Agent that is in existence on the Closing Date, and (ii) 
an agreement is in effect between the Borrower owning such Equipment and 
the holder of such Lien that prohibits such Borrower from granting a Lien 
on such Equipment to another Person.

"Federal Funds Rate" shall mean, for any day, the weighted 
average of the rates on overnight Federal funds transactions with members 
of the Federal Reserve System arranged by Federal funds brokers, as 
published for such day (or if such day is not a Business Day, for the next 
preceding Business Day) by the Federal Reserve Bank of New York, or if 
such rate is not so published for any day which is a Business Day, the 
average of quotations for such day on such transactions received by PNC 
from three (3) Federal funds brokers of recognized standing selected by 
PNC.

Borrowers and PNC.

"Fee Letter" shall mean that certain letter agreement dated December 29, 
199X among

"Fiscal Quarter" shall mean one (1) of the four (4) fiscal 
quarters of Borrowers and their Subsidiaries for accounting and tax 
purposes, which end on March 31, June 30, September 30 and December 31 of 
each Fiscal Year.

"Fiscal Year" shall mean the fiscal year of Borrowers and 
their Subsidiaries for accounting and tax purposes, which ends on December 
31 of each year and, when preceded by the designation of a calendar year 
(e.g., 1999 Fiscal Year), means the Fiscal Year of Borrowers and their 
Subsidiaries ended on December 31 of such designated calendar year.

"Fixed Charges" shall mean, with respect to Borrowers on a 
consolidated basis for any period, the sum of (i) interest expense of 
Borrowers for such period; (ii) the aggregate of all scheduled principal 
payments on Funded Debt during such period; (iii) cash dividends, 
distributions, repurchases or redemptions permitted under this Agreement, 
whether declared or paid; (iv) payments with respect to Capitalized Lease 
Obligations during such period; and (v) Indebtedness that is payable 
during such period with respect to Capital Expenditures (other than 
Capital Expenditures made or incurred to maintain or preserve assets of a 
Borrower); provided, however, that Fixed Charges shall not include the 
amounts actually expended by the Borrowers in connection with (a) 
redemptions or repurchases of the Equity Interests of any Borrower 
permitted by Section 7.7 hereof and (b) prepayment of the Subordinated 
Indebtedness permitted by Section 7.17 hereof.

"Formula Amount" shall have the meaning set forth in Section 2.1(

"Funded Debt" shall mean all Capitalized Lease Obligations and 
all other Indebtedness that would, in accordance with GAAP, constitute 
long-term debt, including any Indebtedness with a maturity of more than 
one ( I ) year after the creation thereof and any Indebtedness that is 
renewable or extendable at the option of a Borrower for a period of more 
than one (1) year from the date of creation of such Indebtedness.

"GAAP" shall mean generally accepted accounting principles in 
the United States of America in effect from time to time.

172406 7} 001246-00024

- 11 -



"General Intangibles" shall mean and include, as to each 
Borrower, all of such Borrower's general intangibles, whether now owned or 
hereafter acquired, including all chases in action, causes of action, 
corporate or other business records, inventions, designs, patents, patent 
applications, equipment formulations, manufacturing procedures, quality 
control procedures, trademarks, service marks, trade secrets, goodwill, 
copyrights, design rights, registrations, licenses, franchises, customer 
lists, tax refunds, tax refund claims, computer programs, all claims under 
guaranties, security interests or other security held by or granted to 
such Borrower to secure payment of any of the Receivables by a Customer 
all rights of indemnification and all other intangible property of every 
kind and nature (other than Receivables).

"Governmental Body" shall mean any nation or government, any 
state or other political subdivision thereof or any entity exercising the 
legislative, judicial, regulatory or administrative functions of or 
pertaining to a government.

"Guarantor" shall mean a Person who may hereafter guarantee 
payment or performance of the whole or any part of the Obligations and 
"Guarantors" means collectively all such Persons.

"Guaranty" shall mean any guaranty of the Obligations executed 
by a Guarantor in favor of Agent for Agent's benefit and for the ratable 
benefit of Lenders.

"Guaranty Security Documents" shall mean and include (i) a 
Security Agreement duly executed by a Guarantor in favor of Agent, in form 
and content acceptable to Agent, and by which such Guarantor shall grant a 
security interest in favor of Agent, for its benefit and for the ratable 
benefit of Lenders, in all of such Guarantor's properties as security for 
the Obligations and such Guarantor's Guaranty, and (ii) all Lien 
Perfection Documents requested by Agent.

"Hazardous Discharge" shall have the meaning set forth in Section 4.19(d) 
hereof.

corporation.

"Hazardous Substance" shall mean, without limitation, any 
flammable explosives, radon, radioactive materials, asbestos, urea 
formaldehyde foam insulation, polychlorinated biphenyls, petroleum and 
petroleum products, methane, hazardous materials, Hazardous Wastes, 
hazardous or Toxic Substances or related materials as defined in CERCLA, 
the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801, et 
seq.), RCRA, or any other applicable Environmental Law and in the 
regulations adopted pursuant thereto.

"Hazardous Wastes" shall mean all waste materials subject to 
regulation under CERCLA, RCRA or applicable state law, and any other 
applicable Federal and state laws now in force or hereafter enacted 
relating to hazardous waste disposal.

"Hibbing Maryland" shall mean Hibbing Electronics Corporation MD, a 
Maryland

"Indebtedness" of a Person at a particular date shall mean all 
obligations of such Person which in accordance with GAAP would be 
classified upon a balance sheet as liabilities (except capital stock and 
surplus earned or otherwise) and in any event, without limitation by 
reason of enumeration, shall include all indebtedness, debt and other 
similar monetary obligations of such Person whether direct or guaranteed, 
and all premiums, if any, due at the required prepayment dates of such 
indebtedness, and all indebtedness secured by a Lien on assets owned by 
such Person, whether or not such indebtedness actually shall have been 
created,

	( 72406 7 	~00 1 246-00024

- 12 -



assumed or incurred by such Person. Any indebtedness of such Person 
resulting from the acquisition by such Person of any assets subject to any 
Lien shall be deemed, for the purposes hereof, to be the equivalent of the 
creation, assumption and incurring of the indebtedness secured thereby, 
whether or not actually so created, assumed or incurred.

"Indenture" shall mean that certain Indenture dated as of 
August 5, 1997, between Reptron and Reliance Trust Company, as Trustee.

Section 2.2(b).

"Individual Formula Amount" shall mean at the date of 
determination thereof, with respect to each Borrower, an amount equal to: 
(i) up to the Receivables Advance Rate of Eligible Receivables of such 
Borrower, ~ (ii) up to the Inventory Advance Rate of the value of Eligible 
Inventory of such Borrower; minus (iv) such reserves as Agent may 
reasonably deem proper and necessary from time to time.

"Interest Period" shall mean the period provided for any Eurodollar Rate 
Loan pursuant to

"Interest Rate Agreement" shall mean any forward contracts, 
future contracts, interest rate swap agreement, interest rate cap 
agreement, interest rate collar agreement, interest rate change agreement 
or other similar agreement or arrangement designed to protect any Borrower 
against fluctuations in interest rates.

"Inventory" shall mean and include as to each Borrower all of 
such Borrower's now owned or hereafter acquired goods, merchandise and 
other personal property, wherever located, to be furnished under any 
contract of service or held for sale or lease, all raw materials, work in 
process, finished goods and materials and supplies of any kind, nature or 
description which are or might be used or consumed in such Borrower's 
business or used in selling or furnishing such goods, merchandise and 
other personal property, and all documents of title or other documents 
representing them.

"Inventory Advance Rate" shall have the meaning set forth in Section 
2.1(a)(y)(ii) hereof.

"Joinder Agreement" shall mean an agreement in the form of 
Exhibit B annexed hereto by which a Person that is a wholly-owned 
Subsidiary of a Borrower shall become a "Borrower" under, and shall be 
bound by all the terms of, this Agreement, but only if and to the extent 
requested or permitted to do so by Agent in the exercise of its sole and 
absolute discretion.

"Leasehold Interest" shall mean the interest of a Borrower as 
lessee under a lease with respect to the premises used or occupied by it 
or at which any of the Collateral is stored.

"Lender" and "Lenders" shall have the meaning ascribed to such 
term in the preamble to this Agreement and shall include each Person which 
becomes a transferee, successor or assign of any Lender.

"Lien" shall mean any mortgage, deed of trust, pledge, 
hypothecation, assignment, security interest, lien (whether statutory or 
otherwise), Charge, claim or preference, priority or other security 
agreement or preferential arrangement held or asserted in respect of any 
asset of any kind or nature whatsoever, including any conditional sale or 
other title retention agreement, any lease having substantially the same 
economic effect as any of the foregoing, and the filing of, or agreement 
to give, any financing statement under the UCC or comparable law of any 
jurisdiction.

~ 72406.7 ~ 00 1 246-00024



"Lien Perfection Documents" shall mean all instruments, 
agreements, filings and recordings necessary or, in Agent's reasonable 
determination, necessary or desirable to perfect, maintain or continue the 
perfection of, or achieve or maintain the first priority status of any 
Lien granted to Agent pursuant to any of the Loan Documents by any 
Borrower or Guarantor, including all UCC- 1 financing statements, pledges, 
assignments, hypothecations, registrations of pledge, notifications, 
bailment agreements, landlord or mortgagee waivers, processor waivers, 
intercreditor agreements, subordination agreements, chattel mortgage 
filings or similar instruments, agreements or documents.

"Loan Documents" shall mean this Agreement and all of the Other Documents.

$50,000,000.

"Material Adverse Effect" shall mean a material adverse effect 
upon (a) the condition, operations, assets, business or prospects of any 
Borrower or Guarantor, (b) any Borrower's or Guarantor's ability to pay 
the Obligations in accordance with the terms thereof, (c) the value of the 
Collateral, or Agent's Liens on the Collateral or the priority of any such 
Lien or (d) the practical realization of the benefits of Agent's and each 
Lender's rights and remedies under this Agreement and the Other Documents.

"Material Contract" shall mean an agreement to which a 
Borrower or Guarantor is a party (other than the Loan Documents) (i) which 
is deemed to be a material contract as provided in Regulation S-K 
promulgated by the SEC under the Securities Act of 1933 or (ii) for which 
breach, termination, cancellation, nonperformance or failure to renew 
could reasonably be expected to have a Material Adverse Effect.

"Maximum Revolving Advance Amount" shall mean, from and after the Closing 
Date,

"Money Borrowed" shall mean, as applied to any Person, (i) 
Indebtedness arising from the lending of money by any other Person to such 
Person; (ii) Indebtedness, whether or not in any such case arising from 
the lending of money by another Person to such Person, (A) which is 
represented by notes payable or drafts accepted that evidence extensions 
of credit, (B) which constitutes obligations evidenced by bonds, 
debentures, notes or similar instruments, or (C) upon which interest 
charges are customarily paid (other than accounts payable) or that was 
issued or assumed as full or partial payment for property; (iii) 
Indebtedness that constitutes a capitalized lease obligation; (iv) 
reimbursement obligations with respect to letters of credit or guaranties 
of letters of credit; and (v) Indebtedness of such Person under any 
guaranty of obligations that would constitute Indebtedness for Money 
Borrowed under clauses (i) through (iii) hereof, if owed directly by such 
Person.

"Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.

"Multiemployer Plan" shall mean a "multiemployer plan" as 
defined in Sections 3(37) and 4001(a)(3) of ERISA.

"NationsBank" shall mean NationsBank, N.A., and its successors in 
interest.

"NationsBank Mortgage" shall mean the mortgage executed by 
Reptron with respect to the Real Property owned by Reptron in Tampa, 
Florida, to secure payment of the NationsBank Term Loan.

	'72406 7)	001246-00024

- 14



"NationsBank Term Loan" shall mean the term loan made by 
NationsBank to Reptron, in the original principal amount of $8,800,000, 
which is secured by the NationsBank Mortgage and as evidenced by the 
NationsBank Term Note.

"NationsBank Term Note" shall mean the promissory note 
evidencing the obligation of Reptron to pay the NationsBank Term Loan.

"Net Amount" shall mean, with reference to Eligible 
Receivables, the face amount of such Eligible Receivables on any date, 
less any and all returns, rebates, discounts (which may, at Agent's 
option, be calculated on shortest terms), credits, allowances or taxes 
(including sales, excise or other taxes) at any time issued, owing, 
claimed by Customers, granted, outstanding or payable in connection with, 
or any interest accrued on the amount of, such Eligible Receivables at 
such date.

"Note Pledge" shall mean the Note Pledge Agreement to be 
executed by Reptron Pennsylvania in favor of Agent on or before the 
Closing Date and by which Reptron Pennsylvania shall grant a Lien to 
Agent, for its benefit and for the ratable benefit of Lenders, as security 
for the Obligations, all of Reptron Pennsylvania's' right, title and 
interest in and to the NationsBank Term Note and the NationsBank Mortgage.

"Obligations" shall mean and include the following, in each 
case, whether now in existence or hereafter arising, (i) the principal of, 
and interest and premium, if any, on the Advances; (ii) all Indebtedness 
and other obligations of any Borrower to any Lender under any Interest 
Rate Agreement, currency or equity swap, future, option, or other similar 
agreement or arrangement; (iii) all other Indebtedness, covenants and 
duties now or at any time or times hereafter owing by any or all of 
Borrowers to Agent or any Lender arising under or pursuant to this 
Agreement or any of the other Loan Documents, whether evidenced by any 
note or other writing, whether arising from any extension of credit, 
opening of a letter of credit, acceptance, loan, guaranty, indemnification 
or otherwise, whether direct or indirect, absolute or contingent, due or 
to become due, primary or secondary, or joint or several, including all 
interest, charges, expenses, fees or other sums chargeable to any or all 
Borrowers or Guarantors hereunder or under any of the other Loan 
Documents; and (iv) in the case of PNC and its Affiliates, any 
indebtedness, liabilities, obligations, covenants and duties arising in 
connection with any banking or related transactions, services or functions 
provided to any Borrower or Guarantor in connection with any conduct of 
such Borrower's or Guarantor's business (excluding extensions of credit 
giving rise to any Indebtedness for Money Borrowed not related to this 
Agreement or any other Loan Documents).

"Organization Documents" shall mean, with respect to any 
Person, its charter, certificate or articles of incorporation, bylaws, 
articles of organization, operating agreement, members' agreement, 
partnership agreement, voting trust or similar agreement or instrument 
governing the formation or operation of such Person.

"Other Documents" shall mean the Revolving Credit Notes, any 
Interest Rate Agreement with PNC, the Questionnaires, each Joinder 
Agreement, each Guaranty, the Guaranty Security Documents, the Trademark 
Security Agreement, the Note Pledge, the Business Interruption Insurance 
Assignment, all Lien Perfection Documents and any and all other 
agreements, instruments and documents, including guaranties, pledges, 
powers of attorney, consents, and all other writings heretofore, now or 
hereafter executed by any Borrower or any Guarantor and/or delivered to 
Agent or any Lender in respect of the transactions contemplated by this 
Agreement.

t72406 7} 001246-00024

- 15 -



-

"Out-of-Formula Condition" shall have the meaning set forth in Section 
2.1(c) of this

Agreement.

"Out-of-Formula Loan" shall mean a Revolving Advance made when 
an Out-of-Formula Condition exists or the amount of any Revolving Advance 
which, when funded, results in an Out-of-Formula Condition.

"Owned Real Property" shall mean the Real Property that is 
owned by a Borrower and that is located in Tampa, Florida and Gaylord, 
Michigan.

"Parent" of any Person shall mean a corporation or other 
entity owning, directly or indirectly at least 50% of the shares of stock 
or other Equity Interests having ordinary voting power to elect a majority 
of the directors of the Person or other individuals performing similar 
functions for any such Person.

"Participant" shall mean each Person who shall be granted the 
right by any Lender to participate in any of the Advances and who shall 
have entered into a participation agreement in form and substance 
satisfactory to such Lender.

"Payment Office" shall mean initially Two PNC Plaza, 620 
Liberty Avenue, 18th Floor, Pittsburgh, Pennsylvania 15222; thereafter, 
such other office of Agent, if any, which it may designate by notice to 
Borrowing Agent and to each Lender to be the Payment Office.

"PBGC" shall mean the Pension Benefit Guaranty Corporation.

"Permitted Acquisition" shall mean any Acquisition by any 
Borrower in which each of the following conditions is satisfied: (i) the 
business of the Acquisition Target to be acquired is related or 
substantially similar to the business of Borrowers; (ii) immediately 
before and after giving effect to such Acquisition, no Default or Event of 
Default shall have occurred and be continuing or would result therefrom; 
(iii) Borrowing Agent has given Agent not less than 30 days prior written 
notice of the proposed consummation of the Acquisition and has provided to 
Agent complete and accurate copies of all term sheets, letters of intent, 
commitment letters, proposals and drafts of Acquisition Documents, 
promptly after Borrower's receipt thereof; (iv) immediately after giving 
effect to the consummation of such Acquisition, Borrowers shall have an 
Undrawn Availability of at least $1O,00O,000; (v) Borrowers' consummation 
of the Acquisition will be in compliance with Applicable Law (and Agent 
and Lenders shall have received legal opinions to that effect from 
Borrowers' legal counsel, if and to the extent so requested by Agent and 
Lenders) and Borrowers shall have obtained all required approvals from 
Governmental Bodies; (vi) Agent shall have completed its field examination 
of the business to be acquired with respect to all assets of the 
Acquisition Target which may constitute Eligible Receivables or Eligible 
Inventory and the information obtained may be used by Agent and Lenders in 
determining applicable advance rates for the assets of the Acquisition 
Target for purposes hereof; (vii) if the Acquisition takes the form of a 
purchase of Equity Interests of the Acquisition Target or if the 
Acquisition involves the formation of a new Subsidiary of a Borrower to 
purchase the assets of the Acquisition Target, the Acquisition Target or 
such newly-formed Subsidiary becomes a wholly-owned Subsidiary of a 
Borrower upon the consummations of the Acquisitions; and (viii) 
concurrently with the consummation of such Acquisition, any wholly-owned 
Subsidiary formed or acquired in connection with the Acquisition shall, at 
Agent's option, either (x) execute and deliver to Agent a Joinder 
Agreement by which such Subsidiary shall become a Borrower hereunder and 
bound by all of the terms hereof and each of the Other Documents or (y) 
execute and deliver to Agent, for its benefit and for the ratable benefit 
of Lenders,

~ 72406 7 ~ 00 1 246-00024

- 16



- ~

a Guaranty and Guaranty Security Documents. Borrowers' acquisition of All 
American Semiconductor Inc. shall not be deemed a Permitted Acquisition.

"Permitted Encumbrances" shall mean (a) Liens in favor of 
Agent for the benefit of Agent and Lenders; (b) Liens for taxes, 
assessments or other governmental charges not delinquent or being contested 
in good faith and by appropriate proceedings and with respect to which 
proper reserves have been taken by Borrowers, but only if the Lien shall 
have no effect on the priority of the Liens in favor of Agent or the value 
of the assets in which Agent has such a Lien and a stay of enforcement of 
any such Lien shall be in effect; (c) Liens disclosed in the financial 
statements referred to in Section 5.5, the existence of which Agent has 
consented to in writing; (d) deposits or pledges to secure obligations 
under worker's compensation, social security or similar laws, or under 
unemployment insurance; (e) deposits or pledges to secure bids, tenders, 
contracts (other than contracts for the payment of money), leases, 
statutory obligations, surety and appeal bonds and other obligations of 
like nature arising in the ordinary course of any Borrower's business; (f) 
judgment Liens that have been stayed or bonded and mechanics', workers', 
materialmen's or other like Liens arising in the ordinary course of any 
Borrower's business with respect to obligations which are not due or which 
are being contested in good faith by the applicable Borrower; (g) Liens 
relating to operating leases that are permitted by this Agreement; (h) 
Purchase Money Liens that secure Permitted Purchase Money Indebtedness; (i) 
Liens securing Indebtedness of a Borrower, or Subsidiary of a Borrower, to 
another Borrower or such other Borrower's Subsidiary; (j) Liens in favor of 
NationsBank on the Closing Date that are to be satisfied in full and 
released on the Closing Date as a result of the application of Borrower's 
cash on hand at the Closing Date from the proceeds of the Advance is to be 
made on the Closing Date; and (k) Liens disclosed on Schedule 1.2B.

"Permitted Purchase Money Indebtedness" shall mean Purchase 
Money Indebtedness of Borrowers (excluding any Purchase Money Indebtedness 
arising in connection with a Permitted Sale/Leaseback Transaction) which is 
incurred after the date of this Agreement and which is secured by no Lien 
or only by a Purchase Money Lien, provided the aggregate amount of Purchase 
Money Indebtedness hereafter incurred in a Fiscal Year by Borrowers Am the 
aggregate of all Sale/Leaseback Transactions in such Fiscal Year by 
Borrowers may not exceed $12,500,000. For the purposes of this definition, 
the principal amount of any Purchase Money Indebtedness consisting of 
capitalized leases shall be computed as a Capitalized Lease Obligation.

"Permitted Sale/Leaseback Transaction" shall mean and include 
(i) a Sale/Leaseback Transaction in which the sale of Equipment is for 
cash; all of the cash from such sale is concurrently remitted to Agent for 
application to the Obligations in accordance with this Agreement; at least 
ten (10) Business Days prior written notice of the Sale/Leaseback 
Transaction is given to Agent; no Default or Event of Default exists at the 
time, or would result from the consummation, of such Sale/Leaseback 
Transaction; immediately prior to giving effect the consummation of any 
Sale/Leaseback Transaction (including the remittance of proceeds therefrom 
to Agent) on or before April 1, 2000, Undrawn Availability is not less than 
$10,000,000; the Equipment that is the subject of the Sale/Leaseback 
Transaction is sold for its fair market value; and the aggregate amount of 
Purchase Money Indebtedness hereafter incurred in a Fiscal Year by 
Borrowers As the aggregate of all Sale/Leaseback Transactions in such 
Fiscal Year by Borrowers may not exceed $12,500,000, and (ii) a 
Sale/Leaseback Transaction in which the sale of Owned Real Property is for 
cash; all of the cash from such sale is concurrently remitted to Agent for 
application to the Obligations in accordance with this Agreement; at least 
ten ( 10) Business Days prior written notice of the Sale/Leaseback 
Transaction is given to Agent; no Default or Event of Default exists at the 
time, or would result from the consummation, of such Sale/Leaseback 
Transaction; immediately prior to giving effect the consummation of any 
Sale/Leaseback

( 72406.7 } 00 1 246-00024

- 17



-

- -

Transaction (including the remittance of proceeds therefrom to Agent) on 
or before April 1, 200O, Undrawn Availability is not less than $1 
O,00O,000; the Owned Real Property that is the subject of the 
Sale/Leaseback Transaction is sold for its fair market value; the 
purchaser of such Owned Real Estate has entered into a landlord, mortgagee 
or other similar agreement satisfactory to Agent; and the aggregate amount 
of Purchase Money Indebtedness hereafter incurred in a Fiscal Year by 
Borrowers Us aggregate of all Sale/Leaseback Transactions in such Fiscal 
Year by Borrowers may not exceed $12,50O,000.

"Permitted Spinoff' shall mean a transaction in which a 
Borrower creates a Subsidiary that is, and all times remains, a 
wholly-owned Subsidiary of such Borrower and to which such Borrower 
transfers all or a part of its assets, provided that no Default or Event 
of Default exists at the time of, or after giving effect to, such 
transaction; such Borrower provides Agent with not less than fifteen (15) 
Business Days prior written notice of its intent to effect such a 
transaction (in which written notice such Borrower shall summarize all of 
the pertinent terms of the proposed transaction); and concurrently with 
the consummation of such transaction such Subsidiary shall, at Agent's 
option, either (x) execute and deliver to Agent a Joinder Agreement by 
which such Subsidiary shall become a Borrower hereunder and bound by all 
of the terms hereof and each of the Other Documents or (y) execute and 
deliver to Agent, for its benefit and for the ratable benefit of Lenders, 
a Guaranty and Guaranty Security Documents.

"Person" shall mean any individual, sole proprietorship, 
partnership, corporation, business trust, joint stock company, trust, 
unincorporated organization, association, limited liability company, 
institution, public benefit corporation, joint venture, entity or 
government (whether Federal, state, county, city, municipal or otherwise, 
including any instrumentality, division, agency, body or department 
thereof).

"Plan" shall mean any employee benefit plan within the meaning 
of Section 3(3) of ERISA, maintained for employees of Borrowers or any 
member of the Controlled Group or any such Plan to which any Borrower or 
any member of the Controlled Group is required to contribute on behalf of 
any of its employees.

"Pricing Formula Ratio" shall mean and include, with respect 
to any fiscal period for Borrowers on a consolidated basis, the ratio of 
(a) EBITDA mires Unfunded Capital Expenditures minus Cash Taxes minus 
payment of any management fees payable by a Borrower to a Person other 
than another Borrower (to the extent not included in the calculation of 
EBITDA), to (b) Fixed Charges, all calculated for such period in 
accordance with GAAP.

"Pro Forma Balance Sheet" shall have the meaning set forth in Section 
5.5(a) hereof.

"Pro Forma Financial Statements" shall have the meaning set forth in 
Section 5.5(b) hereof.

"Projections" shall have the meaning set forth in Section 5.5(b) hereof.

"Purchase Money Indebtedness" shall mean and include (i) 
Indebtedness (other than the Obligations) of any or all of Borrowers for 
the payment of all or any part of the purchase price of any fixed assets, 
(ii) any Indebtedness (other than the Obligations) of any or all of 
Borrowers incurred at the time of or within ten (10) days prior to or 
after the acquisition of any fixed assets for the purpose of financing all 
or any part of the purchase price thereof (whether by means of a loan 
agreement, capitalized lease or otherwise), and (iii) any renewals, 
extensions or refinancings (but not any increases in the principal 
amounts) thereof outstanding at the time.

{ 72406.7 ~ 00 1 246-00024

- 18 -
An

"Purchase Money Lien" shall mean a Lien upon fixed assets which 
secures Purchase Money Indebtedness, but only if such Lien shall at all 
times be confined solely to the fixed assets acquired through the 
incurrence of the Purchase Money Indebtedness secured by such Lien and 
such Lien constitutes a purchase money security interest under the UCC.

"Questionnaire" shall mean the Documentation Information 
Questionnaire and the responses thereto provided by each Borrower and 
delivered to Agent.

"RCRA" shall mean the Resource Conservation and Recovery Act, 
42 U.S.C. 6901 et seq., as same may be amended from time to time.

"Real Property" shall mean all of each Borrower's right, title 
and interest in and to any real property, whether owned or leased by such 
Borrower.

"Receivables" shall mean and include, as to each Borrower, all 
of such Borrower's accounts, contract rights, instruments (including those 
evidencing Indebtedness owed to a Borrower by any of its Affiliates), 
documents, chattel paper, general intangibles relating to accounts, drafts 
and acceptances, and all other forms of obligations owing to such Borrower 
arising out of or in connection with the sale or lease of Inventory or the 
rendition of services, all guarantees and other security therefor, whether 
secured or unsecured, now existing or hereafter created, and whether or 
not specifically sold or assigned to Agent hereunder.

"Receivables Advance Rate" shall have the meaning set forth in Section 
2.1(a)(y)(i) hereof.

"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.

Of any Borrower.

~ 72406.7 ~ 00 1 246-00024

"Reportable Event" shall mean a reportable event described in 
Section 4043(b) of ERISA or the regulations promulgated thereunder.

"Required Lenders" shall mean Lenders holding at least 
fifty-one percent (51%) of the Advances and, if no Advances are 
outstanding, shall mean Lenders holding fifty-one percent (51 %) of the 
Commitment Percentages; provided, however, that if any Lender shall be in 
breach of its obligations hereunder to any Borrower or Agent, including 
any breach resulting from its failure to honor its commitment in 
accordance with the terms of this Agreement, then, for so long as such 
breach continues, the term "Required Lenders" shall mean Lenders 
(excluding each Lender that is in breach of its obligations hereunder) 
holding at least fifty-one percent (51%) of the Advances, and, if no 
Advances are outstanding, at least fifty-one percent (51%) of the 
Commitment Percentages.

"Reserve Percentage" shall mean the maximum effective 
percentage in effect on any day as prescribed by the Board of Governors of 
the Federal Reserve System (or any successor) for determining the reserve 
requirements (including supplemental, marginal and emergency reserve 
requirements) with respect to euroccurency funding.

"Revolving Advances" shall mean Advances made under this Agreement to be 
for the benefit

- 19



-

Section 2. 1 (a) hereof.

"Revolving Credit Notes" shall mean, collectively, promissory notes 
referred to in

"Revolving Interest Rate" shall mean an interest rate per 
annum equal to (a) the sum of the Alternate Base Rate p1~ the Applicable 
Margin with respect to Domestic Rate Loans, (b) the sum of the Eurodollar 
Rate ~21~ the Applicable Margin with respect to Eurodollar Rate Loans.

"Sale/Leaseback Transaction" shall mean a transaction in which 
a Borrower shall sell a portion of its Equipment to a Person and shall 
concurrently lease such Equipment back from such Person, pursuant to the 
terms of a written lease (whether or not such lease constitutes a true 
lease or a financing lease).

"Settlement Date" shall mean the Closing Date and thereafter 
Wednesday of each week unless such day is not a Business Day in which case 
it shall be the next succeeding Business Day.

"Solvent" shall mean, with respect to any Person, such Person 
(i) owns Property whose fair saleable value is greater than the amount 
required to pay all of such Person's Indebtedness (including contingent), 
(ii) is able to pay all of its Indebtedness as such Indebtedness matures, 
(iii) has capital sufficient to carry on its business and transactions and 
all business and transactions in which it is about to engage, and (iv) is 
not "insolvent" within the meaning of Section 101(32) of the Bankruptcy 
Code.

"Subordinated Debt Documents" shall mean all instruments and 
agreements now or hereafter executed by any or all of Borrowers in favor 
of any Person to evidence any Borrower's obligation to pay any 
Subordinated Indebtedness, including the Indenture and the Subordinated 
Notes.

"Subordinated Indebtedness" shall mean the Indebtedness of 
Reptron evidenced by the Subordinated Notes and all of the Indebtedness of 
any or all of Borrowers that is fully and completely subordinated to the 
payment of the Obligations in a manner acceptable to Agent.

"Subordinated Notes" shall mean the 63/~% Convertible 
Subordinated Notes issued by Reptron pursuant to the Indenture.

"Subordinated Loan Documents" shall mean (i) the Indenture, 
(ii) each of the Subordinated Notes, (iii) any and all other agreements, 
instruments and documents, and all other writings heretofore, now or 
hereafter executed by Reptron or any other Person in respect of the 
transactions contemplated by the Indenture and (iv) any other instrument 
or agreement or hereafter executed by any Borrower in favor of a Person to 
evidence the obligation of such Borrower to pay Subordinated Indebtedness.

"Subsidiary" shall mean a corporation or other entity of whose 
shares of stock or other ownership interests having ordinary voting power 
(other than stock or other ownership interests having such power only by 
reason of the happening of a contingency) to elect a majority of the 
directors of such corporation, or other Persons performing similar 
functions for such entity, are owned, directly or indirectly, by such 
Person.

"Term" shall have the meaning set forth in Section 13.1 hereof.

"Termination Event" shall mean (i) a Reportable Event with 
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any 
Borrower or any member of the Controlled Group from a Plan

	~ 72406.7 }	00 1 246-00024

- 20 -



- -

or Multiemployer Plan during a plan year in which such entity was a 
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the 
providing of notice of intent to terminate a Plan in a distress termination 
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of 
proceedings to terminate a Plan or Multiemployer Plan; (v) any event or 
condition (a) which might constitute grounds under Section 4042 of ERISA 
for the termination of, or the appointment of a trustee to administer, any 
Plan or Multiemployer Plan, or (b) that may result in termination of a 
Multiemployer Plan pursuant to Section 4041 A of ERISA; or (vi) the partial 
or complete withdrawal within the meaning of Sections 4203 and 4205 of 
ERISA, of any Borrower or any member of the Controlled Group from a 
Multiemployer Plan.

"Toxic Substance" shall mean and include any material present 
on the Real Property or the Leasehold Interests which has been shown to 
have significant adverse effect on human health or which is subject to 
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C.   2601 
et seq., applicable state law, or any other applicable Federal or state 
laws now in force or hereafter enacted relating to toxic substances. "Toxic 
Substance" includes asbestos, polychlorinated biphenyls (PCBs) and 
lead-based paints.

"Trademark Security Agreement" shall mean the Trademark 
Security Agreement to be executed by Reptron in favor of Agent on or before 
the Closing Date and by which Reptron shall collaterally assign and grant a 
Lien to Agent, for its benefit and for the ratable benefit of Lenders, as 
security for the Obligations, all of Reptron's right, title and interest in 
and to all of its trademarks.

,,~

"Transferee" shall have the meaning set forth in Section 16.3(b) hereof.

~CC" shall mean the Uniform Commercial Code (or any successor 
statute) as adopted and in force in the State of Georgia or, when the laws 
of any other state govern the method or manner of the perfection or 
enforcement of any security interest in any of the Collateral, the Uniform 
Commercial Code (or any successor statute) of such state.

"Undrawn Availability" at a particular date shall mean an 
amount equal to (a) the lesser of (i) the Formula Amount or (ii) the 
Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding 
amount of Advances, plus (ii) all amounts due and owing to Borrowers' trade 
creditors which are 60 days or more past due, plus (iii) fees and expenses 
for which Borrowers are liable but which have not been paid or charged to 
Borrowers' Account.

"Unfunded Capital Expenditures" shall mean, for any period, 
the Capital Expenditures of a Person not financed by a means other than an 
Advance hereunder.

"Upstream Payment" shall mean a payment or distribution of 
cash or other property by a Subsidiary of a Borrower to such Borrower, 
whether in repayment of Indebtedness owed by such Subsidiary to such 
Borrower, to pay dividends on account of such Borrower's ownership of 
Equity Interests or otherwise.

"Value" shall mean, with reference to the value of Inventory, 
value determined on the basis of the lower of cost or market of such 
Inventory, with the cost thereof calculated on a first-in, first-out basis, 
determined in accordance with GAAP.

"Week" shall mean the time period commencing with the opening 
of business on a Wednesday and ending on the end of business the following 
Tuesday.

~ 72406 7 ~ 00 1 246-00024

- 21 -



1.3 UCC Terms. All terms used herein and defined in the UCC as 
adopted in the State of Georgia shall have the meaning given therein 
unless otherwise defined herein.

1.4 Certain Matters of Construction. The terms "herein," 
"hereof," and "hereunto. and other words of similar import refer to this 
Agreement as a whole and not to any particular section, paragraph or 
subdivision. Any pronoun used shall be deemed to cover all genders. 
Wherever appropriate in the context, terms used herein in the singular 
also include the plural and vice versa. All references to statutes and 
related regulations shall include any amendments of same and any successor 
statutes and regulations. All references herein to the time of day shall 
mean the time in Atlanta, Georgia. Unless otherwise provided all 
references to any instruments or agreements to which Agent is a party, 
including references to any of the Other Documents, shall include any and 
all modifications or amendments thereto and any and all extensions or 
renewals thereof. Whenever the words "including" or "include" shall be 
used, such words shall be understood to mean "including, without 
limitation" or "include, without limitation." A Default or Event of 
Default shall be deemed to exist at all times during the period commencing 
on the date that such Default or Event of Default occurs to the date on 
which such Default or Event of Default is waived in writing pursuant to 
this Agreement or, in the case of a Default, is cured with any period of 
cure expressly provided for in this Agreement; and an Event of Default 
shall "continue" or be "continuing" until such Event of Default has been 
waived in writing by Agent. Any Lien referred to in this Agreement or any 
of the Other Documents as having been created in favor of Agent, any 
agreement entered into by Agent pursuant to this Agreement or any of the 
Other Documents, any payment made by or to or funds received by Agent 
pursuant to or as contemplated by this Agreement or any of the Other 
Documents, or any act taken or admitted to be taken by Agent, shall, 
unless otherwise expressly provided, be created, entered into, made or 
received, or taken or omitted, for the benefit or account of Agent and 
Lenders.

 .

SECTION 2. ADVANCES. PAYMENTS.

2.1 Revolving Advances. (a) Subject to the terms and 
conditions set forth in this Agreement, each Lender, severally and not 
jointly, will make Revolving Advances to Borrowers in aggregate amounts 
outstanding at any time not to exceed such Lender's Commitment Percentage 
of the lesser of (x) the Maximum Revolving Advance Amount or (y) an amount 
equal to the sum of:

(i) up to eighty-five percent (85%), subject to the provisions of Section 
2.1(b) hereof

("Receivables Advance Rate"), of the Net Amount of Eligible Receivables, 
plus

(ii) up to the lesser of (A) fifty percent (50%), subject to the 
provisions of Section 2.1 (b)

hereof ("Inventory Advance Rate"), of the Value of the Eligible Inventory 
(the Receivables Advance
Rate and the Inventory Advance Rate shall be referred to collectively, as 
the "Advance Rates") or
(B) $25,000,000, minus

(iii) such reserves as Agent may reasonably deem proper and necessary from 
time to time.

The amount derived from the sum of(A) Sections 2.1(a)(y)(i) and (ii) 
minus (B) Section 2.1(a)(y)(iii) at any time and from time to time shall 
be referred to as the "Formula Amount." The Revolving Advances shall be 
evidenced by secured promissory notes ("Revolving Credit Notes") in favor 
of each Lender in substantially in the form attached hereto as Exhibit A. 
Borrowers and Lenders agree that, if any event occurs or any condition 
exists that Agent determines is likely to have a Material Adverse Effect, 
or if a Default or Event of Default exists, Agent shall have the right 
(exercisable at such time or times as Agent deems

{72406 7) 001246-00024

- 22 -



appropriate) to require that separate calculations of the Individual 
Formula Amount be made for each Borrower, as well as the right to limit 
the use of proceeds of Advances by each Borrower to an amount that does 
not exceed such Borrower's Individual Formula Amount.

(b) Discretionary Rights. The Advance Rates may be increased 
or decreased by Agent at any time and from time to time in the exercise of 
its reasonable discretion. Each Borrower consents to any such increases or 
decreases and acknowledges that decreasing the Advance Rates or increasing 
the reserves may limit or restrict Advances requested by Borrowing Agent. 
Agent shall give Borrowing Agent five (5) days prior written notice of its 
intention to decrease the Advance Rates.

(c) Out-of-Formula Loans. If the unpaid balance of Revolving 
Advances outstanding at any time should exceed the Formula Amount at such 
time (an "Out-of-Formula Condition"), such Revolving Advances shall 
nevertheless constitute Obligations that are secured by the Collateral and 
entitled to all of the benefits of the Loan Documents. If Agent or Lenders 
are willing in their sole and absolute discretion to make Out-of-Formula 
Loans, such Out-of-Formula Loans shall be payable on demand and shall bear 
interest at the Default Rate; provided that, if Lenders do make 
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to 
have changed the limits of Section 2.1 (a) or be obligated to honor 
requests for Revolving Advances when an Out-of-Formula Condition exists or 
would result therefrom.

2.2 Procedure for Revolving Advances Borrowing.

(a) Borrowing Agent on behalf of any Borrower may notify Agent 
prior to 12:00 noon (New York time) on a Business Day of a Borrower's 
request to incur, on that day, a Revolving Advance hereunder. Should any 
amount required to be paid as interest hereunder, or as fees or other 
charges under this Agreement or any other agreement with Agent or Lenders, 
or with respect to any other Obligation, become due, same shall be deemed 
a request for a Revolving Advance as of the date such payment is due, in 
the amount required to pay in full such interest, fee, charge or 
Obligation under this Agreement or any other agreement with Agent or 
Lenders, and such request shall be irrevocable.

(b) Notwithstanding the provisions of (a) above, in the event 
any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent 
shall give Agent at least three (3) Business Days prior written notice, 
specifying (i) the date of the proposed borrowing (which shall be a 
Business Day), (ii) the type of borrowing and the amount on the date of 
such Advance to be borrowed, which amount shall be an integral multiple of 
$1,000,000 and (iii) the duration of the first Interest Period therefor. 
Interest Periods for Eurodollar Rate Loans shall be for one, two, three or 
six months; provided, if an Interest Period would end on a day that is not 
a Business Day, it shall end on the next succeeding Business Day unless 
such day falls in the next succeeding calendar month in which case the 
Interest Period shall end on the next preceding Business Day. No 
Eurodollar Rate Loan shall be made available to Borrower during the 
continuance of a Default or an Event of Default.

(c) Each Interest Period of a Eurodollar Rate Loan shall 
commence on the date such Eurodollar Rate Loan is made and shall end on 
such date as Borrowing Agent may elect as set forth in (b)(iii) above 
provided that the exact length of each Interest Period shall be determined 
in accordance with the practice of the interbank market for offshore 
Dollar deposits and no Interest Period shall end after the last day of the 
Term.

{72406 7} 001246-00024

- 23 -



Borrowing Agent shall elect the initial Interest Period 
applicable to a Eurodollar Rate Loan by its notice of borrowing given to 
Agent pursuant to Section 2.2(b) or by its notice of conversion given to 
Agent pursuant to Section 2.2(d), as the case may be. Borrowing Agent shall 
elect the duration of each succeeding Interest Period by giving irrevocable 
written notice to Agent of such duration not less than three (3) Business 
Days prior to the last day of the then current Interest Period applicable 
to such Eurodollar Rate Loan. If Agent does not receive timely notice of 
the Interest Period elected by Borrowing Agent, Borrowers shall be deemed 
to have elected to convert to a Domestic Rate Loan subject to Section 
2.2(d) herein below.

(d) Provided that no Event of Default shall have occurred and 
be continuing, Borrowing Agent may, on the last Business Day of the then 
current Interest Period applicable to any outstanding Eurodollar Rate Loan, 
or on any Business Day with respect to Domestic Rate Loans, convert any 
such loan into a loan of another type in the same aggregate principal 
amount provided that any conversion of a Eurodollar Rate Loan shall be made 
only on the last Business Day of the then current Interest Period 
applicable to such Eurodollar Rate Loan. If Borrowing Agent desires to 
convert a loan, Borrowing Agent shall give Agent not less than three (3) 
Business Days prior written notice to convert from a Domestic Rate Loan to 
a Eurodollar Rate Loan or one (1) Business Day's prior written notice to 
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the 
date of such conversion, the loans to be converted and if the conversion is 
from a Domestic Rate Loan to any other type of loan, the duration of the 
first Interest Period therefor. After giving effect to each such 
conversion, there shall not be outstanding more than five (5) Eurodollar 
Rate Loans, in the aggregate.

(e) Borrowers shall jointly and severally indemnify Agent and 
Lenders and hold Agent and Lenders harmless from and against any and all 
losses or expenses that Agent and Lenders may sustain or incur as a 
consequence of any prepayment, conversion of or any default by Borrowers in 
the payment of the principal of or interest on any Eurodollar Rate Loan or 
failure by Borrowers to complete a borrowing of, a prepayment of or 
conversion of or to a Eurodollar Rate Loan after notice thereof has been 
given, including any interest payable by Agent or Lenders to lenders of 
funds obtained by it in order to make or maintain its Eurodollar Rate Loans 
hereunder. A certificate as to any additional amounts payable pursuant to 
the foregoing sentence submitted by Agent or any Lender to Borrowing Agent 
shall be conclusive absent manifest error.

,

,

(f) Notwithstanding any other provision hereof, if any 
applicable law, treaty, regulation or directive, or any change therein or 
in the interpretation or application thereof, shall make it unlawful for 
any Lender (for purposes of this subsection (g), the term "Lender" shall 
include any Lender and the of Lice or branch where any Lender or any 
corporation or bank controlling such Lender makes or maintains any 
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the 
obligation of Lenders to make Eurodollar Rate Loans hereunder shall 
forthwith be canceled and Borrowers shall, if any affected Eurodollar Rate 
Loans are then outstanding, promptly upon request from Agent, either pay 
all such affected Eurodollar Rate Loans or convert such affected Eurodollar 
Rate Loans into loans of another type. If any such payment or conversion of 
any Eurodollar Rate Loan is made on a day that is not the last day of the 
Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall 
pay Agent, upon Agent's request, such amount or amounts as may be necessary 
to compensate Lenders for any loss or expense sustained or incurred by 
Lenders in respect of such Eurodollar Rate Loan as a result of such payment 
or conversion, including any interest or other amounts payable by Lenders 
to lenders of funds obtained by Lenders in order to make or maintain such 
Eurodollar Rate Loan. A certificate as to any additional amounts payable 
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent 
shall be conclusive absent manifest error.

(72406 7) 001246-00024

- 24 -



2.3 Disbursement of Advance Proceeds. All Advances shall be 
disbursed from whichever office or other place Agent may designate from 
time to time and, together with any and all other Obligations of Borrowers 
to Agent or Lenders, shall be charged to Borrowers' Account on Agent's 
books. During the Term, Borrowers may use the Revolving Advances by 
borrowing, prepaying and reborrowing, all in accordance with the terms and 
conditions hereof. The proceeds of each Revolving Advance requested by 
Borrowers or deemed to have been requested by Borrowers under Section 
2.2(a) hereof shall, with respect to requested Revolving Advances to the 
extent Lenders make such Revolving Advances, be made available to the 
Borrowers on the day so requested by way of credit to such operating 
account at PNC, or such other bank as Borrowing Agent may designate 
following notification to Agent, in immediately available federal funds or 
other immediately available funds or, with respect to Revolving Advances 
deemed to have been requested by any Borrower, be disbursed to Agent to be 
applied to the outstanding Obligations giving rise to such deemed request.

2.4 Intentionally Omitted.

2.5 Maximum Advances. The aggregate balance of Revolving 
Advances outstanding at any time shall not exceed the lesser of (a) 
Maximum Revolving Advance Amount or (b) the Formula Amount.

2.6 Repayment of Obligations.

(a) The Advances and other Obligations shall be due and 
payable in full on the last day of the Term subject to earlier prepayment 
as herein provided.

(b) Each Borrower recognizes that the amounts evidenced by 
checks, notes, drafts or any other items of payment relating to and/or 
proceeds of Collateral may not be collectible by Agent on the date 
received. In consideration of Agent's agreement to conditionally credit 
Borrowers' Account as of the Business Day on which Agent receives those 
items of payment, each Borrower agrees that, in computing the charges 
under this Agreement, all items of payment shall be deemed applied by 
Agent on account of the Obligations one ( I ) Business Day after the 
Business Day Agent receives such payments via wire transfer or electronic 
depository check. Agent is not, however, required to credit Borrowers' 
Account for the amount of any item of payment that is unsatisfactory to 
Agent and Agent may charge Borrowers' Account for the amount of any item 
of payment which is returned to Agent unpaid.

(c) All payments of principal, interest and other amounts 
payable hereunder, or under any of the related agreements shall be made to 
Agent at the Payment Office not later than 1:00 p.m. (Pittsburgh, 
Pennsylvania time) on the due date therefor in lawful money of the United 
States of America in federal funds or other funds immediately available to 
Agent. Agent shall have the right to effectuate payment on any and all 
Obligations due and owing hereunder by charging Borrowers' Account or by 
making Advances as provided in Section 2.2 hereof.

(d) Borrowers shall pay principal, interest, and all other 
amounts payable hereunder, or under any related agreement, without any 
deduction whatsoever, including any deduction for any setoff or 
counterclaim.

2.7 Repayment of Excess Advances. The aggregate balance of 
Advances outstanding at any time in excess of the maximum amount of 
Advances permitted hereunder shall be immediately due and

{72406.7} 001246-00024

- 25 -



-

payable without the necessity of any demand, at the Payment Office, whether 
or not a Default or Event of Default has occurred.

2.8 Statement of Account. Agent shall maintain, in accordance 
with its customary procedures, a loan account ("Borrowers' Account") in the 
name of Borrowers in which shall be recorded the date and amount of each 
Advance made by Agent or Lenders and the date and amount of each payment in 
respect thereof; provided, however, the failure by Agent to record the date 
and amount of any Advance shall not adversely affect Agent or any Lender. 
Each month, Agent shall send to Borrowing Agent a statement showing the 
accounting for the Advances made, payments made or credited in respect 
thereof, and other transactions among Agent, Lenders and Borrowers during 
such month. The monthly statements shall be deemed correct and binding upon 
Borrowers in the absence of manifest error and shall constitute an account 
stated between Lenders and Borrowers, unless Agent receives a written 
statement of Borrowers' specific exceptions thereto within thirty (30) days 
after such statement is received by Borrowing Agent. The records of Agent 
with respect to the Borrowers' Account shall be conclusive evidence absent 
manifest error of the amounts of Advances and other charges thereto and of 
payments applicable thereto.

2.9 Intentionally Omitted.

2.10 Intentionally Omitted.

2.11 Intentionally Omitted.

2.12 Additional Payments. Any sums expended by Agent or any 
Lender due to any Borrower's failure to perform or comply with its 
obligations under this Agreement or any Other Document, including any 
Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 
hereof, may be charged to Borrowers' Account as a Revolving Advance and 
added to the Obligations.

2.13 Manner of Borrowing and Payment.

(a) Each borrowing of Revolving Advances shall be advanced 
according to the Commitment Percentages of Lenders.

(b) Each payment (including each prepayment) by Borrowers on 
account of the principal of and interest on the Revolving Advances, shall 
be applied to the Revolving Advances pro rata according to the applicable 
Commitment Percentages of Lenders. Except as expressly provided herein, all 
payments to be made by any Borrower on account of principal, interest and 
fees shall be made without set off or counterclaim and shall be made to 
Agent on behalf of the Lenders to the Payment Office, in each case on or 
prior to 1:00 p.m., in Dollars and in immediately available funds.

(c) (i) Notwithstanding anything to the contrary contained in 
Sections 2.1 3(a) and (b) hereof, commencing with the first Business Day 
following the Closing Date, each borrowing of Revolving Advances shall be 
advanced by Agent and each payment by any Borrower on account of Revolving 
Advances shall be applied first to those Revolving Advances advanced by 
Agent. On or before 1:00 p.m., on each Settlement Date commencing with the 
first Settlement Date following the Closing Date, Agent and Lenders shall 
make certain payments as follows: (i) if the aggregate amount of new 
Revolving Advances made by Agent during the preceding Week (if any) exceeds 
the aggregate amount of repayments applied to outstanding Revolving 
Advances during such preceding Week, then each Lender shall provide Agent 
with funds

~ 72406.7 } 00 1 246-00024

- 26 -



in an amount equal to its applicable Commitment Percentage of the 
difference between (w)such Revolving Advances and (x) such repayments and 
(ii) if the aggregate amount of repayments applied to outstanding Revolving 
Advances during such Week exceeds the aggregate amount of new Revolving 
Advances made during such Week, then Agent shall provide each Lender with 
funds in an amount equal to such Lender's applicable Commitment Percentage 
of the difference between (y) such repayments and (z) such Revolving 
Advances.

(ii) Agent and each Lender shall be entitled to earn 
interest at the applicable Revolving Interest Rate on outstanding Advances 
which it has funded.

(iii) Promptly following each Settlement Date, Agent 
shall submit to each Lender a certificate with respect to payments received 
and Advances made during the Week immediately preceding such Settlement 
Date. Such certificate of Agent shall be conclusive in the absence of 
manifest error.

(d) If any Lender or Participant (a "benefitted Lender") shall 
at any time receive any payment of all or part of its Advances, or interest 
thereon, or receive any Collateral in respect thereof (whether voluntarily 
or involuntarily or by set-off) in a greater proportion than any such 
payment to and Collateral received by any other Lender, if any, in respect 
of such other Lender's Advances, or interest thereon, and such greater 
proportionate payment or receipt of Collateral is not expressly permitted 
hereunder, such benefitted Lender shall purchase for cash from the other 
Lenders a participation in such portion of each such other Lender's 
Advances, or shall provide such other Lender with the benefits of any such 
Collateral, or the proceeds thereof, as shall be necessary to cause such 
benefitted Lender to share the excess payment or benefits of such 
Collateral or proceeds ratably with each of Lenders; provided, however, 
that if all or any portion of such excess payment or benefits is thereafter 
recovered from such benefitted Lender, such purchase shall be rescinded, 
and the purchase price and benefits returned, to the extent of such 
recovery, but without interest. Each Lender so purchasing a portion of 
another Lender's Advances may exercise all rights of payment (including 
rights of set-off) with respect to such portion as fully as if such Lender 
were the direct holder of such portion.

Ad..

 .-

(e) Unless Agent shall have been notified by telephone, 
confirmed in writing, by any Lender that such Lender will not make the 
amount which would constitute its applicable Commitment Percentage of the 
Advances available to Agent, Agent may (but shall not be obligated to) 
assume that such Lender shall make such amount available to Agent on the 
next Settlement Date and, in reliance upon such assumption, make available 
to Borrowers a corresponding amount. Agent will promptly notify Borrowers 
of its receipt of any such notice from a Lender. If such amount is made 
available to Agent on a date after such next Settlement Date, such Lender 
shall pay to Agent on demand an amount equal to the product of (i) the 
daily average Federal Funds Rate (computed on the basis of a year of 360 
days) during such period as quoted by Agent, times (ii) such amount, times 
(iii) the number of days from and including such Settlement Date to the 
date on which such amount becomes immediately available to Agent. A 
certificate of Agent submitted to any Lender with respect to any amounts 
owing under this paragraph (e) shall be conclusive, in the absence of 
manifest error. If such amount is not in fact made available to Agent by 
such Lender within three (3) Business Days after such Settlement Date, 
Agent shall be entitled to recover such an amount, with interest thereon at 
the rate per annum then applicable to such Revolving Advances hereunder, on 
demand from Borrowers; provided however, that Agent's right to such 
recovery shall not prejudice or otherwise adversely affect Borrowers' 
rights (if any) against such Lender.

{72406 7) 001246-00024

- 27 -



~ -

2.14 Mandatory Prepayments.

(a) When any Borrower sells or otherwise disposes of any 
Collateral (other than Inventory in the ordinary course of business), 
Borrowers shall repay the Advances in an amount equal to the net proceeds 
of such sale (i.e., gross proceeds less the reasonable costs of such sales 
or other dispositions), such repayments to be made promptly but in no event 
more than one (l) Business Day following receipt of such net proceeds, and 
until the date of payment, such proceeds shall be held in trust for Agent. 
The foregoing shall not be deemed to be implied consent to any such sale 
otherwise prohibited by the terms and conditions hereof. Such repayments 
shall be applied to the Obligations in such order as Agent may determine, 
subject to Borrowers' ability to reborrow Revolving Advances in accordance 
with the terms hereof.

(b) Intentionally Omitted.

2.15 Use of Proceeds. Borrowers shall apply the proceeds of 
Advances to (i) repay existing Indebtedness owed to NationsBank; (ii) pay 
any of the Obligations, including fees and expenses relating to this 
transaction; (iii) pay the purchase price of Permitted Acquisitions and the 
fees and expenses relating to such Permitted Acquisitions, provided that 
the aggregate amount of Advances that may be used to fund Permitted 
Acquisitions shall not exceed $20,000,000 in the aggregate; (iv) repurchase 
or redeem common stock of Reptron to the extent authorized by this 
Agreement and prepay Subordinated Indebtedness to the extent authorized by 
this Agreement, provided that the aggregate amount of all Advances used to 
redeem or repurchase such common stock and to prepay Subordinated 
Indebtedness, provided that the aggregate amount of Advances that may be 
used to repurchase or redeem common stock of Reptron and to prepay 
Subordinated Indebtedness shall not exceed $20,000,000; and (v) provide for 
Borrowers' working capital needs.

2.16 Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, 
in the event any Lender (x) has refused (which refusal constitutes a breach 
by such Lender of its obligations under this Agreement) to make available 
its portion of any Advance or (y) notifies either Agent or Borrowing Agent 
that it does not intend to make available its portion of any Advance (if 
the actual refusal would constitute a breach by such Lender of its 
obligations under this Agreement) (each, a "Lender Default"), all rights 
and obligations hereunder of such Lender (a "Defaulting Lender") as to 
which a Lender Default is in effect and of the other parties hereto shall 
be modified to the extent of the express provisions of this Section 2. l 6 
while such Lender Default remains in effect.

(b) Advances shall be incurred pro rata from Lenders (the 
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their 
respective Commitment Percentages, and no Commitment Percentage of any 
Lender or any pro rata share of any Advances required to be advanced by any 
Lender shall be increased as a result of such Lender Default. Amounts 
received in respect of principal of any type of Advances shall be applied 
to reduce the applicable Advances of each Lender pro rata based on the 
aggregate of the outstanding Advances of that type of all Lenders at the 
time of such application; provided, that, such amount shall not be applied 
to any Advances of a Defaulting Lender at any time when, and to the extent 
that, the aggregate amount of Advances of any Non-Defaulting Lender exceeds 
such Non-Defaulting Lender's Commitment Percentage of all Advances then 
outstanding.

(72406 7} 001246-00024

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(c) A Defaulting Lender shall not be entitled to give 
instructions to Agent or to approve, disapprove, consent to or vote on any 
matters relating to this Agreement and the Other Documents. All amendments, 
waivers and other modifications of this Agreement and the Other Documents 
may be made without regard to a Defaulting Lender and, for purposes of the 
definition of "Required Lenders," a Defaulting Lender shall be deemed not 
to be a Lender and not to have Advances outstanding.

(d) Other than as expressly set forth in this Section 2.16, 
the rights and obligations of a Defaulting Lender (including the obligation 
to indemnify Agent) and the other parties hereto shall remain unchanged. 
Nothing in this Section 2.16 shall be deemed to release any Defaulting 
Lender from its obligations under this Agreement and the Other Documents, 
shall alter such obligations, shall operate as a waiver of any default by 
such Defaulting Lender hereunder, or shall prejudice any rights which any 
Borrower, Agent or any Lender may have against any Defaulting Lender as a 
result of any default by such Defaulting Lender hereunder.

(e) In the event a Defaulting Lender retroactively cures to 
the satisfaction of Agent the breach which caused a Lender to become a 
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting 
Lender and shall be treated as a Lender under this Agreement.

SECTION 3. INTEREST AND FEES.

,

3.1 Interest. Interest on Advances shall be payable in arrears 
on the last day of each month with respect to Domestic Rate Loans and, with 
respect to Eurodollar Rate Loans, at the end of each Interest Period or, 
for Eurodollar Rate Loans with an Interest Period in excess of three 
months, at (a) each three months on the anniversary date of the 
commencement of such Eurodollar Rate Loan and (b) the end of the Interest 
Period. Interest charges shall be computed on the actual principal amount 
of Advances outstanding during the month (the "Monthly Advances") at a rate 
per annum equal to the applicable Revolving Interest Rate. Whenever, 
subsequent to the date of this Agreement, the Alternate Base Rate is 
increased or decreased, the applicable Revolving Interest Rate for Domestic 
Rate Loans shall be similarly changed without notice or demand of any kind 
by an amount equal to the amount of such change in the Alternate Base Rate 
during the time such change or changes remain in effect. The Eurodollar 
Rate shall be adjusted with respect to Eurodollar Rate Loans without notice 
or demand of any kind on the effective date of any change in the Reserve 
Percentage as of such effective date. Upon and after the occurrence of an 
Event of Default, and during the continuation thereof, the Obligations 
other than Eurodollar Rate Loans shall bear interest at the applicable 
Revolving Interest Rate plus two (2%) percent per annum (the "Default 
Rate").

3.2 Interest Rate Disclosure and Calculation. The Advances to 
be made by Lenders to Borrowers on the Closing Date shall be made as 
Domestic Rate Loans. The Alternate Base Rate on the date hereof is seven 
and three-quarter percent (7.75%) per annum and, therefore, the rate of 
interest in effect hereunder on the date hereof for Domestic Rate Loans, 
expressed in simple interest terms, is seven and three-quarter percent 
(7.75%) per annum.

3.3 Closing. Facility and Agent Fees.

(a) Upon the execution of this Agreement, Borrowers shall pay 
to Agent for the ratable benefit of Lenders a closing fee of $187,500.

t72406.7} 001246-00024

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(b) If, for any month during the Term, the average daily 
unpaid balance of the Revolving Advances for each day of such month does 
not equal the Maximum Revolving Advance Amount for such month, then 
Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a 
rate equal to Applicable Facility Fee Percentage on the amount by which 
the Maximum Revolving Advance Amount exceeds such average daily unpaid 
balance. Such fee shall be payable to Agent in arrears on the last day of 
each month.

(c) In consideration of Agent's syndication of this Agreement 
and service as Agent hereunder, Borrowers shall pay to Agent an agency fee 
of $25,000 per year, which fee shall be payable on the Closing Date and on 
each anniversary of the date of this Agreement.

3.4 Collateral Evaluation and Monitoring Fee.

(a) Borrowers shall pay Agent a collateral evaluation fee 
equal to $1,750 per month, commencing on the first day of the month 
following the Closing Date and on the first day of each month thereafter 
during the Term. The collateral evaluation fee shall be deemed earned in 
full on the date when same is due and payable hereunder and shall not be 
subject to rebate or proration upon termination of this Agreement for any 
reason.

(b) Borrowers shall pay to Agent on the first day of each 
month following any month in which Agent performs any collateral 
monitoring - namely any field examination, collateral analysis or other 
business analysis, the need for which is to be determined by Agent and 
which monitoring is undertaken by Agent or for Agent's benefit - a 
collateral monitoring fee in an amount equal to $675 per day for each 
person (other than Agent's management personnel) employed to perform such 
monitoring and in an amount equal to $675 per day for each manager of 
Agent performing such monitoring, plus all costs and disbursements 
incurred by Agent in the performance of such examination or analysis.

3.5 Computation of Interest and Fees. Interest and fees 
hereunder shall be computed on the basis of a year of 360 days and for the 
actual number of days elapsed. If any payment to be made hereunder becomes 
due and payable on a day other than a Business Day, the due date thereof 
shall be extended to the next succeeding Business Day and interest thereon 
shall be payable at the applicable Revolving Interest Rate during such 
extension.

3.6 Maximum Charges. In no event whatsoever shall interest and 
other charges charged hereunder exceed the highest rate permissible under 
Applicable Law. In the event interest and other charges as computed 
hereunder would otherwise exceed the highest rate permitted under 
Applicable Law, such excess amount shall be first applied to any unpaid 
principal balance owed by Borrowers, and if the then remaining excess 
amount is greater than the previously unpaid principal balance, Lenders 
shall promptly refund such excess amount to Borrowers and the provisions 
hereof shall be deemed amended to provide for such permissible rate.

3.7 Increased Costs. In the event that any Applicable Law, 
treaty or governmental regulation, or any change therein or in the 
interpretation or application thereof, or compliance by any Lender (for 
purposes of this Section 3.7, the term "Lender" shall include Agent or any 
Lender and any corporation or bank controlling Agent or any Lender) and 
the office or branch where Agent or any Lender (as so defined) makes or 
maintains any Eurodollar Rate Loans with any request or directive (whether 
or not having the force of law) from any central bank or other financial, 
monetary or other authority, shall:

{72406 7) 001246-00024

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(a) subject Agent or any Lender to any tax of any kind 
whatsoever with respect to this Agreement or any Other Document or change 
the basis of taxation of payments to Agent or any Lender of principal, 
fees, interest or any other amount payable hereunder or under any Other 
Documents (except for changes in the rate of tax on the overall net income 
of Agent or any Lender by the jurisdiction in which it maintains its 
principal office);

(b) impose, modify or hold applicable any reserve, special 
deposit, assessment or similar requirement against assets held by, or 
deposits in or for the account of, advances or loans by, or other credit 
extended by, any of flee of Agent or any Lender, including pursuant to 
Regulation D of the Board of Governors of the Federal Reserve System; or

(c) impose on Agent or any Lender or the London interbank 
Eurodollar market any other condition with respect to this Agreement or 
any Other Document;

and the result of any of the foregoing is to increase the cost to Agent or 
any Lender of making, renewing or maintaining its Advances hereunder by an 
amount that Agent or such Lender deems to be material or to reduce the 
amount of any payment (whether of principal, interest or otherwise) in 
respect of any of the Advances by an amount that Agent or such Lender 
deems to be material, then, in any case Borrowers shall promptly pay Agent 
or such Lender, upon its demand, such additional amount as will compensate 
Agent or such Lender for such additional cost or such reduction, as the 
case may be, provided that the foregoing shall not apply to increased 
costs which are reflected in the Eurodollar Rate. Agent or such Lender 
shall certify the amount of such additional cost or reduced amount to 
Borrowers, and such certification shall be conclusive absent manifest 
error.

3.S Basis For Determining Interest Rate Inadequate or Unfair. 
In the event that Agent or any Lender shall have determined that:

(a) reasonable means do not exist for ascertaining the 
Eurodollar Rate applicable pursuant to Section 2.2 hereof for any Interest 
Period; or

(b) Dollar deposits in the relevant amount and for the 
relevant maturity are not available in the London interbank Eurodollar 
market, with respect to an outstanding Eurodollar Rate Loan, a proposed 
Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan 
into a Eurodollar Rate Loan,

then Agent shall give Borrowing Agent prompt written, telephonic or 
telegraphic notice of such determination. If such notice is given, (i) any 
such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, 
unless Borrowing Agent shall notify Agent no later than 10:00 a.m. (New 
York City time) two (2) Business Days prior to the date of such proposed 
borrowing, that its request for such borrowing shall be cancelled or made 
as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan 
or Eurodollar Rate Loan that was to have been converted to an affected 
type of Eurodollar Rate Loan shall be continued as or converted into a 
Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later 
than 10:00 a.m. (New York City time) two (2) Business Days prior to the 
proposed conversion, shall be maintained as an unaffected type of 
Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate 
Loans shall be converted into a Domestic Rate Loan, or, if Borrowing Agent 
shall notify Agent, no later than 10:00 a.m. (New York City time) two (2) 
Business Days prior to the last Business Day of the then current Interest 
Period applicable to such affected Eurodollar Rate Loan, shall be 
converted into an unaffected type of Eurodollar Rate Loan, on the last 
Business Day of the then current Interest Period for such affected 
Eurodollar Rate Loans. Until such

{72406 7} 001246-00024

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-

notice has been withdrawn, Lenders shall have no obligation to make an 
affected type of Eurodollar Rate Loan or maintain outstanding affected 
Eurodollar Rate Loans and no Borrower shall have the right to convert a 
Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan into an 
affected type of Eurodollar Rate Loan.

3.9 Capital Adequacy.

(a) In the event that Agent or any Lender shall have 
determined that any Applicable Law, rule, regulation or guideline regarding 
capital adequacy, or any change therein, or any change in the 
interpretation or administration thereof by any governmental authority, 
central bank or comparable agency charged with the interpretation or 
administration thereof, or compliance by Agent or any Lender (for purposes 
of this Section 3.9, the term "Lender" shall include Agent or any Lender 
and any corporation or bank controlling Agent or any Lender) and the office 
or branch where Agent or any Lender (as so defined) makes or maintains any 
Eurodollar Rate Loans with any request or directive regarding capital 
adequacy (whether or not having the force of law) of any such authority, 
central bank or comparable agency, has or would have the effect of reducing 
the rate of return on Agent or any Lender's capital as a consequence of its 
obligations hereunder to a level below that which Agent or such Lender 
could have achieved but for such adoption, change or compliance (taking 
into consideration Agent's and each Lender's policies with respect to 
capital adequacy) by an amount deemed by Agent or any Lender to be 
material, then, from time to time, Borrowers shall pay upon demand to Agent 
or such Lender such additional amount or amounts as will compensate Agent 
or such Lender for such reduction. In determining such amount or amounts, 
Agent or such Lender may use any reasonable averaging or attribution 
methods. The protection of this Section 3.9 shall be available to Agent and 
each Lender regardless of any possible contention of invalidity or 
inapplicability with respect to any Applicable Law or condition.

(b) A certificate of Agent or such Lender setting forth such 
amount or amounts as shall be necessary to compensate Agent or such Lender 
with respect to Section 3.9(a) hereof when delivered to Borrowers shall be 
conclusive absent manifest error.

SECTION 4. COLLATERAL: GENERAL TERMS.

4.1 Security Interest in the Collateral. To secure the prompt 
payment and performance to Agent and each Lender of the Obligations, each 
Borrower hereby assigns, pledges and grants to Agent, for its benefit and 
the ratable benefit of Lenders, a continuing security interest in and to 
all of its Collateral, whether now owned or existing or hereafter acquired 
or arising and wheresoever located. Each Borrower shall mark its books and 
records as may be necessary or appropriate to evidence, protect and perfect 
Agent's security interest and shall cause its financial statements to 
reflect such security interest.

4.2 Perfection of Security Interest. Each Borrower shall take 
all action that may be necessary or desirable, or that Agent may request, 
so as at all times to maintain the validity, perfection, enforceability and 
priority of Agent's security interest in the Collateral and to enable Agent 
to protect, exercise or enforce its rights hereunder and in the Collateral, 
including (i) immediately discharging all Liens other than Permitted 
Encumbrances, (ii) obtaining landlords' or mortgagees' Lien waivers, (iii) 
delivering to Agent, endorsed or accompanied by such instruments of 
assignment as Agent may specify, and stamping or marking, in such manner as 
Agent may specify, any and all chattel paper, instruments, letters of 
credits and advices thereof and documents evidencing or forming a part of 
the Collateral, (iv) entering into warehousing, lockbox and other custodial 
arrangements satisfactory to Agent, and (v) executing and delivering, or 
causing to be

{72406 7) 001246-00024

- 32 -



executed or delivered, Lien Perfection Documents requested by Agent, in 
each case in form and substance satisfactory to Agent, relating to the 
creation, validity, perfection, maintenance or continuation of Agent's 
security interest under the UCC or other Applicable Law. Agent is hereby 
authorized to file financing statements signed by Agent instead of Borrower 
in accordance with Section 9-402(2) of the UCC as adopted in the State of 
Georgia. Reptron Pennsylvania shall execute and deliver the Note Pledge 
and, pursuant to the terms thereof, deliver to Agent the original of the 
NationsBank Term Note and NationsBank Mortgage, as security for the payment 
of the Obligations. All charges, expenses and fees Agent may incur in doing 
any of the foregoing, and any local taxes relating thereto, shall be 
charged to Borrowers' Account as a Revolving Advance of a Domestic Rate 
Loan and added to the Obligations, or, at Agent's option, shall be paid to 
Agent for the ratable benefit of Lenders immediately upon demand.

4.3 Disposition of Collateral. Each Borrower will safeguard 
and protect all Collateral for Agent's general account and make no 
disposition thereof whether by sale, lease or otherwise except (a) the sale 
of Inventory in the ordinary course of business, (b) the disposition or 
transfer of Equipment in the ordinary course of business during any Fiscal 
Year having an aggregate fair market value of not more than $3,000,000 and 
only to the extent that (i) the proceeds of any such disposition are used 
to acquire replacement Equipment which is subject to Agent's first priority 
security interest or (ii) the proceeds of which are remitted to Agent for 
application to the Obligations in accordance with this Agreement, and (c) 
Permitted Sale/Leaseback Transactions.

4.4 Preservation of Collateral. Following the occurrence of a 
Default or Event of Default, in addition to the rights and remedies set 
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as 
Agent deems necessary to protect Agent's interest in and to preserve the 
Collateral, including the hiring of such security guards or the placing of 
other security protection measures as Agent may deem appropriate; (b) may 
employ and maintain at any of any Borrower's premises a custodian who shall 
have full authority to do all acts necessary to protect Agent's interests 
in the Collateral; (c) may lease warehouse facilities to which Agent may 
move all or part of the Collateral; (d) may use any Borrower's owned or 
leased lifts, hoists, trucks and other facilities or equipment for handling 
or removing the Collateral; and (e) shall have, and is hereby granted, a 
right of ingress and egress to the places where the Collateral is located, 
and may proceed over and through any Borrower's Real Property. Each 
Borrower shall cooperate fully with all of Agent's efforts to preserve the 
Collateral and will take such actions to preserve the Collateral as Agent 
may direct. All of Agent's expenses of preserving the Collateral, including 
any expenses relating to the bonding of a custodian, shall be charged to 
Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and added 
to the Obligations.

4.5 Ownership of Collateral. With respect to the Collateral, 
at the time the Collateral becomes subject to Agent's security interest: 
(a) each Borrower shall be the sole owner of and fully authorized and able 
to sell, transfer, pledge and/or grant a first priority security interest 
in each and every item of its respective Collateral to Agent; and, except 
for Permitted Encumbrances the Collateral shall be free and clear of all 
Liens whatsoever; (b) each document and agreement executed by each Borrower 
or delivered to Agent or any Lender in connection with this Agreement shall 
be true and correct in all respects; (c) all signatures and endorsements of 
each Borrower that appear on such documents and agreements shall be 
genuine, and each Borrower shall have full capacity to execute same; and 
(d) each Borrower's Equipment and Inventory shall be located as set forth 
on Schedule 4.5 and shall not be removed from such locations without the 
prior written consent of Agent except with respect to the sale of Inventory 
in the ordinary course of business and Equipment to the extent permitted in 
Section 4.3 hereof. In no event shall (i) the aggregate Value of Consigned 
Inventory on any date exceed ten percent (10%) of the aggregate Value of 
all Inventory,

(72406.7) 001246 00024

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(ii) the aggregate Value of inventory at all locations leased by any 
Borrower and not subject to a landlord, mortgagee or warehouseman 
agreement satisfactory to Agent exceed eight percent (8%) of the aggregate 
Value of all Inventory, and (iii) the aggregate Value of Inventory at any 
single location leased by a Borrower and not subject to a landlord, 
mortgagee or warehouseman agreement satisfactory to Agent exceed five 
percent (5%) of the aggregate Value of all Inventory,.

4.6 Defense of Agent's and Lenders' Interests. Until (a) 
payment and performance in full of all of the Obligations and (b) 
termination of this Agreement, Agent's interests in the Collateral shall 
continue in full force and effect. During such period no Borrower shall, 
without Agent's prior written consent, pledge, sell (except Inventory in 
the ordinary course of business and Equipment to the extent permitted in 
Section 4.3 hereof), assign, transfer, create or suffer to exist a Lien 
upon or encumber or allow or suffer to be encumbered in any way except for 
Permitted Encumbrances, any part of the Collateral. Each Borrower shall 
defend Agent's interests in the Collateral against any and all Persons 
whatsoever. At any time following demand by Agent for payment of all 
Obligations, Agent shall have the right to take possession of the indicia 
of the Collateral and the Collateral in whatever physical form contained, 
including labels, stationery, documents, instruments and advertising 
materials. If Agent exercises this right to take possession of the 
Collateral, Borrowers shall, upon demand, assemble it in the best manner 
possible and make it available to Agent at a place reasonably convenient 
to Agent. In addition, with respect to all Collateral, Agent and Lenders 
shall be entitled to all of the rights and remedies set forth herein and 
further provided by the UCC or other Applicable Law. Each Borrower shall, 
and Agent may, at its option, instruct all suppliers, carriers, 
forwarders, warehouses or others receiving or holding cash, checks, 
Inventory, documents or instruments in which Agent holds a security 
interest to deliver same to Agent and/or subject to Agent's order and if 
they shall come into any Borrower's possession, they, and each of them, 
shall be held by such Borrower in trust as Agent's trustee, and such 
Borrower will immediately deliver them to Agent in their original form 
together with any necessary endorsement.

4.7 Books and Records. Each Borrower shall (a) keep proper 
books of record and account in which full, true and correct entries will 
be made of all dealings or transactions of or in relation to its business 
and affairs; (b) set up on its books accruals with respect to all Charges 
and claims; and (c) on a reasonably current basis set up on its books, 
from its earnings, allowances against doubtful Receivables, advances and 
investments and all other proper accruals (including by reason of 
enumeration, accruals for premiums, if any, due on required payments and 
accruals for depreciation, obsolescence, or amortization of properties), 
which should be set aside from such earnings in connection with its 
business. All determinations pursuant to this subsection shall be made in 
accordance with, or as required by, GAAP consistently applied in the 
opinion of such independent public accountant as shall then be regularly 
engaged by Borrowers.

4.8 Financial Disclosure. Each Borrower hereby irrevocably 
authorizes and directs all accountants and auditors employed by such 
Borrower at any time during the Term to exhibit and deliver to Agent and 
each Lender copies of any of any Borrower's financial statements, trial 
balances or other accounting records of any sort in the accountant's or 
auditor's possession, and to disclose to Agent and each Lender any 
information such accountants may have concerning such Borrower's financial 
status and business operations. Each Borrower hereby authorizes all 
federal, state and municipal authorities to furnish to Agent and each 
Lender copies of reports or examinations relating to such Borrower, 
whether made by such Borrower or otherwise; however, Agent and each Lender 
will attempt to obtain such information or materials directly from such 
Borrower prior to obtaining such information or materials from such 
accountants or such authorities.

(72406.7} 001246-00024

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- --

4.9 Compliance with Laws. Each Borrower shall comply in all 
material respects with all Applicable Law with respect to its respective 
Collateral or any part thereof or to the operation of such Borrowers 
business the non-compliance with which could reasonably be expected to have 
a Material Adverse Effect on such Borrower. Each Borrower may, however, 
contest or dispute any acts, rules, regulations, orders and directions of 
those bodies or officials in any reasonable manner, provided that such 
contest or dispute is pursued diligently, in good faith and by appropriate 
proceedings, any related Lien is inchoate or stayed and sufficient reserves 
are established to the reasonable satisfaction of Agent to protect Agent's 
Lien on or security interest in the Collateral. The Collateral at all times 
shall be maintained in accordance with the requirements of all insurance 
carriers which provide insurance with respect to the Collateral so that 
such insurance shall remain in full force and effect.

4.10 Inspection of Premises. At all reasonable times Agent and 
each Lender shall have full access to and the right to audit, check, 
inspect and make abstracts and copies from each Borrower's books, records, 
audits, correspondence and all other papers relating to the Collateral and 
the operation of each Borrower's business. Agent, any Lender and their 
agents may enter upon any of Borrower's premises at any time during 
business hours and at any other reasonable time, and from time to time, for 
the purpose of inspecting the Collateral and any and all records pertaining 
thereto and the operation of such Borrower's business.

4.11 Insurance. Each Borrower shall bear the full risk of any 
loss of any nature whatsoever with respect to the Collateral. At each 
Borrower's own cost and expense in amounts and with carriers acceptable to 
Agent, each Borrower shall (a) keep all its properties in which it has an 
interest insured against the hazards of fire, flood, sprinkler leakage, 
those hazards covered by extended coverage insurance and such other 
hazards, and for such amounts, as is customary in the case of companies 
engaged in businesses similar to such Borrower's including business 
interruption insurance; (b) maintain a bond in such amounts as is customary 
in the case of companies engaged in businesses similar to such Borrower 
insuring against larceny, embezzlement or other criminal misappropriation 
of insured's officers and employees who may either singly or jointly with 
others at any time have access to the assets or funds of such Borrower 
either directly or through authority to draw upon such funds or to direct 
generally the disposition of such assets; (c) maintain public and product 
liability insurance against claims for personal injury, death or property 
damage suffered by others; (d) maintain all such worker's compensation or 
similar insurance as may be required under the laws of any state or 
jurisdiction in which such Borrower is engaged in business; (e) furnish 
Agent with (i) copies of all policies and evidence of the maintenance of 
such policies by the renewal thereof at least thirty (30) days before any 
expiration date, and (ii) appropriate loss payable endorsements in form and 
substance satisfactory to Agent, naming Agent as a co-insured and loss 
payee as its interests may appear with respect to all insurance coverage 
referred to in clauses (a) and (c) above, and providing (A) that all 
proceeds thereunder shall be payable to Agent, (B) no such insurance shall 
be affected by any act or neglect of the insured or owner of the property 
described in such policy, and (C) that such policy and loss payable clauses 
may not be cancelled, amended or terminated unless at least thirty (30) 
days prior written notice is given to Agent. In the event of any loss 
thereunder, the carriers named therein are hereby directed by Agent and the 
applicable Borrower to make payment for such loss to Agent and not to such 
Borrower and Agent jointly. If any insurance losses are paid by check, 
draft or other instrument payable to any Borrower and Agent jointly, Agent 
may endorse such Borrower's name thereon and do such other things as Agent 
may deem advisable to reduce the same to cash. When any Event of Default 
exists, Agent is hereby authorized to adjust and compromise claims under 
insurance coverage referred to in clauses (a) and (b) above. All loss 
recoveries received by Agent upon any such insurance may be applied to the 
Obligations, in such order as Agent in its sole discretion shall determine. 
Any surplus shall be paid by Agent to Borrowers or applied as may be 
otherwise required by Applicable Law.

	,	.

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Any deficiency thereon, after application of such insurance proceeds, 
shall be paid by Borrowers to Agent, on demand.

4.12 Failure to Pay Insurance. If any Borrower fails to obtain 
insurance as hereinabove provided, or to keep the same in force, Agent, if 
Agent so elects, may obtain such insurance and pay the premium therefor on 
behalf of Borrower, and charge Borrowers' Account therefor as a Revolving 
Advance of a Domestic Rate Loan and such expenses so paid shall be part of 
the Obligations.

4.13 Payment of Taxes. Each Borrower will pay, when due, all 
Charges lawful!, ., . or assessed upon such Borrower or any of the 
Collateral, including real and personal property taxes, assessments and 
charges and all franchise, income, employment, social security benefits, 
withholding, and sales taxes. If any tax by any governmental authority is 
or may be imposed on or as a result of any transaction between any 
Borrower and Agent or any Lender which Agent or any Lender may be required 
to withhold or pay or if Charges remain unpaid after the date fixed for 
their payment, or if any claim shall be made which, in Agent's or any 
Lender's opinion, may possibly create a valid Lien on the Collateral, 
Agent may without notice to Borrowers pay the Charges and each Borrower 
hereby indemnifies and holds Agent and each Lender harmless in respect 
thereof. Agent will not pay any taxes, assessments or Charges to the 
extent that any Borrower has contested or disputed those taxes, 
assessments or Charges in good faith, by expeditious protest, 
administrative or judicial appeal or similar proceeding provided that any 
related tax lien is stayed and sufficient reserves are established to the 
reasonable satisfaction of Agent to protect Agent's security interest in 
or Lien on the Collateral. The amount of any payment by Agent under this 
Section 4.13 shall be charged to Borrowers' Account as a Revolving Advance 
and added to the Obligations and, until Borrowers shall furnish Agent with 
an indemnity therefor (or supply Agent with evidence satisfactory to Agent 
that due provision for the payment thereof has been made), Agent may hold 
without interest any balance standing to Borrowers' credit and Agent shall 
retain its security interest in any and all Collateral held by Agent.

4.14 Payment of Leasehold Obligations. Each Borrower shall at 
all times pay, when and as due, its rental obligations under all leases 
under which it is a tenant, and shall otherwise comply, in all material 
respects, with all other terms of such leases and keep them in full force 
and effect and, at Agent's request will provide evidence of having done 
so.

4.15 Receivables.

(a) Nature of Receivables. Each of the Receivables shall be a 
bona fide and valid account representing a bona fide indebtedness incurred 
by the Customer therein named, for a fixed sum as set forth in the invoice 
relating thereto (provided immaterial or unintentional invoice errors 
shall not be deemed to be a breach hereof) with respect to an absolute 
sale or lease and delivery of goods upon stated terms of a Borrower, or 
work, labor or services theretofore rendered by a Borrower as of the date 
each Receivable is created. Same shall be due and owing in accordance with 
the applicable Borrower's standard terms of sale without dispute, setoff 
or counterclaim except as may be stated on the accounts receivable 
schedules delivered by Borrowers to Agent.

(b) Solvency of Customers. Each Customer, to the best of each 
Borrower's knowledge, as of the date each Receivable is created, is and 
will be Solvent and able to pay all Receivables on which the Customer is 
obligated in full when due or with respect to such Customers of any 
Borrower who are not Solvent, such Borrower has set up on its books and in 
its financial records bad debt reserves adequate to cover such 
Receivables.

t72406 7} 001246-00024

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(c) Locations of Borrower. Each Borrower's chief executive 
office is located at the addresses set forth on Schedule 4.1 5(c) hereto. 
Until written notice is given to Agent by Borrowing Agent of any other 
office at which any Borrower keeps its records pertaining to Receivables, 
all such records shall be kept at such executive office.

(d) Collection of Receivables. Each Borrower shall notify its 
customers to make remittance of all payments with respect to all 
Receivables to a lockbox established at PNC. If at any time a Borrower 
shall receive payment or proceeds with respect to any Receivables, such 
Borrower shall hold such payment or proceeds in trust for Agent and 
Lenders, shall not commingle such payments or proceeds with any Borrower's 
funds or otherwise use the same, except to pay the Obligations, and shall 
promptly remit all such payments and collections directly to Agent for 
application to the Obligations, in accordance with this Agreement.

(e) Notification of Assignment of Receivables. At any time that 
an Event of Default exists, Agent shall have the right to send notice of 
the assignment of, and Agent's security interest in, the Receivables to any 
and all Customers or any third party holding or otherwise concerned with 
any of the Collateral. Thereafter, Agent shall have the sole right to 
collect the Receivables, take possession of the Collateral, or both. 
Agent's actual collection expenses, including stationery and postage, 
telephone and telegraph, secretarial and clerical expenses and the salaries 
of any collection personnel used for collection, may be charged to 
Borrowers' Account and added to the Obligations.

(0 Power of Agent to Act on Borrowers' Behalf. Agent shall have 
the right to receive, endorse, assign and/or deliver in the name of Agent 
or any Borrower any and all checks, drafts and other instruments for the 
payment of money relating to the Receivables, and each Borrower hereby 
waives notice of presentment, protest and non-payment of any instrument so 
endorsed. Each Borrower hereby constitutes Agent or Agent's designee as 
such Borrower's attorney with power (i) to endorse such Borrower's name 
upon any notes, acceptances, checks, drafts, money orders or other 
evidences of payment or Collateral; (ii) to sign such Borrower's name on 
any invoice or bill of lading relating to any of the Receivables, drafts 
against Customers, assignments and verifications of Receivables; (iii) to 
send verifications of Receivables to any Customer; (iv) to sign such 
Borrower's name on all financing statements or any other documents or 
instruments deemed necessary or appropriate by Agent to preserve, protect, 
or perfect Agent's interest in the Collateral and to file same; (v) to 
demand payment of the Receivables; (vi) to enforce payment of the 
Receivables by legal proceedings or otherwise; (vii) when any Event of 
Default exists, to exercise all of Borrowers' rights and remedies with 
respect to the collection of the Receivables and any other Collateral; 
(viii) when any Event of Default exists, to settle, adjust, compromise, 
extend or renew the Receivables; (ix) when any Event of Default exists, to 
settle, adjust or compromise any legal proceedings brought to collect 
Receivables; (x) when any Event of Default exists, to prepare, file and 
sign such Borrower's name on a proof of claim in bankruptcy or similar 
document against any Customer; (xi) to prepare, file and sign such 
Borrower's name on any notice of Lien, assignment or satisfaction of Lien 
or similar document in connection with the Receivables; and (xii) to do all 
other acts and things necessary to carry out this Agreement. All acts of 
said attorney or designee are hereby ratified and approved, and said 
attorney or designee shall not be liable for any acts of omission or 
commission nor for any error of judgment or mistake of fact or of law, 
unless done maliciously or with gross (not mere) negligence; this power 
being coupled with an interest is irrevocable while any of the Obligations 
remain unpaid. Agent shall have the right at any time following the 
occurrence of an Event of Default or Default, to change the address for 
delivery of mail addressed to any Borrower to such address as Agent may 
designate and to receive, open and dispose of all mail addressed to any 
Borrower.

	{72406 7)	001246-00024

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(g) No Liability. Neither Agent nor any Lender shall, under 
any circumstances or in any event whatsoever, have any liability for any 
error or omission or delay of any kind occurring in the settlement, 
collection or payment of any of the Receivables or any instrument received 
in payment thereof, or for any damage resulting therefrom. Following the 
occurrence of a Default or an Event of Default or Default Agent may, 
without notice or consent from any Borrower, sue upon or otherwise 
collect, extend the time of payment of, compromise or settle for cash, 
credit or upon any terms any of the Receivables or any other securities, 
instruments or insurance applicable thereto and/or release any obliger 
thereof. Agent is authorized and empowered to accept following the 
occurrence of an Event of Default or Default the return of the goods 
represented by any of the Receivables, without notice to or consent by any 
Borrower, all without discharging or in any way affecting any Borrower's 
liability hereunder.

(h) Establishment Cash Management System. All proceeds of 
Collateral shall, at the direction of Agent, be deposited by Borrowers 
into a lockbox account, dominion account or other "blocked account" 
("Blocked Account") as Agent may require pursuant to an arrangement with 
such bank or banks as may be selected by Borrowers and be acceptable to 
Agent. Borrowers shall issue to any such bank, an irrevocable letter of 
instruction directing said bank to transfer such funds so deposited to 
Agent, either to any account maintained by Agent at said bank or by wire 
transfer to appropriate account(s) of Agent. All funds deposited into any 
Blocked Account shall immediately become the property of Agent and 
Borrowers shall obtain the agreement by each bank at which a Blocked 
Account is maintained to waive any offset rights against the funds so 
deposited. Neither Agent nor any Lender assumes any responsibility for 
such Blocked Account, including any claim of accord and satisfaction or 
release with respect to deposits accepted by any bank thereunder. Agent 
may also establish depository accounts ("Depository Accounts") in the name 
of Agent at a bank or banks for the deposit of such funds and Borrowers 
shall deposit all proceeds of Collateral or cause same to be deposited, in 
kind, in such Depository Accounts of Agent.

(i) Adjustments. No Borrower will, without Agent's consent, 
compromise or adjust any Receivables (or extend the time for payment 
thereof) or accept any returns of merchandise or grant any additional 
discounts, allowances or credits thereon except for those compromises, 
adjustments, returns, discounts, credits and allowances as have been 
heretofore customary in the business of such Borrower.

4.16 Inventory. To the extent Inventory held for sale or lease 
has been produced by any Borrower, it has been and will be produced by 
such Borrower in accordance with the Federal Fair Labor Standards Act of 
1938 and all rules, regulations and orders thereunder.

4.17 Maintenance of Equipment. The Equipment shall be 
maintained in good operating condition and repair (reasonable wear and 
tear excepted) and all necessary replacements of and repairs thereto shall 
be made so that the value and operating efficiency of the Equipment shall 
be maintained and preserved. No Borrower shall use or operate the 
Equipment in violation of any Applicable Law. Each Borrower shall have the 
right to sell Equipment to the extent set forth in Section 4.3 hereof.

4.18 Exculpation of Liability. Nothing herein contained shall 
be construed to constitute Agent or any Lender as any Borrower's agent for 
any purpose whatsoever, nor shall Agent or any Lender be responsible or 
liable for any shortage, discrepancy, damage, loss or destruction of any 
part of the Collateral wherever the same may be located and regardless of 
the cause thereof. Neither Agent nor any Lender, whether by anything 
herein or in any assignment or otherwise, assume any of any Borrower's 
obligations under any contract or agreement assigned to Agent or such 
Lender, and neither Agent nor any Lender shall be responsible in any way 
for the performance by any Borrower of any of the terms and conditions 
thereof.

t72406 7} 001246-00024

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4.19 Environmental Matters.

(a) Borrowers shall ensure that the Real Property remains in 
compliance with all Environmental Laws, and they shall not place or permit 
to be placed any Hazardous Substances on any Real Property to the extent 
prohibited by Applicable Law, except in each case where noncompliance 
could reasonably be expected to have a Material Adverse Effect .

(b) Borrowers shall establish and maintain a system to assure 
and monitor continued compliance with all applicable Environmental Laws 
which system shall include periodic reviews of such compliance.

(c) Except where the failure to do so could not reasonably be 
expected to have a Material Adverse Effect, Borrowers shall (i) employ in 
connection with the use of the Real Property appropriate technology 
necessary to maintain compliance with any applicable Environmental Laws 
and (ii) dispose of any and all Hazardous Waste generated at the Real 
Property only at facilities and with carriers that maintain valid permits 
under RCRA and any other applicable Environmental Laws. Borrowers shall 
use their best efforts to obtain certificates of disposal, such as 
hazardous waste manifest receipts, from all treatment, transport, storage 
or disposal facilities or operators employed by Borrowers in connection 
with the transport or disposal of any Hazardous Waste generated at the 
Real Property.

(d) In the event any Borrower obtains, gives or receives 
notice of any Release or threat of Release of a reportable quantity of any 
Hazardous Substances at the Real Property (any such event being 
hereinafter referred to as a "Hazardous Discharge") or receives any notice 
of violation, request for information or notification that it is 
potentially responsible for investigation or cleanup of environmental 
conditions at the Real Property, demand letter or complaint, order, 
citation, or other written notice with regard to any Hazardous Discharge 
or violation of Environmental Laws affecting the Real Property or any 
Borrower's interest therein (any of the foregoing is referred to herein as 
an "Environmental Complaint") from any Person, including any state agency 
responsible in whole or in part for environmental matters in the state in 
which the Real Property is located or the United States Environmental 
Protection Agency (any such person or entity hereinafter the "Authority"), 
then Borrowing Agent shall, within five (5) Business Days, give written 
notice of same to Agent detailing facts and circumstances of which any 
Borrower is aware giving rise to the Hazardous Discharge or Environmental 
Complaint. Such information is to be provided to allow Agent to protect 
its security interest in the Real Property and is not intended to create 
nor shall it create any obligation upon Agent or any Lender with respect 
thereto.

(e) Borrowers shall promptly forward to Agent copies of any 
request for information, notification of potential liability, demand 
letter relating to potential responsibility with respect to the 
investigation or cleanup of Hazardous Substances at any other site owned, 
operated or used by any Borrower to dispose of Hazardous Substances and 
shall continue to forward copies of correspondence between any Borrower 
and the Authority regarding such claims to Agent until the claim is 
settled. Borrowers shall promptly forward to Agent copies of all documents 
and reports concerning a Hazardous Discharge at the Real Property that any 
Borrower is required to file under any Environmental Laws. Such 
information is to be provided solely to allow Agent to protect Agent's 
security interest in the Real Property and the Collateral.

{72406 71 001246-00024

- 39 -



for

(f) Borrowers shall respond promptly to any Hazardous 
Discharge or Environmental Complaint and take all necessary action in 
order to safeguard the health of any Person and to avoid subjecting the 
Collateral or Real Property to any Lien. If any Borrower shall fail to 
respond promptly to any Hazardous Discharge or Environmental Complaint or 
any Borrower shall fail to comply with any of the requirements of any 
Environmental Laws, Agent on behalf of Lenders may, but without the 
obligation to do so, for the sole purpose of protecting Agent's interest 
in Collateral: (A) give such notices or (B) enter onto the Real Property 
(or authorize third parties to enter onto the Real Property) and take such 
actions as Agent (or such third parties as directed by Agent) deem 
reasonably necessary or advisable, to clean up, remove, mitigate or 
otherwise deal with any such Hazardous Discharge or Environmental 
Complaint. All reasonable costs and expenses incurred by Agent and Lenders 
(or such third parties) in the exercise of any such rights, including any 
sums paid in connection with any judicial or administrative investigation 
or proceedings, fines and penalties, together with interest thereon from 
the date expended at the Default Rate for Domestic Rate Loans constituting 
Revolving Advances shall be paid upon demand by Borrowers, and until paid 
shall be added to and become a part of the Obligations secured by the 
Liens created by the terms of this Agreement or any other agreement 
between Agent, any Lender and any Borrower.

(g) Promptly upon the written request of Agent from time to 
time, Borrowers shall provide Agent, at Borrowers' expense, with an 
environmental site assessment or environmental audit report prepared by an 
environmental engineering firm acceptable in the reasonable opinion of 
Agent, to assess with a reasonable degree of certainty the existence of a 
Hazardous Discharge and the potential costs in connection with abatement, 
cleanup and removal of any Hazardous Substances found on, under, at or 
within the Real Property. Any report or investigation of such Hazardous 
Discharge proposed and acceptable to an appropriate Authority that is 
charged to oversee the clean-up of such Hazardous Discharge shall be 
acceptable to Agent. If such estimates, individually or in the aggregate, 
exceed $100,000, Agent shall have the right to require Borrowers to post a 
bond, letter of credit or other security reasonably satisfactory to Agent 
to secure payment of these costs and expenses.

(h) Borrowers shall defend and indemnify Agent and Lenders and 
hold Agent, Lenders and their respective employees, agents, directors and 
officers harmless from and against all loss, liability, damage and 
expense, claims, costs, fines and penalties, including attorney's fees, 
suffered or incurred by Agent or Lenders under or on account of any 
Environmental Laws, including the assertion of any Lien thereunder, with 
respect to any Hazardous Discharge, the presence of any Hazardous 
Substances affecting the Real Property, whether or not the same originates 
or emerges from the Real Property or any contiguous real estate, including 
any loss of value of the Real Property as a result of the foregoing except 
to the extent such loss, liability, damage and expense is attributable to 
any Hazardous Discharge resulting from actions on the part of Agent or any 
Lender. Borrowers' obligations under this Section 4.19 shall arise upon 
the discovery of the presence of any Hazardous Substances at the Real 
Property, whether or not any federal, state, or local environmental agency 
has taken or threatened any action in connection with the presence of any 
Hazardous Substances. Borrowers' obligation and the indemnifications 
hereunder shall survive the termination of this Agreement.

(i) For purposes of Section 4.19 and 5.7, all references to 
Real Property shall be deemed to include all of Borrowers' right, title 
and interest in and to its owned and leased premises.

4.20 Financing Statements. Except as respects the financing 
statements filed by Agent and the financing statements described on 
Schedule LAB, no financing statement covering any of the Collateral or any 
proceeds thereof is on file in any public office.

{72406 7} 001246-00024

- 40 -


SECTION 5. REPRESENTATIONS AND WARRANTIES.

Each Borrower represents and warrants to Agent and each Lender, as 
follows:

5.1 Authority. Each Borrower has full power, authority and 
legal right to enter into this Agreement and the Other Documents and to 
perform all its respective Obligations hereunder and thereunder. The 
execution, delivery and performance of this Agreement and of the Other 
Documents (a) are within such Borrower's corporate powers, have been duly 
authorized, are not in contravention of any Applicable Law or the terms of 
such Borrower's Organization Documents relating to such Borrower's 
formation or to the conduct of such Borrower's business or of any material 
agreement or undertaking to which such Borrower is a party or by which 
such Borrower is bound, and (b) will not conflict with nor result in any 
breach in any of the provisions of or constitute a default under or result 
in the creation of any Lien except Permitted Encumbrances upon any asset 
of such Borrower under the provisions of any agreement, Organization 
Documents or other instrument to which such Borrower or its property is a 
party or by which it may be bound.

5.2

Formation and Qualification.

(a) Each Borrower is duly organized and in good standing under 
the laws of the state listed on Schedule 5.2fa! and is qualified to do 
business and is in good standing in the states listed on Schedule 5.2(a! 
which constitute all states in which qualification and good standing are 
necessary for such Borrower to conduct its business and own its property 
and where the failure to so qualify could reasonably be expected to have a 
Material Adverse Effect on such Borrower. Each Borrower has delivered to 
Agent true and complete copies of its Organization Documents and will 
promptly notify Agent of any amendment or changes thereto.

(b) The only Subsidiaries of each Borrower are listed on Schedule 5.2(b!.

5.3 Survival of Representations and Warranties. All 
representations and warranties of such Borrower contained in this 
Agreement and the Other Documents shall be true at the time of such 
Borrower's execution of this Agreement and the Other Documents, and shall 
survive the execution, delivery and acceptance thereof by the parties 
thereto and the closing of the transactions described therein or related 
thereto.

5.4 Tax Returns. Each Borrower's federal tax identification 
number is set forth on Schedule 5.4. Each Borrower has filed all federal, 
state and local tax returns and other reports each is required by law to 
file and has paid all taxes, assessments, fees and other governmental 
charges that are due and payable. Federal, state and local income tax 
returns of each Borrower have been examined and reported upon by the 
appropriate taxing authority or closed by applicable statute and satisfied 
for all fiscal years prior to and including the Fiscal Year ending 
December 3 1, 1997. The provision for taxes on the books of each Borrower 
are adequate for all years not closed by applicable statutes, and for its 
current Fiscal Year, and no Borrower has any knowledge of any deficiency 
or additional assessment in connection therewith not provided for on its 
books.

~ 72406.7 ~ ()0 1 246-00024

- 41 -



- -

5.5 Financial Statements.

(a) The pro forma balance sheet of Borrowers on a 
consolidated basis (the "Pro Forma Balance Sheet") furnished to Agent on 
the Closing Date reflects the consummation of the transactions 
contemplated under this Agreement (the "Transactions") and is accurate, 
complete and correct and fairly reflects the financial condition of 
Borrowers on a consolidated basis as of the Closing Date after giving 
effect to the Transactions, and has been prepared in accordance with GAAP, 
consistently applied. The Pro Forma Balance Sheet has been certified as 
accurate, complete and correct in all material respects by the President 
and Chief Financial Officer of Reptron. All financial statements referred 
to in this subsection 5.5(a), including the related schedules and notes 
thereto, have been prepared, in accordance with GAAP, except as may be 
disclosed in such financial statements.

(b) The twelve-(12) month cash flow projections of Borrowers 
on a consolidated basis and their projected balance sheets as of the 
Closing Date, copies of which are annexed hereto as Exhibit C (the 
"Projections") were prepared by the Chief Financial Officer of Borrowers, 
are based on underlying assumptions which provide a reasonable basis for 
the projections contained therein and reflect Borrowers' judgment based on 
present circumstances of the most likely set of conditions and course of 
action for the projected period. The cash flow Projections together with 
the Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial 
Statements."

(c) The consolidated and consolidating balance sheets of the 
Borrowers and such other Persons described therein as of September 30, 
1998, and the related statements of income, changes in stockholder's 
equity, and changes in cash flow for the period ended on such date, copies 
of which have been delivered to Agent, have been prepared in accordance 
with GAAP, consistently applied (except for changes in application in 
which such accountants concur and present fairly the financial position of 
the Borrowers at such date and the results of their operations for such 
period. Since September 30, 1998 there has been no change in the 
condition, financial or otherwise, of Borrowers as shown on the 
consolidated balance sheet as of such date and no change in the aggregate 
value of machinery, equipment and Real Property owned by Borrowers, except 
changes in the ordinary course of business, none of which individually or 
in the aggregate has been materially adverse.

5.6 Corporate Name. No Borrower has been known by any other 
corporate name in the past five (5) years and does not sell Inventory 
under any other name except as set forth on Schedule 5.6, nor has any 
Borrower been the surviving corporation of a merger or consolidation or 
acquired all or substantially all of the assets of any Person during the 
preceding five (5) years.

5.7 O.S.H.A. and Environmental Compliance.

(a) Each 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, the Environmental Protection Act, RCRA and all 
other Environmental Laws except where noncompliance could not reasonably 
be expected to have a Material Adverse Effect; there have been no 
outstanding citations, notices or orders of non-compliance issued to any 
Borrower or relating to its business, assets, property, leaseholds or 
Equipment under any such laws, rules or regulations.

{72406 7} 001246-00024

- 42 -



r

(b) Each Borrower has been issued all required federal, state 
and local licenses, certificates or permits relating to all applicable 
Environmental Laws where the failure to obtain such licenses, certificates 
or permits could reasonably be expected to have a Material Adverse Effect.

(c)(i) There are no visible signs of releases, spills, 
discharges, leaks or disposal (collectively referred to as "Releases") of 
Hazardous Substances at, upon, under or within any Real Property or any 
property leased by any Borrower; (ii) there are no underground storage 
tanks or polychlorinated biphenyls on Real Property owned or leased by any 
Borrower; (iii) neither any real property owned or any other premises 
leased by any Borrower has ever been used as a treatment, storage or 
disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are 
present on the Real Property or any premises leased by any Borrower' 
excepting such quantities as are handled in accordance with all applicable 
manufacturer's instructions and governmental regulations and in proper 
storage containers and as are necessary for the operation of the 
commercial business of any Borrower or of its tenants.

	5.8	Solvency: No Litigation, Violation. Indebtedness or Default.

Solvent.

(a) After giving effect to the Transactions, each Borrower is and will at 
all times remain

(b) Except as disclosed in Schedule 5.8(b!, no Borrower has 
(i) any pending or threatened litigation, arbitration, actions or 
proceedings which involve the possibility of having a Material Adverse 
Effect on such Borrower, and (ii) any liabilities or Indebtedness for 
Money Borrowed other than the Obligations.

No Borrower is in violation of any Applicable Law in any 
respect which could reasonably be expected to have a Material Adverse 
Effect on such Borrower, nor is any Borrower in violation of any order of 
any Governmental Body or arbitration board or other tribunal.

(d) No Borrower nor any member of the Controlled Group 
maintains or contributes to any Plan other than those listed on Schedule 
5.8(d) hereto. Except as set forth in Schedule 5.8(d!, (i) no Plan has 
incurred any "accumulated funding deficiency," as defined in Section 
302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, 
and each Borrower and each member of the Controlled Group has met all 
applicable minimum funding requirements under Section 302 of ERISA in 
respect of each Plan, (ii) each Plan which is intended to be a qualified 
plan under Section 401(a) of the Code as currently in effect has been 
determined by the Internal Revenue Service to be qualified under Section 
401(a) of the Code and the trust related thereto is exempt from federal 
income tax under Section 501(a) of the Code, (iii) no Borrower nor any 
member of the Controlled Group has incurred any liability to the PBGC 
other than for the payment of premiums, and there are no premium payments 
which have become due which are unpaid, (iv) no Plan has been terminated 
by the plan administrator thereof nor by the PBGC, and there is no 
occurrence which would cause the PBGC to institute proceedings under Title 
IV of ERISA to terminate any Plan, (v) at this time, the current value of 
the assets of each Plan exceeds the present value of the accrued benefits 
and other liabilities of such Plan and no Borrower nor any member of the 
Controlled Group knows of any facts or circumstances which would 
materially change the value of such assets and accrued benefits and other 
liabilities, (vi) no Borrower nor any member of the Controlled Group has 
breached any of the responsibilities, obligations or duties imposed on it 
by ERISA with respect to any Plan, (vii) no Borrower nor any member of a 
Controlled Group has incurred any liability for any excise tax arising 
under Section 4972 or 4980B of the Code, and no fact exists which could 
give rise to any such liability, (viii) no Borrower nor any member of the 
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has 
engaged in a "prohibited transaction"

(72406 7} 001246-00024

- 43 -



described in Section 406 of the ERISA or Section 4975 of the Code nor 
taken any action which would constitute or result in a Termination Event 
with respect to any such Plan which is subject to ERISA, (ix) each 
Borrower and each member of the Controlled Group has made all 
contributions due and payable with respect to each Plan, (x) there exists 
no event described in Section 4043(b) of ERISA, for which the thirty (30) 
day notice period contained in 29 CFR 2615.3 has not been waived, (xi) no 
Borrower nor any member of the Controlled Group has any fiduciary 
responsibility for investments with respect to any plan existing for the 
benefit of persons other than employees or former employees of any 
Borrower and any member of the Controlled Group, and (xii) no Borrower nor 
any member of the Controlled Group has withdrawn, completely or partially, 
from any Multiemployer Plan so as to incur liability under the 
Multiemployer Pension Plan Amendments Act of 1980.

5.9 Patents, Trademarks, Copyrights and Licenses. All 
patents, patent applications, trademarks, trademark applications, service 
marks, service mark applications, copyrights, copyright applications, 
design rights, tradenames, assumed names, trade secrets and licenses owned 
or utilized by any Borrower are set forth on Schedule 5.9, are valid and 
have been duly registered or filed with all appropriate governmental 
authorities and constitute all of the intellectual property rights which 
are necessary for the operation of its business; there is no objection to 
or pending challenge to the validity of any such material patent, 
trademark, copyright, design right, tradename, trade secret or license and 
no Borrower is aware of any grounds for any challenge, except as set forth 
in Schedule 5.9 hereto. Each patent, patent application, patent license, 
trademark, trademark application, trademark license, service mark, service 
mark application, service mark license, copyright, copyright application 
and copyright license owned or held by any Borrower and all trade secrets 
used by any Borrower consist of original material or property developed by 
such Borrower or was lawfully acquired by such Borrower from the proper 
and lawful owner thereof. Each of such items has been maintained so as to 
preserve the value thereof from the date of creation or acquisition 
thereof. With respect to all software used by any Borrower, such Borrower 
is in possession of all source and object codes related to each piece of 
software or is the beneficiary of a source code escrow agreement, each 
such source code escrow agreement being listed on Schedule 5.9 hereto.

5.10 Licenses and Permits. Except as set forth in Schedule 
5.10, each Borrower (a) is in compliance with and (b) has procured and is 
now in possession of, all material licenses or permits required by any 
Applicable Law or regulation for the operation of its business in each 
jurisdiction wherein it is now conducting or proposes to conduct business 
and where the failure to procure such licenses or permits could have a 
Material Adverse Effect on such Borrower.

5.11 Default of Indebtedness. No Borrower is in default in 
the payment of the principal of or interest on any Indebtedness or under 
any instrument or agreement under or subject to which any Indebtedness has 
been issued and no event has occurred under the provisions of any such 
instrument or agreement which with or without the lapse of time or the 
giving of notice, or both, constitutes or would constitute an event of 
default thereunder.

5.12 No Default. No Borrower is in default in the payment or 
performance of any of its contractual obligations and no Default has 
occurred.

5.13 No Burdensome Restrictions. No Borrower is party to any 
contract or agreement the performance of which could have a Material 
Adverse Effect on such Borrower. No Borrower has agreed or consented to 
cause or permit in the future (upon the happening of a contingency or 
otherwise) any of its

{72406.7) 00 1 246-00024

- 44 -



~ -

property, whether now owned or hereafter acquired, to be subject to a Lien 
that is not a Permitted Encumbrance.

5.14 No Labor Disputes. No Borrower is involved in any labor 
dispute which could reasonably be expected to have a Material Adverse 
Effect; there are no strikes or walkouts or union organization of any 
Borrower's employees threatened or in existence which could reasonably be 
expected to have a Material Adverse Effect; and no labor contract is 
scheduled to expire during the Term other than as set forth on Schedule 
5.14 hereto.

5.15 Margin Regulations. No Borrower is engaged, nor will it 
engage, principally or as one of its important activities, in the business 
of extending credit for the purpose of "purchasing" or "carrying" any 
"margin stock" within the respective meanings of each of the quoted terms 
under Regulation U of the Board of Governors of the Federal Reserve System 
as now and from time to time hereafter in effect. No part of the proceeds 
of any Advance will be used for "purchasing" or "carrying" "margin stock" 
as defined in Regulation U of such Board of Governors.

5.16 Investment Company Act. No Borrower is an "investment 
company" registered or required to be registered under the Investment 
Company Act of 1940, nor is it controlled by such a company.

5.17 Disclosure. No representation or warranty made by any 
Borrower in this Agreement or in any financial statement, report, 
certificate or any other document furnished in connection herewith 
contains any untrue statement of fact or omits to state any fact necessary 
to make the statements herein or therein not misleading. There is no fact 
known to Borrowers or which reasonably should be known to Borrowers which 
Borrowers have not disclosed to Agent in writing with respect to the 
transactions contemplated by this Agreement which could reasonably be 
expected to have a Material Adverse Effect on any Borrower.

5.18 Delivery of Subordinated Indebtedness Documents. Agent 
has received complete copies of all documents evidencing the Subordinated 
Indebtedness (including all exhibits, schedules and disclosure letters 
referred to therein or delivered pursuant thereto, if any) and all 
amendments thereto, waivers relating thereto and other side letters or 
agreements affecting the terms thereof. None of such documents and 
agreements has been amended or supplemented, nor have any of the 
provisions thereof been waived, except pursuant to a written agreement or 
instrument which has heretofore been delivered to Agent.

5.19 Swaps. No Borrower is a party to, nor will it be a party 
to, any swap agreement whereby such Borrower has agreed or will agree to 
swap interest rates or currencies unless same provides that damages upon 
termination following an event of default thereunder are payable on an 
unlimited "two-way basis" without regard to fault on the part of either 
party.

5.20 Conflicting Agreements. No provision of any mortgage, 
indenture, contract, agreement, judgment, decree or order binding on any 
Borrower or affecting the Collateral conflicts with, or requires any 
Consent which has not already been obtained to, or would in any way 
prevent the execution, delivery or performance of, the terms of this 
Agreement or the Other Documents.

5.21 Application of Certain Laws and Regulations. No Borrower 
nor any Affiliate of any Borrower is subject to any statute, rule or 
regulation which regulates the incurrence of any Indebtedness,

-

{72406 7} 001246-00024

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including statutes or regulations relative to common or interstate 
carriers or to the sale of electricity, gas, steam, water, telephone, 
telegraph or other public utility services.

5.22 Business and Property of Borrower. Upon and after the 
Closing Date, Borrowers do not propose to engage in any business other 
than distribution of electronic components and the manufacture of 
electronic and mechanical products and activities necessary to conduct the 
foregoing. On the Closing Date, each Borrower will own all the property 
and possess all of the rights and Consents necessary for the conduct of 
the business of such Borrower.

5.23 Compliance with Laws. Each Borrower is in compliance 
with all Applicable Law relating to the conduct of such Borrower's 
business where the failure to comply with such Applicable Law could 
reasonably be expected to have a Material Adverse Effect.

5.24 Hibbing Maryland. Hibbing Maryland conducts no business 
activities, owns no assets and has no liabilities other than accrued 
liabilities which may be owed to Hayes Corporation.

SECTION 6. AFFIRMATIVE COVENANTS.

Each Borrower shall, until payment in full of the Obligations and 
termination of this Agreement:

6.1 Payment of Fees. Pay to Agent on demand all usual and 
customary fees and expenses which Agent incurs in connection with (a) the 
forwarding of Advance proceeds and (b) the establishment and maintenance 
of any Blocked Account or Depository Accounts as provided for in Section 
4.15(h). Agent may, without making demand, charge Borrowers' Account for 
all such fees and expenses.

6.2 Conduct of Business and Maintenance of Existence and 
Assets. (a) Conduct continuously and operate actively its business 
according to good business practices and maintain all of its properties 
useful or necessary in its business in good working order and condition 
(reasonable wear and tear excepted and except as may be disposed of in 
accordance with the terms of this Agreement), including all licenses, 
patents, copyrights, design rights, tradenames, trade secrets and 
trademarks and take all actions necessary to enforce and protect the 
validity of any intellectual property right or other right included in the 
Collateral; (b) keep in full force and effect its existence and comply in 
all material respects with Applicable Law governing the conduct of its 
business where the failure to do so could reasonably be expected to have a 
Material Adverse Effect on such Borrower; and (c) make all such reports 
and pay all such franchise and other taxes and license fees and do all 
such other acts and things as may be lawfully required to maintain its 
rights, licenses, leases, powers and franchises under the laws of the 
United States or any political subdivision thereof where the failure to do 
so could reasonably be expected to have a Material Adverse Effect on such 
Borrower.

6.3 Violations. Promptly notify Agent in writing of any 
violation of any law, statute, regulation or ordinance of any Governmental 
Body, or of any agency thereof, applicable to any Borrower which could 
reasonably be expected to have a Material Adverse Effect on any Borrower.

6.4 Government Receivables. Take all steps necessary to 
protect Agent's interest in the Collateral under the Federal Assignment of 
Claims Act or other Applicable Law and deliver to Agent appropriately 
endorsed, any instrument or chattel paper connected with any Receivable 
arising out of contracts

{72406 7) 001246-00024

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-

/

between any Borrower and the United States, any state or any department, 
agency or instrumentality of any of them.

6.5 Pricing Formula Ratio. Commencing on the earlier of (a) 
April 1, 2000, and (b) such time as the Borrowers fail to maintain an 
Undrawn Availability of at least $10,000,000, maintain a Pricing Formula 
Ratio, as determined at the end of each Fiscal Quarter for the immediately 
preceding four (4) Fiscal Quarters, of at least 1.00 to 1.

6.6 Execution of Supplemental Instruments. Execute and 
deliver to Agent from time to time, upon demand, such supplemental 
agreements, statements, assignments and transfers, or instructions or 
documents relating to the Collateral, and such other instruments as Agent 
may request, in order that the full intent of this Agreement may be 
carried into effect.

6.7 Payment of Indebtedness. Pay, discharge or otherwise 
satisfy at or before maturity (subject, where applicable, to specified 
grace periods and, in the case of the trade payables, to normal payment 
practices) all its obligations and liabilities of whatever nature, except 
when the failure to do so could not reasonably be expected to have a 
Material Adverse Effect or when the amount or validity thereof is 
currently being contested diligently and in good faith by appropriate 
proceedings and each Borrower shall have provided for such reserves as 
Agent may reasonably deem proper and necessary, subject at all times to 
any applicable subordination arrangement in favor of Lenders.

6.S Standards of Financial Statements. Cause all financial 
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 
and 9.14 as to which GAAP is applicable to be complete and correct in all 
material respects (subject, in the case of interim financial statements, 
to normal year-end audit adjustments) and to be prepared in reasonable 
detail and in accordance with GAAP applied consistently throughout the 
periods reflected therein (except as concurred in by such reporting 
accountants or officer, as the case may be, and disclosed therein).

6.9 Year 2000 Compatibility. Take all action necessary to 
assure that such Borrower's computer based systems are able to operate and 
effectively process data, including dates on and after January I, 2000. 
Such Borrower shall provide Agent with copies of all disclosures required 
by the Year 2000 Information and Readiness Disclosure Act of 1998 and such 
disclosures shall indicate that such systems are Year 2000 compliant on or 
before June 30, 1999. Such Borrower shall (i) promptly and in no event 
later than June 30, 1999, take all action necessary to ensure that all 
computer based systems of such Borrower and its Subsidiaries are capable 
of the following: (a) handling date information involving all and any 
dates before, during and/or after January 1, 2000, including accepting 
input, providing output and performing date calculations in whole or in 
part; (b) operating, accurately without interruption on and in respect of 
any and all dates before, during and/or after January 1,2000, and without 
any change in performance; (c) responding to and processing two-digit year 
input without creating any ambiguity as to the century; (d) storing and 
providing date input information without creating any ambiguity as to the 
century; and (ii) promptly and in no event later than June 30, 1999, take 
all action necessary to ensure that all computer based systems of each of 
their vendors, suppliers and customers are capable of (a) through (d) 
above, where noncompliance could be reasonably expected to have a Material 
Adverse Effect. In addition, at the request of Agent, such Borrower shall 
provide Agent assurances in form and substance satisfactory to Agent of 
such Borrower's and each of its Subsidiaries' Year 2000 compatibility.

	~ 72406 7'	00 1 246-00024

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SECTION 7. NEGATIVE COVENANTS.

No Borrower shall, until satisfaction in full of the Obligations and 
termination of this Agreement:

7.1 Merger. Consolidation. Acquisition and Sale of Assets.

(a) Enter into any merger, consolidation or other 
reorganization with or into any other Person, or acquire all or a 
substantial portion of the assets or Equity Interests of any Person other 
than another Borrowers, or permit any other Person (other than another 
Borrower) to consolidate with or merge with it, other than Permitted 
Acquisitions.

(b) Sell, lease, transfer or otherwise dispose of any of its 
properties or assets to any Person other than another Borrower, except (i) 
sales by a Borrower of its Inventory in the ordinary course of its 
business as presently conducted, (ii) transfers of Consigned Inventory by 
a Borrower to the extent not prohibited by this Agreement, (iii) Permitted 
Sale/Leaseback Transactions, (iv) sales and other dispositions of 
Equipment of a Borrower to the extent permitted by this Agreement, (v) 
Permitted Spinoffs, (vi) and other dispositions expressly authorized by 
this Agreement.

7.2 Creation of Liens. Create or suffer to exist any Lien or 
transfer upon or against any of its property or assets now owned or 
hereafter acquired, except Permitted Encumbrances.

7.3 Guarantees. Become liable upon the obligations of any 
Person by assumption, endorsement or guaranty thereof or otherwise (other 
than to Lenders), except (i) the endorsement of checks in the ordinary 
course of business, and (ii) the guaranty by Reptron of certain 
Indebtedness for Money Borrowed by Hibbing to Norwest Equipment Finance, 
Inc. in a maximum principal amount not to exceed

$ 1 73 50,000.

7.4 Investments. Purchase or acquire obligations or stock of, 
or any other interest in, any Person, except (a) obligations issued or 
guaranteed by the United States of America or any agency thereof, (b) 
commercial paper with maturities of not more than 180 days and a published 
rating of not less than A- I or P- I (or the equivalent rating), (c) 
certificates of time deposit and bankers' acceptances having maturities of 
not more than 180 days and repurchase agreements backed by United States 
government securities of a commercial bank if (i) such bank has a combined 
capital and surplus of at least $500,000,000, or (ii) its debt 
obligations, or those of a holding company of which it is a Subsidiary, 
are rated not less than A (or the equivalent rating) by a nationally 
recognized investment rating agency, (d) U.S. money market funds that 
invest solely in obligations issued or guaranteed by the United States of 
America or an agency thereof, (e) redemptions or repurchases of the common 
stock of Reptron to the extent permitted by Section 7.7 hereof and (f) 
Permitted Acquisitions.

7.5 Loans. Make advances, loans or extensions of credit to any 
Person, including any Parent, Subsidiary or Affiliate except (i) with 
respect to the extension of commercial trade credit in connection with the 
sale of Inventory in the ordinary course of its business; (ii) loans or 
advances of money made by one Borrower to another Borrower or to a 
Guarantor, provided that any instrument given to evidence any such loan or 
advance is promptly pledged to Agent as security for the Obligations; and 
(iii) advances to employees for travel, relocation and other lawful 
purposes, not to exceed $50,000 in aggregate for any individual or 
$250,000 in aggregate for all such advances.

t72406.7} 00 1 246-00024

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7.6 Capital Expenditures. Contract for or make any Capital 
Expenditures in any Fiscal Year in an amount in excess of $12,500,000.

7.7 Dividends. Declare, pay or make any dividend or 
distribution on any shares of the Equity Interests of any Borrower (other 
than Upstream Payments or dividends or distributions payable in its stock, 
or split-ups or reclassifications of its stock) or apply any of its funds, 
property or assets to the purchase, redemption or other retirement of any 
Equity Interests, or of any options to purchase or acquire any such Equity 
Interests of any Borrower; provided, however, that Reptron may from time 
to time repurchase or redeem any of its common stock if (i) at least ten ( 
l 0) Business Days prior to the proposed repurchase or redemption Reptron 
gives Agent written notice of its intention to effect such a repurchase or 
redemption, the approximate amount of Advances to be used therefor and the 
date of the proposed repurchase or redemption, and (ii) at the time of 
such repurchase or redemption and after giving effect thereto, no Default 
or Event of Default exists and Borrowers have Undrawn Availability (as 
determined by Agent) of at least $10,000,000, and, (iii) the sum of all 
redemptions, repurchases and prepayments of Subordinated Indebtedness 
permitted by Section 7. l 7 hereof do not exceed, in the aggregate, 
$20,000,000.

7.8 Indebtedness. Create, incur or suffer to exist any 
Indebtedness other than (i) the Obligations; (ii) Subordinated 
Indebtedness existing on the Closing Date and such other Subordinated 
Indebtedness incurred after the Closing Date with Agent's prior written 
consent; (iii) accounts payable by a Borrower to trade creditors and 
current operating expenses that are not aged more than ninety (90) days 
from the billing date or more than thirty (30) days from due date, in each 
case incurred in the ordinary course of business and paid within such time 
period, unless the same are being actively contested in good faith and by 
appropriate, lawful proceedings; (iv) obligations to pay rent to the 
extent not prohibited by this Agreement; (v) Permitted Purchase Money 
Indebtedness; (vi) Indebtedness of Borrowers for Money Borrowed, but only 
to the extent that such Indebtedness is outstanding on the date of this 
Agreement and is not satisfied on or about the Closing Date from the 
proceeds of the Advances; (vii) contingent Indebtedness arising out of 
endorsements of checks and other negotiable instruments for deposit or 
collection in the ordinary course of a Borrower's business; (viii) 
Permitted Sale/Leaseback Transactions; and (ix) Indebtedness not included 
in clauses (i) through (viii) that is not secured by Lien (unless such 
Lien is a Permitted Encumbrance) and does not exceed at any time, in the 
aggregate the sum of $3,000,000 as to all Borrowers and all of their 
respective Subsidiaries.

7.9 Nature of Business. Substantially change the nature of 
the business in which it is presently engaged, nor except as specifically 
permitted hereby purchase or invest, directly or indirectly, in any assets 
or property other than in the ordinary course of business for assets or 
property which are useful in, necessary for and are to be used in its 
business as presently conducted.

7.10 Transactions with Affiliates. Directly or indirectly, 
purchase, acquire or lease any property from, or sell, transfer or lease 
any property to, or otherwise deal with, any Affiliate (other than another 
Borrower), except transactions disclosed in the ordinary course of 
business, on an arms-length basis on terms no less favorable than terms 
which would have been obtainable from a Person other than an Affiliate.

7.11 Leases. Enter as lessee into any lease arrangement for 
real or personal property (unless capitalized and permitted under Section 
7.6 hereof) if after giving effect thereto, aggregate annual rental 
payments for all leased property would exceed $3,000,000 in any one Fiscal 
Year

172406 71 001246-00024

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-

7.12 Subsidiaries. Form or maintain any Subsidiary other than 
a wholly-owned Subsidiary organized under the laws of a state of the 
United States and formed or acquired as part of a Permitted Acquisition or 
a Permitted Spinoff; enter into any partnership, joint venture or similar 
arrangement; or own less than all of the Equity Interests of any 
Subsidiary that is a Borrower or Guarantor.

7.13 Fiscal Year and Accounting Changes. Change its Fiscal 
Year from December 31, permit any Subsidiary to have a fiscal year that is 
different from the Fiscal year or make any change (i) in accounting 
treatment and reporting practices except as required by GAAP or (ii) in 
tax reporting treatment except as required by Applicable Law.

7.14 Pledge of Credit. Now or hereafter pledge Agent's or any 
Lender's credit on any purchases or for any purpose whatsoever or use any 
portion of any Advance in or for any business other than such Borrower's 
business as conducted on the date of this Agreement.

7.15 Amendment of Organization Documents. Amend, modify or 
waive any term or material provision of its Organization Documents except 
as required by Applicable Law.

7.16 Compliance with ERISA. (i) (x) Maintain, or permit any 
member of the Controlled Group to maintain, or (y) become obligated to 
contribute, or permit any member of the Controlled Group to become 
obligated to contribute, to any Plan, other than those Plans disclosed on 
Schedule 5.8(d!, (ii) engage, or permit any member of the Controlled Group 
to engage, in any non-exempt "prohibited transaction," as that term is 
defined in Section 406 of ERISA and Section 4975 of the Code, (iii) incur, 
or permit any member of the Controlled Group to incur, any "accumulated 
funding deficiency," as that term is defined in Section 302 of ERISA or 
Section 412 of the Code, (iv) terminate, or permit any member of the 
Controlled Group to terminate, any Plan where such event could result in 
any liability of any Borrower or any member of the Controlled Group or the 
imposition of a Lien on the property of any Borrower or any member of the 
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit 
any member of the Controlled Group to assume, any obligation to contribute 
to any Multiemployer Plan not disclosed on Schedule 5.8(d!, (vi) incur, or 
permit any member of the Controlled Group to incur, any withdrawal 
liability to any Multiemployer Plan, (vii) fail promptly to notify Agent 
of the occurrence of any Termination Event, (viii) fail to comply, or 
permit a member of the Controlled Group to fail to comply, with the 
requirements of ERISA or the Code or other applicable laws in respect of 
any Plan, or (ix) fail to meet, or permit any member of the Controlled 
Group to fail to meet, all minimum funding requirements under ERISA or the 
Code or postpone or delay or allow any member of the Controlled Group to 
postpone or delay any funding requirement with respect of any Plan.

7.17 Prepayment of Indebtedness. At any time, directly or 
indirectly, prepay any Indebtedness (other than to the Obligations), or 
repurchase, redeem, retire or otherwise acquire any Indebtedness of any 
Borrower, including the Subordinated Indebtedness; provided, however, that 
Borrowers may from time to time prepay Subordinated Indebtedness, as and 
to the extent permitted by the Subordinated Loan Documents, if (i) at 
least ten (10) Business Days prior to the proposed prepayment, Borrowers 
give Agent written notice of their intention to effect such a prepayment, 
the approximate amount of Advances to be used therefor and the date of the 
proposed prepayment; (ii) at the time of such prepayment and after giving 
effect thereto no Default or Event of Default exists, Borrowers have 
Undrawn Availability (as determined by Agent) of at least $10,000,000; and 
(iii) the sum of all prepayments of Subordinated Indebtedness and all 
redemptions and repurchases permitted by Section 7.7 hereof do not exceed, 
in the aggregate, $20,000,000.

	{72406 7)	001246-00024

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7.18 Subordinated Loan Documents. At any time, directly or 
indirectly, amend or modify the terms of any agreement applicable to the 
Subordinated Indebtedness, other than to extend the time of payment 
thereof or to reduce the rate of interest payable in connection therewith.

7.19 Upstream Payments. Create or suffer to exist any 
encumbrance or restriction on the ability of any Borrower or a Subsidiary 
of any Borrower to make any Upstream Payment, except for encumbrances or 
restrictions (i) pursuant to any of the Other Documents and (ii) existing 
under Applicable

Law.

7.20 Consigned Inventory. Permit the aggregate Value of all 
Consigned Inventory to exceed ten percent ( 10%) of the Value of all 
Inventory on any date. If and to the extent requested to do so by Agent, 
each Borrower having any Consigned Inventory shall execute and deliver to 
Agent, for its benefit and the pro rata benefit of Lenders, collateral 
assignments of all UCC consignment filings and other documents at any time 
executed, delivered or filed with any Governmental Body to evidence or 
perfect such Borrower's rights with respect to such Consigned Inventory.

7.21 Tax Consolidation. File or consent to the filing of any 
consolidated income tax return with any Person other than a Subsidiary.

7.22 Conduct of Business. Engage in any business other than 
the business engaged by it on the Closing Date and any business or 
activities that are substantially similar, related or incidental thereto.

7.23 Hibbing Maryland. Permit Hibbing Maryland to conduct any 
business activities, own any assets or incur any liabilities.

SECTION 8. CONDITIONS PRECEDENT.

8.1 Conditions to Initial Advances. The agreement of Lenders 
to make the initial Advances requested to be made on the Closing Date is 
subject to the satisfaction, or waiver by Lenders, immediately prior to or 
concurrently with the making of such Advances, of the following conditions 
precedent:

(a) Other Documents. Agent shall have received each of the 
Other Documents duly executed and delivered by an authorized officer of 
each of the parties thereto, including each Borrower;

(b) Filings Registrations and Recordings. Each document 
(including any UCC financing statement) required by this Agreement or any 
Other Documents or under Applicable Law or reasonably requested by the 
Agent to be filed, registered or recorded in order to create, in favor of 
Agent, a perfected security interest in or Lien upon the Collateral shall 
have been properly filed, registered or recorded in each jurisdiction in 
which the filing, registration or recordation thereof is so required or 
requested, and Agent shall have received an acknowledgment copy, or other 
evidence satisfactory to it, of each such filing, registration or 
recordation and satisfactory evidence of the payment of any necessary fee, 
tax or expense relating thereto;

{72406.7) 00 1 246-00024

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-

(c) Corporate Proceedings of Borrowers. Agent shall have 
received a copy of the resolutions in form and substance reasonably 
satisfactory to Agent, of the Board of Directors of each Borrower 
authorizing (i) the execution, delivery and performance of each of the 
Loan Documents and (ii) the granting by each Borrower of the security 
interests in and Liens upon the Collateral, in each case certified by the 
Secretary or an Assistant Secretary of each Borrower as of the Closing 
Date; and, such certificate shall state that the resolutions thereby 
certified have not been amended, modified, revoked or rescinded as of the 
date of such certificate;

(d) incumbency Certificates of Borrowers. Agent shall have 
received a certificate of the Secretary or an Assistant Secretary of each 
Borrower, dated the Closing Date, as to the incumbency and signature of 
the officers of each Borrower executing this Agreement, any certificate or 
other documents to be delivered by it pursuant hereto, together with 
evidence of the incumbency of such Secretary or Assistant Secretary;

(e) Organization Documents. Agent shall have received a copy 
of the Organization Documents of each Borrower, and all amendments 
thereto, certified by the Secretary of State or other appropriate official 
of its jurisdiction of organization, together with copies of the By-Laws 
of each Borrower and all agreements of each Borrower's shareholders 
certified as accurate and complete by the Secretary of each Borrower;

(f) Good Standing Certificates. Agent shall have received 
good standing certificates for each Borrower dated not more than fifteen ( 
15) days prior to the Closing Date, issued by the Secretary of State or 
other appropriate official of each Borrower's jurisdiction of 
incorporation and each jurisdiction where the conduct of each Borrower's 
business activities or the ownership of its properties necessitates 
qualification;

(g) Legal Opinion. Agent shall have received the favorable 
legal opinions of Borrowers' counsel (qualified to practice in the States 
of Florida, Michigan, Minnesota and Pennsylvania) in form and substance 
satisfactory to Agent, which shall cover such matters incident to the 
transactions contemplated by this Agreement and the Other Documents as 
Agent may require, and each Borrower hereby authorizes and directs each 
such counsel to deliver such opinions to Agent;

(h) No Litigation. No litigation, investigation or proceeding 
before or by any arbitrator or Governmental Body shall be continuing or 
threatened against any Borrower or against the officers or directors of 
any Borrower (A) in connection with any of the Loan Documents or any of 
the transactions contemplated thereby and which, in the reasonable opinion 
of Agent, is deemed material or (B) which could, in the reasonable opinion 
of Agent, have a Material Adverse Effect; and no injunction, writ, 
restraining order or other order of any nature materially adverse to any 
Borrower or the conduct of its business or inconsistent with the due 
consummation of the transactions shall have been issued by any 
Governmental Body;

(i) Collateral Examination. Agent shall have completed 
Collateral examinations and received appraisals, the results of which 
shall be satisfactory in form and substance to Lenders, of the 
Receivables, Inventory, General Intangibles, and Equipment of each 
Borrower and all books and records in connection therewith;

(j) Fees. Agent shall have received all fees payable to Agent 
and Lenders on or prior to the Closing Date pursuant to Section 3 hereof;

t72406.7} 001246-00024

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(k) Pro Forma Financial Statements. Agent shall have received 
a copy of the Pro Forma Financial Statements which shall be satisfactory 
in all respects to Agent;

(1) Insurance. Agent shall have received in form and 
substance satisfactory to Agent, certified copies of Borrowers' casualty 
insurance policies, together with loss payable endorsements on Agent's 
standard form of loss payee endorsement naming Agent as loss payee, and 
certified copies of Borrowers' liability insurance policies, together with 
endorsements naming Agent as a co-insured;

(m) Payment Instructions. Agent shall have received written 
instructions from Borrowers directing the application of proceeds of the 
initial Advances made pursuant to this Agreement;

(n) Lockbox Blocked Account Agreements. Agent shall have 
received duly executed agreements establishing the Blocked Accounts 
acceptable in all respects to Agent, for the collection and servicing of 
the Receivables and other proceeds of Collateral;

(o) Consents. Agent shall have received any and all Consents 
necessary to permit the effectuation of the transactions contemplated by 
any of the Loan Documents; and, Agent shall have received such Consents 
and waivers of such third parties as might assert claims with respect to 
the Collateral, as Agent and its counsel shall deem necessary;

(p) No Adverse Material Change. Since September 30, 1998, 
there shall not have occurred any event, condition or state of facts which 
could reasonably be expected to have a Material Adverse Effect and no 
representations made or information supplied to Agent shall have been 
proven to be inaccurate or misleading in any material respect;

(q) Leasehold Agreements. Agent shall have received landlord, 
mortgagee or warehouseman agreements satisfactory to Agent with respect to 
all premises owned or leased by any Borrower in Tampa, Florida and 
Hibbing, Minnesota;

(r) Contract Review. Agent shall have reviewed all material 
contracts of Borrowers including leases, union contracts, labor contracts, 
vendor supply contracts, license agreements and distributorship agreements 
and such contracts and agreements shall be satisfactory in all respects to 
Agent;

(s) Closing Certificate. Agent shall have received a closing 
certificate signed by the Chief Financial Officer of Borrowing Agent, on 
behalf of each Borrower, dated as of the date hereof, stating that (i) all 
representations and warranties set forth in this Agreement and the Other 
Documents are true and correct on and as of such date, (ii) Borrowers are 
on such date in compliance with all the terms and provisions set forth in 
each of the Loan Documents and (iii) on such date no Default or Event of 
Default has occurred Or is continuing;

(t) Borrowing Base. Agent shall have received evidence from 
Borrowers that the aggregate amount of Eligible Receivables and Eligible 
Inventory is sufficient in value and amount to support Advances in the 
amount requested by Borrowers on the Closing Date;

(u) Undrawn Availability. After giving effect to the initial 
Advances hereunder to be made on the Closing Date, Borrowers shall have 
Undrawn Availability of at least $10,000,000;

{72406 7) 001246-00024

'] _

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-

(v) Subordinated Indebtedness. Agent shall have received, 
reviewed and found acceptable copies of all the Subordinated Loan 
Documents relating to the Subordinated Notes and shall have received duly 
executed and delivered copies of any and all intercreditor agreements 
with the holders of the Subordinated Notes, in form and substance 
acceptable to Agent;

(w) No Labor Disputes. Agent shall have received assurances 
satisfactory to it that there are no threats of strikes or work stoppages 
by any employees, or organization of employees, of any Borrower or any 
Guarantor, which Agent reasonably determines may have a Material Adverse 
Effect; and

(x) Other. All corporate and other proceedings, and all 
documents, instruments and other legal matters in connection with the 
transactions contemplated hereby shall be satisfactory in form and 
substance to Agent and its counsel.

8.2 Conditions to Each Advance. The agreement of Lenders to 
make any Advance requested to be made on any date (including the initial 
Advance) is subject to the satisfaction of the following conditions 
precedent as of the date such Advance is made:

(a) Representations and Warranties. Each of the 
representations and warranties made by any Borrower in or pursuant to 
this Agreement and any of the Other Documents, and each of the 
representations and warranties contained in any certificate, document or 
financial or other statement furnished at any time under or in connection 
with this Agreement or any of the Other Documents shall be true and 
correct in all material respects on and as of such date as if made on and 
as of such date;

(b) No Default. No Event of Default or Default shall have 
occurred and be continuing on such date, or would exist after giving 
effect to the Advances requested to be made, on such date; provided, 
however, that Lenders, in their sole discretion, may continue to make 
Advances notwithstanding the existence of an Event of Default or Default 
and that any Advances so made shall not be deemed a waiver of any such 
Event of Default or Default;

(c) Borrowing Base Certificates: Maximum Advances. Agent 
shall have received each Borrowing Base Certificate required by the terms 
of this Agreement or otherwise requested by Agent, and, in the case of 
any Advances requested to be made, after giving effect thereto, the 
aggregate Advances shall not exceed the maximum amount of Advances 
permitted under Section 2.1 hereof;

(d) No Litigation. No action, proceeding, investigation, 
regulation or legislation shall have been instituted, threatened or 
proposed before any court or Governmental Body to enjoin, restrain or 
prohibit, or to obtain damages in respect of, or which is related to or 
arises out of, this Agreement or any of the Other Documents or the 
consummation of the transactions contemplated hereby or thereby; and

(e) No Material Adverse Effect. No event shall have occurred 
and no condition shall exist which has or could be reasonably expected to 
have a Material Adverse Effect.

Each request for an Advance by any Borrower hereunder shall constitute a 
representation and warranty by each Borrower as of the date of such 
Advance that the conditions contained in this subsection shall have been 
satisfied.

SECTION 9. INFORMATION AS TO BORROWERS.

{72406.7} 001246-00024

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Agreement:

Each Borrower shall, until satisfaction in full of the Obligations and the 
termination of this

9.1 Disclosure of Material Matters. Immediately upon learning 
thereof, report to Agent all matters materially affecting the value, 
enforceability or collectibility of any portion of the Collateral 
including any Borrower's reclamation or repossession of, or the return to 
any Borrower of, a material amount of goods or claims or disputes asserted 
by any Customer or other obliger.

9.2 Schedules. Deliver to Agent on or before the fifteenth ( 
15th) day of each month as and for the prior month (a) accounts receivable 
agings, (b) accounts payable schedules, (c) Inventory reports, and (d) a 
Borrowing Base Certificate. In addition, each Borrower will deliver to 
Agent at such intervals as Agent may require: (i) confirmatory assignment 
schedules, (ii) copies of Customer's invoices, (iii) evidence of shipment 
or delivery, and (iv) inch further schedules. documents and/or information 
regarding the Collateral as Agent may require including trial balances and 
test verifications. Agent shall have the right to confirm and verify all 
Receivables by any manner and through any medium it considers advisable 
and do whatever it may deem reasonably necessary to protect its interests 
hereunder. The items to be provided under this Section are to be in form 
satisfactory to Agent and executed by each Borrower and delivered to Agent 
from time to time solely for Agent's convenience in maintaining z records 
of the Collateral, and any Borrower's failure to deliver any of such items 
to Agent shall not affect, terminate, modify or otherwise limit Agent's 
Lien with respect to the Collateral.


9.3 Environmental Reports. Furnish Agent, concurrently with 
the delivery of the financial statements referred to in Sections 9.7 and 
9.8, with a certificate signed by the Chief Financial Officer of Borrowing 
Agent, on behalf of each Borrower, stating, to the best of his knowledge, 
that each Borrower is in compliance in all material respects with all 
Environmental Laws and laws relating to occupational safety and health. To 
the extent any Borrower is not in compliance with the foregoing laws, the 
certificate shall set forth with specificity all areas of non-compliance 
and the proposed action such Borrower will implement in order to achieve 
full compliance.

9.4 Litigation. Promptly notify Agent in writing of any 
litigation, suit or administrative proceeding affecting any Borrower, 
whether or not the claim is covered by insurance, and of any suit or 
administrative proceeding, which in any such case could reasonably be 
expected to have a Material Adverse Effect on any Borrower.

9.5 Material Occurrences. Promptly notify Agent in writing 
upon the occurrence of (a) any Default or Event of Default; (b) any event 
of default under any Subordinated Debt Documents; (c) any event which with 
the giving of notice or lapse of time, or both, would constitute an event 
of default under any Subordinated Debt Documents; (d) any event, 
development or circumstance whereby any financial statements or other 
reports furnished to Agent fail in any material respect to present fairly, 
in accordance with GAAP consistently applied, the financial condition or 
operating results of any Borrower as of the date of such statements; (e) 
any accumulated retirement plan funding deficiency which, if such 
deficiency continued for two plan years and was not corrected as provided 
in Section 4971 of the Code, could subject any Borrower to a tax imposed 
by Section 4971 of the Code; (f) each and every default by any Borrower 
which might result in the acceleration of the maturity of any 
Indebtedness, including the names and addresses of the holders of such 
Indebtedness with respect to which there is a default existing or with 
respect to which the maturity has been or could be accelerated, and the 
amount of such Indebtedness; and (g) any other development in the

t72406.7i 001246-00024

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business or affairs of any Borrower which could reasonably be expected to 
have a Material Adverse Effect; in each case describing the nature thereof 
and the action Borrowers propose to take with respect thereto.

9.6 Government Receivables. Notify Agent immediately if any 
of its Receivables arise out of contracts between any Borrower and any

Governmental Body.

9.7 Annual Financial Statements. Furnish Agent within ninety 
(90) days after the end of each Fiscal Year of Borrowers, financial 
statements of Borrowers on a consolidating and consolidated basis 
including statements of income and stockholders' equity and cash flow from 
the beginning of the current Fiscal Year to the end of such Fiscal Year 
and the balance sheet as at the end of such Fiscal Year, all prepared in 
accordance with GAAP applied on a basis consistent with prior practices, 
and in reasonable detail and reported upon without qualification by an 
independent certified public accounting firm selected by Borrowers and 
satisfactory to Agent (the "Accountants"). The report of the Accountants 
shall be accompanied by a statement of the Accountants certifying that (i) 
they have caused the Loan Agreement to be reviewed, (ii) in making the 
examination upon which such report was based either no information came to 
their attention which to their knowledge constituted an Event of Default 
or a Default under this Agreement or any related agreement or, if such 
information came to their attention, specifying any such Default or Event 
of Default, its nature, when it occurred and whether it is continuing, and 
such report shall contain or have appended thereto calculations which set 
forth Borrowers' compliance with the requirements or restrictions imposed 
by Sections 6.5, 7.6 and 7.1 l hereof. In addition, the reports shall be 
accompanied by a Compliance Certificate.

9.8 Quarterly Financial Statements. Furnish Agent within 
forty-five (45) days after the end of each Fiscal Quarter, an unaudited 
balance sheet of Borrowers on a consolidated and consolidating basis and 
unaudited statements of income and stockholders' equity and cash flow of 
Borrowers on a consolidated and consolidating basis reflecting results of 
operations from the beginning of the Fiscal Year to the end of such 
quarter and for such quarter, prepared on a basis consistent with prior 
practices and complete and correct in all material respects, subject to 
normal year end adjustments. The reports shall be accompanied by a 
Compliance Certificate.

9.9 Monthly Financial Statements. Furnish Agent within 
forty-five (45) days after the end of each month from the Closing Date 
through June 30, 1999 and thirty (30) days after the end of each month 
thereafter, an unaudited balance sheet of Borrowers on a consolidated and 
consolidating basis and unaudited statements of income and stockholders' 
equity and cash flow of Borrowers on a consolidated and consolidating 
basis reflecting results of operations from the beginning of the Fiscal 
Year to the end of such month and for such month, prepared on a basis 
consistent with prior practices and complete and correct in all material 
respects, subject to normal year end adjustments.

Certificate.

The reports shall be accompanied by a Compliance

9.10 Other Reports. Furnish Agent as soon as available, but 
in any event within ten (10) days after the issuance thereof, (i) with 
copies of such financial statements, reports and returns as each Borrower 
shall send to its stockholders and (ii) copies of all notices sent 
pursuant to the Subordinated Documents.

(72406 7} 001246-00024

9.11 Additional Information. Furnish Agent with such 
additional information as Agent shall reasonably request in order to 
enable Agent to determine whether the terms, covenants, provisions and 
conditions of this Agreement and the Revolving Credit Notes have been 
complied with by Borrowers including, without limitation and without the 
necessity of any request by Agent, (a) copies of all

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-

environmental audits and reviews, (b) at least thirty (30) days prior 
thereto, notice of any Borrower's opening of any new office or place of 
business or any Borrower's closing of any existing office or place of 
business, and (c) promptly upon any Borrower's learning thereof, notice of 
any labor dispute to which any Borrower may become a party, any strikes or 
walkouts relating to any of its plants or other facilities, and the 
expiration of any labor contract to which any Borrower is a party or by 
which any Borrower is bound.

9.12 Projected Operating Budget. Furnish Agent, no later than 
thirty (30) days prior to the beginning of each Borrower's Fiscal Years 
commencing with Fiscal Year 1999, a Fiscal Quarter by Fiscal Quarter 
projected operating budget and cash flow of Borrowers on a consolidated 
and consolidating basis for such Fiscal Year (including an income 
statement for each Fiscal Quarter and a balance sheet as at the end of 
each Fiscal Quarter), such projections to be accompanied by a certificate 
signed by the President or Chief Financial Officer of Borrowing Agent, on 
behalf of each Borrower, to the effect that such projections have been 
prepared on the basis of sound financial planning practice consistent with 
past budgets and financial statements and that such officer has no reason 
to question the reasonableness of any material assumptions on which such 
projections were prepared.

9.13 Variances From Operating Budget. Furnish Agent, 
concurrently with the delivery of the financial statements referred to in 
Section 9.S, a written report summarizing all material variances from 
budgets submitted by Borrowers pursuant to Section 9. l 2 and a discussion 
and analysis by management with respect to such variances.

9.14 Notice of Suits. Adverse Events. Furnish Agent with 
prompt notice of (i) any lapse or other termination of any Consent issued 
to any Borrower by any Governmental Body or any other Person that is 
material to the operation of any Borrower's business, (ii) any refusal by 
any Governmental Body or any other Person to renew or extend any such 
Consent; and (iii) copies of any periodic or special reports filed by any 
Borrower with any Governmental Body or Person, if such reports indicate 
any material change in the business, operations, affairs or condition of 
any Borrower, or if copies thereof are requested by Lender, and (iv) 
copies of any material notices and other communications from any 
Governmental Body or Person which specifically relate to any Borrower.

9.15 ERISA Notices and Requests. Furnish Agent with immediate 
written notice in the event that (i) any Borrower or any member of the 
Controlled Group knows or has reason to know that a Termination Event has 
occurred, together with a written statement describing such Termination 
Event and the action, if any, which such Borrower or member of the 
Controlled Group has taken, is taking, or proposes to take with respect 
thereto and, when known, any action taken or threatened by the Internal 
Revenue Service, Department of Labor or PBGC with respect thereto, (ii) 
any Borrower or any member of the Controlled Group knows or has reason to 
know that a prohibited transaction (as defined in Sections 406 of ERISA 
and 4975 of the Code) has occurred together with a written statement 
describing such transaction and the action which such Borrower or any 
member of the Controlled Group has taken, is taking or proposes to take 
with respect thereto, (iii) a funding waiver request has been filed with 
respect to any Plan together with all communications received by any 
Borrower or any member of the Controlled Group with respect to such 
request, (iv) any increase in the benefits of any existing Plan or the 
establishment of any new Plan or the commencement of contributions to any 
Plan to which any Borrower or any member of the Controlled Group was not 
previously contributing shall occur, (v) any Borrower or any member of the 
Controlled Group shall receive from the PBGC a notice of intention to 
terminate a Plan or to have a trustee appointed to administer a Plan, 
together with copies of each such notice, (vi) any Borrower or any member 
of the Controlled Group shall receive any favorable or unfavorable 
determination letter from the Internal Revenue Service regarding the 
qualification

~ 72406.7 ) 00 1 246-00024

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of a Plan under Section 401(a) of the Code, together with copies of each 
such letter; (vii) any Borrower or any member of the Controlled Group 
shall receive a notice regarding the imposition of withdrawal liability, 
together with copies of each such notice; (viii) any Borrower or any 
member of the Controlled Group shall fail to make a required installment 
or any other required payment under Section 412 of the Code on or before 
the due date for such installment or payment; (ix) any Borrower or any 
member of the Controlled Group knows that (a) a Multiemployer Plan has 
been terminated, (b) the administrator or plan sponsor of a Multiemployer 
Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has 
instituted or will institute proceedings under Section 4042 of ERISA to 
terminate a Multiemployer Plan.

9.16 Additional Documents. Execute and deliver to Agent, upon 
request, such documents and agreements as Agent may, from time to time, 
reasonably request to carry out the purposes, terms or conditions of this 
Agreement.

SECTION 10. EVENTS OF DEFAULT.

The occurrence of any one or more of the following events shall constitute 
an "Event of Default":

10.1 failure by any Borrower to pay any principal or interest 
on the Obligations when due (whether at maturity or by reason of 
acceleration pursuant to the terms of this Agreement or by notice of 
intention to prepay, or by required prepayment) or failure to pay any 
other liabilities or make any other payment, fee or charge provided for 
herein or in any Other Document when due;

10.2 any representation or warranty made or deemed made by 
any Borrower in this Agreement or any Other Document or in any 
certificate, document or financial or other statement furnished at any 
time in connection herewith or therewith shall prove to have been 
misleading in any material respect on the date when made or deemed to have 
been made;

10.3 failure by any Borrower to (i) furnish financial 
information when due or when requested, or (ii) permit the inspection of 
its books or records except for a failure or neglect of a Borrower to 
furnish the information required by Section 9.9 hereof which is cured 
within fifteen (15) days from the occurrence of such failure or neglect, 
provided that such opportunity to cure shall not apply if the Borrower 
have failed or neglected to furnish the required information two (2) 
previous times within the previous twelve ( 12) months

10.4 issuance of a notice of Lien, levy, assessment, 
injunction or attachment against a material portion of any Borrower's 
property which is not stayed or lifted within thirty (30) days;

10.5 except as otherwise provided for in Sections 10.1 and 
10.3, failure or neglect of any Borrower to perform, keep or observe any 
term, provision, condition, covenant herein contained, or contained in any 
other agreement or arrangement, now or hereafter entered into between any 
Borrower and Agent or any Lender except for a failure or neglect of a 
Borrower to perform, keep or observe any term, provision, condition or 
covenant contained in Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4 or 
9.6 hereof which is cured within twenty (20) days from the occurrence of 
such failure or neglect;

10.6 any judgment or judgments are rendered against any 
Borrower or Guarantor for an aggregate amount in excess of $250,000 and 
either (i) enforcement proceedings shall have been

~ 72406.7 } 00 1 246-00024

- SS

~ _



commenced upon such judgment or (ii) there shall be any period of thirty 
(30) consecutive days during which a stay of enforcement of such judgment, 
by reason of a pending appeal or otherwise, shall not be in effect.

10.7 any Borrower shall (i) apply for, consent to or suffer 
the appointment of, or the taking of possession by, a receiver, custodian, 
trustee, liquidator or similar fiduciary of itself or of all or a 
substantial part of its property, (ii) make a general assignment for the 
benefit of creditors, (iii) commence a voluntary case under any state or 
federal bankruptcy laws (as now or hereafter in effect), (iv) be 
adjudicated a bankrupt or declared insolvent, (v) file a petition seeking 
to take advantage of any other law providing for the relief of debtors, 
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any 
petition filed against it in any involuntary case under such bankruptcy 
laws, or (vii) take any action for the purpose of effecting any of the 
foregoing;

10.8 any Borrower or Guarantor shall admit in writing its 
inability, or be generally unable, to pay its debts as they become due, 
cease operations of its present business or cease to be Solvent;

10.9 any Subsidiary of any Borrower, or any Guarantor, shall 
(i) apply for, consent to or suffer the appointment of, or the taking of 
possession by, a receiver, custodian, trustee, liquidator or similar 
fiduciary of itself or of all or a substantial part of its property, (ii) 
admit in writing its inability, or be generally unable, to pay its debts 
as they become due, cease operations of its present business or cease to 
be Solvent, (iii) make a general assignment for the benefit of creditors, 
(iv) commence a voluntary case under any state or federal bankruptcy laws 
(as now or hereafter in effect), (v) be adjudicated a bankrupt or declared 
insolvent, (vi) file a petition seeking to take advantage of any other law 
providing for the relief of debtors, (vii) acquiesce to, or fail to have 
dismissed, within thirty (30) days, any petition filed against it in any 
involuntary case under such bankruptcy laws, or (viii) take any action for 
the purpose of effecting any of the foregoing;

10.10 any change in any Borrower's condition or affairs 
(financial or otherwise) which, in Agent's opinion, has a Material Adverse 
Effect;

10.11 any Lien created hereunder or provided for hereby or 
under any Other Document for any reason ceases to be or is not a valid and 
perfected Lien having a first priority interest;

10.12 an event of default has occurred and been declared 
under the Subordinated Debt Documents, which default shall not have been 
cured or waived within any applicable grace period;

10.13 a default of the obligations of any Borrower under any 
other agreement to which it is a party shall occur that has or could be 
reasonably expected to have a Material Adverse Effect and which is not 
cured within any applicable grace period;

10.14 termination or breach of any Guaranty Security 
Documents executed and delivered to Agent in connection with the 
Obligations or, if any Guarantor attempts to terminate or challenges the 
validity of or its liability under, any such Guaranty or Guaranty Security 
Documents or similar agreement;

10.1S any Change of Control shall occur;

10.16 any material provision of this Agreement or any of the 
Other Documents shall, for any reason, cease to be valid and binding on 
any Borrower, or any Borrower shall so claim in writing to Agent;

{72406 7} 001246-00024

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7

10.17 (i) any Governmental Body shall (A) revoke, terminate, 
suspend or adversely modify any license, permit, patent trademark or 
tradename of any Borrower, the continuation of which is material to the 
continuation of any Borrower's business, or (B) commence proceedings to 
suspend, revoke, terminate or adversely modify any such license, permit, 
trademark, tradename or patent and such proceedings shall not be dismissed or 
discharged within sixty (60) days, or (c) schedule or conduct a hearing on 
the renewal of any license, permit, trademark, tradename or patent necessary 
for the continuation of any Borrower's business and the staff of such 
Governmental Body issues a report recommending the termination, revocation, 
suspension or material, adverse modification of such license, permit, 
trademark, tradename or patent; (ii) any agreement which is necessary or 
material to the operation of any Borrower's business shall be revoked or 
terminated and not replaced by a substitute acceptable to Agent within thirty 
(30) days after the date of such revocation or termination, and such 
revocation or termination and non-replacement would reasonably be expected to 
have a Material Adverse Effect on any Borrower;

10.18 any portion of the Collateral shall be seized or taken by a 
Governmental Body, or any Borrower or the title and rights of any Borrower or 
any original owner which is the owner of any material portion of the 
Collateral shall have become the subject matter of litigation which might, in 
the opinion of Agent, upon final determination, result in impairment or loss 
of the security provided by this Agreement or the Other Documents;

10.19 the operations of any Borrower's manufacturing facility are 
interrupted at any time for more than forty-eight (48) hours during any 
period of fourteen (14) consecutive days, unless such Borrower shall (i) be 
entitled to receive for such period of interruption, proceeds of business 
interruption insurance sufficient to assure that its per diem cash needs 
during such period is at least equal to its average per diem cash needs for 
the consecutive three-(3) month period immediately preceding the initial date 
of interruption and (ii) receive such proceeds in the amount described in 
clause (i) preceding not later than thirty (30) days following the initial 
date of any such interruption; provided, however, that notwithstanding the 
provisions of clauses (i) and (ii) of this section, an Event of Default shall 
be deemed to have occurred if such Borrower shall be receiving the proceeds 
of business interruption insurance for a period of thirty (30) consecutive 
days;

10.20 an event or condition specified in Sections 7.16 or 9.15 
hereof shall occur or exist with respect to any Plan and, as a result of such 
event or condition, together with all other such events or conditions, any 
Borrower or any member of the Controlled Group shall incur, or in the opinion 
of Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or 
both) which, in the reasonable judgment of Agent, could reasonable be 
expected to have a Material Adverse Effect on any Borrower; or

10.21 any Borrower shall cease to be entitled to use or operate 
any machinery or equipment leased by it from another Person by reason of such 
Person's insolvency, bankruptcy, dissolution, receivership or other winding 
up of its affairs or liquidation of its assets.

SECTION 11. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.

11.1 Rights and Remedies. Upon the occurrence of (i) an Event of 
Default pursuant to Section 10.7 all Obligations shall be immediately due and 
payable and this Agreement and the obligation of Lenders to make Advances 
shall be deemed terminated; and, (ii) any of the other Events of Default and 
at any time thereafter (such default not having previously been cured), at 
the option of Required Lenders all

~ 72406.7) 00 1246-00024

- 60 -

Obligations shall be immediately due and payable and Lenders shall have 
the right to terminate this Agreement and to terminate the obligation of 
Lenders to make Advances and (iii) a filing of a petition against any 
Borrower in any involuntary case under any state or federal bankruptcy 
laws, the obligation of Lenders to make Advances hereunder shall be 
terminated other than as may be required by an appropriate order of the 
bankruptcy court having jurisdiction over any Borrower. Upon or after the 
occurrence of any Event of Default, Agent shall have the right to exercise 
any and all other rights and remedies provided for herein, under the UCC 
and at law or equity generally, including the right to foreclose the 
security interests granted herein and to realize upon any Collateral by 
any available judicial procedure and/or to take possession of and sell any 
or all of the Collateral with or without judicial process. Agent may enter 
any of Borrower's premises or other premises without legal process and 
without incurring liability to any Borrower therefor, and Agent may 
thereupon, or at any time thereafter, in its discretion without notice or 
demand, take the Collateral and remove the same to such place as Agent may 
deem advisable and Agent may require Borrowers to make the Collateral 
available to Agent at a convenient place. With or without having the 
Collateral at the time or place of sale, Agent may sell the Collateral, or 
any part thereof, at public or private sale, at any time or place, in one 
or more sales, at such price or prices, and upon such terms, either for 
cash, credit or future delivery, as Agent may elect. Except as to that 
part of the Collateral which is perishable or threatens to decline 
speedily in value or is of a type customarily sold on a recognized market, 
Agent shall give Borrowers reasonable notification of such sale or sales, 
it being agreed that in all events written notice mailed to Borrowers at 
least five (5) days prior to such sale or sales is reasonable 
notification. At any public sale Agent or any Lender may bid for and 
become the purchaser, and Agent, any Lender or any other purchaser at any 
such sale thereafter shall hold the Collateral sold absolutely free from 
any claim or right of whatsoever kind, including any equity of redemption 
and such right and equity are hereby expressly waived and released by each 
Borrower. In connection with the exercise of the foregoing remedies, Agent 
is granted permission to use all of each Borrower's trademarks, trade 
styles, trade names, patents, patent applications, licenses, franchises 
and other proprietary rights which are used in connection with (a) 
Inventory for the purpose of marketing, advertising for sale and disposing 
of such Inventory and (b) Equipment for the purpose of completing the 
manufacture of unfinished goods. The proceeds realized from the sale of 
any Collateral shall be applied as follows: first, to the reasonable 
costs, expenses and attorneys' fees and expenses incurred by Agent for 
collection and for acquisition, completion, protection, removal, storage, 
sale and delivery of the Collateral; second, to interest due upon any of 
the Obligations and any fees payable under this Agreement; and, third, to 
the principal of the Obligations. If any deficiency shall arise, Borrowers 
shall remain liable to Agent and Lenders therefor.

11.2 Agent's Discretion. Agent shall have the right in its 
sole discretion to determine which rights, Liens, security interests or 
remedies Agent may at any time pursue, relinquish, subordinate, or modify 
or to take any other action with respect thereto and such determination 
will not in any way modify or affect any of Agent's or Lenders' rights 
hereunder.

11.3 Setoff. In addition to any other rights which Agent or 
any Lender may have under Applicable Law, upon the occurrence of an Event 
of Default hereunder, Agent and such Lender shall have a right to apply 
any Borrower's property held by Agent and such Lender to reduce the 
Obligations.

11.4 Rights and Remedies not Exclusive. The enumeration of 
the foregoing rights and remedies is not intended to be exhaustive and the 
exercise of any right or remedy shall not preclude the exercise of any 
other right or remedies provided for herein or otherwise provided by law, 
all of which shall be cumulative and not alternative.

-

{72406.7) 001246-00024

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SECTION 12. WAIVERS AND JUDICIAL PROCEEDINGS.

12.1 Waiver of Notice. Each Borrower hereby waives notice of 
non-payment of any of the Receivables, demand, presentment, protest and 
notice thereof with respect to any and all instruments, notice of 
acceptance hereof, notice of loans or advances made, credit extended, 
Collateral received or delivered, or any other action taken in reliance 
hereon, and all other demands and notices of any description, except such 
as are expressly provided for herein.

12.2 Delay. No delay or omission on Agent's or any Lender's 
part in exercising any right, remedy or option shall operate as a waiver 
of such or any other right, remedy or option or of any default.

12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY 
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION 
OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER 
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION 
HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE 
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS 
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR 
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR 
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND 
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY 
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE 
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS 
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH 
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE 
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

SECTION 13. EFFECTIVE DATE AND TERMINATION.

13.1 Term. This Agreement shall become effective on the date 
hereof and shall continue in full force and effect until January 8, 2004 
(the "Term") unless sooner terminated as herein provided. Borrowers may 
terminate this Agreement at any time upon ninety (90) days prior written 
notice upon payment in full of the Obligations. In the event the 
Obligations are prepaid in full prior to the last day of the Term (the 
date of such prepayment hereinafter referred to as the "Early Termination 
Date"), Borrowers shall pay to Agent for the benefit of Lenders an early 
termination fee in an amount equal to one percent (1%) of the Maximum 
Revolving Amount if the Early Termination Date occurs on or after the 
Closing Date to and including the date immediately preceding the third 
anniversary of the Closing Date; provided, however, that such early 
termination fee shall be reduced to one-half percent (0.5%) of the Maximum 
Revolving Amount if (i) the Early Termination Date occurs in connection 
with the consummation of an Acquisition (other than a Permitted 
Acquisition) which the Required Lenders did not agree to permit after 
being requested to do so by Borrowers and (ii) the funds to prepay the 
Obligations in full were advanced by a new lender or lenders 
contemporaneously with the consummation of such Acquisition.

13.2 Termination. The termination of the Agreement shall not 
affect any Borrower's, Agent's or any Lender's rights, or any of the 
Obligations having their inception prior to the effective date of such 
termination, and the provisions hereof shall continue to be fully 
operative until all transactions entered into, rights or interests created 
or Obligations have been fully disposed of, concluded or liquidated. The 
security interests, Liens and rights granted to Agent and Lenders 
hereunder and the financing statements filed

{72406.7) 001246-00024

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hereunder shall continue in full force and effect, notwithstanding the 
termination of this Agreement or the fact that Borrowers' Account may from 
time to time be temporarily in a zero or credit position, until all of the 
Obligations of each Borrower have been paid or performed in full after the 
termination of this Agreement or each Borrower has furnished Agent and 
Lenders with an indemnification satisfactory to Agent and Lenders with 
respect thereto. Accordingly, each Borrower waives any rights which it may 
have under Section 9-404(1 ) of the UCC to demand the filing of 
termination statements with respect to the Collateral, and Agent shall not 
be required to send such termination statements to each Borrower, or to 
file them with any filing of rice, unless and until this Agreement shall 
have been terminated in accordance with its terms and all Obligations paid 
in full in immediately available funds. All representations, warranties, 
covenants, waivers and agreements contained herein shall survive 
termination hereof until all Obligations are paid or performed in full.

SECTION 14. REGARDING AGENT.

14.1 Appointment. Each Lender hereby designates PNC to act as 
Agent for such Lender under this Agreement and the Other Documents. Each 
Lender hereby irrevocably authorizes Agent to take such action on its 
behalf under the provisions of each of the Loan Documents and to exercise 
such powers and to perform such duties hereunder and thereunder as are 
specifically delegated to or required of Agent by the terms hereof and 
thereof and such other powers as are reasonably incidental thereto and 
Agent shall hold all Collateral, payments of principal and interest, fees 
(except the fees set forth in Sections 3.3(a) and 3.4), charges and 
collections (without giving effect to any collection days) received 
pursuant to this Agreement, for its benefit and the ratable benefit of 
Lenders. Agent may perform any of its duties hereunder by or through its 
agents or employees. As to any matters not expressly provided for by this 
Agreement (including collection of the Revolving Credit Notes) Agent shall 
not be required to exercise any discretion or take any action, but shall 
be required to act or to refrain from acting (and shall be fully protected 
in so acting or refraining from acting) upon the instructions of the 
Required Lenders, and such instructions shall be binding; provided, 
however, that Agent shall not be required to take any action which exposes 
Agent to liability or which is contrary to this Agreement or the Other 
Documents or Applicable Law unless Agent is furnished with an 
indemnification reasonably satisfactory to Agent with respect thereto.

14.2 Nature of Duties. Agent shall have no duties or 
responsibilities except those expressly set forth in this Agreement and 
the Other Documents. Neither Agent nor any of its officers, directors, 
employees or agents shall be (i) liable for any action taken or omitted by 
them as such hereunder or in connection herewith, unless caused by their 
gross (not mere) negligence or willful misconduct, or (ii) responsible in 
any manner for any recitals, statements, representations or warranties 
made by any Borrower or any officer thereof contained in this Agreement, 
or in any of the Other Documents or in any certificate, report, statement 
or other document referred to or provided for in, or received by Agent 
under or in connection with, any of the Loan Documents or for the value, 
validity, effectiveness, genuineness, enforceability or sufficiency of any 
of the Loan Documents or for any failure of any Borrower to perform its 
obligations hereunder. Agent shall not be under any obligation to any 
Lender to ascertain or to inquire as to the observance or performance of 
any of the agreements contained in, or conditions of, any of the Loan 
Documents, or to inspect the properties, books or records of any Borrower. 
The duties of Agent as respects the Advances to Borrowers shall be 
mechanical and administrative in nature; Agent shall not have by reason of 
this Agreement a fiduciary relationship in respect of any Lender; and 
nothing in this Agreement, expressed or implied, is intended to or shall 
be so construed as to impose upon Agent any obligations in respect of this 
Agreement except as expressly set forth herein.

14.3 Lack of Reliance on Agent and Resignation.

 .

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(a) Independently and without reliance upon Agent or any other 
Lender, each Lender has made and shall continue to make (i) its own 
independent investigation of the financial condition and affairs of each 
Borrower in connection with the making and the continuance of the Advances 
hereunder and the taking or not taking of any action in connection 
herewith, and (ii) its own appraisal of the creditworthiness of each 
Borrower. Agent shall have no duty or responsibility, either initially or 
on a continuing basis, to provide any Lender with any credit or other 
information with respect thereto, whether coming into its

r

possession before making of the Advances or at any time or times 
thereafter except as shall be provided by any Borrower pursuant to the 
terms hereof. Agent shall not be responsible to any Lender for any 
recitals, statements, information, representations or warranties herein or 
in any agreement, document, certificate or a statement delivered in 
connection with or for the execution, effectiveness, genuineness, 
validity, enforceability, collectibility or sufficiency of any of the Loan 
Documents, or of the financial condition of any Borrower, or be required 
to make any inquiry concerning either the performance or observance of any 
of the terms, provisions or conditions of this Agreement, the Revolving 
Credit Notes, the Other Documents or the financial condition of any 
Borrower, or the existence of any Event of Default or any Default.

(b) Agent may resign on sixty (60) days written notice to each 
of Lenders and Borrowing Agent and upon such resignation, the Required 
Lenders will promptly designate a successor Agent reasonably satisfactory 
to Borrowers. Any such successor Agent shall succeed to the rights, powers 
and duties of Agent, and the term "Agent" shall mean such successor agent 
effective upon its appointment, and the former Agent's rights, powers and 
duties as Agent shall be terminated, without any other or further act or 
deed on the part of such former Agent. After any Agent's resignation as 
Agent, the provisions of this Section l 4 shall inure to its benefit as to 
any actions taken or omitted to be taken by it while it was Agent under 
this Agreement.

14.4 Certain Rights of Agent. If Agent shall request 
instructions from Lenders with respect to any act or action (including 
failure to act) in connection with this Agreement or any Other Document, 
Agent shall be entitled to refrain from such act or taking such action 
unless and until Agent shall have received instructions from the Required 
Lenders; and Agent shall not incur liability to any Person by reason of so 
refraining. Without limiting the foregoing, Lenders shall not have any 
right of action whatsoever against Agent as a result of its acting or 
refraining from acting hereunder in accordance with the instructions of 
the Required Lenders.

14.5 Reliance. Agent shall be entitled to rely, and shall be 
fully protected in relying, upon any note, writing, resolution, notice, 
statement, certificate, telex, teletype or telecopier message, cablegram, 
order or other document or telephone message believed by it to be genuine 
and correct and to have been signed, sent or made by the proper person or 
entity, and, with respect to all legal matters pertaining to this 
Agreement and the Other Documents and its duties hereunder, upon advice of 
counsel selected by it. Agent may employ agents and attorneys-in-fact and 
shall not be liable for the default or misconduct of any such agents or 
attorneys-in-fact selected by Agent with reasonable care.

14.6 Notice of Default. Agent shall not be deemed to have 
knowledge or notice of the occurrence of any Default or Event of Default 
hereunder or under the Other Documents, unless Agent has received notice 
from a Lender or a Borrower referring to this Agreement or the Other 
Documents, describing such Default or Event of Default and stating that 
such notice is a "notice of default." In the event that Agent receives 
such a notice, Agent shall give notice thereof to Lenders. Agent shall 
take such action with respect to such Default or Event of Default as shall 
be reasonably directed by the Required Lenders; provided, however, that, 
unless and until Agent shall have received such directions, Agent may (but 
shall not

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-

be obligated to) take such action, or refrain from taking such action, 
with respect to such Default or Event of Default as it shall deem 
advisable in the best interests of Lenders.

14.7 Indemnification. To the extent Agent is not reimbursed 
and indemnified by Borrowers, each Lender will reimburse and indemnify 
Agent in proportion to its respective portion of the Advances (or, if no 
Advances are outstanding, according to its Commitment Percentage), from 
and against any and all liabilities, obligations, losses, damages, 
penalties, actions, judgments, suits, costs, expenses or disbursements of 
any kind or nature whatsoever which may be imposed on, incurred by or 
asserted against Agent in performing its duties hereunder, or in any way 
relating to or arising out of this Agreement or any Other Document; 
provided that, Lenders shall not be liable for any portion of such 
liabilities, obligations, losses, damages, penalties, actions, judgments, 
suits, costs, expenses or disbursements resulting from Agent's gross (not 
mere) negligence or willful misconduct.

14.8 Agent in its Individual Capacity. With respect to the 
obligation of Agent to lend under this Agreement, the Advances made by it 
shall have the same rights and powers hereunder as any other Lender and as 
if it were not performing the duties as Agent specified herein; and the 
term "Lender" or any similar term shall, unless the context clearly 
otherwise indicates, include Agent in its individual capacity as a Lender. 
Agent may engage in business with any Borrower as if it were not 
performing the duties specified herein, and may accept fees and other 
consideration from any Borrower for services in connection with this 
Agreement or otherwise without having to account for the same to Lenders.

14.9 Delivery of Documents. To the extent Agent receives 
financial statements required under Sections 9.7, 9.8, and 9.9 from any 
Borrower pursuant to the terms of this Agreement, Agent will promptly 
furnish such documents and information to Lenders.

14.10 Borrowers' Undertaking to Agent. Without prejudice to 
their respective obligations to Lenders under the other provisions of this 
Agreement, each Borrower hereby undertakes with Agent to pay to Agent from 
time to time on demand all amounts from time to time due and payable by it 
for the account of Agent or Lenders or any of them pursuant to this 
Agreement to the extent not already paid. Any payment made pursuant to any 
such demand shall pro tanto satisfy the relevant Borrower's obligations to 
make payments for the account of Lenders or the relevant one or more of 
them pursuant to this Agreement.

SECTION 15. CO-BORROWER PROVISIONS.

15.1 Borrowing Agency: Joint and Several Liability.

(a) Each Borrower hereby irrevocably designates Borrowing 
Agent to be its attorney and agent and in such capacity to borrow, sign 
and endorse notes, and execute and deliver all instruments, documents, 
writings and further assurances now or hereafter required hereunder, on 
behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay 
over or credit all loan proceeds hereunder in accordance with the request 
of Borrowing Agent.

(b) The handling of this credit facility as a co-borrowing 
facility with a borrowing agent in the manner set forth in this Agreement 
is solely as an accommodation to Borrowers and at their request. In order 
to utilize the financial powers of each Borrower in the most efficient and 
economical manner, and in order to facilitate the financing of each 
Borrower's needs, Lenders will, at the request of the Borrowing Agent, 
make Advances and other financial accommodations to all Borrowers on a 
combined basis and in

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accordance with the provisions set forth in this Agreement. Borrowers 
acknowledge that their business is a mutual and collective enterprise and 
Borrowers believe that the consolidation of all Advances and other 
financial accommodations under this Agreement will enhance the aggregate 
borrowing powers of each Borrower and ease the administration of their 
loan relationship with Lenders, all to the mutual advantage of Borrowers. 
Agent's and Lenders' willingness to extend credit to Borrowers pursuant to 
the terms hereof and to administer each Borrower's portion of the 
Collateral therefor, on a combined basis as more fully set forth in this 
Agreement, is done solely as an accommodation to Borrowers, at their 
request and in furtherance of their mutual and collective enterprise. To 
induce Agent and Lenders to do so and in consideration thereof, each 
Borrower hereby indemnifies Agent and each Lender and holds Agent and each 
Lender harmless from and against any and all liabilities, expenses, 
losses, damages and claims of damage or injury asserted against Agent or 
any Lender by any Person arising from or incurred by reason of the 
handling of the financing arrangements of Borrowers as provided herein, 
reliance by Agent or any Lender on any request or instruction from 
Borrowing Agent or any other action taken by Agent or any Lender with 
respect to this Section 15.1 except due to willful misconduct or gross 
(not mere) negligence by the indemnified party.

(c) All Obligations shall be joint and several, and each 
Borrower shall make payment upon the maturity of the Obligations by 
acceleration or otherwise, and such obligation and liability on the part 
of each Borrower shall in no way be affected by any extensions, renewals 
and forbearance granted to Agent or any Lender to any Borrower, failure of 
Agent or any Lender to give any Borrower notice of borrowing or any other 
notice, any failure of Agent or any Lender to pursue or preserve its 
rights against any Borrower, the release by Agent or any Lender of any 
Collateral now or thereafter acquired from any Borrower, and such 
agreement by each Borrower to pay upon any notice issued pursuant thereto 
is unconditional and unaffected by prior recourse by Agent or any Lender 
to the other Borrowers or any Collateral for such Borrower's Obligations 
or the lack thereof.

,~

(d) Each Borrower's joint and several liability hereunder with 
respect to the Advances and other Obligations shall, to the fullest extent 
permitted by Applicable Law, be unconditional irrespective of (i) the 
validity, enforceability, avoidance or subordination of any of the 
Obligations or of any promissory note or other document evidencing all or 
any part of the Obligations, (ii) the absence of any attempt to collect 
any of the Obligations from any other Borrower or Guarantor or any 
Collateral or other security therefor, or the absence of any other action 
to enforce the same, (iii) the waiver, consent, extension, forbearance or 
granting of any indulgence by Agent or any Lender with respect to any of 
the Obligations or any instrument or agreement evidencing or securing the 
payment of any of the Obligations, or any other agreement now or hereafter 
executed by any other Borrower and delivered to Agent or any Lender, (iv) 
the failure by Lender to take any steps to perfect or maintain the 
perfected status of its security interest in or Lien upon, or to preserve 
its rights to, any of the Collateral or other security for the payment or 
performance of any of the Obligations, or Agent's or any Lender's release 
of any Collateral or of its Liens upon any Collateral, (v) Agent's or any 
Lenders' election, in any proceeding instituted under the Bankruptcy Code, 
for the application of Section 111 l(b)(2) of the Bankruptcy Code, (vi) 
any borrowing or grant of a security interest by any other Borrower, as 
debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the 
release or compromise, in whole or in part, of the liability of any 
Borrower or Guarantor for the payment of any of the Obligations, (viii) 
any amendment or modification of any of the Loan Documents or waiver of 
any Default or Event of Default thereunder, (ix) any increase in the 
amount of the Obligations beyond any limits imposed herein or in the 
amount of any interest, fees or other charges payable in connection 
therewith, or any decrease in the same, (x) the disallowance of all or any 
portion of Lender's claims for the repayment of any of the Obligations 
under Section 502 of the Bankruptcy Code, or (xi) any other circumstance 
that might constitute a legal or equitable discharge or defense of any 
Borrower and

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Guarantor. At any time an Event of Default exists, Lender may proceed 
directly and at once, without notice to any Borrower or Guarantor, against 
any or all of Borrowers or Guarantors to collect and recover all or any 
part of the Obligations, without first proceeding against any other 
Borrower or Guarantor or against any Collateral or other security for the 
payment or performance of any of the Obligations, and each Borrower waives 
any provision that might otherwise require Agent or any Lender under 
Applicable Law to pursue or exhaust its remedies against any Collateral or 
any other Borrower or Guarantor before pursuing such Borrower. Each 
Borrower consents and agrees that Agent and any Lender shall be under no 
obligation to marshal! any assets in favor of any Borrower or Guarantor or 
against or in payment of any or all of the Obligations.

(e) Each Borrower is unconditionally obligated to repay the 
Obligations as a joint and several obliger under this Agreement. If, as of 
any date, the aggregate amount of payments made by a Borrower on account 
of the Obligations and proceeds of such Borrower's Collateral that are 
applied to the Obligations exceeds the aggregate amount of Advances 
actually used by such Borrower in its business (such excess amount being 
referred to as an "Accommodation Payment"), then each of the other 
Borrowers shall be obligated to make contribution to such Borrower (the 
"Paying Borrower") in an amount equal to (A) the product derived by 
multiplying the sum of each Accommodation Payment of each Borrower by the 
Allocable Percentage of the Borrower from whom contribution is sought less 
(B) the amount, if any, of the then outstanding Accommodation Payment of 
such Contributing Borrower (such last mentioned amount which is to be 
subtracted from the aforesaid product to be increased by any amounts 
theretofore paid by such Contributing Borrower by way of contribution 
hereunder, and to be decreased by any amounts theretofore received by such 
Contributing Borrower by way of contribution hereunder); provided, 
however, that a Paying Borrower's recovery of contribution hereunder from 
the other Borrowers shall be limited to that amount paid by the Paying 
Borrower in excess of its Allocable Percentage of all Accommodation 
Payments then outstanding of all Borrowers. As used herein, the term 
"Allocable Percentage" shall mean, on any date of determinations thereof, 
a fraction the denominator of which shall be equal to the number of 
Borrowers who are parties to this Agreement on such date and the numerator 
of which shall be 1; provided, however, that such percentages shall be 
modified in the event that contribution from a Borrower is not possible by 
reason of insolvency, bankruptcy or otherwise by reducing such Borrower's 
Allocable Percentage equitably and by adjusting the Allocable Percentage 
of the other Borrowers proportionately so that the Allocable Percentages 
of all Borrowers at all times equals 100%.

15.2 Subordination. Each Borrower expressly subordinates and 
postpones the exercise of any and all rights of subrogation, 
reimbursement, indemnity, exoneration, contribution of any other claim 
that such Borrower may now or hereafter have against the other Borrowers 
or other Person directly or contingently liable for the Obligations 
hereunder, or against or with respect to the other Borrowers' property 
(including any property which is Collateral for the Obligations), arising 
from the existence or performance of this Agreement, until termination of 
this Agreement and repayment in full of the Obligations.

SECTION 16. MISCELLANEOUS,

16.1 Governing Law: Process. This Agreement shall be governed 
by and construed in accordance with the laws of the State of Georgia 
applied to contracts to be performed wholly within the State of Georgia. 
Any judicial proceeding brought by or against any Borrower with respect to 
any. of the Obligations, this Agreement or any related agreement may be 
brought in any court of competent jurisdiction in the State of Georgia, 
United States of America, and, by execution and delivery of this 
Agreement, each Borrower accepts for itself and in connection with its 
properties, generally and unconditionally,

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the non-exclusive jurisdiction of the aforesaid courts, and irrevocably 
agrees to be bound by any judgment rendered thereby in connection with 
this Agreement. Each Borrower hereby waives personal service of any and 
all process upon it and consents that all such service of process may be 
made by registered mail (return receipt requested) directed to Borrowing 
Agent at its address set forth in Section 16.6 and service so made shall 
be deemed completed five (5) days after the same shall have been so 
deposited in the mails of the United States of America, or, at the Agent's 
and/or any Lender's option, by service upon Borrowing Agent which each 
Borrower irrevocably appoints as such Borrower's Agent for the purpose of 
accepting service within the State of Georgia. Nothing herein shall affect 
the right to serve process in any manner permitted by law or shall limit 
the right of Agent or any Lender to bring proceedings against any Borrower 
in the courts of any other jurisdiction. Each Borrower waives any 
objection to jurisdiction and venue of any action instituted hereunder and 
shall not assert any defense based on lack of jurisdiction or venue or 
based upon forum non convenient. Any judicial proceeding by any Borrower 
against Agent or any Lender involving, directly or indirectly, any matter 
or claim in any way arising out of, related to or connected with this 
Agreement or any related agreement, shall be brought only in a federal or 
state court located in the County of Cobb, State of Georgia.

16.2 Entire Understanding.

 .

(a) This Agreement and the documents executed concurrently 
herewith contain the entire understanding between each Borrower, Agent and 
each Lender and supersedes all prior agreements and understandings, if 
any, relating to the subject matter hereof. Any promises, representations, 
warranties or guarantees not herein contained and hereinafter made shall 
have no force and effect unless in writing, signed by each Borrower's, 
Agent's and each Lender's respective officers. Neither this Agreement nor 
any portion or provisions hereof may be changed, modified, amended, 
waived, supplemented, discharged, cancelled or terminated orally or by any 
course of dealing, or in any manner other than by an agreement in writing, 
signed by the party to be charged. Each Borrower acknowledges that it has 
been advised by counsel in connection with the execution of this Agreement 
and Other Documents and is not relying upon oral representations or 
statements inconsistent with the terms and provisions of this Agreement.

(b) The Required Lenders, Agent with the consent in writing of 
the Required Lenders, and Borrowers may, subject to the provisions of this 
Section 16.2(b), from time to time enter into written supplemental 
agreements to this Agreement or any of the Other Documents executed by 
Borrowers, for the purpose of adding or deleting any provisions or 
otherwise changing, varying or waiving in any manner the rights of 
Lenders, Agent or Borrowers thereunder or the conditions, provisions or 
terms thereof of waiving any Event of Default thereunder, but only to the 
extent specified in such written agreements; provided, however, that no 
such supplemental agreement shall, without the consent of all Lenders:

(i) increase the Commitment Percentage of any Lender;

(ii) extend the maturity of any Revolving Credit Note or the due 
date for any amount payable hereunder, or decrease the rate of interest or 
reduce any fee payable by Borrowers to Lenders pursuant to this Agreement;

(iii) alter the definition of the term Required Lenders or alter, 
amend or modify this Section 16.2(b);

(iv) release any Collateral during any calendar year (other than in 
accordance with the provisions of this Agreement) having an aggregate 
value in excess of $1,000,000;

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(v) change the rights and duties of Agent;

(vi) increase the Maximum Revolving Advance Amount or permit any 
Out-of-Formula Loan to be made if after giving effect thereto the total of 
Revolving Advances outstanding hereunder would exceed the Formula Amount 
for more than sixty (60) consecutive Business Days or exceed one hundred 
and ten percent (110%) of the Formula Amount; or

(vii) Increase the Advance Rates above the Advance Rates in effect 
on the Closing Date.



Any such supplemental agreement shall apply equally to each Lender and 
shall be binding upon Borrowers, Lenders and Agent and all future holders 
of the Obligations. In the case of any waiver, Borrowers, Agent and 
Lenders shall be restored to their former positions and rights, and any 
Event of Default waived shall be deemed to be cured and not continuing, 
but no waiver of a specific Event of Default shall extend to any 
subsequent Event of Default (whether or not the subsequent Event of 
Default is the same as the Event of Default which was waived), or impair 
any right consequent thereon.

In the event that Agent requests the consent of a Lender pursuant to 
this Section 16.2 and such Lender shall not respond or reply to Agent in 
writing within ten (10) days of delivery of such request, such Lender 
shall be deemed to have consented to matter that was the subject of the 
request. In the event that Agent requests the consent of a Lender pursuant 
to this Section 16.2 and such consent is denied, then PNC may, at its 
option, require such Lender to assign its interest in the Advances to PNC 
or to another Lender or to any other Person designated by the Agent (the 
"Designated Lender"), for a price equal to the then outstanding principal 
amount thereof plus accrued and unpaid interest and fees due such Lender, 
which interest and fees shall be paid when collected from Borrower. In the 
event PNC elects to require any Lender to assign its interest to PNC or to 
the Designated Lender, PNC will so notify such Lender in writing within 
forty five (45) days following such Lender's denial, and such Lender will 
assign its interest to PNC or the Designated Lender no later than five (5) 
days following receipt of such notice pursuant to a Commitment Transfer 
Supplement executed by such Lender, PNC or the Designated Lender, as 
appropriate, and Agent.

16.3 Successors and Assigns: Participations: New Lenders.

(a) This Agreement shall be binding upon and inure to the 
benefit of Borrowers, Agent, each Lender, all future holders of the 
Obligations and their respective successors and assigns, except that no 
Borrower may assign or transfer any of its rights or obligations under 
this Agreement without the prior written consent of Agent and each Lender.

(b) Each Borrower acknowledges that in the regular course of 
commercial banking business one or more Lenders may at any time and from 
time to time sell participating interests in the Advances to other 
financial institutions (each such Participant or purchaser of a 
participating interest, a "Participant"). Each Participant may exercise 
all rights of payment (including rights of set-off) with respect to the 
portion of such Advances held by it or other Obligations payable hereunder 
as fully as if such Participant were the direct holder thereof provided 
that Borrowers shall not be required to pay to any Participant more than 
the amount which it would have been required to pay to Lender which 
granted an interest in its Advances or other Obligations payable hereunder 
to such Participant had such Lender retained such interest in the Advances 
hereunder or other Obligations payable hereunder and in no event shall

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nothing contained herein shall prohibit or restrict PNC from assigning any 
of its rights and obligations under the Loan Document to any other Person 
after the Closing Date. Upon such execution, delivery, acceptance and 
recording, from and after the transfer effective date determined pursuant 
to such Commitment Transfer Supplement, (i) Eligible Assignee thereunder 
shall be a party hereto and, to the extent provided in such Commitment 
Transfer Supplement, have the rights and obligations of a Lender 
thereunder with a Commitment Percentage as set forth therein, and (ii) the 
transferor Lender thereunder shall, to the extent provided in such 
Commitment Transfer Supplement, be released from its obligations under 
this Agreement, the Commitment Transfer Supplement creating a novation for 
that purpose. Such Commitment Transfer Supplement shall be deemed to amend 
this Agreement to the extent, and only to the extent, necessary to reflect 
the addition of such Eligible Assignee and the resulting adjustment of the 
Commitment Percentages arising from the purchase by such Eligible Assignee 
of all or a portion of the rights and obligations of such transferor 
Lender under this Agreement and the Other Documents. Borrowers hereby 
consent to the addition of such Eligible Assignee and the resulting 
adjustment of the Commitment Percentages arising from the purchase by such 
Eligible Assignee of all or a portion of the rights and obligations of 
such transferor Lender under this Agreement and the Other Documents. 
Borrowers shall execute and deliver such further documents and do such 
further acts and things in order to effectuate the foregoing.

(d) Agent shall maintain at its address a copy of each 
Commitment Transfer Supplement delivered to it and a register (the 
"Register") for the recordation of the names and addresses of the Advances 
owing to each Lender from time to time. The entries in the Register shall 
be conclusive, in the absence of manifest error, and Borrowers, Agent and 
Lenders may treat each Person whose name is recorded in the Register as 
the owner of the Advance recorded therein for the purposes of this 
Agreement. The Register shall be available for inspection by Borrowers or 
any Lender at any reasonable time and from time to time upon reasonable 
prior notice. Agent shall receive a fee in the amount of $3,500 payable by 
the applicable Eligible Assignee upon the effective date of each transfer 
or assignment to such Eligible Assignee.

(e) Borrowers authorize each Lender to disclose to any 
Participant or Eligible Assignee and any prospective Participant or 
Eligible Assignee any and all financial information in such Lender's 
possession concerning Borrowers which has been delivered to such Lender by 
or on behalf of Borrowers pursuant to this Agreement or in connection with 
such Lender's credit evaluation of Borrowers.

16.4 Application of Payments. Agent shall have the continuing 
and exclusive right to apply or reverse and re-apply any payment and any 
and all proceeds of Collateral to any portion of the Obligations. To the 
extent that any Borrower makes a payment or Agent or any Lender receives 
any payment or proceeds of the Collateral for any Borrower's benefit, 
which are subsequently invalidated, declared to be fraudulent or 
preferential, set aside or required to be repaid to a trustee, debtor in 
possession, receiver, custodian or any other party under any bankruptcy 
law, common law or equitable cause, then, to such extent, the Obligations 
or part thereof intended to be satisfied shall be revived and continue as 
if such payment or proceeds had not been received by Agent or such Lender.

16.5 Indemnity. Each Borrower shall indemnify Agent, each 
Lender and each of their respective officers, directors, Affiliates, 
employees and agents from and against any and all liabilities, 
obligations, losses, damages, penalties, actions, judgments, suits, costs, 
expenses and disbursements of any kind or nature whatsoever (including 
fees and disbursements of counsel) which may be imposed on, incurred by, 
or asserted against Agent or any Lender in any litigation, proceeding or 
investigation instituted or conducted by any Governmental Body or any 
other Person with respect to any aspect of, or any transaction 
contemplated by, or referred to in, or any matter related to, any of the 
Loan Documents, whether or not Agent

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or any Lender is a party thereto, except to the extent that any of the 
foregoing arises out of the willful misconduct of the party being 
indemnified.

16.6 Notice. Any notice or request hereunder may be given to 
any Borrower or to Agent or any Lender at their respective addresses set 
forth below or at such other address as may hereafter be specified in a 
notice designated as a notice of change of address under this Section. Any 
notice or request hereunder shall be given by (a) hand delivery, (b) 
overnight courier, (c) registered or certified mail, return receipt 
requested, (d) telex or telegram, subsequently confirmed by registered or 
certified mail, or (e) telecopy to the number set out below (or such other 
number as may hereafter be specified in a notice designated as a notice of 
change of address) with electronic confirmation of its receipt. Any notice 
or other communication required or permitted pursuant to this Agreement 
shall be deemed given (a) when personally delivered to any officer of the 
party to whom it is addressed, (b) on the earlier of actual receipt 
thereof or three (3) days following posting thereof in the U.S. Mail by 
certified or registered mail, postage prepaid, or (c) upon actual receipt 
thereof when sent by a recognized overnight delivery service or (d) upon 
actual receipt thereof when sent by telecopier to the number set forth 
below with electronic confirmation of its receipt, in each case addressed 
to each party at its address set forth below or at such other address as 
has been furnished in writing by a party to the other by like notice:

(A) If to Agent or

PNC at:

with a copy to:

PNC Bank, National Association
Two PNC Plaza
620 Liberty Avenue
18th Floor
Pittsburgh, Pennsylvania 15222
Attention: Richard F. Muse, Jr.
Telephone: (412) 762-4471
Telecopier: (412) 768-4369

Parker, Hudson, Rainer & Dobbs LLP
1500 Marquis Two Tower
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: C. Edward Dobbs, Esq.
Telephone: (404) 523-5300
Telecopier: (404) 522-8409

	(B)	If to a Lender other than Agent, as specified on the signature 
pages hereof

	(C)	If to Borrowing Agent

or any Borrower, at: Reptron Electronics, Inc.
14401 McCormick Drive
Tampa, Florida 33626
Attention: President
Telephone: (813) 855-4656
Telecopier: (813) 855-1697




with a copy to:

William Elson,Esq.

Suite 2960
3000 Town Center
Southfield, Michigan 48075
Telephone: (248) 353-6850
Telecopier: (248) 358-4425

16.7 Survival. The obligations of Borrowers under Sections

2.2(f), 3.7,3.8, 3.9, 4.19(h),
14.7 and 16.5 shall survive termination of this Agreement and the Other 
Documents and payment in full of
the Obligations.

16.8 Severability. If any part of this Agreement is contrary 
to, prohibited by, or deemed invalid under Applicable Law or regulations, 
such provision shall be inapplicable and deemed omitted to the extent so 
contrary, prohibited or invalid, but the remainder hereof shall not be 
invalidated thereby and shall be given effect so far as possible.

16.9 Expenses. All costs and expenses including reasonable 
attorneys' fees (including the allocated costs of in house counsel) and 
disbursements incurred by Agent, Agent on behalf of Lenders and Lenders 
(a) in all efforts made to enforce payment of any Obligation or effect 
collection of any Collateral, (b) in connection with the entering into, 
modification, amendment, administration and enforcement of this Agreement 
or any consents or waivers hereunder and all related agreements, documents 
and instruments, (c) in instituting, maintaining, preserving, enforcing 
and foreclosing on Agent's security interest in or Lien on any of the 
Collateral, whether through judicial proceedings or otherwise, (d) in 
defending or prosecuting any actions or proceedings arising out of or 
relating to Agent's or any Lender's transactions with any Borrower, or (e) 
in connection with any advice given to Agent or any Lender with respect to 
its rights and obligations under this Agreement and all related 
agreements, may be charged to Borrowers' Account and shall be part of the 
Obligations.

16.10 Injunctive Relief. Each Borrower recognizes that, in 
the event any Borrower fails to perform, observe or discharge any of its 
obligations or liabilities under this Agreement, any remedy at law may 
prove to be inadequate relief to Lenders; therefore, Agent, if Agent so 
requests, shall be entitled to temporary and permanent injunctive relief 
in any such case without the necessity of proving that actual damages are 
not an adequate remedy.

16.11 Consequential Damages. Neither Agent nor any Lender, 
nor any agent or attorney for any of them, shall be liable to any Borrower 
for consequential damages arising from any breach of contract, tort or 
other wrong relating to the establishment, administration or collection of 
the Obligations.

16.12 Captions. The captions at various places in this 
Agreement are intended for convenience only and do not constitute and 
shall not be interpreted as part of this Agreement.

16.13 Counterparts; Telecopied Signatures. This Agreement may 
be executed in any number of and by different parties hereto on separate 
counterparts, all of which, when so executed, shall be deemed an original, 
but all such counterparts shall constitute one and the same agreement. Any 
signature delivered by a party by facsimile transmission shall be deemed 
to be an original signature hereto.

(72406.7} 001246-00024

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16.14 Construction. The parties acknowledge that each party 
and its counsel have reviewed this Agreement and that the normal rule of 
construction to the effect that any ambiguities are to be resolved against 
the drafting party shall not be employed in the interpretation of this 
Agreement or any amendments, schedules or exhibits thereto.

16.15 Confidentialiy: Sharing Information.

(a) Agent, each Lender and each Participant shall hold all 
non-public information obtained by Agent, such Lender or such Participant 
pursuant to the requirements of this Agreement in accordance with Agent's, 
such Lender's and such Participant's customary procedures for handling 
confidential information of this nature; provided, however, Agent, each 
Lender and each Participant may disclose such confidential information (a) 
to its examiners, affiliates, outside auditors, counsel and other 
professional advisors, (b) to Agent, any Lender or to any prospective 
Participants and Eligible Assignees, and (c) as required or requested by 
any Governmental Body or representative thereof or pursuant to legal 
process; provided, further that (i) unless specifically prohibited by 
Applicable Law or court order, Agent, each Lender and each Participant 
shall use its best efforts prior to disclosure thereof, to notify the 
applicable Borrower of the applicable request for disclosure of such 
non-public information (A) by a Governmental Body or representative 
thereof (other than any such request in connection with an examination of 
the financial condition of a Lender or a Participant by such Governmental 
Body) or (B) pursuant to legal process and (ii) in no event shall Agent, 
any Lender or any Participant be obligated to return any materials 
furnished by any Borrower other than those documents and instruments in 
possession of Agent or any Lender in order to perfect its Lien on the 
Collateral once the Obligations have been paid in full and this Agreement 
has been terminated.

(b) Borrower acknowledges that from time to time financial 
advisory, investment banking and other services may be offered or provided 
to such Borrower or one or more of its Affiliates (in connection with this 
Agreement or otherwise) by any Lender or by one or more Subsidiaries or 
Affiliates of such Lender and each Borrower hereby authorizes each Lender 
to share any information delivered to such Lender by such Borrower and its 
Subsidiaries pursuant to this Agreement, or in connection with the 
decision of such Lender to enter into this Agreement, to any such 
Subsidiary or Affiliate of such Lender, it being understood that any such 
Subsidiary or Affiliate of any Lender receiving such information shall be 
bound by the provision of Section l 6.15 as if it were a Lender hereunder. 
Such authorization shall survive the repayment of the other Obligations 
and the termination of the Loan Agreement.

16.16 Publicity. Each Borrower and each Lender hereby 
authorizes Agent to make appropriate announcements of the financial 
arrangement entered into among Borrowers, Agent and Lenders, including 
announcements which are commonly known as tombstones, in such publications 
and to such selected parties as Agent shall in its sole and absolute 
discretion deem appropriate.

16.17 Acknowledgment. The parties hereto acknowledge that this 
Agreement is intended (i) to act as a "Credit Support Document" (as 
defined in the 1992 ISDA Master Agreement (together with any and all 
schedules, annexes, confirmations and amendments relating thereto or any 
successor ISDA agreement, the "Master Agreement")) with respect to each 
party and is made part of the Schedule to said Master Agreement by and 
between or which may be entered into by and between some of the parties 
hereto, and (ii) as a "transfer" under a swap agreement, made by or to a 
swap participant, in connection with a swap agreement within the meaning 
of U.S. Bankruptcy Code Section 546(g).

{72406.7} 001246-00024

- 73 -



16.18 Designated Senior Indebtedness. All of the Obligations 
of the Borrowers under this Agreement and the Other Documents are intended 
to be and are hereby expressly designated as "Designated Senior 
Indebtedness" as such term is used in the Indenture. It is the intent 
hereof that all of the Subordinated Indebtedness arising under or pursuant 
to the Indenture shall be subordinated in accordance with the provisions 
thereof to the full and final payment of the Obligations.

Each of the parties has executed and delivered this Agreement in 
Atlanta, Georgia as of the day and year first above written.



REPTRON ELECTRONICS, INC.

By: /s/ M. Branca
Michael Branch, Chief Financial Officer

corporate SEAL 

14401 McCormick Drive
Tampa, Florida 33626
Telecopier: (813) 855-1697

REPTRON ELECTRONICS OF PA, INC.

By: /s/ M. Branca

Michael Branca, Vice President and Chief Financial Officer

[CORPORATE SEAL]

14401 McCormick Drive
Tampa, Florida 33626
Telecopier: (813) 855-1697



LAKE SUPERIOR MERGER CORPORATION

By: /s/ M. Branca
Michael Branca, Vice President and
Chief Financial Officer

[CORPORATE SEAL ]

14401 McCormick Drive
Tampa, Florida 33626
Telecopier: (813) 855-1697

HIBBING ELECTRONICS CORPORATION

By: /s/ M. Branca
Michael Branca, Vice President and Chief Financial Officer

[CORPORATE SEAL ]

3125 East 14th Avenue
Hibbing, Minnesota 55746
Telecopier: (218) 263-8970

PNC BANK, NATIONAL ASSOCIATION, as
Lender and as Agent
By: /s/ Richard F. Muse Jr.
Name: Richard F. Muse Jr.
Title: Vice President

Telecopier: (412) 768-4369

Commitment Percentage: 100%
















                                Exhibit 21.0

















Reptron Electronics of PA, Inc.
Lake Superior Merger Corporation
Hibbing Electronics Corporation































                                       EXHIBIT 23.1





















           CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our reports dated February 5, 1999, accompanying the 
consolidated financial statements and schedule of Reptron Electronics, 
Inc., that are included in the Company's form 10-K for the year ended 
December 31, 1998.  We hereby consent to the incorporation by reference 
of said reports in the Registration Statement of Reptron Electronics, 
Inc., on Form S-8 (File No. 33-87854, effective December 22, 1994).

GRANT THORNTON LLP

Tampa, Florida
February 5, 1999