CREDIT AGREEMENT

                                   dated as of

                                December 22, 2006


                                      among


                             JACO ELECTRONICS, INC.
                                       and
                           INTERFACE ELECTRONICS CORP.

                                    Borrowers


                            The Lenders Party Hereto

                                       and

                      THE CIT GROUP/BUSINESS CREDIT, INC.,
                                    as Agent

                                       and

                           CIT CAPITAL SECURITIES, LLC
                            as Syndication Agent and
                    as Sole Bookrunner and Sole Lead Arranger




<PAGE>

<TABLE>


                                                           i



                                TABLE OF CONTENTS

                                                                                                                  Page

ARTICLE I Definitions 1
<S>        <C>                                                                                                   <C>
   SECTION 1.01          Defined Terms............................................................................1
   SECTION 1.02          Classification of Loans and Borrowings..................................................28
   SECTION 1.03          Terms Generally.........................................................................28
   SECTION 1.04          Accounting Terms; GAAP..................................................................28

ARTICLE II The Credits...........................................................................................29
   SECTION 2.01          The Facility............................................................................29
   SECTION 2.02          Loans...................................................................................29
   SECTION 2.03          Loans and Borrowings....................................................................30
   SECTION 2.04          Requests for Borrowings.................................................................30
   SECTION 2.05          [Intentionally Omitted].................................................................31
   SECTION 2.06          Protective Advances.....................................................................31
   SECTION 2.07          Swingline Loans.........................................................................32
   SECTION 2.08          Letters of Credit.......................................................................33
   SECTION 2.09          Funding of Borrowings...................................................................39
   SECTION 2.10          Interest Elections......................................................................40
   SECTION 2.11          Termination or Reduction of Commitments.................................................41
   SECTION 2.12          Repayment of Loans; Evidence of Debt....................................................42
   SECTION 2.13          Prepayment of Loans.....................................................................43
   SECTION 2.14          Fees....................................................................................45
   SECTION 2.15          Interest................................................................................46
   SECTION 2.16          Alternate Rate of Interest..............................................................46
   SECTION 2.17          Increased Costs.........................................................................47
   SECTION 2.18          Break Funding Payments..................................................................48
   SECTION 2.19          Taxes...................................................................................48
   SECTION 2.20          Payments Generally; Allocation of Proceeds; Sharing of Set-offs.........................51
   SECTION 2.21          Mitigation Obligations; Replacement of Lenders..........................................54
   SECTION 2.22          Indemnity for Returned Payments.........................................................54

ARTICLE III Representations and Warranties.......................................................................55
   SECTION 3.01          Organization; Powers....................................................................55
   SECTION 3.02          Authorization; Enforceability...........................................................55
   SECTION 3.03          Governmental Approvals; No Conflicts....................................................55
   SECTION 3.04          Financial Condition; No Material Adverse Change.........................................55
   SECTION 3.05          Intellectual Property...................................................................56
   SECTION 3.06          Litigation..............................................................................56
   SECTION 3.07          Compliance with Laws....................................................................57
   SECTION 3.08          Investment and Holding Company Status...................................................57
   SECTION 3.09          Taxes...................................................................................57
   SECTION 3.10          ERISA...................................................................................57
   SECTION 3.11          Disclosure..............................................................................57
   SECTION 3.12          Material Agreements.....................................................................58
   SECTION 3.13          Solvency................................................................................59
   SECTION 3.14          Intentionally Omitted...................................................................60
   SECTION 3.15          Capitalization and Subsidiaries.........................................................60
   SECTION 3.16          Common Enterprise.......................................................................60
   SECTION 3.17          Security Interest in Collateral.........................................................60
   SECTION 3.18          Labor Matters...........................................................................61
   SECTION 3.19          Affiliate Transactions..................................................................61
   SECTION 3.20          Broker's and Transaction Fees...........................................................61
   SECTION 3.21          Title; Real Property....................................................................61
   SECTION 3.22          Environment.............................................................................63
   SECTION 3.23          Deposit Accounts........................................................................63
   SECTION 3.24          Patriot Act.............................................................................63

ARTICLE IV Conditions 64
   SECTION 4.01          Effective Date..........................................................................64
   SECTION 4.02          Each Credit Event.......................................................................66

ARTICLE V Affirmative Covenants..................................................................................66
   SECTION 5.01          Financial Statements; Borrowing Base and Other Information..............................66
   SECTION 5.02          Notices of Material Events..............................................................70
   SECTION 5.03          Existence; Conduct of Business..........................................................71
   SECTION 5.04          Payment of Obligations..................................................................72
   SECTION 5.05          Maintenance of Properties and Intellectual Property Rights..............................72
   SECTION 5.06          Books and Records; Inspection Rights....................................................72
   SECTION 5.07          Compliance with Laws....................................................................72
   SECTION 5.08          Use of Proceeds and Letters of Credit...................................................73
   SECTION 5.09          Insurance...............................................................................73
   SECTION 5.10          Appraisals..............................................................................73
   SECTION 5.11          Additional Collateral; Further Assurances...............................................74
   SECTION 5.12          Cash Management.........................................................................75
   SECTION 5.13          Post-Closing Obligations................................................................76

ARTICLE VI Negative Covenants....................................................................................76
   SECTION 6.01          Indebtedness............................................................................76
   SECTION 6.02          Liens...................................................................................78
   SECTION 6.03          Fundamental Changes; Asset Sales........................................................79
   SECTION 6.04          Investments, Loans, Advances, Guarantees and Acquisitions...............................80
   SECTION 6.05          Swap Agreements.........................................................................81
   SECTION 6.06          Restricted Payments.....................................................................82
   SECTION 6.07          Transactions with Affiliates............................................................82
   SECTION 6.08          Restrictive Agreements..................................................................82
   SECTION 6.09          Prepayment of Indebtedness; Subordinated Indebtedness...................................83
   SECTION 6.10          Capital Expenditures....................................................................83
   SECTION 6.11          Financial Covenants.....................................................................83

<PAGE>

   SECTION 6.12          Activities of Inactive Subsidiary.......................................................83
   SECTION 6.13          Hazardous Materials.....................................................................84

ARTICLE VII Events of Default....................................................................................84
   SECTION 7.01          Events of Default.......................................................................84
   SECTION 7.02          Application of Funds....................................................................87

ARTICLE VIII The Agent...........................................................................................88

ARTICLE IX Miscellaneous.........................................................................................91
   SECTION 9.01          Notices.................................................................................91
   SECTION 9.02          Electronic Transmissions................................................................92
   SECTION 9.03          Waivers; Amendments.....................................................................93
   SECTION 9.04          Expenses; Indemnity; Damage Waiver......................................................96
   SECTION 9.05          Successors and Assigns..................................................................98
   SECTION 9.06          Survival...............................................................................102
   SECTION 9.07          Counterparts; Integration; Effectiveness...............................................102
   SECTION 9.08          Severability...........................................................................102
   SECTION 9.09          Right of Setoff........................................................................102
   SECTION 9.10          Governing Law; Jurisdiction; Consent to Service of Process.............................103
   SECTION 9.11          WAIVER OF JURY TRIAL...................................................................104
   SECTION 9.12          Headings...............................................................................104
   SECTION 9.13          Confidentiality........................................................................104
   SECTION 9.14          Several Obligations; Non-reliance; Violation of Law....................................105
   SECTION 9.15          USA PATRIOT Act and OFAC...............................................................105
   SECTION 9.16          Disclosure.............................................................................106
   SECTION 9.17          Execution of Loan Documents............................................................106
   SECTION 9.18          Interest Rate Limitation...............................................................106
   SECTION 9.19          Administrative Borrower; Joint and Several Liability...................................106
   SECTION 9.20          Subordination and Contribution.........................................................109



<PAGE>



SCHEDULES:

Commitment Schedule Schedule 3.05 - Intellectual Property Schedule 3.06 -
Disclosed Matters Schedule 3.09 - Taxes Schedule 3.12 - Material Agreements
Schedule 3.15 - Capitalization and Subsidiaries Schedule 3.17 - Financing
Statements Schedule 3.18 - Labor Matters Schedule 3.19 - Affiliate Transactions
Schedule 3.21 - Properties Schedule 3.22 - Environmental Matters Schedule 3.23 -
Deposit Accounts Schedule 6.01 - Existing Indebtedness Schedule 6.02 - Existing
Liens Schedule 6.04 - Existing Investments Schedule 6.08 - Existing Restrictions

EXHIBITS:

Exhibit A - Form of Assignment and Assumption Exhibit B - Form of Borrowing Base
Certificate Exhibit C - Form of Compliance Certificate Exhibit D - Closing
Checklist Exhibit E - Form of Discount Note Exhibit F - Form of Notice of
Drawing


</TABLE>



<PAGE>







                                CREDIT AGREEMENT

         CREDIT AGREEMENT dated as of December 22, 2006 (as it may be amended or
modified from time to time, this "Agreement"), among JACO ELECTRONICS, INC., a
New York corporation (the "Parent"), and INTERFACE ELECTRONICS CORP., a
Massachusetts corporation ("Interface"; together with the Parent, collectively,
the "Borrowers"), the Lenders party hereto, THE CIT GROUP/BUSINESS CREDIT, INC.,
as Agent, Swingline Lender and Issuing Bank, and CIT CAPITAL SECURITIES, LLC, as
Syndication Agent, Sole Bookrunner and Sole Lead Arranger.

         The parties hereto agree as follows:

ARTICLE I

                                   Definitions

SECTION 1.01      Defined Terms.  As used in this Agreement, the following terms
                   have the meanings specified below:
                  -------------

         "ABR," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.

         "Account" has the meaning assigned to such term in the Collateral
Agreement.

         "Account Debtor" means any Person obligated on an Account.

         "Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the Equity
Interests of any Person, or otherwise causing any Person to become a Subsidiary,
or (c) a merger, amalgamation or consolidation or any other combination with
another Person (other than a Person that is a Subsidiary) provided, that, the
applicable Borrower or the Subsidiary is the surviving entity.

         "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest
Period and, in the case of a Eurodollar Borrowing, multiplied by (b) the
Statutory Reserve Rate.

         "Administrative Borrower" has the meaning set forth in Section 9.19.

         "Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Agent.
<PAGE>

         "Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

         "Agent" means The CIT Group/Business Credit, Inc., in its capacity as
agent for the Secured Parties hereunder, together with its successors and
assigns.

         "Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof, which
Aggregate Commitment shall initially be in the amount of $55,000,000.

         "Aggregate Credit Exposure" means, at any time, the aggregate Credit
Exposure of all the Revolving Lenders.

         "Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

         "Applicable Percentage" means, with respect to any Lender, (a) with
respect to Revolving Loans or Swingline Loans, a portion equal to a fraction the
numerator of which is such Lender's Revolving Commitment and the denominator of
which is the aggregate Revolving Commitment of all Revolving Lenders (if the
Revolving Commitments have terminated or expired, the Applicable Percentage
shall be determined based upon the Revolving Commitments most recently in
effect, giving effect to any assignments), (b) with respect to Protective
Advances or with respect to the Aggregate Credit Exposure prior to the Maturity
Date, a portion equal to a fraction the numerator of which is such Lender's
Commitment and the denominator of which is the Aggregate Commitment of all
Lenders, and (c) with respect to Protective Advances or with respect to the
Aggregate Credit Exposure after the Maturity Date, a portion equal to a fraction
the numerator of which is such Lender's Credit Exposure and the denominator of
which is the Aggregate Credit Exposure.

         "Applicable Rate" means, for any day, with respect to any ABR Loan or
Eurodollar Loan payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption "ABR Spread" or "Eurodollar Spread," as
the case may be, based upon the Fixed Charge Coverage Ratio on the last day of
each of the three most recently ended calendar months:
<TABLE>


           Fixed Charge
          Coverage Ratio                 ABR Spread          Eurodollar Spread       Commitment Fee
----------------------------------- ---------------------- ---------------------- ----------------------
<S>                                         <C>                    <C>                   <C>
=> 1.75x                                    0.25%                  1.75%                 0.25%
----------------------------------- ---------------------- ---------------------- ----------------------
=> 1.50x but < 1.75x                        0.50%                  2.00%                 0.25%
----------------------------------- ---------------------- ---------------------- ----------------------
=> 1.25x but < 1.50x                        0.75%                  2.25%                 0.25%
----------------------------------- ---------------------- ---------------------- ----------------------
< 1.25x                                     1.00%                  2.50%                 0.375%
=================================== ====================== ====================== ======================
</TABLE>

<PAGE>


         For the period commencing on the Effective Date and ending on the first
anniversary thereof, the Applicable Rate for the ABR Spread and the Eurodollar
Spread shall be as set forth in the pricing grid in the applicable columns
opposite the row entitled "=> 1.25x but <1.50x" and the Applicable Rate for the
Commitment Fee shall be as set forth in the pricing grid in the column opposite
the row entitled "=> 1.75x". If, as a result of any restatement of or other
adjustment to the financial statements of the Borrowers or for any other reason,
the Agent determines that (a) the Fixed Charge Coverage Ratio as calculated by
the Borrowers as of any applicable date was inaccurate and (b) a proper
calculation of the Fixed Charge Coverage Ratio would have resulted in different
pricing for any period, then (i) if the proper calculation of the Fixed Charge
Coverage Ratio would have resulted in higher pricing for such period, the
Borrowers shall automatically and retroactively be obligated to pay to the Agent
and Lenders, promptly on demand by the Agent, an amount equal to the excess of
the amount of interest and fees that should have been paid for such period over
the amount of interest and fees actually paid for such period; and (ii) if the
proper calculation of the Fixed Charge Coverage Ratio would have resulted in
lower pricing for such period, Agent and Lenders shall have no obligation to
repay any interest or fees to the Borrowers; provided that if, as a result of
any restatement or other event a proper calculation of the Fixed Charge Coverage
Ratio would have resulted in higher pricing for one or more periods and lower
pricing for one or more other periods (due to the shifting of income or expenses
form one period to another period or any similar reason), then the amount
payable by the Borrowers pursuant to clause (i) above shall be based upon the
excess, if any, of the amount of interest and fees that should have been paid
for all applicable periods over the amount of interest and fees paid for all
such periods.

         "Approved Fund" has the meaning assigned to such term in Section 9.05.

         "Assignment and Assumption" means an assignment and assumption entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.05), and accepted by the Agent, in the form of Exhibit A
or any other form approved by the Agent.

         "Authorized Officer" means, with respect to any Person, any of the
principal executive officers, managing members or general partners of such
Person but, in any event, with respect to financial matters, a Financial
Officer.

         "Availability" means, at any time, an amount equal to the lesser of (a)
the Revolving Commitment and (b) the Borrowing Base, in each case, minus the
Revolving Credit Exposure of all Lenders.

         "Availability Block" means $500,000, or such lesser amount as Agent, in
its Permitted Discretion, shall determine.

         "Availability Period" means the period from and including the Effective
Date to but excluding the earlier of the Maturity Date and the date of
termination of the Revolving Commitment.

         "Available Commitment" means, at any time, the Revolving Commitment
then in effect minus the Revolving Credit Exposure of all Revolving Lenders at
such time.
<PAGE>

         "Average 20-Day Availability" means, at any time, the average daily
Availability for the immediately preceding twenty (20) Business Day period.

         "Banking Services" means each and any of the following bank services
provided to any Loan Party by any Lender or any of such Lender's Affiliates: (a)
commercial credit cards, purchasing cards or other similar charge cards, (b)
stored value cards, and (c) treasury management services (including, without
limitation, controlled disbursement, automated clearinghouse transactions,
return items, overdrafts and interstate depository network services).

         "Banking Services Obligations" of the Loan Parties means any and all
obligations of the Loan Parties, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.

         "Blocked Account" means any deposit/collection account established
pursuant to a Blocked Account Agreement; collectively, such accounts are
referred to as the "Blocked Accounts."

         "Blocked Account Agreement" means an agreement among one or more of the
Loan Parties, the Agent, and a Clearing Bank, in form and substance satisfactory
to the Agent, concerning the collection of payments which represent the proceeds
of Accounts and other Collateral of a Loan Party.

         "Board" means the Board of Governors of the Federal Reserve System of
the United States of America.

         "Borrower" and "Borrowers" have the respective meanings set forth in
the preamble to this Agreement.

         "Borrowing" means (a) Revolving Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, (b) a Swingline Loan and (c) a
Protective Advance.

         "Borrowing Base" means, at any time, the sum of (a) 85% of Borrowers'
Eligible Accounts at such time, plus (b) the lesser of (i) 60% of Borrowers'
Eligible Inventory, valued on an average cost basis, consistent with the
Borrowers' practices as of the Effective Date, (ii) 85% of the Net Recovery Rate
of Borrowers' Eligible Inventory, multiplied by the value of such Inventory
determined on an average cost basis, consistent with the Borrowers' practices as
of the Effective Date, and (iii) $25,000,000, minus (c) the Availability Block,
minus (d) Reserves.

         "Borrowing Base Certificate" means a certificate, signed by a Financial
Officer of the Administrative Borrower, in the form of Exhibit B or another form
which is acceptable to the Agent in its sole discretion.

         "Borrowing Request" means a request by the Administrative Borrower for
a Revolving Borrowing in accordance with Section 2.04.
<PAGE>

         "Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided, that, when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.

         "Calculation Date" means the last Business Day of each calendar week.

         "Capital Expenditures" means, without duplication, any expenditure or
commitment to expend money for any purchase or other acquisition of any asset
which would be classified as a fixed or capital asset on a consolidated balance
sheet of the Parent and its Subsidiaries prepared in accordance with GAAP.

         "Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal or movable property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

         "CERCLA" means the United States Comprehensive Environmental Response,
          Compensation,  and Liability Act (42 U.S.C. ss.ss. 9601 et
          ------
seq.).

         "Change in Control" means (a) the ownership by any one Person (other
than Charles Girsky and Joel Girsky) of more than forty (40%) percent of the
common stock of Parent, or (b) Parent shall cease to own, directly or
indirectly, free and clear of all Liens or other encumbrances, 100% of the
outstanding Equity Interests of any other Borrower.

         "Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement, or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.17(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

         "Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
and when used in reference to any Commitment, refers to such Commitment as a
Revolving Commitment.

         "Clearing Bank" means any banking institution with whom a Payment
Account has been established pursuant to a Blocked Account Agreement.

         "Closing Checklist" means the closing checklist attached hereto as
Exhibit D.

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

         "Collateral" means all "Collateral", as defined in any Collateral
Document, whether such "Collateral" is now existing or hereafter acquired.

         "Collateral Access Agreement" has the meaning assigned to such term in
the Collateral Agreement.

         "Collateral Agreement" means that certain Collateral Agreement, dated
as of the date hereof, between the Borrowers and the Agent, for the benefit of
the Agent and the Secured Parties.

         "Collateral Documents" means, collectively, the Security Agreements and
any other security documents delivered pursuant to Section 4.01(b) or Section
5.11 to secure payment of the Obligations.

         "Collection Account" has the meaning assigned to such term in Section
5.12(b).

          "Commitment" means, with respect to each Lender, such Lender's
Revolving Commitment, together with the commitment of such Lender to acquire
participations in Protective Advances hereunder, as such Revolving Commitment
may be (a) reduced from time to time pursuant to Section 2.11, and (b) reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.05. The initial amount of each Lender's Commitment is set
forth on the Commitment Schedule, or in the Assignment and Assumption pursuant
to which such Lender shall have assumed its Commitment, as applicable.

         "Commitment Schedule" means the Schedule attached hereto identified as
such on Annex I.

         "Contracts" has the meaning assigned to such term in Section 3.12.

         "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.

         "Controlled Disbursement Account" means, collectively, any accounts of
the Borrowers maintained as a zero balance, cash management account pursuant to
and under any agreement between the Borrowers and the Agent, as modified and
amended from time to time, and through which all disbursements of the Borrowers,
any Loan Party and any designated Subsidiary of the Borrowers are made and
settled on a daily basis with no uninvested balance remaining overnight.

         "Credit Exposure" means, as to any Lender at any time, the sum of (a)
such Lender's Revolving Credit Exposure at such time, plus (b) an amount equal
to such Lender's Applicable Percentage, if any, of the aggregate principal
amount of Protective Advances outstanding at such time.

         "Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
<PAGE>

         "Defaulting Lender" has the meaning assigned to such term in Section
2.09(b).

         "Departing Lender" has the meaning assigned to such term in Section
2.21(b).

         "Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.

         "Document" has the meaning assigned to such term in the Collateral
Agreement.

         "Dollars" or "$" refers to lawful money of the United States of
America.

         "EBITDA" means for any period Net Income for such period plus, to the
extent deducted from revenues for such period in determining Net Income, (a)
Interest Expense, (b) expense for taxes paid or accrued net of tax refunds, (c)
depreciation, (d) amortization and other non-cash charges, (e) extraordinary
losses (as determined in accordance with GAAP) and non-cash non-recurring
losses, in each case incurred other than in the ordinary course of business and
(f) cash non-recurring losses incurred other than in the ordinary course of
business in an amount not to exceed $1,000,000 in any Fiscal Year or $3,000,000
over the term of this Agreement, minus, to the extent included in Net Income for
such period, extraordinary gains (as determined in accordance with GAAP)
realized other than in the ordinary course of business, all calculated for the
Parent and its Subsidiaries on a consolidated basis.

         "E-Fax" means any system used to receive or transmit faxes
electronically.

         "Effective Date" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.03).

         "Electronic Transmission" means each document, instruction,
authorization, file, information and any other communication transmitted, posted
or otherwise made or communicated by e-mail, E-Fax, Internet or extranet-based
site or any other equivalent electronic service, whether owned, operated or
hosted by the Agent, any of the Agent's Related Persons or any other Person.

         "E-Signature" means the process of attaching to or logically
associating with an Electronic Transmission an electronic symbol, encryption,
digital signature or process (including, without limitation, the name or an
abbreviation of the name of the party transmitting the Electronic Transmission)
with the intent to sign, authenticate or accept such Electronic Transmission.

         "E-Systems" means any electronic system, including IntralinksTM and any
other Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by the Agent, any of its Related Persons or any other Person,
providing for access to data protected by passcodes or other security system.

         "Eligible Accounts" means, at any time, the Accounts of the applicable
Borrowers which the Agent determines in its Permitted Discretion are eligible as
the basis for the extension of Revolving Loans and Swingline Loans hereunder.
Without limiting the Agent's discretion provided herein, Eligible Accounts shall
not include any Account:

<PAGE>


(a)               which is not subject to a first priority perfected security
                  interest in favor of the Agent;

(b)               which is subject to any Lien other than (i) a Lien in favor of
                  the Agent and (ii) a Permitted Encumbrance which does not have
                  priority over the Lien in favor of the Agent;

(c)               with respect to which more than 90 days have elapsed since the
                  date of the original invoice therefor or which is more than 60
                  days past the due date for payment;

(d)               which is owing by an  Account  Debtor  for  which  more  than
                  50% of the  Accounts  owing  from such Account  Debtor and its
                  Affiliates are ineligible hereunder;

(e)               which is owing by an Account Debtor (other than Benchmark
                  Electronics Inc. and Celestica, Inc.) to the extent the
                  aggregate amount of Accounts owing from such Account Debtor
                  and its Affiliates to such Borrowers exceeds 25% of the
                  aggregate Eligible Accounts; and with respect to Benchmark
                  Electronics Inc. and Celestica, Inc. to the extent the
                  aggregate amount of Accounts owing from each such Account
                  Debtor and its Affiliates to such Borrowers exceeds 30% of the
                  aggregate Eligible Accounts;

(f)               with respect to which any covenant, representation, or
                  warranty relating to such Account contained in this Agreement
                  or in the Security Agreements has been breached in any
                  material respect or is not true;

(g)               which (i) does not arise from the sale of goods or performance
                  of services in the ordinary course of business, (ii) is not
                  evidenced by an invoice, or other documentation satisfactory
                  to the Agent, which has been sent to the Account Debtor, (iii)
                  represents a progress billing, (iv) is contingent upon such
                  Borrowers' completion of any further performance, or (v)
                  represents a sale on a bill-and-hold, guaranteed sale,
                  sale-and-return, sale on approval, consignment which is billed
                  prior to actual sale to the end user, cash-on-delivery or any
                  other repurchase or return basis;

(h)               for which the goods giving rise to such Account have not been
                  shipped to the Account Debtor or for which the services giving
                  rise to such Account have not been performed by such
                  Borrowers;

(i)               with respect to which any check or other instrument of payment
                  has been returned uncollected for any reason;

(j)               which is owed by an Account Debtor which  (i) has applied for
                  suffered,  or consented to the  appointment of any receiver,

<PAGE>

                  interim receiver, receiver and manager, custodian,  trustee,
                  or liquidator of its assets,  (ii) has had possession of all
                  or a material  part of its property  taken by any  receiver,
                  interim receiver, receiver and manager,  custodian,  trustee
                  or liquidator, (iii) has filed, or has had filed against it,
                  any request or  petition  for  liquidation,  reorganization,
                  arrangement,  adjustment of debts, adjudication as bankrupt,
                  winding-up,  or  voluntary  or  involuntary  case  under any
                  state,  provincial or federal  bankruptcy  laws, (iv) to the
                  knowledge  of such  Borrowers,  has  admitted in writing its
                  inability,  or is generally unable to, pay its debts as they
                  become due,  (v) to the  knowledge  of such  Borrowers,  has
                  become  insolvent,  or  (vi)  has  ceased  operation  of its
                  business;  (k) which is owed by any Account Debtor which has
                  sold all or substantially all of its assets;

(l)               which is owed by an Account Debtor which (i) does not maintain
                  its chief executive office in the U.S. or Canada or (ii) is
                  not organized under applicable law of the U.S. or any state of
                  the U.S. or Canada or any province of Canada unless, in either
                  case, such Account is backed by a letter of credit, or other
                  credit support acceptable to the Agent from a customary credit
                  risk insurer and which is in the possession of the Agent;

(m)               which is owed in any currency other than Dollars;

(n)               which is owed by (i) the government (or any department,
                  agency, public corporation, or instrumentality thereof) of any
                  country other than the U.S. unless such Account is backed by a
                  Letter of Credit acceptable to the Agent and which is in the
                  possession of the Agent, or (ii) the government of the U.S.,
                  or any department, agency, public corporation, or
                  instrumentality thereof, unless the Federal Assignment of
                  Claims Act of 1940, as amended (31 U.S.C. ss. 3727 et seq. and
                  41 U.S.C. ss. 15 et seq.), and any other steps necessary to
                  perfect the Lien of the applicable Agent in such Account have
                  been complied with to the Agent's satisfaction;

(o)               which is owed by any Affiliate, employee, director, or officer
                  of any Loan Party;

(p)               which, for any Account Debtor, exceeds a credit limit
                  determined by the Agent of which the Administrative Borrower
                  has been previously notified, to the extent of such excess;

(q)               which is owed by an Account Debtor or any Affiliate of such
                  Account Debtor (other than a Lender or any Affiliate of a
                  Lender) which is the holder of Indebtedness issued or incurred
                  by any Loan Party, but only to the extent of such
                  Indebtedness;

(r)               which is subject to any counterclaim, deduction, defense,
                  setoff or dispute, but only to the extent of the amount of
                  such counterclaim, deduction, defense, setoff or dispute,
                  unless the Agent, in its Permitted Discretion, has established

<PAGE>

                  an appropriate Reserve and determines to include such Account
                  as an Eligible Account;

(s)               which is evidenced by any promissory note, chattel paper, or
                  instrument;

(t)               which is owed by an Account Debtor located in any jurisdiction
                  that requires, as a condition to access to the courts of such
                  jurisdiction, that a creditor qualify to transact business,
                  file a business activities report or other report or form, or
                  take one or more other actions, unless such Borrowers have so
                  qualified, filed such reports or forms, or taken such actions
                  (and, in each case, paid any required fees or other charges),
                  except to the extent such Borrowers may qualify subsequently
                  as a foreign entity authorized to transact business in such
                  state or jurisdiction and gain access to such courts, without
                  incurring any cost or penalty reasonably viewed by the Agent
                  to be material in amount, and such later qualification cures
                  any access to such courts to enforce payment of such Account;

(u)               with respect to which such Borrowers have made any agreement
                  with the Account Debtor for any reduction thereof, but only to
                  the extent of such reduction, other than discounts and
                  adjustments given in the ordinary course of business; or

(v)               which the Agent determines in its Permitted Discretion will
                  not be paid by reason of the Account Debtor's inability to
                  pay.

         In the event that an Account which was previously an Eligible Account
ceases to be an Eligible Account hereunder, the applicable Borrowers shall
notify the Agent thereof on and at the time of submission to the Agent of the
next Borrowing Base Certificate.

         "Eligible Inventory" means, at any time, the Inventory owned by one of
the applicable Borrowers which the Agent determines in its Permitted Discretion
is eligible as the basis for the extension of Revolving Loans and Swingline
Loans hereunder. Without limiting the Agent's discretion provided herein,
Eligible Inventory shall not include any Inventory:

(a)               which is not subject to a first priority perfected Lien in
                  favor of the Agent;

(b)               which is subject to any Lien other than (i) a Lien in favor of
                  the Agent and (ii) a Permitted Encumbrance which does not have
                  priority over the Lien in favor of the Agent;

(c)               which is, in the Agent's Permitted Discretion, slow moving,
                  obsolete, unmerchantable, defective, unfit for sale, not
                  salable at prices approximating at least the cost of such
                  Inventory in the ordinary course of business or unacceptable
                  due to age, type, category and/or quantity;

(d)               with respect to which any covenant, representation, or
                  warranty contained in this Agreement or any Security Agreement
                  has been breached in any material respect or is not true;
<PAGE>

(e)               which does not conform in all material respects to all
                  standards imposed by any governmental authority;

(f)               which is not finished goods or which constitutes
                  work-in-process, subassemblies (unless the Agent determines,
                  in its Permitted Discretion, to include such work-in-process
                  or subassemblies as Eligible Inventory), packaging and
                  shipping material, manufacturing supplies other than scrap
                  steel, display items, bill-and-hold goods, returned or
                  repossessed goods, defective goods, goods held on consignment,
                  or goods which are not of a type held for sale in the ordinary
                  course of business;

(g)               which is not located in the U.S. or Canada is in transit with
                  a common carrier from vendors and suppliers, except, that,
                  Inventory located in Singapore may be deemed eligible for the
                  purposes of this clause (g) up to an aggregate amount of
                  $1,000,000 provided that (i) Agent receives a Collateral
                  Access Agreement, (ii) under applicable law, Agent has a first
                  priority perfected Lien on such Inventory and (iii) Agent
                  receives such other documentation (including, upon Agent's
                  reasonable request, opinion letter(s)) as Agent may require;

(h)               which is located in any location leased by the Borrowers
                  unless (i) the lessor has delivered to the Agent a Collateral
                  Access Agreement or (ii) a Reserve for rent, charges, and
                  other amounts due or to become due with respect to such
                  facility has been established by the Agent in its Permitted
                  Discretion;

(i)               which is located in any third party warehouse or is in the
                  possession of a bailee and is not evidenced by a Document,
                  unless (i) such warehouseman or bailee has delivered to the
                  Agent a Collateral Access Agreement and such other
                  documentation as the Agent may require or (ii) an appropriate
                  Reserve has been established by the Agent in its Permitted
                  Discretion;

(j)               which is the subject of a consignment by any Borrower as
                  consignor;

(k)               which is perishable; or

(l)               which contains or bears any intellectual property rights
                  licensed to the Borrowers unless the Agent is satisfied that
                  it may sell or otherwise dispose of such Inventory without (i)
                  infringing the rights of such licensor, (ii) violating any
                  contract with such licensor, or (iii) incurring any liability
                  with respect to payment of royalties other than royalties
                  incurred pursuant to sale of such Inventory under the current
                  licensing agreement.

         In the event that Inventory which was previously Eligible Inventory
ceases to be Eligible Inventory hereunder, the Borrowers shall notify the Agent
thereof on and at the time of submission to the Agent of the next Borrowing Base
Certificate.

         "Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in

<PAGE>

any way to the pollution or protection of the environment or the preservation or
reclamation of natural resources, including those relating to the management,
release or threatened release of any Hazardous Material, or to employee health
and safety matters.

         "Environmental Liabilities" means all Liabilities (including costs of
Remedial Actions, natural resource damages and costs and expenses of
investigation and feasibility studies) that may be imposed on, incurred by or
asserted against any Loan Party as a result of, or related to, any claim, suit,
action, investigation, proceeding or demand by any Person, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute or common law or otherwise, arising under any Environmental Law or in
connection with any environmental, health or safety condition or with any
Release or resulting from the ownership, lease, sublease or other operation or
occupation of property by any Loan Party, whether on, prior to or after the date
hereof.

         "Equity Interests" means, with respect to any Person, shares of capital
stock, partnership interests, membership interests in a limited liability
company, beneficial interests in a trust or other equity ownership interests in
such Person, and any warrants, options or other rights entitling the holder
thereof to purchase or acquire any such equity interest.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

         "ERISA Affiliate" means Loan Parties, their Subsidiaries and
Affiliates, but excluding those Persons having a Controlling or ownership
interest in Parent.

         "ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30 day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by any Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

         "Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

         "Event of Default" has the meaning assigned to such term in Article
VII.
<PAGE>

         "Excluded Taxes" means, with respect to any Person, (a) income or
franchise taxes imposed on or measured by (or for which of two or more
alternative bases is based on or measured by reference to) such Person's net
income, (b) taxes imposed by the jurisdiction under the laws of which such
Person is organized or doing business in which its principal office is located
and, in addition, in the case of any Lender, in which its applicable lending
office is located, (c) any branch profits taxes imposed by the United States of
America or any other jurisdiction, (d) any gift, inheritance, succession or
similar taxes, (e) withholding tax imposed with respect to amounts payable to a
Non-U.S. Lender to the extent that such withholding tax is in effect and is
applicable to such Non-U.S. Lender (after giving effect to any treaty or other
applicable basis for reduction or exemption) on the date such Non-U.S. Lender
becomes a party to this Agreement (or designates a new lending office) and (f)
any tax that is attributable to a Lender's failure to comply with Section
2.19(e); provided, that clause (e) above shall not include amounts that arise
(i) as a result of an assignment or the designation of a new lending office made
at the request of the Administrative Borrower under Section 2.21(b), or (ii) to
the extent that such Lender (or its assignor, if any) was entitled, at the time
of designation of a new lending office (or assignment), to receive additional
amounts from the Borrowers with respect to such withholding tax pursuant to
Section 2.19(a).

         "Existing Lender" means GMAC Commercial Finance LLC.
          ---------------

         "Existing Letter(s) of Credit" means (a) that certain standby letter of
credit issued by Bank of New York for the benefit of Samsung Semiconductor USA,
in the face amount of $2,250,000, which expires on February, 28, 2007; (b) that
certain standby letter of credit issued by GMAC Commercial Finance LLC for the
benefit of Sharp Micro Electronics, in the face amount of $250,000, which
expires on December 31, 2006; and (c) that certain standby letter of credit
issued by GMAC Commercial Finance LLC for the benefit of Lambada America, in the
face amount of $100,000, which expires on January 5, 2007.

         "Exposure" means, at any time, the aggregate principal amount of
outstanding Loans at such time. The Exposure of any Lender at any time shall be
the aggregate principal amount of its outstanding Loans at such time.

         "Extraordinary Receipts" means any Net Cash Proceeds exceeding
$100,000, received by any Loan Party or any of its Subsidiaries not in the
ordinary course of business (and not consisting of proceeds described in Section
2.13(b)(ii), (iii) or (iv) hereof), including, without limitation, (i) foreign,
federal, state or local tax refunds, (ii) pension plan reversions, (iii)
proceeds of insurance, (iv) judgments, proceeds of settlements or other
consideration of any kind in connection with any cause of action, (v)
condemnation awards (and payments in lieu thereof), (vi) indemnity payments and
(vii) any purchase price adjustment received in connection with any purchase
agreement.

         "Fair Market Value" shall mean, with respect to real or immovable
property of any Person, the fair market value thereof as determined in the most
recent appraisal received by the Agent in accordance with the terms hereof,
which appraisal shall be performed in a manner reasonably acceptable to the
Agent by an appraiser reasonably acceptable to the Agent.

         "Fee Letter" shall mean the Fee Letter dated as of the date hereof.
<PAGE>

         "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such date, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.

         "Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Administrative Borrower.

         "Fiscal Quarter" means a fiscal quarter of the Parent and its
Subsidiaries ending on September 30, December 31, March 31 or June 30 of each
year.

         "Fiscal Year" means the fiscal year of the Parent and its Subsidiaries
ending on June 30 of each year.

         "Fixed Charge Coverage Ratio" means, the ratio, determined as of the
end of each Fiscal Quarter of the Parent for the most-recently ended four Fiscal
Quarters, of (a) EBITDA for such four Fiscal Quarters, minus Capital
Expenditures during such four Fiscal Quarters (excluding Capital Expenditures to
the extent financed with Indebtedness for borrowed money (other than
Indebtedness incurred hereunder)) to (b) Fixed Charges for such four Fiscal
Quarters, all calculated for the Parent and its Subsidiaries on a consolidated.

         "Fixed Charges" means, with reference to any period, without
duplication, cash Interest Expense for such period, plus scheduled principal
payments on Indebtedness required to be made during such period, plus expense
for taxes paid in cash during such period, plus dividends or distributions paid
in cash during such period, plus Capital Lease Obligation payments during such
period, all calculated for the Parent and its Subsidiaries on a consolidated
basis.

         "Flex-Pricing Provisions" means any term or provision of any fee
letter, commitment letter or term sheet delivered in connection with the
transaction which is the subject of this Agreement which purports to permit the
Syndication Agent or the lead arranger to change any or all of the structure,
terms or pricing of the credit facility evidenced by this Agreement either
before or after the Effective Date in order to aid the Syndication Agent and/or
lead arranger in the successful syndication of such credit facility either
before or after the Effective Date,

         "Funding Accounts" has the meaning assigned to such term in Section
4.01(h).

         "GAAP" means generally accepted accounting principles in the United
States of America.

         "Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,

<PAGE>

central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government, including without limitation the Surface Transportation Board.

         "Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

         "Hazardous Material" means any substance, material or waste that is
classified, regulated or otherwise characterized under any Environmental Law as
hazardous, toxic, a contaminant or a pollutant or by other words of similar
meaning or regulatory effect, including petroleum or any fraction thereof,
asbestos, polychlorinated biphenyls and radioactive substances.

         "Inactive Subsidiary" means Nexus Custom Electronics, Inc., a
          Delaware corporation.
          -------------------

         "Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding accounts payable
incurred in the ordinary course of business and not overdue by more than 60
days), (e) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (i) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances, (j)
obligations under any liquidated earn-out, (k) all Swap Obligations (and the
amount of Indebtedness under any Swap Obligation shall be deemed the Net
Mark-to-Market Exposure thereunder) and (l) obligations of such Person to
purchase securities or other property arising out of or in connection with the
sale of the same or substantially similar securities or property or any other
Off-Balance Sheet Liability. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
<PAGE>

         "Indemnified Taxes" means taxes imposed by any taxing authority on any
Lender with respect to the Loan Documents other than Excluded Taxes.

         "Indemnitee" has the meaning set forth in Section 9.04(b).

         "Interest Election Request" means a request by the Administrative
Borrower to convert or continue a Borrowing in accordance with Section 2.10.

         "Interest Expense" means, with reference to any period, the interest
expense (net of interest income) of the Parent and its Subsidiaries calculated
on a consolidated basis for such period.

         "Interest Payment Date" means (a) with respect to any ABR Loan (other
than a Swingline Loan), the last day of each calendar quarter and the Maturity
Date, (b) with respect to any Eurodollar Loan, the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part, and in the case
of a Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest Period
and the Maturity Date and (c) with respect to any Swingline Loan, the day that
such Loan is required to be repaid and the Maturity Date.

         "Interest Period" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two or three months
thereafter, as the Administrative Borrower may elect; provided, that, (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day, unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and,
in the case of a Revolving Borrowing, thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.

         "Inventory" has the meaning assigned to such term in the Collateral
Agreement.

         "Investment Grade" means a rating of (a) "BBB" or better by S&P or (b)
"Baa" or better by Moody's.

         "Issuing Bank" has the meaning set forth in Section 2.08(a)(i).

         "Joinder Agreement" has the meaning assigned to such term in Section
5.11.

         "Lenders" means the Persons listed on the Commitment Schedule and any
other Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant

<PAGE>

to an Assignment and Assumption. Unless the context otherwise requires, the term
"Lenders" includes the Swingline Lenders and the Issuing Bank.

         "Letter of Credit" means documentary or standby letters of credit
issued for the account of a Borrower by any Issuing Bank for which Agent and
Lenders have incurred Letter of Credit Obligations. Each Existing Letter of
Credit shall be deemed to constitute a Letter of Credit issued hereunder on the
Effective Date for all purposes of the Loan Documents.

         "Letter of Credit Fee" has the meaning assigned to such term in Section
2.08(d).

         "Letter of Credit Guaranty" has the meaning assigned to such term in
Section 2.08(a).

         "Letter of Credit Obligations" means all outstanding obligations
incurred by Agent and Lenders at the request of any Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by any Issuing Bank or the purchase of a
participation as set forth in Section 2.08 with respect to any Letter of Credit.
The amount of such Letter of Credit Obligations shall equal the maximum amount
that may be payable by Agent or Lenders in respect of all outstanding Letter of
Credit and, without duplication, Letter of Credit Guarantees plus all
unreimbursed amounts with respect to drawings thereon.

         "Letter of Credit Sublimit" has the meaning assigned to such term in
Section 2.08(a).

         "LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor page or any successor to such Service, or any substitute
page or substitute for such Service, providing rate quotations comparable to
those currently provided on such page of such Service, as determined by the
Agent from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing
for such Interest Period shall be determined by reference to such other
comparable publicly available service for displaying the offered rate for dollar
deposits in the London interbank market as may be selected by the Agent and, in
the absence of availability, such other method to determine such Eurodollar rate
as may be selected by the Agent in its Permitted Discretion.

         "Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset, and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

         "Loan" or "Loans" means the loans and advances made by the Lenders
pursuant to this Agreement, including Swingline Loans and Protective Advances.
<PAGE>

         "Loan Documents" means this Agreement, any promissory notes issued
pursuant to this Agreement, any Letter of Credit applications, the Collateral
Documents, the Fee Letter and all other agreements, instruments, documents and
certificates identified in Section 4.01 executed and delivered to, or in favor
of, the Agent or any Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, letter of credit agreements
and all other written matter whether heretofore, now or hereafter executed by or
on behalf of any Loan Party, or any employee of any Loan Party, and delivered to
the Agent or any Lender in connection with the Agreement or the transactions
contemplated thereby. Any reference in this Agreement or any other Loan Document
to a Loan Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications thereto,
and shall refer to this Agreement or such Loan Document as the same may be in
effect at any and all times such reference becomes operative.

         "Loan Parties" means each of the Borrowers, each Subsidiary signatory
hereto, and each Subsidiary made a party hereto pursuant to Section 5.11.

         "Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations or financial condition of the Parent and its
Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any
of its obligations under the Loan Documents to which it is a party, (c) the
Collateral, or the Agent's Liens (on behalf of itself and the Secured Parties)
on the Collateral or the priority of such Liens, or (d) the rights of or
benefits available to the Agent or the Lenders thereunder.

         "Material Environmental Liabilities" means Environmental Liabilities
exceeding $250,000 in the aggregate.

         "Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Swap Agreements, of
any one or more of the Parent and its Subsidiaries in an aggregate principal
amount exceeding $250,000. For purposes of determining Material Indebtedness,
the "obligations" of the Parent or any of its Subsidiaries in respect of any
Swap Agreement at any time shall be the maximum aggregate amount (giving effect
to any netting agreements) that the Parent or such Subsidiary would be required
to pay if such Swap Agreement were terminated at such time.

         "Maturity Date" means December 22, 2009 or any earlier date on which
the Revolving Commitments are reduced to zero or otherwise terminated pursuant
to the terms hereof.

         "Moody's" means Moody's Investors Service, Inc. or if such company
shall cease to issue ratings, another nationally recognized statistical rating
company selected in good faith by mutual agreement of the Agent and the
Administrative Borrower.

         "Mortgaged Properties" means the real or immovable property now or
hereafter subject to a Mortgage granted in favor of the Agent for the benefit of
the Lenders.

         "Mortgages" means any mortgage, deed of trust or other agreement which
conveys or evidences a Lien in favor of the Agent, for the benefit of the Agent

<PAGE>

and the Secured Parties, on real or immovable property of a Loan Party,
including any amendment, modification or supplement thereto.

         "Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
         "Net Cash Proceeds" means, if in connection with (a) an asset
disposition, cash proceeds net of (i) commissions, brokers' fees, legal,
accounting and professionals' fees and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by such Loan Party in connection therewith (in each case, paid to
non-Affiliates), (ii) transfer taxes paid in connection therewith, (iii) amounts
payable to holders of senior Liens on such asset (to the extent such Liens
constitute Permitted Encumbrances hereunder), if any, and (iv) cash taxes paid
in connection therewith, (b) the issuance or incurrence of Indebtedness, cash
proceeds net of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith, (c) an equity issuance, cash proceeds
net of underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith or (d) Extraordinary Receipts, cash
proceeds received net of (i) expenses related thereto payable by such Loan Party
in connection therewith (in each case, paid to non-Affiliates), (ii) transfer
taxes paid, and (iii) cash taxes paid in connection therewith.

         "Net Income" means, with reference to any period, the net income (or
loss) of the Parent and its Subsidiaries calculated on a consolidated basis for
such period.

         "Net Mark-to-Market Exposure" shall mean, with respect to any Person,
as of any date of determination, the excess (if any) of all unrealized losses
over all unrealized profits of such Person arising from Swap Agreement
transactions. As used in this definition, "unrealized losses" means the fair
market value of the cost to such Person of replacing such Swap Agreement
transactions as of the date of determination (assuming the Swap Agreement
transactions were to be terminated as of that date), and "unrealized profits"
means the fair market value of the gain to such Person of replacing such Swap
Agreement transactions as of the date of determination (assuming such Swap
Agreement transactions were to be terminated as of that date).

         "Net Orderly Liquidation Value" means, with respect to Inventory or
equipment of any Person, the orderly liquidation value thereof as determined in
a manner acceptable to the Agent by an appraiser reasonably acceptable to the
Agent, net of all costs of liquidation thereof.

         "Net Recovery Rate" means the quotient of (a) the estimated net income,
payments and proceeds from the sale, exchange, collection or other disposition
of each Loan Party's Inventory (as determined on a Net Orderly Liquidation Value
basis), based on an appraisal provided by an appraiser retained or approved by
the Agent and (b) the cost of the Eligible Inventory as of the effective date of
the estimate provided pursuant to clause (a) of this definition.

         "Non-Consenting Lender" has the meaning assigned to such term in
Section 9.03(f).

         "Non-U.S. Lender" means a Lender or a Participant that is (a) organized
under the laws of a jurisdiction other than the United States, any State thereof
or the District of Columbia or (b) organized under the laws of the United
States, any State thereof, or the District of Columbia and whose separate
existence from a Person that is not treated as a "United States person" for
purposes of Section 7701(a)(30) of the Code is disregarded for federal income
tax purposes under Treasury Regulations Section 301.7701-3 or any similar
provision.
<PAGE>

         "Non-U.S. Plan" means any pension, retirement, superannuation or
similar policy or arrangement sponsored, maintained or contributed to by any
Borrower in a jurisdiction other than the United States.

         "Non-U.S. Subsidiary" means any Subsidiary that is organized under the
laws of a jurisdiction other than the United States or any State thereof or the
District of Columbia.

         "Notice of Drawing" has the meaning assigned to such term in Section
2.05(c)(i).

         "Obligations" means: (a) all unpaid principal of and accrued and unpaid
interest on the Loans (including interest that accrues or that would accrue but
for the filing of a bankruptcy case or similar proceeding by a Loan Party,
whether or not such interest would be an allowable claim under any applicable
bankruptcy or other similar proceeding, and other obligations accruing or
arising after commencement of any case under any bankruptcy or similar laws by
or against any Loan Party (or that would accrue or arise but for the
commencement of any such case)); (b) all obligations of the Agent under Letter
of Credit Guaranties; (c) without duplication, the Borrower's liabilities to the
Agent under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Agent, on behalf of the Lenders,
may make or issue to others for the account of the Borrower, including any
accommodations extended by the Agent with respect to applications for Letters of
Credit, the Agent's acceptance of drafts or the Agent's endorsement of notes or
other instruments for the Borrower's account and benefit; and (d) and all
accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Loan Parties to the Lenders or to any Lender, the Agent or
any indemnified party arising under the Loan Documents. Obligations shall also
include all Banking Services Obligations and all Swap Obligations owed by a Loan
Party to one or more Lenders or their respective Affiliates (or to an entity
that was a Lender or Affiliate of a Lender at the time such arrangement was
consummated), provided that no Banking Service Obligation or Swap Obligation
shall constitute an "Obligation" unless within a reasonable time after such
Banking Service arrangement is implemented or Swap Agreement is executed, the
Lender or Affiliate of a Lender party thereto shall have delivered (i) written
notice to the Agent stating (x) that such a transaction has been entered into
and constitutes an Obligation entitled to the benefits of the Collateral
Documents and (y) the maximum dollar amount of the Borrowers' obligations
thereunder (which amount may be included as a Reserve hereunder) and (ii) in the
case of any Banking Service Obligation or Swap Obligation provided by an
Affiliate of a Lender, such Lender Affiliate's written designation of the Agent
as its agent for purposes of the Collateral Documents and acknowledgment of the
terms set forth in Article VIII hereof.

         "Off-Balance Sheet Liability" of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (b) any indebtedness, liability or obligation
under any sale and leaseback transaction which is not a Capital Lease
Obligation, (c) any indebtedness, liability or obligation under any so-called
"synthetic lease" transaction entered into by such Person, or (d) any

<PAGE>

indebtedness, liability or obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person, but excluding from this clause (d) operating leases.

         "Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies (but, for
the avoidance of doubt, not including any income or withholding taxes) arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

         "Overadvance" has the meaning set forth in Section 2.02(c).

         "Overadvance Loan" means an ABR Borrowing made when an Overadvance
exists or is caused by the funding thereof.

         "Parent" has the meaning set forth in the preamble to this Agreement.

         "Participant" has the meaning set forth in Section 9.05.

         "Patriot Act" means USA Patriot Act (Title III of Pub. L. 107-56 (
          signed into law October 26, 2001)).
          -----------

         "Payment Account" means each bank account established pursuant to the
Security Documents, to which the funds of the Borrowers (including proceeds of
Accounts and other Collateral) are deposited or credited, and which is
maintained in the name of Agent or any Loan Party, or any of them, as the Agents
may determine, on terms acceptable to the Agents.

         "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.

         "Permit" means, with respect to any Person, any permit, approval,
authorization, license, registration, certificate, concession, grant, franchise,
variance or permission from, and any other agreement, document, undertaking,
lease, indenture, mortgage, deed of trust or other instrument with, any
Governmental Authority, in each case whether or not having the force of law and
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

         "Permitted Acquisition" has the meaning set forth in Section 6.04(i).

         "Permitted Discretion" means a determination made by Agent in the
exercise of its reasonable judgment (from the perspective of a secured
asset-based lender), exercised in good faith, based upon its consideration of
any factor that (a) would reasonably be expected to materially adversely affect
the quantity, quality, mix or value of any material portion of the Collateral,
the enforceability or priority of the Agent's Liens with respect to any material
portion of the Collateral, or the amount that the Agent and Lenders could
receive in liquidation of any material portion of the Collateral; (b) indicates
that any collateral report or financial information delivered by any Loan Party

<PAGE>

is incomplete, inaccurate or misleading in any material respect; (c) materially
increases the likelihood of any proceeding under debtor relief laws involving
any Loan Party; or (d) creates or would reasonably be expected to result in a
Default or Event of Default. In exercising such judgment, Agent may consider any
factors that would materially increase the credit risk of lending to Borrowers
on the security of the Collateral.

         "Permitted Encumbrances" means:

(a)             Liens imposed by law for taxes that are not yet due or are being
                contested in  compliance  with Section 5.04 other than those

                  arising pursuant to ERISA;

(b)               carriers', warehousemen's, mechanics', materialmen's,
                  repairmen's and other like Liens imposed by law, arising in
                  the ordinary course of business and securing obligations that
                  are not overdue by more than 60 days or are being contested in
                  compliance with Section 5.04;

(c)               pledges and deposits made in the ordinary course of business
                  in compliance with workers' compensation, unemployment
                  insurance and other social security laws or regulations;

(d)               deposits to secure the performance of bids, trade contracts,
                  leases, statutory obligations, surety and appeal bonds,
                  performance bonds and other obligations of a like nature, in
                  each case in the ordinary course of business;

(e)               judgment liens in respect of judgments that do not constitute
                  an Event of Default under clause (k) of Article VII;

(f)               easements, zoning restrictions, rights-of-way and encumbrances
                  on real or immovable property that do not secure any monetary
                  obligations and do not materially detract from the value of
                  the affected property or materially interfere with the
                  ordinary conduct of business of a Borrower or any Subsidiary;

(g)               Liens in favor of the Agent granted pursuant to any Loan
                  Document; and

(h)               title exceptions identified on the title policies delivered on
                  or prior to the Effective Date pursuant to Section 4.01(b).

         "Permitted Investments" means:

(a)               direct obligations of, or obligations the principal of and
                  interest on which are unconditionally guaranteed by, the
                  United States of America (or by any agency thereof to the
                  extent such obligations are backed by the full faith and
                  credit of the United States of America), in each case maturing
                  within one year from the date of acquisition thereof;

(b)               investments in commercial paper maturing within 270 days from
                  the date of acquisition thereof and rated, at such date of
                  acquisition, at least A-1 by S&P, at least P-1 by Moody's;
<PAGE>

(c)               investments in certificates of deposit, banker's acceptances
                  and time deposits maturing within 270 days from the date of
                  acquisition thereof issued or guaranteed by or placed with,
                  and money market deposit accounts issued or offered by, any
                  domestic office of any commercial bank organized under the
                  laws of the United States of America or any State thereof
                  which has a combined capital and surplus and undivided profits
                  of not less than $100,000,000;

(d)               fully collateralized repurchase agreements with a term of not
                  more than 30 days for securities described in clause (a) above
                  and entered into with a financial institution satisfying the
                  criteria described in clause (c) above; and

(e)               money market funds that (i) have substantially all of their
                  assets invested continuously in the types of investments
                  listed in clauses (a), (b), (c) and (d) above, (ii) are rated
                  AAA by S&P, Aaa by Moody's and (iii) have portfolio assets of
                  at least $5,000,000,000.

         "Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

         "Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

         "Post-Closing Letter" means that certain Post-Closing Letter dated as
of the date hereof by the Loan Parties in favor of the Agent.

         "Prepayment Fee" means a fee payable to the Agent, for the benefit of
the applicable Lenders, in the following amount:
<TABLE>


    Period during which early termination or reduction occurs           Revolving Loan Prepayment Fee
------------------------------------------------------------------ -----------------------------------------
<S>                                                                <C>
On or prior to the first anniversary of the date of this           1.0% of the Aggregate Commitment
Agreement                                                          terminated
------------------------------------------------------------------ -----------------------------------------
After the first anniversary of the date of this Agreement but on 0.5% of the
Aggregate Commitment or prior to the second anniversary of the date of this
Agreement terminated
------------------------------------------------------------------ -----------------------------------------
After the second anniversary of the date of this Agreement         No Prepayment Fee
------------------------------------------------------------------ -----------------------------------------
</TABLE>


         "Prime Rate" means in respect of ABR Loans, the rate of interest per
annum publicly announced from time to time by JPMorgan Chase Bank (or its
successor) as its prime rate in effect at its principal office in New York City
(or if such rate is at any time not available, the prime rate so quoted by any
banking institution as determined by the Agent in its sole discretion); each
change in the Prime Rate shall be effective on the date such change is publicly
announced as being effective.
<PAGE>

         "Projections" has the meaning assigned to such term in Section 5.01(f).

         "Protective Advance" has the meaning assigned to such term in Section
2.06.

         "Register" has the meaning set forth in Section 9.05.

         "Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.

         "Release" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material into or through the environment.

         "Remedial Action" means all actions required to (a) clean up, remove,
treat or in any other way address any Hazardous Material in the indoor or
outdoor environment, (b) prevent or minimize any Release so that a Hazardous
Material does not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment or (c) perform pre-remedial studies
and investigations and post-remedial monitoring and care with respect to any
Hazardous Material.

         "Report" means reports prepared in good faith by the Agent or another
Person showing the results of appraisals, field examinations or audits
pertaining to the Borrowers' assets from information furnished by or on behalf
of the Borrowers, after the Agent has exercised its rights of inspection
pursuant to this Agreement, which Reports may be distributed to the Lenders by
the Agent.

         "Required Lenders" means, at any time, (a) if there are two (2) Lenders
or less, all Lenders, or (b) if there are three (3) or more Lenders, Lenders
having Commitments representing a majority of the Aggregate Commitment at such
time or, if the Commitments of the Lenders have been terminated, Lenders
representing a majority of the Aggregate Credit Exposure.

         "Reserves" means (i) any and all reserves which the Agent deems
necessary, in its Permitted Discretion, to from time to time establish against
the gross amounts of Eligible Accounts and Eligible Inventory (including,
without limitation, reserves for rent at locations leased by any Borrower and
for which no Collateral Access Agreement is in effect, to the extent property at
such locations is included in the Borrowing Base; reserves for consignee's,
warehousemen's and bailee's charges at locations for which no Collateral Access
Agreement is in effect, to the extent property at such locations is included in
the Borrowing Base; reserves for dilution of Accounts; reserves for Inventory
shrinkage; reserves for customs charges and shipping charges related to any
Inventory in transit; reserves for contingent liabilities of any Borrower;
reserves for uninsured losses of any Borrower and reserves for taxes, fees,
assessments, and other governmental charges) and (ii) any and all reserves for
Swap Obligations of any Loan Party which any Lender to whom Swap Obligations are
owing directs the Agent to establish, or which the Agent deems necessary in its
Permitted Discretion to establish, from time to time against the gross amounts
of Eligible Accounts and Eligible Inventory.
<PAGE>

         "Reset Date" has the meaning set forth in Section 2.24(a).

         "Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
any Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in any Borrower or any Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in any Borrower or
any Subsidiary.

         "Revolving Commitment" means, with respect to each Revolving Lender,
the commitment of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit and Swingline Loans hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.11, and
(b) reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.05. The initial amount of each Revolving Lender's
Revolving Commitment is set forth on the Commitment Schedule, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Revolving Commitment, as applicable. The initial aggregate amount of the
Revolving Lenders' Revolving Commitments is $55,000,000.

         "Revolving Credit Exposure" means, with respect to any Revolving Lender
at any time, the sum of (a) the outstanding principal amount of such Revolving
Lender's Revolving Loans plus (b) an amount equal to its Applicable Percentage
of the sum of (i) the aggregate principal amount of all Protective Advances and
Swingline Loans outstanding at such time, plus (ii) the aggregate amount of
Letter of Credit Obligations outstanding at such time.

         "Revolving Lenders" means, as of any date of determination, Lenders
having a Revolving Commitment or, if the Revolving Commitments have been
terminated, the Lenders having Revolving Credit Exposure.

         "Revolving Loan" means a Loan made pursuant to Section 2.02(a).

         "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc. or if such company shall cease to issue ratings,
another nationally recognized statistical rating company selected in good faith
by mutual agreement of the Agent and the Administrative Borrower.

         "Secured Parties" means, collectively, (a) the Agent, (b) the Lenders,
(c) an Issuing Bank, (d) any Person indemnified under the Loan Documents and (e)
any Lender or an Affiliate of any Lender with respect to any Banking Services
Obligation or Swap Obligation that constitutes an Obligation.

         "Security Agreements" means the Collateral Agreement and any other
pledge or security agreement entered into, after the date of this Agreement by
any other Loan Party (as required by this Agreement or any other Loan Document),
or any other Person, as the same may be amended, restated or otherwise modified
from time to time.
<PAGE>

         "Settlement" has the meaning assigned to such term in Section 2.07(c).

         "Settlement Date" has the meaning assigned to such term in Section
2.07(c).

         "Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board with respect to the Adjusted LIBO Rate, for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.

         "Subordinated Indebtedness" of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Obligations to the
written satisfaction of the Agent.

         "subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.

         "Subsidiary" means any subsidiary of any Borrower or a Loan Party, as
applicable other than the Inactive Subsidiary.

         "Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided, that, no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
any Borrower or any Subsidiary shall be a Swap Agreement.

         "Swap Obligations" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and

<PAGE>

modifications thereof and substitutions therefor), under (a) any and all Swap
Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.

         "Swingline Lender" means The CIT Group/Business Credit, Inc., in its
capacity as lender of the Swingline Loans hereunder.

         "Swingline Loan" has the meaning assigned to such term in Section
2.07(a).

         "Syndication Agent" means CIT Capital Securities, LLC, in its capacity
as syndication agent with respect to the Loans.

         "tax", "Tax" or "Taxes" means any and all present or future taxes,
levies, imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority, together with any interest, penalties or additions to
tax imposed thereon or with respect thereto.

         "Tax Sharing Agreement" means any tax sharing agreement or arrangement,
as the same may be amended from time to time, in form and substance reasonably
satisfactory to the Agent, between and among the Borrowers or between Parent or
any other Borrower and one or more other Persons, provided, that, in the later
case (x) in no event shall the amount paid by the Borrowers to such other Person
or Persons pursuant to all such agreements and/or arrangements exceed a
reasonable estimate of the amount that the Parent would be required to pay for
taxes (including interest, penalties and additions to tax and including
estimated taxes) were it to file a consolidated, combined, unitary or similar
tax return for itself and its subsidiaries as if it were the common parent (or
analogous person) with respect to a consolidated, combined, unitary or similar
tax group, (y) in the event that such reasonable estimate exceeds the actual
amount that Parent would be required to pay exceeds such reasonable estimate,
such other Person or Persons are required to repay the excess to Parent or the
other Borrowers within a reasonable period after the later of the date on which
such excess is determined and the date on which such other Person or Persons
receives any refund related to such excess and (z) the agreement or arrangement
contains an acknowledgement by Parent or any other Person entitled to receive
payments from Parent or any other Borrower that payments under such agreement or
arrangement may be restricted by the terms of this Agreement.

         "Total Exposure" means the Aggregate Credit Exposure.


         "Transactions" means the execution, delivery and performance by the
Borrowers of this Agreement and the other Loan Documents, the borrowing of Loans
and other credit extensions, the use of the proceeds thereof and the issuance of
Letters of Credit hereunder.

         "Transfer" has the meaning assigned to such term in Section 2.06(b).

         "Transfer Date" has the meaning assigned to such term in Section
2.06(b).

         "Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate.
<PAGE>

         "U.S. Subsidiary" means each Subsidiary which is not a Non-U.S.
Subsidiary; "U.S. Subsidiaries" means all such Subsidiaries.

         "UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.

         "Unliquidated Obligations" means, at any time, any Obligations (or
portion thereof) that are contingent in nature or unliquidated at such time,
including any Obligation that is: (i) an obligation to reimburse a bank for
drawings not yet made under a letter of credit issued by it; (ii) any other
obligation (including any guarantee) that is contingent in nature at such time;
or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.

         "Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION  1.02  Classification  of Loans and  Borrowings.  For  purposes  of this
Agreement,     Loans    may    be     classified     and    referred    to    by
---------------------------------------  Class (e.g., a "Revolving  Loan") or by
Type  (e.g.,  a  "Eurodollar  Loan") or by Class and Type  (e.g.,  a  "Revolving
Eurodollar  Loan").  Borrowings  also may be classified and referred to by Class
(e.g., a "Revolving  Borrowing") or by Type (e.g., a "Eurodollar  Borrowing") or
by Class and Type (e.g., a "Revolving Eurodollar Borrowing").

SECTION 1.03 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein) unless the context
requires otherwise, (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns unless the context requires
otherwise, (c) the words "herein", "hereof" and "hereunder", and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e)
the words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

SECTION 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided, that, if the
Borrower notifies the Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date

<PAGE>

hereof in GAAP or in the application thereof on the operation of such provision
(or if the Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.

ARTICLE II

                                   The Credits
SECTION 2.01      The Facility.

(a)      Subject to the terms and conditions set forth herein, each Lender
         agrees to make Loans to the Borrowers from time to time during the
         Availability Period, each in an aggregate principal amount that will
         not result in (i) such Lender's Exposure exceeding such Lender's
         Commitment or (ii) (A) on the Effective Date, the Total Exposure
         exceeding the Aggregate Commitment and (B) thereafter, the Aggregate
         Credit Exposure exceeding the Aggregate Commitment. The facility shall
         be composed of Revolving Loans, Swingline Loans and Protective Advances
         as set forth below.

(b)      Within the foregoing limits and subject to the terms and conditions set
         forth herein, the Borrowers may borrow, prepay and reborrow Loans from
         each Revolving Lender during the Availability Period.

SECTION 2.02      Loans.

     (a)  Subject to the terms and conditions  set forth herein,  each Revolving
          Lender agrees to make Revolving Loans to the Borrowers at any time and
          from time to time  during  the  Availability  Period  in an  aggregate
          principal  amount that will not result in (i) such  Lender's  Exposure
          exceeding such Lender's Commitment, (ii) the Aggregate Credit Exposure
          exceeding the  Aggregate  Commitments  or (iii) the  Aggregate  Credit
          Exposure  exceeding the Borrowing Base then in effect.  (b) Within the
          foregoing  limits and  subject to the terms and  conditions  set forth
          herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

     (c)  Overadvances.  If the Aggregate  Revolving Credit Exposure exceeds the
          Borrowing  Base at any  time  (an  "Overadvance"),  such  ------------
          -----------  excess  amount shall be payable by Borrowers on demand by
          the Agent. All Overadvances  shall constitute  Obligations  secured by
          the  Collateral  and entitled to all  benefits of the Loan  Documents.
          Unless its authority has been revoked in writing by Required  Lenders,
          the  Agent  may  require  Revolving  Lenders  to  honor  requests  for
          Overadvance  Loans and to forbear from requiring  Borrowers to cure an
          Overadvance, as long as (i) the Overadvance does not continue for more
          than 30 consecutive  days (and no  Overadvance  may exist for at least
          five consecutive days thereafter before further  Overadvance Loans are
          required),  and (ii) the  Overadvance,  together  with any  Protective

<PAGE>

          Advances   made   pursuant  to  Section   2.06(a)(i)   and  (ii),   do
          ---------------------------  not exceed $5,000,000.  Overadvance Loans
          may be made even if the conditions precedent set forth in Section 4.02
          have not ------------  been satisfied.  In no event shall  Overadvance
          Loans be required  that would  cause the  Aggregate  Revolving  Credit
          Exposure  to exceed  the  Aggregate  Commitments.  Any  funding  of an
          Overadvance Loan or sufferance of an Overadvance  shall not constitute
          a waiver by the Agent or  Revolving  Lenders  of the Event of  Default
          caused thereby.  In no event shall any Borrower or other Loan Party be
          deemed a beneficiary of this Section 2.03(c) nor authorized to enforce
          any of its terms ---------------

SECTION 2.03      Loans and Borrowings.

(a)      Each Loan shall be made as part of a Borrowing consisting of Loans of
         the same Class and Type made by the Lenders ratably in accordance with
         their respective Commitments of the applicable Class. Any Protective
         Advance shall be made in accordance with the procedures set forth in
         Section 2.06.

(b)      Subject to Section 2.15, each Borrowing shall be denominated in Dollars
         and comprised entirely of ABR Loans or Eurodollar Loans as the
         applicable Borrower may request in accordance herewith. Each Swingline
         Loan shall be denominated in Dollars and shall be an ABR Loan. Each
         Lender at its option may make any Eurodollar Loan by causing any
         domestic or foreign branch or Affiliate of such Lender to make such
         Loan; provided, that, any exercise of such option shall not affect the
         obligation of the Borrowers to repay such Loan in accordance with the
         terms of this Agreement.

(c)      At the commencement of each Interest Period for any Eurodollar
         Revolving Borrowing, such Borrowing shall be in an aggregate amount
         that is an integral multiple of $1,000,000 and not less than
         $1,000,000. ABR Revolving Borrowings may be in any amount. Borrowings
         of more than one Type and Class may be outstanding at the same time;
         provided, that, there shall not at any time be more than a total of
         five (5) Eurodollar Revolving Borrowings outstanding.

(d)      Notwithstanding any other provision of this Agreement, the Borrowers
         shall not be entitled to request, or to elect to convert or continue,
         any Borrowing if the Interest Period requested with respect thereto
         would end after the Maturity Date.

SECTION 2.04 Requests for Borrowings. To request a Borrowing, the Administrative
Borrower shall notify the Agent of such request by telephone (or, if permitted
by Agent, by request posted to Agent's StuckeyNet system) (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 1:00 p.m., New York City time, on the day of the
proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery, facsimile or Electronic
Transmission to the Agent of a written Borrowing Request in a form approved by
the Agent and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:

(i)               the aggregate amount of the requested Borrowing;
<PAGE>

(ii)              the date of such Borrowing, which shall be a Business Day;

(iii)             whether such Borrowing is to be an ABR Borrowing or a
                  Eurodollar Borrowing;

(iv)              in the case of a Eurodollar Borrowing, the initial Interest
                  Period to be applicable thereto, which shall be a period
                  contemplated by the definition of the term "Interest Period";

(v)               in the case of a Revolving Borrowing, the Availability (after
                  giving effect to such Borrowing); and

(vi)              if not a conversion or continuance, the Borrower to whom the
                  proceeds from such Borrowing are to be disbursed.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrowers shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Agent shall advise each Lender of the details thereof and of the amount of such
Lender's Loan to be made as part of the requested Borrowing.

SECTION 2.05      [Intentionally Omitted]

SECTION 2.06      Protective Advances.

(a)  Subject to the limitations set forth below,  the Agent is authorized by the
     Borrowers and the Lenders, from time to time in the Agent's sole discretion
     (but  shall  have  absolutely  no  obligation  to),  to make  Loans  to the
     Borrowers,  on behalf of all  Lenders,  which the Agent,  in its  Permitted
     Discretion,  deems  necessary or  desirable  (i) to preserve or protect the
     Collateral or any portion  thereof,  (ii) to enhance the  likelihood of, or
     maximize the amount of,  repayment of the Loans and other  Obligations,  or
     (iii) to pay any other amount  chargeable  to or required to be paid by the
     Borrowers  pursuant to the terms of this Agreement,  including  payments of
     principal,  interest,  fees,  premiums,  reimbursable  expenses  (including
     costs,  fees and  expenses  as  described  in Section  9.04) and other sums
     payable  under the Loan  Documents  (any of such  Loans  are  -------------
     herein referred to as "Protective Advances"); provided, that, no Protective
     Advance shall cause the Aggregate  Credit  Exposure to exceed the Aggregate
     Commitments;  provided,  further,  that, the aggregate amount of Protective
     Advances  --------  ------- ----  outstanding at any time,  which were made
     pursuant to clauses (i) and (ii) above,  together with the aggregate amount
     of all ----------- ---- Overadvance Loans made pursuant to Section 2.01(c),
     shall  not  exceed  at any  time  $5,000,000.  Protective  Advances  may be
     ---------------- made even if the conditions precedent set forth in Section
     4.02 have not been satisfied. The Protective Advances shall be ------------
     secured  by the  Liens in favor of the Agent in and to the  Collateral  and
     shall constitute  Obligations  hereunder.  All Protective Advances shall be
     ABR Borrowings.  The Agent's  authorization to make Protective Advances may
     be revoked at any time by the Required Lenders. Any such revocation must be
     in  writing  and shall  become  effective  prospectively  upon the  Agent's
     receipt thereof. At any time that there is sufficient  Availability and the
     conditions   precedent  set  forth  in  Section  --------  4.02  have  been
     satisfied,  the Agent may request  the Lenders to make a Revolving  Loan to
     repay a  Protective  Advance.  At any ---- other time the Agent may require
     the Lenders to fund their risk participations described in Section 2.06(b).
     ---------------
<PAGE>

(b)  Upon the making of a  Protective  Advance by the Agent  (whether  before or
     after the  occurrence of a Default),  each Lender shall be deemed,  without
     further action by any party hereto, to have unconditionally and irrevocably
     purchased  from the  Agent  without  recourse  or  warranty,  an  undivided
     interest and participation in such Protective  Advance in proportion to its
     Applicable  Percentage  of the  Aggregate  Commitment.  Each  Lender  shall
     transfer (a "Transfer") the amount of such Lender's  Applicable  Percentage
     of the outstanding  principal amount of the applicable  Protective  Advance
     with respect to such  purchased  interest and  participation  promptly when
     requested  to the  Agent,  to such  account  of the  Agent as the Agent may
     designate, but in any case not later than 3:00 p.m., New York City time, on
     the  Business  Day  notified  (if notice is  provided by the Agent prior to
     12:00 p.m. New York City time, and otherwise on the  immediately  following
     Business  Day  (the  "Transfer  Date").  Transfers  may  occur  during  the
     existence  of a  Default  and  whether  or not  the  applicable  conditions
     precedent set forth in Section 4.02 have then been satisfied.  Such amounts
     transferred to the Agent shall be applied  against the amount  ------------
     of the Protective Advance and, together with Lender's Applicable Percentage
     of such  Protective  Advance,  shall  constitute  Loans  of  such  Lenders,
     respectively.  If any such  amount is not  transferred  to the Agent by any
     Lender on such Transfer  Date, the Lender shall be entitled to recover such
     amount on  demand  from such  Lender  together  with  interest  thereon  as
     specified in Section  2.09.  From and after the date,  if any, on which any
     Lender is required to fund, and funds, its  -------------  participation in
     any  Protective  Advance  purchased  hereunder,  the Agent  shall  promptly
     distribute  to such Lender,  such  Lender's  Applicable  Percentage  of all
     payments of principal and interest and all proceeds of Collateral  received
     by the Agent in respect of such Protective Advance.

SECTION 2.07      Swingline Loans.

(a)  The Agent,  the  Swingline  Lender and the  Lenders  agree that in order to
     facilitate  the  administration  of  this  Agreement  and  the  other  Loan
     Documents,  promptly  after the  Administrative  Borrower  requests  an ABR
     Borrowing, the Swingline Lender may elect, in its sole discretion,  to have
     the  terms of this  Section  2.07(a)  apply to such  Borrowing  Request  by
     advancing,  on  ---------------  behalf of the  Lenders  and in the  amount
     requested, same day funds to the Borrowers on the applicable Borrowing date
     to a Funding  Account (each such Loan made solely by the  Swingline  Lender
     pursuant to this  Section  2.07(a) is  referred to in this  ---------------
     Agreement  as a "Swingline  Loan"),  with  settlement  among them as to the
     Swingline  Loans to take place on a periodic  basis as set forth in Section
     2.07(c).  Each  Swingline  Loan  shall  be  subject  to all the  terms  and
     conditions  applicable  to other ABR  ----------------  Loans funded by the
     Lenders, except that all payments thereon shall be payable to the Swingline
     Lender  solely for its own  account.  In  addition,  the  Borrowers  hereby
     authorize the Swingline Lender to, and the Swingline Lender shall,  subject
     to the terms and  conditions  set forth  herein  (but  without  any further

<PAGE>

     written notice required),  not later than 2:00 p.m., New York City time, on
     each Business Day, make  available to the Borrowers by means of a credit to
     a Funding Account, the proceeds of a Swingline Loan to the extent necessary
     to pay items to be drawn on any  Blocked  Account  that day (as  determined
     based on notice from the Agent).  The aggregate  amount of Swingline  Loans
     outstanding at any time shall not exceed $10,000,000.  The Swingline Lender
     shall not make any Swingline  Loan if the requested  Swingline Loan exceeds
     Availability (after giving effect to such Swingline Loan).  Swingline Loans
     may not be made if the  Swingline  Lender has been notified by the Agent or
     the Required Lenders that a Default has occurred and is continuing and that
     Swingline  Loans  may  not  be  made.  All  Swingline  Loans  shall  be ABR
     Borrowings.


(b)  Upon the making of a Swingline Loan (whether before or after the occurrence
     of a Default and regardless of whether a Settlement has been requested with
     respect to such  Swingline  Loan),  each  Lender  shall be deemed,  without
     further action by any party hereto, to have unconditionally and irrevocably
     purchased  from the  Swingline  Lender  or the  Agent,  as the case may be,
     without recourse or warranty,  an undivided  interest and  participation in
     such  Swingline  Loan in  proportion  to its  Applicable  Percentage of the
     Revolving  Commitment.  The Swingline Lender or the Agent may, at any time,
     require the Lenders to fund their participations.  From and after the date,
     if  any,  on  which  any  Lender  is  required  to  fund,  and  funds,  its
     participation  in any Swingline Loan purchased  hereunder,  the Agent shall
     promptly distribute to such Lender, such Lender's Applicable  Percentage of
     all  payments of principal  and  interest  and all  proceeds of  Collateral
     received by the Agent in respect of such Loan.

(c)  The Agent, on behalf of the Swingline Lender,  shall request  settlement (a
     "Settlement")  with the  Lenders on at least a weekly  basis or on any date
     that  the  Agent  elects,  by  notifying  the  Lenders  of  such  requested
     Settlement by facsimile,  telephone or Electronic  Transmission (and in the
     case of  telephone,  promptly  followed by  facsimile)  no later than 12:00
     p.m.,  New York City  time on the date of such  requested  Settlement  (the
     "Settlement  Date").  Each Lender (other than the Swingline  Lender, in the
     case of the  Swingline  Loans) shall  transfer the amount of such  Lender's
     Applicable Percentage of the outstanding principal amount of the applicable
     Loan with respect to which  Settlement  is requested to the Agent,  to such
     account of the Agent as the Agent may designate,  not later than 3:00 p.m.,
     New York City time, on such Settlement  Date.  Settlements may occur during
     the  existence  of a Default and whether or not the  applicable  conditions
     precedent set forth in Section 4.02 have then been satisfied.  Such amounts
     transferred  to the Agent  shall be  applied  against  the  amounts  of the
     ------------   Swingline   Lender's  Swingline  Loans  and,  together  with
     Swingline  Lender's  Applicable  Percentage of such Swingline  Loan,  shall
     constitute Loans of such Lenders,  respectively.  If any such amount is not
     transferred  to the  Agent  by any  Lender  on such  Settlement  Date,  the
     Swingline  Lender  shall be entitled to recover  such amount on demand from
     such Lender  together with  interest  thereon as specified in Section 2.09.
     ------------

SECTION 2.08      Letters of Credit.

(a)               Issuance.
<PAGE>

(i)  Subject  to the  terms  and  conditions  of this  Agreement,  the Agent and
     Revolving  Lenders agree to incur,  from time to time prior to the Maturity
     Date, upon the request of the Administrative  Borrower and for a Borrower's
     account,  Letter of Credit  Obligations by causing  Letters of Credit to be
     issued by (i) Agent (or an Affiliate thereof),  (ii) a Revolving Lender (or
     an Affiliate  thereof)  selected by or  acceptable  to the Agent or (iii) a
     bank or other legally  authorized  Person  selected by or acceptable to the
     Agent in its sole  discretion  and  guaranteed  by the Agent (a  "Letter of
     Credit  Guaranty")  (each of (i) through  (iii),  an "Issuing  Bank").  The
     aggregate  amount  of all  such  ---------------------------  -------------
     Letter of Credit  Obligations shall not at any time exceed the least of (A)
     FIVE MILLION  ($5,000,000)  DOLLARS (the "Letter of Credit Sublimit"),  and
     (B) the aggregate  Revolving  Commitments  less the  aggregate  outstanding
     principal  --------------------------  balance of the  Revolving  Loans and
     Swingline Loans, and (C) the Borrowing Base less the aggregate  outstanding
     principal balance of the Revolving Loans, Overadvances, Protective Advances
     and  Swingline  Loans.  No such Letter of Credit  shall have an expiry date
     that is more than one year following the date of issuance  thereof,  unless
     otherwise  determined  by  Agent  in its sole  discretion  (including  with
     respect to customary evergreen provisions), and neither Agent nor Revolving
     Lenders shall be under any obligation to incur Letter of Credit Obligations
     in respect of, or  purchase  risk  participations  in, any Letter of Credit
     having an expiry date that is later than the Maturity Date.

(b)               Advances Automatic; Participations.

(i)  In the event that the Agent or any  Issuing  Bank shall make any payment on
     or pursuant to any Letter of Credit Obligation,  such payment shall then be
     deemed  automatically  to constitute a Revolving Loan under Section 2.02 of
     this  Agreement  ------------  regardless  of whether a Default or Event of
     Default has occurred and is continuing and  notwithstanding  the Borrowers'
     failure to satisfy the conditions  precedent set forth in Section 4.02, and
     each Revolving Lender shall be ------------ obligated to pay its Applicable
     Percentage  thereof in accordance with this  Agreement.  The failure of any
     Revolving Lender to make available to the Agent or Issuing Bank for Agent's
     or  Issuing  Bank's  own  account  its  Applicable  Percentage  of any such
     Revolving  Loan or  payment  by Agent  under or in  respect  of a Letter of
     Credit  shall not  relieve  any other  Revolving  Lender of its  obligation
     hereunder  to make  available  to Agent  or  Issuing  Bank  its  Applicable
     Percentage  thereof,  but no Revolving  Lender shall be responsible for the
     failure  of any  other  Revolving  Lender  to  make  available  such  other
     Revolving Lender's Applicable Percentage of any such payment.

(ii) If it shall be illegal or unlawful for Borrower to incur Revolving Loans as
     contemplated  by  paragraph  (b)(i)  above  because  of an Event of Default
     described in Section  7.01(h) or (i) or otherwise or if it shall be illegal
     or unlawful for  -----------------------  any Revolving Lender to be deemed
     to have assumed a ratable share of the reimbursement obligations owed to an
     Issuing  Bank,  or if the  Issuing  Bank is a  Revolving  Lender,  then (i)
     immediately and without further action  whatsoever,  each Revolving  Lender

<PAGE>

     shall be deemed to have  irrevocably  and  unconditionally  purchased  from
     Agent (or such Issuing Bank, as the case may be) an undivided  interest and
     participation equal to such Revolving Lender's Applicable Percentage (based
     on the  Revolving  Commitments)  of the  Letter  of Credit  Obligations  in
     respect of all  Letters of Credit  then  outstanding  and (ii)  thereafter,
     immediately  upon issuance of any Letter of Credit,  each Revolving  Lender
     shall be deemed to have  irrevocably  and  unconditionally  purchased  from
     Agent (or such Issuing Bank, as the case may be) an undivided  interest and
     participation in such Revolving  Lender's  Applicable  Percentage (based on
     the Revolving Commitments) of the Letter of Credit Obligations with respect
     to such  Letter  of  Credit on the date of such  issuance.  Each  Revolving
     Lender shall fund its  participation in all payments or disbursements  made
     under  the  Letters  of  Credit  in the same  manner  as  provided  in this
     Agreement with respect to Revolving Loans.

(c)               Cash Collateral.

(i)  If the Borrowers are required to provide cash  collateral for any Letter of
     Credit  Obligations  pursuant to this Agreement prior to the Maturity Date,
     the  Borrowers  will pay to Agent for the  ratable  benefit  of itself  and
     Revolving  Lenders  cash or cash  equivalents  acceptable  to Agent  ("Cash
     Equivalents")   in  an  amount   equal  to  105%  of  the  maximum   amount
     -----------------  then available to be drawn under each applicable  Letter
     of Credit  outstanding.  Such  funds or Cash  Equivalents  shall be held by
     Agent in an interest bearing cash collateral  account (the "Cash Collateral
     Account")  maintained  at a bank  ------------------------  - or  financial
     institution  acceptable to Agent.  The Cash Collateral  Account shall be in
     the name of Administrative Borrower and shall be pledged to, and subject to
     the control of, Agent, for the benefit of Agent and Revolving Lenders, in a
     manner  satisfactory to Agent.  Borrowers hereby pledge and grant to Agent,
     on behalf of itself and the Lenders,  a security interest in all such funds
     and Cash Equivalents held in the Cash Collateral  Account from time to time
     and all proceeds thereof, as security for the payment of all amounts due in
     respect of the Letter of Credit Obligations and other Obligations,  whether
     or not then  due.  This  Agreement,  including  this  Section  2.08,  shall
     ------------ constitute a security agreement under applicable law.

(ii) If any Letter of Credit  Obligations,  whether or not then due and payable,
     shall for any reason be outstanding on the Maturity Date,  Borrowers  shall
     either (A) provide cash collateral therefore in the manner described above,
     or (B) cause all such Letters of Credit and guaranties  thereof, if any, to
     be canceled and returned,  or (C) deliver a stand-by letter (or letters) of
     credit in guarantee of such Letter of Credit  Obligations,  which  stand-by
     letter (or  letters) of credit  shall be of like tenor and  duration  (plus
     thirty  (30)  additional  days) as,  and in an amount  equal to 105% of the
     aggregate  maximum amount then available to be drawn under,  the Letters of
     Credit to which such outstanding  Letter of Credit  Obligations  relate and
     shall be  issued  by a  Person,  and  shall be  subject  to such  terms and
     conditions, as are be satisfactory to Agent in its sole discretion.
<PAGE>

(iii) From time to time after funds are deposited in the Cash Collateral Account
     by the  Borrowers,  whether  before or after the Maturity  Date,  Agent may
     apply  such  funds or Cash  Equivalents  then  held in the Cash  Collateral
     Account  to the  payment  of any  amounts,  and in such  order as Agent may
     elect,  as shall be or shall  become due and  payable by the  Borrowers  to
     Agent and Lenders with respect to such Letter of Credit  Obligations of the
     Borrowers  and,  upon the  satisfaction  in full of all  Letter  of  Credit
     Obligations  of the  Borrowers,  to any  other  Obligations  then  due  and
     payable.

(iv) Neither any  Borrower  nor any Person  claiming on behalf of or through any
     Borrower  shall  have  any  right  to  withdraw  any of the  funds  or Cash
     Equivalents  held in the Cash  Collateral  Account,  except  that  upon the
     termination  of all  Letter of Credit  Obligations  and the  payment of all
     amounts  payable by the Borrowers to Agent and Lenders in respect  thereof,
     any funds  remaining  in the Cash  Collateral  Account  shall be applied to
     other  Obligations  then due and  owing  and upon  payment  in full of such
     Obligations  any  remaining  amount  shall be paid to the  Borrowers  or as
     otherwise  required  by  law.  Interest  earned  on  deposits  in the  Cash
     Collateral  Account  shall  be  held  as  additional   Collateral  for  the
     Obligations.

(d)  Fees and Expenses.  Each Borrower agrees to pay to Agent for the benefit of
     Revolving Lenders, as compensation to such  ------------------  Lenders for
     Letter of Credit Obligations incurred hereunder, (i) all costs and expenses
     incurred  by Agent or any  Revolving  Lender on account  of such  Letter of
     Credit  Obligations,  and (ii) for each  month  during  which any Letter of
     Credit  Obligation shall remain  outstanding,  a fee (the "Letter of Credit
     Fee")  (A)  during  the  period  from  and  including  the  Effective  Date
     --------------------  through and  including the first  anniversary  of the
     date of the Credit  Agreement,  2.25% on the face  amount of each Letter of
     Credit  and (B) from and  after the  first  anniversary  of the date of the
     Credit Agreement, the Applicable Rate for Eurodollar Loans per annum on the
     face amount of each Letter of Credit. The Letter of Credit Fee shall be due
     and payable monthly on the first day of each month. In addition,  Borrowers
     shall pay to any Issuing  Bank,  on demand,  such fees  (including  all per
     annum  fees),  charges and  expenses of such Issuing Bank in respect of the
     issuance, negotiation,  acceptance, amendment, transfer and payment of such
     Letter of Credit or  otherwise  payable  pursuant  to the  application  and
     related documentation under which such Letter of Credit is issued.

(e)               Request for Incurrence of Letter of Credit Obligations.
                  Borrowers shall give Agent at least five (5) Business Days'
                  prior written notice requesting the incurrence of any Letter
                  of Credit Obligation. The notice shall be accompanied by the
                  form of the Letter of Credit (which shall be acceptable to the
                  Issuing Bank) and a application therefor completed to the
                  satisfaction of the Issuing Bank.

(f)               Obligation Absolute. The obligation of the Borrowers to
                  reimburse Agent and Revolving Lenders for payments made with
                  respect to any Letter of Credit Obligation shall be absolute,
                  unconditional and irrevocable, without necessity of
                  presentment, demand, protest or other formalities, and the
                  obligations of each Revolving Lender to make payments to Agent
                  or the Issuing Bank, as applicable, with respect to Letters of
                  Credit shall be unconditional and irrevocable. Such
                  obligations of the Borrowers and Revolving Lenders shall be
                  paid strictly in accordance with the terms hereof under all
                  circumstances including the following:
<PAGE>

(i)               any lack of validity or enforceability of any Letter of Credit
                  or this Agreement or the other Loan Documents or any other
                  agreement;

(ii)              the existence of any claim, setoff, defense or other right
                  that any Borrower or any of its Affiliates or any Lender may
                  at any time have against a beneficiary or any transferee of
                  any Letter of Credit (or any Persons or entities for whom any
                  such transferee may be acting), Agent, any Lender, or any
                  other Person, whether in connection with this Agreement, the
                  Letter of Credit, the transactions contemplated herein or
                  therein or any unrelated transaction (including any underlying
                  transaction between Borrower or any of its Affiliates and the
                  beneficiary for which the Letter of Credit was procured);

(iii)             any draft, demand, certificate or any other document presented
                  under any Letter of Credit proving to be forged, fraudulent,
                  invalid or insufficient in any respect or any statement
                  therein being untrue or inaccurate in any respect.

(iv)              payment by the Agent (except as otherwise expressly provided
                  in paragraph (g)(ii)(C) below) or any Issuing Bank under any
                  Letter of Credit or guaranty thereof against presentation of a
                  demand, draft or certificate or other document that does not
                  comply with the terms of such Letter of Credit or such
                  guaranty;

(v)               any other circumstance or event whatsoever, that is similar to
                  any of the foregoing; or

(vi)              the fact that a Default or an Event of Default has occurred
                  and is continuing.

(g)               Indemnification; Nature of Lenders' Duties.

(i)  In addition to amounts  payable as  elsewhere  provided in this  Agreement,
     each  Borrower  hereby  agrees to pay and to protect,  indemnify,  and save
     harmless Agent,  each Issuing Bank and each Lender from and against any and
     all claims,  demands,  liabilities,  damages,  losses,  costs,  charges and
     expenses  (including  reasonable  attorneys'  fees and  allocated  costs of
     internal  counsel) that the Agent,  Issuing Bank or any Lender may incur or
     be subject to as a consequence,  direct or indirect, of (A) the issuance of
     any Letter of Credit or guaranty  thereof,  or (B) the failure of the Agent
     or any Lender  seeking  indemnification  or of any Issuing  Bank to honor a
     demand  for  payment  under any Letter of Credit or  guaranty  thereof as a
     result of any act or omission, whether rightful or wrongful, of any present
     or future de jure or de facto government or Governmental Authority, in each
     case  other  than to the  extent  as a result of the  gross  negligence  or
     willful  misconduct  of the Agent,  Issuing Bank or such Lender (as finally
     determined by a court of competent jurisdiction).
<PAGE>

(ii) As between the Agent, the Issuing Bank and any Lender, on one hand, and the
     Borrowers,  the Borrowers assume all risks of the acts and omissions of, or
     misuse of any Letter of Credit by beneficiaries of any Letter of Credit. In
     furtherance  and not in limitation of the foregoing,  to the fullest extent
     permitted by law none of the Agent, the Issuing Bank or any Lender shall be
     responsible for: (A) the form, validity, sufficiency, accuracy, genuineness
     or legal effect of any document  issued by any party in connection with the
     application  for an issuance of any Letter of Credit,  even if it should in
     fact prove to be in any or all respects invalid, insufficient,  inaccurate,
     fraudulent or forged;  (B) the validity or  sufficiency  of any  instrument
     transferring or assigning or purporting to transfer or assign any Letter of
     Credit or the rights or benefits  thereunder or proceeds thereof,  in whole
     or in part, that may prove to be invalid or ineffective for any reason; (C)
     failure of the  beneficiary  of any  Letter of Credit to comply  fully with
     conditions required in order to demand payment under such Letter of Credit;
     provided,  that in the case of any  payment by Agent or Issuing  Bank under
     any Letter of Credit (or guaranty thereof),  Agent or Issuing Bank shall be
     liable to the extent such  payment was made solely as a result of its gross
     negligence  or willful  misconduct  (as  finally  determined  by a court of
     competent  jurisdiction)  in determining  that the demand for payment under
     such  Letter of Credit or  guaranty  thereof  complies on its face with any
     applicable  requirements  for a demand for  payment  under  such  Letter of
     Credit or guaranty thereof; (D) errors, omissions,  interruptions or delays
     in transmission  or delivery of any messages,  by mail,  cable,  telegraph,
     telex or  otherwise,  whether or not they may be in  cipher;  (E) errors in
     interpretation   of  technical   terms;  (F)  any  loss  or  delay  in  the
     transmission  or  otherwise  of any  document  required  in order to make a
     payment  under any Letter of Credit or guaranty  thereof or of the proceeds
     thereof;  (G) the credit of the proceeds of any drawing under any Letter of
     Credit or guaranty  thereof;  and (H) any consequences  arising from causes
     beyond the control of Agent,  Issuing Bank or any Lender. None of the above
     shall  affect,  impair,  or prevent the vesting of any of Agent's,  Issuing
     Bank's or any Lender's rights or powers hereunder or under this Agreement.

(iii)             Nothing contained herein shall be deemed to limit or to expand
                  any waivers, covenants, or indemnities made by the any
                  Borrower in favor of any Issuing Bank in any letter of credit
                  application, reimbursement agreement or similar document,
                  instrument or agreement between such Borrower and such Issuing
                  Bank.

(h)               Subrogation Rights; Letter of Credit Guaranty.

(i)               Upon any payments made by Agent to an Issuing Bank under a
                  Letter of Credit Guaranty, the Agent, for the benefit of the
                  Lenders, shall acquire by subrogation, any rights, remedies,
                  duties or obligations granted to or undertaken by the

<PAGE>

                  applicable Borrower to the Issuing Bank in any application for
                  Letter of Credit, any standing agreement relating to Letters
                  of Credit or otherwise, all of which shall be deemed to have
                  been granted to Agent, for the benefit of the Lenders, and
                  apply in all respects to the Agent and shall be in addition to
                  any rights, remedies, duties or obligations contained herein.

(ii)              Each Borrower hereby authorizes and directs any Issuing Bank
                  which is not a Lender hereunder to deliver to the Agent all
                  instruments, documents, and other writings and property
                  received by such Issuing Bank pursuant to such Letter of
                  Credit and to accept and rely upon the Agent's instructions
                  with respect to all matters arising in connection with such
                  Letter of Credit and the related application.

(iii)             Any and all charges, commissions, fees, and costs incurred by
                  the Issuing Bank relating to Letters of Credit issued by an
                  Issuing Bank which is not a Lender hereunder in reliance on a
                  Letter of Credit Guaranty shall be Letter of Credit
                  Obligations for purposes of this Agreement and immediately
                  shall be reimbursable by Borrowers to Agent.

SECTION 2.09      Funding of Borrowings.

(a)      Each Lender shall make each Loan to be made by it hereunder on the
         proposed date thereof by wire transfer of immediately available funds
         by 2:00 p.m., New York City time, to the account of the Agent most
         recently designated by it for such purpose by notice to the Lenders;
         provided, that, Swingline Loans shall be made as provided in Section
         2.07. The Agent will make each such Loan available to the relevant
         Borrowers by promptly crediting the amounts so received, in like funds,
         to a Funding Account designated by the Administrative Borrower in the
         Borrowing Request; provided, that, a Protective Advance shall be
         retained by the Agent.

(b)  Unless the Agent  shall have  received  notice  from a Lender  prior to the
     proposed date of any Borrowing  that such Lender will not make available to
     the Agent such Lender's share of such Borrowing,  the Agent may assume that
     such Lender has made such share  available on such date in accordance  with
     Section 2.09(a) and may, in reliance upon such  assumption,  make available
     to --------------- the Borrowers a corresponding  amount. In such event, if
     a Lender has not in fact made its share of the  Borrowing  available to the
     Agent (a "Defaulting Lender"),  then the Defaulting Lender agrees to pay to
     the Agent  forthwith  on demand such  corresponding  amount  with  interest
     thereon,  for each day from and  including  the date  such  amount  is made
     available  to the  Borrowers  to but  excluding  the date of payment to the
     Agent, at the Federal Funds Effective Rate. If such Defaulting  Lender pays
     such amount to the Agent, then such amount shall constitute such Defaulting
     Lender's Loan included in such Borrowing.  The Agent shall not be obligated
     to transfer to a Defaulting  Lender any payments  made by the  Borrowers to
     the Agent for the Defaulting Lender's benefit,  and, in the absence of such
     transfer  to the  Defaulting  Lender,  the Agent  shall  transfer  any such
     payments to each other  non-Defaulting  Lender  ratably in accordance  with
     their Applicable Percentage of the Commitments (but only to the extent that
     such Defaulting  Lender's Borrowing was funded by the other Lenders) or, if

<PAGE>

     so directed by the  Administrative  Borrower and if no Default has occurred
     and is continuing (and to the extent such Defaulting Lender's Borrowing was
     not funded by the other Lenders),  retain the same to be re-advanced to the
     Borrowers  as if such  Defaulting  Lender had made Loans to the  Borrowers.
     Subject  to the  foregoing,  the  Agent  may  hold  and,  in its  Permitted
     Discretion,  setoff such Defaulting Lender's funding shortfall against that
     Defaulting Lender's Applicable Percentage of all payments received from the
     Borrowers or re-lend to the  Borrowers  for the account of such  Defaulting
     Lender the amount of all such  payments  received and retained by the Agent
     for the account of such Defaulting Lender.  Until a Defaulting Lender cures
     its failure to fund its  Applicable  Percentage of any Borrowing (i) solely
     for the  purposes of voting or  consenting  to matters  with respect to the
     Loan Documents, such Defaulting Lender shall be deemed not to be a "Lender"
     and such Defaulting  Lender's  Commitment  shall be deemed to be zero, (ii)
     such  Defaulting  Lender  shall  not  be  entitled  to any  portion  of the
     commitment  fee, and (iii) the  commitment fee shall accrue in favor of the
     Lenders that have funded their  respective  Applicable  Percentages of such
     requested  Borrowing  and  shall be  allocated  among  such  non-Defaulting
     Lenders ratably based on their  Applicable  Percentage of the  Commitments.
     This Section 2.09(b) shall remain effective with respect to such Defaulting
     ----------------  Lender  until (x) the  Obligations  under this  Agreement
     shall have been declared or shall have become  immediately due and payable,
     (y) the  non-Defaulting  Lenders,  the Agent,  and the Borrowers shall have
     waived such Defaulting  Lender's default in writing,  or (z) the Defaulting
     Lender makes its  Applicable  Percentage  of the  Borrowing and pays to the
     Agent all amounts owing by the Defaulting  Lender in respect  thereof.  The
     operation  of this  Section  2.09(b)  shall not be  construed  to  increase
     ---------------  or  otherwise  affect the  Commitment  of any  Lender,  to
     relieve or excuse the  performance by such  Defaulting  Lender or any other
     Lender of its duties and obligations hereunder, or to relieve or excuse the
     performance by the Borrowers of their duties and obligations hereunder.

SECTION 2.10      Interest Elections

(a)            Each  Borrowing  initially  shall be of the Type specified in the
               applicable  Borrowing  Request  and, in the case of a  Eurodollar
               Borrowing,  shall have an initial Interest Period as specified in
               such Borrowing  Request.  Thereafter,  the Borrowers may elect to
               convert such  Borrowing to a different  Type or to continue  such
               Borrowing and, in the case of a Eurodollar  Borrowing,  may elect
               Interest Periods therefor,  all as provided in this Section 2.10.
               The  Borrowers  may elect  different  ------------  options  with
               respect to different portions of the affected Borrowing, in which
               case each  such  portion  shall be  allocated  ratably  among the
               Lenders  holding the Loans  comprising  such  Borrowing,  and the
               Loans comprising each such portion shall be considered a separate
               Borrowing.  This  Section  2.10  shall  not  apply  to  Swingline
               Borrowings or Protective Advances,  which ------------ may not be
               converted or continued.

(b)               To make an election pursuant to this Section 2.10, the
                  Administrative Borrower shall notify the Agent of such
                  election by telephone by the time that a Borrowing Request
                  would be required under Section 2.04 if the Borrowers were
                  requesting a Revolving Borrowing of the Class and Type
                  resulting from such election to be made on the effective date

<PAGE>

                  of such election. Each such telephonic Interest Election
                  Request shall be irrevocable and shall be confirmed promptly
                  by hand delivery, facsimile or Electronic Transmission to the
                  Agent of a written Interest Election Request in a form
                  approved by the Agent and signed by the Administrative
                  Borrower.

(c)               Each telephonic and written Interest Election Request shall
                  specify the following information in compliance with Section
                  2.03:

(i)               the Borrowing to which such Interest Election Request applies
                  and, if different options are being elected with respect to
                  different portions thereof, the portions thereof to be
                  allocated to each resulting Borrowing (in which case the
                  information to be specified pursuant to clauses (iii) and (iv)
                  below shall be specified for each resulting Borrowing);

(ii)              the effective date of the election made pursuant to such
                  Interest Election Request, which shall be a Business Day;

(iii)             whether the resulting Borrowing is to be an ABR Borrowing or a
                  Eurodollar Borrowing; and

(iv)              if the resulting Borrowing is a Eurodollar Borrowing, the
                  Interest Period to be applicable thereto after giving effect
                  to such election, which shall be a period contemplated by the
                  definition of the term "Interest Period."

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrowers shall be deemed to have
selected an Interest Period of one month's duration.

(d)      Promptly following receipt of an Interest Election Request, the Agent
         shall advise each affected Lender of the details thereof and of such
         Lender's portion of each resulting Borrowing.

(e)      If the Administrative Borrower fails to deliver a timely Interest
         Election Request with respect to a Eurodollar Revolving Borrowing prior
         to the end of the Interest Period applicable thereto, then, unless such
         Borrowing is repaid as provided herein, at the end of such Interest
         Period such Borrowing shall be converted to an ABR Borrowing.
         Notwithstanding any contrary provision hereof, if a Default has
         occurred and is continuing and the Agent or the Required Lenders so
         notifies the Administrative Borrower, then, so long as a Default is
         continuing (i) no outstanding Revolving Borrowing may be converted to
         or continued as a Eurodollar Borrowing and (ii) unless repaid, each
         Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing
         at the end of the Interest Period applicable thereto.

SECTION 2.11      Termination or Reduction of Commitments.

(a)      The Commitments shall terminate on the Maturity Date and from year to
         year thereafter, unless sooner terminated pursuant to the terms hereof.
         Agent may, at its option (or shall at the direction of any Lender in

<PAGE>

         writing received by Agent at least ninety (90) days prior to the
         Maturity Date or the anniversary of any Maturity Date, as the case may
         be), terminate this Agreement and the other Loan Documents effective on
         the Maturity Date or on the anniversary of the Maturity Date in any
         year by giving to the Administrative Borrower at least sixty (60) days
         prior written notice; provided, that, this Agreement and all other Loan
         Documents must be terminated simultaneously.

(b)      The Borrowers may at any time terminate the Revolving Commitments upon
         (i) the payment in full of all outstanding Loans, together with accrued
         and unpaid interest thereon, (ii) the cancellation and return of all
         outstanding Letters of Credit (or alternatively, with respect to each
         such Letter of Credit, the furnishing to the Agent of a cash deposit as
         required by Section 2.08(c)), (iii) the payment in full of the accrued
         and unpaid fees, including applicable Prepayment Fee (if any) and any
         payments required under Section 2.18, and (iv) the payment in full of
         all reimbursable expenses and other Obligations together with accrued
         and unpaid interest thereon.

(c)      The Borrowers may from time to time reduce the Commitments upon payment
         of the applicable Prepayment Fee (if any); provided, that, (i) each
         reduction of the Commitments shall be in an amount that is an integral
         multiple of $1,000,000 and not less than $1,000,000 and (ii) the
         Borrowers shall not reduce the Commitments if, after giving effect to
         any concurrent repayment of the Revolving Loans in accordance with
         Section 2.12, the Aggregate Credit Exposure would exceed the Borrowing
         Base then in effect.

(d)  The  Administrative  Borrower  shall  notify the Agent of any  election  to
     terminate or reduce the Commitments under Section -------- 2.11(a),  (b) or
     (c) at  least  three  Business  Days  prior to the  effective  date of such
     termination or reduction,  specifying ------- --- --- such election and the
     effective date thereof. Promptly following receipt of any notice, the Agent
     shall advise the  affected  Lenders of the  contents  thereof.  Each notice
     delivered by the  Administrative  Borrower pursuant to this Section 2.11(d)
     ----------------  shall  be  irrevocable;   provided,  that,  a  notice  of
     termination of the Commitments delivered by the Administrative Borrower may
     state  that such  notice is  conditioned  upon the  effectiveness  of other
     credit  facilities,  in  which  case  such  notice  may be  revoked  by the
     Administrative  Borrower  (by  notice  to  the  Agent  on or  prior  to the
     specified  effective  date)  if  such  condition  is  not  satisfied.   Any
     termination  or  reduction  of the  Commitments  of either  Class  shall be
     permanent.  Each reduction of the Commitments of either Class shall be made
     ratably among the applicable  Lenders in accordance  with their  respective
     Commitments of such Class.

SECTION 2.12      Repayment of Loans; Evidence of Debt.

(a)      Each of the Borrowers hereby unconditionally promises to pay to the
         Agent for the account of each Lender the then unpaid principal amount
         of each Loan on the Maturity Date. Each of the Borrowers hereby
         unconditionally promises to pay to the Agent the then unpaid amount of
         each Protective Advance on the earlier of the Maturity Date and demand
         by the Agent.
<PAGE>

(b)      Each Business Day, at or before 12:00 noon, New York City time, the
         Agent shall apply all immediately available funds credited to the
         Collection Account first to prepay any Protective Advances that may be
         outstanding, pro rata, second to prepay any Swingline Loans that may be
         outstanding, pro rata, and third to prepay the Revolving Loans made by
         Lenders, pro rata.

(c)      Each Lender shall maintain in accordance with its usual practice an
         account or accounts evidencing the indebtedness of the Borrowers to
         such Lender resulting from each Loan made by such Lender, including the
         amounts of principal and interest payable and paid to such Lender from
         time to time hereunder.

(d)      The Agent shall maintain accounts in which it shall record (i) the
         amount of each Loan made hereunder, the Class and Type thereof and the
         Interest Period applicable thereto, (ii) the amount of any principal or
         interest due and payable or to become due and payable from the
         Borrowers to each Lender hereunder, and (iii) the amount of any sum
         received by the Agent hereunder for the account of the Lenders and each
         Lender's share thereof.

(e)      The entries made in the accounts maintained pursuant to Section 2.12(d)
         shall be prima facie evidence of the existence and amounts of the
         obligations recorded therein; provided, that, the failure of any Lender
         or the Agent to maintain such accounts or any error therein shall not
         in any manner affect the obligation of the Borrowers to repay the Loans
         in accordance with the terms of this Agreement.

(f)      Any Lender may request that Loans made by it be evidenced by a
         promissory note. In such event, each of the applicable Borrowers shall
         prepare, execute and deliver to such Lender a promissory note payable
         to such Lender (or, if requested by such Lender, to such Lender and its
         registered assigns) and in a form approved by the Agent. Thereafter,
         the Loans evidenced by such promissory note and interest thereon shall
         at all times (including after assignment pursuant to Section 9.05) be
         represented by one or more promissory notes in such form payable to the
         payee named therein (or to such payee and its registered assigns)
         except to the extent that any such Lender subsequently returns any such
         promissory note for cancellation and requests that such Loans once
         again be evidenced as described in Section 2.12(c) and (d).

SECTION 2.13      Prepayment of Loans.

(a)      Voluntary Prepayments. The Borrowers shall have the right at any time
         and from time to time to prepay any Borrowing in whole or in part,
         subject to prior notice in accordance with Section 2.13(d) and the
         payment of the amounts required under Section 2.18.

(b)      Mandatory Prepayments. (i) The Borrowers shall immediately repay, or
         provide cash collateral for, the Revolving Loans, and/or Swingline
         Loans if at any time after the Effective Date the Total Exposure
         exceeds the lesser of (A) the Commitments and (B) the Borrowing Base
         then in effect, to the extent required to eliminate such excess.
<PAGE>

(ii)     Immediately upon receipt by any Loan Party of the Net Cash Proceeds of
         any asset disposition (other than sales of inventory or obsolete or
         worn out property in the ordinary course of business), the Borrowers,
         shall prepay the Obligations, in an amount equal to 100% of such Net
         Cash Proceeds as set forth in Section 2.13(c).

(iii)    If any Borrower issues Equity Interests (other than Equity Interests
         issued to another Loan Party) or any Loan Party issues Indebtedness
         (other than Indebtedness permitted by Sections 6.01(a) through (j) or
         6.01(l)) or if any Loan Party receives any dividend or distribution
         from a Person other than a Loan Party, the Borrowers shall prepay the
         Obligations in an amount equal to 100% of the Net Cash Proceeds of such
         issuance or the amount of such dividend or distribution no later than
         the Business Day following the date of receipt of such Net Cash
         Proceeds or such dividend or distribution as set forth in Section
         2.13(c).

(iv)     Any insurance or condemnation proceeds to be applied to the Obligations
         in accordance with Section 5.09 shall be applied as set forth in
         Section 2.13(c). If the precise amount of insurance or condemnation
         proceeds allocable to Inventory as compared to Equipment, fixtures and
         real or immovable property is not otherwise determined, the allocation
         and application of those proceeds shall be determined by the Agent, in
         its Permitted Discretion.

(v)      Immediately upon receipt by any Loan Party of any Extraordinary
         Receipts, the Borrowers shall prepay the Obligations in an amount equal
         to 100% of the Net Cash Proceeds received by such Person in connection
         with such Extraordinary Receipts as set forth in Section 2.13(c).

(vi)     Without in any way limiting the foregoing, immediately upon receipt by
         any Loan Party of proceeds of any sale of any Collateral, the Borrowers
         shall cause such Loan Party to deliver such proceeds to the Agent, or
         deposit such proceeds in a deposit account subject to a control
         agreement acceptable to the Agent. All of such proceeds not required to
         be applied as provided in Section 2.13(c) shall be freely available to
         the Borrowers, except as provided in Section 2.12(b). Nothing in this
         Section 2.13(b) shall be construed to constitute the Agent's or any
         Lender's consent to any transaction that is not permitted by other
         provisions of this Agreement or the other Loan Documents.

(c)      All such amounts required to be prepaid by the Borrowers pursuant to
         Sections 2.13(b)(ii), (iii), (iv) and (v) shall be applied, first to
         prepay any Protective Advances that may be outstanding, second to
         prepay the Swingline Loans without a corresponding reduction in the
         Commitment and third to prepay the Revolving Loans without a
         corresponding reduction in the Commitment.

(d)  The  Administrative  Borrower  shall notify the Agent (and,  in the case of
     prepayment  of a  Swingline  Loan,  the  applicable  Swingline  Lender)  by
     telephone  (confirmed  by  facsimile  or  Electronic  Transmission)  of any
     prepayment  hereunder  (i)  in  the  case  of  prepayment  of a  Eurodollar

<PAGE>

     Borrowing,  not later than 11:00 a.m.,  New York City time,  three Business
     Days before the date of  prepayment,  (ii) in the case of  prepayment of an
     ABR Borrowing (other than a Swingline Loan), not later than 11:00 a.m., New
     York City time, one Business Day before the date of prepayment and (iii) in
     the case of prepayment of a Swingline  Loan, not later than 12:00 noon, New
     York  City  time,  on the date of  prepayment.  Each such  notice  shall be
     irrevocable and shall specify the prepayment date and the principal  amount
     of each Borrowing or portion  thereof to be prepaid;  provided,  that, if a
     notice of prepayment is given in  connection  with a conditional  notice of
     termination of the  Commitments as  contemplated by Section 2.11, then such
     notice of  prepayment  may be  revoked  if such  notice of  termination  is
     revoked in -------------  accordance with Section 2.11.  Promptly following
     receipt of any such notice relating to a Borrowing,  the Agent shall advise
     ------------ the applicable  Lenders of the contents thereof.  Each partial
     prepayment of any Revolving  Borrowing  shall be in an amount that would be
     permitted  in the case of an advance of a Revolving  Borrowing  of the same
     Type as  provided  in Section  2.03.  -------------  Each  prepayment  of a
     Revolving  Borrowing  shall  be  applied  ratably  to the  Revolving  Loans
     included in the prepaid Borrowing.

SECTION 2.14      Fees.
                  -----

(a)      The Borrowers agree to pay to the Agent for the account of each
         Revolving Lender a commitment fee, which shall accrue at the Applicable
         Rate per annum on the average daily amount of the Available Commitment
         of such Revolving Lender during the period from and including the
         Effective Date to but excluding the date on which such Lenders'
         Revolving Commitments terminate. Accrued commitment fees shall be
         payable in arrears on the last day of each calendar quarter and on the
         date on which the Revolving Commitments terminate, commencing on the
         first such date to occur after the date hereof. All commitment fees in
         respect of Commitments shall be payable in Dollars and shall be
         computed on the basis of the actual number of days elapsed (including
         the first day but excluding the last day) in a year of 360 days.

(b)      The Borrowers agree to pay to the Lead Arranger and Agent, for its own
         account, fees due and payable pursuant to the Fee Letter and fees
         payable in the amounts and at the times separately agreed upon between
         the Borrowers and the Agent.

(c)      In consideration of the issuance of any Letter of Credit pursuant to
         Section 2.08 hereof, the Borrower agrees to pay (i) to the Agent, for
         the ratable benefit of the Lenders, the Letter of Credit Fee and (ii)
         to the Agent or Issuing Bank, as applicable, all other fees, expenses
         and amounts payable under Sections 2.08(d) or (h).

(d)      The Borrower agrees to reimburse the Agent for any and all reasonable
         charges, fees, commissions, costs and expenses charged to the Agent for
         the Borrower's account by an Issuing Bank in connection with, or
         arising out of, Letters of Credit or out of transactions relating
         thereto, when charged to or paid by the Agent, or as may be due upon
         any termination of this Agreement.

(e)      All fees payable hereunder shall be paid on the dates due, in
         immediately available funds, to the Agent (or to the Issuing Bank, in

<PAGE>

         the case of fees payable to it) for distribution, in the case of
         commitment fees and participation fees, to the Lenders or Lead Arranger
         entitled thereto. Fees paid shall not be refundable under any
         circumstances.

SECTION 2.15      Interest.

(a)      The Loans comprising each ABR Borrowing (including each Swingline Loan)
         shall bear interest at the Alternate Base Rate plus the Applicable
         Rate.

(b)      The Loans comprising each Eurodollar Borrowing shall bear interest at
         the Adjusted LIBO Rate for the Interest Period in effect for such
         Borrowing plus the Applicable Rate.

(c)      Each Protective Advance shall bear interest at the Alternate Base Rate
         plus the Applicable Rate for Revolving Loans plus 2%.

(d)      Notwithstanding the foregoing, during the occurrence and continuance of
         an Event of Default, the Agent or the Required Lenders may, at their
         option, by notice to the Administrative Borrower (which notice may be
         revoked at the option of the Required Lenders notwithstanding any
         provision of Section 9.03 requiring the consent of "each Lender
         affected thereby" for reductions in interest rates), declare that (x)
         all Loans shall bear interest at 2% plus the rate otherwise applicable
         to such Loans as provided in the preceding subsections of this Section
         2.15, or (y) in the case of any other amount outstanding hereunder,
         such amount shall accrue at 2% plus the rate applicable to such fee or
         other obligation as provided hereunder.

(e)      Accrued interest on each Loan shall be payable in arrears on each
         Interest Payment Date for such Loan, upon termination of the Revolving
         Commitments and on the Maturity Date; provided, that, (i) interest
         accrued pursuant to Section 2.15(d) shall be payable on demand, (ii) in
         the event of any repayment or prepayment of any Loan (other than a
         prepayment of an ABR Revolving Loan prior to the end of the
         Availability Period), accrued interest on the principal amount repaid
         or prepaid shall be payable on the date of such repayment or
         prepayment, and (iii) in the event of any conversion of any Eurodollar
         Revolving Loan prior to the end of the current Interest Period
         therefor, accrued interest on such Loan shall be payable on the
         effective date of such conversion.

(f)      All interest hereunder shall be computed on the basis of a year of 360
         days, and shall be payable for the actual number of days elapsed
         (including the first day but excluding the last day). The applicable
         Alternate Base Rate or Adjusted LIBO Rate shall be determined by the
         Agent, and such determination shall be conclusive absent manifest
         error.

SECTION 2.16      Alternate Rate of Interest.  If prior to the commencement of
                   any Interest Period for a Eurodollar Borrowing:
                  --------------------------

(a)      the Agent determines (which determination shall be conclusive absent
         manifest error) that adequate and reasonable means do not exist for
         ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
         for such Interest Period; or
<PAGE>

(b)      the Agent is advised by the Required Lenders that the Adjusted LIBO
         Rate or the LIBO Rate, as applicable, for such Interest Period will not
         adequately and fairly reflect the cost to such Lenders (or Lender) of
         making or maintaining their Loans (or its Loan) included in such
         Borrowing for such Interest Period;

then the Agent shall give notice thereof to the Administrative Borrower and the
Lenders by telephone or facsimile as promptly as practicable thereafter and,
until the Agent notifies the Administrative Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing of the applicable Class
shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar
Revolving Borrowing of the applicable Class, such Borrowing shall be made as an
ABR Borrowing.

SECTION 2.17      Increased Costs.

(a)               If any Change in Law shall:

(i)               impose, modify or deem applicable any reserve, special
                  deposit, deposit insurance or similar requirement against
                  assets of, deposits with or for the account of, or credit
                  extended by, any Lender (except any such reserve requirement
                  reflected in the Adjusted LIBO Rate); or

(ii)              impose on any Lender or the London interbank market any other
                  condition affecting this Agreement or Eurodollar Loans made by
                  such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan), then the Borrowers will pay to such Lender
such additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered.

(b)      If any Lender determines that any Change in Law regarding capital
         requirements has or would have the effect of reducing the rate of
         return on such Lender's capital or on the capital of such Lender's
         holding company, if any, as a consequence of this Agreement or the
         Loans made by such Lender to a level below that which such Lender or
         such Lender's holding company could have achieved but for such Change
         in Law (taking into consideration such Lender's policies and the
         policies of such Lender's holding company with respect to capital
         adequacy), then from time to time the Borrowers will pay to such Lender
         such additional amount or amounts as will compensate such Lender or
         such Lender's holding company for any such reduction suffered.

(c)      A certificate of a Lender setting forth the amount or amounts necessary
         to compensate such Lender or its holding company, as specified in
         Section 2.17(a) or (b) shall be delivered to the Administrative
         Borrower and shall be conclusive absent manifest error. The Borrowers
         shall pay such Lender the amount shown as due on any such certificate
         within 10 days after receipt thereof.
<PAGE>

(d)      Failure or delay on the part of any Lender to demand compensation
         pursuant to this Section 2.17 shall not constitute a waiver of such
         Lender's right to demand such compensation; provided, that, the
         Borrowers shall not be required to compensate a Lender pursuant to this
         Section for any increased costs or reductions incurred more than 180
         days prior to the date that such Lender notifies the Administrative
         Borrower of the Change in Law giving rise to such increased costs or
         reductions and of such Lender's intention to claim compensation
         therefor; provided further that, if the Change in Law giving rise to
         such increased costs or reductions is retroactive, then the 180-day
         period referred to above shall be extended to include the period of
         retroactive effect thereof.

SECTION 2.18 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.13(d) and is revoked in accordance therewith), or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Administrative Borrower pursuant to
Section 2.21, then, in any such event, the applicable Borrowers shall compensate
each Lender for the loss, cost and expense attributable to such event. In the
case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted LIBO Rate that would
have been applicable to such Loan, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 2.18 shall be
delivered to the Administrative Borrower and shall be conclusive absent manifest
error. The applicable Borrowers shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

SECTION 2.19      Taxes.

(a)      Any and all payments by or on account of any obligation of any
         Borrowers or any other Loan Party under this Agreement or any other
         Loan Document shall be made free and clear of and without deduction for
         any Indemnified Taxes; provided, that, if any Borrowers or the Agent
         shall be required to deduct any Indemnified Taxes from such payments,
         then (i) such Borrowers shall increase the sum payable by an amount
         equal to the sum of (x) the amount deducted in respect of such
         Indemnified Taxes and (y) all Taxes applicable to additional sums
         payable under this Section 2.19(a), (ii) such Borrowers and/or the
         Agent shall make such deductions, and (iii) such Borrowers and/or the
         Agent shall pay the full amount deducted to the relevant Governmental
         Authority in accordance with applicable law.
<PAGE>

(b)      In addition, each of the Borrowers shall pay any Other Taxes to the
         relevant Governmental Authority in accordance with applicable law.

(c)  Each of the Borrowers shall indemnify the Agent, and each Lender, within 20
     days after written demand therefor,  for the full amount of any Indemnified
     Taxes  paid by the  Agent or such  Lender,  as the case may be,  on or with
     respect to any payment by or on account of any obligation of such Borrowers
     or any other Loan Party  under this  Agreement  or any other Loan  Document
     (including  Indemnified  Taxes  imposed or asserted on or  attributable  to
     amounts  payable under this Section 2.19) and any  ------------  reasonable
     expenses  arising  therefrom or with respect  thereto,  whether or not such
     Indemnified  Taxes were  correctly  or legally  imposed or  asserted by the
     relevant  Governmental  Authority;  provided,  however, that the applicable
     Lender  shall  --------  -------  reasonably  assist  (consistent  with its
     preexisting  internal  policies  applied on a  nondiscriminatory  basis and
     legal and  regulatory  restrictions)  Borrowers to recover the amounts paid
     pursuant to this subsection (c) from the relevant Governmental Authority.

(d)      As soon as practicable after any payment of Indemnified Taxes by any
         Borrowers to a Governmental Authority, the Administrative Borrower
         shall deliver to the Agent (i) if reasonably available, the original or
         a certified copy of a receipt issued by such Governmental Authority
         evidencing such payment, (ii) a copy of the return reporting such
         payment or (iii) other evidence of such payment reasonably satisfactory
         to the Agent.

(e)  Each Lender  organized under the Laws of a jurisdiction  outside the United
     States shall,  on or prior to the date such Lender  becomes a party to this
     Agreement,  or any of the Loan Documents or any similar related  agreement,
     and from  time to time  thereafter  as  requested  in  writing  by the Loan
     Parties or the Agent (but only so long  thereafter  as such Lender  remains
     lawfully  able to do so),  provide  each of the Loan  Parties and the Agent
     with two original  Internal  Revenue  Service Form W-8 (e.g.,  W-8 BEN, W-8
     ECI),  as  appropriate,  or any  successor or other form  prescribed by the
     Internal  Revenue  Service,  certifying  that such Lender is exempt from or
     entitled to a reduced  rate of United  States  federal  withholding  tax on
     payments pursuant to this Agreement, or any similar, relevant agreement. If
     the forms  provided  by a Lender at the time such  Lender  first  becomes a
     party to this Agreement,  or any similar,  relevant  agreement  indicates a
     United States federal interest withholding tax rate in excess of zero, U.S.
     federal  withholding  tax at such rate shall be  considered  excluded  from
     Indemnified  Taxes unless and until such Lender  provides  the  appropriate
     form  certifying  that  a  lesser  rate  applies,  whereupon  U.S.  federal
     withholding tax only at such lesser rate shall be considered  excluded from
     Indemnified  Taxes  for  periods  governed  by such  form.  If any  form or
     document  referred to in this  subsection  (e) requires the  disclosure  of
     information,  other than  information  necessary to compute the Tax payable
     and  information  required by  Internal  Revenue  Service  Form W-8, or any
     successor form prescribed by the Internal Revenue Service,  that the Lender
     reasonably  considers  to be  confidential,  the Lender  shall give  notice
     thereof to the Loan  Parties  and the Agent and shall not be  obligated  to

<PAGE>

     include in such form or document such confidential  information.  No Lender
     shall be entitled to payment pursuant to subsection (a), (b) or (c) of this
     Section 2.19 with respect to any Taxes which  resulted  directly  from such
     Lender's change in account, permanent establishment or other branch through
     which such  Lender  receives  any payment  pursuant  to the Loan  Documents
     (although  such Lender  shall be  entitled to payment for Taxes  arising or
     attributable  to acts or  events  subsequent  to such  change  in  account,
     permanent  establishment  or branch).  For purposes of this subsection (e),
     the terms  "United  -------  States"  shall have the meaning  specified  in
     Section 7701 of the Internal Revenue Code.

(f)  If the Agent or a Lender  determines,  in its sole discretion  exercised in
     good  faith,  that it has  received  a  refund,  whether  in the  form of a
     payment, credit or offset, of any Indemnified Taxes as to which it has been
     indemnified  by any Borrowers or with respect to which any  Borrowers  have
     paid additional amounts pursuant to Section 2.19(a), it shall pay over such
     refund  ----------------  to such  Borrowers  (but  only to the  extent  of
     indemnity  payments  made,  or additional  amounts paid, by such  Borrowers
     under this Section 2.19 with respect to the  Indemnified  Taxes giving rise
     to such refund),  net of all out-of-pocket  expenses and ------------ Taxes
     of the Agent or such Lender and without  interest  (other than any interest
     paid,  credited  or  allowed  as an offset,  by the  relevant  Governmental
     Authority with respect to such refund, which interest shall be paid to such
     Borrowers); provided, that such Borrowers, upon the request of the Agent or
     such Lender,  agree to repay the amount paid over to such  Borrowers  (plus
     any  penalties,   interest  or  other  charges   imposed  by  the  relevant
     Governmental  Authority) to the Agent or such Lender in the event the Agent
     or such  Lender is  required  to repay  such  refund  to such  Governmental
     Authority.  Nothing in this  Section 2.19 shall be construed to require the
     Agent  or any  Lender  to make  available  its tax  returns  (or any  other
     -------------  information which it deems confidential) to the Borrowers or
     any other Person.

(g)  For any period with respect to which an Lender  organized under the laws of
     a  jurisdiction  outside  the United  States has failed to provide the Loan
     Parties or the Agent with the appropriate  form described in subsection (e)
     (other than a failure due to a change in Law with respect to the  necessity
     to complete and submit such forms  occurring after the date on which a form
     originally was required to be provided),  such Lender shall not be entitled
     to any payment or  indemnification  under this Section 2.19 with respect to
     U.S.  federal  withholding  taxes  by  reason  of such  failure;  provided,
     however,  that should a --------  -------  Lender  become  subject to Taxes
     because  of its  failure  to deliver a form  required  hereunder,  the Loan
     Parties  shall take such steps as such Lender shall  reasonably  request to
     reasonably  assist  (consistent  with  its  preexisting  internal  policies
     applied on a nondiscriminatory basis and legal and regulatory restrictions)
     such Lender to recover such Taxes.

(h)      No amounts will be payable by the Loan Parties under this Section 2.19
         to the extent that such amounts (i) are otherwise covered (but not
         payable to an Lender) under the Loan Documents and/or (ii) have been
         paid pursuant to another Loan Document or another section of this
         Agreement.

(i)      Each Lender agrees to use reasonable efforts to utilize and claim tax
         credits or deductions ("Foreign Tax Credits") with respect to Taxes

<PAGE>

         that are paid or indemnified pursuant to subsection (a), (b), or (c) of
         this Section 2.19. If any Lender claims a reduction in Tax or tax
         refund for any Foreign Tax Credits with respect to Taxes that are paid
         or indemnified pursuant to subsection (a), (b), or (c) of this Section
         2.19, such Lender shall remit to the Loan Parties, as applicable, the
         actual tax savings attributable to such Foreign Tax Credits.

(j)  In the event  that any Lender is  entitled,  on the  effective  date of any
     Assignment and Assumption  under and as defined in this  Agreement,  to the
     benefits  of a  payment  pursuant  to  subsection  (a),  (b) or (c) of this
     Section  2.19,  the  assignee of such  Lender  shall be  entitled,  without
     duplication,  to no greater  benefits of payment (in addition to any future
     benefits  of payment  that may arise with  respect to such  assignee)  that
     would have been  available  to such Lender had such Lender not entered into
     such  Assignment and Assumption (or such comparable  assignment)  with such
     assignee  and then only to the extent the  relevant  costs are  incurred by
     such   assignee.   Anything   in  this   Section   2.19  to  the   contrary
     notwithstanding,  the Loan  Parties  shall not be required to  indemnify or
     make a payment  with  respect  to Other  Taxes on any such  Assignment  and
     Assumption (or on any such comparable assignment) except to the extent such
     Assignment and Assumption (or such  comparable  assignment) is requested by
     the Loan Parties or is required by law.

(k)      Upon any payment of any amount with respect to any Taxes by the Loan
         Parties to any Lender under this Section 2.19, the Loan Parties, as
         applicable, shall be subrogated to all rights of such Lender to seek
         recovery or reimbursement from any other Person in connection with such
         amount.

(l)      The Lender or Agent shall not be obligated to contest a Tax indemnified
         by the Loan Parties under the Loan Documents that is asserted in the
         name of such Agent or Lender nor will the Loan Parties be permitted to
         contest such a Tax, unless there is a reasonable basis for such
         contest. Except as described above, the Agent or Lender shall cooperate
         with the Loan Parties and the Loan Parties shall have the right to
         contest and to control any contest for the recovery of Taxes that are
         asserted in the name of the Agent or Lender that are indemnified by the
         Loan Parties under the Loan Documents, to the extent that the contest
         and its resolution does not materially disadvantage the Agent or
         Lender.

SECTION 2.20  Payments Generally; Allocation of Proceeds; Sharing of Set-offs.
              ----------------------------------------------------------------

(a)  The Borrowers shall make each payment required to be made by them hereunder
     (whether of principal, interest or fees or of amounts payable under Section
     2.17, 2.18 or 2.19, or otherwise)  prior to 12:00 noon, New York City time,
     on the date  when  ------------  ---- ---- due,  in  immediately  available
     funds, without set off or counterclaim.  All such payments shall be made to
     the Agent at its  offices at 505 Fifth  Avenue,  New York,  New York 10017,
     except payments to be made directly to the Issuing Bank or Swingline Lender
     as expressly  provided herein and except that payments pursuant to Sections
     2.17,  2.18,  2.19 and 9.04  shall be made  -------------  ----  ----  ----
     directly to the Persons entitled thereto and payments pursuant to the other
     Loan Documents shall be made to the Persons  specified  therein.  The Agent
     shall  distribute  any such payments  received by it for the account of any
     other  Person  to the  appropriate  recipient  promptly  following  receipt
     thereof.  If any  payment  hereunder  shall  be due on a day  that is not a
     Business Day, the date for payment shall be extended to the next succeeding

<PAGE>

     Business Day, and, in the case of any payment accruing  interest,  interest
     thereon  shall be payable for the period of such  extension.  All  payments
     hereunder shall be made in Dollars.  Solely for purposes of determining the
     amount of Loans available for borrowing purposes,  checks and cash or other
     immediately  available  funds  from  collections  of items of  payment  and
     proceeds of any Collateral shall be applied in whole or in part against the
     Obligations, on the day of receipt, subject to actual collection.

(b)  Any  proceeds  of  Collateral  received  by the Agent (i) not  constituting
     either (A) a specific  payment of  principal,  interest,  fees or other sum
     payable  under the Loan  Documents  (which shall be applied as specified by
     the Administrative  Borrower),  (B) a mandatory  prepayment (which shall be
     applied in accordance with Section 2.13), or (C) amounts to be applied from
     the -------------  Collection Account (which shall be applied in accordance
     with   Section   2.12(b)),   or  (ii)  after  an  Event  of   Default   has
     ----------------  occurred and is continuing and the Agent so elects or the
     Required  Lenders so direct,  such funds shall be applied ratably first, to
     pay any fees, indemnities, or expense reimbursements including amounts then
     due to the Agent and the Issuing Bank ----- from the Borrowers  (other than
     in  connection  with Banking  Services  Obligations  or Swap  Obligations),
     second,  to pay any fees ------ or expense  reimbursements  then due to the
     Lenders from the Borrowers  (other than in connection with Banking Services
     Obligations or Swap Obligations),  third, to pay interest due in respect of
     the Protective  Advances,  fourth, to pay the ----- ------ principal of the
     Protective  Advances,  fifth,  to  payment  of  any  amounts  owing  by the
     Borrowers  with  respect to Banking  -----  Services  Obligations  and Swap
     Obligations,  and sixth, to the payment of any other  Obligation due to the
     Agent or any Secured ----- Party by the Borrowers. Notwithstanding anything
     to the  contrary  contained  in this  Agreement,  unless so directed by the
     Administrative  Borrower, or unless a Default is in existence,  neither the
     Agent nor any Lender  shall  apply any  payment  which it  receives  to any
     Eurodollar  Loan  of a  Class,  except  (a) on the  expiration  date of the
     Interest  Period  applicable  to any such  Eurodollar  Loan,  or (b) in the
     event,  and only to the extent,  that there are no outstanding ABR Loans of
     the same Class and, in any event,  the applicable  Borrowers  shall pay the
     break  funding   payment   required  in   accordance   with  Section  2.18.
     ------------  The Agent  and the  Lenders  shall  have the  continuing  and
     exclusive  right to apply and reverse and reapply any and all such proceeds
     and  payments  to any  portion  of the  Obligations  owing to the Agent and
     Lenders.

(c)  At the election of the Agent,  all payments of principal,  interest,  fees,
     premiums,   reimbursable  expenses  (including,   without  limitation,  all
     reimbursement  for fees and expenses  pursuant to Section 9.04),  and other
     sums payable under the Loan -------------  Documents,  may be paid from the
     proceeds of Borrowings  made hereunder  whether made following a request by
     the Administrative Borrower pursuant to Section 2.04 or a deemed request as
     provided  in  this  Section  2.20  or  may be  deducted  from  any  deposit

<PAGE>

     ------------  ------------  account of the applicable  Borrowers  under the
     control of the Agent pursuant to a control  agreement in form and substance
     satisfactory to the Agent. The Borrowers hereby  irrevocably  authorize (i)
     the Agent to make a Borrowing  for the  purpose of paying  each  payment of
     principal,  interest  and fees as it  becomes  due  hereunder  or any other
     amount due under the Loan Documents and agree that all such amounts charged
     shall constitute Loans (including  Swingline Loans and Protective Advances)
     and  that all  such  Borrowings  shall be  deemed  to have  been  requested
     pursuant to Sections 2.04, 2.06 or 2.07, as applicable,  ------------- ----
     ---- and (ii) the Agent to charge  any  deposit  account  of the  Borrowers
     maintained with the Agent for each payment of principal,  interest and fees
     as it  becomes  due  hereunder  or any  other  amount  due  under  the Loan
     Documents.

(d)  If any Lender shall,  by exercising any right of set off or counterclaim or
     otherwise, obtain payment in respect of any principal of or interest on any
     of its  Loans  resulting  in such  Lender  receiving  payment  of a greater
     proportion  of the  aggregate  amount  of its Loans  and  accrued  interest
     thereon than the proportion  received by any other Lender,  then the Lender
     receiving such greater  proportion  shall purchase (for cash at face value)
     participations  in the Loans of other  Lenders to the extent  necessary  so
     that the  benefit  of all such  payments  shall be  shared  by the  Lenders
     ratably in accordance with the aggregate amount of principal of and accrued
     interest  on  their  respective  Loans;  provided,  that,  (i) if any  such
     participations  are purchased and all or any portion of the payment  giving
     rise thereto is recovered,  such participations  shall be rescinded and the
     purchase price restored to the extent of such recovery,  without  interest,
     and (ii) the provisions of this subsection  shall not be construed to apply
     to any payment made by the Borrowers pursuant to and in accordance with the
     express  terms of this  Agreement  or any  payment  obtained by a Lender as
     consideration  for the assignment of or sale of a  participation  in any of
     its Loans to any assignee or  participant,  other than to the  Borrowers or
     any  Subsidiary  or Affiliate  thereof (as to which the  provisions of this
     subsection shall apply).  The Borrowers consent to the foregoing and agree,
     to the extent they may  effectively  do so under  applicable  law, that any
     Lender acquiring a participation pursuant to the foregoing arrangements may
     exercise  against the  Borrowers  rights of set-off and  counterclaim  with
     respect  to such  participation  as fully as if such  Lender  were a direct
     creditor of the Borrowers in the amount of such participation.

(e)  Unless  the  Agent  shall  have  received  notice  from the  Administrative
     Borrower prior to the date on which any payment is due to the Agent for the
     account of the Lenders or the Issuing  Bank  hereunder  that the  Borrowers
     will not make  such  payment,  the  Agent may  assume  that the  applicable
     Borrowers  have made such payment on such date in  accordance  herewith and
     may, in reliance upon such assumption, distribute to the applicable Lenders
     or the Issuing Bank, as the case may be, the amount due. In such event,  if
     the applicable  Borrowers have not in fact made such payment,  then each of
     such Lenders or the Issuing Bank, as the case may be,  severally  agrees to
     repay to the Agent  forthwith on demand the amount so  distributed  to such
     Lender or the Issuing  Bank with  interest  thereon,  for each day from and
     including  the date such amount is  distributed  to it to but excluding the
     date of payment to the Agent, at the greater of the Federal Funds Effective
     Rate and a rate determined by the Agent in accordance with banking industry
     rules on interbank compensation.

(f)      If any Lender shall fail to make any payment required to be made by it
         pursuant to Section 2.07, 2.08(d) or (e), 2.09(b), 2.20(e) or 9.04(c),
         then the Agent may, in its discretion (notwithstanding any contrary
         provision hereof), apply any amounts thereafter received by the Agent
         for the account of such Lender to satisfy such Lender's obligations
         under such Sections until all such unsatisfied obligations are fully
         paid.
<PAGE>

SECTION 2.21 Mitigation Obligations; Replacement of Lenders. If any Lender
requests compensation under Section 2.17, or if the Borrowers are required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.19, then:

(a)      such Lender shall use reasonable efforts to designate a different
         lending office for funding or booking its Loans hereunder or to assign
         its rights and obligations hereunder to another of its offices,
         branches or affiliates, if, in the reasonable judgment of such Lender,
         such designation or assignment (i) would eliminate or reduce amounts
         payable pursuant to Section 2.17 or 2.19, as the case may be, and (ii)
         would not subject such Lender to any unreimbursed cost or expense and
         would not otherwise be disadvantageous to such Lender;

(b)  the Borrowers may, at their sole expense and effort, require such Lender or
     any  Defaulting   Lender  (such  Lender  or  Defaulting  Lender  herein,  a
     "Departing  Lender"),  upon notice from the Administrative  Borrower to the
     Departing  Lender and the Agent, to assign and delegate,  without  recourse
     (in accordance  with and subject to the  restrictions  contained in Section
     9.05), all of ------------ such Departing  Lender's  interests,  rights and
     obligations  under this  Agreement  to an assignee  that shall  assume such
     obligations (which assignee may be another Lender, if a Lender accepts such
     assignment);  provided,  that,  (i) the  Borrowers  shall have received the
     prior written consent of the Agent, which consent shall not unreasonably be
     withheld,  (ii) the  Departing  Lender  shall have  received  payment of an
     amount equal to the outstanding principal of its Loans and Swingline Loans,
     accrued interest thereon,  accrued fees and all other amounts payable to it
     hereunder,  from the assignee (to the extent of such outstanding  principal
     and accrued interest and fees) or the applicable  Borrowers (in the case of
     all other amounts),  and (iii) in the case of any such assignment resulting
     from a claim for compensation under Section 2.17 or -------------  payments
     required to be made pursuant to Section 2.19,  such  assignment will result
     in a reduction in such compensation or ------------  payments.  A Departing
     Lender shall not be required to make any such assignment and delegation if,
     prior  thereto,  as a result of a waiver by such Lender or  otherwise,  the
     circumstances  entitling  the  Borrowers  to require  such  assignment  and
     delegation cease to apply and the Borrowers shall have consented thereto.

SECTION 2.22 Indemnity for Returned Payments. If after receipt of any payment
which is applied to the payment of all or any part of the Obligations, the Agent
or any Lender is for any reason compelled to surrender such payment or proceeds
to any Person because such payment or application of proceeds is invalidated,
declared fraudulent, set aside, determined to be void or voidable as a
preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such Lender
and the Borrowers shall be liable to pay to the Agent and the Lenders, and each

<PAGE>

Borrower hereby indemnifies the Agent and the Lenders and holds the Agent and
the Lenders harmless for the amount of such payment or proceeds surrendered. The
provisions of this Section 2.22 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Agent or any Lender in
reliance upon such payment or application of proceeds, and any such contrary
action so taken shall be without prejudice to the Agent's and the Lenders'
rights under this Agreement and shall be deemed to have been conditioned upon
such payment or application of proceeds having become final and irrevocable. The
provisions of this Section 2.22 shall survive the termination of this Agreement.

ARTICLE III

                         Representations and Warranties

         The Borrowers represent and warrant to the Agent, the Lenders and the
Issuing Bank that:

SECTION 3.01 Organization; Powers. Each of the Loan Parties and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.

SECTION 3.02 Authorization; Enforceability. The Transactions are within each
Loan Party's corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action. The Loan Documents to which each
Loan Party is a party have been duly executed and delivered by such Loan Party
and constitute a legal, valid and binding obligation of such Loan Party,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.

SECTION 3.03 Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect and except any filings of the Mortgages or any
of the foregoing which are immaterial in nature and except for filings necessary
to perfect Liens created under the Loan Documents, as contemplated by Section
3.17, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of any Loan Party or its Subsidiaries
or any order of any Governmental Authority, (c) will not violate or result in a
default under any material indenture, agreement or other instrument binding upon
any Loan Party or its Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by any Loan Party or its
Subsidiaries, and (d) will not result in the creation or imposition of any Lien
on any asset of any Loan Party or its Subsidiaries except Liens created under
the Loan Documents.

SECTION 3.04      Financial Condition; No Material Adverse Change.

(a)      The Projections, copies of which have heretofore been furnished to each
         Lender, has been prepared giving effect (as if such events had occurred

<PAGE>

         on such date) to (i) consummation of the Transactions, (ii) the Loans
         and other extensions of credit hereunder to be made on the Effective
         Date and the use of proceeds thereof and (iii) the payment of fees and
         expenses in connection with the foregoing. The Projections have been
         prepared based on good faith estimates and assumptions believed to be
         reasonable at the time made, it being recognized by the Lenders that
         such information as to future events are not to be viewed as facts and
         that actual results during the period or periods covered by any such
         projections may differ materially from the projected results.

(b)  The Parent  has  heretofore  furnished  to the Agent (i)  audited  combined
     balance sheets of Parent and its  Subsidiaries as of the Fiscal Year ending
     June 30, 2006 and the notes thereto and the related combined  statements of
     operations,   shareholders'  equity  and  cash  flows  of  Parent  and  its
     Subsidiaries  for the Fiscal Years then ended and (ii)  unaudited  combined
     balance  sheets of Parent and its  Subsidiaries  as of the  Fiscal  Quarter
     ending  September  30,  2006  and  the  related   combined   statements  of
     operations,   shareholders'  equity  and  cash  flows  of  Parent  and  its
     Subsidiaries for the Fiscal Quarters then ended. Such financial  statements
     present  fairly,  in all  material  respects,  the  financial  position and
     results of operations and cash flows of Parent and its  Subsidiaries  as of
     such dates and for such periods in  accordance  with GAAP,  subject to year
     end audit  adjustments  and the  absence  of  footnotes  in the case of the
     statements referred to in clause (ii) above. -----------

(c)      Since June 30, 2006, there has been no change in the business, assets,
         operations or financial condition of Parent and its Subsidiaries, taken
         as a whole, which could reasonably be expected to have a Material
         Adverse Effect.

SECTION 3.05 Intellectual Property. Except as would not result in a Material
Adverse Effect, each Loan Party and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property necessary to the current and future anticipated conduct of the Loan
Parties' and their Subsidiaries' business, a correct and complete list of which,
as of the Effective Date and after giving effect to the consummation of the
Transactions, is set forth on Schedule 3.05, and, to the Loan Parties'
knowledge, the use thereof by the Loan Parties and their Subsidiaries does not
infringe in any material respect upon the rights of any other Person, and the
Loan Parties either (i) own the entire right, title and interest thereto or (ii)
hold such interest pursuant to a valid, subsisting and enforceable license.

SECTION 3.06 Litigation. (a) Except as disclosed on Schedule 3.06, there are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of any Loan Party, threatened
against or affecting the Loan Parties or their Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.

(a)      Since the date of this Agreement, there has been no change in the
         status of the Disclosed Matters that, individually or in the aggregate,
         has resulted in, or materially increased the likelihood of, a Material
         Adverse Effect.
<PAGE>

SECTION 3.07 Compliance with Laws. Each Loan Party is in compliance with all
laws, regulations and orders of any Governmental Authority applicable to it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

SECTION 3.08 Investment and Holding Company Status. No Loan Party nor any of its
Subsidiaries is an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940, as amended.

SECTION 3.09 Taxes. Except as disclosed on Schedule 3.09, each Loan Party and
its Subsidiaries has timely filed or caused to be filed all federal and other
material Tax returns and reports required to have been filed by it and has paid
or caused to be paid all Taxes required to have been paid by it, except (x)
Taxes that are being contested in good faith by appropriate proceedings and for
which the applicable Loan Party or Subsidiary has set aside on its books
adequate reserves and (y) Taxes the non-payment of which, in the aggregate, is
not reasonably expected to have a Material Adverse Effect. Except as disclosed
on Schedule 3.09, no Tax liens have been filed and no material claims have been
asserted in writing with respect to any such Taxes.

SECTION 3.10      ERISA.
                  ------

(a)  No ERISA Event has occurred or is reasonably  expected to occur that,  when
     taken  together  with all other such ERISA  Events for which  liability  is
     reasonably  expected to occur,  could reasonably be expected to result in a
     Material  Adverse  Effect.  The present  value of all  accumulated  benefit
     obligations  under each Plan (based on the assumptions used for purposes of
     Statement of Financial Accounting Standards No. 87) did not, as of the date
     of the most recent financial statements reflecting such amounts,  exceed by
     an amount that could reasonably be expected to result in a Material Adverse
     Effect the fair  market  value of the assets of such Plan,  and the present
     value of all  accumulated  benefit  obligations  of all  underfunded  Plans
     (based on the  assumptions  used for  purposes of  Statement  of  Financial
     Accounting  Standards  No. 87) did not,  as of the date of the most  recent
     financial statements reflecting such amounts,  exceed by more than $100,000
     the fair market value of the assets of all such underfunded Plans.

(b)      No Non-U.S. Plan has incurred any unfunded liability which could
         reasonably be expected to give rise to a Material Adverse Effect.

(c)      Except as required by applicable law, or which could not reasonably be
         expected to give rise to a Material Adverse Effect, neither the
         Borrowers nor any Subsidiary thereof maintains, sponsors or contributes
         to any plan, policy or arrangement that provides medical benefits to
         retirees or their beneficiaries.

SECTION 3.11 Disclosure. Each Loan Party and its Subsidiaries have disclosed to
the Agent all agreements, instruments and corporate or other restrictions to
which they are subject, and all other matters known to it, in each case that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. No reports, financial statements, certificates or other

<PAGE>

information furnished by or on behalf of the Borrowers to the Agent or any
Lender in connection with the negotiation of this Agreement or delivered
hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, that, with respect to
projected financial information, the Borrowers represent only that such
projected statements are based on good faith estimates and assumptions believed
to be reasonable at the time made.

SECTION 3.12 Material Agreements. Schedule 3.12 attached hereto contains a
correct and complete list, as of the Effective Date, of the following contracts,
agreements, or arrangements (other than those entered into in the ordinary
course of business) to which the Loan Parties are a party (the "Contracts"):

(a)      notes, mortgages, indentures, loan or credit agreements, security
         agreements each of which secures Indebtedness, and other agreements and
         instruments reflecting obligations for borrowed money or other monetary
         Indebtedness or otherwise relating to the borrowing of money by, or the
         extension of credit to the Loan Parties, in each case creating an
         actual or potential obligation of the Loan Parties of not less than
         $500,000, or commitments to enter into any such agreements or
         commitments;

(b)      management, consulting and employment agreements and written
         agreements, commitments, representations, promises or communications to
         enter into the same other than as previously approved by Parent where
         such agreement is terminable upon not more than sixty (60) days' prior
         notice without further Liability of the Loan Parties thereunder;

(c)      (i) with respect to real or immovable property, option agreements,
         purchase and sale agreements, lease agreements or other agreements
         involving the Mortgaged Properties, and (ii) with respect to equipment,
         machinery, personal or movable property or other assets, tangible or
         intangible, option agreements, purchase and sale agreements, lease
         agreements or other agreements involving amounts payable by or to the
         Loan Parties of $250,000 or more;

(d)      agreements and purchase orders for the purchase or sale of goods,
         services, supplies or capital assets that have continuing obligations
         to perform and (i) have terms of more than one year, are subject to
         automatic renewal or are indefinite and (ii) involved an annual payment
         of more than $250,000 during at least one of the last three Fiscal
         Years or, to the knowledge of the Loan Parties, would reasonably be
         expected to involve the payment of more than $250,000 during any Fiscal
         Year in the future;

(e)      partnership, joint venture, stockholders' or other similar agreements
         with any Person;

(f)      contracts or agreements between or among the Loan Parties, on the one
         hand, and any current or former director, officer or Affiliate of the
         Loan Parties, on the other hand, with respect to the business as
         conducted by the Loan Parties on the date of execution of this
         Agreement except for contracts and agreements between the Loan Parties;
<PAGE>

(g)      outstanding guarantees, subordination agreements, indemnity agreements
         and other similar types of agreements, whether or not entered into in
         the ordinary course of business, which any Loan Party is or may become
         liable for or obligated to discharge, or any asset of any Loan Party is
         or may become subject to the satisfaction of, any Indebtedness,
         obligation, performance or undertaking of any other Person, except for
         (i) indemnification agreements contained in any of the instruments
         listed in the schedules hereto or any other customary indemnity
         provisions included in agreements for the purchase or sale of goods,
         services or supplies and (ii) any of the foregoing in which, in each
         case, the aggregate obligation of any Loan Party thereunder is less
         than $250,000;

(h)      contracts, orders, decrees or judgments preventing or restricting the
         Loan Parties from carrying on any business activity or competing with
         any Person or prohibiting or limiting disclosure of confidential or
         proprietary information;

(i)      agreements, contracts or commitments relating to the acquisition by any
         Loan Party of the outstanding capital stock or equity interest of any
         business enterprise or the disposition of any assets or properties of
         any Loan Party (excluding dispositions of real or immovable property)
         within the last five Fiscal Years;

(j)      agreements, contracts or commitments with independent contractors,
         distributors, dealers, manufacturers' representatives or sales agencies
         that involved the payment of commissions during at least one of the
         last three Fiscal Years of more than $250,000 or, to the knowledge of
         the Loan Parties, would reasonably be expected to involve the payment
         of more than $250,000 during any Fiscal Year in the future;

(k)      all contracts that (i) limit or contain restrictions on the ability of
         any Loan Party to declare or pay dividends on, to make any other
         distribution in respect of or to issue or purchase, redeem or otherwise
         acquire its capital stock, to incur Indebtedness, to incur or suffer to
         exist any Lien, to purchase or sell any assets or properties, to change
         the lines of business in which it participates or engages or to engage
         in any Business Combination, or (ii) require any Loan Party to maintain
         specified financial ratios or levels of net worth or other indicia of
         financial condition; and

(l)      all Plans, Multiemployer Plans and Non-U.S. Plans.

         Except as disclosed in Schedule 3.12, there is not under (i) any
material contract to which any Borrower is a party or (ii) any instrument or
agreement governing Material Indebtedness any existing material breach or
material default (or event or condition, which after notice or lapse of time, or
both, would constitute a material breach or material default) by any Loan Party
with respect thereto.

SECTION 3.13      Solvency
<PAGE>

(a)  Immediately  after the  consummation  of the  Transactions  and immediately
     following  the making of each  Borrowing and the issuance of each Letter of
     Credit,  if any, and after giving effect to the application of the proceeds
     of such  Borrowing or such issuance of a Letter of Credit,  with respect to
     any Loan Party,  (i) the fair value of the assets of each Loan Party,  at a
     fair  valuation,  will  exceed  its  debts and  liabilities,  subordinated,
     contingent  or  otherwise;  (ii) the  present  fair  saleable  value of the
     property  of each Loan Party will be greater  than the amount  that will be
     required to pay the probable  liability of its debts and other liabilities,
     subordinated,  contingent or otherwise, as such debts and other liabilities
     become absolute and matured;  (iii) each Loan Party will be able to pay its
     debts and liabilities, subordinated, contingent or otherwise, as such debts
     and liabilities become absolute and matured;  and (iv) each Loan Party will
     not have unreasonably small capital with which to conduct the businesses in
     which it is engaged as such  businesses  are now conducted and are proposed
     to be conducted after the date hereof.

(b)      No Loan Party intends to, or will permit any of its Subsidiaries to,
         and believes that it or any of its Subsidiaries will, incur debts
         beyond its ability to pay such debts as they mature, taking into
         account the timing of and amounts of cash to be received by it or any
         such Subsidiary and the timing of the amounts of cash to be payable on
         or in respect of its Indebtedness or the Indebtedness of any such
         Subsidiary.

SECTION 3.14      Intentionally Omitted.

SECTION 3.15 Capitalization and Subsidiaries. As of the Effective Date and after
giving effect to the consummation of the Transactions, Schedule 3.15 sets forth
(a) a correct and complete list of the name and relationship to the Parent of
each and all of the Parent's Subsidiaries, (b) a true and complete listing of
each class of each Loan Party's authorized Equity Interests, of which all of
such issued shares are validly issued, outstanding, fully paid and
non-assessable, and (c) the type of entity of each Loan Party and each of its
Subsidiaries. All of the issued and outstanding Equity Interests owned by any
Loan Party has been (to the extent such concepts are relevant with respect to
such ownership interests) duly authorized and issued and is fully paid and non
assessable.

SECTION 3.16 Common Enterprise. The successful operation and condition of each
of the Loan Parties is dependent on the continued successful performance of the
functions of the group of the Loan Parties as a whole and the successful
operation of each of the Loan Parties is dependent on the successful performance
and operation of each other Loan Party. Each Loan Party expects to derive
benefit (and its board of directors or other governing body has determined that
it may reasonably be expected to derive benefit), directly or indirectly, from
(i) successful operations of each of the other Loan Parties, and (ii) the credit
extended by the Lenders to the Borrowers hereunder, both in their separate
capacities and as members of the group of companies. Each Loan Party has
determined that execution, delivery, and performance of this Agreement and any
other Loan Documents to be executed by such Loan Party is within its purpose,
will be of direct and indirect benefit to such Loan Party, and is in its best
interest.

SECTION 3.17 Security Interest in Collateral. The provisions of this Agreement
and the other Loan Documents will, when executed and delivered, create legal and

<PAGE>

valid Liens on all the Collateral in favor of the Agent, for the benefit of the
Agent and the Secured Parties, and (upon the filing of UCC-1 financing
statements in the jurisdictions listed on Schedule 3.17, the filing, recording
or registering of financing statements or analogous documents under other
applicable personal property security laws in the jurisdictions listed on
Schedule 3.17), such Liens constitute perfected and continuing Liens on the
Collateral, securing the Obligations, enforceable against the applicable Loan
Party and all third parties, and having priority over all other Liens on the
Collateral except for (a) Permitted Encumbrances, to the extent any such
Permitted Encumbrances would have priority over the Liens in favor of the Agent
pursuant to any applicable law, and (b) Liens perfected only by possession
(including possession of any certificate of title) to the extent the Agent has
not obtained or do not maintain possession of such Collateral.

SECTION 3.18 Labor Matters. As of the Effective Date and after giving effect to
the consummation of the Transactions (a) except as set forth on Schedule 3.18,
there is no collective bargaining agreement or other material labor contract
covering employees of any Borrower, (b) no union or other labor organization is
seeking to organize, or to be recognized as, a collective bargaining unit of
employees of any Borrower or for any similar purpose, and (c) there is no
pending or (to the best of the Borrowers' knowledge) threatened, strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting the Borrowers or their Subsidiaries or their employees.

SECTION 3.19 Affiliate Transactions. Except as set forth on Schedule 3.19, as of
the Effective Date and after giving effect to the consummation of the
Transactions, there are no existing or proposed agreements, arrangements,
understandings, or transactions between any Loan Party and any Affiliates (other
than Subsidiaries) of any Loan Party or any members of their respective
immediate families.

SECTION 3.20 Broker's and Transaction Fees. No Loan Party has any obligation to
any Person in respect of any finder's, broker's or investment banker's fees in
connection with the Transactions.

SECTION 3.21      Title; Real Property.

(a)  Each Loan  Party  has good and  marketable  title  to,  or valid  leasehold
     interests in, all real or immovable property and good title to all personal
     or movable  property,  in each case that is purported to be owned or leased
     by it,  including those reflected on the most recent  financial  statements
     delivered by the Loan  Parties or  purported  to have been  acquired by any
     Loan Party after the date of such financial  statements  (except as sold or
     otherwise disposed of since such date as permitted by this Agreement),  and
     none of such  properties  and assets is subject to any Lien,  except  Liens
     permitted  under Section  -------- 6.02. The Loan Parties have received all
     deeds, assignments,  waivers, consents,  non-disturbance and recognition or
     similar  agreements,  bills of sale and other  documents in respect of, and
     have duly effected all recordings,  filings and other actions  necessary to
     establish, protect and perfect, the Loan Parties' right, title and interest
     in and to all such property that is included in the Borrowing Base.
<PAGE>

(b)      Set forth on Schedule 3.21 is a complete and accurate list of all real
         or immovable property owned, leased, licensed or otherwise used in the
         operations of the business of each Loan Party and showing the current
         street address (including, where applicable, county, state and other
         relevant jurisdictions), record owner (if owned) or leasehold interest
         holder and, (if leased) lessee or other user thereof. Each of such
         leases and subleases is valid and enforceable in accordance with its
         terms (except as such enforceability may be subject to or limited by
         bankruptcy, insolvency, reorganization or other similar laws) and is in
         full force and effect, and to each Loan Party's knowledge, no default
         by any party to any material lease or material sublease exists.

(c)      Except as set forth on Schedule 3.21, as of the Effective Date, no Loan
         Party owns or holds, or is obligated under, subject to or a party to,
         any lease, option, right of first refusal or other right (contractual
         or otherwise) to purchase, acquire, sell, assign, dispose of or lease
         any Mortgaged Property or any material real or immovable property of
         such Loan Party.

(d)  No portion of any real or immovable property of any Loan Party has suffered
     any material  damage by fire or other casualty loss that has not heretofore
     been  completely  repaired  and  restored  to  substantially  its  original
     condition other than losses covered by insurance the proceeds of which are,
     or will be, applied  toward the  restoration of such property (if permitted
     hereunder) or which property is immaterial to the current  business of such
     Loan Party. As of the Effective Date, except as set forth on Schedule 3.21,
     no portion of any  Mortgaged  Property is located in a special flood hazard
     area as designated by -------------- any federal Governmental Authority. To
     the  knowledge  of each Loan  Party,  no portion  of any real or  immovable
     property  of any Loan Party  (not  including  any  Mortgaged  Property)  is
     located  in a  special  flood  hazard  area as  designated  by any  federal
     Governmental Authority, except where such location of any real or immovable
     property,  individually,  or  together  with any  other  real or  immovable
     property  of any Loan  Party,  in a special  flood  hazard  area  could not
     reasonably be expected to have a Material Adverse Effect.

(e)      All permits required to have been issued or appropriate to enable all
         real or immovable property of the Loan Parties to be lawfully occupied
         and used for all of the purposes for which they are currently occupied
         and used have been lawfully issued and are in full force and effect,
         other than those that, in the aggregate, would not have a Material
         Adverse Effect.

(f)      No Loan Party has received any written notice, or has any knowledge, of
         any pending or threatened condemnation proceeding affecting any real or
         immovable property of the Loan Parties or any part thereof, except
         those that, in the aggregate, would not have a Material Adverse Effect.

(g)      Each real or immovable property owned, leased or otherwise used in the
         operation of business of any Loan Party is in condition and repair
         consistent with prudent industry practice in the business of such Loan
         Party as currently conducted, suitable for its intended purposes and
         the operation of the business of the applicable Loan Party thereon, and
         there exist no material defects in the same.
<PAGE>

SECTION 3.22      Environment.  Except as set forth on Schedule 3.22:
                  -----------                          -------------

(a)      The operations of each Loan Party are and have been for the past four
         years in compliance with all applicable Environmental Laws, other than
         (i) any past non-compliance for which there are no remaining
         obligations or liabilities, and (ii) non-compliances that, in the
         aggregate, would not have a reasonable likelihood of resulting in a
         Material Adverse Effect.

(b)      No Lien in favor of any Governmental Authority securing, in whole or in
         part, Environmental Liabilities is attached to any property of any Loan
         Party and, to the knowledge of any Loan Party, no facts, circumstances
         or conditions exist that could reasonably be expected to result in any
         such Lien attaching to any such property.

(c)      No Loan Party has caused or suffered to occur a Release of Hazardous
         Materials on, at, in, under, above, to, or from any real or immovable
         property of any Loan Party and each such real or immovable property is
         free of contamination by any Hazardous Materials except for such
         Release or contamination that could not reasonably be expected to
         result, in the aggregate, in a Material Adverse Effect.

(d)      No Loan Party, or to its knowledge, any corporate predecessor, (i) is
         or has been engaged in operations, or (ii) knows of any facts,
         circumstances or conditions, including receipt of any information
         request or notice of potential responsibility under CERCLA or similar
         Environmental Laws, that, in the aggregate, would have a reasonable
         likelihood of resulting in Material Environmental Liabilities, except
         as could not reasonably be expected to result, in the aggregate, in a
         Material Adverse Effect.

(e)      Each Loan Party has made available to the Agent copies of the
         environmental reports, reviews and audits and other documents
         pertaining to actual or potential Environmental Liabilities set forth
         on Schedule 3.22.

SECTION 3.23 Deposit Accounts. Schedule 3.23 lists all banks and other financial
institutions at which any Loan Party or any of its Subsidiaries maintains
deposit or other accounts as of the Effective Date, including any Blocked
Accounts, and such Schedule correctly identifies the name of each depository,
the name in which the account is held, a description of the purpose of the
account and the complete account number therefor.

SECTION 3.24 Patriot Act. Each Loan Party is in compliance, in all material
respects, with the (a) the Trading with the Enemy Act, as amended, and each of
the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation
or executive order relating thereto, and (b) the Uniting And Strengthening
America By Providing Appropriate Tools Required To Intercept And Obstruct
Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Loans will
be used, directly or indirectly, for any payments to any governmental official
or employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.
<PAGE>

ARTICLE IV

                                   Conditions

SECTION 4.01 Effective Date. The obligations of the Lenders to make Loans and to
assist the Company in obtaining initial Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.03):

(a)      The Agent (or its counsel) shall have received from each party hereto
         either (i) a counterpart of this Agreement signed on behalf of such
         party or (ii) written evidence satisfactory to the Agent (which may
         include facsimile transmission of a signed signature page of this
         Agreement) that such party has signed a counterpart of this Agreement.

(b)      The Agent shall have received duly executed copies of the Loan
         Documents and such other certificates, documents, instruments and
         agreements as the Agent shall reasonably request in connection with the
         transactions contemplated by this Agreement and the other Loan
         Documents, including written opinions of the Loan Parties' counsel,
         addressed to the Agent, the Issuing Bank and the Lenders, each in form
         and substance reasonably satisfactory to the Agent.

(c)  The Agent shall have received evidence satisfactory to the Agent that, upon
     the filing and recording of  instruments  delivered by each  Borrower,  the
     Agent  for the  benefit  of the  Secured  Parties  shall  have a valid  and
     perfected first priority security interest in the Collateral (except as may
     be agreed to by the Agent),  including  copies of UCC and other  applicable
     personal   property  Lien  search  reports  and  all  effective   financing
     statements  listed therein,  in each case as may be reasonably  required by
     the Agent, all certificates,  instruments and other documents  representing
     all  Securities  (as  defined in the UCC)  being  pledged  pursuant  to the
     Collateral   Documents   and,  as  the  case  may  be,  updated  powers  or
     endorsements  executed in blank by a duly authorized  officer with power to
     transfer such Securities and all control agreements that, in the reasonable
     judgment of the Agent,  shall be  required  for  perfection  of any deposit
     account of any Loan Party, each duly executed by the Loan Party maintaining
     such  account  and  the  applicable  financial   institutions,   securities
     intermediaries and commodity intermediaries with respect thereto.

(d)      The Agent shall have received, in form and substance satisfactory to
         Agent, all releases, terminations and such other documents as Agent may
         request to evidence and effectuate the termination by the Existing
         Lender of its respective financing arrangements with Borrowers and the
         termination and release by it of any interest in and to any assets and
         properties of each Borrower, duly authorized, executed and delivered by
         it, including, but not limited to, (i) UCC termination statements for
         all UCC financing statements previously filed by it or its
         predecessors, as secured party and any Borrower, as debtor; and (ii)
         satisfactions and discharges of any mortgages, deeds of trust or deeds
         to secure debt by any Borrower or Guarantor in favor of it, in form
         acceptable for recording with the appropriate Governmental Authority.
<PAGE>

(e)      All legal (including tax implications) and regulatory matters,
         including, but not limited to compliance with applicable requirements
         of Regulations U, T and X of the Board of Governors of the Federal
         Reserve System, shall be satisfactory to the Agent and the Lenders.

(f)      After giving effect to all Borrowings to be made on the Effective Date
         and the issuance of any Letters of Credit on the Effective Date and
         payment of all fees and expenses due hereunder, and with all of the
         Loan Parties' indebtedness, liabilities, and obligations current, the
         Borrowers' Availability shall not be less than $3,500,000.

(g)      The Agent shall have received all fees and other amounts due and
         payable on or prior to the Effective Date, including, to the extent
         invoiced, reimbursement or payment of all out of pocket expenses
         required to be reimbursed or paid by the Borrowers hereunder.

(h)      The Borrowers shall have delivered to the Agent a notice setting forth
         the deposit accounts of the Borrowers (the "Funding Accounts") to which
         the Agent is authorized by the Borrowers to transfer the proceeds of
         any Borrowings requested or authorized pursuant to this Agreement.

(i)      The Agent shall be reasonably satisfied with the form of (i) the
         audited combined balance sheets of Parent and its Subsidiaries as of
         the Fiscal Year ending June 30, 2006, and the notes thereto and the
         related combined statements of operations, shareholders' equity and
         cash flows of Parent and its Subsidiaries for the years then ended and
         (ii) the unaudited combined balance sheets of Parent and its
         Subsidiaries as of the Fiscal Quarter Ending September 30, 2006 and the
         related combined statements of operations, shareholders' equity and
         cash flows of Parent and its Subsidiaries for the periods then ended.

(j)      The Agent or its Affiliates shall have received projections and shall
         have conducted a field examination of the Borrowers' assets,
         liabilities, cash management systems, books and records, all of which
         shall be reasonably satisfactory to the Agent in all respects.

(k)      The Borrowers shall have delivered to the Agent evidence of insurance
         with respect to the Loan Parties customary for similarly situated
         companies, including reasonably satisfactory endorsements naming the
         Agent as mortgagee, loss payee and additional insured on all such
         policies.

(l)      The Borrowers shall have delivered to the Agent a solvency certificate,
         in form and substance reasonably satisfactory to the Agent, together
         with such other evidence of solvency reasonably requested by the Agent,
         confirming the solvency of each Borrower and its Subsidiaries after
         giving effect to the Transactions.

(m)      The Agent shall have received, in form and substance satisfactory to
         the Agents, duly executed Blocked Account Agreements or similar
         agreements required by this Agreement.
<PAGE>

(n)      The Loan Parties shall have delivered such other documents as the
         Agent, the Issuing Bank, any Lender or their respective counsel may
         have reasonably requested.

SECTION 4.02 Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and the issuance of any Letter of Credit
(including any extension or amendment thereto), in each case is subject to the
satisfaction of the following conditions:

(a)      The representations and warranties of the Borrowers set forth in this
         Agreement shall be true and in all material respects, correct on and as
         of the date of such Borrowing.

(b)      At the time of and immediately after giving effect to such Borrowing,
         no Event of Default shall have occurred and be continuing.

(c)      In the case of any such Borrowing, the Agent shall have received a
         Borrowing Request pursuant to Section 2.04 and, in the case of any such
         Letter of Credit, the Agent and Issuing Bank shall have received all
         documentation pursuant to Section 2.08(e).

(d)      After giving effect to any Borrowing, Availability is not less than
         zero.

Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrowers on the date thereof as to the matters specified in Sections
4.02(a), (b) and (c).

ARTICLE V

                              Affirmative Covenants

         Until the Commitments have expired or been terminated, the principal of
and interest on each Loan and all other Obligations (other than contingent
indemnification obligations to the extent no claim giving rise thereto has been
asserted and Letter of Credit Obligations that have been fully cash
collateralized) shall have been paid in full, Borrowers jointly and severally
covenant and agree with the Agent and the Lenders that:

SECTION 5.01 Financial  Statements;  Borrowing Base and Other  Information.  The
     Borrowers    will    furnish    to    the    Agent,    for    itself    and
     ----------------------------------------------------------- Lenders:

(a)  within 90 days after the end of each  Fiscal Year of the Parent its audited
     consolidated   balance  sheet  and  related   statements   of   operations,
     stockholders'  equity  and cash  flows as of the end of and for such  year,
     together with unaudited  business segment  reporting to the extent required
     by GAAP and the Securities and Exchange  Commission,  setting forth in each
     case in  comparative  form the figures for the previous  Fiscal  Year,  all
     reported  on by  independent  public  accountants  of  recognized  national
     standing (without a "going concern" qualification, paragraph of emphasis or
     explanatory  note or any like  qualification,  explanation or exception and
     without any  qualification  or  exception as to the scope of such audit) to
     the effect that such consolidated  financial  statements  present fairly in
     all material respects the financial  condition and results of operations of
     the Parent and its  consolidated  Subsidiaries  on a consolidated  basis in
     accordance with GAAP  consistently  applied,  accompanied by any management
     letter prepared by said accountants;
<PAGE>

(b)  within 45 days after the end of each of the first three Fiscal  Quarters of
     the Parent other than the first Fiscal  Quarter after the  Effective  Date,
     and within 90 days after the end of the first Fiscal  Quarter of the Parent
     after the Effective Date, its consolidated and consolidating  balance sheet
     and related statements of operations,  stockholders'  equity and cash flows
     as of the end of and for such Fiscal  Quarter and the then elapsed  portion
     of the Fiscal Year,  together with unaudited  business segment reporting to
     the extent  required by GAAP and the  Securities  and Exchange  Commission,
     setting  forth  in each  case  in  comparative  form  the  figures  for the
     corresponding  period or periods of (or, in the case of the balance  sheet,
     as of the end of) the  previous  Fiscal Year,  all  certified by one of its
     Financial  Officers  as  presenting  fairly in all  material  respects  the
     financial  condition  and  results  of  operations  of the  Parent  and its
     consolidated  Subsidiaries on a consolidated  basis in accordance with GAAP
     consistently applied,  subject to normal year-end audit adjustments and the
     absence of footnotes;

(c)      within 30 days after the end of each fiscal month of the Parent, its
         unaudited consolidated and consolidating balance sheet and related
         statements of operations, stockholders' equity and cash flows as of the
         end of and for such fiscal month and the then elapsed portion of the
         Fiscal Year, setting forth in each case in comparative form the figures
         for the corresponding period or periods of (or, in the case of the
         balance sheet, as of the end of) the previous Fiscal Year, all
         certified by one of its Financial Officers as presenting fairly in all
         material respects the financial condition and results of operations of
         the Parent and its consolidated Subsidiaries on a consolidated basis in
         accordance with GAAP consistently applied, subject to normal year-end
         audit adjustments and the absence of footnotes;

(d)  concurrently  with any delivery of financial  statements  under clause (a),
     (b) or (c) above, a certificate  of a Financial  ---------- --- --- Officer
     of the  Administrative  Borrower in substantially the form of Exhibit C (i)
     certifying,  in the case of the financial  ---------  statements  delivered
     under clause (b) or (c), as presenting  fairly in all material respects the
     financial  condition and ---------- --- results of operations of the Parent
     and its  consolidated  Subsidiaries  on a consolidated  basis in accordance
     with  GAAP   consistently   applied,   subject  to  normal  year-end  audit
     adjustments  and the absence of footnotes,  (ii) certifying as to whether a
     Default has occurred and, if a Default has occurred, specifying the details
     thereof and any action taken or proposed to be taken with respect  thereto,
     (iii)  setting  forth  reasonably   detailed   calculations   demonstrating
     compliance  with Section 6.11, and (iv) stating  whether any change in GAAP
     or in the  application  thereof has occurred since the date of ------------
     the audited financial  statements referred to in Section 3.04 which affects
     the financial statements  accompanying such -------------  certificate and,
     if any such change has  occurred,  specifying  the effect of such change on
     the financial statements accompanying such certificate;

(e)      concurrently with any delivery of financial statements under clause (a)
         above, a certificate of the accounting firm that reported on such
         financial statements stating whether they obtained knowledge during the
         course of their examination of such financial statements of any Default
         (which certificate may be limited to the extent required by accounting
         rules or guidelines);
<PAGE>

(f)      as soon as available, but in any event not more than 45 days prior to
         the end of each Fiscal Year of the Parent, but not less than 15 days
         prior to the end of such Fiscal Year, a copy of the financial plan and
         forecast (including a projected consolidated and consolidating balance
         sheet, income statement, funds flow statement and schedule of projected
         Availability) of the Parent for each month of the immediately
         succeeding Fiscal Year of the Parent (the "Projections") in form
         reasonably satisfactory to the Agent;

(g)      as soon as available but in any event within two (2) Business Days of
         the end of each calendar week and at such other times as may be
         reasonably requested by the Agent, in each case as of the period then
         ended, a Borrowing Base Certificate and supporting information in
         connection therewith;

(h)      as soon as available but in any event within ten (10) Business Days of
         the end of each calendar month and at such other times as may be
         requested by the Agent, in each case as of the period then ended:

(i)      a detailed aging of the Borrowers' Accounts (1) including all invoices
         aged by invoice date and (2) reconciled to the Borrowing Base
         Certificate delivered as of such date prepared in a manner reasonably
         acceptable to the Agent, together with a summary specifying the name,
         address, and balance due for each Account Debtor;

(ii) a schedule detailing the Borrowers' Inventory,  in form satisfactory to the
     Agent, (1) by location (showing Inventory in transit, any Inventory located
     with a third party under any consignment,  bailee arrangement, or warehouse
     agreement), by class (raw material, work-in-process and finished goods), by
     product type, and by volume on hand, which Inventory shall be valued at the
     lower of cost  (determined  on a first-in,  first-out  basis) or market and
     adjusted  for  Reserves  as the  Agent  have  previously  indicated  to the
     Borrowers  are  deemed by the Agent to be  appropriate  in their  Permitted
     Discretion,  (2)  including a report of any  variances or other  results of
     Inventory  counts  performed  by the  Borrowers  since  the last  Inventory
     schedule  (including  information  regarding  sales  or  other  reductions,
     additions,  returns,  credits issued by Borrowers and complaints and claims
     made against the  Borrowers),  and (3)  reconciled  to the  Borrowing  Base
     Certificate delivered as of such date;

(iii)    a worksheet of calculations prepared by the Borrowers to determine
         Eligible Accounts and Eligible Inventory, such worksheets detailing the
         Accounts and Inventory excluded from Eligible Accounts and Eligible
         Inventory and the reason for such exclusion;
<PAGE>

(iv)     a reconciliation of the Borrowers' Accounts and Inventory between the
         amounts shown in the Borrowers' general ledger and financial statements
         and the reports delivered pursuant to clauses (i) and (ii) above;

(v)      a reconciliation of the loan balance per the Borrowers' general ledger
         to the loan balance under this Agreement; and

(vi)     a schedule detailing the obligations of each Borrower and each of the
         Borrowers' Subsidiaries in respect of any Swap Agreement (for purposes
         of this subsection, the "obligations" of any Borrower or any Subsidiary
         in respect of any Swap Agreement at any time shall be the maximum
         aggregate amount (giving effect to any netting agreements) that such
         Borrower or such Subsidiary would be required to pay if such Swap
         Agreement were terminated at such time);

(i)      as soon as available but in any event within ten days of the end of
         each calendar month and at such other times as may be requested by the
         Agent, as of the month then ended, a schedule and aging of the
         Borrowers' accounts payable;

(j)      promptly upon the request of the Agent:

(i)      copies of invoices in connection with the invoices issued by the
         Borrowers in connection with any Accounts, credit memos, shipping and
         delivery documents, and other information related thereto;

(ii)     copies of purchase orders, invoices, and shipping and delivery
         documents in connection with any Inventory or Equipment purchased by
         any Loan Party; and

(iii)    a schedule detailing the balance of all intercompany accounts of the
         Loan Parties;

(k)      as soon as available but in any event within three days of the end of
         each calendar week and at such other times as may be requested by the
         Agent, as of the period then ended, the Borrowers' sales journal, and
         debit memo/credit memo journal;

(l)      as soon as possible and in any event within twenty days of filing
         thereof, copies of all tax returns filed by any Loan Party with the
         Internal Revenue Service;

(m)      as soon as possible and in any event within two-hundred and seventy
         days after the close of the Fiscal Year of the Parent, a statement of
         the unfunded liabilities of each Plan, certified as correct by an
         actuary enrolled under ERISA;

(n)      within thirty days of the first Business Day of each September, a
         certificate of good standing for each Loan Party from the appropriate
         governmental officer in its jurisdiction of incorporation, formation,
         or organization and a customer list for the Loan Parties and their
         Subsidiaries, with the name, mailing address and phone number of each
         customer;
<PAGE>

(o)      promptly after the same become publicly available, copies of all
         periodic and other reports, proxy statements and other materials filed
         by any Borrower or any Subsidiary with the Securities and Exchange
         Commission, or any Governmental Authority succeeding to any or all of
         the functions of said Commission, or with any national securities
         exchange, or distributed by any Borrower to its shareholders generally,
         as the case may be; and

(p)      promptly following any request therefor, such other information
         regarding the operations, business affairs and financial condition of
         any Borrower or any Subsidiary, or compliance with the terms of this
         Agreement as the Agent or any Lender may reasonably request.

SECTION 5.02 Notices of Material Events. The Borrowers will furnish to the Agent
and each Lender prompt written notice of the following:

(a)      the occurrence of any Default;

(b)      the assertion by the holder of any Indebtedness of any Loan Party in
         excess of $250,000 that any default exists with respect thereto or that
         any Loan Party is not in compliance therewith;

(c)      receipt of any notice of any governmental investigation or any
         litigation commenced or threatened against any Loan Party that (i)
         seeks damages in excess of $250,000, (ii) seeks injunctive relief,
         (iii) is asserted or instituted against any Plan, its fiduciaries or
         its assets, (iv) alleges criminal misconduct by any Loan Party, (v)
         alleges the violation of any law regarding, or seeks remedies in
         connection with, any Environmental Laws; or (vi) involves any product
         recall;

(d)      any Lien (other than Permitted Encumbrances) securing a claim or claims
         made or asserted against any of the Collateral;

(e)  commencement of any  proceedings  contesting any tax, fee,  assessment,  or
     other governmental charge in excess of $250,000;

(f)      the opening of any new deposit account by any Loan Party with any bank
         or other financial institution;

(g)  any  loss,  damage,  or  destruction  to the  Collateral  in the  amount of
     $250,000 or more, whether or not covered by insurance;

(h)      any and all default notices sent or received under or with respect to
         (i) any leased location where more than $100,000 of Collateral is
         located or (ii) public warehouse where more than $100,000 of Collateral
         is located (which shall be delivered within two Business Days after
         receipt thereof);

(i)      all material amendments to any material real estate lease, together
         with a copy of each such amendment;
<PAGE>

(j)      immediately after becoming aware of any pending or threatened strike,
         work stoppage, unfair labor practice claim, or other labor dispute
         affecting any Borrower or any of their Subsidiaries in a manner which
         could reasonably be expected to have a Material Adverse Effect;

(k)      the fact that a Loan Party has entered into a Swap Agreement or an
         amendment to a Swap Agreement, together with copies (unless a Lender is
         a party thereto) of all agreements evidencing such Swap Agreement or
         amendments thereto (which shall be delivered within two Business Days);

(l)      the occurrence of any ERISA Event or underfunding of any Non-U.S. Plan
         that, alone or together with any other ERISA Events that have occurred,
         could reasonably be expected to result in a liability for the Loan
         Parties and their Subsidiaries greater than $250,000; and

(m)      (i) (A) the occurrence of unpermitted Releases of Hazardous Material of
         which any Loan Party is aware, (B) the receipt by any Loan Party of any
         notice of violation of or potential liability or similar notice under,
         or the existence of any condition that could reasonably be expected to
         result in violations of or liabilities under, any Environmental Law or
         (C) the commencement of, or any material change to, any action,
         investigation, suit, proceeding, claim, demand, dispute alleging a
         violation of or liability under any Environmental Law, that, for each
         of clauses (A), (B) and (C) (and, in the case of clause (C), if
         adversely determined), in the aggregate for each such clause, could
         reasonably be expected to result in Environmental Liabilities in excess
         of $250,000;

(i)      the receipt by any Loan Party of notification (A) that any property of
         any Loan Party is subject to any Lien in favor of any Governmental
         Authority securing, in whole or in part, Environmental Liabilities in
         excess of $250,000 or (B) that any Governmental Authority is seeking
         such a Lien; and

(ii)     any acquisition of Securities (as defined in the UCC), other real or
         immovable property or any other property, any proposed leasing of
         property or any other action by any Loan Party, in each case the
         consequences of which, in the aggregate, have a reasonable likelihood
         of resulting in Environmental Liabilities in excess of $250,000; and

(n)      any other development that results in, or could reasonably be expected
         to result in, a Material Adverse Effect.

(o)      Each notice delivered under this Section 5.02 shall be accompanied by a
         statement of a Financial Officer or other executive officer of the
         Administrative Borrower setting forth the details of the event or
         development requiring such notice and any action taken or proposed to
         be taken with respect thereto.

SECTION 5.03 Existence; Conduct of Business. Each Borrower will, and will cause
each other Loan Party and its Subsidiaries to, (a) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal

<PAGE>

existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business, and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted, provided,
that, the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03 and (b) carry on and conduct its
business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted.

SECTION 5.04 Payment of Obligations. Each Borrower will, and will cause each
other Loan Party and its Subsidiaries to, pay or discharge when due all Material
Indebtedness and all other material liabilities and obligations, including
taxes, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Loan Party and its Subsidiaries
have set aside on their books adequate reserves with respect thereto in
accordance with GAAP, (c) such liabilities would not result in aggregate
liabilities in excess of $100,000 and (d) none of the Collateral becomes subject
to forfeiture or loss as a result of the contest.

SECTION 5.05 Maintenance of Properties and Intellectual Property Rights. Each
Borrower will, and will cause each other Loan Party and its Subsidiaries to, (a)
keep and maintain all property material to the conduct of its business in good
working order and condition sufficient and advisable for the ordinary operations
of such Loan Party, and (b) obtain and maintain in effect at all times all
material franchises, governmental authorizations, intellectual property rights,
licenses and permits, which are necessary for it to own its property or conduct
its business as conducted on the date of this Agreement.

SECTION 5.06 Books and Records; Inspection Rights. Each Borrower will, and will
cause each other Loan Party and its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. Each Borrower will, and
will cause each other Loan Party and its Subsidiaries to, permit any
representatives designated by the Agent (no more than twice during any calendar
year, other than during the existence and continuation of an Event of Default)
or any Lender (only upon the existence and continuation of an Event of Default),
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times and as often as reasonably requested. The Borrowers
acknowledge, and upon the request of the Agent will cause each other Loan Party
to acknowledge, that the Agent, after exercising its right of inspection, may
prepare and distribute to the Lenders certain Reports pertaining to the Loan
Parties' assets for internal use by the Agent and the Lenders. After the
occurrence and during the continuance of any Event of Default, the Borrower
will, and will cause each other Loan Party to, provide the Agent and each Lender
with access to its suppliers.

SECTION 5.07 Compliance with Laws. Each Borrower will, and will cause each other
Loan Party and its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

<PAGE>


SECTION 5.08 Use of Proceeds and Letters of Credit. The proceeds of the Loans
will be used only (i) to pay fees and expenses in connection with the
Transactions, (ii) for working capital needs and general corporate purposes of
the Borrowers and the other Loan Parties and (iii) to effectuate the termination
of the Borrowers' financing arrangements with the Existing Lender and (iv) to
finance Acquisitions permitted by Section 6.04. No part of the proceeds of any
Loan will be used, whether directly or indirectly, (i) for any purpose that
entails a violation of any of the Regulations of the Board, including
Regulations T, U and X, or (ii) to make any Acquisition, except as expressly
permitted pursuant to the terms hereof. Letters of Credit will be issued only to
support the working capital needs and general corporate purposes of the
Borrowers and the other Loan Parties.

SECTION 5.09 Insurance. Each Borrower will, and will cause each other Loan Party
and each Subsidiary of a Loan Party to, maintain with financially sound and
reputable carriers, insurance against: (i) loss or damage by fire and loss in
transit; (ii) theft, burglary, pilferage, larceny, embezzlement, and other
criminal activities; (iii) business interruption; (iv) general liability; and
(v) and such other hazards, as is customary in the business of such Person. All
such insurance shall be in amounts, cover such assets and be under policies
acceptable to the Agent in their Permitted Discretion. All policies covering the
casualty of the Collateral are to be made payable to the Agent for the benefit
of the Secured Parties, as its interests may appear, in case of loss, under a
standard non-contributory "lender" or "secured party" clause and are to contain
such other provisions as the Agent may reasonably require to fully protect the
Secured Parties' interest in the Collateral and to any payments to be made under
such policies. All certificates of insurance are to be delivered to the Agent,
with the loss payable and additional insured endorsement in favor of the Agent,
and shall provide for not less than 30 days' prior written notice to the Agent
of the exercise of any right of cancellation and that any loss payable
thereunder shall be payable notwithstanding any act or negligence of any Loan
Party or any Secured Party which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment. The Borrowers will not,
and will not permit any other Loan Party and its Subsidiaries to, use or permit
any property to be used in any manner which would be reasonably likely to render
inapplicable any insurance coverage. The Borrowers will cause any insurance or
condemnation proceeds received by any Loan Party in excess of $500,000 to be
immediately forwarded to the Agent and the Agent will apply any such proceeds to
the reduction of the Obligations in accordance with Section 2.13(b)(iv) and
Section 2.13(c). Original policies or certificates thereof reasonably
satisfactory to the Agent evidencing such insurance shall be delivered to the
Agent at least 30 days prior to the expiration of the existing or preceding
policies.

SECTION 5.10 Appraisals. At any time that the Agent requests, each Borrower
will, and will cause each other Loan Party to, at the sole expense of the Loan
Parties, provide the Agent with appraisals or updates thereof of their Inventory
from an appraiser selected and engaged by the Agent, and prepared on a basis
satisfactory to the Agent, such appraisals and updates to include, without
limitation, information required by applicable law and regulations; provided,
however, if no Event of Default shall have occurred and be continuing, only one
(1) such appraisal or update per calendar year shall be conducted; provided,
further, that the Agent may require appraisals or updates more frequently at its
own expense.
<PAGE>



SECTION 5.11      Additional Collateral; Further Assurances.

(a)      The Borrowers will, unless the Required Lenders otherwise consent,
         cause each Subsidiary of any Loan Party (excluding any Non-U.S.
         Subsidiary) formed or acquired after the date of this Agreement in
         accordance with the terms of this Agreement to become a Borrower by
         executing this Agreement through a joinder agreement in form and
         substance reasonably satisfactory to the Agent (the "Joinder
         Agreement"). Upon execution and delivery thereof, each such Person (i)
         shall automatically become a Loan Party hereunder and thereupon shall
         have all of the rights, benefits, duties, and obligations in such
         capacity under the Loan Documents, and (ii) will grant Liens to the
         Agent, for the benefit of the Agent and the Secured Parties, in any
         property of such Loan Party which constitutes Collateral.

(b)  Each Borrower  will, and will cause each other Loan Party to cause (i) 100%
     of the issued and  outstanding  Equity  Interests  of each of its  domestic
     Subsidiaries to be subject at all times to a first priority, perfected Lien
     (subject to Permitted  Encumbrances)  in favor of the Agent pursuant to the
     terms and conditions of the Loan  Documents or other security  documents as
     the  Agent  shall  reasonably  request,  and  (ii)  65% of the  issued  and
     outstanding Equity Interests entitled to vote (within the meaning of Treas.
     Reg. Section  1.956-2(c)(2))  and 100% of the issued and outstanding Equity
     Interests not entitled to vote (within the meaning of Treas.  Reg.  Section
     1.956-2(c)(2)) in each Non-U.S.  Subsidiary  directly owned by any Borrower
     or any Subsidiary to be subject at all times to a first priority, perfected
     Lien (subject to Permitted  Encumbrances) in favor of the Agent pursuant to
     the terms and conditions of the Loan Documents or other security  documents
     as the Agent shall reasonably request; provided, that, if, as a result of a
     change  in  applicable  law after  the date  hereof,  a pledge of a greater
     percentage than 65% of the issued and outstanding Equity Interests entitled
     to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) could not
     reasonably be expected to cause (1) undistributed earnings of such Non-U.S.
     Subsidiary (as determined for federal income tax purposes) to be treated as
     a deemed  dividend to such  Non-U.S.  Subsidiary's  domestic  parent or (2)
     other material adverse tax consequences, then the Borrowers will take steps
     to  cause  such  greater  percentage  to be  subject  to a first  priority,
     perfected Lien (subject to Permitted Encumbrances) in favor of the Agent.

(c)      Without limiting the foregoing, each Borrower will, and will cause each
         other Loan Party and each Subsidiary of a Loan Party which is required
         to become a Loan Party pursuant to the terms of this Agreement to,
         execute and deliver, or cause to be executed and delivered, to the
         Agent such documents and agreements, and will take or cause to be taken
         such actions as the Agent may, from time to time, reasonably request to
         carry out the terms and conditions of this Agreement and the other Loan
         Documents, including but not limited to all items of the type required
         by Section 4.01 (as applicable).

(d)      To the extent permitted hereunder, if any Loan Party proposes to
         acquire a fee ownership interest in real property after the date of
         this Agreement, the Borrower will, and will cause each other Loan Party
         to, first provide to the Agent a mortgage or deed of trust granting the
         Agent a first priority Lien on such real property, together with
         environmental audits, mortgage title insurance commitment, real
         property survey, local counsel opinion(s), and, if required by the
         Agent, supplemental casualty insurance and flood insurance, and such
         other documents, instruments or agreements reasonably requested by the
         Agent, in each case, in form and substance reasonably satisfactory to
         the Agent.
<PAGE>

SECTION 5.12      Cash Management.

(a)      Each Borrower shall (i) instruct each depository institution for a
         deposit account to cause all amounts on deposit and available at the
         close of each Business Day in such deposit account to be swept to one
         of the Borrowers' concentration accounts no less frequently than on a
         daily basis, such instructions to be irrevocable unless otherwise
         agreed to by the Agent, and (ii) enter into Blocked Account Agreements
         with respect to all deposit accounts. All amounts received by a
         Borrower or any of its Subsidiaries and any Clearing Bank in respect of
         any deposit account, in addition to all other cash received from any
         other source, shall upon receipt be deposited into a deposit account.
         Each Loan Party agrees that it will not cause proceeds of such deposit
         accounts to be otherwise redirected.

(b)      Each Blocked Account Agreement shall require wire transfers no less
         frequently than once per Business Day (unless the Commitments have been
         terminated and the Obligations hereunder and under the other Loan
         Documents have been paid in full), of all available cash balances and
         cash receipts, including the then contents or then entire ledger
         balance of each Blocked Account net of such minimum balance (not to
         exceed $10,000 per account), if any, required by the bank at which such
         Blocked Account is maintained to an account maintained with the Agent
         (the "Collection Account"). Each Loan Party agrees that it will not
         cause proceeds of any Blocked Account to be otherwise redirected.

(c)      All collected amounts received in the Collection Account shall be
         distributed and applied on a daily basis in accordance with Section
         2.12(b).

(d)      If any cash or cash equivalents owned by any Loan Party (other than (i)
         de minimis cash or cash equivalents from time to time inadvertently
         misapplied by any Loan Party, (ii) funds in any deposit account the
         amounts in which are solely swept into any Blocked Account and (iii)
         any funds which are held by any Borrower and any of their respective
         Subsidiaries on behalf of any customer in the ordinary course of
         business) are deposited to any account, or held or invested in any
         manner, otherwise than in a Blocked Account subject to a Blocked
         Account Agreement, the Agent shall be entitled to require the
         applicable Loan Party to close such account and have all funds therein
         transferred to a Blocked Account, and to cause all future deposits to
         be made to a Blocked Account.

(e)  The  Collection  Account  shall at all times be under the sole dominion and
     control of the Agent. Each Loan Party hereby  acknowledges and agrees that,
     except to the extent otherwise provided in the Security Agreements (i) such
     Loan Party has no right of withdrawal from the Collection Account, (ii) the
     funds on deposit in the  Collection  Account shall at all times continue to
     be  collateral  security  for all of the  obligations  of the Loan  Parties
     hereunder  and  under  the  other  Loan  Documents,  and (iii) the funds on
     deposit in the  Collection  Account  shall be applied as  provided  in this
     Agreement.  In the  event  that,  notwithstanding  the  provisions  of this

<PAGE>

     Section  5.12,  any Loan Party  receives  or  otherwise  has  dominion  and
     -------------  control  of  any  proceeds  or  collections  required  to be
     transferred to the Collection Account,  such proceeds and collections shall
     be held in trust by such Loan Party for the Agent,  shall not be commingled
     with any of such Loan  Party's  other funds or  deposited in any account of
     such Loan Party and shall promptly be deposited into the Collection Account
     or dealt with in such other fashion as such Loan Party may be instructed by
     the Agent.

SECTION 5.13 Post-Closing Obligations. The Loan Parties shall comply with each
requirement set forth in the Post-Closing Letter on or before the date referred
to in the Post-Closing Letter with respect to such requirement.

ARTICLE VI

                               Negative Covenants

         Until the Commitments have expired or been terminated, the principal of
and interest on each Loan and all other Obligations (other than contingent
indemnification obligations to the extent no claim giving rise thereto has been
asserted and Letter of Credit Obligations that have been fully cash
collateralized) shall have been paid in full, Borrowers jointly and severally
covenant and agree with the Agent and the Lenders that:

SECTION 6.01 Indebtedness. The Borrowers will not, and will not permit any other
Loan Party or its Subsidiaries to, create, incur or suffer to exist any
Indebtedness, except:

(a)      the Obligations;

(b)      Indebtedness existing on the date hereof and set forth on Schedule 6.01
         and extensions, renewals and replacements of any such Indebtedness in
         accordance with clause (f) hereof;

(c)      Indebtedness of any Loan Party to any other Loan Party or a Non-U.S.
         Subsidiary, provided, that:

(i)      the applicable Loan Parties and Non-U.S. Subsidiaries shall have
         executed on the Effective Date a demand note to evidence any such
         intercompany Indebtedness owing at any time by any applicable Loan
         Party to another applicable Loan Party or Non-U.S. Subsidiary, which
         demand notes shall be in form and substance reasonably satisfactory to
         the Agent and shall be pledged and delivered to the Agent pursuant to
         the Security Agreement as additional collateral security for the
         Obligations;

(ii)     each Loan Party shall record all intercompany transactions on its books
         and records in a manner reasonably satisfactory to the Agent; and
<PAGE>

(iii)    the obligations of the Loan Parties under any such Intercompany Notes
         shall be subordinated to the Obligations hereunder in accordance with
         Section 9.20.

(d)      Guarantees by a Loan Party of Indebtedness of any other Loan Party if
         the primary obligation is expressly permitted elsewhere in this Section
         6.01;

(e)      Indebtedness of any Loan Party incurred to finance the acquisition,
         construction or improvement of any fixed or capital assets, including
         Capital Lease Obligations and any Indebtedness assumed in connection
         with the acquisition of any such assets or secured by a Lien on any
         such assets prior to the acquisition thereof, and extensions, renewals
         and replacements of any such Indebtedness in accordance with clause (f)
         hereof; provided, that, (i) such Indebtedness is incurred prior to or
         within 90 days after such acquisition or the completion of such
         construction or improvement, and (ii) the aggregate principal amount of
         Indebtedness permitted by this clause (e) shall not exceed $500,000 at
         any time outstanding;

(f)  Indebtedness which represents an extension,  refinancing, or renewal of any
     of the Indebtedness described in clauses (b), ----------- (c), (e), (j) and
     (l) hereof;  provided,  that, (i) the principal  amount or interest rate of
     such  Indebtedness  is not --- --- ---  increased,  (ii) any Liens securing
     such  Indebtedness are not extended to any additional  property of any Loan
     Party,  (iii) such  extension,  refinancing or renewal does not result in a
     shortening  of  the  average  weighted  maturity  of  the  Indebtedness  so
     extended,  refinanced  or  renewed,  (iv) the terms of any such  extension,
     refinancing,  or renewal are not less  favorable to the obligor  thereunder
     than the original terms of such  Indebtedness  and (v) if the  Indebtedness
     that is  refinanced,  renewed,  or extended  was  subordinated  in right of
     payment  to  the  Obligations,   then  the  terms  and  conditions  of  the
     refinancing,  renewal, or extension Indebtedness must include subordination
     terms and  conditions  that are at least as  favorable to the Agent and the
     Lenders  as those  that were  applicable  to the  refinanced,  renewed,  or
     extended Indebtedness;

(g)      Indebtedness consisting of reimbursement or indemnification obligations
         incurred in the ordinary course of business in favor of any Person
         providing worker's compensation, health, disability or other employee
         benefits or property, casualty or liability insurance to any of the
         Loan Parties (including obligations in respect of letters of credit
         obtained in the ordinary course of business for the benefit of any such
         Person);

(h)      Indebtedness of any Loan Party in respect of performance bonds, bid
         bonds, appeal bonds, surety bonds, self-insurance obligations and
         similar obligations and trade-related letters of credit, in each case
         provided in the ordinary course of business, including those to secure
         health, safety, and environmental obligations;

(i)      Indebtedness in respect of deposits or advances received in the
         ordinary course of business in connection with the sale of goods and
         services;

(j)  unsecured  Indebtedness that is subordinated to the Obligations in a manner
     satisfactory  to the Agent and the proceeds of which are used  concurrently

<PAGE>

     to finance the  consideration  for Permitted  Acquisitions or the making of
     Restricted Payments permitted under Section 6.06;  provided,  that, (i) the
     maturity  date  of  such  Indebtedness  is no  sooner  than  twelve  months
     ------------  -------- ---- after the Maturity Date, (ii) the terms of such
     Indebtedness  do not require any  scheduled  amortization,  sinking fund or
     other  payments  (other than scheduled  payments of interest)  prior to the
     maturity date of such Indebtedness,  (iii) the Fixed Charge Coverage Ratio,
     as of the last day of the Fiscal  Quarter  ended  immediately  prior to the
     date of incurrence of such  Indebtedness  and after giving pro forma effect
     to the  incurrence of such  Indebtedness,  is at least 1.5:1.0 and (iv) the
     Borrowers' Average 20-Day  Availability is not less than $5,000,000 and the
     Borrowers'   Availability  as  of  the  date  of  the  incurrence  of  such
     Indebtedness is not less than $5,000,000;

(k)      Swap Obligations to the extent permitted under Section 6.05; and

(l)      other unsecured Indebtedness in an aggregate principal amount not
         exceeding $500,000 at any time outstanding.

SECTION 6.02 Liens. The Borrowers will not, and will not permit any other Loan
Party or its Subsidiaries to, create, incur, assume or permit to exist any Lien
on any property or asset now owned or hereafter acquired by it, or assign or
sell any income or revenues (including accounts receivable) or rights in respect
of any thereof, except:

(a)      Permitted Encumbrances;

(b)      the filing of financing statements or the equivalent thereof in any
         applicable jurisdiction solely as a precautionary measure in connection
         with operating leases or consignment of goods;

(c)      leases or subleases of assets or properties of a Loan Party, in each
         case entered into in the ordinary course of such Loan Party's business
         so long as such leases do not, individually or in the aggregate (i)
         interfere in any material respect with the ordinary conduct or business
         of such Loan Party and (ii) materially impair the use or the value of
         the property or assets subject thereto;

(d)      Liens on assets acquired in a Permitted Acquisition after the Effective
         Date existing at the time of acquisition thereof by a Loan Party;
         provided, that, such Liens were not incurred in connection with, or in
         contemplation of, such acquisition and do not extend to any assets of
         such Loan Party other than the specific assets so acquired;

(e)      any Lien on any property or asset of any Loan Party or its Subsidiaries
         existing on the date hereof and set forth in Schedule 6.02; provided,
         that, (i) such Lien shall not apply to any other property or asset of
         such Loan Party, and (ii) such Lien shall secure only those obligations
         which it secures on the date hereof and extensions, renewals and
         replacements thereof that do not increase the outstanding principal
         amount thereof;

(f)      Liens on fixed or capital assets acquired, constructed or improved by a
         Loan Party or its Subsidiaries; provided, that, (i) such security
         interests secure Indebtedness permitted by clause (e) of Section 6.01,

<PAGE>

         (ii) such security interests and the Indebtedness secured thereby are
         incurred prior to or within 90 days after such acquisition or the
         completion of such construction or improvement, (iii) the Indebtedness
         secured thereby does not exceed the cost of acquiring, constructing or
         improving such fixed or capital assets, and (iv) such security
         interests shall not apply to any other property or assets of such Loan
         Party or its Subsidiaries; and

(g)      other Liens not of a type set forth in clauses (a) through (f) above
         incurred in the ordinary course of business of any Loan Party that do
         not in the aggregate exceed $250,000; provided, that, no such Lien
         shall secure Indebtedness for borrowed money or any Swap Obligation.

Notwithstanding the foregoing, none of the Liens permitted pursuant to this
Section 6.02 (other than any Lien junior to the Lien of the Agent described in
clause (a) (but only to the extent not yet due), (b) (to the extent securing
obligations that are not overdue), (c) or (e) in the definition of Permitted
Encumbrances) may at any time attach to any Loan Party's (1) Accounts and (2)
Inventory.

SECTION 6.03      Fundamental Changes; Asset Sales

(a)  The  Borrowers  will not,  and will not  permit any other Loan Party or its
     Subsidiaries to, merge into or consolidate with any other Person, or permit
     any other  Person to merge  into or  consolidate  with it or  liquidate  or
     dissolve,  or amend or terminate  its articles of  incorporation,  charter,
     certificate  of formation,  by-laws,  operating,  management or partnership
     agreement  or other  organizational  document,  or change its Fiscal  Year,
     except that,  if at the time thereof and  immediately  after giving  effect
     thereto no Event of Default shall have  occurred and be continuing  (i) any
     Borrower  may merge into any other  Borrower and (ii) any Loan Party (other
     than any  Borrower)  may merge into (1) any  Borrower in a  transaction  in
     which the Borrower is the surviving corporation or (2) any other Loan Party
     (other than any  Borrower);  provided,  that, any such -------- ---- merger
     involving a Person that is not a wholly owned Subsidiary  immediately prior
     to such merger  shall not be  permitted  unless also  permitted  by Section
     6.04. ------------

(b)  The Borrowers  will not, and will not permit any other Loan Party to, sell,
     transfer,  lease or otherwise dispose of (in one transaction or in a series
     of  transactions)  any of its assets,  or all or  substantially  all of the
     stock  of any of its  Subsidiaries  (in each  case,  whether  now  owned or
     hereafter  acquired),  except that, so long as no Event of Default  exists,
     any Loan Party may sell,  transfer,  lease or otherwise  dispose of (1) its
     assets to any Loan  Party,  if at the time  thereof and  immediately  after
     giving  effect  thereto no Event of  Default  shall  have  occurred  and be
     continuing, (2) Inventory in the ordinary course of business, (3) equipment
     that is obsolete or no longer useful in its business;  provided,  that, (x)
     the  Administrative  Borrower  shall provide  prompt  written notice to the
     Agent of any  equipment  that is sold,  transferred,  leased  or  otherwise
     disposed of and (y) such Loan Party complies with the mandatory  prepayment
     provisions in Section 2.13, and (4) ------------ other assets having a book
     value not exceeding  $250,000 in the aggregate in any Fiscal Year.  The Net
     Cash Proceeds of any sale or disposition permitted pursuant to this Section
     6.03(b)   (other   than   pursuant  to  clause   (i)(2)  of  this   Section
     ---------------  -------------- -------- 6.03(b)) shall be delivered to the
     Agent  as  required  by  Sections  2.13(b)  and  (c)  and  applied  to  the
     Obligations as set forth ----------------- --- therein.

<PAGE>


(c)      The Borrowers will not, and will not permit any other Loan Party or its
         Subsidiaries to, engage in any business other than businesses of the
         type conducted by the Borrowers and their Subsidiaries on the date of
         execution of this Agreement and businesses reasonably related thereto.

SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions. The
Borrowers will not, and will not permit any other Loan Party or its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger or amalgamation
with any Person that was not a Loan Party and a wholly owned Subsidiary prior to
such merger or amalgamation) any capital stock, evidences of indebtedness or
other securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit (whether through purchase of assets, merger,
amalgamation or otherwise), except:

(a)      Permitted Investments, subject to control agreements in favor of the
         Agent for the benefit of the Secured Parties or otherwise subject to a
         perfected security interest in favor of the Agent for the benefit of
         the Secured Parties;

(b)      investments by any Loan Party existing on the date hereof in the Equity
         Interests of its Subsidiaries;

(c)      loans or advances made by a Loan Party to any other Loan Party
         permitted by Section 6.01;

(d)      investments in a wholly-owned Non-U.S. Subsidiary that is not a Loan
         Party by any Borrower, provided, that, the aggregate amount of all
         investments made under this clause (d) shall not exceed $250,000;

(e)      Guarantees constituting Indebtedness permitted by Section 6.01;

(f)      other investments in existence on the date of this Agreement and
         described in Schedule 6.04;

(g)      loans or advances made by a Loan Party to its employees on an
         arms-length basis in the ordinary course of business consistent with
         past practices for travel and entertainment expenses, relocation costs
         and similar purposes up to a maximum of $50,000 to any employee and up
         to a maximum of $100,000 in the aggregate at any one time outstanding;

(h)      subject to Section 4.3(c) of the Collateral Agreement, notes payable,
         or stock or other securities issued by Account Debtors to a Loan Party
         pursuant to negotiated agreements with respect to settlement of such
         Account Debtor's Accounts in the ordinary course of business,
         consistent with past practices;
<PAGE>

(i)  investments incurred in order to consummate  Acquisitions  provided,  that,
     (i) the  Fixed  Charge  Coverage  Ratio,  as of the last day of the  Fiscal
     Quarter  ended  immediately  prior  to the  date  of  consummation  of such
     Acquisition  and after giving pro forma effect to such  Acquisition,  is at
     least 1.5:1.0,  (ii) the Borrowers' Average 20-Day Availability is not less
     than $5,000,000, and after giving effect to such Acquisition, the Borrowers
     shall have a minimum pro forma  Availability as of the date of consummation
     of such  Acquisition  (after  giving effect to the funding of all Revolving
     Loans and the  issuance  of all Letters of Credit to be funded or issued as
     of such date) of not less than  $5,000,000,  (iii) the Borrowers shall have
     obtained  the  prior,   effective  written  consent  or  approval  to  such
     Acquisition  of the board of directors or equivalent  governing body of the
     Person being acquired or whose assets are being  acquired,  (iv) the Person
     or  business  which is the  subject of such  Acquisition  is in the same or
     similar  line  of  business  as the  Borrowers,  (v) all  governmental  and
     material   third-party   approvals   necessary  in  connection   with  such
     Acquisition shall have been obtained and be in full force and effect,  (vi)
     if acquiring a Person,  such Person becomes a wholly owned  Subsidiary of a
     Borrower and a Loan Party,  (vii) the Agent shall be  reasonably  satisfied
     with  the form and  substance  of the  purchase  or  acquisition  agreement
     executed in connection  with such  Acquisition  and with all other material
     agreements,  instruments  and documents  implementing  such  Acquisition or
     executed in connection  therewith and such Acquisition shall be consummated
     in  accordance  with the terms of such  documents  and in  compliance  with
     applicable  law and  regulatory  approvals,  (viii) no  Default or Event of
     Default shall have occurred and be continuing or would result therefrom and
     all  representations  and warranties  contained in this Agreement  shall be
     true and correct in all material  respects on the date of the  consummation
     of such Acquisition, and (ix) on or before the date of consummation of such
     Acquisition,  the Agent shall have received (A) all  documents  required by
     the  provisions  of Section  5.11 with  respect to any Person  purchased or
     formed in  connection  with such  Acquisition  and which will  ------------
     become a Subsidiary  of a Borrower  and (B) if  requested  by the Agent,  a
     certificate  from the  Administrative  Borrower  executed by an  Authorized
     Officer  of the  Administrative  Borrower  certifying  to the Agent and the
     Lenders as to the  matters set forth in the  foregoing  clauses (i) through
     (viii) (each such acquisition,  a "Permitted Acquisition" and collectively,
     "Permitted ----------- ------ Acquisitions");

(j)      Swap Agreements otherwise permitted under Section 6.05; and

(k)      non-cash consideration received in connection with the sale, transfer,
         lease or disposal of any asset in compliance with Section 6.03(b).

SECTION 6.05 Swap Agreements. The Borrowers will not, and will not permit any
other Loan Party or its Subsidiaries to, enter into any Swap Agreement, except
(a) Swap Agreements entered into to hedge or mitigate risks to which any Loan
Party or its Subsidiaries has actual exposure (other than those in respect of
Equity Interests of any Loan Party or its Subsidiaries), and (b) Swap Agreements

<PAGE>

entered into in order to effectively cap or collar interest rates with respect
to any interest-bearing liability of the Loan Party or its Subsidiaries or to
exchange interest rates (from fixed to floating rates, from one floating rate to
another floating rate or otherwise) with respect to any interest-bearing
investment of the Loan Party or its Subsidiaries.

SECTION 6.06 Restricted Payments. The Borrowers will not, and will not permit
any other Loan Party or any Subsidiary of any Loan Party to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a)      any Loan Party may declare and pay dividends with respect to its Equity
         Interests payable solely in additional shares of its common stock,

(b)      so long as no Default or Event of Default shall have occurred and be
         continuing, Subsidiaries of the Loan Parties may declare and pay
         dividends ratably with respect to their Equity Interests to any other
         Loan Party; and

(c)      so long as no payment default, bankruptcy or insolvency default, or
         Event of Default shall have occurred and be continuing, each Borrower
         may make distributions or payments, directly or indirectly, to (i)
         Parent or any Borrower to be used by Parent or such Borrower to pay
         franchise taxes and other fees required to maintain Parent's or such
         Borrower's corporate existence, and (ii) another Borrower or to Parent
         under a Tax Sharing Agreement and (iii) another Borrower or Parent to
         be used to pay taxes (including estimated taxes) directly attributable
         to (or arising as a result of) such other Borrower's or Parent's being
         required to include in its income for tax purposes income of the
         Borrower making the payment or a Subsidiary of such Borrower.

SECTION 6.07 Transactions with Affiliates. The Borrowers will not, and will not
permit any other Loan Party or its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Loan Party or its Subsidiaries
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among a Loan Party and another Loan Party that is a
wholly owned Subsidiary of a Loan Party not involving any other Affiliate, (c)
any Restricted Payment permitted by Section 6.06 or (d) as may be set forth on
Schedule 3.19.

SECTION 6.08 Restrictive Agreements. The Borrowers will not, and will not permit
any other Loan Party or its Subsidiaries to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of such Loan Party or
any of its Subsidiaries to create, incur or permit to exist any Lien upon any of
its property or assets, or (b) the ability of any Subsidiary of a Loan Party to
pay dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the Borrowers or any other
Subsidiary of any Borrower or to Guarantee Indebtedness of the Borrowers or any
other Subsidiary of any Borrower; provided, that, (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 6.08 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness, and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases restricting the assignment thereof.

<PAGE>


SECTION 6.09 Prepayment of Indebtedness; Subordinated Indebtedness. The
Borrowers will not, and will not permit any Loan Party to, directly or
indirectly, purchase, redeem, defease or prepay any principal of, premium, if
any, interest or other amount payable in respect of any Indebtedness prior to
its scheduled maturity, other than (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such Indebtedness has
been sold or otherwise disposed of in accordance with Section 6.03; (iii)
Indebtedness permitted by Section 6.01(b), (c), (e), (j) and (l), in each case
upon any refinancing thereof in accordance with Section 6.01(f); and (iv) so
long as no default or Event of Default shall have occurred and be continuing,
Indebtedness permitted by Section 6.01(d) or Section 6.01(l).

         No Loan Party shall make any amendment or modification to the
indenture, note or other agreement evidencing or governing any Subordinated
Indebtedness, or directly or indirectly voluntarily prepay, defease or in
substance defease, purchase, redeem, retire or otherwise acquire, any
Subordinated Indebtedness.

SECTION 6.10 Capital Expenditures. The Borrowers will not, and will not permit
any Loan Party or its Subsidiaries to, expend, or be committed to expend, in
excess of (a) $700,000 for Capital Expenditures during the Borrowers' 2007
Fiscal Year in the aggregate for the Borrowers and the other Loan Parties, and
(b) $500,000 for Capital Expenditures during any Fiscal Year thereafter in the
aggregate for the Borrowers and the other Loan Parties, provided, however, that
the amount of permitted Capital Expenditures during any Fiscal Year will be
increased by the positive amount equal to the amount (if any), equal to the
difference obtained by taking the Capital Expenditures limit specified above for
the immediately preceding Fiscal Year minus the actual amount of any Capital
Expenditures expended during such immediately preceding Fiscal Year (the "Carry
Over Amount"), and for purposes of measuring compliance herewith, the Carry Over
Amount shall be deemed to be the first amount spent on Capital Expenditures in
that succeeding year. Any Carry Over Amount not used in any applicable Fiscal
Year may not be carried over to any subsequent Fiscal Year.

SECTION 6.11      Financial Covenants.

(a)      Fixed Charge Coverage Ratio. In the event that the Borrowers'
         Availability, for any five (5) consecutive days, is less than
         $5,000,000 (the "Trigger Event"), Borrowers will not permit the Fixed
         Charge Coverage Ratio as of the last day of any Fiscal Quarter,
         commencing as of the end of the Fiscal Quarter immediately preceding
         the Fiscal Quarter in which the Trigger Event occurred, to be less than
         1.1:1.0.

SECTION 6.12 Activities of Inactive Subsidiary. Inactive Subsidiary will not
engage in any trade or business, or own any assets (other than its rights in the

<PAGE>

litigation described in Schedule 3.06) or incur any Indebtedness and, for the
purpose of the Loan Documents, shall not constitute a Loan Party.

SECTION 6.13 Hazardous Materials. No Loan Party or its Subsidiaries shall cause
or suffer to exist any release of any Hazardous Material on, at, in, under,
above, to or from any real or immovable property owned, leased, subleased or
otherwise operated or occupied by any Loan Party or its Subsidiaries that would
violate any Environmental Law, form the basis for any Environmental Liabilities
or otherwise adversely affect the value or marketability of any real or
immovable property owned, leased, subleased or otherwise operated or occupied by
any Loan Party or any other property, other than such violations, Environmental
Liabilities and effects that would not, in the aggregate, have a Material
Adverse Effect.

ARTICLE VII

                                Events of Default

SECTION 7.01 Events of Default. If any of the following events ("Events of
Default") shall occur:

(a)      the Borrowers shall fail to pay any principal of any Loan or
         reimbursement obligations in respect of any Letter of Credit when and
         as the same shall become due and payable, whether at the due date
         thereof or at a date fixed for prepayment thereof or otherwise;

(b)      the Borrowers shall fail to pay any interest on any Loan or any fee or
         other amount (other than such amount referred to in Article VII, clause
         (a)) payable under this Agreement, within three Business Days after the
         same shall become due and payable, whether at the due date thereof or
         at a date fixed for prepayment thereof or otherwise;

(c)      any representation or warranty made or deemed made by or on behalf of
         any Loan Party or any Subsidiary of any Loan Party in or in connection
         with this Agreement or any Loan Document or any amendment or
         modification thereof or waiver thereunder, or in any report,
         certificate, financial statement or other document furnished pursuant
         to or in connection with this Agreement or any Loan Document or any
         amendment or modification thereof or waiver thereunder, shall prove to
         have been materially incorrect when made or deemed made;

(d)      any Loan Party shall fail to observe or perform any covenant, condition
         or agreement contained in Sections 5.01, 5.02(a), 5.03 (with respect to
         a Loan Party's existence), 5.08 or in Article VI;

(e)      any Loan Party shall fail to observe or perform any covenant, condition
         or agreement contained in this Agreement (other than those which
         constitute a default under another clause of this Article VII), and
         such failure shall continue unremedied for a period of (i) 5 days after
         the earlier of such breach or notice thereof from the Agent (which
         notice will be given at the request of any Lender) if such breach
         relates to terms or provisions of Section 5.02 (other than Section
         5.02(a)), 5.03 (other than with respect to a Loan Party's existence)

<PAGE>

         through 5.07, 5.09 and 5.10 of this Agreement or (ii) 30 days after the
         earlier of such breach or notice thereof from Agent (which notice will
         be given at the request of any Lender) if such breach relates to terms
         or provisions of any other section of this Agreement;

(f)      any Loan Party or any Subsidiary shall fail to make any payment
         (whether of principal or interest and regardless of amount) in respect
         of any Material Indebtedness, when and as the same shall become due and
         payable after giving effect to any applicable grace period;

(g)      any event or condition occurs that results in any Material Indebtedness
         becoming due prior to its scheduled maturity or that enables or permits
         (with or without the giving of notice, the lapse of time or both) the
         holder or holders of any Material Indebtedness or any trustee or agent
         on its or their behalf to cause any Material Indebtedness to become
         due, or to require the prepayment, repurchase, redemption or defeasance
         thereof, prior to its scheduled maturity; provided, that, this clause
         (g) shall not apply to secured Indebtedness that becomes due as a
         result of the voluntary sale or transfer of the property or assets
         securing such Indebtedness;

(h)      an involuntary proceeding shall be commenced or an involuntary petition
         shall be filed seeking (i) liquidation, reorganization or other relief
         in respect of a Loan Party or its Subsidiary or either of its debts, or
         of a substantial part of its assets, under any federal, state,
         provincial or foreign bankruptcy, insolvency, reorganization,
         adjustment of debt, receivership or similar law now or hereafter in
         effect or (ii) the appointment of a receiver, receiver and manager,
         interim receiver, trustee, custodian, sequestrator, conservator or
         similar official for any Loan Party or its Subsidiary or for a
         substantial part of either of its assets, and, in any such case, such
         proceeding or petition shall continue undismissed or unstayed for 60
         consecutive days or an order or decree approving or ordering any of the
         foregoing shall be entered;

(i)  any  Loan  Party or its  Subsidiary  shall  (i)  voluntarily  commence  any
     proceeding  or file any petition  seeking  liquidation,  reorganization  or
     other relief under any federal,  state,  provincial or foreign  bankruptcy,
     insolvency, reorganization, adjustment of debt, receivership or similar law
     now or hereafter in effect,  (ii) consent to the institution of, or fail to
     contest in a timely and  appropriate  manner,  any  proceeding  or petition
     described  in clause (h) of this  Article,  (iii) apply  ----------  for or
     consent to the  appointment  of a receiver,  receiver and manager,  interim
     receiver, trustee, custodian, sequestrator, conservator or similar official
     for such Loan Party or its  Subsidiary or for a substantial  part of either
     of its assets, (iv) file an answer admitting the material  allegations of a
     petition  filed  against  it in any such  proceeding,  (v)  make a  general
     assignment  for the  benefit of  creditors  or (vi) take any action for the
     purpose of effecting any of the foregoing;

(j)      any Loan Party or its Subsidiary shall become unable, admit in writing
         its inability or fail generally to pay its debts as they become due;


<PAGE>

(k)      one or more judgments for the payment of money in an aggregate amount
         in excess of $500,000 shall be rendered against any Loan Party or its
         Subsidiary and the same shall remain undischarged for a period of 30
         consecutive days during which execution shall not be effectively
         stayed, or any action shall be legally taken by a judgment creditor to
         attach or levy upon any assets of any Loan Party or its Subsidiary to
         enforce any such judgment or any Loan Party or its Subsidiary shall
         fail within 30 days to discharge one or more non-monetary judgments or
         orders which, individually or in the aggregate, could reasonably be
         expected to have a Material Adverse Effect, which judgments or orders,
         in any such case, are not stayed on appeal or otherwise being
         appropriately contested in good faith by proper proceedings diligently
         pursued;

(l)      (i) a Lien shall have arisen, or in the reasonable opinion of the
         Required Lenders, may reasonably be expected to arise, under the terms
         of ERISA or the Code with respect to any Plan, or (ii) an ERISA Event
         or unfunded liability arising under a Non-U.S. Plan shall have occurred
         that, in the opinion of the Required Lenders, when taken together with
         all other ERISA Events and unfunded Non-U.S. Plan liabilities that have
         occurred, could reasonably be expected to result in a Material Adverse
         Effect;

(m)      a Change in Control shall occur;

(n)      the occurrence of any "default", as defined in any Loan Document (other
         than this Agreement) or the breach of any of the terms or provisions of
         any Loan Document (other than this Agreement), which default or breach
         continues beyond any period of grace therein provided;

(o)      any Collateral Document shall for any reason fail to create a valid and
         perfected first priority security interest in any Collateral purported
         to be covered thereby, except as permitted by the terms of any
         Collateral Document or this Agreement, or any Collateral Document shall
         fail to remain in full force or effect or any action shall be taken to
         discontinue or to assert the invalidity or unenforceability of any
         Collateral Document, or any Loan Party shall fail to comply with any of
         the terms or provisions of any Collateral Document;

(p)      any material provision of any Loan Document for any reason ceases to be
         valid, binding and enforceable in accordance with its terms (or any
         Loan Party shall challenge the enforceability of any Loan Document or
         shall assert in writing, or engage in any action or inaction based on
         any such assertion, that any provision of any of the Loan Documents has
         ceased to be or otherwise is not valid, binding and enforceable in
         accordance with its terms);

(q)      any Loan Party is criminally indicted or convicted under any law that
         may reasonably be expected to lead to a forfeiture of any property of
         such Loan; or

(r)      the subordination provisions of any agreement or instrument governing
         any Subordinated Indebtedness are for any reason revoked or
         invalidated, or otherwise cease to be in full force and effect, any
         Person contests in any manner the validity or enforceability thereof,
         of the Indebtedness hereunder is for any reason subordinated or does
         not have the priority contemplated by the Loan Documents or such
         subordination provisions;

<PAGE>



then, and in every such event (other than an event with respect to any Borrower
described in clause (h) or (i) of this Article VII), and at any time thereafter
during the continuance of such event, the Agent may, and at the request of the
Required Lenders shall, by notice to the Administrative Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and/or
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrowers accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrowers;
and in case of any event with respect to any Borrower described in clause (h) or
(i) of this Article VII, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrowers accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrowers. Upon
the occurrence and the continuance of an Event of Default, the Agent may, and at
the request of the Required Lenders shall, increase the rate of interest
applicable to the Loans and other Obligations as set forth in Section 2.15(d)
and exercise any rights and remedies provided to the Agent under the Loan
Documents or at law or equity, including all remedies provided under the UCC.

SECTION 7.02 Application of Funds. After (a) an Event of Default has occurred
and is continuing and the Agent so elects or the Required Lenders so direct and
(b) the exercise of remedies provided for in this Article VII (or after the
Loans have automatically become immediately due and payable and the Letter of
Credit Obligations have automatically been required to be cash collateralized as
set forth in Section 7.01), any amounts received on account of the Obligations
shall be applied by the Agent in the following order:


                  first, to pay any fees, indemnities, expense reimbursements or
         other Obligations then due to the Agent in its capacity as such,

    second, to pay all amounts then due and payable to the Agent on account of
    Protective Advances,
    ------

    third, to pay all amounts then owed to the Swingline Lender on account of
    Swingline Loans,
    -----

    fourth, to ratably pay all amounts owed to the Issuing Bank(s) on account of
     Letter of Credit Obligations,
    ------

    fifth, to ratably pay all interest and fees owed on account of the Revolving
    Loans
    -----
<PAGE>

    sixth, to ratably pay all principal amounts of the Revolving Loans then
    outstanding,
    -----

    seventh, to provide cash collateral for any outstanding Letters of Credit,
    -------

                  eighth, to ratably pay any other expense reimbursements or
         other Obligations then due and payable to the Lenders (other than with
         respect to Banking Services Obligations and Swap Obligations), and

                  ninth, to ratably pay of any amounts owing by the Borrowers
         with respect to Banking Services Obligations and Swap Obligations.

The Agent and the Lenders shall have the continuing and exclusive right to apply
and reverse and reapply any and all such proceeds and payments to any portion of
the Obligations owing to the Agent and Lenders.

ARTICLE VIII

                                    The Agent

(a)      Each of the Lenders and the Issuing Bank hereby irrevocably appoints
         the Agent as its agent and authorizes the Agent to take such actions on
         its behalf and to exercise such powers as are delegated to the Agent by
         the terms of the Loan Documents, together with such actions and powers
         as are reasonably incidental thereto.

(b)      The financial institution serving as the Agent hereunder shall have the
         same rights and powers in its capacity as a Lender as any other Lender
         and may exercise the same as though it were not the Agent, and such
         financial institution and its Affiliates may accept deposits from, lend
         money to and generally engage in any kind of business with the Loan
         Parties or any Subsidiary of a Loan Party or other Affiliate thereof as
         if it were not the Agent hereunder.

(c)  The Agent shall not have any duties or obligations  except those  expressly
     set forth in the Loan  Documents.  Without  limiting the  generality of the
     foregoing,  (a) the Agent  shall not be subject to any  fiduciary  or other
     implied duties,  regardless of whether an Event of Default has occurred and
     is  continuing,  (b) the  Agent  shall  not  have  any  duty  to  take  any
     discretionary   action  or  exercise  any  discretionary   powers,   except
     discretionary  rights  and  powers  expressly   contemplated  by  the  Loan
     Documents  that the Agent is required to exercise in writing as directed by
     the applicable  Required Lenders (or such other number or percentage of the
     Lenders  as shall be  necessary  under the  circumstances  as  provided  in
     Section 9.03), and (c)  -------------  except as expressly set forth in the
     Loan  Documents,  the Agent shall not have any duty to disclose,  and shall
     not be liable for the failure to disclose,  any information relating to any
     Loan Party or any of its  Subsidiaries  that is communicated to or obtained
     by the financial  institution serving as the Agent or any of its Affiliates
     in any capacity.  The Agent shall not be liable for any action taken or not
     taken by it with the consent or at the request of the Required  Lenders (or
     such other number or percentage of the Lenders as shall be necessary  under

<PAGE>

     the  circumstances  as  provided in Section  9.03) or in the  -------------
     absence of its own gross negligence or willful misconduct.  The Agent shall
     be deemed not to have  knowledge  of any Event of Default  unless and until
     written notice thereof is given to the Agent by the Administrative Borrower
     or a Lender, and the Agent shall not be responsible for or have any duty to
     ascertain or inquire  into (i) any  statement,  warranty or  representation
     made in or in connection  with any Loan Document,  (ii) the contents of any
     certificate,  report or other document delivered hereunder or in connection
     with any Loan Document,  (iii) the  performance or observance of any of the
     covenants,  agreements or other terms or  conditions  set forth in any Loan
     Document, (iv) the validity,  enforceability,  effectiveness or genuineness
     of any Loan Document or any other agreement, instrument or document, or (v)
     the  satisfaction  of any  condition  set forth in Article  IV, the Closing
     Checklist  or  elsewhere  in any  Loan  Document,  other  than  to  confirm
     -----------  receipt of items  expressly  required to be  delivered  to the
     Agent.

(d)      The Agent shall be entitled to rely upon, and shall not incur any
         liability for relying upon, any notice, request, certificate, consent,
         statement, instrument, document or other writing believed by it to be
         genuine and to have been signed or sent by the proper Person. The Agent
         also may rely upon any statement made to it orally or by telephone and
         believed by it to be made by the proper Person, and shall not incur any
         liability for relying thereon. The Agent may consult with legal counsel
         (who may be counsel for the Borrowers), independent accountants and
         other experts selected by it, and shall not be liable for any action
         taken or not taken by it in accordance with the advice of any such
         counsel, accountants or experts.

(e)      The Agent may perform any and all its duties and exercise its rights
         and powers by or through any one or more sub-agents appointed by the
         Agent. The Agent and any such sub-agent may perform any and all its
         duties and exercise its rights and powers through their respective
         Related Parties. The exculpatory provisions of the preceding paragraphs
         shall apply to any such sub-agent and to the Related Parties of the
         Agent and any such sub-agent, and shall apply to their respective
         activities in connection with the syndication of the credit facilities
         provided for herein as well as activities as the Agent.

(f)  Subject to the  appointment and acceptance of a successor Agent as provided
     in this  paragraph,  so long as no Event of Default  exists,  the Agent may
     resign at any time by  notifying  the  Lenders,  the  Issuing  Bank and the
     Administrative  Borrower upon 30 days' prior written notice.  Upon any such
     resignation,  the  applicable  Required  Lenders  shall have the right,  in
     consultation with the Administrative  Borrower, to appoint a successor.  If
     no  successor  shall have been so appointed  by such  Required  Lenders and
     shall have  accepted  such  appointment  within 30 days after the  retiring
     Agent gives  notice of its  resignation,  then the  retiring  Agent may, on
     behalf of the Lenders and the Issuing Bank, appoint a successor Agent which
     shall be a commercial  bank or an Affiliate  of any such  commercial  bank.
     Upon the acceptance of its  appointment as Agent  hereunder by a successor,
     such  successor  shall  succeed to and become  vested  with all the rights,
     powers, privileges and duties of the retiring Agent, and the retiring Agent
     shall be discharged  from its duties and  obligations  hereunder.  The fees
     payable by the  Borrowers  to a successor  Agent shall be the same as those
     payable to its predecessor  unless  otherwise  agreed between the Borrowers
     and such successor. After the Agent's resignation hereunder, the provisions
     of this Article -------- VIII and Section 9.04 shall continue in effect for
     the benefit of the retiring Agent, its sub agents and their respective ----
     ------------  Related Parties in respect of any actions taken or omitted to
     be taken by any of them while it was acting as Agent.
<PAGE>

(g)      Each Lender acknowledges that it has, independently and without
         reliance upon the Agent or any other Lender and based on such documents
         and information as it has deemed appropriate, made its own credit
         analysis and decision to enter into this Agreement. Each Lender also
         acknowledges that it will, independently and without reliance upon the
         Agent or any other Lender and based on such documents and information
         as it shall from time to time deem appropriate, continue to make its
         own decisions in taking or not taking action under or based upon this
         Agreement, any other Loan Document or related agreement or any document
         furnished hereunder or thereunder.

(h)      The Agent shall not have any obligation to any of the Lenders to ensure
         that the Collateral exists, is owned by the Loan Parties, is cared for,
         protected or insured, is unencumbered by others, or that the Liens
         granted to the Agent therein have been properly, sufficiently or
         lawfully created, perfected, protected or enforced, or that such Liens
         are entitled to any particular priority, it being understood and agreed
         that in respect of the Collateral, or any act, omission, or event
         related thereto, the Agent may act in any manner it may deem
         appropriate, in its sole discretion given the Agent's own interest in
         the Collateral in its capacity as one of the Lenders and that the Agent
         shall not have any other duty or liability whatsoever to any Lender as
         to any of the foregoing.

(i)      Each Lender hereby appoints each other Lender as its agent for the
         purpose of perfecting Liens, for the benefit of the Agent and the
         Secured Parties, in assets which, in accordance with Article 9 of the
         UCC or any other applicable law can be perfected only by possession.
         Should any Lender (other than the Agent) obtain possession of any such
         Collateral, such Lender shall notify the Agent thereof, and, promptly
         upon the Agent's request therefor shall deliver such Collateral to the
         Agent or otherwise deal with such Collateral in accordance with the
         Agent's instructions.

(j)  Each Lender hereby agrees that (a) it is deemed to have  requested that the
     Agent furnish such Lender,  promptly after it becomes available,  a copy of
     each Report prepared by or on behalf of the Agent;  (b) the Agent (i) makes
     no representation or warranty,  express or implied,  as to the completeness
     or accuracy of any Report or any of the  information  contained  therein or
     any inaccuracy or omission  contained in or relating to a Report,  and (ii)
     shall not be liable for any  information  contained in any Report;  (c) the
     Reports are not comprehensive  audits or examinations,  and that the Agent,
     or any other party  performing any audit or  examination  will inspect only
     specific information regarding the Loan Parties and will rely significantly
     upon the Loan Parties' books and records,  as well as on representations of
     the Loan Parties'  personnel and that the Agent undertakes no obligation to
     update,  correct or  supplement  the Reports;  (d) it will keep all Reports
     confidential  and strictly for its internal  use, not share the Report with
     any Loan Party and not  distribute any Report to any other Person except as
     otherwise  permitted  pursuant to this Agreement;  and (e) without limiting
     the  generality of any other  indemnification  provision  contained in this
     Agreement,  it will pay and protect,  and indemnify,  defend,  and hold the
     Agent  and any such  other  Person  preparing  a Report  harmless  from and
     against, the claims,  actions,  proceedings,  damages, costs, expenses, and
     other amounts (including  reasonable  attorney fees) incurred by the Agent,
     CIT and its Affiliates and any such other Person  preparing a Report as the
     direct or indirect result of any third parties who might obtain all or part
     of any Report through the indemnifying Lender.
<PAGE>

(k)      CIT Capital Securities, LLC, in its capacities as Syndication Agent and
         Sole Bookrunner and Sole Lead Arranger hereunder, shall not have any
         right, power, obligation, liability, responsibility or duty under this
         Agreement other than those applicable to all Lenders as such.

ARTICLE IX

                                  Miscellaneous

SECTION 9.01      Notices.

(a)      Except in the case of notices and other communications expressly
         permitted to be given by telephone (and subject to Section 9.01(b)),
         all notices and other communications provided for herein shall be in
         writing and shall be delivered by hand or overnight courier service,
         mailed by certified or registered mail or sent by facsimile or
         Electronic Transmission, as follows:

(i)      if to any Loan Party, to the Administrative Borrower at:

                        Jaco Electronics, Inc.
                        145 Oser Avenue
                        Hauppauge, New York 11778
                        Attention:            Mr. Jeffrey Gash
                        Facsimile No:         (631) 273-3621
                        E-mail:               jgash@jacoelect.com

(ii) if to the Agent or the Swingline Lender, to the Agent at:

                          The CIT Group/Business Credit, Inc.
                          11 West 42nd Street, 13th Floor
                          New York, New York 10036
                          Attention:            Louis McKinley
                          Facsimile No:         (212) 461-7736
                          E-mail:               Louis.mckinley@cit.com

                          with copy to:
<PAGE>

                          CIT Business Capital
                          505 Fifth Avenue, 3rd Floor
                          New York, New York 10017
                          Attention:            Frank A. Bertelle
                          Facsimile No:         212 771-1759
                          E-mail:               frank.bertelle@cit.com

(iii)    if to any other Lender, to it at its address or facsimile number or
         e-mail address set forth in its Administrative Questionnaire.

(b)      Any party hereto may change its address or facsimile number for notices
         and other communications hereunder by notice to the other parties
         hereto.

(c)      All such notices and other communications (i) sent by hand or overnight
         courier service, or mailed by certified or registered mail, shall be
         deemed to have been given when received, or (ii) sent by facsimile
         shall be deemed to have been given when sent, provided that if not
         given during normal business hours for the recipient, shall be deemed
         to have been given at the opening of business on the next Business Day
         for the recipient, or (iii) sent by Electronic Transmission shall be
         deemed to have been given (A) if delivered by posting to an E-System or
         other Intranet or extranet-based website, prior to 5:00 p.m., New York
         City time, on the date of such posting and (B) if delivered by any
         other Electronic Transmission, prior to 5:00 p.m., New York City time,
         on the date of transmission thereof.

SECTION 9.02      Electronic Transmissions.

(a)  Authorization.  The  Agent  and  its  Related  Persons  are  authorized  to
     transmit, post or otherwise make or communicate,  in its ------------- sole
     discretion (but shall not be required to do so),  Electronic  Transmissions
     in  connection  with any Loan  Document and the  transactions  contemplated
     therein; provided,  however, that no notice to any Loan Party shall be made
     by posting to an -------- ------- Internet or extranet-based  site or other
     equivalent  service  but  may be  made  by  e-mail  or  E-Fax.  Each of the
     Administrative  Borrower and each Secured  Party  hereby  acknowledges  and
     agrees, and each of the Administrative Borrower shall cause each other Loan
     Party to acknowledge and agree, that the use of Electronic Transmissions is
     not necessarily  secure and that there are risks  associated with such use,
     including, without limitation, risks of interception,  disclosure and abuse
     and each indicates it assumes and accepts such risks by hereby  authorizing
     the Agent and its Related Persons to transmit Electronic Transmissions.

(b)  Signatures.  No Electronic Transmission shall be denied legal effect merely
     because it is made electronically. Electronic ---------- Transmissions that
     are not readily  capable of bearing either a signature or a reproduction of
     a signature may be signed,  and shall be deemed signed, by attaching to, or
     logically  associating with such Electronic  Transmission,  an E-Signature,
     upon  which  each  Secured  Party and Loan  Party may rely and  assume  the
     authenticity thereof. Each Electronic  Transmission containing a signature,

<PAGE>

     a reproduction of a signature or an E-Signature  shall, for all intents and
     purposes,  have the same effect and weight as a signed paper original. Each
     E-Signature  shall be deemed  sufficient to satisfy any  requirement  for a
     "signature" and each Electronic  Transmission shall be deemed sufficient to
     satisfy any requirement for a "writing", in each case including pursuant to
     any Loan Document,  the UCC, the Federal  Uniform  Electronic  Transactions
     Act, the Electronic  Signatures in Global and National Commerce Act and any
     substantive or procedural law governing such subject matter.  Each party or
     beneficiary  hereto agrees not to contest the validity or enforceability of
     an  Electronic  Transmission  or  E-Signature  under the  provisions of any
     applicable  law  requiring  certain  documents  to be in writing or signed;
     provided,  however,  that  nothing  herein  shall  limit  such  party's  or
     beneficiary's  right to  contest  whether  an  Electronic  Transmission  or
     E-Signature has been altered after transmission.

(c)      Separate Agreements. All uses of an E-System shall be governed by and
         subject to, in addition to this Section 9.02, separate terms and
         conditions posted or referenced in such E-System and related
         agreements, documents or other instruments executed by Secured Parties
         and Loan Parties in connection with such use.

(d)  Limitation of Liability.  All E-Systems and Electronic  Transmissions shall
     be provided "as is" and "as available". Neither ----------------------- the
     Agent nor any of its Related  Persons  warrants the  accuracy,  adequacy or
     completeness of any E-Systems or Electronic  Transmission and disclaims all
     liability for errors or omissions therein.  No warranty of any kind is made
     by the Agent or any of its Related Persons in connection with any E-Systems
     or Electronic  Communication,  including  any warranty of  merchantability,
     fitness for a particular purpose, non-infringement of third party rights or
     freedom  from  viruses or other code  defects.  Each of the  Administrative
     Borrower and each Secured  Party (other than the Agent) agrees (and each of
     Parent and the Administrative Borrower shall cause each other Loan Party to
     agree) that the Agent have no  responsibility  for maintaining or providing
     any  equipment,  software,  services or any testing  required in connection
     with all Electronic Transmissions or otherwise required for any E-System.

SECTION 9.03      Waivers; Amendments.

(a)  No  failure  or delay by the  Agent,  the  Issuing  Bank or any  Lender  in
     exercising  any right or power  hereunder or under any other Loan  Document
     shall operate as a waiver thereof, nor shall any single or partial exercise
     of any such right or power, or any abandonment or  discontinuance  of steps
     to enforce such a right or power,  preclude  any other or further  exercise
     thereof  or the  exercise  of any other  right or  power.  The  rights  and
     remedies of the Agent, the Issuing Bank and the Lenders hereunder and under
     any other Loan Document are  cumulative and are not exclusive of any rights
     or remedies that they would  otherwise  have. No waiver of any provision of
     any Loan Document or consent to any  departure by any Loan Party  therefrom
     shall in any event be  effective  unless  the same  shall be  permitted  by
     Section 9.03(b), and then such waiver or consent shall  ---------------- be
     effective  only in the  specific  instance  and for the  purpose  for which
     given.  Without  limiting the generality of the foregoing,  the making of a
     Loan or issuance of a Letter of Credit  shall not be  construed as a waiver
     of Event of Default,  regardless  of whether  the Agent,  any Lender or the
     Issuing  Bank may have had notice or  knowledge of such Event of Default at
     the time.
<PAGE>

(b)  Neither this Agreement nor any other Loan Document nor any provision hereof
     or thereof  may be waived,  amended or  modified  except (i) in the case of
     this  Agreement,  pursuant to an agreement or agreements in writing entered
     into by the Borrowers and the Required Lenders,  or (ii) in the case of any
     other Loan  Document,  pursuant to an  agreement or  agreements  in writing
     entered  into by the  Agent  and the Loan  Party or Loan  Parties  that are
     parties thereto, with the consent of the Required Lenders;  provided, that,
     no such  agreement  shall (i) increase the Commitment of any Lender without
     the written  consent of such  Lender  (provided,  that,  the Agent may make
     Protective  Advances as set forth in Section 2.06),  (ii) reduce or forgive
     ------------ the principal amount of any Loan owing to any Lender or reduce
     the rate of interest  thereon,  or reduce or forgive  any  interest or fees
     payable  hereunder,  without  the  written  consent of such  Lender,  (iii)
     postpone  the  maturity of any Loan owing to any Lender,  or any  scheduled
     date of payment of the principal amount of any Loan owing to any Lender, or
     any date for the payment of any interest, fees or other Obligations payable
     hereunder,  or reduce the amount of, waive or excuse any such  payment,  or
     postpone the scheduled  date of expiration of any Commitment of any Lender,
     without the  written  consent of such  Lender;  provided  further  that the
     Aggregate  Commitments  hereunder  may not be  increased  except  with  the
     consent of each Lender,  (iv) change Section 2.12(b),  Section 2.13(c),  or
     Section  2.20(b)  in  a  manner  that  would  alter  the  manner  in  which
     ----------------  ----------------  ---------------  payments  are  shared,
     without the written consent of each Lender,  (v) increase the advance rates
     or  components  of the  Borrowing  Base if  such  increase  would  increase
     Availability  or include  additional  categories of Collateral set forth in
     the  definition  of  Borrowing  Base  if  such  inclusion   would  increase
     Availability, in each case without the written consent of each Lender, (vi)
     increase the limit on  Protective  Advances  set forth in Section  2.06(a),
     without the written consent of each  ----------------  Lender, (vii) change
     any of the  provisions  of  this  Section  9.03(b)  or  the  definition  of
     "Required  Lenders"  or any other  ----------------  provision  of any Loan
     Document  specifying the number or percentage of Lenders (or Lenders of any
     Class) required to waive, amend or modify any rights thereunder or make any
     determination or grant any consent thereunder,  without the written consent
     of each Lender,  (viii) except as provided in Section  9.03(d) or (e) or in
     any Collateral Document,  release all or ---------------- --- substantially
     all of the Collateral, without the written consent of each Lender; provided
     further that no such agreement shall amend,  modify or otherwise affect the
     rights or duties of the Agent,  the Issuing Bank or the  Swingline  Lenders
     hereunder  without the prior written consent of the Agent, the Issuing Bank
     or the  Swingline  Lenders,  as the  case  may be,  or  (ix)  contractually
     subordinate  any of the Liens  granted to the Agent  without the consent of
     each Lender, provided, however, this subparagraph (ix) shall not apply to a
     subordination  of the  Liens  granted  to the  Agent if such  subordination
     arises pursuant to the granting of liens or  superpriority  claims pursuant
     to  section  364 of title 11 of the  United  States  Code (the  "Bankruptcy
     Code") or any other provision of the Bankruptcy Code.

(c)      The Agent may (i) amend the Commitment Schedule to reflect assignments
         entered into pursuant to Section 9.05, (ii) waive payment of the fee
         required under Section 9.05(b)(ii)(D) and (iii) upon the request of the
         Syndication Agent or the lead arranger, implement any Flex-Pricing
         Provisions contained in the Fee Letter or any separate letter agreement
         with respect to fees payable to Agent or any commitment letter
         delivered in connection with the transaction which is the subject of
         this Agreement without obtaining the consent of any other party to this
         Agreement.
<PAGE>

(d)  The Lenders hereby  irrevocably  authorize the Agent,  at its option and in
     its sole discretion,  to release any Liens granted to the Agent by the Loan
     Parties  on any  Collateral  (i)  upon  the  termination  of the  Aggregate
     Commitment,  payment and  satisfaction  in full in cash of all  Obligations
     (other than Unliquidated  Obligations),  and the cash  collateralization of
     all  Unliquidated  Obligations  in a manner  satisfactory  to each affected
     Lender,  (ii)  constituting  property being sold or disposed of if the Loan
     Party  disposing of such  property  certifies to the Agent that the sale or
     disposition is made in compliance with the terms of this Agreement (and the
     Agent  may rely  conclusively  on any  such  certificate,  without  further
     inquiry),  (iii)  constituting  property  in which no Loan Party has at any
     time  during  the  term  of  this  Agreement   owned  any  interest,   (iv)
     constituting  property  leased  to a Loan  Party  under a lease  which  has
     expired or been terminated in a transaction permitted under this Agreement,
     (v) owned by or leased to any Loan  Party  which is  subject  to a purchase
     money security interest or which is a Capital Lease  Obligation,  in either
     case,   entered  into  by  such  Loan  Party   pursuant  to  Section  6.01,
     ------------ or (vi) as required to effect any sale or other disposition of
     such  Collateral in  connection  with any exercise of remedies of the Agent
     and the Lenders  pursuant to Article VII.  Upon request by the Agent at any
     time,  the Lenders will  confirm in writing the Agent's  authority to cause
     the Agent to release any Liens upon particular types or items of Collateral
     pursuant  to this  Section  9.03.  Except as  provided  in the  immediately
     preceding  sentence,  the Agent will not release any Liens on -------------
     Collateral without the prior written  authorization of the Required Lenders
     or if  required  by  Section  9.03(b)(vii),  all the  ---------------------
     Lenders;  provided, that, the Agent may in its Permitted Discretion,  cause
     the Agent release their Liens on Collateral  valued in the aggregate not in
     excess of $500,000  during any  calendar  year  without  the prior  written
     authorization of the Required Lenders.

(e)  Upon receipt by the Agent of any authorization required pursuant to Section
     9.03(d) from the Required Lenders of the Agent's ---------------  authority
     to  cause  the  release  of any  Liens  upon  particular  types or items of
     Collateral,  and upon at least five Business Days prior written  request by
     the Loan Parties, the Agent shall (and are hereby irrevocably authorized by
     the Lenders to) execute such  documents as may be necessary to evidence the
     release of the Agent's Liens upon such Collateral;  provided, that, (i) the
     Agent shall not be required to execute any such document on terms which, in
     the Agent's  opinion,  would  expose the Agent to  liability  or create any
     obligation or entail any  consequence  other than the release of such Liens
     without recourse or warranty, and (ii) such release shall not in any manner
     discharge, affect, or impair the Obligations or any Liens (other than those
     expressly  being  released)  upon (or  obligations  of the Loan  Parties in
     respect of) all  interests  retained  by the Loan  Parties,  including  the
     proceeds of any sale, all of which shall continue to constitute part of the
     Collateral.

(f)  If, in connection with any proposed amendment,  waiver or consent requiring
     the consent of "each Lender" or "each Lender affected thereby," the consent
     of the  Required  Lenders is obtained,  but the consent of other  necessary
     Lenders is not obtained (any such Lender whose consent is necessary but not
     obtained  being  referred to herein as a  "Non-Consenting  ----------------

<PAGE>

     Lender"),  then, so long as the Agent is not a Non-Consenting  Lender,  the
     Borrowers may elect to replace a Non-Consenting Lender as a Lender party to
     this Agreement,  provided,  that,  concurrently with such replacement,  (i)
     another bank or other -------- ---- entity which is reasonably satisfactory
     to the  Borrowers  and the Agent shall agree,  as of such date, to purchase
     for cash the Loans and other Obligations due to the  Non-Consenting  Lender
     pursuant to an  Assignment  and  Assumption  and to become a Lender for all
     purposes  under  this  Agreement  and  to  assume  all  obligations  of the
     Non-Consenting  Lender to be  terminated as of such date and to comply with
     the  requirements of Section  9.05(b),  and (ii) the Borrowers shall pay to
     such Non-Consenting  --------------- Lender in same day funds on the day of
     such replacement (1) all interest,  fees and other amounts then accrued but
     unpaid to such  Non-Consenting  Lender by the  Borrowers  hereunder  to and
     including the date of termination,  including without  limitation  payments
     due to such Non-Consenting  Lender under Sections 2.17 and 2.19, and (2) an
     amount,  if any, equal to the payment  -------------  ---- which would have
     been due to such Lender on the day of such  replacement  under Section 2.18
     had  the   Loans  and   Acceptance   -------------   Obligations   of  such
     Non-Consenting  Lender  been  prepaid on such date  rather than sold to the
     replacement Lender.

SECTION 9.04      Expenses; Indemnity; Damage Waiver.

(a)  Expenses.  (i) The Borrowers  shall pay all  reasonable,  documented out of
     pocket expenses  incurred by the Agent and the --------  Syndication  Agent
     and their respective Affiliates, including the reasonable fees, charges and
     disbursements  of counsel for the Agent, in connection with the syndication
     and  distribution  (including,  without  limitation,  via the  internet  or
     through a service such as Intralinks) of the credit facilities provided for
     herein,  the  preparation and  administration  of the Loan Documents or any
     amendments,  modifications  or  waivers  of  the  provisions  of  the  Loan
     Documents (whether or not the transactions  contemplated  hereby or thereby
     shall  be  consummated),  (ii)  the  Borrowers  shall  pay  all  reasonable
     out-of-pocket  expenses incurred by the Issuing Bank in connection with the
     issuance,  amendment,  renewal or  extension of any Letter of Credit or any
     demand  for  payment  thereunder,  and  (iii) the  Borrowers  shall pay all
     out-of-pocket  expenses  incurred by the Agent, the Syndication  Agent, the
     Issuing Bank or any Lender,  including the fees,  charges and disbursements
     of any counsel for the Agent, the Issuing Bank or any Lender, in connection
     with the enforcement,  collection or protection of its rights in connection
     with the Loan  Documents,  including its rights under this Section 9.04, or
     in connection with the Loans made or ------------- Letters of Credit issued
     hereunder,  including all such  out-of-pocket  expenses incurred during any
     workout,  restructuring or negotiations in respect of such Loans or Letters
     of Credit;  provided  however that such obligation  shall be subject to the
     -------- limitations set forth in Section 5.10;  provided,  further that to
     the extent that the costs and expenses referred to in -------------  clause
     (iii) consist of fees, charges and disbursements of counsel,  the Borrowers
     shall be obligated to pay such fees,  charges and disbursements for counsel
     to the Agent and for only one counsel  acting for all  Lenders  (other than
     the Agent).  Expenses being  reimbursed by the Borrowers under this Section
     9.04(a) include,  without  limiting the generality of the  ----------------
     foregoing, costs and expenses incurred in connection with:
<PAGE>

(1)               appraisals of all or any portion of the Collateral (including
                  travel, lodging, meals and other out of pocket expenses of the
                  appraisers) as permitted under the terms of this Agreement;

(2)               field examinations and the preparation of Reports at either
                  the Agent's then customary charge (such charge is currently
                  $1,000 per day (or portion thereof) for each Person employed
                  by the Agent with respect to each field examination) or at the
                  fee charged by a third party retained by the Agent, plus in
                  each case reasonable travel, lodging, meals and other out of
                  pocket expenses, in each case as permitted under the
                  Agreement;

(3)               lien and title searches and title insurance; provided, that,
                  neither the Agent, the Syndication Agent, the Issuing Bank nor
                  any Lender shall be entitled to reimbursement for title
                  insurance with respect to the Mortgaged Properties unless such
                  title insurance is obtained in connection with the initial
                  inclusion of the Mortgaged Properties in the Borrowing Base or
                  is obtained with the consent of the Administrative Borrower;

(4)  taxes,  fees  and  other  charges  for  filing  financing   statements  and
     continuations,  and other  actions to perfect,  protect,  and  continue the
     Agent's Liens;

(5)  sums paid or incurred  to take any action  required of any Loan Party under
     the Loan Documents that such Loan Party fails to pay or take; and

(6)  costs and expenses of forwarding loan proceeds, collecting checks and other
     items of payment,  and  establishing  and maintaining the accounts and lock
     boxes, and costs and expenses of preserving and protecting the Collateral.

All of the foregoing costs and expenses may be charged to the Borrowers as
Revolving Loans or to another deposit account, all as described in Section
2.20(c).

(b)  Indemnities.  The  Borrowers  shall  indemnify the Agent,  the  Syndication
     Agent, the Issuing Bank and each Lender, and each ----------- Related Party
     of  any of  the  foregoing  Persons  (each  such  Person  being  called  an
     "Indemnitee")  against,  and hold  each  Indemnitee  harmless  from,  on an
     after-Tax  basis,  any  and  all  losses,   claims,   damages,   penalties,
     liabilities  and  related  expenses,   including  the  fees,   charges  and
     disbursements  of any counsel for any  Indemnitee,  incurred by or asserted
     against any Indemnitee  arising out of, in connection  with, or as a result
     of (i) the execution or delivery of the Loan  Documents or any agreement or
     instrument  contemplated  thereby, the performance by the parties hereto of
     their  respective   obligations  thereunder  or  the  consummation  of  the
     Transactions or any other transactions  contemplated  hereby, (ii) any Loan
     or Letter of Credit or the use of the  proceeds  therefrom  (including  any
     refusal by the Issuing Bank to honor a demand for payment under a Letter of
     Credit if the  documents  presented in  connection  with such demand do not
     strictly comply with the terms of such Letter of Credit),  (iii) any actual
     or  alleged  presence  or  release of  Hazardous  Materials  on or from any
     property  owned or operated by the Borrowers or any of their  Subsidiaries,
     or any  Environmental  Liability related in any way to the Borrowers or any
     of their Subsidiaries, or (iv) any actual or prospective claim, litigation,
     investigation or proceeding relating to any of the foregoing, whether based
     on  contract,  tort or any other  theory  and  regardless  of  whether  any
     Indemnitee is a party thereto; provided, that, such indemnity shall not, as
     to any  Indemnitee,  be available  to the extent that such losses,  claims,
     damages, penalties, liabilities or related expenses resulted from the gross
     negligence or willful misconduct of such Indemnitee.
<PAGE>

(c)      To the extent that (i) the Borrowers fail to pay any amount required to
         be paid by them to the Agent, the Issuing Bank or the Swingline Lender
         under Section 9.04(a) or (b) or (ii) the Agent conducts an appraisal or
         update at its own expense pursuant to Section 5.10, each Lender
         severally agrees to pay to the Agent, the Issuing Bank or the Swingline
         Lender, as the case may be, such Lender's Applicable Percentage
         (determined as of the time that the applicable unreimbursed expense or
         indemnity payment is sought) of such unpaid amount; provided, that, the
         unreimbursed expense or indemnified loss, claim, damage, penalty,
         liability or related expense, as the case may be, was incurred by or
         asserted against the Agent, Issuing Bank or Swingline Lender in its
         capacity as such.

(d)  The  relationship  between any Loan Party on the one hand and the  Lenders,
     the  Issuing  Bank and the Agent on the other hand shall be solely  that of
     debtor and creditor. Neither the Agent, the Issuing Bank nor any Lender (i)
     shall  have  any  fiduciary  responsibilities  to any Loan  Party,  or (ii)
     undertakes  any  responsibility  to any Loan Party to review or inform such
     Loan Party of any matter in  connection  with any phase of any Loan Party's
     business or operations.  To the extent permitted by applicable law, no Loan
     Party  shall  assert,  and  each  hereby  waives,  any  claim  against  any
     Indemnitee,   on  any  theory  of   liability,   for   special,   indirect,
     consequential  or punitive damages (as opposed to direct or actual damages)
     arising out of, in connection  with,  or as a result of, this  Agreement or
     any agreement or instrument contemplated hereby, the Transactions, any Loan
     or Letter of Credit or the use of the proceeds thereof.

(e)      All amounts due under this Section shall be payable promptly after
         written demand therefor.

(f)      In no event shall any Indemnitee be liable on any theory of liability
         for any special, indirect, consequential or punitive damages (including
         any loss of profits, business or anticipated savings).

SECTION 9.05      Successors and Assigns.

(a)  The  provisions  of this  Agreement  shall be binding upon and inure to the
     benefit of the parties hereto and their  respective  successors and assigns
     permitted  hereby  (including  any Affiliate of an Issuing Bank that issues
     any Letter of  Credit),  except  that (i) the  Borrowers  may not assign or

<PAGE>

     otherwise transfer any of their rights or obligations hereunder without the
     prior  written  consent of each Lender  (and any  attempted  assignment  or
     transfer by the Borrowers without such consent shall be null and void), and
     (ii) no Lender may assign or otherwise  transfer its rights or  obligations
     hereunder  except  in  accordance  with  this  Section.   Nothing  in  this
     Agreement,  expressed  or implied,  shall be  construed  to confer upon any
     Person (other than the parties  hereto,  their  respective  successors  and
     assigns  permitted hereby  (including any Affiliate of an Issuing Bank that
     issues any Letter of  Credit),  Participants  (to the  extent  provided  in
     Section 9.05(c)) and, to the extent ---------------- expressly contemplated
     hereby, the Related Parties of the Agent, the Issuing Bank and the Lenders)
     any legal or  equitable  right,  remedy or claim under or by reason of this
     Agreement.

(b)  (i) Subject to the conditions set forth in Section 9.05(b)(ii), any Lender
     may assign to one or more assignees all or a portion of its rights and
     obligations under this Agreement (including all or a portion of its
     Commitment and the Loans at the time owing to it) with the prior written
     consent (such consent not to be unreasonably withheld or delayed) of:

(A)  the Administrative Borrower, provided, that, no consent of the
     Administrative Borrower shall be required for an assignment to (v) a
     Lender, (w) an Affiliate of a Lender, (x) an Approved Fund, (y) in
     connection with any merger, consolidation, sale, transfer or other
     disposition of all or any substantial portion of the business or loan
     portfolio of the assigning Lender or (z) if a Default has occurred and is
     continuing, any other assignee;

(B)  the Agent, provided, that, the consent of the Agent will not be necessary
     for assignments among Lenders or Affiliates of Lenders or in connection
     with any merger, consolidation, sale, transfer or other disposition of all
     or any substantial portion of the business or loan portfolio of the
     assigning Lender; and

(C)  the Issuing Bank.

(ii) Assignments shall be subject to the following additional conditions:

(A)  except in the case of an assignment to a Lender or an Affiliate of a Lender
     or an assignment of the entire remaining amount of the assigning Lender's
     Commitment or Loans of any Class, the amount of the Commitment or Loans of
     the assigning Lender subject to each such assignment (determined as of the
     date the Assignment and Assumption with respect to such assignment is
     delivered to the Agent) shall not be less than $5,000,000 unless each of
     the Administrative Borrower and the Agent otherwise consent, provided,
     that, no such consent of the Administrative Borrower shall be required if
     an Event of Default has occurred and is continuing;

(B)  after giving effect to any partial assignment, the assignor's Commitments
     and Revolving Credit Exposure shall not be less than $1,000,000;

<PAGE>


(C)  each partial assignment shall be made as an assignment of a proportionate
     part of all the assigning Lender's rights and obligations under this
     Agreement;

(D)  the parties to each assignment shall execute and deliver to the Agent an
     Assignment and Assumption, together with a processing and recordation fee
     of $3,500, in the case of fees payable to the Agent; and

(E)  the assignee, if it shall not be a Lender, shall deliver to the Agent an
     Administrative Questionnaire.

                  For the purposes of this Section 9.05(b), the term "Approved
Fund" has the following meaning:

                  "Approved Fund" means any Person (other than a natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender, or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

(i)      Subject to acceptance and recording thereof pursuant to Section
         9.05(b)(iv), from and after the effective date specified in each
         Assignment and Assumption the assignee thereunder shall be a party
         hereto and, to the extent of the interest assigned by such Assignment
         and Assumption, have the rights and obligations of a Lender under this
         Agreement, and the assigning Lender thereunder shall, to the extent of
         the interest assigned by such Assignment and Assumption, be released
         from its obligations under this Agreement (and, in the case of an
         Assignment and Assumption covering all of the assigning Lender's rights
         and obligations under this Agreement, such Lender shall cease to be a
         party hereto but shall continue to be entitled to the benefits of
         Sections 2.16, 2.17, 2.18 and 9.04). Any assignment or transfer by a
         Lender of rights or obligations under this Agreement that does not
         comply with this Section 9.05 shall be treated for purposes of this
         Agreement as a sale by such Lender of a participation in such rights
         and obligations in accordance with Section 9.05(c).

(ii) The Agent,  acting for this  purpose  as an agent of the  Borrowers,  shall
     maintain at one of its  offices a copy of each  Assignment  and  Assumption
     delivered  to it and a  register  for  the  recordation  of the  names  and
     addresses of the Lenders,  and the Commitment  of, and principal  amount of
     and  interest  owing on, the Loans owing to,  each  Lender  pursuant to the
     terms  hereof  from  time to time  (the  "Register").  The  entries  in the
     Register shall be conclusive,  -------- and the Borrowers,  the Agent,  the
     Issuing  Banks and the Lenders may treat each Person whose name is recorded
     in the Register  pursuant to the terms hereof as the absolute  owner of any
     Obligations  held by such  Person,  as  included in the  Register,  for all
     purposes of this  Agreement,  notwithstanding  notice to the contrary.  The
     Register shall be available for inspection by the Administrative  Borrower,
     the Issuing Banks and any Lender,  at any reasonable  time and from time to
     time upon reasonable prior notice.

<PAGE>


(iii) Upon its receipt of a duly completed Assignment and Assumption executed by
     an   assigning   Lender  and  an   assignee,   the   assignee's   completed
     Administrative Questionnaire (unless the assignee shall already be a Lender
     hereunder),  the  processing  and  recordation  fee  referred to in Section
     9.05(b)  and  any   written   consent  to  such   assignment   required  by
     --------------- Section 9.05(b), the Agent shall accept such Assignment and
     Assumption and record the information contained therein  --------------- in
     the  Register;  provided,  that,  if  either  the  assigning  Lender or the
     assignee shall have failed to make any -------- ---- payment required to be
     made by it pursuant to Section 2.06, 2.07, 2.08(d) or (e), 2.09(b), 2.20(d)
     or 9.04(c), the ------------ ---- ------- --- ------- ------- ------- Agent
     shall have no  obligation  to accept such  Assignment  and  Assumption  and
     record  the  information  therein  in the  Register  unless  and until such
     payment shall have been made in full,  together  with all accrued  interest
     thereon.  No assignment  shall be effective for purposes of this  Agreement
     unless it has been recorded in the Register as provided in this paragraph.

(c)  (i) Any Lender may,  without the consent of the Borrowers,  the Agent,  the
     Issuing Bank or the Swingline Lenders,  sell  participations to one or more
     banks or other  entities  (a  "Participant")  in all or a  portion  of such
     Lender's  rights and obligations  under this Agreement  (including all or a
     portion of its Commitment and the Loans owing to it);  provided,  that, (A)
     such Lender's obligations under this Agreement shall remain unchanged,  (B)
     such Lender shall remain solely responsible to the other parties hereto for
     the performance of such obligations,  and (C) the Borrowers, the Agent, the
     Issuing  Bank and the other  Lenders  shall  continue  to deal  solely  and
     directly  with such  Lender in  connection  with such  Lender's  rights and
     obligations under this Agreement.  Any agreement or instrument  pursuant to
     which a Lender sells such a  participation  shall  provide that such Lender
     shall  retain the sole right to enforce this  Agreement  and to approve any
     amendment,  modification  or waiver  of any  provision  of this  Agreement;
     provided,  that,  such agreement or instrument may provide that such Lender
     will not, without the consent of the  Participant,  agree to any amendment,
     modification  or waiver  described in the first proviso to Section  9.03(b)
     that  affects  such  Participant.   Subject  to  Section  9.05(c)(ii),  the
     Borrowers agree that each Participant ---------------  --------------------
     shall be entitled to the  benefits of Sections  2.17,  2.18 and 2.19 to the
     same  extent as if it were a Lender and had  acquired  --------------  ----
     ---- its interest by assignment  pursuant to Section 9.05(b). To the extent
     permitted by law, each Participant also shall be ----------------  entitled
     to the benefits of Section 9.09 as though it were a Lender,  provided  such
     Participant agrees to be subject to ------------- Section 2.20(c) as though
     it were a Lender. ---------------

(ii)     A Participant shall not be entitled to receive any greater payment
         under Section 2.17 or 2.19 than the applicable Lender would have been
         entitled to receive with respect to the participation sold to such
         Participant, unless the sale of the participation to such Participant
         is made with the Administrative Borrower's prior written consent. A
         Participant that would be a Non-U.S. Lender if it were a Lender shall
         not be entitled to the benefits of Section 2.19 unless the
         Administrative Borrower is notified of the participation sold to such
         Participant and such Participant agrees, for the benefit of the
         Borrowers, to comply with Section 2.19(e) as though it were a Lender.

<PAGE>



(d)      Any Lender may at any time pledge or assign a security interest in all
         or any portion of its rights under this Agreement to secure obligations
         of such Lender or an Affiliate of such Lender, including without
         limitation any pledge or assignment to secure obligations to a Federal
         Reserve Bank, and this Section 9.05 shall not apply to any such pledge
         or assignment of a security interest; provided, that, no such pledge or
         assignment of a security interest shall release a Lender from any of
         its obligations hereunder or substitute any such pledgee or assignee
         for such Lender as a party hereto.

SECTION 9.06 Survival. All covenants, agreements, representations and warranties
made by the Loan Parties in the Loan Documents and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Event of Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.17, 2.18, 2.19 and
9.04 and Article VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement or any provision
hereof.

SECTION 9.07 Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents and any separate letter agreements with respect to fees payable
to the Agent constitute the entire contract among the parties relating to the
subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agent and when the Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
facsimile or electronic scan shall be effective as delivery of a manually
executed counterpart of this Agreement.

SECTION 9.08 Severability. Any provision of any Loan Document held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions thereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

SECTION 9.09 Right of Setoff. If an Event of Default shall have occurred and be
continuing or if any Borrower or any other Loan Party becomes insolvent, however
evidenced, each Lender and each of its Affiliates is hereby authorized at any

<PAGE>

time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrowers or such
Loan Party against any of and all the Obligations held by such Lender,
irrespective of whether or not such Lender shall have made any demand under the
Loan Documents and although such obligations may be unmatured. The rights of
each Lender under this Section 9.09 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.

SECTION 9.10      Governing Law; Jurisdiction; Consent to Service of Process

(a)      THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
         CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND CONSTRUED IN
         ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO
         FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

(b)  EACH LOAN PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY  SUBMITS, FOR ITSELF
     AND ITS PROPERTY,  TO THE  NONEXCLUSIVE  JURISDICTION  OF ANY UNITED STATES
     FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION
     OR  PROCEEDING  ARISING OUT OF OR RELATING  TO ANY LOAN  DOCUMENTS,  OR FOR
     RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,  AND EACH OF THE PARTIES HERETO
     HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
     ANY SUCH ACTION OR PROCEEDING  MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
     STATE OR, TO THE EXTENT  PERMITTED BY LAW, IN SUCH FEDERAL  COURT.  EACH OF
     THE  PARTIES  HERETO  AGREES  THAT A FINAL  JUDGMENT  IN ANY SUCH ACTION OR
     PROCEEDING  SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER  JURISDICTIONS
     BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN
     THIS  AGREEMENT OR ANY OTHER LOAN DOCUMENT  SHALL AFFECT ANY RIGHT THAT ANY
     ADMINISTRATIVE  AGENT,  ISSUING BANK OR LENDER MAY OTHERWISE  HAVE TO BRING
     ANY  ACTION OR  PROCEEDING  RELATING  TO THIS  AGREEMENT  OR ANY OTHER LOAN
     DOCUMENT  AGAINST  ANY LOAN  PARTY OR ITS  PROPERTIES  IN THE COURTS OF ANY
     JURISDICTION.

(c)      Each Loan Party hereby irrevocably and unconditionally waives, to the
         fullest extent it may legally and effectively do so, any objection
         which it may now or hereafter have to the laying of venue of any suit,
         action or proceeding arising out of or relating to this Agreement or
         any other Loan Document in any court referred to in Section 9.10(b).
         Each of the parties hereto hereby irrevocably waives, to the fullest
         extent permitted by law, the defense of an inconvenient forum to the
         maintenance of such action or proceeding in any such court.
<PAGE>

(d)      Each party to this Agreement irrevocably consents to service of process
         in the manner provided for notices in Section 9.01. Nothing in this
         Agreement or any other Loan Document will affect the right of any party
         to this Agreement to serve process in any other manner permitted by
         law.

SECTION 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

SECTION 9.12 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

SECTION 9.13      Confidentiality

(a)  Each of the Agent,  the Issuing Bank and the Lenders  agree to maintain the
     confidentiality  of  the  Information  (as  defined  below),   except  that
     Information  may be  disclosed  (i) to its and its  Affiliates'  directors,
     officers,  employees and agents,  including accountants,  legal counsel and
     other  advisors  (it  being  understood  that  the  Persons  to  whom  such
     disclosure  is made will be  informed  of the  confidential  nature of such
     Information and instructed to keep such Information confidential),  (ii) to
     the  extent  requested  by any  regulatory  authority,  (iii) to the extent
     required by applicable  laws or  regulations  or by any subpoena or similar
     legal process, (iv) to any other party to this Agreement, (v) in connection
     with  the  exercise  of any  remedies  hereunder  or any  suit,  action  or
     proceeding  relating to this  Agreement  or any other Loan  Document or the
     enforcement of rights hereunder or thereunder, (vi) subject to an agreement
     containing  provisions  substantially the same as those of this Section, to
     (A) any assignee of or Participant  in, or any  prospective  assignee of or
     Participant in, any of its rights or obligations  under this Agreement,  or
     (B) any actual or prospective counterparty (or its advisors) to any swap or
     derivative  transaction relating to the Loan Parties and their obligations,
     (vii) with the  consent of the  Administrative  Borrower,  or (viii) to the
     extent such  Information  (A) becomes  publicly  available  other than as a
     result of a breach of this Section,  or (B) becomes available to any Agent,
     Issuing Bank or Lender on a non-confidential basis from a source other than
     the Borrowers.  For the purposes of this Section 9.13,  "Information" means
     all  information  received  from the  Borrowers  -------------  -----------
     relating  to  the  Borrowers  or  their  business,   other  than  any  such

<PAGE>

     information  that is  available  to any Agent,  Issuing Bank or Lender on a
     non-confidential  basis prior to  disclosure  by the  Borrowers;  provided,
     that, in the case of information  received -------- ---- from the Borrowers
     after the date hereof,  such information is clearly  identified at the time
     of  delivery  as   confidential.   Any  Person  required  to  maintain  the
     confidentiality  of  Information  as provided in this Section 9.13 shall be
     considered to  ------------  have complied with its  obligation to do so if
     such  Person  has  exercised  the  same  degree  of  care to  maintain  the
     confidentiality  of such Information as such Person would accord to its own
     confidential  information.  Notwithstanding  the  foregoing,  Agent  or any
     Lender  may  issue  and  disseminate  to  the  public  general  information
     describing this credit  facility,  including the names and addresses of the
     Borrowers and a general description of the Borrowers'  businesses,  and may
     (so  long  as the  Administrative  Borrower  has  previously  reviewed  and
     approved  the form of such  advertisement  or  promotional  materials)  use
     Borrowers' names in published advertising and other promotional materials.

(b)  In the event that Agent,  the Issuing Bank or any Lender receives a request
     or demand to disclose any confidential information pursuant to any subpoena
     or court order,  Agent, the Issuing Bank or any Lender, as the case may be,
     agrees (i) to the extent  permitted  by  applicable  law or if permitted by
     applicable  law, to the extent  Agent,  the Issuing Bank or any such Lender
     determines  in good faith that it will not create any risk of  liability to
     Agent, the Issuing Bank or any such Lender,  Agent, the Issuing Bank or any
     such Lender will promptly notify Administrative Borrower of such request so
     that  Administrative   Borrower  may  seek  a  protective  order  or  other
     appropriate  relief or remedy and (ii) if disclosure of such information is
     required,  disclose  such  information  and,  subject to  reimbursement  by
     Borrowers of Agent's,  Issuing Bank's or such Lender's expenses,  cooperate
     with  Administrative  Borrower in the reasonable efforts to obtain an order
     or other reliable assurance that confidential treatment will be accorded to
     such portion of the disclosed information which Administrative  Borrower so
     designates,  to the extent  permitted by applicable  law or if permitted by
     applicable law, to the extent Agent, Issuing Bank or such Lender determines
     in good  faith  that it will not  create  any risk of  liability  to Agent,
     Issuing Bank or such Lender.

SECTION 9.14 Several Obligations; Non-reliance; Violation of Law. The respective
obligations of the Lenders hereunder are several and not joint and the failure
of any Lender to make any Loan or perform any of its obligations hereunder shall
not relieve any other Lender from any of its obligations hereunder. Each Lender
hereby represents that it is not relying on or looking to any margin stock for
the repayment of the Borrowings provided for herein. Anything contained in this
Agreement to the contrary notwithstanding, neither the Issuing Bank nor any
Lender shall be obligated to extend credit to the Borrowers in violation of any
limitation or prohibition provided by any applicable statute or regulation.

SECTION 9.15      USA PATRIOT Act and OFAC.

(a)      Each Lender that is subject to the requirements of the Patriot Act
         hereby notifies the Borrowers that pursuant to the requirements of the
         Patriot Act, it is required to obtain, verify and record information
         that identifies the Borrowers, which information includes the names and
         addresses of the Borrowers and other information that will allow such
         Lender to identify the Borrowers in accordance with the Patriot Act.
<PAGE>

(b)  A Lender will not assign, sell  participations,  syndicate all or a portion
     of a Loan or any  interest  therein  to any Person who is (i) listed on the
     Specially  Designated  Nationals and Blocked Persons List maintained by the
     U.S.  Department  of Treasury  Office of Foreign  Assets  Control  ("OFAC")
     and/or on any other  similar list  maintained  by the OFAC  pursuant to any
     authorizing  statute,  Executive Order or regulation  (collectively,  "OFAC
     Laws  and  Regulations");  or (ii)  either  (A)  included  within  the term
     "designated  national" as defined in the Cuban Assets Control  Regulations,
     31 C.F.R.  Part 515, or (B) designated  under Sections 1(a),  1(b), 1(c) or
     1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published  September
     25, 2001) or similarly designated under any related enabling legislation or
     any other similar executive orders (collectively, the "Executive Orders").

SECTION 9.16 Disclosure. Each Loan Party and each Lender hereby acknowledges and
agrees that the Agent and/or the Affiliates from time to time may hold
investments in, make other loans to or have other relationships with any of the
Loan Parties and their respective Affiliates.

SECTION 9.17 Execution of Loan Documents. The Lenders hereby empower and
authorize the Agent, on behalf of the Lenders, to execute and deliver to the
Loan Parties the other Loan Documents and all related agreements, certificates,
documents, or instruments as shall be necessary or appropriate to effect the
purposes of the Loan Documents. Each Lender agrees that any action taken by the
Agent or the Required Lenders in accordance with the terms of this Agreement or
the other Loan Documents, and the exercise by the Agent or the Required Lenders
of their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders. The Lenders acknowledge that all of the Obligations hereunder
constitute one debt, secured pari passu by all of the Collateral.

SECTION 9.18 Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section 9.18 shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.19      Administrative Borrower; Joint and Several Liability.
                  ----------------------------------------------------

(a)  Each Borrower hereby  irrevocably  appoints Jaco Electronics,  Inc., as the
     borrowing agent and attorney-in-fact for all Borrowers (the "Administrative
     Borrower") which  appointment  shall remain in full force and effect unless

<PAGE>

     and until the Agent  ------------------------  shall  have  received  prior
     written  notice  signed by each  Borrower  that such  appointment  has been
     revoked  and  that  another  Borrower  has  been  appointed  Administrative
     Borrower.  Each Borrower  hereby  irrevocably  appoints and  authorizes the
     Administrative  Borrower (i) to provide the Agent, Issuing Bank and Lenders
     with all notices with respect to Borrowings and Letters of Credit  obtained
     for the benefit of any  Borrower  and all other  notices  and  instructions
     under this  Agreement  and (ii) to take such  action as the  Administrative
     Borrower deems  appropriate on its behalf to obtain  Borrowings and Letters
     of Credit and to exercise  such other powers as are  reasonably  incidental
     thereto to carry out the purposes of this Agreement.  It is understood that
     the handling of the Funding Accounts,  Collection Account, Blocked Accounts
     and Collateral of Borrowers in a combined fashion,  as more fully set forth
     herein, is done solely as an accommodation to Borrowers in order to utilize
     the  collective  borrowing  powers of Borrowers in the most  efficient  and
     economical manner and at their request,  and that no Agent, Issuing Bank or
     Lender shall incur any liability to any Borrower as a result  hereof.  Each
     Borrower  expects  to derive  benefit,  directly  or  indirectly,  from the
     handling of the Funding Accounts,  Collection Account, Blocked Accounts and
     the Collateral in a combined fashion since the successful operation of each
     Borrower  is  dependent  on the  continued  successful  performance  of the
     integrated  group. To induce the Agent,  Issuing Bank and Lenders to do so,
     and in  consideration  thereof,  each Borrower hereby jointly and severally
     agrees  to  indemnify  Agent,  Issuing  Bank  and each  Lender  and hold it
     harmless against any and all liability, expense, loss or claim of damage or
     injury,  made  against  such  Lender by any  Borrower or by any third party
     whosoever,  arising  from or incurred by reason of (a) the  handling of the
     Funding Accounts,  Collection  Account,  Blocked Accounts and Collateral of
     Borrowers  as  herein  provided,  (b) such  Agent,  Issuing  Bank or Lender
     relying on any  instructions  of the  Administrative  Borrower,  or (c) any
     other action taken by the Agent, Issuing Bank or Lenders hereunder or under
     the other Loan  Documents,  except that  Borrowers  will have no  liability
     under this Section 9.19 with ------------ respect to any liability that has
     been  finally  determined  by a court  of  competent  jurisdiction  to have
     resulted  solely from the gross  negligence  or willful  misconduct of such
     indemnified party.

(b)  Unless otherwise specifically provided herein, all references to "Borrower"
     or  "Borrowers"  herein  shall refer to and include  each of the  Borrowers
     separately and all  representations  contained herein shall be deemed to be
     separately made by each of them, and each of the covenants,  agreements and
     obligations  set forth  herein  shall be deemed to be the joint and several
     covenants,  agreements  and  obligations  of  them.  Any  notice,  request,
     consent, report or other information or agreement delivered to any Agent or
     Lender by the Borrowers shall be deemed to be ratified by, consented to and
     also delivered by the other Borrowers.  Each Borrower recognizes and agrees
     that each covenant and agreement of  "Borrower" or  "Borrowers"  under this
     Agreement  and the other Loan  Documents  shall  create a joint and several
     obligation  of the  Borrowers,  which may be  enforced  against  Borrowers,
     jointly or against each of the Borrowers separately.

(c)  All Loans to the  Borrowers,  upon  funding,  shall be deemed to be jointly
     funded  to and  received  by  the  Borrowers.  Each  Borrower  jointly  and

<PAGE>

     severally  agrees to pay, and shall be jointly and  severally  liable under
     this  Agreement for, all  Obligations  of the Borrowers,  regardless of the
     manner or  amount  in which  proceeds  of such  Loans are used,  allocated,
     shared, or disbursed by or among the Borrowers themselves, or the manner in
     which Agent and/or any Lender  accounts for such Loans or other  extensions
     of credit on its books and records.  Each Borrower  shall be liable for all
     amounts due to Agent and/or any Lender under this Agreement,  regardless of
     which  Borrower  actually  receives  Loans or other  extensions  of  credit
     hereunder or the amount of such Loans and extensions of credit  received or
     the manner in which Agent  and/or such  Lender  accounts  for such Loans or
     other  extensions  of  credit on its books  and  records.  Each  Borrower's
     Obligations  with respect to Loans and other  extensions  of credit made to
     it, and such  Borrower's  Obligations  arising as a result of the joint and
     several liability of such Borrower hereunder, with respect to Loans made to
     the other Borrowers hereunder,  shall be separate and distinct obligations,
     but all such  Obligations of the Borrowers shall be primary  obligations of
     such  Borrower.  The Borrowers  acknowledge  and  expressly  agree with the
     Agent,  the  Issuing  Bank  and each  Lender  that the  joint  and  several
     liability  of each  Borrower is required  solely as a condition  to, and is
     given  solely  as  inducement  for  and  in  consideration  of,  credit  or
     accommodations  extended or to be extended  under the Loan Documents to any
     or all of the other  Borrowers.  Each  Borrower's  obligations  under  this
     Agreement  and as an  obligor  under  the  Collateral  Documents  shall  be
     separate and distinct  obligations.  Upon any Event of Default,  the Agents
     may proceed directly and at once,  without notice,  against any Borrower to
     collect  and recover the full  amount,  or any portion of the  Obligations,
     without first proceeding against any other Borrower or any other Person, or
     against any  security or  collateral  for the  Obligations.  Each  Borrower
     consents and agrees that the Agent shall be under no  obligation to marshal
     any assets in favor of any  Borrower or against or in payment of any or all
     of the Obligations.

(d)      With respect to any Borrower's Obligations arising as a result of the
         joint and several liability of the Borrowers hereunder with respect to
         Loans or other extensions of credit made to any of the other Borrowers
         hereunder, such Borrower waives, until the Obligations shall have been
         indefeasibly paid in full, the Commitments and this Agreement shall
         have been terminated, any right to enforce any right of subrogation or
         any remedy which Agent and/or any Lender now has or may hereafter have
         against any other Borrower, any endorser or any guarantor of all or any
         part of the Obligations, and any benefit of, and any right to
         participate in, any security or collateral given to Agent and/or any
         Lender to secure payment of the Obligations or any other liability of
         any Borrower to Agent and/or any Lender.

(e)  Subject  to  Section  9.19(d),  to the extent  that any  Borrower  shall be
     required to pay a portion of the Obligations which  ----------------  shall
     exceed the amount of Loans  other  extensions  of credit  received  by such
     Borrower and all interest,  costs,  fees and expenses  attributable to such
     Loans or other extensions of credit, then such Borrower shall be reimbursed
     by the other Borrowers for the amount of such excess.  This Section 9.19(e)
     is   intended   only  to  define   the   relative   rights  of   Borrowers,
     ----------------  and nothing set forth in this Section 9.19(e) is intended
     or  shall   impair  the   obligations   of  each   Borrower,   jointly  and
     ----------------  severally,  to pay to Agent, the Issuing Bank and Lenders
     the  Obligations  as and when the same  shall  become  due and  payable  in
     accordance with the terms hereof.  Notwithstanding anything to the contrary

<PAGE>

     set forth in this Section 9.19(e) or any ----------------  other provisions
     of  this  Agreement,  it is the  intent  of the  parties  hereto  that  the
     liability  incurred by each Borrower in respect of the  Obligations  of the
     other  Borrowers  (and any Lien  granted by each  Borrower  to secure  such
     Obligations), not constitute a fraudulent conveyance or fraudulent transfer
     under  the  provisions  of  any  applicable  law  of  any  state  or  other
     governmental unit ("Fraudulent Conveyance").  Consequently,  each Borrower,
     Agent, the Issuing Bank and each Lender hereby ---------------------- agree
     that if a court of competent jurisdiction determines that the incurrence of
     liability  by any  Borrower  in  respect  of the  Obligations  of any other
     Borrower (or any Liens granted by such Borrower to secure such Obligations)
     would,  but for the  application of this sentence,  constitute a Fraudulent
     Conveyance,  such liability (and such Liens) shall be valid and enforceable
     only to the maximum  extent that would not cause the same to  constitute  a
     Fraudulent  Conveyance,  and this  Agreement  and the other Loan  Documents
     shall  automatically be deemed to have been amended  accordingly,  nunc pro
     tunc.

(f)      Each Borrower's obligation to pay and perform the Obligations shall be
         absolute, unconditional and irrevocable, and shall be paid and
         performed strictly in accordance with the terms of this Agreement under
         any and all circumstances whatsoever and irrespective of (i) any lack
         of validity or enforceability of this Agreement, or any term or
         provision therein, as to any other Borrower, or (ii) any other event or
         circumstance whatsoever, whether or not similar to any of the
         foregoing, that might, but for the provisions of this Section,
         constitute a legal or equitable discharge of, or provide a right of
         setoff against, any Borrower's obligations hereunder.

SECTION 9.20      Subordination and Contribution.

(a)  Each Borrower hereby agrees that any Indebtedness of any other Borrower now
     or hereafter owing to such Borrower,  whether heretofore,  now or hereafter
     created (the "Borrower  Subordinated  Debt"), is hereby subordinated to all
     of  the  Obligations   ----------------------------  and  that,  except  as
     permitted  under Section 6.9, the Borrower  Subordinated  Debt shall not be
     paid in whole or in part until  ----------- the Obligations  have been paid
     in full and this Agreement is terminated and of no further force or effect.
     No  Borrower  shall  accept any  payment  of or on account of any  Borrower
     Subordinated  Debt at any  time in  contravention  of the  foregoing.  Each
     payment on the Borrower  Subordinated  Debt received in violation of any of
     the  provisions  hereof  shall be  deemed  to have  been  received  by such
     Borrower as trustee  for the Secured  Parties and shall be paid over to the
     Agent  immediately  on account of the  Obligations,  but without  otherwise
     affecting in any manner such Borrower's liability hereunder.  Each Borrower
     agrees to file all  claims  against  the  Borrower  from whom the  Borrower
     Subordinated  Debt is owing in any bankruptcy or other  proceeding in which
     the  filing  of  claims  is  required  by law in  respect  of any  Borrower
     Subordinated  Debt,  and  the  Agent  shall  be  entitled  to all  of  such
     Borrower's  rights  thereunder.  If for any reason a Borrower fails to file
     such claim at least ten Business  Days prior to the last date on which such
     claim should be filed, such Borrower hereby irrevocably  appoints the Agent

<PAGE>

     as its true and lawful attorney-in-fact, and the Agent is hereby authorized
     to act as  attorney-in-fact  in such Borrower's name to file such claim or,
     in the Agent's discretion, to assign such claim to and cause proof of claim
     to be filed in the name of the  Agent or its  nominee.  In all such  cases,
     whether in administration,  bankruptcy or otherwise,  the person or persons
     authorized to pay such claim shall pay to the Agent the full amount payable
     on the claim in the proceeding,  and, to the full extent necessary for that
     purpose,  each Borrower  hereby assigns to the Agent all of such Borrower's
     rights to any payments or  distributions  to which such Borrower  otherwise
     would be entitled.  If the amount so paid is greater  than such  Borrower's
     liability  hereunder,  the Agent  shall pay the excess  amount to the party
     entitled thereto.  In addition,  each Borrower hereby irrevocably  appoints
     the Agent as its attorney-in-fact to exercise all of such Borrower's voting
     rights in  connection  with any  bankruptcy  proceeding or any plan for the
     reorganization of the Borrower from whom the Borrower  Subordinated Debt is
     owing.

(b)  Additionally,  to the extent that any  Borrower  shall be required to pay a
     portion of the Obligations which shall exceed the amount of loans, advances
     or other  extensions of credit  received by such Borrower and all interest,
     costs,  fees and  expenses  attributable  to such loans,  advances or other
     extensions of credit,  then such Borrower  shall be reimbursed by the other
     Borrowers for the amount of such excess.  This Section  9.20(b) is intended
     only to define  the  relative  rights of  Borrowers,  ----------------  and
     nothing set forth in this  Section  9.20(b) is intended or shall impair the
     obligations of each Borrower,  jointly and ----------------  severally,  to
     pay to Agent and Lenders the  Obligations as and when the same shall become
     due and  payable  in  accordance  with the  terms  hereof.  Notwithstanding
     anything to the  contrary  set forth in this  Section  9.20(b) or any other
     provisions  of  ----------------  this  Agreement,  it is the intent of the
     parties  hereto that the liability  incurred by each Borrower in respect of
     the  Obligations  of the  other  Borrowers  (and any Lien  granted  by each
     Borrower  to  secure  such   Obligations),   not  constitute  a  fraudulent
     conveyance or fraudulent  transfer  under the  provisions of any applicable
     law of any  state or other  governmental  unit  ("Fraudulent  Conveyance").
     Consequently, each Borrower, each Agent and the Lender hereby agree that if
     a court  of  competent  jurisdiction  determines  that  the  incurrence  of
     liability  by any  Borrower  in  respect  of the  Obligations  of any other
     Borrower (or any Liens granted by such Borrower to secure such Obligations)
     would,  but for the  application of this sentence,  constitute a Fraudulent
     Conveyance,  such liability (and such Liens) shall be valid and enforceable
     only to the maximum  extent that would not cause the same to  constitute  a
     Fraudulent  Conveyance,  and this  Agreement  and the other Loan  Documents
     shall  automatically be deemed to have been amended  accordingly,  nunc pro
     tunc.

(c)  If for the purpose of  obtaining  judgment in any court it is  necessary to
     convert a sum due from any Borrower under any Loan Document in the currency
     expressed to be payable in any Loan  Document  (the  "specified  currency")
     into another currency, the parties hereto agree, to the fullest extent that
     they may effectively do so, that the rate of exchange used shall be that at
     which in accordance with normal banking procedures the Agent could purchase
     the  specified  currency  with such other  currency at the Agent's New York
     office at 11:00 A.M.  (Eastern  time) on the Business Day preceding that on
     which final judgment is given.  The obligations of each Borrower in respect
     of any sum due to any Lender or the Agent  under any Loan  Document  shall,
     notwithstanding  any  judgment  in a  currency  other  than  the  specified

<PAGE>

     currency,  be  discharged  only  to the  extent  that on the  Business  Day
     following  receipt by such  Lender or the Agent (as the case may be) of any
     sum adjudged to be so due in such other  currency  such Lender or the Agent
     (as the case  may be) may in  accordance  with  normal  banking  procedures
     purchase the specified currency with such other currency.  If the amount of
     the specified  currency so purchased is less than the sum originally due to
     such Lender or the Agent,  as the case may be, in the  specified  currency,
     each Borrower agrees,  to the fullest extent that it may effectively do so,
     as  a  separate  obligation  and  notwithstanding  any  such  judgment,  to
     indemnify such Lender or the Agent, as the case may be, against such loss.

                            [SIGNATURE PAGES FOLLOW]


<PAGE>



 Credit Agreement Signature Page




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

                              JACO ELECTRONICS, INC.


                              By: /s/ Jeffrey D. Gash
                                  ----------------------------------------
                              Name:    Jeffrey D. Gash
                                    --------------------------------------
                              Title: CFO
                                     -------------------------------------


                           INTERFACE ELECTRONICS CORP.


                                 By: /s/ Jeffrey D. Gash
                                     ----------------------------------------
                                 Name:    Jeffrey D. Gash
                                       --------------------------------------
                                 Title: EVP
                                        -------------------------------------



<PAGE>



                          THE CIT GROUP/BUSINESS CREDIT, INC., individually, as
                           Agent, Lender and Swingline Lender


                          By: /s/ Frank Bertelle
                                ----------------------------------------
                          Name:    Frank Bertelle
                                ----------------------------------------
                          Title: Sr. Vice President
                                ----------------------------------------



<PAGE>


                        THE CIT GROUP/BUSINESS CREDIT, INC., individually, as
                        Issuing Bank


                        By: /s/ Frank Bertelle
                                ----------------------------------------
                        Name:   Frank Bertelle
                                ----------------------------------------
                        Title:  Sr. Vice President
                                ----------------------------------------




<PAGE>





                                      Annex I


                               COMMITMENT SCHEDULE


                         Lender                         Revolving Commitment
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
The CIT Group/Business Credit, Inc.                             $55,000,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total                                                           $55,000,000
-------------------------------------------------------------------------------