Exhibit 10.2


                                 LOAN AGREEMENT

                                            Dated as of January 7, 1997


     HIRSCH  INTERNATIONAL  CORP., a Delaware  corporation  having its principal
place of  business at 200  Wireless  Boulevard,  Hauppauge,  New York 11788 (the
"Borrower"), HAPL LEASING CO., INC., a New York corporation having its principal
place of business at 200 Wireless Boulevard, Hauppauge, New York 11788 ("HAPL"),
SEWING  MACHINE  EXCHANGE,  INC., an Illinois  corporation  having its principal
place of  business  at 1847  South  Michigan  Avenue,  Chicago,  Illinois  60616
("SMX"),  PULSE  MICROSYSTEMS  LTD., an Ontario,  Canada  corporation having its
principal place of business at 2660 Meadowvale Boulevard,  Unit 10, Mississauga,
Ontario,  Canada L5N6M6 ("Pulse") and SEDECO,  INC., a Texas corporation  having
its  principal  place of business at 1124 W. Fuller  Avenue,  Fort Worth,  Texas
76115 ("Sedeco")(HAPL,  SMX, Pulse and Sedeco being individually,  a "Guarantor"
and collectively,  the  "Guarantors"),  THE BANK OF NEW YORK, a New York banking
organization,  having an office at 1401 Franklin  Avenue,  Garden City, New York
11530  ("BNY" or a "Bank")  FLEET BANK,  N.A., a national  banking  association,
having an office at 300 Broad  Hollow  Road,  Melville,  New York  ("Fleet" or a
"Bank") and THE BANK OF NEW YORK,  as agent for the Banks (the  "Agent")  hereby
agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

     SECTION  1.01.  Certain  Defined  Terms.  As used in  this  Agreement,  the
following  terms shall have the following  meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

     "ABR  Applicable  Margin" shall have the meaning set forth in Sections 2.04
and 2.13 of this Agreement.

     "Adjusted  LIBOR Rate" means,  with respect to any Eurodollar  Loan for any
Interest  Period,  an interest rate per annum  (rounded,  if not already a whole
multiple  of 1/100 of one  (.01%)  percent  to the  nearest  1/100 of one (.01%)
percent)  determined  by the Agent to be equal to the  quotient of (a) the LIBOR
Rate divided by (b) a percentage  equal to 100% minus the  Eurocurrency  Reserve
Requirement  as determined  by the Agent on the date the Adjusted  LIBOR Rate is
determined.

     "Affiliate"  means,  as to  any  Person  (i) a  Person  which  directly  or
indirectly controls,  or is controlled by, or is under common control with, such
Person;  (ii) a Person which directly or indirectly  beneficially  owns or holds
ten (10%)  percent or more of any class of voting stock of, or ten (10%) percent
or more of the equity interest in, such Person; or (iii) a Person ten (10%)


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percent or more of the voting  stock of which,  or ten (10%) or more of the
equity interest of which, is directly or indirectly  beneficially  owned or held
by such Person.  The term control means the possession,  directly or indirectly,
of the power to direct or cause the direction of the  management and policies of
a Person,  whether through the ownership of voting securities,  by contract,  or
otherwise.

     "Agent"  means  The Bank of New York,  or any bank  which  succeeds  to the
position of Agent, as provided in this Agreement.

     "Aggregate  Outstandings"  means,  at any time,  the  aggregate  of (i) the
principal amount of outstanding Revolving Credit Loans and (ii) L/C Exposure.

     "Agreement" means this Loan Agreement, as amended, supplemented or modified
from time to time.

     "Alternate Base Rate" means,  for any day, an interest rate per annum equal
to the higher of (i) the Prime Rate in effect on such day (computed on the basis
of the actual  number of days elapsed  over a year of 365/366  days) or (ii) the
Federal Funds  Effective  Rate in effect on such day plus 1/2 of 1% (computed on
the basis of the actual  number of days  elapsed  over a year of 360 days).  For
purposes of this Agreement any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds  Effective Rate shall be effective on the
effective  date of such change in the Prime Rate or the Federal Funds  Effective
Rate, respectively.  The Agent shall use its best efforts to notify the Borrower
of any change in the  Alternate  Base Rate,  but any  failure of the Agent to so
notify the Borrower shall not void or otherwise delay the  effectiveness  of the
change in the  Alternate  Base  Rate.  If for any  reason  the Agent  shall have
determined (which  determination shall be conclusive absent manifest error) that
it is unable to  ascertain  the  Federal  Funds  Effective  Rate for any reason,
including,  without limitation,  the inability or failure of the Agent to obtain
sufficient  bids or  publications  in  accordance  with the terms  thereof,  the
Alternate  Base Rate shall be  determined  without  regard to clause (ii) of the
first  sentence of this  definition,  as  appropriate,  until the  circumstances
giving rise to such inability no longer exist.

     "Alternate  Base Rate Loan" means a Loan bearing  interest at the Alternate
Base Rate.

     "Arranger" means BNY Capital Markets, Inc.

     "Bank" or "Banks" means one or more, as the context requires, of BNY, Fleet
and each other lender which becomes a party to this Agreement.


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     "BNY  Existing  Facility"  means the line of credit made  available  to the
Borrower by BNY prior to the date of this Agreement.

     "BNY Existing Term Loan  Agreement"  means the Term Loan Agreement dated as
of June 10, 1996 among the Borrower, HAPL, Pulse, SMX, BNY as Agent, and BNY and
Fleet as lending banks, as it may be amended or supplemented from time to time.

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

     "Business  Day" means a day of the year on which banks are not  required or
authorized to close in New York City, provided that, if the relevant day relates
to a Eurodollar Loan, an Interest Period, or notice with respect to a Eurodollar
Loan,  the term  "Business  Day"  shall mean a day on which  dealings  in dollar
deposits are also carried on in the London  interbank  market and banks are open
for business in London.

     "Capital  Lease"  means a lease which has been or should be, in  accordance
with GAAP, capitalized on the books of the lessee.

     "Commitment" means, with respect to each Bank, the aggregate obligations of
such Bank to (i) make  Revolving  Credit Loans to the  Borrower  pursuant to the
terms and conditions of the Agreement and (ii)  participate in Letters of Credit
issued pursuant to the terms and conditions of this  Agreement,  in each case in
the aggregate Dollar amount set forth in Schedule 1.01-A annexed hereto.

     "Commitment  Letter"  means  the  letter  from BNY to the  Borrower,  dated
November 21, 1996  pursuant to which BNY agreed to extend sixty (60%) percent of
a credit  facility as described  therein to the Borrower and the Arranger agreed
to use its  best  efforts  to  arrange,  structure  and  syndicate  such  credit
facility.

     "Consolidated Affiliates" means, as to any Person, those Affiliates of such
Person  which are  consolidated  with such  Person in the  financial  statements
delivered pursuant to Section 5.01(b).

     "Consolidated  Capital Expenditures" means, as to any Person, the aggregate
amount of any  expenditures  (including  purchase  money Debt or purchase  money
Liens) by such  Person and its  Consolidated  Affiliates  for assets  (including
fixed assets  acquired under Capital  Leases) which it is  contemplated  will be
used or  usable in  fiscal  years  subsequent  to the year of  acquisition,  all
computed and consolidated in accordance with GAAP.

     "Consolidated  Current  Liabilities" means, as to any Person, the aggregate
amount  of all  liabilities  of  such  Person  and its  Consolidated  Affiliates
(including tax and other proper accruals)

                                      - 3 -

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which would be properly classified as current liabilities, all computed and
consolidated in accordance with GAAP.

     "Consolidated  Funded Debt" means, as to the Borrower and its  Consolidated
Affiliates,   the  aggregate  of  the  Funded  Debt  of  the  Borrower  and  its
Consolidated Affiliates, computed and consolidated in accordance with GAAP.

     "Consolidated  Tangible Net Worth" means,  as to any Person,  the excess of
(i) such Person's Consolidated Total Assets, less all intangible assets properly
classified as such in accordance with GAAP,  including,  but without limitation,
patents,  patent  rights,  trademarks,  trade  names,  franchises,   copyrights,
licenses,  permits and  goodwill,  over (ii) such  Person's  Consolidated  Total
Liabilities.

     "Consolidated Total Assets" means, as to any Person, the aggregate net book
value of the assets of such  Person and its  Consolidated  Affiliates  after all
appropriate  adjustments in accordance with GAAP (including without  limitation,
reserves for doubtful receivables,  obsolescence,  depreciation and amortization
and excluding the amount of any write-up or revaluation of any asset).

     "Consolidated  Total  Liabilities"  means,  as to  any  Person,  all of the
liabilities of such Person and its Consolidated Affiliates,  including all items
which, in accordance  with GAAP,  would be included on the liability side of the
balance sheet (other than capital stock,  capital surplus and retained earnings)
computed and consolidated in accordance with GAAP.

     "Debt" means, as to any Person,  (i) all  indebtedness or liability of such
Person for borrowed  money;  (ii)  indebtedness  of such Person for the deferred
purchase  price of property or services  (including  trade  obligations);  (iii)
obligations  of such  Person as a lessee  under  Capital  Leases;  (iv)  current
liabilities  of such Person in respect of  unfunded  vested  benefits  under any
Plan;  (v)  obligations  of such Person under  letters of credit  issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities;  (vii) all  guaranties,  endorsements  (other than for collection or
deposit in the ordinary course of business) and other contingent  obligations to
purchase,  to provide funds for payment,  to supply funds to invest in any other
Person,  or  otherwise to assure a creditor  against  loss;  (viii)  obligations
secured  by any  Lien on  property  owned  by  such  Person  whether  or not the
obligations have been assumed;  and (ix) all other liabilities recorded as such,
or which should be recorded as such,  on such Person's  financial  statements in
accordance with GAAP.

     "Default"  means  any of the  events  specified  in  Section  6.01  of this
Agreement,  whether  or not any  requirement  for notice or lapse of time or any
other condition has been satisfied.

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

     "EBITDA" means, as to the Borrower and its Consolidated  Affiliates for any
period, the sum of (i) net income (excluding  extraordinary  gains and excluding
extraordinary  losses), (ii) interest expense,  (iii) depreciation expense, (iv)
amortization of intangible assets and (v) federal,  state and local income taxes
paid, in each case measured for the Borrower and its Consolidated  Affiliates on
a consolidated  basis for such period,  computed and  consolidated in accordance
with GAAP.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended  from  time to time,  the  regulations  promulgated  thereunder  and the
published interpretations thereof as in effect from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
which  together with any other Person would be treated,  with such Person,  as a
single employer under Section 4001 of ERISA.

     "Eurocurrency  Reserve  Requirement"  means,  with  respect to the Adjusted
LIBOR Rate for an Interest Period,  the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal, supplemental
or emergency  reserves)  are required to be  maintained at the beginning of such
Interest  Period  under  any  regulation  (including,  but  without  limitation,
Regulation D) promulgated by the Board of Governors (or any successor thereto or
other  governmental  authority having  jurisdiction over the Agent) by the Agent
against  "Eurocurrency  liabilities" (as such term is used in Regulation D), but
without  benefit  or credit for  proration,  exemptions  or  offsets  that might
otherwise  be  available  to the Agent  from time to time  under  Regulation  D.
Without  limiting  the  effect  of  the  foregoing,   the  Eurocurrency  Reserve
Requirement  shall reflect any other  reserves  required to be maintained by the
Agent  against  (1) any  category  of  liabilities  that  includes  deposits  by
reference  to which the  Adjusted  LIBOR  Rate is to be  determined;  or (2) any
category of extension of credit or other  assets that include  loans  bearing an
Adjusted LIBOR Rate.

     "Eurodollar  Loan"  means a Loan  bearing  interest  at a rate based on the
Adjusted LIBOR Rate in accordance with the provisions of Article II hereof.

     "Event of Default"  means any of the events  specified  in Section  6.01 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.

     "Existing  Letters of Credit"  means those  letters of credit issued by BNY
under the BNY Existing Facility as described in

                                      - 5 -

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     Schedule  1.01-B  annexed  hereto  and  which  are,  on the  date  of  this
Agreement, unexpired and on which no presentment has been made.

     "Federal  Funds  Effective  Rate"  means,  for any  period,  a  fluctuating
interest  rate per annum equal for each day during  such period to the  weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers,  as published for such
day (or, if such day is not a Business Day for the next preceding  Business Day)
by the Federal  Reserve  Bank of New York,  or, if such rate is not so published
for any day which is a Business Day, the average of the  quotations for such day
on such transactions  received by the Agent from three (3) federal funds brokers
of recognized standing selected by it.

     "Fee  Letter"  means the letter  dated  November  21,  1996 from BNY to the
Borrower in which the Borrower agreed to pay certain fees in connection with the
credit facility as described therein.

     "Fixed  Charge   Coverage   Ratio"  means,  as  to  the  Borrower  and  its
Consolidated  Affiliates for any period, the ratio of (i) the difference between
(a)  EBITDA  for  such  period  and  (b)  the  sum of (x)  Consolidated  Capital
Expenditures  for  such  period  and (y) the  amount  of  treasury  stock of the
Borrower  acquired during such period to (ii) the sum of (a) the current portion
(as of the  last  day of such  period)  of long  term  Debt  (including  Capital
Leases),  (b) interest expense for such period and (c) dividends payable in cash
during such period on preferred  stock described in clause (v) of the definition
of "Funded Debt".  The Fixed Charge  Coverage Ratio shall be measured and tested
at the end of each fiscal quarter and for a period  covering the four (4) fiscal
quarters then ended.

     "Funded  Debt" means,  as to any Person,  such Debt of such Person which is
(i) all  indebtedness or liability for borrowed money;  (ii) all indebtedness or
liability  for  the  deferred  purchase  price  of  property   (excluding  trade
obligations);  (iii) all obligations as a lessee under Capital Leases;  (iv) all
obligations to reimburse the Issuing Bank for the amount of all unmatured drafts
accepted or deferred payment  obligations  incurred under Letters of Credit, and
(v) all  liabilities  of such Person under any  preferred  stock  which,  at the
option of the holder or upon the  occurrence of one or more certain  events,  is
redeemable by such holder, or which, at the option of such holder is convertible
into Debt.

     "Funded  Debt  to  EBITDA  Ratio"  means,   as  to  the  Borrower  and  its
Consolidated  Affiliates for any period,  the ratio of (i)  Consolidated  Funded
Debt (as of the last day of such  period) to (ii)  EBITDA for such  period.  The
Funded  Debt to EBITDA  Ratio  shall be  measured  and tested at the end of each
fiscal quarter and, in

                                      - 6 -

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the case of EBITDA, for a period covering the four (4) fiscal quarters then
ended.

     "GAAP" means Generally Accepted Accounting Principles.

     "Generally Accepted  Accounting  Principles" means those generally accepted
accounting principles and practices which are recognized as such by the American
Institute  of  Certified  Public   Accountants   acting  through  the  Financial
Accounting  Standards  Board  ("FASB") or through  other  appropriate  boards or
committees  thereof and which are consistently  applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting  principle or practice  required to be changed by the
FASB (or other  appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting  principle or practice may be so changed. Any
dispute or  disagreement  between  the  Borrower  and the Agent  relating to the
determination of Generally Accepted Accounting  Principles shall, in the absence
of manifest  error,  be  conclusively  resolved for all  purposes  hereof by the
written opinion with respect thereto, delivered to the Agent, of the independent
accountants  selected by the  Borrower and approved by the Agent for the purpose
of auditing the periodic financial statements of the Borrower.

     "Guarantor" or Guarantors" means one or more of HAPL, SMX, Pulse or Sedeco,
and any other Person  required to guarantee the  obligations  of the Borrower in
accordance with Section 5.01(k) of this Agreement.

     "Guaranty" or  "Guaranties"  means the guaranty or guaranties  executed and
delivered by the Guarantors  pursuant to Section  3.01(h) or Section  5.01(k) of
this Agreement.

     "HAPL Facility" means a revolving credit facility in the maximum  principal
amount of $5,000,000.00 which may be made available by BNY and one or more other
banks to HAPL.

     "Hazardous  Materials" includes,  without limit, any flammable  explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances,  or related  materials  defined in the  Comprehensive  Environmental
Response,  Compensation,  and  Liability  Act of 1980,  as  amended  (42  U.S.C.
Sections 9601, et seq.), the Hazardous Materials  Transportation Act, as amended
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C.  Sections 9601 et. seq.), and in the regulations  adopted and
publications  promulgated pursuant thereto, or any other federal, state or local
environmental law, ordinance, rule or regulation.

     "Interest  Determination  Date" means the date on which an  Alternate  Base
Rate Loan is converted to a Eurodollar Loan and, in

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the case of a  Eurodollar  Loan,  the last day of the  applicable  Interest
Period.

     "Interest  Payment Date" means (i) as to each  Eurodollar  Loan, (a) in the
case of Eurodollar  Loans with  Interest  Periods of less than three (3) months,
the last day of such  Interest  Period and (b) in the case of  Eurodollar  Loans
with Interest Periods of three (3) months or more, the last Business Day of each
calendar  quarter during the applicable  Interest Period and the last day of the
applicable  Interest  Period and (ii) as to each  Alternate  Base Rate Loan, the
last Business Day of each month.

     "Interest Period" means as to any Eurodollar Loan, the period commencing on
the date of such Eurodollar Loan and ending on the numerically corresponding day
in the calendar month that is one, two, three or six months  thereafter,  as the
Borrower  may elect (or, if there is no  numerically  corresponding  day, on the
last Business Day of such month); provided, however, (i) that no Interest Period
shall end  later  than the  Maturity  Date or the Term Loan  Maturity  Date,  as
applicable,  (ii) if any Interest Period would end on a day which shall not be 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, (iii) no Interest Period in respect of a Eurodollar Loan
representing a portion of the principal  required to be paid in accordance  with
Section 2.13 may be selected  unless the  outstanding  Alternate Base Rate Loans
and Eurodollar Loans for which the relevant  Interest Periods end on or prior to
the date of such payment are in an aggregate  amount which will be sufficient to
make such payment,  (iv) interest  shall accrue from and including the first day
of such Interest  Period to but excluding the date of payment of such  interest,
and (v) no Interest  Period of particular  duration with respect to a Eurodollar
Loan may be selected by the Borrower if the Agent determines,  in its sole, good
faith  discretion,  that Eurodollar Loans with such maturities are not generally
available.

     "Investment"  means any stock,  evidence  of Debt or other  security of any
Person,  any loan,  advance,  contribution  of capital,  extension  of credit or
commitment therefor,  including without limitation the guaranty of loans made to
others (except for current trade and customer  accounts  receivable for services
rendered in the  ordinary  course of business  and  payable in  accordance  with
customary  trade terms in the ordinary  course of business)  and any purchase of
(i) any security of another  Person or (ii) any business or  undertaking  of any
Person  or any  commitment  or option  to make any such  purchase,  or any other
investment.

     "Issuing Bank" means BNY.


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     "Letters of Credit"  means trade  letters of credit and standby  letters of
credit  issued by the Issuing Bank for the account of the  Borrower  pursuant to
the terms and conditions of this Agreement. Letters of Credit shall include, for
all purposes under this Agreement, Existing Letters of Credit.

     "L/C Documents"  means all documents  required to be executed and delivered
by the  Borrower  in  connection  with the  issuance  of  Letters  of  Credit in
accordance with the usual and customary practices of the Issuing Bank.

     "L/C  Exposure"  means,  at any  time,  the  aggregate  of (i)  the  amount
available to be drawn on all outstanding  Letters of Credit,  (ii) the aggregate
amount  of all  unmatured  drafts  accepted  and  deferred  payment  obligations
incurred  by the  Issuing  Bank  under any  Letters  of Credit  (including  such
unmatured  drafts accepted and/or deferred payment  obligations  incurred by BNY
prior to the date of this Agreement and as identified on Schedule 1.01-C annexed
hereto), and (iii) the amount of any payments made by the Issuing Bank under any
Letters of Credit that has not been reimbursed by the Borrower.

     "LIBOR Applicable Margin" shall have the meaning set forth in Sections 2.04
and 2.13 of this Agreement.

     "LIBOR Rate" means the rate per annum (rounded upwards, if necessary to the
nearest one-tenth (1/10th) of one (1%) percent quoted  approximately  11:00 a.m.
London time by the Agent two (2) Business Days prior to the  requested  Interest
Period,  for the offering by the Agent to prime  commercial  banks in the London
interbank market of dollar deposits in immediately available funds for a period,
and in an amount,  comparable  to such Interest  Period and principal  amount of
such Eurodollar Loan, respectively.

     "Lien"  means any  mortgage,  deed of  trust,  pledge,  security  interest,
hypothecation,  assignment, deposit arrangement, encumbrance, lien (statutory or
other),  or preference,  priority,  or other security  agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing,  and  the  filing  of  any  financing  statement  under  the  Uniform
Commercial  Code or comparable  law of any  jurisdiction  to evidence any of the
foregoing.

     "Loan" or Loans" means  Revolving  Credit Loans and Term Loans,  or both as
the  context  requires,  and may  refer to  Alternate  Base  Rate  Loans  and/or
Eurodollar Loans, as the context requires.

     "Loan Documents" means this Agreement,  the Notes, the Guaranties,  the L/C
Documents, the Commitment Letter, the Fee

                                      - 9 -

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     Letter  and any other  document  executed  or  delivered  pursuant  to this
Agreement.

     "Material  Adverse Change" means, as to any Person,  (i) a material adverse
change in the financial condition, business,  operations,  properties or results
of operations of such Person or (ii) any event or occurrence  which could have a
material adverse effect on the ability of such Person to perform its obligations
under the Loan Documents.

     "Maturity Date" means January 7, 2000.

     "Multiemployer  Plan" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any ERISA Affiliate.

     "Note" or "Notes"  means one or more of the  Revolving  Credit Notes or the
Term Loan Notes as the context requires.

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

     "Permitted  Acquisition"  means  an  acquisition  by  the  Borrower  or any
Subsidiary by merger,  consolidation  or by purchase of a voting majority of the
stock of  another  Person or the  purchase  of all or  substantially  all of the
assets of another  Person  (or of a division  or other  operating  component  of
another Person) (an "Acquisition") if all of the following conditions are met:

     (i) The  majority of such  Person's  revenue is derived from one or more of
the following lines of business:  (a) distribution of embroidery equipment,  (b)
embroidery  related  software,  (c)  distribution  of embroidery  supplies,  (d)
embroidery design, and/or (e) embroidery equipment servicing;

     (ii) The Agent and the Banks shall have  received a  certificate  signed by
the chief  financial  officer of the Borrower to the effect that (and  including
calculations  indicating  that) on a pro forma basis after giving  effect to the
Acquisition:  (a) all  representations  and  warranties  contained  in the  Loan
Documents  will  remain  true and  correct,  (b) the  Borrower  will  remain  in
compliance  with  all  covenants  contained  in the Loan  Documents,  and (c) no
Default or Event of Default has  occurred and is  continuing  or will occur as a
result of the consummation of the Acquisition; and

     (iii) The Agent and the Banks shall have received at least two (2) years of
historical  financial statements of such Person and a set of projections setting
forth in reasonable  detail (with those stated  assumptions set forth below) the
pro forma effect of the Acquisition and showing  compliance by the Borrower with
all covenants set forth in Section 5.03 of this

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     Agreement for the next  succeeding  four  quarters.  The  projections to be
delivered  hereunder shall include and specify the  assumptions  used to prepare
such projections  regarding  growth of sales,  margins on sales and cost savings
resulting from the Acquisition.

     "Permitted Acquisition Loans" means Revolving Credit Loans, the proceeds of
which are used to fund Permitted Acquisitions.

     "Permitted   Acquisition  Sublimit"  means  Ten  Million   ($10,000,000.00)
Dollars.

     "Permitted  Investments" means, (i) direct obligations of the United States
of America or any governmental agency thereof, or obligations  guaranteed by the
United States of America,  provided that such obligations mature within one year
from the date of acquisition thereof; (ii) time certificates of deposit having a
maturity  of two  years or less  issued by any  commercial  bank  organized  and
existing  under the laws of the United  States or any state  thereof  and having
aggregate capital and surplus in excess of $1,000,000,000.00; (iii) money market
mutual funds having assets in excess of  $2,500,000,000;  (iv) commercial  paper
rated not less than P-1 or A-1 or their equivalent by Moody's Investor Services,
Inc.  or  Standard & Poor's  Corporation,  respectively;  (v)  foreign  exchange
contracts with the Banks; (vi) treasury stock of the Borrower,  (vii) tax exempt
securities rated Prime 2 or better by Moody's Investor Services,  Inc. or A-1 or
better by Standard & Poor's  Corporation  or (viii) Inter  Company  Transactions
permitted by Section 5.02(r) or Section 5.02(s).

     "Person"  means  an  individual,  partnership,   corporation  (including  a
business  trust),  limited  liability  company,  joint  stock  company,   trust,
unincorporated association, joint venture or other entity or a federal, state or
local  government,  or a  political  subdivision  thereof  or any agency of such
government or subdivision.

     "Plan" means any employee benefit plan established, maintained, or to which
contributions have been made by the Borrower or any ERISA Affiliate.

     "Prime  Rate"  means  the  prime  commercial  lending  rate of the Agent as
publicly  announced to be in effect from time to time,  each change in the Prime
Rate to be effective on the date such change is announced to be effective.

     "Prohibited  Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.

     "Quick  Asset  Ratio"  means,  as to  the  Borrower  and  its  Consolidated
Affiliates, as of any date, the ratio of (i) the sum

                                     - 11 -

<PAGE>



of (a)  cash  on  hand or on  deposit  in  banks,  (b)  readily  marketable
securities issued by the United States, (c) readily marketable  commercial paper
rated "A-2" by Standard and Poors Corporation (or having a similar rating by any
similar  organization which rates commercial paper), (d) certificates of deposit
or  banker's  acceptances  issued by  commercial  banks of  recognized  standing
operating in the United States, and (e) accounts receivable to (ii) Consolidated
Current Liabilities.

     "Regulation  D" means  Regulation D of the Board of Governors,  as the same
may be amended and in effect from time to time.

     "Regulation  G" means  Regulation G of the Board of Governors,  as the same
may be amended and in effect from time to time.

     "Regulation  T" means  Regulation T of the Board of Governors,  as the same
may be amended and in effect from time to time.

     "Regulation  U" means  Regulation U of the Board of Governors,  as the same
may be amended and in effect from time to time.

     "Regulation  X" means  Regulation X of the Board of Governors,  as the same
may be amended and in effect from time to time.

     "Reportable  Event"  means any of the events  set forth in Section  4043 of
ERISA.

     "Required  Banks" means,  (i) at any time while there are Revolving  Credit
Loans  outstanding,  those Banks  having,  in the  aggregate,  sixty six and two
thirds (66 2/3%) percent of such Revolving Credit Loans,  (ii) at any time while
there are no Revolving  Credit Loans  outstanding  but the Total  Commitment  is
available,  those Banks having,  in the aggregate,  sixty six and two thirds (66
2/3%) percent of the Total Commitment, and, (iii) after the Maturity Date, those
Banks having,  in the  aggregate,  sixty six and two-thirds (66 2/3%) percent of
the outstanding principal amount of the Term Loans.

     "Revolving  Credit Loan" or "Revolving  Credit Loans" means one or more, as
the context  requires,  of the  revolving  credit loans made by the Banks to the
Borrower pursuant to the terms and conditions of this Agreement.

     "Revolving  Credit Note" or "Revolving  Credit Notes" means one or more, as
the context  requires,  of the promissory  notes of the Borrower  payable to the
order of each of the  Banks,  in  substantially  the form of  Exhibit  A annexed
hereto,  evidencing the indebtedness of the Borrower to each such Bank resulting
from Revolving  Credit Loans made by such Bank to the Borrower  pursuant to this
Agreement.


                                     - 12 -

<PAGE>



     "Sedeco Tajima Agreement" means that certain  distribution  agreement dated
as of February 21, 1991 among Sedeco,  Tajima  Industries  Ltd.,  Nomura Trading
Co.,  Inc.  and Nomura  (America)  Corp.,  as same has been amended from time to
time.

     "Subsidiary" means, as to any Person, any corporation, partnership, limited
liability  company,  joint  venture or other  Person  whether  now  existing  or
hereafter  organized or acquired:  (i) in the case of a corporation,  of which a
majority of the  securities  having  ordinary  voting  power for the election of
directors  (other  than  securities  having  such  power  only by  reason of the
happening of a  contingency)  are at the time owned by such Person and/or one or
more  Subsidiaries of such Person or (ii) in the case of a partnership,  limited
liability  company,  joint venture or similar entity, of which a majority of the
partnership,  membership or other  ownership  interests are at the time owned by
such Person and/or one or more of its Subsidiaries.

     "Tajima  Agreement" means that certain  distribution  agreement dated as of
February 21, 1991 among the Borrower,  Tajima  Industries  Ltd.,  Nomura Trading
Co.,  Ltd.  and Nomura  (America)  Corp.,  as same has been amended from time to
time.

     "Term Loan" or "Term Loans" means one or more, as the context requires,  of
the term  loans  made by the  Banks to the  Borrower  pursuant  to the terms and
conditions of this Agreement.

     "Term Loan  Installment  Date"  shall mean (i) the day that is ninety  (90)
days  after  the  making of the Term  Loans and (ii) the same day of each  third
month thereafter.

     "Term Loan Maturity Date" means the third  anniversary of the making of the
Term Loans by the Banks, but not later than January 6, 2003.

     "Term Loan Note" or "Term Loan  Notes"  means one or more,  as the  context
requires,  of the promissory  notes of the Borrower payable to the order of each
of the Banks, in substantially the form of Exhibit B annexed hereto,  evidencing
the  indebtedness of the Borrower to each such Bank resulting from the Term Loan
made by such Bank to the Borrower pursuant to this Agreement.

     "Total  Commitment"  means the aggregate of the  Commitments of each of the
Banks, which, on the date of this Agreement, is Thirty Million  ($30,000,000.00)
Dollars.

     "Unused  Facility  Fee" means the fee payable  pursuant to Section  2.06 of
this Agreement.

     SECTION  1.02.  Computation  of  Time  Periods.  In this  Agreement  in the
computation of periods of time from a specified date to a

                                     - 13 -

<PAGE>



later  specified  date,  the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding".

     SECTION 1.03.  Accounting  Terms.  Except as otherwise herein  specifically
provided,  each  accounting  term used herein shall have the meaning given to it
under GAAP.


                                     - 14 -

<PAGE>



                                   ARTICLE II

                          AMOUNT AND TERMS OF THE LOANS

     SECTION 2.01. The Revolving  Credit Loans.  (a) The Banks agree,  severally
but not jointly,  on the terms and subject to the conditions of this  Agreement,
and in reliance upon the  representations and warranties of the Borrower and the
Guarantors set forth in this  Agreement that the Banks will,  until the Maturity
Date,  lend to the  Borrower  such  Revolving  Credit  Loans as the Borrower may
request from time to time,  which Loans may be borrowed,  repaid and reborrowed,
provided, however, that (w) the Aggregate Outstandings at any one time shall not
exceed the Total  Commitment  as it may be  reduced  pursuant  to  Section  2.07
hereof,  (x) each  Bank's  pro rata  share of  Revolving  Credit  Loans  and L/C
Exposure shall not exceed its Commitment,  (y) the aggregate principal amount of
Permitted  Acquisition  Loans made during the term of this  Agreement  shall not
exceed  the  Permitted  Acquisition  Sublimit  and  (z) if all or any  part of a
Permitted  Acquisition  Loan is repaid,  such amount may not be  reborrowed as a
Permitted Acquisition Loan.

     (b) Each  Revolving  Credit Loan shall be an Alternate  Base Rate Loan or a
Eurodollar  Loan (or a combination  thereof) as the Borrower may request subject
to and in  accordance  with  Section  2.02.  Any Bank may at its option make any
Eurodollar  Loan by  causing a foreign  branch or  affiliate  to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower  to  repay  such  Loan in  accordance  with the  terms  of such  Bank's
Revolving  Credit  Note.  Subject  to the other  provisions  of this  Agreement,
Revolving Credit Loans of more than one type may be outstanding at the same time
provided,  however,  that  not  more  than  six  (6)  Eurodollar  Loans  may  be
outstanding at the same time.

     SECTION 2.02. Notice of Revolving Credit Loans.

     (a)  The  Borrower  shall  give  the  Agent  irrevocable  written,   telex,
telephonic  (immediately  confirmed in writing) or facsimile notice (i) at least
two (2) Business Days prior to each Revolving  Credit Loan comprised in whole or
in part of one or more Eurodollar Loans (subject to availability) and (ii) prior
to 11:00 a.m. on the day of each Revolving  Credit Loan consisting  solely of an
Alternate Base Rate Loan. Upon receipt of such notice,  the Agent shall promptly
notify  each Bank of the  contents  thereof  and of the  amount,  type and other
relevant information regarding the Loan requested.  Thereupon,  each Bank shall,
not later than 2:00 p.m. (New York time),  transfer immediately  available funds
equal to such  Bank's  share of the  requested  borrowing  to the Agent,  which,
provided the  conditions  of Section 3.01 and 3.02 of this  Agreement  have been
met, shall thereupon transfer immediately available funds equal to the requested
borrowing to the Borrower's  account with the Agent. If a notice of borrowing is
received by the Agent after

                                     - 15 -

<PAGE>



11:00 a.m.  on a Business  Day,  such  notice  shall be deemed to have been
given on the next  succeeding  Business  Day.  Any  Bank's  failure  to make any
requested  Loan shall not relieve any other Bank of its  obligation to make such
Loan,  but such other  Bank  shall not be liable  for such  failure of the first
Bank.

     (b) Each notice given  pursuant to this Section 2.02 shall specify the date
of such  borrowing,  the amount  thereof and whether such Loan is to be (or what
portion  or  portions  thereof  are to be) an  Alternate  Base  Rate  Loan  or a
Eurodollar Loan and, if such Loan or any portion thereof is to consist of one or
more  Eurodollar  Loans,  the principal  amounts  thereof and Interest Period or
Interest  Periods with respect  thereto.  If no election as to a type of Loan is
specified in such notice,  such Loan (or portion thereof as to which no election
is  specified)  shall be an Alternate  Base Rate Loan.  If no election as to the
Interest Period is specified in such notice with respect to any Eurodollar Loan,
the Borrower shall be deemed to have selected an Interest  Period of one month's
duration  and if a  Eurodollar  Loan  is  requested  when  such  Loans  are  not
available, the Borrower shall be deemed to have requested an Alternate Base Rate
Loan.

     (c) The  Borrower  shall have the right,  on such notice to the Agent as is
required pursuant to (a) above, (x) to continue any Eurodollar Loan or a portion
thereof into a subsequent  Interest Period (subject to availability)  and (y) to
convert  an  Alternate  Base  Rate  Loan  into a  Eurodollar  Loan  (subject  to
availability) subject to the following:

     (i) if a  Default  or an  Event  of  Default  shall  have  occurred  and be
continuing at the time of any proposed conversion or continuation only Alternate
Base Rate Loans shall be available;

     (ii) in the case of a  continuation  or conversion of fewer than all Loans,
the aggregate principal amount of each Eurodollar Loan continued or into which a
Loan is converted shall be in the minimum principal amount of $250,000.00 and in
minimum increased multiples of $100,000.00;

     (iii)  each  continuation  or  conversion  shall be  effected  by each Bank
applying  the  proceeds of the new Loan to the Loan (or portion  thereof)  being
continued or converted;

     (iv) if the new Loan made as a result of a continuation or conversion shall
be a Eurodollar  Loan,  the first  Interest  Period with respect  thereto  shall
commence on the date of continuation or conversion;

     (v)  each  request  for a  Eurodollar  Loan  which  shall  fail to state an
applicable  Interest  Period  shall be deemed to be a  request  for an  Interest
Period of one month's  duration and each request for a Eurodollar Loan made when
such Loans are not

                                     - 16 -

<PAGE>



available shall be deemed to be a request for an Alternate Base Rate Loan;

     (vi) in the event that the  Borrower  shall not give  notice to  continue a
Eurodollar Loan as provided above,  such Loan shall  automatically  be converted
into an Alternate Base Rate Loan at the expiration of the then current  Interest
Period.

     (d) Unless the Agent shall have  received  notice from a Bank prior to 2:00
p.m.  (New  York  time) on the  requested  date,  that  such  Bank will not make
available to the Agent the Loan requested to be made on such date, the Agent may
assume that such Bank has made such Loan  available to the Agent on such date in
accordance  with Section  2.01(a) and the Agent in its sole  discretion  may, in
reliance  upon such  assumption,  make  available to the Borrower on such date a
corresponding  amount on behalf of such  Bank.  If and to the  extent  such Bank
shall not have so made  available to the Agent the Loan  requested to be made on
such  date  and the  Agent  shall  have  so made  available  to the  Borrower  a
corresponding  amount on behalf of such Bank, such Bank shall, on demand, pay to
the Agent such  corresponding  amount  together  with interest  thereon,  at the
Federal Funds  Effective Rate, for each day from the date such amount shall have
been so made  available by the Agent to the Borrower  until the date such amount
shall  have  been  repaid  to  the  Agent.  If  such  Bank  does  not  pay  such
corresponding amount promptly upon the Agent's demand therefor,  the Agent shall
promptly  notify the  Borrower and the  Borrower  shall,  not later than one (1)
Business Day following such notice, repay such corresponding amount to the Agent
together with accrued  interest thereon at the applicable rate or rates provided
in Section 2.04.

     SECTION 2.03.  Revolving Credit Notes. (a) Each Revolving Credit Loan shall
be (i) in the case of each  Alternate  Base Rate Loan in the  minimum  principal
amount of  $100,000.00,  and in minimum  increased  multiples of $100,000.00 and
(ii) in the case of each  Eurodollar  Loan in the  minimum  principal  amount of
$250,000.00 and in minimum increased  multiples of $100,000.00  (except that, if
any such  Alternate  Base Rate Loan so  requested  shall  exhaust the  remaining
available Commitment, such Alternate Base Rate Loan may be in an amount equal to
the amount of the remaining  available  Commitment).  Each Revolving Credit Loan
shall be evidenced by the Revolving  Credit Notes.  Each  Revolving  Credit Note
shall be dated the date hereof and be in the principal  amount set forth next to
the applicable  Bank's name on the signature  pages hereto,  and shall mature on
the Maturity Date, at which time the entire  outstanding  principal  balance and
all interest thereon shall be due and payable.  Each Revolving Credit Note shall
be entitled to the benefits and subject to the provisions of this Agreement.

     (b) At the time of the making of each Revolving Credit Loan and at the time
of each  payment of principal  thereon,  each Bank is hereby  authorized  by the
Borrower to make a notation on the

                                     - 17 -

<PAGE>



schedule annexed to its Revolving  Credit Note of the date and amount,  and
the type and Interest  Period,  if applicable,  of the Revolving  Credit Loan or
payment,  as the case may be.  Failure  to make a notation  with  respect to any
Revolving  Credit Loan shall not limit or otherwise affect the obligation of the
Borrower hereunder or under the applicable Revolving Credit Note with respect to
such  Revolving  Credit Loan, and any payment of principal by the Borrower shall
not be affected by the failure to make a notation thereof on said schedule.

     SECTION 2.04. Payment of Interest on the Revolving Credit Notes.

     (a) In the case of an Alternate  Base Rate Loan,  interest shall be payable
at a rate per annum  equal to the  Alternate  Base Rate plus the ABR  Applicable
Margin. Such interest shall be payable on each Interest Payment Date, commencing
with the first Interest  Payment Date after the date of such Alternate Base Rate
Loan  and on the  Maturity  Date.  Any  change  in the rate of  interest  on the
Revolving Credit Notes due to a change in the Alternate Base Rate or a change in
the ABR Applicable Margin shall take effect as of the date of such change in the
Alternate Base Rate or ABR Applicable Margin, as applicable.

     (b) In the case of a Eurodollar  Loan,  interest shall be payable at a rate
per annum equal to the  Adjusted  LIBOR Rate plus the LIBOR  Applicable  Margin.
Such interest shall be payable on each Interest  Payment Date,  commencing  with
the first Interest  Payment Date after the date of such  Eurodollar  Loan and on
the Maturity Date. In the event Eurodollar Loans are available,  the Agent shall
determine the rate of interest applicable to each requested  Eurodollar Loan for
each  Interest  Period  at  11:00  a.m.,  New  York  City  time,  or as  soon as
practicable thereafter,  two (2) Business Days prior to the commencement of such
Interest  Period and shall use its best  efforts to notify the  Borrower and the
Banks  of the  rate of  interest  so  determined.  Such  determination  shall be
conclusive absent manifest error.

     (c) The ABR Applicable Margin and the LIBOR Applicable Margin shall each be
determined  on the  basis of the  Borrower's  Funded  Debt to EBITDA  Ratio,  as
calculated  based on the Borrower's  consolidated  financial  statements for its
most recent fiscal quarter.  The ABR Applicable  Margin and the LIBOR Applicable
Margin shall be determined as follows:

     (i) The initial ABR  Applicable  Margin  shall be -0- basis  points and the
initial  LIBOR  Applicable  Margin  shall  be 100  basis  points,  and  shall be
applicable until delivery of the Borrower's  financial statements for its fiscal
year ending  January 31, 1997  pursuant to Section  5.01(b)  hereof  (subject to
increase in the event that the  Borrower  fails to deliver  such  statements  as
required below).

                                     - 18 -

<PAGE>



     Beginning  with delivery of the  Borrower's  financial  statements  for the
fiscal year ending January 31, 1997, and for each fiscal quarter thereafter:

     (ii) If the  Borrower's  Funded Debt to EBITDA  Ratio as of the end of such
fiscal quarter is less than 1.25 to 1.00, the ABR Applicable Margin shall be -0-
basis points and the LIBOR Applicable Margin shall be 75 basis points.

     (iii) If the  Borrower's  Funded Debt to EBITDA Ratio as of the end of such
fiscal  quarter is equal to or  greater  than 1.25 to 1.00 but less than 1.85 to
1.00,  the ABR  Applicable  Margin  shall  be -0-  basis  points  and the  LIBOR
Applicable Margin shall be 100 basis points.

     (iv) If the  Borrower's  Funded Debt to EBITDA  Ratio as of the end of such
fiscal  quarter is equal to or  greater  than 1.85 to 1.00 but less than 2.00 to
1.00,  the ABR  Applicable  Margin  shall  be -0-  basis  points  and the  LIBOR
Applicable Margin shall be 125 basis points.

     (v) If the  Borrower's  Funded  Debt to EBITDA  Ratio as of the end of such
fiscal  quarter is equal to or  greater  than 2.00 to 1.00,  the ABR  Applicable
Margin  shall be -0- basis points and the LIBOR  Applicable  Margin shall be 150
basis points.

     In the event that the Borrower fails to deliver any financial statements or
the related  certificate within five (5) days of the due date therefor set forth
in  Section  5.01(b)(i),  (ii) or (iv)  hereof,  unless an Event of  Default  is
declared as a result of such  failure,  the ABR  Applicable  Margin shall be -0-
basis points and the LIBOR Applicable Margin shall be 150 basis points until the
Borrower  delivers all required  financial  statements and certificates at which
time  the ABR  Applicable  Margin  and the  LIBOR  Applicable  Margin  shall  be
redetermined as provided for in this Section 2.04.

     Upon the occurrence and during the  continuance of a Default or an Event of
Default  the ABR  Applicable  Margin and the LIBOR  Applicable  Margin may, as a
result of changes in the  Borrower's  Funded Debt to EBITDA Ratio,  increase but
will not decrease.

     (d) All interest  shall be paid to the Agent for the pro rata  distribution
to the Banks.

     SECTION 2.05.  Use of Proceeds.  (a) The proceeds of the  Revolving  Credit
Loans shall be used by the Borrower (i) to repay any  indebtedness  owing to BNY
under the Existing BNY Facility,  (ii) to refinance the promissory  notes issued
in connection with the  acquisition of Sedeco,  (iii) to finance working capital
of the Borrower and, subject to the limitations set forth in Section

                                     - 19 -

     <PAGE>



5.02(r) and Section 5.02(s), to finance working capital of its Subsidiaries
and (iv) subject to the Permitted  Acquisition  Sublimit,  to finance  Permitted
Acquisitions.  No part of the  proceeds  of any Loan may be used for any purpose
that directly or indirectly  violates or is inconsistent with, the provisions of
Regulations G, T, U or X.

     (b)  Letters  of  Credit  shall be  issued  exclusively  to  finance  trade
transactions  and other commercial  transactions  related to the working capital
needs of the Borrower and its Subsidiaries.

     SECTION 2.06.  Fees. (a) The Borrower  agrees to pay to the Agent,  for the
pro rata  distribution to the Banks,  from the date of this Agreement and for so
long as the Total  Commitment  remains in effect,  on the first  Business Day of
each calendar  quarter,  and on any day that the Total  Commitment is reduced or
terminated,  an Unused  Facility Fee computed at a rate per annum as  determined
below (computed on the basis of the actual number of days elapsed over 360 days)
on the average daily unused amount of the Total Commitment, such Unused Facility
Fee being  payable for the calendar  quarter,  or part  thereof,  preceding  the
payment date.  The Unused  Facility Fee shall be  determined as follows,  on the
basis of the Borrower's  Funded Debt to EBITDA Ratio, as calculated based on the
Borrower's financial statements for its most recent fiscal quarter.

     (i) The initial  Unused  Facility Fee shall be 0.15% per annum and shall be
applicable until delivery of the Borrower's  financial statements for its fiscal
year ending  January 31, 1997  pursuant to Section  5.01(b)  hereof  (subject to
increase in the event that the  Borrower  fails to deliver  such  statements  as
required below).

         Beginning with delivery of the Borrower's  financial statements for the
fiscal year ending January 31, 1997, and for each fiscal quarter thereafter:

     (ii) If the  Borrower's  Funded Debt to EBITDA  Ratio as of the end of such
fiscal quarter is less than 1.25 to 1.00, the Unused Facility Fee shall be 0.10%
per annum.

     (iii) If the  Borrower's  Funded Debt to EBITDA Ratio as of the end of such
fiscal  quarter is equal to or  greater  than 1.25 to 1.00 but less than 1.85 to
1.00, the Unused Facility Fee shall be 0.15% per annum.

     (iv) If the  Borrower's  Funded Debt to EBITDA  Ratio as of the end of such
fiscal  quarter is equal to or  greater  than 1.85 to 1.00 but less than 2.00 to
1.00, the Unused Facility Fee shall be 0.20% per annum.

     (v) If the  Borrower's  Funded  Debt to EBITDA  Ratio as of the end of such
fiscal quarter is equal to or greater than

                                     - 20 -

<PAGE>



     2.00 to 1.00, the Unused Facility Fee shall be 0.25% per annum.

     In the event that the Borrower fails to deliver any financial statements or
the related  certificate within five (5) days of the due date therefor set forth
in  Section  5.01(b)(i),  (ii) or (iv)  hereof,  unless an Event of  Default  is
declared as a result of such failure, the Unused Facility Fee shall be 0.25% per
annum  until  the  Borrower  delivers  all  required  financial  statements  and
certificates.

     Upon the occurrence and during the  continuance of a Default or an Event of
Default the Unused  Facility  Fee may, as a result of changes in the  Borrower's
Funded Debt to EBITDA Ratio, increase but will not decrease.

     (b) The  Borrower  agrees to pay to the Agent,  for its  services  as Agent
hereunder,  those fees,  charges and  expenses as the Borrower and the Agent may
mutually agree in a separate writing.

     SECTION 2.07. Reduction of Commitment. (a) Upon at least three (3) Business
Days' prior written notice to the Agent,  the Borrower may irrevocably  elect to
have  the  unused  Total  Commitment  terminated  in whole  or  reduced  in part
provided,  however, that any such partial reduction shall be in a minimum amount
of  $1,000,000.00,  or whole  multiples  thereof.  The  Total  Commitment,  once
terminated  or reduced,  shall not be  reinstated  without  the express  written
approval of the Agent and the Banks. Any reduction to the Total Commitment shall
be applied pro rata to the respective Commitments of each Bank.

     (b) In the event that the Borrower,  Tajima  Industries  Ltd., or any other
party to the Tajima  Agreement  gives  notice that it intends to  terminate  the
Tajima Agreement,  the Total Commitment shall automatically,  and without notice
from the Agent or the Banks,  terminate and the Aggregate  Outstandings shall be
paid or provided for as provided in Section 2.08 of this Agreement.

     (c) In the event that by March 31, 1997 the  Borrower  fails to provide the
Agent with a document evidencing that the term of the Sedeco Tajima Agreement is
extended by the parties  thereto  until the Maturity  Date or beyond,  or in the
event that before or after any such  extension,  any party  thereto gives notice
that it intends to terminate the Sedeco Tajima Agreement, then, upon notice from
the  Agent  (i)  the  Permitted   Acquisition   Sublimit  shall  be  reduced  to
$4,165,000.00 and shall be further and permanently reduced by the amount of each
principal payment made pursuant to clause (iii) below; (ii) the Total Commitment
shall be reduced to  $25,000,000.00  (and the  Commitments of each Bank shall be
reduced  pro-rata)  and (iii) if such document is not received by June 29, 1997,
the aggregate amount of all Permitted  Acquisition Loans used to fund the Sedeco
Acquisition (including, without limitation, amounts used

                                     - 21 -

<PAGE>



to pay the  Borrower's  Debt owing to Jimmy L.  Yates,  shall be prepaid in
four (4) equal principal installments, beginning on June 30, 1997 and continuing
on each of the three (3) succeeding 90th days  thereafter  until such amount has
been paid in full.

     (d)  Notwithstanding  the provisions of clause (c) above, in the event that
any time prior to the  Maturity  Date,  the  Borrower  provides the Agent with a
document  evidencing  that the term of the Sedeco  Tajima  Agreement is extended
until the Maturity Date or beyond, then (i) the Permitted  Acquisition  Sublimit
shall be  increased  to  $10,000,000.00  (of which  only  $5,865,000.00  will be
available for Permitted  Acquisitions other than the Sedeco  Acquisition);  (ii)
the Total Commitment shall be increased to  $30,000,000.00  (and the Commitments
of each Bank shall be increased  pro rata);  and (iii) the Borrower may reborrow
those Permitted  Acquisition Loans used to fund the Sedeco Acquisition and which
were repaid pursuant to clause (c) above.

     (e) In the  event  that the  Borrower  fails to  deliver  to the  Agent the
opinion of counsel  required by Section 3.05 of this  Agreement,  the  Permitted
Acquisition  Sublimit shall be reduced to $4,165,000.00,  all of which will have
been allocated to the acquisition of Sedeco.

     SECTION 2.08. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any  Alternate  Base Rate  Loan,  in whole or in
part,  without  premium or penalty on one (1) Business  Day's prior  irrevocable
written notice to the Agent provided,  however,  that each such prepayment shall
be on a Business Day and shall be in an aggregate  principal  amount which is in
the  minimum  amount of  $100,000.00  and in  increased  integral  multiples  of
$100,000.00.

     (b) The  Borrower  shall  have the right at any time and from time to time,
subject to the provisions of this  Agreement,  including but without  limitation
Section 2.21, to prepay any  Eurodollar  Loan, in whole or in part, on three (3)
Business Days' prior irrevocable written notice to the Agent, provided, however,
that  each  such  prepayment  shall  be on a  Business  Day and  shall  be in an
aggregate  principal amount which is in the minimum amount of $250,000.00 and in
increased integral multiples of $100,000.00.

     (c) The notice of  prepayment  under this  Section 2.08 shall set forth the
prepayment date and the principal  amount of the Loan being prepaid and shall be
irrevocable  and shall commit the Borrower to prepay such Loan by the amount and
on the date stated  therein.  All  prepayments  shall be  accompanied by accrued
interest on the principal  amount being prepaid to the date of prepayment.  Each
prepayment  under  this  Section  2.08  shall be applied  first  towards  unpaid
interest on the amount being  prepaid and then towards the principal in whole or
partial prepayment of Loans as specified by the Borrower. In the absence of such
specification,

                                     - 22 -

<PAGE>



amounts being  prepaid  shall be applied  first to any Alternate  Base Rate
Loan then  outstanding and then to Eurodollar  Loans in the order of the nearest
expiration of their Interest Periods.

     (d)  At  any  time  that  the  Aggregate   Outstandings  exceed  the  Total
Commitment,  the Borrower  shall first,  prepay so much of the Revolving  Credit
Loans as shall exceed the Commitment and second, if Aggregate Outstandings still
exceed the  Commitment,  deposit  with the Agent for the  benefit of the Issuing
Bank cash  collateral  for any undrawn and  outstanding  Letters of Credit in an
amount equal to the amount by which the remaining Aggregate  Outstandings exceed
the Total Commitment.  Any such prepayments shall be applied as set forth in (c)
above and if such  prepayments  of  Revolving  Credit  Loans  shall  result in a
prepayment  of a  Eurodollar  Loan  other  than on the last day of its  Interest
Period,  such  prepayment  shall be subject  to the  reimbursement  required  by
Section 2.21.

     (e) In the event that the  Borrower,  Tajima  Industries  Ltd. or any other
party to the Tajima  Agreement  gives  notice that it intends to  terminate  the
Tajima Agreement,  the Total Commitment shall terminate and the then outstanding
principal  balance of Revolving  Credit Loans (including  Permitted  Acquisition
Loans) shall be repaid in equal  quarterly  installments,  each due on the first
day of each  calendar  quarter,  beginning  with the first  such day after  said
notice of  termination.  Such  outstanding  balance  shall be  payable  over the
shorter of (i) twelve  (12)  quarterly  installments  or (ii) the number of full
calendar  quarters  between the date of notice of  termination  and the Maturity
Date.  The  payments  required by this  sub-section  (e) shall be applied as set
forth, and subject to the other provisions of, this Section 2.08.

     SECTION 2.09.  The Term Loans.  The Banks hereby  agree,  severally but not
jointly,  on the Maturity  Date, and on the terms and conditions and in reliance
upon the  representations  and  warranties  of the Borrower  and the  Guarantors
hereinafter  set forth in this  Agreement,  and  provided no Default or Event of
Default has occurred and is  continuing,  or would result from the making of the
Term Loan,  to  convert  the then  outstanding  principal  balance of  Permitted
Acquisition Loans to a Term Loan and the Borrower agrees to convert such amounts
by executing and  delivering to the Agent,  for delivery to the Banks,  the Term
Loan Notes.  The Term Loans, or portions  thereof,  shall be Alternate Base Rate
Loans or Eurodollar Loans (or a combination thereof) as the Borrower may request
subject to and in  accordance  with  Section  2.10  hereof.  Any Bank may at its
option make any Eurodollar Loan by causing a foreign branch or affiliate to make
such  Loan,  provided  that any  exercise  of such  option  shall not affect the
obligation  of the Borrower to repay such Loan in  accordance  with the terms of
the Notes.

     SECTION 2.10. Notice of Term Loan Designations.  (a) The Borrower may elect
to designate the Term Loan (or a portion thereof) as an Alternate Base Rate Loan
or a Eurodollar Loan by so

                                     - 23 -

<PAGE>



specifying in the  irrevocable  notice given pursuant to this Section 2.10;
provided,  however,  that each  Eurodollar  Loan  requested of the Agent for any
specific Interest Period shall be in the minimum principal amount of $250,000.00
and in minimum integral multiples of $100,000.00 thereafter.

     (b)  The  Borrower  shall  give  the  Agent  irrevocable  written,   telex,
telephonic  (immediately  confirmed in writing) or facsimile notice (i) at least
two (2) Business  Days' prior to each election to designate each Term Loan (or a
portion  thereof) as a Eurodollar  Loan, and (ii) prior to 11:00 a.m. on the day
of each  election  to  designate  each Term Loan (or a  portion  thereof)  as an
Alternate  Base Rate Loan,  in each case  specifying  the date (which shall be a
Business  Day) thereof and the  aggregate  principal  amount and, if any portion
thereof is to consist of one or more Eurodollar Loans, the respective  principal
amounts and Interest Periods for each such Eurodollar Loan; provided that:

     (i) if the  Borrower  shall fail to specify  the  duration  of an  Interest
Period with regard to any  Eurodollar  Loan in its notice,  the Interest  Period
shall be for a period of one month; and

     (ii) if the Borrower shall fail to specify the type of Loan requested,  the
request shall be deemed to be a request for an Alternate Base Rate Loan.

     (c) Upon receipt of such notice,  the Agent shall promptly notify each Bank
of the contents thereof and of the amount,  type and other relevant  information
regarding the Loan requested.

     SECTION  2.11.  Term Loan Notes.  The Term Loans shall be  evidenced by the
Term Loan Notes.  The Term Loan Notes shall be dated as of the Maturity Date and
each of the Term Loan Notes shall mature on the Term Loan Maturity Date at which
time the entire outstanding  principal balance and all interest thereon shall be
due and  payable.  The Term Loan Notes  shall be entitled  to the  benefits  and
subject to the provisions of this Agreement.

     SECTION 2.12.  Repayment of Term Loan Notes.  (a) The principal  balance of
each of the Term Loan  Notes  shall be payable  in twelve  (12) equal  quarterly
installments,  each due on a Term Loan Installment Date,  beginning on the first
such day after the Maturity Date and  continuing  on each Term Loan  Installment
Date  thereafter.  Each of the first  eleven  (11) of such  quarterly  principal
installments  shall  be in an  amount  equal  to  one  twelfth  (1/12th)  of the
principal  amount of the  Permitted  Acquisition  Loans so converted to the Term
Loan and the final such quarterly  principal  installment  shall be in an amount
equal to the then  aggregate  outstanding  principal  balance  of the Term  Loan
Notes.

     (b) All  payments of  installments  on the Term Loan Notes shall be made to
the Agent for the pro rata distributions to the Banks.

                                     - 24 -

<PAGE>




     SECTION 2.13.  Payment of Interest on the Term Loan Notes.  (a) In the case
of an Alternate  Base Rate Loan,  interest  shall be payable at a rate per annum
equal to the Alternate Base Rate plus the ABR Applicable  Margin.  Such interest
shall be payable to the Agent,  for the pro rata  distribution  to the Banks, on
each Interest  Payment Date,  commencing  with the first  Interest  Payment Date
after the date of such Alternate Base Rate Loan, on each Interest  Determination
Date and on the Term Loan Maturity  Date.  Any change in the rate of interest on
the Term Loan  Notes due to a change in the  Alternate  Base Rate or a change in
the ABR Applicable Margin shall take effect as of the date of such change in the
Alternate Base Rate or the ABR Applicable Margin.

     (b) In the case of a Eurodollar  Loan,  interest shall be payable at a rate
per annum  (computed  on the basis of the actual  number of days  elapsed over a
year of 360 days)  equal to the  Adjusted  LIBOR Rate plus the LIBOR  Applicable
Margin.  Such  interest  shall  be  payable  to the  Agent,  for  the  pro  rata
distribution  to the Banks on each Interest  Payment Date,  commencing  with the
first  Interest  Payment Date after the date of such  Eurodollar  Loan,  on each
Interest  Determination Date and on the Term Loan Maturity Date. The Agent shall
determine the rate of interest applicable to each requested  Eurodollar Loan for
each  Interest  Period  at  11:00  a.m.,  New  York  City  time,  or as  soon as
practicable thereafter,  two (2) Business Days prior to the commencement of such
Interest  Period  and shall  notify  the  Borrower  of the rate of  interest  so
determined. Such determination shall be conclusive absent manifest error.

     (c) The ABR Applicable Margin and the LIBOR Applicable Margin shall each be
determined  on the  basis of the  Borrower's  Funded  Debt to EBITDA  Ratio,  as
calculated  based on the  Borrower's  financial  statements  for its most recent
fiscal quarter.  The ABR Applicable Margin and the LIBOR Applicable Margin shall
be determined as set forth in Section 2.04(c) of this Agreement.

     SECTION 2.14. Conversion and Continuation of Loans. The Borrower shall have
the  right,  at any time,  on such  notice to the Agent as set forth in  Section
2.10(b)  of this  Agreement,  (i) to  continue  any  Eurodollar  Loan or portion
thereof into a subsequent  Interest Period (subject to  availability) or (ii) to
convert  an  Alternate  Base  Rate  Loan  into a  Eurodollar  Loan  (subject  to
availability), subject to the following:

     (a) no Default or Event of Default shall have occurred and be continuing at
the time of any proposed conversion or continuation;

     (b) in the case of a  continuation  or  conversion of fewer than all Loans,
the aggregate  principal  amount of each  Eurodollar Loan continued or converted
shall  be in  the  minimum  amount  of  $250,000.00  and in  increased  integral
multiples of $100,000.00;


                                     - 25 -

<PAGE>



     (c) each continuation or conversion shall be effected by each Bank applying
the proceeds of the new Loan to the Loan (or portion thereof) being continued or
converted;

     (d) if the new Loan made as a result of a continuation or conversion  shall
be a Eurodollar  Loan,  the first  Interest  Period with respect  thereto  shall
commence on the date of continuation or conversion;

     (e)  each  request  for a  Eurodollar  Loan  which  shall  fail to state an
applicable  Interest  Period  shall be deemed to be a  request  for an  Interest
Period of one month;

     (f) unless  sufficient  Alternate Base Rate Loans are  outstanding or other
Eurodollar  Loans are outstanding  with Interest  Periods  expiring prior to the
next scheduled installment payment of the Term Loan Notes, and are sufficient to
enable the Borrower to make such  installment  payments,  any Eurodollar Loan, a
portion of which is required to be repaid on any such  installment  payment date
shall be  automatically  converted  at the end of such  Interest  Period into an
Alternate Base Rate Loan; and

     (g) in the event  that the  Borrower  shall not give  notice to  continue a
Eurodollar Loan as provided above,  such Loan shall  automatically  be converted
into an Alternate Base Rate Loan at the expiration of the then current  Interest
Period.

     SECTION 2.15. Use of Proceeds. The proceeds of the Term Loans shall be used
by the Borrower  exclusively to refinance the Permitted  Acquisition  Loans.  No
part of the proceeds of any Term Loan may be used for any purpose that  directly
or indirectly  violates or is inconsistent with, the provisions of Regulation G,
T, U or X.

     SECTION 2.16. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any  Alternate  Base Rate  Loan,  in whole or in
part,  without  premium or penalty on one (1) Business  Day's prior  irrevocable
written notice to the Agent provided,  however,  that each such prepayment shall
be on a Business Day and shall be in an aggregate  minimum  principal  amount of
$250,000.00 and in increased integral multiples of $100,000.00.

     (b) The  Borrower  shall  have the right at any time and from time to time,
subject to the  provisions  hereof and of Section 2.21, to prepay any Eurodollar
Loan, in whole or in part, on three (3) Business Days prior irrevocable  written
notice to the Agent,  provided,  however,  that such  prepayment  shall be in an
aggregate  minimum  principal  amount of $250,000.00  and in increased  integral
multiples of $100,000.00.

     (c) The notice of  prepayment  under this  Section 2.16 shall set forth the
prepayment date and the principal amount of the Loan

                                     - 26 -

<PAGE>



     being prepaid and shall be irrevocable and shall commit the Borrower to pay
such Loan by the amount and on the date stated therein. All prepayments shall be
accompanied  by accrued  interest on the  principal  amount being prepaid to the
date of  prepayment.  Each  prepayment  under this Section 2.16 shall be applied
first towards  unpaid  interest on the amount being prepaid and then towards the
principal  in  whole  or  partial  prepayment  of  Loans  by the  Borrower.  All
prepayments  shall be  applied  first to any  Alternate  Base  Rate  Loans  then
outstanding and then to Eurodollar Loans outstanding in the order of the nearest
expiration of their Interest Periods.  All partial prepayments of the Term Loans
shall be applied to  installments  of principal of the Term Loans in the inverse
order of maturity.  All principal  payments or prepayments  shall be made to the
Agent for the pro rata distribution to the Banks.

     SECTION 2.17.  Eurocurrency Reserve Requirement.  It is understood that the
cost to the Banks of making or maintaining  Eurodollar  Loans may fluctuate as a
result  of  the  applicability  of,  or  change  in,  the  Eurocurrency  Reserve
Requirement. The Borrower agrees to pay to the Agent on behalf of the Banks from
time to time,  as  provided  in Section  2.18  below,  such  amounts as shall be
necessary  to  compensate  each  Bank for the  portion  of the cost of making or
maintaining  any  Eurodollar  Loans made by it resulting  from any change in the
Eurocurrency Reserve Requirement, it being understood that the rates of interest
applicable to Eurodollar  Loans  hereunder have been  determined on the basis of
the Eurocurrency  Reserve  Requirement in effect at the time of determination of
the Adjusted LIBOR Rate and that such rates do not reflect costs imposed on each
Bank in connection with any change to the Eurocurrency Reserve  Requirement.  It
is  agreed  that for  purposes  of this  paragraph  the  Eurodollar  Loans  made
hereunder shall be deemed to constitute  Eurocurrency  Liabilities as defined in
Regulation  D and to be subject to the  reserve  requirements  of  Regulation  D
without  benefit  or credit of  proration,  exemptions  or offsets  which  might
otherwise be available to each Bank from time to time under Regulation D.

     SECTION 2.18.  Increased Costs.  If, after the date of this Agreement,  the
adoption  of,  or any  change  in,  any  applicable  law,  regulation,  rule  or
directive,  or any  interpretation  thereof by any  authority  charged  with the
administration or interpretation thereof:

     (i)  subjects  any Bank or the  Letter  of  Credit  Issuer  to any tax with
respect to the Notes,  the Letters of Credit or on any amount paid or to be paid
under or pursuant to this  Agreement,  the Notes or the Letters of Credit (other
than any tax  measured  by or based upon the  overall net income of such Bank or
the Letter of Credit Issuer);


                                     - 27 -

<PAGE>



     (ii) changes the basis of taxation of payments to any Bank or the Letter of
Credit Issuer of any amounts payable  hereunder  (other than any tax measured by
or based  upon the  overall  net  income  of such  Bank or the  Letter of Credit
Issuer);

     (iii) imposes,  modifies or deems applicable any reserve,  capital adequacy
or deposit  requirements  against any assets held by,  deposits  with or for the
account of, or loans made by, any Bank or the Letter of Credit Issuer; or

     (iv)  imposes on the Agent,  any Bank or the Letter of Credit  Issuer,  any
other  condition  affecting the Notes,  the Letters of Credit or this Agreement;
and the result of any of the  foregoing is to increase the cost to the Agent,  a
Bank or the Letter of Credit Issuer of maintaining  this  Agreement,  making the
Loans or issuing the  Letters of Credit,  or to reduce the amount of any payment
(whether of principal,  interest or otherwise) receivable by the Agent, any Bank
or the Letter of Credit  Issuer or to require the Agent,  any Bank or the Letter
of Credit  Issuer to make any payment on or calculated by reference to the gross
amount of any sum received by them, in each case by an amount which the Agent in
its sole, reasonable judgment deems material, then and in any such case:

     (a) the Agent shall  promptly  advise the Borrower of such event,  together
with the date thereof, the amount of such increased cost or reduction or payment
and the way in which such amount has been calculated; and

     (b) the Borrower  shall pay to the Agent on behalf of itself,  such Bank or
the Letter of Credit Issuer,  within ten (10) days after the advice  referred to
in subsection (a) hereinabove,  such an amount or amounts as will compensate the
Agent,  the Bank or the  Letter  of  Credit  Issuer  for such  additional  cost,
reduction or payment for so long as the same shall remain in effect.

     The determination of the Agent as to additional amounts payable pursuant to
this Section 2.18 shall be conclusive  evidence of such amounts absent  manifest
error and if made in good faith.

     SECTION 2.19.  Capital  Adequacy.  If the Agent,  any Bank or the Letter of
Credit  Issuer shall have  reasonably  determined  that,  subsequent to the date
hereof,  any  change  in the  applicability  of any  law,  rule,  regulation  or
guideline,  or the  adoption  after  the date  hereof of any  other  law,  rule,
regulation or guideline regarding capital adequacy,  or any change in any of the
foregoing or in the  interpretation or administration of any of the foregoing by
any governmental  authority,  central bank or comparable agency charged with the
interpretation  or  administration  thereof,  or  compliance by such Bank or the
Letter of Credit  Issuer  (or any  lending  office of such Bank or the Letter of
Credit Issuer) or such

                                     - 28 -

<PAGE>



Bank's or the Letter of Credit Issuer's holding company with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such  authority,  central bank or comparable  agency,  has or would have the
effect of  reducing  the rate of return on such  Bank's or the  Letter of Credit
Issuer's  capital  or on the  capital  of such  Bank's  or the  Letter of Credit
Issuer's holding company, if any, as a consequence of its obligations  hereunder
to a level  below that  which  such Bank or the Letter of Credit  Issuer or such
Bank's or the Letter of Credit Issuer's  holding company could have achieved but
for such adoption,  change or compliance  (taking into consideration such Bank's
or the Letter of Credit Issuer's policies and the policies of such Bank's or the
Letter of Credit Issuer's  holding company with respect to capital  adequacy) by
an amount  deemed by such Bank or the  Letter of Credit  Issuer to be  material,
then  from  time to time the  Borrower  shall pay to the Agent on behalf of such
Bank or the Letter of Credit  Issuer such  additional  amount or amounts as will
reasonably  compensate  such Bank or the Letter of Credit Issuer or its or their
holding company or companies for any such reduction suffered.

     SECTION  2.20.  Change in  Legality.  (a)  Notwithstanding  anything to the
contrary  contained  elsewhere in this  Agreement,  if any change after the date
hereof in law, rule,  regulation,  guideline or order, or in the  interpretation
thereof by any governmental  authority charged with the administration  thereof,
shall make it unlawful for any of the Banks to make or maintain  any  Eurodollar
Loan or to give effect to its obligations as contemplated hereby with respect to
a Eurodollar Loan, then, by written notice to the Borrower, the Agent, on behalf
of such Bank may:

     (i) declare that Eurodollar  Loans will not thereafter be made by such Bank
hereunder,  whereupon the Borrower  shall be  prohibited  from  requesting  such
Eurodollar   Loans  from  such  Bank  hereunder   unless  such   declaration  is
subsequently withdrawn; and

     (ii)  require  that,  subject  to  the  provisions  of  Section  2.21,  all
outstanding  Eurodollar  Loans made by it be converted to an Alternate Base Rate
Loan, whereupon all of such Eurodollar Loans shall be automatically converted to
an Alternate  Base Rate Loan as of the effective date of such notice as provided
in paragraph (b) below.

     (b) For  purposes of this  Section  2.20,  a notice to the  Borrower by the
Agent  pursuant to paragraph (a) above shall be  effective,  for the purposes of
paragraph  (a)  above,  if lawful,  and if any  Eurodollar  Loans  shall then be
outstanding,  on the last day of the then current  Interest  Period;  otherwise,
such notice shall be effective on the date of receipt by the Borrower.


                                     - 29 -

<PAGE>



     SECTION 2.21.  Funding  Losses.  (a) The Borrower agrees to compensate each
Bank  for any  loss or  expense  which  such  Bank  may  sustain  or  incur as a
consequence  of (a) default by the Borrower in payment when due of the principal
amount of or interest on any  Eurodollar  Loan,  (b) default by the  Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans after
the  Borrower  has given a notice  requesting  the same in  accordance  with the
provisions  of this  Agreement,  (c)  default  by the  Borrower  in  making  any
prepayment  after the Borrower has given a notice thereof in accordance with the
provisions  of this  Agreement or (d) the making of a prepayment  of  Eurodollar
Loans on a day  which is not the last day of an  Interest  Period  with  respect
thereto, including,  without limitation, in each case, any such loss (including,
without limitation,  loss of margin) or expense arising from the reemployment of
funds  obtained by it or from  amounts  payable by such Bank to lenders of funds
obtained by it in order to make or maintain such Loans.  Such  compensation  may
include an amount  equal to the  excess,  if any,  of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow,  convert or continue to the last day of such Interest  Period (or, in
the case of a failure to borrow,  convert or continue,  the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of  interest  for such Loans  provided  for  herein,  including,  the LIBOR
Applicable Margin included therein, if any, over (ii) the amount of interest (as
reasonably  determined  by such Bank) which  would have  accrued to such Bank on
such  amount by placing  such  amount on deposit  for a  comparable  period with
leading banks in the interbank  eurodollar  market.  This covenant shall survive
the  termination  of this  Agreement  and the payment of the Loans and all other
amounts payable  hereunder.  When claiming under this Section 2.21, the claiming
Bank shall  provide to the  Borrower a  statement,  signed by an officer of such
Bank,  explaining  the  amount  of any  such  loss  or  expense  (including  the
calculation of such amount),  which statement  shall, in the absence of manifest
error, be conclusive with respect to the parties hereto.

     SECTION 2.22. Change in LIBOR;  Availability of Rates. In the event, and on
each occasion,  that, on the day the interest rate for any Eurodollar Loan is to
be determined,  the Agent shall have  determined  (which  determination,  absent
manifest  error,  shall be conclusive and binding upon the Borrower) that dollar
deposits in the amount of the principal amount of the requested  Eurodollar Loan
are not generally  available in the London interbank market, or that the rate at
which such dollar  deposits  are being  offered will not  adequately  and fairly
reflect the cost to the Banks of making or maintaining  the principal  amount of
such Eurodollar Loan during such Interest Period,  such Eurodollar Loan shall be
unavailable.  The Agent shall, as soon as practicable thereafter, given written,
telex or  telephonic  notice  of such  determination  of  unavailability  to the
Borrower. Any request by the Borrower for an unavailable

                                     - 30 -

<PAGE>



Eurodollar  Loan  shall be deemed to have been a request  for an  Alternate
Base Rate  Loan.  After  such  notice  shall have been given and until the Agent
shall have  notified the  Borrower  that the  circumstances  giving rise to such
unavailability  no longer  exist,  each  subsequent  request for an  unavailable
Eurodollar Loan shall be deemed to be a request for an Alternate Base Rate Loan.

     SECTION  2.23.  Authorization  to Debit  Borrower's  Account.  The Agent is
hereby authorized to debit the Borrower's  account maintained with the Agent for
(i) all scheduled  payments of principal  and/or interest and/or  commissions or
fees under the Notes and the Letters of Credit, (ii) the Agent's fees, and (iii)
all other  amounts  due  hereunder;  all such debits to be made on the days such
payments are due in accordance with the terms hereof.

     SECTION 2.24.  Late Charges,  Default  Interest.  (a) If the Borrower shall
default in the payment of any principal  installment of or interest on any Loan,
or any amount due under any Letter of Credit,  or any other amount  becoming due
hereunder,  the Borrower shall pay to the Agent for the pro rata distribution to
the Banks or the Issuing Bank, as applicable,  interest, to the extent permitted
by law, on such defaulted amount up to the date of actual payment (after as well
as before  judgment)  at a rate per annum  (computed  on the basis of the actual
number of days  elapsed  over a year of 360 days)  equal to two (2%)  percent in
excess of the interest rate otherwise in effect with respect to the type of Loan
or Letter of Credit reimbursement in connection with which the required payments
have not been made.

     (b) Upon the occurrence and during the continuation of an Event of Default,
the Borrower shall pay to the Agent, for the pro rata distribution to the Banks,
interest on the Aggregate  Outstandings  (after as well as before judgment) at a
rate per annum  (computed on the basis of the actual number of days elapsed over
a year of 360 days)  equal to two (2%)  percent in excess of the  interest  rate
otherwise in effect hereunder.

     SECTION 2.25. Payments.  All payments by the Borrower hereunder,  under the
Notes  or  under  the  Letters  of  Credit  shall  be made in  U.S.  dollars  in
immediately  available  funds at the office of the Agent by 12:00 noon, New York
City time on the date on which such payment shall be due.

     SECTION  2.26.  Interest  Adjustments.   (a)  If  the  provisions  of  this
Agreement,  the Notes or the L/C Documents  would at any time otherwise  require
payment  by the  Borrower  to any  Bank or the  Issuing  Bank of any  amount  of
interest in excess of the maximum  amount then  permitted by applicable  law the
interest  payments shall be reduced to the extent necessary so that such Bank or
the Issuing Bank shall not receive interest in excess of such maximum amount. To
the extent that,  pursuant to the  foregoing  sentence,  the Agent shall receive
interest payments on behalf of the Banks or the

                                     - 31 -

<PAGE>



Issuing Bank  hereunder,  under the Notes or under the L/C  Documents in an
amount less than the amount otherwise provided, such deficit (hereinafter called
the  "Interest  Deficit")  will  cumulate and will be carried  forward  (without
interest) until the termination of this Agreement. Interest otherwise payable to
any Bank or the  Issuing  Bank  hereunder,  under  the  Notes  or under  the L/C
Documents for any subsequent period shall be increased by such maximum amount of
the  Interest  Deficit  that may be so added  without  causing  such Bank or the
Issuing Bank to receive  interest in excess of the maximum amount then permitted
by applicable law.

     (b) The amount of the  Interest  Deficit  shall be treated as a  prepayment
penalty and paid in full at the time of any optional  prepayment by the Borrower
of all or any part of the Term Loans.  The amount of the Interest Deficit at the
time of any complete payment of the Term Loans at that time  outstanding  (other
than an optional prepayment thereof) shall be cancelled and not paid.


                                     - 32 -

<PAGE>



                                   ARTICLE IIA

                              THE LETTERS OF CREDIT

     SECTION 2A.01. Letters of Credit. (a) On the terms and conditions set forth
herein,  (i) the Issuing  Bank  agrees,  from time to time on any  Business  Day
during the period from the date of this  Agreement to the Maturity Date to issue
Letters of Credit for the account of the Borrower  and (ii) the Banks  severally
agree to  participate  in  Letters  of  Credit  issued  for the  account  of the
Borrower.  Within the  foregoing  limits,  and  subject  to the other  terms and
conditions  hereof,  the Borrower's ability to obtain Letters of Credit shall be
fully  revolving,  and,  accordingly,  the Borrower  may,  during the  foregoing
period, obtain Letters of Credit to replace Letters of Credit which have expired
or which have been drawn upon and reimbursed.

     (b) The Issuing Bank has no obligation to Issue any Letter of Credit if:

     (i)  any  order,  judgment  or  decree  of any  governmental  authority  or
arbitrator  purports  by its terms to enjoin or restrain  the Issuing  Bank from
issuing  such  Letter of  Credit or any  requirement  of law  applicable  to the
Issuing  Bank or any  request or  directive  (whether or not having the force of
law) from any  governmental  authority with  jurisdiction  over the Issuing Bank
prohibits,  or requests  that the Issuing  Bank  refrain  from,  the issuance of
commercial  or standby  letters of credit  generally or such Letter of Credit in
particular  or imposes  upon such  Issuing  Bank with  respect to such Letter of
Credit any restriction,  reserve or capital  requirement (for which such Issuing
Bank is not otherwise  compensated  hereunder) not in effect on the date of this
Agreement,  or imposes  upon the Issuing  Bank any  unreimbursed  loss,  cost or
expense  which was not  applicable  on the date of this  Agreement and which the
Issuing Bank in good faith deems material to it;

     (ii) the Issuing Bank has received  written notice from any Bank, the Agent
or the Borrower,  on or prior to the Business Day prior to the requested date of
issuance of such Letter of Credit, that one or more of the applicable conditions
contained in Article III is not then satisfied;

     (iii) the expiry  date of any  requested  Letter of Credit is (x) more than
one (1) year from its date of issuance or (y) later than five (5) Business  Days
prior to the Maturity Date;

     (iv) the  aggregate  L/C  Exposure,  after giving  effect to the  requested
Letter  of  Credit,   under  all  standby   Letters  of  Credit   shall   exceed
$2,250,000.00; or


                                     - 33 -

<PAGE>



     (v) any requested Letter of Credit is not in form and substance  acceptable
to the  Issuing  Bank,  or the  issuance  of a Letter  of  Credit  violates  any
applicable policies of the Issuing Bank.

     SECTION 2A.02.  Issuance of Letters of Credit.  Each Letter of Credit shall
be issued upon the request of the Borrower (which request shall be irrevocable),
received by the Issuing Bank in accordance with arrangements between the Issuing
Bank and the  Borrower  to provide  the  Issuing  Bank  electronically  with the
information   necessary  to  issue,  amend  or  renew  Letters  of  Credit.  The
arrangements  between the Borrower and the Issuing Bank are set forth in the L/C
Documents  (other than the Letters of Credit)  between the Issuing  Bank and the
Borrower.  To the extent any term in any such L/C Documents (other than a Letter
of Credit)  conflicts with or is inconsistent  with the terms of this Agreement,
the term most favorable to the Issuing Bank shall apply, and an Issuing Bank may
exercise its rights under either such L/C Document or this  Agreement  vis-a-vis
the Borrower,  but subject in any event to the provisions herein with respect to
sharing and notification.  If any such  inconsistency  exists, the Agent and the
Banks  shall not be deemed to have  waived any rights  hereunder,  nor shall the
Issuing  Bank be deemed to have waived any rights  under such L/C  Document,  by
reason of such inconsistency.

     SECTION 2A.03.  Participations  of Banks. (a) Immediately upon the issuance
of each Letter of Credit,  each Bank shall be deemed to, and hereby  irrevocably
unconditionally  agrees to,  purchase from the Issuing Bank a  participation  in
such  Letter of Credit,  each  drawing  thereunder  in any amount and each draft
accepted or deferred payment obligation incurred in any amount under such Letter
of Credit equal in each case to the product of (i) the pro rata share (expressed
as a percentage) of each Bank,  represented  by the percentage  that each Bank's
Commitment  bears  to the  Total  Commitment,  times  (ii)  the  maximum  amount
available  to be drawn  under  such  Letter  of  Credit  and the  amount of such
drawing,  accepted  draft or deferred  payment  obligation,  respectively.  Each
issuance of a Letter of Credit shall be deemed to utilize the Commitment of each
Bank by an amount equal to the amount of such participation.

     (b) The Issuing Bank will promptly notify the Borrower of any drawing under
a Letter of Credit.  The Borrower shall  reimburse the Issuing Bank on each date
that any amount is paid by the  Issuing  Bank  under any Letter of Credit  (each
such date,  an "Honor  Date") at such time(s) as are agreed upon by the Borrower
and the Issuing  Bank,  in an amount  equal to the amount so paid by the Issuing
Bank. If the Borrower fails to reimburse the Issuing Bank for the full amount of
any  drawing  under any Letter of Credit at such  agreed  upon time on the Honor
Date,  such  Issuing  Bank will  promptly  notify  the Agent and the Agent  will
promptly  notify each Bank thereof.  The Honor Date shall, in every case, be (i)
not later than seventy

                                     - 34 -

<PAGE>



(70) days  beyond  the date when the  beneficiary  of the  Letter of Credit
makes  presentment of the required  documents under the Letter of Credit or (ii)
not later than five (5) Business Days prior to the Maturity Date.

     (c) Upon  receipt  of any  notice  from the  Agent  of any  failure  by the
Borrower to reimburse  the Issuing Bank,  each Bank shall make  available to the
Agent for the  account of the  Issuing  Bank its pro rata share of the amount of
such reimbursement. If, after receipt of such notice, any Bank fails to transfer
its pro rata share of the amount of such  reimbursement  to the Agent,  interest
shall accrue on such Bank's  obligation to make such payment from the Honor Date
to the date such  Bank  makes  such  payment,  at a rate per annum  equal to the
Federal Funds Effective Rate in effect from time to time during such period. Any
failure  of the  Agent  to give  notice  to the  Banks  on an  Honor  Date or in
sufficient time to enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this subsection (c).

     (d) Each Bank's  payment to the Issuing Bank  pursuant to Section  2A.03(c)
shall be deemed payment in respect of and in satisfaction  of its  participation
in such Letter of Credit.

     (e) Each Bank's  obligation to make payment in respect of its participation
in Letters of Credit,  shall be absolute and  unconditional and without recourse
to the Issuing Bank and shall not be affected by any circumstance, including (i)
any setoff, counterclaim, recoupment, defense or other right which such Bank may
have against the Issuing  Bank,  the Borrower or any other Person for any reason
whatsoever;  (ii) the  occurrence  or  continuance  of a Default or any Event of
Default; or (iii) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.

     (f) Notwithstanding anything herein to the contrary, no Bank shall have any
liability to BNY for any  reimbursement  or other  obligation in connection with
unmatured  drafts accepted and/or deferred payment  obligations  incurred by BNY
prior to the date of this Agreement and as identified on Schedule 1.01-C.

     SECTION 2A.04. Repayment of Participations. (a) Upon receipt by the Issuing
Bank of (i) reimbursement  from the Borrower for any payment made by the Issuing
Bank  under a Letter of Credit  with  respect to which any Bank has paid for its
participation in such Letter of Credit or (ii) payment of interest thereon,  the
Issuing  Bank  will pay such  amounts  to the  Agent in the same  funds as those
received by the Issuing Bank. The Agent shall  promptly  distribute to each Bank
its pro rata share thereof.

     (b) If the Agent or any  Issuing  Bank is required at any time to return to
the Borrower, or to a trustee, receiver, liquidator,  custodian, or any official
in any insolvency proceeding, any

                                     - 35 -

<PAGE>



portion of the payments made by the Borrower to the Agent or to the Issuing
Bank  pursuant to Section  2A.04(a) in  reimbursement  of a payment made under a
Letter of Credit or interest  thereon or fees relating thereto or as a result of
a setoff,  each Bank shall,  on demand of the Agent or the Issuing  Bank, as the
case may be,  forthwith return to the Agent or the Issuing Bank, as the case may
be, the amount of its pro rata share of any  amounts so returned by the Agent or
the Issuing Bank plus interest  thereon from the date such demand is made to the
date such amounts are returned by such Bank to the Agent or the Issuing Bank, at
a rate per annum equal to the Federal Funds  Effective  Rate in effect from time
to time.

     (c) If any event  described in subsection (b) above occurs,  the obligation
of the  Borrower  in respect of the  payment or setoff  required  to be returned
shall be revived and  continued  in full force and effect as if such payment had
not been make or such setoff had not been effected.

     SECTION 2A.05 Role of the Issuing Bank. (a) The Issuing Bank shall not have
any  responsibility  to obtain any document in  connection  with paying any draw
under a  Letter  of  Credit  (other  than  any  required  sight  or time  draft,
certificate and other documents  expressly  required by the Letter of Credit) or
to ascertain  or inquire as to the validity or accuracy of any such  document or
the authority of the Person executing or delivering any such document.

     (b) Neither the Issuing  Bank nor any of its  correspondents  or  assignees
shall be liable to any Bank for: (i) any action  taken or omitted in  connection
herewith  at the  request  or with the  approval  of the  Banks  (including  the
Required Banks, as applicable);  (ii) any action taken or omitted in the absence
of  gross  negligence  or  willful  misconduct;  or  (iii)  the  due  execution,
effectiveness, validity or enforceability of any L/C Document.

     (c) The Borrower  hereby  assumes all risks of the acts or omissions of any
beneficiary  or  transferee  with  respect  to its use of any  Letter of Credit;
provided,  however,  that this  assumption  is not  intended  to, and shall not,
preclude the Borrower's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other  agreement.  Neither the
Agent,  nor  any  of  its  officers,  directors  or  employees,  nor  any of the
respective correspondents,  participants or assignees of the Issuing Bank, shall
be liable or responsible for any of the matters described in clauses (i) through
(vii) of Section 2A.06;  provided,  however,  that the Borrower may have a claim
against the Issuing Bank, and the Issuing Bank may be liable to the Borrower, to
the extent of any direct,  as opposed to  consequential  or  exemplary,  damages
suffered by the Borrower  which the  Borrower  proves were caused by the Issuing
Bank's  willful  misconduct or gross  negligence or the Issuing  Bank's  willful
failure to pay under any Letter of Credit  after the  presentation  to it by the
beneficiary of a

                                     - 36 -

<PAGE>



required sight or time draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing: (i) the Issuing Bank may accept documents that appear on their
face  to  be  in  order,  without   responsibility  for  further  investigation,
regardless of any notice or  information  to the contrary;  and (ii) the Issuing
Bank shall not be responsible  for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits  thereunder or proceeds thereof,  in whole or in part,
which may prove to be invalid or ineffective for any reasons.

     SECTION 2A.06.  Obligations Absolute. The obligations of the Borrower under
this Agreement and any L/C Documents to reimburse the Issuing Bank for a drawing
under a Letter of Credit shall be unconditional  and  irrevocable,  and shall be
paid  strictly  in  accordance  with  the  terms of this  Agreement  and the L/C
Documents under all circumstances, including the following:

     (i) any lack of validity or  enforceability  of this  Agreement  or any L/C
Document;

     (ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the  obligations of the Borrower in respect of any Letter
of Credit or any other  amendment or waiver of or any consent to departure  from
all or any of the L/C Documents;

     (iii) the existence of any claim,  setoff,  defense or other right that the
Borrower may have at any time against any  beneficiary  or any transferee of any
Letter  of  Credit  (or any  Person  for whom any such  beneficiary  or any such
transferee  may be acting),  the Issuing  Bank or any other  Person,  whether in
connection with this Agreement,  the transactions  contemplated hereby or by the
L/C Documents or any unrelated transaction;

     (iv) any draft,  demand,  certificate or 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;
or any loss or delay in the  transmission or otherwise of any document  required
in order to make a drawing under any Letter of Credit;

     (v) any  payment  by the  Issuing  Bank  under a Letter of  Credit  against
presentation  of a draft or certificate  that does not strictly  comply with the
terms of any Letter of Credit; or any payment made by the Issuing Bank under any
Letter  of Credit  to any  Person  purporting  to be a  trustee  in  bankruptcy,
debtor-in-possession,   assignee  for  the  benefit  of  creditors,  liquidator,
receiver or other representative of or

                                     - 37 -

<PAGE>



successor to any  beneficiary  or any  transferee  of any Letter of Credit,
including any arising in connection with any insolvency proceeding;

     (vi) any exchange,  release or  non-perfection  of any  collateral,  or any
release  or  amendment  or  waiver of or  consent  to  departure  from any other
guarantee,  for all or any of the  obligations of the Borrower in respect of any
Letter of Credit; or

     (vii)  any other  circumstance  or  happening  whatsoever,  whether  or not
similar to any of the  foregoing,  including any other  circumstance  that might
otherwise constitute a defense available to, or a discharge of, the Borrower.

     SECTION  2A.07.  Uniform  Customs and  Practices.  The Uniform  Customs and
Practices for Documentary  Credits as published by the International  Chamber of
Commerce  most  recently at the time of  issuance of any Letter of Credit  shall
(unless  otherwise  expressly  provided in the  Letters of Credit)  apply to the
Letters of Credit.

     SECTION 2A.08.  Fees and  Commissions.  (a) In the case of trade Letters of
Credit  payable  on  sight,  the  Borrower  shall  pay to the  Agent  a  payment
commission  equal  to  0.25%  of  the  amount  drawn,  payable  on the  date  of
presentment of the required documents under the Letter of Credit.

     (b) In the case of trade  Letters of Credit  payable at a stated time,  the
Borrower shall pay to the Agent a per annum  commission on the average amount of
drafts accepted and deferred payment obligations as outstanding from the date of
presentment  of  required  documents  under the  Letter of Credit to the date of
payment,  equal to (i) 0.75% during such periods when the Borrower's Funded Debt
to  EBITDA  Ratio (as  determined  from the  Borrower's  most  recent  financial
statements) is less than 2.00 to 1.00 and (ii) 1.25% when the Borrower's  Funded
Debt to EBITDA Ratio is equal to or greater than 2.00 to 1.00.  Such  commission
shall be payable on the Honor Date.

     (c) In the case of standby Letters of Credit, the Borrower shall pay to the
Agent a per annum fee equal to the LIBOR  Applicable  Margin,  as in effect from
time to time, on the average  amount issued and available to be drawn on standby
Letters of Credit  (computed  on the basis of a year of 360 days for actual days
elapsed), payable quarterly in arrears.

     (d) In the case of all  Letters of Credit,  the  Borrower  shall pay to the
Issuing Bank its usual and customary  letter of credit fees as established  from
time to time,  including without limitation,  fees,  commissions and charges for
issuance, payment, processing amendment and expiration.


                                     - 38 -

<PAGE>



     (e) In the case of the fees and  commissions  set forth in (a), (b) and (c)
above,  same  shall be paid to the  Agent for the pro rata  distribution  to the
Banks.

     (f) Notwithstanding anything herein to the contrary, any amounts payable by
the Borrower with respect to unmatured  drafts accepted and/or deferred  payment
obligations  incurred  by BNY  prior  to  the  date  of  this  Agreement  and as
identified on Schedule 1.01-C annexed  hereto,  shall be paid to BNY for its own
account.

                                     - 39 -

<PAGE>




                                   ARTICLE III

                              CONDITIONS OF LENDING

     SECTION 3.01.  Conditions  Precedent to the Making of the Initial Revolving
Credit Loan and the Issuing of the Initial  Letter of Credit.  The obligation of
the  Banks to make the  initial  Revolving  Credit  Loans  contemplated  by this
Agreement and the  obligation of the Issuing Bank to issue the initial Letter of
Credit issued after the date of this  Agreement  contemplated  by this Agreement
are each subject to the condition  precedent  that the Agent,  the Banks and the
Issuing Bank shall have  received  from the Borrower  and the  Guarantors  on or
before the date of this  Agreement the  following,  each dated such day, in form
and substance satisfactory to the Agent and its counsel:

     (a) A Revolving  Credit Note,  duly executed by the Borrower and payable to
the order of each of the Banks.

     (b) Certified (as of the date of this Agreement)  copies of the resolutions
of the Board of Directors of the Borrower  authorizing the Loans and the Letters
of Credit  and  authorizing  and  approving  this  Agreement  and the other Loan
Documents  and the  execution,  delivery and  performance  thereof and certified
copies  of  all  documents  evidencing  other  necessary  corporate  action  and
governmental  approvals,  if any,  with respect to this  Agreement and the other
Loan Documents.

     (c) Certified (as of the date of this Agreement)  copies of the resolutions
of the  Boards of  Directors  and the  shareholders  of each of the  Guarantors,
authorizing  and approving this Agreement,  their  Guaranties and any other Loan
Document  applicable  to  the  Guarantors,  and  the  execution,   delivery  and
performance  thereof and  certified  copies of all  documents  evidencing  other
necessary corporate action and governmental  approvals,  if any, with respect to
this Agreement, their Guaranties and the other Loan Documents.

     (d) A certificate of the Secretary or an Assistant  Secretary  (attested to
by  another  officer)  of the  Borrower  certifying:  (i)  the  names  and  true
signatures  of the officer or officers of the Borrower  authorized  to sign this
Agreement,  the Notes and the other Loan Documents to be delivered  hereunder on
behalf of the Borrower;  and (ii) a copy of the  Borrower's  by-laws as complete
and correct on the date of this Agreement.

     (e) A Certificate of the Secretary or an Assistant  Secretary  (attested to
by another officer) of each of the Guarantors  certifying (i) the names and true
signatures of the officer or officers of the Guarantors  authorized to sign this
Agreement,  their  Guaranties  and any  other  Loan  Documents  to be  delivered
hereunder on behalf of the Guarantors; (ii) a copy of each of the Guarantors'

                                     - 40 -

<PAGE>



by-laws as complete  and correct on the date of this  Agreement;  and (iii)
the stock ownership of each Guarantor.

     (f) Copies of the certificate of incorporation  and all amendments  thereto
of the Borrower and the  Guarantors  certified in each case by the  Secretary of
State  (or  equivalent  officer)  of the state of  incorporation  of each of the
Borrower and the  Guarantors  and a  certificate  of existence and good standing
with respect to the Borrower and the Guarantors  from the Secretary of State (or
equivalent  officer)  of the  state of  incorporation  of the  Borrower  and the
Guarantors) and from the Secretary of State (or equivalent officer) of any state
in which the Borrower or the Guarantors are authorized to do business.

     (g) An opinion of (i) Ruskin, Moscou, Evans & Faltischek, P.C., counsel for
the Borrower and the Guarantors as to certain matters  referred to in Article IV
hereof and as to such other  matters as the Agent or its counsel may  reasonably
request and (ii) of Cantey & Hanger,  L.L.P. with respect to Sedeco,  concerning
such matters as the Agent or its counsel may reasonably request.

     (h) From each of the Guarantors, an executed Guaranty.

     (i) From the Borrower,  copies of all of the Borrower's credit  agreements,
loan  agreements,  indentures,  mortgages  and other  documents  relating to the
extension of credit.

     (j) From the Borrower, a copy of the Sedeco Tajima Agreement.

     (k) From the  Borrower,  the fees and expenses to be paid  pursuant to this
Agreement, the Commitment Letter and the Fee Letter.

     (l) The  Agent and the Banks  shall,  prior to the date of this  Agreement,
have completed their due diligence reviews of the Borrower, the results of which
shall be satisfactory to the Agent and the Banks in their sole discretion.

     (m) From the Borrower,  a copy of all  contracts,  documents and agreements
relating to the acquisition of Sedeco, the review of which shall be satisfactory
to the  Banks  and  their  counsel  in  all  respects,  and  evidence  that  the
acquisition of Sedeco has been completed.

     (n) From the Borrower, a copy of an amendment to the BNY Existing Term Loan
Agreement  executed  by each of the  parties  thereto,  in  form  and  substance
satisfactory to the Agent and its counsel,  which conforms the covenants therein
to those set forth in Article V of this Agreement.


                                     - 41 -

<PAGE>



     (o) From the Borrower, a waiver, in form and substance  satisfactory to the
Agent and its  counsel,  by which  The Chase  Manhattan  Bank  consents  to this
Agreement and the transactions contemplated hereby.

     (p) Intentionally omitted.

     (q) The  following  statements  shall  be true  and the  Agent  shall  have
received a certificate signed by the President or Chief Financial Officer of the
Borrower and each Guarantor dated the date hereof, stating that:

     (i) The  representations  and  warranties  contained  in Article IV of this
Agreement and in the other Loan Documents are true and correct on and as of such
date; and

     (ii) No Default or Event of Default  has  occurred  and is  continuing,  or
would  result  from the  making of the  initial  Revolving  Credit  Loans or the
issuance of the initial Letter of Credit, as applicable.

     (r) All legal matters incident to this Agreement and the Loan  transactions
contemplated  hereby shall be satisfactory to Cullen and Dykman,  counsel to the
Agent.

     (s) Receipt by the Agent of such other approvals,  opinions or documents as
the Agent or its counsel may reasonably request.

     SECTION 3.02.  Conditions  Precedent to All Revolving  Credit Loans and all
Letters of Credit.  The  obligation of the Banks to make each  Revolving  Credit
Loan and the  obligation  of the Issuing  Bank to issue  Letters of Credit shall
each be  subject to the  further  condition  precedent  that on the date of such
Revolving Credit Loan or Letter of Credit:

     (a) The  following  statements  shall  be true  and the  Agent  shall  have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower dated the date of such  Revolving  Credit Loan or Letter of Credit,
stating that:

     (i) The  representations  and  warranties  contained  in Article IV of this
Agreement  and in the other Loan  Documents are true and correct in all material
respects  on and as of such  date as though  made on and as such date  (provided
that the  representation  made in Section 4.01(f) shall be deemed made as to the
then most recent fiscal year and interim period financial  statements  delivered
to the Agent and the Banks); and

     (ii) No Default or Event of Default  has  occurred  and is  continuing,  or
would result from such Revolving Credit Loan or Letter of Credit.


                                     - 42 -

<PAGE>



     (b) The Agent  shall  have  received  such  other  approvals,  opinions  or
documents as the Agent or its counsel may reasonably request.

     SECTION 3.03.  Conditions Precedent to the Making of Permitted  Acquisition
Loans.  The obligation of the Banks to make each Revolving  Credit Loan which is
Permitted  Acquisition Loan shall be subject to the further conditions precedent
that on the date of such Revolving Credit Loan:

     (a) The Agent and the Banks shall have received, at least ten (10) Business
Days prior to such request,  the certificate and information  required under the
definition of Permitted Acquisition.

     (b) The Agent and the Banks shall have  received  copies of all  contracts,
documents and agreements relating to the Permitted Acquisition (the "Acquisition
Documents"),  and  evidence  that except for the payment of that  portion of the
purchase price to be funded by the proceeds of any Permitted  Acquisition Loans,
the Permitted Acquisition has been completed in accordance with the terms of the
Acquisition  Documents  previously  furnished  and that no condition or material
obligation on the part of the acquired Person has been waived.

     SECTION  3.04.  Conditions  Precedent  to the Making of the Term Loan.  The
obligation  of each Bank to make its share of the Term Loan  shall be subject to
the condition  precedent  that the Agent and the Banks shall have received on or
before the Maturity Date all of the documents required by Section 3.01, 3.02 and
3.03 and each of the following,  in form and substance satisfactory to the Agent
and its counsel:

     (a) A Term Loan Note,  duly  executed  by the  Borrower  and payable to the
order of each of the Banks.

     (b) The  following  statements  shall  be true  and the  Agent  shall  have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower and each Guarantor dated the Maturity Date, stating that:

     (i) The  representations  and  warranties  contained  in Article IV of this
Agreement  and in the other Loan  Documents are true and correct in all material
respects  on and as of the  Maturity  Date as though made on and as of such date
(provided that the  representation  made in Section 4.01(f) shall be deemed made
as to the then most recent fiscal year and interim period  financial  statements
delivered  to the Agent and the Banks);  and (ii) No Default or Event of Default
has  occurred  and is  continuing,  or would  result from the making of the Term
Loan.


                                     - 43 -

<PAGE>



     (c)  Additional  Documentation.  The Agent shall have  received  such other
approvals,  opinions,  or documents  as the Agent or its counsel may  reasonably
request.

     SECTION 3.05 Special Condition Precedent. The Borrower shall deliver to the
Agent,  on or before  February  28,  1997,  an opinion of Illinois  counsel with
respect to SMX,  concerning certain matters referred to in Article IV hereof and
as to such other matters as the Agent or its counsel may reasonably request. The
failure of the Borrower to deliver such opinion  shall result in the  provisions
of Section 2.07(d) becoming effective.

                                     - 44 -

<PAGE>



                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     SECTION  4.01.   Representations  and  Warranties.  On  the  date  of  this
Agreement,  on each date that the Borrower requests a Revolving Credit Loan or a
Letter of Credit and on the date the Term Loan is made, the Borrower and each of
the Guarantors represent and warrant as follows:

     (a) Subsidiaries. On the date hereof, the only Subsidiaries of the Borrower
or a Guarantor are those set forth on Schedule  4.01(a)  annexed  hereto,  which
Schedule  accurately sets forth with respect to each such  Subsidiary,  its name
and address,  any other  addresses at which it conducts  business,  its state of
incorporation  and  each  other  jurisdiction  in which  it is  qualified  to do
business and the identity and share holdings of its stockholders.  Except as set
forth on  Schedule  4.01(a),  all of the issued and  outstanding  shares of each
Subsidiary  which  are owned by the  Borrower  or a  Guarantor  are owned by the
Borrower  or such  Guarantor  free and clear of any  mortgage,  pledge,  lien or
encumbrance.  Except as set forth on Schedule 4.01(a), there are not outstanding
any warrants, options, contracts or commitments of any kind entitling any Person
to purchase or otherwise  acquire any shares of common or capital stock or other
equity  interest  of any  Guarantor  or any  Subsidiary  of  the  Borrower  or a
Guarantor,  nor are there  outstanding any securities which are convertible into
or  exchangeable  for any shares of the common or capital stock of any Guarantor
or any Subsidiary of the Borrower or a Guarantor.

     (b) Good Standing.  The Borrower and the  Guarantors are each  corporations
duly  incorporated,  validly existing and in good standing under the laws of the
States of their respective incorporation and each has the corporate power to own
their assets and to transact the  business in which they are  presently  engaged
and are duly  qualified  and are in good  standing  in such other  jurisdictions
where failure to qualify or otherwise  maintain such standing  could result in a
Material Adverse Change in the Borrower and the Guarantors, taken as a whole.

     (c) Due  Execution,  etc. The  execution,  delivery and  performance by the
Borrower and each  Guarantor of the Loan Documents to which they are a party are
within the Borrower's  and the  Guarantors'  corporate  power and have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the stockholders of the Borrower or Guarantors;  (ii)
do not  contravene  the  Borrower's or any of the  Guarantors'  certificates  of
incorporation,  charters or by-laws;  (iii)  violate any  provision  of any law,
rule, regulation, contractual restriction, order, writ, judgment, injunction, or
decree,  determination  or award  binding on or  affecting  the  Borrower or any
Guarantor; (iv) result in a breach of or constitute a

                                     - 45 -

<PAGE>



default  under  any  indenture  or loan or credit  agreement,  or any other
agreement, lease or instrument to which the Borrower or any Guarantor is a party
or by which it or its properties may be bound or affected;  or (v) result in, or
require, the creation or imposition of any Lien (other than the Lien of the Loan
Documents)  upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower or any Guarantor.

     (d) No Consents Required.  No authorization or approval or other action by,
and no notice to or filing with, any  governmental  authority or regulatory body
is required for the due execution,  delivery and  performance by the Borrower or
any   Guarantor  of  any  Loan   Document  to  which  it  is  a  party,   except
authorizations, approvals, actions, notices or filings which have been obtained,
taken or made, as the case may be.

     (e)  Validity  and  Enforceability.   The  Loan  Documents  when  delivered
hereunder  will have been duly  executed and delivered on behalf of the Borrower
and each  Guarantor,  as the case may be, and will be legal,  valid and  binding
obligations of the Borrower and each Guarantor,  as the case may be, enforceable
against the  Borrower or such  Guarantor  in  accordance  with their  respective
terms.

     (f) Financial  Statements.  The  consolidated  financial  statements of the
Borrower,  the Guarantors and their respective  Consolidated  Affiliates for the
fiscal year ended  January 31,  1996,  and for the most  recent  interim  fiscal
period,  copies of which have been furnished to the Agent and the Banks,  fairly
present the financial condition of the Borrower and its Consolidated  Affiliates
as at  such  dates  and  the  results  of  operations  of the  Borrower  and its
Consolidated  Affiliates for the periods ended on such dates,  all in accordance
with GAAP, and since such dates (and each succeeding  January 31) there has been
(i) no material increase in the liabilities of the Borrower and its Consolidated
Affiliates  and  (ii)  no  Material  Adverse  Change  in the  Borrower  and  its
Consolidated Affiliates.

     (g) No  Litigation.  There is no pending or, to the  Borrower's  knowledge,
threatened  action,  proceeding or  investigation  affecting  the Borrower,  any
Guarantor or any  Subsidiary  of the Borrower or a Guarantor,  before any court,
governmental  agency  or  arbitrator,  which  may  either  in one case or in the
aggregate, result in a Material Adverse Change in the Borrower, any Guarantor or
any such Subsidiary.

     (h) Taxes.  The Borrower and each Guarantor  have filed all federal,  state
and local tax returns required to be filed and have paid all taxes,  assessments
and governmental  charges and levies thereon to be due,  including  interest and
penalties.  The federal  income tax liability of the Borrower and each Guarantor
has been

                                     - 46 -

<PAGE>



finally  determined and satisfied for all taxable years up to and including
the taxable year ending January 31, 1996.

     (i) Licenses,  etc. The Borrower, each Guarantor and each Subsidiary of the
Borrower or each Guarantor possess all licenses, permits,  franchises,  patents,
copyrights,  trademarks  and trade names,  or rights  thereto,  to conduct their
respective  businesses  substantially as now conducted and as presently proposed
to be conducted, and neither the Borrower, any Guarantor nor any such Subsidiary
are in violation of any similar rights of others.

     (j) Burdensome  Agreements.  To the best of Borrower's  knowledge after due
inquiry,  neither  the  Borrower  nor any of the  Guarantors  are a party to any
indenture, loan or credit agreement or any other agreement,  lease or instrument
or subject to any charter,  corporate  or  partnership  restriction  which could
result in a Material  Adverse Change in the Borrower and Guarantors,  taken as a
whole.  Neither the Borrower  nor any  Guarantor is in default in any respect in
the  performance,  observance,  or  fulfillment  of any of  the  obligations  or
covenants contained in any agreement or instrument material to its business.

     (k) Margin Stock.  The Borrower is not engaged in the business of extending
credit for the  purpose of  purchasing  or  carrying  margin  stock  (within the
meaning of Regulation G, T, U or X), and no proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of  purchasing or carrying any margin stock or in any other way which will cause
the Borrower to violate the provisions of Regulations G, T, U or X.

     (l) Compliance With Laws. The Borrower,  each Guarantor and each Subsidiary
of the Borrower or a Guarantor are in all material  respects in compliance  with
all  federal  and state  laws and  regulations  in all  jurisdictions  where the
failure  to comply  with such laws or  regulations  could  result in a  Material
Adverse Change in the Borrower and the Guarantors, taken as a whole.

     (m) ERISA. The Borrower, each Guarantor, each Subsidiary of the Borrower or
a Guarantor and each ERISA Affiliate are in compliance in all material  respects
with all  applicable  provisions  of  ERISA.  Neither a  Reportable  Event nor a
Prohibited  Transaction has occurred and is continuing with respect to any Plan;
no notice of intent  to  terminate  a Plan has been  filed nor has any Plan been
terminated;  no circumstances  exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate,  or appoint a
trustee  to  administrate,  a  Plan,  nor  has  the  PBGC  instituted  any  such
proceedings; neither the Borrower, any Guarantor, any Subsidiary of the Borrower
or a Guarantor,  nor any ERISA  Affiliate has completely or partially  withdrawn
under  Sections 4201 or 4204 of ERISA from a  Multiemployer  Plan; the Borrower,
each Guarantor, each Subsidiary of the Borrower or a

                                     - 47 -

<PAGE>



Guarantor  and  each  ERISA   Affiliate  have  met  their  minimum  funding
requirements under ERISA with respect to all of their Plans and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent  valuation date of the Plan in
accordance with the provisions of ERISA for calculating the potential  liability
of the Borrower,  any Guarantor,  any such  Subsidiary or any ERISA Affiliate to
PBGC or the  Plan  under  Title IV of  ERISA;  and  neither  the  Borrower,  any
Guarantor,  any  such  Subsidiary  nor any  ERISA  Affiliate  has  incurred  any
liability to the PBGC under ERISA.

     (n) Hazardous Materials.  The Borrower,  each Guarantor and each Subsidiary
of the Borrower or a Guarantor  are in  compliance  with all  federal,  state or
local laws,  ordinances,  rules,  regulations  or policies  governing  Hazardous
Materials and neither the Borrower,  any Guarantor nor any such  Subsidiary  has
used  Hazardous  Materials  on,  from,  or  affecting  any property now owned or
occupied or hereafter  owned or occupied by the  Borrower,  any Guarantor or any
such  Subsidiary  in any manner  which  violates  federal,  state or local laws,
ordinances,   rules,   regulations  or  policies  governing  the  use,  storage,
treatment,  transportation,  manufacture,  refinement,  handling,  production or
disposal  of  Hazardous  Materials,  and  that to the  best  of the  Borrower's,
Guarantors'  and  such  Subsidiaries'  knowledge,  no  prior  owner  of any such
property or any tenant,  subtenant,  prior tenant or prior  subtenant  have used
Hazardous  Materials  on, from or  affecting  such  property in any manner which
violates  federal,  state or local  laws,  ordinances,  rules,  regulations,  or
policies  governing the use, storage,  treatment,  transportation,  manufacture,
refinement, handling, production or disposal of Hazardous Materials.

     (o) Use of Proceeds.  The proceeds of the  Revolving  Credit Loans shall be
used  exclusively  for  the  purposes  set  forth  in  Section  2.05(a)  of this
Agreement.  Letters of Credit  shall be used  exclusively  for the  purposes set
forth in Section 2.05(b) of this Agreement. The proceeds of the Term Loans shall
be  used  exclusively  for  the  purposes  set  forth  in  Section  2.15 of this
Agreement.

     (p) No Liens.  The properties and assets of the Borrower and the Guarantors
are not  subject  to any Lien  other than  those  described  in Section  5.02(a)
hereof.

     (q)  Casualties.  Neither the business nor the  properties of the Borrower,
any  Guarantor or any  Subsidiary of the Borrower or a Guarantor are affected by
any fire, explosion, accident, strike, hail, earthquake,  embargo, act of God or
of the public enemy,  or other  casualty  (whether or not covered by insurance),
which  could  result  in a  Material  Adverse  Change  in the  Borrower  and the
Guarantors, taken as a whole.


                                     - 48 -

<PAGE>



     (r) Solvency of Guarantors.  The liability of the Guarantors as a result of
the execution of their respective Guaranties and the execution of this Agreement
shall not cause the liabilities  (including  contingent  liabilities) of each of
the Guarantors to exceed the fair saleable value of their respective assets.

     (s) Advantage to Guarantors.  The Guarantors  acknowledge they have derived
or expect to derive a financial or other  advantage  from the Loans  obtained by
the Borrower from the Bank.

     (t) Credit  Agreements.  Schedule 4.01(t) is a complete and correct list of
all credit agreements,  indentures,  purchase  agreements,  guaranties,  Capital
Leases, and other investments,  agreements and arrangements  presently in effect
providing  for or relating to  extensions of credit  (including  agreements  and
arrangements for the issuance of letters of credit or for acceptance  financing)
in respect of which the Borrower or any  Guarantor is in any manner  directly or
contingently obligated,  and the maximum principal or face amounts of the credit
in question,  outstanding or to be outstanding,  are correctly  stated,  and all
Liens of any  nature  given or  agreed  to be given  as  security  therefor  are
correctly  described or indicated in such  Schedule and neither the Borrower nor
any Guarantor is in default with respect to its obligations thereunder.


                                     - 49 -

<PAGE>



                                    ARTICLE V

                            COVENANTS OF THE BORROWER

     SECTION 5.01.  Affirmative  Covenants.  So long as (i) the Total Commitment
shall be in effect,  (ii) any amount shall remain  outstanding  under any of the
Notes,  or (iii) any  Letter  of  Credit,  accepted  draft or  deferred  payment
obligation under a Letter of Credit is outstanding, the Borrower and each of the
Guarantors will, unless the Agent and the Required Banks shall otherwise consent
in writing:

     (a) Compliance  with Laws,  Etc.  Comply,  and cause each Subsidiary of the
Borrower or a Guarantor to comply,  in all material respects with all applicable
laws, rules, regulations and orders, where the failure to so comply could result
in a  Material  Adverse  Change  in  the  Borrower,  a  Guarantor  or  any  such
Subsidiary.

     (b) Reporting Requirements. Furnish to the Agent and each of the Banks:

         (i) Annual Financial Statements.

     (1) As soon as  available  and in any event  within  ninety  five (95) days
after  the  end of  each  fiscal  year of the  Borrower,  a copy of the  audited
consolidated   financial   statements  of  the  Borrower  and  its  Consolidated
Affiliates for such year,  including a balance sheet with related  statements of
income and retained  earnings and  statements  of cash flows,  all in reasonable
detail and setting forth in comparative form the figures for the previous fiscal
year (the comparative form of such statements for the fiscal year ending January
31, 1997 may exclude SMX and Sedeco for the fiscal years ending January 31, 1995
and  January  31,  1996),  together  with an  unqualified  opinion,  prepared by
Deloitte  &  Touche  or such  other  independent  certified  public  accountants
selected by the  Borrower and  reasonably  satisfactory  to the Agent,  all such
financial statements to be prepared in accordance with GAAP, and

     (2) As soon as  available  and in any event  within  ninety  five (95) days
after the end of each fiscal year of the Borrower,  a copy of the  consolidating
financial  statements of the Borrower and its  Consolidated  Affiliates for such
year,  including  balance sheets with related  statements of income and retained
earnings and a statement of (x) the aggregate  advances by the Borrower to HAPL,
(y) the  aggregate  advances by the  Borrower to Sedeco,  and (z) the  aggregate
advances by the Borrower to all Subsidiaries  other than HAPL or Sedeco,  all in
reasonable  detail and  setting  forth in  comparative  form the figures for the
previous fiscal year, prepared by management of the Borrower, all such financial
statements to be prepared in accordance with GAAP.

     (ii) Quarterly Financial Statements.

                                     - 50 -

<PAGE>




     (1) As soon as available  and in any event within fifty (50) days after the
end of each of the  first  three  fiscal  quarters  of each  fiscal  year of the
Borrower,  a copy of the consolidated  financial  statements of the Borrower and
its Consolidated  Affiliates for such quarter and for year to date,  including a
balance  sheet with related  statements  of income and  retained  earnings and a
statement  of  cash  flows,  all in  reasonable  detail  and  setting  forth  in
comparative  form the figures for the comparable  quarter and comparable year to
date period for the previous  fiscal year, all such  financial  statements to be
prepared by management of the Borrower in accordance with GAAP, and

     (2) As soon as available  and in any event within fifty (50) days after the
end of each of the  first  three  fiscal  quarters  of each  fiscal  year of the
Borrower,  a copy of the consolidating  financial statements of the Borrower and
its Consolidated Affiliates,  for such quarter and for year to date, including a
balance  sheet with related  statements  of income and  retained  earnings and a
statement  of (x) the  aggregate  advances  by the  Borrower  to  HAPL,  (y) the
aggregate  advances by the Borrower to Sedeco, and (z) the aggregate advances by
the Borrower to all  Subsidiaries  other than HAPL or Sedeco,  all in reasonable
detail and setting  forth in  comparative  form the  figures for the  comparable
quarter and  comparable  year to date period for the previous  fiscal year,  all
such  financial  statements  to be prepared  by  management  of the  Borrower in
accordance with GAAP.

     (iii)  Management  Letters.  Promptly upon receipt  thereof,  copies of any
reports  submitted to the Borrower or any  Guarantor  by  independent  certified
public accountants in connection with examination of the financial statements of
the Borrower and each Guarantor made by such accountants.

         (iv) Certificate of No Default. Simultaneously with the delivery of the
financial  statements  referred to in Section 5.01(b)(i) and (ii), a certificate
of the President or the Chief Financial Officer of the Borrower or Guarantor, as
the case may be, (1) certifying that no Default or Event of Default has occurred
and is  continuing,  or if a Default or Event of  Default  has  occurred  and is
continuing,  a  statement  as to the  nature  thereof  and the  action  which is
proposed  to  be  taken  with  respect  thereto;   and  (2)  with   computations
demonstrating compliance with the covenants contained in Section 5.03.

     (v) Intentionally omitted.

     (vi) Notice of Litigation.  Promptly after the commencement thereof, notice
of  all  actions,  suits  and  proceedings  before  any  court  or  governmental
department,  commission, board, bureau, agency, or instrumentality,  domestic or
foreign, affecting the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor which, if determined adversely to the Borrower, any

                                     - 51 -

<PAGE>



Guarantor or any such Subsidiary  could result in a Material Adverse Change
in the Borrower and the Guarantors, taken as a whole.

     (vii) Notice of Defaults and Events of Default.  As soon as possible and in
any event within five (5) days after the  occurrence of each Default or Event of
Default,  a written notice setting forth the details of such Default or Event of
Default  and the  action  which is  proposed  to be taken by the  Borrower  with
respect thereto.

     (viii)  ERISA  Reports.  Promptly  after the filing or  receiving  thereof,
copies of all reports,  including annual reports, and notices which the Borrower
any Guarantor and any  Subsidiary of the Borrower or a Guarantor,  files with or
receives from the PBGC or the U.S.  Department of Labor under ERISA; and as soon
as possible after the Borrower,  any Guarantor or any such  Subsidiary  knows or
has  reason to know that any  Reportable  Event or  Prohibited  Transaction  has
occurred  with  respect  to any  Plan or that  the  PBGC  or the  Borrower,  any
Guarantor or any such  Subsidiary has  instituted or will institute  proceedings
under Title IV of ERISA to terminate  any Plan,  the Borrower or such  Guarantor
will deliver to the Agent a certificate of the President or the Chief  Financial
Officer of the  Borrower  or such  Guarantor  setting  forth  details as to such
Reportable  Event or Prohibited  Transaction or Plan  termination and the action
the Borrower or such Guarantor proposes to take with respect thereto.

     (ix) Reports to Other  Creditors.  Promptly after the  furnishing  thereof,
copies of any statement or report  furnished to any other party  pursuant to the
terms of any indenture,  loan, or credit or similar  agreement and not otherwise
required  to be  furnished  to the Agent  pursuant  to any other  clause of this
Section 5.01(b).

     (x) Proxy  Statements,  Etc.  Promptly after the sending or filing thereof,
copies of all proxy  statements,  financial  statements  and  reports  which the
Borrower or any Guarantor sends to its stockholders,  and copies of all regular,
periodic,  and  special  reports,  and all  registration  statements  which  the
Borrower or any Guarantor  files with the Securities and Exchange  Commission or
any  governmental  authority  which  may be  substituted  therefor,  or with any
national securities exchange.

     (xi) Notice of Termination of Tajima Agreement or Sedeco Tajima  Agreement.
Promptly upon receipt  thereof,  notice of the cancellation or suspension of the
Tajima  Agreement or the Sedeco  Tajima  Agreement or of any notice by any party
thereto of its intent to cancel or suspend  the Tajima  Agreement  or the Sedeco
Tajima Agreement, and notice of the existence of any default or event of default
thereunder.

     (xii) General Information.  Such other information respecting the condition
or operations, financial or otherwise, of the

                                     - 52 -

<PAGE>



Borrower, any Guarantor or any Subsidiary of the Borrower or a Guarantor as
the Bank may from time to time reasonably request.

     (c)  Taxes.  Pay and  discharge,  and  cause  its  Subsidiaries  to pay and
discharge,  all taxes, assessments and governmental charges upon it or them, its
or  their  income  and its or  their  properties  prior  to the  dates  on which
penalties  are  attached  thereto,  unless and only to the extent  that (i) such
taxes shall be contested  in good faith and by  appropriate  proceedings  by the
Borrower,  any  Guarantor or any such  Subsidiary,  as the case may be, and (ii)
there be adequate reserves therefor in accordance with GAAP entered on the books
of the Borrower, any Guarantor or any such Subsidiary.

     (d) Corporate Existence.  Preserve and maintain, and cause its Subsidiaries
to preserve and  maintain,  their  corporate  existence and good standing in the
jurisdiction of their incorporation and the rights, privileges and franchises of
the Borrower, each Guarantor and each such Subsidiary in each case where failure
to so preserve  or maintain  could  result in a Material  Adverse  Change in the
Borrower and the Guarantors, taken as a whole.

     (e)  Maintenance  of  Properties  and  Insurance.  (i) Keep,  and cause any
Subsidiaries  to  keep,  the  respective  properties  and  assets  (tangible  or
intangible) that are useful and necessary in its business, in good working order
and condition,  reasonable wear and tear excepted;  and (ii) maintain, and cause
any  Subsidiaries to maintain,  insurance with  financially  sound and reputable
insurance  companies or  associations in such amounts and covering such risks as
are  usually  carried by  companies  engaged in  similar  businesses  and owning
properties  doing business in the same general areas in which the Borrower,  any
Guarantors and any such Subsidiaries operate.

     (f) Books of Record and Account.  Keep and cause any  Subsidiaries to keep,
adequate  records  and  proper  books of record and  account  in which  complete
entries  will be  made in a  manner  to  enable  the  preparation  of  financial
statements in accordance with GAAP, reflecting all financial transactions of the
Borrower, the Guarantors, and any such Subsidiaries.

     (g) Visitation. At any reasonable time and upon reasonable notice, and from
time  to  time,  permit  the  Agent  or any  of  the  Banks  or  any  agents  or
representatives  thereof,  to examine and make copies of and abstracts  from the
books and records of, and visit the properties of, the Borrower or any Guarantor
and to discuss  the  affairs,  finances  and  accounts  of the  Borrower  or any
Guarantor  with any of the  respective  officers or directors of the Borrower or
such Guarantor or the Borrower's or such Guarantor's independent accountants.

     (h) Performance and Compliance  with Other  Agreements.  Perform and comply
with each of the provisions of each and every agreement

                                     - 53 -

<PAGE>



the  failure  to perform or comply  with which  could  result in a Material
Adverse Change in the Borrower and the Guarantors, taken as a whole.

     (i)  Pension  Funding.  Comply  with the  following  and cause  each  ERISA
Affiliate of the Borrower,  any Guarantor or any Subsidiary of the Borrower or a
Guarantor to comply with the following:

     (i) engage  solely in  transactions  which  would not  subject  any of such
entities to either a civil penalty assessed  pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Internal  Revenue Code in either case in
an amount in excess of $25,000.00;

     (ii) make full payment when due of all amounts which,  under the provisions
of any Plan or ERISA,  the Borrower,  any Guarantor,  any such Subsidiary or any
ERISA Affiliate of any of same is required to pay as contributions thereto;

     (iii)  all  applicable  provisions  of the  Internal  Revenue  Code and the
regulations  promulgated  thereunder,  including  but not limited to Section 412
thereof,  and all  applicable  rules,  regulations  and  interpretations  of the
Accounting Principles Board and the Financial Accounting Standards Board;

     (iv) not fail to make any  payments in an  aggregate  amount  greater  than
$25,000.00 to any Multiemployer Plan that the Borrower, any Guarantor,  any such
Subsidiary  or any ERISA  Affiliate  may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining thereto; or

     (v) not take any  action  regarding  any Plan  which  could  result  in the
occurrence of a Prohibited Transaction.

     (j) Licenses.  Maintain at all times, and cause each Subsidiary to maintain
at all times,  all licenses or permits  necessary to the conduct of its business
or as may be required by any governmental agency or instrumentality thereof.

     (k) New  Subsidiaries  and  Affiliates.  Cause  (i) any  Subsidiary  of the
Borrower  or any  Guarantor,  or  (ii)  any  Affiliate  of the  Borrower  or any
Guarantor  engaged in any of the  businesses  of Hirsch as set forth in Hirsch's
initial public offering prospectus dated as of February 17, 1994, in either case
formed  after  the date of this  Agreement,  to (x)  become a  guarantor  of all
obligations  of the Borrower  under this  Agreement and the other Loan Documents
and (y) become a party to this Agreement.

     (l) Agent's  Administrative Fee. Pay to the Agent an annual  administrative
fee as set forth in the Fee Letter.


                                     - 54 -

<PAGE>



     (m) Prepayment of Sedeco Mortgage.  Prepay, not later than January 31, 1997
all amounts  outstanding  under the existing  mortgage loan owing from Sedeco to
Bank One, Texas N.A. (as described in Schedule  5.02(b)) and provide,  not later
than  February  28, 1997  evidence to the Agent (i) of such  prepayment  and the
satisfaction  of such  mortgage and related  security  documents and (ii) of the
release  by Bank One,  Texas  N.A.  of any  security  interest  in any  personal
property of Sedeco.

     SECTION 5.02. Negative Covenants. So long as (i) the Total Commitment shall
be in effect,  (ii) any amount shall remain  outstanding under any of the Notes,
or (iii) any Letter of Credit,  accepted  draft or deferred  payment  obligation
under a Letter of Credit is  outstanding,  neither the  Borrower  nor any of the
Guarantors  will,  without  the  written  consent of the Agent and the  Required
Banks:

     (a) Liens, Etc. Create, incur, assume or suffer to exist, any Lien, upon or
with respect to any of its properties, now owned or hereafter acquired, except:

     (i) Liens in favor of the Banks securing Debt permitted by Section 5.02;

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

     (iii) Liens imposed by law, such as mechanics', materialmen's,  landlords',
warehousemen's,   and  carriers'  Liens,  and  other  similar  Liens,   securing
obligations  incurred in the ordinary  course of business which are not past due
or which are being  contested in good faith by appropriate  proceedings  and for
which appropriate reserves have been established;

     (iv) Liens under  workers'  compensation,  unemployment  insurance,  Social
Security, or similar legislation;

     (v) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts  (other than  contracts for the payment of money),  leases  (permitted
under the terms of this  Agreement),  public or statutory  obligations,  surety,
stay,  appeal,  indemnity,  performance or other similar bonds, or other similar
obligations arising in the ordinary course of business;

     (vi) Liens described in Schedule 5.02(a), provided that no such Liens shall
be renewed, extended or refinanced;

     (vii)  Judgment and other similar  Liens  arising in connection  with court
proceedings  (other  than those  described  in Section  6.01(f)),  provided  the
execution or other enforcement of

                                     - 55 -

<PAGE>



such Liens is effectively  stayed and the claims secured  thereby are being
actively contested in good faith and by appropriate proceedings;

     (viii)   Easements,   rights-of-way,   restrictions,   and  other   similar
encumbrances  which,  in the  aggregate,  do not  materially  interfere with the
Borrower's  or a  Guarantor's  occupation,  use and enjoyment of the property or
assets  encumbered  thereby in the normal  course of its business or  materially
impair the value of the property subject thereto;

     (ix)  Purchase  money  Liens  on any  property  hereafter  acquired  or the
assumption of any Lien on property existing at the time of such acquisition,  or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:

     (1)  Any  property  subject  to any of the  foregoing  is  acquired  by the
Borrower or any Guarantor in the ordinary course of its respective  business and
the  Lien  on  any  such  property  is  created   contemporaneously   with  such
acquisition;

     (2) The  obligation  secured by any Lien so created,  assumed,  or existing
shall not exceed one  hundred  (100%)  percent of lesser of cost or fair  market
value of the property  acquired as of the time of the Borrower or any  Guarantor
acquiring the same;

     (3) Each such Lien shall  attach only to the property so acquired and fixed
improvements thereon;

     (4) The Debt  secured  by all such  Liens  shall  not  exceed  Two  Million
($2,000,000.00) Dollars at any time outstanding in the aggregate; and

     (5) The  obligation  secured by such Lien is permitted by the provisions of
Section  5.02(b) and the related  expenditure  is permitted by the provisions of
Section 5.03(b); and

     (x) Liens constituting mortgages on real property in an aggregate principal
amount not to exceed Five Million ($5,000,000.00) Dollars.

     (b) Debt. Create, incur, assume, or suffer to exist, any Debt, except:

     (i) Debt of the Borrower under this Agreement,  the Notes or the Letters of
Credit;

     (ii) Debt described in Schedule  5.02(b),  provided that no such Debt shall
be renewed, extended or refinanced;


                                     - 56 -

<PAGE>



     (iii) Accounts payable to trade creditors for goods or services and current
operating  liabilities (other than for borrowed money), in each case incurred in
the  ordinary  course of business  and paid within the  specified  time,  unless
contested in good faith and by appropriate proceedings;

     (iv) Debt of the Borrower or any Guarantor  secured by purchase money Liens
permitted by Section 5.02(a)(ix);

     (v) Debt of HAPL under the HAPL Facility;

     (vi)  Unsecured  Debt  owing to Jimmy L. Yates in the  principal  amount of
$4,165,000.00 incurred in connection with the acquisition of Sedeco which is due
and payable on January 19, 1997.

     (vii) Debt in connection with mortgage liens permitted  pursuant to Section
5.02(a)(x) hereof;

     (viii)  Debt to the  principals  of SMX  incurred  in  connection  with the
acquisition  of  SMX in an  aggregate  principal  amount  of  not  greater  than
$3,266,664.00, and which Debt is unsecured except for a Lien in the name "Sewing
Machine Exchange, Inc."; and

     (ix) Debt owing to BNY in connection with unmatured  drafts accepted and/or
deferred payment obligations incurred by BNY prior to the date of this Agreement
and as described on Schedule 1.01-C annexed hereto.

     (c)  Lease  Obligations.  Create,  incur,  assume,  or  suffer to exist any
obligation  as lessee for the rental or hire of any real or  personal  property,
except (i) Capital Leases permitted by Section 5.02(a);  (ii) leases existing on
the date of this  Agreement and any  extensions or renewals  thereof;  and (iii)
leases (other than Capital  Leases)  which do not in the  aggregate  require the
Borrower  or  any  Guarantor  to  make  payments  (including  taxes,  insurance,
maintenance,  and  similar  expenses  which the  Borrower  or any  Guarantor  is
required to pay under the terms of any lease) in any fiscal year of the Borrower
in excess of $2,000,000.00.

     (d) Merger.  Merge into, or  consolidate  with or into, or have merged into
it, any Person (for the purpose of this  subsection (d), the acquisition or sale
by the Borrower or any  Guarantor by lease,  purchase or  otherwise,  of all, or
substantially  all,  of the  common  stock or the  assets of any Person or of it
shall be deemed a merger of such  Person  with the  Borrower  or any  Guarantor)
other than (i) a merger of a Subsidiary  into its parent  corporation or (ii) in
connection  with  Permitted  Acquisitions,  provided  that the  total  aggregate
consideration  for all Permitted  Acquisitions  (including the consideration for
the acquisition of Sedeco and all Permitted  Acquisition Loans) shall not exceed
$15,000,000.00 in the aggregate during the term of this Agreement.

                                     - 57 -

<PAGE>




     (e) Sale of Assets, Etc. Sell, assign, transfer, lease or otherwise dispose
of any of its assets,  (including a saleleaseback  transaction)  with or without
recourse,  except  for (i)  inventory  disposed  of in the  ordinary  course  of
business;  and (ii) the sale or other  disposition  of assets no longer  used or
useful in the conduct of its business, (iii) saleleaseback transactions which in
the aggregate involve the sale of assets for total  consideration of not greater
than $2,000,000.00 Dollars, (iv) leases sold by HAPL on a non-recourse basis and
(v)  leases  sold by HAPL on a  recourse  basis,  provided  that  the  aggregate
liability of HAPL for such recourse does not exceed $1,000,000.00 at any time.

     (f) Investments, Etc. Make any Investment other than Permitted Investments.

     (g) Transactions With Affiliates. Except in the ordinary course of business
and pursuant to the reasonable requirements of the Borrower's,  a Guarantor's or
a Subsidiary's  business and upon fair and reasonable terms no less favorable to
the  Borrower,  or the Guarantor or the  Subsidiary  than would be obtained in a
comparable arm's length  transaction with a Person not an Affiliate,  enter into
any transaction,  including, without limitation, the purchase, sale, or exchange
of property or the rendering of any service, with any Affiliate.

     (h)  Prepayment  of  Outstanding  Debt.  Pay,  in  whole  or in  part,  any
outstanding  Debt (other than the Loans) of the Borrower or any Guarantor  which
by its  terms is not then due and  payable  (other  than the  Loans),  provided,
however that (i) Debt  incurred in  connection  with the  acquisition  of SMX or
Sedeco may be  prepaid,  in whole or in part,  but only if the Agent  receives a
Certificate of No Default (after giving effect to such payment ) in the form set
forth in Section  5.01(b)(iv)  hereof  from the Chief  Financial  Officer of the
Borrower  dated as of the date of the  proposed  prepayment  and (ii) the Sedeco
mortgage referred to in Section 5.01(m) shall be prepaid as described therein.

     (i)  Guarantees.   Guaranty,  or  in  any  other  way  become  directly  or
contingently  obligated  for  any  Debt  of  any  other  Person  (including  any
agreements  relating to working  capital  maintenance,  take or pay contracts or
similar  arrangements) other than (i) the endorsement of negotiable  instruments
for deposit in the ordinary course of business;  (ii) guarantees existing on the
date  hereof  and set  forth  in  Schedule  5.02(i)  annexed  hereto,  or  (iii)
guarantees of Debt permitted hereunder.

     (j) Change of Business. Materially alter the nature of its business.

     (k) Fiscal Year. Change the ending date of its fiscal year from January 31.


                                     - 58 -

<PAGE>



     (l) Losses. Incur a net loss for any fiscal year.

     (m)  Accounting  Policies.   Change  any  accounting  policies,  except  as
permitted by GAAP.

     (n)  Change  of  Tax  Status.  Change  its  tax  reporting  status  as  a C
corporation.

     (o) Change in  Ownership.  Fail or cease to maintain the  ownership by Paul
Levine and Henry Arnberg,  directly or indirectly, of a majority of such classes
of voting  stock of the  Borrower  and the  Guarantors  such as would enable the
holder  thereof to elect a majority of the members of the Board of  Directors of
the Borrower and each Guarantor.

     (p)  Management.  Fail to retain each of Henry Arnberg and Paul Levine in a
reasonably  active full time  capacity in the  management  of the  Borrower  and
Guarantors.

     (q) Hazardous Material. The Borrower, each Guarantor and each Subsidiary of
the  Borrower or a  Guarantor  shall not cause or permit any  property  owned or
occupied by the  Borrower,  any  Guarantor or any such  Subsidiary to be used to
generate,  manufacture,   refine,  transport,  treat,  store,  handle,  dispose,
transfer, produce or process Hazardous Materials,  except in compliance with all
applicable federal,  state and local laws or regulations nor shall the Borrower,
any  Guarantor  or any such  Subsidiary  cause  or  permit,  as a result  of any
intentional or  unintentional  act or omission on the part of the Borrower,  any
Guarantor  or any such  Subsidiary  or any  tenant or  subtenant,  a release  of
Hazardous  Materials  onto any property  owned or occupied by the Borrower,  any
Guarantor or any such Subsidiary or onto any other property. The Borrower,  each
Guarantor and each such  Subsidiary  shall not fail in all material  respects to
comply with all applicable federal, state and local laws, ordinances,  rules and
regulations,  whenever and by whomever  triggered,  and shall not fail to obtain
and comply  with,  any and all  approvals,  registrations  or  permits  required
thereunder.  The Borrower and the  Guarantors  shall  execute any  documentation
reasonably  required  by the  Agent  in  connection  with  the  representations,
warranties  and covenants  contained in this  paragraph and Section 4.01 of this
Agreement.

     (r) HAPL  Transactions.  (i) Permit HAPL to incur Debt for  borrowed  money
other than  pursuant to the HAPL  Facility  and (ii)  engage in any  transaction
involving  a  loan,  advance,   capital  or  other  contribution  or  any  other
transaction  pursuant  to which cash or other  assets are  transferred  from the
Borrower to HAPL (an "Inter Company Transaction"), other than transactions which
at any time do not  exceed  the  lesser of (x) the  difference  between  (i) one
hundred (100%) percent of the net present value of HAPL's lease  receivables and
(2)  the  principal  amount  outstanding  under  the  HAPL  Facility  or (y) the
following amounts: (a) from the date of this

                                     - 59 -

<PAGE>



Agreement until January 31, 1998, $12,500,000.00; (b) from January 31, 1998
until  January  31,  1999,  $16,500,000.00;  and (c) from  January  31, 1999 and
thereafter, $21,000,000.00.

     (s) Inter Company Transactions. Engage in any transaction involving a loan,
advance,  capital or other  contribution  or any other  transaction  pursuant to
which cash or other assets are  transferred  from the Borrower to any Subsidiary
(an "Inter  Company  Transaction")  (other than HAPL,  for which  Inter  Company
Transactions  are  governed  by Section  5.02(r)),  if the  aggregate  (i) Inter
Company  Transactions with Sedeco would exceed $5,000,000.00 at any time or (ii)
Inter Company Transactions with all Subsidiaries other than HAPL or Sedeco would
exceed $2,000,000.00 at any time.

     SECTION 5.03. Financial  Requirements.  So long as (i) the Total Commitment
shall be in effect,  (ii) any amount shall remain  outstanding  under any of the
Notes,  or (iii) any  Letter  of  Credit,  accepted  draft or  deferred  payment
obligation under a Letter of Credit is outstanding:

         (a) Minimum Consolidated Tangible Net Worth.  The Borrower and
Guarantors will maintain at all times a Consolidated Tangible Net
Worth ("TNW") of not less than the following, to be tested
quarterly:

                 Period                                    Minimum TNW

     From the date of this Agreement until                $23,000,000.00
     January 31, 1997

     From January 31, 1997 until                          $25,000,000.00
     January 31, 1998


     From January 31, 1998 and until                      $30,000,000.00
     January 31, 1999

     From January 31, 1999 and until                      $35,000,000.00
     January 31, 2000

     From January 31, 2000 and                            $40,000,000.00
     thereafter

     (b) Consolidated  Capital  Expenditures.  The Borrower,  the Guarantors and
their respective Subsidiaries will not make Consolidated Capital Expenditures in
excess of Two Million ($2,000,000.00) Dollars in the aggregate during any fiscal
year,   provided  that  the  Borrower,   the  Guarantors  and  their  respective
Subsidiaries may make Consolidated Capital Expenditures in excess of such amount
solely for the purchase of a new building(s) or

                                     - 60 -

<PAGE>



expansion  of their  existing  building(s)  in  amounts  not in  excess  of
$5,000,000.00 in the aggregate.

     (c) Quick Asset Ratio.  The Borrower and the  Guarantors  will at all times
maintain  a Quick  Asset  Ratio of not less than 0.75 to 1.0,  such  ratio to be
tested quarterly.

     (d) Funded Debt to EBITDA Ratio.  The Borrower and Guarantors will maintain
at all times on a  consolidated  basis,  a Funded  Debt to EBITDA  Ratio,  to be
tested quarterly, of not greater than the following:

                  Period                        Funded Debt to EBITDA Ratio

     From the date of this Agreement                    2.50 to 1.0 
     until January 31, 1998

     From January 31, 1998 and                          2.25 to 1.0
     thereafter.

     (e) Fixed Charge Coverage Ratio.  The Borrower and Guarantors will maintain
at all times on a  consolidated  basis a minimum Fixed Charge  Coverage Ratio of
not less than 3.50 to 1.0, such ratio to be tested quarterly.


                                     - 61 -

<PAGE>



                                   ARTICLE VI

                                EVENTS OF DEFAULT

     SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:

     (a) The Borrower  shall fail to pay any  installment  of  principal  of, or
interest  on, any of the Notes when due,  or any fees or other  amounts  owed in
connection  with this  Agreement  or the Borrower  shall fail to  reimburse  the
Letter  of  Credit  Issuer  for  any  draw,  accepted  draft,  deferred  payment
obligations  or any other amounts owed in connection  with any Letters of Credit
when due; or

     (b) Any  representation  or warranty  made by the Borrower or any Guarantor
herein  or in the  Loan  Documents  or which is  contained  in any  certificate,
document,  opinion,  or financial or other statement furnished at any time under
or in connection  with any Loan Document  shall prove to have been  incorrect in
any material respect when made; or

     (c) The  Borrower or any  Guarantor  shall fail to perform any  affirmative
covenant  contained in Section 5.01 hereof  within  twenty (20) calendar days of
the date required thereunder, or shall fail to perform any other term, covenant,
or agreement  contained in this Agreement in any other Loan Document (other than
the Notes) on its part to be performed or observed; or

     (d) The Borrower,  any  Guarantor,  or any  Subsidiary of the Borrower or a
Guarantor  shall fail to pay any Debt  (excluding Debt evidenced by the Notes or
the Letters of Credit) of the Borrower, any Guarantor or any such Subsidiary (as
the case may be), or any interest or premium thereon, when due (other than trade
payables in the  ordinary  course of business  of less than  $250,000.00  in the
aggregate) (whether by scheduled maturity,  required  prepayment,  acceleration,
demand or otherwise) and such failure shall continue after the applicable  grace
period, if any, specified in the agreement or instrument  relating to such Debt;
or any other  default  under any  agreement or  instrument  relating to any such
Debt,  or any other event shall occur and shall  continue  after the  applicable
grace period, if any,  specified in such agreement or instrument,  if the effect
of such default or event is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or  required  to be  prepaid  (other  than  by a  regularly  scheduled  required
prepayment), prior to the stated maturity thereof; or

     (e) The  Borrower,  any  Guarantor or any  Subsidiary  of the Borrower or a
Guarantor  shall  generally not pay its Debts as such Debts become due, or shall
admit in  writing  its  inability  to pay its Debts  generally,  or shall make a
general  assignment  for the benefit of creditors;  or any  proceeding  shall be
instituted by or

                                     - 62 -

<PAGE>


against the  Borrower,  any  Guarantor  or any such  Subsidiary  seeking to
adjudicate  it a bankrupt  or  insolvent,  or seeking  liquidation,  winding up,
reorganization,  arrangement,  adjustment, protection, relief, or composition of
it  or  its  Debts  under  any  law  relating  to   bankruptcy,   insolvency  or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver,  trustee,  or other similar official for it or
for any substantial part of its property and if instituted against the Borrower,
any Guarantor or any such Subsidiary shall remain undismissed for a period of 90
days;  or the  Borrower,  any  Guarantor or any such  Subsidiary  shall take any
action to authorize any of the actions set forth above in this  subsection  (e);
or

     (f) Any  judgment or order or  combination  of  judgments or orders for the
payment of money, in excess of $500,000.00 in the aggregate, which sum shall not
be subject to full, complete and effective insurance coverage, shall be rendered
against the  Borrower,  any  Guarantor  or any  Subsidiary  of the Borrower or a
Guarantor and either (i)  enforcement  proceedings  shall have been commenced by
any creditor upon such judgment or order or (ii) there shall be any period of 60
consecutive  days during which a stay of  enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or

     (g) Any Guarantor shall fail to perform or observe any term or provision of
its Guaranty or any  representation or warranty made by any Guarantor (or any of
its officers or partners) in connection  with such  Guarantor's  Guaranty  shall
prove to have been incorrect in any material respect when made; or

     (h)  Any of the  following  events  occur  or  exist  with  respect  to the
Borrower, any Guarantor,  any Subsidiary of the Borrower or a Guarantor,  or any
ERISA  Affiliate:  (i) any Prohibited  Transaction  involving any Plan; (ii) any
Reportable  Event with respect to any Plan;  (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the  termination  of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute  proceedings  under Section 4042 of ERISA for the  termination
of,  or for the  appointment  of a  trustee  to  administer,  any  Plan,  or the
institution  of the  PBGC of any  such  proceedings;  (v)  complete  or  partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer  Plan or the
reorganization insolvency, or termination of any Multiemployer Plan; and in each
case  above,  such  event or  condition,  together  with  all  other  events  or
conditions,  if any, could in the opinion of the Agent subject the Borrower, any
Guarantor,  any such Subsidiary or any ERISA Affiliate to any tax,  penalty,  or
other liability to a Plan, a Multiemployer  Plan, the PBGC, or otherwise (or any
combination  thereof) which in the aggregate exceeds or may exceed  $500,000.00;
or


                                     - 63 -

<PAGE>



     (i) This  Agreement  or any  other  Loan  Document,  at any time  after its
execution and delivery and for any reason, ceases to be in full force and effect
in all  material  respects  or shall be  declared  to be null and  void,  or the
validity or enforceability of any document or instrument  delivered  pursuant to
this Agreement shall be contested by the Borrower, any Guarantor or any party to
such document or instrument or the Borrower,  any Guarantor or any party to such
document  or  instrument  shall  deny that it has any or  further  liability  or
obligation under any such document or instrument; or

     (j) An event of  default  specified  in any Loan  Document  other than this
Agreement shall have occurred and be continuing.

     SECTION 6.02.  Remedies on Default.  Upon the occurrence and continuance of
an Event of Default  the Agent may,  and at the  request of the  Required  Banks
shall, by notice to the Borrower take any or all of the following  actions:  (i)
terminate the Commitment,  (ii) declare the Notes,  all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable,  and
(iii)  demand that the  Borrower  provide the Letter of Credit  Issuer with cash
collateral for any undrawn Letters of Credit and any accepted drafts or deferred
payment obligations under any Letters of Credit,  whereupon the Commitment shall
be terminated,  the Notes,  all such interest,  all such cash collateral and all
such other  amounts  shall  become and be  forthwith  due and  payable,  without
presentment,  demand,  protest or further  notice of any kind,  all of which are
hereby  expressly  waived by the Borrower and (iv) proceed to enforce its rights
whether by suit in equity or by action at law, whether for specific  performance
of any covenant or agreement  contained in this  Agreement or any Loan Document,
or in aid of the exercise of any power  granted in either this  Agreement or any
Loan  Document  or proceed to obtain  judgment  or any other  relief  whatsoever
appropriate to the  enforcement  of its rights,  or proceed to enforce any other
legal or equitable  right which the Agent or the Banks may have by reason of the
occurrence  of any  Event  of  Default  hereunder  or under  any Loan  Document,
provided,  however,  upon the  occurrence of an Event of Default  referred to in
Section 6.01(e), the Commitment shall be immediately terminated,  the Notes, all
interest  thereon,  all such cash collateral and all other amounts payable under
this Agreement shall be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby  expressly waived
by the  Borrower.  Any amounts  collected  pursuant  to action  taken under this
Section 6.02 shall be applied to the payment of,  first,  any costs  incurred by
the Agent in taking such action, including but without limitation attorneys fees
and expenses,  second, to provide cash collateral to the Letter of Credit Issuer
for  any  undrawn  Letters  of  Credit,  accepted  drafts  or  deferred  payment
obligations,  third, to payment of the accrued interest on the Notes and fourth,
to payment of the unpaid principal of the Notes.

                                     - 64 -

<PAGE>



     SECTION 6.03. Remedies Cumulative.  No remedy conferred upon or reserved to
the Agent or the Banks  hereunder  or in any Loan  Document  is  intended  to be
exclusive of any other available remedy, but each and every such remedy shall be
cumulative  and in addition to every other remedy given under this  Agreement or
any Loan Document or now or hereafter  existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised  from time to time and as often as may
be deemed expedient.  In order to entitle the Agent or the Banks to exercise any
remedy  reserved  in this  Article  VI,  it shall not be  necessary  to give any
notice,  other  than such  notice as may be herein  expressly  required  in this
Agreement or in any Loan Document.

                                     - 65 -

<PAGE>




                                   ARTICLE VII

                  THE AGENT; RELATIONS AMONG BANKS AND BORROWER

     SECTION 7.01. Appointment, Powers and Immunities of Agent. Each Bank hereby
irrevocably  appoints and authorizes the Agent to act as its agent hereunder and
under any other Loan Document with such powers as are specifically  delegated to
the Agent by the terms of this Agreement and any other Loan  Document,  together
with such other powers as are  reasonably  incidental  thereto.  The Agent shall
have no duties or  responsibilities  except  those  expressly  set forth in this
Agreement and any other Loan Document, and shall not by reason of this Agreement
be a trustee or fiduciary for any Bank.  The Agent shall not be  responsible  to
the Banks for any recitals,  statements,  representations  or warranties made by
the  Borrower or the  Guarantors,  or any officer or official of the Borrower or
Guarantors,  or any of them, or any other Person  contained in this Agreement or
any other Loan Document,  or in any  certificate or other document or instrument
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document, or for the value, legality, validity, effectiveness,
genuineness,  enforceability  or sufficiency of this Agreement or any other Loan
Document or any other document or instrument  referred to or provided for herein
or therein,  except as  explicitly  provided  herein,  or for the failure by the
Borrower,  the  Guarantors,  or any of  them  to  perform  any of  their  or its
respective obligations hereunder or thereunder.  The Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact  selected by it with reasonable care. Except as
otherwise  explicitly  provided  herein,  neither  the  Agent  nor  any  of  its
directors,  officers,  employees or agents shall be liable or responsible to any
Bank for any  action  taken or omitted  to be taken by it or them  hereunder  or
under any other Loan Document or in connection herewith or therewith, except for
its or their own gross negligence or wilful  misconduct.  The Borrower shall pay
any fee  agreed to by the  Borrower  and the Agent with  respect to the  Agent's
services hereunder.

     SECTION 7.02.  Reliance by Agent.  The Agent shall be entitled to rely upon
any  certification,  notice or other  communication  (including  any  thereof by
telephone,  telex,  telegram or cable)  believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal  counsel,  independent  accountants  and
other experts selected by the Agent with reasonable care. The Agent may deem and
treat each Bank as the holder of the Loans  made by it for all  purposes  hereof
unless and until a notice of the permitted transfer thereof satisfactory to, the
Agent signed by such Bank shall have been furnished to the Agent but the Agent

                                     - 66 -

<PAGE>



shall  not be  required  to  deal  with  any  Person  who  has  acquired  a
participation in any Loan from a Bank. As to any matters not expressly  provided
for by this Agreement or any other Loan  Document,  the Agent shall in all cases
be fully  protected  in acting,  or in  refraining  from  acting,  hereunder  in
accordance with instructions signed by the Required Banks, and such instructions
of the Required  Banks and any action  taken or failure to act pursuant  thereto
shall be binding on all of the Banks and any other  holder of all or any portion
of any Loan.

     SECTION 7.03. Defaults.  The Agent shall not be deemed to have knowledge of
the occurrence of a Default or Event of Default  (other than the  non-payment of
principal of or interest on the Loans) unless the Agent has actual  knowledge of
any  Default  or Event of  Default  or has  received  notice  from a Bank or the
Borrower  specifying  such  Default or Event of Default  and  stating  that such
notice is a "Notice of  Default."  In the event that the Agent  receives  such a
notice of, or otherwise has actual  knowledge of the  occurrence of a Default or
Event of Default,  the Agent shall give prompt notice  thereof to the Banks (and
shall give each Bank prompt  notice of each such  non-payment).  The Agent shall
(subject to Section 7.08) take such action with respect to such Default or Event
of Default  which is  continuing  as shall be  directed by the  Required  Banks;
provided that,  unless and until the Agent shall have received such  directions,
the Agent may take such action, or refrain from taking such action, with respect
to such  Default  or Event of Default  as it shall  deem  advisable  in the best
interest of the Banks; and provided further that the Agent shall not be required
to take any such action which it determines to be contrary to law.

     SECTION 7.04.  Rights of Agent as a Bank. With respect to the Loans made by
it, the Agent in its capacity as a Bank hereunder shall have the same rights and
powers  hereunder  as any other Bank and may exercise the same as though it were
not  acting as the  Agent,  and the term  "Bank" or  "Banks"  shall,  unless the
context  otherwise  indicates,  include the Agent in its capacity as a Bank. The
Agent or any Bank and their respective Affiliates may (without having to account
therefor  to any other  Bank  except as  otherwise  expressly  provided  in this
Agreement)  accept  deposits  from,  lend  money to (on a secured  or  unsecured
basis),  and generally  engage in any kind of banking,  trust or other  business
with, the Borrower, the Guarantors or any of them (and any of their Affiliates);
provided that no payment or lien priority  shall be given to the Agent or to any
Bank for any other  transaction  without the express written  approval of all of
the other  Banks.  In the case of BNY,  it may do so as if it were not acting as
the  Agent,  and the Agent may  accept  fees and  other  consideration  from the
Borrower,  the  Guarantors or any of them for services in  connection  with this
Agreement  or  otherwise  without  having to account  for the same to the Banks.
Although the Agent or a Bank or any of their  respective  Affiliates  may in the
course of such relationships and

                                     - 67 -

<PAGE>



relationships  with other Persons acquire  information  about the Borrower,
the Guarantors,  their Affiliates and such other Persons,  neither the Agent nor
such Bank shall have any duty to the other Banks or the Agent to  disclose  such
information to the other Banks or the Agent except as otherwise  provided herein
with respect to the occurrence of an Event of Default.

     SECTION 7.05.  Indemnification  of Agent.  The Banks agree to indemnify the
Agent (to the extent not  reimbursed  under Section 8.04 or under the applicable
provisions of any other Loan Document,  but without  limiting the obligations of
the Borrower and Guarantors under Section 8.04 or such  provisions),  ratably in
accordance with their respective  percentages of the Total  Commitment  (without
giving effect to any participation in all or any portion of the Total Commitment
sold by them to any other  Person),  for any and all  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  of any  kind and  nature  whatsoever  which  may be  imposed  on,
incurred by or asserted  against the Agent in any way relating to or arising out
of this Agreement,  any other Loan Document or any other documents  contemplated
by or  referred  to herein or the  transactions  contemplated  hereby or thereby
(including,  without  limitation,  the costs and expenses which the Borrower and
Guarantors  are  obligated  to pay under  Section  8.04 or under the  applicable
provisions of any other Loan Document but  excluding,  unless a Default or Event
of Default has occurred,  normal administrative costs and expenses incidental to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents or instruments;  provided
that no Bank shall be liable for any of the  foregoing  to the extent they arise
from the gross negligence or wilful misconduct of the party to be indemnified.

     SECTION  7.06.  Documents.  It is the  responsibility  of the  Borrower  to
forward to each Bank,  on or before  the due dates set forth  herein,  a copy of
each report,  notice or other  document  required by this Agreement or any other
Loan  Document to be delivered to the Agent.  The Agent is not  responsible  for
forwarding such information to the Banks.

     SECTION 7.07.  Non-Reliance on Agent and Other Banks. Each Bank agrees that
it has,  independently  and without reliance on the Agent or any other Bank, and
based on such documents and information as it has deemed  appropriate,  made its
own credit analysis of the Borrower,  the Guarantors and their  Subsidiaries and
decision  to enter  into  this  Agreement  and that it will,  independently  and
without  reliance upon the Agent or any other Bank,  and based on such documents
and information as it shall deem  appropriate at the time,  continue to make its
own analysis and decisions in taking or not taking  action under this  Agreement
or any other Loan  Document.  The Agent  shall not be  required  to keep  itself
informed as to the performance or observance by the Borrower

                                     - 68 -

<PAGE>



or  Guarantors  of this  Agreement or any other Loan  Document or any other
document  referred  to or  provided  for herein or  therein  or to  inspect  the
properties or books of the Borrower,  the Guarantors or any  Subsidiary.  Except
for notices,  reports and other documents and information  expressly required to
be furnished to the Banks by the Agent  hereunder,  the Agent shall not have any
duty or  responsibility to any other Bank to provide any Bank with any credit or
other information concerning the affairs, financial condition or business of the
Borrower,  the Guarantors or any Subsidiary (or any of their  Affiliates)  which
may come into the possession of the Agent or of its Affiliates.  The Agent shall
not be required to file this Agreement,  any other Loan Document or any document
or  instrument  referred to herein or therein,  or record or give notice of this
Agreement,  any other Loan  Document or any document or  instrument  referred to
herein or therein, to any Person.

     SECTION 7.08. Failure of Agent to Act. Except for action expressly required
of the Agent  hereunder,  the Agent  shall in all  cases be fully  justified  in
failing or  refusing  to act  hereunder  unless it shall have  received  further
assurances   (which  may  include  cash   collateral)  of  the   indemnification
obligations  of the Banks under Section 7.05 in respect of any and all liability
and expense  which may be incurred  by it by reason of taking or  continuing  to
take any such action.

     SECTION  7.09.  Resignation  of  Agent.  Subject  to  the  appointment  and
acceptance of a successor Agent as provided  below,  the Agent may resign at any
time by giving written  notice  thereof to the Banks and the Borrower.  Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent.  If no successor Agent shall have been so appointed by the Required Banks
and shall have  accepted  such  appointment  within 30 days  after the  retiring
Agent's giving of notice of resignation,  then the retiring Agent may, on behalf
of the Banks,  appoint a  successor  Agent,  which  shall be a bank which has an
office in New York, New York. The Required Banks or the retiring  Agent,  as the
case may be, shall upon the  appointment of a Successor Agent promptly so notify
the Borrower,  the  Guarantors  and the other Banks.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent,  such successor Agent shall
thereupon 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.   After  any  retiring  Agent's
resignation as Agent,  the provisions of this Article 7 shall continue in effect
for its  benefit in respect  of any  actions  taken or omitted to be taken by it
while it was acting as the Agent.

     SECTION 7.10. Amendments Concerning Agency Function. The Agent shall not be
bound by any waiver, amendment,  supplement or modification of this Agreement or
any other Loan Document which

                                     - 69 -

<PAGE>



affects its duties  hereunder or thereunder  unless it shall have given its
prior written consent thereto.

     SECTION 7.11.  Liability of Agent. The Agent shall not have any liabilities
or responsibilities to the Borrower, the Guarantors or any of them on account of
the failure of any Bank to perform its  obligations  hereunder or to any Bank on
account of the failure of the Borrower, the Guarantors or any of them to perform
their or its obligations hereunder or under any other Loan Document.

     SECTION  7.12.  Transfer  of Agency  Function.  Without  the consent of the
Borrower,  the Guarantors or any Bank, the Agent may at any time or from time to
time  transfer its functions as Agent  hereunder to any of its offices  wherever
located,  provided  that the Agent  shall  promptly  notify  the  Borrower,  the
Guarantors and the Banks thereof.

     SECTION 7.13.  Withholding  Taxes. Each Bank represents that it is entitled
to receive any payments to be made to it hereunder  without the  withholding  of
any tax and will furnish to the Agent such forms, certifications, statements and
other  documents  as the Agent may request  from time to time to  evidence  such
Bank's  exemption from the withholding of any tax imposed by any jurisdiction or
to enable the Agent to comply with any applicable  laws or regulations  relating
thereto.  Without  limiting  the  effect  of the  foregoing,  if any Bank is not
created or organized under the laws of the United States of America or any state
thereof,  in the event that the payment of  interest by the  Borrower is treated
for U.S.  income tax  purposes as derived in whole or in part from  sources from
within the U.S.,  such Bank will  furnish to the Agent Form 4224 or Form 1001 of
the Internal Revenue Service, or such other forms, certifications, statements or
documents,  duly  executed and completed by such Bank as evidence of such Bank's
exemption from the withholding of U.S. tax with respect thereto. The Agent shall
not be obligated  to make any payments  hereunder to such Bank in respect of any
Loan  until  such Bank shall have  furnished  to the Agent the  requested  form,
certification, statement or document.

     SECTION 7.14.  Several  Obligations and Rights of Banks. The failure of any
Bank to make any Loan to be made by it on the date specified  therefor shall not
relieve any other Bank of its  obligation to make its Loan on such date,  but no
Bank shall be responsible for the failure of any other Bank to make a Loan to be
made by such other Bank.

     SECTION  7.15.  Pro Rata  Treatment  of Loans,  Etc.  Except to the  extent
otherwise  provided,  each prepayment and payment of principal of or interest on
Loans of a particular type and a particular Interest Period shall be made to the
Agent for the  account  of the  Banks  holding  Loans of such type and  Interest
Period pro rata in accordance with the respective  unpaid  principal  amounts of
such Loans of such Interest Period held by such Banks.

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<PAGE>




     SECTION  7.16.  Sharing of Payments  Among  Banks.  If a Bank shall  obtain
payment of any  principal  of or  interest  on any Loan made by it  through  the
exercise of any right of setoff,  banker's lien,  counterclaim,  or by any other
means,  it shall share such  payment with the other Banks and the amount of such
payment  shall be  applied  to  reduce  the  Loans of all the  Banks pro rata in
accordance with the unpaid principal on the Loans held by each of them, and make
such other  adjustments  from time to time as shall be equitable to the end that
all the Banks shall share the benefit of such payment (net of any expenses which
may be incurred by such Bank in obtaining or  preserving  such benefit) pro rata
in accordance  with the unpaid  principal and interest on the Loans held by each
of  them.  To such  end the  Banks  shall  make  appropriate  adjustments  among
themselves  if such  payment is rescinded  or must  otherwise  be restored.  The
Borrower agrees that any Bank so purchasing a participation (or direct interest)
in the  loans  made by the  other  Banks  may  exercise  all  rights of set off,
banker's lien, counterclaim or similar rights with respect to such participation
(or  direct  interest).  Nothing  contained  herein  shall  require  any Bank to
exercise any such right or shall  affect the right of any Bank to exercise,  and
retain the  benefits  of  exercising,  any such right with  respect to any other
indebtedness  of the  Borrower.  Notwithstanding  the  foregoing  or  any  other
provision  of this  Agreement,  no right or remedy of any Bank  relating  to any
assets of the Borrower  (including real property,  improvements or fixtures) not
covered by this Agreement or the Loan Documents  shall in any way be affected by
this  Agreement  or  otherwise  with  respect to any other  indebtedness  of the
Borrower to any of the Banks.

     SECTION  7.17.  Nonreceipt  of Funds by Agent.  Unless the Agent shall have
received  notice  from a Bank prior to the date on which such Bank is to provide
funds to the  Agent  for a Loan to be made by such  Bank that such Bank will not
make available to the Agent such funds,  the Agent may assume that such Bank has
made such funds  available to the Agent on the date of such Loan,  and the Agent
in its sole discretion may, but shall not be obligated to, in reliance upon such
assumption,  make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such funds  available
to the Agent,  such Bank agrees to repay to the Agent  forthwith  on demand such
corresponding  amount together with interest thereon, for each day from the date
such  amount is made  available  to the  Borrower  until the date such amount is
repaid to the Agent,  at the customary  rate set by the Agent for the correction
of errors among banks for three  Business Days and thereafter at the Prime Rate.
If such Bank shall repay to the Agent such corresponding  amount, such amount so
repaid shall constitute such Bank's Loan for purposes of this Agreement. If such
Bank  does not pay such  corresponding  amount  forthwith  upon  Agent's  demand
therefor,  the Agent shall promptly notify the Borrower,  and the Borrower shall
immediately pay such  corresponding  amount to the Agent with interest  thereon,
for each day from the

                                     - 71 -

<PAGE>



date such  amount is made  available  to the  Borrower  until the date such
amount is repaid to the Agent, at the rate of interest applicable at the time to
such proposed Loan.

     Unless the Agent shall have received  notice from the Borrower prior to the
date on which any payment is due to the Banks  hereunder  that the Borrower will
not make such  payment in full,  the Agent may assume that the Borrower has made
such  payment  in full to the  Agent  on such  date  and the  Agent  in its sole
discretion may, but shall not be obligated to, in reliance upon such assumption,
cause to be  distributed  to each Bank on such due date an  amount  equal to the
amount then due such Bank. If and to the extent the Borrower  shall repay to the
Agent  forthwith on demand such amount  distributed  to such Bank  together with
interest thereon,  for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent,  at the customary
rate set by the  Agent  for the  correction  of  errors  among  banks  for three
Business Days and thereafter at the Prime Rate.

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<PAGE>



                                  ARTICLE VIII

                                  MISCELLANEOUS

     SECTION 8.01.  Amendments.  Etc. Except as otherwise  expressly provided in
this Agreement,  any provision of this Agreement may be amended or modified only
by an instrument in writing signed by the Borrower,  the  Guarantors,  the Agent
and the Required Banks, and any provision of this Agreement may be waived by the
Borrower (if such provision  requires  performance by the Agent or the Banks) or
by the Agent  acting with the consent of the Required  Banks (if such  provision
requires performance by the Borrower); provided that no amendment,  modification
or waiver shall,  unless by an  instrument  signed by all of the Banks or by the
Agent  acting with the consent of all of the Banks:  (a)  increase or extend the
term of the  Commitment or the Loans,  (b) extend the date fixed for the payment
of principal of or interest on any Loan, (c) reduce the amount of any payment of
principal  thereof or the rate at which  interest is payable  thereon or any fee
payable  hereunder,  (d)  alter the terms of this  Section  8.01,  (e) amend the
definition of the term "Required Banks", (f) change the fees payable to any Bank
except as  otherwise  provided  herein,  (g) permit the  Borrower to transfer or
assign any of its obligations  hereunder or under the Loan Documents,  (h) amend
the  provisions  of Article 7 hereof,  or (i) give any  payment  priority to any
Person  (including  any of the Banks) over  amounts due in  connection  with the
Loans or the Letters of Credit.  No failure on the part of the Agent or any Bank
to exercise, and no delay in exercising,  any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any  other  right.  The  remedies  herein  provided  are  cumulative  and not
exclusive of any remedies provided by law.

     SECTION 8.02. Notices,  Etc. All notices and other communications  provided
for hereunder  shall be in writing  (including  telegraphic  communication)  and
mailed via certified mail, telegraphed, sent by overnight mail delivery service,
sent by facsimile or  delivered,  if to the  Borrower or any  Guarantor,  at the
address  of the  Borrower  or  Guarantor,  as the case may be,  set forth at the
beginning of this Agreement  with a copy to Irvin Brum,  Esq.,  Ruskin,  Moscou,
Evans & Faltischek,  P.C., 170 Old Country Road, Mineola,  New York 11501 and if
to the Agent or any Bank,  at the address of the Agent or such Bank set forth at
the beginning of this Agreement to the attention of Hirsch  International  Corp.
Account  Officer,  or,  as to each  party,  at such  other  address  as shall be
designated by such party in a written  notice  complying as to delivery with the
terms  of  this  Section  8.02  to the  other  parties.  All  such  notices  and
communications shall be effective when mailed, telegraphed or delivered,  except
that notices to the Bank shall not be effective until received by the Bank.


                                     - 73 -

<PAGE>



     SECTION 8.03. No Waiver,  Remedies.  No failure on the part of the Agent or
any Bank to exercise,  and no delay in  exercising,  any right,  power or remedy
under any Loan Document, shall operate as a waiver thereof; nor shall any single
or partial  exercise of any right under any Loan Document  preclude any other or
further  exercise  thereof or the  exercise  of any other  right.  The  remedies
provided in the Loan  Documents are cumulative and not exclusive of any remedies
provided by law.

     SECTION  8.04.  Costs,  Expenses and Taxes.  The Borrower  agrees to pay on
demand all costs and expenses of the Agent in connection  with the  preparation,
execution, delivery and administration of this Agreement, the Notes, the Letters
of Credit and any other  Loan  Documents,  including,  without  limitation,  the
reasonable  fees and expenses of counsel for the Agent with respect  thereto and
with  respect  to  advising  the  Banks  as  to  their  respective   rights  and
responsibilities  under  this  Agreement,  and all  costs and  expenses,  if any
(including  reasonable  counsel  fees  and  expenses),  in  connection  with the
enforcement of this  Agreement,  the Notes,  the Letters of Credit and any other
Loan Documents. The Borrower shall at all times protect,  indemnify,  defend and
save  harmless  the Agent and the Banks  from and  against  any and all  claims,
actions,  suits and  other  legal  proceedings,  and  liabilities,  obligations,
losses, damages,  penalties,  judgments,  costs, expenses or disbursements which
the Agent or the Banks  may,  at any time,  sustain  or incur by reason of or in
consequence  of or arising out of the execution  and delivery of this  Agreement
and the  consummation  of the  transactions  contemplated  hereby.  The Borrower
acknowledges  that it is the intention of the parties hereto that this Agreement
shall be construed  and applied to protect and indemnify the Agent and the Banks
against  any and all  risks  involved  in the  execution  and  delivery  of this
Agreement and the consummation of the transactions  contemplated  hereby, all of
which risks are hereby assumed by the Borrower,  including,  without limitation,
any and all risks of the acts or omissions, whether rightful or wrongful, of any
present  or future de jure or de facto  government  or  governmental  authority,
provided  that  the  Borrower  shall  not be  liable  for  any  portion  of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  resulting from the Agent or any Bank's gross
negligence  or willful  misconduct.  The  provisions  of this Section 8.04 shall
survive the payment of the Notes and the termination of this Agreement.

     SECTION  8.05.  Right of Set-off.  Upon (i) the  occurrence  and during the
continuance  of any Event of Default and (ii) the  declaration  of the making of
the Notes due and payable  pursuant to the provisions of Section 6.02, the Banks
each are hereby  authorized  at any 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
indebtedness  at any time owing by the Banks to or for the credit or the account
of the Borrower or any Guarantor

                                     - 74 -

<PAGE>



against any and all of the obligations of the Borrower or any Guarantor now
or  hereafter  existing  under this  Agreement  and the Notes,  irrespective  of
whether  or not the Agent or the Banks  shall  have made any  demand  under this
Agreement or the Term Loan Notes and although such obligations may be unmatured.
The rights of the Banks under this  Section are in addition to all other  rights
and remedies (including,  without limitation, other rights of set-off) which the
Agent and the Banks may have.

     SECTION 8.06. Binding Effect. This Agreement shall become effective when it
shall have been  executed by the  Borrower,  the  Guarantors,  the Agent and the
Banks.

     SECTION 8.07.  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,  except that the Borrower may not assign or
otherwise  transfer  any of its rights  under this  Agreement  without the prior
written consent of all Banks.

     (b)  Any  Bank  may at  any  time  grant  to one or  more  banks  or  other
institutions (each a "Participant") participating interests in its Commitment or
any or all of  its  Loans.  In the  event  of  any  such  grant  by a Bank  of a
participating  interest  to a  Participant,  whether  or not upon  notice to the
Borrower and the Agent,  such Bank shall remain  responsible for the performance
of its obligations  hereunder,  and the Borrower and the Agent shall continue to
deal solely and directly  with such Bank in  connection  with such Bank's rights
and obligations under this Agreement.  Any agreement  pursuant to which any Bank
may grant  such a  participating  interest  shall  provide  that such Bank shall
retain  the sole right and  responsibility  to enforce  the  obligations  of the
Borrower  hereunder  including,  without  limitation,  the right to approve  any
amendment,  modification or waiver of any provision of this Agreement;  provided
that such  participation  agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clauses (a)
through (i) of Section 8.01 without the consent of the Participant. The Borrower
agrees that each Participant  shall, to the extent provided in its participation
agreement,  be entitled to the benefits of this Article VIII with respect to its
participating  interest.  An assignment or other transfer which is not permitted
by  subsection  (c) or (d) below  shall be given  effect  for  purposes  of this
Agreement only to the extent of a participating  interest  granted in accordance
with this subsection (b).

     (c) (i) Any  Bank  may at any  time  assign  to one or more  banks or other
institutions (each  an"Assignee") all, or a proportionate part (equivalent to an
initial  Commitment  of not less than  $5,000,000)  of all,  of its  rights  and
obligations  under this Agreement and the Notes,  and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement

                                     - 75 -

<PAGE>



in substantially the form of Exhibit C hereto executed by such Assignee and
such  transferor  Bank,  with,  so long as no Default  or Event of  Default  has
occurred  and is  continuing,  (and  subject to) the  subscribed  consent of the
Borrower, which shall not be unreasonably withheld, and the Agent; provided that
if an Assignee is an affiliate of such transferor Bank, no such consent shall be
required.  Upon  execution and delivery of such  instrument  and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such  transferor  bank and such Assignee,  such Assignee shall be a Bank
party to this Agreement and shall have all the rights and  obligations of a Bank
with a  Commitment  as set  forth  in such  instrument  of  assumption,  and the
transferor  Bank  shall  be  released  from  its  obligations   hereunder  to  a
corresponding  extent,  and no further  consent or action by any party  shall be
required.

     (ii) Upon the  consummation  of any assignment  pursuant to this subsection
(c), the  transferor  Bank,  the Agent and the Borrower  shall make  appropriate
arrangements  so that,  if required,  a new Note is issued to the  Assignee.  In
connection with any such  assignment,  the tranferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the amount of $3,500.00.
If the  Assignee  is not  incorporated  under the laws of the  United  States of
America  or a state  thereof,  it shall  deliver to the  Borrower  and the Agent
certification as to exemption from deduction or withholding of any Unites States
federal income taxes in accordance with Section 7.13.

     (d) Any Bank may at any time assign all or any portion of its rights  under
this Agreement and its Note to a Federal Reserve Bank. No such assignment  shall
release the transferor Bank from its obligations hereunder.

     SECTION 8.08. Further Assurances.  The Borrower and each Guarantor agree at
any time and from time to time at its expense,  upon  request of the Agent,  the
Banks or their respective  counsel,  to promptly execute,  deliver, or obtain or
cause to be executed,  delivered or obtained any and all further instruments and
documents  and to take or cause to be taken all such  other  action the Agent or
any Bank may deem desirable in obtaining the full benefits of this Agreement.

     SECTION 8.09. Section Headings, Severability, Entire Agreement. Section and
subsection headings have been inserted herein for convenience only and shall not
be construed as part of this  Agreement.  Every  provision of this Agreement and
each Loan Document is intended to be severable; if any term or provision of this
Agreement,  any Loan  Document,  or any other  document  delivered in connection
herewith shall be invalid,  illegal or unenforceable for any reason  whatsoever,
the validity,  legality and enforceability of the remaining provisions hereof or
thereof shall not in any way be affected or impaired thereby. All exhibits and

                                     - 76 -

<PAGE>



schedules to this Agreement  shall be annexed hereto and shall be deemed to
be part of this  Agreement.  This  Agreement  and  the  exhibits  and  schedules
attached  hereto  embody the entire  Agreement  and  understanding  between  the
Borrower,  the  Guarantors,  the Agent and the  Banks  and  supersede  all prior
agreements and  understandings  relating to the subject matter hereof  provided,
however,  that to the extent that the provisions of the Commitment Letter and/or
the Fee Letter are not  inconsistent  with the  provisions of this Agreement and
the  other  Loan  Documents  but  are  cumulative  with  respect  thereto,  such
provisions  of the  Commitment  Letter  and the Fee  Letter  shall  survive  the
execution and delivery of this Agreement.

     SECTION 8.10.  Governing Law. This Agreement,  the Notes and all other Loan
Documents  shall be governed by, and construed in accordance  with,  the laws of
the State of New York.

     SECTION 8.11. Waiver of Jury Trial. The Borrower, each Guarantor, the Agent
and the Banks waive all rights to trial by jury on any cause of action  directly
or indirectly involving the terms,  covenants or conditions of this Agreement or
any Loan Document.

     SECTION 8.12. Execution in Counterparts.  This Agreement may be executed in
any  number  of  counterparts  and  by  different  parties  hereto  in  separate
counterparts, each of which when so executed

                                     - 77 -

<PAGE>



shall be deemed to be an  original  and all of which taken  together  shall
constitute one and the same agreement.

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

THE BANK OF NEW YORK, as Agent

By:____________________________ 
   Adam Ostrach, Vice President


THE BANK OF NEW YORK

By:____________________________
   Adam Ostrach, Vice President

FLEET BANK, N.A.

By:____________________________
   Alice Adelberg
   Vice President

HIRSCH INTERNATIONAL CORP.

By:____________________________
   Kenneth Shifrin
   Chief Financial Officer

PULSE MICROSYSTEMS, LTD.

By:____________________________
   Kenneth Shifrin
   Vice President

HAPL LEASING CO., INC.

By:____________________________
   Kenneth Shifrin
   Vice President

SEWING MACHINE EXCHANGE, INC.

By:____________________________
   Kenneth Shifrin
   Vice President

SEDECO, INC.

By:____________________________
   Kenneth Shifrin
   Vice President


                                     - 78 -

<PAGE>



                                 SCHEDULE 1.01-A

                            Commitments of Each Bank


                      The Bank of New York - $18,000,000.00

                        Fleet Bank, N.A. - $12,000,000.00


<PAGE>



                                 SCHEDULE 1.01-B

                           Existing Letters of Credit


<PAGE>



                                 SCHEDULE 1.01-C

                          Unmatured Drafts Accepted and
                          Deferred Payment Obligations


<PAGE>



                                SCHEDULE 4.01(a)




                         STATE OF INCORPORATION     IDENTITY AND
                        AND EACH STATE IN WHICH     PERCENTAGE OF
SUBSIDIARY'S NAME    IT IS QUALIFIED TO DO       OWNERSHIP OF
   AND ADDRESS             BUSINESS            EACH SHAREHOLDER





<PAGE>



                                SCHEDULE 4.01 (t)


             Nature of       Amount of          Liens Securing
Creditor     Agreement        Credit               Credit


<PAGE>



                                SCHEDULE 5.02(a)


Creditor             Amount              Property Subject to Lien



<PAGE>



                                SCHEDULE 5.02(b)



     Creditor                                   Amount





<PAGE>



                                SCHEDULE 5.02(i)



     Description of All Guaranties:



<PAGE>



                                    EXHIBIT A

                              REVOLVING CREDIT NOTE

     $_________________                                  Garden City, New York
                                                         __________, 199_


     FOR VALUE RECEIVED,  on the Maturity Date,  HIRSCH  INTERNATIONAL  CORP., a
Delaware  corporation,  having its  principal  place of business at 200 Wireless
Boulevard, Hauppauge, New York 11788 ("Borrower"),  promises to pay to the order
of __________________  ("Bank") at the office of The Bank of New York, as Agent,
located at 1401 Franklin Avenue,  Garden City, New York 11530, the principal sum
of the  lesser  of:  (a)  ________________  ($___________)  DOLLARS;  or (b) the
aggregate  unpaid principal amount of all Revolving Credit Loans made by Bank to
Borrower  pursuant to the  Agreement  (as  defined  below).  Borrower  shall pay
interest  on the  unpaid  principal  balance  of  this  Note  from  time to time
outstanding,  at said office, at the rates of interest, at the times and for the
periods set forth in the Agreement.  All payments including  prepayments on this
Note  shall  be  made in  lawful  money  of the  United  States  of  America  in
immediately available funds. Except as otherwise provided in the Agreement, if a
payment becomes due and payable on a day other than a Business Day, the maturity
thereof  shall be extended to the next  succeeding  Business  Day,  and interest
shall be payable  thereon at the rate herein  specified  during such  extension.
Borrower  hereby  authorizes  Bank to enter from time to time the amount of each
Loan to  Borrower  and the  amount  of each  payment  on a Loan on the  schedule
annexed  hereto  and  made a  part  hereof.  Failure  of  Bank  to  record  such
information on such schedule shall


<PAGE>



not in any way  effect the  obligation  of  Borrower  to pay any amount due
under this Note.  This Note is one of the Revolving  Credit Notes referred to in
that certain Loan Agreement among Borrower,  certain Guarantors, The Bank of New
York, as Agent,  [The Bank of New York] [Fleet Bank, N.A.] and Bank of even date
herewith (the "Agreement"),  as such Agreement may be amended from time to time,
and is subject to prepayment  and its maturity is subject to  acceleration  upon
the terms contained in said Agreement.  All capitalized  terms used in this Note
and not defined herein shall have the meanings  given them in the Agreement.  If
any action or proceeding be commenced to collect this Note or enforce any of its
provisions, Borrower further agrees to pay all costs and expenses of such action
or proceeding and attorneys' fees and expenses and further  expressly waives any
and every right to interpose any  counterclaim in any such action or proceeding.
Borrower hereby submits to the jurisdiction of the Supreme Court of the State of
New York and agrees with Bank that personal  jurisdiction  over  Borrower  shall
rest with the Supreme  Court of the State of New York for purposes of any action
on or related to this Note, the liabilities, or the enforcement of either or all
of the same.  Borrower  hereby waives  personal  service by manual  delivery and
agrees that service of process may be made by post-paid  certified mail directed
to the  Borrower  at the  Borrower's  address  set forth  above or at such other
address as may be  designated  in writing by the Borrower to Bank in  accordance
with Section 8.02 of the  Agreement,  and that upon mailing of such process such
service be effective with the same effect as though personally served.  Borrower
hereby expressly waives any and every right to a trial by


<PAGE>



jury in any  action on or  related to this  Note,  the  liabilities  or the
enforcement  of either  or all of the same.  Subject  to the  provisions  of the
Agreement,  Bank may transfer this Note and may deliver the security or any part
thereof to the transferee or transferees, who shall thereupon become vested with
all the powers and rights above given to Bank in respect thereto, and Bank shall
thereafter  be forever  relieved  and fully  discharged  from any  liability  or
responsibility  in the matter.  The failure of any holder of this Note to insist
upon strict  performance of each and/or all of the terms and  conditions  hereof
shall not be construed  or deemed to be a waiver of any such term or  condition.
Borrower and all endorsers and guarantors  hereof waive  presentment  and demand
for payment,  notice of non-payment,  protest, and notice of protest.  This Note
shall be construed in  accordance  with and governed by the laws of the State of
New York. HIRSCH INTERNATIONAL CORP.


                               By ----------------------------------
                                             Kenneth Shifrin
                                             Chief Financial Officer




<PAGE>




                       Schedule of Revolving Credit Loans

                            Amount of
                            Principal              Unpaid             Name of
Making  Amount of  Type of  Paid or     Principal  Person Making
 Date     Loan      Loan    Prepaid      Balance      Notation

























<PAGE>



                                    EXHIBIT B
                                 TERM LOAN NOTE
                                                         Garden City, New York
$_______________                                           _____________, 199_


     FOR VALUE RECEIVED,  HIRSCH  INTERNATIONAL  CORP., a Delaware  corporation,
having its principal place of business at 200 Wireless Boulevard, Hauppauge, New
York 11788 ("Borrower")  promises to pay to the order of _____________  ("Bank")
at the  office  of The Bank of New  York,  as Agent,  located  at 1401  Franklin
Avenue,  Garden  City,  New  York  11530,  the  principal  sum of  _____________
($___________) DOLLARS in twelve (12) quarterly principal installments,  each of
the  first  eleven  (11)  such  installments  being in the  principal  amount of
$_____________,  commencing  on the first Term Loan  Installment  Date after the
date hereof and continuing on each Term Loan  Installment  Date thereafter until
the twelfth  (12th) Term Loan  Installment  Date,  when any remaining  principal
amount  shall be due and  payable.  Borrower  shall pay  interest  on the unpaid
balance of this Note from time to time outstanding at said office,  at the rates
of interest,  at the times and for the periods as set forth in the Agreement (as
defined below). All payments including  prepayments on this Term Loan Note shall
be made in lawful money of the United States of America in immediately available
funds.  Except as otherwise provided in the Agreement,  if a payment becomes due
and payable on a day other than a Business  Day, the maturity  thereof  shall be
extended to the next  succeeding  Business  Day, and  interest  shall be payable
thereon at the rate herein specified during such extension.


<PAGE>



     This  Term  Loan Note is one of the Term  Loan  Notes  referred  to in that
certain Loan Agreement among Borrower, certain Guarantors, The Bank of New York,
as Agent, [The Bank of New York] [Fleet Bank, N.A.] and Bank dated as of January
7, 1997 (the  "Agreement"),  as such Agreement may be amended from time to time,
and is subject to prepayment  and its maturity is subject to  acceleration  upon
the terms contained in said Agreement.  All capitalized  terms used in this Term
Loan Note and not  defined  herein  shall  have the  meanings  given them in the
Agreement.  If any action or  proceeding  be commenced to collect this Term Loan
Note or enforce any of its provisions,  Borrower further agrees to pay all costs
and expenses of such action or proceeding and  attorneys'  fees and expenses and
further  expressly  waives any and every right to interpose any  counterclaim in
any such action or proceeding.  Borrower  hereby submits to the  jurisdiction of
the Supreme  Court of the State of New York and agrees  with Bank that  personal
jurisdiction over Borrower shall rest with the Supreme Court of the State of New
York for  purposes  of any  action on or  related  to this Term Loan  Note,  the
liabilities,  or the  enforcement of either or all of the same.  Borrower hereby
waives  personal  service by manual  delivery and agrees that service of process
may be made by  post-paid  certified  mail  directed to  Borrower at  Borrower's
address  designated  in  the  Agreement  or at  such  other  address  as  may be
designated in writing by Borrower to Bank in accordance with Section 7.02 of the
Agreement,  and that upon mailing of such process such service be effective with
the same effect as though  personally  served.  Borrower hereby expressly waives
any and every right to a trial by jury in any action on or


<PAGE>


     related to this Term Loan  Note,  the  liabilities  or the  enforcement  of
either or all of the same. Subject to the provisions of the Agreement,  Bank may
transfer this Term Loan Note and may deliver the security or any part thereof to
the transferee or transferees,  who shall  thereupon  become vested with all the
powers  and  rights  above  given to Bank in  respect  thereto,  and Bank  shall
thereafter  be forever  relieved  and fully  discharged  from any  liability  or
responsibility  in the matter.  The failure of any holder of this Term Loan Note
to insist upon strict performance of each and/or all of the terms and conditions
hereof  shall  not be  construed  or  deemed  to be a waiver of any such term or
condition.  Borrower and all endorsers and Guarantors  hereof waive  presentment
and demand for payment,  notice of non-payment,  protest, and notice of protest.
This Term Loan Note shall be  construed in  accordance  with and governed by the
laws of the State of New York.

                                        HIRSCH INTERNATIONAL CORP.

                                        By:___________________________
                                           Kenneth Shifrin
                                           Chief Financial Officer