LOAN AGREEMENT


         THIS LOAN  AGREEMENT,  dated as of August 27,  1996,  is by and between
PIPER JAFFRAY COMPANIES INC., a Delaware corporation (the "Borrower"), and FIRST
BANK NATIONAL ASSOCIATION, a national banking association (the "Bank").

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         Section 1.1 Defined  Terms.  As used in this  Agreement  the  following
terms shall have the following  respective  meanings (and such meanings shall be
equally applicable to both the singular and plural form of the terms defined, as
the context may require):

                  "Adjusted  Eurodollar  Rate":  With  respect to each  Interest
Period  applicable to a Eurodollar Rate Advance,  the rate (rounded  upward,  if
necessary,  to the next one hundredth of one percent) determined by dividing the
Eurodollar  Rate for such Interest  Period by 1.00 minus the Eurodollar  Reserve
Percentage.

                  "Advance":  Any  portion  of the  Term  Loan as to  which  the
Borrower elected one of the available  interest rate options and, if applicable,
an Interest  Period.  An Advance may be a Eurodollar Rate Advance or a Reference
Rate Advance.

                  "Affiliate":  When used with reference to any Person, (a) each
Person that,  directly or  indirectly,  controls,  is  controlled by or is under
common control with, the Person referred to, (b) each Person which  beneficially
owns or holds,  directly  or  indirectly,  five  percent or more of any class of
voting  stock of the Person  referred to (or if the Person  referred to is not a
corporation, five percent or more of the equity interest), (c) each Person, five
percent or more of the  voting  stock (or if such  Person is not a  corporation,
five percent or more of the equity  interest) of which is beneficially  owned or
held,  directly or indirectly,  by the Person  referred to, and (d) each of such
Person's  officers,  directors,  joint venturers and partners.  The term control
(including the terms  "controlled by" and "under common control with") means the
possession,  directly,  of the power to direct  or cause  the  direction  of the
management and policies of the Person in question.

                  "Aggregate  Debit Items":  At any time,  the  aggregate  debit
items  of PJI at such  time as  computed  in  accordance  with the  Formula  for
Determination of Reserve Requirements for Brokers and Dealers, Exhibit A to Rule
15c3-3.



<PAGE>


                  "Applicable Margin":  With respect to:

                           (a)      Reference Rate Advances -- 0%.

                           (b)      Eurodollar Rate Advances for the periods:

                                    (i)     from and including the Closing Date
through March 31, 1997 -- 1.25%;

                                    (ii)    from and including April 1, 1997
through June 30, 1997 -- 1.50%; and

                                    (iii)   from and including July 1, 1997
until all Obligations are paid in full -- 1.75%.

                  "Bank":  As defined in the opening paragraph hereof.

                  "Board":  The Board of Governors of the Federal Reserve System
 or any successor thereto.

                  "Borrower":  As defined in the opening paragraph hereof.

                  "Business  Day":  Any day (other  than a  Saturday,  Sunday or
legal holiday in the State of Minnesota) on which  national  banks are permitted
to be open in Minneapolis, Minnesota.

                  "Capitalized  Lease": A lease of (or other agreement conveying
the right to use) real or  personal  property  with  respect to which at least a
portion  of the rent or  other  amounts  thereon  constitute  Capitalized  Lease
Obligations.

                  "Capitalized  Lease  Obligations":   As  to  any  Person,  the
obligations  of such  Person to pay rent or other  amounts  under a lease of (or
other  agreement  conveying  the right to use) real or personal  property  which
obligations  are required to be classified  and accounted for as a capital lease
on a balance sheet of such Person under GAAP  (including  Statement of Financial
Accounting  Standards No. 13 of the Financial  Accounting Standards Board), and,
for  purposes of this  Agreement,  the amount of such  obligations  shall be the
capitalized  amount thereof,  determined in accordance with GAAP (including such
Statement No. 13).

                  "Closing  Date":  Any  Business  Day  between the date of this
Agreement  and September 30, 1996 selected by the Borrower for the making of the
Term  Loan  hereunder;  provided,  that  all  the  conditions  precedent  to the
obligation  of the Bank to make the Term Loan, as set forth in Article III, have
been, or, on such Closing Date,  will be satisfied.  The Borrower shall give the
Bank not less than three  Business  Days prior notice of the day selected as the
Closing Date.

                  "Code":  The Internal Revenue Code of 1986, as amended.

                  "Commission":  The Securities and Exchange Commission, or any
regulatory body that succeeds to the functions thereof.

                  "Commitment Fee":  As defined in Section 2.17.

                  "Collateral    Agreement":    The   Pledge   and    Collateral
Administration  Agreement  dated as of November  23,  1994 among PJI,  the Bank,
various other lenders, and the Northern Trust Company, as administrator.

                  "Contingent  Obligation":  With  respect  to any Person at the
time of any determination,  without duplication,  any obligation,  contingent or
otherwise,  of such  Person  guaranteeing  or  having  the  economic  effect  of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner,  whether  directly or  otherwise:  (a) to purchase or pay (or advance or
supply  funds for the purchase or payment of) such  Indebtedness  or to purchase
(or to  advance or supply  funds for the  purchase  of) any  direct or  indirect
security  therefor,  (b) to purchase  property,  securities  or services for the
purpose  of  assuring  the owner of such  Indebtedness  of the  payment  of such
Indebtedness, (c) to maintain working capital, equity capital or other financial
statement  condition of the primary  obligor so as to enable the primary obligor
to pay such  Indebtedness or otherwise to protect the owner thereof against loss
in respect  thereof,  or (d)  entered  into for the  purpose of  assuring in any
manner the owner of such  Indebtedness of the payment of such Indebtedness or to
protect  the owner  against  loss in respect  thereof;  provided,  that the term
"Contingent  Obligation"  shall  not  include  endorsements  for  collection  or
deposit, in each case in the ordinary course of business.

                  "Current Liabilities":  As of any date, the consolidated 
current liabilities of the Borrower, determined in accordance with GAAP.

                  "Default": Any event which, with the giving of notice (whether
such notice is required under Section 7.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.

                  "ERISA":  The Employee Retirement Income Security Act of 1974,
as amended.

                  "ERISA  Affiliate":  Any  trade or  business  (whether  or not
incorporated)  that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.

                  "Eurodollar  Business Day": A Business Day which is also a day
for  trading  by and  between  banks in United  States  dollar  deposits  in the
interbank  Eurodollar  market and a day on which banks are open for  business in
New York City.

                  "Eurodollar  Rate":  With  respect  to  each  Interest  Period
applicable to a Eurodollar  Rate Advance,  the average offered rate for deposits
in United States dollars (rounded upward,  if necessary,  to the nearest 1/16 of
1%) for delivery of such deposits on the first day of such Interest Period,  for
the number of days in such Interest Period,  which appears on the Reuters Screen
LIBO page as of 10:00  a.m.,  London  time (or such  other time as of which such
rate  appears)  two  Eurodollar  Business  Days  prior to the  first day of such
Interest  Period,  or the rate for such deposits  determined by the Bank at such
time based on such other  published  service of general  application as shall be
selected by the Bank for such purpose; provided, that in lieu of determining the
rate in the foregoing manner,  the Bank may determine the rate based on rates at
which United  States  dollar  deposits are offered to the Bank in the  interbank
Eurodollar  market at such time for delivery in Immediately  Available  Funds on
the first day of such Interest  Period in an amount  approximately  equal to the
Advance by the Bank to which such Interest  Period is to apply (rounded  upward,
if necessary,  to the nearest 1/16 of 1%).  "Reuters Screen LIBO page" means the
display  designated as page "LIBO" on the Reuters  Monitor Money Rate Screen (or
such other page as may replace the LIBO page on such  service for the purpose of
displaying  London  interbank  offered  rates of major  banks for United  States
dollar deposits).

                  "Eurodollar  Rate  Advance":  An Advance with respect to which
the interest rate is determined by reference to the Adjusted Eurodollar Rate.

                  "Eurodollar   Reserve   Percentage":   As  of  any  day,  that
percentage  (expressed  as a  decimal)  which  is in  effect  on  such  day,  as
prescribed  by  the  Board  for  determining  the  maximum  reserve  requirement
(including any basic,  supplemental or emergency  reserves) for a member bank of
the Federal Reserve System,  with deposits comparable in amount to those held by
the Bank, in respect of  "Eurocurrency  Liabilities"  as such term is defined in
Regulation D of the Board.  The rate of interest  applicable to any  outstanding
Eurodollar  Rate  Advances  shall  be  adjusted  automatically  on and as of the
effective date of any change in the Eurodollar Reserve Percentage.

                  "Event of Default":  Any event described in Section 7.1.

                  "Focus Report": The Financial and Operational Combined Uniform
Single Report required to be filed on a monthly or quarterly  basis, as the case
may be, with the  Commission or the NYSE, or any report that is required in lieu
of such report.

                  "GAAP":  Generally accepted accounting principles set forth in
the  opinions  and  pronouncements  of the  Accounting  Principles  Board of the
American   Institute  of  Certified   Public   Accountants  and  statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statements by such other entity as may be approved by a  significant  segment of
the accounting  profession,  which are applicable to the circumstances as of any
date of determination.

                  "Governmental Authority":  Any nation or government, any state
or  other  political  subdivision  thereof,  any  entity  exercising  executive,
legislation,  judicial,  regulatory or administrative functions of or pertaining
to government, including, without limitation, the Commission.

                  "Immediately Available Funds":  Funds with good value on the
day and in the city in which payment is received.

                  "Indebtedness":  With respect to any Person at the time of any
determination, without duplication, all obligations, contingent or otherwise, of
such Person which in accordance  with GAAP should be classified upon the balance
sheet  of such  Person  as  liabilities,  but in any  event  including:  (a) all
obligations  of such Person for  borrowed  money,  (b) all  obligations  of such
Person evidenced by bonds, debentures,  notes or other similar instruments,  (c)
all obligations of such Person upon which interest  charges are customarily paid
or accrued,  (d) all obligations of such Person under  conditional sale or other
title retention  agreements  relating to property  purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred  purchase price
of property or services,  (f) all  obligations  of others secured by any Lien on
property  owned or  acquired  by such  Person,  whether  or not the  obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person,  (h)  all  obligations  of such  Person  in  respect  of  interest  rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all  obligations of any  partnership or joint venture as to which such Person is
or may become  personally  liable,  and (k) all  Contingent  Obligations of such
Person.

                  "Interest  Period":  With  respect  to  each  Eurodollar  Rate
Advance, the period commencing on the date of such Advance or on the last day of
the immediately  preceding Interest Period, if any, applicable to an outstanding
Advance and ending  thirty (30) or sixty (60) days  thereafter,  as the Borrower
may elect in the  applicable  notice of borrowing,  continuation  or conversion;
provided that:

                           (a) Any Interest Period that would otherwise end on a
         day which is not a  Eurodollar  Business  Day shall be  extended to the
         next succeeding Eurodollar Business Day unless such Eurodollar Business
         Day falls in another calendar month, in which case such Interest Period
         shall end on the next preceding Eurodollar Business Day;

                           (b) Any  Interest  Period  that  begins  on the  last
         Eurodollar  Business Day of a calendar  month (or a day for which there
         is no numerically corresponding day in the calendar month at the end of
         such Interest Period) shall end on the last Eurodollar  Business Day of
         a calendar  month. No Interest Period can end after the maturity of the
         Term Note.

                  "Investment": The acquisition,  purchase, making or holding of
any  stock or other  security,  any  loan,  advance,  contribution  to  capital,
extension  of credit  (except for trade and  customer  accounts  receivable  for
inventory  sold or services  rendered  in the  ordinary  course of business  and
payable in accordance with customary trade terms),  any  acquisitions of real or
personal  property  (other  than  real and  personal  property  acquired  in the
ordinary  course  of  business)  and any  purchase  or  commitment  or option to
purchase stock or other debt or equity  securities of or any interest in another
Person or any  integral  part of any  business  or the  assets  comprising  such
business or part  thereof.  The amount of any  Investment  shall be the original
cost of such  Investment  plus the cost of all  additions  thereto,  without any
adjustments  for increases or decreases in value,  or write-ups,  write-downs or
write-offs with respect to such Investment.

                  "Knowledge":  With respect to any  occurrence  or event,  when
such occurrence or event is brought to the attention of a responsible officer of
the  Borrower or should have been  brought to such  officer's  attention  if the
Borrower had exercised due diligence.

                  "Leverage Ratio":  At the time of any determination, the ratio
 of (a) Total Liabilities to (b) Tangible Net Worth.

                  "Lien":  With respect to any Person,  any  security  interest,
mortgage,  pledge,  lien,  charge,  encumbrance,  title  retention  agreement or
analogous  instrument or device (including the interest of each lessor under any
Capitalized  Lease),  in, of or on any assets or properties of such Person,  now
owned or hereafter acquired, whether arising by agreement or operation of law.

                  "Loan  Documents":  This  Agreement,  the Term  Note  and,  if
required to be  delivered  to the Bank  pursuant to Section  2.18,  the Security
Documents.

                  "Material Subsidiary":  A Subsidiary having Tangible Net Worth
in excess of $1,000,000.

                  "Maturity":  September 30, 1997.

                  "Multiemployer  Plan": A  multiemployer  plan, as such term is
defined in Section 4001 (a) (3) of ERISA,  which is  maintained  (on the Closing
Date, within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Borrower or any ERISA Affiliate.

                  "NYSE":  The New York Stock Exchange.

                  "Net  Capital":  As determined in accordance  with the capital
requirements,  rules and  regulations  of the NYSE that are applicable to PJI at
any time of determination.

                  "Obligations":  The  Borrower's  obligations in respect of the
due and punctual  payment of principal and interest on the Term Note when and as
due, whether by acceleration or otherwise and all fees,  expenses,  indemnities,
reimbursements and other obligations of the Borrower under this Agreement or any
other Loan Document,  in all cases whether now existing or hereafter  arising or
incurred.

                  "PBGC": The Pension Benefit Guaranty Corporation,  established
pursuant to Subtitle A of Title IV of ERISA, and any successor thereto or to the
functions thereof.

                  "PJI":  Piper Jaffray Inc., a Delaware corporation, and a
wholly owned subsidiary of the Borrower.

                  "PJI Credit Agreement":  That certain Credit Agreement dated
as of November 23, 1994 between the Bank and PJI.

                  "Person":  Any  natural  person,   corporation,   partnership,
limited   partnership,   limited  liability   company,   joint  venture,   firm,
association,  trust,  unincorporated  organization,  government or  governmental
agency or  political  subdivision  or any  other  entity,  whether  acting in an
individual, fiduciary or other capacity.

                  "Plan":  Each  employee  benefit plan (whether in existence on
the Closing Date or thereafter instituted), as such term is defined in Section 3
of ERISA, maintained for the benefit of employees,  officers or directors of the
Borrower or of any ERISA Affiliate.

                  "Pledge Agreement":  As defined in Section 2.18.

                  "Prohibited Transaction":  The respective meanings assigned to
such term in Section 4975 of the Code and Section 406 of ERISA.

                  "Reference  Rate":  The  rate of  interest  from  time to time
publicly announced by the Bank as its "reference rate." The Bank may lend to its
customers at rates that are at, above or below the Reference  Rate. For purposes
of  determining  any interest  rate  hereunder or under any other Loan  Document
which is based on the  Reference  Rate,  such  interest rate shall change as and
when the Reference Rate shall change.

                  "Reference Rate Advance": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.

                  "Regulatory  Change":  Any change  after the  Closing  Date in
federal,  state or foreign laws or  regulations  or the adoption or making after
such date of any interpretations,  directives or requests applying to a class of
banks including the Bank under any federal, state or foreign laws or regulations
(whether  or not  having  the  force  of law) by any  court or  governmental  or
monetary authority charged with the interpretation or administration thereof.

                  "Reportable  Event":  A reportable event as defined in Section
4043 of ERISA and the regulations  issued under such Section,  with respect to a
Plan,  excluding,  however,  such events as to which the PBGC by regulation  has
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the  occurrence  of such  event,  provided  that a  failure  to meet the
minimum funding  standard of Section 412 of the Code and of Section 302 of ERISA
shall  be a  Reportable  Event  regardless  of the  issuance  of any  waiver  in
accordance with Section 412(d) of the Code.

                  "Security Documents":  The Pledge Agreement and related
documents required to be delivered to the Bank pursuant to Section 2.18.

                  "Self-Regulatory Organization": As defined in Section 3(a)(26)
 of the Securities Exchange Act of 1934, as amended.

                  "Subordinated  Debt":  Any  Indebtedness of the Borrower,  now
existing or hereafter  created,  incurred or arising,  which is  subordinated in
right of payment to the payment of the  Obligations in a manner and to an extent
(a) that the  Bank  has  approved  in  writing  prior  to the  creation  of such
Indebtedness, or (b) as to any Indebtedness of the Borrower existing on the date
of this Agreement,  that the Bank has approved as Subordinated Debt in a writing
delivered by the Bank to the Borrower on or prior to the Closing Date.

                  "Subsidiary":   Any  corporation  or  other  entity  of  which
securities or other  ownership  interests  having  ordinary voting power for the
election of a majority of the board of  directors  or other  Persons  performing
similar  functions are owned by the Borrower  either  directly or through one or
more Subsidiaries.

                  "Tangible Net Worth":  With respect to any Person, at the date
of any determination,  the sum of the amounts set forth on the consolidated,  if
applicable,  balance  sheet  of such  Person,  as the sum of the  common  stock,
preferred stock, additional paid-in capital and retained earnings of such Person
(excluding treasury stock), less the net book value of all assets of such Person
and its subsidiaries  (to the extent reflected as an asset on such  consolidated
balance  sheet) that would be treated as intangibles  under GAAP,  including all
such items as goodwill,  trademarks,  trade names,  service  marks,  copyrights,
patents, licenses,  unamortized debt discount and expenses and the excess of the
purchase  price of the assets of any  business  acquired  by such  Person or any
subsidiary over the book value of such assets, and less obligations owed to such
person by any Affiliate.  Tangible Net Worth of the Borrower shall exclude loans
made by the Borrower to any of its officers, directors or employees.

                  "Term Loan":  As defined in Section 2.1.

                  "Term Loan  Commitment":  The  agreement of the Bank to make a
Term Loan to the Borrower in the amount  specified in Section 2.1 upon the terms
and subject to the conditions of this Agreement.

                  "Term Note":  A promissory note of the Borrower in the form of
Exhibit A hereto.

                  "Total  Liabilities":  With respect to any Person, at the time
of any  determination,  the amount,  on a  consolidated  basis,  of all items of
Indebtedness  of  such  Person  and  its  Subsidiaries   that  would  constitute
"liabilities" for balance sheet purposes in accordance with GAAP.

         Section  1.2  Accounting  Terms  and  Calculations.  Except  as  may be
expressly  provided to the contrary  herein,  all  accounting  terms used herein
shall be interpreted and all accounting  determinations  hereunder shall be made
in  accordance  with  GAAP.  To the  extent  any  change  in  GAAP  affects  any
computation  or  determination  required to be made pursuant to this  Agreement,
such  computation or  determination  shall be made as if such change in GAAP had
not occurred  unless the Borrower and the Bank agree in writing on an adjustment
to such computation or determination to account for such change in GAAP.

         Section 1.3  Computation  of Time Periods.  In this  Agreement,  in the
computation of a period of time from a specified date to a later specified date,
unless  otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".

         Section 1.4 Other Definitional Terms. The words "hereof",  "herein" and
"hereunder"  and words of similar import when used in this Agreement shall refer
to  this  Agreement  as a  whole  and not to any  particular  provision  of this
Agreement.  References to Sections,  Exhibits, schedules and like references are
to this Agreement  unless  otherwise  expressly  provided.  The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or".

                                   ARTICLE II

                                TERMS OF THE LOAN

         Section  2.1 Term Loan.  Upon the terms and  subject to the  conditions
hereof,  the Bank  agrees to make a loan (the "Term  Loan") to the  Borrower  of
$30,000,000  on the Closing  Date.  The Term Loan and any portion of the balance
thereof (in minimum  amounts of  $100,000,  or, if more,  in integral  multiples
thereof) may be made,  maintained,  continued  and  converted to Reference  Rate
Advances or Eurodollar  Rate Advances as the Borrower may elect in its notice of
borrowing, continuation or conversion.

                  Notwithstanding  any provision  hereof,  this Agreement  shall
terminate  and the Bank  shall  have no  obligation  hereunder  if the Term Loan
hereunder has not been made by September 30, 1996, provided,  however,  that the
obligations   of  the  Borrower   under  Section  8.2  shall  survive  any  such
termination.

         Section  2.2  Procedure  for Term  Loan.  Not  later  than  12:00  noon
(Minneapolis  time) two Eurodollar  Business Days prior to the requested Closing
Date if the Term Loan is requested  as a  Eurodollar  Rate Advance and not later
than 12:00  noon  (Minneapolis  time) one  Business  Day prior to the  requested
Closing  Date if the Term Loan is  requested as a Reference  Rate  Advance,  the
Borrower shall deliver to the Bank a written notice of borrowing. Such notice of
borrowing  shall be  irrevocable  and  shall be deemed a  representation  by the
Borrower  that on the Closing Date and after giving  effect to the Term Loan the
applicable  conditions specified in Article III have been and will be satisfied.
Such notice of borrowing  shall  specify (a) the  requested  Closing  Date,  (b)
whether  such  Term  Loan is to be  funded as a  Eurodollar  Rate  Advance  or a
Reference Rate Advance,  and (c) in the case of a Eurodollar  Rate Advance,  the
duration of the initial  Interest  Period  applicable  thereto.  Unless the Bank
determines that any applicable  condition  specified in Article III has not been
satisfied,  the Bank will make the  proceeds of the Term Loan  available  to the
Borrower at the Bank's main office on the requested date.

         Section  2.3 Note.  The Term  Loan  shall be  evidenced  by a Term Note
payable to the order of the Bank in the principal  amount of the Term Loan.  The
Bank shall enter in its  ledgers  and  records the amount of the Term Loan,  the
various Advances made, converted or continued and the payments made thereon, and
the Bank is  authorized  by the Borrower to enter on a schedule  attached to its
Term Note a record of such Term Loan, Advances and payments;  provided,  however
that the  failure by the Bank to make any such entry or any error in making such
entry  shall  not limit or  otherwise  affect  the  obligation  of the  Borrower
hereunder and on the Term Note, and, in all events,  the principal amounts owing
by the Borrower in respect of the Term Note shall be the aggregate amount of the
Term Loan less all payments of principal thereof made by the Borrower.

         Section 2.4 Conversions and Continuations.  On the terms and subject to
the limitations  hereof, the Borrower shall have the option at any time and from
time to time to convert all or any portion of the Advances into  Reference  Rate
Advances or Eurodollar  Rate Advances,  or to continue a Eurodollar Rate Advance
as such;  provided,  however that a Eurodollar  Rate Advance may be converted or
continued only on the last day of the Interest Period applicable  thereto and no
Advance may be  converted  to or  continued  as a  Eurodollar  Rate Advance if a
Default or Event of Default has occurred and is  continuing on the proposed date
of  continuation  or conversion.  Advances may be converted to, or continued as,
Eurodollar  Rate Advances only in integral  multiples of $100,000.  The Borrower
shall give the Bank written  notice of any  continuation  or  conversion  of any
Advances  and such  notice  must be given so as to be  received  by the Bank not
later than 12:00 noon (Minneapolis  time) two Eurodollar  Business Days prior to
requested date of conversion or continuation in the case of the continuation of,
or  conversion  to,  Eurodollar  Rate  Advances and on the date of the requested
conversion to Reference  Rate  Advances.  Each such notice shall specify (a) the
amount  to be  continued  or  converted,  (b) the date for the  continuation  or
conversion (which must be (i) the last day of the preceding  Interest Period for
any  continuation  or  conversion  of  Eurodollar  Rate  Advances,  and  (ii)  a
Eurodollar  Business  Day in the  case  of  continuations  as or  conversion  to
Eurodollar  Rate  Advances  and a  Business  Day in the case of  conversions  to
Reference Rate Advances), and (c) in the case of conversions to or continuations
as Eurodollar Rate Advances,  the Interest Period applicable thereto. Any notice
given by the Borrower under this Section shall be  irrevocable.  If the Borrower
shall  fail to  notify  the  Bank of the  continuation  of any  Eurodollar  Rate
Advances  within the time required by this Section,  such Advances shall, on the
last day of the Interest Period applicable  thereto,  automatically be converted
into Reference Rate Advances of the same principal amount.

         Section 2.5     Interest Rates, Interest Payments and Default Interest.
Interest shall accrue and be payable on Term Loan as follows:

                  (a)  Subject to  paragraph  (c) below,  each  Eurodollar  Rate
         Advance  shall bear  interest on the unpaid  principal  amount  thereof
         during the Interest Period applicable thereto at a rate per annum equal
         to the  sum of (i) the  Adjusted  Eurodollar  Rate  for  such  Interest
         Period, plus (ii) the Applicable Margin.

                  (b) Subject to paragraph (c) below each Reference Rate Advance
         shall bear interest on the unpaid principal amount thereof at a varying
         rate per annum equal to the sum of (i) the  Reference  Rate,  plus (ii)
         the Applicable Margin.

                  (c) Any  Advance  not  paid  when  due,  whether  at the  date
         scheduled  therefor or earlier upon  acceleration,  shall bear interest
         until  paid in full (i)  during  the  balance  of any  Interest  Period
         applicable to such Advance, at a rate per annum equal to the sum of the
         rate  applicable to such Advance during such Interest Period plus 2.0%,
         and (ii)  otherwise,  at a rate per  annum  equal to the sum of (1) the
         Reference  Rate,  plus (2) the  Applicable  Margin for  Reference  Rate
         Advances, plus (3) 2.0%.

                  (d)  Interest  shall  be  payable  (i)  with  respect  to each
         Eurodollar  Rate  Advance  on  the  last  day of  the  Interest  Period
         applicable thereto; (ii) with respect to any Reference Rate Advance, on
         the last day of each month;  (iii) with respect to all  Advances,  upon
         any permitted prepayment (on the amount prepaid); and (iv) with respect
         to all  Advances,  on the  earlier  of the  date on  which  the  unpaid
         principal amount of the Term Loan is paid in full or Maturity; provided
         that interest under Section 2.5 (c) shall be payable on demand.

         Section 2.6       Repayment.  The unpaid principal amount of the Term
Loan shall be due and payable no later than Maturity.

         Section 2.7 Optional  Prepayments.  The  Borrower may prepay  Reference
Rate Advances, in whole or in part, at any time, without premium or penalty. Any
such prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid.  Each  partial  prepayment  shall be in an  amount  of  $100,000  or an
integral  multiple  thereof.  Except upon an acceleration  following an Event of
Default,  the Borrower may pay Eurodollar  Rate Advances only on the last day of
the Interest Period applicable thereto. Amounts so prepaid cannot be reborrowed.

         Section 2.8       Computation.  Interest and the Commitment Fee on the
Term Loan shall be computed on the basis of actual days elapsed and a year of
360 days.

         Section 2.9  Payments.  Payments and  prepayments  of principal of, and
interest on, the Term Note and all fees,  expenses and other  obligations  under
this Agreement  payable to the Bank shall be made without setoff or counterclaim
in Immediately  Available Funds not later than 2:00 p.m.  (Minneapolis  time) on
the dates called for under this  Agreement  and the Term Note to the Bank at its
main office in Minneapolis,  Minnesota.  Funds received after such time shall be
deemed to have been received on the next  Business Day.  Whenever any payment to
be made  hereunder  or on the Term Note shall be stated to be due on a day which
is not a  Business  Day,  such  payment  shall  be made on the  next  succeeding
Business Day and such  extension of time, in the case of a payment of principal,
shall be included in the computation of any interest on such principal payment.

         Section 2.10 Use of Loan Proceeds.  The proceeds of the Term Loan shall
be used for certain litigation settlement costs and general corporate purposes.

         Section 2.11 Interest Rate Not  Ascertainable,  Etc. If, on or prior to
the date for determining the Adjusted Eurodollar Rate in respect of the Interest
Period for any Eurodollar Rate Advance, the Bank determines (which determination
shall be conclusive and binding, absent error) that:

                  (a)    deposits in dollars (in the applicable amount) are not
         being made available to the  Bank in the relevant market for such
         Interest Period, or

                  (b) the  Adjusted  Eurodollar  Rate  will not  adequately  and
         fairly  reflect  the  cost  to  the  Bank  of  funding  or  maintaining
         Eurodollar Rate Advances for such Interest Period,

the Bank shall  forthwith  give notice to the  Borrower  of such  determination,
whereupon  the  obligation  of the Bank to make or  continue,  or to convert any
Advances to, Eurodollar Rate Advances shall be suspended until the Bank notifies
the Borrower  that the  circumstances  giving rise to such  suspension no longer
exist.  While any such suspension  continues,  all further  Advances by the Bank
shall be made as Reference Rate Advances.  No such  suspension  shall affect the
interest  rate then in effect  during  the  applicable  Interest  Period for any
Eurodollar Rate Advance outstanding at the time such suspension is imposed.

         Section 2.12      Increased Cost.  If any Regulatory Change:

                  (a) shall  subject the Bank to any tax,  duty or other  charge
         with  respect to its  Eurodollar  Rate  Advances,  the Term Note or its
         obligation to make  Eurodollar  Rate Advances or shall change the basis
         of taxation of payment to the Bank of the  principal  of or interest on
         Eurodollar  Rate Advances or any other amounts due under this Agreement
         in  respect of  Eurodollar  Rate  Advances  or its  obligation  to make
         Eurodollar Rate Advances  (except for changes in the rate of tax on the
         overall  net income of the Bank  imposed by the  jurisdiction  in which
         such Bank's principal office is located); or

                  (b) shall  impose,  modify  or deem  applicable  any  reserve,
         special deposit, capital requirement or similar requirement (including,
         without  limitation,  any such  requirement  imposed by the Board,  but
         excluding  with  respect  to  any  Eurodollar  Rate  Advance  any  such
         requirement  to the  extent  included  in  calculating  the  applicable
         Adjusted  Eurodollar  Rate) against assets of, deposits with or for the
         account of, or credit extended by, the Bank or shall impose on the Bank
         or the interbank  Eurodollar  market any other condition  affecting its
         Eurodollar  Rate  Advances,  the Term  Note or its  obligation  to make
         Eurodollar Rate Advances;

and the result of any of the  foregoing  is to increase  the cost to the Bank of
making or maintaining  any Eurodollar  Rate Advance,  or to reduce the amount of
any sum  received or  receivable  by the Bank under this  Agreement or under the
Term Note, then, within 30 days after demand by the Bank, the Borrower shall pay
to the Bank such  additional  amount or amounts as will  compensate the Bank for
such increased cost or reduction.  The Bank will promptly notify the Borrower of
any event of which it has knowledge, occurring after the date hereof, which will
entitle the Bank to compensation  pursuant to this Section. If the Bank fails to
give such notice within 45 days after it obtains knowledge of such an event, the
Bank shall, with respect to compensation payable pursuant to this Section,  only
be entitled to payment under this Section for costs  incurred from and after the
date 45 days  prior  to the  date  that  the  Bank  does  give  such  notice.  A
certificate of the Bank claiming compensation under this Section,  setting forth
the  additional  amount or amounts  to be paid to it  hereunder  and  stating in
reasonable detail the basis for the charge and the method of computation,  shall
be conclusive in the absence of error. In determining such amount,  the Bank may
use any reasonable averaging and attribution methods. Failure on the part of the
Bank to demand  compensation  for any  increased  costs or  reduction in amounts
received or receivable  with respect to any Interest Period shall not constitute
a waiver of the Bank's rights to demand  compensation for any increased costs or
reduction in amounts received or receivable in any subsequent Interest Period.

         Section  2.13  Illegality.  If any  Regulatory  Change  shall  make  it
unlawful or  impossible  for the Bank to make,  maintain or fund any  Eurodollar
Rate Advances,  the Bank shall notify the Borrower,  whereupon the obligation of
the Bank to make or continue,  or to convert any Advances  to,  Eurodollar  Rate
Advances  shall be  suspended  until the Bank  notifies  the  Borrower  that the
circumstances  giving  rise to such  suspension  no  longer  exist.  If the Bank
determines  that it may not lawfully  continue to maintain any  Eurodollar  Rate
Advances to the end of the  applicable  Interest  Periods,  all of the  affected
Advances shall be  automatically  converted to Reference Rate Advances as of the
date of the Bank's notice, and upon such conversion the Borrower shall indemnify
the Bank in accordance with Section 2.15.

         Section 2.14 Capital Adequacy.  In the event that any Regulatory Change
reduces or shall have the  effect of  reducing  the rate of return on the Bank's
capital or the  capital of its parent  corporation  (by an amount the Bank deems
material) as a consequence of the Term Loan Commitment and/or the Term Loan to a
level below that which the Bank or its parent  corporation  could have  achieved
but for such Regulatory  Change (taking into account the Bank's policies and the
policies of its parent corporation with respect to capital  adequacy),  then the
Borrower  shall,  within five (5) days after written  notice and demand from the
Bank, pay to the Bank  additional  amounts  sufficient to compensate the Bank or
its parent  corporation for such reduction.  Any determination by the Bank under
this Section and any certificate as to the amount of such reduction given to the
Borrower by the Bank shall be final,  conclusive  and binding for all  purposes,
absent error.

         Section 2.15 Funding  Losses;  Eurodollar  Rate Advances.  The Borrower
shall  compensate the Bank, upon its written request,  for all losses,  expenses
and  liabilities  (including  any interest  paid by the Bank to lenders of funds
borrowed  by it to make or carry  Eurodollar  Rate  Advances  to the  extent not
recovered by the Bank in  connection  with the  re-employment  of such funds and
including  loss of anticipated  profits) which the Bank may sustain:  (i) if for
any reason,  other than a default by the Bank,  a funding of a  Eurodollar  Rate
Advance does not occur on the date specified  therefor in the Borrower's request
or notice as to such Advance  under Section 2.2 or 2.4, or (ii) if, for whatever
reason (including,  but not limited to, acceleration of the maturity of Advances
following an Event of Default), any repayment of a Eurodollar Rate Advance, or a
conversion  pursuant to Section 2.13,  occurs on any day other than the last day
of the Interest Period applicable  thereto.  The Bank's request for compensation
shall  set  forth  the  basis  for the  amount  requested  and  shall be  final,
conclusive and binding, absent error.

         Section 2.16 Discretion of Bank as to Manner of Funding. The Bank shall
be entitled to fund and maintain its funding of Eurodollar  Rate Advances in any
manner it may elect, it being understood, however, that for the purposes of this
Agreement  all  determinations   hereunder  (including,   but  not  limited  to,
determinations  under  Section  2.15) shall be made as if the Bank had  actually
funded and maintained  each  Eurodollar Rate Advances during the Interest Period
for  such  Advance   through  the   purchase  of  deposits   having  a  maturity
corresponding  to the last day of the  Interest  Period and  bearing an interest
rate equal to the Eurodollar Rate for such Interest Period.

         Section 2.17  Commitment  Fee. The Borrower shall pay to the Bank a fee
(the "Commitment Fee") in an amount determined by applying a rate of one-quarter
of one percent  (.25%) per annum to the amount of the Term Loan  Commitment  for
the period from and including  July 8, 1996 to the Closing Date.  The Commitment
Fee is payable on the Closing Date.

         Section 2.18 Pledge  Agreement.  In the event that the Term Loan is not
paid in full by March  31,  1997,  the Bank  may,  at its  option,  require  the
Borrower to execute and deliver to the Bank a pledge agreement  substantially in
the form of Exhibit B hereto ("Pledge Agreement"), duly executed by the Borrower
in favor of the Bank  pledging  and  granting a security  interest in all of the
outstanding  shares of stock of PJI owned by the  Borrower as  security  for the
Obligations, together with the stock certificates or such other evidence of said
shares as is  acceptable  to the Bank and undated  stock powers duly executed by
the Borrower in blank and authenticated,  and such other agreements or documents
as the Bank may require to assure the validity, perfection and first priority of
its security interest under the Pledge Agreement.

                                   ARTICLE III

                              CONDITIONS PRECEDENT

         The  making  of  the  Term  Loan  shall  be  subject  to the  prior  or
simultaneous fulfillment of the following conditions:

         Section 3.1    Documents.  The Bank shall have received the following:

                  3.1(a) The Term Note executed by a duly authorized officer (or
         officers) of the Borrower and dated the Closing Date.

                  3.1(b) A copy of the  corporate  resolutions  of the  Borrower
         authorizing  the  execution,  delivery  and  performance  of  the  Loan
         Documents,  certified  as of the Closing  Date by the  Secretary  or an
         Assistant Secretary of the Borrower.

                  3.1(c) An incumbency  certificate showing the names and titles
         and bearing the  signatures of the officers of the Borrower  authorized
         to execute the Loan  Documents and to request the Term Loan,  certified
         as of the Closing Date by the  Secretary  or an Assistant  Secretary of
         the Borrower.

                  3.1(d) A copy of the Articles of Incorporation of the Borrower
         with all amendments thereto,  certified by the appropriate governmental
         official of the jurisdiction of its incorporation as of a date not more
         than ten (10) days prior to the Closing Date.

                  3.1(e) A certificate  of good standing for the Borrower in the
         jurisdiction  of  its  incorporation  and in the  State  of  Minnesota,
         certified by the  appropriate  governmental  officials as of a date not
         more than ten (10) days prior to the Closing Date.

                  3.1(f) A copy of the bylaws of the  Borrower,  certified as of
         the Closing  Date by the  Secretary  or an  Assistant  Secretary of the
         Borrower.

                  3.1(g) A  certificate  dated  the  Closing  Date of the  chief
         executive officer or chief financial officer of the Borrower certifying
         as to the matters set forth in Sections 3.6 (a) and 3.6 (b) below.

         Section 3.2 Opinion. The Borrower shall have requested Faegre & Benson,
its counsel,  to prepare a written opinion,  addressed to the Bank and dated the
Closing  Date,  covering  the  matters  set forth in Exhibit C hereto,  and such
opinion shall have been  delivered to the Bank;  provided,  that with respect to
certain  matters  the Bank may  accept the  opinion  of  general  counsel to the
Borrower.

         Section 3.3 Compliance.  The Borrower shall have performed and complied
with all agreements,  terms and conditions  contained in this Agreement required
to be performed or complied with by the Borrower prior to or simultaneously with
the Closing Date,  including  payment of the Commitment Fee and all unpaid legal
fees and expenses  incurred by the Bank  through the Closing Date in  connection
with this Agreement.

         Section 3.4 Fees.  The Borrower  shall have paid to the Bank a facility
fee in the amount of $150,000 and  reimbursed the Bank for all fees and expenses
of the type  described  in Section 8.2 incurred by the Bank prior to and through
the Closing Date.

         Section 3.5 Other Matters. All corporate and legal proceedings relating
to the  Borrower and all  instruments  and  agreements  in  connection  with the
transactions contemplated by this Agreement shall be satisfactory in scope, form
and substance to the Bank and its counsel,  and the Bank shall have received all
information  and  copies  of  all  documents,  including  records  of  corporate
proceedings,  as the  Bank or its  counsel  may  reasonably  have  requested  in
connection therewith, such documents where appropriate to be certified by proper
corporate or governmental authorities.

         Section 3.6       Representations; Default; Request.

                  3.6(a) Representations and Warranties. The representations and
         warranties  contained in Article IV shall be true and correct on and as
         of the Closing Date,  with the same force and effect as if made on such
         date.

                  3.6(b) No Default.  No Default or Event of Default  shall have
         occurred  and be  continuing  on the  Closing  Date or will exist after
         giving effect to the Term Loan made on such date.

                  3.6(c) Loan  Request. The Bank shall have received the Borrow-
         er's request for the Term Loan as required under Section 2.2.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         To induce  the Bank to enter into this  Agreement  and to make the Term
Loan hereunder, the Borrower represents and warrants to the Bank:

         Section 4.1 Organization,  Standing, Etc. The Borrower is a corporation
duly  incorporated  and validly  existing and in good standing under the laws of
the jurisdiction of its incorporation and has all requisite  corporate power and
authority  to  carry on its  business  as now  conducted,  to  enter  into  this
Agreement  and to issue the Term Note and to perform its  obligations  under the
Loan Documents.  Each Material Subsidiary is a corporation duly incorporated and
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation  and has all requisite  corporate  power and authority to carry on
its  business  as  now  conducted.   Each  of  the  Borrower  and  the  Material
Subsidiaries  (a) holds all  certificates  of  authority,  licenses  and permits
necessary to carry on its business as presently  conducted in each  jurisdiction
in which it is carrying on such business,  except where the failure to hold such
certificates,  licenses or permits would not have a material  adverse  effect on
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and the Material  Subsidiaries taken as a whole, and (b) is duly
qualified and in good standing as a foreign  corporation in each jurisdiction in
which the  character of the  properties  owned,  leased or operated by it or the
business conducted by it makes such  qualification  necessary and the failure so
to qualify would permanently  preclude the Borrower or such Material  Subsidiary
from  enforcing  its rights with respect to any assets or expose the Borrower or
such  Material  Subsidiary  to any  liability,  which in  either  case  would be
material to the Borrower and the Subsidiaries taken as a whole.

         Section 4.2  Authorization  and Validity.  The execution,  delivery and
performance by the Borrower of the Loan  Documents have been duly  authorized by
all necessary corporate action by the Borrower,  and this Agreement constitutes,
and the Term Note and other Loan  Documents when executed will  constitute,  the
legal, valid and binding  obligations of the Borrower,  enforceable  against the
Borrower in accordance with their respective terms, subject to limitations as to
enforceability  which might result from bankruptcy,  insolvency,  moratorium and
other  similar  laws  affecting  creditors'  rights  generally  and  subject  to
limitations on the availability of equitable remedies.

         Section 4.3 No Conflict. The execution, delivery and performance by the
Borrower of the Loan  Documents  will not (a) violate any  provision of any law,
statute,  rule or regulation or any order, writ, judgment,  injunction,  decree,
determination or award of any court, governmental agency or arbitrator presently
in effect having  applicability  to the Borrower,  (b) violate or contravene any
provision of the Articles of  Incorporation  or bylaws of the  Borrower,  or (c)
result  in a breach of or  constitute  a default  under any  indenture,  loan or
credit  agreement  or any  other  agreement,  lease or  instrument  to which the
Borrower  is a party  or by which  it or any of its  properties  may be bound or
result in the creation of any Lien thereunder.

         Section 4.4 Government Consent. No order, consent,  approval,  license,
authorization  or validation of, or filing,  recording or registration  with, or
exemption  by, any  governmental  or public body or authority is required on the
part of the  Borrower  to  authorize,  or is  required  in  connection  with the
execution,  delivery and  performance  of, or the  legality,  validity,  binding
effect or enforceability of, the Loan Documents, except for any necessary filing
or recordation of or with respect to any of the Security Documents.

         Section 4.5 Financial Statements and Condition.  The Borrower's audited
consolidated  financial  statements  as at September  30, 1995 and its unaudited
financial  statements as at June 30, 1996, as heretofore  furnished to the Bank,
have been prepared in accordance with GAAP on a consistent basis (except for the
absence of footnotes and subject to year-end audit adjustments as to the interim
statements)  and fairly present the financial  condition of the Borrower and its
Subsidiaries as at such dates and the results of their operations and changes in
financial  position for the  respective  periods then ended.  As of the dates of
such  financial  statements,  neither the  Borrower nor any  Subsidiary  had any
material  obligation,  contingent  liability,  liability  for taxes or long-term
lease obligation  which is not reflected in such financial  statements or in the
notes thereto. Since June 30, 1996, there has been no material adverse change in
the business, operations, property, assets or condition, financial or otherwise,
of the Borrower and its Subsidiaries taken as a whole.

         Section 4.6 Litigation. Except as disclosed in financial statements and
in reports filed with the Commission or any national securities exchange,  there
are no  actions,  suits or  proceedings  pending  or,  to the  Knowledge  of the
Borrower,   threatened  against  or  affecting  the  Borrower  or  any  Material
Subsidiary or any of their  properties  before any court or  arbitrator,  or any
governmental  department,  board,  agency  or other  instrumentality  which,  if
determined  adversely to the Borrower or such Subsidiary,  would have a material
adverse effect on the business, operations,  property or condition (financial or
otherwise)  of the  Borrower  and the  Subsidiaries  taken  as a whole or on the
ability of the Borrower to perform its obligations under the Loan Documents.

         Section 4.7 ERISA.  Each Plan  complies  with all  material  applicable
requirements of ERISA and the Code and with all material  applicable rulings and
regulations  issued under the  provisions  of ERISA and the Code  setting  forth
those  requirements.  No Reportable  Event has occurred and is  continuing  with
respect to any Plan.  All of the minimum  funding  standards  applicable to such
Plans have been  satisfied  and there exists no event or  condition  which would
permit the  institution  of proceedings to terminate any Plan under Section 4042
of ERISA. The current value of the Plans' benefits  guaranteed under Title IV of
ERISA does not exceed the current value of the Plans'  assets  allocable to such
benefits.

         Section 4.8 Federal  Reserve  Regulations.  The Borrower is not engaged
principally  or as one of its important  activities in the business of extending
credit for the purpose of  purchasing  or carrying  margin  stock (as defined in
Regulation U of the Board).  The value of all margin stock owned by the Borrower
does not constitute more than 25% of the value of the assets of the Borrower.

         Section 4.9 Title to Property;  Leases; Liens;  Subordination.  Each of
the Borrower and the Material  Subsidiaries has (a) good and marketable title to
its real properties and (b) good and sufficient  title to, or valid,  subsisting
and enforceable leasehold interest in, its other material properties,  including
all real properties,  other  properties and assets,  referred to as owned by the
Borrower and its Subsidiaries in the most recent financial statement referred to
in Section 4.5 (other than property disposed of since the date of such financial
statements in the ordinary  course of business).  None of the  properties of the
Borrower is subject to a Lien, except as allowed under Section 6.9. The Borrower
has not  subordinated  any of its rights under any obligation owing to it to the
rights of any other person.

         Section 4.10 Taxes. Each of the Borrower and the Material  Subsidiaries
has filed all federal,  state and local tax returns required to be filed and has
paid or made provision for the payment of all taxes due and payable  pursuant to
such  returns and  pursuant  to any  assessments  made  against it or any of its
property and all other taxes, fees and other charges imposed on it or any of its
property by any governmental  authority  (other than taxes,  fees or charges the
amount or  validity  of which is  currently  being  contested  in good  faith by
appropriate  proceedings  and with respect to which reserves in accordance  with
GAAP have been  provided on the books of the  Borrower).  No tax Liens have been
filed and no material  claims are being asserted with respect to any such taxes,
fees or charges. The charges, accruals and reserves on the books of the Borrower
in respect of taxes and other governmental charges are adequate and the Borrower
knows  of no  proposed  material  tax  assessment  against  it or  any  Material
Subsidiary or any basis therefor.

         Section 4.11 Trademarks, Patents. Each of the Borrower and the Material
Subsidiaries  possesses or has the right to use all of the patents,  trademarks,
trade names, service marks and copyrights,  and applications  therefor,  and all
technology,  know-how,  processes,  methods and designs used in or necessary for
the conduct of its business, without known conflict with the rights of others.

         Section  4.12  Burdensome  Restrictions.  Neither the  Borrower nor any
Material  Subsidiary is a party to or otherwise bound by any indenture,  loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter,  corporate or partnership  restriction  which would  foreseeably have a
material  adverse  effect on the  business,  properties,  assets,  operations or
condition  (financial or otherwise) of the Borrower or such Material  Subsidiary
or on the ability of the  Borrower or any Material  Subsidiary  to carry out its
obligations under any Loan Document.

         Section  4.13  Investment  Company  Act.  Neither the  Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.

         Section 4.14 Public Utility Holding  Company Act.  Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding  company or of a subsidiary  company of a
holding  company within the meaning of the Public Utility Holding Company Act of
1935, as amended.

         Section 4.15      [Intentionally Omitted.]

         Section  4.16  Full  Disclosure.  Subject  to the  following  sentence,
neither  the  financial  statements  referred  to in  Section  4.5 nor any other
certificate,  written statement,  exhibit or report furnished by or on behalf of
the  Borrower in  connection  with or pursuant to this  Agreement  contains  any
untrue  statement  of a  material  fact or  omits  to state  any  material  fact
necessary  in order to make the  statements  contained  therein not  misleading.
Certificates or statements furnished by or on behalf of the Borrower to the Bank
consisting  of  projections  or forecasts of future  results or events have been
prepared in good faith and based on good faith  estimates and assumptions of the
management of the Borrower,  and the Borrower has no reason to believe that such
projections or forecasts are not reasonable.

         Section 4.17  Subsidiaries.  Schedule 4.17 sets forth as of the date of
this Agreement a list of all  Subsidiaries  and the number and percentage of the
shares of each class of capital  stock  owned  beneficially  or of record by the
Borrower or any Subsidiary  therein,  and the  jurisdiction of  incorporation of
each Subsidiary.

         Section 4.18  Compliance  with Laws and Other  Agreements.  Neither the
Borrower nor any of its Material  Subsidiaries is in default with respect to any
order,   writ,   injunction   or  decree  of  any   Governmental   Authority  or
Self-Regulatory  Organization or, to the knowledge of the Borrower, in violation
of any law,  statute,  rule or regulation to which the Borrower or such Material
Subsidiary or any Property of the Company or any such Material  Subsidiary is or
are subject,  which default or violation could  reasonably be expected to have a
material  adverse  effect  on the  business,  operations,  property,  assets  or
condition,  financial or otherwise, of the Borrower or such Material Subsidiary;
provided, that certain allegations have been made by the Commission with respect
to  certain  sales  practices  of a Material  Subsidiary,  as  disclosed  in the
Borrower's  Form 10-Q as of March 31, 1996.  Neither the Borrower nor any of its
Material  Subsidiaries is in default in the payment or performance of any of its
obligations or in the performance of any mortgage, indenture, lease, contract or
other  agreement to which it is a party or by which it or any of its property is
bound,  which  default could  reasonably be expected to have a material  adverse
effect on the business, operations,  property, assets or condition, financial or
otherwise, of the Borrower.

         Section  4.19  Ownership  of PJI.  The  Borrower  owns all (other  than
directors' qualifying shares) of the voting shares of PJI.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

                  Until the Term Note and all of the other Obligations have been
paid in full and the Bank has no  obligation  to extend  credit to the  Borrower
hereunder, unless the Bank shall otherwise consent in writing:

         Section 5.1       Financial Statements and Reports.  The Borrower will
         furnish to the Bank:

                  5.1(a) As soon as  available  and in any event  within  ninety
         (90)  days  after  the end of each  fiscal  year of the  Borrower,  the
         consolidated  financial statements of the Borrower and the Subsidiaries
         consisting of at least  statements of income,  cash flow and changes in
         stockholders' equity, and a consolidated balance sheet as of the end of
         such year, setting forth in each case in comparative form corresponding
         figures from the previous annual audit, certified without qualification
         by Deloitte & Touche or other independent  certified public accountants
         of recognized national standing selected by the Borrower and acceptable
         to the Bank,  together with letter from such  accountants  addressed to
         the  Bank  (a)  acknowledging  that the  Bank is  extending  credit  in
         reliance on such financial statements and authorizing such reliance and
         (b) confirming that no management  letter,  management  report or other
         supplementary  comments  or  reports  to the  Borrower  or its board of
         directors  furnished by such accountants  advised the recipients of the
         same of any material weakness of the Borrower and its Subsidiaries.

                  5.1(b) Together with the audited financial statements required
         under Section  5.1(a),  a statement by the accounting  firm  performing
         such audit to the effect that it has reviewed  this  Agreement and that
         in the  course  of  performing  its  examination  nothing  came  to its
         attention  that  caused  it to  believe  that any  Default  or Event of
         Default  exists,  or,  if such  Default  or  Event of  Default  exists,
         describing its nature.

                  5.1(c) As soon as  available  and in any event  within  thirty
         (30) days after the end of each fiscal  month,  unaudited  consolidated
         statements  of income for the  Borrower and the  Subsidiaries  for such
         month and for the period from the  beginning of such fiscal year to the
         end of such month, and a consolidated  balance sheet of the Borrower as
         at the end of such month, setting forth in comparative form figures for
         the corresponding period for the preceding fiscal year,  accompanied by
         a  certificate  signed by the chief  financial  officer of the Borrower
         stating that such  financial  statements  present  fairly the financial
         condition of the Borrower and the  Subsidiaries  and that the same have
         been  prepared  in  accordance  with GAAP  (except  for the  absence of
         footnotes and subject to year-end  audit  adjustments as to the interim
         statements).

                  5.1(d) As soon as  practicable  and in any event within thirty
         (30) days after the end of each fiscal month, a Compliance  Certificate
         in the form attached  hereto as Exhibit D signed by the chief financial
         officer of the Borrower  demonstrating in reasonable  detail compliance
         (or noncompliance,  as the case may be) with these Sections: 5.12, 6.11
         and 6.12, as at the end of such month and stating that as at the end of
         such month  there did not exist any  Default or Event of Default or, if
         such  Default or Event of Default  existed,  specifying  the nature and
         period of existence  thereof and what action the  Borrower  proposes to
         take with respect thereto.

                  5.1(e)  Promptly  upon the  filing  thereof  with  NYSE or the
         Commission, Part II of PJI's Focus Report, as filed for the most recent
         quarterly period for which such report is required to be filed.

                  5.1(f)  Immediately upon the Borrower  obtaining  Knowledge of
         any Default or Event of Default, a notice describing the nature thereof
         and what action the Borrower proposes to take with respect thereto.

                  5.1(g)  Immediately upon the Borrower  obtaining  Knowledge of
         the  occurrence,  with respect to any Plan, of any Reportable  Event or
         any Prohibited Transaction,  a notice specifying the nature thereof and
         what action the Borrower  proposes to take with respect  thereto,  and,
         when received, copies of any notice from PBGC of intention to terminate
         or have a trustee appointed for any Plan.

                  5.1(h) Promptly upon the mailing or filing thereof,  copies of
         all financial  statements,  reports and proxy statements  mailed to the
         Borrower's  shareholders  and  copies of all  registration  statements,
         periodic  reports and other  documents  filed by the Borrower  with the
         Commission or any national securities exchange;  provided, that so long
         as the  Borrower  delivers  to the  Bank a copy  of the  press  release
         associated  with each Form 8-K, the Borrower  need not deliver the Form
         8-K unless requested by the Bank.

                  5.1(i) From time to time, such other information regarding the
         business,  operation  and  financial  condition of the Borrower and the
         Subsidiaries as the Bank may reasonably request.

         Section 5.2 Corporate Existence.  The Borrower will maintain, and cause
each Material  Subsidiary to maintain,  its corporate existence in good standing
under the laws of its  jurisdiction of  incorporation  and its  qualification to
transact  business  in each  jurisdiction  where  failure  so to  qualify  would
permanently preclude the Borrower or such Material Subsidiary from enforcing its
rights with respect to any  material  asset or would expose the Borrower or such
Material Subsidiary to any material liability;  provided,  however, that nothing
herein shall  prohibit  the merger or  liquidation  of any  Material  Subsidiary
allowed under Section 6.1.

         Section 5.3  Insurance.  The Borrower shall  maintain,  and shall cause
each  Material  Subsidiary  to maintain,  with  financially  sound and reputable
insurance  companies  such  insurance  as may be  required by law and such other
insurance  in such  amounts and against such hazards as is customary in the case
of  reputable  firms  engaged  in the same or  similar  business  and  similarly
situated.

         Section 5.4 Payment of Taxes and Claims.  The Borrower  shall file, and
cause each Material  Subsidiary  to file,  all tax returns and reports which are
required  by law to be  filed  by it and  will  pay,  and  cause  each  Material
Subsidiary to pay,  before they become  delinquent  all taxes,  assessments  and
governmental  charges and levies  imposed upon it or its property and all claims
or  demands  of any kind  (including  but not  limited  to  those of  suppliers,
mechanics,  carriers,  warehouses,  landlords and other like Persons)  which, if
unpaid, might result in the creation of a Lien upon its property;  provided that
the foregoing  items need not be paid if they are being  contested in good faith
by appropriate  proceedings,  and as long as the Borrower's or such Subsidiary's
title to its  property is not  materially  adversely  affected,  its use of such
property in the  ordinary  course of its business is not  materially  interfered
with and  adequate  reserves  with  respect  thereto  have been set aside on the
Borrower's or such Subsidiary's books in accordance with GAAP.

         Section 5.5 Inspection. The Borrower shall permit any Person designated
by the Bank to visit and  inspect  any of the  properties,  corporate  books and
financial records of the Borrower and the Material Subsidiaries,  to examine and
to make  copies of the books of  accounts  and other  financial  records  of the
Borrower and the Material Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries  with, and to be advised as to the
same by, its  officers at such  reasonable  times and  intervals as the Bank may
designate.  So long as no Event of Default exists,  the expenses of the Bank for
such visits,  inspections and examinations  shall be at the expense of the Bank,
but any such  visits,  inspections  and  examinations  made  while  any Event of
Default is continuing shall be at the expense of the Borrower.

         Section 5.6 Maintenance of Properties.  The Borrower will maintain, and
cause each Material  Subsidiary to maintain its properties used or useful in the
conduct of its  business  in good  condition,  repair  and  working  order,  and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements,  betterments and improvements  thereto, all as may be necessary so
that the  business  carried  on in  connection  therewith  may be  properly  and
advantageously conducted at all times.

         Section 5.7 Books and Records.  The Borrower will keep,  and will cause
each  Material  Subsidiary  to keep,  adequate  and proper  records and books of
account in which full and correct entries will be made of its dealings, business
and affairs.

         Section 5.8 Compliance.  The Borrower will comply,  and will cause each
Material  Subsidiary to comply,  in all material  respects with all laws, rules,
regulations,  orders, writs, judgments,  injunctions, decrees or awards to which
it may be subject;  provided,  however, that failure so to comply shall not be a
breach of this  covenant if such  failure  does not have,  or is not  reasonably
expected to have,  a  materially  adverse  effect on the  properties,  business,
prospects or condition (financial or otherwise) of the Borrower or such Material
Subsidiary and the Borrower or such Material  Subsidiary is acting in good faith
and with reasonable dispatch to cure such noncompliance.

         Section 5.9 Notice of Litigation. The Borrower will give prompt written
notice to the Bank of the commencement of any action,  suit or proceeding before
any court or arbitrator or any governmental  department,  board, agency or other
instrumentality  affecting  the  Borrower  or  any  Material  Subsidiary  or any
property of the Borrower or a Material  Subsidiary or to which the Borrower or a
Material Subsidiary is a party in which an adverse determination or result could
have a material adverse effect (as determined by the Borrower in the exercise of
its  reasonable  judgment) on the  business,  operations,  property or condition
(financial or otherwise) of the Borrower and the  Subsidiaries  taken as a whole
or on the ability of the  Borrower  or any  Material  Subsidiary  to perform its
obligations  under this  Agreement  and the other Loan  Documents,  stating  the
nature and status of such action,  suit or  proceeding.  The Borrower shall give
the Bank  prompt  written  notice of any  decision  by the  Borrower,  PJI or an
Affiliate  to settle any suit or  proceeding,  whether now pending or  hereafter
commenced,  for an amount of $2,000,000  or more;  provided,  however,  that the
Borrower  will provide the amount which it, PJI or any  Affiliate has decided to
pay in settlement,  but will not provide any further information  concerning the
settlement,  unless  the Bank  agrees to the terms of a written  confidentiality
agreement on terms reasonably acceptable to the Borrower.

         Section 5.10 ERISA. The Borrower will maintain, and cause each Material
Subsidiary  to maintain,  each Plan in compliance  with all material  applicable
requirements  of ERISA  and of the Code and  with  all  applicable  rulings  and
regulations  issued under the  provisions  of ERISA and of the Code and will not
and not permit any of the ERISA  Affiliates to (a) engage in any  transaction in
connection  with  which the  Borrower  or any of the ERISA  Affiliates  would be
subject to either a civil penalty  assessed  pursuant to Section 502(i) of ERISA
or a tax  imposed  by  Section  4975 of the Code,  in  either  case in an amount
exceeding  $1,000,000,  (b) fail to make full  payment  when due of all  amounts
which,  under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as  contributions  thereto,  or permit to exist any  accumulated
funding  deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the  Code),  whether  or not  waived,  with  respect  to any  Plan  in an
aggregate  amount  exceeding  $1,000,000  or (c) fail to make any payments in an
aggregate  amount  exceeding  $1,000,000  to any  Multiemployer  Plan  that  the
Borrower  or any of the  ERISA  Affiliates  may be  required  to make  under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.

         Section 5.11 Further  Assurances.  The Borrower shall promptly  correct
any  defect  or error  that may be  discovered  in any Loan  Document  or in the
execution,  acknowledgment or recordation thereof.  Promptly upon request by the
Bank,  the  Borrower  also  shall do,  execute,  acknowledge,  deliver,  record,
re-record,  file,  re-file,  register  and  re-register,  any and all  financing
statements  and  continuations  thereof,   notices  of  assignment,   transfers,
certificates,  assurances  and  other  instruments  as the Bank  may  reasonably
require  from  time to time in  order:  (a) to carry  out more  effectively  the
purposes  of the Loan  Documents;  (b) to perfect  and  maintain  the  validity,
effectiveness and priority of any security  interests  intended to be created by
the Loan Documents;  and (c) to better assure, convey, grant, assign,  transfer,
preserve,  protect and confirm unto the Bank the rights granted now or hereafter
intended  to be granted to the Bank under any Loan  Document  or under any other
instrument  executed in  connection  with any Loan Document or that the Borrower
may be or become bound to convey, pledge or assign to the Bank in order to carry
out the intention or facilitate  the  performance  of the provisions of any Loan
Document.  The Borrower shall furnish to the Bank evidence  satisfactory  to the
Bank of every such recording, filing or registration.

         Section  5.12 Net Capital.  The Borrower  will cause PJI to maintain at
all  times  Net  Capital  of not  less  than  10% of  Aggregate  Debit  Items as
determined as of the close of each Business Day.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

         Until the Term Note and all of the other  Obligations have been paid in
full and the Bank has no obligation to extend credit to the Borrower  hereunder,
unless the Bank shall otherwise consent in writing:

         Section 6.1 Merger. The Borrower will not merge or consolidate or enter
into any analogous  reorganization  or transaction with any Person or liquidate,
wind up or dissolve  itself (or suffer any liquidation or dissolution) or permit
any Material  Subsidiary  to do any of the  foregoing;  provided,  however,  any
Subsidiary  may  be  merged  with  or  liquidated   into  the  Borrower  or  any
wholly-owned  Subsidiary (if the Borrower or such wholly-owned Subsidiary is the
surviving corporation).

         Section 6.2 Sale of Assets.  The Borrower will not, and will not permit
any Material Subsidiary to, sell, transfer, lease or otherwise convey all or any
substantial  part of its  assets  except  for  sales in the  ordinary  course of
business and except for sales or other transfers by a Subsidiary to the Borrower
or a wholly-owned Subsidiary.

         Section 6.3 Plans. The Borrower will not permit, and will not allow any
Material  Subsidiary  to permit,  any event to occur or condition to exist which
would permit any Plan to terminate under any circumstances which would cause the
Lien  provided  for in  Section  4068 of ERISA to  attach  to any  assets of the
Borrower  or any  Material  Subsidiary;  and the  Borrower  will not  permit the
underfunded amount of Plan benefits guaranteed under Title IV of ERISA to exceed
$1,000,000.

         Section 6.4 Change in Nature of Business.  The  Borrower  will not, and
will not permit any  Material  Subsidiary  to, make any  material  change in the
nature of the business of the Borrower or such Material  Subsidiary,  as carried
on at the date hereof.

         Section 6.5 Negative  Pledges;  Subsidiary  Restrictions.  The Borrower
will not enter into any agreement,  bond,  note or other  instrument  that would
prohibit or limit the ability of the Borrower to perform  under  Section 2.18 of
this Agreement. The Borrower will not permit any Material Subsidiary to place or
allow any restriction,  directly or indirectly,  on the ability of such Material
Subsidiary to (a) pay dividends or any  distributions on or with respect to such
Material  Subsidiary's capital stock or (b) make loans or other cash payments to
the Borrower.

         Section 6.6  Accounting  Changes.  The Borrower  will not, and will not
permit any Material  Subsidiary  to, make any  significant  change in accounting
treatment  or  reporting  practices,  except as required by GAAP,  or change its
fiscal year or the fiscal year of any Material Subsidiary.

         Section 6.7  [Intentionally Omitted.]


         Section 6.8       Indebtedness.  The Borrower will not incur, create,
issue, assume or suffer to exist any Indebtedness, except:

                  6.8(a)  The Obligations.

                  6.8(b)  Current  Liabilities,  other than for borrowed  money,
         incurred in the ordinary course of business.

                  6.8(c) Indebtedness existing on the date of this Agreement and
         disclosed on Schedule 6.8 hereto,  but not  including  any extension or
         refinancing thereof.

                  6.8(d)  Indebtedness secured by Liens permitted under Section
          6.9 hereof.

                  6.8(e)  Subordinated Debt.

                  6.8(f)   Indebtedness of the type described in clauses (d),
(e), (f) or (g) of the definition of "Indebtedness."

                  6.8(g)   Indebtedness arising out of agreements in settlement
         of litigation.

         Section  6.9 Liens.  The  Borrower  will not create,  incur,  assume or
suffer to exist any Lien, or enter into,  or make any  commitment to enter into,
any arrangement for the acquisition of any property  through  conditional  sale,
lease-purchase or other title retention agreements, with respect to any property
now owned or hereafter acquired by the Borrower, except:

                  6.9(a)  Liens granted to the Bank under the Security Documents
to secure the Obligations.

                  6.9(b)  Liens  existing  on the  date  of this  Agreement  and
disclosed on Schedule 6.9 hereto.
                                                     
                  6.9(c)  Deposits  or  pledges to secure  payment  of  workers'
         compensation,  unemployment insurance, old age pensions or other social
         security  obligations,  in  the  ordinary  course  of  business  of the
         Borrower or a Subsidiary.

                  6.9(d) Liens for taxes,  fees,  assessments  and  governmental
         charges not delinquent or to the extent that payment therefor shall not
         at the time be required to be made in accordance with the provisions of
         Section 5.4.

                  6.9(e)  Liens  of  carriers,   warehousemen,   mechanics   and
         materialmen,  and other like Liens  arising in the  ordinary  course of
         business, for sums not due or to the extent that payment therefor shall
         not at  the  time  be  required  to be  made  in  accordance  with  the
         provisions of Section 5.4.

                  6.9(f) Liens  incurred or deposits or pledges made or given in
         connection  with, or to secure  payment of,  indemnity,  performance or
         other similar bonds.

                  6.9(g)  Liens  arising  solely by virtue of any  statutory  or
         common law provision  relating to banker's liens,  rights of set-off or
         similar  rights and  remedies  as to deposit  accounts  or other  funds
         maintained with a creditor  depository  institution;  provided that (i)
         such deposit account is not a dedicated cash collateral  account and is
         not subject to restriction  against access by the Borrower in excess of
         those set forth by regulations  promulgated by the Board, and (ii) such
         deposit  account is not intended by the Borrower to provide  collateral
         to the depository institution.

                  6.9(h)  Encumbrances  in the  nature of  zoning  restrictions,
         easements  and  rights  or  restrictions  of  record on the use of real
         property and  landlord's  Liens under  leases on the  premises  rented,
         which do not  materially  detract  from the value of such  property  or
         impair the use thereof in the business of the Borrower.

                  6.9(i) The interest of any lessor under any Capitalized  Lease
         entered into after the Closing Date or purchase money Liens on property
         acquired after the Closing Date;  provided,  that, (i) the Indebtedness
         secured thereby is otherwise  permitted by this Agreement and (ii) such
         Liens  are  limited  to  the  property   acquired  and  do  not  secure
         Indebtedness  other than the related  Capitalized  Lease Obligations or
         the purchase price of such property.

         Section 6.10  Contingent  Obligations.  The Borrower will not, and will
not permit any Material  Subsidiary  to, be or become  liable on any  Contingent
Obligations except Contingent Obligations existing on the date of this Agreement
and  described  on  Schedule  6.10 and  Contingent  Obligations  incurred in the
ordinary course of business of the Borrower or such Material Subsidiary.

         Section  6.11  Tangible  Net Worth.  The  Borrower  will not permit its
Tangible Net Worth at any time to be less than  $125,000,000 or the Tangible Net
Worth of PJI at any time to be less than $100,000,000.

         Section 6.12      Leverage Ratio.  The Borrower will not permit PJI's
Leverage Ratio to be more than 8.0 to 1.0 at any time.

         Section 6.13 Loan Proceeds.  The Borrower will not, and will not permit
any  Material  Subsidiary  to,  use any part of the  proceeds  of the Term  Loan
directly or indirectly, and whether immediately, incidentally or ultimately, (a)
to purchase or carry margin  stock (as defined in  Regulation U of the Board) or
to extend  credit to others for the purpose of  purchasing  or  carrying  margin
stock or to refund Indebtedness  originally incurred for such purpose or (b) for
any purpose  which entails a violation of, or which is  inconsistent  with,  the
provisions of Regulations G, U, T or X of the Board.



<PAGE>


                                   ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

         Section 7.1       Events of Default.  The occurrence of any one or more
of the following events shall constitute an Event of Default:

                  7.1(a) The  Borrower  shall fail to make when due,  whether by
         acceleration  or otherwise,  any payment of principal of or interest on
         the Term Note or any other  Obligation  required to be made to the Bank
         pursuant to this Agreement.

                  7.1(b) Any  representation or warranty made by or on behalf of
         the Borrower or any Material  Subsidiary in this Agreement or any other
         Loan  Document  or by or on  behalf  of the  Borrower  or any  Material
         Subsidiary in any certificate,  statement,  report or document herewith
         or hereafter  furnished to the Bank  pursuant to this  Agreement or any
         other Loan Document shall prove to have been false or misleading in any
         material respect on the date as of which the facts set forth are stated
         or certified.

                  7.1(c) The Borrower  shall fail to comply with  Sections  5.2,
         5.3 or 5.12 hereof or any Section of Article VI hereof.

                  7.1(d)  The  Borrower  shall  fail to  comply  with any  other
         agreement,  covenant,  condition,  provision or term  contained in this
         Agreement (other than those  hereinabove set forth in this Section 7.1)
         and such failure to comply shall continue for thirty (30) calendar days
         after  whichever of the following  dates is the earliest:  (i) the date
         the Borrower  gives  notice of such failure to the Bank,  (ii) the date
         the  Borrower  should  have  given  notice of such  failure to the Bank
         pursuant  to Section  5.1,  or (iii) the date the Bank gives  notice of
         such failure to the Borrower.

                  7.1(e) Any default  (however  denominated  or  defined)  shall
occur under any Security Document.

                  7.1(f) The  Borrower or any Material  Subsidiary  shall become
         insolvent or shall  generally not pay its debts as they mature or shall
         apply for, shall consent to, or shall acquiesce in the appointment of a
         custodian,  trustee  or  receiver  of the  Borrower  or  such  Material
         Subsidiary or for a substantial part of the property thereof or, in the
         absence of such  application,  consent or  acquiescence,  a  custodian,
         trustee or receiver  shall be appointed  for the Borrower or a Material
         Subsidiary or for a substantial  part of the property thereof and shall
         not be  discharged  within 45 days,  or the  Borrower  or any  Material
         Subsidiary shall make an assignment for the benefit of creditors.

                  7.1(g) Any  bankruptcy,  reorganization,  debt  arrangement or
         other  proceedings  under any  bankruptcy  or  insolvency  law shall be
         instituted by or against the Borrower or any Material Subsidiary,  and,
         if instituted  against the Borrower or any Material  Subsidiary,  shall
         have  been  consented  to or  acquiesced  in by the  Borrower  or  such
         Material  Subsidiary,  or shall remain  undismissed  for 60 days, or an
         order for relief shall have been  entered  against the Borrower or such
         Material Subsidiary.

                  7.1(h) Any dissolution or liquidation proceeding not permitted
         by Section  6.1 shall be  instituted  by or against  the  Borrower or a
         Material  Subsidiary,  and, if  instituted  against the Borrower or any
         Material  Subsidiary,  shall be  consented to or  acquiesced  in by the
         Borrower  or such  Material  Subsidiary  or  shall  remain  for 45 days
         undismissed.

                  7.1(i) A judgment  or  judgments  for the  payment of money in
         excess of the sum of  $10,000,000  in the  aggregate  shall be rendered
         against  the  Borrower  or a  Material  Subsidiary  and  either (i) the
         judgment  creditor  executes  on such  judgment  or (ii) such  judgment
         remains unpaid or  undischarged  for more than 60 days from the date of
         entry  thereof or such longer  period  during  which  execution of such
         judgment shall be stayed during an appeal from such judgment.

                  7.1(j)  The  maturity  of  any  material  Indebtedness  of the
         Borrower (other than  Indebtedness  under this Agreement) or a Material
         Subsidiary  shall  be  accelerated,  or  the  Borrower  or  a  Material
         Subsidiary  shall fail to pay any such material  Indebtedness  when due
         (after the lapse of any  applicable  grace  period)  or, in the case of
         such Indebtedness  payable on demand, when demanded (after the lapse of
         any  applicable  grace  period),  or any event shall occur or condition
         shall exist and shall  continue  for more than the period of grace,  if
         any,  applicable  thereto  and shall  have the  effect of  causing,  or
         permitting the holder of any such  Indebtedness or any trustee or other
         Person  acting  on  behalf  of such  holder  to  cause,  such  material
         Indebtedness  to become due prior to its stated  maturity or to realize
         upon any collateral  given as security  therefor.  For purposes of this
         Section,  Indebtedness of the Borrower or a Subsidiary  shall be deemed
         "material" if it exceeds  $10,000,000 as to any item of Indebtedness or
         in the  aggregate for all items of  Indebtedness  with respect to which
         any of the events described in this Section 7.1(j) has occurred.

                  7.1(k) Any execution or attachment shall be issued whereby any
         substantial  part  of the  property  of the  Borrower  or any  Material
         Subsidiary  shall be taken or  attempted to be taken and the same shall
         not have been  vacated  or stayed  within  30 days  after the  issuance
         thereof.

                  7.1(l) Any Security  Document shall, at any time,  cease to be
         in full force and effect or shall be judicially declared null and void,
         or the  validity or  enforceability  thereof  shall be contested by the
         Borrower,  or the  Bank  shall  cease  to  have a valid  and  perfected
         security interest having the priority contemplated thereunder in all of
         the collateral  described therein,  other than by action or inaction of
         the Bank.

                  7.1(m) Any "event of default" shall occur under the PJI Credit
Agreement.

         Section 7.2 Remedies. If (a) any Event of Default described in Sections
7.1(f),  (g) or (h) shall occur with respect to the Borrower,  the Term Note and
all other Obligations shall automatically become immediately due and payable; or
(b) any other Event of Default shall occur and be continuing,  then the Bank may
declare the outstanding  unpaid principal  balance of the Term Note, the accrued
and unpaid  interest  thereon and all other  Obligations to be forthwith due and
payable,  whereupon the Term Note, all accrued and unpaid  interest  thereon and
all such  Obligations  shall  immediately  become due and payable,  in each case
without presentment,  demand,  protest or other notice of any kind, all of which
are hereby expressly  waived,  anything in this Agreement or in the Term Note to
the contrary notwithstanding. Upon the occurrence of any of the events described
in clauses (a) or (b) of the preceding sentence the Bank may exercise all rights
and  remedies  under any of the Loan  Documents,  and  enforce  all  rights  and
remedies under any applicable law.

         Section 7.3 Offset.  In addition to the  remedies  set forth in Section
7.2, upon the occurrence of any Event of Default and  thereafter  while the same
be continuing,  the Borrower hereby  irrevocably  authorizes the Bank to set off
any  Obligations  against all deposits and credits of the Borrower with, and any
and all claims of the Borrower against, the Bank. Such right shall exist whether
or not the Bank  shall have made any  demand  hereunder  or under any other Loan
Document,  whether or not the Obligations,  or any part thereof, or deposits and
credits held for the account of the Borrower is or are matured or unmatured, and
regardless of the existence or adequacy of any collateral, guaranty or any other
security,  right or remedy  available  to the Bank.  The Bank  agrees  that,  as
promptly as is reasonably  possible after the exercise of any such setoff right,
it shall  notify the Borrower of its  exercise of such setoff  right;  provided,
however,  that the failure of the Bank to provide  such notice  shall not affect
the validity of the exercise of such setoff  rights.  Nothing in this  Agreement
shall be deemed a waiver or  prohibition  of or  restriction  on the Bank to all
rights of banker's Lien, setoff and counterclaim available pursuant to law.



<PAGE>


                                  ARTICLE VIII

                                  MISCELLANEOUS

         Section  8.1  Modifications.  Notwithstanding  any  provisions  to  the
contrary  herein,  any term of this  Agreement  may be amended  with the written
consent of the Borrower;  provided that no amendment,  modification or waiver of
any  provision  of this  Agreement  or consent to any  departure by the Borrower
therefrom  shall in any event be  effective  unless the same shall be in writing
and signed by the Bank, and then such amendment, modification, waiver or consent
shall be effective  only in the specific  instance and for the purpose for which
given.

         Section  8.2  Expenses.  Whether or not the  transactions  contemplated
hereby are  consummated,  the Borrower  agrees to reimburse the Bank upon demand
for  all  reasonable  out-of-pocket  expenses  paid  or  incurred  by  the  Bank
(including  filing and recording costs and fees and expenses of Dorsey & Whitney
LLP,  counsel  to the Bank) in  connection  with the  negotiation,  preparation,
approval, review, execution, delivery,  administration,  amendment, modification
and  interpretation  of this  Agreement  and the other  Loan  Documents  and any
commitment letters relating thereto.  The Borrower shall also reimburse the Bank
upon demand for all reasonable  out-of-pocket  expenses  (including  expenses of
legal  counsel) paid or incurred by the Bank in connection  with the  collection
and  enforcement of this Agreement and any other Loan Document.  The obligations
of the  Borrower  under this  Section  shall  survive  any  termination  of this
Agreement.

         Section  8.3  Waivers,  etc.  No failure on the part of the Bank or the
holder  of the Term Note to  exercise  and no delay in  exercising  any power or
right  hereunder  or under any other  Loan  Document  shall  operate as a waiver
thereof; nor shall any single or partial exercise of any power or right preclude
any other or further  exercise  thereof or the  exercise  of any other  power or
right.  The  remedies  herein  and in the  other  Loan  Documents  provided  are
cumulative and not exclusive of any remedies provided by law.

         Section  8.4  Notices.  Except  when  telephonic  notice  is  expressly
authorized by this Agreement,  any notice or other communication to any party in
connection  with this Agreement  shall be in writing and shall be sent by manual
delivery,  telegram, telex, facsimile transmission,  overnight courier or United
States mail (postage  prepaid)  addressed to such party at the address specified
on the signature page hereof,  or at such other address as such party shall have
specified to the other party  hereto in writing.  All periods of notice shall be
measured from the date of delivery thereof if manually delivered,  from the date
of sending thereof if sent by telegram,  telex or facsimile  transmission,  from
the first  Business Day after the date of sending if sent by overnight  courier,
or from four days after the date of mailing if mailed;  provided,  however, that
any  notice to the Bank  under  Article  II hereof  shall be deemed to have been
given only when received by the Bank.

         Section  8.5  Taxes.  The  Borrower  agrees  to pay,  and save the Bank
harmless from all  liability  for, any stamp or other taxes which may be payable
with respect to the  execution or delivery of this  Agreement or the issuance of
the Term Note, which obligation of the Borrower shall survive the termination of
this Agreement.

         Section 8.6 Successors and Assigns;  Disposition of Loans; Transferees.
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 its rights or delegate its  obligations  hereunder or under any other
Loan Document without the prior written consent of the Bank. The Bank may at any
time sell, assign,  transfer,  grant  participations in, or otherwise dispose of
any portion of the Term Loan  Commitment  and/or Advances (each such interest so
disposed of being  herein  called a  "Transferred  Interest")  to banks or other
financial institutions ("Transferees"). The Borrower agrees that each Transferee
shall be entitled to the benefits of Sections  2.12,  2.13,  2.14,  2.15 and 8.2
with respect to its  Transferred  Interest and that each Transferee may exercise
any  and all  rights  of  banker's  Lien,  setoff  and  counterclaim  as if such
Transferee  were  a  direct  lender  to the  Borrower.  If the  Bank  makes  any
assignment to a Transferee, then upon notice to the Borrower such Transferee, to
the extent of such assignment (unless otherwise provided therein),  shall become
a "Bank"  hereunder  and shall have all the rights and  obligations  of the Bank
hereunder and the Bank shall be released from its duties and  obligations  under
this Agreement to the extent of such assignment. Notwithstanding the sale by the
Bank of any participation hereunder, (a) no participant shall be deemed to be or
have  the  rights  and  obligations  of  the  Bank  hereunder  except  that  any
participant  shall have a right of setoff  under  Section  7.3 as if it were the
Bank and the amount of its participation were owing directly to such participant
by the Borrower and (b) the Bank shall not in  connection  with selling any such
participation  condition  the Bank's  rights in  connection  with  consenting to
amendments  or granting  waivers  concerning  any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating to
(i) any reduction in the amount of any principal of, or the amount of or rate of
interest on, the Term Note or Advance in which such  participation is sold, (ii)
any  postponement  of the date fixed for any payment of principal of or interest
on the Term Note or  Advance in which  such  participation  is sold or (iii) the
release or  subordination  of any material  portion of any collateral other than
pursuant to the terms of any Security Document.

         Section  8.7  Confidentiality  of  Information.   The  Bank  shall  use
reasonable  efforts  to  assure  that  information  about the  Borrower  and its
operations,  affairs and financial  condition,  not  generally  disclosed to the
public or to trade and other creditors,  which is furnished to the Bank pursuant
to the provisions hereof is used only for the purposes of this Agreement and any
other  relationship  between the Bank and the Borrower and shall not be divulged
to any Person other than the Bank, its Affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants,
(b) in connection  with the  enforcement of the rights of the Bank hereunder and
under the Term Note and the Security  Documents or otherwise in connection  with
applicable litigation, (c) in connection with assignments and participations and
the solicitation of prospective  assignees and  participants  referred to in the
immediately preceding Section, and (d) as may otherwise be required or requested
by  any  regulatory  authority  having  jurisdiction  over  the  Bank  or by any
applicable law, rule,  regulation or judicial process, the opinion of the Bank's
counsel  concerning  the making of such  disclosure to be binding on the parties
hereto.  The Bank shall not incur any liability to the Borrower by reason of any
disclosure permitted by this Section 8.7.

         Section 8.8 Governing Law and Construction. THE VALIDITY,  CONSTRUCTION
AND  ENFORCEABILITY OF THIS AGREEMENT AND THE TERM NOTE SHALL BE GOVERNED BY THE
INTERNAL  LAWS OF THE STATE OF MINNESOTA,  WITHOUT  GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF,  BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE  TO  NATIONAL  BANKS.  Whenever  possible,  each  provision  of  this
Agreement and the other Loan  Documents and any other  statement,  instrument or
transaction  contemplated  hereby or thereby or relating hereto or thereto shall
be interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this  Agreement,  the other Loan  Documents or any
other  statement,  instrument or transaction  contemplated  hereby or thereby or
relating  hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision  shall be ineffective  only to the extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining  provisions of this Agreement,  the other Loan Documents or any
other  statement,  instrument or transaction  contemplated  hereby or thereby or
relating hereto or thereto.

         Section 8.9 Consent to  Jurisdiction.  AT THE OPTION OF THE BANK,  THIS
AGREEMENT  AND THE OTHER LOAN  DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN  COUNTY,  MINNESOTA;  AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES
ANY ACTION IN ANOTHER  JURISDICTION  OR VENUE UNDER ANY TORT OR CONTRACT  THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP  CREATED BY THIS AGREEMENT,
THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE  TRANSFERRED TO ONE OF
THE  JURISDICTIONS  AND VENUES  ABOVE-DESCRIBED,  OR IF SUCH TRANSFER  CANNOT BE
ACCOMPLISHED   UNDER  APPLICABLE  LAW,  TO  HAVE  SUCH  CASE  DISMISSED  WITHOUT
PREJUDICE.

         Section  8.10 Waiver of Jury Trial.  EACH OF THE  BORROWER AND THE BANK
HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY  WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,  OR ANY COURSE OF CONDUCT,  COURSE
OF  DEALING,  STATEMENTS  (WHETHER  VERBAL OR  WRITTEN)  OR ACTIONS OF ANY PARTY
HERETO.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT  CONSIDERATION  FOR THIS  PROVISION  AND  THAT  THIS  PROVISION  IS A
MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.

         Section 8.11 Survival of Agreement.  All  representations,  warranties,
covenants  and  agreement  made by the  Borrower  herein  or in the  other  Loan
Documents and in the certificates or other instruments  prepared or delivered in
connection  with or pursuant to this  Agreement or any other Loan Document shall
be deemed to have been relied  upon by the Bank and shall  survive the making of
the Term  Loan by the Bank and the  execution  and  delivery  to the Bank by the
Borrower of the Term Note,  regardless of any investigation made by or on behalf
of the  Bank,  and  shall  continue  in full  force  and  effect  as long as any
Obligation is outstanding and unpaid; provided, however, that the obligations of
the Borrower under  Sections 8.2, 8.5 and 8.12 shall survive  payment in full of
the Obligations.

         Section 8.12  Indemnification.  The Borrower  hereby  agrees to defend,
protect,  indemnify  and  hold  harmless  the Bank  and its  Affiliates  and the
directors,  officers,  employees,  attorneys  and  agents  of the  Bank  and its
Affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being  collectively  the  "Indemnitees")  from and  against  any and all claims,
actions,  damages,  liabilities,  judgments,  costs and expenses  (including all
reasonable  fees and  disbursements  of  counsel  which may be  incurred  in the
investigation  or defense of any matter)  imposed upon,  incurred by or asserted
against any Indemnitee,  whether direct,  indirect or consequential  and whether
based on any federal,  state,  local or foreign laws or  regulations  (including
securities laws,  environmental  laws,  commercial laws and regulations),  under
common law or on equitable cause, or on contract or otherwise:

                  (a) by  reason  of,  relating  to or in  connection  with  the
         execution,  delivery,  performance or enforcement of any Loan Document,
         any commitments  relating thereto,  or any transaction  contemplated by
         any Loan Document; or

                  (b) by reason of, relating to or in connection with any credit
         extended or used under the Loan Documents or any act done or omitted by
         any Person  relating to or in  connection  with any credit  extended or
         used  under  the Loan  Documents,  or the  exercise  of any  rights  or
         remedies thereunder, including the acquisition of any collateral by the
         Bank by way of foreclosure of the Lien thereon, deed or bill of sale in
         lieu of such foreclosure or otherwise;

provided,  however,  that the Borrower shall not be liable to any Indemnitee for
any portion of such claims,  damages,  liabilities  and expenses  resulting from
such  Indemnitee's  gross  negligence or willful  misconduct.  In the event this
indemnity  is  unenforceable  as a matter  of law as to a  particular  matter or
consequence  referred  to herein,  it shall be  enforceable  to the full  extent
permitted by law.

         This indemnification applies, without limitation, to any act, omission,
event or  circumstance  existing or occurring on or prior to the date of payment
in full of the Obligations,  including  specifically  Obligations  arising under
clause (b) of this Section. The indemnification provisions set forth above shall
be in addition  to any  liability  the  Borrower  may  otherwise  have.  Without
prejudice to the survival of any other obligation of the Borrower  hereunder the
indemnities  and  obligations  of the Borrower  contained in this Section  shall
survive the payment in full of the other Obligations.

         Section 8.13 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.

         Section  8.14  Entire  Agreement.  This  Agreement  and the other  Loan
Documents embody the entire agreement and understanding between the Borrower and
the Bank with respect to the subject  matter hereof and thereof.  This Agreement
supersedes  all prior  agreements  and  understandings  relating  to the subject
matter  hereof.  Nothing  contained  in  this  Agreement  or in any  other  Loan
Document,  expressed  or implied,  is intended to confer upon any Persons  other
than the  parties  hereto  any  rights,  remedies,  obligations  or  liabilities
hereunder or thereunder.

         Section 8.15 Counterparts. This Agreement may be executed in any number
of  counterparts,  all of which taken together shall constitute one and the same
instrument,  and any of the parties hereto may execute this Agreement by signing
any such counterpart.

         Section   8.16   Borrower   Acknowledgements.   The   Borrower   hereby
acknowledges  that  (a) it has  been  advised  by  counsel  in the  negotiation,
execution and delivery of this Agreement and the other Loan  Documents,  (b) the
Bank has no fiduciary  relationship  to the  Borrower,  the  relationship  being
solely that of debtor and  creditor,  (c) no joint  venture  exists  between the
Borrower and the Bank,  and (d) the Bank  undertakes  no  responsibility  to the
Borrower to review or inform the Borrower of any matter in  connection  with any
phase of the business or operations of the Borrower and the Borrower  shall rely
entirely  upon its own judgment  with respect to its  business,  and any review,
inspection or supervision  of, or  information  supplied to, the Borrower by the
Bank is for the  protection  of the Bank and neither the  Borrower nor any third
party is entitled to rely thereon.


<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                          PIPER JAFFRAY COMPANIES INC.


                         By   /s/Deborah K. Roesler
                               Deborah K. Roesler
                             Chief Financial Officer


                         By /s/ Jennifer A. Olson-Goude
                             Jennifer A. Olson-Goude
                          Assistant Vice President and
                               Assistant Treasurer

                         Piper Jaffray Tower, 16th Floor
                         222 South Ninth Street
                         Minneapolis, MN  55402
                         Fax:  (612) 342-6085


                         FIRST BANK NATIONAL ASSOCIATION

                              By /s/ Jose A. Peris
                                  Jose A. Peris
                                 Vice President

                           Financial Services Division
                                First Bank Place
                             601 Second Avenue South
                           Minneapolis, MN 55402-4302
                               Fax: (612) 973-0825