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NATIONSCREDIT COMMERCIAL FUNDING
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                        LOAN AND SECURITY AGREEMENT

    This Loan and Security Agreement (as it may be amended, this "AGREEMENT")
is entered into on April 20, 1998 between NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("LENDER"), having an
address at 1177 Avenue of the Americas, 36th Floor, New York, New York 10036
and CRAGAR INDUSTRIES, INC., A Delaware corporation ("BORROWER"), whose chief
executive office is located at 4636 North 43rd Avenue, Phoenix, Arizona 85031
("BORROWER'S ADDRESS").  The Schedules to this Agreement are an integral part
of this Agreement and are incorporated herein by reference.  Terms used, but
not defined elsewhere, in this Agreement are defined in Schedule B.

1.   LOANS AND CREDIT ACCOMMODATIONS.

     1.1  AMOUNT.  Subject to the terms and conditions contained in this 
Agreement, Lender will:

          (a)  REVOLVING LOANS AND CREDIT ACCOMMODATIONS.  From time to time 
during the Term at Borrower's request, make revolving loans to Borrower 
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and 
other credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, 
in each case to the extent that there is sufficient Availability at the time 
of such request to cover, dollar for dollar, the requested Revolving Loan or 
Credit Accommodation; PROVIDED, that after giving effect to such Revolving 
Loan or Credit Accommodation, (x) the outstanding balance of all monetary 
Obligations (INCLUDING the principal balance of any Term Loan and, solely for 
the purpose of determining compliance with this provision, the Credit 
Accommodation Balance) will not exceed the Maximum Facility Amount set forth 
in Section 1(a) of Schedule A and (y) none of the other Loan Limits set forth 
in Section 1 of Schedule A will be exceeded.  For this purpose, 
"AVAILABILITY" means:

               (i)  the aggregate amount of Eligible Accounts (less maximum 
    existing or asserted taxes, discounts, credits and allowances related to 
    otherwise Eligible Accounts) multiplied by the Accounts Advance Rate set 
    forth in Section 1(b)(i) of Schedule A but not to exceed the Accounts 
    Sublimit set forth in Section 1(c) of Schedule A;
    
                                     PLUS
                                       
               (ii) the lower of cost or market value of Eligible Inventory 
    multiplied by the Inventory Advance Rate(s) set forth in Section 1(b)(ii) 
    of Schedule A, but not to exceed the Inventory Sublimit(s) set forth in 
    Section 1(d) of Schedule A;
    
                                     MINUS


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               (iii) all Reserves which Lender has established pursuant to 
    Section 1.2 (including those to be established in connection with the 
    requested Revolving Loan or Credit Accommodation);
    
                                     MINUS
                                       
               (iv)  the outstanding balance of all of the monetary 
    Obligations (EXCLUDING the Credit Accommodation Balance and the principal 
    balance of the Term Loan);
    
                                     PLUS
                                       
               (v)  the Overadvance Amount, if any, set forth in Section 1(g) 
    of Schedule A; and
    
                                     PLUS
                                       
               (vi) the marked to market value, determined on a weekly basis,
    of Eligible Investment Property multiplied by the Investment Property 
    Advance Rate set forth in Section 1(b)(iii) of Schedule A; but not to 
    exceed the Investment Property Sublimit set forth in Section 1(h) of 
    Schedule A, PROVIDED that the Investment Property Advance will be 
    available only if, and to the extent that, there is a shortfall in 
    Required Excess Availability on the date of this Agreement.
    
               (b)  TERM LOAN.  Make (i) on the date of this Agreement, an 
    advance to Borrower computed with respect to the value of Borrower's 
    Eligible Equipment (the ("EQUIPMENT ADVANCE") in the principal amount, if 
    any, set forth in Section 2(a)(i) of Schedule A, (ii) an advance to 
    Borrower computed with respect to the value of Borrower's Eligible Real 
    Property (the "REAL PROPERTY ADVANCE") in the principal amount, if any, 
    set forth in Section 2(a)(ii) of Schedule A, (iii) in Lender's sole and 
    absolute discretion upon prior written request by Borrower, one or more 
    advances to Borrower computed with respect to the value of Borrower's 
    Eligible Equipment to be acquired with the proceeds of each such advance 
    (each a "CAPITAL EXPENDITURE ADVANCE") in a principal amount, if any, set 
    forth in Section 2(a)(i)(iii) of Schedule A and (iv) on the date of this 
    Agreement, an advance to Borrower computed with respect to Borrower's 
    Eligible Intellectual Property (the "INTELLECTUAL PROPERTY ADVANCE") in 
    the principal amount, if any, set forth in Section 2(a)(iv) of Schedule 
    A.  The Equipment Advance, the Real Property Advance, each Capital 
    Expenditure Advance and the Intellectual Property Advance are 
    collectively referred to as the "TERM LOAN."
     
    1.2  RESERVES.  Lender may from time to time establish and revise such 
reserves as Lender deems appropriate in its sole and reasonable discretion 
("RESERVES") to reflect (i) events, conditions, contingencies or risks which 
affect or may affect (A) the Collateral or its value, or the security 
interests and other rights of Lender in the Collateral or (B) the assets, 
business or prospects of Borrower or any Obligor, (ii) Lender's good faith 
concern that any Collateral report or financial information furnished by or 
on behalf of Borrower or any

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Obligor to Lender is or may have been incomplete, inaccurate or misleading in 
any material respect, (iii) any fact or circumstance which Lender determines 
in good faith constitutes, or could constitute, a Default or Event of Default 
or (iv) any other events or circumstances which Lender determines in good 
faith make the establishment or revision of a Reserve prudent. Without 
limiting the foregoing, Lender shall (x) in the case of each Credit 
Accommodation issued for the purchase of Inventory (a) which meets the 
criteria for Eligible Inventory set forth in clauses (i), (ii), (iii), (v) 
and (vi) of the definition of Eligible Inventory, (b) which is or will be in 
transit to one of the locations set forth in Section 9(d) of Schedule A, (c) 
which is fully insured in a manner satisfactory to Lender and (d) with 
respect to which Lender is in possession of all bills of lading and all other 
documentation which Lender has requested, all in form and substance 
satisfactory to Lender in its sole discretion, establish a Reserve equal to 
the cost of such Inventory (plus all duties, freight, taxes, insurance, costs 
and other charges and expenses relating to such Credit Accommodation or such 
Eligible Inventory) multiplied by a percentage equal to 100% minus the 
Inventory Advance Rate applicable to Eligible Inventory and (y) in the case 
of any other Credit Accommodation issued for any purpose, establish a Reserve 
equal to the full amount of such Credit Accommodation plus all costs and 
other charges and expenses relating to such Credit Accommodation. In 
addition, (x) Lender shall establish a permanent Reserve in the amount set 
forth in Section 1(f) of Schedule A, and (y) if the outstanding principal 
balance of the Term Loan advance with respect to Eligible Equipment exceeds 
the percentage set forth in Section 2(a)(i) or (iii) of Schedule A, as 
applicable, of the appraised value of such Eligible Equipment, Lender may 
establish an additional Reserve in the amount of such excess (and, for this 
purpose, if payments of principal on the Term Loan advances against Eligible 
Equipment and Real Property are not calculated separately, payments of 
principal of the Term Loan made by Borrower shall be deemed to apply to the 
Term Loan advance with respect to Eligible Equipment and Real Property, 
respectively, in proportion to the original principal amounts of such 
advances).  Lender may, in its discretion, establish and revise Reserves by 
deducting them in determining Availability or by reclassifying Eligible 
Accounts or Eligible Inventory as ineligible.  In no event shall the 
establishment of a Reserve in respect of a particular actual or contingent 
liability obligate Lender to make advances hereunder to pay such liability or 
otherwise obligate Lender with respect thereto.  Lender will provide Borrower 
with one Business Day's notice of Lender's intent to establish a reserve, 
stating the amount and the reason therefor, and shall, if requested by 
Borrower, discuss the reason for the reserve with Borrower.

    1.3  OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS.  Lender may, 
in its sole discretion and on terms and conditions acceptable to Lender, make 
Credit Accommodations available to Borrower either by issuing them, or by 
causing other financial institutions to issue them supported by Lender's 
guaranty or indemnification; PROVIDED, that after giving effect to each 
Credit Accommodation, the Credit Accommodation Balance will not exceed the 
Credit Accommodation Limit set forth in Section 1(e) of Schedule A.  Any 
amounts paid by Lender in respect of a Credit Accommodation will be treated 
for all purposes as a Revolving Loan which shall be secured by the Collateral 
and bear interest, and be 

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payable, in the same manner as a Revolving Loan.  Borrower agrees to execute 
all documentation required by Lender or the issuer of any Credit 
Accommodation in connection with any such Credit Accommodation.  Lender will 
use its best efforts to cause any Credit Accommodation requested by Borrower 
to be issued within five Business Days following receipt by Lender of such 
request and a properly completed application for such Credit Accommodation.

    1.4  REPAYMENT.  Accrued interest on all monetary Obligations shall be 
payable on the first day of each month.  Principal of the Term Loan shall be 
repaid as set forth in Section 2(b) of Schedule A.  If at any time any of the 
Loan Limits are exceeded, Borrower will immediately pay to Lender such 
amounts (or provide cash collateral to Lender with respect to the Credit 
Accommodation Balance in the manner set forth in Section 7.3), as shall cause 
Borrower to be in full compliance with all of the Loan Limits.  
Notwithstanding the foregoing, Lender may, in its sole discretion, make or 
permit Revolving Loans, the Term Loan, any Credit Accommodations or any other 
monetary Obligations to be in excess of any of the Loan Limits; PROVIDED, 
that Borrower shall, upon Lender's demand, pay to Lender such amounts as 
shall cause Borrower to be in full compliance with all of the Loan Limits.  
All unpaid monetary Obligations shall be payable in full on the Maturity Date 
(as defined in Section 7.1) or, if earlier, the date of any early termination 
pursuant to Section 7.2.

    1.5  MINIMUM BORROWING.  Subject to the terms and conditions of this 
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the 
outstanding principal balance of the Loans to equal or exceed, at all times 
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of 
Schedule A and (ii) use its best efforts to maintain Availability sufficient 
to enable Borrower to do so.  However, Lender shall not be obligated to loan 
Borrower the Minimum Loan Amount other than in accordance with all of the 
terms and conditions of this Agreement.

2.   INTEREST AND FEES.

    2.1  INTEREST.  All Loans and other monetary Obligations shall bear 
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except 
where expressly set forth to the contrary in this Agreement or another Loan 
Document; PROVIDED, that after the occurrence of an Event of Default, all 
Loans and other monetary Obligations shall, at Lender's option, bear interest 
at a rate per annum equal to two percent (2%) in excess of the rate otherwise 
applicable thereto (the "DEFAULT RATE") until paid in full (notwithstanding 
the entry of any judgment against Borrower or the exercise of any other right 
or remedy by Lender), and all such interest shall be payable on demand.  
Changes in the Interest Rate shall be effective as of the date of any change 
in the Prime Rate.  Notwithstanding anything to the contrary contained in 
this Agreement, the aggregate of all amounts deemed to be interest hereunder 
and charged or collected by Lender is not intended to exceed the highest rate 
permissible under any applicable law, but if it should, such interest shall 
automatically be reduced to the extent 

                                       4

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necessary to comply with applicable law and Lender will refund to Borrower 
any such excess interest received by Lender.

    2.2  FEES AND WARRANTS.  Borrower shall pay Lender the following fees, 
and issue Lender the following warrants, which are in addition to all 
interest and other sums payable by Borrower to Lender under this Agreement, 
and are not refundable:

         (a)  CLOSING FEE.  A closing fee in the amount set forth in Section 
6(a) of Schedule A, which shall be deemed to be fully earned as of the date 
hereof and payable in 11 equal consecutive monthly installments of $7,083.33 
each, due on the 20th day of each calendar month commencing May 20, 1998.

         (b)  FACILITY FEES.  A facility fee for the Initial Term in the 
amount set forth in Section 6(b)(i) of Schedule A (which shall be payable in 
arrears in equal installments due, respectively, on each anniversary of the 
date of this Agreement during the Initial Term, other than the Maturity Date, 
PROVIDED, that the Facility Fee will be pro-rated on a monthly basis in the 
event of early termination of this Agreement), and a facility fee for each 
Renewal Term in the amount set forth in Section 6(b)(ii) of Schedule A (which 
shall be fully earned as of the first day of such Renewal Term and shall be 
payable in equal installments due, respectively, on the first day of such 
Renewal Term and on each anniversary thereof during such Renewal Term, other 
than the Maturity Date).

         (c)  SERVICING FEE.  A monthly servicing fee in the amount set forth 
in Section 6(c) of Schedule A, in consideration of Lender's administration 
and other services for each month (or part thereof), which shall be fully 
earned as of, and payable in advance on, the date of this Agreement and on 
the first day of each month thereafter so long as any of the Obligations are 
outstanding.

         (d)  UNUSED LINE FEE.  An unused line fee at a rate equal to the 
percentage per annum set forth in Section 6(d) of Schedule A of the amount by 
which the Maximum Facility Amount exceeds the average daily outstanding 
principal balance of the Loans and the Credit Accommodation Balance during 
the immediately preceding month (or part thereof), which fee shall be 
payable, in arrears, on the first day of each month so long as any of the 
Obligations are outstanding and on the Maturity Date.

         (e)  MINIMUM BORROWING FEE.  A minimum borrowing fee equal to the 
excess, if any, of (i) interest which would have been payable in respect of 
each period set forth in Section 6(e)(i) of Schedule A if, at all times 
during such period, the principal balance of the Loans was equal to the 
Minimum Loan Amount over (ii) the actual interest payable in respect of such 
period, which fee shall be fully earned as of the last day of such period and 
payable on the date set forth in Section 6(e)(ii) of Schedule A and on the 
Maturity Date, commencing with the immediately following period.


                                       5
<PAGE>

         (f)  SUCCESS FEE.  A success fee in the amount set forth in Section 
6(f) of Schedule A, which shall be fully earned as of the date of this 
Agreement and payable as set forth in Section 6(f) of Schedule A.

         (g)  WARRANTS.  Warrants to acquire the capital stock of Borrower, 
as summarized in Section 6(g) of Schedule A and as more fully set forth in a 
separate warrant agreement executed by Borrower contemporaneously with this 
Agreement.

         (h)  CREDIT ACCOMMODATION FEES.  The fees relating to Credit 
Accommodations set forth in Section 6(i) of Schedule A, payable, in arrears, 
on the first day of each month so long as any of the Obligations are 
outstanding and on the Maturity Date, plus all costs and fees charged by the 
issuer, payable as and when such costs and fees are charged.

    2.3  COMPUTATION OF INTEREST AND FEES.  All interest and fees shall be 
calculated daily on the closing balances in the Loan Account based on the 
actual number of days elapsed in a year of 360 days.  For purposes of 
calculating interest and fees, if the outstanding daily principal balance of 
the Revolving Loans is a credit balance, such balance shall be deemed to be 
zero.

    2.4  LOAN ACCOUNT; MONTHLY ACCOUNTINGS.  Lender shall maintain a loan 
account for Borrower reflecting all advances, charges, expenses and payments 
made pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide 
Borrower with a monthly accounting reflecting the activity in the Loan 
Account.  Each accounting shall be deemed correct, accurate and binding on 
Borrower and an account stated (except for reverses and reapplications of 
payments made and corrections of errors discovered by Lender), unless 
Borrower notifies Lender in writing to the contrary within sixty days after 
such account is rendered, describing the nature of any alleged errors or 
omissions.  However, Lender's failure to maintain the Loan Account or to 
provide any such accounting shall not affect the legality or binding nature 
of any of the Obligations.  Interest, fees and other monetary Obligations due 
and owing under this Agreement (including fees and other amounts paid by 
Lender to issuers of Credit Accommodations) may, in Lender's discretion, be 
charged to the Loan Account, and will thereafter be deemed to be Revolving 
Loans and will bear interest at the same rate as other Revolving Loans.

3.   SECURITY INTEREST.

    3.1  To secure the full payment and performance of all of the 
Obligations, Borrower hereby grants to Lender a continuing security interest 
in all of Borrower's property and interests in property, whether tangible or 
intangible, now owned or in existence or hereafter acquired or arising, 
wherever located, including Borrower's interest in all of the following, 
whether or not eligible for lending purposes:  (i) all Accounts, Chattel 
Paper, Instruments, Documents, Goods (including Inventory, Equipment, farm 
products and consumer goods), Investment Property, General Intangibles, 
Deposit Accounts and money, (ii)  all proceeds and 


                                       6
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products of all of the foregoing (including proceeds of any insurance 
policies, proceeds of proceeds and claims against third parties for loss or 
any destruction of any of the foregoing) and (iii) all books and records 
relating to any of the foregoing.

4.   ADMINISTRATION.

    4.1  LOCK BOXES AND BLOCKED ACCOUNTS.  Borrower will, at its expense, 
establish (and revise from time to time as Lender may require) collection 
procedures acceptable to Lender, in Lender's sole and reasonable discretion, 
for the collection of checks, wire transfers and other proceeds of Accounts 
("ACCOUNT PROCEEDS"), which may include (i) directing all Account Debtors to 
send all such proceeds directly to a post office box designated by Lender 
either in the name of Borrower (but as to which Lender has exclusive access) 
or, at Lender's option, in the name of Lender (a "LOCK BOX") or (ii) 
depositing all Account Proceeds received by Borrower into one or more bank 
accounts maintained in Lender's name (each, a "BLOCKED ACCOUNT"), under an 
arrangement acceptable to Lender with a depository bank acceptable to Lender, 
pursuant to which all funds deposited into each Blocked Account are to be 
transferred to Lender in such manner, and with such frequency, as Lender 
shall specify or (iii) a combination of the foregoing.  Borrower agrees to 
execute, and to cause its depository banks to execute, such Lock Box and 
Blocked Account agreements and other documentation as Lender shall require 
from time to time in connection with the foregoing.

    4.2  REMITTANCE OF PROCEEDS.  Except as provided in Section 4.1, all 
proceeds arising from the sale or other disposition of any Collateral shall 
be delivered, in kind, by Borrower to Lender in the original form in which 
received by Borrower not later than the following Business Day after receipt 
by Borrower.  Until so delivered to Lender, Borrower shall hold such proceeds 
separate and apart from Borrower's other funds and property in an express 
trust for Lender.  Nothing in this Section 4.2 shall limit the restrictions 
on disposition of Collateral set forth elsewhere in this Agreement.

    4.3  APPLICATION OF PAYMENTS.  Lender may, in its sole discretion, apply, 
reverse and re-apply all cash and non-cash proceeds of Collateral or other 
payments received with respect to the Obligations, in such order and manner 
as Lender shall determine, whether or not the Obligations are due, and 
whether before or after the occurrence of a Default or an Event of Default.  
For purposes of determining Availability, such amounts will be credited to 
the Loan Account and the Collateral balances to which they relate upon 
Lender's receipt of advice from Lender's Bank (set forth in Section 11 of 
Schedule A) that such items have been credited to Lender's account at 
Lender's Bank (or upon Lender's deposit thereof at Lender's Bank in the case 
of payments received by Lender in kind), in each case subject to final 
payment and collection.  However, for purposes of computing interest on the 
Obligations, such items shall be deemed applied by Lender one Business Day 
after Lender's receipt of advice of deposit thereof at Lender's Bank.


                                       7
<PAGE>

    4.4  NOTIFICATION; VERIFICATION.  Lender or its designee may, from time 
to time, (i) whether or not a Default or Event of Default has occurred: (a) 
verify directly with the Account Debtors the validity, amount and other 
matters relating to the Accounts and Chattel Paper, by means of mail, 
telephone or otherwise, either in the name of Borrower or Lender or such 
other name as Lender may choose; and (b) notify Account Debtors that Lender 
has a security interest in the Accounts and that payment thereof is to be 
made directly to Lender; and (iii) after the occurrence of a Default or Event 
of Default, demand, collect or enforce payment of any Accounts and Chattel 
Paper (but without any duty to do so).

    4.5  POWER OF ATTORNEY.  Borrower hereby grants to Lender an irrevocable 
power of attorney, coupled with an interest, authorizing and permitting 
Lender (acting through any of its officers, employees, attorneys or agents), 
at any time (whether or not a Default or Event of Default has occurred and is 
continuing, except as expressly provided below), at Lender's option, but 
without obligation, with or without notice to Borrower, and at Borrower's 
expense, to do any or all of the following, in Borrower's name or otherwise: 
(i) execute on behalf of Borrower any documents that Lender may, in its sole 
discretion, deem advisable in order to perfect and maintain Lender's security 
interests in the Collateral, to exercise a right of Borrower or Lender, or to 
fully consummate all the transactions contemplated by this Agreement and the 
other Loan Documents (including such financing statements and continuation 
financing statements, and amendments thereto, as Lender shall deem necessary 
or appropriate) and to file as a financing statement any copy of this 
Agreement or any financing statement signed by Borrower; (ii) execute on 
behalf of Borrower any document exercising, transferring or assigning any 
option to purchase, sell or otherwise dispose of or lease (as lessor or 
lessee) any real or personal property which is part of the Collateral or in 
which Lender has an interest; (iii) execute on behalf of Borrower any 
invoices relating to any Accounts, any draft against any Account Debtor, any 
proof of claim in bankruptcy, any notice of Lien or claim, and any assignment 
or satisfaction of mechanic's, materialman's or other Lien; (iv) execute on 
behalf of Borrower any notice to any Account Debtor; (v) receive and 
otherwise take control in any manner of any cash or non-cash items of payment 
or proceeds of Collateral; (vi) endorse Borrower's name on all checks and 
other forms of remittances received by Lender; (vii) pay, contest or settle 
any Lien, charge, encumbrance, security interest and adverse claim in or to 
any of the Collateral, or any judgment based thereon, or otherwise take any 
action to terminate or discharge the same; (viii) after the occurrence of a 
Default or Event of Default, grant extensions of time to pay, compromise 
claims relating to, and settle Accounts, Chattel Paper and General 
Intangibles for less than face value and execute all releases and other 
documents in connection therewith; (ix) pay any sums required on account of 
Borrower's taxes or to secure the release of any Liens therefor; (x) pay any 
amounts necessary to obtain, or maintain in effect, any of the insurance 
described in Section 5.12; (xi) settle and adjust, and give releases of, any 
insurance claim that relates to any of the Collateral and obtain payment 
therefor; (xii) instruct any third party having custody or control of any 
Collateral or books or records belonging to, or relating to, Borrower to give 
Lender the same rights of access and other rights with respect thereto as 
Lender has under this 


                                       8
<PAGE>

Agreement; and (xiii) after the occurrence of a Default or Event of Default, 
change the address for delivery of Borrower's mail and receive and open all 
mail addressed to Borrower.  Any and all sums paid, and any and all costs, 
expenses, liabilities, obligations and reasonable attorneys' fees incurred, 
by Lender with respect to the foregoing shall be added to and become part of 
the Obligations, shall be payable on demand, and shall bear interest at a 
rate equal to the highest interest rate applicable to any of the Obligations. 
Borrower agrees that Lender's rights under the foregoing power of attorney 
or any of Lender's other rights under this Agreement or the other Loan 
Documents shall not be construed to indicate that Lender is in control of the 
business, management or properties of Borrower.

    4.6  DISPUTES.  Borrower shall notify Lender of all disputes or claims 
relating to Accounts and Chattel Paper in the next regular report to Lender, 
unless the dispute or claim is in the amount of $25,000 or more, in which 
case Borrower shall notify Lender thereof promptly.  Borrower will not, 
without Lender's prior written consent, compromise or settle any Account or 
Chattel Paper for less than the full amount thereof, grant any extension of 
time of payment of any Account or Chattel Paper, release (in whole or in 
part) any Account Debtor or other person liable for the payment of any 
Account or Chattel Paper or grant any credits, discounts, allowances, 
deductions, return authorizations or the like with respect to any Account or 
Chattel Paper; except that prior to the occurrence of an Event of Default, 
Borrower may take any of such actions in the ordinary course of its business, 
PROVIDED that Borrower promptly reports the same to Lender.

    4.7  INVOICES.  At Lender's request, Borrower will cause all invoices and 
statements which it sends to Account Debtors or other third parties to be 
marked, in a manner satisfactory to Lender, to reflect Lender's security 
interest therein.

    4.8  INVENTORY.

         (a)  RETURNS.  Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount (sending a copy to Lender).  After the occurrence of an
Event of Default, Borrower will not accept any return without Lender's prior
written consent.  Regardless of whether an Event of Default has occurred,
Borrower will (i) hold the returned Inventory in trust for Lender;
(ii) segregate all returned Inventory from all of Borrower's other property;
(iii) conspicuously label the returned Inventory as Lender's property; and
(iv) immediately notify Lender of the return of such Inventory, specifying the
reason for such return, the location and condition of the returned Inventory
and, at Lender's request, deliver such returned Inventory to Lender at an
address specified by Lender.

         (b)  OTHER COVENANTS.  Borrower will not, without Lender's prior 
written consent, (i) store any Inventory with any warehouseman or other third 
party other than as set 


                                       9
<PAGE>

forth in Section 9(d) of Schedule A or (ii) sell any Inventory on a 
sale-or-return, guaranteed sale, consignment, or other contingent basis.  All 
of the Inventory has been produced only in accordance with the Fair Labor 
Standards Act of 1938 and all rules, regulations and orders promulgated 
thereunder.

    4.9  ACCESS TO COLLATERAL, BOOKS AND RECORDS.  At reasonable times, and 
on at least three Business Days' notice (although Lender will use its best 
efforts to give at least five Business Days' notice), prior to the occurrence 
of a Default or an Event of Default, and at any time and with or without 
notice after the occurrence of a Default or an Event of Default, Lender or 
its agents shall have the right to inspect the Collateral, and the right to 
examine and copy Borrower's books and records.  Lender shall take reasonable 
steps to keep confidential all information obtained in any such inspection or 
examination, but Lender shall have the right to disclose any such information 
to its auditors, regulatory agencies, attorneys and participants, and 
pursuant to any subpoena or other legal process.  Borrower agrees to give 
Lender access to any or all of Borrower's premises to enable Lender to 
conduct such inspections and examinations.  Such inspections and examinations 
shall be at Borrower's expense and the charge therefor shall be $650 per 
person per day (or such higher amount as shall represent Lender's then 
current standard charge), plus reasonable out-of-pocket expenses.  Lender 
may, at Borrower's expense, use Borrower's personnel, computer and other 
equipment, programs, printed output and computer readable media, supplies and 
premises for the collection, sale or other disposition of Collateral to the 
extent Lender, in its sole discretion, deems appropriate.  Borrower hereby 
irrevocably authorizes all accountants and third parties to disclose and 
deliver to Lender, at Borrower's expense, all financial information, books 
and records, work papers, management reports and other information in their 
possession regarding Borrower.  Borrower will not enter into any agreement 
with any accounting firm, service bureau or third party to store Borrower's 
books or records at any location other than Borrower's Address without first 
obtaining Lender's written consent (which consent may be conditioned upon 
such accounting firm, service bureau or other third party agreeing to give 
Lender the same rights with respect to access to books and records and 
related rights as Lender has under this Agreement).

5.   REPRESENTATIONS, WARRANTIES AND COVENANTS.

    To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be
affected by any knowledge of, or any investigation by, Lender, and (ii) the
accuracy of each such representation, warranty and covenant will be a condition
to each Loan and Credit Accommodation):

    5.1  EXISTENCE AND AUTHORITY.  Borrower is duly organized, validly 
existing and in good standing under the laws of the jurisdiction of its 
incorporation or formation.  Borrower is qualified and licensed to do 
business in all jurisdictions in which any failure to do so would 


                                       10
<PAGE>

have a material adverse effect on Borrower.  The execution, delivery and 
performance by Borrower of this Agreement and all of the other Loan Documents 
have been duly and validly authorized, do not violate Borrower's articles or 
certificate of incorporation, by-laws or other organizational documents, or 
any law or any agreement or instrument or any court order which is binding 
upon Borrower or its property, do not constitute grounds for acceleration of 
any indebtedness or obligation under any agreement or instrument which is 
binding upon Borrower or its property, and do not require the consent of any 
Person.  This Agreement and such other Loan Documents have been duly executed 
and delivered by, and are enforceable against, Borrower, and all other 
Obligors who have signed them, in accordance with their respective terms.  
Sections 9(g) and 9(h) of Schedule A set forth the ownership of Borrower and 
the names and ownership of Borrower's Subsidiaries as of the date of this 
Agreement.

    5.2  NAME; TRADE NAMES AND STYLES.  The name of Borrower set forth in the 
heading to this Agreement is its correct and complete legal name as of the 
date hereof.  Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all 
prior names of Borrower and all of Borrower's present and prior trade names. 
Borrower shall give Lender at least thirty days' prior written notice before 
changing its name or doing business under any other name.  Borrower has 
complied with all laws relating to the conduct of business under a fictitious 
business name.  Borrower represents and warrants that (i) each trade name 
does not refer to another corporation or other legal entity; (ii) all 
Accounts invoiced under any such trade names are owned exclusively by 
Borrower and are subject to the security interest of Lender and the other 
terms of this Agreement and (iii) all schedules of Accounts, including any 
sales made or services rendered using any trade name shall show Borrower's 
name as assignor.

    5.3  TITLE TO COLLATERAL; PERMITTED LIENS.  Borrower has good and 
marketable title to the Collateral.  The Collateral now is and will remain 
free and clear of any and all liens, charges, security interests, 
encumbrances and adverse claims, except for Permitted Liens.  Lender now has, 
and will continue to have, a first-priority perfected and enforceable 
security interest in all of the Collateral, subject only to the Permitted 
Liens, and Borrower will at all times defend Lender and the Collateral 
against all claims of others.  None of the Collateral which is Equipment is 
or will be affixed to any real property in such a manner, or with such 
intent, as to become a fixture.  Except for leases or subleases as to which 
Borrower has delivered to Lender a landlord's waiver in form and substance 
satisfactory to Lender, Borrower is not a lessee or sublessee under any real 
property lease or sublease pursuant to which the lessor or sublessor may 
obtain any rights in any of the Collateral, and no such lease or sublease now 
prohibits, restrains, impairs or conditions, or will prohibit, restrain, 
impair or condition, Borrower's right to remove any Collateral from the 
premises.  Whenever any Collateral is located upon premises in which any 
third party has an interest (whether as owner, mortgagee, beneficiary under a 
deed of trust, lien or otherwise), Borrower shall, whenever requested by 
Lender, cause each such third party to execute and deliver to Lender, in form 
and substance acceptable to Lender, such waivers and subordinations as Lender 
shall specify, so as to ensure that Lender's rights in the Collateral are, 
and will continue to be, superior to the 


                                       11
<PAGE>

rights of any such third party.  Borrower will keep in full force and effect, 
and will comply with all the terms of, any lease of real property where any 
of the Collateral now or in the future may be located.

    5.4  ACCOUNTS AND CHATTEL PAPER.  As of each date reported by Borrower, 
all Accounts which Borrower has reported to Lender as being Eligible Accounts 
comply in all respects with the criteria for eligibility established by 
Lender and in effect at such time.  All Accounts and Chattel Paper are 
genuine and in all respects what they purport to be, arise out of a 
completed, bona fide and unconditional and non-contingent (except for 
standard warranties and customary return rights) sale and delivery of goods 
or rendition of services by Borrower in the ordinary course of its business 
and in accordance with the terms and conditions of all purchase orders, 
contracts or other documents relating thereto, each Account Debtor thereunder 
had the capacity to contract at the time any contract or other document 
giving rise to such Accounts and Chattel Paper were executed, and the 
transactions giving rise to such Accounts and Chattel Paper comply with all 
applicable laws and governmental rules and regulations.

    5.5  INVESTMENT PROPERTY.  Borrower will take any and all actions 
required or requested by Lender, from time to time, to (i) cause Lender to 
obtain exclusive control of any Investment Property in a manner acceptable to 
Lender and (ii) obtain from any issuers of Investment Property and such other 
Persons as Lender shall specify, for the benefit of Lender, written 
confirmation of Lender's exclusive control over such Investment Property and 
take such other actions as Lender may request to perfect Lender's security 
interest in such Investment Property.  For purposes of this Section 5.5, 
Lender shall have exclusive control of Investment Property if (A) such 
Investment Property consists of certificated securities and Borrower delivers 
such certificated securities to Lender (with appropriate endorsements if such 
certificated securities are in registered form); (B) such Investment Property 
consists of uncertificated securities and either (x) Borrower delivers such 
uncertificated securities to Lender or (y) the issuer thereof agrees, 
pursuant to documentation in form and substance satisfactory to Lender, that 
it will comply with instructions originated by Lender without further consent 
by Borrower, and (C) such Investment Property consists of security 
entitlements and either (x) Lender becomes the entitlement holder thereof or 
(y) the appropriate securities intermediary agrees, pursuant to documentation 
in form and substance satisfactory to Lender, that it will comply with 
entitlement orders originated by Lender without further consent by Borrower.

    5.6  PLACE OF BUSINESS; LOCATION OF COLLATERAL.  Borrower's Address is 
Borrower's chief executive office and the location of its books and records. 
In addition, except as provided in the immediately following sentence, 
Borrower has places of business and Collateral located only at the locations 
set forth on Sections 9(d) and 9(e) of Schedule A.  Borrower will give Lender 
at least thirty days' prior written notice before opening any additional 
place of business, changing its chief executive office or the location of its 
books and records, or moving any of the Collateral to a location other than 
Borrower's Address or 


                                       12
<PAGE>

one of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and 
will execute and deliver all financing statements and other agreements, 
instruments and documents which Lender shall require as a result thereof.

    5.7  FINANCIAL CONDITION, STATEMENTS AND REPORTS.  All financial 
statements delivered to Lender by or on behalf of Borrower have been prepared 
in conformity with GAAP and completely and fairly reflect the financial 
condition of Borrower, at the times and for the periods therein stated.  
Between the last date covered by any such financial statement provided to 
Lender and the date hereof (or, with respect to the remaking of this 
representation in connection with the making of any Loan or the providing of 
any Credit Accommodation, the date such Loan is made or such Credit 
Accommodation is provided), there has been no material adverse change in the 
financial condition or business of Borrower.  Borrower is solvent and able to 
pay its debts as they come due, and has sufficient capital to carry on its 
business as now conducted and as proposed to be conducted.  All schedules, 
reports and other information and documentation delivered by Borrower to 
Lender with respect to the Collateral are, or will be, when delivered, true, 
correct and complete as of the date delivered or the date specified therein.

    5.8  TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS.  Borrower has 
timely filed all tax returns and reports required by applicable law, has 
timely paid all applicable taxes, assessments, deposits and contributions 
owing by Borrower and will timely pay all such items in the future as they 
became due and payable.  Borrower may, however, defer payment of any 
contested taxes; PROVIDED, that Borrower (i) in good faith contests 
Borrower's obligation to pay such taxes by appropriate proceedings promptly 
and diligently instituted and conducted; (ii) notifies Lender in writing of 
the commencement of, and any material development in, the proceedings; (iii) 
posts bonds or takes any other steps required to keep the contested taxes 
from becoming a Lien upon any of the Collateral and (iv) maintains adequate 
reserves therefor in conformity with GAAP.  Borrower is unaware of any claims 
or adjustments proposed for any of Borrower's prior tax years which could 
result in additional taxes becoming due and payable by Borrower.  Borrower 
has paid, and shall continue to pay, all amounts necessary to fund all 
present and future pension, profit sharing and deferred compensation plans in 
accordance with their terms, and Borrower has not withdrawn from 
participation in, permitted partial or complete termination of, or permitted 
the occurrence of any other event with respect to, any such plan which could 
result in any liability of Borrower, including any liability to the Pension 
Benefit Guaranty Corporation or any other governmental agency.

    5.9  COMPLIANCE WITH LAWS.  Borrower has complied in all material 
respects with all provisions of all applicable laws and regulations, 
including those relating to Borrower's ownership of real or personal 
property, the conduct and licensing of Borrower's business, the payment and 
withholding of taxes, ERISA and other employee matters, safety and 
environmental matters.


                                       13
<PAGE>

    5.10 LITIGATION.  Section 9(f) of Schedule A discloses all claims, 
proceedings, litigation or investigations pending or (to the best of 
Borrower's knowledge) threatened against Borrower.  There is no claim, suit, 
litigation, proceeding or investigation pending or (to the best of Borrower's 
knowledge) threatened by or against or affecting Borrower in any court or 
before any governmental agency (or any basis therefor known to Borrower) 
which may result, either separately or in the aggregate, in any material 
adverse change in the financial condition or business of Borrower, or in any 
material impairment in the ability of Borrower to carry on its business in 
substantially the same manner as it is now being conducted.  Borrower will 
promptly inform Lender in writing of any claim, proceeding, litigation or 
investigation in the future threatened or instituted by or against Borrower.

    5.11 USE OF PROCEEDS.  All proceeds of all Loans will be used solely for 
lawful business purposes.

    5.12 INSURANCE.  Borrower will at all times carry property, liability and 
other insurance, with insurers acceptable to Lender, in such form and 
amounts, and with such deductibles and other provisions, as Lender shall 
reasonably require, and Borrower will provide evidence of such insurance to 
Lender, so that Lender is satisfied that such insurance is, at all times, in 
full force and effect. Each property insurance policy shall name Lender as 
loss payee and shall contain a lender's loss payable endorsement in form 
acceptable to Lender, each liability insurance policy shall name Lender as an 
additional insured, and each business interruption insurance policy shall be 
collaterally assigned to Lender, all in form and substance satisfactory to 
Lender.  All policies of insurance shall provide that they may not be 
cancelled or changed without at least thirty days' prior written notice to 
Lender, shall contain breach of warranty coverage, and shall otherwise be in 
form and substance satisfactory to Lender.  Upon receipt of the proceeds of 
any such insurance, Lender shall apply such proceeds in reduction of the 
Obligations as Lender shall determine in its sole discretion.  Borrower will 
promptly deliver to Lender copies of all reports made to insurance companies.

    5.13 FINANCIAL AND COLLATERAL REPORTS.  Borrower has kept and will keep 
adequate records and books of account with respect to its business activities 
and the Collateral in which proper entries are made in accordance with GAAP 
reflecting all its financial transactions, and will cause to be prepared and 
furnished to Lender the following (all to be prepared in accordance with 
GAAP, unless Borrower's certified public accountants concur in any change 
therein and such change is disclosed to Lender):

         (a)  COLLATERAL REPORTS.  On or before the fifteenth day of each 
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, 
and weekly Inventory reports, all in such form, and together with such 
additional certificates, schedules and other  information with respect to the 
Collateral or the business of Borrower or any Obligor, as Lender shall 
request; PROVIDED, that Borrower's failure to execute and deliver the same 
shall not affect or limit Lender's security interests and other rights in any 
of the Accounts, nor shall Lender's failure to advance or lend against a 
specific Account affect or limit Lender's security interest 


                                       14
<PAGE>

and other rights therein.  Together with each such schedule, Borrower shall 
furnish Lender with copies (or, at Lender's request, originals) of all 
contracts, orders, invoices, and other similar documents, and all original 
shipping instructions, delivery receipts, bills of lading, and other evidence 
of delivery, for any goods the sale or disposition of which gave rise to such 
Accounts, and Borrower warrants the genuineness of all of the foregoing.  In 
addition, Borrower shall deliver to Lender the originals of all Instruments, 
Chattel Paper, security agreements, guaranties and other documents and 
property evidencing or securing any Accounts, immediately upon receipt 
thereof and in the same form as received, with all necessary endorsements.  
Lender may destroy or otherwise dispose of all documents, schedules and other 
papers delivered to Lender pursuant to this Agreement (other than originals 
of Instruments, Chattel Paper, security agreements, guaranties and other 
documents and property evidencing or securing any Accounts) six months after 
Lender receives them, unless Borrower requests their return in writing in 
advance and arranges for their return to Borrower at Borrower's expense.

         (b)  ANNUAL STATEMENTS.  Not later than one hundred twenty days 
after the close of each fiscal year of Borrower, unqualified (except for a 
qualification for a change in accounting principles with which the accountant 
concurs) audited financial statements of Borrower and its Subsidiaries as of 
the end of such year, on a consolidated and consolidating basis, certified by 
a firm of independent certified public accountants of recognized standing 
selected by Borrower but acceptable to Lender, together with a copy of any 
management letter issued in connection therewith and a letter from such 
accountants acknowledging that Lender is relying on such financial statements;

         (c)  INTERIM STATEMENTS.  Not later than thirty days after the end 
of each month hereafter, including the last month of Borrower's fiscal year, 
unaudited interim financial statements of Borrower and its Subsidiaries as of 
the end of such month and of the portion of Borrower's fiscal year then 
elapsed, on a consolidated and consolidating basis, certified by the 
principal financial officer of Borrower as prepared in accordance with GAAP 
and fairly presenting the consolidated financial position and results of 
operations of Borrower and its Subsidiaries for such month and period subject 
only to changes from audit and year-end adjustments and except that such 
statements need not contain notes;         

         (d)  PROJECTIONS, ETC.  Such business projections, Availability 
projections, business plans, budgets and cash flow statements for Borrower 
and its Subsidiaries as Lender shall request from time to time;

         (e)  SHAREHOLDER REPORTS, ETC.  Promptly after the sending or filing 
thereof, as the case may be, copies of any proxy statements, financial 
statements or reports which Borrower has made available to its shareholders 
and copies of any regular, periodic and special reports or registration 
statements which Borrower files with the Securities and 


                                       15
<PAGE>

Exchange Commission or any governmental authority which may be substituted 
therefor, or any national securities exchange;

         (f)  ERISA REPORTS.  Upon request by Lender, copies of any annual 
report to be filed pursuant to the requirements of ERISA in connection with 
each plan subject thereto; and

         (g)  OTHER INFORMATION.  Such other data and information (financial 
and otherwise) as Lender, from time to time, may reasonably request, bearing 
upon or related to the Collateral or Borrower's and each of its Subsidiary's 
financial condition or results of operations.

    5.14 LITIGATION COOPERATION.  Should any third-party suit or proceeding 
be instituted by or against Lender with respect to any Collateral or in any 
manner relating to Borrower, Borrower shall, without expense to Lender, make 
available Borrower and its officers, employees and agents, and Borrower's 
books and records, without charge, to the extent that Lender may deem them 
reasonably necessary in order to prosecute or defend any such suit or 
proceeding.

    5.15 MAINTENANCE OF COLLATERAL, ETC.  Borrower will maintain all of its 
Equipment in good working condition, ordinary wear and tear excepted, and 
Borrower will not use the Collateral for any unlawful purpose.  Borrower will 
immediately advise Lender in writing of any material loss or damage to the 
Collateral and of any investigation, action, suit, proceeding or claim 
relating to the Collateral or which may result in an adverse impact upon 
Borrower's business, assets or financial condition.

    5.16 NOTIFICATION OF CHANGES.  Borrower will promptly notify Lender in 
writing of any change in its officers or directors, the opening of any new 
bank account or other deposit account, or any material adverse change in the 
business or financial affairs of Borrower or the existence of any 
circumstance which would make any representation or warranty of Borrower 
untrue in any material respect or constitute a material breach of any 
covenant of Borrower.

    5.17 FURTHER ASSURANCES.  Borrower agrees, at its expense, to take all 
actions, and execute or cause to be executed and delivered to Lender all 
promissory notes, security agreements, agreements with landlords, mortgagees 
and processors and other bailees, subordination and intercreditor agreements 
and other agreements, instruments and documents as Lender may request from 
time to time, to perfect and maintain Lender's security interests in the 
Collateral and to fully effectuate the transactions contemplated by this 
Agreement.

    5.18 NEGATIVE COVENANTS.  Except as set forth in Section 13 of Schedule 
A, Borrower will not, without Lender's prior written consent, which shall not 
be unreasonably withheld or delayed (i) merge or consolidate with another 
Person, form any new Subsidiary or acquire any interest in any Person; (ii) 
acquire any assets except in the ordinary course of business and as otherwise 
permitted by this Agreement and the other Loan Documents; (iii) enter into 
any 


                                       16
<PAGE>

transaction outside the ordinary course of business; (iv) sell or transfer 
any Collateral or other assets, except that Borrower may sell finished goods 
Inventory, work in process, raw materials and scrap in the ordinary course of 
its business; (v) make any loans to, or investments in, any Affiliate or 
other Person in the form of money or other assets; (vi) incur any debt 
outside the ordinary course of business; (vii) guaranty or otherwise become 
liable with respect to the obligations of another party or entity; (viii) pay 
or declare any dividends or other distributions on Borrower's stock, if 
Borrower is a corporation (except for dividends payable solely in capital 
stock of Borrower) or with respect to any equity interests, if Borrower is 
not a corporation; (ix) redeem, retire, purchase or otherwise acquire, 
directly or indirectly, any of Borrower's capital stock or other equity 
interests; (x) make any change in Borrower's capital structure (except in 
connection with the exercise of warrants or conversion rights existing on the 
date of this Agreement); (xi) dissolve or elect to dissolve; (xii) pay any 
principal or interest on any indebtedness owing to an Affiliate, (xiii) enter 
into any transaction with an Affiliate other than on arms-length terms; or 
(xiv) agree to do any of the foregoing.

    5.19 FINANCIAL COVENANTS.

         (a)  CAPITAL EXPENDITURES.  Borrower will not expend or commit to 
expend, directly or indirectly, for capital expenditures (including capital 
lease obligations) in excess of the amount set forth in Section 8(a) of 
Schedule A as the Capital Expenditure Limitation in any fiscal year.

         (b)  NET WORTH.  Borrower will at all times maintain a net worth of 
at least the amount set forth in Section 8(b) of Schedule A.

         (c)  TANGIBLE NET WORTH.  Borrower will at all times maintain a 
minimum tangible net worth of at least the amount set forth in Section 8(c) 
of Schedule A. 

         (d)  WORKING CAPITAL.  Borrower will at all times maintain working 
capital of at least the amount set forth in Section 8(d) of Schedule A.       

         (e)  NET LOSSES.  Borrower will not permit its cumulative net loss 
to exceed the amount set forth in Section 8(e) of Schedule A. 

         (f)  NET INCOME.  Borrower will not permit its cumulative net income 
to be less than the amount set forth in Section 8(f) of Schedule A. 

         (g)  LEVERAGE.  Borrower will not permit the ratio of its total 
liabilities to its net worth to exceed, at any time, the ratio set forth in 
Section 8(g) of Schedule A. 

         (h)  OTHER FINANCIAL COVENANTS.  Borrower will comply with any 
additional financial covenants set forth in Section 8(j) of Schedule A. 


                                       17
<PAGE>

6.   RELEASE AND INDEMNITY.

    6.1  RELEASE.  Borrower hereby releases Lender and its Affiliates and 
their respective directors, officers, employees, attorneys and agents and any 
other Person affiliated with or representing Lender (the "RELEASED PARTIES") 
from any and all liability arising from acts or omissions under or pursuant 
to this Agreement, whether based on errors of judgment or mistake of law or 
fact, except for those arising from gross negligence or willful misconduct of 
the Released Parties.  However, in no circumstance will any of the Released 
Parties be liable for other special or consequential damages.  Such release 
is made on the date hereof and remade upon each request for a Loan or Credit 
Accommodation by Borrower.  Without limiting the foregoing:

         (a)  Lender shall not be liable for (i) any shortage or discrepancy 
in, damage to, or loss or destruction of, any goods, the sale or other 
disposition of which gave rise to an Account; (ii) any error, act, omission, 
or delay of any kind occurring in the settlement, failure to settle, 
collection or failure to collect any Account; (iii) settling any Account in 
good faith for less than the full amount thereof; or (iv) any of Borrower's 
obligations under any contract or agreement giving rise to an Account; and

         (b)  In connection with Credit Accommodations or any underlying 
transaction, Lender shall not be responsible for the conformity of any goods 
to the documents presented, the validity or genuineness of any documents, 
delay, default or fraud by Borrower, shippers and/or any other Person. 
Borrower agrees that any action taken by Lender, if taken in good faith, or 
any action taken by an issuer of any Credit Accommodation, under or in 
connection with any Credit Accommodation, shall be binding on Borrower and 
shall not create any resulting liability to Lender.  In furtherance thereof, 
Lender shall have the full right and authority to clear and resolve any 
questions of non-compliance of documents, to give any instructions as to 
acceptance or rejection of any documents or goods, to execute for Borrower's 
account any and all applications for steamship or airway guaranties, 
indemnities or delivery orders, to grant any extensions of the maturity of, 
time of payment for, or time of presentation of, any drafts, acceptances or 
documents, and to agree to any amendments, renewals, extensions, 
modifications, changes or cancellations of any of the terms or conditions of 
any of the Credit Accommodations or applications and other documentation 
pertaining thereto.

    6.2   INDEMNITY.  Borrower hereby agrees to indemnify the Released 
Parties and hold them harmless from and against any and all claims, debts, 
liabilities, demands, obligations, actions, causes of action, penalties, 
costs and expenses (including attorneys' fees), of every nature, character 
and description, which the Released Parties may sustain or incur based upon 
or arising out of any of the transactions contemplated by this Agreement or 
the other Loan Documents or any of the Obligations, including any 
transactions or occurrences relating to the issuance of any Credit 
Accommodation, the Collateral relating thereto, any drafts thereunder and any 
errors or omissions relating thereto (including any loss or claim due to any 
action or 

                                       18
<PAGE>

inaction taken by the issuer of any Credit Accommodation) (and for this 
purpose any charges to Lender by any issuer of Credit Accommodations shall be 
conclusive as to their appropriateness and may be charged to the Loan 
Account), or any other matter, cause or thing whatsoever occurred, done, 
omitted or suffered to be done by Lender relating to Borrower or the 
Obligations (except any such amounts sustained or incurred as the result of 
the gross negligence or willful misconduct of the Released Parties). 
Notwithstanding any provision in this Agreement to the contrary, the 
indemnity agreement set forth in this Section shall survive any termination 
of this Agreement.

7.   TERM.

     7.1  MATURITY DATE.  Lender's obligation to make Loans and to provide 
Credit Accommodations under this Agreement shall initially continue in effect 
until the Initial Maturity Date set forth in Section 7 of Schedule A (the 
"INITIAL TERM"); PROVIDED, that such date shall automatically be extended 
(the Initial Maturity Date, as it may be so extended, being referred to as 
the "MATURITY DATE") for successive additional terms of three years each 
(each a "RENEWAL TERM"), unless one party gives written notice to the other, 
not less than sixty days prior to the Maturity Date, that such party elects 
not to extend the Maturity Date.  This Agreement and the other Loan Documents 
and Lender's security interests in and Liens upon the Collateral, and all 
representations, warranties and covenants of Borrower contained herein and 
therein, shall remain in full force and effect after the Maturity Date until 
all of the monetary Obligations are indefeasibly paid in full.

     7.2  EARLY TERMINATION. Lender's obligation to make Loans and to provide 
Credit Accommodations under this Agreement may be terminated prior to the 
Maturity Date as follows:  (i) by Borrower, effective thirty business days 
after written notice of termination is given to Lender or (ii) by Lender at 
any time after the occurrence of an Event of Default, without notice, 
effective immediately; PROVIDED, that if any Affiliate of Borrower is also a 
party to a financing arrangement with Lender, no such early termination shall 
be effective unless such Affiliate simultaneously terminates its financing 
arrangement with Lender. If so terminated under this Section 7.2, Borrower 
shall pay to Lender (i) an early termination fee (the "EARLY TERMINATION 
FEE") in the amount set forth in Section 6(h) of Schedule A plus (ii) any 
earned but unpaid Facility Fee.  Such fee shall be due and payable on the 
effective date of termination and thereafter shall bear interest at a rate 
equal to the highest rate applicable to any of the Obligations. In addition, 
if Borrower so terminates and repays the Obligations without having provided 
Lender with at least thirty days' prior written notice thereof, an additional 
amount equal to thirty days of interest at the applicable Interest Rate(s), 
based on the average outstanding amount of the Obligations for the six month 
period immediately preceding the date of termination.

     7.3  PAYMENT OF OBLIGATIONS.  On the Maturity Date or on any earlier 
effective date of termination, Borrower shall pay in full all Obligations, 
whether or not all or any part of such Obligations are otherwise then due and 
payable. Without limiting the generality of the 


                                       19
<PAGE>

foregoing, if, on the Maturity Date or on any earlier effective date of 
termination, there are any outstanding Credit Accommodations, then on such 
date Borrower shall provide to Lender cash collateral in an amount equal to 
110% of the Credit Accommodation Balance to secure all of the Obligations 
(including estimated attorneys' fees and other expenses) relating to said 
Credit Accommodations or such greater percentage or amount as Lender 
reasonably deems appropriate, pursuant to a cash pledge agreement in form and 
substance satisfactory to Lender.

     7.4  EFFECT OF TERMINATION.  No termination shall affect or impair any 
right or remedy of Lender or relieve Borrower of any of the Obligations until 
all of the monetary Obligations have been indefeasibly paid in full.  Upon 
indefeasible payment and performance in full of all of the monetary 
Obligations (and the provision of cash collateral with respect to any Credit 
Accommodation Balance as required by Section 7.3) and termination of this 
Agreement, Lender shall promptly deliver to Borrower termination statements, 
requests for reconveyances and such other documents as may be reasonably 
required to terminate Lender's security interests in the Collateral.

8.   EVENTS OF DEFAULT AND REMEDIES.

     8.1  EVENTS OF DEFAULT.  The occurrence of any of the following events 
shall constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower 
shall give Lender immediate written notice thereof: (i) if any warranty, 
representation, statement, report or certificate made or delivered to Lender 
by Borrower or any of Borrower's officers, employees or agents is untrue or 
misleading; (ii) if Borrower fails to pay when due any principal or interest 
on any Loan or any other monetary Obligation; (iii) if Borrower breaches any 
covenant or obligation contained in this Agreement or any other Loan Document 
or fails to perform any other non-monetary Obligation PROVIDED that any 
breach of subsection 5.13(b), (c), (d), (e) or (f) of this Agreement shall 
not constitute an Event of Default until twenty (20) days after the 
occurrence thereof; (iv) if any unsatisfied levy, assessment, attachment, 
seizure, lien or encumbrance (other than a Permitted Lien) is made or 
permitted to exist and is not dismissed in thirty days on all or any part of 
the Collateral; (v) if one or more judgments aggregating in excess of 
$100,000, or any injunction or attachment, is obtained against Borrower or 
any Obligor which remains unstayed for more than thirty days or is enforced; 
(vi) the occurrence of any default not cured within the time allowed under 
any financing agreement, security agreement or other agreement, instrument or 
document executed and delivered by (A) Borrower with, or in favor of, any 
Person other than Lender or (B) Borrower or any Affiliate of Borrower with, 
or in favor of, Lender or any Affiliate of Lender; (vii) the dissolution, 
death, termination of existence in good standing, insolvency or business 
failure or suspension or cessation of business as usual of Borrower or any 
Obligor (or of any general partner of Borrower or any Obligor if it is a 
partnership) or the appointment of a receiver, trustee or custodian for all 
or any part of the property of, or an assignment for the benefit of creditors 
by Borrower or any Obligor, or the commencement of any proceeding by Borrower 
or any Obligor under any reorganization, bankruptcy, insolvency, arrangement, 
readjustment of debt, dissolution or 


                                       20
<PAGE>

liquidation law or statute of any jurisdiction, now or in the future in 
effect, or if Borrower makes or sends a notice of a bulk transfer or calls a 
meeting of its creditors; (viii) the commencement of any proceeding against 
Borrower or any Obligor under any reorganization, bankruptcy, insolvency, 
arrangement, readjustment of debt, dissolution or liquidation law or statute 
of any jurisdiction, now or in the future in effect; (ix) the actual or 
attempted revocation or termination of, or limitation or denial of liability 
upon, any guaranty of the Obligations, or any security document securing the 
Obligations, by any Obligor; (x) if Borrower makes any payment on account of 
any indebtedness or obligation which has been subordinated to the Obligations 
other than as permitted in the applicable subordination agreement, or if any 
Person who has subordinated such indebtedness or obligations attempts to 
limit or terminate its subordination agreement; (xi) if there is any actual 
or threatened indictment of Borrower or any Obligor under any criminal 
statute or commencement or threatened commencement of criminal or civil 
proceedings against Borrower or any Obligor, pursuant to which the potential 
penalties or remedies sought or available include forfeiture of any property 
of Borrower or such Obligor; (xii) if there is a change in the record or 
beneficial ownership (other than as permitted in Section 5.18) of an 
aggregate of more than 20% of the outstanding shares of stock of Borrower (or 
partnership or membership interests if it is a partnership or limited 
liability company), in one or more transactions, compared to the ownership of 
outstanding shares of stock (or partnership or membership interests) of 
Borrower as of the date hereof, without the prior written consent of Lender; 
(xiii) if there is any change in the chief executive officer, chief operating 
officer or chief financial officer of Borrower without a replacement 
satisfactory to Lender; (xiv) if an Event of Default occurs under any Loan 
and Security Agreement between Lender and an Affiliate of Borrower; or (xv) 
if Lender determines in good faith that the Collateral is insufficient to 
fully secure the Obligations or that the prospect of payment of performance 
of the Obligations is impaired.

     8.2  REMEDIES.  Upon the occurrence of any Default, and at any time 
thereafter, Lender, at its option, may cease making Loans or otherwise 
extending credit to Borrower under this Agreement or any other Loan Document. 
 Upon the occurrence of any Event of Default, and at any time thereafter, 
Lender, at its option, and without notice or demand of any kind (all of which 
are hereby expressly waived by Borrower), may do any one or more of the 
following: (i) cease making Loans or otherwise extending credit to Borrower 
under this Agreement or any other Loan Document; (ii) accelerate and declare 
all or any part of the Obligations to be immediately due, payable and 
performable, notwithstanding any deferred or installment payments allowed by 
any instrument evidencing or relating to any of the Obligations; (iii) take 
possession of any or all of the Collateral wherever it may be found, and for 
that purpose Borrower hereby authorizes Lender, without judicial process, to 
enter onto any of Borrower's premises without interference to search for, 
take possession of, keep, store, or remove any of the Collateral, and remain 
(or cause a custodian to remain) on the premises in exclusive control 
thereof, without charge for so long as Lender deems it reasonably necessary 
in order to complete the enforcement of its rights under this Agreement or 
any other agreement; PROVIDED, that if Lender seeks to take possession of any 
of the Collateral by court 


                                       21
<PAGE>

process, Borrower hereby irrevocably waives (A) any bond and any surety or 
security relating thereto required by law as an incident to such possession, 
(B) any demand for possession prior to the commencement of any suit or action 
to recover possession thereof and (C) any requirement that Lender retain 
possession of, and not dispose of, any such Collateral until after trial or 
final judgment; (iv) require Borrower to assemble any or all of the 
Collateral and make it available to Lender at one or more places designated 
by Lender which are reasonably convenient to Lender and Borrower, and to 
remove the Collateral to such locations as Lender may deem advisable; (v) 
complete the processing, manufacturing or repair of any Collateral prior to a 
disposition thereof and, for such purpose and for the purpose of removal, 
Lender shall have the right to use Borrower's premises, vehicles and other 
Equipment and all other property without charge; (vi) sell, lease or 
otherwise dispose of any of the Collateral, in its condition at the time 
Lender obtains possession of it or after further manufacturing, processing or 
repair, at one or more public or private sales, in lots or in bulk, for cash, 
exchange or other property, or on credit (a "SALE"), and to adjourn any such 
Sale from time to time without notice other than oral announcement at the 
time scheduled for Sale (and, in connection therewith, (A) Lender shall have 
the right to conduct such Sale on Borrower's premises without charge, for 
such times as Lender deems reasonable, on Lender's premises, or elsewhere, 
and the Collateral need not be located at the place of Sale; (B) Lender may 
directly or through any of its Affiliates purchase or lease any of the 
Collateral at any such public disposition, and if permissible under 
applicable law, at any private disposition and (C) any Sale of Collateral 
shall not relieve Borrower of any liability Borrower may have if any 
Collateral is defective as to title, physical condition or otherwise at the 
time of sale); (vii) demand payment of and collect any Accounts, Chattel 
Paper, Instruments and General Intangibles included in the Collateral and, in 
connection therewith, Borrower irrevocably authorizes Lender to endorse or 
sign Borrower's name on all collections, receipts, Instruments and other 
documents, to take possession of and open mail addressed to Borrower and 
remove therefrom payments made with respect to any item of Collateral or 
proceeds thereof and, in Lender's sole discretion, to grant extensions of 
time to pay, compromise claims and settle Accounts, General Intangibles and 
the like for less than face value; and (viii) demand and receive possession 
of any of Borrower's federal and state income tax returns and the books and 
records utilized in the preparation thereof or relating thereto.  In addition 
to the foregoing remedies, upon the occurrence of any Event of Default 
resulting from a breach of any of the financial covenants set forth in 
Section 5.19, Lender may, at its option, upon not less than ten days' prior 
notice to Borrower, reduce any or all of the Advance Rates set forth in 
Section 1(b) of Schedule A to the extent Lender, in its sole discretion, 
deems appropriate.  In addition to the rights and remedies set forth above, 
Lender shall have all the other rights and remedies accorded a secured party 
after default under the UCC and under all other applicable laws, and under 
any other Loan Document, and all of such rights and remedies are cumulative 
and non-exclusive.  Exercise or partial exercise by Lender of one or more of 
its rights or remedies shall not be deemed an election or bar Lender from 
subsequent exercise or partial exercise of any other rights or remedies. The 
failure or delay of Lender to exercise any rights or remedies shall not 
operate as a waiver thereof, but all rights and remedies shall continue in 
full force 


                                       22
<PAGE>

and effect until all of the Obligations have been fully paid and performed.  
If notice of any sale or other disposition of Collateral is required by law, 
notice at least seven days prior to the sale designating the time and place 
of sale in the case of a public sale or the time after which any private sale 
or other disposition is to be made shall be deemed to be reasonable notice, 
and Borrower waives any other notice.  If any Collateral is sold or leased by 
Lender on credit terms or for future delivery, the Obligations shall not be 
reduced as a result thereof until payment is collected by Lender.

     8.3  APPLICATION OF PROCEEDS.  Subject to any application required by 
law, all proceeds realized as the result of any Sale shall be applied by 
Lender to the Obligations in such order as Lender shall determine in its sole 
discretion. Any surplus shall be paid to Borrower or other persons legally 
entitled thereto; but Borrower shall remain liable to Lender for any 
deficiency.  If Lender, in its sole discretion, directly or indirectly enters 
into a deferred payment or other credit transaction with any purchaser at any 
Sale, Lender shall have the option, exercisable at any time, in its sole 
discretion, of either reducing the Obligations by the principal amount of the 
purchase price or deferring the reduction of the Obligations until the actual 
receipt by Lender of the cash therefor.

9.   GENERAL PROVISIONS.

     9.1  NOTICES.  All notices to be given under this Agreement shall be in 
writing and shall be given either personally, by reputable private delivery 
service, by regular first-class mail or certified mail return receipt 
requested, addressed to Lender or Borrower at the address shown in the 
heading to this Agreement, or by facsimile to the facsimile number shown in 
Section 9(i) of Schedule A, or at any other address (or to any other 
facsimile number) designated in writing by one party to the other party in 
the manner prescribed in this Section 9.1.  All notices shall be deemed to 
have been given when received or when delivery is refused by the recipient.

     9.2  SEVERABILITY.  If any provision of this Agreement, or the 
application thereof to any party or circumstance, is held to be void or 
unenforceable by any court of competent jurisdiction, such defect shall not 
affect the remainder of this Agreement, which shall continue in full force 
and effect.

     9.3  INTEGRATION.  This Agreement and the other Loan Documents represent 
the final, entire and complete agreement between Borrower and Lender and 
supersede all prior and contemporaneous negotiations, oral representations 
and agreements, all of which are merged and integrated into this Agreement.  
THERE ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE 
PARTIES WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

     9.4  WAIVERS.  The failure of Lender at any time or times to require 
Borrower to strictly comply with any of the provisions of this Agreement or 
any other Loan Documents 


                                       23
<PAGE>

shall not waive or diminish any right of Lender later to demand and receive 
strict compliance therewith.  Any waiver of any default shall not waive or 
affect any other default, whether prior or subsequent, and whether or not 
similar.  None of the provisions of this Agreement or any other Loan Document 
shall be deemed to have been waived by any act or knowledge of Lender or its 
agents or employees, but only by a specific written waiver signed by an 
authorized officer of Lender and delivered to Borrower.  Borrower waives 
demand, protest, notice of protest and notice of default or dishonor, notice 
of payment and nonpayment, release, compromise, settlement, extension or 
renewal of any commercial paper, Instrument, Account, General Intangible, 
Document, Chattel Paper, Investment Property or guaranty at any time held by 
Lender on which Borrower is or may in any way be liable, and notice of any 
action taken by Lender, unless expressly required by this Agreement, and 
notice of acceptance hereof.

     9.5  AMENDMENT.  The terms and provisions of this Agreement may not be 
amended or modified except in a writing executed by Borrower and a duly 
authorized officer of Lender.

     9.6  TIME OF ESSENCE.  Time is of the essence in the performance by 
Borrower of each and every obligation under this Agreement and the other Loan 
Documents.

     9.7  ATTORNEYS FEES AND COSTS.  Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to,
in connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to
administer this Agreement and the other Loan Documents (including the cost of
periodic financing statement, tax lien and other searches conducted by Lender);
to enforce, or seek to enforce, any of its rights; prosecute actions against,
or defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to enforce and protect, or to seek to enforce and
protect, any of its rights and interests in any bankruptcy case of Borrower,
including, without limitation, by initiating and prosecuting any motion for
relief from the automatic stay and by initiating, prosecuting or defending any
other contested matter or adversary proceeding in bankruptcy; to file or
prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; to examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; to protect, obtain possession of, lease, dispose
of, or otherwise enforce Lender's security interests in, the Collateral; and to
otherwise represent Lender in any litigation relating to Borrower.  If either
Lender or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment.  All attorneys' fees and costs
to which Lender may be entitled pursuant to this Section shall immediately
become part of the Obligations, shall be due on demand, and shall bear 
interest at 


                                       24
<PAGE>

a rate equal to the highest interest rate applicable to any of the
Obligations.  Lender shall provide Borrower with a detailed invoice or cost
summary of all costs and fees payable by Borrower under this Section 9.7.

     9.8  BENEFIT OF AGREEMENT; ASSIGNABILITY.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
PROVIDED, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void.  No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations.  Lender shall have the
right to assign all or any of its rights and obligations under the Loan
Documents, and to sell participating interests therein, to one or more other
Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.

     9.9  HEADINGS; CONSTRUCTION.  Section and subsection headings are used 
in this Agreement only for convenience.  Borrower and Lender acknowledge that 
the headings may not describe completely the subject matter of the applicable 
Sections or subsections, and the headings shall not be used in any manner to 
construe, limit, define or interpret any term or provision of this Agreement. 
This Agreement has been fully reviewed and negotiated between the parties and 
no uncertainty or ambiguity in any term or provision of this Agreement shall 
be construed strictly against Lender or Borrower under any rule of 
construction or otherwise.

     9.10 GOVERNING LAW; CONSENT TO FORUM, ETC.  THIS AGREEMENT HAS BEEN 
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN 
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH 
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE 
AND FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE 
COLLATERAL IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND 
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO 
THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR 
RELATED TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY 
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT 
COMMENCED IN ANY SUCH COURT, AND WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE 
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON 
CONVENIENS.  BORROWER ALSO AGREES THAT ANY CLAIM OR DISPUTE BROUGHT BY 
BORROWER AGAINST LENDER PURSUANT TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT 
OR ANY MATTER ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL 
BE BROUGHT EXCLUSIVELY IN THE STATE 


                                       25
<PAGE>

AND FEDERAL COURTS OF NEW YORK.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF 
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT 
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE 
MADE IN THE MANNER AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 
FOR NOTICES, TO THE EXTENT PERMITTED BY LAW.  NOTHING IN THIS AGREEMENT SHALL 
BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN 
ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER 
OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION 
UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR 
JURISDICTION.

     9.11 WAIVER OF JURY TRIAL, ETC.  BORROWER WAIVES (i) THE RIGHT TO TRIAL 
BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR 
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN 
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR 
OMISSIONS OF LENDER OR BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, 
OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OR ANY OTHER PERSONS AFFILIATED WITH 
LENDER OR BORROWER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; (ii) 
NOTICE PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR 
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING 
LENDER TO EXERCISE ANY OF LENDER'S REMEDIES AND (iii) THE BENEFIT OF ALL 
VALUATION, APPRAISEMENT AND EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE 
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS 
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE 
DEALINGS WITH BORROWER.  BORROWER WARRANTS AND REPRESENTS THAT IT HAS 
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND 
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL 
COUNSEL.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A 
WRITTEN CONSENT TO A TRIAL BY THE COURT.


                                       26
<PAGE>

    IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of 
the date set forth in the heading.

BORROWER:                                    LENDER:
                                             
CRAGAR INDUSTRIES, INC.                      NATIONSCREDIT COMMERCIAL
                                             CORPORATION, THROUGH ITS
                                             NATIONSCREDIT COMMERCIAL FUNDING 
                                             DIVISION
                                             
                                             
By  /s/ [ILLEGIBLE]                          By   /s/ Lynne Ciaccia
  ---------------------------------            ---------------------------------
  Its  PRES/CEO                               Its Authorized Signatory
     ------------------------------


                                       27
<PAGE>

                                   SCHEDULE A
                                       
                         DESCRIPTION OF CERTAIN TERMS
                                       
    This Schedule is an integral part of the Loan and Security Agreement 
between CRAGAR INDUSTRIES, INC. and NATIONSCREDIT COMMERCIAL CORPORATION, 
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").

                                
                                
       1.   Loan Limits for     
            Revolving Loans:         
       
            (a)  Maximum Facility    $8,500,000
                 Amount:              
           
            (b)  Advance Rates:      
                                
                 (i)  Accounts        85%; PROVIDED, that if the
                      Advance Rate:   Dilution Percentage exceeds
                                      5.0%, Lender may, at its
                                      option, (i) reduce such advance
                                      rate or (ii) implement a
                                      collateral reserve, each in the
                                      amount of such excess Dilution
                                      Percentage
                                
                 (ii) Inventory 
                      Advance
                      Rate(s):         
               
                      (A)  Finished   54% (excluding finished goods
                           goods:     Inventory which has not turned
                                      over in one year or more
                                      ("Excess Finished Goods
                                      Inventory") and finished goods
                                      Inventory not advertised in
                                      Borrower's then current
                                      catalogue ("Obsolete
                                      Inventory"))
                                      
                      (B)  Raw        41%
                           materials: 
                                
                      (C)  Work in    54%
                           process:   
                                        

                                       A-1
<PAGE>

                      (D)  Excess     48%
                           Finished 
                           Goods
                           Inventory 
                           and 
                           Obsolete
                           Inventory
                           
                (iii) Investment      75%
                      Property 
                      Advance Rate
               
            (c) Accounts Sublimit:    $2,000,000 for Eligible
                                      Accounts with terms greater
                                      than 90 days but not in excess
                                      of 180 days
                                
            (d) Inventory Sublimit(s):
                                
                (i)   Overall         $4,000,000
                      sublimit 
                      on advances 
                      against 
                      Eligible
                      Inventory
               
                (ii)  Sublimit on     Not applicable
                      advances
                      against 
                      finished 
                      goods
               
                (iii) Sublimit on     Not applicable
                      advances 
                      against raw
                      materials
               
                (iv)  Sublimit on     $250,000
                      advances
                      against work 
                      in process
               
            (e) Credit                $500,000
                Accommodation  
                Limit:               
            
            (f) Permanent             None
                Reserve  
                Amount:              
           

                                       A-2
<PAGE>

            (g) Overadvance           None
                Amount:
                                
                                
                                
            (h) Investment Property   $1,500,000
                Sublimit             
           
                                
                                
       2.   Loan Limits for Term
            Loan:                    
       
            (a)  Principal Amount:   
                                
                 (i)   Equipment      $627,000 based on 80% of the
                       Advance        appraised auction sale value of
                                      Borrower's Eligible Equipment
                                
                 (ii)  Real Property  Not Applicable
                       Advance:

                 (iii) Capital        The lesser of $750,000 in the
                       Expenditure    aggregate and 80% of the
                       Advance:       appraised auction sale value of
                                      Borrower's Eligible Equipment
                                      purchased after the date of the
                                      Agreement
                                       
                 (iv) Intellectual    The lesser of $500,000 and 30%
                      Property        of the appraised quick sale
                      Advance:        value of Borrower's Eligible
                                      Intellectual Property
                                
            (b)  Repayment Schedule: 
                                
                 (i)  Equipment       The Equipment Advance shall be
                      Advance:        repaid in equal consecutive
                                      monthly installments amortized
                                      over 60 months payable on the
                                      first day of each calendar
                                      month commencing May 1, 1998,
                                      with the entire unpaid balance
                                      due and payable on the Maturity
                                      Date
                                
                 (ii) Real Property   Not applicable
                      Advance:          
                                
                                
                                       A-3
<PAGE>

                 (iii) Capital        Each Capital Expenditure
                       Expenditure    Advance shall be repaid in
                       Advance:       equal consecutive monthly
                                      installments amortized over 60
                                      months payable on the first day
                                      of each calendar month
                                      commencing on the first day of
                                      the month following the month
                                      in which such Capital
                                      Expenditure Advance was made,
                                      with the entire unpaid balance
                                      due and payable on the Maturity
                                      Date
                                
                                
                 (iv) Intellectual    The Intellectual Property
                      Property        Advance shall be repaid in
                      Advance:        equal consecutive monthly
                                      installments amortized over 48
                                      months payable on the first day
                                      of each calendar month
                                      commencing May 1, 1998, with
                                      the entire unpaid balance due
                                      and payable on the Maturity
                                      Date.
                                
                                
                                
       3.   Interest Rates:     
                                
            (a)  Revolving Loans:     1.25%  per  annum  in excess
                                      of the Prime Rate, provided
                                      that such percentage will
                                      reduce to 1.0% per annum in
                                      excess of the Prime Rate
                                      effective on the first day of
                                      the calendar month following
                                      the month in which Borrower
                                      makes timely delivery of its
                                      audited year-end financial
                                      statements for any fiscal year
                                      showing that Borrower's net
                                      operating profit for such
                                      fiscal year (excluding any
                                      extraordinary items) was
                                      positive
                                

                                       A-4
<PAGE>

            (b)  Term Loan:           1.25%  per  annum  in excess
                                      of the Prime Rate, provided
                                      that such percentage will
                                      reduce to 1.0% per annum in
                                      excess of the Prime Rate
                                      effective on the first day of
                                      the calendar month following
                                      the month in which Borrower
                                      makes timely delivery of its
                                      audited year-end financial
                                      statements for any fiscal year
                                      showing that Borrower's net
                                      operating profit for such
                                      fiscal year (excluding any
                                      extraordinary items) was
                                      positive
                                
                                
                                
       4.   Minimum Loan Amount:      $4,000,000
                                
                                
                                
       5.   Maximum Days:       
                                
            (a)  Maximum days after   210
                 original INVOICE 
                 DATE for Eligible 
                 Accounts:
           
            (b)  Maximum days after   60
                 original INVOICE 
                 DUE DATE for 
                 Eligible Accounts:
                                
                                
       6.   Fees:               
                                
            (a)  Closing Fee:         $85,000, of which $7,083 has
                                      been paid prior to the date of
                                      the Agreement
                                
            (b)  Facility Fee:       
                                
                 (i)  Initial Term:   $127,500
                                
                 (ii) Renewal         Not applicable
                      Term(s):
                                
            (c)  Servicing Fee:       Not applicable
                                
            (d)  Unused Line Fee:     Not applicable
                                

                                       A-5
<PAGE>

            (e)  Minimum 
                 Borrowing Fee:
                                
                 (i)  Applicable      Each year
                      period:
                                
                 (ii) Date payable:   Each anniversary of the date of
                                      the Agreement
                                
            (f)  Success Fee:         Not applicable
                                
            (g)  Warrants:            Warrants to acquire up to
                                      50,000 shares of the capital
                                      stock of Borrower for a
                                      purchase price equal to 105% of
                                      the value of such capital stock
                                      on the date of the Agreement,
                                      exercisable within 5 years
                                      after the date of the Agreement
                                      and with other terms and
                                      conditions acceptable to Lender
                                
            (h)  Early Termination    3.0% of the Maximum Facility
                 Fee:                 Amount if terminated during the
                                      first year of the Initial Term,
                                      1.5% of the Maximum Facility
                                      Amount if terminated during the
                                      second year of the Initial
                                      Term, 1.0% of the Maximum
                                      Facility Amount if terminated
                                      during the third year of the
                                      Initial Term and 0.50% of the
                                      Maximum Facility Amount if
                                      terminated thereafter and prior
                                      to the Maturity Date; PROVIDED
                                      that, if the Agreement is
                                      terminated during the first
                                      year of the Initial Term in
                                      connection with a sale of, or a
                                      change in the controlling
                                      ownership of, Borrower, the
                                      Early Termination Fee will be
                                      1.0% of the Maximum Facility
                                      Amount
                                
            (i)  Fees for letters     1.5% per annum of the face
                 of credit and        amount of each open Credit
                 other Credit         Accommodation
                 Accommodations (or   
                 guaranties thereof 
                 by Lender):
           
                                
                                       A-6
<PAGE>

       7.   Initial Maturity Date:               April 19, 2002
                                
                                
                                
       8.   Financial Covenants:
                                
            (a)  Capital Expenditure             Not applicable
                 Limitation:          
                 
            (b)  Minimum Net Worth               Not applicable
                 Requirement:         
                 
            (c)  Minimum Tangible Net            Not applicable
                 Worth:               
                 
            (d)  Minimum Working                 Not applicable
                 Capital:             
                 
            (e)  Maximum Cumulative Net          Not applicable
                 Loss:                
                 
            (f)  Minimum Cumulative Net          Not applicable
                 Income:              
                 
            (g)  Maximum Leverage                Not applicable
                 Ratio:               
                 
            (h)  Limitation on Purchase          Not applicable
                 Money Security Interests:
                 
            (i)  Limitation on                   Not applicable
                 Equipment Leases:    
                 
            (j)  Additional Financial            None
                 Covenants:           
           
                                
       9.   Borrower Information:
                                
            (a)  Prior Names of                 None
                 Borrower:            
           
                                       A-7
<PAGE>

            (b)  Prior Trade Names of            Tru=Spoke Wire Wheels
                 Borrower:            
           
            (c)  Existing Trade Names
                 of Borrower:                    None
                                
            (d)  Inventory Locations:            4636 North 43rd Avenue
                                                 Phoenix, Arizona  85031
                                
            (e)  Other Locations:                None
                                     
            (f)  Litigation:                     See attached Schedule 1
                                     
            (g)  Ownership of Borrower:          See attached Schedule 2
                                     
            (h)  Subsidiaries (and               None
                 ownership thereof):  
                
            (i)  Facsimile Numbers:  
                                      
                 Borrower:                       602-846-0684
                                
                 Lender:                         (212) 597-1666
                                
                                
       10.  Description of Real                  None
            Property:                
                                
                                
       11.  Lender's Bank:                       The First National Bank of
                                                  Chicago
                                                 One First National Plaza
                                                 Chicago, Illinois  60670
                                
                                
       12.  Other Covenants:                     None
                                                  
                                                  
       13.  Exceptions to Negative               None
            Covenants:               
                                

                                       A-8
<PAGE>

     IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.


BORROWER:                        LENDER:
                                 
CRAGAR INDUSTRIES, INC.          NATIONSCREDIT COMMERCIAL
                                 CORPORATION, THROUGH ITS
                                 NATIONSCREDIT COMMERCIAL
                                 FUNDING DIVISION
                                 
                                 
By /s/ [ILLEGIBLE]               By /s/ Lynne Ciaccia
  ---------------------------      -------------------------
  Its PRES/CEO                   Its Authorized Signatory
     ------------------------


                                       A-9
<PAGE>

                                   SCHEDULE B
                                       
                                   DEFINITIONS
                                       
    This Schedule is an integral part of the Loan and Security Agreement
between CRAGAR INDUSTRIES, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").

    As used in the Agreement, the following terms have the following meanings:

         "ACCOUNT" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.

         "ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.

         "ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.

         "AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person,
any parent or subsidiary of such Person, or any Person controlling, controlled
by or under common control with such Person or any other Person affiliated,
directly or indirectly, by virtue of family membership, ownership, management
or otherwise.

         "AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security Agreement
of which this Schedule B is a part and the Schedules thereto.

         "AVAILABILITY" has the meaning set forth in Section 1.1(a)

         "BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
Section 101 ET SEQ.).

         "BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.

         "BORROWER" has the meaning set forth in the heading to the Agreement.

         "BORROWER'S ADDRESS" has the meaning set forth in the heading to the
Agreement.

         "BUSINESS DAY" means a day other than a Saturday or Sunday or any
other day on which Lender or banks in New York are authorized to close.

         "CHATTEL PAPER" has the meaning set forth in the UCC.

         "COLLATERAL" means all property and interests in property in or upon
which a security interest or other Lien is granted pursuant to this Agreement
or the other Loan Documents.

         "CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).


                                       B-1
<PAGE>

         "CREDIT ACCOMMODATION BALANCE" means the sum of (i) the aggregate
undrawn face amount of all outstanding Credit Accommodations and (ii) all
interest, fees and costs due or, in Lender's estimation, likely to become due
in connection therewith.

         "DEFAULT" means any event which with notice or passage of time, or
both, would constitute an Event of Default.

         "DEFAULT RATE" has the meaning set forth in Section 2.1.

         "DEPOSIT ACCOUNT" has the meaning set forth in the UCC.

         "DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a trailing twelve month basis but excluding dilution related to
the Accounts owed by Super Shops, Inc..

         "DOCUMENT" has the meaning set forth in the UCC.

         "EARLY TERMINATION FEE" has the meaning set forth in Section 7.2.

         "ELIGIBLE ACCOUNT" means, at any time of determination, an Account
which satisfies the general criteria set forth below and which is otherwise
reasonably acceptable to Lender (PROVIDED, that Lender may, in its sole and
reasonable discretion, change the general criteria for acceptability of
Eligible Accounts upon at least fifteen days' prior notice to Borrower).  An
Account shall be deemed to meet the current general criteria if (i) neither the
Account Debtor nor any of its Affiliates is an Affiliate, creditor or supplier
of Borrower; (ii) it does not remain unpaid more than the earlier to occur of
(A) the number of days after the original INVOICE DATE set forth in
Section 5(a) of Schedule A or (B) the number of days after the original INVOICE
DUE DATE set forth in Section 5(b) of Schedule A; (iii) the Account Debtor or
its Affiliates are not past due on other Accounts owing to Borrower comprising
more than 50% of all of the Accounts owing to Borrower by such Account Debtor
or its Affiliates; (iv) all Accounts owing by the Account Debtor or its
Affiliates do not represent more than 20% of all otherwise Eligible Accounts
(PROVIDED, that Accounts which are deemed to be ineligible solely by reason of
this clause (iv) shall be considered Eligible Accounts to the extent of the
amount thereof which does not exceed 20% of all otherwise Eligible Accounts);
(v) no covenant, representation or warranty contained in this Agreement with
respect to such Account (including any of the representations set forth in
Section 5.4) has been breached; (vi) the Account is not subject to any contra
relationship, counterclaim, dispute or set-off (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (vi) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such contra relationships, counterclaims, disputes or set-offs);
(vii) the Account Debtor's chief executive office or principal place of
business is located in the United States or Provinces of Canada which have
adopted the Personal Property Security Act or a similar act, unless (A) the
sale is fully backed by a letter of credit, guaranty or acceptance acceptable
to Lender in its sole discretion, and if backed by a letter of credit, such
letter of credit has been issued or confirmed by a bank satisfactory to Lender,
is sufficient to cover such Account, and if required by Lender, the original of
such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the 


                                       B-2
<PAGE>

assignment of the proceeds of such letter of credit to Lender or (B) such 
Account is subject to credit insurance payable to Lender issued by an insurer 
and on terms and in an amount acceptable to Lender; (viii) it is absolutely 
owing to Borrower and does not arise from a sale on a bill-and-hold, 
guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or 
any other repurchase or return basis or consist of progress billings; (ix) 
Lender shall have verified the Account in a manner satisfactory to Lender; 
(x) the Account Debtor is not the United States of America or any state or 
political subdivision (or any department, agency or instrumentality thereof), 
unless Borrower has complied with the Assignment of Claims Act of 1940 (31 
U.S.C. Section 203 et seq.) or other applicable similar state or local law in 
a manner satisfactory to Lender; (xi) it is at all times subject to Lender's 
duly perfected, first priority security interest and to no other Lien that is 
not a Permitted Lien, and the goods giving rise to such Account (A) were not, 
at the time of sale, subject to any Lien except Permitted Liens and (B) have 
been delivered to and accepted by the Account Debtor, or the services giving 
rise to such Account have been performed by Borrower and accepted by the 
Account Debtor; (xii) the Account is not evidenced by Chattel Paper or an 
Instrument of any kind and has not been reduced to judgment; (xiii) the 
Account Debtor's total indebtedness to Borrower does not exceed the amount of 
any credit limit established by Borrower or Lender and the Account Debtor is 
otherwise deemed to be creditworthy by Lender (PROVIDED, that Accounts which 
are deemed to be ineligible solely by reason of this clause (xiii) shall be 
considered Eligible Accounts to the extent the amount of such Accounts does 
not exceed the lower of such credit limits); (xiv) there are no facts or 
circumstances existing, or which could reasonably be anticipated to occur, 
which might result in any adverse change in the Account Debtor's financial 
condition or impair or delay the collectibility of all or any portion of such 
Account; (xv) Lender has been furnished with all documents and other 
information pertaining to such Account which Lender has requested, or which 
Borrower is obligated to deliver to Lender, pursuant to this Agreement; (xvi) 
Borrower has not made an agreement with the Account Debtor to extend the time 
of payment thereof beyond the time periods set forth in clause (ii) above; 
and (xvii) Borrower has not posted a surety or other bond in respect of the 
contract under which such Account arose.

         "ELIGIBLE EQUIPMENT" means, at any time of determination, Equipment
owned by Borrower which Lender, in its sole discretion, deems to be eligible
for borrowing purposes.

         "ELIGIBLE INVENTORY" means, at any time of determination, Inventory
(other than packaging materials and supplies) which satisfies the general
criteria set forth below and which is otherwise reasonably acceptable to Lender
(PROVIDED, that Lender may, in its sole and reasonable discretion, change the
general criteria for acceptability of Eligible Inventory upon at least fifteen
days' prior written notice to Borrower).  Inventory shall be deemed to meet the
current general criteria if (i) it consists of raw materials or finished goods,
or work-in-process that is readily marketable in its current form; (ii) it is
in good, new and saleable condition; (iii) it is not unmerchantable; (iv) it is
not in the possession of a processor, consignee or bailee, or located on
premises leased or subleased to Borrower, or on premises subject to a mortgage
in favor of a Person other than Lender, unless such processor, consignee,
bailee or mortgagee or the lessor or sublessor of such premises, as the case
may be, has executed and delivered all documentation which Lender shall require
to evidence the subordination or other limitation or extinguishment of such
Person's rights with respect to such Inventory and Lender's right to gain
access thereto; (v) it meets all standards imposed by any governmental agency
or authority; (vi) it conforms in all 


                                       B-3
<PAGE>

respects to any covenants, warranties and representations set forth in the 
Agreement; (vii) it is at all times subject to Lender's duly perfected, first 
priority security interest and no other Lien except a Permitted Lien; and 
(viii) it is situated at an Inventory Location listed in Section 9(d) of 
Schedule A or other location of which Lender has been notified as required by 
Section 5.6.

          "ELIGIBLE INTELLECTUAL PROPERTY" means patents and patent
applications (collectively, "PATENTS") and trademarks, trademark registrations,
trademark applications, tradenames and tradestyles, service marks, service mark
registrations and service mark registration applications (collectively,
"TRADEMARKS") and all license agreements with respect to any Patents or
Trademarks, in each case subject to Lender's perfected first priority security
interest and not subject to any other security interests, liens or
encumbrances.

         "ELIGIBLE INVESTMENT PROPERTY" means marketable stocks and bonds
acceptable to Lender in its sole discretion, subject to Lender's perfected
first priority security interest and not subject to any other security
interests, liens or encumbrances.

         "ELIGIBLE REAL PROPERTY" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.

         "EQUIPMENT" means all Goods which are used or bought for use primarily
in business (including farming or a profession) or by a Person who is a non-
profit organization or governmental subdivision or agency and which are not
Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.

         "EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).

         "ERISA" means the Employee Retirement Income Security Act of 1974 and
all rules, regulations and orders promulgated thereunder.

         "EVENT OF DEFAULT" has the meaning set forth in Section 8.1.

         "GAAP" means generally accepted accounting principles as in effect
from time to time, consistently applied.

         "GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or 


                                       B-4
<PAGE>

otherwise), and all judgments now or hereafter arising therefrom, rights to 
purchase or sell real or personal property, rights as a licensor or licensee 
of any kind, royalties, telephone numbers, internet addresses, proprietary 
information, purchase orders, and all insurance policies and claims 
(including life insurance, key man insurance, credit insurance, liability 
insurance, property insurance and other insurance), tax refunds and claims, 
letters of credit, banker's acceptances and guaranties, computer programs, 
discs, tapes and tape files in the possession of Borrower or any other 
Person, claims under guaranties, security interests or other security held by 
or granted to Borrower, all rights to indemnification and all other 
intangible property of every kind and nature.

         "GOODS" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.

         "INITIAL TERM" has the meaning set forth in Section 7.1.

         "INSTRUMENT" has the meaning set forth in the UCC.

         "INVENTORY" means all Goods held for sale or lease or furnished or to
be furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
Goods, and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.

         "INVESTMENT PROPERTY" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.

         "LENDER" has the meaning set forth in the heading to the Agreement.

         "LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property.  For the purpose of this Agreement, Borrower shall be
deemed to be the owner of any property which it has acquired or holds subject
to a conditional sale agreement or other arrangement pursuant to which title to
the property has been retained by or vested in some other Person for security
purposes.

         "LOAN ACCOUNT" has the meaning set forth in Section 2.4.

         "LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by 


                                       B-5
<PAGE>

Borrower or any Obligor in connection with, or to evidence the transactions 
contemplated by, this Agreement.

         "LOAN LIMITS" means, collectively, the Availability limits and all
other limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.

         "LOANS" means, collectively, the Revolving Loans and any Term Loan.

         "LOCK BOX" has the meaning set forth in Section 4.1.

         "MATURITY DATE" has the meaning set forth in Section 7.1.

         "OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Servicing Fees, Unused Line Fees,
Minimum Borrowing Fees, Success Fees, amounts owing under Warrants, Credit
Accommodation Fees and any other sums chargeable to Borrower under this
Agreement or under any other Loan Document.

         "OBLIGOR" means any guarantor, endorser, acceptor, surety or other
person liable on, or with respect to, the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.

         "PERMITTED LIENS" means:  (i) purchase money security interests in
specific items of Equipment in an aggregate amount not to exceed the limit set
forth in Section 8(h) of Schedule A; (ii) leases of specific items of Equipment
in an aggregate amount not to exceed the limit set forth in Section 8(i) of
Schedule A; (iii) Liens for taxes not yet due and payable; (iv) additional
Liens which are fully subordinate to the security interests of Lender and are
consented to in writing by Lender; (v) security interests being terminated
concurrently with the execution of this Agreement; (vi) Liens of materialmen,
mechanics, warehousemen or carriers arising in the ordinary course of business
and securing obligations which are not delinquent; (vii) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clause (i) or (ii) above; PROVIDED,
that any extension, renewal or replacement Lien is limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; (viii) Liens in favor
of customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; and (ix) security deposits posted in
connection with real property leases or subleases. Lender will 


                                       B-6
<PAGE>

have the right to require, as a condition to its consent under clause (iv) 
above, that the holder of the additional Lien sign an intercreditor agreement 
in form and substance satisfactory to Lender, in its sole discretion, 
acknowledging that the Lien is subordinate to the security interests of 
Lender, and agreeing not to take any action to enforce its subordinate Lien 
so long as any Obligations remain outstanding, and that Borrower agree that 
any uncured default in any obligation secured by the subordinate Lien shall 
also constitute an Event of Default under this Agreement.

         "PERSON" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.

         "PRIME RATE" means, at any given time, the prime rate as quoted in THE
WALL STREET JOURNAL as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).

         "REAL PROPERTY" means the real property described in Section 10 of
Schedule A.

         "REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).

         "RELEASED PARTIES" has the meaning set forth in Section 6.1.

         "RENEWAL TERM" has the meaning set forth in Section 7.1.

         "REQUIRED EXCESS AVAILABILITY" means unused Availability in an amount
equal to the absolute value of Borrower's net profit or loss for the three
months ended March 31, 1998, TIMES 4, PLUS actual annual depreciation and
amortization, MINUS actual annual debt service and MINUS [HISTORICAL] Capital
Expenditures, determined on the date of this Agreement after the making of the
initial Loans and taking of initial Reserves, if any, under the Agreement and
provided that, at such time, Borrower has no accounts payable more than 60 days
past due (unless Lender has established a Reserve for the full amount thereof)
and no past due taxes.

         "RESERVES" has the meaning set forth in Section 1.2.

         "REVOLVING LOANS" has the meaning set forth in Section 1.1(a).

         "SALE" has the meaning set forth in Section 8.2.

         "SUBSIDIARY" means any corporation or other entity of which a Person
owns, directly or indirectly, through one or more intermediaries, more than 50%
of the capital stock or other equity interest at the time of determination.

         "TERM" means the period commencing on the date of this Agreement and
ending on the Maturity Date.

         "TERM LOAN" has the meaning set forth in Section 1.1(b).


                                       B-7
<PAGE>

         "UCC" means, at any given time, the Uniform Commercial Code as adopted
and in effect at such time in the State of New York.

    All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP.  All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein.
The term "INCLUDING," whenever used in this Agreement, shall mean "including
but not limited to."  The singular form of any term shall include the plural
form, and vice versa, when the context so requires.  References to Sections,
subsections and Schedules are to Sections and subsections of, and Schedules to,
this Agreement.  All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.

    IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.

BORROWER:                        LENDER:
                                 
CRAGAR INDUSTRIES, INC.          NATIONSCREDIT COMMERCIAL
                                 CORPORATION, THROUGH ITS
                                 NATIONSCREDIT COMMERCIAL
                                 FUNDING DIVISION
                                 
                                 
By /s/ [ILLEGIBLE]               By /s/ Lynne Ciaccia
  --------------------------       --------------------------
  Its PRES/CEO                     Its Authorized Signatory
     -----------------------

                                      B-8