UNSIGNED
                                                                  EXECUTION COPY


                                CREDIT AGREEMENT

                          Dated as of October 7, 1996

                                    Between

                              KOMAG, INCORPORATED

                                  as Borrower

                                      and

                       THE DAI-ICHI KANGYO BANK, LIMITED,
                    acting through its San Francisco Agency

                                   as Lender

<PAGE>

                               TABLE OF CONTENTS

                                                                            Page

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01. Certain Defined Terms .......................................    1
SECTION 1.02. Computation of Time Periods .................................   10
SECTION 1.03. Accounting Terms ............................................   10


                                   ARTICLE II

                       AMOUNTS AND TERMS OF THE ADVANCES
                           AND THE LETTERS OF CREDIT

SECTION 2.01. The Advances ................................................   11
SECTION 2.02. Making the Advances .........................................   11
SECTION 2.03. Repayment of Advances .......................................   12
SECTION 2.04. Termination or Reduction of the Commitments .................   12
SECTION 2.05. Prepayments .................................................   12
SECTION 2.06. Interest ....................................................   12
SECTION 2.07. Fees ........................................................   13
SECTION 2.08. Conversion of Advances ......................................   13
SECTION 2.09. Increased Costs, Etc ........................................   14
SECTION 2.10. Payments and Computations ...................................   16
SECTION 2.11. Taxes .......................................................   16
SECTION 2.12. Use of Proceeds .............................................   18
SECTION 2.13. Extension of Scheduled Termination Date .....................   18


                                  ARTICLE III

                             CONDITIONS OF LENDING

SECTION 3.01. Conditions Precedent to Initial Borrowing ...................   19
SECTION 3.02. Conditions Precedent to Each Borrowing ......................   20

                                       i
<PAGE>
                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower ..............   20

                                   ARTICLE V

                           COVENANTS OF THE BORROWER

SECTION 5.01. Affirmative Covenants .......................................   23
SECTION 5.02. Financial Covenants .........................................   26
SECTION 5.03. Negative Covenants ..........................................   26
SECTION 5.04. Effect of Dastek Increase Notice ............................   27


                                   ARTICLE VI

                               EVENTS OF DEFAULT

SECTION 6.01. Events of Default ...........................................   28

                                   ARTICLE VII

                                  MISCELLANEOUS

SECTION 7.01. Amendments, Etc .............................................   30
SECTION 7.02. Notices, Etc ................................................   31
SECTION 7.03. No Waiver; Remedies .........................................   31
SECTION 7.04. Costs, Expenses .............................................   31
SECTION 7.05. Right of Set-off ............................................   32
SECTION 7.06. Binding Effect ..............................................   32
SECTION 7.07. Assignments and Participation ...............................   32
SECTION 7.08. Execution in Counterparts ...................................   33
SECTION 7.09. Confidentiality .............................................   33
SECTION 7.10. Governing Law ...............................................   34


                                       ii
<PAGE>
EXHIBITS

Exhibit A - Form of Note

Exhibit B - Form of Notice of Borrowing

Exhibit C - Form of Confidentiality Agreement

Exhibit D - Form of Compliance Computation Schedule


                                      iii

<PAGE>

                                                                  EXECUTION COPY


                                CREDIT AGREEMENT


                  CREDIT   AGREEMENT   dated  as  of   October   7,  1996  (this
"Agreement")   between  Komag,   Incorporated,   a  Delaware   corporation  (the
"Borrower"),  and The Dai-Ichi  Kangyo  Bank,  Limited  (the  "Lender"),  acting
through its San Francisco Agency. The parties hereto hereby agree as follows:


                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

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

                  "Advance" has the meaning set forth in Section 2.01.

                  "Affiliate"  means,  as to any Person,  any other Person that,
         directly or indirectly,  controls,  is controlled by or is under common
         control  with such Person or is a director  or officer of such  Person.
         For purposes of this  definition,  the term  "control"  (including  the
         terms  "controlling,"  "controlled by" and "under common control with")
         of a Person means the possession,  direct or indirect,  of the power to
         vote 5% or more of the  Voting  Stock of such  Person  or to  direct or
         cause the  direction  of the  management  and  policies of such Person,
         whether   through  the  ownership  of  Voting  Stock,  by  contract  or
         otherwise.

                  "Applicable  Lending  Office"  means,  the  Lender's  Domestic
         Lending Office in the case of a Base Rate Advance or Federal Funds Rate
         Advance and the Lender's  LIBOR  Lending  Office in the case of a LIBOR
         Advance.

                  "Base Rate"  means a  fluctuating  interest  rate per annum in
         effect  from time to time,  which rate per annum  shall at all times be
         equal to the rate of interest  announced  publicly by the Lender in New
         York,  New York,  from time to time,  as the Lender's  base rate (which
         rate is not  necessarily  the lowest  rate of  interest  charged by the
         Lender).

                  "Base Rate  Advance"  means an Advance that bears  interest as
         provided in Section 2.06(a)(i).
<PAGE>
                                       2


                  "Borrower" has the meaning specified in the recital of parties
         to this Agreement.

                  "Borrower's   Account"  means  the  account  of  the  Borrower
         maintained by the Borrower with Wells Fargo Bank, N.A. at its office at
         121  Park  Center  Plaza,  San  Jose,  California  95172,  Account  No.
         684501705.

                  "Borrowing"  means a borrowing  consisting  of an Advance of a
         single Type made by the Lender.

                  "Business  Day" means a day of the year on which banks are not
         required or  authorized  by law to close in San  Francisco  or New York
         City and, if the applicable  Business Day relates to any LIBOR Advances
         or Federal Funds Rate Advances, on which dealings are carried on in the
         London interbank market or Federal funds market, respectively.

                  "Capitalized Leases" means all leases that have been or should
         be, in accordance with GAAP, recorded as capitalized leases.

                  "Commitment" means, at any time, the amount set forth opposite
         the  Lender's  name on the  signature  pages  hereto  under the caption
         "Commitment," as such amount may be reduced at or prior to such time by
         reductions in the Unused Commitment pursuant to Section 2.04.

                  "Confidentiality  Agreement" means a confidentiality agreement
         in substantially the form of Exhibit C.

                  "Consolidated"  refers to the  consolidation  of  accounts  in
         accordance  with GAAP;  provided,  however,  that Asahi Komag Co., Ltd.
         shall not be deemed to be a Consolidated Subsidiary of the Borrower for
         purposes of this Agreement.

                  "Conversion",  "Convert"  and  "Converted"  each  refer  to  a
         conversion  of an Advance  of one Type into an Advance of another  Type
         pursuant to Section 2.08 or 2.09.

                  "Dastek Increase Notice" has the meaning  specified in Section
         5.03(c).

                  "Dastek(M)" means Dastek(M) SDN BHD, a Malaysian corporation.

                  "Default"  means any Event of  Default or any event that would
         constitute an Event of Default but for the  requirement  that notice be
         given or time elapse or both.
<PAGE>

                                       3

                  "Domestic  Lending  Office"  means the  office  of the  Lender
         specified  as its  "Domestic  Lending  Office" on the  signature  pages
         hereto or such  other  office of the Lender as the Lender may from time
         to time specify to the Borrower.

                  "EBITDA"  means,  for any  period,  the sum,  determined  on a
         Consolidated  basis,  of (a) net  income (or net  loss),  (b)  interest
         expense,  (c) income tax  expense,  (d)  depreciation  expense  and (e)
         amortization   expense,   in  each  case  of  the   Borrower   and  its
         Subsidiaries, determined in accordance with GAAP for such period.

                  "Environmental  Action" means any action, suit, demand, demand
         letter,  claim,  notice  of  non-compliance  or  violation,  notice  of
         liability or potential liability,  investigation,  proceeding,  consent
         order or consent  agreement  relating  in any way to any  Environmental
         Law, any  Environmental  Permit or  Hazardous  Material or arising from
         alleged  injury  or  threat  to  health,  safety  or  the  environment,
         including,  without  limitation,  (a) by any governmental or regulatory
         authority for  enforcement,  cleanup,  removal,  response,  remedial or
         other  actions or damages  and (b) by any  governmental  or  regulatory
         authority  or third party for damages,  contribution,  indemnification,
         cost recovery, compensation or injunctive relief.

                  "Environmental Law" means any federal, state, local or foreign
         statute, law, ordinance, rule, regulation, code, order, writ, judgment,
         injunction,  decree or  judicial  or agency  interpretation,  policy or
         guidance  relating  to  pollution  or  protection  of the  environment,
         health,  safety or natural resources,  including,  without  limitation,
         those  relating  to  the  use,  handling,  transportation,   treatment,
         storage, disposal, release or discharge of Hazardous Materials.

                  "Environmental    Permit"   means   any   permit,    approval,
         identification  number,  license or other authorization  required under
         any Environmental Law.

                  "ERISA" means the Employee  Retirement  Income Security Act of
         1974, as amended from time to time, and the regulations promulgated and
         rulings issued thereunder.

                  "ERISA  Affiliate"  means any  Consolidated  Subsidiary of the
         Borrower  that for  purposes  of  Title IV of ERISA is a member  of the
         controlled  group of the  Borrower,  or under  common  control with the
         Borrower,  within the  meaning of Section 414 of the  Internal  Revenue
         Code.

                  "ERISA  Event"  means  (a)(i) the  occurrence  of a reportable
         event, within the meaning of Section 4043 of ERISA, with respect to any
         Plan unless the 30-day  notice  requirement  with respect to such event
         has been waived by the PBGC, or (ii) the requirements of subsection (1)
         of Section  4043(b) of ERISA (without  regard to

<PAGE>
                                       4

         subsection  (2) of such Section) are met with respect to a contributing
         sponsor,  as defined in Section 4001(a)(13) of ERISA, of a Plan, and an
         event  described in paragraph (9), (10),  (11), (12) or (13) of Section
         4043(c) of ERISA is  reasonably  expected to occur with respect to such
         Plan within the following 30 days;  (b) the  application  for a minimum
         funding  waiver  with  respect  to a  Plan;  (c) the  provision  by the
         administrator of any Plan of a notice of intent to terminate such Plan,
         pursuant to Section 4041(a)(2) of ERISA (including any such notice with
         respect to a plan amendment  referred to in Section  4041(e) of ERISA);
         (d) the  cessation of  operations  at a facility of the Borrower or any
         ERISA  Affiliate in the  circumstances  described in Section 4062(e) of
         ERISA; (e) the withdrawal by the Borrower or any ERISA Affiliate from a
         Multiple  Employer  Plan  during  a  plan  year  for  which  it  was  a
         substantial  employer,  as defined in Section  4001(a)(2) of ERISA; (f)
         the  conditions  for imposition of a lien under Section 302(f) of ERISA
         shall have been met with  respect to any Plan;  (g) the  adoption of an
         amendment to a Plan  requiring  the  provision of security to such Plan
         pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
         proceedings  to terminate a Plan pursuant to Section 4042 of ERISA,  or
         the  occurrence of any event or condition  described in Section 4042 of
         ERISA  that  constitutes   grounds  for  the  termination  of,  or  the
         appointment of a trustee to administer, such Plan.

                  "Eurocurrency   Liabilities"  has  the  meaning  specified  in
         Regulation D of the Board of Governors of the Federal  Reserve  System,
         as in effect from time to time.

                  "Events of Default" has the meaning specified in Section 6.01.

                  "Federal  Funds  Advance  Rate" means,  for any Federal  Funds
         Interest Period, a fluctuating  interest rate per annum equal from time
         to time during such Federal Funds Interest  Period to the Federal Funds
         Rate as in effect from time to time during such Federal Funds  Interest
         Period.

                  "Federal Funds Interest  Period" means, for each Federal Funds
         Rate Advance,  the period  commencing on the date of such Federal Funds
         Rate Advance or the date of the  Conversion of any Base Rate Advance or
         LIBOR Advance into such Federal  Funds Rate Advance,  and ending on the
         last  day of  the  period  selected  by the  Borrower  pursuant  to the
         provisions below and, thereafter,  each subsequent period commencing on
         the last day of the immediately preceding Federal Funds Interest Period
         and  ending  on the last day of the  period  selected  by the  Borrower
         pursuant to the  provisions  below.  The  duration of each such Federal
         Funds  Interest  Period shall be one, two,  three,  six, nine or twelve
         months,  as the Borrower  may,  upon notice  received by the Lender not
         later than 10:00 A.M. (San Francisco  time) on the Business Day that is
         the first day of such Federal Funds Interest Period, select;  provided,
         however, that:
<PAGE>

                                       5

                           (a)  whenever  the  last  day  of any  Federal  Funds
                  Interest  Period would  otherwise  occur on a day other than a
                  Business  Day,  the last day of such  Federal  Funds  Interest
                  Period  shall be  extended  to  occur  on the next  succeeding
                  Business Day, provided, however, that, if such extension would
                  cause the last day of such Federal  Funds  Interest  Period to
                  occur in the next following  calendar  month,  the last day of
                  such  Federal  Funds  Interest  Period shall occur on the next
                  preceding Business Day; and

                           (b)  whenever  the  first  day of any  Federal  Funds
                  Interest  Period occurs on a day of an initial  calendar month
                  for which  there is no  numerically  corresponding  day in the
                  calendar  month that succeeds such initial  calendar  month by
                  the  number  of months  equal to the  number of months in such
                  Federal Funds  Interest  Period,  such Federal Funds  Interest
                  Period shall end on the last  Business Day of such  succeeding
                  calendar month.

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

                  "Federal  Funds  Rate  Advance"  means an  Advance  that bears
         interest as provided in Section 2.06(a)(iii).

                  "GAAP" has the meaning specified in Section 1.03.

                  "Hazardous   Materials"   means  (a)  petroleum  or  petroleum
         products,  by-products or breakdown  products,  radioactive  materials,
         asbestos-containing materials,  polychlorinated biphenyls and radon gas
         and  (b) any  other  chemicals,  materials  or  substances  designated,
         classified  or  regulated  as  hazardous  or toxic or as a pollutant or
         contaminant under any Environmental Law.

                  "Indebtedness" of any Person means, without  duplication,  (a)
         all  indebtedness  for borrowed money,  (b) that portion of obligations
         with respect to  Capitalized  Leases which is classified as a liability
         on a balance  sheet in  conformity  with GAAP,  (c) notes  payable  and
         drafts  accepted  representing  extensions  of  credit  whether  or not
         representing  obligations for borrowed  money,  (d) any obligation owed
         for all or any  part of the  deferred  purchase  price of  property  or
         services  which purchase price is (i) due more than six months from the
         date  of  incurrence  of the  obligation  in  respect  thereof  or (ii)
         evidenced  by  a  note  or  similar   written   instruments,   (e)  all
         Indebtedness secured by any Lien on any property or asset owned or held
         by that Person  regardless of whether the Indebtedness  secured thereby
         shall have been assumed by that Person 

<PAGE>

                                       6

         or  is   non-recourse  to  the  credit  of  that  Person  and  (f)  all
         Indebtedness  of others  referred  to in clauses  (a) through (e) above
         where both (i) such  Indebtedness has become due and payable and demand
         for such payment has been made and (ii) such Indebtedness is guaranteed
         directly  or  indirectly  in any  manner by such  Person,  or in effect
         guaranteed  directly or indirectly by such Person  through an agreement
         (A) to pay or purchase such  Indebtedness or to advance or supply funds
         for the payment or purchase of such Indebtedness, (B) to purchase, sell
         or lease  (as  lessee  or  lessor)  property,  or to  purchase  or sell
         services,  primarily  for the  purpose of  enabling  the debtor to make
         payment  of  such   Indebtedness  or  to  assure  the  holder  of  such
         Indebtedness  against  loss,  (C) to  supply  funds to or in any  other
         manner  invest  in the  debtor  (including  any  agreement  to pay  for
         property or services  irrespective of whether such property is received
         or such  services are  rendered) or (D)  otherwise to assure a creditor
         against loss.

                  "Insufficiency"  means,  with respect to any Plan, the amount,
         if any,  of its  unfunded  benefit  liabilities,  as defined in Section
         4001(a)(18) of ERISA.

                  "Interest Period" means (i) in reference to any LIBOR Advance,
         the LIBOR Interest Period for such Advance and (ii) in reference to any
         Federal Funds Rate Advance,  the Federal Funds Interest Period for such
         Advance.

                  "Internal  Revenue  Code" means the  Internal  Revenue Code of
         1986, as amended from time to time, and the regulations promulgated and
         rulings issued thereunder.

                  "Lender"  has the meaning  specified in the recital of parties
         to this Agreement.

                  "Lender's  Account" means the account of the Lender maintained
         by the Lender at The Dai-Ichi  Kangyo Bank,  Limited,  New York Branch,
         One World Trade Center, New York, New York 10048; ABA No.  026-004-307;
         Account No. 079-740-111268;  Reference: Komag, Incorporated; Attention:
         DKB San Francisco Agency.

                  "LIBO  Rate"  means,  for any  Interest  Period  for all LIBOR
         Advances  comprising part of the same  Borrowing,  an interest rate per
         annum equal to the rate per annum obtained by dividing

                           (i) the higher of (A) the rate per annum displayed at
         9:00 A.M. (San  Francisco  time) two Business Days before the first day
         of such  Interest  Period on Telerate  page 3750 (or such other page as
         may  replace  such page on the  Telerate  service  for the  purpose  of
         displaying interest rates at which deposits in U.S. dollars are offered
         by prime banks in the London  interbank  market)  for  deposits in U.S.
         dollars in an amount  substantially  equal to the Advance to which such
         Interest Period pertains and for a period equal to such Interest Period
         and (B) the  rate  per  annum at which  deposits  in U.S.  dollars  are
         offered by the principal  office of the Lender in London,  England,  to
         prime banks in the London  interbank market at 9:00 A.M. (San

<PAGE>
                                       7

         Francisco time) two Business Days before the first day of such Interest
         Period in an amount  substantially  equal to the  Advance to which such
         Interest  Period  pertains  and for a  period  equal  to such  Interest
         Period; by

                           (ii) a  percentage  equal  to 100%  minus  the  LIBOR
         Reserve Percentage for such Interest Period.

                  "LIBOR  Advance"  means an  Advance  that  bears  interest  as
         provided in Section 2.06(a)(ii).

                  "LIBOR  Interest  Period" means,  for each LIBOR Advance,  the
         period  commencing on the date of such LIBOR Advance or the date of the
         Conversion  of any Base Rate Advance or Federal Funds Rate Advance into
         such LIBOR Advance,  and ending on the last day of the period  selected
         by the Borrower pursuant to the provisions below and, thereafter,  each
         subsequent  period  commencing  on the  last  day  of  the  immediately
         preceding  LIBOR  Interest  Period  and  ending  on the last day of the
         period selected by the Borrower  pursuant to the provisions  below. The
         duration of each such LIBOR Interest  Period shall be one, two,  three,
         six, nine or twelve months,  as the Borrower may, upon notice  received
         by the Lender not later than  10:00 A.M.  (San  Francisco  time) on the
         third  Business  Day  prior to the  first  day of such  LIBOR  Interest
         Period, select; provided, however, that:

                           (a)  whenever  the  last  day of any  LIBOR  Interest
                  Period  would  otherwise  occur on a day other than a Business
                  Day,  the  last day of such  LIBOR  Interest  Period  shall be
                  extended  to  occur  on  the  next  succeeding  Business  Day,
                  provided,  however,  that, if such  extension  would cause the
                  last day of such  LIBOR  Interest  Period to occur in the next
                  following  calendar month, the last day of such LIBOR Interest
                  Period shall occur on the next preceding Business Day; and

                           (b)  whenever  the first  day of any  LIBOR  Interest
                  Period occurs on a day of an initial  calendar month for which
                  there  is no  numerically  corresponding  day in the  calendar
                  month that succeeds such initial  calendar month by the number
                  of months equal to the number of months in such LIBOR Interest
                  Period,  such  LIBOR  Interest  Period  shall  end on the last
                  Business Day of such succeeding calendar month.

                  "LIBOR  Lending   Office"  means  the  office  of  the  Lender
         specified as its "LIBOR Lending  Office" on the signature pages hereto,
         or such other  office of the Lender as the Lender may from time to time
         specify to the Borrower.

                  "LIBOR Reserve  Percentage"  for any LIBOR Interest Period for
         all LIBOR  Advances  comprising  part of the same  Borrowing  means the
         reserve percentage applicable two Business Days before the first day of
         such Interest Period under regulations  issued from time to time by the
         Board of Governors of the Federal 

<PAGE>
                                       8

         Reserve System (or any successor) for  determining  the maximum reserve
         requirement (including, without limitation, any emergency, supplemental
         or other marginal reserve requirement) for a member bank of the Federal
         Reserve  System in New York City with respect to  liabilities or assets
         consisting of or including Eurocurrency Liabilities (or with respect to
         any other category of liabilities  that includes  deposits by reference
         to which the interest rate on LIBOR  Advances is  determined)  having a
         term equal to such LIBOR Interest Period.

                  "Lien"  means any lien,  security  interest or other charge or
         encumbrance of any kind, or any other type of preferential arrangement,
         including, without limitation, the lien or retained security title of a
         conditional vendor and any easement,  right of way or other encumbrance
         on title to real property.

                  "Loan  Documents"  means this  Agreement and the Note, in each
         case as amended or otherwise modified from time to time.

                  "Material Adverse Change" means any material adverse change in
         the  business,   condition   (financial  or   otherwise),   operations,
         performance  or  properties  of  the  Borrower  and  its   Consolidated
         Subsidiaries, taken as a whole.

                  "Material Adverse Effect" means any material adverse effect on
         (a) the business,  condition  (financial or  otherwise),  operations or
         properties of the Borrower taken  separately or on the Borrower and its
         Consolidated Subsidiaries taken as a whole, (b) the rights and remedies
         of the Lender  under this  Agreement  or the Note or (c) the ability of
         the Borrower to perform its  obligations  under this  Agreement and the
         Note.

                  "Multiemployer Plan" means a multiemployer plan, as defined in
         Section  4001(a)(3)  of  ERISA,  to which  the  Borrower  or any  ERISA
         Affiliate is making or accruing an obligation to make contributions, or
         has  within  any of the  preceding  five plan  years made or accrued an
         obligation to make contributions.

                  "Multiple  Employer  Plan" means a single  employer  plan,  as
         defined in Section  4001(a)(15)  of ERISA,  that (a) is maintained  for
         employees  of the  Borrower  or any  ERISA  Affiliate  and at least one
         Person other than the Borrower and the ERISA  Affiliates  or (b) was so
         maintained and in respect of which the Borrower or any ERISA  Affiliate
         could have  liability  under Section 4064 or 4069 of ERISA in the event
         such plan has been or were to be terminated.

                  "Net Worth" of any Person means the positive excess of (i) the
         Consolidated total assets of such Person and its Subsidiaries over (ii)
         the Consolidated total liabilities of such Person and its Subsidiaries,
         in each case determined in accordance with GAAP.
<PAGE>
                                       9

                  "Note" means a promissory note of the Borrower  payable to the
         order of the  Lender,  in  substantially  the form of Exhibit A hereto,
         evidencing  the  indebtedness  of the Borrower to the Lender  resulting
         from the Advances made by the Lender.

                  "Notice of  Borrowing"  has the meaning  specified  in Section
         2.02(a).

                  "OECD" means the  Organization  for Economic  Cooperation  and
         Development.

                  "Other Taxes" has the meaning specified in Section 2.11(b).

                  "PBGC" means the Pension Benefit Guaranty  Corporation (or any
         successor).

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

                  "Plan"  means a Single  Employer  Plan or a Multiple  Employer
         Plan.

                  "Scheduled  Termination Date" means the fourth  anniversary of
         the date of this  Agreement  or such later  anniversary  thereof as the
         Lender shall have agreed to as the Scheduled  Termination Date pursuant
         to Section 2.13.

                  "Single  Employer  Plan"  means a  single  employer  plan,  as
         defined in Section  4001(a)(15)  of ERISA,  that (a) is maintained  for
         employees  of the Borrower or any ERISA  Affiliate  and no Person other
         than the Borrower and the ERISA Affiliates or (b) was so maintained and
         in  respect of which the  Borrower  or any ERISA  Affiliate  could have
         liability  under  Section 4069 of ERISA in the event such plan has been
         or were to be terminated.

                  "Subsidiary" of any Person means any corporation, partnership,
         joint venture,  limited liability company, trust or estate of which (or
         in which) more than 50% of (a) the issued and outstanding capital stock
         having  ordinary  voting  power to  elect a  majority  of the  Board of
         Directors  of such  corporation  (irrespective  of  whether at the time
         capital stock of any other class or classes of such  corporation  shall
         or might have voting power upon the occurrence of any contingency), (b)
         the  interest  in the  capital or profits  of such  partnership,  joint
         venture or limited liability company or (c) the beneficial  interest in
         such trust or estate is at the time  directly  or  indirectly  owned or
         controlled by such Person,  by such Person and one or more of its other
         Subsidiaries or by one or more of such Person's other Subsidiaries.

                  "Tangible Net Worth" means, at any date of determination,  the
         positive excess of total assets over total  liabilities of the Borrower
         and its Consolidated  Subsidiaries  determined on a Consolidated basis,
         excluding,  however  from the  determination  of total  assets  (i) all
         intangible assets,  including,  without  limitation,  goodwill (whether

<PAGE>
                                       10

         representing  the  excess  cost over book value of assets  acquired  or
         otherwise),  patents, trademarks, trade names, copyrights,  franchises,
         and deferred charges (including,  without limitation,  unamortized debt
         discount and expense, organization and research and product development
         costs), (ii) treasury stock, (iii) cash set apart and held in a sinking
         or other  analogous fund  established  for the purpose of redemption or
         other  retirement of capital stock,  and (iv) to the extent not already
         deducted  from total  assets,  reserves  for  depreciation,  depletion,
         obsolescence,  and/or amortization of properties and all other reserves
         or appropriation  of retained  earnings which, in accordance with GAAP,
         should be established in connection with the business  conducted by the
         relevant entity.

                  "Taxes" has the meaning specified in Section 2.11(a).

                  "Termination  Date"  means the  earlier  of (i) the  Scheduled
         Termination  Date  and (ii)  the  date of  termination  in whole of the
         Commitments pursuant to Section 2.04 or 6.01.

                  "Total  Capitalization" of any Person means the sum of (i) the
         amount of Consolidated Indebtedness of such Person and its Subsidiaries
         plus (ii) the amount of the  Consolidated  Net Worth of such Person and
         its Subsidiaries.

                  "Type"  refers to the  distinction  between  Advances  bearing
         interest at the Base Rate,  Advances  bearing interest at the LIBO Rate
         and Advances bearing interest at the Federal Funds Advance Rate.

                  "Unused  Commitment"  means,  at any  time,  (a) the  Lender's
         Commitment  at  such  time  minus  (b)  the  sum of (i)  the  aggregate
         principal  amount of all Advances made by the Lender and outstanding at
         such time.

                  "Voting Stock" means capital stock issued by a corporation, or
         equivalent  interests  in any other  Person,  the  holders of which are
         ordinarily,  in the absence of contingencies,  entitled to vote for the
         election of directors (or persons performing similar functions) of such
         Person,  even  if the  right  so to  vote  has  been  suspended  by the
         happening of such a contingency.

                  "Withdrawal  Liability" has the meaning specified in Part I of
         Subtitle E of Title IV of ERISA.

                  SECTION 1.02.  Computation of Time Periods.  In this Agreement
in the computation of periods of time from a specified date to a later specified
date,  the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".

                  SECTION  1.03.  Accounting  Terms.  All  accounting  terms not
specifically  defined  herein shall be construed in  accordance  with  generally
accepted accounting principles

<PAGE>
                                       11

consistent  with those applied in the  preparation  of the financial  statements
referred to in Section 4.01(e) ("GAAP").


                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES
                            AND THE LETTERS OF CREDIT

                  SECTION 2.01. The Advances.  The Lender  agrees,  on the terms
and conditions  hereinafter  set forth,  to make advances (each an "Advance") to
the  Borrower  from time to time on any  Business Day during the period from the
date hereof until the Termination Date in an amount for each such Advance not to
exceed the Lender's  Unused  Commitment at such time. Each Borrowing shall be in
an aggregate amount of $1,000,000 or an integral  multiple of $100,000 in excess
thereof. Within the limits of the Lender's Unused Commitment in effect from time
to time, the Borrower may borrow under this Section 2.01(a),  prepay pursuant to
Section 2.05 and reborrow under this Section 2.01(a).

                  SECTION 2.02. Making the Advances. (a) Each Borrowing shall be
made on notice,  given not later than 10:00  A.M.  (San  Francisco  time) on the
third Business Day prior to the date of the proposed Borrowing, in the case of a
Borrowing consisting of a LIBOR Advance, or the Business Day that is the date of
the proposed  Borrowing,  in the case of a Borrowing  consisting  of a Base Rate
Advance or Federal Funds Rate Advance,  by the Borrower to the Lender. Each such
notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed
immediately in writing,  or telex or telecopier,  in  substantially  the form of
Exhibit B hereto,  specifying  therein the requested (i) date of such Borrowing,
(ii) Type of Advance  comprising such Borrowing,  (iii) amount of the Advance to
comprise  such  Borrowing  and (iv) in the case of a Borrowing  consisting  of a
LIBOR Advance or Federal Funds Rate Advance,  initial LIBOR  Interest  Period or
Federal Funds Interest Period, as the case may be, for such Advance.  The Lender
shall, before 2:00 P.M. (San Francisco time) on the date of such Borrowing, make
available  for the account of its  Applicable  Lending  Office to the  Borrower,
subject to fulfillment  of the  applicable  conditions set forth in Article III,
funds in the amount of the  Advance  made in such  Borrowing  by  crediting  the
Borrower's Account.

                  (b)  Anything  in   subsection   (a)  above  to  the  contrary
notwithstanding,  (i) the  Borrower  may not  select a LIBOR  Advance or Federal
Funds Rate Advance,  as the case may be in an amount of less than  $1,000,000 or
if the  obligation  of the Lender to make LIBOR  Advances or Federal  Funds Rate
Advances,  as the case may be, shall then be suspended  pursuant to Section 2.08
or Section 2.09 and (ii) not more than six Advances  may be  outstanding  at any
time.

                  (c) Each Notice of Borrowing  shall be irrevocable and binding
on the  Borrower.  In the case of any  Borrowing  that  the  related  Notice  of
Borrowing  specifies is to be comprised of a LIBOR Advance or Federal Funds Rate
Advance,  the Borrower  shall 

<PAGE>
                                      12

indemnify the Lender against any loss, cost or expense incurred by the Lender as
a result of any  failure  to fulfill  on or before  the date  specified  in such
Notice of Borrowing for such  Borrowing the  applicable  conditions set forth in
Article III, including,  without limitation,  any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by the Lender to fund the  Advance  to be made by the  Lender in such  Borrowing
when such Advance, as a result of such failure, is not made on such date.

                  SECTION 2.03. Repayment of Advances.  The Borrower shall repay
to the Lender on the Termination Date the aggregate outstanding principal amount
of the Advances then outstanding.

                  SECTION 2.04. Termination or Reduction of the Commitments. The
Borrower may, upon at least five Business Days' notice to the Lender,  terminate
in whole or reduce in part the Unused Commitment;  provided,  however, that each
such partial  reduction  shall be in an  aggregate  amount of  $1,000,000  or an
integral multiple of $100,000 in excess thereof.

                  SECTION 2.05. Prepayments. The Borrower may, upon at least one
Business  Day's notice in the case of Base Rate  Advances or Federal  Funds Rate
Advances and three Business Days' notice in the case of LIBOR Advances,  in each
case to the Lender stating the proposed date and aggregate  principal  amount of
the  prepayment,  and if such  notice is given the  Borrower  shall,  prepay the
outstanding  aggregate  principal  amount  of an  Advance  in  whole or in part,
together  with  (i)  accrued  interest  to the  date of such  prepayment  on the
aggregate  principal amount prepaid;  provided,  however,  that (x) each partial
prepayment  shall  be in an  aggregate  principal  amount  of  $1,000,000  or an
integral  multiple of $100,000 in excess  thereof and (y) if any prepayment of a
LIBOR  Advance  or Federal  Funds Rate  Advance is made on a date other than the
last day of an Interest  Period for such Advance the Borrower shall also pay any
amounts owing pursuant to Section 7.04(b).

                  SECTION 2.06. Interest.  (a) Scheduled Interest.  The Borrower
shall pay interest on the unpaid  principal  amount of each Advance owing to the
Lender from the date of such Advance until such  principal  amount shall be paid
in full, at the following rates per annum:

                  (i) Base Rate Advances. During such periods as such Advance is
         a Base Rate  Advance,  a rate per annum  equal at all times to the Base
         Rate in effect  from time to time,  payable in  arrears  monthly on the
         first day of each month  during such  periods and on the date such Base
         Rate Advance shall be Converted or paid in full.

                  (ii) LIBOR Advances.  During such periods as such Advance is a
         LIBOR  Advance,  a rate per annum equal at all times  during each LIBOR
         Interest  Period  for such  Advance to the sum of (A) the LIBO Rate for
         such  Interest  Period for such  Advance  plus (B)  0.375%,  payable in
         arrears on the last day of such  Interest  Period and, if such Interest
         Period  has a  duration  of more than  three  months,  on each day
<PAGE>
                                       13

         that occurs  during such  Interest  Period  every three months from the
         first day of such  Interest  Period and on the date such LIBOR  Advance
         shall be Converted or paid in full.

                  (iii) Federal Funds Rate Advances. During such periods as such
         Advance is a Federal Funds Rate Advance,  a rate per annum equal at all
         times during each Federal Funds Interest Period for such Advance to the
         sum of (A) the Federal  Funds  Advance Rate in effect from time to time
         during such Interest Period plus (B) 0.375%,  payable in arrears on the
         last day of such  Interest  Period and, if such  Interest  Period has a
         duration of more than three months, on each day that occurs during such
         Interest  Period every three months from the first day of such Interest
         Period  and on the  date  such  Federal  Funds  Rate  Advance  shall be
         Converted or paid in full.

                  (b) Default Interest.  To the fullest extent permitted by law,
the Borrower shall pay interest on the amount of any principal, interest, fee or
other amount  payable  hereunder  that is not paid when due,  from the date such
amount shall be due until such amount shall be paid in full,  payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid,
in the case of principal or interest,  on the Type of Advance  comprised of such
principal  or on which such  interest  has accrued  pursuant  to clause  (a)(i),
(a)(ii) or  (a)(iii)  above,  and,  in all other  cases,  on Base Rate  Advances
pursuant to clause (a)(i) above.

                  SECTION 2.07.  Fees.  (a) Facility Fee. The Borrower shall pay
to the Lender a facility  fee,  payable  quarterly on the first  Business Day of
each December,  March, June and September,  commencing  December 1, 1996, and on
the Termination  Date,  accruing from the date hereof until the Termination Date
at the rate of 0.1875% per annum on the amount of the Lender's  Commitment as in
effect on such due date for payment.

                  (b) Upfront Fee.  The Borrower  agrees to pay to the Lender an
upfront fee in the amount  $35,000  (being 0.10% of the  Commitment  on the date
hereof), payable upon execution of this Agreement.

                  (c) Administration  Fee. The Borrower agrees to pay the Lender
an  administration  fee of $1000 per annum,  payable  in  advance in  semiannual
installments  of $500 each,  with the first such  installment  to be paid on the
date of execution of this Agreement and each  subsequent  installment to be paid
on the last day of each six month period after the date of this Agreement  until
such time as all obligations  under the Credit  Agreement have been paid in full
and the Commitment terminated.

                  SECTION  2.08.  Conversion  of  Advances.  (a)  Optional.  The
Borrower may on any Business Day, upon notice given to the Lender not later than
10:00 A.M. (San  Francisco  time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.06 and 2.09,
Convert an Advance of one Type into an

<PAGE>
                                       14

Advance of another Type; provided,  however,  that (i) any Conversion of a LIBOR
Advance  into a Base  Rate  Advance  or  Federal  Funds  Rate  Advance,  and any
Conversion  of a Federal  Funds Rate  Advance  into a Base Rate Advance or LIBOR
Advance, shall be made only on the last day of an Interest Period for such LIBOR
Advance or Federal Funds Rate Advance,  as the case may be, (ii) any  Conversion
of an Advance into a LIBOR  Advance or Federal Funds Rate Advance shall be in an
amount not less than the minimum amount  specified in Section  2.02(b) and (iii)
no Conversion of any Advance  shall result in more  Advances  being  outstanding
than  permitted  under Section  2.02(b).  Each such notice of Conversion  shall,
within  the  restrictions   specified  above,  specify  (x)  the  date  of  such
Conversion, (y) the Advance to be Converted and (z) if such Conversion is into a
LIBOR  Advance or Federal  Funds  Rate  Advance,  the  duration  of the  initial
Interest Period for such Advance. Each notice of Conversion shall be irrevocable
and binding on the Borrower.

                  (b) Mandatory.  (i) On the date on which the aggregate  unpaid
principal amount of any LIBOR Advance or Federal Funds Rate Advance, as the case
may be, shall be reduced,  by payment or prepayment  or otherwise,  to less than
$1,000,000, such Advance shall automatically Convert into a Base Rate Advance.

                  (ii) If the Borrower  shall fail to select the duration of any
Interest Period for any LIBOR Advance or Federal Funds Rate Advance, as the case
may be, in accordance with the provisions  contained in the definition of "LIBOR
Interest  Period" or "Federal  Funds  Interest  Period",  as the case may be, in
Section 1.01, the Lender will  forthwith so notify the Borrower,  whereupon each
such LIBOR  Advance or Federal  Funds  Rate  Advance,  as the case may be,  will
automatically,  on the last day of the then existing  Interest Period  therefor,
Convert into a Base Rate Advance.

                  (iii) Upon the  occurrence  and during the  continuance of any
Event of Default,  (x) each LIBOR  Advance and each  Federal  Funds Rate Advance
will  automatically,  on the  last  day of the  then  existing  Interest  Period
therefor,  Convert into a Base Rate Advance and (y) the obligation of the Lender
to make,  or to Convert  Advances  into,  LIBOR  Advances or Federal  Funds Rate
Advances shall be suspended.

                  SECTION 2.09.  Increased Costs, Etc. (a) If, due to either (i)
the  introduction of or any change in, or in any written  interpretation  by any
central bank or other governmental  authority of competent  jurisdiction of, any
law or regulation or (ii) the compliance  with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law),  there shall be any increase in the cost to the Lender of agreeing to make
or of making,  funding or maintaining LIBOR Advances  (excluding for purposes of
this Section 2.09 any such increased  costs  resulting from (i) taxes covered by
the gross-up and indemnification  provisions of Section 2.11 and (ii) changes in
the basis of  taxation  of overall  net income or  overall  gross  income by the
United  States or by the foreign  jurisdiction  or state under the laws of which
the Lender is organized or has its  Applicable  Lending  Office or any political
subdivision thereof),  then the Borrower shall from time to time, upon demand by
the Lender,  pay to the Lender additional  amounts  sufficient to compensate the
Lender for such increased cost; provided, however, that if the Lender should

<PAGE>
                                       15

claim  additional  amounts  under this Section  2.09(a) the Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different  Applicable  Lending Office if the making
of such a  designation  would  avoid the need for, or reduce the amount of, such
increased  cost that may  thereafter  accrue  and would not,  in the  reasonable
judgment  of  the  Lender,  be  otherwise   disadvantageous  to  the  Lender.  A
certificate  as to the  amount of such  increased  cost set forth in  reasonable
detail,  submitted to the Borrower by the Lender,  shall be presumptive evidence
of such increased cost.

                  (b) If,  due to either (i) the  introduction  of or any change
in, or in any written  interpretation by any central bank or other  governmental
authority  of  competent  jurisdiction  of,  any law or  regulation  or (ii) the
compliance  with  any  guideline  or  request  from  any  central  bank or other
governmental  authority (whether or not having the force of law), there shall be
any increase in the amount of capital  required or expected to be  maintained by
the Lender as a result of or based upon the existence of the Lender's commitment
to lend hereunder and other  commitments of such type,  then, upon demand by the
Lender, the Borrower shall pay to the Lender,  from time to time as specified by
the Lender,  additional amounts sufficient to compensate the Lender in the light
of such circumstances,  to the extent that such increase in capital is allocable
to the existence of the Lender's commitment to lend hereunder.  A certificate as
to such amounts  submitted  to the  Borrower by the Lender shall be  presumptive
evidence of such increased cost.

                  (c) If,  with  respect to any LIBOR  Advance or Federal  Funds
Rate  Advance  the Lender  reasonably  determines  that the LIBO Rate or Federal
Funds  Interest  Rate,  as the case may be,  for any  Interest  Period  for such
Advance will not adequately reflect the cost to the Lender of making, funding or
maintaining  such LIBOR Advance or Federal  Funds Rate Advance,  as the case may
be, for such Interest Period, the Lender shall forthwith so notify the Borrower,
whereupon (i) such LIBOR Advance or Federal Funds Rate Advance,  as the case may
be, will  automatically,  on the last day of the then existing  Interest  Period
therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lender
to make,  or to Convert  Advances  into,  LIBOR  Advances or Federal  Funds Rate
Advances,  as the case may be, shall be suspended  until the Lender shall notify
the  Borrower  that  it has  determined  that  the  circumstances  causing  such
suspension no longer exist.

                  (d) Notwithstanding any other provision of this Agreement,  if
the  introduction of or any change in, or in any written  interpretation  by any
central bank or other governmental  authority of competent  jurisdiction of, any
law or  regulation  shall  make  it  unlawful,  or any  central  bank  or  other
governmental  authority shall assert that it is unlawful,  for the Lender or its
LIBOR Lending Office to perform its obligations hereunder to make LIBOR Advances
or to continue to fund or maintain  LIBOR  Advances  hereunder,  then, on notice
thereof  and  demand  therefor  by the  Lender to the  Borrower,  (i) each LIBOR
Advance will automatically,  upon such demand,  Convert into a Base Rate Advance
and (ii) the  obligation  of the Lender to make,  or to Convert  Advances  into,
LIBOR  Advances  shall be  suspended  until the Lender shall notify the Borrower
that it has determined that the circumstances  causing such suspension no longer
exist; provided, however, that, before making any such demand, the Lender agrees
to use reasonable  efforts  (consistent  with its 

<PAGE>
                                       16

internal policy and legal and regulatory  restrictions) to designate a different
LIBOR Lending Office if the making of such a designation  would allow the Lender
or its LIBOR Lending Office to continue to perform its obligations to make LIBOR
Advances or to continue to fund or maintain LIBOR Advances and would not, in the
reasonable judgment of the Lender, be otherwise significantly disadvantageous to
the Lender.

                  SECTION  2.10.  Payments  and  Computations.  (a) The Borrower
shall make each payment hereunder and under the Note,  irrespective of any right
of  counterclaim  or set-off,  not later than 11:00 A.M. (San Francisco time) on
the day when due in U.S.  dollars to the Lender at the Lender's  Account in same
day funds,  which shall be applied for the  account of the  Lender's  Applicable
Lending Office.

                  (b) The Borrower hereby  authorizes the Lender,  if and to the
extent  payment  owed to the Lender is not made when due  hereunder or under the
Note, to charge from time to time against any or all of the Borrower's  accounts
with the Lender any amount so due.  The  Lender  agrees  promptly  to notify the
Borrower after any such charge to the Borrower's  accounts;  provided,  however,
that the  failure to give such  notice  shall not affect  the  validity  of such
charge.

                  (c) All  computations  of  interest  based on the Base Rate or
Federal  Funds Rate shall be made by the Lender on the basis of a year of 365 or
366 days, as the case may be, and all computations of interest based on the LIBO
Rate and of fees shall be made by the Lender on the basis of a year of 360 days,
in each  case  for the  actual  number  of days  (including  the  first  day but
excluding the last day) occurring in the period, if any, for which such interest
or fees are  payable.  Each  determination  by the  Lender of an  interest  rate
hereunder  or fee  payable  under  Section  2.07,  as the case may be,  shall be
conclusive and binding for all purposes, absent manifest error.

                  (d) Whenever any payment  hereunder or under the Note shall be
stated to be due on a day other than a Business  Day, such payment shall be made
on the next  succeeding  Business Day, and such  extension of time shall in such
case be included in the  computation of payment of interest or accruing fees, as
the case may be; provided,  however, that, if such extension would cause payment
of interest on or principal of any LIBOR  Advance or Federal  Funds Rate Advance
to be made in the next following  calendar month,  such payment shall be made on
the next preceding Business Day.

                  SECTION 2.11.  Taxes. (a) Any and all payments by the Borrower
hereunder  shall be made, in accordance with Section 2.10, free and clear of and
without deduction for any and all future (after the date hereof) taxes,  levies,
imposts or withholdings, and all liabilities with respect thereto, excluding net
income  taxes that are  imposed on the Lender by the United  States or any other
governmental entity (all such non-excluded taxes, levies, imposts,  withholdings
and liabilities in respect of payments  hereunder being referred to as "Taxes").
If the Borrower  shall be required by law to deduct any Taxes from or in respect
of any sum  payable  hereunder  to the  Lender,  (i) the sum  payable  shall  be
increased  as may be  necessary  so that after  making all  required  deductions
(including deductions

<PAGE>
                                       17

applicable  to  additional  sums  payable  under this  Section  2.11) the Lender
receives  an  amount  equal  to the  sum it  would  have  received  had no  such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant  taxation  authority
or other authority in accordance with applicable law.

                  (b) In addition,  the Borrower shall pay any present or future
stamp,  documentary,  excise,  property  or  similar  taxes  that arise from any
payment  made  hereunder or from the  execution,  delivery or  registration  of,
performing  under, or otherwise with respect to, this Agreement or the Note (all
such non-excluded taxes being referred to as "Other Taxes").

                  (c) The  Borrower  shall  indemnify  the  Lender  for the full
amount of Taxes and Other Taxes, and for the full amount of taxes imposed by any
jurisdiction on amounts  payable under this Section 2.11,  imposed on or paid by
the Lender and any liability  (including  penalties,  additions to tax, interest
and expenses)  arising therefrom or with respect thereto.  This  indemnification
shall be made  within  30 days from the date the  Lender  makes  written  demand
therefor accompanied by a reasonably detailed explanation thereof.

                  (d) Within 30 days after the date of any payment of Taxes, the
Borrower  shall  furnish to the Lender,  at its  address  referred to in Section
7.02,  the  original  receipt of payment  thereof  or a  certified  copy of such
receipt, unless such payment has been made to or through the Lender. In the case
of any payment  hereunder by or on behalf of the Borrower  through an account or
branch  outside the United  States or by or on behalf of the Borrower by a payor
that is not a United States person, if the Borrower determines that no Taxes are
payable  in  respect  thereof,  the  Borrower  shall  furnish  to the  Lender  a
certificate of the Borrower  certifying  that such payment is exempt from Taxes.
For  purposes of this  subsection  (d) and  subsection  (e),  the terms  "United
States" and "United States person" shall have the meanings  specified in Section
7701 of the Internal Revenue Code.

                  (e) The Lender shall, on or prior to the date of its execution
and delivery of this Agreement, and from time to time thereafter as requested in
writing by the  Borrower  (but only so long  thereafter  as the  Lender  remains
lawfully able to do so), provide the Borrower with two original Internal Revenue
Service  forms 1001 or 4224,  as  appropriate,  or any  successor  or other form
prescribed by the Internal Revenue Service, certifying that the Lender is exempt
from or entitled to a reduced rate of United States  withholding tax on payments
pursuant to this  Agreement or the Note. If the forms  provided by the Lender at
the time the Lender first  becomes a party to this  Agreement  indicate a United
States interest withholding tax rate in excess of zero,  withholding tax at such
rate  shall be  considered  excluded  from  Taxes  unless  and until the  Lender
provides the appropriate  form certifying that a lesser rate applies,  whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods  governed by such form. If any form or document  referred to in this
subsection (e) requires the disclosure of  information,  other than  information
necessary to compute the tax payable and information required on the date hereof
by  Internal  Revenue  Service  form 1001 or 4224,  that the  Lender  reasonably
considers  to be
<PAGE>
                                       18

confidential, the Lender shall give notice thereof to the Borrower and shall not
be obligated to include in such form or document such confidential information.

                  (f) For any period with respect to which the Lender has failed
to provide the Borrower with the  appropriate  form  described in subsection (e)
(other than if such failure is due to a change in law  occurring  after the date
on which a form originally was required to be provided or if such form otherwise
is not  required  under  subsection  (e)),  the Lender  shall not be entitled to
indemnification under subsection (a) or (c) with respect to Taxes imposed by the
United  States by reason of such  failure;  provided,  however,  that should the
Lender become subject to Taxes because of its failure to deliver a form required
hereunder,  the Borrower  shall take such steps as the Lender  shall  reasonably
request to assist the Lender to recover such Taxes.

                  (g) Without  prejudice to the survival of any other  agreement
hereunder,  the agreements and obligations of the Borrower  contained in Section
2.09 and this  Section  2.11 shall  survive  the  payment in full of  principal,
interest and all other amounts payable hereunder;  provided,  however,  that the
Borrower's obligation in respect of any claim under Section 2.09 or this Section
2.11  shall  terminate  on the  earlier  to occur of (i) the 180th day after the
expiration of all applicable periods under statutes of limitations applicable to
the matters  underlying  such claims and (ii) the 180th day after any officer of
the Lender having principal  responsibility  for administering this Agreement on
behalf of the Lender  has  actual  knowledge  of the facts  giving  rise to such
claim. The word "hereunder" as used in this Section 2.11 also includes under the
Note.

                  SECTION  2.12.  Use of Proceeds.  The proceeds of the Advances
shall be available  solely to provide  working  capital for the Borrower and for
general corporate purposes of the Borrower.

                  SECTION  2.13.  Extension of Scheduled  Termination  Date.  At
least  45 but  not  more  than 75  days  prior  to the  then  current  Scheduled
Termination  Date, the Borrower,  by written  notice to the Lender,  may request
that the Scheduled Termination Date be extended one calendar year from such then
current  Scheduled  Termination  Date. The Lender shall in turn,  within 30 days
after receipt of such  extension  request  notice from the Borrower,  notify the
Borrower in writing regarding whether the Lender will consent to such extension.
If, and only if, the Lender  consents in writing to such extension  prior to the
30th day after its receipt of such  extension  request notice from the Borrower,
the Scheduled  Termination  Date shall be so extended for such one calendar year
and references  herein to the "Scheduled  Termination  Date" shall refer to such
"Scheduled  Termination  Date" as so extended.  It is understood that the Lender
shall not have any  obligation  whatsoever  to agree to any request  made by the
Borrower for an extension of the Scheduled Termination Date.
<PAGE>
                                       19

                                   ARTICLE III

                              CONDITIONS OF LENDING

                  SECTION 3.01.  Conditions Precedent to Initial Borrowing.  The
obligation  of the  Lender to make an  Advance on the  occasion  of the  initial
Borrowing  hereunder is subject to the satisfaction of the following  conditions
precedent before or concurrently with the initial Borrowing:

                  (a) The Borrower shall have paid all accrued fees and expenses
         of the Lender (including the accrued fees (up to an amount equal to not
         more than the lesser of (x) $19,000 and (y) the sum of $14,000 plus 50%
         of such fees in excess of  $14,000)  and  expenses  of  counsel  to the
         Lender)  to  the  extent  requested  as of  the  date  of  the  initial
         Borrowing.

                  (b) The Lender shall have received on or before the day of the
         initial Borrowing the following,  each dated such day (unless otherwise
         specified), in form and substance satisfactory to the Lender:

                           (i) A Note  payable to the order of the Lender in the
                  face amount of the Lender's Commitment.

                           (ii) Certified copies of the resolutions of the Board
                  of Directors of the Borrower, approving this Agreement and the
                  Note,  and  of  all  documents   evidencing   other  necessary
                  corporate  action  and  governmental  and  other  third  party
                  approvals and consents, if any, with respect to this Agreement
                  and the Note.

                           (iii) A copy of a  certificate  of the  Secretary  of
                  State of the  jurisdiction  of the  Borrower's  incorporation,
                  dated  reasonably  near  the  date of the  initial  Borrowing,
                  listing the charter of the Borrower and each amendment thereto
                  on file in his office and certifying  that (A) such amendments
                  are the only  amendments to the Borrower's  charter on file in
                  the Secretary of State's office, (B) the Borrower has paid all
                  franchise  taxes to the date of such  certificate  and (C) the
                  Borrower is duly  incorporated  and in good standing under the
                  laws of the State of the jurisdiction of its incorporation.

                           (iv) A certificate of the Borrower,  signed on behalf
                  of the Borrower by its Secretary or any  Assistant  Secretary,
                  dated the date of the initial  Borrowing (the  statements made
                  in  which  certificate  shall be true on and as of the date of
                  the initial  Borrowing),  certifying  as to (A) the absence of
                  any  amendments to the charter of the Borrower  since the date
                  of the Secretary of State's certificate referred to in Section
                  3.01(b)(iii)  and (B) a true and correct copy of the bylaws of
                  the  Borrower  as  in  effect  on  the  date  of  the  initial
                  Borrowing.
<PAGE>
                                       20

                           (v) A  certificate  of the  Secretary or an Assistant
                  Secretary  of the  Borrower  certifying  the  names  and  true
                  signatures of the officers of the Borrower  authorized to sign
                  this  Agreement,  the  Note  and  the  other  documents  to be
                  delivered hereunder.

                           (vi) A certificate of the Borrower certifying that on
                  and as of the date of such  certificate  no event has occurred
                  or  circumstance  exists that would  reasonably be expected to
                  result in any Material Adverse Change.

                  SECTION  3.02.  Conditions  Precedent to Each  Borrowing.  The
obligation  of the Lender to make an Advance on the  occasion of each  Borrowing
(including  the initial  Borrowing)  shall be subject to the further  conditions
precedent that on the date of such Borrowing (a) the following  statements shall
be true (and each of the giving of the  applicable  Notice of Borrowing  and the
acceptance by the Borrower of the proceeds of such Borrowing shall  constitute a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such Borrowing such statements are true):

                  (i) the representations and warranties contained in Article IV
         hereof  are  correct on and as of such  date,  before and after  giving
         effect  to  such  Borrowing  and to  the  application  of the  proceeds
         therefrom, as though made on and as of such date ; and

                  (ii) no event has occurred and is continuing,  or would result
         from such Borrowing or from the application of the proceeds  therefrom,
         that constitutes a Default;

and (b) the Lender shall have received such other  approvals or documents as the
Lender may reasonably request.


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

                  SECTION 4.01.  Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:

                  (a) The  Borrower is a  corporation  duly  organized,  validly
         existing  and in good  standing  under  the  laws  of the  jurisdiction
         indicated at the beginning of this Agreement.

                  (b) The execution, delivery and performance by the Borrower of
         this Agreement and the Note are within the Borrower's corporate powers,
         have been duly authorized by all necessary corporate action, and (i) do
         not and will not contravene,  conflict with or result in a breach of or
         default  under (a) the  Borrower's  charter or
<PAGE>
                                       21

         by-laws or (b) except in the case of any  noncompliance  that would not
         reasonably be expected to have a Material  Adverse  Effect,  any law or
         any contractual  provision  binding on or affecting the Borrower or any
         of its Consolidated Subsidiaries and (ii) do not and will not result in
         or require the creation or imposition of any Lien upon or in respect of
         any  of  the  properties  of the  Borrower  or any of its  Consolidated
         Subsidiaries.  . (c) No  authorization  or approval or other action by,
         and no notice to or filing with, any governmental authority, regulatory
         body or other third party is required for the due  execution,  delivery
         and performance by the Borrower of this Agreement or the Note.

                  (d) This Agreement is, and the Note when  delivered  hereunder
         will be, the  legal,  valid and  binding  obligations  of the  Borrower
         enforceable  against the Borrower in accordance  with their  respective
         terms, subject to the effect of any applicable bankruptcy,  insolvency,
         reorganization, liquidation, readjustment of debt, moratorium and other
         similar laws affecting creditors' rights generally and to the effect of
         general principles of equity.

                  (e) The  Consolidated  balance  sheets of the Borrower and its
         Subsidiaries  as at December  31,  1995,  and the related  Consolidated
         statements   of  income  and  cash  flows  of  the   Borrower  and  its
         Subsidiaries for the fiscal year then ended,  accompanied by an opinion
         of Ernst & Young, independent public accountants,  and the Consolidated
         balance  sheets of the  Borrower  and its  Subsidiaries  as at June 30,
         1996, and the related Consolidated  statements of income and cash flows
         of the  Borrower  and its  Subsidiaries  for the six months then ended,
         copies  of all of which  have  been  furnished  to the  Lender,  fairly
         present the financial condition of the Borrower and its Subsidiaries as
         at such dates and the results of the operations of the Borrower and its
         Subsidiaries for the periods ended on such dates (subject,  in the case
         of such  statements as at June 30, 1996, to customary  fiscal  year-end
         adjustments),  all in accordance  with  generally  accepted  accounting
         principles  consistently  applied,  and since June 30, 1996,  there has
         been no Material Adverse Change.

                  (f)  There is no  pending  or,  to the  Borrower's  knowledge,
         threatened  action,  suit,  investigation,   litigation  or  proceeding
         affecting the Borrower or any of its Consolidated  Subsidiaries  before
         any court, governmental department,  commission,  board, bureau, agency
         or instrumentality,  domestic or foreign, or any arbitrator which would
         reasonably be expected to result in a Material Adverse Effect.

                  (g) No  proceeds of the  Advances  will be used to acquire any
         equity security,  including, without limitation, any equity security of
         a class which is  registered  pursuant to Section 12 of the  Securities
         Exchange  Act of 1934,  except to the extent  permitted  under  Section
         5.03(b).
<PAGE>
                                       22

                  (h) The  Borrower is not engaged in the  business of extending
         credit for the purpose of purchasing  or carrying  margin stock (within
         the meaning of  Regulation  U issued by the Board of  Governors  of the
         Federal Reserve  System),  and no proceeds of the Advances will be used
         to purchase or carry any margin stock or to extend credit to others for
         the purpose of purchasing or carrying any margin stock.

                  (i) No ERISA Event has occurred or is  reasonably  expected to
         occur with respect to any Plan.

                  (j) As of the last annual actuarial valuation date, the funded
         current liability percentage, as defined in Section 302(d)(8) of ERISA,
         of each Plan exceeds 90% and there has been no Material  Adverse Change
         arising from the funding status of any such Plan since such date.

                  (k) Neither the Borrower nor any ERISA  Affiliate has incurred
         or is  reasonably  expected to incur any  Withdrawal  Liability  to any
         Multiemployer Plan.

                  (l)  Neither the  Borrower  nor any ERISA  Affiliate  has been
         notified by the sponsor of a Multiemployer Plan that such Multiemployer
         Plan is in reorganization or has been terminated, within the meaning of
         Title  IV of  ERISA,  and no  such  Multiemployer  Plan  is  reasonably
         expected  to be in  reorganization  or to  be  terminated,  within  the
         meaning of Title IV of ERISA.

                  (m) Except as set forth in the financial  statements  referred
         to in this  Section  4.01 and in Section  5.01,  the  Borrower  and its
         Consolidated  Subsidiaries  have no material  liability with respect to
         "expected post retirement  benefit  obligations"  within the meaning of
         Statement of Financial Accounting Standards No. 106.

                  (n) The  operations and properties of the Borrower and each of
         its Consolidated  Subsidiaries comply in all material respects with all
         applicable  Environmental Laws and Environmental  Permits, all material
         past  non-compliance  with such  Environmental  Laws and  Environmental
         Permits has been  resolved  without  material  ongoing  obligations  or
         costs, and no circumstances  exist that would reasonably be expected to
         form the basis of an  Environmental  Action against the Borrower or any
         of its Consolidated  Subsidiaries or any of their properties that would
         reasonably be expected to have a Material Adverse Effect.

                  (o)  Neither  the  Borrower   nor  any  of  its   Consolidated
         Subsidiaries is undertaking, and has not completed, either individually
         or together with other potentially responsible parties, any remedial or
         response action relating to any actual or threatened release, discharge
         or disposal of Hazardous  Materials at any site, location or operation,
         either  voluntarily  or  pursuant to the order of any  governmental  or
         regulatory  authority or the  requirements  of any  Environmental  Law,
         which such release,  discharge or disposal would reasonably be expected
         to  have  a  Material  Adverse  Effect;  and  all  Hazardous  Materials
         generated,  used,  treated,  handled or 
<PAGE>
                                       23

         stored  at,  or  transported  to or from,  any  property  currently  or
         formerly  owned or operated by the Borrower or any of its  Consolidated
         Subsidiaries  have  been  disposed  of  in  a  manner  that  would  not
         reasonably be expected to result in a Material Adverse Effect.


                                    ARTICLE V

                            COVENANTS OF THE BORROWER

                  SECTION 5.01. Affirmative Covenants.  So long as any amount of
principal or interest or other amount  shall remain  payable  hereunder or under
the Note or the Lender shall have any Commitment  hereunder,  the Borrower will,
unless the Lender shall otherwise consent in writing:

                  (a) Compliance with Laws, Etc.  Comply,  and cause each of its
         Consolidated  Subsidiaries to comply, in all material respects with all
         applicable  laws,  rules,  regulations  and orders,  such compliance to
         include,  without  limitation,  compliance with ERISA and the Racketeer
         Influenced  and Corrupt  Organizations  Chapter of the Organized  Crime
         Control  Act of 1970,  except  for  such  noncompliance  as  would  not
         reasonably be expected to result in a Material Adverse Effect.

                  (b) Payment of Taxes,  Etc. Pay and discharge,  and cause each
         of  its  Consolidated   Subsidiaries  (except  Dastek(M))  to  pay  and
         discharge,  before the same  shall  become  delinquent,  (i) all taxes,
         assessments and governmental  charges or levies imposed upon it or upon
         its  property  and (ii) all lawful  claims  that,  if unpaid,  would be
         likely by law to become a Lien upon its  property;  provided,  however,
         that  neither the  Borrower  nor any of its  Consolidated  Subsidiaries
         shall be required to pay or discharge any such tax, assessment,  charge
         or  claim  that  is  being  contested  in  good  faith  and  by  proper
         proceedings and as to which appropriate  reserves are being maintained,
         unless and until any Lien resulting therefrom attaches to its property,
         becomes  enforceable  against its other creditors and secures an amount
         that  would  be  material  to  the   Borrower   and  its   Consolidated
         Subsidiaries, taken as a whole.

                  (c) Compliance with Environmental Laws. Comply, and cause each
         of its  Consolidated  Subsidiaries  and all lessees  and other  Persons
         operating  or  occupying  its  properties  to comply,  in all  material
         respects,  with all  applicable  Environmental  Laws and  Environmental
         Permits;   obtain  and  renew  and  cause  each  of  its   Consolidated
         Subsidiaries to obtain and renew all  Environmental  Permits  necessary
         for its operations and properties;  and conduct,  and cause each of its
         Subsidiaries  to  conduct,  any  investigation,   study,  sampling  and
         testing, and undertake any cleanup,  removal,  remedial or other action
         necessary to remove and clean up all  Hazardous  Materials  from any of
         its   properties,   in  accordance   with  the   requirements   of  all
         Environmental  Laws  except,  in each case,  where the failure to do so
         would not  reasonably  be  expected  to result  in a  Material  Adverse
         Effect;  provided,  however,  that  neither the 
<PAGE>
                                       24

         Borrower nor any of its Consolidated  Subsidiaries shall be required to
         undertake  any such cleanup,  removal,  remedial or other action to the
         extent that its  obligation  to do so is being  contested in good faith
         and by proper proceedings and appropriate reserves are being maintained
         with respect to such circumstances.

                  (d) Maintenance of Insurance.  Maintain, and cause each of its
         Consolidated  Subsidiaries  (except  Dastek(M)) to maintain,  insurance
         with responsible and reputable  insurance  companies or associations in
         such amounts and covering such risks as is usually carried by companies
         engaged in similar businesses and owning similar properties in the same
         general  areas in which the  Borrower or such  Consolidated  Subsidiary
         operates.

                  (e)  Preservation of Corporate  Existence,  Etc.  Preserve and
         maintain,  and  cause  each of its  Consolidated  Subsidiaries  (except
         Dastek(M) and Dastek  Holding  Company) to preserve and  maintain,  its
         existence, legal structure, legal name, rights (charter and statutory),
         permits, licenses, approvals,  privileges and franchises except, in the
         case of any Consolidated  Subsidiary,  where failure to do so would not
         reasonably  be  expected  to  result  in  a  Material  Adverse  Effect;
         provided,  however, that the Borrower and its Consolidated Subsidiaries
         may  consummate  any merger or  consolidation  permitted  under Section
         5.03(a).

                  (f) Visitation Rights. At any reasonable time, upon reasonable
         prior notice, and from time to time, permit the Lender or any agents or
         representatives  thereof to examine  and make  copies of and  abstracts
         from the records and books of account of, and visit the  properties of,
         the Borrower and any of its Consolidated Subsidiaries (except Dastek(M)
         and Dastek Holding Company),  and to discuss the affairs,  finances and
         accounts  of the  Borrower  and  any of its  Consolidated  Subsidiaries
         (except  Dastek(M)  and  Dastek  Holding  Company)  with  any of  their
         officers  or  directors  and with their  independent  certified  public
         accountants.

                  (g) Keeping of Books. Keep, and cause each of its Consolidated
         Subsidiaries to keep, proper books of record and account, in which full
         and correct entries shall be made of all financial transactions and the
         assets  and  business  of  the  Borrower  and  each  such  Consolidated
         Subsidiary in accordance with GAAP.

                  (h) Maintenance of Properties, Etc. Maintain and preserve, and
         cause  each of its  Consolidated  Subsidiaries  (except  Dastek(M)  and
         Dastek Holding Company) to maintain and preserve, all of its properties
         that are used or useful in the conduct of its  business in good working
         order and  condition,  except  for  ordinary  wear and  except  for any
         dispositions  of,  or  alterations  in,  such  properties  as would not
         reasonably be expected to result in a Material Adverse Effect.

                  (i)      Reporting Requirements.  Furnish to the Lender:
<PAGE>
                                       25

                           (i) as soon as  available  and in any event within 60
                  days after the end of each of the first three quarters of each
                  fiscal year of the Borrower,  Consolidated  balance  sheets of
                  the Borrower and its  Consolidated  Subsidiaries as of the end
                  of such quarter and Consolidated statements of income and cash
                  flows of the Borrower and its  Consolidated  Subsidiaries  for
                  the period  commencing at the end of the previous  fiscal year
                  and  ending  with the end of such  quarter,  certified  by the
                  chief  financial  officer  of  the  Borrower  as  having  been
                  prepared  in  accordance  with  GAAP,   together  with  (i)  a
                  certificate  of said officer  stating that no Default or Event
                  of Default has occurred and is continuing  or, if a Default or
                  Event of Default has occurred and is  continuing,  a statement
                  as to the nature  thereof and the action that the Borrower has
                  taken and  proposes  to take with  respect  thereto and (ii) a
                  schedule,  in  substantially  the form of Exhibit  D,  setting
                  forth the  computations  used by the  Borrower in  determining
                  compliance,  as at the end of such  fiscal  quarter,  with the
                  covenants contained in Section 5.02;

                           (ii) as soon as available and in any event within 120
                  days after the end of each fiscal year of the Borrower, a copy
                  of the annual  audit report for such year for the Borrower and
                  its Consolidated Subsidiaries, containing Consolidated balance
                  sheets of the Borrower and its Consolidated Subsidiaries as at
                  the end of such fiscal  year and  Consolidated  statements  of
                  income and cash  flows of the  Borrower  and its  Consolidated
                  Subsidiaries for such fiscal year, in each case accompanied by
                  an  opinion  reasonably  acceptable  to the  Lender of Ernst &
                  Young or other  independent  public  accountants of recognized
                  standing  acceptable  to  the  Lender,  together  with  (i)  a
                  certificate  of the chief  financial  officer of the  Borrower
                  stating  that no Default or Event of Default has  occurred and
                  is  continuing  or,  if a  Default  or  Event of  Default  has
                  occurred  and is  continuing,  a  statement  as to the  nature
                  thereof  and the  action  that  the  Borrower  has  taken  and
                  proposes to take with respect thereto and (ii) a schedule,  in
                  substantially  the form of  Exhibit  D,  setting  forth of the
                  computations  used by the Borrower in determining  compliance,
                  as at the end of the such  fiscal  year,  with  the  covenants
                  contained in Section 5.02;

                           (iii) as soon as  possible  and in any  event  within
                  three  Business  Days  occurrence  of each Default or Event of
                  Default or any event,  development  or  occurrence  reasonably
                  likely to have a Material  Adverse  Effect  continuing  on the
                  date of such  statement,  a statement  of the chief  financial
                  officer of the Borrower  setting forth the material details of
                  such  Default,  Event of  Default  or  event,  development  or
                  occurrence  and the  action  that the  Borrower  has taken and
                  proposes to take with respect thereto;

                           (iv)  promptly  after the sending or filing  thereof,
                  copies  of all  proxy  statements,  financial  statements  and
                  reports  that  the   Borrower  or  any  of  its   Consolidated
                  Subsidiaries  sends in a general  distribution to its security
                  holders, and copies of all reports and registration statements
                  that  the  Borrower  or any 
<PAGE>
                                       26

                  of its Consolidated Subsidiaries files with the Securities and
                  Exchange Commission or any national securities exchange;

                           (v) (i)  promptly and in any event within 10 Business
                  Days after the Borrower or any ERISA  Affiliate knows that any
                  ERISA Event has occurred,  a statement of the chief  financial
                  officer of the  Borrower  describing  such ERISA Event and the
                  action,  if any, that the Borrower or such ERISA Affiliate has
                  taken and  proposes  to take  with  respect  thereto  and (ii)
                  promptly after the filing or receiving thereof,  copies of all
                  material  reports and notices  that the Borrower or any of its
                  Consolidated  Subsidiaries files under ERISA with the Internal
                  Revenue Service or the PBGC or the U.S. Department of Labor or
                  that  the  Borrower  or any of its  Consolidated  Subsidiaries
                  receives from the PBGC; and

                           (vi) such other information  respecting the condition
                  or operations,  financial or otherwise, of the Borrower or any
                  of its  Consolidated  Subsidiaries as the Lender may from time
                  to time reasonably request.

                  SECTION 5.02.  Financial  Covenants.  So long as any amount of
principal or interest or other amount  shall remain  payable  hereunder or under
the Note or the Lender shall have any Commitment  hereunder,  the Borrower will,
unless the Lender shall otherwise consent in writing:

                  (a) Fixed Charge Coverage Ratio.  Maintain, at the end of each
         fiscal quarter of the Borrower,  a ratio of Consolidated  EBITDA of the
         Borrower and its Consolidated  Subsidiaries for the four-quarter period
         of such  fiscal  quarter and the  immediately  preceding  three  fiscal
         quarters of the Borrower to the sum of (i)  interest  expense plus (ii)
         scheduled  principal amounts payable, in each case, by the Borrower and
         its Consolidated  Subsidiaries during such four-quarter  period, of not
         less than 2.00 to 1.00.

                  (b) Debt to Capitalization  Ratio.  Maintain,  at all times, a
         ratio  of  the  Consolidated  Indebtedness  of  the  Borrower  and  its
         Consolidated  Subsidiaries to the Consolidated Total  Capitalization of
         the Borrower and its Consolidated Subsidiaries of not more that 0.60 to
         1.00.

                  (c)  Tangible Net Worth.  Maintain,  at the end of each fiscal
         quarter  of the  Borrower,  a  Consolidated  Tangible  Net Worth of the
         Borrower and its Consolidated  Subsidiaries of not less that the sum of
         (i) $400,000,000 plus (ii) 50% of the cumulative  Consolidated positive
         net income of the Borrower and its  Consolidated  Subsidiaries  for the
         fiscal year of the  Borrower  ending on or most  recently  prior to the
         last day of such fiscal quarter.

                  SECTION  5.03.  Negative  Covenants.  So long as any amount of
principal or interest or other amount  shall remain  payable  hereunder or under
the Note or the Lender
<PAGE>
                                       27

shall have any Commitment hereunder,  the Borrower will not, without the written
consent of the Lender:

                  (a)  Mergers,  Etc.  Merge or  consolidate  with or  into,  or
         convey,  transfer,  lease  or  otherwise  dispose  of  (whether  in one
         transaction or in a series of transactions) all or substantially all of
         its assets (whether now owned or hereafter acquired) to, any Person, or
         permit any of its Consolidated  Subsidiaries  (except  Dastek(M)) to do
         so, except that any Subsidiary of the Borrower may merge or consolidate
         with or into, or dispose of assets to, any  Consolidated  Subsidiary of
         the Borrower and except that any  Subsidiary  of the Borrower may merge
         into or dispose of assets to the Borrower,  provided in each case that,
         immediately  after  giving  effect  to such  proposed  transaction,  no
         Default  or Event of  Default  would  exist and in the case of any such
         merger to which the Borrower is a party,  the Borrower is the surviving
         corporation.

                  (b)  Use of  Proceeds.  Use the  proceeds  of any  Advance  to
         acquire any equity security,  including, without limitation, any equity
         security of a class which is  registered  pursuant to Section 12 of the
         Securities  Exchange Act of 1934 unless prior to such  acquisition  the
         Lender  shall  have  received  written  evidence,  in  form  reasonably
         satisfactory to the Lender,  of the prior approval of such acquisition,
         to the  extent  required  under  applicable  law or the  organizational
         documents  of the  issuer of such  equity  security  for the  effective
         consummation  of  such  acquisition,  by  the  board  of  directors  or
         equivalent  governing  body of such  issuer and the holders of stock or
         other equity of such issuer.

                  (c) Dastek(M) and Dastek Holding  Company.  Make or permit any
         material  increase  in the  investment  of the  Borrower  or any of its
         Subsidiaries   in  Dastek(M)  or  Dastek  Holding  Company  or  in  the
         obligations  of  Dastek(M)  or  Dastek  Holding  Company  owing  to the
         Borrower or any of its Subsidiaries or permit any material  increase in
         the  operations of or business of Dastek(M) or Dastek  Holding  Company
         unless,  in any case,  the Borrower  shall have  notified the Lender of
         such  increase in  investment  or operations in respect of Dastek(M) or
         Dastek  Holding  Company,  as the case may be,  in a notice  dated  and
         delivered before the  effectiveness of such increase (such notice being
         a "Dastek Increase Notice").

                  SECTION 5.04.  Effect of Dastek Increase Notice.  In the event
that the  Borrower  should  deliver  a Dastek  Increase  Notice  in  respect  of
Dastek(M) or Dastek Holding  Company,  as the case may be, then (i) on and after
the date of such Dastek Increase Notice, in the case of a Dastek Increase Notice
in respect of  Dastek(M),  the terms of this  Agreement  shall  apply,  and this
Agreement  shall be construed,  without regard to any exception set forth in the
terms  hereof  for  Dastek  (M) and (ii) on and  after  the date of such  Dastek
Increase  Notice,  in the case of a Dastek  Increase Notice in respect of Dastek
Holding  Company,  the terms of this Agreement  shall apply,  and this Agreement
shall be  construed,  without  regard  to any  exception  set forth in the terms
hereof for Dastek Holding Company.
<PAGE>
                                       28

                                   ARTICLE VI

                                EVENTS OF DEFAULT

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

                  (a) The  Borrower  (i) shall fail to pay any  principal of the
         Advances  under this Agreement when the same becomes due and payable or
         (ii)  shall  fail  to pay  any  interest  on the  Advances  under  this
         Agreement or any fee payable  hereunder within five Business Days after
         such interest or fee becomes due and payable; or

                  (b) Any representation or warranty made by the Borrower herein
         or by the Borrower (or any of its  officers)  in  connection  with this
         Agreement or in any  certificate  or document  delivered in  connection
         herewith  shall prove to have been  incorrect in any  material  respect
         when made; or

                  (c) The  Borrower  shall fail to  perform  or observe  (i) any
         term, covenant or agreement contained in Sections 5.01(a),  (c) or (e),
         Section  5.02 or  Section  5.03 or (ii) any  other  term,  covenant  or
         agreement  contained  in this  Agreement on its part to be performed or
         observed if such  failure  referred to in this clause (ii) shall remain
         unremedied  for 30 days after  written  notice  thereof shall have been
         given to the Borrower by the Lender; or

                  (d)  The  Borrower  or any of  its  Consolidated  Subsidiaries
         (except  Dastek(M))  shall fail to pay (after written demand  therefor)
         any amount on any  Indebtedness  (other  than  Indebtedness  under this
         Agreement)  under any  agreement,  document or  instrument  (or related
         group thereof) providing for Indebtedness in an aggregate  principal or
         notional  amount of  $20,000,000  or more when the same becomes due and
         payable   (whether  by   scheduled   maturity,   required   prepayment,
         acceleration,  demand or  otherwise),  and such failure shall  continue
         after the applicable grace period, if any, specified in the agreements,
         documents or instruments  relating to such  Indebtedness;  or any other
         event  shall  occur or  condition  shall  exist  under  any  agreement,
         document  or  instrument  relating to any such  Indebtedness  and shall
         continue after the applicable grace period,  if any,  specified in such
         agreement,  document  or  instrument,  if the  effect of such  event or
         condition  is to  accelerate,  or to permit  the  acceleration  of, the
         maturity  of such  Indebtedness;  or any  such  Indebtedness  shall  be
         declared in a written  notice to be due and  payable,  or required in a
         written  notice to be  prepaid  (other  than by a  regularly  scheduled
         required prepayment), prior to the stated maturity thereof; or

                  (e)  The  Borrower  or any of  its  Consolidated  Subsidiaries
         (except  Dastek(M))  shall  generally  not pay its debts as such  debts
         become due, or shall  admit in writing its  inability  to pay its debts
         generally,  or shall  make a  general  assignment  for the  benefit  of
         creditors;  or any  proceeding  shall be  instituted  by or against the
<PAGE>
                                       29

         Borrower or any of its  Consolidated  Subsidiaries  (except  Dastek(M))
         seeking  to  adjudicate   it  a  bankrupt  or  insolvent,   or  seeking
         liquidation,  winding  up,  reorganization,   arrangement,  adjustment,
         protection,  relief,  or  composition  of it or its debts under any law
         relating  to  bankruptcy,  insolvency  or  reorganization  or relief of
         debtors, or seeking the entry of an order for relief or the appointment
         of a receiver,  trustee,  custodian or other similar official for it or
         for any  substantial  part of its property and, in the case of any such
         proceeding  instituted  against it (but not  instituted by it),  either
         such proceeding shall remain undismissed or unstayed for a period of 30
         days,  or any of the  actions  sought  in such  proceeding  (including,
         without  limitation,  the entry of an order for relief against,  or the
         appointment of a receiver, trustee, custodian or other similar official
         for, it or for any  substantial  part of its property)  shall occur; or
         the Borrower or any of its Consolidated Subsidiaries (except Dastek(M))
         shall take  corporate  action to authorize any of the actions set forth
         above in this subsection (e); or

                  (f) Any single  judgment  or order for the payment of money in
         excess  of $15  million  (and  which is not  covered  at  least  75% by
         insurance  or an  indemnity of a Person that is not an Affiliate of the
         Borrower)  shall  be  rendered  against  the  Borrower  or  any  of its
         Consolidated Subsidiaries (except Dastek(M)) and either (i) enforcement
         proceedings  shall  have  been  commenced  by any  creditor  upon  such
         judgment or order or (ii) there  shall be any period of 30  consecutive
         days during which a stay of enforcement  of such judgment or order,  by
         reason of a pending appeal or otherwise, shall not be in effect; or

                  (g) (i) any  Person or two or more  Persons  acting in concert
         shall have acquired  beneficial  ownership  (within the meaning of Rule
         13d-3 of the  Securities and Exchange  Commission  under the Securities
         Exchange Act of 1934),  directly or indirectly,  of Voting Stock of the
         Borrower  (or other  securities  convertible  into such  Voting  Stock)
         representing  50% or more of the  combined  voting  power of all Voting
         Stock  of  the  Borrower;  or  (ii)  during  any  period  of  up  to 24
         consecutive  months,  commencing  before  or  after  the  date  of this
         Agreement,  individuals  who at the beginning of such  24-month  period
         were directors of the Borrower shall cease for any reason to constitute
         a  majority  of the  board  of  directors  of the  Borrower  (excluding
         ordinary course attrition of directors, which shall not be counted when
         determining  if the test in this  clause  (ii) has been  satisfied  and
         which shall not in any way be restricted by this clause (ii)); or (iii)
         any Person or two or more Persons acting in concert shall have acquired
         by  contract or  otherwise,  or shall have  entered  into a contract or
         arrangement  that,  upon  consummation,  will  result  in its or  their
         acquisition of the power to exercise,  directly or  indirectly,  50% or
         more of the combined  voting power of all Voting Stock of the Borrower;
         or

                  (h) any ERISA Event shall have occurred with respect to a Plan
         and the sum  (determined  as of the date of  occurrence  of such  ERISA
         Event) of the  Insufficiency of such Plan and the  Insufficiency of any
         and all other  Plans with  respect to which an ERISA  Event  shall have
         occurred and then exist (or the liability
<PAGE>
                                       30

         of the Borrower and the ERISA  Affiliates  related to such ERISA Event)
         exceeds $15 million; or

                  (i) the  Borrower  or any  ERISA  Affiliate  shall  have  been
         notified by the sponsor of a  Multiemployer  Plan that it has  incurred
         Withdrawal Liability to such Multiemployer Plan in an amount that, when
         aggregated with all other amounts  required to be paid to Multiemployer
         Plans by the Borrower and the ERISA Affiliates as Withdrawal  Liability
         (determined as of the date of such  notification),  exceeds $15 million
         or requires per annum payments exceeding $15 million; or

                  (j) the  Borrower  or any  ERISA  Affiliate  shall  have  been
         notified by the sponsor of a Multiemployer Plan that such Multiemployer
         Plan is in reorganization or is being terminated, within the meaning of
         Title  IV  of  ERISA,  and  as  a  result  of  such  reorganization  or
         termination the aggregate annual  contributions of the Borrower and the
         ERISA  Affiliates  to  all   Multiemployer   Plans  that  are  then  in
         reorganization  or being terminated have been or will be increased over
         the amounts  contributed to such Multiemployer Plans for the plan years
         of such  Multiemployer  Plans  immediately  preceding  the plan year in
         which such  reorganization or termination occurs by an amount exceeding
         $15 million;

then,  and in any such  event,  the Lender (i) may,  by notice to the  Borrower,
declare any  obligation  to make Advances to be  terminated,  whereupon the same
shall forthwith terminate, and (ii) may, by notice to the Borrower,  declare the
Advances  and the Note,  all  interest  thereon  and all other  amounts  payable
thereunder and under this  Agreement to be forthwith due and payable,  whereupon
the Advances and the Note,  all such  interest and all such amounts shall become
and be  forthwith  due and  payable,  without  presentment,  demand,  protest or
further  notice of any kind,  all of which are  hereby  expressly  waived by the
Borrower;  provided,  however, that in the event of an actual or deemed entry of
an order for relief with  respect to the Borrower  under the Federal  Bankruptcy
Code (11 U.S.C.  ss.ss.  101 et seq.,  as amended,  or its  successor),  (A) any
obligation of the Lender to make any Advance shall  automatically  be terminated
and (B) the Advances and the Note,  all such interest and all such amounts shall
automatically  become  and be due  and  payable,  without  presentment,  demand,
protest or any notice of any kind, all of which are hereby  expressly  waived by
the Borrower.


                                   ARTICLE VII

                                  MISCELLANEOUS

                  SECTION 7.01.  Amendments,  Etc. No amendment or waiver of any
provision  of this  Agreement or the Note,  nor consent to any  departure by the
Borrower therefrom,  shall in any event be effective unless the same shall be in
writing  and signed by the  Lender,  and then such  waiver or  consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given.
<PAGE>
                                       31

                  SECTION   7.02.   Notices,   Etc.   All   notices   and  other
communications  provided for hereunder shall be in writing  (including  telecopy
communication) and mailed,  telecopied or delivered,  if to the Borrower, at its
address at 275 South Hillview  Drive,  Milpitas,  California  95035,  Attention:
David  Allen,  Treasurer;  if to the Lender,  at its  address at 101  California
Street, Suite 4000, San Francisco,  California 94111, Attention: Mark Dirsa; or,
as to either  party,  at such other address as shall be designated by such party
in a written  notice to the other  party.  All such  notices and  communications
shall,  when mailed or  telecopied,  be effective when deposited in the mails or
transmitted by telecopier,  respectively, except that notices and communications
to the  Lender  pursuant  to  Article  II or III  shall not be  effective  until
received by the Lender. Delivery by telecopier of an executed counterpart of any
amendment  or waiver of any  provision of this  Agreement  shall be effective as
delivery of a manually executed counterpart thereof.

                  SECTION 7.03. No Waiver;  Remedies.  No failure on the part of
the Lender to exercise, and no delay in exercising, any right hereunder or under
the Note  shall  operate  as a waiver  thereof;  nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

                  SECTION 7.04. Costs,  Expenses. (a) The Borrower agrees to pay
within 30 days after demand in the form of a reasonably  detailed  bill therefor
(i) all  reasonable  costs and  expenses  of the Lender in  connection  with the
preparation, execution, delivery, administration,  modification and amendment of
the Loan Documents and the other documents to be delivered hereunder (including,
without  limitation,  the reasonable fees and expenses of counsel for the Lender
with respect  thereto,  with respect to advising the Lender as to its rights and
responsibilities,  or the  perfection,  protection or  preservation of rights or
interests,  under the Loan  Documents,  with  respect to  negotiations  with the
Borrower or with other  creditors  of the  Borrower  or any of its  Subsidiaries
arising out of any Default or any events or circumstances  that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy,  insolvency or other similar proceeding  involving
creditors'  rights generally and any proceeding  ancillary  thereto);  provided,
however,  that  the  Borrower's  obligation  hereunder  to pay  the  fees of the
Lender's  counsel,  to the extent such fees are incurred in connection  with the
preparation,  execution and delivery of the Loan  Documents and accrued  through
the time of the initial Borrowing  hereunder,  shall be limited to an amount not
in excess of the lesser of (x)  $19,000  and (y) the sum of $14,000  plus 50% of
such fees in excess of $14,000,  and (ii) all  reasonable  costs and expenses of
the Lender in connection with the enforcement of the Loan Documents,  whether in
any action,  suit or  litigation,  any  bankruptcy,  insolvency or other similar
proceeding affecting creditors' rights generally (including, without limitation,
the reasonable fees and expenses of counsel for the Lender with respect thereto;
provided,  however,  that (1) the  Borrower's  obligations  under  this  Section
7.04(a) to pay fees and expenses of counsel retained by the Lender in respect of
any matter  referred to in clause (i) hereof or in respect of any single action,
suit, litigation or proceeding referred to in clause (ii) hereof shall not apply
beyond the fees and  expenses of one firm of general  outside  counsel  together
with one firm of local  counsel  in each  relevant  jurisdiction  for each  such
matter, action, suit, litigation
<PAGE>
                                       32

or proceeding  and (2) nothing  contained  herein shall obligate the Borrower to
pay the fees or expenses of any counsel  retained by any  assignee of the Lender
hereunder.

                  (b) If any  payment of  principal  of, or  Conversion  of, any
LIBOR  Advance or Federal  Funds Rate  Advance is made by the Borrower to or for
the account of the Lender other than on the last day of the Interest  Period for
such  Advance,  as a result of a  payment  or  Conversion  pursuant  to  Section
2.08(b)(i)  or 2.09(d),  acceleration  of the  maturity of the Note  pursuant to
Section 6.01 or for any other  reason,  the Borrower  shall,  upon demand by the
Lender (accompanied with a written statement explaining in reasonable detail the
basis of the demand),  pay to the Lender any amounts  required to compensate the
Lender for any additional losses, costs or expenses that it reasonably incurs as
a result of such  payment,  including,  without  limitation,  any loss,  cost or
expense  incurred by reason of the  liquidation or  reemployment  of deposits or
other  funds  acquired by the Lender to fund or  maintain  such  Advance but not
including loss of anticipated profits.

                  SECTION 7.05.  Right of Set-off.  Upon (a) the  occurrence and
during the  continuance  of any Event of Default and (b) the  declaration of the
Note due and payable  pursuant to the  provisions of Section 6.01, the Lender is
hereby  authorized  at any time and from  time to time,  to the  fullest  extent
permitted by law, to set off and otherwise  apply any and all deposits  (general
or  special,  time or demand,  provisional  or final) at any time held and other
indebtedness at any time owing by the Lender to or for the credit or the account
of the Borrower  against any and all of the  obligations  of the Borrower now or
hereafter  existing under this Agreement and the Note,  irrespective  of whether
the Lender  shall have made any demand  under this  Agreement  or the Note.  The
Lender  agrees  promptly  to notify  the  Borrower  after any such  set-off  and
application;  provided,  however, that the failure to give such notice shall not
affect the  validity of such set-off and  application.  The rights of the Lender
under this  Section  are in addition to other  rights and  remedies  (including,
without limitation, other rights of set-off) that the Lender may have.

                  SECTION 7.06.  Binding  Effect.  This  Agreement  shall become
effective  when it shall have been  executed by the  Borrower and the Lender and
thereafter  shall be binding  upon and inure to the benefit of the  Borrower and
the Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights  hereunder or any interest  herein
without the prior written consent of the Lender.

                  SECTION 7.07.  Assignments and  Participation.  (a) The Lender
may assign to one or more Persons all or a portion of its rights and obligations
under this Agreement  (including,  without  limitation,  all or a portion of its
Commitment,  the  Advances  owing  to it and the  Note  held  by it);  provided,
however,  that (i) each  such  assignment  (other  than to an  Affiliate  of the
Lender) shall be made only with the written approval of the Borrower and (ii) no
such assignment shall result in the Lender holding a combination of Advances and
Unused  Commitment  in an  aggregate  amount of less  than 51% of the  aggregate
amount of the Advances and Unused Commitment.
<PAGE>

                                       33

                  (b) The Lender may sell  participations to one or more Persons
(other than (x) the Borrower or any of its Affiliates or (y) any Person that is,
or has Affiliates that are,  engaged in any line of business in competition with
the Borrower or any of the  Borrower's  Affiliates) in or to all or a portion of
its rights and obligations under this Agreement (including,  without limitation,
all or a portion of its  Commitment,  the Advances owing to it and the Note held
by  it);  provided,  however,  that  (i) the  Lender's  obligations  under  this
Agreement   (including,   without  limitation,   its  Commitment)  shall  remain
unchanged,  (ii) the Lender shall remain solely  responsible to the Borrower for
the performance of such obligations, (iii) the Lender shall remain the holder of
its Note for all purposes of this Agreement, (iv) the Borrower shall continue to
deal solely and directly with the Lender in connection  with the Lender's rights
and  obligations  under this  Agreement  and (v) no  participant  under any such
participation  shall have any right to approve  any  amendment  or waiver of any
provision of any Loan Document,  or any consent to any departure by the Borrower
therefrom,  except to the extent that such  amendment,  waiver or consent  would
reduce the  principal  of, or interest  on, the Note or any fees  payable to the
Lender or other amounts payable hereunder, in each case to the extent subject to
such participation,  postpone any date fixed for any payment of principal of, or
interest on, the Note or any fees or other amounts  payable  hereunder,  in each
case to the extent subject to such participation.

                  (c) The Lender  may,  in  connection  with any  assignment  or
participation or proposed  assignment or participation  pursuant to this Section
7.07,   disclose  to  the  assignee  or  participant  or  proposed  assignee  or
participant, any information relating to the Borrower furnished to the Lender by
or on  behalf  of the  Borrower;  provided,  however,  that,  prior  to any such
disclosure,  the assignee or  participant  or proposed  assignee or  participant
shall agree to preserve  the  confidentiality  of any  confidential  information
received by it from the Lender on the terms provided for in the  Confidentiality
Agreement.

                  (d)  Notwithstanding  any  other  provision  set forth in this
Agreement,  the Lender may at any time assign any of its rights and  obligations
under this  Agreement to any of its  Affiliates  without notice to or consent of
the Borrower; and the Lender or its Affiliates may at any time create a security
interest in all or any portion of its rights  under this  Agreement  (including,
without  limitation,  the Advances owing to it and the Note held by it) in favor
of any Federal  Reserve  Bank in  accordance  with  Regulation A of the Board of
Governors  of the Federal  Reserve  System  without  notice to or consent of the
Borrower.

                  SECTION 7.08. Execution in Counterparts. This Agreement may be
executed  in any  number of  counterparts  and by  different  parties  hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original  and all of which  taken  together  shall  constitute  one and the same
agreement.  Delivery of an  executed  counterpart  of a  signature  page to this
Agreement by  telecopier  shall be effective as delivery of a manually  executed
counterpart of this Agreement.

                  SECTION 7.09. Confidentiality. Concurrently with its execution
and  delivery  of  this  Agreement,  the  Lender  will  execute  and  deliver  a
Confidentiality Agreement to the Borrower.

<PAGE>

                                       34

                  SECTION 7.10. Governing Law. This Agreement and the Note shall
be governed  by, and  construed  in  accordance  with,  the laws of the State of
California.

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

                               KOMAG, INCORPORATED


                               By ______________________________________________
                                   Name:
                                   Title:


                               THE DAI-ICHI KANGYO BANK,
                               LIMITED, acting through its San Francisco Agency


                               By ______________________________________________
                                   Name:
                                   Title:

                               Commitment: $35,000,000

                               Domestic Lending Office:

                                    101 California Street, Suite 4000
                                    San Francisco, California 94111


                              LIBOR Lending Office:

                                    101 California Street, Suite 4000
                                    San Francisco, California 94111


<PAGE>

                                    EXHIBIT A

                                       to
                  Credit Agreement dated as of October 7, 1996


                                 PROMISSORY NOTE


$35,000,000.00                                             Dated: ______________


                  FOR VALUE RECEIVED, the undersigned,  Komag,  Incorporated,  a
Delaware  corporation (the  "Borrower"),  HEREBY PROMISES TO PAY to the order of
The  Dai-Ichi  Kangyo  Bank,  Limited  (the  "Lender"),  acting  through its San
Francisco Agency for the account of its Applicable Lending Office (as defined in
the Credit  Agreement  referred to below) the aggregate  principal amount of the
Advances (as defined below) owing to the Lender by the Borrower  pursuant to the
Credit  Agreement  dated as of  October  7, 1996 (as  amended,  supplemented  or
otherwise  modified  from time to time,  the "Credit  Agreement";  terms defined
therein  being used  herein as therein  defined)  between the  Borrower  and the
Lender, on the Termination Date.

                  The Borrower  promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full,  at such  interest  rates,  and payable at such  times,  as are
specified in the Credit Agreement.

                  Both principal and interest are payable in lawful money of the
United  States of America to the Lender at the  Lender's  Account (as defined in
the Credit  Agreement),  in same day funds.  Each Advance owing to the Lender by
the  Borrower  and the maturity  thereof,  and all  payments  made on account of
principal  thereof,  shall be recorded by the Lender and,  prior to any transfer
hereof,  endorsed on the grid attached hereto,  which is part of this Promissory
Note.

                  This  Promissory  Note  is the  Note  referred  to in,  and is
entitled to the benefits of, the Credit Agreement.  The Credit Agreement,  among
other things,  (i) provides for the making of advances (the  "Advances")  by the
Lender to the Borrower from time to time in an aggregate amount not to exceed at
any  time  outstanding  the  U.S.  dollar  amount  first  above  mentioned,  the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this  Promissory  Note,  and (ii) contains  provisions for  acceleration  of the
maturity  hereof  upon the  happening  of  certain  stated  events  and also for
prepayments on 


<PAGE>

                                       2

account of  principal  hereof  prior to the  maturity  hereof upon the terms and
conditions therein specified.

                               KOMAG, INCORPORATED


                               By ______________________________________________
                                   Name:
                                   Title: