Document:

<PAGE>
                                                                    Exhibit 10.2

                        THIRD AMENDMENT TO LOAN AGREEMENT
                        ---------------------------------

         THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Third Amendment") is made
as of the 21st day of December, 2001, by and among UNI-MARTS, INC., a Delaware
corporation, and UNI-MARTS OF AMERICA, INC., a Delaware corporation (together,
the "Borrowers"), and THE PROVIDENT BANK, a bank chartered under the laws of the
State of Ohio (the "Lender").

                              W I T N E S S E T H:
                              --------------------

         WHEREAS, the Borrowers and the Lender have heretofore entered into a
certain Loan Agreement dated as of April 20, 2000, as amended by the First
Amendment to Loan Agreement dated as of January 16, 2001, and the Second
Amendment to Loan Agreement dated as of March 31, 2001 (as so amended, the "Loan
Agreement"), pursuant to which the Lender has agreed to provide a $13,000,000
secured revolving credit facility to the Borrowers, subject to the terms and
conditions set forth in the Loan Agreement; and

         WHEREAS, the Borrowers have requested that the Lender provide temporary
seasonal increases in the maximum committed amount of the revolving credit
facility from $13,000,000 to $15,000,000, to extend the Expiration Date from
April 20, 2003, to April 20, 2004, to amend the Fixed Charge Coverage Ratio and
the Interest Coverage Ratio and to amend certain other provisions of the Loan
Agreement and the Lender is willing to do so under the terms, and subject to the
conditions, set forth in this Third Amendment.

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and with the intent to be legally bound, the parties
hereto agree as follows:

         1. RECITALS AS COVENANTS. The foregoing recitals are hereby
incorporated in this Third Amendment as covenants.

         2. USE OF TERMS. Terms used herein and not otherwise defined are used
herein as defined in the Loan Agreement.

         3. AMENDED AND RESTATED DEFINITIONS. The following definitions set
forth in Section 1.01 of the Loan Agreement are hereby amended and restated in
their entirety as follows:

         "Agreement" means this Loan Agreement, as amended by the First
         Amendment, the Second Amendment, the Third Amendment, and as the same
         may be further amended, modified or supplemented from time to time.

         "Expiration Date" means April 20, 2004, unless extended in writing by
         the Lender in its sole and absolute discretion.

                                       1
<PAGE>

                  "Revolving Credit Note" means the Second Amended and Restated
                  Revolving Credit Note of the Borrowers in the form of Exhibit
                  "A" to the Third Amendment evidencing the Revolving Credit
                  Loans together with all extensions, renewals, refinancings or
                  refundings in whole or in part.

                  "Security Agreement" means the Security Agreement dated as of
                  April 20, 2000, as amended and restated by that certain
                  Amended and Restated Security Agreement dated as of December
                  21, 2001, and as further amended, modified or supplemented
                  from time to time, between the Borrowers and the Lender.

         In addition to the foregoing, the following defined terms are hereby
added to Section 1.01 of the Loan Agreement:

                  "Third Amendment" means the Third Amendment to Loan Agreement
                  dated as of December 21, 2001, among the Borrowers and the
                  Lender.

                  "Third Amendment Closing Date" means December 21, 2001, or
                  such other date as the parties may agree.

         4.       AMENDMENTS TO REVOLVING CREDIT LOAN FACILITY.

                  (a) AMENDMENT OF SECTION 2.01 - REVOLVING CREDIT LOANS.
Subject to the terms and conditions of this Third Amendment and the Loan
Agreement, the Lender has agreed to provide temporary seasonal increases in the
maximum principal amount of the Revolving Credit Loans from $13,000,000 to
$15,000,000. Accordingly, subsections (b) and (c) of Section 2.01 of the Loan
Agreement are hereby amended and restated in their entirety to read as follows:

                           (b) REVOLVING CREDIT NOTE. The obligations of the
         Borrowers to repay the unpaid principal amount of the Revolving Credit
         Loans made to the Borrowers by the Lender and to pay interest on the
         unpaid principal amount will be evidenced in part by the Revolving
         Credit Note of the Borrowers dated the Third Amendment Closing Date, in
         substantially the form attached as EXHIBIT "A" to the Third Amendment,
         with the blanks appropriately filled. The executed Revolving Credit
         Note will be delivered by the Borrowers to the Lender on the Third
         Amendment Closing Date. The Revolving Credit Note shall be an
         amendment, restatement and replacement of the Revolving Credit Note
         dated as of January 16, 2001, executed and delivered by the Borrowers
         to the Lender (the "Existing Note"), and the indebtedness evidenced by
         the Existing Note, together with additional Revolving Credit Loans made
         by the Lender to the Borrower pursuant to this Agreement after the
         Third Amendment Closing Date, shall be evidenced by the Revolving
         Credit Note.

                           (c) BORROWING BASE. The maximum borrowing
         availability under this Agreement applicable to the Revolving Credit
         Loans to all Borrowers taken as a whole shall be equal on any day
         during the term of this Agreement to the lesser of (i) Fifteen Million
         Dollars ($15,000,000) during the periods beginning on January 1 and
         ending on (x) April 30 of each of 2002 and 2003 and (y) April 20 of
         2004, and, at all other times, Thirteen Million

                                       2
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         Dollars ($13,000,000.00), or (ii) seventy-five percent (75%) of the
         aggregate gross amount of Qualified Accounts, PLUS sixty percent (60%)
         of the aggregate value of Qualified Inventory, PLUS fifty percent (50%)
         of the value of the real properties identified on APPENDIX 1 to this
         Agreement, as revised from time to time by Uni-Marts as provided herein
         (the lesser of the amounts described in clauses (i) and (ii) of this
         sentence is sometimes referred to in this Agreement as the "Borrowing
         Base"). In the event that Uni-Marts desires to add properties to
         APPENDIX 1, or substitute one or more properties (collectively the "New
         Properties") for properties then listed on APPENDIX 1 (collectively the
         "Released Properties"), upon and subject to Lender's agreeing to make
         the proposed substitution, (i) the Borrowing Base shall be adjusted to
         reflect the substitution and the Borrowers shall repay the amount of
         any Loans that exceed the Borrowing Base, (ii) the applicable Borrower
         shall grant to Lender Mortgages meeting the requirements of this
         Agreement on all New Properties, and (iii) Lender shall release its
         lien and Mortgage on the Released Properties. Upon the sale or other
         disposition of any property listed on APPENDIX 1 (a "Sold Property"),
         the Sold Property shall immediately be removed from the Borrowing Base
         and Borrowers shall immediately repay any Loans in excess of the
         Borrowing Base as calculated to take into account the sale of the Sold
         Property. The Borrowing Base shall be further reduced by (i) the
         aggregate undrawn amount of all Letters of Credit from time to time
         outstanding as of the date of the determination, and (ii) any reserve
         or reserves created and maintained by the Lender from time to time and
         in its sole reasonable discretion to reflect events, conditions,
         contingencies or risks which affect the Qualified Accounts or the
         Qualified Inventory or otherwise affect the assets, the business,
         operations or financial condition of the Borrowers or any individual
         Borrower.

                  (b) AMENDED AND RESTATED REVOLVING CREDIT NOTE. The Borrowers
shall execute and deliver the Revolving Credit Note in the form attached to the
Third Amendment as EXHIBIT A to evidence the Revolving Credit Loans as herein
provided.

                  (c) AMENDMENTS OF SECTION 6.13 - FINANCIAL MAINTENANCE
COVENANTS. Subject to the terms and conditions of this Third Amendment and the
Loan Agreement, the Lender has agreed to amend certain financial maintenance
covenants. Accordingly, subsections (b) and (c) of Section 6.13 are hereby
amended and restated in their entirety to read as follows:

                           (b) FIXED CHARGE COVERAGE RATIO. For the fiscal
                  quarter ending January 3, 2002, the Borrowers shall at all
                  times maintain a Fixed Charge Coverage Ratio equal to or
                  greater than 1.0 to 1.0; from and after January 3, 2002, the
                  Borrowers shall at all times maintain a Fixed Charge Coverage
                  Ratio equal to or greater than 1.1 to 1.0.

                           (c) INTEREST COVERAGE RATIO. Borrowers shall maintain
                  at all times an Interest Coverage Ratio equal to or greater
                  than 2.05 to 1.0.

         5. FEES. The Borrowers agree to pay the Lender a closing fee with
respect to the amendments set forth in this Third Amendment equal to $16,250.00,
payable on or before the Third Amendment Closing Date. In addition, the
Borrowers agree to pay the Lender a fee for the extension of the Expiration Date
and for the temporary seasonal increase of the revolving credit facility equal

                                       3
<PAGE>

to $25,000.00; $12,500 of such fee is due and payable on June 1, 2002, and the
remaining $12,500 is due and payable on September 1, 2001. This extension and
temporary seasonal increase fee shall be deemed earned in full on the Third
Amendment Closing Date and shall not be subject to rebate or proration.

         6. REPRESENTATIONS AND WARRANTIES. The Borrowers hereby represent and
warrant to the Lender that:

         (a) The Borrowers have and will continue to have corporate power and
authority to execute, deliver and perform the provisions of this Third Amendment
and the Loan Agreement, as amended hereby, and to execute and deliver the
instruments required by the provisions of this Third Amendment and the Loan
Agreement, as amended hereby, to be executed and delivered by the Borrowers; and
all such action has been duly and validly authorized by all necessary corporate
proceedings on the part of the Borrowers.

         (b) The execution, delivery and performance of this Third Amendment,
the Revolving Credit Note and the Security Agreement will not conflict with,
constitute a default under or result in the breach of, any provisions of Law or
the Articles of Incorporation or the By-laws of the Borrowers or of any
agreement or other instrument to which each Borrower is a party or by which it
is bound or to which it is subject.

         (c) This Third Amendment, the Revolving Credit Note and the Security
Agreement have each been duly and validly executed and delivered by the
Borrowers, and this Third Amendment, the Revolving Credit Note and the Security
Agreement constitute legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms.

         (d) The representations and warranties by the Borrowers contained in
Article III of the Loan Agreement are correct and accurate in all material
respects on and as of the date of this Third Amendment with the same effect as
though made on and as of the date of this Third Amendment.

         (e) No event has occurred and is continuing which constitutes an Event
of Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.

         (f) The security interest in the Collateral (as defined in the Security
Agreement) (i) constitutes and will continue to constitute a perfected security
interest under the Code entitled to all of the rights, benefits and priorities
provided by the Code and (ii) except as otherwise permitted under Section 6.01
of the Loan Agreement, is and will continue to be superior and prior to the
rights of all third parties existing on the date of this Third Amendment or
arising after the date of this Third Amendment whether by Lien or otherwise, to
the full extent provided by Law. All such action as is necessary or advisable to
establish such rights of the Lender has been taken or will be taken at or prior
to the time required for such purpose and there is no necessity of any further
action in order to preserve, protect and continue such rights except the filing
of continuation statements with respect to such financing statements within six
months prior to each five year anniversary of the filing of such financing
statements and continued possession by the Lender of the Collateral delivered to
it.

                                       4
<PAGE>

         7. CONDITIONS PRECEDENT. It shall be a condition precedent to the
effectiveness of this Third Amendment that the Lender shall have received, on or
before the Third Amendment Closing Date, each of the following items, in form
and substance satisfactory to the Lender and its counsel:

                  (i) this Third Amendment, duly executed and delivered;

                  (ii) the Second Amended and Restated Revolving Credit Note (in
         the form of EXHIBIT A to this Third Amendment), duly executed and
         delivered;

                  (iii) the Amended and Restated Security Agreement (in the form
         of EXHIBIT B to this Third Amendment), duly executed and delivered;

                  (iv) a certificate of the Borrowers, addressed to the Lender
         and executed by the Chief Financial Officer or President of each
         Borrower on behalf of the Borrowers, certifying that all corporate
         actions necessary for the consummation of the obligations to be
         incurred under this Third Amendment have been taken; and

                  (v) such other items, instruments, documents and certificates
         as to the transactions contemplated by this Third Amendment and the
         Loan Documents as the Lender may reasonably request.

         8. FURTHER ASSURANCES. The Borrowers, at their own cost and expense,
shall cause to be promptly and duly taken, executed, acknowledged and delivered
all such further acts, documents and assurances as the Lender may from time to
time request in order more effectively to carry out the intent and purposes of
this Third Amendment and the transactions contemplated by this Third Amendment
including, without limitation, amendments to each or any of the Loan Documents
consistent with the intent and purposes of this Third Amendment. Promptly upon
request by the Lender, the Borrowers agree to execute and deliver and to file
and record and refile and record such financing statements and amendments and
other assignments and other documents in such manner, at such time or times and
in such place or places as may be required by any Law and to cause such other
actions which may be required by any Law or as may be requested by the Lender in
order more effectively to carry out the intent and purposes of this Third
Amendment.

         9. SCOPE OF THIS THIRD AMENDMENT. Except as amended by this Third
Amendment, the provisions of the Loan Agreement shall remain in full force and
effect. The Loan Documents shall likewise remain in full force and effect. The
Loan Agreement and this Third Amendment shall be construed as complementing each
other and, except as specifically amended by this Third Amendment, augmenting
and not restricting the Lender's rights, and the Loan Agreement shall remain in
full force and effect in accordance with its terms. The Borrowers hereby ratify,
confirm and reaffirm, without condition, all liens and security interests
granted to the Lender pursuant to the Loan Agreement and the Loan Documents, and
such liens and security interests shall continue to secure the Secured
Obligations. Except as expressly provided in this Third Amendment, the Lender
has not agreed to any amendment or modification to the Loan Agreement or to any
of the Loan Documents or to any departure by the Borrowers from their due
performance under the Loan

                                       5
<PAGE>

Agreement or under any of the Loan Documents. The rights and remedies of the
Lender under the Loan Agreement, as amended by this Third Amendment, and the
Loan Documents shall survive the execution and delivery of this Third Amendment
and the Lender may exercise such rights and remedies with respect to any such
defaults at any time and from time to time.

         10. MISCELLANEOUS. The following provisions shall apply to this Third
Amendment:

                  (a) REFERENCES. All notices, communications, agreements,
         certificates, documents or other instruments executed and delivered
         after the execution and delivery of this Third Amendment may refer to
         the Loan Agreement without making specific reference to this Third
         Amendment, but nevertheless all such references shall include this
         Third Amendment unless the context requires otherwise.

                  (b) COUNTERPARTS. This Third Amendment may be executed in as
         many different counterparts as may be convenient to the parties hereto,
         each of which when executed by the Borrowers and the Lender shall be
         regarded as an original and all such counterparts shall constitute but
         one Third Amendment.

         11. COSTS AND EXPENSES. The Borrowers will pay all costs and expenses
of the Lender (including, without limitation, the reasonable fees and the
disbursements of the Lender's counsel) in connection with the preparation,
execution and delivery of this Third Amendment.

         12. GOVERNING LAW. This Third Amendment and the rights and obligations
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.

         13. HEADINGS. The headings of this Third Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning thereof.

                            [SIGNATURE PAGE FOLLOWS]

                                       6
<PAGE>

                                                                     Exhibit "B"
                                                          to the Third Amendment

         IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have executed this Third Amendment to Loan Agreement as of the day and year
first above written.

ATTEST:                          UNI-MARTS, INC.

         /s/ Harry A. Martin     By:      /s/ N. Gregory Petrick
------------------------------       --------------------------------

Name:    Harry A. Martin         Name:    N. Gregory Petrick
         Secretary               Title:   Executive Vice President and
                                          Chief Financial Officer

ATTEST                           UNI-MARTS OF AMERICA, INC.

   /s/ Harry A. Martin           By:      /s/ N. Gregory Petrick
------------------------------      ---------------------------------

Name:    Harry A. Martin         Name:    N. Gregory Petrick
         Secretary               Title:   President

                                 THE PROVIDENT BANK

                                 By:      /s/ Ronald L. Tassone
                                    --------------------------------

                                 Name:    Ronald L. Tassone
                                 Title:   Senior Vice President

<PAGE>

                                                                     Exhibit "A"
                                                          to the Third Amendment

                           SECOND AMENDED AND RESTATED
                              REVOLVING CREDIT NOTE

$15,000,000.00                                                 December 21, 2001

         FOR VALUE RECEIVED, the undersigned, UNI-MARTS, INC., a Delaware
corporation, and UNI-MARTS OF AMERICA, INC., a Delaware corporation
(collectively, the "Borrowers"), jointly and severally promise to pay to the
order of THE PROVIDENT BANK (the "Lender"), on April 20, 2004, if not sooner
paid, the lesser of: (i) the principal sum of FIFTEEN MILLION DOLLARS
($15,000,000.00) or (ii) the aggregate unpaid principal amount of all revolving
credit loans and extensions of credit made by the Lender to the Borrowers
pursuant to the Loan Agreement, dated as of April 20, 2000, entered into by and
between the Borrowers and the Lender, as amended by the First Amendment to Loan
Agreement dated as of January 16, 2001, the Second Amendment to Loan Agreement
dated as of March 31, 2001, and the Third Amendment to Loan Agreement dated as
of the date hereof, as such agreement may be further amended, modified or
supplemented from time to time (the "Loan Agreement"). The Borrowers further
promise to pay to the order of the Lender interest from time to time outstanding
on the unpaid principal amount of this Revolving Credit Note at the rate or
rates per annum determined pursuant to, or otherwise provided in, the Loan
Agreement, and with such amounts being payable on the dates set forth, or as
otherwise provided in, the Loan Agreement.

         All payments and prepayments to be made in respect of principal,
interest or other amounts due from the Borrowers under this Revolving Credit
Note shall be payable at 12:00 noon, New York time, on the day when due. Such
payments shall be made to the Lender at its office identified in the Loan
Agreement, or at such other place as Lender may designate in writing, in lawful
money of the United States of America in immediately available funds without
setoff, counterclaim or other deduction of any nature. The Borrowers expressly
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Revolving Credit Note, and an action for any amounts due and unpaid shall
therefore accrue immediately.

         If any payment of principal or interest under this Revolving Credit
Note becomes due on a day which is a Saturday, Sunday or other day on which
lending institutions are authorized or obligated to close in Cincinnati, Ohio or
New York, New York, such payment will be made on the next following business day
on which the Lender is open for business and such extension of time will be
included in computing interest in connection with such payment.

         This Second Amended and Restated Revolving Credit Note is the
"Revolving Credit Note" referred to in, and is entitled to the benefits of, the
Loan Agreement as defined herein, between the Borrowers and the Lender. This
Revolving Credit Note is secured by, and is entitled to the benefits of, certain
other Loan Documents, as each of them may be amended, modified or supplemented
from

                                       8
<PAGE>

time to time. Capitalized terms used in this Revolving Credit Note which are
defined in the Loan Agreement have the meanings assigned to them in the Loan
Agreement unless otherwise expressly defined in this Revolving Credit Note.

         This Revolving Credit Note amends, restates, consolidates and continues
that certain Amended and Restated Revolving Credit Note dated December 16, 2000,
in the original principal amount of Thirteen Million Dollars ($13,000,000) and
executed by Borrowers in favor of the Lender. This amendment and restatement
does not constitute a novation of the indebtedness evidenced by the original
Revolving Credit Note. Any and all amounts outstanding under such note,
including any accrued and unpaid interest, shall be evidenced by this Revolving
Credit Note and shall be paid in accordance with the terms hereof.

         This Revolving Credit Note is governed by, and will be construed and
enforced in accordance with, the laws of the Commonwealth of Pennsylvania
without regard to principles of conflicts of law in the Commonwealth of
Pennsylvania. The Borrowers consent to the exclusive jurisdiction and venue of
the Federal and State courts located in Allegheny County, Pennsylvania with
respect to any suit arising out of, relating to, or mentioning this Revolving
Credit Note.

         THE BORROWERS AUTHORIZE AND EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF
ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE, UPON THE OCCURRENCE
OF ANY EVENT OF DEFAULT UNDER THE LOAN AGREEMENT, UNDER THIS REVOLVING CREDIT
NOTE OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, TO APPEAR FOR AND CONFESS
JUDGMENT AGAINST THE BORROWERS IN FAVOR OF THE LENDER OR ANY HOLDER OF THIS
REVOLVING CREDIT NOTE, FOR ALL SUMS DUE AND UNPAID UNDER THIS REVOLVING CREDIT
NOTE, WHETHER BY ACCELERATION OR NOT, WITH OR WITHOUT DECLARATION, WITH COST OF
SUIT, RELEASE OF ALL ERRORS, WITHOUT STAY OF EXECUTION AND WITH TEN PERCENT
(10%) ADDED FOR COLLECTION FEE (PROVIDED, HOWEVER, THAT, DESPITE THE ENTRY OF
JUDGMENT IN SUCH AMOUNT, THE LENDER SHALL NOT BE ENTITLED TO COLLECT AS PART OF
SUCH COLLECTION FEE AN AMOUNT IN EXCESS OF REASONABLE ATTORNEYS' AND PARALEGALS'
FEES). THE BORROWERS ALSO WAIVE THE RIGHT OF INQUISITION OF ANY REAL ESTATE
LEVIED ON, VOLUNTARILY CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK
TO ENTER THE WRIT OF EXECUTION AND VOLUNTARY CONDEMNATION, AGREES THAT SAID REAL
ESTATE MAY BE SOLD ON A WRIT OF EXECUTION, AND ALSO WAIVES AND RELEASES ALL
RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN
FORCE OR ENACTED IN THE FUTURE. IF A COPY OF THIS REVOLVING CREDIT NOTE,
VERIFIED BY AFFIDAVIT OF THE LENDER OR ANY HOLDER OF THIS REVOLVING CREDIT NOTE
OR SOMEONE AUTHORIZED TO ACT ON BEHALF OF THE LENDER OR ANY SUCH HOLDER, HAS
BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL OF THE
REVOLVING CREDIT NOTE AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST THE BORROWERS WILL NOT BE EXHAUSTED BY ANY
SINGLE EXERCISE OF THE AUTHORIZED POWER, AND THE SAME MAY BE EXERCISED FROM TIME
TO TIME AS OFTEN AS THE HOLDER DEEMS NECESSARY OR DESIRABLE; AND THIS INSTRUMENT
WILL BE A SUFFICIENT WARRANT.

                                       9
<PAGE>

                            [SIGNATURE PAGE FOLLOWS]

                                       10
<PAGE>

          IN WITNESS WHEREOF, and intending to be legally bound, the Borrowers
have executed, issued and delivered this Second Amended and Restated Revolving
Credit Note as of the day and year first above written.

ATTEST:                                  UNI-MARTS, INC.

                                         By:
---------------------------------           --------------------------------

         Secretary                       Name:  N. Gregory Petrick
                                         Title:    Executive Vice President and
                                                   Chief Financial Officer

ATTEST:                                  UNI-MARTS OF AMERICA, INC.

                                         By:
---------------------------------           --------------------------------
         Secretary                       Name:  N. Gregory Petrick
                                         Title:    President

                                       11
<PAGE>

                                                                     Exhibit "B"
                                                          to the Third Amendment

                              AMENDED AND RESTATED
                               SECURITY AGREEMENT

         THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Security
Agreement"), made and entered into the 21st day of December, 2001, by UNI-MARTS,
INC., a Delaware corporation, UNI-MARTS OF AMERICA, INC. (individually and
collectively, "Debtor"), and THE PROVIDENT BANK, an Ohio chartered bank (the
"Secured Party").

                                   WITNESSETH:
                                   -----------

                  WHEREAS, the Debtor and the Secured Party entered into a
certain Loan Agreement dated as of April 20, 2001, as amended by the First
Amendment to Loan Agreement dated as of January 16, 2001, the Second Amendment
to Loan Agreement dated as of March 31, 2001, and the Third Amendment to Loan
Agreement dated as of December 21, 2001 (as so amended and as may be further
amended, modified or supplemented from time to time, the "Loan Agreement"),
providing the Debtor with Revolving Credit Loans in an aggregate amount
outstanding at any time not to exceed $15,000,000; and

                  WHEREAS, in accordance with the terms of the Loan Agreement,
the Debtor executed and delivered that certain Security Agreement dated as of
April 20, 2000 (the "Existing Security Agreement"), granting to the Secured
Party a first priority lien on and security interest in all of the Debtor's
tangible and intangible properties, then owned or thereafter acquired; and

         WHEREAS, the Debtor has requested the Secured Party to amend certain
provisions of the Loan Agreement; and

         WHEREAS, the Secured Party is not willing to amend the Loan Agreement
unless and until the Debtor makes, executes and delivers this Security Agreement
for the purpose of (i) confirming to the Secured Party that the security
interests in the collateral under the Existing Security Agreement continue as
security for the prompt and full payment and performance of the indebtedness and
obligations of the Debtor under the Loan Agreement, and (ii) amending and
restating the Existing Security Agreement in its entirety upon the terms and
conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound hereby, the Debtor
and the Secured Party hereby covenant and agree as follows:

                                       12
<PAGE>

ARTICLE I.  DEFINITIONS
-----------------------

         Unless otherwise defined herein, terms defined in the Loan Agreement
are used herein as therein defined, and the following terms shall have the
following meanings (such meanings being equally applicable to both the singular
and plural forms of the terms defined):

                  "Accounts" shall mean any "account," as such term is defined
         in the UCC, now owned or hereafter acquired by the Debtor and, in any
         event, shall include, without limitation, all accounts receivable, book
         debts and other forms of payment obligations (other than forms of
         obligations evidenced by Chattel Paper, Documents or Instruments) now
         owned or hereafter received or acquired by or belonging or owing to the
         Debtor (whether held in the name of the Debtor or any division thereof
         or in any applicable trade name or trade style) whether arising out of
         property that has been or is to be sold, leased, licensed, assigned or
         otherwise disposed of or out for services rendered or to be rendered by
         the Debtor or from any other transaction, whether or not the same
         involves the sale of goods or services by the Debtor (including,
         without limitation, any such obligation that might be characterized as
         an account or contract right under the UCC), and all of the Debtor's
         rights in, to and under all purchase orders or receipts now owned or
         hereafter acquired by it for goods or services sold or rendered or to
         be rendered by the Debtor (or by any Person from whom the Debtor
         acquired such rights), and all of the Debtor's rights to any goods
         represented by any of the foregoing (including, without limitation,
         unpaid seller's rights of rescission, replevin, reclamation and
         stoppage in transit and rights to returned, reclaimed or repossessed
         goods), and choses in action and causes of action (whether arising in
         contract, tort or otherwise and whether or not currently in litigation)
         and all other debts, obligations and liabilities in whatever form owing
         to the Debtor, documents of title, warehouse receipts, leases,
         investment accounts, deposit accounts, Cash, contract rights, insurance
         policies, dividends, distributions, judgments, covenants, licenses,
         franchises, warranties, indemnities, partnership and joint venture
         interests, and other rights, including all rights to the payment of
         moneys due or to become due to the Debtor, under all contracts for the
         sale, lease, license or assignment of goods or the performance of
         services or both by the Debtor (whether or not yet earned by
         performance on the part of the Debtor or in connection with any other
         transaction), now in existence or hereafter occurring, including,
         without limitation, the right to receive the proceeds of said purchase
         orders and contracts, and all collateral security and guarantees of any
         kind given by any Person with respect to any of the foregoing.

                  "Additional Collateral" shall mean all funds of the Debtor on
         deposit with the Secured Party and property of any nature and the cash
         and non-cash proceeds thereof owned by the Debtor, or in which the
         Debtor has an interest, which now or hereafter are in the possession
         and control of the Secured Party, including, without limitation,
         Deposit Accounts.

                  "Cash" shall mean cash or cash equivalents now owned or
         hereafter acquired by the Debtor.

                                       13
<PAGE>

                  "Chattel Paper" shall mean any "chattel paper," "Tangible
         Chattel Paper" and "Electronic Chattel Paper," as such terms are
         defined in the UCC, now owned or hereafter acquired by the Debtor, or
         in which the Debtor now has or hereafter acquires any rights.

                  "Commercial Tort Claims" shall mean any "commercial tort
         claim," as such term is defined in the UCC, now owned or hereafter
         acquired by the Debtor, or in which the Debtor now has or hereafter
         acquires any rights.

                  "Commonwealth" shall mean the Commonwealth of Pennsylvania.

                  "Contracts" shall mean all contracts, undertakings, or other
         agreements (other than rights evidenced by Chattel Paper, Documents or
         Instruments) in or under which the Debtor may now or hereafter have any
         right, title or interest, including, without limitation, with respect
         to an Account and any agreement relating to the terms of payment or the
         terms of performance of such Account.

                  "Copyrights" shall mean all of the following now or hereafter
         acquired by the Debtor: (i) all copyrights, registrations and
         applications therefor, (ii) all renewals and extensions thereof, (iii)
         all income, royalties, damages and payments now and hereafter due or
         payable or both with respect thereto, including, without limitation,
         damages and payments for past or future infringements or
         misappropriations thereof, (iv) all rights to sue for past, present and
         future infringements or misappropriations thereof, and (v) all other
         rights corresponding thereto throughout the world.

         "Deposit Accounts" shall mean any "deposit account," as such term is
defined in the UCC, now or hereafter held in the name of the Debtor or in which
the Debtor now has or hereafter acquires any rights.

                  "Documents" shall mean any "documents," as such term is
         defined in the UCC, now owned or hereafter acquired by the Debtor or in
         which the Debtor now has or hereafter acquires any rights.

                  "Equipment" shall mean any "equipment," as such term is
         defined in the UCC, now owned or hereafter acquired by Debtor.

                  "Fixtures" shall mean any "fixtures," as such term is defined
         in the UCC, now owned or hereafter acquired by Debtor.

                  "General Intangibles" shall mean any "general intangibles" as
         such term is defined in the UCC, now owned or hereafter acquired by the
         Debtor and, in any event, shall include, without limitation, all right,
         title and interest that the Debtor may now or hereafter have in or
         under any Contract, in or to any partnerships, joint ventures and
         similar entities and rights to distribution of income therefrom, all
         tax refunds, tax refund claims, customer lists, Payment Intangibles,
         Copyrights, Trademarks, Trademark licenses, Patents, Patent licenses,
         rights in intellectual property, permits, Trade Secrets, proprietary or
         confidential information, inventions

                                       14
<PAGE>

         (whether patented or patentable or not) and technical information,
         procedures, designs, knowledge, know-how, software, computer programs,
         computer records and discs, computer data, data bases, data, skill,
         expertise, experience, processes, models, drawings, materials and
         records, now owned or hereafter acquired by the Debtor, and the
         goodwill and rights of indemnification related thereto and associated
         therewith.

                  "Goods" shall mean any "goods," as such term is defined in the
         UCC, now owned or hereafter acquired by the Debtor, wherever located,
         including embedded software to the extent included in "goods" as
         defined in the UCC.

                  "Instruments" shall mean any "instrument," as such term is
         defined the UCC, now owned or hereafter acquired by the Debtor or in
         which the Debtor now has or hereafter acquires any rights, including
         promissory notes, but not including instruments that constitute, or are
         a part of a group of writings that constitute, Chattel Paper.

                  "Inventory" shall mean any "inventory," as such term is
         defined in the UCC, now owned or hereafter acquired by the Debtor and,
         in any event, shall include, without limitation, all inventory,
         merchandise, goods and other personal property now owned or hereafter
         acquired by the Debtor that are held for sale or lease or are furnished
         or are to be furnished under a contract of service or that constitute
         raw materials, work in process or materials used or consumed or to be
         used or consumed in the Debtor's business, or the processing,
         packaging, delivery or shipping of the same, and all finished goods.

                  "Investment Property" shall mean any "investment property,"
         as such term is defined in the UCC, now owned or hereafter acquired by
         Debtor and, in any event, shall include, without limitation, all
         securities, securities accounts and security entitlements.

                  "Letter-of-Credit Rights" shall mean any "letter-of-credit
         right," as such term is defined in the UCC, now owned or hereafter
         acquired by the Debtor or in which the Debtor now has or hereafter
         acquires any rights, including rights to payment or performance under a
         letter of credit, whether or not the Debtor, as beneficiary, has
         demanded or is entitled to demand payment or performance.

                  "Patents" shall mean all of the following now or hereafter
         owned by the Debtor, if any: (i) all patents and patent applications,
         (ii) all inventions and improvements described and claimed therein,
         (iii) all reissues, divisions, continuations, renewals, extensions and
         continuations-in-part thereof, (iv) all income, royalties, damages and
         payments now and hereafter due and/or payable to the Debtor with
         respect thereto, including, without limitation, damages and payments
         for past or future infringements or misappropriations thereof, (v) all
         rights to sue for past, present and future infringements or
         misappropriations thereof and (vi) all other rights corresponding
         thereto throughout the world.

                                       15
<PAGE>

                  "Payment Intangible" shall mean any "payment intangible," as
         such term is defined in the UCC, now owned or hereafter acquired by the
         Debtor, or in which the Debtor now has or hereafter acquires any
         rights.

                  "Person" shall mean any individual, corporation, joint
         venture, general or limited partnership, limited liability company,
         trust, association, unincorporated organization or other business
         entity.

                  "Proceeds" shall mean "proceeds," as such term is defined in
         the UCC and, in any event, shall include, without limitation, (i) any
         and all proceeds of any insurance, indemnity or warranty payable to the
         Debtor from time to time with respect to any of the Collateral, (ii)
         any and all payments (in any form whatsoever) made or due and payable
         to the Debtor from time to time in connection with any requisition,
         confiscation, condemnation, seizure or forfeiture of all or any part of
         the Collateral by any governmental body, authority, bureau or agency
         (or any person acting under color of governmental authority), (iii) any
         claim of the Debtor against third parties (A) for past, present or
         future infringement of any Patent or Patent license or (B) for past,
         present or future infringement or dilution of any Trademark or
         Trademark license or for injury to the goodwill associated with any
         Trademark, Trademark registration or Trademark licensed under any
         Trademark license and (iv) any and all other amounts from time to time
         paid or payable under or in connection with any of the Collateral.

                  "Revised Article 9" shall mean the uniform version of Article
         9 of the Uniform Commercial Code, with new provisions added to other
         Articles of the Uniform Commercial Code contemplated by such revision,
         all as approved in 1999 by The American Law Institute and by the
         National Conference of Commissioners of Uniform State Laws.

                  "Secured Obligations" shall mean (i) all indebtedness and
         obligations of the Debtor to the Secured Party under the Loan Agreement
         and the other Loan Documents (including this Security Agreement), now
         existing or hereafter incurred, and (ii) the payment of amounts that
         would become due from the Debtor to the Secured Party but for the
         operation of the automatic stay provisions of ss.362(a) of the
         Bankruptcy Code, 11 U.S.C. ss.362(a).

                  "Trademarks" shall mean all of the following, now owned or
         hereafter acquired by the Debtor: (i) all trademarks (including service
         marks and trade names, whether registered or at common law),
         registrations and applications therefor, and the entire product lines
         and goodwill of the Debtor's business connected therewith and
         symbolized thereby, (ii) all renewals thereof, (iii) all income,
         royalties, damages and payments now and hereafter due or payable or
         both with respect thereto, including, without limitation, damages and
         payments for past or future infringements or misappropriations thereof,
         (iv) all rights to sue for past, present and future infringements or
         misappropriations thereof and (v) all other rights corresponding
         thereto throughout the world.

                                       16
<PAGE>

                  "Trade Secrets" shall mean all of the following, now owned or
         hereafter acquired by the Debtor: (i) trade secrets, (ii) income,
         royalties, damages and payments now and hereafter due and/or payable to
         the Debtor with respect to trade secrets, including, without
         limitation, damages and payments for past or future infringements or
         misappropriations thereof, (iii) rights to sue for past, present and
         future infringements or misappropriations of trade secrets, and (iv)
         all other rights corresponding to trade secrets throughout the world.

                  "UCC" shall mean the Uniform Commercial Code as in effect from
         time to time in the Commonwealth, including without limitation, the
         Uniform Commercial Code as amended by Revised Article 9 as in effect
         from time to time (PROVIDED, however, in the event that, by reason of
         mandatory provisions of law, any or all of the attachment, perfection
         or priority of the Secured Party's security interest in any Collateral
         is governed by the Uniform Commercial Code as in effect in a
         jurisdiction other than the Commonwealth, the term "UCC" shall mean the
         Uniform Commercial Code as in effect in such other jurisdiction
         (including without limitation, the Uniform Commercial Code as amended
         by Revised Article 9) for purposes of the provisions hereof relating to
         such attachment, perfection or priority and for purposes of definitions
         related to such provisions.

ARTICLE II.  SECURITY INTEREST
------------------------------

         (a) As security for the prompt and full payment and performance of the
Secured Obligations, the Debtor (i) hereby ratifies, confirms and restates its
prior and continuing assignment, pledge and grant to the Secured Party of a
continuing lien on and security interest, prior to all other Liens except Liens
permitted under the Loan Agreement, on and in and to all of the Debtor's
property described below, as well as all products thereof and proceeds derived
therefrom (including, without limitation, all proceeds of insurance), whether
now owned or existing or hereafter acquired or arising or created, all of the
Debtor's right, title and interest in and to and relating to all such property,
products or proceeds, wherever located, and (ii) hereby further assigns and
pledges, and hereby creates and grants, to the Secured Party, a continuing lien
on and security interest in and to all of the following items and types of
properties, now owned or hereafter arising or acquired by the Debtor,
wheresoever located, and all right, title and interest of the Debtor therein
(collectively, the "Collateral"):

                  (i) All Accounts, Chattel Paper (including Tangible Chattel
         Paper and Electronic Chattel Paper), Commercial Tort Claims, Contracts,
         Documents and Instruments;

                  (ii)     All Inventory;

                  (iii)    All Goods, excluding all Fixtures and Equipment;

                  (iv) All General Intangibles (including Payment Intangibles),
         Trademarks, Patents, Copyrights and Trade Secrets;

                                       17
<PAGE>

                  (v) All Cash, Deposit Accounts, Investment Property,
         Letter-of-Credit Rights and Supporting Obligations;

                  (vi) All Additional Collateral;

                  (vii) All other goods and personal property of the Debtor,
         whether tangible or intangible, now owned or hereafter acquired by the
         Debtor, wheresoever located; and

                  (viii) All Proceeds and products relating to each of the
         foregoing.

         (b) The Collateral includes all of the items described above in
paragraph (a), whether now owned or hereafter at any time arising or acquired by
the Debtor and wherever located, and includes all replacements, additions,
accessions, substitutions, repairs, guaranties and securities therefor, Proceeds
and products relating thereto or therefrom, and all documents, records
(including but not limited to, manual records, computer runs, print outs, tapes,
disks, software, programs, source codes and other computer prepared information
and equipment of any kind), ledger sheets and files of the Debtor relating
thereto. Proceeds hereunder include any insurance now or hereafter payable by
reason of loss or damage to any item of Collateral or any proceeds thereof, and
all unearned refund premiums and dividends which may become payable under such
policies of insurance and loss payments under such policies, which shall reduce
the unearned premiums.

         (c) If the Debtor shall at any time acquire a Commercial Tort Claim
with a value of which the Debtor reasonably believes to be in excess of
$500,000, the Debtor shall promptly notify the Secured Party, in writing signed
by the Debtor, of the brief details thereof and grant to the Secured Party in
such writing a security interest in the Commercial Tort Claim and in the
Proceeds thereof, all upon the terms of this Security Agreement, with such
writing to be in form and substance satisfactory to the Secured Party.

         (d) The security interest granted pursuant to this Article II is
granted as security only and shall not subject the Secured Party to, or transfer
or in any way affect or modify, any obligations or liability of the Debtor under
any of the Collateral or any transaction which gave rise thereto.

ARTICLE III.  REPRESENTATIONS AND WARRANTIES
------------------------------------------

         The Debtor represents and warrants to the Secured Party as follows:

                  (i) The Debtor is (or to the extent that this Security
         Agreement states that the Collateral is to be acquired after the date
         hereof, will be) the sole owner of the Collateral except to the extent
         the Collateral is leased or licensed by the Debtor pursuant to leases
         or licenses with other Persons entered into in the ordinary course of
         business; the liens and security interests granted hereby to the
         Secured Party in the Collateral which can be perfected by the filing of
         UCC financing statements will be perfected liens and security interests
         upon the filing of such financing statements having priority over all
         other Liens except Liens permitted pursuant to the Loan Agreement, and
         there are no other Liens in such Collateral or any portion thereof
         except Liens permitted pursuant to the Loan Agreement; and no financing
         statement,

                                       18
<PAGE>

         mortgage or deed of trust covering the Collateral or any portion
         thereof exists or is on file in any public office except those related
         to a Lien permitted pursuant to the Loan Agreement;

                  (ii) SCHEDULE ONE attached hereto (the "Disclosure Schedule")
         contains a complete list of, among other items, (A) the exact current
         name and former corporate and fictitious names utilized by the Debtor,
         (B) the chief executive office of the Debtor, (C) the office where the
         Debtor keeps its records concerning the Collateral, (D) each place of
         business of the Debtor, and (E) as to Inventory, a complete list of
         each location where Inventory is located. All information contained in
         the Disclosure Schedule is true, complete and correct and the Debtor
         hereby acknowledges and agrees that the Secured Party and its legal
         counsel may fully rely upon the information contained therein as
         representations and warranties of the Debtor, the falsity of which may
         constitute a Default (as hereinafter defined);

                  (iii) Except as otherwise disclosed to the Secured Party or
         provided for in the Loan Agreement, the Debtor has exclusive possession
         and control of all its Inventory, and the Debtor has not and will not
         allow any of its contractors, processors or suppliers to have
         possession or control of any Inventory;

                  (iv) Except as required hereby or by the Loan Documents, no
         consent, authorization, approval, or other action by and no notice to
         or filing with, any Official Body is required for (A) the grant by the
         Debtor of the Liens granted hereby or for the execution, delivery or
         performance of this Security Agreement by the Debtor, (B) the
         perfection of the Liens created hereby which may be perfected by the
         filing of financing statements, or (C) the exercise by the Secured
         Party of any of its rights and remedies hereunder, except for the
         filing of financing statements necessary to perfect or continue the
         perfection of the security interests granted by this Security
         Agreement;

                  (v) This Security Agreement creates a valid security interest
         in the Collateral, and the filing of the financing statements in the
         jurisdictions listed in the Disclosure Schedule perfects and
         establishes the first priority of those security interests (except for
         Liens permitted pursuant to the Loan Agreement) in such Collateral
         which can be perfected by the filing of financing statements; and

                  (vi) Neither the execution and delivery of this Security
         Agreement by the Debtor, the consummation of the transactions herein
         contemplated nor the fulfillment of the terms hereof will (A) result in
         a breach of any of the terms or provisions of, or constitute a default
         under, or constitute an event which, with notice or lapse of time or
         both will result in a breach of or constitute a default under, any
         agreement, indenture, mortgage, deed of trust, equipment lease,
         instrument or other document to which the Debtor is a party, or (B)
         conflict with any Law, except to the extent that any such breach,
         default, event or conflict would not have a Material Adverse Change on
         the business, operations or financial condition of the Debtor.

                                       19
<PAGE>

                  (vii) Each Debtor is incorporated in the State of Delaware
         under the Delaware General Corporation Law. The Debtor's exact legal
         name is as set forth in the first paragraph of this Security Agreement
         and is as it appears in official filings in the State of Delaware.

ARTICLE IV.  COVENANTS OF THE DEBTOR
------------------------------------

         The Debtor covenants and agrees to perform each of the covenants set
forth below in this Article IV unless specifically provided for otherwise in the
Loan Agreement or the Secured Party shall otherwise give its prior written
consent.

                  (i) The Debtor will defend the Collateral against all claims
         and demands of all Persons at any time claiming the same or any
         interest therein;

                  (ii) The Debtor will not change the location of its chief
         executive office or the office where it keeps its records concerning
         Accounts from the locations set forth in the Disclosure Schedule except
         with thirty (30) days' prior written notice to the Secured Party, nor
         will the Debtor move, or permit to be moved, the Collateral or any
         portion thereof to any location other than those set forth in the
         Disclosure Schedule other than sales of inventory in the ordinary
         course of business;

                  (iii) The Debtor will not voluntarily or involuntarily change
         its name, identity or corporate structure;

                  (iv) The Debtor will, promptly upon request by the Secured
         Party, procure or execute and deliver any document not inconsistent
         herewith or with the Loan Agreement (including, without limitation,
         mortgagee or landlord waivers with respect to any and all Inventory
         which is a part of the Collateral), give any notices, execute and file
         any financing statements, mortgages or other documents not inconsistent
         herewith or with the Loan Agreement, all in form and substance
         satisfactory to the Secured Party, mark any Chattel Paper, deliver any
         Chattel Paper or Instruments to the Secured Party and take any other
         actions which are necessary or, in the reasonable judgment of the
         Secured Party, desirable to perfect or continue the perfection and
         priority of the Secured Party's liens on and security interests in the
         Collateral, to protect the Collateral against the rights, claims or
         interests of any Person other than the Secured Party or to effect the
         purposes of this Security Agreement, and will pay all reasonable costs
         and expenses incurred in connection therewith;

                  (v) The Debtor will not, without the prior written consent of
         the Secured Party, in any way hypothecate or create or permit to exist
         any Lien on or other interest in the Collateral except Liens permitted
         pursuant to the Loan Agreement and those created by this Security
         Agreement, nor will the Debtor sell, transfer, assign, exchange or
         otherwise dispose of the Collateral except sales of Inventory in the
         ordinary course of business or as otherwise permitted by the Loan
         Agreement. If the proceeds of any such sale are notes, Instruments or
         Chattel Paper, such proceeds shall be promptly delivered upon request
         consistent with the Loan Agreement to the Secured Party to be held as
         part of the Collateral. If the Collateral, or any part

                                       20
<PAGE>

         thereof, is sold, transferred, assigned, exchanged or otherwise
         disposed of in violation of these provisions, the lien and security
         interest of the Secured Party shall continue in such Collateral or part
         thereof notwithstanding such sale, transfer, assignment, exchange or
         other disposition, and the Debtor will hold the proceeds thereof in a
         separate account for the Secured Party's benefit. The Debtor will, at
         the Secured Party's request, transfer such proceeds to the Secured
         Party in kind;

                  (vi) The Debtor will not enter into, modify or amend any
         existing or future contracts or agreements relating to the sale or
         disposition of the Collateral or any part thereof except those made in
         the ordinary course of business or as otherwise permitted by the Loan
         Agreement. Upon request from the Secured Party, the Debtor will provide
         the Secured Party with copies of all existing and hereafter created
         contracts and agreements and of all amendments and modifications
         thereto;

                  (vii) The Debtor will not, without the Secured Party's prior
         written consent, grant any extension of the time of payment of any
         Accounts, or compromise, compound or settle the same for less than the
         full amount thereof, release, in whole or in part, any Person liable
         for the payment thereof, or allow any credit or discount whatsoever
         thereon, except extensions, credits, discounts, compromises,
         settlements or releases granted or made in the ordinary course of
         business and consistent with past practices or as otherwise permitted
         by the Loan Agreement;

                  (viii) The Debtor will pay and discharge all taxes,
         assessments and governmental charges or levies against the Collateral
         prior to delinquency thereof except taxes, assessments or charges
         subject to good faith dispute for which the Debtor has created adequate
         reserves on its books and will keep the Collateral free of all unpaid
         charges whatsoever where the failure to make any of such payments could
         result in a material adverse effect on the business, operations or
         financial condition of the Debtor;

                  (ix) The Debtor will at all times be in substantial compliance
         with all Laws pertaining to the use or ownership of the Collateral,
         except where the failure to so comply would not work a Material Adverse
         Change on the assets, business, operations or financial condition of
         the Debtor or the ability of the Debtor to perform its obligations
         under this Agreement, the Notes and the other Loan Documents;

                  (x) The Debtor will keep accurate and correct records of the
         Inventory, itemizing and describing the kind, type and quantity of
         Inventory, the Debtor's cost therefor and (where applicable) the
         current price list for such Inventory;

                  (xi) The Debtor will cause the Collateral to be kept insured
         at its own expense as provide in Section 5.03 of the Loan Agreement;

                  (xii) The Debtor will, upon the Secured Party's request,
         deliver to the Secured Party records and schedules which show the
         status, condition and location of all its Inventory. The Secured Party
         shall have the right to review and verify such

                                       21
<PAGE>

         records, schedules, notices and financial information, and the Debtor
         will reimburse the Secured Party for all costs incurred thereby;

                  (xiii) If any Accounts arise out of a contract with the United
         States or any department, agency, or instrumentality thereof, the
         Debtor will immediately notify the Secured Party thereof in writing and
         execute any instruments and take any steps required by the Secured
         Party in order that all monies due and to become due under such
         contracts shall be assigned to the Secured Party and notice thereof
         given to the U. S. Government under the Federal Assignment of Claims
         Act;

                  (xiv) If any Accounts should be evidenced by promissory notes,
         trade acceptances, or other instruments for the payment of money, the
         Debtor will upon request deliver the same to the Secured Party,
         appropriately endorsed to the order of the Secured Party and,
         regardless of the form of such endorsement, and the Debtor hereby
         waives presentment, demand, notice of dishonor, protest and notice of
         protest and all other notices with respect thereto;

                  (xv) The Debtor shall, at any time and from time to time, take
         such steps as the Secured Party may reasonably require, not
         inconsistent herewith, for the Secured Party to obtain an
         acknowledgment, in form and substance satisfactory to the Secured
         Party, of any third party having possession of any of the Collateral
         that the third party holds such Collateral for the benefit of the
         Secured Party and, to obtain "control" (as described in the UCC) of any
         Investment Property, Deposit Accounts, Letter-of-Credit Rights or
         Electronic Chattel Paper, with any agreements, establishing control to
         be in form and substance satisfactory to the Secured Party;

                  (xvi) Upon request from the Secured Party, the Debtor will
         execute and deliver to the Secured Party UCC financing statements, in
         form and substance satisfactory to the Secured Party, to assure the
         protection, perfection and enforcement of the Liens in the Collateral
         in favor of the Secured Party, and the Debtor will pay all filing fees
         and taxes related thereto. The Debtor further agrees that a carbon,
         photographic, facsimile or other reproduction of such financing
         statements or this Security Agreement shall be sufficient as a
         financing statement and may be filed as such. The Debtor hereby
         irrevocably appoints the Secured Party, its agents and employees, as
         attorney-in-fact for the Debtor to execute, deliver, file and record
         any such financing statements in the name of the Debtor at any time
         and, as applicable, under the rules of the UCC;

                  (xvii) The Debtor will permit the Secured Party to enter into
         and upon any premises where any of the Collateral or records with
         respect thereto are located for the purpose of inspecting the same,
         making copies of records, observing the use of any part of the
         Collateral, or otherwise protecting its security interest in the
         Collateral;

                  (xviii) After the occurrence and during the continuance of an
         Event of Default, the Secured Party shall have the right at any time to
         make any payments and do any other acts the Secured Party may deem
         reasonably necessary to protect its

                                       22
<PAGE>

         security interest in the Collateral, including, without limitation, the
         right to pay, purchase, contest or compromise any Lien which is prior
         to or superior to the liens and security interests granted hereunder,
         and appear in and defend any action or proceeding purporting to affect
         its security interest in the Collateral, and in exercising any such
         powers or authority, the right to pay all reasonable costs and expenses
         incurred in connection therewith, including reasonable attorneys? fees.
         The Debtor hereby agrees to reimburse the Secured Party for all such
         payments made and expenses incurred, which amounts shall be secured
         under this Security Agreement, and agree they shall be bound by any
         payment made or act taken by the Secured Party hereunder. The Secured
         Party shall have no obligation to make any of the foregoing payments or
         perform any of the foregoing acts; and

                  (xix) After the occurrence and during the continuance of an
         Event of Default, the Debtor hereby grants to the Secured Party for a
         term to commence on the date of this Security Agreement and continuing
         thereafter until all of the Secured Obligations are fully paid and
         discharged, the right to use all premises or places of business which
         the Debtor presently owns, leases or otherwise occupies or may
         hereafter own, lease or otherwise occupy and where any Collateral may
         be located, at a total rental for the entire period of $1.00. The
         Secured Party agrees not to exercise the foregoing right granted unless
         and until the Secured Party determines to exercise its rights against
         the Collateral.

ARTICLE V.  COLLECTIONS
-----------------------

         SECTION 5.01. DEPOSIT, CASH COLLATERAL AND CONCENTRATION ACCOUNTS. The
Debtor shall establish at the Secured Party operating and cash collateral and
concentration accounts to facilitate the collection of cash from the Debtor's
operations (collectively, the "Deposit Accounts").

         SECTION 5.02. AUTHORITY OF SECURED PARTY. From and after an Event of
Default, the Debtor hereby irrevocably constitutes and appoints the Secured
Party and any agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the name of
the Debtor or in its own name to take any and all action and to execute any and
all documents and instruments which the Secured Party, at any time and from time
to time after the occurrence of a Default, deems necessary or desirable to
accomplish the purposes of this Security Agreement and, without limiting the
generality of the foregoing, the Debtor hereby gives the Secured Party the power
and right on behalf of the Debtor and in its own name to do any of the following
at any time and from time to time after the occurrence of a Default (as
hereinafter defined), without notice to or the consent of the Debtor:

                  (i) to demand, sue for, collect, or receive in the name of the
         Debtor or in its own name, any money or property at any time payable or
         receivable on account of or in exchange for any of the Collateral and,
         in connection therewith, endorse checks, notes, drafts, acceptances,
         money orders, documents of title, or any other instruments for the
         payment of money under the Collateral or any policy of insurance;

                  (ii) to pay or discharge taxes, Liens, security interests, or
         other encumbrances levied or placed on or threatened against the
         Collateral;

                                       23
<PAGE>

                  (iii) to send requests for verification to account debtors and
         other obligors;

                  (iv) to notify post office authorities to change the address
         for delivery of mail of the Debtor to an address designated by the
         Secured Party and to receive, open and dispose of mail addressed to the
         Debtor;

                  (v) (A) to direct the account debtors and any other parties
         liable for any payment under any of the Collateral to make payment of
         any and all monies due and to become due thereunder directly to the
         Secured Party or as the Secured Party shall direct; (B) to receive
         payment of and receipt for any and all monies, claims, and other
         amounts due and to become due at any time in respect of or arising out
         of any Collateral; (C) to sign and endorse any invoices, freight or
         express bills, bills of lading, storage or warehouse receipts, drafts
         against the Debtor, assignments, proxies, stock powers, verifications
         and notices in connection with an account and other documents relating
         to the Collateral; (D) to commence and prosecute any suit, action, or
         proceeding at law or in equity in any court of competent jurisdiction
         to collect the Collateral or any part thereof and to enforce any other
         right in respect of any Collateral; (E) to defend any suit, action, or
         proceeding brought against the Debtor with respect to any Collateral;
         (F) to settle, compromise or adjust any suit, action, or proceeding
         described above and, in connection therewith, to give such discharges
         or releases as the Secured Party may deem appropriate; (G) to exchange
         any of the Collateral for other property upon any merger,
         consolidation, reorganization, recapitalization, or other readjustment
         of the issue thereof and, in connection therewith, deposit any of the
         Collateral with any committee, depositary, transfer agent, registrar,
         or other designated agency upon such terms as the Secured Party may
         determine; (H) to add or release any guarantor, endorser, surety, or
         other party to any of the Collateral; (I) to renew, extend, or
         otherwise change the terms and conditions of any of the Collateral; and
         (J) to sell, transfer, pledge, make any agreement with respect to or
         otherwise deal with any of the Collateral as fully and completely as
         though the Secured Party were the absolute owner thereof for all
         purpose, and to do, at the Secured Party's option and the Debtor's
         expense, at any time, or from time to time, all acts and things which
         the Secured Party deems necessary to protect, preserve, or realize upon
         the Collateral and the Secured Party's security interest therein.

         This power of attorney is a power coupled with an interest and shall be
irrevocable. The Secured Party shall be under no duty to exercise or withhold
the exercise of any of the rights, power, privileges, and options expressly or
implicitly granted to the Secured Party in this Security Agreement, and shall
not be liable for any failure to do so or any delay in doing so. The Secured
Party shall not be liable for any act or omission or error of judgment or any
notice of act or law in its individual capacity or in its capacity as
attorney-in-fact except acts or omissions resulting from its willful misconduct
or gross negligence. This power of attorney is conferred on the Secured Party to
protect, preserve, and realize upon its lien and security interest in the
Collateral. The Secured Party shall not be responsible for any decline in the
value of the Collateral, be required to take any steps to preserve rights
against prior parties or to protect, preserve, or maintain any security interest
given to secure the Collateral.

                                       24
<PAGE>

ARTICLE VI.  DEFAULTS AND REMEDIES
----------------------------------

         SECTION 6.01. DEFAULTS. The occurrence of any one or more of the
following events or conditions shall constitute a default under this Security
Agreement (a "Default"):

                  (i) The occurrence of an Event of Default under the Loan
         Agreement.

                  (ii) The Debtor fails to pay any Debt or perform any
         obligation or covenant required to be performed by it in accordance
         with the terms and conditions of this Security Agreement after the
         expiration of any applicable grace period.

                  (iii) The Debtor makes or has made or furnishes or has
         furnished any warranty, representation or statement to the Secured
         Party in connection with this Security Agreement, or any other
         agreement to which it and the Secured Party are parties, which is or
         was false or misleading in any material respect when made or furnished.

                  (iv) The Secured Party shall receive (and deliver to the
         Debtor) at any time after the date hereof a verifiable written report
         from a reputable independent lien search provider indicating that the
         Secured Party's security interest in any Collateral is not prior to all
         other security interests or other interests reflected in such report
         other than Liens and security interests to the extent permitted in
         Section 6.01 of the Loan Agreement; provided that there shall be no
         Default hereunder where (i) the value of all such Collateral, in the
         aggregate, is less than $50,000, (ii) the reason such Collateral is not
         prior to all other security interests or other interests is due to the
         failure of the Secured Party to take the required action to perfect its
         security interest hereunder, or (iii) the Debtor, within 30 days after
         receiving a copy of such report from the Secured Party, fails to remove
         of record or subordinate to the Secured Party such senior security
         interest or interests.

         SECTION 6.02. REMEDIES. Upon the occurrence of a Default, the Secured
Party may, at its option, without notice to or demand upon the Debtor, do any
one or more of the following:

                  (i) Declare all of the Secured Obligations immediately due and
         payable.

                  (ii) Exercise any or all of the rights and remedies provided
         for by the UCC of the state or states having jurisdiction with respect
         to all or any portion of the Collateral from time to time, specifically
         including, without limitation, the right to recover reasonable
         attorneys' fees and other expenses incurred by the Secured Party in the
         enforcement of this Security Agreement or in connection with the
         Debtor's redemption of the Collateral.

                  (iii) Require the Debtor to assemble the Collateral or any
         part thereof and make it available at one or more places as the Secured
         Party may designate, and to deliver possession of the Collateral or any
         part thereof to the Secured Party, who

                                       25
<PAGE>

         shall have full right to enter upon any or all of the Debtor's premises
         and property to exercise the Secured Party's rights hereunder.

                  (iv) Use, manage, operate and control the Collateral and the
         Debtor's business and property to preserve the Collateral or its value,
         including, without limitation, the right to take possession of all of
         the Collateral and to dispose of all or any portion of the Collateral
         in the ordinary course of the Debtor's business.

                  (v) Use, in connection with any assembly, use or disposition
         of the Collateral, any Trademark, Trade Secret, trade name, trade
         style, copyright, Patent or technical knowledge or process used or
         utilized by the Debtor.

                  (vi) Enforce one or more remedies hereunder, successively or
         concurrently, and such action shall not operate to stop or prevent the
         Secured Party from pursuing any other or further remedy which it may
         have, and any repossession or retaking or sale of the Collateral
         pursuant to the terms hereof shall not operate to release the Debtor
         until full and final payment of any deficiency has been made in cash.
         The Debtor shall reimburse the Secured Party upon demand for, or the
         Secured Party may apply any proceeds of the Collateral to, the costs
         and expenses (including reasonable attorneys' fees, transfer taxes and
         any other charges) incurred by the Secured Party in connection with any
         sale, disposition or retention of any Collateral hereunder.

                  (vii) In connection with any public or private sale under the
         applicable UCC, the Secured Party shall give the Debtor at least ten
         (10) days' prior written notice of the time and place of any public
         sale of the Collateral or of the time after which any private sale or
         other intended disposition thereof is to be made, which shall be deemed
         to be reasonable notice of such sale or other disposition. Such notice
         may be mailed to the Debtor at the address set forth in this Security
         Agreement for delivery of notices. Further, in the event of any public
         sale hereunder, the Secured Party shall exhibit the Collateral for a
         reasonable period of time not later than the day before such sale is to
         take place, and, if practicable, shall exhibit the Collateral at the
         time and place of such sale; provided, however, that the Secured Party
         shall have no obligation to exhibit any part of the Collateral at or
         prior to the sale thereof, if, at the time of default, such Collateral
         is in the Debtor's possession or under its control, and if the Secured
         Party sends a the Debtor a written demand for possession thereof under
         clause (iii) of Section 6.02 and the Debtor fails to comply with such
         demand at least three (3) days prior to the date set for sale of such
         Collateral.

                  (viii) Proceed by an action or actions at law or in equity to
         recover the Secured Obligations or to foreclose under this Security
         Agreement and sell the Collateral, or any portion thereof, pursuant to
         a judgment or decree of a court or courts of competent jurisdiction.

                  (ix) In the event the Secured Party recovers possession of all
         or any part of the Collateral pursuant to a writ of possession or other
         judicial process, whether prejudgment or otherwise, the Secured Party
         may thereafter retain, sell or otherwise

                                       26
<PAGE>

         dispose of such collateral in accordance with this Security Agreement
         or the applicable UCC, and following such retention, sale or other
         disposition, the Secured Party may voluntarily dismiss without
         prejudice the judicial action in which such writ of possession or other
         judicial process was issued. The Debtor hereby consents to the
         voluntary dismissal by the Secured Party of such judicial action, and
         the Debtor further consents to the exoneration of any bond which the
         Secured Party filed in such action.

ARTICLE VII.  MISCELLANEOUS PROVISIONS

         SECTION 7.01. NOTICES. Any notice or consent required or permitted by
this Security Agreement shall be in writing and shall be delivered in the manner
and to the addresses specified in the Loan Agreement for delivery of notice. All
notices shall be deemed effective at the times specified in the Loan Agreement
based upon the means of delivery.

         SECTION 7.02. HEADINGS. The various headings in this Security Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Security Agreement or any provision hereof.

         SECTION 7.03. GOVERNING LAW. This Security Agreement shall be construed
in accordance with and governed by the laws of the Commonwealth of Pennsylvania
without giving effect to its conflict of laws principles.

         SECTION 7.04. AMENDMENTS. This Security Agreement or any provision
hereof may be changed, waived, or terminated only by a statement in writing
signed by the party against which such change, waiver or termination is sought
to be enforced.

         SECTION 7.05. NO WAIVER. No delay in enforcing or failure to enforce
any right under this Security Agreement shall constitute a waiver by the Secured
Party of such right. No waiver by the Secured Party of any default hereunder
shall be effective unless in writing, nor shall any waiver operate as a waiver
of any other default or of the same default on a future occasion.

         SECTION 7.06. TIME OF THE ESSENCE. TIME IS OF THE ESSENCE IN EACH
PROVISION OF THIS SECURITY AGREEMENT OF WHICH TIME IS AN ELEMENT.

         SECTION 7.07. BINDING AGREEMENT. All rights of the Secured Party
hereunder shall inure to the benefit of its successors and assigns. The Debtor
shall not assign any of its interest under this Security Agreement without the
prior written consent of the Secured Party. Any purported assignment
inconsistent with this provision shall, at the option of the Secured Party, be
null and void.

         SECTION 7.08. ENTIRE SECURITY AGREEMENT. This Security Agreement and
the other Loan Documents are intended by the parties as a final expression of
their agreement and is intended as a complete and exclusive statement of the
terms and conditions thereof. Acceptance of or acquiescence in a course of
performance rendered under this Security Agreement shall not be relevant to
determine the meaning of this Security Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.

                                       27
<PAGE>

         SECTION 7.09. ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Security Agreement, or to seek damages for a
breach of any provision hereof, or where any provision hereof is asserted as a
defense, the Debtor shall pay the Secured Party's reasonable attorneys' fees in
addition to any other remedy available under this Security Agreement.

         SECTION 7.10. SEVERABILITY. If any provision of this Security Agreement
should be found to be invalid or unenforceable, all of the other provisions
shall nonetheless remain in full force and effect to the maximum extent
permitted by law.

         SECTION 7.11. SURVIVAL OF PROVISIONS. All representations, warranties
and covenants of the Debtor contained herein shall survive the execution and
delivery of this Security Agreement, and terminate only upon full and final
payment and performance of the Secured Obligations.

         SECTION 7.12. SET-OFF. The Secured Party shall have the right, at any
time after the occurrence of a Default, to set off any indebtedness or
obligation of the Debtor to the Secured Party against any indebtedness or
obligation of the Secured Party to the Debtor, without notice to or demand upon
the Debtor and whether or not any such indebtedness or obligations are
liquidated or mature at the time of such offset. The Secured Party's right of
offset hereunder shall be in addition to and not in limitation of any other
rights or remedies which may exist in favor of the Secured Party.

         SECTION 7.13. AUTHORITY OF THE SECURED PARTY. The Secured Party shall
have and be entitled to exercise all powers hereunder which are specifically
delegated to the Secured Party by the terms hereof, together with such powers as
are reasonably incident thereto. The Secured Party may perform any of its duties
hereunder or in connection with the Collateral by or through agents or employees
and shall be entitled to retain counsel to act in reliance upon the advice of
counsel concerning all such matters. Neither the Secured Party nor any director,
officer, employee, attorney or agent of the Secured Party shall be liable to the
Debtor for any action taken or omitted to be taken by it or them hereunder,
except for its or their own gross negligence or willful misconduct; nor shall
the Secured Party be responsible for the validity, effectiveness or sufficiency
hereof or of any document or security furnished pursuant hereto. The Secured
Party shall be entitled to rely on any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons. The Debtor agrees to indemnify and hold harmless the
Secured Party and/or any such other person from and against any and all costs,
expenses (including reasonable attorneys' fees), claims or liability incurred by
the Secured Party or such other persons hereunder, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Secured Party or such other person.

         SECTION 7.14. COUNTERPARTS. This Security Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall together constitute one and the same agreement.

         SECTION 7.15. TERMINATION OF SECURITY AGREEMENT. This Security
Agreement shall continue in force so long as any portion of the Secured
Obligations remain unpaid. If the Secured Party receives any payment or payments
on account of the Secured Obligations which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver, or any other
party under the Bankruptcy Code, 11 U.S.C. ss.101 ET SEQ., as amended, or any
other state or federal law, common law or

                                       28
<PAGE>

equitable doctrine, then to the extent of any sum not finally retained by the
Secured Party, the Debtor's obligations to the Secured Party shall be reinstated
and this Security Agreement, and any security therefor, shall remain in full
force and effect (or be reinstated) until payment shall have been made to the
Secured Party, notwithstanding termination of this Security Agreement or the
cancellation of any note, instrument or agreement evidencing the Secured
Obligations, and such payment shall be due on demand by the Secured Party. If
any proceeding seeking such repayment is pending or, in the Secured Party's sole
judgment, threatened, this Security Agreement and any security therefor shall
remain in full force and effect notwithstanding that a the Debtor may not be
obligated to the Secured Party.

         SECTION 7.16. INCONSISTENT AGREEMENTS. If any inconsistency shall exist
between the terms and conditions of the Loan Agreement and this Security
Agreement, the terms and conditions of the Loan Agreement shall control.

         SECTION 7.17 AMENDMENT AND RESTATEMENT. This Security Agreement is an
amendment and restatement of the Existing Security Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                       29
<PAGE>

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

ATTEST:                                   UNI-MARTS, INC.

                                          By:
--------------------------------             --------------------------------
                  Secretary               Name:  N. Gregory Petrick
                                          Title:  Executive Vice President and
                                                   Chief Financial Officer

ATTEST:                                   UNI-MARTS OF AMERICA, INC.

                                          By:
--------------------------------             --------------------------------
                  Secretary               Name:  N. Gregory Petrick
                                          Title:  President

                                          THE PROVIDENT BANK

                                          By:
                                             ---------------------------------
                                                   Ronald L. Tassone
                                                   Senior Vice President

                                       30
<PAGE>

                       SCHEDULE ONE TO SECURITY AGREEMENT

                                       (A)

                         EXACT CURRENT NAMES OF DEBTOR:
                          -----------------------------

                                 UNI-MARTS, INC.
                           UNI-MARTS OF AMERICA, INC.

                         ANY ASSUMED OR FICTITIOUS NAMES
               DEBTOR HAS USED IN PAST FIVE (5) YEARS/OR ANY OTHER
                   CORPORATE NAME USED IN PAST FIVE (5) YEARS:

                                      NONE

                                       (B)

                  LOCATION OF CHIEF EXECUTIVE OFFICES OF DEBTOR

                             477 EAST BEAVER AVENUE
                          STATE COLLEGE, PA 16801-5690

                                       (C)

           OFFICE WHERE DEBTOR KEEPS ITS RECORDS CONCERNING INVENTORY,
           ----------------------------------------------------------
                     ACCOUNTS, CONTRACTS AND OTHER PROPERTY
                     --------------------------------------

                             477 EAST BEAVER AVENUE
                          STATE COLLEGE, PA 16801-5690

                                       (D)

           PLACE OF BUSINESS OF DEBTOR, TOGETHER WITH NAME AND ADDRESS
                      OF LANDLORD OF SUCH PLACE OF BUSINESS

                             477 EAST BEAVER AVENUE
                          STATE COLLEGE, PA 16801-5690

                           LANDLORD - HFL CORPORATION
                             477 EAST BEAVER AVENUE
                             STATE COLLEGE, PA 16801
                                  ------------

                                       31
<PAGE>

                  SCHEDULE ONE TO SECURITY AGREEMENT (CONT'D.)

                                 ---------------

                                       (E)

                         LOCATION OF DEBTOR'S INVENTORY

                        SEE APPENDIX 2 TO LOAN AGREEMENT

                                       32<PAGE>
                                                                   Exhibit 10.60

                              SEPARATION AGREEMENT

         This Separation Agreement is entered into by and between Philip F.
Schultz ("Employee") and Eagle-Picher Industries, Inc., an Ohio corporation
("Employer"). In exchange for the payments provided herein, the mutual
undertakings, and other good and valuable consideration, the parties agree as
follows:

1.   Employee's employment with Employer shall terminate effective as of the
     later of (a) November 30, 2001, or (b) the earlier of (i) December 31,
     2001, or (ii) the date of closing of the "Securitization Transaction" (as
     defined in Paragraph 3 below) (as the case may be, the "Separation Date").
     Employer shall pay Employee at Employee's current rate of pay according to
     Employer's ordinary payroll practices for all wages due up to and including
     the Separation Date. Employer shall also compensate Employee for fifteen
     (15) unused vacation days as of the Separation Date. Employee's positions
     as an officer or director of Employer or any of its affiliates shall
     terminate effective October 8, 2001.

2.   Employer shall pay or provide to Employee:

a)   SEVERANCE PAY. Employer shall pay to Employee, without setoff or deduction,
     the amount of $290,000 (the "Annual Salary Amount"), which Annual Salary
     Amount shall be paid as follows:

          i)   If the Annual Salary Amount has not previously been paid in full,
               commencing on the day following the Separation Date and
               continuing until the Annual Salary Amount has been paid in full,
               Employer shall pay to Employee each month in accordance with

<PAGE>

               Employer's normal payroll practices an amount equal to
               one-twelfth (1/12) of the Annual Salary Amount;

          ii)  On or before the earlier of (x) March 1, 2002, or (y) the date of
               closing of the Securitization Transaction (as the case may be,
               the "Deferred Payment Date"), Employer shall pay to Employee in a
               lump sum the then unpaid balance of the Annual Salary Amount.

          As a material inducement to Employee to enter into this Agreement,
          Employer agrees and intends that the covenant of Employer to pay the
          Annual Salary Amount at the times and in the manner set forth in this
          Paragraph 2 (a) is an independent covenant, and Employer is and
          intends to be unconditionally obligated to pay the Annual Salary
          Amount without setoff or deduction and regardless of any breach of
          this Agreement by Employee or any other claims or defenses to payment
          Employer may have against Employee.

     b)   SALARY CONTINUATION. Commencing on the day following the Separation
          Date and continuing for a period of fifty-two (52) consecutive weeks,
          Employer shall pay Employee the annual amount of $11,154, such amount
          to be paid in equal installments in accordance with Employer's normal
          payroll practices for the fifty-two (52) weeks following the
          Separation Date (the "Severance Period"). For avoidance of doubt, no
          bonuses will be due to Employee except as provided in Paragraph 3
          below, and Employee shall have no obligations to Employer during the
          Severance Period and shall not be obligated to provide any services to
          Employer in connection with any payments during the Severance Period.

     c)   MEDICAL BENEFITS. At Employer's sole cost (but subject to applicable
          co-pays and deductibles, which shall be the responsibility of
          Employee), Employer will provide

                                       2
<PAGE>

          Employee and his immediate family with medical benefits under the
          Employer's Group Medical Plan until the earlier of (A) the last day of
          the Severance Period, or (B) if during the Severance Period Employee
          obtains employment with a new employer that offers Medical coverage
          for Employee and his family that does not exclude coverage for any
          pre-existing conditions (but regardless of any co-pay or contribution
          requirements for such medical coverage), the date Employee is eligible
          for such Medical coverage ("New Coverage"). Employee shall give
          Employer notice of New Coverage. While covered by the Employer's Group
          Medical Plan, Employee will also be entitled to participate in
          Employer's Dental Plan and Flex Plan.

     d)   LIFE INSURANCE. Employee shall have basic coverage under Employer's
          Group Life Insurance Plan during the Severance Period.

     e)   COMPANY CAR. Employer shall continue to insure and timely to pay all
          lease payments applicable to, and provide Employee the exclusive use
          of, Employee's leased company vehicle through the Deferred Payment
          Date. Employee intends to purchase such vehicle at the buy-out price
          available to Employer under the lease immediately following the
          Deferred Payment Date, and Employer shall cooperate with Employee to
          cause outright ownership of Employee's leased vehicle to be
          transferred to Employee in exchange for payment by Employee of the
          applicable buy-out price within thirty (30) days of the Deferred
          Payment Date.

     f)   PERSONAL ELECTRONICS. On the Separation Date Employer shall be deemed
          to have transferred to Employee ownership of the Palm V (together with
          related software, chargers and modems) currently used by Employee and
          the cellular phone (including related phone number, cases and
          chargers) used by Employee. Employer and Employee

                                       3
<PAGE>

          shall cooperate in the transfer of any related third party accounts as
          of the Separation Date.

     g)   OUTPLACEMENT. Employer shall pay for outplacement services and career
          counseling at Drake Beam Morin (or a comparable facility selected by
          Employee), which services shall commence immediately and shall end on
          the last day of the Severance Period.

     h)   RESTRICTED STOCK PURCHASE. Employer shall purchase from Employee for
          cash, and Employee shall sell to Employer or its designee, the 1,250
          shares of Restricted Stock of Eagle-Picher Holdings, Inc. beneficially
          owned by Employee (the "Employee Stock Interest") for an aggregate
          purchase price of $139,575 (the "Down Payment") plus the "Contingent
          Payment" described in Paragraph 3 below. The Down Payment shall be
          paid by Employer to Employee, without setoff or deduction, on or
          before the Deferred Payment Date and the Contingent Payment shall be
          paid, if at all, in accordance with Paragraph 3 below. As a material
          inducement to Employee to enter into this Agreement, Employer agrees
          and intends that the covenant of Employer to pay the Down Payment at
          the times and in the manner set forth in this Paragraph 2 (h) is an
          independent covenant, and Employer is and intends to be
          unconditionally obligated to pay the Down Payment without setoff or
          deduction and regardless of any breach of this Agreement by Employee
          or any other claims or defenses to payment Employer may have against
          Employee.

    Employee acknowledges that this Agreement provides for payments and benefits
    not contemplated under the terms and conditions applicable to his
    employment. All lump sum and periodic payments and other benefits and
    distributions under this Agreement shall be subject to any withholding and
    employment taxes consistent with the character of the

                                       4
<PAGE>

     payments in accordance with law. Employee shall pay the income tax costs
     for all payments and benefits under this Agreement.

3.   SECURITIZATION AND INCENTIVE. Employer is attempting to obtain financing
     through the securitization of certain of the accounts receivable of
     Employer and its subsidiaries (the "Securitization Transaction"). Employer
     has requested Employee's continued assistance with the Securitization
     Transaction, which assistance Employee is willing to provide. In
     consideration of assistance provided by Employee in connection with the
     Securitization Transaction, Employer agrees that if the closing of the
     Securitization Transaction occurs on or before May 31, 2002, Employer shall
     pay to Employee the additional aggregate amount of $116,000 for the
     Employee Stock Interest (the "Contingent Payment") within ten (10) days
     after the closing of the Securitization Transaction. Employer further
     agrees that if Employer at any time prior to May 31, 2002 ceases to
     diligently and continuously pursue the Securitization Transaction to
     closing, Employer shall pay the Contingent Payment to Employee within ten
     (10) days after such cessation, but in any event on or before May 31, 2002.

4.   Employee releases, holds harmless, and covenants not to sue or bring any
     charge or other claim against Employer and it affiliates and the officers,
     directors, shareholders, owners, employees and agents of Employer and its
     affiliates (collectively, the "Released Parties") in connection with any
     matter relating to, connected with, or arising out of his employment by
     Employer (other than personal injury) or the termination of that
     employment. Further, Employee expressly waives any rights under any
     Employer severance plan, or, except as expressly provided herein, any other
     Employer benefit plan. Specifically, but without limitation, Employee
     releases Employer and the Released Parties from, and agrees that he

                                       5
<PAGE>

     will not bring any action against Employer or any of the Released Parties
     based on, any claim or denial of equal employment opportunity or
     discrimination in violation of any statute or regulation governing
     employment practices and specifically releases any such claim or action
     relating to age discrimination, including any claim under the federal Age
     Discrimination in Employment Act. Further, also without limitation,
     Employee agrees that he will not bring any action or other claim against
     Employer or any Released Party based on any theory of wrongful termination,
     intentional or negligent infliction of mental distress or other tort,
     breach of express or implied contract, or promissory estoppel. Any rights
     Employee is entitled to under his employment with Employer that are not
     specifically enumerated in this Agreement are canceled upon the Separation
     Date. This paragraph shall not preclude Employee from bringing an action to
     enforce the terms of this Agreement.

5.   Employee will be entitled to benefits under the Eagle-Picher Salaried
     Pension Plan, the Eagle-Picher Supplemental Executive Retirement Plan
     ("SERP"), and the Eagle-Picher Salaried 401(k) Plan in accordance with the
     terms of those plans. Benefits under each of those plans will be calculated
     utilizing the Separation Date as the date of the Employee's termination of
     employment. Employee specifically acknowledges, agrees to and accepts the
     amendments to Employer's Supplemental Executive Retirement Plan made as of
     March 27, 2001. Employee specifically acknowledges, agrees to and accepts
     Rule No. 1 under the Second Amended and Restated Incentive Stock Plan of
     Eagle-Picher Industries, Inc. (the "Stock Plan") adopted by the Committee
     for the Stock Plan; provided, however, that the payments and benefits
     contemplated by this Agreement shall in no event be, or be deemed to be,
     prohibited, limited or otherwise restricted by such Rule, it being the
     intent and agreement of the parties that the negotiated payments and
     benefits provided for in this Agreement not be

                                       6
<PAGE>

     the same as those contemplated under the terms and conditions applicable to
     Employee's employment with Employer. Employee also specifically
     acknowledges, agrees to and accepts the adjustments to the Agreed Share
     Price made by the Committee for the Plan on March 27, 2001 and agrees that
     the Agreed Share Price for shares of Restricted Stock under the Stock Plan
     shall be $94.06; provided, however, that the payments and benefits
     contemplated by this Agreement shall in no event be, or be deemed to be,
     prohibited, limited or otherwise restricted by such Rule, it being the
     intent and agreement of the parties that the negotiated payments and
     benefits provided for in this Agreement not be the same as those
     contemplated under the terms and conditions applicable to Employee's
     employment with Employer.

6.   Employee shall hold all Confidential Information (as defined below) in
     strict confidence and not disclose any Confidential Information except as
     expressly provided herein and shall not use any Confidential Information
     for his own benefit or otherwise against the best interests of Employer. As
     used herein, "Confidential Information" shall mean any information
     regarding Employer and/or its affiliates (whether written, oral or
     otherwise), received or obtained before, on or after the date hereof,
     including without limitation any product design, specification or other
     technical information, manufacturing or other process information,
     financial information, customer information, general business information,
     or market information, WHETHER OR NOT marked or designated as
     "Confidential," "Proprietary" or the like, in any form, including
     electronic or optical data storage and retrieval mechanisms, and including
     all forms of communication, including but not limited to physical
     demonstrations, in-person conversations and telephone conversations, email
     and other means of information transfer such as facility tours, regardless
     of whether any such information is protected by applicable trade secret or
     similar laws. The term "Confidential Information" shall not include

                                       7
<PAGE>

     information which: (i) is or becomes generally available to the public
     other than as a result of the disclosure by Employee or another person
     bound by a confidentiality agreement with, or other legal or fiduciary or
     other obligation of secrecy or confidentiality to, Employer or another
     party with respect to such information; or (ii) becomes available to
     Employee from a source other than Employer or any of its directors,
     officers, employees, agents, affiliates, representatives, or advisors,
     provided that such source is not bound by a confidentiality agreement with,
     or other legal or fiduciary or other obligation of secrecy or
     confidentiality to, Employer or another party with respect to such
     information. If Employee shall be required by subpoena or similar
     government order or other legal process ("Legal Process") to disclose any
     Confidential Information, then Employee shall provide Employer with prompt
     written notice of such requirement and cooperate if requested with Employer
     in efforts to resist disclosure or to obtain a protective order or similar
     remedy. Subject to the foregoing, if Confidential Information is required
     by Legal Process to be disclosed, then Employee may disclose such
     Confidential Information but shall not disclose any Confidential
     Information for a reasonable period of time, unless compelled under
     imminent threat of penalty, sanction, contempt citation or other violation
     of law, in order to allow Employer time to resist disclosure or to obtain a
     protective order or similar remedy. If Employee discloses any Confidential
     Information, then Employee shall disclose only that portion of the
     Confidential Information which, in the opinion of counsel, is required by
     such Legal Process to be disclosed. Employee represents and warrants to
     Employer that as of the date this Agreement becomes irrevocable, Employee
     will not have in his possession or in the possession of any of his family
     members any Confidential Information in tangible form (including electronic

                                       8
<PAGE>

     computer files). Employee also agrees not to disparage Employer or any of
     its shareholders, directors, officers or employees and Employer agrees not
     to disparage Employee.

7.   If Employee brings an action or other claim against Employer or any
     Released Party in violation of paragraph 5 or otherwise materially breaches
     this Agreement, in addition to any and all damages to which Employer or a
     Released Party may be entitled, all payments and benefits to Employee set
     forth in paragraph 2 above shall cease (excepting any benefit received in
     accordance with the requirements of C.O.B.R.A.). Employer shall give
     Employee notice of a claim that Employee has materially breached this
     Agreement and Employee shall have a period of thirty (30) days to cure such
     breach if it is capable of cure (provided that Employer may seek immediate
     injunctive relief for a breach or threatened breach of this Agreement).
     Employee acknowledges and agrees that in the event of any breach or
     threatened breach of this Agreement by Employee, then Employer shall be
     entitled to specific performance and injunctive relief as a remedy for any
     such breach or threatened breach hereof without necessity of posting bond
     or other security, the requirement for which is expressly waived. Employee
     agrees not to raise and hereby waives any defense to injunctive relief
     based on lack of irreparable harm or sufficiency of monetary damages. Such
     remedy shall not be deemed to be the exclusive remedy for any breach of
     this Agreement, but shall be in addition to all other remedies available to
     Employer at law or in equity.

8.   Employee recognizes that the release and waiver provisions of this
     Agreement may surrender valuable legal rights. He acknowledges full
     awareness of the extinguishment of such rights in exchange for the
     consideration provided under this Agreement. Employee further acknowledges
     that he has been advised by Employer to consult an attorney with respect to
     this Agreement prior to executing it. Further, Employee acknowledges that
     he has been given

                                       9
<PAGE>

     twenty-one (21) calendar days from initial presentation of this Agreement
     on October 12, 2001 in order to consult an attorney.

9.   This Agreement shall be binding upon Employer as of the date of its
     execution and presentation by Employer if it is executed by the Employee
     within twenty-one (21) calendar days of presentation by Employer and not
     later rescinded as provided herein. If Employee does not execute this
     Agreement and deliver it to Employer within twenty-one (21) calendar days
     of presentation by Employer, it shall be voidable at the option of
     Employer. Employee, at his sole election and option, shall be entitled to
     rescind and withdraw from this Agreement without further obligation at
     anytime within seven (7) calendar days from the date Employee executes the
     Agreement. Employee shall evidence any withdrawal and rescission by giving
     written notice to Employer's Senior Vice President and General Counsel, 250
     E. 5th Street, 5th Floor, Cincinnati, Ohio 45202, telecopy (513) 629-2571,
     with a written notice stating that Employee rescinds the Agreement and
     withdraws from it. If Employee has not given Employer such written notice
     on or before the expiration of such seven (7) calendar days from the date
     Employee executes the Agreement, this Agreement shall be irrevocable. The
     day on which such seven day period ends shall be referred to herein as the
     ("Effective Date").

Executed and presented as of the 1st day of November 2001.

                         EAGLE-PICHER INDUSTRIES, INC.

                         By:
                               ----------------------------
                         Name:  DAVID G. KRALL
                               ----------------------------
                         Title: SENIOR VICE PRESIDENT
                               ----------------------------

                                       10
<PAGE>

Executed and agreed to this 1st day of November 2001.

                                    By:
                                         ------------------------
                                         Philip F. Schultz

                                       11

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