Document:

<PAGE>
                                                                  EXHIBIT 10.3

                           PREFERRED STOCK AND WARRANT
                               PURCHASE AGREEMENT

                                      AMONG

                            P.N.Y. ELECTRONICS, INC.,

                          GS CAPITAL PARTNERS II, L.P.

                             AND AFFILIATED PARTIES

                                       AND

                                   GADI COHEN

                           DATED AS OF AUGUST 4, 1995
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                                TABLE OF CONTENTS

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                                                                                                                         PAGE
<S>                                                                                                                     <C>
Section 1.           Issuance and Sale of Securities......................................................................2

           1.1       The Purchase.........................................................................................2
           1.2       The Closing..........................................................................................2
           1.3       Actions at the Closing...............................................................................2

Section 2.           Representations and Warranties of the Corporation....................................................4

           2.1       Organization and Good Standing; Power and Authority; Qualifications..................................4
           2.2       Authorization of the Documents.......................................................................4
           2.3       Capitalization.......................................................................................5
           2.4       Authorization and Issuance of Capital Stock..........................................................5
           2.5       Reservation of Shares................................................................................6
           2.6       Financial Statements.................................................................................6
           2.7       Absence of Undisclosed Liabilities...................................................................7
           2.8       Absence of Changes...................................................................................7
           2.9       No Conflict..........................................................................................8
           2.10      Agreements...........................................................................................8
           2.11      Intellectual Property Rights.........................................................................9
           2.12      Equity Investments..................................................................................11
           2.13      Corporate Minute Books..............................................................................11
           2.14      Assets..............................................................................................11
           2.15      Employee Benefit Plans..............................................................................12
           2.16      Labor Relations; Employees..........................................................................14
           2.17      Litigation; Orders..................................................................................14
           2.18      Compliance with Laws; Permits.......................................................................15
           2.19      Offering Exemption..................................................................................15
           2.20      Related Transactions................................................................................15
           2.21      Disclosure..........................................................................................15
           2.22      Taxes...............................................................................................16
           2.23      Environmental Matters...............................................................................17
           2.24      Consents............................................................................................20
           2.25      Insurance...........................................................................................20
           2.26      Brokers.............................................................................................20
           2.27      Predecessor Corporation.............................................................................20

Section 3.           Representations and Warranties of GSCP..............................................................20

Section 4.           Certain Covenants...................................................................................22

           4.1       Access to Records...................................................................................22
           4.2       Financial Reports...................................................................................22
           4.3       Management Shares...................................................................................23
           4.4       System of Accounting................................................................................24
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<S>                                                                                                                     <C>
           4.5       Maintenance of Corporate Existence, etc.............................................................24
           4.6       Compliance with Laws................................................................................24
           4.7       Maintenance of Properties and Leases................................................................24
           4.8       Insurance...........................................................................................24
           4.9       Licenses and Permits................................................................................25
           4.10      Intellectual Property...............................................................................25
           4.11      Employee Nondisclosure and Secrecy Agreements.......................................................25
           4.12      Disclosure of Investment............................................................................25
           4.13      Limitations on Breaches.............................................................................26
           4.14      Confidentiality.....................................................................................26
           4.15      Investment Banking Services.........................................................................27
           4.16      Subsidiary Transfer.................................................................................27

Section 5.           Transfer Taxes......................................................................................28

Section 6.           Exchanges; Lost, Stolen or Mutilated Certificates...................................................28

Section 7.           Survival of Representations, Warranties, Agreements and Covenants, etc..............................28

Section 8.           Expenses............................................................................................29

Section 9.           Indemnification.....................................................................................29

Section 10.          Remedies............................................................................................31

Section 11.          Further Assurances..................................................................................31

Section 12.          Successors and Assigns..............................................................................31

Section 13.          Entire Agreement....................................................................................31

Section 14.          Notices.............................................................................................32

Section 15.          Amendments..........................................................................................33

Section 16.          Counterparts........................................................................................34

Section 17.          Headings............................................................................................34

Section 18.          Nouns and Pronouns..................................................................................34

Section 19.          Governing Law.......................................................................................34

Section 20.          Severability........................................................................................34

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                                       ii
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Exhibit A-1               Form of $15,000,000 Note
Exhibit A-2               Form of $5,140,000 Additional Note
Exhibit B                 Form of Warrant
Exhibit C                 Form of Registration Rights Agreement
Exhibit D                 Form of Secretary's Certificate
Exhibit E                 Form of Restated Certificate of Incorporation
Exhibit F                 Form of By-Laws
Exhibit G                 Form of Opinion of Counsel to the Corporation
Exhibit H                 Form of Stockholder Agreement
Exhibit I                 Form of Gadi Cohen Non-Competition Agreement
Exhibit J                 Form of Dividend Remittitur and Pledge Agreement
Exhibit K                 Form of Agreement Between Securityholders
Exhibit L                 Form of Employee Nondisclosure and Secrecy Agreement
Exhibit M                 Initial Form of Report
Exhibit N                 Final Form of Report

                                      iii
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TERM                                                                                                       SECTION
----                                                                                                       -------
<S>                                                                                                      <C>
AA Account............................................................................................     Recitals
Additional Note.......................................................................................     Recitals
Balance Sheets........................................................................................     2.6(a)
Benefit Plan..........................................................................................     2.15(a)
Business..............................................................................................     2.1
By-Laws...............................................................................................     1.3
Certificate of Incorporation..........................................................................     1.3
Claim.................................................................................................     9
Closing...............................................................................................     1.2(a)
Closing Agreements....................................................................................     2.3
Closing Date..........................................................................................     1.2(a)
Code..................................................................................................     2.15(a)
Common Stock..........................................................................................     Recitals
Contract..............................................................................................     2.10(a)
Conversion Shares.....................................................................................     2.5
Corporation...........................................................................................     Preamble
Dividend..............................................................................................     Recitals
Dividend Declaration Date.............................................................................     Recitals
Dividend Remittitur Agreement.........................................................................     Recitals
Employee..............................................................................................     2.15(a)
Employee Agreement....................................................................................     2.15(a)
Employee Nondisclosure and Secrecy Agreements.........................................................     2.16
Encumbrances..........................................................................................     2.14
Environmental Costs...................................................................................     2.23(a)
Environmental Laws....................................................................................     2.23(a)
Environmental Matter..................................................................................     2.23(a)
Environmental Permits.................................................................................     2.23(a)
ERISA.................................................................................................     2.15(a)
GAAP..................................................................................................     2.6(a)
Goldman Sachs.........................................................................................     4.15
GS Parties............................................................................................     4.1
GSCP..................................................................................................     Preamble
GSCP Affiliate........................................................................................     12
Hazardous Substances..................................................................................     2.23(a)
Indemnified Party.....................................................................................     9
Indemnifying Party....................................................................................     9
Industries............................................................................................     Recitals
Initial Period........................................................................................     4.2.1
Intellectual Property.................................................................................     2.11(i)
Investment............................................................................................     4.14
Litigation............................................................................................     19
Losses................................................................................................     9(a)
Management............................................................................................     4.3
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TERM                                                                                                       SECTION
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<S>                                                                                                      <C>
Management Letter.....................................................................................     4.2.1
Material Adverse Effect...............................................................................     2.1
Material Contracts....................................................................................     2.10(a)
Minimum Ownership.....................................................................................     4.1
Moonachie Purchase....................................................................................     Recitals
Note..................................................................................................     Recitals
Preferred Stock.......................................................................................     Recitals
Premises..............................................................................................     2.23
Property Purchase Agreement...........................................................................     Recitals
PTO...................................................................................................     2.11(c)
Purchase..............................................................................................     1.1
Purchase Price........................................................................................     1.1
Qualified IPO.........................................................................................     7
Qualifying Shares.....................................................................................     2.12
Real Property and Tangible Assets.....................................................................     2.23(a)
Registration Rights Agreement.........................................................................     1.3(a)
Reincorporation.......................................................................................     Recitals
SEC...................................................................................................     4.2.4
Securities............................................................................................     3(c)
Securities Act........................................................................................     2.19
Stockholder...........................................................................................     Preamble
Stockholder Agreement.................................................................................     1.3(e)
Subsidiary............................................................................................     Recitals
Subsidiary Transfer...................................................................................     Recitals
Taxes.................................................................................................     2.22
Transfers.............................................................................................     Recitals
200 Anderson Avenue...................................................................................     2.14
Warrants..............................................................................................     Recitals
Warrant Shares........................................................................................     Recitals

</TABLE>

                                       v
<PAGE>
                            P.N.Y. ELECTRONICS, INC.

                 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

                     AGREEMENT, dated as of August 4, 1995, by and among P.N.Y.
ELECTRONICS, INC., a Delaware corporation (the "Corporation"), GS CAPITAL
PARTNERS II, L.P., a Delaware limited partnership ("GSCP"), GS CAPITAL PARTNERS
II OFFSHORE, L.P., GOLDMAN, SACHS & CO. VERWALTUNGS GmbH, STONE STREET FUND
1995, L.P. and BRIDGE STREET FUND 1995, L.P., each of which is a GSCP Affiliate
(as defined in Section 12 hereof) (collectively referred to as the "GSCP
Investors"), and GADI COHEN, residing at 8 Shinnecock Trail, Franklin Lakes, New
Jersey 07417 (the "Stockholder").

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

                     WHEREAS, on August 3, 1995, P.N.Y. Electronics, Inc., a New
Jersey corporation (the "Predecessor Corporation"), merged with and into P.N.Y.
Electronics, Inc., a Delaware corporation (the "Reincorporation");

                     WHEREAS, on August 3, 1995 (the "Dividend Declaration
Date"), the Corporation declared a dividend (the "Dividend") payable to the
Stockholder, upon the terms in the board resolutions relating thereto, in an
amount effectively representing, in the aggregate, substantially all of the
aggregate amount of the Corporation's accumulated adjustments account (as
defined in ss. 1368(e)(1) of the Internal Revenue Code of 1986, as amended) as
of the date hereof;

                     WHEREAS, the Dividend is being paid by means of and in the
form of (i) the issuance by the Corporation to the Stockholder, on the business
day prior hereto, of a subordinated note substantially in the form of Exhibit
A-1 hereto and having a principal amount of $15,000,000 (the "Note"), (ii) the
issuance by the Corporation to the Stockholder, on the business day prior
hereto, of a subordinated note substantially in the form of Exhibit A-2 hereto
and having an initial principal amount of $5,140,000 (which amount is subject to
adjustment as described therein) (the "Additional Note"), (iii) the payment by
the Corporation to the Stockholder, on the date hereof, of $15,000,000 in cash
and (iv) the payment by the Corporation to the Stockholder from time to time of
certain cash amounts in respect of certain tax payments which the Stockholder
may be required to make;

                     WHEREAS, the Stockholder agrees to contribute to the
capital of the Corporation all of the outstanding shares of capital stock of PNY
Electronics Europe S.A., a French corporation (the "Subsidiary"), owned by the
Stockholder (the "Subsidiary Transfer");

                     WHEREAS, on August 4, 1995, the Corporation entered into an
agreement (the "Property Purchase Agreement") pursuant to which it agreed,
subject to certain conditions enumerated therein, to purchase from P.N.Y.
Industries Corp., a New Jersey corporation ("Industries"), the premises located
<PAGE>
at 200 Anderson Avenue, Moonachie, New Jersey, which were leased by the
Corporation from Industries, for a purchase price of $272,794 and the
forgiveness of a loan from the Corporation to Industries in the amount of
$1,362,206 (the "Moonachie Purchase" and, together with the Subsidiary Transfer,
the "Transfers"); and

                     WHEREAS, the Corporation wishes to sell to GSCP and GSCP
wishes to purchase from the Corporation shares of the Corporation's Series A
Convertible Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and warrants to purchase shares of the Corporation's Common Stock, par value
$.01 per share (the "Common Stock"), in the form of Exhibit B hereto (the
"Warrants") (the shares of Common Stock issuable upon exercise of the Warrants
being referred to herein as the "Warrant Shares").

                     ACCORDINGLY, the parties hereto hereby agree as follows:

                     Section 1. Issuance and Sale of Securities.
                                -------------------------------

                     1.1 The Purchase. At the Closing (as defined in Section
                         ------------
1.2(a)), GSCP and the GSCP Investors shall purchase from the Corporation, and
the Corporation shall sell to GSCP and the GSCP Investors, an aggregate of
13,000 shares of Preferred Stock and Warrants to purchase an aggregate of 4,875
shares of Common Stock (the "Purchase") (as set forth on Annex I hereto), at an
aggregate purchase price of $15,000,000 (the "Purchase Price").

                     1.2 The Closing. (a) The closing of the transactions
                         -----------
contemplated by the Purchase (the "Closing") shall take place simultaneously
with the execution and delivery of this Agreement at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004
(the date hereof being referred to herein as the "Closing Date").

                     (b) At the Closing, the Corporation shall deliver to GSCP
and the GSCP Investors a certificate or certificates representing the shares of
Preferred Stock and the Warrants purchased by GSCP at the Closing, in each case
registered in the name of GSCP or a GSCP Investor. Delivery of such certificates
and Warrants shall be made against receipt by the Corporation from GSCP of the
Purchase Price at the Closing, which shall be paid by wire transfer in
immediately available funds to an account designated at least one business day
prior to the Closing by the Corporation.

                     1.3 Actions at the Closing. Simultaneously with, or prior
                         ----------------------
to, the execution and delivery of this Agreement, the following actions shall
occur:

                     (a) A registration rights agreement (the "Registration
Rights Agreement") by and among the Corporation, GSCP, the GSCP Investors and
the Stockholder, substantially in the form of Exhibit C hereto, shall be duly
                                              ---------
executed and delivered by the Corporation and such parties.

                                       2
<PAGE>
                     (b) The Corporation shall deliver to GSCP: (i) long-form
certificates of good standing for the Corporation from the States of New Jersey,
Delaware, Michigan, California and Texas and an "extrait K-bis" (or equivalent
certification) from France with respect to the Subsidiary, dated as of a date no
earlier than five days prior to the Closing Date, (ii) a Secretary's
Certificate, substantially in the form attached hereto as Exhibit D, (iii) the
                                                          ---------
certificates representing the Preferred Stock and the Warrants and (iv)
certified copies, as of a date as close as practicable to the Closing, of the
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and the By-Laws of the Corporation (the "By-Laws"), which
Certificate of Incorporation and By-Laws shall be in the form of Exhibits E and
                                                                 ----------
F, respectively, attached hereto.

                     (c) GSCP shall receive from Milbank, Tweed, Hadley &
McCloy, counsel for the Corporation, its opinion addressed to GSCP, dated as of
the Closing Date, satisfactory in form and substance to GSCP, which shall
include the opinions set forth in Exhibit G attached hereto.
                                  ---------

                     (d) Robert R. Grusky shall have been elected as the GSCP
designee to the Board of Directors of the Corporation and shall hold such
position as of the Closing Date, and Gadi Cohen shall hold the position of
director as of the Closing Date.

                     (e) A stockholder agreement (the "Stockholder Agreement")
by and among the Corporation, GSCP, the GSCP Investors and the Stockholder,
substantially in the form of Exhibit H hereto, pursuant to which, inter alia,
                             ---------                            ----- ----
GSCP shall have the right to designate one or more members of the Board of
Directors of the Corporation, shall be duly executed and delivered by the
Corporation and such parties.

                     (f) GSCP shall receive from the Stockholder a
noncompetition agreement, by and between the Stockholder and GSCP, substantially
in the form of Exhibit I hereto.
               ---------

                     (g) The Corporation shall have obtained, with financially
sound and reputable insurers, directors' and officers' liability insurance, or
binders with respect to such insurance, in form satisfactory to GSCP, and the
Corporation shall be named as payee of all benefits under the "key man" term
life insurance maintained by the Corporation on the life of the Stockholder in
the amount of $4,000,000.

                     (h) GSCP shall have received evidence, reasonably
satisfactory to it, of the Reincorporation.

                     (i) GSCP shall have received a Phase I Environmental Site
Assessment Report of the facilities and property located at 200 Anderson Avenue,
Moonachie, New Jersey, prepared by Geraghty & Miller, Inc. according to the
standards established by the American Society of Testing and Materials, or its

                                       3
<PAGE>
substantial equivalent, at the Corporation's expense, which shall be acceptable
to GSCP in all respects.

                     (j) GSCP shall have received a copy of the Property
Purchase Agreement.

                     (k) GSCP shall have received from the Stockholder a copy of
an agreement relating to a dividend remittitur and pledge of shares (the
"Dividend Remittitur Agreement") between the Stockholder and the Corporation,
substantially in the form of Exhibit J hereto.

                     (l) GSCP shall have received from the Stockholder a copy of
an Agreement Between Securityholders, by and among the Stockholder, GSCP and the
Corporation, substantially in the form of Exhibit K hereto.

                     Section 2. Representations and Warranties of the
                                -------------------------------------
Corporation. The Corporation hereby represents and warrants to GSCP (and the
-----------
GSCP Investors) as follows:

                     2.1 Organization and Good Standing; Power and Authority;
                         ---------------------------------------------------
Qualifications. The Corporation (i) is a corporation duly organized, validly
--------------
existing and in good standing under the laws of the State of Delaware, and (ii)
has all requisite corporate power and authority to own, lease and operate its
properties, to carry on the business of the Corporation as presently conducted
and as proposed to be conducted (collectively, the "Business") and to carry out
the transactions contemplated by this Agreement. The Corporation is qualified to
transact business as a foreign corporation in, and is in good standing under the
laws of, those jurisdictions listed on Schedule 2.1 hereto, which jurisdictions
constitute all of the jurisdictions wherein the character of the property owned
or leased or the nature of the activities conducted by the Corporation makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified and in good standing would not, individually or in the
aggregate, have or reasonably be expected to have a material adverse effect on
the business, operations, assets, financial condition or results of operations
of the Corporation and the Subsidiary taken as a whole (a "Material Adverse
Effect"). Each of the Corporation and the Subsidiary is primarily engaged in the
production or sale of a product or service other than the investment of capital.

                     2.2 Authorization of the Documents. The execution, delivery
                         ------------------------------
and performance by the Corporation of this Agreement, the Registration Rights
Agreement and the Stockholder Agreement have been duly authorized by all
requisite corporate action on the part of the Corporation, and this Agreement,
the Registration Rights Agreement and the Stockholder Agreement constitute
legal, valid and binding obligations of the Corporation, enforceable against the
Corporation in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally.

                                       4
<PAGE>
                     2.3 Capitalization. The authorized and issued capital stock
                         --------------
of the Corporation immediately prior to the Purchase consists of:

                     (a) Preferred Stock. Twenty-five thousand (25,000) shares
                         ---------------
of Preferred Stock, par value $.01 per share, of which fourteen thousand
(14,000) shares have been designated Series A Preferred Stock, none of which
shares of Series A Preferred Stock are outstanding.

                     (b) Common Stock. Two hundred fifty thousand (250,000)
                         ------------
shares of Common Stock, par value $.01 per share, of which eighty-six thousand
(86,000) shares are outstanding, have been validly issued and are fully paid and
non-assessable, with no personal liability attaching to the ownership thereof.

                     Without giving effect to the Purchase, the Stockholder is
the only holder of record of capital stock of the Corporation and there are no
outstanding warrants, options, agreements, convertible securities or other
commitments pursuant to which the Corporation is or may become obligated to
issue any shares of the capital stock or other securities of the Corporation,
other than as contemplated by or referred to in this Agreement. Except as set
forth on Schedule 2.3, the Corporation has no knowledge of the names of any
beneficial owners of shares of capital stock of the Corporation who are not
otherwise holders of record. Except as set forth in Schedule 2.3 or as
contemplated by or referred to in this Agreement, the Registration Rights
Agreement and the Stockholder Agreement (collectively, the "Closing
Agreements"), there are, and immediately after the Closing, there will be, no
rights, including preemptive or similar rights, to purchase or otherwise acquire
shares of the capital stock of the Corporation pursuant to any provision of law
in effect on the date hereof, the Certificate of Incorporation or the By-Laws
(in each case, as amended and in effect on the date hereof), or agreements to
which the Corporation is a party; and, except as contemplated by or referred to
in the Closing Agreements, the Corporation is not a party to, and, to the
Corporation's knowledge, there are, and immediately after the Closing, there
will be, no agreement, restriction or encumbrance (such as a right of first
refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, stockholder agreement, etc., whether or not the
Corporation is a party thereto) with respect to the purchase, sale or voting of
any shares of capital stock of the Corporation (whether outstanding or issuable
upon conversion or exercise of outstanding securities).

                     2.4 Authorization and Issuance of Capital Stock. The
                         -------------------------------------------
authorization, issuance, sale and delivery of the Preferred Stock and the
Warrants pursuant to this Agreement and the authorization, reservation,
issuance, sale and delivery of the Warrant Shares and the Conversion Shares (as
defined in Section 2.5) have been duly authorized by all requisite corporate
action on the part of the Corporation, and, when issued, sold and delivered in
accordance with the terms of this Agreement, the Certificate of Incorporation
and the Warrants, as applicable, the Preferred Stock, the Warrant Shares and the
Conversion Shares will be validly issued and outstanding, fully paid and
nonassessable, free of any Encumbrances (as defined in Section 2.14) and not
subject to preemptive or similar rights of the stockholders of the Corporation
or others. Except as set forth in the Closing Agreements or on Schedule 2.4, the

                                       5
<PAGE>
terms, designations, powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations and restrictions,
of each series of Preferred Stock of the Corporation are as stated in the
Certificate of Incorporation and the By-Laws.

                     2.5 Reservation of Shares. The Corporation has reserved
                         ---------------------
4,875 shares of Common Stock for issuance to GSCP and the GSCP Investors upon
exercise of the Warrants and 13,000 shares of Common Stock in connection with
the conversion of the Preferred Stock issued or issuable to GSCP and the GSCP
Investors in accordance with this Agreement (collectively, the "Conversion
Shares").

                     2.6 Financial Statements. The Corporation has furnished to
                         --------------------
GSCP (a) the audited combined financial statements for the Corporation and
Industries as of December 31, 1994, audited by Ernst & Young LLP, (b) the
audited balance sheet and income statement for the Subsidiary as of December 31,
1994, audited by Ernst & Young Bordeaux, (c) the audited combined financial
statements for the Corporation and Industries as of December 31, 1991, 1992 and
1993, audited by Anchin Block & Anchin, (d) the unaudited combined financial
statements of the Corporation and Industries as of June 30, 1995, (e) the
unaudited combined and combining pro forma balance sheets of the Corporation as
of June 30, 1995 which reflect the Transfers, as though the Transfers had
occurred as of January 1, 1995 and the combining pro forma statements of income
of the Corporation, Industries and the Subsidiary for the six months ended June
30, 1995 and (f) the unaudited combined and combining pro forma financial
statements as of December 31, 1994 and December 31, 1993 which reflect the
Transfers, as though the Transfers had occurred as of the beginning of the
respective years (the balance streets included in the above being collectively
referred to herein as the "Balance Sheets"). All such financial statements are
in accordance with the books and records of the Corporation, the Subsidiary
and/or Industries, as applicable. Except as described in Schedule 2.6, the
financial statements referred to in subsections (a) through (d) above have been
prepared (or, with respect to the Subsidiary, adjusted) in accordance with
generally accepted accounting principles ("GAAP") consistently applied (except
that such unaudited financial statements and the audited financial statements of
the Subsidiary prepared by Ernst & Young Bordeaux do not contain all of the
footnotes required under GAAP and that such unaudited financials are subject to
year-end adjustments) and fairly present in all material respects the financial
position of the entities included in such financial statements as of the dates
of such financial statements and, where applicable, the results of their
operations and cash flows for the periods noted above. Except as described in
Schedule 2.6, the pro forma financial statements referred to in subsections (e)
and (f) above were prepared in good faith, on the basis of information contained
in the related historical financial statements referred to in this Section 2.6,
and in a manner intended to fairly present in all material respects the combined
financial position and results of operations of the Company and the Subsidiary
as of the dates and for the periods indicated therein on a pro forma basis,
giving effect to the Transfers as if the Transfers had occurred as of the dates
indicated therein.

                                       6
<PAGE>
                     2.7 Absence of Undisclosed Liabilities. Except as disclosed
                         ----------------------------------
on Schedule 2.7(a) hereto, neither the Corporation nor the Subsidiary has any
liabilities or obligations (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due) other than (i) liabilities or
obligations reserved against or otherwise disclosed in the Balance Sheets, (ii)
liabilities or obligations arising since June 30, 1995 which were incurred in
the ordinary course of business consistent with past practice or (iii)
liabilities or obligations which would not, individually, exceed $200,000. To
the knowledge of the Corporation, Schedule 2.7(b) hereto includes a list of all
liabilities or obligations of the Corporation and the Subsidiary arising since
June 30, 1995 which individually are in excess of $200,000.

                     2.8 Absence of Changes. Except as set forth on Schedule 2.8
                         ------------------
hereto and except for the execution and delivery of this Agreement and the
Closing Agreements and the transactions contemplated hereby and thereby, or
referred to herein or therein, including, without limitation, (i) the Dividend,
(ii) the Transfers and (iii) the Reincorporation, since December 31, 1994, there
has not been (a) any change in the business, operations, financial condition,
results of operations, assets, liabilities or prospects of the Corporation or
the Subsidiary, or any transaction, which, individually or in the aggregate,
would have or could reasonably be expected to have a Material Adverse Effect,
other than as reflected in the Balance Sheets or the related unaudited
statements of income, stockholder's equity and cash flows of the Corporation and
of the Subsidiary for the six months ended June 30, 1995, (b) any waiver or
cancellation of any valuable right of the Corporation or the Subsidiary or the
cancellation of any debt or claim held by the Corporation or the Subsidiary
which has had, or could reasonably be expected to have, a Material Adverse
Effect, (c) any payment of dividends on, or other distribution with respect to,
or any direct or indirect redemption or acquisition of, any shares of the
capital stock of the Corporation or the Subsidiary, (d) any issuance of any
stock, bonds or other securities of the Corporation or the Subsidiary, (e) any
sale, assignment or transfer of any material tangible or intangible assets of
the Corporation or the Subsidiary, except in the ordinary course of business,
(f) any loan by the Corporation or the Subsidiary to the Stockholder or to any
other officer, director, employee, consultant or shareholder of the Corporation
or the Subsidiary (other than advances to such persons in the ordinary course of
business in connection with travel, entertainment or similar expenses), (g) any
damage, destruction or loss (whether or not covered by insurance) which has had,
or could reasonably be expected to have, a Material Adverse Effect, (h) any
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee, consultant or agent of the Corporation or the
Subsidiary, except for (1) increases to any employee who is not an officer,
director, consultant or otherwise an agent of the Corporation or the Subsidiary
in the ordinary course of business in amounts consistent with past practice on
the anniversary date of his employment, or upon his annual award date, and (2)
any increase in the compensation of employees presently earning less than
$50,000 per annum, (i) any material change in the accounting or Tax methods,
practices or policies or in any Tax election of the Corporation or the
Subsidiary, (j) any indebtedness incurred for borrowed money, other than
pursuant to the Accounts Financing Agreement, dated January 29, 1993, with

                                       7
<PAGE>
Congress Financial Corporation, as amended, (k) any termination of any material
agreement to which the Corporation or the Subsidiary is a party (other than
terminations of agreements pursuant to or contemplated by this Agreement), (l)
to the actual knowledge of the Corporation, any change with respect to the
regulation of the Corporation or the Subsidiary or their products by any
administrative agency or governmental body or any other change which has had, or
could reasonably be expected to have, a Material Adverse Effect, (m) any sale,
assignment, transfer or grant by the Corporation or the Subsidiary of any
exclusive license with respect to any of the Corporation's or the Subsidiary's
Intellectual Property (as defined in Section 2.11(i)), or(n) any agreement or
commitment (contingent or otherwise) to do any of the foregoing.

                     2.9 No Conflict. The execution, delivery and performance by
                         -----------
the Corporation of this Agreement and the documentation relating hereto, the
consummation by the Corporation of the transactions contemplated hereby and
thereby, and the issuance, sale and delivery by the Corporation of the Preferred
Stock, the Warrants, the Warrant Shares and the Conversion Shares will not (a)
except as set forth on Schedule 2.9, violate any provision of law, statute, rule
or regulation, except such violations as would not, individually or in the
aggregate, have or could not reasonably be expected to have a Material Adverse
Effect, or any material ruling, writ, injunction, order, judgment or decree of
any court, administrative agency or other governmental body applicable to the
Corporation, the Subsidiary or any of their properties or assets, (b) conflict
with or result in any breach of any of the terms, conditions or provisions of,
or constitute (with due notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, or result
in the creation of any Encumbrance upon any of the properties or assets of the
Corporation or the Subsidiary under, any Contract (as defined in Section
2.10(a)) set forth on Schedule 2.10 hereto except such as would not, in the
aggregate, have or could not reasonably be expected to have a Material Adverse
Effect or (c) violate the Certificate of Incorporation or the By-Laws of the
Corporation or the Subsidiary.

                     2.10 Agreements. (a) Schedule 2.10 hereto identifies each
                          ----------
indenture, mortgage, guaranty, lease, license or other contract or agreement,
written or oral, to which the Corporation or the Subsidiary is a party (a
"Contract"), other than any Contract which (x) is a purchase or sales order, a
sales representative agreement or a distributor agreement or (y) is reasonably
expected to involve aggregate payments to or from the Corporation or the
Subsidiary of $200,000 or less in any twelve-month period, and which in either
case is not otherwise material to the business or financial condition of the
Corporation and the Subsidiary taken a whole.

                     (b) Complete copies (or, if oral, full written
descriptions) of all Contracts listed on Schedule 2.10 hereto (the "Material
Contracts"), including all amendments thereto, have been delivered to GSCP.
Except as disclosed on Schedule 2.10 hereto, (i) all of the Material Contracts
are valid, binding, in full force and effect and enforceable in accordance with
their terms against the Corporation or the Subsidiary, as the case may be,
except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally and, to

                                       8
<PAGE>
the actual knowledge of the Corporation, against the respective counterparties
to such Material Contracts and (ii) to the actual knowledge of the Corporation,
none of the respective counterparties to the Material Contracts (based upon
facts as they exist on the date hereof) has indicated any intention to terminate
or change any term of a Material Contract following the Closing. Except as set
forth on Schedule 2.10 hereto, (A) there is no breach, violation or default by
the Corporation or the Subsidiary, as the case may be, and no event which, with
notice or lapse of time or both, would constitute a breach, violation or default
by the Corporation or the Subsidiary, as the case may be, or give rise to any
lien or right of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration against the Corporation or
the Subsidiary, as the case may be, under, any such Material Contracts which has
had, or could reasonably be expected to have, a Material Adverse Effect, and (B)
to the actual knowledge of the Corporation, no other party to any of the
Material Contracts is in arrears in respect of the performance or satisfaction
of the terms and conditions on its part to be performed or satisfied under any
of such Material Contracts, no waiver or indulgence has been granted by any of
the parties thereto and no party to any of such Material Contracts has
repudiated any provision thereof.

                     2.11 Intellectual Property Rights. (a) To the knowledge of
                          ----------------------------
the Corporation, each of the Corporation and the Subsidiary owns or has the
right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property (as defined below) necessary for the operation of the
businesses of the Corporation and the Subsidiary. Each item of Intellectual
Property owned or used by the Corporation or the Subsidiary, as the case may be,
immediately prior to the Closing hereunder will be owned or available for use by
the Corporation or the Subsidiary on identical terms and conditions immediately
subsequent to the Closing. Each of the Corporation and the Subsidiary has taken
all reasonable action, and continues to do so, to maintain and protect each item
of Intellectual Property that it owns or uses.

                     (b) Except as set forth on Schedule 2.11(b) hereto, to the
knowledge of the Corporation, neither the Corporation nor the Subsidiary has
interfered with, infringed upon or misappropriated any Intellectual Property
rights of third parties, and neither the Corporation nor the Subsidiary has ever
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement or misappropriation (including any claim that the
Corporation or the Subsidiary must license or refrain from using any
Intellectual Property rights of any third party). To the knowledge of the
Corporation, no third party has interfered with, infringed upon or
misappropriated any Intellectual Property rights of the Corporation or the
Subsidiary.

                     (c) Schedule 2.11(c) hereto identifies each license,
agreement and other permission which the Corporation or the Subsidiary has
granted to any third party with respect to any of its Intellectual Property with
a value of $10,000 or greater (together with any exceptions) and the Corporation
has delivered to GSCP copies of all such licenses, agreements and permissions
(as amended), identified therein. Neither the Corporation nor the Subsidiary has
any patents or pending patent applications.

                                       9
<PAGE>
                     (d) Schedule 2.11(d) hereto identifies each item of
Intellectual Property that any third party owns and that the Corporation or the
Subsidiary uses pursuant to license, sublicense, agreement or permission. Except
as set forth on Schedule 2.11(d), (i) to the knowledge of the Corporation, each
such item of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or change, (ii) to the knowledge of the
Corporation, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or is threatened which challenges the
legality, validity or enforceability of any such item of Intellectual Property,
(iii) neither the Corporation nor the Subsidiary has granted any sublicense or
similar right with respect to any such agreements or Intellectual Property and
(iv) to the knowledge of the Corporation, any such license, sublicense,
agreement and permission is valid, binding, in full force and effect and
enforceable in accordance with their terms and there is no breach, violation or
default by any party thereto.

                     (e) Except as set forth on Schedule 2.11(e), the
Corporation has no present knowledge that the Corporation or the Subsidiary will
interfere with, infringe upon or misappropriate any Intellectual Property rights
of third parties as a result of the operation of the Business after the Closing.

                     (f) Neither the Corporation nor the Subsidiary has
disclosed any of its proprietary information which, if disclosed, would
adversely affect the Corporation other than in the regular and ordinary course
of business or other than to representatives of the Corporation or the
Subsidiary and other than in connection with entering into this Agreement.

                     (g) The Corporation has provided GSCP with copies of (1)
all written opinions of legal counsel issued to the Corporation or to the
Subsidiary relating to Intellectual Property and (2) all correspondence it has
received from, or sent to, any third party concerning or relating to any
interference with, infringement upon or misappropriation of the Corporation's,
the Subsidiary's or any third party's Intellectual Property.

                     "Intellectual Property" means (a) all inventions and
discoveries (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrights and all
applications, registrations and renewals in connection therewith, (d) all mask
works and all applications, registrations and renewals in connection therewith,
(e) all know-how, trade secrets and confidential business information, whether
patentable or unpatentable and whether or not reduced to practice (including
ideas, research and development, know-how, formulas, compositions, manufacturing
and production process and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and

                                       10
<PAGE>
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
(h) all copies and tangible embodiments thereof (in whatever form or medium) and
(i) all licenses and agreements in connection therewith.

                     2.12 Equity Investments. Except for the Subsidiary, the
                          ------------------
Corporation has never had, nor does it presently have, any subsidiaries, nor has
it owned, nor does it presently own, any capital stock or other proprietary
interest, directly or indirectly, in any corporation, association, trust,
partnership, joint venture or other entity. Schedule 2.12 sets forth a complete
and correct description of (i) the number of shares of authorized capital stock
of the Subsidiary, the number of shares of each class of capital stock of the
Subsidiary owned by the Corporation and the number of shares owned by each other
stockholder ("Qualifying Shares") and (ii) the jurisdictions in which the
Subsidiary is qualified to transact business as a foreign corporation. All of
the shares of capital stock of the Subsidiary are owned by the Corporation or
are Qualifying Shares, are free and clear of any liens, claims and encumbrances
and are validly issued, fully paid and non-assessable. There are no outstanding
or authorized subscriptions, options, warrants, calls, rights, commitments or
any other agreements of any character obligating the Subsidiary to issue any
additional shares of its capital stock or any securities convertible into or
evidencing the right to subscribe for any shares of such capital stock, nor are
there any voting trusts or any other agreements or understandings with respect
to the capital stock of the Subsidiary. The Corporation is not a party to any
agreement, arrangement or understanding with respect to the sale or other
disposition of any shares of capital stock of the Subsidiary (including, without
limitation, any options, warrants, calls, rights or other commitments relating
thereto). The Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted. The Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the property
owned, operated or leased by it or the nature of the business conducted by it
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified and in good standing would not, individually or in
the aggregate, have or could not reasonably be expected to have a Material
Adverse Effect. The Subsidiary does not directly or indirectly control, or have
any equity investment or interest, direct or indirect, in any person,
corporation, partnership, joint venture or other business association. Complete
and correct copies of the certificate of incorporation and the by-laws (or their
equivalents) of the Subsidiary, as currently in effect, have been furnished to
GSCP.

                     2.13 Corporate Minute Books. The Corporation has previously
                          ----------------------
provided or made available to GSCP true and correct copies of all minutes of
meetings or other actions taken at meetings by written consent by the directors,
stockholders or incorporators of the Corporation and of the Subsidiary since
inception.

                     2.14 Assets. Each of the Corporation and the Subsidiary has
                          ------
good and marketable title to all of its material assets and properties, and
Industries has good and marketable title to, and, following the Moonachie

                                       11
<PAGE>
Purchase, the Corporation will have good and marketable title to, the real
property located at 200 Anderson Avenue, Moonachie, New Jersey ("200 Anderson
Avenue"), free and clear of any mortgages, judgments, claims, liens, security
interests, pledges, escrows, charges or other encumbrances of any kind or
character whatsoever (collectively, "Encumbrances"), except (i) as disclosed in
Schedule 2.14 hereto; (ii) Encumbrances for taxes not yet due and payable; (iii)
Encumbrances for taxes and charges and other claims, the validity of which the
Corporation, Industries or the Subsidiary, as the case may be, is contesting in
good faith; (iv) Encumbrances which arise in the ordinary course of business and
do not materially impair the Corporation's (or Industries' or the Subsidiary's,
as the case may be) ownership, use of any such asset or property or the
Corporation's (or Industries' or the Subsidiary's, as the case may be) ability
to obtain financing by using such assets or property as collateral; (v)
Encumbrances described in the title insurance policies for real property owned
by the Corporation and the Encumbrances described in the title insurance policy
issued to Industries with respect to 200 Anderson Avenue (complete and correct
copies of which have been provided to GSCP); or (vi) Encumbrances constituting
purchase money security interests in personal property. Complete and correct
copies of all documents relating to the Moonachie Purchase (including
Industries' title insurance policies) have been provided to GSCP. The initial
cost to Industries for the purchase of the premises located at 200 Anderson
Avenue, Moonachie, New Jersey was $1,635,000.

                     2.15 Employee Benefit Plans. (a) Schedule 2.15 hereto
                          ----------------------
contains a true and complete list of (i) each plan, program, policy, payroll
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral, which is now, or previously has
been sponsored, maintained, contributed to or required to be contributed to by
the Corporation or the Subsidiary or pursuant to which the Corporation or the
Subsidiary has any liability, contingent or otherwise, including with respect to
the Corporation, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (each, a "Benefit Plan"); and (ii) each management,
employment, bonus, option, equity (or equity related), severance, consulting,
noncompete, confidentiality or similar agreement or contract between the
Corporation or the Subsidiary and any current, former or retired employee,
officer, consultant, independent contractor, agent or director of the
Corporation or the Subsidiary (an "Employee") (each, an "Employee Agreement").
The Corporation does not currently sponsor, maintain, or contribute to, and is
not required to contribute to, nor has it ever sponsored, maintained,
contributed to or been required to contribute to, or incurred any liability to,
(i) any "defined benefit plan" (as defined in ERISA Section 3(35)); (ii) any
"multiemployer plan" (as defined in ERISA Section 3(37)) or (iii) any Benefit
Plan which provides, or has any liability to provide, life insurance, medical,
severance or other employee welfare benefits to any Employee upon his or her
retirement or termination of employment, except as required by Section 4980B of
the Internal Revenue Code of 1986, as amended (the "Code").

                                       12
<PAGE>
                     (b) The Corporation is not (i) a member of a "controlled
group of corporations," or under "common control" within the meaning of Sections
414(b) or (c) of the Code or (ii) under "common control," within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections, in each case with any entity other than the
Subsidiary.

                     (c) The Corporation has provided to GSCP current, accurate
and complete copies of all material documents embodying or relating to each
Benefit Plan and each Employee Agreement, including all amendments thereto,
interpretations thereof, trust or funding agreements relating thereto (if any),
the two most recent annual reports (Series 5500 and related schedules) required
under ERISA (if any), the most recent determination letter received from the
Internal Revenue Service (if any), the most recent summary plan description
(with all material modifications) (if any), and all material communications to
any Employee or Employees relating to any Benefit Plan or Employee Agreement.

                     (d) Each Benefit Plan has been established and maintained
in accordance with its terms and each is in compliance with all applicable laws,
statutes, orders, rules and regulations, including, but not limited to, ERISA
and the Code, except to the extent that failure to so comply would not or could
not reasonably be expected to have a Material Adverse Effect; and each Benefit
Plan intended to qualify under Section 401 of the Code is, and since its
inception has been, so qualified. There are no material actions, suits or claims
pending or, to the knowledge of the Corporation, threatened or anticipated
(other than routine benefit claims) against the Corporation or the Subsidiary
with respect to any Benefit Plan or against any Benefit Plan or the assets of
any Benefit Plan. Except as otherwise required by law, each Benefit Plan can be
amended, terminated or otherwise discontinued after the Closing Date, without
material liability to the Company or the Subsidiary, except for the payment of
ordinary benefit accruals.

                     (e) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or in connection with the
occurrence of any additional or subsequent events) constitute an event under the
express terms and provisions of any Benefit Plan or Employee Agreement that will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligations to fund benefits with respect to any Employee, which
payment, acceleration, forgiveness, vesting, distribution or increase, in the
absence of such execution and performance, would not or may not otherwise occur.

                     (f) The Subsidiary has paid, or specifically reserved for
in the Balance Sheets of the Subsidiary, all contributions (whether related to
unemployment, social security, medical, old age or retirement), dismissal
indemnities, paid vacation allowances or other benefits accrued or payable by
the Subsidiary as of the dates thereof to any former employee of the Subsidiary
or Compagnie de Technologie de l'Electronique et de Controle, except to the
extent that such failure to pay, or reserve for in the Balance Sheets of the
Subsidiary, has not or is not reasonably expected to have a material adverse

                                       13
<PAGE>
effect on the business, operations, assets, financial condition or results of
operations of the Subsidiary, and there are no actions, suits or claims which
have been instituted or asserted, or which are reasonably expected by the
Corporation to be asserted, against or relating to any of such Benefit Plans of
the Subsidiary, by or on behalf of any such former employee.

                     2.16 Labor Relations; Employees. Schedule 2.16 hereto lists
                          --------------------------
all employees of the Corporation and of the Subsidiary with an annual salary in
excess of $100,000. Except as set forth on Schedule 2.16 hereto, (i) neither the
Corporation nor the Subsidiary is delinquent in payments to any of its
employees, for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by the date hereof or amounts required
to be reimbursed by them to the date hereof, (ii) each of the Corporation and
the Subsidiary is in compliance in all material respects with all material
applicable Federal, state, local and foreign laws, rules and regulations
respecting employment, employment practices, labor, terms and conditions of
employment and wages and hours, (iii) neither the Corporation nor the Subsidiary
is bound by or subject to (and none of their respective assets or properties is
bound by or subject to) any written or oral, express or implied, commitment or
arrangement with any labor union, and no labor union has requested or, to the
actual knowledge of the Corporation, has sought to represent any of the
employees, representatives or agents of the Corporation or the Subsidiary, (iv)
there is no labor strike, dispute, slowdown or stoppage actually pending or, to
the actual knowledge of the Corporation, threatened against or involving the
Corporation or the Subsidiary, (v) to the actual knowledge of the Corporation,
no salaried key employee has any plans to terminate his or her employment with
the Corporation or the Subsidiary. Each of the officers and employees of the
Corporation listed in Schedule 2.16 hereto has executed an Employee
Nondisclosure and Secrecy Agreement substantially in the form of Exhibit L
hereto, and each of the officers and employees of the Subsidiary has executed a
document which relates to, among other things, the treatment of confidential
information (collectively, the "Employee Nondisclosure and Secrecy Agreements"),
and such Agreements are in full force and effect. Such officers and employees of
the Corporation and the Subsidiary, together with those officers and employees
of the Corporation listed in Schedule 4.11 hereto, constitute all of the
officers and employees of the Corporation who have access to such material
confidential information of the Corporation or the Subsidiary that the
Corporation deems it necessary and appropriate to require such officers and
employees to enter into such Employee Nondisclosure and Secrecy Agreements.

                     2.17 Litigation; Orders. Except as set forth in Schedule
                          ------------------
2.17, there is no civil, criminal or administrative action, suit, claim, notice,
hearing, inquiry, proceeding or investigation at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
knowledge of the Corporation, threatened against the Corporation, the
Subsidiary, the Intellectual Property or other property owned by the Corporation
or the Subsidiary or the business of the Corporation or the Subsidiary. Neither
the Corporation nor the Subsidiary is subject to any order, writ, injunction or

                                       14
<PAGE>
decree of any court of any Federal, state, municipal or other domestic or
foreign governmental department, commission, board, bureau, agency or
instrumentality.

                     2.18 Compliance with Laws; Permits. The Corporation and the
                          -----------------------------
Subsidiary (a) have complied in all respects with all Federal, state, local and
foreign laws, rules, ordinances, codes, consents, authorizations, registrations,
regulations, decrees, directives, judgments and orders applicable to the
Corporation and the Subsidiary and their respective businesses (except for
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or which have been cured) and (b)
have all Federal, state, local and foreign governmental licenses, permits and
qualifications material to and necessary in the conduct of their respective
businesses as currently conducted, such licenses, permits and qualifications are
in full force and effect, and no violations have been recorded in respect of any
such licenses, permits and qualifications, and no proceeding is pending or, to
the actual knowledge of the Corporation, threatened to revoke or limit any such
license, permit or qualification. Schedule 2.18 hereto sets forth a list of all
such licenses, permits and qualifications, and the expiration dates thereof.

                     2.19 Offering Exemption. Assuming the accuracy of the
                          ------------------
representations and warranties contained in Section 3 hereof, the offer and sale
of the Preferred Stock and the Warrants as contemplated hereby, the issuance and
delivery of the Warrant Shares to GSCP and the GSCP Investors upon the exercise
of the Warrants and the issuance and delivery of the Conversion Shares to GSCP
and the GSCP Investors upon the conversion of the Preferred Stock are each
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and under applicable state securities and "blue sky" laws, as
currently in effect.

                     2.20 Related Transactions. Except as set forth on Schedule
                          --------------------
2.20 hereto, since December 31, 1991, no current stockholder, director, officer
or employee of the Corporation or of the Subsidiary, or any "associate" (as
defined in the rules and regulations promulgated under the Securities Exchange
Act of 1934, as amended) of the Corporation or of the Subsidiary, is presently,
or since the organization of the Corporation or of the Subsidiary, has been,
directly or indirectly through such person's affiliation with any other person
or entity, a party to any material agreement or transaction with the Corporation
or the Subsidiary, other than in such person's capacity as, or in connection
with any such person's duties as a director, officer or employee of the
Corporation or of the Subsidiary.

                     2.21 Disclosure. Except as set forth in Schedule 2.21, to
                          ----------
the actual knowledge of the Corporation, there is no fact which the Corporation
has not disclosed to GSCP or its counsel in writing and which, to the actual
knowledge of the Corporation, has materially and adversely affected or would
reasonably be expected to (based solely upon the facts known to the Corporation)
materially and adversely affect the business, prospects, financial condition,
operations, property or affairs of the Corporation and the Subsidiary taken as a
whole; provided, however, that no representation or warranty is made by the
       --------  -------
Corporation with respect to any facts relating to general economic conditions,

                                       15
<PAGE>
conditions in the industry in which the Corporation or the Subsidiary operates
or financial markets or with respect to any projected financial information for
any periods.

                     2.22 Taxes. (a) Except as set forth in Schedule 2.22(a),
                          -----
each of the Corporation and the Subsidiary has filed all Tax (as defined below)
returns required by law to be filed or to have been filed by it at or prior to
the Closing Date and has paid or in all material respects made adequate
provision for the payment of all Taxes for the periods to which such returns
relate, including, without limitation, any Tax levied upon any of its
properties, assets, income or franchises, and the failure to pay any Taxes shall
not materially and adversely affect the business, operations, assets, financial
condition or results of operations of the Corporation or the Subsidiary, as the
case may be. All such Tax returns filed were correct and complete in all
material respects.

                     (b) Except as set forth in Schedule 2.22(b), all amounts
required to be collected or withheld for remission to a taxing authority, by the
Corporation and the Subsidiary have been collected or withheld, and any such
amounts that are required to be remitted to any taxing authority at or prior to
the Closing Date have been or will be duly remitted.

                     (c) Except as set forth in Schedule 2.22(c), the accruals
and reserves for Taxes in each of the Balance Sheets referenced in Section 2.6
are adequate in all respects to cover any material liability of the Corporation
or the Subsidiary for Taxes for periods through the date of such Balance Sheets.

                     (d) Except as set forth on Schedule 2.22(d), (i) for
federal income tax purposes, the Corporation has made a timely and valid
election to be treated as an "S corporation" under Section 1361(a) of the Code
and the treasury regulations promulgated thereunder effective on January 1,
1989, and was so classified for state and local income tax purposes pursuant to
analogous state or local provisions in the jurisdictions and effective on the
dates set forth on Schedule 2.22(d); (ii) the Corporation has maintained its
status as a "small business corporation" within the meaning of Section 1361(b)
of the Code, and any analogous provision of state or local law in any
jurisdiction listed in Schedule 2.22(d); (iii) at no time since electing to be
treated as an "S corporation" has such election been terminated or revoked
pursuant to Section 1362 of the Code, or any analogous provision of state or
local law in any jurisdiction listed in Schedule 2.22(d); and (iv) the
Corporation has never been taxed other than as an "S corporation".

                     (e) No taxing authority in a jurisdiction where either the
Corporation or the Subsidiary does not file Tax returns has made a claim or
asserted that such non-filing entity (or the Stockholder thereof) is or may be
subject to taxation by such jurisdiction. Schedule 2.22(e) contains a list of
states, territories and jurisdictions (whether foreign or domestic) in which
each of the Corporation and Subsidiary has filed an income, franchise, sales and
use tax return for taxable periods ending on or after December 31, 1990.

                                       16
<PAGE>
                     (f) For purposes of this Section 2.22, "Tax" or "Taxes"
means any taxes, assessment, duties, fees, levies, imposts, deductions, or
withholdings including, without limitation, income, gross receipts, ad valorem,
value added, excise, real or personal property, asset, sales, use, license,
payroll, transaction, capital, net worth and franchise taxes, estimated taxes,
withholding, employment, social security, workers compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, or other governmental charges of any nature
whatsoever, imposed by any taxing authority of any government or country or
political subdivision of any country, and any liabilities with respect thereto,
including any penalties, additions to tax, fines or interest thereon. For
purposes of this Section 2.22, the terms "Corporation" and "Subsidiary" shall
include any corporation or similar entity to which such entity is a successor by
merger, liquidation or otherwise.

                     2.23 Environmental Matters. (a) (i) Except as set forth in
                          ---------------------
Schedule 2.23(a)(i), the Corporation and the Subsidiary are in compliance with
all applicable federal, state, local, and foreign laws, rules, regulations,
codes, ordinances, orders, decrees, directives and judgments relating to
Environmental Matters, permits, licenses, authorizations, registrations and
other governmental consents required by applicable Environmental Laws
("Environmental Permits"), including, without limitation, those regulating
emissions, discharges, or releases of Hazardous Substances, or the use, storage,
treatment, transportation, release, emission and disposal of raw materials,
by-products, wastes and other substances used or produced by or otherwise
relating to the business of the Corporation or the Subsidiary, except for any
such failure to comply that could not reasonably be expected to have a Material
Adverse Effect.

                     (ii) Except as set forth in Schedule 2.23(a)(ii), all
Environmental Permits are in full force and effect, and the Corporation and the
Subsidiary have made all appropriate filings for issuance or renewal of such
Environmental Permits.

                     (iii) Except as set forth on Schedule 2.23(a)(iii), there
has been no release at any time of any Hazardous Substances at, on or about,
under or within any Real Property and Tangible Assets, to the knowledge of the
Corporation (other than pursuant to and in accordance with permits held by the
Corporation or the Subsidiary or applicable Environmental Laws), and all of the
Real Property and Tangible Assets are free of any Hazardous Substances (except
those authorized pursuant to and in accordance with Environmental Permits held
by the Corporation or the Subsidiary or applicable Environmental Laws) and free
of all contamination arising from, relating to, or resulting from any such
Hazardous Substances, in each case, that could reasonably be expected to have a
Material Adverse Effect.

                     (iv) Except as set forth in Schedule 2.23(a)(iv), there are
no claims, notices (including, without limitation, any notices that the
Corporation or the Subsidiary is or may be a potentially responsible party or
otherwise liable in connection with any site), civil, criminal or administrative
actions, suits, hearings, investigations, governmental requests to perform
investigatory or remedial activities, inquiries or proceedings pending or, to

                                       17
<PAGE>
the knowledge of the Corporation, threatened that are based on or related to any
Environmental Matters or the failure to have any required Environmental Permits.

                     (v) Except as set forth in Schedule 2.23(a)(v), there are
no past or present conditions, events, circumstances, facts, activities,
practices, incidents, actions, omissions or plans: (1) that are reasonably
likely to interfere with or prevent continued material compliance by the
Corporation or the Subsidiary with Environmental Laws and the requirements of
Environmental Permits, or (2) that are reasonably likely to give rise to any
material liability or other obligation under any Environmental Laws that may
require the Corporation or the Subsidiary to incur any actual or potential
Environmental Costs, or (3) that are reasonably likely to form the basis of any
claim, action, suit, proceeding, hearing, investigation or inquiry against or
involving the Corporation or the Subsidiary based on or related to any material
Environmental Matter or which could require the Corporation or the Subsidiary to
incur any material Environmental Costs.

                     (vi) Except as set forth in Schedule 2.23(a)(vi), there are
no underground or aboveground storage tanks, incinerators or surface
impoundments at, on, or about, under or within any Real Property or Tangible
Assets. Schedule 2.23(a)(vi) also lists all underground or aboveground storage
tanks, incinerators or surface impoundments that, to the knowledge of the
Corporation, were removed from any such properties.

                     (vii) Except as set forth on Schedule 2.23(a)(vii), to the
knowledge of the Corporation, neither the Corporation nor the Subsidiary has
used any waste disposal site, or otherwise disposed of, transported, or arranged
for the transportation of, any Hazardous Substances to any place or location, or
in violation of any Environmental Laws.

                     (viii) Except as set forth in Schedule 2.23(a)(viii), no
lien exists, and no condition exists, to the knowledge of the Corporation, which
could result in the filing of a lien, against any Real Property or Tangible
Assets under any Environmental Law or relating to any Environmental Matter.

                     (ix) In the event of any conflict between Sections 2.17 and
2.18 of this Agreement and Section 2.23 of this Agreement, Section 2.23 shall
control with respect to all Environmental Matters.

                     For the purposes of this Section, the following terms shall
have the meanings indicated:

                     "Environmental Costs" means, without limitation, any actual
or potential cleanup costs, remediation, removal, or other response costs,
investigation costs (including, without limitation, fees of consultants,
counsel, and other experts in connection with any environmental investigation,
testing, audits or studies), losses, liabilities or obligations, payments,

                                       18
<PAGE>
damages under any statutory or common law causes of action (including, without
limitation, damages (a) of third parties for personal injury or property damage,
or (b) to natural resources), civil or criminal fines or penalties, judgments
and amounts paid in settlement ) arising out of or relating to or resulting from
any Environmental Matter.

                     "Environmental Matter" means any matter arising out of,
relating to, or resulting from pollution, contamination, protection of the
environment, health or safety, and any matters relating to emissions,
discharges, disseminations, releases or threatened releases, of Hazardous
Substances into the air (indoor and outdoor), surface water, groundwater, soil,
land surface or subsurface, buildings, facilities, real or personal property or
otherwise arising out of, relating to, or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, release or threatened release of Hazardous Substances.

                     "Hazardous Substances" means any pollutants, contaminants,
toxic or hazardous or extremely hazardous substances, materials, wastes,
constituents, compounds or chemicals (including, without limitation, petroleum
or any by-products or fractions thereof, any form of natural gas, lead, asbestos
and asbestos-containing materials ("ACM"), polychlorinated biphenyls ("PCBs")
and PCB-containing equipment, radon and other radioactive elements, ionizing
radiation, electromagnetic field radiation and other non-ionizing radiation)
that are regulated by, or may form the basis of liability under, any
Environmental Laws.

                     "Environmental Laws" means, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. ss.ss. 9601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et eq., the Toxic
Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq., the Clean Air Act,
42 U.S.C. ss.ss. 7401 et seq., the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. ss.ss. 1251 et seq., the Safe Drinking Water Act, 42
U.S.C. ss.ss. 300f et seq., the Occupational Safety and Health Act, 29 U.S.C.
ss.ss. 641 et seq., and the Hazardous Materials Transportation Act, 49 U.S.C.
ss.ss. 1801 et seq., as any of the above statutes have been or may be amended
from time to time, all rules and regulations promulgated pursuant to any of the
above statutes, and any other applicable foreign, federal, state or local law,
statute, ordinance, rule or regulation governing Environmental Matters
(including, without limitation, French Law No. 76.663 of July 19, 1976, as
amended, and any French laws, regulations or other mandatory provisions relating
to the operation of installations classees, to the extent applicable to the
Subsidiary) as the same have been or may be amended from time to time, including
any common law cause of action providing any right or remedy relating to
Environmental Matters, and all applicable judicial and administrative decisions,
orders, and decrees relating to Environmental Matters.

                     "Real Property and Tangible Assets" means all real property
owned, operated, used or leased by the Corporation or the Subsidiary and any
buildings, facilities, machinery, equipment, furniture, leasehold and other

                                       19
<PAGE>
improvements, fixtures, vehicles, structures, any related capital items and
other tangible property located on, in, under, or above the real property of the
Corporation or the Subsidiary.

                     2.24 Consents. Except as set forth on Schedule 2.24 hereto,
                          --------
no permit, authorization, consent or approval of or by, or any notification of
or filing with, any person (governmental or private), other than any such
permit, authorization, consent, approval, notification or filing the absence of
which would not have or could not reasonably be expected to have a Material
Adverse Effect, is required in connection with the execution, delivery and
performance by the Corporation of this Agreement or any documentation relating
thereto, the consummation by the Corporation of the transactions contemplated
hereby and thereby, the Reincorporation or the issuance, sale or delivery of the
Preferred Stock, the Warrants, the Warrant Shares and the Conversion Shares
(other than such notifications or filings required under applicable state
securities laws, if any, which shall be made on a timely basis).

                     2.25 Insurance. All of the material assets of the
                          ---------
Corporation and the Subsidiary that are of insurable character are covered by
insurance with reputable insurers against risks of liability, casualty and fire
and other losses and liabilities customarily obtained to cover comparable
businesses and assets in amounts, scope and coverage which are consistent with
prudent industry practice. Schedule 2.25 hereto sets forth a list of all
material insurance policies currently in effect that insure the business
operations, assets or employees of the Corporation or the Subsidiary, the name
of the carrier and a brief description of the terms and amount of coverage.

                     2.26 Brokers. Neither the Corporation nor the Stockholder
                          -------
has employed any broker or finder in connection with the transactions with GSCP
contemplated by this Agreement.

                     2.27 Predecessor Corporation. All of the foregoing
                          -----------------------
representations and warranties, to the extent they apply to the Corporation,
will be deemed to apply to the Corporation and the Predecessor Corporation and
any other predecessor corporation of the Corporation.

                     Section 3. Representations and Warranties of GSCP. GSCP
                                --------------------------------------
(and each GSCP Affiliate (as defined in Section 12) purchasing securities
hereunder) hereby jointly and severally represent and warrant to the Corporation
as follows:

                     (a) It is an entity duly organized and validly existing
under the laws of the jurisdiction of its organization and has all power and
authority to enter into and perform the Closing Agreements. Each of the Closing
Agreements has been duly authorized by all necessary action on its part. Each of
the Closing Agreements constitutes a legal, valid and binding agreement of such
entity enforceable against it in accordance with its terms except to the extent
that enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting creditors' rights generally.

                                       20
<PAGE>
                     (b) The execution, delivery and performance by it of each
of the Closing Agreements and its consummation of the transactions contemplated
thereby will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to it, or any of its
properties or assets, (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of any mortgage, judgment,
claim, lien, security interest, pledge, escrow, charge or other encumbrance of
any kind or character whatsoever upon any of its properties or assets under, any
material indenture, mortgage, guaranty, lease, license or other contract or
agreement, written or oral, to which it is a party or (c) violate its
organizational documents.

                     (c) It is acquiring the Preferred Stock and the Warrants to
be purchased by it under this Agreement for its own account, for investment and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act and has no present intention or plan of
distributing or selling to others any of such interest or granting any
participation therein other than as contemplated by this Agreement.

                     (d) It understands that the Warrants and the Preferred
Stock have not been, and that the Warrant Shares and the Conversion Shares will
not be, registered under the Securities Act, by reason of their issuance by the
Corporation in a transaction exempt from the registration requirements of the
Securities Act and that this transaction has not been reviewed by, passed on or
submitted to any Federal or state agency where an exemption is being relied
upon, and that the Corporation's reliance thereon is based in part upon the
representations made by it in this Agreement.

                     (e) It further acknowledges that no sale, assignment or
transfer of any of the Preferred Stock, the Warrants, the Warrant Shares and the
Conversion Shares (collectively, the "Securities") shall be valid or effective,
and the Corporation shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the
Securities is registered under the Securities Act, or (ii) such Securities are
sold, assigned or transferred in accordance with all of the requirements and
limitations of Rule 144 under the Securities Act, it being understood that Rule
144 is not available at the present time for the sale of the Securities, or
(iii) such sale, assignment or transfer is otherwise exempt from registration
under the Securities Act, or (iv) such sale, assignment or transfer is in
accordance with the terms of the Stockholder Agreement.

                     (f) It has not employed any broker or finder in connection
with the transactions contemplated by this Agreement.

                     (g) It is an "Accredited Investor" (as defined in Rule
501(a) under the Securities Act).

                                       21
<PAGE>
                     (h) It has been afforded access to information about the
Corporation, the Corporation's financial condition and the Preferred Stock and
the Warrants. It has had an opportunity to ask questions and receive answers
from the Corporation regarding the terms and conditions of the sale of the
Preferred Stock and the Warrants and the merits and risks of investing in the
Preferred Stock and the Warrants and to obtain such additional information which
the Corporation possesses or can acquire without unreasonable effort or expense.

                     Section 4. Certain Covenants.
                                -----------------

                     4.1 Access to Records. From and after the Closing, the
                         -----------------
Corporation shall afford to GSCP, for so long as GSCP and the GSCP Affiliates
(collectively, the "GS Parties") continue to maintain Minimum Ownership (as
defined in the Stockholder Agreement), and to its employees, counsel and other
authorized representatives reasonable access, during normal business hours, upon
reasonable advance notice, with due regard to the Corporation's ongoing
operations, to all of the books, records and properties of the Corporation and
to all officers and employees of the Corporation, for any reasonable purpose
related to the investment of GSCP or the GSCP Affiliates in the Corporation, and
shall furnish on a timely basis any other financial or other information
reasonably available to management of the Corporation as GSCP shall have
reasonably requested. GSCP shall be entitled to receive, at the time of delivery
to it of the financial statements set forth in Sections 4.2.1 and 4.2.2 hereof,
reports in the form attached hereto as Exhibit M; provided, however, that, as
                                       ---------  --------  -------
soon as practicable and no later than the report for the month of November 1995,
such reports shall be in the form attached hereto as Exhibit N. In all cases,
                                                     ---------
the Corporation shall provide to GSCP all information which it provides or has
an obligation to provide to any other stockholder of the Corporation, in its
capacity as such, other than the Stockholder, pursuant to any agreement with
such stockholder or otherwise and any other information that GSCP may reasonably
request.

                     4.2 Financial Reports. From and after the Closing, the
                         -----------------
Corporation agrees to furnish to GSCP the following:

                     4.2.1. For a period of twelve months from the date hereof
(the "Initial Period") within (a) 30 days after the end of each fiscal month,
for the months of July 1995 and August 1995, (b) 21 days after the end of each
fiscal month, for the months of September 1995, October 1995, November 1995 and
December 1995 and (c) 15 days after the end of each fiscal month for the month
of January 1996 and thereafter (or sooner, to the extent practicable), (i)
internal summary financial and operating statements for such month, prepared by
management for the Chief Executive Officer of the Corporation and a letter or
memorandum discussing the revenues and operations of the Corporation and summary
financial information for such period (a "Management Letter"), plus (ii) a
statement certified by the Chief Executive Officer or the Chief Financial
Officer of the Corporation, certifying that the financial position and results
of operations of the Corporation for such period as reflected in the Management
Letter are presented fairly and have been prepared in accordance with GAAP
(subject to normal year-end adjustments), consistently applied.

                                       22
<PAGE>
                     4.2.2. Within 45 days after the end of each quarterly
fiscal period, commencing with the first quarterly fiscal period ending after
the Initial Period, (i) unaudited balance sheets and an income statement as of
the end of such period, together with statements of retained earnings and cash
flow for such period, and a Management Letter, plus (ii) a statement certified
by the Chief Executive Officer or the Chief Financial Officer of the
Corporation, certifying that the financial position and results of operations of
the Corporation for such period as reflected in the Management Letter are
presented fairly and have been prepared in accordance with GAAP (subject to
normal year-end adjustments), consistently applied.

                     4.2.3. Within 90 days after the end of each fiscal year,
commencing with the first fiscal year ending after the Closing, (i) audited
balance sheets and an income statement as of the end of such fiscal year,
together with statements of retained earnings and cash flow for such fiscal
year, all in reasonable detail and certified by Ernst & Young LLP, or such other
recognized "Big Six" national firm of independent accountants as is selected by
the Board of Directors of the Corporation, as presenting fairly the financial
position and results of operations of the Corporation and as having been
prepared in accordance with GAAP consistently applied, including their opinion
thereon, and (ii) the accounting firm's management letter.

                     4.2.4. Promptly upon becoming available, copies of all
financial statements, reports, press releases, notices, proxy statements and
other documents sent by the Corporation to its stockholders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Corporation with the Securities and Exchange Commission ("SEC") or any
securities exchange.

                     4.2.5. If for any period the Corporation shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of the
Corporation, then, in respect of such period, the financial statements and
information delivered pursuant to the foregoing Sections 4.2.1, 4.2.2 and 4.2.3
shall be the consolidated and consolidating financial statements of the
Corporation and all such consolidated subsidiaries and such consolidated and
consolidating financial statements, in the case of the Subsidiary, shall be
prepared in good faith in a manner intended to fairly present in all material
respects the combined financial position and results of operations of the
Corporation and the Subsidiary.

                     4.3 Management Shares. The parties hereto acknowledge and
                         -----------------
agree that the Corporation intends to sell, within 60 days following the Closing
Date, up to 1,000 shares of Preferred Stock (representing, in the aggregate and
on a fully-diluted basis, up to one percent (1%) of the Common Stock), at a
purchase price of $1,153.85 per share, to certain key senior members of
management of the Corporation ("Management"), all in a manner and on terms
consistent with those previously discussed by the parties hereto. The
Corporation, the Stockholder and GSCP hereby further agree (i) that, as a
condition precedent to any such sales of Preferred Stock, each member of
Management shall be required to enter into an agreement with the Corporation,
the Stockholder and GSCP which includes, among other things, rights and
obligations of the Corporation to repurchase shares of Stock and a

                                       23
<PAGE>
non-competition agreement by Management (in form and substance reasonably
satisfactory to the Stockholder and GSCP), (ii) to modify any other relevant
agreements contemplated by this Agreement, including, without limitation, the
Registration Rights Agreement and the Stockholder Agreement, to reflect the sale
of Preferred Stock to Management, and (iii) to cooperate with each other and
take all other steps as may reasonably be deemed necessary or desirable in order
to effectuate such sale of shares of Preferred Stock to Management as
contemplated by this Section 4.3 and as promptly as practicable following the
date hereof.

                     4.4 System of Accounting. The Corporation shall use
                         --------------------
commercially reasonable efforts to maintain the books of account and other
financial and corporate records of the Corporation and its subsidiaries in
accordance with good business and accounting practices and to accurately reflect
the financial condition of the Corporation in the financial statements referred
to in Section 4.2.

                     4.5 Maintenance of Corporate Existence, etc. The
                         ---------------------------------------
Corporation shall maintain in full force and effect its corporate existence,
rights, governmental approvals and franchises and shall use commercially
reasonable efforts to maintain all licenses and other rights to use patents,
processes, trademarks, trade names or copyrights owned or possessed by it and
deemed by the Corporation to be material to the conduct of its business.

                     4.6 Compliance with Laws. The Corporation shall comply, and
                         --------------------
use its best efforts to cause each subsidiary to comply, with all applicable
laws, rules regulations and orders.

                     4.7 Maintenance of Properties and Leases. The Corporation
                         ------------------------------------
and its subsidiaries, if any, shall use commercially reasonable efforts to keep
its properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all reasonably needful and proper, or
legally required, repairs, renewals, replacement, additions and improvements
thereto; and the Corporation and its subsidiaries, if any, shall at all times
use commercially reasonable efforts to comply with each provision of all leases
to which any of them is a party or under which any of them occupies, or has
possession, of, property.

                     4.8 Insurance. (a) The Corporation shall use commercially
                         ---------
reasonable efforts to keep its assets and those of its subsidiaries, if any,
which are of an insurable character, if any, insured by financially sound and
reputable insurers against loss or damage by fire, extended coverage and other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.

                     (b) Within 30 days following the Closing, the Corporation
shall use its best efforts to obtain, in addition to the $4 million of "key man"
term life insurance presently owned on the life of the Stockholder, and shall
thereafter use its commercially reasonable efforts to maintain (together with

                                       24
<PAGE>
such insurance as is presently in effect), with financially sound and reputable
insurers, "key man" term life insurance on the life of the Stockholder in an
amount not less than $16,000,000. Such policy shall be owned by the Corporation
and the Corporation shall be named as the payee of all benefits thereunder.

                     (c) The Corporation shall use commercially reasonable
efforts to cause to be maintained in effect, with financially sound insurers, a
policy of directors' and officers' liability insurance reasonably acceptable to
GSCP.

                     4.9 Licenses and Permits. The Corporation shall use
                         --------------------
commercially reasonable efforts to obtain all Federal, state, local and foreign
governmental licenses, permits and qualifications material to and necessary in
the conduct of business as proposed to be conducted.

                     4.10 Intellectual Property. The Corporation shall use
                          ---------------------
commercially reasonable efforts to cause all Intellectual Property, including,
but not limited to, technological developments, inventions, discoveries or
improvements made by employees of the Corporation and its subsidiaries, if any,
to be fully documented in engineering or other notebooks in accordance with the
prevailing industrial professional standards, and, where possible and
appropriate, file and prosecute United States and foreign patent applications
relating to and protecting such developments. In addition, the Corporation shall
use commercially reasonable efforts to cause all Intellectual Property,
including, but not limited to, all technological developments, inventions,
discoveries or improvements made by any employee of the Corporation and its
subsidiaries, if any, to be owned by the Corporation and, where possible and
appropriate, obtain reasonable legal protections for the benefit of the
Corporation with respect to such property.

                     4.11 Employee Nondisclosure and Secrecy Agreements. The
                          ---------------------------------------------
Corporation shall use its reasonable best efforts to obtain, and shall cause its
subsidiaries, if any, to use their reasonable efforts to obtain, an Employee
Nondisclosure and Secrecy Agreement in substantially the form of Exhibit L, as
                                                                 ---------
applicable, from those employees listed in Schedule 4.11 and all future
officers, key employees and other employees who will have access to confidential
information of the Corporation or any of its subsidiaries upon their employment
by the Corporation or any of such subsidiaries. In the case of the Subsidiary,
the Corporation shall use its reasonable best efforts to obtain Employee
Nondisclosure and Secrecy Agreements substantially in the form of Exhibit L and
adapted to the satisfaction of counsel for the Corporation and GSCP to meet the
requirements of French law. The Corporation shall not amend, modify, terminate,
waive or otherwise alter, in whole or in part, in any material respect, any
Employee Nondisclosure and Secrecy Agreement without the written consent of
GSCP.

                     4.12 Disclosure of Investment. Each of the Corporation, on
                          ------------------------
the one hand, and GSCP, on the other hand, agrees that it will not, (i) except
as may be necessary or desirable in connection with a request by a governmental
agency, regulatory or supervisory authority or court or as required by law and
other than to potential investors in the Corporation, disclose the transactions

                                       25
<PAGE>
contemplated by this Agreement, the Stockholder Agreement or the Registration
Rights Agreement without the prior consent of the Corporation and GSCP
(provided, however, that the Stockholder may disclose the existence only, but
 --------  -------
not any of the terms, of the investment by GSCP and GSCP Affiliates in the
Corporation to customers or suppliers of the Corporation), (ii) use in
advertising or publicity the name of any party hereto, or any partner or
employee of such party hereto or any of its respective affiliates, or any trade
name, trademark, trade device, service mark, symbol or any abbreviation,
contraction or simulation thereof owned by the other party hereto or any of its
respective affiliates, in either case without the prior written consent of such
party or (iii) represent, directly or indirectly, any product or any service
provided by, the Corporation has been approved or endorsed by GSCP without the
prior written consent of GSCP.

                     4.13 Limitations on Breaches. Notwithstanding any provision
                          -----------------------
hereof to the contrary, any failure by the Corporation to comply with, or
violation by the Corporation of, any of the covenants or agreements set forth in
Sections 4.4 through 4.7, 4.8(a), 4.9 and 4.10, shall not constitute a breach of
such covenant or agreement unless, at the time of such failure or violation,
such failure or violation has had, or would reasonably be expected to have, a
Material Adverse Effect.

                     4.14 Confidentiality. GSCP hereby agrees that all
                          ---------------
information relating to the Corporation and its subsidiaries and affiliates
furnished to it, its Representatives (as defined below) or the GSCP Designees,
either prior to the date hereof or pursuant hereto (the "Confidential
Information"), will be kept strictly confidential and will be used solely for
the purpose of monitoring, evaluating and taking any action with respect to its
investment in the Corporation (the "Investment"); provided, however, that GSCP
may disclose the Confidential Information to any of its partners, officers,
directors, employees, legal counsel, affiliates or agents (the
"Representatives") who need to know such information for the purposes of
assisting GSCP in monitoring, evaluating and taking any action with respect to
its Investment or whom GSCP determines otherwise need to know such information
in connection with the Investment; and provided, further, that the Corporation
                                       --------  -------
shall cooperate with GSCP in permitting the disclosure of certain of such
Confidential Information to potential purchasers of Stock held by the GSCP
Parties, except to the extent that the Corporation reasonably believes that such
disclosure, to a potential purchaser in the same industry or any related
industry as the Corporation, would result in a material competitive disadvantage
to the Corporation. GSCP agrees that it shall not release any Confidential
Information to a potential purchaser hereunder until the Corporation shall have
received from the potential purchaser a fully executed confidentiality agreement
on customary terms and containing, among other things, such limitations and
restrictions as are reasonably required by the Corporation to address any
competitive concerns, which shall be timely provided. GSCP also agrees that the
Confidential Information will not be used by it or its Representatives in any
way detrimental to the Corporation or its stockholders; provided, however, that
                                                        --------  -------
GSCP shall be entitled to use the Confidential Information in connection with
the enforcement of GSCP's rights hereunder or under the Certificate of
Incorporation. GSCP will be responsible for any breach of this Section by any of

                                       26
<PAGE>
its Representatives and agrees to take all reasonable measures to restrain its
Representatives from prohibited or unauthorized disclosure or use of
Confidential Information. The term "Confidential Information" does not include
                                   --------------------------
information (i) which is or becomes available to GSCP or any of its
Representatives on a non-confidential basis from a source other than the
Corporation or (ii) to the extent such information is or shall have become
generally available to the public without breach of this Section.

                     If GSCP or any of its Representatives is requested by a
court or by a judicial, regulatory, self-regulatory or legislative body,
organization, agency or committee in connection with any judicial or
administrative proceeding to disclose any Confidential Information, GSCP will
give the Corporation prompt notice of such request so that it may seek an
appropriate protective order, and GSCP will cooperate fully with the Corporation
in obtaining such an order. If in the absence of a protective order GSCP is
nonetheless compelled to disclose Confidential Information, the Corporation
agrees that GSCP may make such disclosure without liability hereunder, provided
                                                                       --------
that GSCP gives the Corporation written notice of the information to be
disclosed as far in advance of its disclosure as is practicable and, upon the
Corporation's request and at its expense, uses its best efforts to obtain
reasonable assurances that confidential treatment will be accorded to such
information. This Section 4.14 supercedes that certain letter agreement, dated
May 31, 1995, between the Corporation and GSCP.

                     4.15 Investment Banking Services. For so long as the GS
                          ---------------------------
Parties have Minimum Ownership, Goldman, Sachs & Co. ("Goldman Sachs") or any
appropriate affiliate of Goldman Sachs shall, to the extent that the Corporation
is seeking investment banking services, have the right to perform all
appropriate investment banking services for the Corporation if permitted by
applicable regulations (including, without limitation, with respect to the sale
of the Corporation or a public offering of securities of the Corporation) upon
customary terms, including compensation, consistent with an arm's-length
transaction. If the Corporation and Goldman Sachs or its affiliate, after good
faith discussions, cannot agree on the terms of any such engagement, the
Corporation may hire such other investment banker as it finds acceptable,
provided that Goldman Sachs will then be entitled to be a member of the
management group in connection with any underwriting of capital stock of the
Corporation if permitted by applicable regulations.

                     4.16 Subsidiary Transfer. The Stockholder hereby agrees to
                          -------------------
contribute to the capital of the Corporation, within 30 days following the
Closing Date, all of the outstanding shares of capital stock of the Subsidiary
owned by the Stockholder, to make or cause to be made all filings and
notifications and to obtain all consents required in connection therewith, to
obtain appropriate documentation with respect to the Qualifying Shares and to
obtain the resignation of Mr. Roni Cohen as a director of the Subsidiary, and
the assignment of his Qualifying Shares.

                                       27
<PAGE>
                     Section 5. Transfer Taxes. The Corporation agrees that it
                                --------------
will pay, and will hold GSCP and the GSCP Investors harmless from, any and all
liability with respect to any transfer, stamp or similar taxes which may be
determined to be payable in connection with the execution and delivery and
performance of this Agreement or any modification, amendment or alteration of
the terms or provisions of this Agreement, and that it will similarly pay and
hold GSCP harmless from all issue taxes in respect of the issuance of the
Preferred Stock, the Warrants, the Warrant Shares and the Conversion Shares to
GSCP.

                     Section 6. Exchanges; Lost, Stolen or Mutilated
                                ------------------------------------
Certificates. Upon surrender by GSCP to the Corporation of any certificate
------------
representing Preferred Stock or Common Stock purchased or acquired hereunder,
the Corporation at its expense will, within 5 business days, issue in exchange
therefor, and deliver to GSCP, a new certificate or certificates representing
such shares, in such denominations as may be requested by GSCP. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of any certificate representing any share of Preferred Stock or
Common Stock purchased or acquired by GSCP or any GSCP Investor hereunder, and,
in case of any such loss, theft or destruction, upon delivery of any indemnity
agreement satisfactory to the Corporation, or, in any case of any such
mutilation, upon surrender and cancellation of such certificate, the Corporation
at its expense will, within 5 business days, issue and deliver to GSCP or any
GSCP Investor a new certificate for such Preferred Stock or Common Stock of like
tenor, in lieu of such lost, stolen or mutilated certificate.

                     Section 7. Survival of Representations, Warranties,
                                ---------------------------------------
Agreements and Covenants, etc. All representations and warranties hereunder
-----------------------------
shall survive the Closing until the earlier of (a) 30 days after delivery to
GSCP of the audited financial statements for the fiscal year ending December 31,
1996 in accordance with Section 4.2.3, hereof or (b) the execution and delivery
of an underwriting agreement relating to a bona fide, firm commitment,
underwritten public offering pursuant to an effective registration statement
under the Securities Act resulting in at least $15,000,000 of gross proceeds to
the sellers (including the Corporation) before deducting underwriting discounts
and commissions and offering expenses (a "Qualified IPO") which is consummated
and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of GSCP; provided, however, that (i) the
                                      --------  -------
representations and warranties set forth in Sections 2.1, 2.2, 2.3 and 2.4
hereof shall survive indefinitely and (ii) the representations made in Section
2.7 hereof, as they relate to Taxes, and in Section 2.22 hereof shall survive
until the execution and delivery of an underwriting agreement relating to a
Qualified IPO which is consummated. All agreements contained herein shall
survive indefinitely until, by their respective terms, they are no longer
operative; provided, however, that the rights of GSCP and the GSCP Investors and
           --------  -------
the obligations of the Corporation to GSCP and the GSCP Investors under Sections
4.01 through 4.13 of this Agreement shall, unless otherwise specified therein,
terminate upon the earlier of (a) such time as the GS Parties do not
beneficially own any shares of the capital stock of the Corporation and (b) a
Qualified IPO.

                                       28
<PAGE>
                     Section 8. Expenses. Each of the Corporation and GSCP shall
                                --------
pay all of its costs and expenses incurred by it or on its behalf in connection
with this Agreement and the consummation of the transactions contemplated
hereby.

                     Section 9. Indemnification.
                                ---------------
                     (a) The Corporation shall indemnify, defend and hold GSCP
harmless against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including legal and accounting fees and
expenses) (collectively, "Losses"), arising from the breach of any of the
representations, warranties, covenants or agreements made by it herein. GSCP
shall indemnify, defend and hold the Corporation harmless against all Losses
arising from the breach of any of the representations, warranties, covenants or
agreements of GSCP herein. Notwithstanding anything to the contrary in this
Agreement, any and all payments by the Corporation pursuant to this Section 9
with respect to breach of representation or warranties shall be limited to, in
the aggregate, an amount equal to (y) the Purchase Price, and no indemnification
payment by the Corporation (except as provided in Section 9(b)) with respect to
any such Losses otherwise payable hereunder shall be payable until such time as
all such Losses (exclusive of attorneys' fees or other expenses of investigation
or defense) shall aggregate to more than $300,000, and then only to the extent
that such Losses, in the aggregate, exceed $300,000; provided, however, that,
                                                     --------  -------
for purposes of determining the amount of any particular Loss, but not for
purposes of determining whether a breach of a representation or warranty exists
which could give rise to an indemnity obligation under this Section 9, the
amount of any Losses shall be calculated as though no limitations or
qualifications as to materiality (such as the words "material adverse effect,"
"immaterial," "material" and "in all material respects" or words of similar
import) had been made in the applicable representation or warranty. Any
indemnification payment by the Corporation to GSCP pursuant to this Section 9
shall include an additional amount so that GSCP suffers no Loss as a result of
any diminution in the book value of the stockholder's equity related to its
investment under the Agreement as a result of such indemnification payment. Any
payment by the Corporation to GSCP pursuant to this Section shall be treated for
federal income tax purposes as an adjustment to the Purchase Price. Any Losses
with regard to Taxes shall be calculated after giving effect to all payments, if
any, made to the Corporation pursuant to the Dividend Remittitur Agreement
between the Corporation and the Stockholder dated as of the date hereof.

                     (b) The Corporation shall indemnify, defend and hold GSCP
harmless against all Losses relating to any matters referred to or disclosed on
Schedule 2.11 hereto, including, without limitation, any claim with respect to
interference with, infringement upon or misappropriation of any of the
Intellectual Property referred to in item 2.11(b) of Schedule 2.11; provided,
                                                                    --------
however, that all breaches of the representations set forth in Section 2.11 of
-------
this Agreement shall be governed by the provisions set forth above in Section
9(a); and provided, further that, notwithstanding the provisions set forth above
          --------  -------
in Section 9(a), no indemnification payment by the Corporation with respect to
such Losses under this Section 9(b) shall be payable until such time as all such

                                       29
<PAGE>
Losses shall aggregate to more than $1,000,000, and then only to the extent that
such Losses, in the aggregate, exceed $1,000,000.

                     (c) The Corporation shall indemnify, defend and hold GSCP
harmless against all Losses relating to the matter referred to in item number 17
in Schedule 2.7(a) hereto.

                     (d) Any claim for indemnification pursuant to this Section
9 must be made before the expiration of the survival periods set forth in
Section 7 of this Agreement. A party entitled to indemnification under this
Section 9 (an "Indemnified Party") shall give prompt written notice to the
indemnifying party (the "Indemnifying Party") when and to the extent that the
Indemnified Party has actual knowledge of any condition, event or occurrence or
the commencement of any claim, action or proceeding (a "Claim") for which
indemnification may be sought. The Indemnifying Party may, through counsel of
its own choosing and reasonably satisfactory to the Indemnified Party, assume
the defense thereof or other indemnification obligation with respect thereto;
provided, however, that (x) any Indemnified Party shall be entitled to
--------  -------
participate in any such Claim with counsel of its own choice but at its own
expense and (y) any Indemnified Party shall be entitled to participate in any
such Claim with counsel of its own choice at the expense of the Indemnifying
Party if, in the good faith determination of the Indemnified Party's counsel,
representation by the Indemnifying Party's counsel may present a conflict of
interests. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 9, except to the extent that the Indemnifying Party is actually
prejudiced by failure to give such notice. In any event, if the Indemnifying
Party fails to assume the defense within a reasonable time, the Indemnified
Party may assume such defense or other indemnification obligation and the
reasonable fees and expenses of its attorneys will be covered by the indemnity
provided for in this Section 9. No Claim for which indemnification may be sought
shall be compromised or settled in any manner which might adversely affect the
interests of the Indemnifying Party without the prior written consent of such
Indemnifying Party (which shall not be unreasonably withheld). Notwithstanding
anything in this Section 9 to the contrary, the Indemnifying Party shall not,
without the written consent of the Indemnified Party, (i) settle or compromise
any Claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnified Party of a written release from all liability in respect of such
Claim, or (ii) settle or compromise any Claim in any manner that may materially
and adversely affect the Indemnified Party.

                                       30
<PAGE>
                     Section 10. Remedies. In case any one or more of the
                                 --------
covenants and/or agreements set forth in this Agreement shall have been breached
by the Corporation, GSCP may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement.
Notwithstanding anything contained in this Section 10, any action for money
damages by GSCP against the Corporation for breach of any representation,
warranty, covenant or agreement contained in this Agreement shall only be
pursuant to Section 9 of this Agreement.

                     Section 11. Further Assurances. At any time or from time to
                                 ------------------
time after the Closing, the Corporation, on the one hand, and GSCP, on the other
hand, agree to cooperate with each other, and at the request of the other party,
to execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the Purchase, and to otherwise carry out the intent of the parties hereunder.

                     Section 12. Successors and Assigns. This Agreement shall
                                 ----------------------
bind and inure to the benefit of the Corporation and GSCP and the GSCP Investors
and the respective successors, permitted assigns, heirs and personal
representatives of the Corporation and GSCP and the GSCP Investors; provided,
                                                                    --------
however, that, except in the case of a transfer by a GSCP Party of all or part
-------
of the securities acquired by it hereunder to a GSCP Affiliate, (a) GSCP's
rights under Sections 4.1, 4.15 and 9 of this Agreement shall not be assignable
or transferable and (b) GSCP's rights with respect to Sections 4.2 through 4.13
shall be assignable and transferable only to a transferee who, together with its
Affiliates beneficially owns (on a fully diluted basis) 5% or more of the shares
of capital stock of the Corporation. The Corporation acknowledges that GSCP may
transfer all or part of the securities acquired by it hereunder and assign all
or part of its rights and obligations under this Agreement to one or more other
partnerships, corporations, trusts or other organizations directly or indirectly
controlling or controlled by or under direct or indirect common control with
GSCP (each, a "GSCP Affiliate"), and each of GSCP and the GSCP Investors shall
have the right to transfer all or part of the securities of the Corporation
acquired by it hereunder and assign all or part of its rights and obligations
under this Agreement to one or more GSCP Affiliates without the consent of the
Corporation; upon any such assignment, such assignee shall have and be able to
exercise all rights of GSCP hereunder. This Section 12 shall not constitute a
modification or waiver of any of the terms or conditions relating to the subject
matter hereof which are set forth in the Stockholder Agreement.

                     Section 13. Entire Agreement. This Agreement and the other
                                 ----------------
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous arrangements
or understandings with respect thereto.

                                       31
<PAGE>
                     Section 14. Notices. All notices, requests, consents and
                                 -------
other communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally-recognized overnight courier or first-class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:

                     (i) if to the Corporation, to:

                                  P.N.Y. Electronics, Inc.
                                  200 Anderson Avenue
                                  Moonachie, New Jersey 07074
                                  Telecopy:  (201) 531-9408
                                  Attention:  Gadi Cohen

                                  with a copy to:

                                  Klein & Hill
                                  521 Fifth Avenue
                                  New York, New York 10175
                                  Telecopy:  (212) 697-9570
                                  Attention:  Reuven Klein, Esq.
                                              Gadi Hill, Esq.

                                  and

                                  Milbank, Tweed, Hadley & McCloy
                                  One Chase Manhattan Plaza
                                  New York, NY 10005
                                  Telecopy:  (212) 530-0211
                                  Attention:  Michael W. Goroff, Esq.

                     (ii) if to GSCP, to:

                                  GS Capital Partners II, L.P.
                                  85 Broad Street
                                  New York, New York 10004
                                  Telecopy:  (212) 902-3000
                                  Attention:  Robert R. Grusky

                                       32
<PAGE>
                                  with a copy to:

                                  Fried, Frank, Harris, Shriver & Jacobson
                                  One New York Plaza
                                  New York, New York 10004
                                  Telecopy:  (212) 859-8586
                                  Attention:  Paul M. Reinstein, Esq.

                     (iii) if to the Stockholder, to:

                                  Gadi Cohen
                                  8 Shinnecock Trail
                                  Franklin Lakes, New Jersey 07417

                                  with copies to:

                                  Klein & Hill
                                  521 Fifth Avenue
                                  New York, New York 10175
                                  Telecopy:  (212) 697-9570
                                  Attention:  Reuven Klein, Esq.
                                              Gadi Hill, Esq.

                                  and

                                  Milbank, Tweed, Hadley & McCloy
                                  One Chase Manhattan Plaza
                                  New York, New York 10005
                                  Telecopy:  (212) 530-5219
                                  Attention:  Michael W. Goroff, Esq.

All such notices, requests, consents and other communications shall be deemed to
have been given when received.

                     Section 15. Amendments. The terms and provisions of this
                                 ----------
Agreement may be modified or amended, or any of the provisions hereof waived,
temporarily or permanently, pursuant to the written consent of the Corporation
and the Stockholder and the holders of a majority of the outstanding Preferred
Stock (and/or Common Stock issued upon conversion thereof) acquired under this
Agreement and the Warrants; provided, however, that Sections 1, 4.12, 7, 8, 9
                            --------  -------
and this Section 15 may not be amended with respect to GSCP without the written
consent of GSCP; and provided, further, that, in addition to the Sections
                     --------  -------
referenced in the immediately preceding proviso, Sections 4.3, 4.11, 9 and 12
may not be amended without the written consent of GSCP.

                                       33
<PAGE>
                     Section 16. Counterparts. This Agreement may be executed in
                                 ------------
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one agreement.

                     Section 17. Headings. The headings of the sections of this
                                 --------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.

                     Section 18. Nouns and Pronouns. Whenever the context may
                                 ------------------
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice-versa.

                     Section 19. Governing Law. This Agreement shall be governed
                                 -------------
by and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflicts of law. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States of
America, in each case located in the County of New York, for any action,
proceeding or investigation in any court or before any governmental authority
("Litigation") arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in this Agreement shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any Litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of New York or the United States of America,
in each case located in the County of New York, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such Litigation brought in any such court has been brought in an
inconvenient forum.

                     Section 20. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.

                                       34
<PAGE>
                     IN WITNESS WHEREOF, the parties hereto have duly executed
this agreement as of the date first above written.

                CORPORATION

                P.N.Y. ELECTRONICS, INC.

                By:  /s/ Gadi Cohen
                   --------------------------------------------------------
                     Name: Gadi Cohen
                     Title: President and Chief Executive Officer

                GSCP:

                GS CAPITAL PARTNERS II, L.P.

                By:  GS Advisors, L.P., its general partner
                 By: GS Advisors, Inc., its general partner

                By:  /s/ Joseph P. DiSabato
                   --------------------------------------------------------
                     Joseph P. DiSabato, Attorney-in-Fact

                GS CAPITAL PARTNERS II OFFSHORE, L.P.

                By:  GS Advisors, II (Cayman), L.P.,
                     its general partner

                By:  GS Advisors II, Inc.,
                     its general partner

                By:  /s/ Joseph P. DiSabato
                   --------------------------------------------------------
                     Joseph P. DiSabato, Attorney-in-Fact

                GOLDMAN, SACHS & CO. VERWALTUNGS GmbH

                By:  /s/ Joseph P. DiSabato
                   --------------------------------------------------------
                     Joseph P. DiSabato, Attorney-in-Fact

                and

                By:  /s/ Terence O'Toole
                   --------------------------------------------------------
                     Terence O'Toole, Managing Director

                                       35
<PAGE>
                STONE STREET FUND 1995, L.P.

                By:   Stone Street Value Corp.,
                      General Partner

                By:  /s/ Joseph P. DiSabato
                   --------------------------------------------------------
                     Joseph P. DiSabato, Attorney-in-Fact

                BRIDGE STREET FUND 1995, L.P.

                By:   Stone Street Value Corp.,
                      Managing General Partner

                By:  /s/ Joseph P. DiSabato
                   --------------------------------------------------------
                     Joseph P. DiSabato, Attorney-in-Fact

                STOCKHOLDER:

                /s/ Gadi Cohen
                -----------------------------------------------------------
                GADI COHEN

                                       36
<PAGE>
                                                                       ANNEX I

GS CAPITAL PARTNERS II, L.P.                8,157 shares of Preferred Stock
                                            Warrants to purchase 3,059 shares of
                                            Common Stock

GS CAPITAL PARTNERS II OFFSHORE, L.P.       3,242 shares of Preferred Stock
                                            Warrants to purchase 1,216 shares of
                                            Common Stock

GOLDMAN, SACHS & CO. VERWALTUNGS
GmbH                                        301 shares of Preferred Stock
                                            Warrants to purchase 113 shares of
                                            Common Stock

STONE STREET FUND 1995, L.P.                612 shares of Preferred Stock
                                            Warrants to purchase 229 shares of
                                            Common Stock

BRIDGE STREET FUND 1995, L.P.               688 shares of Preferred Stock
                                            Warrants to purchase 258 shares of
                                            Common Stock

                                       37<PAGE>
                                                                 EXHIBIT 10.4

                         REGISTRATION RIGHTS AGREEMENT

                                     among

                           P.N.Y. ELECTRONICS, INC.,

                         GS CAPITAL PARTNERS II, L.P.

                            AND AFFILIATED PARTIES

                                      and

                                  GADI COHEN

                          Dated as of August 4, 1995
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
1.  Certain Definitions...................................................    1

      1.1.  "Affiliates"..................................................    1
      1.2.  "Cohen Affiliates"............................................    2
      1.3.  "Cohen Parties"...............................................    2
      1.4.  "Beneficially Own" or "Beneficial Ownership"..................    2
      1.5.  "Commission"..................................................    2
      1.6.  "Exchange Act"................................................    2
      1.7.  "GSCP Affiliates".............................................    2
      1.8.  "GSCP Parties"................................................    2
      1.9.  "Holder" or "Holders".........................................    2
      1.10. "IPO".........................................................    2
      1.11. "Notes".......................................................    2
      1.12. "Person"......................................................    2
      1.13. "Preferred Stock".............................................    3
      1.14. "Qualified IPO"...............................................    3
      1.15. "Registrable Securities"......................................    3
      1.16. "Securities Act"..............................................    3
      1.17. "Warrants"....................................................    3

2.  Registration Rights...................................................    3

      2.1.  Demand Registrations..........................................    3
      2.2.  Piggyback Registrations.......................................    6
      2.3.  Allocation of Securities Included in Registration Statement...    8
      2.4   Registration Procedures.......................................    11
      2.5.  Registration Expenses.........................................    17
      2.6.  Certain Limitations on Registration Rights....................    19
      2.7.  Limitations on Sale or Distribution of Other Securities.......    19
      2.8.  No Required Sale..............................................    20
      2.9.  Indemnification...............................................    20

3.  Underwritten Offerings................................................    24

      3.1.  Requested Underwritten Offerings..............................    24
      3.2.  Piggyback Underwritten Offerings..............................    24

4.  General...............................................................    25

      4.1.  Adjustments Affecting Registrable Securities..................    25
      4.2.  Rule 144......................................................    25
      4.3.  Nominees for Beneficial Owners................................    25
      4.4.  Amendments and Waivers........................................    26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                          <C>
      4.5.  Notices.......................................................    26
      4.6.  Miscellaneous.................................................    28
      4.7.  No Inconsistent Agreements....................................    29
</TABLE>
<PAGE>
                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

          REGISTRATION RIGHTS AGREEMENT, dated as of August 4, 1995 (this
"Agreement"), among P.N.Y. Electronics, Inc., a Delaware corporation (the
"Company"), GS Capital Partners II, L.P., a Delaware limited partnership
("GSCP"), GS Capital Partners II Offshore, L.P., Goldman, Sachs & Co.
Verwaltungs GmbH, Stone Street Fund 1995, L.P., Bridge Street Fund 1995, L.P.
and Gadi Cohen, residing at 8 Shinnecock Trail, Franklin Lakes, New Jersey 07417
("Cohen").

          The Company, GSCP, GS Capital Partners II Offshore, L.P., Goldman,
Sachs & Co. Verwaltungs GmbH, Stone Street Fund 1995, L.P., Bridge Street Fund
1995, L.P. and Cohen have entered into a Preferred Stock and Warrant Purchase
Agreement (the "Purchase Agreement"), dated as of the date hereof.

          The Company, GSCP, GS Capital Partners II Offshore, L.P., Goldman,
Sachs & Co. Verwaltungs GmbH, Stone Street Fund 1995, L.P., Bridge Street Fund
1995, L.P. and Cohen have entered into a Stockholder Agreement (the "Stockholder
Agreement"), dated as of the date hereof.

          The parties hereto desire to provide certain registration rights with
respect to the shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company held as of the date hereof, by Cohen, or issued or
issuable upon conversion of the Preferred Stock (as such term is defined herein)
or upon exercise of any Warrants (as such term is defined herein) held by the
GSCP Parties or issued to management pursuant to Section 4.3 of the Purchase
Agreement (as such term is defined herein) or in certain other circumstances.

          Accordingly, the parties hereto agree as follows:

1. Certain Definitions.
   -------------------

As used in this Agreement, the following terms shall have the meanings ascribed
to them below:

          1.1. "Affiliates" shall mean, (i) with respect to any Person, any
                ----------
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person and (ii) with respect to
any individual, shall also mean the spouse, child or parent of such Person or
any trust or similar entity of which there are no principal beneficiaries other
than such Person and/or one or more of such relatives. Notwithstanding the
foregoing, neither the Corporation nor any Person controlled by the Corporation
shall be deemed to be an Affiliate of Cohen or Affiliate of GSCP for purposes of
this Agreement.

          1.2. "Cohen Affiliates" shall mean Affiliates of Cohen.
                ----------------
<PAGE>
          1.3.  "Cohen Parties" shall mean Cohen, together with the Cohen
                 -------------
Affiliates.

          1.4.  "Beneficially Own" or "Beneficial Ownership" shall have the
                 ----------------      --------------------
meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.

          1.5.  "Commission" shall mean the Securities and Exchange Commission.
                 ----------

          1.6.  "Exchange Act" shall mean the Securities Exchange Act of 1934,
                 ------------
as amended.

          1.7.  "GSCP Affiliates" shall mean (a) prior to a Qualified IPO,
                 ---------------
Affiliates of GSCP and (b) after a Qualified IPO, one or more partnerships,
corporations, trusts or other organizations which are controlled by, control or
are under common control with GSCP or one or more of the then current, former or
future partners of GSCP to the extent that they receive Stock as a distribution
in kind on a pro rata basis upon or after a Qualified IPO.

          1.8.  "GSCP Parties" shall mean GSCP together with the GSCP Affiliates
                 ------------

          1.9.  "Holder" or "Holders" shall mean any party who is a signatory
                 ------      -------
to this Agreement and any party who shall hereafter acquire and hold Registrable
Securities.

          1.10. "IPO" shall mean the initial underwritten public offering
                 ---
pursuant to which the Common Stock becomes registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

          1.11. "Notes" shall mean the subordinated notes, dated August 3, 1995,
                 -----
issued by the Company to Cohen, comprised of (a) a note in the principal amount
of $15,000,000 (the "$15,000,000 Note") and (b) a note in the initial principal
amount of $5,140,000 (the "$5,140,000 Note").

          1.12. "Person" shall mean any individual, corporation, partnership,
                 ------
firm, association, trust, government, governmental agency or other entity,
whether acting in an individual, fiduciary or other capacity.

          1.13. "Preferred Stock" shall mean the Series A Convertible Preferred
                 ---------------
Stock, par value $.01 per share, of the Company.

                                      -2-
<PAGE>
          1.14.  "Qualified IPO" shall mean a bona fide, firm commitment,
                  -------------
underwritten public offering pursuant to an effective registration statement
under the Securities Act resulting in at least $15,000,000 of gross proceeds to
the sellers (including the Corporation) before deducting underwriting discounts
and commissions and offering expenses.

          1.15.  "Registrable Securities" shall mean (i) any shares of Common
                  ----------------------
Stock held as of the date hereof by the Cohen Parties, (ii) any shares of Common
Stock issued upon conversion of any share of Preferred Stock or upon exercise of
any of the Warrants held by the GSCP Parties (the "Conversion Shares), (iii) any
shares of Common Stock issued upon conversion of any share of Preferred Stock
held by some or all of the members of key management of the Company
("Management"), pursuant to an agreement to be entered into by the Company and
Management as contemplated by Section 4.3 of the Purchase Agreement (the
"Management Stock Purchase Agreement") and any other shares of Common Stock
issued to (or issuable upon exercise of options or warrants issued to) members
of the Company's management prior to a Qualified IPO in compliance with the
provisions of Section 9 of the Stockholder Agreement, and (iv) any shares of
Common Stock issued upon any subdivision, combination or reclassification of
such shares or any stock dividend in respect of any of the foregoing shares. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been sold (other than in
a privately negotiated sale) pursuant to Rule 144 (or any successor provision)
under the Securities Act or (iii) such securities shall have ceased to be
outstanding.

          1.16.  "Securities Act" shall mean the Securities Act of 1933, as
                  --------------
amended.

          1.17.  "Warrants" shall mean the warrants to purchase Common Stock
                  --------
issued pursuant to the Purchase Agreement.

2. Registration Rights.
   -------------------

          2.1.   Demand Registrations.
                 --------------------

                 (a) (i) Subject to Sections 2.1(b), 2.1(e) and 2.3 below, (x)
at any time and from time to time, in the case of any Cohen Party, (y) at any
time and from time to time after the earlier of (A) six (6) months following the
closing of an IPO and (B) the first anniversary of the date hereof in the case
of any GSCP Party or (z) at any time and from time to time after six (6) months
following the closing of an IPO in the case of any other Holder, such Holder or
a group of Holders shall have the right to require the Company to file a
registration statement under the Securities Act covering all or any permitted
part of their respective Registrable Securities, by delivering a written

                                      -3-
<PAGE>
request therefor to the Company specifying the number of Registrable Securities
to be included in such registration by such Holder or group of Holders and the
intended method of distribution thereof. All requests pursuant to this Section
2.1(a)(i) are referred to herein as "Demand Registration Requests," and the
registrations requested are referred to herein as "Demand Registrations." As
promptly as practicable, but no later than ten days after receipt of a Demand
Registration Request, the Company shall give written notice of such Demand
Registration Request to all Holders of record of Registrable Securities.

                    (ii)  The Company, subject to Sections 2.3 and 2.6, shall
include in a Demand Registration (x) the Registrable Securities of the Holder(s)
which requested such registration and (y) the Registrable Securities of any
Holder which shall have made a written request to the Company for registration
thereof in accordance with the provisions of Section 2.2. (which request shall
specify the maximum number of Registrable Securities intended to be disposed of
by such Holder) within 30 days after the receipt of written notice (or, 15 days
if, at the request of the Holder(s) which requested such registration, the
Company states in such written notice or gives telephonic notice to all Holders,
with written confirmation to follow promptly thereafter, that such registration
will be on Form S-3 )

                    (iii) The Company shall, as expeditiously as possible
following a Demand Registration Request, use its best efforts to (x) effect such
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register, for distribution in accordance with
such intended method of distribution, and (y) if requested by the Holder(s)
which requested such registration, obtain acceleration of the effective date of
the registration statement relating to such registration.

               (b)  The Demand Registration rights granted to the Holders in
Section 2.1(a) are subject to the limitations set forth in Section 4.6(a) and to
the following limitations: (i) each Demand Registration Request must include
Registrable Securities either (A) having an aggregate market value of at least
$15,000,000, which market value shall be determined by multiplying the number of
Registrable Securities to be included in the Demand Registration by the proposed
per share offering price thereof or (B) the case of an IPO, in an amount equal
to fifty percent of the number of shares of Common Stock which may be acquired
upon the conversion of all of the shares of Preferred Stock presently held by
the GSCP Parties (the "Preferred Stock Conversion Shares") (provided that the
limitations set forth in this clause (i) shall not be in effect at any time the
Holders' Registrable Securities would otherwise be able to be sold under Rule
144 under the Securities Act but for the Company's failure to comply with the
information requirements thereunder, unless at such time, the Company's outside
counsel (which shall be reasonably acceptable to the Holders requesting such
registration) delivers a written opinion of counsel to such Holders to the
effect that such Holders' Registrable Securities may be publicly offered and
sold without registration

                                      -4-
<PAGE>
under the Securities Act); (ii) the Company shall not be required to cause a
registration pursuant to Section 2.1(a)(i) to be declared effective within a
period of 180 days after the effective date of any other registration statement
of the Company (other than a registration statement on Form S-8); (iii) if the
Board of Directors of the Company, in its good faith judgment, determines that
any registration of Registrable Securities should not be made or continued
because it would materially interfere with or materially adversely affect, any
material financing, acquisition, disposition of assets or stock, corporate
reorganization or merger or other transaction involving the Company or any of
its subsidiaries or would require the Company to make public disclosure of
information the public disclosure of which would not otherwise then be required
and which would have a material adverse effect upon the Company or the value of
the Company's Stock (a "Valid Business Reason"), the Company may postpone filing
a registration statement relating to a Demand Registration Request until such
Valid Business Reason no longer exists, but in no event for more than six
months, and, in case a registration statement has been filed relating to a
Demand Registration Request, if the Valid Business Reason has not resulted from
actions taken by the Company, the Company may cause such registration statement
to be withdrawn and its effectiveness terminated or may postpone amending or
supplementing such registration statement; and the Company shall give written
notice of its determination to postpone or withdraw a registration statement and
of the fact that the Valid Business Reason for such postponement or withdrawal
no longer exists, in each case, promptly after the occurrence thereof; and (iv)
the offering of Registrable Securities requested to be registered pursuant to
Section 2.1(a)(i) shall be pursuant to a firm commitment underwritten offering
unless the Company has previously sold Registrable Securities pursuant to a
registration statement under the Securities Act.

               If the Company shall give any notice of postponement or
withdrawal of any registration statement, the Company shall not, during the
period of postponement or withdrawal, register any Common Stock, other than
pursuant to a registration statement on Form S-4 or S-8 (or an equivalent
registration form then in effect) or a registration on any registration form
that does not permit secondary sales. Each Holder of Registrable Securities
agrees that, upon receipt of any notice from the Company that the Company has
determined to withdraw any registration statement pursuant to clause (iii)
above, such Holder will discontinue its disposition of Registrable Securities
pursuant to such registration statement and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the prospectus
covering such Registrable Securities that was in effect at the time of receipt
of such notice. If the Company shall have withdrawn or prematurely terminated a
registration statement filed under Section 2.1(a)(i) (whether pursuant to clause
(iii) above or as a result of any stop order, injunction or other order or
requirement of the Commission or any other governmental agency or court), the
Company shall not be considered to have effected an effective registration for
the purposes of this Agreement until the Company shall have filed a new
registration statement covering the Registrable Securities covered by the

                                      -5-
<PAGE>
withdrawn registration statement and such registration statement shall have been
declared effective and shall not have been withdrawn. If the Company shall give
any notice of withdrawal or postponement of a registration statement, the
Company shall, at such time as the Valid Business Reason that caused such
withdrawal or postponement no longer exists (but in no event later than six
months after the date of the postponement), use its best efforts to effect the
registration under the Securities Act of the Registrable Securities covered by
the withdrawn or postponed registration statement in accordance with this
Section 2.1 (unless the Holder(s) delivering the Demand Registration Request
shall have withdrawn such request, in which case the Company shall not be
considered to have effected an effective registration for the purposes of this
Agreement), and such registration shall not be withdrawn or postponed pursuant
to clause (iii) above.

               (c) The Company, subject to Sections 2.3 and 2.6, may elect to
include in any registration statement and offering made pursuant to Section
2.1(a)(i), authorized but unissued shares of Common Stock or shares of Common
Stock held by the Company as treasury shares; provided, however, that such
                                              --------  -------
inclusion shall be permitted only to the extent that it is pursuant to and
subject to the terms of the underwriting agreement or arrangements, if any,
entered into by the Holders exercising the Demand Registration rights granted to
the Holders under Section 2.1(a)(i).

               (d) Subject to any provisions in the Purchase Agreement or the
Stockholder Agreement, the managing underwriter for any Demand Registration
shall be selected by the party or parties making the demand for such
registration, provided that such underwriter shall be reasonably satisfactory to
the Company.

               (e) Notwithstanding any other provision of this Agreement, no
Person other than a Cohen Party or a GSCP Party shall be entitled to make a
Demand Registration Request pursuant to this Section 2 until six (6) months
following the closing of an IPO.

          2.2. Piggyback Registrations.
               -----------------------

               (a) If, at any time, the Company proposes or is required to
register any of its equity securities under the Securities Act (other than
pursuant to (i) a registration on a registration statement on Form S-4 or S-8 or
on any registration form that does not permit secondary sales or (ii) a Demand
Registration under Section 2.1) on a registration statement on Form S-1, Form S-
2 or Form S-3 (or an equivalent general registration form then in effect),
whether or not for its own account, the Company shall give prompt written notice
of its intention to do so to each of the Holders of record of Registrable
Securities. Upon the written request of any Holder, made within 15 days
following the receipt of any such written notice (which request shall specify
the maximum number of Registrable Securities intended to be disposed of by such
Holder and the intended method of distribution thereof), and subject in all
cases to Section

                                      -6-
<PAGE>
2.2(d), the Company shall, subject to Sections 2.2(b), 2.3 and 2.6 hereof, use
its best efforts to cause all such Registrable Securities, the Holders of which
have so requested the registration thereof, to be registered under the
Securities Act (with the securities which the Company at the time proposes to
register) to permit the sale or other disposition by the Holders (in accordance
with the intended method of distribution thereof) of the Registrable Securities
to be so registered. No registration effected under this Section 2.2(a) shall
relieve the Company of its obligations to effect Demand Registrations. There is
no limitation on the number of such piggyback registrations under this Section
2.2 which the Company is obligated to effect.

               (b) If, at any time after giving written notice of its intention
to register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such abandoned
registration, without prejudice, however, to the rights of Holders under Section
2.1, and (ii) in the case of a determination to delay such registration of its
equity securities, shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities.

               (c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 2.2 by giving written notice to the Company of its request to
withdraw; provided, however, that (i) such request must be made in writing prior
          --------  -------
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.

               (d) Notwithstanding any other provision of this Agreement, if any
over-allotment option is exercised in an IPO, then, to the extent of the number
of shares of Common Stock to be sold pursuant to such over-allotment option,
such shares shall be provided (i) first, from Registrable Securities the GSCP
Parties desire to be sold pursuant to such over-allotment option, (ii) second,
from Registrable Securities held by any other Holders which desire to sell such
Registrable Securities pursuant to such over-allotment option (each Holder to be
entitled to contribute a pro rata share of such Registrable Securities based on
the number of Registrable Securities then owned by each Holder (considered
together with its Affiliates) requesting inclusion in relation to the number of
Registrable Securities then owned by all Holders requesting inclusion (the "Pro
Rata Basis")), and (iii) third, from the Company.

          2.3. Allocation of Securities Included in Registration Statement.
               -----------------------------------------------------------

                                      -7-
<PAGE>
               (a) If any requested registration pursuant to Section 2.1
involves an underwritten offering and a co-manager of such offering, which shall
be a prominent investment banking firm which is unaffiliated with the Holders
(the "Co-Manager"), shall advise the Company that, in its view, the number of
securities requested to be included in such registration (including those
securities requested by the Company (the "Company Securities") to be included in
such registration) exceeds the largest number (the "Section 2.1 Sale Number")
that can be sold in an orderly manner in such offering within a price range
acceptable to the Holders of a majority of the Registrable Securities proposed
to be registered, the Company shall include in such registration:

          (x)  in the case of a Demand Registration Request by GSCP Parties (a
     "GSCP Request"), include:

                    (1)  Registrable Securities included by the GSCP Parties in
     such GSCP Request having an aggregate market value (based upon the net
     proceeds received per share upon sale in such registration) ("Aggregate
     Market Value") equal to (A) $15,000,000 less (B) the aggregate amount of
     any consideration previously received by the GSCP Parties from all sales of
     Registrable Securities by the GSCP Parties to any party other than a GSCP
     Party (the number of shares having an Aggregate Market Value equal to such
     difference being referred to as the "GSCP Number"), and, thereafter,

                    (2)  Company Securities, up to an amount equal to 50% of the
     Section 2.1 Sale Number and, thereafter, (3) all of the Registrable
     Securities of all Holders requesting that Registrable Securities be
     included in such registration (each such Holder, a "Participating Holder").
     If the number of such Registrable Securities exceeds 50% of the Section 2.1
     Sale Number, then the number of such Registrable Securities (not to exceed
     in number the Section 2.1 Sale Number) to be included in such registration
     shall be allocated among all the Participating Holders on a Pro Rata Basis;
     provided, however, that, after giving effect to the foregoing allocation
     --------  -------
     pursuant to this subsection (x)(3), the aggregate number (the "Aggregate
     Number") of shares allocated pursuant to this subsection (x)(3) to
     Participating Holders who are Cohen Parties or GSCP Parties shall be
     reallocated among such Participating Holders such that (1) the sum of (I)
     the aggregate number of shares allocated pursuant to this subsection (x)(3)
     to Participating Holders who are GSCP Parties plus (II) the GSCP Number
     equals the sum of (I) the aggregate number of shares allocated pursuant to
     this subsection (x)(3) to Participating Holders who are Cohen Parties plus
     (II) such Company Securities included pursuant to subsection (x)(2), the
     proceeds of which will be used to make mandatory prepayments pursuant to
     Section 1.2(a) of the $15,000,000 Note ("Designated Company Securities");
     and (2) at such time as all of the Registrable Securities requested to be
     included of either the Cohen Parties or GSCP Parties have been so
     allocated, the remainder of such Registrable Securities not allocated
     pursuant to subclause

                                      -8-
<PAGE>
     (1) of this proviso, if any, up to the Aggregate Number, shall be allocated
     to either the Participating Holders who are Cohen Parties or to the
     Participating Holders who are GSCP Parties, to the extent one of them has
     Registrable Securities requested to be included which have not previously
     been included pursuant to the allocation of the Aggregate Number; and
     provided further, that, other than with respect to an IPO, from and after
     -------- -------
     the point at which the GSCP Parties have or, after giving effect to the
     foregoing allocation pursuant to this Section (x)(1), (2) and (3) and the
     sale of Registrable Securities pursuant to the registration to which such
     allocation relates, would have, Sold (as such term is defined in the
     Stockholder Agreement), in the aggregate, but excluding any Sales (as such
     term is defined in the Stockholder Agreement) by GSCP Parties to or among
     GSCP Parties, a number of Warrants or shares of Common Stock or Preferred
     Stock representing Beneficial Ownership of 50% of the Conversion Shares the
     beneficial ownership of which was acquired pursuant to the Purchase
     Agreement (regardless of the manner in which such Sale is effected), the
     reallocation of shares among Participating Holders who are Cohen Parties or
     GSCP Parties shall be, in lieu of the reallocation set forth in subclause
     (1) of the preceding proviso, such that the aggregate number of shares
     allocated to Participating Holders who are Cohen Parties equals three times
     the sum of (I) the aggregate number of shares which are allocated to the
     Participating Holders who are GSCP Parties plus (II) the GSCP Number, with
     any Designated Company Securities being counted as shares allocated to
     Participating Holders who are Cohen Parties (the allocation pursuant to the
     provisions set forth in this subsection (x)(3) is referred to as the
     "Agreed Allocation"), and

               (y)  in all other cases, the number of such Registrable
     Securities and Company Securities (not to exceed in number the Section 2.1
     Sale Number) to be included in such registration shall be allocated among
     the Company and such Holders in accordance with the Agreed Allocation (with
     the GSCP Number, for purposes of such allocation, being equal to 0).

                         If, as a result of the proration provisions of this
Section 2.3(a), any Holder shall not be entitled to include all Registrable
Securities in a registration that such Holder has requested be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration or may reduce the number requested to be included; provided,
                                                                     --------
however, that (x) such request must be made in writing prior to the earlier of
- -------
the execution of the underwriting agreement or the execution of the custody
agreement with respect to such registration and (y) such withdrawal shall be
irrevocable and, after making such withdrawal, a Holder shall no longer have any
right to include Registrable Securities in the registration as to which such
withdrawal was made.

                    (b)  If any registration pursuant to Section 2.2 involves an
underwritten offering and the Co-Manager shall advise the Company that, in its
view,

                                      -9-
<PAGE>
the number of securities requested to be included in such registration exceeds
the number (the "Section 2.2 Sale Number") that can be sold in an orderly manner
in such registration within a price range acceptable to the Company, the Company
shall include in such registration, subject to Section 2.2(d), (i) first,
Company Securities, the proceeds of which will be used to make mandatory
prepayments pursuant to Section 1.3(a) of the $5,140,000 Note, and thereafter,
(ii) subject to Section 4.3(c), Designated Company Securities, and, thereafter,
(iii) Registrable Securities requested to be included by the GSCP Parties in an
amount up to the amount of Designated Company Securities included pursuant to
the preceding clause (ii), and thereafter (iv) all other Company Securities and,
thereafter (v) to the extent that the number of Registrable Securities and
Company Securities to be sold pursuant to (i), (ii), (iii) and (iv) (the "Prior
Securities") is less than the Section 2.2 Sale Number, all Registrable
Securities (other than Registrable Securities set forth in (iii) above)
requested to be included by all Holders; provided, however, that if the number
                                         --------  -------
of such Registrable Securities exceeds the Section 2.2 Sale Number less the
number of the Prior Securities, then the number of such Registrable Securities
included in such registration shall be allocated among all the Participating
Holders on a Pro Rata Basis; provided, further, however, that if, after giving
                             --------  -------  -------
effect to the foregoing allocation, the aggregate number (the "2.2 Aggregate
Number") of shares allocated pursuant to this subsection (v) to Participating
Holders who are Cohen Parties or GSCP Parties shall be reallocated among such
Participating Holders such that (1) the aggregate number of shares allocated
pursuant to this subsection (v) to Participating Holders who are GSCP Parties
equals the aggregate number of shares allocated pursuant to this subsection (v)
to Participating Holders who are Cohen Parties; and (2) at such time as all of
the Registrable Securities requested to be included of either the Cohen Parties
or GSCP Parties have been so allocated, the remainder of such Registrable
Securities not allocated pursuant to subclause (1) of this proviso, if any, up
to the 2.2 Aggregate Number, shall be allocated to either the Participating
Holders who are Cohen Parties or to the Participating Holders who are GSCP
Parties, to the extent one of them has Registrable Securities requested to be
included which have not previously been included pursuant to the allocation of
the 2.2 Aggregate Number; and provided, further, that, other than with respect
                              --------  -------
to an IPO, from and after the point at which the GSCP Parties have or, after
giving effect to the foregoing allocation and the sale of Registrable Securities
pursuant to the registration to which such allocation relates, would have, Sold
(as such term is defined in the Stockholder Agreement), in the aggregate, but
excluding any Sales (as such term is defined in the Stockholder Agreement) by
GSCP Parties to or among GSCP Parties, a number of Warrants or shares of Common
Stock or Preferred Stock representing Beneficial Ownership of 50% of the
Conversion Shares the Beneficial Ownership of which was acquired pursuant to the
Purchase Agreement (regardless of the manner in which such Sale is effected),
the reallocation of shares among Participating Holders who are Cohen Parties or
GSCP Parties shall be, in lieu of the reallocation set forth in subclause (1) of
the preceding proviso, such that the aggregate number of shares allocated to
Participating Holders who are Cohen Parties equals three times the

                                      -10-
<PAGE>
aggregate number of shares which are allocated to the Participating Holders who
are GSCP Parties.

               (c) In connection with an IPO with respect to which the GSCP
Parties have requested that Registrable Securities held by them be included in
the IPO, Cohen agrees not to waive his right to receive any mandatory prepayment
on the $15,000,000 Note pursuant to Section 1.2 thereof to the extent that such
waiver would result in Cohen receiving less than $5,000,000 from such
prepayment. In addition, in connection with any public offering by the Company,
Cohen agrees that he will waive the right to receive mandatory prepayment
pursuant to Section 1.2 of the $15,000,000 Note, of any amount in excess of the
initial $5,000,000 mandatory prepayment of the $15,000,000 Note unless the GSCP
Parties shall be entitled to include, in such public offering, the lesser of (1)
the number of shares which have an Aggregate Market Value equal to the amount of
the mandatory prepayment received by Cohen pursuant to Section 1.2(a) of the
$15,000,000 Note in connection with such public offering or (2) the number of
shares which the GSCP Parties may then sell in accordance with Section 3(b) of
the Stockholder Agreement.

               (d) Notwithstanding any other provision of this Agreement, (i)
any sale of shares by the GSCP Parties pursuant to a Demand Registration Request
or a piggyback registration request pursuant to Section 2.2 of this Agreement
shall be subject to, and no provision of this Agreement shall constitute a
waiver of, any of the restrictions on, or agreements with respect to, transfer
of securities set forth in the Stockholder Agreement, including, without
limitation, the restrictions set forth in Section 3(b) thereof, and (ii) Holders
shall not be entitled to include in any Demand Registration Request or any
piggyback registration request pursuant to Section 2.2 of this Agreement any
Registrable Securities which may not then be sold by such Holder due to the
restrictions referred to in clause (i) above or otherwise.

          2.4. Registration Procedures.  If and whenever the Company is required
               -----------------------
by the provisions of this Agreement to use its best efforts to effect or cause
the registration of any Registrable Securities under the Securities Act as
provided in this Agreement, the Company shall, as expeditiously as possible:

               (a) prepare and file with the Commission a registration statement
on an appropriate registration form of the Commission for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form (i) shall be selected by the Company and (ii)
shall, in the case of a shelf registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and such registration
statement shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by the
Commission to be filed therewith, and the Company shall use its best efforts to
cause such registration statement to become and remain effective (provided,
however, that before filing a registration statement or prospectus or any

                                      -11-
<PAGE>
amendments or supplements thereto, or comparable statements under securities or
blue sky laws of any jurisdiction, the Company will furnish, if requested, to
one counsel for the Holders participating in the planned offering (selected by
the Holders making the Demand Registration Request, in the case of a
registration pursuant to Section 2.1, and selected by the Holders of a majority
of the Registrable Securities included in such registration, in the case of a
registration pursuant to Section 2.2) and the underwriters, if any, copies of
all such documents proposed to be filed (including all exhibits thereto), which
documents will be subject to the reasonable review and reasonable comment of
such counsel, and the Company shall not file any registration statement or
amendment thereto or any prospectus or supplement thereto to which the holders
of a majority of the Registrable Securities covered by such registration
statement or the underwriters, if any, shall reasonably object in writing);

               (b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period (which shall not be required to exceed the shorter of (i) 150 days
in the case of a registration pursuant to Section 2.1 or 120 days in the case of
a registration pursuant to Section 2.2 or (ii) such shorter period when all
Registrable Securities covered by such registration statement shall have been
sold in the manner set forth and as contemplated in such registration statement)
as any seller of Registrable Securities pursuant to such registration statement
shall request and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all Registrable Securities covered
by such registration statement in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;

               (c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with all applicable law of each such registration statement (or
amendment or post-effective amendment thereto) and each such prospectus (or
preliminary prospectus or supplement thereto) by each such seller of Registrable
Securities and the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by such registration statement or
prospectus);

               (d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other state
securities or "blue sky" laws of such jurisdictions within the United States as
any sellers of Registrable Securities or any managing underwriter, if any, shall
reasonably request in

                                      -12-
<PAGE>
writing in advance of the effectiveness of such registration statement, and do
any and all other acts and things as are reasonably necessary or advisable to
enable such sellers or underwriter, if any, to consummate the disposition of the
Registrable Securities in such jurisdictions, except that in no event shall the
Company be required to qualify to do business as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not, but for the
requirements of this paragraph (d), be required to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;

               (e)  promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or state securities authority for
amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any Registrable Securities for sale under the state securities
or blue sky laws of any jurisdiction or the initiation of any proceeding for
such purpose; (v) of the existence of any fact of which the Company becomes
aware which results in the registration statement, the prospectus related
thereto or any document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein not misleading; and
(vi) if at any time the representations and warranties contemplated by Section 3
below cease to be true and correct in all material respects; and, if the
notification relates to an event described in clause (v), the Company shall
promptly prepare and furnish to each such seller and each underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company may postpone taking
                      --------  -------
action with respect to a supplement or amendment to the applicable registration
statement or a supplement or amendment to the related prospectus or any document
incorporated or deemed to be incorporated therein by reference if the Board of
Directors of the Company, in its good faith judgment, determines that the
registration of Registrable Securities related to such registration statement or
prospectus should not be made or continued due to the existence of a Valid
Business Reason, provided that such postponement may only take place until such
Valid Business Reason no longer exists, but in no event for more than six
months;

                                      -13-
<PAGE>
               (f) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;

               (g) (i)  cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, cause all such
Registrable Securities to be listed on a national securities exchange or,
failing that, secure designation of all such Registrable Securities as a
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") "national market system security" within the meaning of Rule 11Aa2-1
of the Commission or, failing that, secure NASDAQ authorization for such shares
and, without limiting the generality of the foregoing, take all actions that may
be required by the Company as the issuer of such Registrable Securities in order
to facilitate the managing underwriter's arranging for the registration of at
least two market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc. (the "NASD");

               (h) provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;

               (i) enter into such customary and reasonable agreements
(including, if applicable, an underwriting agreement) and take such other
appropriate actions as the Holders of a majority of the Registrable Securities
participating in such offering shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities, provided that the
underwriting agreement, if any, shall be reasonably satisfactory in form and
substance to the Company. The Holders of the Registrable Securities which are to
be distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that the Company make to and for the
benefit of such Holders the representations, warranties and covenants of the
Company which are being made to and for the benefit of such underwriters and
which are of the type customarily provided to institutional investors in
secondary offerings; provided, however, that the Company shall not be required
                     --------  -------
to make any representations or warranties with respect to information
specifically provided by a selling holder or any underwriter for inclusion in
the registration documents;

                                      -14-
<PAGE>
               (j) obtain an opinion from the Company's counsel and a "cold
comfort" letter from the Company's independent public accountants in customary
form and covering such matters as are customarily covered by such opinions and
"cold comfort" letters delivered to underwriters in underwritten public
offerings, which opinion and letter shall be reasonably satisfactory to the
underwriter, if any, and to the Holders of a majority of the Registrable
Securities participating in such offering, and furnish to each Holder
participating in the offering and to each underwriter, if any, a copy of such
opinion and letter addressed to such Holder or underwriter;

               (k) deliver promptly to each Holder participating in the offering
and each underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all memoranda relating
to discussions with the Commission or its staff with respect to the registration
statement, other than those portions of any such correspondence and memoranda
which contain information subject to attorney-client privilege with respect to
the Company, and, upon receipt of such confidentiality agreements as the Company
may reasonably request, make reasonably available for inspection by any seller
of such Registrable Securities covered by such registration statement, by any
underwriter, if any, participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement (the
foregoing confidentiality agreements will require such Holders to agree that,
among other things, (i) the information obtained by them as a result of such
inspections shall be deemed confidential and shall not be used by them as the
basis for any market transactions in the securities of the Company unless and
until such information is made generally available to the public, and (ii) upon
learning that disclosure of such information may be required pursuant to a
subpoena or other order from a court of competent jurisdiction, they will give
notice to the Company and allow the Company at its expense to undertake
appropriate action to prevent disclosure of the information and other records of
the Company deemed confidential);

               (l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;

               (m) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the registration statement;

               (n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;

                                      -15-
<PAGE>
               (o)  promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement) provide copies of such
document to counsel to the selling holders of Registrable Securities and to the
managing underwriter, if any, and make the Company's representatives reasonably
available for discussion of such document and make such changes in such document
concerning the selling holders prior to the filing thereof as counsel for such
selling holders or underwriters may reasonably request;

               (p)  furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);

               (q)  cooperate with the selling holders of Registrable Securities
and the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling holders of Registrable Securities at least three
business days prior to any sale of Registrable Securities; and

               (r)  take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.

               The Company may require as a condition precedent to the Company's
obligations under this Section 2.4 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration.

               Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in clauses (ii), (iii), (iv) and (v) of paragraph (e) of this Section
2.4, such Holder will discontinue such Holder's disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by paragraph (e) of this Section 2.4 or until
such Holder is advised in writing (the "Advice") by the Company that the use of
the applicable prospectus may be resumed and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies,

                                      -16-
<PAGE>
other than permanent file copies, then in such Holder's possession of the
prospectus covering such Registrable Securities that was in effect at the time
of receipt of such notice. In the event the Company shall give any such notice,
the applicable period mentioned in paragraph (b) of this Section 2.4 shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received (i) the copies of the supplemented or amended prospectus contemplated
by paragraph (e) of this Section 2.4 or (ii) the Advice.

               If any such registration statement or comparable statement under
"blue sky" laws refers to any Holder by name or otherwise as the Holder of any
securities of the Company, then such Holder shall have the right to require (i)
the insertion therein of language, in form and substance reasonably satisfactory
to such Holder and the Company, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.

         2.5.  Registration Expenses.
               ---------------------

               (a)  "Expenses" shall mean any and all reasonable fees and
expenses incident to the Company's performance of or compliance with this
Article 2, including, without limitation: (i) Commission, stock exchange or NASD
registration and filing fees and all listing fees and fees with respect to the
inclusion of securities in NASDAQ, (ii) reasonable fees and expenses of
compliance with state securities or "blue sky" laws and in connection with the
preparation of a "blue sky" survey, including, without limitation, reasonable
fees and expenses of blue sky counsel, (iii) printing expenses, (iv) messenger
and delivery expenses, (v) reasonable fees and disbursements of counsel for the
Company, (vi) with respect to each registration, the fees and disbursements of
one counsel for the selling Holders (selected by the Holders making the Demand
Registration Request, in the case of a registration pursuant to Section 2.1, and
selected by the Holders of a majority of the Registrable Securities included in
such registration, in the case of a registration pursuant to Section 2.2), (vii)
reasonable fees and disbursements of all independent public accountants
(including the expenses of any audit and/or "cold comfort" letter) and
reasonable fees and expenses of other persons, including special experts,
retained by the Company, (viii) reasonable fees and expenses payable to a
Qualified Independent Underwriter, to the extent a Qualified Independent
Underwriter is required pursuant to rules of the National Association of
Securities Dealers, Inc., and (ix) any other fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities
(collectively, "Expenses").
                --------

                                      -17-
<PAGE>
               (b)  The Company shall pay all Expenses with respect to any
Demand Registration that shall not be deemed to have been effected as
contemplated by Section 2.1(b) and any registration effected under Section 2.2.
With respect to any Demand Registration effected pursuant to Section 2.1, (i)
the Company shall pay all Expenses related to (A) the first three Demand
Registrations which GSCP elects to have the Company pay the Expenses related
thereto and (B) the first three Demand Registrations which Cohen elects to have
the Company pay the Expenses related thereto and (ii) the Holders of Registrable
Securities shall pay all Expenses related to any other Demand Registration
effected pursuant to Section 2.1. (such Expenses shall be allocated among the
Holders of Registrable Securities participating in a Demand Registration on a
pro rata basis based on the lesser of (1) number of Registrable Securities
included in such offering by a Holder relative to the number of Registrable
Securities included in such offering by all Holders, except to the extent
Expenses are attributable to a Holder or to securities included in an offering
by a Holder).

               (c)  Notwithstanding the foregoing, (x) the provisions of this
Section 2.5 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any capital gains, income or transfer taxes, if
any, attributable to the sale of such Registrable Securities, pro rata with
                                                              --- ----
respect to payments of discounts and commissions in accordance with the number
of shares sold in the offering, and all fees and disbursements of counsel for
such Holder (other than fees and disbursements of counsel included in the amount
of Expenses paid or payable by the Company pursuant to this Section 2.5) and (z)
the Company shall, in the case of all registrations under this Article 2, be
responsible for all its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties).

         2.6.  Certain Limitations on Registration Rights.  In the case of any
               ------------------------------------------
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2 if the Company has determined to enter
into an underwriting agreement in connection therewith, all Registrable
Securities to be included in such registration shall be subject to an
underwriting agreement and no person may participate in such registration unless
such person agrees to sell such person's securities on the basis provided
therein and completes and executes all reasonable questionnaires, indemnities,
underwriting agreements, lock-up letters and other documents (other than powers
of attorney) which must be executed in connection therewith, and provides such
other information to the Company or the underwriter as may be necessary to
register such Holder's Registrable Securities.

         2.7.  Limitations on Sale or Distribution of Other Securities.
               -------------------------------------------------------

               (a)  If requested in writing by the Company or the managing
underwriter, if any, of any registration effected pursuant to Section 2.1 or
2.2, each

                                      -18-
<PAGE>
Holder of Registrable Securities agrees not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any Registrable Securities, or of any other equity security of the Company or
of any security convertible into or exchangeable or exercisable for any equity
security of the Company (other than as part of such underwritten public
offering) during the time period reasonably requested by the managing
underwriter, not to exceed 90 days (and the Company hereby also so agrees
(except that the Company may effect any sale or distribution of any such
securities pursuant to a registration on Form S-4 (if reasonably acceptable to
the managing underwriter) or Form S-8, or an equivalent form which is then in
effect) and agrees to use its best efforts to cause each holder of any equity
security or of any security convertible into or exchangeable or exercisable for
any equity security of the Company purchased from the Company at any time other
than in a public offering so to agree).

               (b)  The Company hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 2.1 or 2.2, and if such
previous registration shall not have been withdrawn or abandoned, the Company
shall not effect any registration of any of its securities under the Securities
Act (other than a registration on Form S-4 or Form S-8 or an equivalent form
which is then in effect), whether or not for sale for its own account, until a
period of 90 days shall have elapsed from the effective date of such previous
registration; and the Company shall so provide in any registration rights
agreements hereafter entered into with respect to any of its securities.

         2.8.  No Required Sale.  Nothing in this Agreement shall be deemed to
               ----------------
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.

         2.9.  Indemnification.
               ---------------

               (a)  In the event of any registration of any securities of the
Company under the Securities Act pursuant to this Article 2, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, the seller of any Registrable Securities covered by such registration
statement, its directors, officers, fiduciaries, employees and stockholders or
general and limited partners (and the directors, officers, employees and
stockholders thereof), each other individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof (each, a "Person") who participates as an underwriter or a
Qualified Independent Underwriter, if any, in the offering or sale of such
securities, each officer, director, employee, stockholder or partner of such
underwriter or Qualified Independent Underwriter, and each other Person, if any,
who controls such seller or any such underwriter within the meaning of the
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
and all losses, claims, damages or liabilities, joint or several, actions or
proceedings (whether commenced or threatened) in respect thereof ("Claims") and
expenses (including reasonable fees of

                                      -19-
<PAGE>
counsel and any amounts paid in any settlement effected with the Company's prior
written consent, which consent shall not be unreasonably withheld or delayed) to
which each such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) any violation by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, and the Company will reimburse any such indemnified party for any
reasonable legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such Claim as such expenses
are incurred; provided, however, that the Company shall not be liable to any
              --------  -------
such indemnified party in any such case to the extent such Claim or expense
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
such registration statement or amendment thereof or supplement thereto or in any
such prospectus or any preliminary, final or summary prospectus in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such indemnified party specifically for use therein. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.

               (b)  Each Holder of Registrable Securities that are included in
the securities as to which any registration under Section 2.1 or 2.2 is being
effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or 2.2, any underwriter and Qualified Independent Underwriter, if
any) shall, severally and not jointly, indemnify and hold harmless (in the same
manner and to the same extent as set forth in paragraph (a) of this Section 2.9)
to the fullest extent permitted by law, the Company, its officers, directors,
employees and agents, each Person controlling the Company within the meaning of
the Section 15 of the Securities Act or Section 20 of the Exchange Act and all
other prospective sellers and their directors, officers, employees, agents,
general and limited partners and respective controlling Persons with respect to
any untrue statement or alleged untrue statement of any material fact in, or
omission or alleged omission of any material fact from, such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement

                                      -20-
<PAGE>
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company or its representatives by or on behalf of such Holder or
underwriter or Qualified Independent Underwriter, if any, specifically for use
therein and reimburse such indemnified party for any reasonable legal or other
expenses reasonably incurred in connection with investigating or defending any
such Claim as such expenses are incurred; provided, however, that the aggregate
                                          --------  -------
amount which any such Holder shall be required to pay pursuant to this Section
2.9(b) and Sections 2.9(c) and (e) shall in no case be greater than the amount
of the net proceeds received by such person upon the sale of the Registrable
Securities pursuant to the registration statement giving rise to such claim.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party and shall survive
the transfer of such securities by such Holder.

               (c)  Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.

               (d)  Any person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 2.9, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.9, except to the
extent the indemnifying party is materially prejudiced thereby and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Article 2. In case any action or
proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, to assume the defense thereof jointly with any other indemnifying
party similarly notified, to the extent that it chooses, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party that it so chooses,
the indemnifying party shall not be liable to such indemnified party for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable out of pocket costs of
investigation; provided, however, that (i) if the indemnifying party fails to
               --------  -------
take reasonable steps necessary to defend diligently the action or

                                      -21-
<PAGE>
proceeding within 20 days after receiving notice from such indemnified party
that the indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there may be one or more legal defenses available to such indemnified party
which are not available to the indemnifying party; or (iii) if representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the indemnified party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all indemnified parties in each
jurisdiction in connection with any action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, except to the extent any indemnified party or parties reasonably
shall have concluded that there may be legal defenses available to such party or
parties which are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct) and
the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.

               (e)  If for any reason the foregoing indemnity is unavailable or
is insufficient to hold harmless an indemnified party under Sections 2.9(a), (b)
or (c), then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative fault of the indemnifying party, on the
one hand, and the indemnified party, on the other hand, with respect to such
offering of securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. If, however, the
allocation provided in the second preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative faults but also the relative benefits of the
indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.9(e) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the preceding sentences
of this Section 2.9(e). The amount paid or payable in respect of any Claim shall
be deemed to include any reasonable legal or other expenses reasonably incurred
by such indemnified party in

                                      -22-
<PAGE>
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything in this
Section 2.9(e) to the contrary, no indemnifying party (other than the Company)
shall be required pursuant to this Section 2.9(e) to contribute any amount in
excess of the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less the amount of any
indemnification payment made by such indemnifying party pursuant to Sections
2.9(b) and (c).

               (f)  The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.

               (g)  The indemnification and contribution required by this
Section 2.9 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

               (h)  Any amounts advanced by the indemnifying party to an
indemnified party pursuant to this Section 2.9 as a result of any Claim referred
to herein or any expenses related to any such Claim shall be returned to the
indemnifying party if it shall be finally determined by a court of competent
jurisdiction in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by such indemnifying
party.

               (i)  Notwithstanding anything to the contrary in this Section
2.9, to the extent provisions on indemnification and contribution contained in
the underwriting agreement entered into in connection with an underwritten
public offering are in conflict with the foregoing provisions, the provisions in
the underwriting agreement shall control.

3. Underwritten Offerings.
   ----------------------

         3.1.  Requested Underwritten Offerings.  If requested by the
               --------------------------------
underwriters for any underwritten offering by the Holders pursuant to a
registration requested under Section 2.1, the Company shall enter into a
customary underwriting agreement with the underwriters. Such underwriting
agreement shall be reasonably satisfactory in form and substance to the Holders
which requested such registration and shall contain such representations and
warranties by, and such other agreements on the part of, the Company

                                      -23-
<PAGE>
and such other terms as are generally prevailing in agreements of that type,
including, without limitation, indemnities and contribution agreements. Any
Holder participating in the offering shall be a party to such underwriting
agreement and may, at its option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder; provided, however, that the Company
                                             --------  -------
shall not be required to make any representations or warranties with respect to
information specifically provided by a selling Holder or an underwriter for
inclusion in the registration statement. Such underwriting agreement shall also
contain such representations and warranties by the participating Holders as are
customary in agreements of that type.

         3.2.  Piggyback Underwritten Offerings.  In the case of a registration
               --------------------------------
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into an underwriting agreement in connection therewith, all of the Holders'
Registrable Securities to be included in such registration shall be subject to
such underwriting agreement. Any Holder participating in such registration shall
be a party to such underwriting agreement and may, at its option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such Holder and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holder. Such underwriting agreement shall also contain such representations and
warranties by the participating Holders as are customary in agreements of that
type.

4. General.
   -------

         4.1.  Adjustments Affecting Registrable Securities. The Company agrees
               --------------------------------------------
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration. The Company agrees that it will take all
reasonable steps necessary to effect a subdivision of shares if in the
reasonable judgment of (a) the Holder of Registrable Securities that makes a
Demand Registration Request and (b) the managing underwriter for the offering in
respect of such Demand Registration Request, such subdivision would enhance the
marketability of the Registrable Securities.

         4.2.  Rule 144.  If the Company shall have filed a registration
               --------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Common Stock or securities of the Company convertible into or
exchangeable or exercisable for

                                      -24-
<PAGE>
Common Stock, the Company covenants that it will timely file the reports
required to be filed by it under the Securities Act or the Exchange Act
(including, but not limited to, the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities
Act), and will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.

         4.3.  Nominees for Beneficial Owners.  If Registrable Securities are
               ------------------------------
held by a nominee for the beneficial owner thereof, the beneficial owner thereof
may, at its option, be treated as the Holder of such Registrable Securities for
purposes of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number or
percentage of shares constituting Registrable Securities held by any Holder or
Holders of Registrable Securities contemplated by this Agreement), provided that
the Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.

         4.4.  Amendments and Waivers.  This Agreement may be amended, modified,
               ----------------------
supplemented or waived only upon the written agreement of the party against whom
enforcement of such amendment, modification, supplement or waiver is sought. In
addition, the definition of Registrable Securities may be amended to include
additional securities, pursuant to the written consent of the Company, Cohen and
GSCP.

          4.5. Notices.  Except as otherwise provided in this Agreement, all
               -------
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other parties:

               (i)   if to the Company, to:

                     P.N.Y. Electronics, Inc.
                     200 Anderson Avenue
                     Moonachie, New Jersey 07074
                     Telecopy: (201) 438-9097
                     Attention: Gadi Cohen

                                      -25-
<PAGE>
                      with copies to:

                      Klein & Hill
                      521 Fifth Avenue
                      New York, New York 10175
                      Telecopy: (212) 697-9570
                      Attention: Reuven Klein, Esq.
                                 Gadi Hill, Esq.

                      and

                      Milbank, Tweed, Hadley & McCloy
                      One Chase Manhattan Plaza
                      New York, New York 10005
                      Telecopy: (212) 530-5219
                      Attention: Michael Goroff, Esq.

               (ii)   if to GSCP or any GSCP Party, to:

                      GS Capital Partners II, L.P.
                      85 Broad Street
                      New York, New York 10004
                      Telecopy: (212) 902-3000
                      Attention: Robert R. Grusky

                      with a copy to:

                      Fried, Frank, Harris, Shriver & Jacobson
                      One New York Plaza
                      New York, New York 10004
                      Telecopy: (212) 859-8586
                      Attention: Paul M. Reinstein, Esq.

               (iii)  if to Cohen or any Cohen Party, to:

                      Gadi Cohen
                      8 Shinnecock Trail
                      Franklin Lakes, New Jersey 07417

                                      -26-
<PAGE>
                     with copies to:

                     Klein & Hill
                     521 Fifth Avenue
                     New York, New York 10175
                     Telecopy: (212) 697-9570
                     Attention: Reuven Klein, Esq.
                                Gadi Hill, Esq.
                     and

                     Milbank, Tweed, Hadley & McCloy
                     One Chase Manhattan Plaza
                     New York, New York 10005
                     Telecopy: (212) 530-5219
                     Attention: Michael W. Goroff, Esq.

               (iv)  if to any other Holder, to the address
                     set forth on Schedule 1.1.

All such notices, requests, consents and other communications shall be deemed to
have been given when received.

         4.6.  Miscellaneous.
               -------------

               (a)  This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors and assigns of the parties hereto, whether so expressed or not. No
Person other than a Holder shall be entitled to any benefits under this
Agreement, except as otherwise expressly provided herein. This Agreement and the
rights of the parties hereunder may be assigned by any of the parties hereto to
any transferee of Registrable Securities; provided, however, that such rights
                                          --------  -------
shall not be transferred until such time as the transferee has executed and
delivered to the Corporation, as a condition precedent to such transfer, an
instrument in form and substance satisfactory to the Company confirming that
such transferee takes such rights subject to all of the terms and conditions of
this Agreement and agrees to be bound by the terms of this Agreement; and
provided, further, that, in the case of any transfer of rights to a third party
- --------  -------
other than a Cohen Party or a GSCP Party, such transferee shall only have the
rights of, and be subject only to the obligations of, a Holder under this
Agreement; and provided, further, that the last sentence of Section 4.4 shall
               --------  -------
not be assignable.

               (b)  This Agreement (with the documents referred to herein or
delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof. Notwithstanding the
foregoing, nothing in this Agreement shall

                                      -27-
<PAGE>
be deemed to affect or abrogate any obligation which any Holder may otherwise
have to the Company or any other party to this Agreement under the Purchase
Agreement or the Stockholder Agreement or, in the case of Management, under the
Management Stockholder Agreement to be entered into with the Company, GSCP and
Cohen within 60 days of the date hereof, as contemplated by Section 4.3 of the
Purchase Agreement.

               (c)  This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New York without giving effect to
the conflicts of law principles thereof.

               (d)  The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.

               (e)  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

               (f)  Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.

               (g)  It is hereby agreed and acknowledged that it will be
impossible to measure in money the damages that would be suffered if the parties
fail to comply with any of the obligations herein imposed on them and that in
the event of any such failure, an aggrieved person will be irreparably damaged
and will not have an adequate remedy at law. Any such person, therefore, shall
be entitled to injunctive relief, including specific performance, to enforce
such obligations, without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy at
law. Notwithstanding the foregoing, no Holder shall have any right to take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy that may arise with respect to the interpretation or
implementation of this Agreement.

               (h)  Each party hereto shall do and perform or cause to be done
and performed all such further acts and things and shall execute and deliver all
such other agreements, certificates, instruments, and documents as any other
party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                                      -28-
<PAGE>
         4.7.  No Inconsistent Agreements.  Without the prior written consent of
               --------------------------
GSCP, neither the Company nor any Holder will, on or after the date of this
Agreement, enter into any agreement with respect to its securities which is
inconsistent with the rights granted in this Agreement or otherwise conflicts
with the provisions hereof, other than any lock-up agreement with the
underwriters in connection with any registered offering effected hereunder,
pursuant to which the Company shall agree not to register for sale, and the
Company shall agree not to sell or otherwise dispose of, Common

                                      -29-
<PAGE>
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, for a specified period following the registered offering.

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.

                        P.N.Y. ELECTRONICS, INC.

                        By: /s/ Gadi Cohen
                            ----------------------------------------------
                             Gadi Cohen, President and
                             Chief Executive Officer

                        GS CAPITAL PARTNERS II, L.P.

                        By: GS Advisors, L.P., its general partner
                            By:  GS Advisors, Inc., its general partner

                        By: /s/ Joseph P. DiSabato
                            ----------------------------------------------
                             Joseph P. DiSabato, attorney-in-fact

                        GS CAPITAL PARTNERS II OFFSHORE, L.P.

                        By: GS Advisors, II (Cayman), L.P.,
                            its general partner
                            By: GS Advisors, II, Inc.,
                            its General partner

                        By: /s/ Joseph P. DiSabato
                            ----------------------------------------------
                             Joseph P. DiSabato, attorney-in-fact

                        GOLDMAN, SACHS & CO. VERWALTUNGS GmbH

                        By: /s/ Joseph P. DiSabato
                            ----------------------------------------------
                             Joseph P. DiSabato, attorney-in-fact

                        and

                        By: /s/ Terence O'Toole
                            ----------------------------------------------
                             Terence O'Toole, Managing Director

                                      -30-
<PAGE>
                        STONE STREET FUND 1995, L.P.

                        By: Stone Street Value Corp.,
                            General Partner

                        By: /s/ Joseph P. DiSabato
                            ----------------------------------------------
                             Joseph P. DiSabato, attorney-in-fact

                        BRIDGE STREET FUND 1995, L.P.

                        By: Stone Street Value Corp.,
                            Managing General Partner

                        By: /s/ Joseph P. DiSabato
                            ----------------------------------------------
                             Joseph P. DiSabato, attorney-in-fact

                        /s/ GADI COHEN
                        --------------------------------------------------
                        GADI COHEN

                                      -31-

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